GBGI.L Regulatory News (GBGI)

GBGI Limited

22 February 2017

Admission to Trading on AIM and First Day of Dealings

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

22 February 2017

GBGI Limited

("GBGI" or "Global Benefits Group" or the "Company" and, together with its subsidiary undertakings, the "Group")

Admission to Trading on AIM and First Day of Dealings

GBGI Limited, a leading integrated provider of international benefits insurance, is pleased to announce that its entire issued ordinary share capital will today be admitted to trading on AIM, a market operated by London Stock Exchange plc. Dealings in the Company's ordinary shares will commence at 8.00 a.m. under the ticker "GBGI", with ISIN GG00BYQFSK24.

On Admission, the Company will have a market capitalisation of approximately £130.4m, following a Placing of ordinary shares in the Company, successfully raising total gross proceeds of £32.0m for the Company, at a placing price of 150 pence per share. Canaccord Genuity is acting as Nominated Adviser, Broker and Financial Adviser to the Company.

Highlights

· An established, leading integrated provider of international benefits insurance, operating globally across over 120 jurisdictions.

· Trading principally as The Global Benefits Group or GBG, the Group distributes and underwrites health, life and disability, and travel insurance policies with a client base spanning multinational corporations, expatriates, local high net worth individuals, international schools, non-profit organisations and international students.

· Over 150,0001 lives insured as of 30 June 2016 (a CAGR of 20.3% for the period 30 June 2014-2016).

· Distribution via a diversified, international network of more than 90 intermediaries; a flexible model allowing scalability as well as the ability to identify, address and efficiently penetrate niche markets.

· The Group combines global reach with a fully integrated operational model. Operating across the value chain enables a core focus on high standards of customer care and service with client retention rates above 80% in the year ended 30 June 2016.

· Agile underwriting, underpinned by a long track record and a technical, data-driven approach, enables the Group to access opportunities in underserved, niche markets. Aggregate loss ratios in the three years ended 30 June 2016 have been 50.9%, 58.6% and 53.1%.

· Recent strategic partnership with AXA, the Group's principal reinsurance partner, adds further new business momentum.

· The Group's differentiated business model and proven strategic execution have delivered strong earnings growth. Underlying Profit After Tax grew at a CAGR of 45.7% to US$12.7m over the 3 year period to 30 June 2016.

· Attractive dividend policy supported by a proven, profitable, cash generative financial profile.

Placing Highlights

· The Company raised gross proceeds of £32.0m (before expenses) by way of a placing of 21.3m new ordinary and existing treasury shares at a placing price of 150 pence per ordinary share (the "Placing").

· The net proceeds of the Placing (£29.2m) will be used to further strengthen the Group's capital position, support future growth, provide enhanced financial flexibility and make contractual payments to certain shareholders.

· GBGI's market capitalisation on Admission, based on the Placing price, is approximately £130.4m, with an enlarged share capital on Admission of 86,964,195 ordinary shares. 

· Canaccord Genuity is acting as Nominated Adviser, Broker and Financial Adviser to the Company.

· The Admission Document is available on the Company's website at https://www.gbg.com/

GBGI's CEO, Bob Dubrish commented:

"We are delighted to announce our admission to AIM following a successful placing. This transaction marks the next stage in GBGI's growth story, building on our long, profitable track record of delivering international benefits insurance solutions to our clients in over 120 jurisdictions worldwide.

"Our differentiated business model leverages both our agile underwriting capability and our scalable distribution platform, enabling us to access profitable opportunities in niche, underserved markets. We operate in a large, fragmented market, and there are significant growth opportunities for the Group going forward.

"We put client service at the heart of what we do, and we control all aspects of the value chain to ensure the right customer outcomes. As a result we benefit from high retention levels and a growing book of business.

"Admission to AIM will enable us to further raise the Group's profile, providing additional momentum to our growth strategy. We remain focused on delivering profitable, cash generative growth and paying an attractive level of dividends to our shareholders going forward."

For further information please contact:

Further Information

Overview

GBGI is a leading integrated provider of international benefits insurance, operating globally across over 120 jurisdictions. Trading principally as "The Global Benefits Group" or "GBG", the Group distributes and underwrites health, life and disability, and travel insurance, with a client base that spans multinational corporations, expatriates, local HNWIs, international schools, non-profit organisations and international students. GBGI is a fully integrated insurance group providing services from policy sales to claims administration and servicing and is committed to delivering high levels of customer service. GBGI is incorporated in Guernsey.

The Group's differentiated business model and the execution of its strategy has delivered profitable growth over recent years. For the year ended 30 June 2016, the Group underwrote US$153.6 million of gross written premium ("GWP") (US$140.6 million for the year ended 30 June 2015) and delivered an Underlying Profit After Tax of US$12.7 million (US$6.5 million for the year ended 30 June 2015).

Products

The Group distributes and underwrites international health, life and disability and travel insurance products which can be tailored to client needs. The portfolio is currently weighted toward Health (79% of GWP in the year to 30 June 2016). Health insurance products encompass a variety of group and individual plans with a range of benefits and levels of cover including emergency evacuation, maternity cover, dental cover, wellness programmes and pre-existing conditions.

