Everest Re bulks up for mid-year renewals with $1.5bn in fresh capital

Everest Re is bulking up for a strong run at mid-year renewals and beyond, raising $1.3 billion in fresh equity in a deal that quickly upsized during pricing and could yet take the firm to a $1.5 billion gross take.

Accelerated growth may be in the plans, management said. The equity increase comes just days ahead of the first of the mid-year reinsurance treaty renewal deadlines at June 1 with a focus on US property, including catastrophe prone zones.

“The Company intends to use the net proceeds from this offering for general corporate purposes, which may include expanding its existing business lines and operations,” management said in its statement announcing the share sale.

And Everest Re has been talking growth into the hard property reinsurance market. Management last said they expect the mid-year renewals to bring modelled returns in excess of what was visible at the already hardened 1/1 and 1.4 renewals.

“We are on offence,” CEO Juan Andrade (pictured) told his company’s Q1 earnings call early May. “The momentum is strong and our ambition is high.”

Treaty renewals should deliver increasingly improved margin, even if headline rate growth starts to temper against already strong prior year terms.

“We think the market will continue to dislocate,” group COO and head of Everest Reinsurance Jim Williamson added for the Q1 call early May. He expects “increased opportunities to grow” while deploying capital for “superior returns … at or above what we saw at 1/1.”

By the final tally, Everest Re sold 3.6 million shares on the market and gave its underwriters the option to sweep up an additional 540,00 shares, which could put the gross take to points shy of $1.5 billion. Everest had gone to market with a slightly more modest plan, then upped the offer by 20% following pricing.

Shares had closed at $378.40 Tuesday on the New York Stock Exchange. Indicative pricing ahead of the Wednesday open adjusted quickly to the announcement, falling in excess of 4% before gaining traction just above the SPO price.

The share issue, at maximum underwriter purchase, represents a 10.5% capital increase against common shareholder equity.

But any quick back-of-the-envelope calculations might suggest that a chunk of the per share earnings dilution can be recouped in June 1 renewals, a chunk in July and any lingering gap could be wiped out at January 1, 2024, assuming reinsurance markets follow Everest Re thinking.

Everest did not reveal in its early statements the cost of the issue or the size of the eventual net take on the offer.

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