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Singapore Reinsurance to delist after Fairfax compulsorily acquires remaining shares
Fairfax Asia, which launched a cash offer for Singapore Reinsurance in March, will exercise its right to compulsorily acquire all the shares of dissenting shareholders.After that, the offeror will delist the mainboard-listed company, which underwrites general reinsurance and is also involved in investment activities of its non-reinsurance funds.
As at 6pm on Wednesday, Fairfax received valid acceptances amounting to about 90.02 per cent of the total number of issued shares other than those already held by the offeror, its related corporations or their respective nominees.
Fairfax said it is thus entitled to, and intends to, exercise its right of compulsory acquisition.
The offer will stay open for acceptance until the final closing date of June 17 at 5.30pm.
It therefore " remains as an opportunity" for Singapore Reinsurance shareholders who have not accepted the offer to realise their shares at the offer price as soon as practicable, Fairfax said in a filing on Wednesday night.
The offer price of 35.35 Singapore cents a share was 20.6 per cent higher than the volume weighted average price for both the one-month and three-month periods up till March 18.
Fairfax had offered to buy the 71.8 per cent interest that it and its concert parties did not own then. Public acceptances later amounted to 63.1 per cent as at June 1, and ticked up to about 64.7 per cent by June 16.
The offeror extended the closing date twice, from May 18 to June 2, and then to June 17.
Singapore Reinsurance lost its free float on May 25, which means the trading of its shares will be suspended at the close of the offer.
With the AGM in exactly a month?s time on 27 April 2021, the burning question from shareholders will be - is the offer price a fair and reasonable one.
Or would the IFA provide an opinion before the AGM, given that the most recent opinion by IFA for GL, took approximately one month after the announcement of buyout.
Fingers crossed - an offer by SingRe on 19 March 2021, could mean the IFA might give an opinion before 27 April 2021.
It seems the offer price might be not be enticing for shareholders, given that the price has been mainly trading 0.355 and 0.36 over the past week - a spread above the offer price of 0.3535.
Dyodd.
Or would the IFA provide an opinion before the AGM, given that the most recent opinion by IFA for GL, took approximately one month after the announcement of buyout.
Fingers crossed - an offer by SingRe on 19 March 2021, could mean the IFA might give an opinion before 27 April 2021.
It seems the offer price might be not be enticing for shareholders, given that the price has been mainly trading 0.355 and 0.36 over the past week - a spread above the offer price of 0.3535.
Dyodd.
https://www.businesstimes.com.sg/companies-markets/fairfax-asia-making-cash-offer-of-s03535-a-share-for-singapore-reinsurance-with-a
An offer that took place faster than expected. Perhaps by the offerer knowing that in the short to mid term - there are three simple ways to boost their cash holdings and income:
1. Increasing reinsurance rates leading to better business ahead
2. Disposal of investment properties for the Shophouses for a chance to make a profit above current values as well as funds in hand
3. Increasing yields for bonds leading to higher interest income
Some few possibilities here:
1. An upward revision of offer price as a potential scenario, especially when the IFA calls for. Fellow reinsurance firms are trading at 1.0 or above 1.0 P/BV. Should the offer be at 0.45, or even above.
2. Competitive offer from another party - UOI, GE etc - or a decline of the offer price at 0.3535 - could send some messages there. This is further strengthened by the fact that current substantial shareholders are not part of the concert parties, which meant that Fairfax would like to make it a wholly-owned subsidiary.
I might be wrong here, DYODD.
An offer that took place faster than expected. Perhaps by the offerer knowing that in the short to mid term - there are three simple ways to boost their cash holdings and income:
1. Increasing reinsurance rates leading to better business ahead
2. Disposal of investment properties for the Shophouses for a chance to make a profit above current values as well as funds in hand
3. Increasing yields for bonds leading to higher interest income
Some few possibilities here:
1. An upward revision of offer price as a potential scenario, especially when the IFA calls for. Fellow reinsurance firms are trading at 1.0 or above 1.0 P/BV. Should the offer be at 0.45, or even above.
2. Competitive offer from another party - UOI, GE etc - or a decline of the offer price at 0.3535 - could send some messages there. This is further strengthened by the fact that current substantial shareholders are not part of the concert parties, which meant that Fairfax would like to make it a wholly-owned subsidiary.
I might be wrong here, DYODD.
https://www.businesstimes.com.sg/banking-finance/reinsurer-miller-finds-new-owner-in-gic-and-a-refreshed-strategy
1. Recent corporate activities in reinsurance business for eg. GIC took a stake in Miller.
2. We need to look out for a potential turnaround of the business, given that they have recently disposed non-core business in INS, which could lead to it being a pure-play reinsurance player - leading to a clear business strategy and more effective allocation of management resources. This should lead to better shareholder value ultimately.
Dyodd.
