Beazley raises $300m to expand & respond to Covid-19

Specialist London market insurance and reinsurance firm Beazley has successfully raised around $300 million through an equity placement designed to fund growth, enable it to capitalise on rates and help it respond to the Covid-19 pandemic.

Beazley’s move, to raise capital, had been expected and comes on the heels of Hiscox doing the same.

The equity raise was announced late yesterday by Beazley, with a target of raising around $300 million through an equity placement of new shares representing roughly 15% of the its existing issued share capital and with executive participation in a placement of new subscription shares.

Beazley said that the capital raise would support the ongoing organic growth of the company and that having seen rates rise in recent years, the company expects that rate momentum will continue.

Beazley cited property and marine as two classes of insurance and reinsurance business where it sees some of the best opportunities for expansion of its book.

In addition, the capital raise is designed to strengthen Beazley’s balance-sheet in the wake of the Covid-19 pandemic and given the ongoing uncertainty over economic conditions.

The capital raise has been successful, with Beazley listing 78,501,420 new ordinary shares through the placement and 13,085 shares through the subscription.

The price was 315 pence per placing share, which represents a roughly 4.9% discount to the closing share price of 331.4 pence on 18th May 2020, but has been sufficient to raise the targeted roughly $300 million of capital.

A number of Beazley’s senior directors have subscribed to the placement and subscription, demonstrating alignment with the third-party investors backing the company’s capital raise.

Raising capital at this time positions Beazley with increased firepower for underwriting new business, something that will benefit the company’s third-party reinsurance capital investors and is likely to mean more risk flowing to its various capital partners, some of which are insurance-linked securities (ILS) type investors.

It will be interesting to see how the company grows, where its underwriting focus lies, as it seeks to capitalise on the rate opportunities now presented to it as the market hardens in the wake of the pandemic.

It’s possible other listed insurance or reinsurance firms may look to raise capital as we move through the year.

A range of other companies are looking at different capital solutions, from sidecars to funds, as alternatives to equity raises as well, we’re told.

Capital is king right now across the industry and in this firming (or hardening) market for insurance and reinsurance, our sources tell us that capital at almost any cost, as long as a return can be generated by underwriting on it, is an attractive option for re/insurers right now.

Analysts said that the capital raise positions Beazley well to take advantage of opportunities as the market firms, while also providing a buffer against further losses due to the pandemic.