Westaim Q1 profits leap as it prepares to exit Stephen Way’s HIIG

Canadian holding company Westaim Corp pointed to the “improved pricing” in the US specialty markets enjoyed by HIIG, the insurer that is expected to shortly have a new backer.

Westaim – who engaged Credit Suisse in 2018 to sell its 43.9 percent stake in the US insurance group headed by HCC founder Stephen Way – is thought to be close to agreeing terms with a non-strategic buyer to acquire its stake and potentially some other minority HIIG shareholders which include (re)insurers such as Argo Group and Everest Re.

The Toronto-listed company – whose only other asset is alternative investment firm Arena – said yesterday it recorded a net profit of $10.1mn in Q1 2019 vs $5.9mn a year earlier.

It posted a net unrealized gain on investments of $11.8mn in the first quarter with the majority, $8.2mn, coming from its stake in the HIIG Partnership.

Westaim owns a 58.5 percent interest in the HIIG Partnership, equivalent to a 43.9 percent indirect interest in HIIG.

Houston-headquartered HIIG operates four subsidiary US P&C carriers – E&S carriers Houston Specialty and Oklahoma Specialty; admitted insurers Imperium and Great Midwest – and the MGA HIIG Underwriters Agency.

The subsidiaries operate in niche sectors such as mining, construction, workers compensation, A&H and transactional property.

HIIG is understood to be a lead primary layer market for US and international commercial property (Fortune 1000 type clients), a class that is enjoying substantial rate increases following the recent contraction of capacity from existing markets, including Lloyd’s.

Last month, this publication revealed that the process has currently narrowed to two bidders, both private equity houses and it is now understood to have gone exclusive.

https://www.theinsurer.com/news/400mn-hiig-sale-speculation-boosts-westaim-shares/3373.article

“Westaim reported a solid start to 2019 as reflected in our first quarter results with both Arena Group and HIIG achieving strong performances” the company said yesterday.

It continued: “HIIG financial results reflect growth, investment portfolio performance and operational profitability in an insurance market that is experiencing improved pricing.”

Book value per share was $2.49 (C$3.33) at 31 March 2019, compared to $2.35 (C$3.03) a year earlier.

At 31 March 2019, Westaim’s consolidated shareholders’ equity was $355.6mn. It values its HIIG holding at $170mn.