I am pleased to report another strong set of financial results for the Nexus Group for the year ended 31st December 2017.
The combined results for the Group can be summarised as follows;
|Year ended 31 December||2017
|Gross Written Premium (GWP)||135,165||108,490||24.6|
|Earnings before interest, tax depreciation and amortisation (EBITDA)||10,011||5,004||100.0|
|Total Capital & Reserves||20,665||14,556||40.3|
2017 has been a transformational year for Nexus, the highlights are as follows:
In June, we completed the acquisition of Vectura Underwriting, a specialist Marine Cargo Lloyd's Coverholder and reinsurer underwriting c£4m of GWP per annum of niche marine business that includes highly specialised fields such as ATA Carnet and Customs Bonds associated with the transport of goods. Vectura joins Nexus with a rich auditable history of making underwriting profit for their capacity providers and adds a new class of short tail business to our London operations.
In July, we successfully concluded raising capital, by way of loan facilities, totalling £30 million that will enable the Group to undertake further merger and acquisition activity. There is an accordion provision within the facility agreement that will allow the Group to raise a further £14m of debt capital which will satisfy the Group's merger and acquisition cash requirements through to the end of 2018. Importantly, the financial covenants are structured and designed to allow the Group to grow both organically and inorganically with no deviation away from its underwriting strategy focus.
This capital raising quickly allowed the Group to complete three further acquisitions over the following three months.
Firstly, in July, we completed the acquisition of the Personal Accident ("PA") Treaty Reinsurance MGA operated by ZON Re. This was a seminal moment in the Group's history, marking our breakthrough into the U.S. MGA market, the addition of Treaty Reinsurance and a new class of business to the Group whilst also triggering the exciting launch of "Nexus Re". Treaty Reinsurance MGA's are rare beasts with very few existing globally and even fewer that can rub shoulders with this business' average 15 year historical combined ratio of 68%. Trading out of offices in New Jersey, the MGA underwrites a portfolio of over $15m in gross written premium.
Next up, in August, we completed the acquisition of Equinox Global, a fast-growing £20 million GWP specialist Trade Credit MGA with its head offices in London and international offices, infrastructure and personal in New York, Paris, Hamburg and Amsterdam. Equinox is very complementary to our existing Trade Credit proposition, Nexus CIFS, with there now being a unique and clear opportunity to build a truly global market leading trade credit business. Equinox will continue to be provided with underwriting capacity by Beazley (who lead their underwriting agreement), previously Equinox's largest shareholder, through an unprecedented 10-year underwriting support agreement which significantly will also apply to Nexus CIFS.
Finally, in October, we completed the acquisition of Credit Risk Solutions, a highly successful client-focused specialist Trade Credit broker with offices in Manchester, Birmingham and Halifax. Since being founded in 2003, CRS boasts annual income growth of 24% and is now the broker for a £25 million GWP book of specialty business, positioning CRS as one of the top 5 credit insurance brokers in the UK. CRS is primarily a WTO Trade Credit broker with particular specialisms in the Construction, Food & Drink, Metals and Clothing/Textiles sectors and has a growing Surety/Bond practice. Importantly, CRS has and will remain an open market broker, independent of the underwriting operations of the Nexus Group, and focused on providing an exceptional client service.
Away from our merger and acquisition activity, the Group enjoyed strong organic growth during 2017, with core EBITDA growing 26% from £5m to £6.3m. We expect more organic growth during 2018 by virtue of continued product innovation, leveraging the Group's international infrastructure and the improving rating environment following the Q3/Q4 2017 catastrophe losses.
From a MGA's perspective, the global insurance market is currently experiencing a `Perfect Storm' where Insurer's return on capital is under pressure, excess capital is allowing MGAs to access capital on attractive terms and there is a significant MGA consolidation opportunity in a fragmented market with over 4,000 Lloyd's coverholders.
The Group continues to take a proactive approach to Brexit, with regulated entities in Germany, France, Ireland and Italy providing strong optionality as we continue to monitor the Brexit negotiations with interest.
2017 was a year during which we added 3 new countries (USA, Holland, Germany), 8 new operating branches (New York, New Jersey, Hamburg, Paris, Amsterdam, Halifax, Birmingham and Manchester), multiple new products / business streams (treaty reinsurance, trade credit broking, highly specialised marine cargo, international trade credit). At 31st December 2017, we are a Group with over 180 employees present in 8 countries and 13 offices, underwriting an array of over 500,000 policies across 12 classes of business with a network of in excess of 500 brokers. We finished the year as an international `Virtual Insurer' with an annualised GWP adjusted for acquisitions during the financial year of £175 million, which from a premium perspective, would position us as a sizeable Lloyd's syndicate.
Despite a highly competitive trading environment our employees have performed at the highest level. This is evidenced by the fact that 2017 was another year of record performance and the Group collected a record £3.9m of profit commissions during the course of the year.
On account of our strong organic growth and successful buy & build strategy, B.P.Marsh & Partners Plc attributed a value for Nexus as at 31st December, in excess of £106 million. This represents a market capitalisation CAGR of 64% since B.P Marsh & Partners Plc's first independent valuation and is strong validation of our model.
Subsequent to the end of the 2017 financial year, we moved into our impressive newly fitted out corporate headquarters at 52-56 Leadenhall Street in January. Just down the road from the Lloyd's building, the office includes a broker lounge directly accessible off Leadenhall Street. In February 2018, we completed the acquisition of Apsley Specialty, one of the few specialist Directors & Officers and Financial Institutions MGAs of prominence along with an impressive growth story. DOFI is a class of business where Nexus already has significant pedigree, with this being the first class of business underwritten at Nexus' genesis in 2008, and coupling these businesses brings complementary capacity and distribution opportunities.
Finally, in April 2018, Mike Sibthorpe joined the Nexus Group in a newly created role as Chief Executive Officer of Insurance and Reinsurance and will also join the Nexus Group board. Bringing with him a wealth of experience in the market, Mike's arrival kick started a number of changes to the management team and structure in order to arrive at what we believe is the optimum management structure. This will allow the Group to not only consolidate the business we have all built today, but also to build for the future as we look forward to becoming a £500 million GWP business over the next 5 years. As part of this, I have relinquished the role of Executive Chairman and re-assumed the position of Group CEO. Meanwhile, Tim Coles has become Group C00 while Stuart Rouse continues as Group CFO.
On behalf of the Board, I would like to thank the staff for their hard work, determination and contribution. The quality of our people and the commitment of our underwriting partners provides confidence that the Group will continue to develop profitable growth in 2018 and beyond, whilst providing a rewarding and enriching experience for all our very talented staff.
Group Chief Executive Officer
Registered Number: 07055303