Date: 8 February 2022

B.P. Marsh & Partners Plc

("B.P. Marsh", the "Company" or the "Group")

Trading Update

Chairman's Update

Introduction

B.P. Marsh, the niche venture capital provider to early stage financial services businesses, is pleased to provide the market with an update on trading for the Group's year ended 31 January 2022.

Update

We have had a positive year to 31 January 2022. This began with the early repayment of loans from Stewart Specialty Risk Underwriting Ltd in Canada, and from Nexus Underwriting Management Limited and CBC UK Limited, both headquartered in London.

However, we are particularly pleased with the number of disposals which have been completed in the second half of the year. We have realised our holdings in MB Prestige Holdings PTY Limited in Australia, Mark Edward Partners LLC in the USA and Walsingham Motor Insurance Limited in London. We are also in the final stage of the proposed sale of our majority stake in Summa Insurance Brokerage S.L. ("Summa") in Spain. More information about each disposal can be found below in the Chief Investment Officer's report.

We continue to keep a close eye on the developments regarding Coronavirus but we are encouraged by the recent relaxation of restrictions in the United Kingdom and the fact that business appears to be 'returning to normal'. In line with this, the Company is beginning to return to the office on a more regular basis, adopting a hybrid approach where appropriate.

We are looking forward to 2022 and believe the Company is well positioned to take advantage of opportunities as they arise.  

Net Asset Value

One of the Group's key financial objectives is the delivery of long-term growth in Net Asset Value. The Group's interim results to 31 July 2021 showed an increase in Net Asset Value to £155.0m (31 July 2020: £142.6m; 31 January 2021: £149.9m), producing a 4.0% return to shareholders (including the payment of a dividend) in the six month period. The Group remains positive regarding its ongoing performance.

We remain focussed on taking actions to reduce the differential between Net Asset Value per share and the current share price.

Cash Balance and Loan Facility

Group cash has increased by £8.5m overall since the Interim Results to 31 July 2021 to £8.6m as at 31 January 2022. This increase was mainly due to receiving £5.0m from the sale of Walsingham Motor Insurance Ltd including the repayment of our £0.3m loan from Walsingham Holdings Ltd, plus £2.0m from the repayment of loans from CBC UK Ltd and £1.1m from the disposal of the Group's interest in Mark Edwards Partners LLC. This enabled the Group by November 2021 to repay the £1.0m drawn down from its £3.0m loan facility with Brian Marsh Enterprises Ltd, a company of which I am a director and sole shareholder.

In addition, we are expecting to receive a further £9.6m in cash from the sale of our investment in Summa and the repayment of outstanding loans to that company.

The £3.0m loan facility with Brian Marsh Enterprises Ltd expired on 29 January 2022 and the Group is now debt free with significant cash resources to fund future investments.

Dividend

The Board has recommended a dividend of 2.78p per share (£1.0m) for the financial year ending 31 January 2022 to be paid in July 2022, subject to Shareholder Approval at the Company's Annual General Meeting.

This represents an increase of 13.9% over the dividend of 2.44p per share (£0.9m) paid in respect of the prior year.

It is the Board's aspiration to maintain a dividend of at least 2.78p per share for the years ending 31 January 2023 and 31 January 2024, subject to ongoing review and approval by the Board and the Company's shareholders, and the anticipated disposal of Summa completing on the agreed terms.

Publication of Full Year Results

The Group intends to release its Full Year Results for the year to 31 January 2022 on 13 June 2022.

Brian Marsh OBE

Chairman

7 February 2022

Chief Investment Officer's Update

Over the year ending 31 January 2022, our underlying portfolio has continued to perform well, notwithstanding the lingering challenges posed by the Covid-19 pandemic. This performance is expected to continue throughout the Group's current financial year, to 31 January 2023, in which we see many opportunities for further growth. 

Over the last 12 months, our focus has been on our existing portfolio, and in the final quarter, the Group made a number of realisations. 

This has resulted in an increase in the Group's liquidity, with a forecast cash balance of approximately £18.2m, subject to the completion of the sale of Summa Insurance Brokerage S.L.. 

