Despite the credit crunch, 3i's move to invest in Hyperion proves that interest in the sector is undiminished
Private equity’s appetite for the insurance sector appears pretty hearty at the moment. 3i’s investment in Hyperion is the latest in a string of deals in the insurance sector involving private equity - and is unlikely to be the last.
In February, 3i took a significant minority stake (around 25%) in consolidator Jelf, while Charterhouse took a 60% shareholding in Giles Insurance Brokers last month.
Jelf and Giles now have access to hundreds of millions of pounds in finance to fuel their respective acquisition drives.
As Bill Cooper, managing director of Lloyds TSB Corporate Market’s financial institutions practice, writes in this week’s Insurance Times says, the insurance sector is an attractive market for investors. Insurance is a vibrant sector, whose fortunes are mostly insulated from the wider economic conditions, including those affecting other financial services sectors, he argues.
And with the likes of Jelf and Giles growing at a phenomenal rate and gathering increasingly leverage in the insurance sector, it is not surprising that investors have been keen to put their money in.
So it seems likely that that private equity will be eyeing the opportunities in the insurance sector for the near future at least, particularly whilst the broker market remains in a state of flux and acquisition targets remain plentiful.
Like Jelf before it Hyperion, having posted 27% year on year growth in profits to £8.3 million, certainly seems like a good investment. The company ranked 90th in the Sunday Times Deloitte Buyout Track 100 league table; the only insurance group to be included in consecutive years, and one of only four financial services companies to make the list.
When the M&A boom in the insurance sector begins to slow and the number of investment targets dwindles, then private equity may look elsewhere.
But for the moment, the private equity money-men are still hungry for investments.
