SCHEME OF ARRANGEMENT – PSC INSURANCE GROUP TO ACQUIRE ENSURANCE LTD PSC Insurance Group Limited (ASX:

PSI) (PSC) is pleased to announce that it has entered into a binding scheme implementation deed (Implementation Deed) under which, subject to the satisfaction of various conditions, PSC will acquire all of the shares in the capital of Ensurance Ltd (ASX:ENA) (ENA) by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) (Corporations Act) (Scheme).  

Here is 1.9 Net cash form Operaring Activities: $312,000 see Below:

Market cap $21Mill only a minnow small one here.

Not sure this is the type of investment I was expecting from ENA - not sure what I think of it. No financials given.

Could well be $1.5M torched or a significant winner. Not sure how likely it is for people to want to install something on their car, those that don't drive much I imagine would be classic cars which would def not want to add something and probably wouldn't work being electronic?

Ensurance Limited (ASX: ENA) (Ensurance or the Company) is pleased to announce that it has made a strategic investment in innovative car insurance retailer, KOBA Insurance, providing Ensurance with the right to distribute KOBA’s insurance product.

KOBA is a private Australian company that launched in November 2021, offering a data-driven approach to car insurance. Users pay a fixed amount to have their car insured while it’s parked, and then pay only for the distance they drive. Usage is measured through a small matchboxsized device called a KOBA Rider that attaches to a car’s On-board Diagnostics (OBD) port.

pdf (markitdigital.com)

Ensurance CEO shares growth plan after regulator clears sale of UK arm

13 March 2023

Underwriting agency Ensurance says the business is in a “good position” to grow its Australian presence after completing the sale of its UK arm to Melbourne-based listed PSC Insurance Group for $8.2 million.

The two companies said last week the deal has received approval from UK regulator, the Financial Conduct Authority.

Under the terms of the agreement, 75% of the purchase price will be payable in cash and the other 25% via paid ordinary shares of PSC. The issue price of the shares will be determined by the average closing price of PSC stock for the 10 days prior to completion.

Ensurance CEO Tom Kent says the sale proceeds will allow the underwriting agency to “catalyse” its growth plan for the Australian market.

“Now we can look at acquisitions, work on new products. It’s a good position to be in,” Mr Kent told insuranceNEWS.com.au today.

He says one of Ensurance’s goals is to “achieve growth over and above market rates” and the business has been able to do so.

Ensurance is re-focusing on the Australian market, having worked in the last few years to establish its UK business after selling its local underwriting arm to 360 Construction and Engineering in 2020.

Mr Kent says the feedback from brokers has been positive.

“We’re finding that brokers just want more products, they want tailored service, they want to be able to have a discussion with an underwriter about a risk rather than just being told they have to log on to another quote and bind platform,” Mr Kent said.

Clearly investing for growth with a $400k increase in employment costs on the pcp. If they hadn't invested for growth the Australian operations would have generated about $450k in NPBT or annualised about $900k perhaps a bit below with other salary increases. Say 800k NPBT or NPAT of about $560k. That would put them on about 40x earnings but adjust for the PSC shares and cash to come in in the 3Q very roughly 22x earnings.

As long as the investments in staff make sense and they generate revenue ENA looks to be going in the right direction albeit some of it is hidden with the investment. I imagine expenses will increase with the new offices too in the next 6 months.

They would have been FCF positive just from the Australian operations even with the increase in costs which is also nice.

Might take quite some time for everything to show through and be recognised by the market. The insurance PI market may shift to premium softening which would not be good.

A team of former Steadfast executives has launched an underwriting agencies incubator, backed by an American investor, to help new agencies enter the market.

“Rhodian is looking to create and incubate, support the next generation of agency leaders and the brands that they will create,” he says.

Agencies incubator launches with US investor backing - Breaking News - Insurance News - insuranceNEWS.com.au

More interest in the space, a bit annoying for competition with ENA but hopefully there's enough to go around.

Continued strong Quarter from Ensurance especially in the core Australian division.

Great to see not only a positive operating cashflow but also continued profitability.

With one off expenses associated with the settlement of the sale of UK division and set up of casualty division within Australia these costs will be yielding future growth in revenue and profitability.

Looking at the quarter I sense its a bit of a reset in terms of preparation of the sale of the UK division and formation of the casualty division in Australia.

