CAB has acquisition target in sight
Caribbean Assurance Brokers Limited, CAB, is doing due diligence on a targeted business that’s expected to become its first acquisition in nearly two decades of operation.
The deal is being pursued simultaneously with internal software upgrades under way since last year to drive up earnings over the short term.
“The insurance brokerage business is based on margins so in order to have critical mass, you have to grow. You can grow organically by increasing revenue base or you can go out an acquire existing brokerages. That’s the route we are looking at,” said Executive Chairman Raymond Walker.
“We are currently looking at entities that we think will be a perfect fit for us in terms of business type, structure and so on. If we find what we are looking for then we will proceed with negotiations,” he added.
The company being hunted is based in Jamaica, Walker said, but gave no other information.
CAB began operations in 2005 and went public via a stock market listing in March 2020. Its expansion plans were temporarily brought to a halt by COVID-19, but by mid-2021, the insurance brokerage had returned to its growth agenda.
Since its listing, its business outside of Jamaica has largely been through partnerships, the first being with Canada-based Sutton Special Risk in which it expanded its offering to include coverage of special hazards such as high-risk occupations, out-of-country exposures and high-sum insurance for kidnap, ransom and extortion.
The company later joined forces with Lloyd’s of London, aimed at building up a larger pool of clients in Barbados, Guyana and Trinidad & Tobago where CAB already had business.
CAB has ambitions of entering four more English-speaking countries in the region.
For competitive reasons, Walker, who will take on the duties of interim CEO on Monday following the April 30 departure of Tania Waldron-Gooden, did not disclose if the local business being sought has a presence in the Caribbean. The new Caribbean destinations that CAB has been eyeing were also not disclosed.
For the year ended December 31, 2022, CAB reported earnings of $78 million, up 39 per cent over the prior year.
Revenues grew nine per cent to $506 million, while operating expenses of the insurance brokerage firm jumped 10 per cent year on year to $427 million.
“Areas that contributed to the increase in expenses included staff costs, product development initiatives, professional fees, repairs and maintenance, registration fees arising from increased licence and regulatory fees and depreciation on additions to property, plant, and equipment,” the company said.
“These increased costs are related to setting the stage for expansionary activities,” CAB added.