Brandes Proposes 40 yen Per Share Dividend for Mitsui Sumitomo Insurance Group Holdings, Inc. Annual
Meeting
SAN DIEGO, May 8 /PRNewswire-AsiaNet/ --
Brandes Investment Partners, L.P. ("Brandes") today announced that, as of
April 20th, 2009, it submitted to Mitsui Sumitomo Insurance Group Holdings,
Inc. (the "Company"), an insurance company based in Japan and listed on the
Tokyo Stock Exchange, a proposal for a resolution (the "Resolution") to be
submitted for shareholder approval at the Company's upcoming annual meeting
of shareholders. On behalf of its investment advisory clients, Brandes
currently holds in excess of 8.0% of the Company's shares. This represents an
ownership position built since 2003 which initially started with Mitsui
Sumitomo Insurance Company, Limited shares that were then exchanged to Mitsui
Sumitomo Insurance Group Holdings, Inc., shares in April 2008.
The Resolution calls for the Company to authorize a one-time dividend of
40 yen per share of common stock (including the interim dividend of 27 yen
per share, the annual dividend, if approved, shall be 67 yen per share),
payable by September 30, 2009. A copy of Brandes' letter to the Company and
the Resolution are available at Brandes website:
Background
The Company has long publicly disclosed that it has substantial excess
capital of at least 200 billion yen (please refer to the Company's 2008
Annual Report and 'Summary Q&A' of FY2008 Second Information Meeting
latest disclosures). While the Company has historically stated that excess
capital would be used for 'strategic investments,' no significant actions
have been taken to reduce excess capital, and the Company has failed to
implement any managerial policies or undertake any transactions that would
improve the Company's capital efficiency. Moreover, the recent disclosure
that the Company intends to consolidate with Aioi Insurance Co., Ltd.
("Aioi") and Nissay Dowa General Insurance Co., Ltd. ("Nissay Dowa") through
a share exchange contradicts the Company's previously stated intentions to
fund 'strategic investments' with excess capital.
Brandes believes that - even taking into account current global credit
conditions and expected capital needs - the Company retains an unnecessary
amount of excess capital. Brandes recognizes that the Company must continue
to secure a strong capital base to support its business, but also believes
that maintaining excess capital without any clear return-on-capital targets
is not in the Company's best long term interests. Even taking into account
the Company's downward earnings revision for FY 03/09, announced on April
28th, due to larger than expected valuation losses on its security holdings,
Brandes believes that the current Resolution for a one time increase in
dividend is appropriate and reasonable.
The Shareholder Proposal
In past years, Brandes has encouraged the Company to reduce excess
capital via share repurchases. Brandes recently submitted to the Company a
draft shareholder proposal to give shareholders the right to vote on a 25.2
billion yen share buyback program. Brandes believes this would be the
preferred way to reduce excess capital because the Company's shares trade at
a discount to book value per share.
Unfortunately, it appears that the Company may not legally engage in a
share buyback at this time due to the ongoing business consolidation
discussions with Aioi and Nissay Dowa, and that this restriction will not be
lifted until an Extraordinary General Meeting is held - likely in late 2009
or early 2010 - to vote on the pending business combination and business
alliance. As such, Brandes has converted its draft proposal and is now
formally proposing that an initial step be taken to reduce excess capital via
a one-time dividend of 40 yen per share.
This amount represents a modest incremental return to shareholders of
approximately 5.5 billion yen, which is significantly less than 5% of the
disclosed excess capital figure of 200 billion yen. Brandes believes that the
Company's remaining financial assets will be more than sufficient to support
the Company's operations, including the funds needed for the integration of
Aioi and Nissay Dowa, while still allowing it to pursue available growth
opportunities. For more details on the rationale for the proposal, please see
the attached shareholder proposal excerpt for reference.
Brandes is a U.S. registered investment advisor. Located at 11988 El
Camino Real, Suite 500, San Diego, California, 92130, Brandes managed
approximately US$42.4 billion on behalf of institutional and individual
investors, as of March 31, 2009.
