Fairfax and Mitsui Sumitomo Insurance (MSI), a subsidiary of MS&AD Insurance Group Holdings, have entered into an agreement to pursue a strategic partnership which will include establishing reinsurance relationships and Mitsui’s acquisition of Fairfax’s 97.7% interest in First Capital Insurance Limited of Singapore.
Under the agreement the firms announced plans to collaborate in a range of segments including reinsurance relationships which would offer the opportunity to mutually participate in writing selected classes of non-life insurance business.
Fairfax and MSI say this broad global partnership will lead to growth and added value for both entities.
Member of the Board, Senior Executive Officer of MSI, Masahiro Matsumoto, said; “Mitsui Sumitomo and Fairfax share the same long-term vision and values. We look forward to building our partnership with Fairfax to expand on our complementary global strengths and, in particular, with Mr. Athappan to continue building First Capital.”
FairRamaswamy Athappan will continue as First Capital’s Chief Executive Officer, while retaining his responsibilities as Chairman of Fairfax Asia.
Fairfax’s interest in First Capital will be purchased at $U.S. 1.6 billion – which means a realized net investment gain for the insurer of $U.S. 900 million after tax, increasing Fairfax’s original book value per basic share by approximately $U.S. 33 on a pro forma basis.
Fairfax will retain a meaningful quota share exposure to First Capital’s insurance portfolio, when the acquisition is completed.
Prem Watsa, Chairman and Chief Executive Officer of Fairfax, commented; “We are very excited to become partners with Mitsui Sumitomo.
“Mitsui Sumitomo’s scale in Asia will give First Capital, under the continued leadership of Mr. Athappan, the opportunity to grow significantly.
“Mr. Athappan championed this transaction, based on his strong belief that it was the best way for First Capital to continue to grow successfully while also creating a valuable long-term partnership for the Fairfax group.”
Athappan said; I am extremely happy to partner with Mitsui Sumitomo. This wonderful new partnership creates a win-win-win by providing a runway for growth of the company I helped nurture and grow, while also significantly growing the business of both Fairfax Asia and the Fairfax group.”
The acquisition of First Capital by Mitsui is subject to approvals by the Monetary Authority of Singapore and the Financial Services Agency of the Government of Japan, and is forecast to be completed late this year or early next year.
BofA Merrill Lynch acted as exclusive financial advisor to Fairfax throughout the transaction.
Both Mitsui Sumitomo and Fairfax Financial have been active in insurance and reinsurance mergers & acquitions (M&A) in recent years.