1. Recent corporate activities in reinsurance business for eg. GIC took a stake in Miller.
2. We need to look out for a potential turnaround of the business, given that they have recently disposed non-core business in INS, which could lead to it being a pure-play reinsurance player - leading to a clear business strategy and more effective allocation of management resources. This should lead to better shareholder value ultimately.
Dyodd.
https://www.straitstimes.com/business/economy/business-insurance-premiums-rising-amid-pandemic-report
In my opinion, there may the value unlocking from the Company in the future - given the expected better operating conditions and higher interest rates, large cash floats, and corporate activities in reinsurance business. I may be wrong. Dyodd.
1. https://www.reinsurancene.ws/re-insurance-ma-to-surge-in-2021-clyde-co/
?With deal announcements continuing apace, we expect the level of completed M&A in the coming months to accelerate as re/insurance businesses scent opportunities to build scale, generate efficiencies and reach new customers in new markets.?
Given the volume of deals announced in recent months, Clyde & Co predicts that insurance M&A will surge in the first half of 2021.?
?Despite market hardening, many of the fundamentals driving M&A will persist. These include competition for assets, the need to diversify portfolios, add digital capabilities, and increase scale and market share. The availability of plentiful capital, combined with a deeper pool of targets, will give buyers plenty of choice although we expect them to select acquisitions carefully to ensure the best fit with their strategic objectives.?
2. https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/75787/Type/eDaily/Reinsurance-Rate-hikes-in-1-Jan-renewals-fall-short
?2021
An overhang on the reinsurance sector in the short term persists, as seen in the latest business interruption rulings in the UK and South Africa. Therefore, higher technical underwriting margins are greatly needed to make up for the shortfall in investment income, elevated natural catastrophe losses, and additional pandemic claims, which S&P believes collectively will carry the positive reinsurance pricing momentum throughout 2021.?
1. https://www.reinsurancene.ws/re-insurance-ma-to-surge-in-2021-clyde-co/
?With deal announcements continuing apace, we expect the level of completed M&A in the coming months to accelerate as re/insurance businesses scent opportunities to build scale, generate efficiencies and reach new customers in new markets.?
Given the volume of deals announced in recent months, Clyde & Co predicts that insurance M&A will surge in the first half of 2021.?
?Despite market hardening, many of the fundamentals driving M&A will persist. These include competition for assets, the need to diversify portfolios, add digital capabilities, and increase scale and market share. The availability of plentiful capital, combined with a deeper pool of targets, will give buyers plenty of choice although we expect them to select acquisitions carefully to ensure the best fit with their strategic objectives.?
2. https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/75787/Type/eDaily/Reinsurance-Rate-hikes-in-1-Jan-renewals-fall-short
?2021
An overhang on the reinsurance sector in the short term persists, as seen in the latest business interruption rulings in the UK and South Africa. Therefore, higher technical underwriting margins are greatly needed to make up for the shortfall in investment income, elevated natural catastrophe losses, and additional pandemic claims, which S&P believes collectively will carry the positive reinsurance pricing momentum throughout 2021.?
I have taken interest in Singapore Reinsurance as a long term investment.
Major Shareholders :
1. Fairfax Financial Holdings Limited - 27.76%
2. Newline Holdings UK Limited ? 8.70%
3. Oversea-Chinese Banking Corporation Limited - 8.42% (via Great Eastern)
4. United Overseas Insurance Limited - 6.01%
5. India International Insurance Pte Ltd - 5.02%
6. Dalton Investments - 5.01%
Gross Written Premium vs Underwriting Results vs Reinsurance Income vs PAT:
FY2017: 182m vs 1.3m vs 8.1m vs 12.6m (1.3 cents as div) avg. 4%, EPS 2.09
FY2018: 207m vs -4.8m vs 3.2m vs 8.8m (1.3 cents as div) avg. 4%, EPS 1.45
FY2019: 238m vs -3.4m vs 4.4m vs 9.8m (1.3 cents as div) avg. 4%, EPS 1.62
FY2020: 264m vs -5.4m vs 0.2m vs 5.1m (0.7 cents as div) 2.4%, EPS 0.86
Reasons for the downtrend in results, would likely be due to the COVID-19 pandemic, climate-related claims, low interest rates (as its investment assets are largely cash and fixed income, balance equity and properties) and the competitive market scenario.
I see some key potential game-changing factors, some of them megatrend:
1. recent emphasis in ESG and climate change initiatives - which could drive climate-related impacts down in the long run.
2. large holding of shophouses at 68/69 and 85 Amoy Street (as PPE), 55-58 and 103 Amoy Street (as investment properties).
3. Disposal of non-core business in INS - which could mgt expenses down, strengthen focus in core reinsurance ops.
4. No-debt, large cash holdings of 150m (25 cents per share), NAV of 45 cents. Cash holdings from 87m in 2018, to 103m in 2019, and now at 150m in 2020.
