Lancashire Holdings Limited is following in the footsteps of Hiscox, Beazley, and RenaissanceRe, who have all announced in recent weeks that they are raising capital.
According to the Bermuda-headquartered insurance group, it is issuing as much as approximately 39.6 million new common shares in a non-pre-emptive placing to be conducted via an accelerated bookbuilding process. The company’s corporate brokers, Morgan Stanley & Co. International Plc and Citigroup Global Markets Limited, are acting as joint bookrunners.
“The placing shares will not exceed 19.5% of the company’s existing issued share capital,” noted Lancashire, “which, based on the price of 726 pence per common share as at 4pm on June 09, 2020, would raise gross proceeds of approximately £287 million (approximately US$365 million).”
The goal is to fund organic growth, as well as take advantage of rate rises that the firm said it is currently seeing across the majority of its business lines.
Lancashire explained: “The recent COVID-19 pandemic has generated (re)insurance market losses both in terms of the claims environment and the negative impact on the investment markets. In the face of these challenges there has been a retrenchment in (re)insurance market risk capital and capacity.
“This in turn has led recently to continued rate increases in many of the group’s core insurance segments and accelerated rating dislocation in catastrophe-exposed reinsurance lines. For example, the company has seen, to date, rate rises of 20%-30% for June 01 renewals in the Florida property catastrophe portfolio.”
The group added that its long-term strategy is to deploy more capital when the market is hardening, or when pricing strengthens due to capital constraints, and to lower the amount of capital it deploys in softer markets where pricing is weaker due to an over-supply of risk capital.
Settlement for the shares and admission to trading on the London Stock Exchange is expected to take place on or before 8am BST on Friday.
