Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

RenRe looks to raise around $1bn to capitalise on “significant” opportunities


RenaissanceRe, the Bermuda-headquartered reinsurance company and third-party capital manager, sees itself as well positioned to deploy more capital to take advantage of “significant” opportunities in the wake of the Covid-19 pandemic, so is raising around $1 billion of capital through a new share issuance.

renaissance-reinsurance-logoThe company has launched an offering of its common shares and at the same time a private placement with already key investor insurer State Farm, as the reinsurance firm looks to set itself up for further growth at a time of accelerating rate firming.

The registration statement is for a maximum aggregate offering price of $1.25 billion, but RenaissanceRe said that it expects the proceeds will be somewhere around $957 million to almost $1.1 billion.

State Farm will take $75 million of RenRe shares in the concurrent private placement, adding to its stake in the reinsurance carrier and third-party capital manager.

The pair have a long relationship, with State Farm a key investor owning roughly 4.4% of RenaissanceRe’s total common shares outstanding, and also collaborating on the Top Layer Re joint-venture reinsurance vehicle as well.

RenRe said that the proceeds of the share issuance and private placement will be put to use in a variety of ways, but all seemingly focused on capitalising on the hardening of reinsurance pricing.

Among the uses could be “expanding our existing business lines, entering new business lines, forming new joint ventures, or acquiring books of business from other companies,” RenRe said.

Despite the challenges faced due to the Covid-19 pandemic, RenRe says “We believe that our track record of responding to industry events, differentiated risk management and client service capabilities, and access to diverse sources of both capital and risk position us favorably in the current environment.”

Explaining the background to the capital raise, RenRe said, “The global COVID-19 pandemic has had immense impacts on a global scale, including on the insurance and reinsurance industries, where it has contributed to an accelerating hard market across property, casualty and specialty lines. We believe that mid-year renewals reflected tightening conditions as industry participants assess the broad impacts and ongoing uncertainties of the COVID-19 pandemic.”

Adding that, “As an organization, we believe that these market conditions have created significant opportunities in the lines of business that we write, and that we are well positioned to deploy capital in this environment to pursue superior returns for our shareholders.”

RenRe has access to capital in many forms, but this capital raise will see the company expanding its own balance-sheet, which will please its shareholders.

It’s interesting that part of the proceeds could be used for joint-ventures or setting up such vehicles, which could imply an appetite to expand its work with pension funds and other major ILS investors.

We’d imagine RenRe will be raising capital into its ILS funds and collateralised reinsurance vehicles as well, particularly later this year in readiness for the January 2021 renewal season.

The main underwritten offering will see 5,500,000 of RenRe’s common shares on offer, as well as an allotment for the underwriters who can buy an additional 825,000 shares.

At yesterday’s closing price of $164.91 per share, that would be more than $1 billion raised.

Update, Jun 3rd: The offering was priced at $166 per share, so the 5.5 million public share offering should raise $913 million, the allotment for underwriters of 825,000 shares another almost $137 million, then adding on the $75 million investment being made by State Farm means RenaissanceRe could raise roughly $1.125 billion in total. Read more in this update.

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