The Wyncrest Group Inc. (WNCG) provides insurance products and services through its Southwest Financial Group subsidiary and Wyncrest Offshore Services. Southwest Financial Group (SFG) has been in business for 21 years, has 18,000 clients, and sells through 85 representatives nationwide. SFG generated approximately $22 million in gross insurance policy sales during 2008. WNCG plans to continue to grow SFG and its other businesses through synergistic acquisitions that create economies of scale and extend its presence into new insurance segments and markets.
Through its Wyncrest Offshore Services Division, the Company is expanding into the growing offshore insurance and reinsurance market by offering a variety of services and insurance products, including Life & Health, Casualty and Warranty Service Policies, as a controlled foreign corporation.
WNCG also plans to use offshore insurance as a vehicle for generating cash flows that can be reinvested in green technologies through its WynGreen division. WynGreen has interests in state-of-the-art, patented turn-key home pre-fabrication technologies, solar nanotechnology systems, alternative fuel conversion technologies and independent sustainable zero emissions energy systems.
Investment Highlights
Business model focused on acquisitions
WNCG plans to deliver innovative insurance products in high demand and underserved niches and grow through strategic acquisitions of insurance and financial services companies. WNCG believes there are many smaller insurance and financial service companies or agencies that would be interested in merging with a larger entity in order to share best practices and generate synergies and economies of scale while retaining their existing client list.
Market opportunity
Global insurance premiums topped $4.1 trillion in 2007. The global recession has negatively impacted every insurance segment, with life insurance revenues and profits being particularly hard hit. World insurance premium volume fell for the first time in more than 30 years in 2008, according to a report released by Swiss Re. Shareholder capital in the life insurance industry has shrunk by 30%-40% on average, with some companies suffering declines of up to 70%. As the economy recovers, life premiums and investment returns are expected to rise. WNCG sees an opportunity to acquire undervalued insurance assets now and capitalize on their improving value as the economy recovers.
SFG acquisition provides platform for future growth
Southwest Financial Group (SFG) has operated for 21 years and has interests in businesses ranging from life insurance and long-term care to insuring sports events and pet insurance. SFG has 18,000 clients and 85 representatives nationwide, and generated approximately $22 million in gross insurance policy sales in 2008. SFG markets a variety of life protection products and services including: family and personal insurance; real estate and asset insurance products and services; niche tax and wealth building strategies; employee group benefits; 401K retirement plans; earthquake, flood and disaster insurance; debt reduction; alternative investments; and mortgage purchasing and refinancing.
Aggressive acquisition strategy
WNCG’s plan is to acquire companies in specific insurance growth areas. In July 2009, the Company announced it was negotiating six business acquisitions, all of which have synergies with its flagship SFG subsidiary. WNCG anticipates closing all six acquisitions in the second half of 2009, pending financial audits for each of the companies.
Offshore services growth opportunity
WNCG’s Offshore Services Division capitalizes on a growing trend favouring offshore insurance. It provides services to offshore insurance and banking companies and up-to-date tools in the areas of tax planning and tax optimization. It also provides insurance products, including life& health, casualty and warranty service policies, as a controlled foreign entity. Like offshore banks, insurance companies formed in offshore jurisdictions benefit from lower taxes and a more liberal regulatory environment.
Acquisition of Florida Insurance Consulting likely to close in Q3 09
The Company has signed a non-disclosure agreement as the first step in the process of acquiring Florida Insurance Consulting. A letter of intent is likely to follow in August, then due diligence with the expectation of closing the acquisition in Q3 09. Florida Insurance Consulting has more than 100 insurance agents in Florida and generates roughly $10 million - $15 million in premium sales per year.
WNCG’s SFG subsidiary plans to capitalize on synergies with Florida Insurance Consulting to develop additional business in the Latin American community. Hispanics represent the largest minority group in the United States at 44.3 million or 14.8% of the population.
Strong premium growth outlook
SFG generated approximately $22 million in premium sales in 2008. With the business climate beginning to improve in Q2 09, SFG management anticipates comparable sales volume in 2009. The acquisition of Florida Insurance Consulting may add another $10 million to $15 million to premium sales and another acquisition, Cleverbiz may add $30 million to premium sales. Assuming these acquisitions close as planned in 2009 and the Company makes another one or two acquisitions next year, we estimate WNCG revenues could exceed $50 million in 2010 and net income could reach a $2.5 million range.
Alternative energy opportunity
WNCG is using offshore insurance as a vehicle for generating profits that can be reinvested in green technologies through its WynGreen division. WynGreen makes green energy investments and acquisitions in independent energy resources, independent power generation, alternative fuels production, conversion technologies and sustainable energy systems. It already owns interests in turn-key home pre-fabrication, solar nanotechnology, alternative fuel conversion, and independent sustainable energy systems.
