Singapore’s Hwa Hong to Sell Tenet Insurance

Hwa Hong Corp. said it has signed a nonbinding agreement with an unnamed buyer to sell its entire stake in its nonlife subsidiary, Tenet Insurance Co. Ltd. [89446] for S$95 million (US$68 million) in cash.The proposed deal is expected to bring S$43 million to Hwa Hong, an investment holding company with subsidiaries in property rental, investment and development, chemical trading and nonlife insurance. The agreement is nonbinding, with no guarantee for the deal to be completed, said the Singapore-based group."The proposed divestment would enable the company to divest its entire interest in Tenet at an attractive cash consideration and realize its investment in Tenet at a substantial gain," said Hwa Hong in a statement. The plan is also "beneficial to the future development and prospects of Tenet."Tenet's audited net asset value stood at S$52 million at the end of 2008. The nonlife insurer offers property, workers' compensation, automobile, travel and medical insurance for individual and corporate clients.In 2008, Tenet reported total revenue of S$41.2 million, contributing about half of Hwa Hong's group revenue of S$80.2 million, according to Hwa Hong's annual report.Tenet recorded an overall operating loss of S$4.3 million in 2008, compared with net income of S$6.7 million in 2007, due to unfavorable underwriting results and investment losses. Motor and workers' compensation loss ratios surged from 25.3 and 30 in 2007 to 92.2 and 149.1 in 2008. Overall, the insurer's net loss ratio increased to 61% from 27.4% in 2007 (BestWire, Sept. 14, 2009).Tenet was founded in 1957 as People's Insurance Co. and was bought by Hwa Hong in the 1980s. U.S.-based Hartford Financial Services Group Inc. [58707] bought a 49% stake in the insurer and changed the name to Hartford Insurance Co. in 1997. Hwa Hong acquired Hartford Financial's stake and renamed it as Tenet in 2002.Hwa Hong said the proposed sale is subject to further due diligence investigations on Tenet and negotiations.The company added there is no assurance that a transaction will materialize from the nonbinding agreement. CIMB Bank Hwa Hong's financial adviser on the proposed sale.Tenet Insurance Co. Ltd. currently has a Best's Financial Strength Rating of A- (Excellent).(By Iris Lai, Hong Kong bureau manager: [email protected])