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24 August 2017
Mitsui Sumitomo Insurance and Fairfax Financial Holdings to Enter into a Global Partnership
 
Mitsui Sumitomo Insurance to Acquire First Capital Insurance, Singapore’s Largest Commercial Property and Casualty Insurer

 

Mitsui Sumitomo Insurance Company, Limited ("MSI", President: Noriyuki Hara), a subsidiary of MS&AD Insurance Group Holdings, Inc. ("the Company", President: Yasuyoshi Karasawa), today announces it has reached an agreement with Fairfax Financial Holdings Limited (“Fairfax”) to enter into a global partnership and to acquire First Capital Insurance Limited ("First Capital Insurance"), Singapore’s largest commercial property and casualty insurer ("the Acquisition").

 

1. Global Partnership with Fairfax and Background of Acquisition

MSI will enter into an agreement and explore a broad global partnership with Fairfax in various areas including reinsurance relationships that would lead to successful growth and value creation for both parties.

MSI, as well as the Company, is working to grow enterprise value through sustainable growth, ensuring financial soundness, enhancing profitability and improving capital efficiency, based on the medium-term management plan "Next Challenge 2017." Our international business is positioned as a growth engine to support these efforts, and we have been working to increase stable profits and spread risk through diversification of our portfolio and by continuously investing in areas of high profitability and growth.

Based on this strategy, we have rapidly grown to become the top non-life insurer (as measured by direct written premiums) in the ASEAN region and expanded our operations centered on Asia,  building  on  the  momentum  from  our  acquisition  of  the  Asian  non-life  insurance operations of UK company AVIVA, in 2004. We are further strengthening our revenue base through significant efforts in emerging markets where future growth is expected and we have increased our presence in Europe and the US, major insurance markets, by developing direct insurance business in Continental Europe and acquiring Amlin plc in February 2016.

In order to maintain and strengthen our leading position in the ASEAN region as well as to complement our existing operation and achieve synergies, MSI will acquire First Capital Insurance, one of the leading players in the Singaporean non-life insurance market.


2.           Outline of the Acquisition

(1)       Target company: First Capital Insurance Limited

(2)         Acquisition method:

Acquisition of 97.7% of the shares of First Capital Insurance by MSI


(3)        
Status of the shares prior to and after the Acquisition, purchase price and number of shares:

Number of shares held prior to acquisition

0 shares

(Number of voting rights: 0) (Percentage of voting rights held: 0%)

Number of shares to be held after acquisition

24,427,799 shares

(Number of voting rights: 24,427,799) (Percentage of voting rights held: 97.7%)

Acquisition price

Common shares of First Capital Insurance: Approximately USD1.6billion (Approximately JPY174.4 billion)

Advisory and other fees: Approximately JPY 1.1 billion

Total: Approximately JPY 175.5 billion


(4)        
Acquisition Terms:  USD 65.5 per common share

This acquisition price represents a book value (Note 1) multiple of 3.3x.


(5)      
Acquisition Financing: The funds for the Acquisition are to be provided from cash on hand(Note 2).

(6)      
Time of Completion: Subject to the receipt of approvals from the relevant regulators, completion is planned to occur in the fourth quarter of the fiscal year (i.e., January 2018 to March 2018).

* In these materials, we calculate figures using exchange rate of 109 yen per USD.


(Note 1) As of June 30, 2017. 80 yen per SGD.
(Note 2) The company does not intend to raise equity-finance for this transaction.

3. Strengths of First Capital Insurance

 

(1)      Presence in the Singapore Insurance Market

First Capital Insurance is the largest property and casualty insurance company in the Singapore market in terms of gross written premiums and a leading player in Singapore with annual  profits of approximately JPY 7 billion.

 

(2)      High Profitability

First Capital Insurance has strengths in underwriting corporate/commercial risks located in the ASEAN. First Capital Insurance has maintained high profitability with a five-year average combined ratio of 76% and ROE of 15%. In addition, First Capital Insurance has diversified underwriting risk portfolio across geographies and products with limited exposure to natural catastrophe risks.

 

(3)      Strong Business Base

First Capital Insurance has strong and stable relationships with clients, reinsurers and brokers, under a company philosophy that values trusted relationship with business partners.

 

4.            Rationale for the Acquisition

(1)           Enhance profitability and realize further growth in Singapore

The acquisition will enable us to become a No.1 insurer in Singapore non-life insurance market. The acquisition is highly complementary as First Capital has a strong presence and underwriting capability in the local corporate market which fits well with MSI who has a competitive advantage in retail and SME business.

 

(2)        Further strengthen our Leading Position in the ASEAN Region

MSI is the only non-life insurance company in the world with operations in all 10 ASEAN countries, and has the largest market share in terms of GWP for non-life insurance. First Capital Insurance is a leading insurer in the ASEAN region in term of both GWP and profit. By acquiring First Capital Insurance, we can also cement our position as the No.1 in the ASEAN region. In addition to its strengths in underwriting local commercial risk in Asia,  First Capital Insurance has growth strategies in the retail business by utilizing digital technologies. By integrating the capabilities of First Capital Insurance and MSI’s network in the region, we can expect new business opportunities in the local corporate and retail market in Singapore as well as other Asian countries.

