Friday, June 29, 2007

Symetra Financial IPO

Symetra Financial announced today that they have filed with the Securities and Exchange Commission (SEC) to do an initial public offering of its stock. The shares will trade under the symbol SYA. Symetra is owned by White Mountains Insurance (WTM), Berkshire Hathaway, Inc. (BKRA) and a host of other private investors and hedge funds. The investor group purchased the company in August 2004, when it was known as Safeco Life and Investments, for $1.35 billion.

It's hard to tell what type of return WTM made on its investment in the three years it held it. The issue has not been priced yet, and although we know what the total purchase price was back in 2004, WTM and others had to put capital in at the closing of the deal. They also may have withdrawn capital over the preceding three years.

If you assume that the offer is priced at a 1.5 times multiple of Symetras book value of $124.6 per fully diluted shares and shares owned by WTM of 3,090,560 then that will value its stake at $577.8 million.

I don't remember WTM saying much about Symetra at the recent analyst meeting - a quick look at my notes shows the following:

"Private equity buyout of Safeco Life and Investments in 2004. 14% after tax rate of return – paid $100 mm dividend to shareholders."

There was a question at the end about the tendency of WTM to exercise excellent cycle management when it comes to exiting and entering different businesses so maybe this is an example of that. I looked up an old story from 2004 and it appears that WTM paid less than book value for the Safeco assets at the time.

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