By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A leading Bahamian insurer is examining whether it should become a public company by offering shares to investors via an IPO, its chairman revealed yesterday.
Franklyn Wilson told Tribune Business that RoyalStar Assurance’s Board of Directors were meeting next week, and one of their agenda items was whether the property and casualty underwriter should go public.
He added that RoyalStar wanted to “leverage” the highest possible rating it had received from A. M. Best, the global insurance industry rating agency, and was assessing whether this might be best achieved as a public company.
“The directors of RoyalStar Assurance are meeting next week, and the question of whether or not the company becomes public is a matter the directors will consider in the not too distant future,” Mr Wilson revealed to Tribune Business.
“The directors will consider it. The bottom line is that with a company like RoyalStar, which has this exceptionally high rating, we have to find ways to leverage that.
“We have to ask ourselves the question of how best we leverage that. It may be easier to leverage that as a public rather than private company, but we don’t know that yet. It’s a matter for the directors to consider.”
Tribune Business was tipped several weeks ago that the Bahamas-based property and casualty insurer was mulling an initial public offering (IPO) of shares to Bahamian retail and institutional investors, but Mr Wilson’s comments are the first public confirmation of these deliberations.
The Board discussions are at too early a stage to provide any details of a potential IPO, such as price and the amount of equity offered, but it is possible the proceeds may be employed - at least in part - to finance RoyalStar’s further regional expansion.
The insurance underwriter already does business outside the Bahamas, via its presence in the Cayman Islands and Turks & Caicos and the British Virgin Islands (BVI).
And Anton Saunders, RoyalStar’s managing director, has indicated in previous interviews that the carrier was open to further Caribbean growth via organic means, rather than acquisition.
He told Tribune Business in February that RoyalStar had hit its financial targets for 2014, although its audited financial statements have yet to be released.
This will likely further increase RoyalStar’s retained earnings, which stood at $25.339 million at year-end 2013, accounting for 57.6 per cent of the company’s net equity at that point.
RoyalStar is understood to be keen to put its strong capital/equity base to further good use, and is eyeing expansion opportunities that fit with its conservative underwriting and business approach.
Mr Saunders, though, in his last interview with Tribune Business, expressed concern about the “significant pressure” RoyalStar’s profits and margins will likely face in 2015, due to a combination of excess global reinsurance capacity and the influx of foreign competitors into the Bahamian market,
Thus expansion into other Caribbean markets would enable RoyalStar to both relieve these pressures, and take on regional competitors at their own game.
A. M. Best earlier this year reaffirmed the company’s top ‘A’ (Excellent) financial strength rating and ‘a’ issuer credit rating, making RoyalStar the equal highest rated insurer in the Caribbean region.
RoyalStar’s main current shareholder is Mr Wilson’s Sunshine Holdings conglomerate, which holds a 36 per cent equity stake.
Sunshine led the consortium, featuring Bahamas-based Star General and Trinidadian insurer, Nemwil, that acquired RoyalStar’s predecessor, Royal Sun Alliance (Bahamas), from its then-UK owner.
Sunshine Holdings, in documents relating to its $20 million preference share offering earlier this year, said RoyalStar generated $38.73 million in cumulative profits between 2005 and 2012.
It added that these were “significantly in excess” of those produced by its closest competitors, Bahamas First at $20.18 million, and Insurance Company of the Bahamas (ICB) at $19.41 million.
RoyalStar was also revealed as a 19 per cent shareholder in Luxury Homes Bahamas, an entity owned 81 per cent by Sunshine Holdings, and which owns 104.4 acres of land on New Providence’s southern shores immediately adjacent to Treasure Cove, opposite St Andrew’s School.
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