Thai Reinsurance

Thai Reinsurance Plc

Listing of THREL. THRE has informed the SET that wholly-owned THAIRE Life
Assurance Public Company Limited (THREL) will issue new shares to the public via an
IPO to strengthen its risk-based capital and allow for future business expansion. THREL
is raising capital by issuing 100mn shares that will be offered to the public in an IPO.
Allocation of existing THREL shares to THRE shareholders. In addition, THRE will
sell 195mn of the THREL shares it now holds: a) 118mn shares will be offered to specific
persons who are existing THRE shareholders based on their shareholdings (preemptive
rights) at a ratio of 29.76 existing THRE shares to 1 THREL share (fractions will
be disregarded) and b) 77mn shares offered to the public plus any remaining
unsubscribed shares from (a) above. The offering price for these shares will be the
same as the IPO price, which has not been determined.
Holding dilution. The IPO and sale of shares it now holds in THREL will cut THRE’s
shareholding in THREL from 99.99% to 50.83%, which will reduce the earnings
contributed by THREL to THRE. THREL reported a 2012 net profit of Bt222mn with ROE
of 29%. THRE targets to expand THREL’s net reinsurance premiums by 30% in 2013.
Preliminary estimate of IPO/fair price of THREL. We preliminarily estimate the
IPO price or fair price of THREL at Bt6/share (4x 2012 BVPS), with realized gain of
Bt978mn (Bt0.28/share) and unrealized gain of Bt1.5bn (Bt0.44/share) for THRE.
Action: Maintain Buy. Listing THREL is a key share price catalyst for THRE and will
erase the capital overhang for THRE. It has also led us to place our Bt6.4 TP under
review. Wiped out by the 2011 floods, THRE is emerging with a higher ROE and net
profit this year and lower risk exposure brought by a structural change in business
platform. It is facing upside not only from the listing of THREL, but also from
resumption of dividends and eventual raise in credit rating by S&P that will allow THRE
to return to the international reinsurance market.