Swiss Re Insurance-Linked Fund Management

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Nephila sale will net Man Group $130m for its 18.5% stake


The sale of the world’s largest insurance-linked securities (ILS) and reinsurance linked investment manager Nephila Capital to re/insurer Markel is set to net part owner Man Group $130 million for its 18.5% stake in the ILS fund manager.

Nephila Capital is being 100% acquired by Markel Corporation in a deal announced at the end of August that positions Markel as the leading provider of alternative reinsurance capital, given its ownership of Markel CATCo as well.

Man Group, the institutional asset manager, was a long-time investor in Nephila Capital, having bought into the firm back in 2008, when it invested $50 million in Nephila, as part of a programme of diversifying it’s alternative investment strategies.

At the time of that investment the $50 million equated to a 25% stake in Nephila Capital Ltd., but today the firm has revealed just how profitable that investment a decade ago was.

Man Group said that, “The sale of Man Group’s 18.5% management fee only profit interest in Nephila would generate net proceeds of around $130 million.”

Man had sold a portion of its stake in Nephila when private equity and buyout giant KKR & Co. L.P. (Kohlberg Kravis Roberts) also bought into the ILS manager in 2013.

That’s a decent return on the initial investment, not to mention the fact that Man has also been benefiting from commission on the sale of Nephila’s ILS funds to its clients, which has amounted to as much as $15 million a year at times.

Of course, what is also interesting about knowing that an 18.5% stake in Nephila Capital is worth $130 million is that it also gives us an idea of the value of the management company in the acquisition by Markel Corporation.

If 18.5% equals $130 million then 100% is worth almost $703 million. We understand this to be more than 10 times operating earnings at the management company.

Man Group’s investment in Nephila Capital has proved to be very profitable for the firm and demonstrates the significant value the Nephila leadership and team created through their work in reinsurance investing and breaking down value-chain barriers in the global market place.

It also shows why Markel found the firm such an attractive acquisition proposition.

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