Amlin plc, the non-life insurance and reinsurance group, has now signed the definitive agreement to increase its existing stake in insurance-linked securities (ILS) and reinsurance-linked investments manager Leadenhall Capital Partners to 75% of the firm.
An agreement in principle had been announced in July, after the two firms reached terms as to how the increase in Amlin’s existing stake in Leadenhall would be actioned.
Leadenhall Capital Partners LLP, a London-based ILS manager with $1.8 billion of insurance linked assets under its management, was formed in 2008 as a joint venture between its founding partners and Amlin. Amlin has always enjoyed a 40% stake in Leadenhall, providing it a valuable and growing source of income from the management fees and profits of an ILS business, while also giving it a foothold in the ILS and third-party reinsurance capital management space.
Under the terms of the signed definitive agreement, Amlin has upped its current 40% stake in Leadenhall Capital partners to 75%, through a partial acquisition of each individual partner’s stake. The final consideration amount will be determined by the future profitability of Leadenhall, and will be payable in three installments over the period to May 2016.
The remaining 25% interest in Leadenhall will remain with the individual partners of the firm on an ongoing basis. The current management team of John Wells (Chairman) and Luca Albertini (CEO and CIO) will remain in their existing roles following completion of the transaction.
The agreement reached also establishes a number of safeguards to preserve Leadenhall’s operation independence and alignment of interest between Leadenhall’s management and their third-party investors through the continuation of separate entity and remuneration structures and strengthened governance including the addition of an independent non-executive. All of the investment decisions for third-party capital used by Leadenhall in its day-to-day business of underwriting collateralized reinsurance and ILS deals will continue to be made independently of Amlin.
Charles Philipps, CEO of Amlin, commented on the announcement; “I am pleased that we have further strengthened our relationship with Leadenhall Capital Partners. We have already developed significant synergies between LCP and Amlin’s reinsurance business, which have helped to differentiate Amlin’s (re)insurance client proposition from its competitors, as well as strengthening LCP’s market position. As alternative capital plays a greater role in (re)insurance markets, I expect Amlin’s increased interest in LCP to be a valuable strategic advantage to both businesses.”
John Wells, Chairman of Leadenhall, added; “We are delighted to have established the basis for the next stage of our development with Amlin. The combination of independent capital markets skills with the power and reach of a major (re)insurer has proved an attractive proposition for investors, which is capable of delivering good returns. This agreement provides a stable platform for further growth, while maintaining the independence of investment decision-making and a strong alignment between the management team and our investors.”
The increased stake in Leadenhall Capital Partners gives Amlin a strong base to grow the contribution that third-party capital and insurance-linked securities (ILS) management makes to its business. Amlin is now well positioned to continue to capitalise on this and leverage efficient, third-party reinsurance capital, alongside its own balance-sheet, to grow the overall business underwritten and to assist it in navigating the evolving reinsurance marketplace.
The income from the third-party capital management business will make an increasing contribution to Amlin’s bottom-line as well, which could lead to further growth potential for Leadenhall. Amlin will be able to help Leadenhall to grow its assets, while increased synergies between the two will assist with access to attractive reinsurance-linked investments.
For Leadenhall this agreement allows the firm to concentrate on its job of growing its assets under management while continuing to make independent investment decisions to put the capital to work prudently in reinsurance linked investments. Already among the largest ILS managers, the signing of this agreement will help Leadenhall to further secure this position as one of the leading investors in the insurance linked securities space.