The Ardonagh Group is selling its personal insurance business in a deal that will give Chief Executive Officer David Ross an £800 million ($1 billion) war chest for further acquisitions in specialist insurance broking.
Ardonagh is selling its Atlanta Group division to the UK insurer Markerstudy, in a deal that values the unit at £1.2 billion, according to a statement Thursday seen by Bloomberg. The deal is being funded by Pollen Street Capital and Bain. Pollen Street will remain Markerstudy’s majority owner.
As part of the deal, Ardonagh will also take a minority equity stake in the combined business worth about £400 million, according to people familiar with the matter.
With the sale, Ardonagh is offloading a division that has made up a fifth of the group and contains household insurer Swinton, van specialist Autonet and motorcycle underwriter Carole Nash. The deal will free up cash the company can use for overseas acquisitions, Ross said.
The company is eyeing opportunities in Continental Europe with Scandinavia a focus, plus deals to build on acquisitions last year in Australia and Portugal, Ross said. The goal is to better compete with insurance giants such as Marsh & McLennan Cos., Aon Plc and Willis Towers Watson Plc.
“You have to have scale to go toe-to-toe with the big brokers because if someone is placing a large amount of business with an underwriter they would have much more negotiating power,” Ross said in an interview.
Ardonagh plans to compete with its bigger rivals by staying private, maximizing its flexibility to react quickly to changing circumstances, according to Ross. “Our plan is to build a sustainable model that allows us to stay private for decades,” he said.
The business, whose chairman is ex-Financial Services Authority chief executive John Tiner, aims to have reporting standards that are similar to that of a public company, but wants to avoid other burdens associated with being listed.
“Twenty years ago, going public was a reward for being successful. It now looks like an extraordinary punishment,” Ross said.
Founded in 2017 from the combination of broker Towergate plus four other entities, Ardonagh is majority-owned by HPS Investment Partners and Madison Dearborn Partners. The company operates as an independent insurance broker with four units — international, specialty, advisory and retail.
Two years ago, the Abu Dhabi Investment Authority acquired a stake in Ardonagh that valued the company at $7.5 billion.
Ardonagh has grown to become one of the 20 largest brokers in the world, having made 130 acquisitions since 2017 and spent about $1 billion annually on deals in recent years. It generated $2 billion in pro forma income in the year to June 30.
The combined business of Atlanta Group and Markerstudy will have nearly 8 million customers across its home and motor insurance businesses with more than £3 billion in annual premiums. The company will ultimately employ around 7,300 people across the UK.
Fenchurch Advisory Partners advised Ardonagh on the deal, while Markerstudy and Pollen Street were advised by Continuum Partners.
“A combination with Atlanta has been a long-term ambition of ours,” said Kevin Spencer, chief executive of Markerstudy. “The strong alignment in our models and shared values and ambitions simply could not be ignored.”
Photograph: City of London; photo credit: Jason Alden/Bloomberg
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