The above information is based on the following conditions.
This press release is not intended to advocate the purchase or sale of
the Company's stock. Also, the press release is not based on the intentions
that Brandes, its related parties and other 3rd parties solicit proxies for
the Company's Annual General Meeting ("AGM").
This press release and the Resolution are based on information currently
available as of the date of this announcement. Brandes has acted in full
caution and on best effort, but cannot guarantee that the information is
correct. In addition, the Resolution does not guarantee a specific outcome
for the votes at the AGM. Brandes may, depending on the situation, change or
revoke the Resolution.
This press release is not intended to influence the share price of the
Company. Brandes does not guarantee any reaction by the market in regards to
the Resolution or the Company's response to the Resolution. This Resolution
is intended to propose an idea to the shareholders of the Company at the
upcoming AGM, and this press release is solely intended to explain the
background and rationale for submitting the Resolution.
(Reference Material)
Direct excerpt from Shareholder Proposal (please note that 'Company'
refers to Mitsui Sumitomo Insurance Group Holdings)
(II) Reasons
This proposal reflects the belief that the Company should maintain a
balance sheet that is consistent with its core business as an insurance
company, and that capital well in excess of such needs should, if
opportunities arise, be deployed in a more value enhancing manner, which
would include the repurchase of its own shares or a return to shareholders
via dividends.
This proposal for a one time dividend increase aims for the gradual
reduction of the Company's excess capital. In past years, Brandes has
encouraged the Company to reduce excess capital via share repurchases. It
recently submitted to the Company a draft shareholder proposal to give
shareholders the right to vote on a 25.2 billion yen share buyback program as
it believes that this would be the preferred way to reduce excess capital due
to the Company's shares trading at a discount to book value per share.
Unfortunately, it appears that the Company may not legally engage in a
share buyback at this time due to the ongoing business consolidation
discussions with Aioi Insurance Co., Ltd. ("Aioi") and Nissay Dowa General
Insurance Co., Ltd. ("Nissay Dowa"), and that this restriction will not be
lifted until an Extraordinary General Meeting is held - likely in late 2009
or early 2010 - to vote on the pending business combination and business
alliance. As such, Brandes has converted its draft proposal and is now
formally proposing that an initial step be taken to reduce excess capital via
a one-time dividend of 40 yen per share.
The Company has long publicly disclosed that it has substantial excess
capital of at least 200 billion yen (please refer to the Company's 2008
Annual Report and 'Summary Q&A' of FY2008 Second Information Meeting
latest disclosures). While the Company has historically stated that excess
capital would be used for 'strategic investments,' no significant actions
have been taken to reduce excess capital, and the Company has failed to
implement any managerial policies or undertake any transactions that would
improve the Company's capital efficiency. Moreover, the recent disclosure
that the Company intends to consolidate with Aioi and Nissay Dowa through a
share exchange contradicts the Company's previously stated intentions to fund
'strategic investments' with excess capital. In addition, the current
Distribution Policy which distributes approximately 40% of the 'Group Core
Profits' is effectively adding to the excess capital through the 60% that
remains undistributed.
Brandes believes that - even taking into account current global credit
conditions and expected capital needs - the Company retains an unnecessary
amount of excess capital. Brandes recognizes that the Company must continue
to secure a strong capital base to support its business, but also believes
that maintaining excess capital without any clear return-on-capital targets
is not in the Company's best long term interests.
The proposal, if approved, would result in the incremental return to
shareholders of approximately 5.5 billion yen, which is significantly less
than 5% of the Company's said excess capital of at least 200 billion yen. The
remaining financial assets will be more than sufficient to support the
Company's operations, including the funds needed for the integration of Aioi
and Nissay Dowa, while still allowing for it to pursue available growth
opportunities.
SOURCE: Brandes Investment Partners, L.P.
CONTACT: Ray Lewis of Brandes Investment Partners, L.P.
+1-858-523-3588,
PublicRelations@brandes.com
Translations:
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