David Batchelor, President of Marsh's International Division, said: "The combination of Alexander Forbes' well-established South African operations, its regional network and respected team together with Marsh's existing South African business, global solutions, resources and placement skills, will bring dramatically enhanced benefits to all our clients. Companies in the rapidly-developing African region are increasingly looking for insurance brokers and risk advisers that can help them both protect their vital assets and grow. This transaction, which is driven by our growth ambitions to be a pan-African leader, gives us a powerful platform to meet these expectations."

Jurie Erwee, who has assumed the responsibilities as CEO of the combined enterprise, now called Marsh Africa, added: "The whole team at AFRS has been made to feel very welcome by our colleagues at Marsh and we look forward to a rapid integration of the businesses. Together, as we unite our growth ambitions to become the continent's pre-eminent broker and risk adviser, we are committed to bringing the world's best to Africa."

On closing the transaction, Marsh stated that it had retained its Level 3 status in its Broad-Based Black Economic Empowerment (B-BBEE) scorecard rating. "Through focused investment and support, Marsh has made significant achievements in its levels of Black Economic Empowerment. The combined Marsh entity will remain strongly committed to continuous improvement in its BEE performance levels," Mr Erwee said.

Catlin steps up risk management services

Catlin, the international specialty property/casualty insurer and reinsurer, has formed a partnership with two specialist risk management consultancies that it says will enhance the services it offers to clients with hijack, kidnap, extortion and wrongful detention exposures.

The partnership with Drum Cussac and Compass Risk Management, which commenced on 1 January, 2012, is designed to ensure that Catlin clients have access to a quality response, prevention and maritime intelligence service, 24/7 wherever they operate, said Peter Dobbs, head of Catlin Asset Protection in London.

Catlin said that over the past decade Drum Cussac has developed an 'international reputation' for its understanding of maritime protection, supported by a dedicated Maritime Operations Team and a purpose-built response centre based in Poole, UK.

Compass Risk Management specialises in the prevention and safe resolution of incidents of maritime piracy, kidnap and extortion.

JLT combines Italian business with Marine & Aviation S.p.A

Broker JLT has confirmed that it has combined its existing Italian broking business Jardine Lloyd Thompson S.p.A. with the business of Marine & Aviation S.p.A (M&A).

Following the transaction, JLT has a 25% interest in the joint venture, Marine & Aviation JLT, and has representation on the board with JLT senior employees forming part of the ongoing senior management team.

JLT has also acquired a 25% interest in Marine Aviation & General (London) Ltd. The London-based broker said that the total consideration for the acquisition was JLT's existing Italian business together with €5.4m, payable in cash on completion.

M&A's operations generated net revenue of €9.5m in 2010 and produced a profit before tax of €1m.

M&A specialises in marine, aviation, reinsurance, corporate clients, high net worth and affinity business. It is one the oldest brokers in the Italian insurance market and since 1993, the operation has also been a Lloyd's broker placing Italian wholesale and reinsurance business into the London Market.

The broker also announced last week that its Irish subsidiary has acquired Irish firm FBD Insurance Brokers from FBD Holdings.

As part of this transaction JLT has also acquired FBD Risk Management Services (FRMS) and International Loss Control Services (ILCS). The businesses of FBD Brokers will be integrated with the existing business of JLT Ireland.

FBD Brokers was established in 1973 by FBD Holdings plc to manage the commercial insurance needs of large commercial and corporate clients. It employs 33 staff, is headquartered in Dublin and specialises in the Irish agri-food sector with strong positions in waste management and the renewable energy sectors, said JLT.

The deal comprised an initial payment of €6.75m, an additional payment of €500,000 adjustable on working capital and a deferred payment up to but not exceeding €1.25m, payable based on the financial performance of FBD Brokers in the year following completion.

JLT Ireland is the fifth largest insurance brokerage in Ireland and has offices in Dublin and Cork employing 100 staff.

