DBRS Morningstar Comments on Fairfax’s Plan to Acquire an Additional 46.32% of Gulf Insurance Group from KIPCO
DBRS Morningstar released a commentary titled “DBRS Morningstar Comments on Fairfax’s Plan to Acquire an Additional 46.32% of Gulf Insurance Group from KIPCO.” Fairfax Financial Holdings Limited’s (Fairfax or the Company; rated BBB (high) with a Positive trend by DBRS Morningstar) ratings are unaffected following the company’s announcement that it has entered into a definitive agreement to acquire an additional 46.32% of Gulf Insurance Group (GIG) from Kuwait Projects Company (KIPCO). This transaction will increase Fairfax's ownership stake to 90.01% from 43.69%, effectively giving the Company full control of GIG. We expect that Fairfax will manage the acquired company as a stand-alone entity, providing it with a large degree of independence, in line with how Fairfax manages its other major insurance subsidiaries.The commentary highlights the following:
-- The acquisition will increase Fairfax's annual consolidated gross premiums written by approximately 10% based on earnings reported for F2022 with GIG becoming the fifth-largest consolidated subsidiary of Fairfax, ahead of Northbridge Financial Corporation and Zenith National Insurance Corp.
-- Located between Asia, Europe, and Africa, the MENA region has evolved into a growing commercial hub. However, operating in this region does increase risk exposures, such as operating within a foreign regulatory environment and elevated geopolitical risk in some areas.
“GIG has a demonstrated track record of delivering topline growth and underwriting profitability in its various markets. Moreover, as Fairfax has owned a sizable portion since 2010 and has had a successful partnership with KIPCO, we anticipate the positive results reported so far by GIG should continue,” said Victor Adesanya, Vice President, Insurance. “We believe that the operational and integration risks associated with having a substantial presence within a foreign regulatory environment are manageable for Toronto-based Fairfax given its past record of similar international acquisitions and prior presence in the region.”
Fairfax Financial Holdings is a financial services holding company. Through its subsidiaries, Co. is engaged in property and casualty insurance and reinsurance and investment management. Co.'s insurance and reinsurance companies operate on a decentralized basis, with autonomous management teams applying a focused underwriting strategy to their markets. Co.'s investments are centrally managed for all the Co.'s group of companies by Hamblin Watsa Investment Counsel Ltd. Co. operates four main operating segments: Insurance, Reinsurance, Reinsurance and Insurance - Other, and Runoff.
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