Canada Pension Plan Investment Board to acquire Lloyd’s syndicate Ascot Underwriting for US$1.1 billion

The Canada Pension Plan Investment Board (CPPIB) announced on Friday that it has signed an agreement with American International Group (AIG) to acquire 100% of Ascot, AIG’s Lloyd’s platform, for a “total consideration” of US$1.1 billion.

The CPPIB said in a press release that the transaction involves the acquisition of Ascot Underwriting Ltd. and Ascot Corporate Name Ltd. (together Ascot), as a capital provider for Syndicate 1414 at Lloyd’s, and is subject to customary regulatory approvals and closing conditions. AIG added in a statement that it will receive approximately US$240 million in net cash proceeds from the transaction after Syndicate 1414’s Funds at Lloyd’s recapitalization and release of the AIG-guaranteed letter of credit currently supporting Funds at Lloyd’s.

Upon closing, Ascot will continue to operate as a standalone, independent business governed by its own board of directors and will retain its entire senior management team and approximately 194 employees, led by its CEO, Andrew Brooks. AIG will continue to maintain its strategic partnership with Ascot Underwriting Bermuda Ltd.

As part of the agreement, AIG, CPPIB and Ascot intend to expand a “collective commercial relationship in Bermuda and for AIG to be a preferred reinsurer to Syndicate 1414,” AIG said in the statement.

Based in London, England, Ascot is a Lloyd’s syndicate and a global specialty (re)insurance underwriter. Ascot operates globally, with expertise spanning multiple lines of businesses, including property, energy, cargo, terrorism and political risk, marine hull and liability, casualty, renewable energy, excess of loss, reinsurance, and specie and fine art.

The CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 19 million contributors and beneficiaries, the release explained. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York and São Paulo, CPPIB invests in public and private equities, real estate, infrastructure and fixed-income instruments. It is governed and managed independently of the CPP and at arm’s length from governments. At June 30, 2016, the CPP fund totalled $287.3 billion. 

Related: Ascot Underwriting, AIG open new Bermuda-based reinsurance platform

“Ascot is well respected within the Lloyd’s market for its ability to underwrite complex and critical risks, with many of its underwriters recognized as experts in their respective classes of business,” the release said. “Lloyd’s is the oldest and most prominent marketplace for specialty risk. CPPIB expects to pursue mutually beneficial business opportunities with AIG through Ascot moving forward as we seek to build on the collaborative relationship developed through this transaction.”

Ryan Selwood, managing director, head of direct private equity with CPPIB, said that the acquisition “represents another important step in our strategy to achieve scale in targeted sub-sectors within financial services through long-term platform investments. We have studied the global property and casualty insurance sector for several years and specifically identified Ascot as an ideal platform through which CPPIB can access diverse global insurance premiums at scale. Ascot’s proven track record of superior underwriting performance through pricing cycles, standing in the Lloyd’s specialist insurance market and highly experienced management team, provides CPPIB with turn-key access to an asset class that is well-suited to our long-term horizon.”

Brooks said that Ascot is “thrilled” to be entering into a strategic partnership with CPPIB that will have “at its core a common philosophy, understanding and long-term vision, and which will enable Ascot to position the business in a way that will significantly enhance the services that it can offer to both its clients and brokers. CPPIB ownership and their depth of capital resources will allow Ascot to move to the next stage in its development and to deliver a business plan for profitable growth over the long term with strongly aligned goals and objectives.”

CPPIB continues to expand its global platform strategy, which leverages comparative advantages of a long-term focus and access to capital at scale, the release said. “In Ascot, CPPIB is acquiring a best-in-class global platform in the property & casualty insurance sector, which will provide durable cash yield and an attractive scalable investment for the (CPP) fund.”