Shares in AIM-listed insurance and private equity investor B.P. Marsh (BPM:AIM) gained 16% to 221p after the firm posted a healthy increase in net asset value (NAV) for the year to 31 January.
Group NAV rose by 8.5% or £10.7m to £136.9m, net of dividends, meaning an increase of 29.8p in per-share NAV to 380.1p. Including the dividend paid last July, total shareholder returns increased by 9.8%.
EXPONENTIAL GROWTH
The increase was driven by Marsh’s two biggest insurance businesses, UK based underwriter Nexus and US based underwriter XPT Group, which account for 35% and 9% of group NAV, and by its investment in UK financial advisor LEBC which accounts for 22% of group NAV.
Since it invested in Nexus in 2014, the value of Marsh’s 18% holding has grown from £31m to £228m as gross written premiums have increased from £50m to £325m and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) have risen from £2.3m to £15m.
This ‘exponential profitable growth’ has come from new product lines such as trade credit underwriting as well as small bolt-on acquisitions.
Meanwhile, from a ‘standing start’ in 2017, XPT is forecast to write $300m of gross premiums this year, yet Marsh’s cost of investment for a 32% stake was just over £7m.
SMALL IS BEAUTIFUL
Some of its smaller investments have done even better. Its 38% stake in UK insurance brokerage CBC, which cost just £4000, is now worth over £7m, while its 30% equity stake in Canadian specialty risk underwriter cost less than £20 and is now worth north of £2.5m.
While today’s update excludes the potential impact of coronavirus on the firm’s carrying values, management has been in ‘close and constant communication’ with its investee companies to run through various risk scenarios.
'At this juncture Covid-19 appears unlikely to negatively influence the portfolio as a whole in a material fashion, and we remain confident that our investment strategy and sector focus will prove resilient during this period of disruption,' said chief investment officer Daniel Topping.