Growth will thus occur both organically via price increases but also via new products as mentioned in 4C across the environmental impairment and general liability area across the Australian Market.

@Invmum good call re GWP growth and slowing nature and something to keep a close eye on but feel this the beginning of the journey for Tom and the team not a flattening.

Finally concur with @Mujo re the disciplined manner in which capital is being used. This is a real strength and look forward to the future quarters especially with the receipt of the 6.2 million in cash (in Q3 2023) which will be added to the 1.163 million in cash currently.

Disc. Top 5 position in RL and SM

@mujo appreciate the post and interesting development in the insurance, specifically MGA space.

For me this clearly shows the strength of this sector at the present time and attractive margins that accompany the players that operate in the space.

Fluent will be tested in terms of the multiples they will need to pay to gain a share in the space in Australia or they will need to wait years to see the cycle adjust and thus multiple offered to be lower.

Fluent's advantage may be the ability to provide funding for any MGA whom seeks to grow and capitalise on the positive conditions presented ie, accelerate grow. This makes sense on one hand but the question would be at what cost would equity be offered?

Fascinating to see unfold over the next 5 years.

Tom Kent - ENA CEO has repeatedly commented on the stretched mutiples in the market place presently and the need for patience and discipline.

In respect to being acquired themselves i suspect the offer for ENA to give equity away would need to be very attractive as the high insider ownership would simply lead to dilution.

Would love to here anyone else's thoughts?

DISC: Holder of ENA in RL and SM

A fund manager letter explaining a little about MGAs - Fluent+Risk+Partners+Inaugural+Partner+Letter.pdf (squarespace.co

Obviously getting some attention overseas.

More on-market trades for Ensurance... this one very small from Anthony Leibowitz, but continues the pattern @TEPCapital

Chairman Tony Leibowitz continues to top up at ENA with further purchase of over 320,000 shares at 0.23c this week.

Holding now sits at 17.5% with Tom Kent - CEO holding a further 15.8%

This takes past 12months purchases from CEO and Chairman to just under $690k

Disc Hold

One of ENA's key lines:

"There is an excess demand for Cyber insurance in Australia vs. available supply. Research by insurance brokerage Aon found the most common reason for an insurer declining to quote for Cyber coverage was inappropriate access controls, followed by the lack of business resilience plans. The same analysis by Aon found insurers were increasingly becoming concerned about risks across all sectors."

Will have to be careful though, a lot of policies losing money for insurers:

Per Macquarie:

Hi Straws had the opportunity to attend AGM of ENA on Wednesday 23rd Nov and wanted to share some insights in lookng ahead.

Firstly declaring my holding in RL and SM of ENA.

Secondly having attended larger AGM's it was fantastic to be able to able to sit in more of a intimate setting to complete the formalities and then break out in open dialoge and in turn one on one discussion with the key leaders of ENA.

Specifically , CEO - Tom, CFO - Lauren , Chairman - Tony and National Sales Manager in Nick.

In doing so the ability to explore the edge ENA have created and looking to exploit was of high interest and being able to ask how this will be executed to confirm this edge is real .

Key take outs:

• Ensurance is a very united and focused/ disciplined team led by Tom Kent driven to deliver material returns financially for shareholders for not only in the short term but over the next 5yrs plus.

• Current climate of insurance underwriting is presenting strong organic growth within Australia particularly with high margins when comparing to UK as an example. Much work has been undertaken this year to develop new products base on market trends which will be coming on stream over the next 6-9months and offer broader options for customers where traditional insurers are not covering at all . Areas include professional indemnity , management liability and cyber liability.

• UK sale for 8.2m (6.15m cash and 2.05m script of PSC)is on track and waiting for clearance of two regulatory checks. This cash when is lands will ensure funding for growth in Australia.

• 2022 has seen key positions in Australia fulfilled ( Nick in National Sales and Richard in Vic. Andrew Enc as well other Senior Underwriters) . Growth in Gross Written Premium (GWS) has flowed already but 2023 and beyond will see further opportunities.

• When delving deeper into the recruitment it is pleasing to see the focus on quality candidates whom are experienced and proven whom had worked with Tom Kent prior and were motivated to shift away from the larger organisations such as AXA due to the slow and bureaucratic nature of how they run and invoke change or meet the changing needs of the insurance market . This was explained as an edge currently being experienced for ENA with other underwriter's seeking to follow Nick's move to ENA (Nick did outline he does not see this continuing too long but in the current tight labour environment was a positive) .I was also able to explore what made a good Senior Underwriter and the response was interesting in terms of gender . We discussed that women's strengths of listening and paying attention to client requirements as well as cover the details is resulting in stronger results than their male counterparts . This is due to male senior underwriters tending to seek the results without necessarily building the relationship.

