Insurance Claims Firm Cunningham Lindsey Put Up for Sale

By and | March 29, 2012

Cunningham Lindsey, an insurance claims management company controlled by buyout firm Stone Point Capital LLC, is up for sale and could fetch more than $1 billion, sources familiar with the situation said.

Bank of America Merrill Lynch is advising Cunningham Lindsey on the auction, the sources said, adding that the company is expected to draw interest from private equity firms.

Stone Point owns a majority stake in Cunningham Lindsey, while property/casualty insurer and reinsurer Fairfax Financial Holdings Ltd. owns a large minority stake. First round bids are expected near the end of this month, the sources said.

Separately, Stone Point is also selling Genex Services Inc., a care management service provider to insurance carriers, the sources said. Stone Point bought Genex in March 2007. Bank of America Merrill Lynch is advising on that sale as well, the sources said.

Representatives of Stone Point and Genex declined to comment, while spokespeople for Cunningham Lindsey and Fairfax did not respond to a request for comment.

The asset sales signal a tentative pickup in deal activity in the insurance industry, as valuations in some areas begin to recover. Typically, the non-risk bearing segment of the industry, such as insurance brokers, tend to see benefits of increasing prices before the insurance companies themselves.

Last month, BB&T Corp. said it would buy the life, property and casualty insurance operations of Crump Group Inc. – the second largest wholesale insurance distributor in the United States – from J.C. Flowers & Co. LLC for $570 million in cash.

The deal valued the company at about nine times projected earnings before interest, taxes, depreciation and amortization (EBITDA) and 1.8 times projected revenue.

AmWINS Group Inc., the largest wholesale insurance broker in the United States measured by premiums placed, is also on the block. The company’s owners have put most of the company up for sale, expecting about $1.5 billion, three people familiar with the matter said earlier this month.

Shares of private equity-backed Guidewire Software Inc., a provider of software to property and casualty insurers, soared 32 percent in their debut on the New York Stock Exchange in January.

These sale plans also come as private equity firms seize opportunities across all sectors of the economy as markets thaw again after what has been an exceptionally volatile period since the financial crisis of 2008.

Private equity has often been stuck holding on to investments longer than it had hoped as markets have roiled both their traditional ways to exit investments — initial public offerings and outright sales.

LARGE RETURNS

Stone Point bought a controlling stake in Cunningham Lindsey from Fairfax in December 2007 through its fourth private equity fund — Trident IV — paying about C$88 million for a 51 percent interest.

It owned 43.2 percent of the company as of the end of 2011, with a fair value of about $230 million. Cunningham Lindsey’s senior managers have invested about $10 million in the company.

In January last year, Cunningham Lindsey bought the U.S. loss-adjusting business of GAB Robins North America Inc. It did not disclose the terms of the deal.

Sources said Cunningham had an EBITDA of around $120 million, which at a multiple of 10 times would value the company at more than $1 billion.

Cunningham Lindsey’s services include claims adjusting, appraisal and claims and risk management for property and casualty insurance losses. Its customers include insurance and reinsurance companies, insurance syndicates, insurance brokers and multinational corporations.

Stone Point has raised and managed five private equity funds – the Trident Funds – with combined committed capital of $9 billion.

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