The Lloyd’s of London managing agency platform of in run-off Neon Underwriting, part of American Financial Group, Inc., is up for sale in a process being run by broker TigerRisk Partners, we understand.
That placed the Neon managing agency business into run-off, with AFG’s goal being to reallocate capital to its other insurance businesses and opportunities that have the potential to earn its targeted returns on investment, AFG said at the time.
Neon was running as a live managing agency at Lloyd’s until January, after which it went into a state of run-off, but retained many of its staff to manage that process.
The Neon managing agency business at Lloyd’s is now being offered for sale, with a number of different opportunities seen to attract potential buyers.
The Neon managing agency could be repurposed as a run-off consolidator for Lloyd’s books of business, is one opportunity being explained to potential buyers we understand.
Already with some £250 million or so of reserves from the Neon portfolios, the managing agency vehicle could be used to enter into reinsurance to close transactions with other syndicates, giving them finality on certain books of business while allowing the Neon managing agency structure to manage those books to completion. Neon’s existing reserves can provide any legacy-focused buyer with immediate diversification as well, we’re told the sales pitch explains.
We understand that this has attracted some of the largest legacy players and a range of the usual suspects, who seeing the potential for run-off opportunities to increase in the London market, given the uncertain impacts of Covid-19, believe this could be an attractive proposition at this time.
The Neon structure could also be used to provide managing agency services to other Lloyd’s layers and syndicates, we’re told. This could include enabling access to Lloyd’s business for investors, as well as helping underwriters and MGA’s access the market, or acting as a home for start-up syndicates to launch into the market, we’re told.
Finally, someone could buy the Neon managing agency as a live concern, launching new syndicates for itself from what is a fully-formed Lloyd’s platform. For any companies looking to enter Lloyd’s, or a major private equity investor looking to launch and quickly scale an insurance or reinsurance platform, this could be an interesting opportunity as well.
We’re told the sales pitch details a modern and scalable Lloyd’s platform that Neon had created, as well as a strong team of full time employees that are still with the managing agent, that could allow a buyer to get up to speed in the Lloyd’s market rapidly.
The managing agency had written more than £300 million of premiums as recently as two years ago and is seen as quickly ready to return to those levels, with the right backing and business plan (Neon had been planning expansion in 2020 and beyond).
TigerRisk is running this sales process, we’re told.
Given the resurging interest in re/insurance from private equity investors, as well as some other large backers, all of who are seeking quick entry routes to capitalise on hardening insurance and reinsurance rates, the sale of Neon’s managing agent could attract significant interest, it is believed.
As ever, price will be key, as while interest is rising on entering re/insurance, investors are very focused on making strong returns from any initiative they support, so to enable that the managing agent will have to be keenly priced, no matter what strategic direction an eventual buyer wants to take it in.