Brit directors and private equity backers cash in on flotation frenzy

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The Independent Online

The England cricket team's sponsor Brit Insurance is joining the queue of firms floating on the Stock Exchange as share prices hover around record highs.

The deal, likely to value Brit at £900m to £1bn, will crystallise bumper profits for the private equity firms who bought it off the market little more than three years ago, and handsome payouts for its directors, who own 10 per cent of the business.

Since the firm was sold to Apollo and CVC for £888m in October 2010, the Netherlands-domiciled insurer has sold parts of its business to QBE and improved its presence in markets such as the US, Bermuda and China. Brit sold its UK general insurance arm for $300m, leaving it as a focused commercial insurance and reinsurance business operating at the Lloyd's of London market.

Its chairman to lead the flotation process is Richard Ward, the former chief executive of Lloyd's.

It is thought that the private equity firm had approached potential buyers from the insurance industry with a view to making bids, but the flotation process is now well advanced, meaning it is the most likely route, sources said.

Brit's chief executive, Mark Cloutier, is expected to be the biggest individual financial beneficiary from the sale, although it is not yet clear how much of their shareholding the management will be selling.

Combined, the private equity firms and management will offload a quarter of their stake in the company on to the stock market. There are no plans to raise fresh capital for the business in the float, which is being run by UBS and JPMorgan.

Mr Cloutier said there were significant growth opportunities for the company, but investors will be asking tough questions about how it will perform in an uncertain global economic environment and where stiff competition among speciality insurers has driven down profit margins for the industry.

Brit saw its profits rise 20.1 per cent to £101.7m last year and its combined ratio improve from 93.2 per cent to 85.2 per cent, meaning it pays out £85.20 in claims for every £100 of premiums.

It will be replaced as England's sponsor by Waitrose this month.

Other private equity-backed insurers have followed Direct Line's lead in floating recently, while Saga is currently heading for a float. Direct Line had to be sold by state-owned RBS in 2012 for competition reasons. Its shares have leaped from 175p to 264.2p.