Venture capital provider B.P. Marsh has reported that its income for 2020 shrank by 15% due to the impact of COVID-19 on its investment portfolio.
Its portfolio companies responded to the pandemic by maximizing liquidity, although the group’s underlying profit is expected to remain in line with the prior year’s £0.8 million due to cost mitigation.
However, B.P. Marsh maintains that its portfolio generally proved resilient to the challenges of COVID-19, and said insurance investments continue to see significant pricing increases.
“The impact of Covid-19 has not only intensified premium pricing increases but also led to many insurers reducing their risk appetite for new business and seeking to mitigate their existing exposures, presenting opportunities for our portfolio companies to fill the gaps this may create,” the company stated. “The Group expects this to continue into 2021 and beyond.”
B.P. Marsh’s underwriting agency investments, which account for 11 of its 18 current investments, provide insurance across nearly 30 specialist sectors, with not one product area accounting for more than 20% of the £620m of Gross Written Premium produced by these agencies over 2020, an increase of £95 million on the previous year.
The company also noted that it has very limited exposure to business interruption insurance, which continues to be a major area of dispute in connection with the pandemic.
In addition, the Group does not have any exposure to balance sheet risk via its investment portfolio, and is therefore unaffected directly by insurance losses.
“The Insurance Market, with ongoing consolidation and corporate activity, has continued to provide deal flow to the Group, both in terms of new investments and potential realisations,” B.P. Marsh continued.
“Because of the climate, we have taken a cautious approach but believe that we and the portfolio are well positioned looking to 2021. Our appetite for investment, from financing start-ups, to a maximum of £5m as an initial investment amount, has served us well.”
Commenting on performance of Nexus Underwriting Management Limited, Founder and CEO Colin Thompson stated: “Nexus is firmly in the midst of the hardening market, the likes of which have not been felt for the last two decades. We expect the market will continue to harden over the next couple of years at a minimum, which when coupled with the returning economic activity for product areas severely impacted in 2020, should spur strong organic growth for Nexus in 2021.”
“With B.P. Marsh’s investment, Nexus has built up a strong and diversified capacity base, which is essential for an MGA in these conditions,” he added. “Furthermore, Nexus plans to continue adding to its existing 18 acquisitions during 2021, whilst exploring a variety of new strategic avenues in order to fully maximise the current market opportunity.”
And on Fiducia MGA Company Limited, Gerry Sheehy said: “With Fiducia’s book of business weighted heavily towards physical damage cover, we have been less affected than others by Covid-19. 2020 was a year of growth for Fiducia, as we have built on the foundations of the past four years. Fiducia is looking to continue that growth into 2021 and has had a positive start to the year.”
