Trust, confidence and open dialogue are the key elements to ensure a smooth journey to concluding a successful transaction. We adopt the same ethos to each situation whether a share acquisition, a (re)insurance portfolio transfer or an assignment of rights.
We have an approachable and open communication style and we apply clear structure to our assessment of investments and management of acquired business. Obligations and responsibilities on both sides are clearly defined, understood and sustained.
In what is a niche business based on trust and expertise, we recognise the need to treat policyholders and other parties fairly, so that on-going commercial relationships can flourish.
Ashbooke provides solutions that eliminate or reduce the financial and operational risks of discontinued, run-off and other non-core (re)insurance business. We operate globally, wherever client needs exist.
Each of our solutions draws on Ashbrooke’s unrivalled expertise, relationships and trust in our approach.
a. Why do you feel there is room for an additional run-off acquirer?
The Ashbrooke team has a proven track record within Corporate Finance and Restructuring in the legacy market for 15 years and has decades of combined expertise. Our launch strategy was to execute a deal before announcing our wider presence to demonstrate that we don’t shy away from opportunities that are complex to execute or may appear less attractive to others. In fact, we welcome them.
To differentiate, Ashbrooke has developed capital models and structures that reduce the cost of capital traditionally associated with the run-off market. This gives us a very broad risk appetite and allows us to be very flexible in our pricing and in developing future operating plans so as to meet all of the exit requirements of vendors. We also focus on a less ‘traditional’ part of the market.
b. What is your focus?
Ashbrooke can acquire at any deal size and we vary our approach to be competitive. This makes us operationally effective and efficient on smaller transactions that are sub-scale and unattractive to other participants. We see the mid/large market as the most competitive with numerous participants in need to execute transactions. Pricing will be key and Ashbrooke, with lower costs of capital and a lean operating model, will have an important role to play.
Furthermore, Ashbrooke is not a “me too” investor – we can look at opportunities differently and provide effective structured solutions so as to minimise our own capital costs. We are not constrained by the need to use any particular form of capital or any committee capital relationship. We therefore retain absolute flexibility and can offer highly competitive financial and non-financial transaction terms to vendors.
c. How would you describe your typical transaction?
Ashbrooke does not have a typical acquisition profile as such. Especially as we are unconstrained by transaction size, transaction structure, geography, class of business or locked-in capital sources etc. That said, we believe we can add most value to vendors in the more complex situations.
Ashbrooke’s solutions are ideally suited to situations that require reorganisation, restructuring, carve-outs, add-ins or structured solutions (e.g. Special Purpose Reinsurance Vehicles) as they hit the sweet-spot of our core skill set. Purchase price tends to be only one of a number of factors that will influence and measure transaction value on the part of vendors.
Another transaction source that we are keen to support is incumbent management teams of run-off portfolios, divisions and companies. They have the in-depth knowledge of the underlying run-off operations and the institutional knowledge to smooth an exit for potential vendors. We are happy to support such management teams with acquisition finance, transaction advice and regulatory support
In addition, we could be the perfect partner for smaller scale, secondary buy-out opportunities from historic and existing run-off acquirers. Such investments have been managed down in scale since the original purchase and are below the size and return profile of the parent group These transactions may come as portfolio transfers as a cleaning-up or solvent liquidation event for the run-off entity.
In all of the above situations, we are happy to review investments in competition with other market participants.
d. Would you expect to see further competition emerging in this sector and if so from what type of organisation?
We believe any future competition will be driven by new capital. We expect this additional competition, both sustained and for specific, one-off situations, from: (1) existing (re)insurance market participants undertaking a “live to legacy” play as a consequence of the need for capital efficiency and risk diversification in a Solvency II world; and (2) cash rich investors (eg. sovereign wealth funds, hedge funds etc) driven out of bond holdings due to interest rate increases, specifically holders of US dollar denominated debt, chasing attractive investment opportunities.
The challenge for this new capital, however, will be finding the right management team with the appropriate experience and a business plan that offers something different. Otherwise increased competition, driven by capital only, will push up prices.
e. How do you think the legacy market will develop going forward?
We expect a large number of transactions to be portfolio transfers from live underwriting businesses or existing run-off companies to facilitate capital efficiency or as a result of a solvent liquidation exercise. Our ethos and core skills will make an Ashbrooke structured solution very attractive to such vendors.
We foresee increased activity coming from three sources: (1) the increased flow of transactions as a result of the dislocation provided by Solvency II; (2) the continuing low interest rate/inflation environment, specifically in Europe; and (3) our expectation that future transactions will be increasingly driven by Corporate Finance/Restructuring solutions rather than Insurance/Claims Management driven solutions.
f. What are your capital sources?
We have access to all available capital sources such as debt, equity and reinsurance.
As Ashbrooke is able to prove it has the skills to support high quality, properly structured run-off market investments and can demonstrate the appropriate risk adjusted returns, investing institutions – whether lenders, equity funds or reinsurers – are prepared to make capital available.
Ideally we structure capital such that its costs and characteristics, change as the risk profile of each investment changes during its run off. This will attract different capital providers. Futhermore, Ashbrooke’s understanding of capital markets means we won’t raise money at historic prices from inappropriate sources.