Overall, group business represented 57% of GWP for FY16, with individual business making up the balance. The Group's ability to write business in over 120 jurisdictions has resulted in a portfolio of considerable geographical diversification. For FY16, Latin America represented 34% of GWP, Africa 21%, North America 13% and Asia Pacific 12%.

Market

The International private medical insurance market is estimated to be worth just under US$10 billion growing strongly at a CAGR of 13.5% (2014-2018) 2. The principal drivers of growth are:

· Growth in the number and scale of multinational corporations

· Increasingly wealthy populations in developing economies

· Growth in the number of international students

· Medical cost inflation

These structural growth drivers are expected to underpin increasing demand for multinational risk solutions and for high quality medical insurance solutions.

Competitive Position

The Directors believe the majority of market participants can be divided into two groups:

1. Specialist divisions of large, global insurers: these operate across the value chain with typically standardised products and underwriting, policy administration and client service often performed remotely.

2. Brokers and smaller managing general underwriters: these are typically smaller players who specialise in a limited number of products/geographic regions. They typically perform only part of the value chain and many do not retain risk.

GBGI is well positioned to compete effectively with both categories in its chosen markets and niches. The Group operates across the value chain, controlling the customer experience throughout. Its agile underwriting model allows policy customisation, rather than standardisation. In-house customer service supports high standards of service delivery and retention rates of over 80%3. All these capabilities are underpinned by a disciplined focus on underwriting performance.

Growth Strategy

The Group's strategy is to continue to grow its business by delivering increasing profitability and cash generation while maintaining underwriting discipline.

Revenue Growth

The Group intends to further expand its client base across the following three pillars:

(i) Expand distribution of existing products in existing jurisdictions

(ii) In-fill product gaps in existing jurisdictions

(iii) Enter new jurisdictions

Strategic Development Opportunities

i) GBG Assist: Launched in 2016, GBG Assist provides worldwide customer support with access to assistance on a wide range of medical services, from basic enquiries to emergency medical situations, at any time in over 180 different languages. There is the potential to offer these services to third parties on a fee basis.

ii) A.M. Best Insurer Strength Rating: The Group is currently rated as secure (B++(negative outlook)). The Directors expect that an improvement to an A rating would, if obtained, expand the Group's addressable market.

iii) Acquisitions: The Group monitors opportunities to add scale through the acquisition of smaller businesses or books of business, or to enhance service offerings. On 20 January 2017 the Group agreed to acquire Quality Health Management LLC, a Miami-based company specializing in cost containment, network access and patient assistance for maximum consideration of US$3 million.

New Strategic partnership with AXA

In October 2016 the Group entered into a memorandum of understanding with AXA covering collaboration across four key areas: reinsurance, client referrals, access to new markets and support in improving the Group's insurer financial strength rating. As part of this partnership, AXA is expected to serve as the Group's principal reinsurance partner, taking a quota share participation in all lines of the Group's business.

Current Trading

Since 30 June 2016, the Group has continued to attract new clients. In the six months to 31 December 2016, the Group's GWP and GEP were approximately US$104 million and US$81 million, respectively (US$94 million and US$74 million, respectively, for the six months to 31 December 2015). The Directors remain confident that the Group will achieve Underlying EBITDA and Underlying Profit After Tax in line with their expectations, of its ability to execute on its strategy and in the outlook for the Group's longer term prospects.

Summary Financial Information

Dividend Policy

For the financial year ending 30 June 2017, the Company has a target payout ratio of 60% of annual distributable profits. Going forward the Directors intend to adopt a policy that will see the dividend per share grow in absolute terms. The intention is to split the annual dividend one third as an interim dividend and two thirds as a final dividend.

For the financial year ending 30 June 2017 the Directors intend therefore to pay two thirds of annual distributable profits as a final dividend; no interim dividend will be paid in respect of the financial year ending 30 June 2017.

Board of Directors

The Group benefits from a high calibre senior management team with substantial and diverse experience. Together, the senior management team has collectively approximately 150 years of financial services experience, and has driven the growth and strong financial performance of the business over the past few years.

Robert (Bob) Eugene Dubrish, aged 65 - Chief Executive Officer

Bob has over 35 years of experience in the financial services sector with a track record in leading and building high growth businesses. He joined the Group in February 2015 and was formally appointed as a director of the Company on 26 January 2017. Bob was formerly the president of the wholesale division of New Penn Financial of Shellpoint Partners LLC and senior vice president at loanDepot LLC. Bob was also founder and director of Option One Mortgage Corporation until 2008. At Option One, Bob oversaw its growth to one of the largest non-bank mortgage companies in the USA.

Eric Kevin Dickelman, aged 58 - Chief Financial Officer

Eric has 30 years of experience of financial management across insurance, healthcare and manufacturing. He joined the Group as Chief Financial Officer in November 2011, and is responsible for finance, operations and administration of the Group. Eric was formally CFO of Marina Medical Billing Service, Inc. and prior to this, he held various senior financial management positions including as chief financial officer of Tri-Star Electronics International, Inc. and Pressure Systems, Inc.

