Sirius International Launches Formal Process to Find a Buyer
Sirius International Insurance Group, Ltd. (Sirius Group) announced it has launched a formal process to sell the company after a strategic review.
The company said it has approved the launch of a sales process, after reviewing multiple expressions of interest with representatives of Sirius Group’s majority shareholder, CM Bermuda Ltd., a subsidiary of Shanghai-based China Minsheng Investment Group (CMIG).
Early last year, reports revealed that Shanghai-based CMIG, a private investment group, was facing liquidity issues related to a massive debt burden, which was approximately $34 billion in June 2018. Problems with the company’s liquidity were highlighted on Feb. 1, 2019 when it missed payments owed to bondholders. S&P Global Ratings issued a report at the time, which said the liquidity issues at parent company CMIG did not affect Sirius Group’s creditworthiness.
S&P said its rating for Sirius Group was based on its assessment of the group on a stand-alone basis rather than the assessment of CMIG’s financial position.
However, that distance between Sirius International and CMIG appeared to narrow when CM Bermuda issued a resolution on Feb. 25, 2020, which would have prohibited Sirius International’s board of director’s from issuing any shares and taking other share actions without the prior approval of holders of the common shares of Sirius, representing at least 75% of the shareholder voting rights, according to AM Best.
The ratings agency responded to the resolution on March 4, 2020 by downgrading the credit ratings of Sirius International and its subsidiaries — because CM Bermuda has 87% of the shareholder voting rights. The company’s Financial Strength Ratings (FSR) were downgraded to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” from “a”.
“The rating downgrades reflect the negative impact on the rating fundamentals of SIIG from its association with CMIG,” said AM Best, noting that this development had the potential to affect adversely the company’s business profile “and is a strain on management’s time and resources at a time when the company needs to address deterioration in its operating performance.”
The ratings reflect SIIG’s consolidated balance sheet strength, which AM Best categorized as very strong, as well as the group’s strong operating performance, neutral business profile and appropriate enterprise risk management.
The adviser for the sale is Barclays, which had assisted Sirius in a strategic review to determine whether there should be a capital raise transaction versus other potential strategic alternatives, such as a sale.
CMIG completed the purchase of Sirius International for $2.6 billion in 2016 from White Mountains Insurance Group.
“Maintaining the strength of Sirius Group’s 75-year deep-rooted franchise and maximizing value for all stakeholders remains our number one priority,” commented Meyer S. Frucher, chairman of the board.
Frucher said Sirius Group’s employees will continue operations as usual, “as we work with CM Bermuda Ltd. towards completing the strategic review process and announcing a transaction expeditiously.”
Peter W.H. Tan, chairman of CM Bermuda Limited’s parent, CMIG International Holding Pte. Ltd., said: “We appreciate the opportunity to work cooperatively and collaboratively with the management team and the Strategic Review Committee to achieve an optimal outcome for Sirius Group. The involvement of key stakeholders is critical to ensuring an orderly and successful outcome for any transaction.”
The company warned there is no assurance that a transaction will be completed.
With $2.5 billion of capital, Sirius Group is a global multi-line re/insurer headquartered in Bermuda and has offices in Stockholm, New York and London.