B.p Marsh Regulatory News (BPM)

9 January 2023

B.P. Marsh & Partners Plc

("B.P. Marsh", "the Company" or "the Group")

Investee Company Updates - Kentro Capital Limited, ATC Insurance Solutions PTY Limited, XPT Group LLC & Lilley Plummer Risks Limited

B.P. Marsh & Partners Plc ("B.P. Marsh"), the specialist investor in early-stage financial services businesses, is pleased to announce updates on four of its investments, Kentro Capital Limited, ATC Insurance Solutions PTY Limited, XPT Group LLC and Lilley Plummer Risks Limited.

Kentro Capital Limited ("Kentro") - London

i. Linda Scott Associates Limited ("Linda Scott")

On 5th December 2022 Kentro agreed the conditional acquisition of Linda Scott, an independent Trade Credit broker based in Glasgow.

This acquisition was undertaken via Kentro's broking arm, Xenia Broking Group, now one of the largest specialist Trade Credit brokers in the UK. This is Xenia's tenth acquisition in three years.

Established in 1991 by Linda Scott, the team are well respected and highly regarded in the industry and now manage a portfolio of 40 clients.

Linda Scott's product offering and client base complements Xenia's existing business, whilst the hire of an experienced Trade Credit team in Glasgow will help to support new business generation in Scotland.

ii. Kentro - Trading Performance

Driven by performance across both Nexus Underwriting, Kentro's MGA business, and Xenia, Kentro has continued to produce strong growth in its financial year to 31st December 2022. 

In its 2021 financial year, Kentro produced Gross Written Premium of £367m, a year on year increase of 19%, and generated revenue of £53m, a year on year increase of 21%. EBITDA increased by 14% over the course of 2021 to £16m. This impressive growth continued, with Kentro guiding to Gross Written Premium of c. £440m in 2022.

Commenting on the acquisition of Linda Scott and Kentro's overall performance, Colin Thompson, Founder and Group Chief Executive Officer of Kentro, said:-

"Linda Scott represents Kentro's 24th acquisition since inception and is another example of Xenia's tried and tested strategy to acquire complementary "bolt-on" portfolios. Xenia has a unique ability to integrate trade credit books into its existing infrastructure at very high margins, as demonstrated by its previous acquisitions to date.

"Turning to Kentro's overall performance, I remain optimistic on the future performance of the business. Since inception in 2008, Kentro now manages Gross Written Premium of over $600m, which has been delivered via strong organic growth and a successful acquisition strategy. I see no reason why such performance will not continue over the coming years and beyond."

B.P. Marsh first invested in Nexus Underwriting Management Limited ("Nexus") in August 2014, investing £1.6m for a 5% shareholding.

Since then, B.P. Marsh has invested a further £13.6m and has increased its holding to 19.05%. As at 31st July 2022, B.P. Marsh valued this shareholding at £51.5m, representing an Internal Rate of Return of 27.90%.

In February 2022, Nexus rebranded to Kentro, the 100% owner of the subsidiaries Nexus Underwriting and Xenia.

Kentro now employs over 300 staff, with 250+ employee shareholders, with offices in nine countries across the world. 

XPT Group LLC ("XPT") - New York

In June 2017, B.P. Marsh invested $6m (c. £4.7m) for a 35% shareholding in the U.S. based specialty lines insurance distribution company, XPT.

Since this time, follow on funding has been provided to XPT, with £11.6m being provided in total. B.P. Marsh currently has a shareholding of 29.15%.

XPT's performance since inception has been impressive, with the business on track to produce Gross Written Premium of over US$500m in its financial year which ended on 31st December 2022 (2021: US$400m).

This growth has emanated from XPT's acquisition strategy, with their 12th acquisition completing this year, alongside strong organic growth.

Thomas Ruggieri, Founding Partner & CEO of XPT commented:-

"It's been great to see our strategy and tactics driving our +40% organic GWP growth in 2022. We have benefitted in recent years from the hardening insurance market and, although we have seen some plateauing of rates heading into 2023, rates remain at productive levels and expertise in specialty segments like hospitality, trucking, energy and agriculture is still keenly sought after by retailers.

