The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian insurance agent/broker market is "ripe for consolidation", Bahamas First's chief believes, with its latest acquisitions set to boost its subsidiary's performance by over ten percent.

Patrick Ward, the property and casualty underwriter's president and chief executive, told Tribune Business that expansion through purchasing intermediaries was "an easier growth path" than seeking to acquire rival insurers.

Speaking after Bahamas First's recent acquisition of CMA Insurance Brokers & Agents (CMA), along with gaining the renewal rights to Response Insurance Agency's (RIA) client portfolio, Mr Ward said the two deals combined with have a "material" impact on the top-line and profitability of its wholly-owned agent subsidiary, NUA Insurance Agents & Brokers (NUA).

He added that the "very competitive" Bahamian insurance market was continuing to squeeze both premium pricing and margins, especially at the broker/agent level, and might force further sales and mergers and acquisitions in this sector.

"The market is ripe for consolidation," Mr Ward confirmed to this newspaper. "Acquiring businesses through a broker/agent is an easier growth path as opposed to the alternatives. Organic growth is very difficult, and buying insurance companies is also more difficult and less easy to conclude."

Both CMA Insurance Brokers & Agents and Response Insurance Agency will be merged into NUA, and Mr Ward said of the expected benefits: "It is expected to have a positive material impact on overall top-line growth and the bottom line as well.

"It's difficult to say what will happen in year one, as there will be a lot of issues to sort out, but if the material threshold is 10 percent I would say the impact will be beyond 10 percent."

Mr Ward said market forces were driving consolidation among Bahamian insurance intermediaries, and explained: "I think it's very competitive in the market, which is obviously a great thing from a client point of view.

"Competition tends to be around price for the most part, but this continues to put pressure on margins for all players in the market, particularly in the intermediary sector. The dynamics of what makes a viable operation are changing because of that. If intermediaries have very limited growth opportunities, they might have to consolidate with other entities or look for a sale."

The two acquisitions represent the latest phase of Bahamas First's long-running strategy to pursue expansions through the purchase of other insurance agents and brokers that fit with its own portfolio.

Each of CMA Insurance Brokers & Agents and Response Insurance Agency already write business for Bahamas First, but Mr Ward said this was "not the only issue we considered in terms of whether they were good acquisition targets or not".

"We still proper due diligence on the enterprise," he explained. "The driving factor is more: Does it have the portfolio and history; the criteria we're looking for, and to what extent can we rely on the client base remaining solid for a reasonable period of time.

"We know them well, we are very comfortable with the portfolio make-up, and we feel there's a shared outlook in terms of the underwriting focus and client servicing, and to that extent there should really be a seamless integration into our business."

Mr Ward said there would be "no negative impact from a staffing perspective as a result of this acquisition", with both CMA and Response staff set to be merged into NUA.

He added that Bahamas First would continue to explore expansion-by-acquisition opportunities where "it's the right fit and it ties in with the overall profile of what we're looking for".