Bermuda insurer and reinsurer, Hamilton Insurance Group, could receive net proceeds of up to USD 97.1 million from its initial public offering (IPO) of its Class B common shares, which will be used to make capital contributions to its re/insurance subsidiaries amid favourable market conditions.
After submitting a draft proposal in early September, Hamilton commenced the IPO process on October 16th, and has now announced the official launch of its IPO.
Pursuant to a registration statement on Form S-1 filed with the US Securities and Exchange Commission (SEC), Hamilton is to offer 15,000,000 of its Class B common shares at an expected price range of between $16 and $18 per share. So, in total, the offering could raise between USD 242 million and USD 272 million.
However, of the total, the offering consists of 6,250,000 Class B common shares offered by the company, and 8,750,000 Class B common shares to be sold by certain of the firm’s current shareholders. Additionally, the underwriters will have a 30-day option to purchase up to an additional Class B 2,250,000 common shares from the selling shareholders.
It’s important to note that Hamilton will not receive any proceeds from the sale of its shares by the selling shareholders.
So, this means that with a price range of $16 to $18 per share, proceeds from the sale that go to Hamilton could be between USD 100 million and USD 112 million, before any deductions for estimated underwriting discounts and commissions and estimated offering expenses payable by the company.
Hamilton says that assuming an IPO price of $17 per share, so the midpoint of the range, it estimates that net proceeds from the sale will be approximately $91.3 million, after the deductions mentioned above.
The re/insurer adds that each $1 increase in the assumed IPO price of $17 per common share, again after deducting underwriting discounts and commissions and expenses, would increase the net proceeds to Hamilton by around USD 5.8 million.
So, at the top-end of its range, Hamilton would receive proceeds of approximately USD 97.1 million from this offering.
At $18 per share, the IPO would value Hamilton at approximately USD 2 billion.
“The Company intends to use the net proceeds it receives from the offering to make capital contributions to its insurance and reinsurance operating subsidiaries, for use by its three operating platforms, which should enable the Company to take advantage of ongoing favorable market conditions in the markets in which the Company operates by writing more business pursuant to its strategy,” says Hamilton.
In its filing, Hamilton says that it has “significant opportunities to capture profitable risk-adjusted returns from sustained favorable property and casualty insurance and reinsurance market conditions due to our scale, disciplined underwriting, and financial and operating flexibility as well as our low counterparty credit concentration.”
The re/insurer goes on to note that the global macroeconomic and social environment continues to drive favorable demand for insurance and reinsurance solutions.
“Increased interest rates have resulted in mark-to-market losses in investment portfolios, causing several of our competitors to recognize balance sheet impairments, thereby reducing their underwriting capacity. In recent years, rate increases have been required to keep pace with the increased frequency and severity of natural catastrophe events globally, which has been impacted by changing weather patterns, inflation, increased geopolitical tensions and other risks that have grown or emerged,” continues Hamilton.
Owing to these factors, Hamilton sees a continuation of market opportunities for its business and will use the proceeds from its IPO to take advantage of this.
Barclays and Morgan Stanley are acting as Joint Lead Bookrunning Managers for the proposed offering, while Citigroup and Wells Fargo Securities are acting as Joint Bookrunning Managers for the proposed offering.
BMO Capital Markets, Dowling & Partners Securities LLC, JMP Securities, A Citizens Company, Keefe, Bruyette & Woods, A Stifel Company, and Commerzbank are acting as co-managers for the offering.
