Ambac buying majority stake in ILS capacity-supported Beat Capital

Ambac Financial Group, Inc., an NYSE listed insurance holding company, has entered into a definitive agreement to acquire a 60% controlling stake in Beat Capital Partners Limited, the London-based long duration re/insurance investor, underwriter and MGA incubation platform.

Beat Capital will become part of Ambac’s Cirrata Group insurance distribution platform.

The move is of interest to us, as Beat Capital has been supported by ILS capital from certain insurance-linked securities (ILS) investors and funds, including Canadian pension Ontario Teachers’.

Ambac will purchase 60% of Beat Capital from existing shareholders, including Bain Capital, an investor that bought in back in 2020 to provide capital to Syndicate 4242 and support Beat’s underwriting businesses operating in the Lloyd’s market, as well as from Beat’s management team.

“This is a monumental day for Ambac,” explained Claude LeBlanc, President and Chief Executive Officer of Ambac. “The acquisition of Beat, which is one of the largest UK independent underwriting managers, aligns with our vision of being a premier destination for MGAs and materially accelerates our progress towards our three-year target of generating in excess of $100 million of annual EBITDA.

“This acquisition propels Ambac to the forefront of the specialty program insurance market,” LeBlanc continued. “We are not simply acquiring a leading specialty underwriting platform; we are aligning with a team that has proven ability to build and launch profitable de novo MGAs, which is a core pillar of our growth strategy. Adding Beat to our platform gives us immediate scale and a strong pipeline to fuel future growth.”

John Cavanagh, Partner and Chairman of Beat will continue to manage the business as part of the senior Beat leadership team.

Beat provides underwriters with a full range of services, one of which is access to capacity, alongside providing infrastructure, and partnership, guiding new businesses through the start-up phase and providing ongoing oversight and support.

Beat has launched 13 Underwriting Franchises and MGAs since its launch and has certain management rights for Syndicates 4242 and 1416 at Lloyd’s and an exclusive capacity relationship with a Bermuda reinsurer, Cadenza Re.

Third-party capital supports Beat’s syndicates and also Cadenza Re, with ILS investor support part of the overall mix.

In fact, Beat has benefited from backing provided by ILS fund managers, institutional investors, pension funds and high-net worth investors.

One of the London Bridge ILS deals that has taken place, to channel third-party investor funds into the Lloyd’s market, saw pension Ontario Teachers’ Pension Plan (OTPP) providing capital to a Lloyd’s Member with one of the syndicates supported being Beat’s Syndicate 1416.

In addition, we’ve also learned that OTPP has held a board seat on Beat’s Bermuda-based reinsurance company Cadenza Re, suggesting the pension may also be (or have been) an investor-backer of that vehicle as well.

Beat’s businesses produced $533 million in combined gross premiums and approximately $17 million in EBITDA in 2023.

Cavanagh of Beat said, “This is a transformational partnership for Beat. Ambac’s well-established MGA incubation and carrier capabilities and its outstanding leadership team is a perfect fit with Beat’s existing platform and team. This joint enterprise now represents one of the foremost global platforms for MGAs and Underwriting Franchises, with a significant footprint in the US, UK and Bermudan markets and scope to grow into other geographies. Our aligned capacity, affiliated carrier capabilities and global licensing offers leading specialty underwriters who have an absolute focus on underwriting profit the perfect platform to build their businesses.”

“The Beat team have built an incredible franchise over the past seven years by balancing exceptional growth with a ceaseless focus on underwriting performance. We are fortunate to be part of their journey,” added Matt Cannan, Partner of Bain Capital. “We believe partnering with Ambac perfectly complements Beat’s capabilities and creates an outstanding global specialty insurance destination for top-tier underwriters.”

The acquisition of a majority stake in Beat Capital provides Ambac with exposure to a specialist Lloyd’s business that has leveraged a broad swathe of available capital sources and forms.

It builds out a strong platform for Ambac, which is expected to grow its specialty P&C platform to generate over $1.4 billion in gross written premiums on a combined full-year 2024 pro forma basis.

Accessing efficient capital and finding innovative ways to support new underwriting companies with expertise, infrastructure and importantly capacity, has been the mantra at Beat Capital since its launch.

We expect the company will continue to be capital agnostic, potentially now growing access to underwriting business for the investors and ILS funds it works with.

Ambac executives highlighted today that its Cirrata insurance distribution is designed to be “capital light”, something that aligns perfectly with the strategy Beat has employed.