Realisations

MB Prestige Holdings PTY Limited ("MB") 

·    Sale date: August 2021

·    Proceeds received: AU$6.8m (£3.6m) of Shares in ATC Insurance Solution PTY Limited

·    31 July 2021 Valuation: £3.6m

In August 2021, the Group sold its 40% equity stake in MB for AU$6.8m (£3.6m) to ATC Insurance Solutions PTY Limited ("ATC"), in which the Group is also a shareholder.

The Group received newly issued shares in ATC in consideration for its stake, increasing its overall shareholding in ATC to 25.5% from 20%.

The acquisition by ATC valued 100% of MB at AU$17.0m (£9.0m), representing a c.20% uplift over the Group's published valuation of MB as at 31 January 2021.

This realisation represented an Internal Rate of Return of 29% since the Group's original investment in MB in 2013 (inclusive of all income and fees) and a money multiple of equity invested of almost 9x. 

This transaction demonstrates the Group's bespoke and flexible approach to investing and realising investments within the financial services sector, in terms of both size and structure.

Mark Edward Partners LLC ("MEP")

·    Sale date: November 2021

·    Proceeds received: $1.5m

·    31 July 2021 Valuation: £nil

In November 2021, the Group exited in full from its position in MEP, for a cash consideration of $1.5m (£1.1m).

The Board of B.P. Marsh was not aligned with the strategic direction of the business and therefore negotiated with Management an exit for $1.5m (£1.1m) for its aggregate position in MEP. Such a transaction removed uncertainty with MEP's ongoing valuation for B.P. Marsh and allowed the Management team to pursue their own strategy going forward.

Walsingham Motor Insurance Limited ("WMIL")

·    Sale date: December 2021

·    Proceeds received: £4.8m

·    31 July 2021 Valuation: £3.9m

In December 2021, the Group sold its 40.5% stake in WMIL to Humn.ai Limited ("Humn"), a London-based insurance provider producing real-time data-driven fleet insurance, for a cash consideration of £4.6m.

The Group also received repayment of its £0.3m loan Walsingham Holdings Limited and will also receive a further £0.2m in cash from its 20% shareholding in Walsingham Holdings, which results in total proceeds of £4.8m.

The sale of the Group's shareholding in WMIL to Humn produced a 23% uplift over the last published valuation in July 2021, and represented an 8x money multiple and an Internal Rate of Return of 22% (inclusive of all income and fees).

This transaction is a good example of the Group's strategy of investing for the long term in start-up and early stage businesses with ambitious management teams, assisting in the growth of a business, before disposing of its stake at a beneficial time for all parties involved.

Summa Insurance Brokerage, S.L.

Proceeds to be received: €9.7m (c.£8.1m)

31 July 2021 Valuation €9.4m (£8.0m)

In January 2022, the Group agreed to the conditional disposal of its 77.25% holding in Summa to Acrisure España S.L., part of Acrisure LLC, the global financial services business, for a cash consideration of €9.7m (c.£8.1m).

The sale is conditional upon, inter alia, the approval of the Direccion General de Seguros, the Spanish financial regulator, which supervises and controls Spain's insurance sector.

As at 31 July 2021, the most recent published valuation, the Group valued its shareholding in Summa at £8.0m. As such, the proposed sale represents an uplift of c.£0.1m over this most recent valuation.

Additionally, upon completion, Acrisure España S.L. will acquire in full the Group's outstanding loan of €1.8m (c.£1.5m) pursuant to the terms of the disposal, which we will receive in cash.

Increased Investments

Nexus Underwriting Management Limited ("Nexus")

In October 2021, B.P. Marsh acquired a further 100,000 shares in Nexus for £4m from Ian Whistondale, a founding non-management shareholder.

The Group saw this further acquisition as an excellent opportunity to acquire a further 2.49% shareholding in Nexus at a discount to our last valuation, whilst also allowing a founding shareholder to partially realise the value of his equity in Nexus, without the need to exit in full.