"We also see great strength in construction both from rebuilding post catastrophic events and from the US infrastructure bill. "XPT Specialty's small and medium insured business strategy continues to fulfil a top priority for our retail agent customers, while our Platinum programs supporting the wholesale distribution channel provide differentiation in the MGU space."

ATC Insurance Solutions Limited ("ATC") - Melbourne

BP Marsh first invested in ATC in July 2018, investing AU$5.1m (c. £2.9m) for a 20% shareholding.

ATC is a Managing General Agency and Lloyd's Coverholder, specialising in, among other things, accident & health, motor and sports insurance headquartered in Melbourne, Australia. ATC is run by a longstanding and experienced management team led by CEO and Founder, Chris Anderson, alongside co-founder and director Shane Sheppard.

i. Acquisition of MB Prestige Limited ("MB")

The acquisition of MB in August 2021 resulted in ATC becoming one of the largest independently owned underwriting agencies in Australia.

From an operational and administrative perspective, MB has successfully integrated into ATC, which has created a number of cost and efficiency synergies. Additionally, by joining ATC, MB has been able to access numerous capacity providers (including Lloyd's of London) which has enabled MB to secure additional capacity for new products that complement the high value motor line, such as high value home and contents.

As at 31st July 2022, BP Marsh valued its 25.5% shareholding in ATC at AU$30.0m (C. £17.2m). This represents an Internal Rate of Return of 50.48%, including loans.

Chris Anderson, Chief Executive Officer of ATC commented:-

"We are delighted with the performance of MB since acquisition and how the business has integrated into ATC.

"High value motor was a completely new line of business for ATC, which meant there was no conflict with our existing clients. It has helped to diversify ATC's overall product offering and has opened up new opportunities for growth." 

Lilley Plummer Risks Limited ("Lilley Plummer") - London

In October 2019, B.P. Marsh took a 30% equity stake in Lilley Plummer for a total cash consideration of £1m, in a mixture of Redeemable and Non-Redeemable Preference shares.

Since formation, Lilley Plummer has continued to expand its product offering beyond its core Marine business into a number of niche and diverse areas, for example Political Violence, Terrorism and North American P&C insurance.

Lilley Plummer has grown substantially and is on track to deliver considerable year on year growth in respect of revenue and EBITDA. This positive performance is due to Lilley Plummer growing its client base, winning new business and continuing to respond to the demand for coverage in war-stricken locations.

i. Outlook

Lilley Plummer continues to diversify into different classes of business and will continue to expand into new areas in 2023.

Lilley Plummer has reaped the benefits of being able to offer multi-product solutions to its growing client base and sees further opportunity to develop new classes of business.

Stuart Lilley and Dan Plummer, Chief Executive Officer and Managing Director, respectively, of Lilley Plummer commented:-

"We are delighted with the continued success of Lilley Plummer since its inception in late 2019. Since Lilley Plummer was established, the business has grown its underlying marine portfolio, and has also expanded into new product lines in new geographic locations, taking advantage of market conditions.

"With regard to Lilley Plummer's core business, the Marine market has seen some relatively flat pricing over the last six months. Despite this, increases in reinsurance costs are expected, which many predict will lead to pricing increases in 2023.

"The conflict in Ukraine has resulted in increased premiums, with vessels paying to regularly operate in both Ukraine and Russia. Whilst Lilley Plummer does not foresee this continuing long-term, the same situation is expected to continue in the first half of 2023.

"In addition, the Marine market has seen a large amount of consolidation with many small and medium sized brokers being acquired by the larger brokers. The subsequent fallout has provided a number of opportunities to secure new business, which perhaps were not possible without such consolidation."

For further information:

Notes to Editors:

B.P. Marsh's current portfolio contains fifteen companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for approaching ten years.

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