Hiscox looks to capital raise through share placement

Hiscox has announced an equity placing for up to just under a fifth (19.99%) of its issued share capital.

In addition to a release of 6.5p shares, some directors are expected to subscribe to around £600,000 worth of shares, with £150,000 accounted for by Hiscox CEO Bronek Masojada.

Together these actions will not exceed the 19.99% referred to above.

In an update on the London Stock Exchange on Tuesday afternoon, as it published its Q1 2020 trading update, the insurer said: “Hiscox expects opportunities for profitable growth in wholesale and reinsurance markets as a result of capital contraction and rate improvement across the market following the uncertainty caused by the Covid-19 pandemic.

Hiscox’s board of directors believes that its capital, liquidity and funding positions remain robust, with sufficient capital available to meet expected liabilities arising as a result of exposures to the Covid-19 pandemic. The net proceeds raised from the capital raise will enable Hiscox to respond to future growth opportunities and rate improvement in the US wholesale and reinsurance markets, as well as prudently position the group to withstand a range of downside scenarios.

“Hiscox is seeing continued positive momentum in its London Market business, with Hiscox Re & ILS positioned well to capture opportunities presented by capital contraction which is expected to drive rates up further. The opportunities for Hiscox Retail remain significant, with Hiscox currently occupying only small market shares in very large addressable markets. The Board is optimistic about the scale of the opportunity which lies ahead.

“Hiscox has a long-held strategy of diversification to ensure it is not overly reliant on any one of its segments for the group’s overall profits. A key element of this strategy is active portfolio management, with Hiscox shrinking and expanding in more volatile catastrophe-exposed London market and reinsurance businesses according to market conditions, while re-investing excess profits generated from those businesses into Hiscox Retail, which is less volatile and has significant long-term organic growth potential. This diversified business model and active approach to managing the business enables Hiscox to adapt to market conditions, providing opportunities for profitable growth throughout the cycle.”

The insurer has pegged its coronavirus exposure at up to $175m (£141m) across events, entertainment and travel.

However, it is facing potential group actions from business interruption policyholders in the UK who argue their policy wordings mean they should receive a pay out from Hiscox.

The insurer has said it has 10,000 BI policyholders in the UK, with 70% of these having normal monthly revenues of under £40,000, and a significant proportion would expect monthly revenues of under £10,000.

For quarter one Hiscox saw gross written premium rise 2% in constant currency to $1.18bn (£950m) with the biggest growth in the London market arm of 12% to $254.5m. Hiscox UK grew its GWP by 3% in constant currency to $181.7m (2019: $178.9m) as the business reported “good growth driven by broker commercial business and underwriting partnerships, which more than offset a contraction in the art and private client book”.

 

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