atans1

Posts Tagged ‘Prudential’

Pru eyeing Thai insurance assets

In Uncategorized on 21/04/2012 at 9:29 am

British insurer Prudential Plc  is thinking of bidding for the insurance business of Thailand’s Thanachart Bank, Reuters and the FT report, in a abt US$500 million (310 million sterling) deal. The Pru wants to expand further into SE Asia but has only 2% of the Thai market, unlike Indonesia where it has extensive operations.. It has not tried to do a major deal since shareholders aborted a US435bn bid for AIA in early 2011.

The Thanachart Bank unit, which is set to be auctioned, is expected to include life and non-life assets as well as a bancassurance arrangement. Some Japanese and European insurers are also expected to participate in the process.

Note ING , which is in the process of selling its Asia insurance and asset management businesses, also has assets in Thailand that are up for sale.

Why investors don’t like acquirers

In Uncategorized on 16/08/2010 at 6:35 am

The reason: most deals destroy value for acquirers. The evidence.

And think of DBS’s purchase of Dao Heng, and PosBank. And even Singtel’s purchase of Optus. A dirty secret that the public are not aware of is that value of Optus is less than what SingTel paid for it. http://atans1.wordpress.com/2010/01/15/singtel-lost-at-least-a2-billion-on-optus/

AIA/PRU Update at 700 hrs GMT

In Insurance on 01/06/2010 at 10:51 am

[Update: AIG tells Pru, "Bugger off on yr new price" ]

Reducing the price to 1.3 times its own estimate of AIA’s embedded value of $22bn (from 1.69 times) would be US$29bn, down from US$35.5bn*. Even at this new price there are UK investors unhappy with the deal.They say execution is difficult, or why risk it? But according to press reports, the Pru’s largest investor, Los Angeles-based Capital Group, indicated it will vote in favour of the deal if the price drops to US$31bn-US$32bn. Prudential declined to comment.

FT’s Lex reports Whispers among underwriters suggest AIG could sell just under half of AIA at 1.6 times its disclosed embedded value**, netting the group about $15bn.

*BTW GE Life is trading at 1.23X 2009 embedded value at its current price of $ 16.20.

**AIA’s 2009 EV is US$18.75bn but Pru has a higher number US$21.01 — 12% higher. No wonder shareholders are upset even though AIA is more traditionally more conservative than Pru. BTW at 1.6x GE is worth $21.

Is GE Life fairly valued?

In Uncategorized on 03/05/2010 at 4:40 am

Based on friday’s closing price of $15.66,  GE Life is trading at  1.18x 2009 ‘s  Embedded Value (the sum of net assets plus the current value of future profits from existing policies) of $13.167 a share. I have argued that based on what PRU is paying for AIA, GE Life’s value should be unlocked by OCBC http://atans1.wordpress.com/2010/04/26/ocbc-value-to-be-unlocked-ii/

According to FT’s Lex, when an insurer is sold at  EV, this means it is assumed it will write no more new business, nor make any gains on its investments.  That is why most recent deals in mature markets have been completed at about 1.2 times – a small premium for control, for cost synergies, and for growth potential. The 1.69 times that the UK insurer is proposing to pay seems bullish, given that AIA’s two biggest markets by gross written premiums are Hong Kong and Singapore, already overrun by agents.

Then there’s the question of what the new owner will be allowed by regulators to keep. Some of the licences AIA holds were acquired decades ago, under old rules on foreign ownership. Factor in forced disposals, likely to be at multiples below 1.69, and the effective price for the remnants could become even higher. Korea Life, another insurer talking up an Asian growth story, recently went public at one times embedded value. Japan’s Daiichi Mutual, ditto, went at 0.6 times.

So if FT is right, the Pru is overpaying for AIA, and by implication GE Life at $15.66, is priced about right at about 1.18x EV. And that I talked nonsense about how much it was worth to OCBC, if sold.  If Pru’s shareholders vote against the deal, I talked rubbish.


Innovation: Takes a British insurer to sell motor insc here online

In Uncategorized on 11/04/2010 at 4:48 am

Aviva’s move to sell motor insurance (followed in few mths time by home and travel insurance)  here marks a return to Asia for the UK insurer, which exited general insurance (except for some inconsequential exceptions)  when it sold its general insurance operations in Asia in 2004 to Mitsui Sumitomo Insurance. Aviva’s non-competition agreement with Mitsui Sumitomo, which was part of that deal, expired this year.

More to the point, the  Pru’s hubristic Asian ambitions, should have played a part in the decision to return.

Although new to Singapore, online insurance is established in Western markets. For instance, 60 per cent of motor insurance in the UK is bought online according to BT.

As FT reports,”Parts of Asia boast some of the highest internet penetration rates in the world, and managing an online operation beats teams of agents – Aviva has had to add precisely one extra member of staff. It is cheaper, too. By eliminating 15-17 per cent commission rates, Aviva can hand customers cheaper contracts and cream off more profit itself to boot [Aviva talks of pricing its products 7% below existing rates]. Whether Singapore will be fertile ground remains to be seen. The motor insurance market, worth about US$700bn, is saturated with two-thirds of the business shared by one domestic* and two international players. But as a platform for online Asian growth this looks just the ticket.”

*NTUC Income

Temasek: Lost its balls? Or wings clipped?

In Temasek on 06/03/2010 at 8:53 am

The three banks (Credit Suisse, HSBC and JPMorgan Cazenove) supporting Prudential’s $35.5bn bid for AIA  said on Thursday that the soveriegn wealth funds of Qatar (Qatar Holding LLC) and S’pore (GIC) have agreed to underwrite a significant portion of the US$20bn rights issue.

Bit surprised that given its record of big (and successful) bets on Asian banks (unlike on Western banks), Temasek isn’t an underwriter.  Or maybe, it had its wings clipped? Or lost its nerve? Only time will tell us why.

Reminder: The Pru needs to raise the cash from its shareholders to fund most of of the deal. The group will also issue to AIG US$5.5bn of stock, US$3bn of convertible notes and US$2bn of preferred shares.

BTW, among the 30 -odd bank underwriters, Standard Chartered and United Overseas Bank are co-lead managers, while DBS is a mere co-manager.

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