Markel completes purchase of Alterra, gains collateralized reinsurance operations

by Artemis on May 1, 2013

Markel Corporation has announced today the completion of its acquisition of insurance and reinsurance group Alterra Capital Holdings after all regulatory approvals were received and votes cast in favour of the transaction by the two firms shareholders. Markel has now gained access to a major reinsurance and large-account insurance business. It also gains collateralized reinsurance operations giving it a platform to grow third-party capital management if it so chooses.

The completed acquisition creates a very large specialty insurance, reinsurance and investment management group with a combined shareholder equity of around $6 billion and $23 billion in combined assets. Markel has gained a large reinsurance business and large-account insurance portfolio to add to its speciality insurance business as well.

On the collateralized reinsurance and third-party capital management side of the reinsurance market, Markel now has the Alterra New Point collateralized reinsurance sidecar operations within its business as well.

In December Alterra announced an increase in the total capital committed to their New Point V Limited fully collateralized reinsurance sidecar vehicle to $247m. Then in February we reported that Alterra had seen a $30.3m income flow from its New Point IV sidecar in the full year 2012.

The New Point IV sidecar, in which Alterra had a 34.8% equity share, with the remainder owned by third-party investors including hedge fund manager Stone Point Capital LLC and a number of other private investors, underwrote $75.7m of premiums in 2012. New Point V is a joint venture reinsurance sidecar between Alterra and Stone Point Capital through its private equity fund, Trident V, L.P. and its affiliates.

So the closure of the acquisition of Alterra by Markel, gives Markel access to an operational third-party capital platform with the New Point sidecars. We don’t know at this stage what plans Markel may have for the sidecars; whether it intends to continue, cease managing or even grow that side of its newly acquired business.

If Markel does have third-party reinsurance capital management aspirations, which is highly likely given the firms investment focus, it is now in a very good position to capitalise on the current growth and interest in that side of the alternative reinsurance market.

Markel is creating two new business units to assist the integration of Alterra’s operations, Markel Global Insurance (for large commercial account business) and Markel Global Reinsurance. Alan I. Kirshner, Chairman and Chief Executive Officer of Markel, commented; “We are committed to all these businesses, which we believe fit well with our disciplined underwriting approach, on a worldwide basis.”

Kirshner added; “With our enhanced scale, approximately $23 billion in combined assets and $6 billion in shareholders’ equity, we believe we will be well positioned to take advantage of a wide range of profitable opportunities in insurance and investments.”

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