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Cooper Gay puts Swett & Crawford, other business up for sale

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Reinsurance brokerage Cooper Gay Swett & Crawford Ltd. said Friday that it plans to sell its North American business, including U.S. wholesale brokerage Swett & Crawford with which it merged five years ago.

The North American business Cooper Gay has put on the block includes specialty managing general agencies:

• Houston-based J.H. Blades & Co. Inc., with which Swett & Crawford merged in 1997;

• Toronto-based Creechurch International Underwriters Ltd., which Cooper Gay bought in 2008; and

• An undisclosed U.S. reinsurance broker.

London-based Cooper Gay said it will retain its Miami hub office for its Latin American operation, which will remain part of the firm's international business.

“We believe this transaction will best serve the long-term interest of our clients, employees and shareholders,” CEO Steve Hearn said in a statement.

Mr. Hearn joined Cooper Gay in June, shortly after Toby Esser stepped down after 30 years with the broker. Mr. Esser also oversaw its 2010 merger with Swett & Crawford Group Inc. that established a combined entity with about $3.5 billion in premiums.

The recent leadership change “enabled the company to (do) a 'clean slate' evaluation of those business groups,” John Wicher, principal of San Francisco-based John Wicher & Associates Inc., said in an email Friday. While Cooper Gay globally is a reinsurance business, the U.S. wholesale business “wasn't necessarily complementary.”

At the time of the 2010 merger with Swett & Crawford, observers said it made strategic sense as it satisfied Cooper Gay's desire to expand in the U.S. wholesale market and stretched Swett's international and reinsurance capabilities.

But Cooper Gay has performed poorly recently, as “tough market conditions in many of its markets, including reinsurance and property rate declines, a challenging economic climate in Europe resulting in lower renewals and new business development, and significantly increased competition in Latin America,” have weighed on its revenue, according to an August report by Standard & Poor's Corp.

Moody's Investors Service, which is reviewing the reinsurance broker for a potential downgrade in ratings, said in September that Cooper Gay for the first half of 2015 “reported steady performance in its North American business, accounting for nearly 60% of commissions and fees,” though the international regions saw pricing and volume declines.

Cooper Gay had revenue of $369 million for 12-month period ended in June, Moody's said.

Still, Mr. Wicher said the wholesale business remains “scrappy and volatile.”

“If you are carrying debt and valuations are strong, Swett may be off the island,” he said.