Specialist insurance and reinsurance group Beazley is raising capital in the form of a roughly $300 million equity placement, as it looks to support growth and to capitalise on rising rates being seen across its book.
Beazley is the latest to look to a fresh capital raise to not just shore up its business in the wake of the Covid-19 pandemic, but to provide ammunition for future growth.
The company said it will try and raise around US $300 million through the placement of new shares representing roughly 15% of the its existing issued share capital.
These shares are being offered to investors through an accelerated bookbuilding process which is underway immediately and the shares on offer are priced at 329 pence, Beazley’s share price as at 4.00 pm on 18th May 2020.
A number of Beazley’s directors and members of the senior management team are participating in the share placing, either through the main bookbuilding, or a placement of new subscription shares at five pence each in the capital of the re/insurer.
Beazley explained the reasoning for the capital raise, saying it wants to raise this equity to continue to support ongoing organic growth of the company.
Beazley said that, after recent loss years it has already seen rates rise steadily across its core underwriting markets, and expects “this strong momentum is expected to continue.”
In particular, Beazley highlights the property and marine markets as examples that have now “experienced two consecutive years of rising rates and present attractive near term opportunities.”
“The Board has considered the optimal capital structure for the Group and believes that it is an appropriate time for the Company to raise equity in order to position the business for future growth opportunities as well as providing further strength to the balance sheet in light of the continued uncertainty from COVID-19,” the announcement stated.
The proceeds from the share placings, alongside a new banking facility that Beazley has established, “demonstrate Beazley’s continued commitment to maintaining a strong balance sheet that can support the Company’s growth ambitions and withstand a range of stress scenarios,” the firm explained.
Since issuing its trading update for the first-quarter, Beazley has agreed an increase to its banking facility from $225 million to $450 million.
Beazley said it has now drawn down a further $85 million letter of credit, taking the total draw down under the letter of credit to $225 million and leaving another $225 million of unutilised capacity under this banking facility.
The placing and amendments to the banking facility will lift Beazley’s surplus capital considerably, providing a significant source of capacity for growth and allowing the re/insurer to capitalise on market conditions, while buffering its balance-sheet against further pandemic related losses as well.
Given the share placing and changes to the banking facility, Beazley’s Board has decided not to pay a first interim dividend for the six months ending 30th June 2020, but notes that it does intend to pay dividends again in future.
Specialist re/insurer Hiscox recently completed an equity capital raise, amounting to 19.99% of the existing issued ordinary share capital of the company.
Analysts had been suggesting that Beazley could follow-suit, which today’s announcement now confirms.