Decision to buy Island Heritage was one to diversify

FRIDAY, MAY 18: A lack of new business opportunities in Bermuda means companies are looking overseas to expand their empires.

The 109-year-old BF&M insurance company has just forked out $68 million for Caymans-based Island Heritage, which has insurance business all over the Caribbean.

BF&M president John Wight said: “Up until 2008, Bermuda and the rest of the western world was doing just fine, but since then, there have been economic changes in Bermuda and elsewhere.

“There are fewer new business opportunities in Bermuda, although we are confident that over time there will be.

“It’s a case of diversifying our operation so we have less dependence on one island.”

He added: “Statistics indicate that most acquisitions don’t return shareholder value in the ways that companies expect them to, but you need to grow your business and your shareholder value.

“Every company has to determine the best way to do that. In our case, it was the right decision to diversify our interests outside of Bermuda.”

Mr Wight added that the company had been looking to expand its operations before the recession bit in 2008.

He said: “It was good practice not to have all your eggs in one basket — my feeling is that’s shared by our board. But it’s important to stick to what you know.

“We didn’t want to look outside of Bermuda just for the sake of expansion. We were very specific about what we were looking for.

“Island Heritage is about property and casualty insurance and we have been in that business since 1903.”

Island Heritage was sold by Flagstone Re, which bought a controlling interest in 2007, as part of a drive to concentrate on core areas.

Luxembourg-based Flagstone, which has underwriting business based in Bermuda, had heavy catastrophe losses in 2011, leading to a $326 million net loss last year.

Mr Wight said that — in addition to meshing with existing BF&M business — Island Heritage offered economies of scale and a spread of risk.

He added: “Island Heritage insures homes in thirteen islands and that reduces the probability of one hurricane in one year hurting the bottom line of BF&M.

“From our perspective, we’re looking for geographic diversification and local options were less attractive to us than those in other islands.”

Mr Wight said: “BF&M has a successful business model which has worked since 1903 and we have great confidence that our business model can work equally well in other jurisdictions like the islands of the Caribbean.”