The deal appears to be a move by Torus to concentrate on its core insurance activities—retaining what its CEO, Clive Tobin, terms “niche exposure” on the reinsurance side of the business—whilst for Montpelier Re, the deal will serve to further complement its existing book of short-tail reinsurance and other specialty lines.
In a statement on the move, Tobin said that Torus sees “continued expansion opportunities” in its insurance operations, but that the fi rm has “determined it is more effective for our catastrophe reinsurance business to be integrated into the larger Montpelier portfolio and for us to continue our catastrophe reinsurance participation through a sidecar arrangement”.
For Montpelier, the acquisition of Torus’s renewal rights, coupled with the additional capacity afforded by its sidecar, “further enhances our position in one of our core markets at a time when conditions are visibly improving”, said Christopher Harris, president and CEO of Montpelier.
And in the search for scale that has pre-occupied reinsurers for a time, the deal looks to be a shrewd move by Montpelier in a period when price to book values have been depressed and the appetite for M&A is far from buoyant. For Torus, the sale will enable the fi rm to concentrate on its core insurance business, whilst providing it with the opportunity to deploy capital into the reinsurance space—as and when conditions suit—through its sidecar. It would seem the synergies are mutually beneficial.
Addressing the move, Robert De Rose, vice president – reinsurance ratings at A.M. Best, said: “It is a relatively small deal and appears to be a ‘win win’ for both parties. It allows Torus to focus its underwriting initiatives on core businesses, while retaining some diversifi cation benefit to property catastrophe business through its sidecar. Montpelier gains additional business penetration within its core expertise. In essence, the transaction allows each company to do what they do best.”
The beginning or the end?
It is unclear whether the Montpelier-Torus deal will herald other, similar moves, although the ongoing tussle over Transatlantic Re suggests that a search for further combinations may well be on the cards. Few would argue that the industry is in need of some consolidation, with such developments—should they unfold—likely to encourage a more conservative approach to pricing. However, few shareholders have been interested in pursuing mergers during a period when most players have been trading well below book value. The Transatlantic deal might just serve as a catalyst for further M&A, but those conditions that discouraged such moves continue to prevail, and selective acquisitions—such as that carried out by Montpelier—might just prove a more attractive prospect.
Montpelier, Torus, Bermuda, reinsurance, M&A