 

   (3)         Synergies through global partnership with Fairfax

Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management (Total premium income of approximately 1 trillion yen.). Fairfax has insurance and reinsurance operations globally, with a presence in more than 30 countries, with great presence in North America and the Lloyd’s market. Fairfax also owns FairVentures that conducts research and development of digital technologies enabling application of these technologies to its insurance business globally. The global partnership with Fairfax, in areas including reinsurance and digital technologies, will enable further growth in our overseas businesses.

 
 

(End of document)


[Attachments]

 

1. Corporate Outline of First Capital Insurance(As of the end of July 2017, unless otherwise stated.)

(1)     Trade name

First Capital Insurance Limited

(2)     Year of incorporation

1950

(3)     Headquarters

Singapore

(4)     Management

CEO: Ramaswamy Athappan

(5)     Number of employees

About 160

(6)     Main lines of business (of  the

Group)

Property and casualty insurance

(7)     Capital

SGD 26.5 million

(8)     Rating

A.M. Best: A (Excellent)

(9)     Listed on:

Not listed

(10)    Fiscal year

Ending on December 31 of each year

(11)    Major    shareholders                       and

shareholding ratio

Fairfax Asia Limited(Note 3)

Others

:

:

97.7%

2.3%

(12)    Ties with MSI

There  are  no  capital  ties  or  personnel  ties,  but  there  are reinsurance

transactions.

(13)   First Capital Insurance's consolidated business results and financial condition over the last three years

(unit: millions of SGD)

Fiscal year

Ended Dec 2014

Ended Dec 2015

Ended Dec 2016

Consolidated net assets

501

578

664

Consolidated total assets

1,753

1,908

1,967

Gross written premium

532

548

542

Net written premium

206

184

209

Underwriting revenue

52

55

67

Consolidated current net profits

79

80

89

Combined ratio

73.9%

71.4%

67.3%

ROE (Return on Equity)

17.3%

14.8%

14.3%

           

(Note 3) a wholly-owned subsidiary (intermediate holding company in the Asian region) of Fairfax.


 

2. Corporate Outline of Fairfax(As of the end of July 2017, unless otherwise stated)

(1)     Trade name

Fairfax Financial Holdings

(2)     Year of incorporation

1985

(3)     Headquarters

Toronto, Canada

(4)     Management

Chairman and CEO: Prem Watsa

(5)     Main lines of business (of  the

Group)

Insurance, Reinsurance and Investment management

(6)     Common shareholders’ equity

USD 8,484 million(Note 4)

(7)     Rating

S&P: BBB- Stable

(8)     Listed on:

Toronto Stock Exchange

(9)     Fiscal year

Ending on December 31 of each year

(10)    Ties with MSI

There  are  no  capital  ties  or  personnel  ties,  but  there  are reinsurance

transactions.

(11)   Fairfax's consolidated business results and financial condition over the last three years

(unit: millions of USD)

Fiscal year

Ended Dec 2014

Ended Dec 2015

Ended Dec 2016

Consolidated net assets

9,743

12,018

11,820

Consolidated total assets

36,131

41,529

43,384

Gross written premium

7,459

8,655

9,534

Net written premium

6,301

7,520

8,088

Underwriting revenue

400

532

390

Consolidated current net profits

1,664

642

394

Combined ratio

90.8%

89.9%

92.5%

ROE (Return on Equity)

18.6%

6.5%

3.9%

(Note 4) The figures shows Common shareholders’ equity at the end of December 2016.



 

Important information

This document has been prepared, in any jurisdiction, for the purpose of publicly announcing the acquisition of shares by Mitsui Sumitomo Insurance Company, Limited ("MSI"), a subsidiary of MS&AD Insurance Group Holdings, Inc. ("MS&AD Holdings", MS&AD Holdings and MSI collectively, "MS&AD") which results in the change of subsidiary of MSI, and not for the purpose of soliciting investment or engaging in any other similar activities within or outside Japan.
The information contained herein does not, and is not intended to, constitute an offer to  sell securities in the United States. In the United States, no securities may be offered or sold unless registered under the Securities Act of 1933 or pursuant to an exemption from such registration.

 

Forward looking statements

This document contains forward-looking statements. These forward-looking statements are based on MS&AD’s current assumptions, expectations and beliefs in light of the information currently possessed by it and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause MS&AD’s actual results, financial position or cash flows to be materially different from any future results, financial position or cash flows expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include those contained in the MS&AD’s latest Annual Securities Report and Quarterly Securities Report  etc., and MS&AD undertakes no obligation to publicly update or revise any forward-looking statements.


For more information, please contact the communications team at communications@msig-asia.com.


   
       
 
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