One of the insurance and reinsurance market’s leading catastrophe risk modelling firms, RMS, is being offered for sale by its owner DMGT.
This morning, in announcing a reorganisation and possibly buy-out by its major shareholders, DMGT noted that any such deal would be conditional on a sale of RMS.
DMGT said, “Its controlling shareholder, Rothermere Continuation Limited (RCL), had notified it of a possible offer for the entire share capital of DMGT not already owned by RCL. The possible offer is subject to a number of pre-conditions and, even if satisfied, there can be no certainty that an offer will be made.”
Adding that, “One of the pre-conditions is the successful sale of RMS, DMGT’s Insurance Risk business, at a premium valuation. The potential sale of RMS was announced at the same time as the possible offer.”
The company added that, “Following a number of enquiries from third parties, it is in discussions in relation to the sale of its Insurance Risk division (RMS).
DMGT would expect to generate a return on its investment in RMS, saying that a sale would deliver a premium for its shareholders and if terms are agreed the sale would be expected to go ahead in Q3 2021.
A sale of RMS is expected to represent a “significant milestone” in the transformation of DMGT the company further explained, adding that a sale of the catastrophe risk modeller could deliver “substantial cash proceeds.”
DMGT warned that RMS sale related conversations are continuing, saying that, “discussions are ongoing and there can be no certainty that a transaction will result.”
RMS is a catastrophe risk modelling firm that is central to global insurance, reinsurance and insurance-linked securities (ILS) markets, as one of the main views of risk utilised across the industry today.
Its business model has generated significant cash over the years, but right now it faces growing competition from insurtech start-ups and analytical companies that are in some cases threatening the major model providers by providing more niche and focused services, often targeting single perils instead of trying to create models for everything.
But the depth of expertise RMS has and its reach into insurance and reinsurance markets could make it a very attractive acquisition, especially for someone able to transform its business model to make it more nimble.
We’d expect acquirers could range from incumbents and competitors, possibly a major re/insurance broking house, to a SPAC acquirer, private equity buyers, or other existing insurance and financial sector technology players.
One reason RMS could be a very attractive buy right now, is the wave of climate finance and disclosure sweeping the globe, as this required modelling to measure and benchmark climate exposure, something RMS and the main catastrophe risk modellers are very well-positioned to lead on.