" Deal activity among smaller companies has continued apace, with broking groups such as Howden and Ardonagh hoping to beef up their challenge to the largest operators. Private equity investors have poured capital into these challenger brokers in recent years, with Hg taking a stake in Howden last year. That deal boosted Howden’s capacity to make further acquisitions and valued the group at about $5bn including debt."
Financial Times 13th October 2021
With the vast majority of commercial insurance flowing through brokers these battles for market share are important for carriers who must invest in distribution and customers seeking advice on obtaining the best risk cover. As the Business Interruption test case at the FCA showed this year product innovation, coverage wording, underwriting accuracy and finding capacity at a fair value are all key areas where world-class brokers have a pivotal role.
Just as private equity investors have poured capital into these challenger brokers in recent years, investors are also eying the low valuations and big cash piles at UK and European groups opening the doors to agitating shareholders
The slow-moving beasts of the insurance sector are being targeted by activist investors betting that a pandemic knock to valuations and years of overexpansion have made them vulnerable.
“Nobody pushes us harder than we do,” Aviva chief executive Amanda Blanc told the FT last month. “We will constantly be pushing for the organisation to continue to improve, we know it has underperformed in the past, we recognise that and we want to make the performance better,” she added. “We didn’t need Cevian to tell us that RSA had an expense issue and had to therefore improve its productivity,” said Scott Egan, chief executive at RSA’s UK and international business, who has been at the group since 2015, shortly after the activist joined the shareholder register. While productivity goals can be obvious, reaching them is the important bit, he said. “The world is littered with good PowerPoint decks, but the execution is what differentiates.”
Two key insights from ITC 2021 by Celent Senior Analyst Jim Manzini are worth pondering over.
Distribution innovation: Digital agents and brokers , as well as platforms, exchanges, etc., are in the driver’s seat when it comes to distribution innovation, and carriers are becoming more adept at integrating with them.
Executing on innovation: Carriers are realizing the key to insuretech innovation is to change the way they innovate: digital product-led, human-centered design; long-term vision but small, incremental experiments; and modern architectures that support rapid development.
Technology partners will be key players to help brokers and carriers collaborate and compete. Howden is energetically executing strategic plans and investing in these areas.
No time to rest on laurels is there?
Howden, the UK-based insurance broker, has announced the takeover of rival Aston Lark, its largest acquisition to date and the latest in a string of deals by challengers hoping to take on the industry’s top-tier firms.