By Jamie McGee and Michael Tsang
January 06, 2010, 06:52 PM EST
Jan. 6 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. and White Mountains Insurance Group Ltd., the two largest shareholders in insurer Symetra Financial Corp., won’t cut their stakes when the company sells stock to the public this year.
Berkshire and White Mountains led the investor group that formed the life and health insurer in 2004 and each will keep their 26.9 million common shares when the company completes a planned initial public offering, Bellevue, Washington-based Symetra said today in a registration statement. Symetra said in previous regulatory filings that the companies might sell their stakes, which each equal 26 percent of existing shares.
“It’s certainly a vote of confidence regarding Warren Buffett’s long-term view of the business,” said Paul Bard, vice president of research at Renaissance Capital, an IPO research firm in Greenwich, Connecticut. “When he makes an investment call, investors take notice.”
Stock picks by Buffett, the second-richest American, are watched by mutual funds and individuals hoping to duplicate his investing success. Omaha, Nebraska-based Berkshire kept its stake in Verisk Analytics Inc. when that company went public in October, while other owners such as American International Group Inc. and Travelers Cos. sold shares. Verisk, which sells actuarial data to insurers, has jumped 39 percent.
Symetra may be the first U.S. IPO in 2010, data compiled by Bloomberg show. The insurer plans to raise as much as $434.7 million in an initial public offering of 31 million shares, today’s filing said. The target figure was scaled back from a planned sale of as much as $575 million that had been listed in a Dec. 29 registration statement.‘A Great Sign’
Investors formed Symetra in 2004 by buying insurance and investment units from Safeco Corp., the property insurer bought by Liberty Mutual Group Inc. in 2008. Berkshire’s decision to retain the shares is “a great sign,” said Francis Gaskins, president of IPOdesktop.com in Marina del Rey, California.
“The fact that he is holding his stock is a definite plus,” Gaskins said. “It gives the institutional investors a feeling of security.”
Berkshire, where Buffett is chairman and chief executive officer, typically gets about half its profit from insurance units including General Re Corp. and car insurer Geico Corp. Symetra has reinsurance agreements with General Re, sold medical and life protection with Berkshire’s MidAmerican Energy Holdings Co. in 2006, and provided part of the coverage for Berkshire’s Nebraska Furniture Mart last year, today’s filing said.Owning Berkshire Shares
Symetra’s life unit held $3.6 million in Berkshire Class B shares on Sept. 30, the company said in the filing. Buffett didn’t respond to a request for comment sent in an e-mail to assistant Carrie Kizer. Eric Brielmann, a spokesman for White Mountains, declined to comment.
Symetra estimated it would have a so-called tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation, of $12.42 a share after the offering and assuming an IPO price of $13.
At that share price, Symetra would be valued at 1.05 times tangible book value, a premium to the median of 0.97 for 24 life insurers traded in the U.S., data compiled by Bloomberg show.
U.S. companies may raise as much as $50 billion through IPOs this year, more than triple last year’s tally, according to an estimate by London-based Barclays Plc.
Bank of America Corp., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc are co-managing the Symetra stock sale.
--With assistance from Dakin Campbell in San Francisco. Editors: Erik Holm, Dan Reichl
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