CGM Gallagher buys Zenith's commercial portfolio
Published:Friday | April 9, 2010 | 12:00 AM
Sabrina Gordon, Business Reporter
Coming close on the heels of a Caribbean expansion with the setting up of its latest stand-alone, full-service office in Grenada last December, regional insurance broker CGM Gallagher Group has acquired the commercial portfolio of Zenith Insurance Brokers Limited.
Details of the deal, including the price for the business, have not been disclosed, but the new insurance line is being merged with CGM Gallagher's operation, which will be selling its newly acquired service as a unit at its Harbour Street office in downtown Kingston.
Zenith, which began operations in 1984 with head office at Barbados Avenue in Kingston, is said to be still seeking a buyer for its $160-million premium, income-strong personal-insurance business.
After a deal is negotiated for its personal-life business, Zenith will then be closing its Mandeville and Ocho Rios branches, which for now will continue under the Zenith name. Its only other office, in Montego Bay, is now being rebranded CGM Gallagher.
Zenith is reported to be adding J$700 million in annualised commercial insurance premiums to CGM Gallagher's already US$150-million premium income.
The new business, said Matthew Pragnell, the chief executive officer of CGM Gallagher, will make the combined operation the largest in terms of premium values in the Jamaican insurance market.
There are indications that the merger is a direct response to the challenges facing the insurance sector since the worldwide downturn in business.
"The insurance industry is a very soft market now, perhaps the softest in decades," said Pragnell.
"That gives us great opportunities for merger and acquisitions within the industry. It gives the ability to provide better leverage for customers and a better way to manage risk," Pragnell noted.
Zenith's bosses have pointed to benefits of size which, they say, CGM Gallagher brings to the table.
"The alliance with CGM Gallagher will ensure that all clients will receive the benefits of being involved with a company that has large market share and connections throughout the world," James Pawson, Zenith's managing director, said at a function held at CGM Gallagher's Harbour Street, Kingston, office Wednesday to announce the deal.
"We feel that in this day and age, technical expertise is a vital part of anything that we are providing for customers, and the combination of Zenith and CGM Gallagher will allow us to serve our clients better by combining all that expertise," Pawson said.
He later told the Financial Gleaner that the bad economy eventually got the better of the company and, once the other business lines are disposed of, Zenith will cease to exist.
"We feel, for the long term, this is our best choice," said Pawson Thursday.
"Yes, the company will eventually be wound up in the long term as we merge into CGM Gallagher anddispose personal lines of business."
He added: "The company does have debt but it is very current and up to date with just the normal payables from the day-to-day activities."
Zenith currently has 40 employees with some dislocation expected from the sale of the business.
The 26-year-old brokerage has operated predominantly in the general insurance business spanning motor, property and casualty and branched out into employee benefits, including health insurance, in 2004.
The company's shareholders are founder Oliver Jones and Lascelles Chin, the executive chairman of the Lasco Group of Companies, who each own 27.5 per cent of the business.
The other owners, each with a 15 per cent stake, are Pawson, Gordon Sharpe and the Wisynco Group of Companies, owned by the Mahfood family.
Zenith has approximately six to seven per cent of a market with 25 players and policies totalling about 3,000, according to Pawson.
"Ultimately, the idea is that Zenith, as they go through the process, will be keeping the branches of Mandeville and Ocho Rios but these will eventually be closed, with the Mandeville business operating out of Kingston and Montego Bay managing the Ocho Rios business," said Pragnell of the operational changes accompanying the sale.
Stanley Black, who is part of the Zenith management team and manager of the Montego Bay branch, will remain in charge of the reconfigured western division.
The Zenith head and his team at the Barbados Avenue headquarters will be relocated to CGM Gallagher's new commercial unit at Harbour Street.
Pawson will report to Saundra Bailey, the group managing director at CGM Gallagher.
CGM Gallagher services clients in Barbados, Grenada, St Vincent, St Lucia, South America, Central America and the United States, with its insurance and reinsurance business based in Jamaica and Barbados with a staff of more than 160.
The 37-year-old company, which develops and administers retail and wholesale insurance broking, risk management and captive management solutions for its Caribbean clients, also lists among its portfolio captive insurance vehicles in the Cayman Islands, Bermuda, Turks and Caicos Islands and Haiti.