Andrew (Andy) Thorburn, aged 73 - Director of Strategic Planning

Andy has over 30 years of experience in the financial services sector. He joined the Group in 1999 as Chief Marketing Officer, became its CEO in 2005 and Executive Chairman in 2015. Andy had previously founded a specialised insurance agency in New Jersey, subsequently acquired by the Travelers Insurance Company in 1985.

William (Bill) Stephen Ward, aged 55 - Non-Executive Chairman

Bill has over 30 years of experience in the healthcare and health insurance sector. Bill was formerly COO of Bupa's Global Health Insurance businesses, Managing Director of Bupa International and CEO of Cigna Europe. Bill is founder and CEO of Lime White Advisory Limited and is currently a Senior Advisor at the Boston Consulting Group for their worldwide healthcare and insurance practices. His independent non-executive experience includes Al Noor Hospitals Group PLC, which was a FTSE 250 company. Bill has also recently been appointed as a non-executive director of Ingenica Solutions Limited. Bill is Institute of Chartered Secretaries and Administrators (ACIS) qualified.

Murray Andrew Wood, aged 46 - Non-Executive Director

Murray has over 20 years of experience in the financial services sector. Murray was formerly Global Head of Insurance Solutions at Japanese bank Nomura where he was responsible for making principal investments in life insurance related opportunities globally. As part of this role, Murray set up Nomura Re to allow Nomura to participate in reinsurance transactions with insurance clients. Prior to that, Murray was European Head of Insurance Solutions at Lehman Brothers in London where he focused on European clients and Director of Insurance Solutions at Barclays Capital. Murray's early career in finance was in providing mergers and acquisitions and capital management advisory services to European insurance companies.

Anne Margaret Gunther, aged 62 - Non-Executive Director

Anne has over 40 years' experience in financial services in the UK, with executive experience across all sectors including insurance, broking and wealth management. Anne is also currently Non-Executive Director of Mattioli Woods plc, Masthaven Bank Limited, and MBNA Limited. Anne was formerly CEO of both Standard Life Bank and Standard Life Healthcare, a director of Standard Life Wealth and was previously a director of Co-operative Bank plc. In her non-executive career, Anne has chaired audit, risk and remuneration committees in both the charitable and commercial sectors. Anne is a Chartered Banker and Associate of Chartered Institute of Bankers (UK) and holds a Masters in Business Administration from Warwick Business School.

David Arthur Gibson, aged 42 - Non-Executive Director

David founded Molokai Partners LLC in 2007. Molokai Partners is a private investment firm that acts as investment adviser to Finbar's controlling trust. Previously, David was a Partner at Socratic Fund Management LP and Managing Director at Tremblant Capital LP. He started his career at William Trading. David's current directorships include Solarsilicon Recycling Services, LLC, Clinical Research Laboratories, LLC, Rockets Sports Group, LLC and XSi International Corporation. David earned a Bachelor of Arts degree in History from St. Lawrence University.

Notes

1 Lives insured under health and life and disability products

2 Source: McGrigor, The global market for International Private Medical Insurance, 2014

3Average aggregate retention rate across the health, and life and disability books of business (excludes travel and other specialist products)

IMPORTANT INFORMATION

This announcement is not an offer of securities for sale or the solicitation of an offer to buy the securities discussed herein in the United States, Canada, Australia, Japan, the Republic of South Africa or in any jurisdiction in which such offer or solicitation is unlawful. Investors should not subscribe for or purchase any transferable securities referred to in this announcement except on the basis of information in the admission document (the "Admission Document") of the Company dated 20 February 2017. Copies of the Admission Document are available for inspection from www.gbg.com, subject to applicable securities laws.

No securities may be offered or sold in the United States unless the securities are registered under the Securities Act of 1933, as amended, or an exemption from registration requirements is available. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Canada, Australia, Japan, the Republic of South Africa or the United States or to, or for the account or benefit of, any national, resident or citizen of Canada, Australia, Japan, the Republic of South Africa or the United States. The Company has not and does not intend to register any securities in the United States, Australia, Canada, Japan or the Republic of South Africa. There will be no public offer of the securities in the United States or elsewhere. Copies of this announcement should not be, distributed, published or transmitted into the United States.

This announcement does not constitute an offer of securities to the public in the United Kingdom.

This announcement is being distributed only to and directed only at (i) persons outside the United Kingdom and (ii) persons falling within Article 19(5) ("investment professionals") of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") who have professional experience in matters relating to investments, and/or (iii) high net worth companies, unincorporated associations and other bodies and persons to whom it may otherwise lawfully be communicated in accordance with Article 49(2) of the Order (all such persons together being referred to as "relevant persons"). This announcement must not be acted on or relied on by any person who is not a relevant person. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.

Canaccord Genuity, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser, broker and financial adviser to the Company and is advising the Company and no one else in relation to the Placing and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Canaccord Genuity, nor for advising any other person in connection with the Placing or Admission. Canaccord Genuity's responsibilities as the Company's nominated adviser are owed solely to London Stock Exchange plc and not to the Company, to any of its directors or any other person.

All terms used but not defined in this announcement shall have the meaning given to them in the Admission Document (as defined above).