The funding for this further acquisition came from the repayment in full of Nexus' £4.0m loan from the Group. The repayment was a result of Nexus securing a new £70.0m banking facility from Barings LLC.

Nexus is now one of the top ten global MGAs and one of the top three globally, outside the USA. Nexus operates in 18 specialty classes, and has relationships with over 800 brokers and around 40 insurance carriers.

Its subsidiary, Xenia Holdings Limited, is the largest independent specialist trade credit and surety broker in the UK, with a c.20% market share of trade credit insurance distribution.

Since B.P. Marsh first invested in Nexus in August 2014, it has grown from a Gross Written Premium ("GWP") of £55.0m to a projected figure of over £440.0m in 2022. Over the same period, Nexus has grown its EBITDA by over 7x. Management's goal remains taking the business to over $1.0bn of GWP.

New Business Opportunities and Outlook

As has been noted above, the Group has made a number of realisations in its financial year to 31 January 2022, which has resulted in an increase in liquidity, with current available cash of £8.6m and an anticipated balance of approximately £18.2m subject to the completion of the sale of Summa.

Throughout the pandemic, our focus has been on ensuring the stability of our existing underlying portfolio, whilst always keeping an eye on new business opportunities.

Given the number of successful realisations and the Group's current liquidity there is now a  focus on new business, and the Group has an active pipeline of new business opportunities which are currently being considered.

B.P. Marsh is well known in the sectors in which it specialises and the current number of opportunities presented to the Group remains high. This includes (but is not limited to) the following:-

·    A start up specialist wholesale Lloyd's broker; 

·    An established Underwriting Agency, which focuses on professional and management liability for insurance companies and agencies;

·    An online data-driven home insurance platform;

·    A UK specialist high net worth insurance broker;

·    An established international Lloyd's broker; and

·    An international (re)insurance broker

Whilst there are no guarantees that we will invest in the above opportunities, these are the main proposals currently under consideration.

We continue to focus on investing in niche SME sectors, in businesses backed by experienced and capable management teams. Given the current pipeline of new investments, we are optimistic that we will be able to secure scalable and high growth investments, which will deliver substantial shareholder returns over time.

Looking at the insurance intermediary industry more generally, the Group sees many opportunities stemming from current market conditions. Rates in many lines have hardened steadily for at least 18 months, which in turn has increased the profitability of the businesses in which we invest.

Much focus has been placed on how long the current wave of rate hardening can continue and there has been some slowing of rate increases across some classes of business. However, across many business lines, it seems that price increases will continue throughout 2022.

Lastly, whilst the insurance intermediary industry as a whole weathered well the economic   uncertainty brought about by Covid-19, growth was slower than it might have been, as insureds defended their positions throughout this time.

Now, as the global economy once again ramps up as countries reopen, and businesses look to expand, so does their need for extended insurance coverage. In light of this, the Group see many opportunities for growth across our existing portfolio and beyond in 2022.  

Portfolio Developments

UK Investments

Paladin Holdings Limited / CBC UK Limited ("CBC")

CBC, the London based Retail and Wholesale Lloyd's Insurance Broker, has performed well in its financial year to 31  December 2021, producing a year on year increase in EBITDA of over 35%.

In the year, CBC secured £3.0m in financing facilities from Coutts & Company, which enabled the business to repay £2.0m of debt provided by B.P. Marsh. CBC is utilising the remainder of this funding to expand its product offerings.

Within the year, CBC hired a new team to focus on Global Risks, including Crime, Professional Indemnity, Directors and Officers Liability, Cyber Liability and Medical Malpractice.

The team, which is led by Mark Winston, have been together for over 30 years and are highly effective and well-known throughout the industry.

CBC have also appointed Chris Tully to head up their Art & Private Clients division. Chris Tully is highly experienced and well recognised throughout the industry. Before joining CBC, Chris held senior positions with the Layton Blackham Group and the Jelf Group.

The Fiducia MGA Company Limited ("Fiducia")

Fiducia, the Group's UK Marine Cargo Underwriting Agency, continues its successful growth trajectory and expects GWP in excess of £20.0m for its financial year to 31 December 2021, representing considerable year on year growth, with GWP growing by 35%. 

