American Financial Group (AFG) executives are said to be open to offers for the insurance and reinsurance business of Neon, if the price is right.
Senior executives including AFG co-CEO Carl H. Lindner III, CFO Jeff Consolino, and AVP Investor Relations Diane Weidner participated in analyst Buckingham Research’s second annual Boston Insurance & Reinsurance Conference yesterday, during which they discussed the progress being made at Neon.
The analysts said that the executives discussed the future of Neon, as it is not performing to their expectations currently.
They said that Neon needs to gain more scale if it is to be successful, but noted that a more difficult regulatory environment is presenting challenges.
As a result, the analysts wrote that AFG would entertain offers for the Neon business, at the right price.
Neon has been building out its underwriting platform over the last year, with key hires in Bermuda and in London at the Lloyd’s syndicates base, as it looks to expand its footprint and achieve the scale that parent AFG would like to see.
Neon’s property treaty reinsurance book has been growing, but at its size and capacity it is a difficult market to achieve the kind of scale required to perhaps satisfy its owners AFG.
In the current market environment, where acquisitions have been rife, Neon could be a good target for an underwriting house looking for a Lloyd’s platform and Bermuda reinsurance expertise.
As a result of this we’d expect that it will get approached by potential acquirers, but price will likely be key, as Neon has already built out its infrastructure at some expense to the majority owners and investors in the firm.
It’s been widely discussed in the market that a management buyout is one option for Neon’s future, with CEO Martin Reith and others said to be exploring the option.
However, it would be interesting to see whether a private equity buyer may also make itself known, at some stage, as the Neon platform would be a good opportunity for a cash-rich and growth-hungry investor to get into insurance and reinsurance in a relatively meaningful way.
