White Mountains Insurance Group, Ltd. announced today that it has entered into a definitive agreement to invest fresh capital in and to acquire a majority interest in Ark Insurance Holdings Ltd, the ultimate parent company of Ark Syndicate Management Limited.
Ark is a leading Lloyd's platform well positioned to take advantage of the hardening market in property & casualty insurance. Founded in 2007 by Ian Beaton and Nick Bonnar, Ark manages the underwriting of syndicates 4020 and 3902 at Lloyd's. The syndicates underwrite a diversified and balanced portfolio of reinsurance and insurance, including property, accident & health, energy, marine and political risks.
Ark currently has approximately $500 million of stamp capacity. With White Mountains' capital, Ark plans to grow its business substantially by (i) increasing aligned capacity at its Lloyd's syndicates to 100%, (ii) increasing overall stamp capacity, (iii) converting Ark's existing Bermuda reinsurance entity into a Class 4 reinsurer and (iv) hiring talented underwriters in the London and Bermuda markets.
Manning Rountree, CEO of White Mountains, said "Ian, Nick and the rest of the Ark team have built a high-quality insurance business that puts underwriting first. We are delighted to partner with them, and we are excited about the market opportunity in front of us."
Ian Beaton, CEO of Ark, said "We are delighted to have found the right capital partner in White Mountains, an institution with a long track record of successful insurance partnerships. We look forward to a fruitful relationship."
White Mountains will contribute $605 million of equity capital to Ark, at a pre-money valuation of $300 million and will also purchase $41 million of shares from existing owners. White Mountains will commit to contribute up to an additional $200 million of equity capital to Ark in 2021. Total post-closing capitalization will exceed $800 million (and will exceed $1 billion if the additional $200 million is contributed in full).
At closing, White Mountains will own 72% of Ark on a basic shares outstanding basis (63% on a fully-diluted, fully-converted basis, taking account of a sweat equity plan for the go-forward Ark management team). If the additional $200 million is contributed in full, White Mountains will own 77% of Ark on a basic shares outstanding basis (67% on a fully-diluted, fully-converted basis). All shares outstanding not owned by White Mountains will be owned by management rollover shareholders, primarily Ian and Nick.
In the future, management rollover shareholders could earn additional shares in the company if and to the extent that White Mountains achieves certain multiple of invested capital return thresholds. These additional shares have the potential (i) to put rollover shareholders in the position that they would have been in had the current transaction taken place at a pre-money valuation of up to $450 million and (ii) to represent up to 12.5% of the shares outstanding at closing.
White Mountains expects the transaction to close in January 2021.