Eamonn Flanagan, Equity Analyst with Shore Capital, the stockbroking firm, said that the deal is a 'win-win' for both companies. He said that it continues the 'rationalisation' of FBD's operations, following the announcement of its property joint venture in August 2011, and allows it to focus on its core insurance underwriting business.

"For JLT, the fifth largest broker in Ireland, the deal fits with its strategy of building out in niche markets, with the agriculture market in Ireland remaining resilient, and provides additional bulk and critical mass for its Irish operations," he added.

Fitch places Fondiaria on Watch Negative as it seeks to boost solvency

Fitch Ratings has placed the 'BB-' Insurer Financial Strength (IFS) ratings of Italian insurance company Fondiaria and its main subsidiary Milano Assicurazioni on Rating Watch Negative as the group seeks to bolster its solvency.

The rating agency said that the rating action follows Fondiaria's announcement on 23 December, 2011 that it is considering a range of initiatives, including a planned capital raising of €750m, in the short term to improve the consolidated regulatory solvency margin.

Fondiaria's preliminary estimates of the group solvency margin indicate it has fallen to 90% from 111% at the end of the third quarter of 2011. The objective of the capital raising is to bring the solvency margin up to at least 120%, said Fitch.

Fondiaria estimates that it will post an after-tax loss of about €925m for 2011. This includes reserve strengthening of €660m and investment losses of €515m. Given the announced nine month 2011 loss of €179m, the scale of the expected full year loss is 'significantly' in excess of Fitch's expectations, said the agency.

Fitch pointed out that this is the second planned capital increase within a short period of time, after the completion of a €450m capital injection carried out in July 2011.

"In Fitch's view, capital remains volatile and highly exposed to adverse investment market volatility, particularly with reference to Italian sovereign debt and equities. The quality of capital is also negatively affected by the large proportion of unrealised gains on real estate and goodwill, and the form of double leverage between Fondiaria and Milano Assicurazioni," stated the agency.

"Based on the information currently available, if the capital raising is completed, the ratings are likely to be affirmed with a Negative Outlook. However, if the capital raising is not successful, the ratings will be likely to be downgraded by up to two notches," added Fitch.

FonSAI is the parent company and main operating entity of the second largest domestic insurance group in Italy, with consolidated gross written premiums of €12.9bn in 2010.

The group, created by the merger between Fondiaria and SAI in 2002, holds leading positions in the Italian non-life market through FonSAI and its 60% ownership of the other main operating entity, Milano. The group also has a presence in the life sector, noted Fitch.

Fitch also recently stated that Beazley's renewed interest in buying Hardy Underwriting Bermuda as reported in the last CRE newsletter underlined its expectation for increased consolidation in the non-life insurance sector in 2012, driven by low valuations and the impact of Solvency II.

The rating agency said that those insurers that are struggling to repair balance sheets weakened by Asia-Pacific catastrophes in 2011, including the earthquake and tsunami in Japan and flooding in Thailand, are viewed as primary targets, as are smaller franchises.

"The likelihood of continued earnings pressure in 2012, driven by sustained low yields from investment portfolios across the non-life insurance sector, will make it harder for many insurers to convince shareholders to inject fresh capital when faced with the prospect of lower returns," stated Fitch.

"We believe insurers may also be more willing to complete deals as they get a better view of the capital requirements that will be implemented under the Solvency II regime. The capital requirements should become clearer next year [2012], allowing potential buyers to more accurately assess the true value of targets," added the agency.

Fitch said that for smaller insurers with only one or two business lines, Solvency II is likely to require higher capital levels to compensate for a relative lack of diversity. "These firms could, therefore, also become takeover targets in 2012 as they would be able to operate with lower capital levels as part of a bigger group," it said.

Fitch added, however, that its rating outlook for the UK non-life insurance sector in 2012 is stable. "We expect the sector's capitalisation, underwriting and operating trends to support current ratings over the next year or two, even as fundamental indicators remain weak in 2012," it stated.

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