B.p Marsh Regulatory News (BPM)

18 September 2023

B.P. Marsh & Partners Plc

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

Trading Update

B.P. Marsh & Partners Plc (AIM: BPM), the specialist venture capital investor in early stage financial services businesses, is pleased to provide the market with an update on trading for the Group's six month period ended 31 July 2023.

Highlights

Net Asset Value

One of the Group's key financial objectives is the delivery of long-term growth in Net Asset Value. The Group increased Net Asset Value from £166.6m to £189.5m in the year ending 31 January 2023 with the Group's equity Portfolio increasing by £22.2m from £149.3m to £171.5m (adjusting for additions and disposals) in the same period. The Group remains positive regarding its ongoing performance and will be releasing its Interim Results for the six months to 31 July 2023 on 17 October 2023.

Disposals

Kentro Capital Limited ("Kentro")

As announced on 23 May 2023, B.P. Marsh has agreed to dispose of its shareholding in Kentro, the London-based insurance industry investment group, pursuant to an agreement by which Brown & Brown, Inc. ("Brown & Brown"), one of the largest US-based insurance intermediaries, has agreed to acquire the entire issued share capital of Kentro.

Completion of the disposal is dependent on certain regulatory approvals and completion mechanics and a further announcement will be made when all conditions have been met.

Upon completion, the Group expects to receive £51.5m in cash (net of all transaction costs). This is consistent with the Group's most recent £51.5m valuation of the business as at 31 January 2023, underlining the Group's approach and method to valuing our investments.

Dividend and Share Buy-Back

Dividend

As announced on 13 June 2023, the Group declared a final dividend for the year to 31 January 2023 of 1.39p per share following an interim dividend of 1.39p per share paid on 28 February 2023. The final dividend was paid on 31 July 2023.

Subject to the completion of, and receipt of sale proceeds from, the disposal of the Company's holding in Kentro, the Group intends to pay a special dividend of £1.0m. Further information regarding the proposed payment date will be announced in due course.

It is also the intention that a new three-year dividend policy for the 2024, 2025 and 2026 financial years will be implemented from the proceeds of the Kentro deal, with an aggregate of £2m per year being distributed.

Share Buy-Backs

On 16 January 2023, the Group announced that it would allocate £1.0m to the purposes of an on-market Share Buy-Back programme. Since 16 January 2023, the Company has purchased a total of 259,230 shares, of which there are 226,450 shares in Treasury. The Company currently has £0.04m remaining from the £1.0m budget.

Subject to the receipt of the proceeds of sale of Kentro, the Group intends to conduct a £6.0m Return of Capital. The specific mechanics of how this will be achieved are still under consideration and will be announced in due course.

New Investment

Pantheon Specialty Limited ("Pantheon")

On 21 June 2023, B.P. Marsh subscribed for a 25% stake in Pantheon, a new holding company established in partnership with Robert Dowman.

Robert Dowman has over 30 years of experience in the insurance industry, starting his career in 1989 at the Lloyd's Broker Gallagher Plumer where he spent six years before joining Jardine Insurance Brokers in 1995. Robert then joined Besso's Casualty Division in 2000, becoming Managing Director of Besso Global Casualty in 2007 and Joint CEO of Besso Group and Besso Limited in 2015.

In September 2023, the Company provided a loan facility of £3m to Pantheon for working capital purposes.

With the support of B.P. Marsh, Robert Dowman intends to build a market leading independent specialist broker across multiple markets.

Verve Risk Services Limited ("Verve")

In April 2023, the Group announced that it had acquired a 35% Cumulative Preferred Ordinary shareholding in Verve, a London-based Managing General Agency.

Verve specialises in Professional and Management Liability business for the insurance industry in the USA, Canada, Bermuda, Cayman Islands and Barbados.

Since investment, Verve has performed well, outperforming its budget for the months following the involvement of B.P. Marsh.

The Group looks forward to continuing its support for Verve and its Management Team over the coming years, supporting the business to achieve its long term ambitions and goals.

Other Investee Company Highlights

Lilley Plummer Risks Limited ("Lilley Plummer")

The performance of Lilley Plummer continues to be impressive, which is due to the growth of its underlying marine portfolio and diversification into different classes of business, including North American Property.

The strong performance of Lilley Plummer has allowed the business to return £1m to the Group as follows:-

This redemption and repayment demonstrates Lilley Plummer's ability to continually grow their business from a revenue and EBITDA standpoint, whilst accumulating strong cash balances. Revenue has grown from circa £0.6m in 2020, to £5.0m in 2022, with this growth continuing into 2023. EBITDA performance has been similarly impressive. 

Lilley Plummer remains actively looking at new opportunities, within and outside of its core marine offering and the Group is confident regarding its performance over the course of the current financial year and beyond.