• Acquisitions may occur in the short to medium term but will only occur at reasonable multiples ie, under 8x EBITDA .This will be funded with cash where possible or equity / debt . Tom indicated ENA had already walked away to several opportunities but would not entertain acquisition at any price. Growing organically is the main focus .

• it was also discussed as the business grows over the next 3 plus years Ensurance may consider taking on the first million dollars of risk . This will in turn enable improved margins to transpire ie form 15% to 18% or higher.

• Liberty agreement working well and ENA look to exploit the opportunities it presents.

What to watch :

• Growing Operating Margins (especially in Australia)
• Growing GWP , 30% plus per annum
• Positive and Growing CF and Profitability
• Acquisitions to be purchased under 8x EBITDA
• Remain positive and optimistic for the future of ENA
• 
  

Call out to to Tom P fro TEP capital . Great to meet him at the AGM and share the experience.

Solid results released by Ensurance this morning .

Key metrics and highlights .

• Rev growth of 35% total to 2.1million for the quarter .
• Australian growth was 43% v 22% in UK (which is in the process of being sold)
• Q1 2022 rev was $955,000.
• Gross Written Premiums 16.4mill for the quarter up 28% versus Q1 2022.
• Unaudited Qrtly profit to $265,532 v $271 Q1 2022 .
• Profit Margin expansion to 12.87% v 0.02% LY Q1.
• Expect to see this continue expansion to occur in 2023 and beyond especially following the sale of UK operations
• From a cost side the increases to head count have seen staff costs rise 10% year on year (when taking the average qrtly salaries ) for the quarter to $1,388,000.

Tom Kent - CEO commented on continued strength across all segments and intends to release new product lines in the coming months.

Disciplined nature in terms of growing profitability and shareholder return coupled with high insider ownership and senior management alignment bode well for the next 3-5yrs

Hold my current valuation of 44c

Top 5 position in my portfolio

ENA Q1 2023.pdf

A little snippet from Macquarie's review of Arthur J. Gallagher (american insurance company.

PC market renewal premiums continue to increase across all major AJG geographies and product lines globally. Sept qtr to date renewal premiums, rates and exposure combined, are up >10% for the group.

Australia is up 15%; property is up >20%; casualty, high teens; and professional liability in the low teens. Most other lines are in the high single-digit range. New Zealand, renewal premium changes over 10%. Most lines renewal premiums are in this range, +/- a few points.

Cyber remains the most challenging coverage for clients in terms of rate, capacity, and terms. Public company D&O, is seeing a moderation of rate increases; and, in some cases, clients renew their programs closer to flat.

Capital light and operating leverage.

From the SDF recent results call - not on ENA per se but the model.

Stephen Humphrys

Yes, you get a slightly higher leverage, yes, in an agency. It's probably more like 80% as opposed to 70%. And then it really just comes down to that cost and how each particular business performed. As I said, I think where you might have had a slight imbalance this year, I expect some of that to reverse next year and normalize it all back out. So I wouldn't say there's anything what you might call fundamentally different, ultimately, if you look at over that, say, that 2-year horizon.

Robert Kelly

And also, just to give you a little bit more perspective on that, an underwriting agency can write a lot more business without necessarily exponentially having to put on more staff to do it, whereas a broker may be constrained to be able to write another 20% or 30% more business without having an impact on their expense line. So there is a different metric in underwriting agencies in terms of volume, not necessarily being followed by increasing expenses.

Stephen Humphrys

Hence, why the higher margins.

Robert Kelly

That's why the mark in agencies, particularly the larger ones.

Doron Kur

Makes a lot of sense. And maybe just a bit more color, Robert, on your point there around opportunities for agencies as insurers reposition product lines and distribution.

Robert Kelly

Yes. Look, I think that there's more and more where insurers are being more finite about what they want to write and so that at some products, they're dropping out. They're not as keen to write them, but they've still got to be sold into the market that consumers still wishes to buy them. So in doing that, that allows an opportunity for an MGA to pick up the specialist line to fulfill that gap. And so -- and also in some degrees of how their reinsurance is now put together where they elect not to take certain CRESTA codes on in property, then that allows that part of the property section to go into the open market, which again allows us to more develop products to fulfill that gap.

