Singapore Reinsurance

[ACTIVIST SPEAKS]

lol...nobody's child. No wonder the share is so undervalued...investors all seem to pass by and the stock is left all alone

[ACTIVIST SPEAKS]

As at 28 February 2017, First Capital Insurance Limited owns 115,370,835 shares.
Fairfax Financial Holdings Limited is deemed to have an interest in shares held by First Capital Insurance Limited, Newline Corporate Name Limited and Newline Holdings UK Limited.

There was a married deal of 115,370,835 shares @ 0.320 this morning.

Fairfax Financial Holdings Limited  has cashed out ?

Mitsui Sumitomo bought First Capital Insurance from Fairfax for 1.6 billion.  The deal was expected to be wrapped up in early 2018.  The sale of 19% of Singapore Reinsurance by First Capital Insurance was perhaps a pre-condition or a decision made by Mitsui Sumitomo.  In a way, Fairfax has already cashed out of Singapore Re......so  the interesting thing left is .....who is the buyer of this 19% and what are they going to do to this grossly undervalued and conservative reinsurer.

Fairfax is the buyer...so no change.

[AQ.]

Prob mild positive overall.

https://www.thestar.com/business/2017/08...r-16b.html

I quote:

"Fairfax estimates First Capital will grow from $400 million in gross premiums today to over $1 billion over time."

"Fairfax will take a 25-per-cent quota share, under which the insurer will share a certain percentage of premiums and losses.....

If First Capital writes $100 million worth of business, we’ll take a quota share of 25 per cent"

R Athappan continues on as First Capital CEO and Chairman of Fairfax Asia. I suppose he stays as Chair for SingRe as well.

The enlarged underwriting might provide more opportunities for SingRe, which has been scaling back in view of industrial dynamics.

Don't think it's a game changer though.

[¯|_(ツ)_/¯]

SinRe

Fairfax offer@0.3535 (link)

[ghchua]

Seems to be an opportunistic move by Fairfax to gain control of Singapore Reinsurance on a set of poor FY results and a low interest rate environment?

Besides a portfolio of equities and debt securities, Singapore Reinsurance also owns a few 999 year lease conservation shop houses along Amoy Street. These shop houses had seen a decent increase in value throughout the years, as can be observed from their annual reports.

Also, with interest rate at all time low, we should be able to see higher interest income from their mainly fixed income investment on their insurance underwriting "float" in future years from their corporate bonds, deposits and government bonds interest income.

One has to take all the above into consideration before deciding whether to accept the offer from Fairfax, notwithstanding their insurance underwriting losses.

[ongweehiang]

Reinsurance rate globally had been hardening and that means that the company is undervalued relative to its coming earning potential.

Fairfax is a very shrewd operator, so it may be good to be align with them than selling out to them.

Follow use at https://www.weightedresearch.com

[ghchua]

Reinsurance rate globally had been hardening and that means that the company is undervalued relative to its coming earning potential.

Fairfax is a very shrewd operator, so it may be good to be align with them than selling out to them.

Follow use at https://www.weightedresearch.com

I also think so. Going forward, underwriting reinsurance rates should be higher to take into account so much things happening for the past two years. Plus higher interest income from their debt investments going forward. Also, potential future increase in valuation of their shop houses at Amoy Street.

The company should be worth at least 1x book, but even at that level, I might hesitate to sell out, taking into consideration the assets that they have and potential turnaround of their business. I think I will reject their offer.

[¯|_(ツ)_/¯]

SpRe - compulsory acquisition

Singapore Reinsurance Corporation Limited is referred to as “transferor company”, and
Fairfax Asia Limited is referred to as “transferee”.

On 6 April 2021, the transferee made an offer to all the holders of ordinary shares in the transferor company at an offer price of S$0.3535 in cash for each share.

Up to 16 June 2021 (being a date within four (4) months after the making of the offer in that behalf by the transferee), the offer was approved by the holders of not less than 90% of the total number of the ordinary shares in the transferor company (other than shares already held at the date of the offer by, or by a nominee for, the transferee or its related corporations, and excluding any shares held as treasury shares).
https://links.sgx.com/FileOpen/Sunrise%2...eID=672700

Stay home and stay safe, everyone.

[Shrivathsa]

I took a quick look at the industry average price to tangible book value for reinsurance companies.

It ranges from 0.89 to 1.35 as of 2016 (last year for which data was available openly)
     

In terms of price to book value, the trend seems to be increasing, from 0.9 in 2010 to about 1 in 2016.
   

Singapore Reinsurance had a book value of 0.452.

Pessimistically, assuming that it is priced at 0.89 of book value, the exit should have been at 0.4.

Realistically, assuming the industry average of 1.1 (assuming growth from 1 in 2016 to 1.1 in 2021), the exit should have been at 0.495.

Pricing the exit at 0.35 is a very good deal for Fairfax and conversely a very bad deal for existing minority shareholders.

I guess the learning here is that one might buy an undervalued asset, but may not reap the benefit of appreciation of said undervalued asset if it is privatized cheaply.

[ghchua]

Hi Shrivathsa,

Your points are certainly well noted by me. In fact, the IFA appointed had gave an opinion that the offer is not fair but reasonable.
https://links.sgx.com/1.0.0/corporate-an...202021.pdf

As you can read from the report, the IFA used 4 comparable companies, namely, MNRB Holdings Bhd, Vietnam National Reinsurance Corporation, National Reinsurance Corporation of the Philippines and Taiping Reinsurance. The mean and median P/NAV of these companies are actually 0.78x and 0.72x respectively.

Also, do take note that there are few insurance related companies holding quite a big amount of shares in Singapore Reinsurance. Names like UOI, India International Insurance, Great Eastern, Singapore Warehouse (the investment arm of listed Hwa Hong, which owned a general insurance business last time and sold it) etc. These are savvy investors which had eventually throw in the towel, so it is not as if there are only retail investors in the company.

I guess once it reached compulsory acquisition level, minorities will have no choice but to accept the offer. I have tried to resist it until the end, but I guess it is what it is.