Markel Boosts Insurance Linked Securities, to Buy CATCo
Markel Corporation MKL has inked a deal to acquire all the assets of CATCo Investment Management Ltd. (“CATCo”) for an undisclosed amount. The transaction, pending closing conditions, is expected to close in the fourth quarter of this year.
CatCo is reputed for its strong insurance associated investment management capabilities.On the other hand, Markel is a leading global specialty insurer and reinsurer that operates with a strong commitment to provide high quality products and efficient customer service. The combination of Markel’s traditional reinsurance capabilities and CATCo’s specialized business hence will complement each other.
Additionally, the deal will leverage insurance linked securities capabilities despite short-term challenges in the retrocessional and reinsurance markets. Riding on the strength of its ability to offer innovative products and services, Markel is well poised to gain in the long run.
Following the acquisition, the company will operate from its existing Bermuda and Hamilton-based headquarters under Markel’s ownership as Markel CATCo Investment Management Ltd. ("Markel CATCo").
Markel, the diverse financial holding company has made several acquisitions over the last few years to ramp up its inorganic growth. It acquired Alterra in May 2013 for about $3.3 billion, Abbey Protection Plc in Jan 2014 for $190.7 million, Cottrell Inc. in Jul 2014 for $130 million as well as Tromp-Pol Baking Equipment BV (Vanderpol) and Den Boer Baking Systems BV (Den Boer) in Aug 2014.
Markel’s strategic buyouts are well supported by its strong liquidity. The company exited the last quarter with solid cash and cash equivalents of $1.85 billion. Cash from operations was also impressive during the quarter and compared favorably with the year-ago quarter results.
Additionally, the company’s intention to expand globally by adopting the inorganic growth route will likely prompt a revision in earnings estimates and hence, a possible rank upgrade. Currently, the property and casualty insurer carries a Zacks Rank #3 (Hold).
Growth via acquisitions is a well-accepted strategy among insurers. Earlier this month, Arthur J. Gallagher & Co. AJG acquired National Administration Company (“NAC”) to boost its U.S. affinity insurance business. Last month, Brown & Brown Insurance of Nevada, a subsidiary of Brown & Brown Inc. BRO acquired certain assets of Waymark Insurance Services and its affiliates. Also, Willis Group Holdings plc WSH inked a deal to buy PMI Health Group (“PMIHG”) in an attempt to bolster its healthcare advisory business in the U.K.
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