CBC UK Limited ("CBC") / Paladin Holdings Limited ("Paladin")

Paladin, the holding company for CBC, the London based Lloyd's insurance broker, continues to trade significantly ahead of Budget in 2023. At 31 July 2023 Paladin had achieved £7.5m of consolidated adjusted EBITDA for seven months' trading against a full year Budget of £5.5m, up 183% over the prior year period. The growth year-on-year has been achieved through a combination of new hires, new product lines and organic growth.

In July 2023 the Group lent Paladin £1.5m which, together with its own funds, enabled CBC to repay its £2.7m loan from Coutts & Co.

On 11 August 2023 Paladin exercised a Call Option with the Group over 5.9% of shares in Paladin which the Group owned. Pursuant to the share transfer Paladin intend to cancel the shares. As a consequence of this transaction the Group's shareholding will reduce from 47.06% to 43.75%. This transaction was funded through the Group lending Paladin a further £0.8m.

XPT Group LLC ("XPT Group")

XPT Group's performance since its inception continues to be impressive, with the business expecting to produce Gross Written Premium of over US$700m in its current financial year to 31 December 2023 (2022: US$500m).

XPT's two most recent acquisitions, Cal Inspection Bureau, a premier underwriting survey and audit business, and Craig and Leicht, a Texas-based wholesale agency, have both performed well since joining XPT in the first quarter of 2023. 

XPT Group continues to grow via its acquisition strategy, producer hires and underlying organic growth.

The Group remains positive regarding the ongoing performance of XPT and its next stage of growth over the years to come.

LEBC Holdings Limited ("LEBC")

In August 2023, Aspira Corporate Solutions Limited ("Aspira") a wholly-owned subsidiary of LEBC, acquired the trading assets and personnel of its sister company, LEBC Group.

This consolidation follows a Management-led restructuring process which has had the full support of the Group, being in the best interest of all LEBC stakeholders.

The transfer of assets has received consent from the Financial Conduct Authority ("FCA"), following extensive consultation.

This event required no review of the Group's current valuation of LEBC.

Liquidity and Loan Portfolio

Group cash and treasury funds were £4.3m at 31 July 2023 (31 January 2023: £12.1m).

Between 31 January 2023 and 31 July 2023, the Group provided loans to the investment portfolio of £8.2m, including £4.9m (US$6.0m) to XPT Group LLC, £2.0m to Paladin Holdings Ltd ("Paladin"), £0.7m to Denison and Partners Ltd and £0.6m to Verve Risk Services Ltd to support further organic growth or as part of a new investment. In addition, the Group paid dividends totalling £1.0m and bought back £0.7m in shares.

During the six-month period to 31 July 2023 the Group also received £0.7m of proceeds from the redemption of preferred shares held in Lilley Plummer Holdings Ltd and £1.6m in loan repayments and its loan portfolio balance was £17.8m at 31 July 2023 (31 January 2023: £11.5m).

Since 31 July 2023 the Group has provided a further £4.1m in loans as follow-on funding into the existing portfolio and received £0.8m in net realisations relating to shares in Paladin held by the Group under a call option arrangement, which were bought back by Paladin. In addition, the Group has bought back a further £0.2m in shares.

As announced on 23 May 2023, the Group has agreed to sell its 18.7% shareholding in Kentro for £51.5m, subject to regulatory approvals. Net of adjustments, this is expected to increase funds available to £52.2m prior to any distributions.

The Group is debt free.

New Business Opportunities

The Group continues to see a high number of potential new business opportunities and received 60 new business enquiries in the year which ended on 31 January 2023. This was an increase from 48 enquiries in the preceding year.

In the current financial year, the Group has received 42 new business enquiries as at the end of July 2023, compared to 33 enquiries for the same period in the preceding year.

In view of the Group's favourable cash position, subject to completion of the Kentro disposal, it remains ready to take advantage of opportunities emanating from the financial services industry generally, and the insurance market specifically.

Continued M&A activity at the larger end of the insurance market generates opportunities at the smaller end, many of which meet the Company's investment criteria.

Current opportunities under consideration include (but are not limited to) the following:-

Insurance Market Outlook

The insurance industry continues to discuss rate increases across global commercial lines of business.

The second quarter of 2023 resulted in an overall rate increase of 3% across all global commercial lines (down from a 4% increase in the first quarter of 2023).

This increase represented the 23rd consecutive quarter of rate increases, although rate increases are well below the peak, being 22% in the fourth quarter of 2020. 

Price increases across global property insurance were up 10% in the second quarter of 2023, the same increase as in the first quarter of 2023. Casualty insurance pricing increased by 3%, again the same as in the first quarter of 2023.

Conversely, pricing for financial and professional lines fell for the fourth consecutive quarter, with average pricing falling by 8% during the second quarter of 2023, compared to a 5% decline in first quarter of 2023.

In the UK, rates generally have increased over the past four quarters and the Group does not anticipate the market returning to the pricing of the last soft market in the short to medium term.

Interim Results

The Group expects to report the half year results for the year to 31 July 2023 on 17 October 2023 on which date it will hold a briefing for analysts and will hold a presentation for investors and potential investors on the Investor Meet Company platform.

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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