Lloyd's insurer Brit appoints Evercore to sell £150m UK arm

It is understood that the sale is being led by Evercore Partners, who were instructed by the Brit management to find a buyer for the retail business in the summer following the completion of the £888m takeover by Achilles Netherlands Holdings BV.

The move subsequently saw Brit's CEO Dane Douetil - who had played an integral part in the growth of the UK retail business - replaced by the consultant advising Brit Insurance on its future strategy, Mark Cloutier.

According to those who have seen the prospectus, the first round of bids closes at the end of November, and includes the business currently handled by its Brit UK strategic business unit and its Financial Services Authority regulated company Brit Insurance Limited.

The group expects to receive bids north of £150m for the arm.

JUBILEE, AGEAS AND MMA LINKED
Acquisitive insurance groups such as Ageas UK and MMA have been named as prospective buyers, as has Lloyd's/international insurance groups who may be looking to improve their regional reach and/or need a UK company license such as Jubilee, which was recently taken over by the ambitious Ryan Specialty Group.

However, acquisitive Lloyd's rival Canopius which has major UK aspirations having formed a new UK retail division in the summer, with former UK General CEO and Primary managing director Tim Rolfe as CEO, has already ruled itself out.

A spokeswoman told Postonline: "Canopius has not been approached and is not involved in any process to acquire Brit UK. However, Canopius remains acquisitive and is actively looking at insurance assets at the right price."

In 2010, Brit's UK SBU underwrote £441.2m of gross premium in four main classes of business, of which the largest class of business was property and commercial packages accounting for 47.6% of the portfolio.

Brit said the offices outside London experienced further premium growth in 2010 and, on an underwriting year basis, now represent 30% of the UK strategic business unit's portfolio, up from 20% three years ago.

In contrast, according to FSA returns, Brit Insurance Limited actually underwrote £633.7m in 2010, but it is believed the group is in the process of manoeuvring a tranche of non Brit UK business into its Lloyd's arm ahead of the sale.

PROFITABLE BUSINESS
At the half year 2011 BIL recorded GWP of £321.5m (H1 2010: £334.2m) and a profit after tax of £19.8m (H1 2010: £25.3m). The group as a whole saw GWP for the six months to 30 June 2011 decrease by 0.7% to £845.3m (H1 2010: £851.5m) and report a profit after tax of £6.4m.

Brit stepped up its move into the UK retail market following Douetil's elevation to the position of group CEO in 2005, having acted as deputy for a year beforehand.

He oversaw the appointment of the former Zurich commercial managing director Peter Burrows as UK division head and the subsequent hiring from RSA of Ray Cox (pictured) and Simon Cooter, who continue to play key roles today as UK CEO and market management and regional operations director respectively.

RSA CONNECTIONS
Ageas had been tipped as a natural home for the Brit UK business as it is seeking its own growth in the commercial market following the hiring of Mark Cliff as MD of Fortis Insurance in 2008. Cox, Cooter, Cliff and Ageas' distribution & development director Chris Dobson also all know each other from their time at RSA, where most spent the majority of their insurance careers.

One market source told Postonline: "I agree that this has excellent industrial logic for Ageas. The one fly in the ointment could be its parent's sovereign debt problem. If you look at its half-year return, it declares over Euro 4bn of PIGS exposure."

Postonline understands, however, that while Ageas has seen the prospectus, it has decided not to pursue any interest in the business, ahead of the first deadline for bids.

Other market sources have pointed out that many of those employees attracted to Brit in the first place were sold on its anti-insurance establishment approach and that there is a danger involved if a seasoned market player tried to integrate the business into its existing infrastructure.

RISK TO SALE
Another added: "My understanding is that there is one significant risk to the sale - Brit has some very good people out in the branches, and there is always a possibility that they could be tempted away by another employer, taking their business with them."

As such, major established commercial insurers such as RSA, Aviva and Axa are not expected to be among the front runners for the business.

A Brit spokesman said that it is company policy not to comment on market speculation and rumour.

Ageas and MMA declined to comment for the same reasons.

Jubilee could not be contacted.

Evercore Partners took over the boutique financial adviser Lexicon Partners earlier this year. Lexicon has previously advised Brit in the sale to Achilles, its redomiciliation to Holland and the sale of a majority shareholding in RI3K.

Recently it advised on the sale of Endurance's UK renewal rights and Renaissance Re's US insurance operations to QBE.