5. Potential consolidation of the reinsurance businesses in the market as recent trend shows. Recent reinsurance acquisition multiples have ranged from 1.1?1.6x book value, with revenue multiples ranging from 0.7?1.9x. https://www.aranca.com/knowledge-library/articles/business-research/are-mergers-and-acquisitions-the-way-forward-in-the-global-reinsurance-industry. Based on an estimate should this event take place, it could mean the acquisition value of 1.3x BV and 1.3X revenue multiples, leading to a possible buyout price of SGD 0.59 per share, or 2X current share price should this event take place.
6. Recently, they have reduced their shares outstanding from 605m to 599m shares, via cancellation of shares. This 1% reduction initiative is good for long-term shareholders should this be an ongoing scenario.
Catalysts of re-rating of the share price and signs that they want to increase shareholder value are:
1. deployment of the 150m cash to more interesting opportunities.
2. increase in dividend yield and more share buybacks, increasing EPS, DPS
3. tangible signs that ESG initiatives will lower claims (likely in the longer term)
4. improvement in earnings - increase in underwriting rates, disposal of non-core business (and have taken place, which marks a sign of turnaround, or switch in business strategy), increase in interest rates (which i believe is on the uptrend)
UOI currently trades at near 1.0X BV on 17X PE. Should Singapore Reinsurance EPS goes to pre-Covid, we could look at the share price to trade at 0.36-0.38 (0.85X BV), which is a new good price range. Anything beyond would be of interesting development. I am investing in due to the potential for a turnaround.
Dyodd.
Major Shareholders :
1. Fairfax Financial Holdings Limited - 27.76%
2. Newline Holdings UK Limited ? 8.70%
3. Oversea-Chinese Banking Corporation Limited - 8.42% (via Great Eastern)
4. United Overseas Insurance Limited - 6.01%
5. India International Insurance Pte Ltd - 5.02%
6. Dalton Investments - 5.01%
Gross Written Premium vs Underwriting Results vs Reinsurance Income vs PAT:
FY2017: 182m vs 1.3m vs 8.1m vs 12.6m (1.3 cents as div) avg. 4%, EPS 2.09
FY2018: 207m vs -4.8m vs 3.2m vs 8.8m (1.3 cents as div) avg. 4%, EPS 1.45
FY2019: 238m vs -3.4m vs 4.4m vs 9.8m (1.3 cents as div) avg. 4%, EPS 1.62
FY2020: 264m vs -5.4m vs 0.2m vs 5.1m (0.7 cents as div) 2.4%, EPS 0.86
Reasons for the downtrend in results, would likely be due to the COVID-19 pandemic, climate-related claims, low interest rates (as its investment assets are largely cash and fixed income, balance equity and properties) and the competitive market scenario.
I see some key potential game-changing factors, some of them megatrend:
1. recent emphasis in ESG and climate change initiatives - which could drive climate-related impacts down in the long run.
2. large holding of shophouses at 68/69 and 85 Amoy Street (as PPE), 55-58 and 103 Amoy Street (as investment properties).
3. Disposal of non-core business in INS - which could mgt expenses down, strengthen focus in core reinsurance ops.
4. No-debt, large cash holdings of 150m (25 cents per share), NAV of 45 cents. Cash holdings from 87m in 2018, to 103m in 2019, and now at 150m in 2020.
5. Potential consolidation of the reinsurance businesses in the market as recent trend shows. Recent reinsurance acquisition multiples have ranged from 1.1?1.6x book value, with revenue multiples ranging from 0.7?1.9x. https://www.aranca.com/knowledge-library/articles/business-research/are-mergers-and-acquisitions-the-way-forward-in-the-global-reinsurance-industry. Based on an estimate should this event take place, it could mean the acquisition value of 1.3x BV and 1.3X revenue multiples, leading to a possible buyout price of SGD 0.59 per share, or 2X current share price should this event take place.
6. Recently, they have reduced their shares outstanding from 605m to 599m shares, via cancellation of shares. This 1% reduction initiative is good for long-term shareholders should this be an ongoing scenario.
Catalysts of re-rating of the share price and signs that they want to increase shareholder value are:
1. deployment of the 150m cash to more interesting opportunities.
2. increase in dividend yield and more share buybacks, increasing EPS, DPS
3. tangible signs that ESG initiatives will lower claims (likely in the longer term)
4. improvement in earnings - increase in underwriting rates, disposal of non-core business (and have taken place, which marks a sign of turnaround, or switch in business strategy), increase in interest rates (which i believe is on the uptrend)
UOI currently trades at near 1.0X BV on 17X PE. Should Singapore Reinsurance EPS goes to pre-Covid, we could look at the share price to trade at 0.36-0.38 (0.85X BV), which is a new good price range. Anything beyond would be of interesting development. I am investing in due to the potential for a turnaround.
Dyodd.