Millea Holdings, Inc., ("Millea") (President: Shuzo Sumi) today announces that it has agreed to enter into the process of acquiring 100% of the outstanding shares of Kiln Ltd., ("Kiln"), a leading UK-listed Lloyd's insurance group (hereinafter: "the Acquisition"), through its wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. ("Tokio Marine & Nichido Fire Insurance").
The Acquisition has been approved unanimously by the Board of Directors of Kiln, and is therefore a recommended and friendly offer for Kiln.
Millea, together with the management of Kiln, also announced the Acquisition pursuant to UK regulations on 14 December, 2007 (7:00AM London time).
1. Background
Millea has recognized that expansion of its international business is one of the key factors for realizing further growth towards its goal of becoming a global top-tier insurer, as described under its mid-long term business plan. Over the last few years we have focused on entering into emerging and growing markets such as Brazil, India, China and other Asian countries through strategic options including M&A. On the other hand, we have deliberately expanded the insurance and reinsurance operations mainly through organic growth in Bermuda, London, and the US.
We have also recognized that we need to pursue further strategic options in major insurance markets in order to enhance growth and profitability of our international business portfolio. In light of the course of our expansion strategy, we are delighted to announce that we have reached an agreement with the management of Kiln to enter into the process of acquiring Kiln Ltd.
Kiln is the global and prestigious insurance group with the well known and fourth largest Lloyd's managing agent in terms of underwriting capacity. It has a particularly strong track-record of product development and disciplined underwriting in commercial insurance and reinsurance business. Millea has enjoyed a close and long-lasting business relationship with Kiln since Kiln's formation in 1962 and we believe we share the same core values and business philosophy.
By acquiring Kiln, Millea will achieve a step towards increasing profits from its international operations, and will also obtain a solid global insurance platform.
2. Overview of the Acquisition
- Description of the Company
- Kiln Ltd. (Hamilton, Bermuda. Listed on London Stock Exchange (KIN.L)), is a holding company which has subsidiaries / affiliates of insurance businesses including a managing agent (see appendix).
- Acquisition Price
- ￡442 million (150 pence per share). Millea considers that the price is fair and reasonable after careful review of the publicly available information, as disclosed by Kiln as a UK listed company, and following a due diligence exercise of Kiln's assets and business operations.
- Financing
- The Acquisition will be financed in cash by Tokio Marine & Nichido Fire Insurance.
3. Strategic Objectives
- (1) Develop a leading position in the Lloyd's market
- Acquiring Kiln, one of the leading Lloyd's managing agents and insurers, enables us to develop a position in the Lloyd's market, one of the most prominent insurance markets in the world.
- (2) Expand scale of business and enhance profits globally
- In 2006 Kiln generated ￡429 million of Gross Written Premium and ￡43.6 million of Profit after Tax. These results will contribute greatly towards expanding the scale of our business and enhancing the profits generated by Millea's international business.
- (3) Establish a global commercial insurance platform
- Kiln's competitive advantages include strong underwriting discipline and expertise, skilled employees and a strong brand, while Millea's include a high credit rating / financial strength, underwriting capacity and a global network. A combination of the two should dramatically strengthen our platform for international commercial insurance and reinsurance business.
4. Acquisition Process
Under the Bermuda Companies Act, the Acquisition will be implemented firstly by establishing Tokio Marine and Nichido Fire Insurance's 100% owned Special Purpose Company called Tokio Marine Investment (Bermuda) ("TMIB") (registration pending) in Bermuda, and by then merging Kiln and TMIB ("Amalgamation"). To be adopted, the Amalgamation requires the approval of 75 per cent or more in number of the Kiln Shareholders voting at a Special General Meeting and the approval of the shareholder of TMIB. Through this process, Tokio Marine and Nichido Fire Insurance will obtain the entire existing share capital in return for consideration (150 pence of cash per share) to Kiln's existing shareholders. The Acquisition is subject to approval of the relevant regulatory authorities of the related countries.
5. Impact on financial results of Millea
The acquisition of Kiln will contribute to consolidated profit and loss statements of Millea from FY 2008 and onwards.
〈Appendix〉
Kiln Ltd.
- Founded: 1962
- Financial highlights (2006)
| ￡ in millions | |
|---|---|
| Gross written premium(*) | 429 |
| Post-tax profit | 43.6 |
| Total assets | 1,010 |
| Shareholder's equity | 250 |
| Combined ratio | 77% |
| Return on equity | 20% |
- (*)Geographical distribution of GWP:NAFTA including US 41%, UK10%, Other Europe 11%, Asia 9%, Others 29%
| Capacity: | ￡802 million |
|---|---|
| Total existing issued and to be issued shares (000s): | 294,781 |
| Fiscal year: | January - December |
| Credit Rating(S&P): | A+(as Lloyd's) |
| Management: | Chairman Nick Cosh |
| CEO Edward Creasy | |
| Number of Employees: | 335 |
Lloyd's
- Lloyd's, which originates from the 17th century, is one of the most traditional and leading insurance markets in the world.
- Insurance underwriting is carried out by a "Member"; an individual or corporate capital provider. Although previously capital providers were solely individuals, corporate members have been allowed since 1994. Nowadays, 85% of members are corporate members. When underwriting, a single or group of members form a "Syndicate" to share the underwritten risk. Management of syndicates, including underwriting decision-making is handled by a "Managing Agent". The placing of insurance is done by a specially permitted "Lloyd's Broker".
- Now within Lloyd's, 72 Syndicates underwrite risks in 200 or more countries and territories through 167 brokers. Gross premium and income before tax in 2006 were￡16.4 billion and ￡3.7 billion, respectively.