Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Nephila acquisition cost Markel total consideration of $975m


The acquisition of the world’s largest insurance-linked securities (ILS) and reinsurance linked investment fund manager, Nephila Capital, is set to cost Markel Corporation a total consideration of $975 million, which will be paid in cash, the firm has disclosed.

The 100% acquisition of Nephila Capital by Markel was announced at the end of August, but no price was disclosed at the time.

Since then, the value of the Nephila management company has become a little clearer, in the disclosures by former investors in the ILS manager Man Group and KKR & Co. L.P., which seem to put that at somewhere around $700 million, but of course that was never all of the value created across Nephila’s two decade history.

Markel Corporation explained on the acquisition of the ILS and reinsurance linked investment manager, “Total consideration for this acquisition is estimated to be $975.0 million, all of which is expected to be paid in cash. Upon completion of the transaction, Nephila will continue to operate as a separate business unit and its operating results will not be included in a reportable segment. The transaction remains subject to customary closing conditions and is expected to close in the fourth quarter of 2018.”

Investors in Nephila Man Group had said its 18.5% investment stake in Nephila would be worth around $130 million, while KKR said that its 2013 investment in Nephila had delivered a roughly 3 times return.

The full price of $975 million is a significant sum, but fully reflects the significant value created in the Nephila Capital franchise over the twenty years of its operations.

The deal closes soon, after which Markel will have two leading ILS management units (Markel CATCo and Nephila), both of which will be operating as independent entities.

That gives Markel roughly $19 billion of ILS assets under its entities management, a significant chunk of the overall market and providing it with leading positions in collateralized reinsurance, collateralized retrocession and niches including weather insurance linked investments as well.

Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers, commented, “We are excited about recent growth opportunities in both our Markel Ventures and insurance operations, including… our planned acquisition of Nephila, which is expected to close next month.”

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