Hiscox has announced that it plans to raise around £375 million in a share issuance that the company says will enable it “to respond to future growth opportunities and rate improvement” in the US wholesale and reinsurance markets.
The confirmation comes after speculation about the re/insurer’s liabilities from the COVID-19 coronavirus pandemic, and its levels of capital.
Hiscox recently said that it expects to see up to £175 million in COVID-19 payouts, and is also one of the companies at the centre of mounting legal disputes in the UK over refusal to honour claims on some policies.
The company continues to maintain that its capital, liquidity and funding positions are strong enough to meet any COVID-19 liabilities, but it did acknowledge that the capital raise would position it “to withstand a range of downside scenarios.”
Instead, Hiscox linked the share issuance to upcoming opportunities in US wholesale and reinsurance, as well as positive momentum in its London Market business, where capital contraction is expected to drive rates up further.
“The Board expects the current COVID-19 related uncertainty to continue to push up rates and drive improved terms and conditions, with Hiscox Re & ILS well positioned to capitalise upon any growth opportunities,” it stated.
The capital raise will involve the placing of Hiscox new ordinary shares of 6.5p each, up to 19.99% of the company’s existing issued ordinary share capital.
At the same time, directors and members of senior management will subscribe for new ordinary shares to contribute approximately £600,000 to the capital raise, of which approximately £150,000 will be subscribed for by CEO Bronek Masojada.
Goldman Sachs International and UBS AG London are acting as joint bookrunners for the placing.
Hiscox separately announced its results for the first quarter of 2020, reporting 2% growth in gross written premiums to $1.18 billion, with strong growth in Hiscox Retail driven by the US and Europe, as Hiscox London Market benefited from continued rate momentum and Hiscox Re & ILS reduced as planned.
Hiscox London Market also continued rate momentum for third consecutive year, reporting an aggregate rate increase across the portfolio of 12% year to date.
Pricing in reinsurance remains below expectations, with rates are up 8%, including the impact of the Japanese renewals in April.
In Hiscox Retail, rates are up by 4% across the US retail portfolio, and terms and conditions are also improving. In the UK and Europe pricing is stable.
In addition to taking a more conservative approach to its investment portfolio, Hiscox has further shored itself up against COVID-19 exposure by adjusting its business mix and exposures, purchasing $100 million of new reinsurance protections, and cancelling its dividend for 2020.
