RPT-IPO VIEW-Buffett sticks with Symetra IPO in tough market

Sun Jan 10, 2010 12:47pm EST

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* Symetra's 2nd IPO try reveals tough market-analyst

* Berkshire, White Mountains to keep shares in IPO

* Symetra valuation now less compared with first attempt (Repeating item that initially moved on Friday)

By Clare Baldwin and Lilla Zuill

NEW YORK, Jan 8 (Reuters) - U.S. life insurer Symetra's latest attempt to go public shows how difficult the market remains for initial public offerings, even with the cachet of being partly owned by Warren Buffett's Berkshire Hathaway Inc (BRKa.N).

Symetra first filed for an IPO in 2007, but pulled the deal in October 2008 during the worst of the financial crisis.

This time, the Bellevue, Washington-based company has cut its offering and made other tweaks -- such as having Berkshire and White Mountains Insurance Group Ltd (WTM.N) retain full majority ownership.

Buffett's ownership "will give this IPO credibility," said Scott Sweet, senior managing partner of research firm IPO Boutique, although he added there was nothing to stop Buffett from selling shares later in a secondary offering.

Buffett agreed to retain his stake in Verisk Analytics Inc's (VRSK.O) October IPO, which was seen as contributing to that offering's outstanding performance.

But the fact that Symetra has to show its support from Buffett and White Mountains is telling, analysts said.

"Maybe it shows that the IPO market is not as robust as people thought," said Alan Rambaldini, an analyst with investment research house Morningstar.

In the initial 2007 filings, both Berkshire and White Mountains had planned to reduce their respective 26.3 percent stakes in Symetra to 15.2 percent.

A MORE CONSERVATIVE OFFER

Symetra on Wednesday cut the maximum value of its offering to $434.7 million from the $575 million it filed for in October 2009, in its second attempt at an IPO.

The Wednesday filing also showed Symetra cut the number of shares and price range from its first IPO attempt in 2007.

At the midpoint of the price range, the new IPO is worth about $351 million -- 53.2 percent less than the original.

Without sweeteners, the company would have been a tough sell, analysts said.

"The life insurance industry in the U.S. is not the greatest of businesses right now," said Justin Fuller, an analyst with Midway Capital Research & Management who publishes the Buffettologist.com blog.

Life insurers were badly hurt by investment losses during the credit crisis and recently had to shore up capital. Several, including Lincoln National Corp (LNC.N) and Hartford Financial Services Group Inc (HIG.N) sought U.S. bailout funds.

"Probably Symetra had to reduce their offering price because the market just won't bear that right now from a life insurance company," Fuller added.

He said the best performers in this capital-intensive business are the biggest and that Symetra is tiny in comparison to its publicly traded peers.

Symetra now has an estimated price-to-book value of 0.85, in line with other valuations in the sector, but 43 percent less than the 1.5 multiple it would have based on the midpoint of the 2007 offering price, said IPOdesktop.com President Francis Gaskins.

While insurance companies were hit hard by the recession, their shares are showing signs of a recovery. The Dow Jones U.S. Life Insurance index .DJUSIL has more than tripled since March.

And IPO experts believe that underwriters are unlikely to be overly aggressive in pricing the first few deals of the year.

"If the first few deals come to market price and trade really poorly then people are going to start questioning the recovery and it might make more investors gun-shy to investing in IPOs," said Paul Bard, an analyst with Connecticut-based IPO research firm Renaissance Capital. "Underwriters are incentivized to make sure the first few deals that come to market trade well."

Symetra plans to list on the New York Stock Exchange under the symbol "SYA." It is expected to price during the week of Jan. 18, according to underwriters. (Reporting by Clare Baldwin and Lilla Zuill; editing by Andre Grenon)

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