The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading Bahamian insurer yesterday said it “will be in position” by year’s end to become a public company should its Board decide to move in this direction.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that its directors and shareholders had “given instructions” to prepare the property and casualty underwriter for a potential initial public offering (IPO).

He explained that RoyalStar’s management were now completing all the necessary legal and corporate structuring work necessary to facilitate an IPO, and obtaining the required approvals.

This will involve the creation of a “holding company” that would own, or hold, RoyalStar Assurance. And it will be this ‘holding company’ entity which will offer an undetermined percentage of its equity shares to Bahamian institutional and retail investors.

“What we have done is that the Board of Directors have given executive management instructions to prepare the company for a public offering,” Mr Saunders told Tribune Business.

“Whether that happens is up to the Board of Directors. There’s no timescale, but we will be in position at the end of this year if the Board of Directors say they want to go public.

“We will have all the necessary legal approvals done to start that process.”

Explaining how any potential IPO would likely be structured, Mr Saunders added: “We needed a holding company. That holding company will hold RoyalStar Assurance, and that will be the company that will go public.

“We’re doing all that legal work. We’ll have all the necessary legal work complete” by end-2015.

Tribune Business revealed last month that RoyalStar, and its Board of Directors and major shareholders, were mulling whether to tap the Bahamian capital markets and go public via an IPO to investors.

Franklyn Wilson, the insurer’s chairman, said then 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 bottom line is that with a company like RoyalStar, which has this exceptionally high rating, we have to find ways to leverage that,” Mr Wilson said at the time.

“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.”

If it does proceed with an IPO, RoyalStar would potentially become the first property and casualty underwriter listed on the Bahamas International Securities Exchange (BISX). The two current public underwriters, Colina Holdings (Bahamas) and Family Guardian, are both on the life and health side.

And, while RoyalStar’s general insurance rival, Bahamas First, is a public company, it is not listed on the Bahamian stock exchange.

A RoyalStar public share offering would be the first IPO staged in the Bahamas since 2011, when Arawak Port Development Company (APD), owner of the Nassau Container Port, came to the capital markets.

It would thus boost a stock exchange, and market, which has in recent years grown through preference share and investment fund listings, as opposed to equity offerings.

RoyalStar would likely appeal to investors seeking steady, reliable returns as opposed to spectacular dividend payments and share price appreciation.

The company has chugged out a consistent $4 million in net income for each of its past four financial years, with the bottom line ranging from a $3.478 million low in 2011 to a $4.401 million peak in 2012.

Earnings per share (EPS) have ranged between $0.29 to $0.35 per share over the 2011-2014 period, with dividend payouts between $0.15 per share to $0.20 per share.

RoyalStar’s main current shareholder is Mr Wilson’s Sunshine Holdings conglomerate, which holds a 36 per cent equity stake. This is held through SunStar Ensure Ltd, a vehicle majority-owned by Sunshine Holdings and Star General Holdings, which in turn owns 54.04 per cent of RoyalStar.

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 own $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.

Apart from Mr Wilson and Mr Saunders, RoyalStar’s Board also includes BAF Financial chief, Chester Cooper; Grand Bahama Port Authority president, Ian Rolle; and ex-Grand Bahama Chamber of Commerce president, Barry Malcolm.