White Mountains buy-in a win for all parties: Distinguished management

(The Insurer) - Distinguished Programs management has told Program Manager that White Mountains Insurance Group’s acquisition of a further 50% holding in the MGA platform is a “win, win, win” for the Bermuda-based (re)insurance investor, its soon-to-be minority shareholder Aquiline and Distinguished itself.

In an interview with Program Manager, Distinguished’s management explained that the deal provides the company with additional firepower to further build upon its growth plans.

This publication reported on Monday that White Mountains Insurance Group had entered into an agreement to acquire a majority stake in Distinguished. It will buy approximately 50% of the MGA and program administrator's outstanding equity interests for $230 million.

When the transaction closes, White Mountains will hold approximately 51% of Distinguished’s outstanding equity interests as the newly struck deal adds to the 1% the Bermudian company acquired in the New York-based MGA platform last year.

The deal is slated to close in Q3 2025, subject to regulatory approvals and other customary closing conditions.

Current controlling equity holder Aquiline Capital Partners will retain what Distinguished president and chief financial officer Jason Rotman said will be a “significant minority stake” in the business, while the MGA platform’s executive management team will also retain sizable equity positions.

POSITIVE FOR EACH PARTY

Bill Malloy, Distinguished’s CEO, said the White Mountains investment is positive for each of the involved parties.

“Aquiline, as our historical majority shareholder, went to significant lengths to spend time with Jason and I to make sure that we were comfortable, and that this (transaction) was a good fit.

“We had an opportunity, which I think is somewhat rare, to have all three parties have a chance to see the win, win, win all the way around…which just did nothing more than give us a ton of confidence and enthusiasm moving forward,” Malloy added.

Distinguished has been in operation since 1995 and is headquartered in New York.

Aquiline bought into Distinguished in 2022, at which point the program administrator’s current management team of CEO Malloy, president Rotman and chief operating officer Steve Sitterly were brought in to run the platform.

In the years since, Distinguished has grown its business and now places over $550 million in premiums annually across its diversified portfolio of 12 specialty property and casualty programs.

AQUILINE ‘A GREAT PARTNER’

Aquiline “was great” as a capital partner, Rotman said, but for the next chapter of Distinguished’s evolution the company is “very thrilled" to have White Mountains’ backing.

“We're pleased that they want to support the management team and the whole team to continue what we're doing and build out the business,” Rotman added.

The team at White Mountains are “extremely knowledgeable insurance investors” and “very good people,” said Rotman.

“They know the space. They can help us build it through their network and their resources.”

White Mountains also provides long-term capital support to Distinguished, with its investment “eliminating any artificial need for liquidity,” said Rotman.

“We now have a capital provider that matches our business plan very well,” he said.

FOUR GROWTH DRIVERS

With White Mountains’ support, Rotman said Distinguished will remain focused on the four growth pillars that have so far served the company well.

Ritchie Vener leads Distinguished’s business development efforts, and Rotman said the company has “been growing very nicely.” As such, organic growth will remain a key focus going forward.

“Businesses that can grow organically are worth more. They're better businesses,” Rotman declared.

Another growth driver will be team lift outs.

“They take longer,” Rotman said, “but they're attractive (and) you can do them.”

“They're maybe harder than the market thinks they are. There's a lot of people trying to do them (and) I think not all of them are going to work. Not all of ours are going to work, to be clear, but we've really invested in the back office to build the chassis to add on other products in a very scalable, efficient way.”

Acquisitions are another potential growth driver.

“Bill and I have done acquisitions before at other points of our career when we worked together.

“They're certainly not cheap right now, so you want to be thoughtful when you do it and really buy things that can help the business in some way, or answer a problem, because just paying the top price is pretty hard right now. It's pretty aggressive," Rotman said.

The fourth growth driver is carve-outs from insurance companies. In that situation, Distinguished would take a book of business from an insurer in a deal that Rotman said would be a “win, win” for the MGA platform and the carrier.

“Maybe they need capital, maybe there's a technology issue, maybe it's a team retention issue, maybe it's just too small for (the carrier) and it's non-core, but they want to keep a part of it,” said Rotman.

“(Carve-outs are) hard to do and hard to line up…but we spend a lot of time trying to get those done," he said.

Rotman said Distinguished targets business that can generate $75 million of premium in four to five years. And while Distinguished evaluates “hundreds” of program opportunities each year, the focus is on only going live with “four or five smart things a year.”

“We were lucky enough to start with a platform that was pretty meaningful already, and we were fortunate enough to have shareholders that were patient and believed in the strategy before other people were doing it.

“So we're three and a half years in building the back office to be able to do this. That makes it easier for us to take on more complicated books of business,” he said.

UNDERWRITING FOCUS

While Distinguished is committed to growing its business, Malloy said that expansion will not come at the cost of being focused on underwriting.

“We consider ourselves purely an underwriting shop on every level, so all those growth levers have to come with a confidence that we can deliver profitable business to the carriers,” said Malloy.

“The beauty of having the type of capital that White Mountains brings now is we aren't going to necessarily be under pressure because of timelines to have to grow at a pace, or in a sector or in a particular product at a faster pace than we think is smart, because of the nature of 'permanent capital.'

“It's just a really nice place to be. Our view on White Mountains is (they’re) not just another capital provider.

“We had a terrific relationship with Aquiline, but Jason and I have spent a lot of time, not just because of their 1% foothold, getting to know White Mountains and cultivating that for a very deliberate next chapter.”

With the market for MGA M&A and hiring/team lifts currently highly competitive, Rotman said “you have to be very careful and pick and choose where you where you want to play.”

Distinguished tends to focus on bigger books of business than others, Rotman said.

“We have the back office (and) we have the infrastructure to handle it. We have the institutional shareholders behind us to deal with it and the patience of the buildout.

“I don't want to say it's not competitive, because that's not true, but most of those conversations that we are always having are very often bespoke," he said.