What to do with all that cash?

The annual reporting season is now in full swing and more than one firm has already posted record profits for 2009 on the back of excellent underwriting results and the global recovery in financial assets.

Property/catastrophe (re)insurers based in both London and Bermuda have benefitted from the gentle hurricane season and the big question now is how best to deploy that excess capital?

Some may choose to return funds to their investors as Reactions reported Hiscox had done with the announcement of an increased dividend and a declaration that it was ready to buy back shares if the price fell to an “unrealistic level”.

And Bermudian reinsurer Montpelier Re was even more pro-active in this regard, according to BestWire, as it bought the 6.9 million shares previously owned by billionaire investor Wilbur Ross Jr.

Another option is to write more premiums and according to a report by Dow Jones News Service this is exactly what Novae Group is intending to do, despite a modest profit of only £4.2mn last year.

The company’s CEO Matthew Fosh says he expects gross written premiums to almost double to £590mn this year.


Of course what really gets investors and journalists alike excited is the though that companies awash with cash will use it to fund mergers and acquisitions.

Lloyd’s insurer Amlin’s CEO Charles Philipps was quoted in M&A Navigator as saying he would like to use the firm’s bumper profits to follow up last year’s acquisition of Dutch Fortis Corporate Insurance

“By the time we get to the half year, we’ll be more open to larger acquisitions, if we find the right thing,” Philipps said.

Back in Bermuda Max Capital and Harbor Point have agreed to merge in a pact that will rebrand their combined operations as Alterra Capital Holdings Ltd.

This follows last year’s acquisition of IPCRe by Validus and bodes for some interesting times ahead, according to Business Insurance although The Insurance Insider’s excellent commentary on the subject points out that the M&A waters are somewhat muddied by proposed US legislation.

But, it also indulges in some crystal-ball gazing on who might move for who if the landscape were to change favourably and hints that we may see increased action later this year.

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