Hiscox hopes £375m capital raise will help capture growth opportunities amid COVID-19

Specialist insurer Hiscox plans to raise additional capital of around £375 million through share issuance, in a move it hopes will help fund expansion in the wholesale and reinsurance markets and meet expected liabilities arising from the  COVID-19 exposure.

The Bermuda-based re/insurer 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 19 pandemic.

The net proceeds 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".

The company's board of directors emphasised 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.

"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 company said in a statement. "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."

The company will place new ordinary shares of 6.5 pence each up to 19.99 percent of its existing ordinary share capital. Goldman Sachs International and UBS AG London Branch will act as joint bookrunners.

Hiscox has separately announced its trading statement for the first three months of the year to 31 March 2020.

The re/insurer's gross written premiums grew by 2 percent in constant currency to $1.18 billion, compared with $1.16 billion in Q1 2019, 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 said it is taking several actions to protect its capital position, including implementing a recruitment freeze and curtailment of travel and entertainment expenditure.

The company is adjusting its business mix, including its total catastrophe exposures, to provide additional capital relief, and purchasing $100 million of new reinsurance protections, as well as cancelling its dividend in 2020.