No surprises from Ensurance today with the release of full year results but what is evident is the pivot to Australian market which net profit (excluding head office) was 1.345million on revenue of 2.462m. Net profit margin of 54%.

The Sold UK business although delivering good top line of 4.832m for the full year contributed 262k to net profit on a margin of 5.4%.

The high insider ownership Tom Kent (CEO ) and Tony L (Chairman ) have and the discipline approach to the business displayed provides comfort that the future is positive.

Hold in RL and SM

Top 5 position

ENA.pdf

Very large cross trade on ENA. Not sure whether this is the last of the overhang from a shareholder selling out or something else.

Really positive results fro ENA this morning .

Hard to fault.

• Q4 rev was 2.24m up 114% on Q4 2021 taking FY to 7.2mill up 61% on FY21
• Q4 GWP was 16million up 69% on LY taking FY GWP to 57m up 67%
• Q4 was fourth quarter in a row of positive CF ($350k) and has enabled ENA to turn a profit of $224k for the FY . 2021 was a loss of 1.3m
• Debt has been paid off
• 1million in cash on balance sheet ahead of sale of UK business for 8.2m which will be an enabler for growth in Australia at higher margins.
• Looking at the costs side for Q4 they came in at 1.8mill in total. Love the focus on the detail and discipline

ENA Q4 and FY 2022.pdf

In commenting on the year ahead Tom Kent CEO explained the uncertain environment presents opportunity for ENA across multiple areas with professional indemnity area particularly strong

ENA Q4 and FY 2022.pdf

Happy holder on SM and RL

Ensurance Chairman Anthony Leibowitz took Wini's advice to buy the dip and bought up another 500,000 shares on market yesterday. This adds to shares he and CEO Tom Kent had bought in recent weeks. With more than 14.9m shares already owned he wasn't exactly underweight on the register either. Lots of reasons to sell but only one to buy.

To further add to the comments of the 3rd Qrt results both revenue and GWP grew at 46% and 62% which is in line with the YTD revenue and GWP growth of 43% and 66%.

Looking to see this expand in the coming Quarters as TEP capital eluded to .

Currently 28.8mill of 40mill GWP is being generated out of UK arm with construction driving 60% of revenue and 25% revenue coming from cyber security.

The opening of Sydney on jan 1st 2022 and Melbourne branches May 2022 with two senior underwriters in line with Liberty agreement provides confidence growth can continue to accelerate .(Using what Tom at TEP capital outlined if each senior underwriter employed brings in 3.75mill and additional = $7-8mill additional in GWP annually which is 57% increase for the Australian division).

To support this the reference to the following conditions is another positive indicator for the future.

"The Australian division of the Company has again seen an increase in premiums, particularly in the classes of Professional Indemnity insurance and Cyber Liability insurance. The scarcity of capacity, particularly in construction related classes, has contributed to growth in new business enquiries and retention rates across the Ensurance Australia renewal portfolio"

The reference to scarcity of capacity provides ENA a real edge in what ENA elects to take on to ensure the quality of the GWP is enabling the business to be profitable.

With respect to costs ENA is on the cusp of profitability and in 3rd Qrt its costs were 1.481m which were 9.3% below the average costs of the first two quarters in FY22.

This disciplined nature will no doubt will be real positive as the quarters unfold for ENA.

Disc Held on SM and RL

Yes nice to see the overhang clear.

I was able to chat with Tom Kent today and can align the sentiments of TEP capital.

Tom Perfrement really appreciate the insight you have provided to date on ENA.

The business is strict on where it plays with a keen eye on high margins niche areas which continue to emerge such as terrorism.

Tom having rolled his TKSR business into ENA is keen to pay off debt (last 1mil) and in turn look to distribute via dividends in time if small acquisitions don't eventuate.

With approx 12 small ensurers being independent in Australia Tom Kent made it clear he sees the road to drive GWP organically as attractive as any acquisition if multiples to EBIT are greater than 4x.

Tom agreed that seeking to grow GWP by 20-25% was a reasonable assumption and in line with this remain cashflow positive

This is a bet which provides nice upside with low risk.

Held in IRL (in top 6 position in portfolio) and SM

BT