Activist value-investor Ong Chin Woo, who represents shareholders holding 5% of United Overseas Insurance ’s shares in issue, has written to the Board of Directors proposing two resolutions to be tabled at UOI’s annual general meeting to be held in April.
Resolution 1: To distribute UOI’s 4,274,600 ordinary shares in Haw Par Corporation directly to UOI shareholders.
Resolution 2: To appoint a financial advisor to evaluate strategic options for maximising shareholder value.
Ong points out that UOI holds 4.274 million Haw Par shares comprising 6.58% of UOI’s total assets, 9.35% of its shareholders equity and 27.71% of UOI’s equity investments.
“Distributing Haw Par shares could help mitigate UOI’s investment concentration risk while preserving cash to support the company’s operational and expansion risk,” Ong says.
In addition, Haw Par has underperformed the Straits Times Index. UOI should just have bought the STI ETF, he quips.
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As an example, in the past three years, from Feb 28, 2022 to Feb 28 this year, Haw Par’s share price has risen 7.8%, and its total shareholder return (TSR) including dividends is 19.5% according to Bloomberg data.
In the same period, the STI is up more than 20%, with a TSR of 38.9%.
UOI's capital adequacy ratio (CAR) has fluctuated between 415% and 446% since 2020, standing at 415% in FY2023. This is considerably higher than the general insurance sector average of 338% in FY2023.
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UOI’s Shareholders’ Fund to Total Assets Ratio has remained stable at over 68% since 2020, reaching 70.42% in FY2023. This is substantially higher than the general insurance sector average of 33.5% in FY2023.
“These strong ratios, which are well above industry averages, demonstrate UOI’s capacity to return excess capital to its shareholders. Doing so would enable the company to achieve a more optimal capital structure without impairing business growth or the interests of other stakeholders,” Ong argues.
He calculates that UOI's CAR would still be well above the sector average if the Haw Par shares are distributed as a dividend-in-specie.
