Through the deal, Ambac aims to expand its platform for fee-based MGA and MGU businesses
Ambac Financial Group, a New York-based financial services company, has agreed to acquire 80% of the stake in Xchange Benefits and Xchange Affinity Underwriting Agency, for an undisclosed amount.
The management principals of Xchange Benefits and Xchange Affinity Underwriting Agency will retain the remaining 20% of the stake. After the deal is closed, the insurance firms will continue to operate under their existing brand.
The Xchange Group was established in 2010 and operates from New York and Indiana. The firm is a diverse group of business units serving the insurance and reinsurance industry.
It is a property and casualty (P&C) managing general underwriter (MGU) that specializes in accident and health insurance. With support from major insurers, reinsurers, third party administrators, brokers and producers, the firm claims to have created a successful business.
The deal will support Xchange in realising a significant growth potential through geographic and product diversification, while accelerating its strategic plans.
Xchange president and CEO Peter McGuire said: “We are thrilled to be joining the Ambac family as they transition to the specialty programme market. This transaction provides us with a strategic partner plus access to permanent capital that will accelerate our planned growth strategy and Ambac will benefit from a proven, established niche MGU with a history of consistently strong operating results and carrier support.”
Ambac said that its diversification strategy includes building a platform with both admitted and non-admitted carriers, along with MGAs (managing general agency) and MGUs.
The acquisition of Xchange is the first step in developing a platform dedicated to fee-based MGA and MGU businesses. Ambac intends to develop the platform from next year through acquisitions and organic growth.
Ambac president and CEO Claude LeBlanc said: “As part of our broader speciality programme insurance strategy we have been actively pursuing acquisition opportunities in the MGU and managing general agent (MGA) sector. We expect the acquisition of Xchange to be immediately accretive to Ambac and allow us to use our net operating losses.
“We also believe that the acquisition furthers Ambac’s commitment to unlocking long-term shareholder value by generating recurring fee-based income with attractive risk-adjusted returns. The Xchange team has delivered outstanding underwriting results for their carrier partners and we look forward to welcoming the team to the Ambac family.”