Article img

Insurer in Full: What AUB is getting in £500mn+ deal for Lloyd’s oldest broker Tysers

  • Published by:

  • Topics:
    • Mergers & Acquisitions
    • Strategy

We examine AUB’s disclosures to look at what Tysers currently is and how it will sit within the Australian group…

  • Lloyd’s oldest broker and 7th largest (Marsh McLennan, Aon, WTW, Gallagher, Corant and Howden)
  • 2021 revenues = £183mn
  • 2021 Ebitda £14.7mn; normalised £36.4mn (see below)
  • 2021 GWP fell sharply from £2.4bn to £2bn primarily because of Covid 
  • Valuation of £500mn = 12x normalised Ebitda
  • Carries debt of $386.5mn set to mature in 2022; recently refinanced?
  • Employs 1,100 but plans to split out retail book in JV
  • Strategy to channel wholesale business into Tysers = use Aus retail engine to gain extra revenues
  • Strong Q1/April 22 trading reinforces post-Covid bounce narrative of seller

This morning’s announcement of AUB Group’s £500mn+ takeover agreement for London wholesaler Tysers finally brings certainty over the future for the 1,100 employees at Lloyd’s oldest broker. 

The long-running saga has seen several potential suitors emerge for Tysers at different times, although a transaction with AUB has looked the most likely outcome since The Insurer revealed the Australian group was the frontrunner for a deal at the start of last month. 

Following completion of the deal, which is expected during the first half of next year, Tysers will become a new standalone division of AUB Group.

While Tysers will adopt its new parent’s governance policies and risk frameworks, continuing as a standalone business will reduce the potential for integration risks (and subsequent personnel departures) that would likely have occurred had the acquirer been a rival London wholesaler.

AUB said appropriate retention mechanisms had been put in place for Tysers employees with financial incentives and non-competes in place contingent on retention for 12 months post-completion.

AUB said it expects its remuneration and share ownership model to be compelling to Tysers brokers, with the transition from private equity backing to a long-term strategic owner providing stability for the London wholesaler. It will also create certainty for Tysers’ debt holders and comfort for financial regulators, which are currently investigating the firm over legacy bribery allegations.

Positive start to 2022

The deal comes on the back of a strong start to the year for Tysers. Figures disclosed within this morning’s AUB investor presentation show Tysers generated Q1 revenue of £51.1mn, up 13.3 percent on the fourth quarter of last year and ahead of AUB’s expectations.

Tysers key stats

AUB said Tysers had seen a strong bounce back in pandemic-impacted lines during the first four months of the year, with year-to-date revenue in North American P&C lines up 11 percent compared with the first four months of 2021. 

For its leading contingency business, which was hit hard by Covid-19 lockdowns, revenue is up 780 percent year on year. The business – on a normalised basis – is one of Tysers’ crown jewels with estimated revenues of £12mn and a margin thought to be ~50 percent, according to market intelligence.

Across the group, Tysers has seen revenue rise 6 percent year on year during the first four months of 2022 despite reductions in its international P&C and specialty lines. 

International P&C is down 26 percent due to one-off impacts from ceasing operations in Ecuador and Colombia as well as the impact of Russia-Ukraine sanctions.

Specialty is down 17 percent due to the slow return to activity of horseracing events – thoroughbred bloodstock is one of the largest components of Tysers’ specialty portfolio.

Growth opportunity

Tysers is currently the seventh-largest broker at Lloyd’s and will grow under AUB’s leadership with the Australian group set to redirect ~A$200mn ($140mn) of wholesale premiums through its new acquisition.

Tysers' revenue by practice area

In the presentation today, Tysers was also described as the leading independent London broker with revenues of £183mn. If its revenues grow to £220mn within a set period then it will trigger an additional £100mn payment.

Wholesale and MGA business currently represents 82 percent of Tysers’ portfolio, with marine and aviation the largest component at 27 percent of the broker’s total revenue. 

North American P&C accounts for 16 percent with international P&C representing 14 percent and management risk 11 percent.

On a regional basis, North America accounts for 30 percent of revenue with the UK at 28 percent and Asia 17 percent.

Tysers-Revenue-by-geography

Across the group, Tysers brokered A$3.58bn of gross written premium (GWP) during 2021, down from A$4.27bn the previous year in light of the Covid-19 pandemic. However, it expects to return to growth in 2022 on the back of the strong start to the year.

On a normalised basis, Tysers generated Ebitda of A$64.1mn in 2021 (£36.4mn).

London anchor

AUB stated its desire to grow its London wholesale presence in an investor presentation last week. In this morning’s disclosures, AUB describes how a global footprint anchored in London “remains the best broking model for long-term success”. 

Today, it reiterated its plan to use Tysers as its main wholesale arm, using its ability to place complex risks and reinsurance where necessary on its large retail book and, as a consequence, grow revenues by effectively earning additional fees and commissions. 

The presentation lists Tysers as the third-biggest London broker outside of the big three of Aon, Marsh McLennan and WTW, with £183mn in London wholesale revenue. Only Ardonagh, at £310mn, and Howden, at £270mn, rank as larger players in the space (There is no mention of Gallagher – we assume an anomaly). See graphic 

Tysers revenues vs nearest London market competitors

AUB said consolidation at the top end of the market was creating opportunities for independents of scale, at a time when Lloyd’s strategic plans were improving market profitability.

The presence of Clive Buesnel – described in the presentation as Lloyd’s blueprint architect – as Tysers’ CEO will add further confidence in the broker’s capability to at least grow in line with the wider Lloyd’s market. In part, key to this will be retaining talent which should in theory be easier now there is certainty. 

The combined group, which would have more than A$1bn in annual revenues, would see combined run-rate synergies of ~A$25mn. It will also place A$7.9bn in combined GWP.

Buesnel has described AUB as the “perfect partner to allow Tysers to continue our proud history and support our growth ambitions”. 

“The strategic and cultural alignment is clear, and we are excited about executing on future opportunities together,” he said.

He will form part of AUB’s new operating management structure reporting to group CEO Mike Emmett. The latter will join the Tysers board, together with AUB non-executive director and former Aon UK boss Peter Harmer.

Buesnel’s executive management team includes Jason Collins and David Abraham as co-heads of global broking, Bob Pybus as head of retail, CFO Andrew Westenberger and COO Martin Elton.

 

 

For continued access to market leading content click here to enquire about a subscription to The Insurer - your company may already have a corporate subscription in place...