Specialist insurance investor ‘well positioned’ to brace portfolio against COVID-19 fallout

Senior leaders of specialist investor BP Marsh said they were “pleased” with the firm’s annual results, as the company said it was “well positioned” to provide financial assistance to its portfolio companies despite tough challenges wrought by the coronavirus outbreak.

Chairman Brian Marsh and managing director Alice Foulk pointed to an increase in the company’s net asset value, which rose to £136.9 million for the year ended 31 January 2020 up from £126.2 million for the previous year (to 31 January 2019), representing a rise of £10.7 million or 8.5 percent.

The results showed consolidated profit after tax rose to £12.5 million from £12.4 million the previous year, marking an increase of 3.4 percent, excluding one-off items of £0.4 million.

The firm, which almost exclusively invests in insurance intermediaries, made two new investments in the 12 month period - Agri Services Company in Sydney and Lilley Plummer Risks in London.

Marsh said: “The group is pleased to have continued to produce a good overall performance throughout the year despite the various challenges we faced.”

Daniel Topping, chief investment officer at BP Marsh and a member of the board for Lilley Plummer Risks, added that he was “very happy with the results given the circumstances”.

He highlighted the firm’s net asset value increase, saying: “We’ve still got cash to pay a dividend and to make new investments and support the portfolio, so I think where we are now is a pretty positive position in light of where the world is.”

As of 31 January, 2020, the company had available cash of £3.8 million, made up of a free cash balance of £0.8 million with access to a further £3 million via a loan facility with Brian Marsh Enterprises. The results showed that as of June 8, 2020, the cash balance had been bolstered further by the repayment of a £2 million loan facility from Nexus Underwriting. It now stands at £1.8 million after providing £1 million of additional finance to the portfolio. Total available cash, including the loan facility, was reported to be £4 million net of the dividend payable in July 2020.

“The group believes it is well positioned to be able to provide financial assistance to our portfolio companies, enabling them to continue to trade through the challenges posed by COVID-19,” a results statement said.

Commenting on the impact of coronavirus, Topping told Intelligent Insurer: “We have had challenges with Nexus. For example, they got a good aviation portfolio when they bought Altitude Risk Partners, unfortunately the aviation sector has closed down in terms of travel. “When all this started we sat down with all our portfolio companies to look at forecasts and liquidity. The Nexus management team were able to look at it and set about restructuring in terms of making sure that everything was set as well as looking at other areas.

“They were hit by aviation but they’ve also got a very significant D&O book where rates are increasing at a fairly rip-roaring rate, so they countered it in other areas.”

Another coronavirus challenge was met head on by EC3, which has a large team of event cancellation brokers, he said. “There aren’t many events happening at the moment and there won’t be for some time I would've thought. But they’ve been supporting their clients in arranging for claims to be paid on events that have been cancelled. And we’ve looked at help for EC3 to get into other areas such as North American property, which again is doing quite significant rate rises.”
Topping added that as BP Marsh’s portfolio is balanced it is able to take on changes.

This strength was highlighted by Marsh and Foulk in the results. They said: “It is our belief that due to the diversity of our portfolio, which operates solely within the intermediary space, we are well positioned to manage through these unprecedented times.

“We have no doubt that there will be difficult hurdles ahead, but our spread of risk across the globe, and across many classes of business, should provide a natural hedge for the challenges to come.

“We have managed our business satisfactorily during previous recessions and financial crises; we are confident that we can build on these experiences and that we are well prepared for what might lie ahead. Staff morale remains high, and we are pleased to be able to deliver a dividend at this time, as well as to provide reassurance to our partners that we are well placed to be able to assist them through the challenges ahead.”