BP Marsh targets mid-market deals as it reports strong H1 growth

Specialist venture capital firm BP Marsh plans to focus on smaller intermediary opportunities, as the firm reported strong growth in the first half of the year.

Speaking to Insurance Day, the firm's chief investment officer, Dan Topping, said the company is looking to take advantage of the gap in the middle market left by acquisitions by larger firms. 

His comments come as the intermediary-focused investor reported before-tax profits of £17m ($19.2m) for the six months to July 31, compared to £6.2m the same period last year.

Net asset value increased to £179.8m, up from £166.6m at the end of January.

BP Marsh's portfolio include managing general agent Nexus Underwriting, US broker XPT Group and EC3 Brokers. The latter investment "continues to experience difficulty" and has been written down.

During the first half of the year, BP Marsh also made a new investment in Denison and Partners and finalised the disposal of its Spanish broking consolidator, Summa Insurance Brokerage. 

Topping said, with a couple of exceptions, the business had seen growth from across the portfolio.

“It’s a good time to be in the smaller end of the insurance intermediary sector where there’s a lot of opportunity to grow from small to medium-sized because there’s no middle market anymore: they’ve all been bought or merged,” he said.

He said the gap in the middle market had been “a crescendo” with two or three big players making most of the acquisitions. “They’re not leaving much in the middle. They’re buying everything up and clearly that presents an opportunity for entrepreneurial-minded individuals to set out on their own,” said Topping.

'It’s a good time to be in the smaller end of the insurance intermediary sector where there’s a lot of opportunity to grow from small to medium-sized because there’s no middle market anymore: they’ve all been bought or merged'

^{Dan Topping
BP Marsh}

“From our understanding of it, market counterparties trading with London want more options to trade with as opposed to fewer,” he said.

The business reported £12.7m in liquidity and a healthy pipeline of new business opportunities, which Topping described as being “more of the same”, meaning specialty wholesale brokers and underwriting agents.

He added the business had consistently aimed for 10% annual net asset value growth and it should be capable of maintaining this going forward.

On insurance rates, Topping said while the significant increases recently seen were starting to reduce, he expected them to stay strong.

“Looking at what’s happened with Hurricane Ian, the ongoing issues in Ukraine [and] commodity prices, [rates] may start to reduce but I think this has extended the period of potential rate increases,” he said.