In one of the largest equity fundraisings since the Covid-19 crisis began, Hiscox (HSX) tapped new and existing investors for £375m this week in a placing at 650p per share. That was 6 per cent below the prevailing price, and less than half the insurer’s market value at the start of the year.
Hiscox first confirmed it was considering a capital raise on 29 April, despite stating its capital levels were sufficient to cover expected liabilities. Seven days before, the Bermudan group had flagged “material uncertainty” in its potential exposure to the Covid-19 pandemic and resulting claims environment.
When it came to ask investors for fresh cash, the tone was considerably more bullish. Management said the new funds would give the business the flexibility "to respond to growth opportunities and rate improvement in the US wholesale and reinsurance markets”. Hiscox believes a likely contraction in capital across the industry will lead to attractive market conditions in wholesale policy lines.
Management is also confident that business interruption claims will be limited, despite vociferous opposition from some policyholders. These include the Hiscox Action Group, a consortium of hundreds of small businesses that has launched a class action against the insurer. Currently, Hiscox expects losses from business interruption claims of between £10m and £250m, net of reinsurance.