Business Model
WNCG is a holding company with subsidiaries in international financial services and insurance. The Company is expanding into the offshore insurance market and capitalizing on growing demand for specialty insurance products and services lines in areas underserved by existing providers.
WNCG plans to acquire insurance and financial services businesses that can be vertically integrated into its existing operations to create synergies and economies of scale and enhance market penetration. WNCG seeks to acquire businesses with strong management that are profitable have good long-term viability and present exceptional growth potential. Extensive due diligence is performed on all potential acquisitions to evaluate strengths and potential weaknesses of the business.
WNCG has assembled a team of acquisition experts with strong financial backgrounds and expertise in sales and marketing. As a parent company, WNCG will acquire and support these businesses, negotiate strategic alliances, develop proprietary financial tools, and apply the skills and experience of management to enhance shareholder value.
WNCG acquired Southwest Financial Group (SFG) in February 2007. Southwest Financial Group has operated for 21 years and has interests in business ranging from life insurance and long-term care to sporting events insurance and pet insurance. It mainly sells family and personal insurance; real estate and asset insurance products and services; niche tax and wealth building consulting; employee group benefits; 401K retirement plans; earthquake, flood and disaster insurance; debt reduction; alternative investments; and mortgage purchasing and refinancing.
SFG has 18,000 clients and 85 representatives nationwide and generated approximately $22 million in gross insurance sales during 2008. In addition to its core offerings, SFG also has growing interests in long-term care for student sports programs and student athletes, as well as pet insurance. SFG offers an exclusive program of accident and sickness insurance for college students and handles all administration of the program, including underwriting and quoting, policy issuance, eligibility and billing and paying claims. There are currently more than 100 colleges and universities covered by the program.
SFG is developing new products for insuring sporting events such as PGA tournaments, the NBA Playoffs, and city marathons. It also acquired Cleverbiz, which has more than 200 agents in the Chicago market, last year. Cleverbiz will help SFG grow in the single annuity premium and life insurance premium segments.
Offshore services
WNCG’s dedicated Offshore division provides services to offshore insurance companies and banks and offers the most up-to-date tools in the areas of tax planning and tax optimization. Like offshore banks, insurance companies formed in offshore jurisdictions benefit from lower taxes and a more liberal regulatory environment.
Offshore insurance offers the following benefits:
- Minimal interventions from authorities and institutions;
- Lower capital requirements than other jurisdictions;
- Tax aspects, they are often exempted from all forms of direct taxes;
- Tax on profits are replaced with lump-sum taxes;
- Low establishment and license fees;
- Liberal operating requirements;
- Generally not subject to foreign exchange restrictions;
- Licenses are easily available in many offshore jurisdictions;
- In a number of countries no obligation of capital adequacy maintenance; and
- Possibility of offering all types of insurance policies, including life policies.
WNCG’s Offshore Services Division offers:
- Catastrophic insurance
- Extended warranty insurance
- Captive insurance
- Aviation insurance
WynGreen Division
WNCG uses offshore insurance as a vehicle for creating profits to reinvest in green technologies through its WynGreen division. WynGreen acquires innovative green technologies and already owns interests in turn-key home pre fabrication, solar nanotechnology, alternative fuel conversion and independent sustainable energy systems with zero emissions or fossil fuels.
Pending acquisitions
WNCG plans to acquire businesses in insurance growth areas and other financial services areas. It has a goal of acquiring businesses representing revenues of between $25 million and $75 million each year over the next five years.
During July 2009, the Company announced that it was negotiating six acquisitions. Each of the acquisition candidates have been evaluated for potential synergies with SFG. The Company expects to close all six acquisitions in the second half of 2009, pending financial audits for each company.
The first acquisition likely to close is Florida Insurance Consulting in Bartow Florida. The Company has signed a non-disclosure agreement signalling its interest and a letter of intent is likely to follow in August, followed by due diligence and closing in Q3 009. Florida Insurance Consulting has more than 100 agents in Florida and generates $10 million - $15 million in premium insurance and financial sales each year.
SFG plans to work through Florida Insurance Consulting to develop additional business in the Latin American community. Hispanics represent the largest minority group in the U.S. at 44.3 million or 14.8% of the population and are also the fastest-growing minority group, accounting for nearly 50% of U.S. population growth in 2006.
The relatively young Hispanic population has impressive purchasing power. Many Latin Americans have successfully started their own businesses, as evidenced by the 1.2 million Hispanic-owned firms in the U.S. Health insurance providers and hospitals are advertising online to build brand awareness within the Hispanic community, and tax preparation and accounting services are advertising through Spanish-language media.
The Company plans to extend its market penetration within the Hispanic community by recruiting new agents and associates with strong family backgrounds and ties to Latin America, Cuba, the Caribbean and South America.
