Financial News

  • 17 February 2014, 6:58

ECI Weighs Flood Insurer Deal As Storms Bite

A London-based investment firm is weighing up a 40m takeover of an insurer specialising in cover for properties with high flood-risk potential even as the weather battering Britain shows little sign of abating.

Sky News understands that the Financial Conduct Authority (FCA) this week approved a change of control of Avantia that paves the way for its sale to ECI Partners, a private equity group.

Avantia, which describes itself as a financial services technology business, writes insurance policies for categories of consumers who are typically shunned by mainstream competitors, such as those who have previously been declared bankrupt or have unspent convictions.

The company is understood to have seen a surge in applications from people in flood-prone areas following the inclement conditions which have caused chaos in numerous areas of the country.

Analysts predict that the storms will cost insurers billions of pounds and damage regional economies for months.

Avantia provides insurance directly to consumers under the brand HomeProtect, and now has roughly 100,000 customers through the division, say people familiar with the business.

"Living in a high flood risk area shouldn't get in the way of insuring your home and belongings," promotional material on the HomeProtect website says. "Our award-winning online insurance service is designed for all properties at risk of flooding or those in a "flood zone postcode".

A sale of Avantia would net significant payouts for directors of the company including David Walker, who founded it in 1997.

The deal is not certain to go through, and ECI is understood to have the option of withdrawing from the transaction under a material adverse change clause in the contract.

However, an insider said on Friday that ECI was unlikely to walk away from the deal, with the company being a beneficiary of wider demand for its products in recent weeks.

Avantia last year recorded premium income of 30m, roughly half of which was generated from new business. Accounts filed at Companies House say that it made a post-tax profit of almost 3m in 2012, on turnover up 55%.

"The business continues to grow organically in uncertain times, debt-free and backed by long-term contracts with its insurance partners," the accounts say.

"The company will continue to invest extensively in the HomeProtect product with the constant evolution of its underwriting model, question-set and the underlying technology used to service its customers."

A spokesman for ECI and Avantia declined to comment.

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