Fairfax and Mitsui Sumitomo partnership will extend to reinsurance buying
Fairfax Financial and Mitsui Sumitomo Insurance Company have unveiled a global strategic alliance that revolves around the latter buying the majority of Singapore-based First Capital Insurance from Fairfax but which also has wider implications for the way the two companies manage their reinsurance buying.
Mitsui Sumitomo, a subsidiary of MS&AD Insurance Group Holdings, will acquire Fairfax's 97.7 percent interest in First Capital Insurance of Singapore with Fairfax retaining a meaningful quota share exposure to First Capital's insurance portfolio.
The cash purchase price for Fairfax's interest in First Capital is $1.6 billion, which will result in a realized net investment gain of approximately $900 million after tax (an increase in book value per basic share of Fairfax of approximately $33 on a pro forma basis).
Ramaswamy Athappan will continue as First Capital's chief executive, while continuing to retain his responsibilities as chairman of Fairfax Asia.
But the company’s also stressed that the relationship will extend beyond this deal as they “explore a broad global partnership in various areas, including reinsurance relationships that would lead to successful growth and value creation for both parties”.
"We are very excited to become partners with Mitsui Sumitomo," said Prem Watsa, chairman and chief executive of Fairfax. "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 added: “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."
Masahiro Matsumoto, senior executive officer of Mitsui Sumitomo, 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."
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