Everest Re Group, Ltd, the global insurance and reinsurance player, sees an opportunity to expand its capital base to take advantage of growth opportunities during the current hard market period and is raising almost $1.5 billion of new equity capital to fuel expansion.
Everest Re launched a new equity raise yesterday evening, announcing it would target issuance of 3,000,000 new common shares, alongside an underwriters option to purchase up to an aggregate of 450,000 additional shares.
At a $360.00 per share price (which it transpires will be the price, before underwriting discounts and commission), that would have been a maximum equity capital raise of roughly $1.24 billion.
But, it seems the response from investment banks and investors was strong, as within a few hours Everest Re was back and priced the offering, at the $360.000 price per share, but for an offering of 3,600,000 common shares, as well as an underwriters option to purchase up to 540,000 more.
As a result, it seems the top-end of this capital raise for Everest Re will near $1.5 billion (just over $1.49bn to be precise), providing the company a significant war chest for growth at the mid-year reinsurance renewals.
Everest Re said that the capital raised will be used for general corporate purposes, which might includes expanding its existing business lines and operations.
This offering is expected to close by May 19th and running the book are Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC.
Closing in May, means that for Everest Re this fresh injection of growth capital will be secured in advance of the all-important mid-year reinsurance renewals, so could be used to maximise the underwriting opportunity for the company, at the particularly attractive pricing available at this time.
Analysts have come out with upgraded share price estimates for Everest Re overnight, all expecting a positive response as it goes through this process.
KBW’a analysts stated that they believe the, “announced secondary offering reflects the likely strong property-catastrophe reinsurance growth opportunities at mid-year reinsurance renewals, keeping us optimistic on all property-catastrophe exposed Bermudian (re)insurers.”
Juan Andrade, President and CEO of Everest Re, recently stated that the company’s recent results have been strong.
While Jim Williamson, the Chief Operating Officer and Head of Reinsurance at Everest Re, stated on the upcoming renewal season, “We think the market will continue to dislocate, we will have incredible opportunities to grow with our best-in-class clients and really allocate our capacity to superior returns.”
Everest Re is first out of the gates for a capital raise, with not many signs of other reinsurance focused underwriters looking to increase capacity significantly before the mid-year.
Could they trigger an opening of the flood gates and other capital raises to emerge in the final days before June? It’s possible, but companies would need to be well-prepared and to have already laid much of the groundwork, it would be hard to achieve reactively for many firms, although perhaps some of the biggest could.
It will be interesting to see whether any other companies come forward with clearly elevated appetites for growth in the next week or so.
