REFILE-Exclusive: Tangram spins off from Heffernan with creation of new SkyKnight-backed MGA platform

By David Bull

May 27 - (The Insurer) - Tangram Insurance Services is being spun off from Heffernan Group as the foundational portfolio company of a newly formed MGA platform called Balavant Insurance Group.

The new platform aims to become a next-gen program manager leveraging best-in-class technology, centralised services, and ownership alignment with underwriting teams to deliver profitable growth for carrier and distribution partners.

It will also look to diversify its existing suite of programs from a currently largely admitted focus at Tangram to more non-admitted offerings.

Tangram has steadily grown to around $200 million of in-force premium since its 1999 launch. Balavant has ambitions to scale to $1 billion plus of premium through organic growth of its programs portfolio, new program incubations driven by recruitment of underwriting teams, and acquisitions of organisations with market leadership in their programs.

Balavant will be led by current Tangram president and CEO Rekha Skantharaja, who joined the MGA in 2009, took the President role in 2013 and then became CEO role in 2018.

The new holding company will be staffed with a combination of Tangram’s existing executive team under Skantharaja, as well as new hires in key functional areas including technology and finance.

SkyKnight Capital, which is also an investor in Heffernan, will be a significant owner of the new platform, securing a vehicle to build out in the MGA space.

Heffernan Group president and CEO Mike Heffernan has invested in Balavant alongside other investors in the retail broker and the management of Tangram, which is based in Novato, California.

Balavant is also inviting capacity providers to participate as investors in the newly created business, as it looks to strategically align with carrier partners.

In an interview with Program Manager, Skantharaja confirmed the Tangram spin-off and said the transaction represents the best of both worlds for the MGA and its management team.

Against the backdrop of “massive consolidation” in the sector and a recognition that scale and size matter when it comes to leveraging capacity and distribution relationships, the spin-off will allow the MGA to set out on its next phase of development while benefiting from ownership continuity.

The executive said that the creation of Balavant and support of SkyKnight and other investors means the platform will have “dedicated capital, dedicated resources, and dedicated intellect” that will enable it to turbo-charge growth.

“Our team at Tangram is excited to control our own destiny with this decision. Rather than being eaten by Goliath, the dream is to become the Goliath,” she said.

She described SkyKnight as “more patient” capital than other private equity firms in the sector, because a significant proportion of the money it manages comes from family funds.

STRATEGIC ACQUISITIONS

In the interview, Skantharaja said that the new platform and its backer SkyKnight have a strong pipeline and is set to make “strategic acquisitions of teams or entities” in the coming months as it sets out on a path to meet its ambitious growth targets.

The company views its biggest opportunities in the organic growth of Tangram’s portfolio of programs alongside attracting expert teams of underwriters, supplemented with strategic M&A.

“I think this is a compelling story for owners of entities or key underwriters in this business to get their chance to come to Balavant, hang up their shingle, and drive results through best-in-class underwriting and leveraging the significant people and technology investments being made at the holding company.

“And I think many of these underwriters are sitting inside companies where the upside is not as compelling, and the agility of the organisation isn’t as forward-thinking or fast-moving as the MGA side,” she commented.

She added that the opportunity to own equity at the entity and holding company level at the start of the Balavant journey and “take the ride” upwards, could be an exciting proposition for the “right leaders” looking to build and scale on the platform, with the opportunity for a capital turn down the line.

While Balavant is open to a diverse range of industries, the platform will look to attract talent and launch programs in spaces where innovative rate and coverage can be structured, and data driven insights and deep expertise can be applied to risk selection, said Skantharaja.

DIFFERENTIATING FACTORS

The executive said that in addition to its ownership, she believes Balavant has several advantages over some of the other recently launched MGA platforms looking to buy and build their businesses.

“I’m an owner-operator coming out of Tangram and along with our fantastic team have built this company brick by brick. The lens through which we can support others on the platform who are building and scaling an MGA, developing distribution and striking up partnerships, is deeply informed by lessons learned from this journey.

“The other important lever is that we are bringing a very successful, highly profitable entity onto the platform, and that creates a cash engine to help fuel the growth at the holding company level in areas including sales and marketing, program development and technology transformation,” said Skantharaja.

Having an established MGA in Tangram as the first portfolio company under the Balavant umbrella will ease the pressure off new entities and teams joining the platform, she added.

She also highlighted the fact that the platform’s young, experienced and “energetic” management team are committed long-term to the business, with “a lot of runway” in front of them.

She mentioned that Balavant will benefit from the absence of legacy systems, with a focus on investing in “forward-thinking” technologies at the holding company level that will support the whole, while staying nimble enough to accommodate differentiation amongst the portfolio.

Alongside Tangram, the other initial portfolio company on the platform will be Preferred Reinsurance Intermediaries, a reinsurance brokerage that focuses on the MGA and programs space.

“Having a reinsurance intermediary under the Balavant umbrella will be intriguing to folks that want to join and take advantage of the support in navigating reinsurance and fronting companies to the benefit of securing program capacity. Possessing in-house resources is going to be an accelerator,” said the executive.

Finally, Skantharaja gave context to the name Balavant. “The company name is a nod to my heritage. ‘Balavant’ in Sanskrit means ‘one who possesses strength and power in body and character’. We chose this name to reflect our belief in building a company with endurance, integrity, and impact.

“I am so proud of the roots we already have established in the industry today. The best is yet to come.”