Argo Group International Holdings, Ltd., announcing its first major acquisition in eight years, said it will buy Ariel Re for roughly $235 million cash in a deal that could make it a top 10 market at Lloyd’s.

Both companies are international underwriters of specialty insurance and reinsurance products. Argo, with roots as a U.S. specialty company, expanded to Bermuda with the acquisition of property-catastrophe reinsurer PXRE in 2007, and into Lloyd’s with the acquisition of Heritage in 2008.

Argo’s acquisition of Ariel Re is expected to be completed during the first quarter of 2017 and is subject to relevant regulatory approvals.

Ariel Re, a class of 2005 reinsurer, was established by Don Kramer with a consortium of private equity sponsors, which included Blackstone, Thomas H. Lee and Oak Hill. Today, Ariel Re is jointly owned by Banco BTG Pactual S.A. and the Abu Dhabi Investment Council and underwrites a global portfolio of insurance and reinsurance business through Lloyd’s Syndicate 1910.

Mark Watson
Mark Watson

In a statement about the deal, Argo Group CEO Mark E. Watson III said, “There is great synergy between the teams from both companies and we are looking forward to working together to strengthen the offering for our clients.”

“Ariel Re is a terrific fit for Argo Group—operationally and culturally,” he added.

“We’re not becoming a broader reinsurance company. What we’re creating is more critical mass for what we’re already doing with our property-cat reinsurance portfolio in Bermuda and also achieving more economies of scale in London at Lloyd’s,” he said in an accompanying video message.

Noting the good strategic fit, he said the deal will move Argo up the leaderboard in Bermuda and to the top 10 or top 12 underwriter spot at Lloyd’s.

“Under the leadership of Jose A. Hernandez, head of Argo Group’s International Business, the combination of Ariel Re and Argo Re will result in a market-leading business and will make a meaningful and immediate contribution to earnings and return on equity,” Watson said.

Watson says the deal is part of Argo Group’s strategic initiative to build scale in its London- and Bermuda-based platforms by adding complementary lines of specialty business. After the acquisition, Argo Group will have a portfolio mix that’s about 88 percent insurance and 12 percent reinsurance. Watson said the Argo remains committed to the specialty insurance business. With added diversification from direct and facultative business written by Ariel and some complementary E&S business that Argo doesn’t write, Watson sees the deal improving his company’s ability to manage through changing market cycles.

“Argo Group have long been supporters of Ariel Re and we are delighted to take this relationship forward by bringing Ariel Re under the Argo banner,” says Ryan Mather, Ariel Re CEO. “There is great synergy between the teams from both companies and we are looking forward to working together to strengthen the offering for our clients.”

Source: Argo Group International Holdings, Ltd