Fiducia has an extensive distribution network, which has allowed it to write a substantial amount of new business in 2021 across its various facilities.

The Group sees no reason why a similar level of new business income cannot be achieved in 2022 in which event Fiducia's GWP may increase to a figure in excess of £25.0m. 

LEBC Holdings Limited ("LEBC")

In January 2022, the Group announced that Tavistock Investments Plc ("Tavistock") had agreed to acquire the shares in LEBC owned by Marie McVitie, the widow of LEBC's Founder Jack McVitie, subject to the FCA providing its approval.

Once approval has been granted, the consideration paid by Tavistock to Marie McVitie for her shareholding in LEBC will be £10.0m. This implies a 100% equity valuation for LEBC of £44.5m, underpinning the Company's own valuation of LEBC at 31 July 2021 of £25.0m for its 59% shareholding.

Tavistock is an AIM listed financial services group that has over 175 advisers across the UK helping 40,000+ clients look after more than £4.0bn of investments.

B.P. Marsh, alongside LEBC's Management Team, look forward to working with Tavistock to support LEBC in entering the next phase of development and growth.

North American Investments

XPT Group LLC ("XPT")

The Group's investment in XPT, the specialty lines distribution business, continues on its strong growth trajectory.

Over the course of the Group's investment, XPT has made many acquisitions and now has a strong presence on the West and East coasts, as well as a growing footprint in the Midwest, with a diversified book of business.

Recently, XPT acquired Insurance Brokers, Inc. ("IBI") a wholesale insurance broker and general agency based in Indianapolis, Indiana. IBI offers its agents a broad range of personal and commercial insurance products and has licences in nine states across the US.

IBI works with a number of admitted carriers, including but not limited to, Amtrust North America, Chubb, CNA, Hanover, Nationwide, AEGIS.

The acquisition of IBI will provide XPT with access to additional insurance carriers in the personal lines space. Such access will enable other divisions within XPT to sell these products to existing customers as an add on to their core offering. It will also provide XPT with further expertise that intersects with XPT's current partnerships and expands its geographic footprint.

The acquisition of IBI exemplifies XPT's strategy and style, acquiring businesses which bring numerous synergies and benefits to the whole group, and a high level of service to its clients across the small and medium enterprise marketplace.

XPT achieved GWP of c.$400.0m in its financial year to 31 December 2021 and is looking to substantially grow this in 2022, both organically and via acquisitions.

Acquisition growth will continue through the utilisation of its aggregate $67.7m financing from Madison Capital Funding LLC ("Madison"). Madison have supported XPT since 2019 when they provided $37.4m alongside taking an equity stake in XPT. In October 2021, Madison provided an additional $30.3m to further support XPT's development.

Madison, founded in 2001, is a market leader in providing middle market companies with debt solutions and is a leader in financing the insurance distribution sector. Madison is backed by the financial strength and stability of New York Life Insurance Company and has $10.6bn of assets under management, exclusively investing alongside private equity sponsors and other investors.

Stewart Specialty Risk Underwriting Ltd ("SSRU")

The Group invested in SSRU in 2017. Since then, SSRU, the Toronto based independent underwriting agency and coverholder at Lloyd's, has grown significantly.

In its financial year to 31 December 2021 SSRU hit the milestone of CAD$50.0m of GWP, and outperformed its revenue and EBITDA budget.  

SSRU's strong year on year growth is expected to continue through 2022 and beyond.

Australian Investments

B.P. Marsh's existing investments in Australia (Ag Guard PTY Limited, ATC Insurance Solutions PTY Limited and Sterling Insurance PTY Limited) continue to perform well in an insurance market which although challenging from a performance perspective, has presented these companies with growth opportunities. As such premium income and profitability has increased across the board.

Daniel  Topping

Chief Investment Officer

7 February 2022

For further information:

Notes to Editors:

B.P. Marsh's current portfolio contains fourteen companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Several of the directors have worked with each other in previous roles, and all have worked with each other for over ten years.

- Ends -