The Intelligent Quarterly from the publishers of The Insurance Insider

Spring 2012

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Dear friend,

The global specialty (re)insurance world is a bit like the clientele of a large and successful dating agency. Everyone pays their dues and keeps their profile up to date, but there doesn't always seem to be a lot of action going on for the members.

Like all dating agencies the motives for joining are often as varied as the membership.

The class of 2005 might be compared to young professional thirty-somethings anxious to find a mate before their biological time bombs tick down to zero.

The older players who had a harder time throughout the global financial crisis now more closely resemble the crop of needy recent divorcees that also populate the lonely hearts pages.

Their metaphorical ads run something like this: "Global diversified (re)insurer, recently getting over bitter long-term relationship with pure financial lines, looking for shoulder to cry on."

Meanwhile, the larger market seniors fall more closely into the category of "cougars" looking for toy boys to spice things up a little.

But today, although the agency's books are full, the undeniable fact is that a lot of members are not altogether happy with the lack of results, and for the first time in many years are seriously considering letting their expensive memberships lapse.

The professional matchmakers are going through some pretty lean times themselves and are wondering where their next M&A meal is coming from. The clientele keep going out on dates, but nothing substantial seems to come of the liaisons.

We all know the reasons why business is slow - profitable growth prospects are poor and current business valuations are so low that the boards of potential sellers can't recommend selling, while purchasers have only a weak currency to buy with.

As one senior executive explained to us, the only sort of mergers going on these days are the real "perfect fit" matches made in heaven. And as true love always finds a way, these are the sorts of deals that would have probably happened without any outside professional intervention.

Another more jaded market observer told us that he suspected the joys of bachelorhood sometimes outweigh the comforts of settling down, explaining that some transactions simply don't happen because the execs in question "enjoy the lifestyle too much - and let's face it, they don't work that hard!"

But desperate times appear to be calling for desperate measures, which neatly brings us to our title.

The other day when the IQ team was investigating the latest takeover rumour, one of us asked a senior Bermudian executive point blank if he was interested in buying a rival.

It was a dud.

An outright denial was followed by this colourful exchange (apologies for the strong language): "They've been applying rouge to that old whore, but we're definitely not interested!"

We interjected that the particular lady in question was not that long in the tooth.

"She may not be that old, but she's been ridden hard!" came the dismissive response.

For what it's worth, in this case we agreed with our caller's blunt analysis. The firm whose potential sale we were investigating was indeed unlikely to win any beauty contests without the most wily (and liberal) application of all the feminine tools of seduction, rouge doubtless included.

Recently, do we detect a certain amount of cosmetic surgery going on at some of the mail order brides whose parents are most keen to get married so they can collect their dowries?

A bit of boardroom wrinkle reduction here and the removal of an unsightly and prominent facial growth there? An executive tummy tuck and the trimming of excessive nasal hair?

Perhaps.

But as any old sage will doubtless understand - no amount of rouge and aggressive pimping can force something to happen if the potential acquirers just aren't in the mood.

If the sector can drag up its average valuation to even a historically meagre premium to book, then bells will be ringing, but until then it's simply a question of "not tonight, thanks".

Mark Geoghegan, Editor