White Mountains to invest $805m into Ark Insurance Holdings

White Mountains Insurance Group, Ltd. is set to make a significant investment into re/insurer Ark Insurance Holdings, with plans to ramp up its capacity across the markets it operates in and upgrade its reinsurance capabilities in Bermuda.

White Mountains is known for buying stakes in financial services companies, including insurance and reinsurance operations. It also owns a 30% stake in insurance-linked securities (ILS) and catastrophe bond investment manager Elementum Advisors.

Ark Insurance Holdings underwrites a diversified book of reinsurance and insurance, through a leading Lloyd’s market platform and its Bermuda operations.

White Mountains has agreed to invest fresh capital that could take Ark’s capitalisation up to $1 billion and to acquire a majority interest in Ark Insurance Holdings Ltd, the ultimate parent company of Ark Syndicate Management Limited. The deal could see White Mountains owning up to 77% of the group, if the full investment including additional contributions is delivered.

It’s a significant move that will give White Mountains a much greater ability to capitalise on the firming insurance and reinsurance market conditions, while for Ark the capital injection and new backer will help it take its business to a higher level.

Ark was founded in 2007 by Ian Beaton and Nick Bonnar and manages the underwriting of syndicates 4020 and 3902 at Lloyd’s.

The two syndicates underwrite a diversified and balanced portfolio of reinsurance and insurance business, across lines including property, accident & health, energy, marine and political risks.

Ark has around $500 million of stamp capacity at the moment, but with White Mountains’ capital injection, Ark has plans to grow its business substantially.

It aims to achieve this by increasing aligned capacity at its Lloyd’s syndicates to 100%, while growing its overall stamp capacity for its Lloyd’s underwriting operations.

In Bermuda, Ark plans to convert its existing Bermuda reinsurance entity into a Class 4 reinsurer, which will give it much greater options in that marketplace and internationally on the reinsurance side.

In addition the company has plans to staff up and hire talented underwriters in both the London and Bermuda markets.

Manning Rountree, CEO of White Mountains, commented on the news, “Ian, Nick and the rest of the Ark team have built a high-quality insurance business that puts underwriting first.  We are delighted to partner with them, and we are excited about the market opportunity in front of us.”

Ian Beaton, CEO of Ark, added, “We are delighted to have found the right capital partner in White Mountains, an institution with a long track record of successful insurance partnerships.  We look forward to a fruitful relationship.”

White Mountains will invest $605 million of equity capital into Ark, at a pre-money valuation of $300 million and will also purchase $41 million of shares from existing owners.

The group has also committed to invest up to an additional $200 million of equity capital into Ark in 2021.

As a result, the total post-closing capital injection will exceed $800 million and if the additional $200 million is contributed in full, will exceed $1 billion, the company said.

The move is further evidence of the attractive conditions across insurance and reinsurance markets, which are making investments into established platforms that are primed for growth (with the right capital and backing) a particularly favourable option at this time.

Ark has the established franchise and potential to grow, which this significant capital injection should enable it to do. The added bonus of backing from a respected insurance and reinsurance investor and holding group like White Mountains will also help it as it moves forwards.

After closing, which is expected to be in January 2021, White Mountains will own 72% of Ark on a basic shares outstanding basis, but that could rise to as much as 77% if the additional $200 million contribution is fully invested.