There is a long-held contention that it is better to hold shares in a life assurance company than to buy life assurance products. I might have to concur — though let it be said, I’m not recommending buying life assurance company shares.
I have a small life policy payout due to me courtesy of my late mother (bless her heart). It certainly won’t change my address or fund a spanking new vehicle; it’s more likely enough funds to ensure a lifetime supply of tennis rackets, balls and knee braces.
But it’s a welcome stipend nonetheless in these lean times. The first correspondence to the life assurance group in question was dispatched on October 18. More than two months later, the matter remains woefully unresolved and there is a distinct lack of momentum, with “internal processes” still ongoing. Last I checked, priority status was attached to the matter. That was December 8, so any flickers of enthusiasm have been duly doused.
I wouldn’t dare throw around accusations of stalling, even if it would serve the assurer quite well to retain capital for as long as possible. I’m just surprised by the level of bumbling bureaucracy, which seems out of place in a modern financial services industry. It did, however, prompt me to contact my life assurer to make some rather morbid inquiries about just how swift and painless the claims process would be for my grieving beneficiaries — something I don’t think too many people consider before taking up a life policy.
I’m still not sold on buying shares in assurance/insurance companies, but I do see some heavy-hitting international investors are quite keen on the sector. Reports from the Financial Times suggest that investment firms Apollo, Carlyle and the “barbarous” KKR are pondering separate bids for UK-based Pension Insurance Corp (PensCorp).
Local investors will know that Rupert family-controlled investment vehicle Reinet Investments is a major shareholder in PensCorp, with a stake of close to 50%. In fact, PensCorp now ranks as Reinet’s biggest investment, representing, at last count, 48.9% of the portfolio’s €5.6bn NAV. PensCorp plies its trade in the UK pension risk transfer market, offering tailored pension insurance buyouts and buy-ins or bulk annuities. It’s been a pretty sweet niche.
Reports from the Financial Times suggest that investment firms Apollo, Carlyle and the ‘barbarous’ KKR are pondering separate bids for UK-based Pension Insurance Corp
In the first half of the 2023 financial year PensCorp clinched new business with premiums of £6.5bn (well up on the £2.4bn achieved in the first half of 2022). At the end of June PensCorp’s assets were close to £45bn. In March this year PensCorp forked out its first dividend of 7.5p a share. Reinet’s share of the payout was a not insubstantial £50m.
The reported bids are intriguing, with Reinet carrying the value of its stake in PensCorp at about €2.75bn. An offer for all or part of PensCorp by one or all of the three big investment firms will determine whether Reinet’s valuation of its PensCorp stake is realistic. Reinet’s PensCorp stake is worth about R55bn against the group’s JSE market value of about R85bn. Reinet’s stake in British American Tobacco is worth about R26bn at present prices. This means the investments in PensCorp and BAT represent about 95% of Reinet’s market capitalisation with the array of private equity and other partnerships, worth about €1.2bn, given scant regard.
Reinet’s cost of investment in PensCorp, for the record, is €1.315bn. If Reinet is indeed willing to let go of its stake in PensCorp, there would be a rather nifty value unlocking opportunity. It would also be most interesting to see how the market reassesses Reinet sans PensCorp, which might recall the situation with the old Rembrandt offshoot Venfin after its stake in Vodacom was stripped out. Though I very much doubt whether Reinet will be merged back into Remgro — or Richemont.
Moving into deeper waters, Brimstone-controlled fishing group Sea Harvest could buy certain operations from the unlisted TerraSan Group. I’m quite surprised. I initially thought Sea Harvest might look at scaled-up abalone farming business Abagold. In any event, TerraSan has a sizeable pilchard and sardine canning business (under the Saldanha brand), an aquaculture operation and a marine feed business. Annual turnover is about R1.6bn.
Moving into deeper waters, Brimstone-controlled fishing group Sea Harvest could buy certain operations from the unlisted TerraSan Group
Presumably Sea Harvest is looking at all the fishing operations of TerraSan, at an inferred “market value” of about R800m based on the last trading price of its shares on an over-the-counter market. TerraSan earned 900c a share in financial 2022, which translates into bottom-line earnings of about R235m.
TerraSan’s aquaculture interests will add bulk to Sea Harvest’s abalone offering, but it’s the group’s extensive pelagic operations that will be transformative to Sea Harvest. There might be a catch, though. Brimstone is also a major shareholder in fishing group Oceana, which has a sizeable fish canning enterprise in Lucky Star. Sea Harvest would be in direct competition with Oceana, leaving Brimstone in a rather tricky situation.
Perhaps developments at Sea Harvest will hasten a Brimstone decision on Oceana. That said, it will be difficult for Brimstone to unbundle Oceana with a chunk of debt still sitting at centre. It won’t be an easy task to find a buyer for the stake in Oceana, either, with empowerment ownership considerations limiting the pool of possible buyers.
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