RenRe could raise $1.125bn, as equity offering prices at discount

RenaissanceRe, the Bermuda-headquartered reinsurance company and third-party capital manager, may take as much as $1.125 billion of additional capital from its new equity raise, although the public offering priced at a discount to yesterday’s close.

As we reported yesterday, RenaissanceRe (RenRe) launched a public offering of its common shares and at the same time a private placement with already key investor insurer State Farm, seeking to raise capital for new business opportunities.

RenRe had said that it wanted to raise capital as it sees itself as well positioned to deploy more capacity to take advantage of “significant” opportunities across insurance and reinsurance in the wake of the Covid-19 pandemic.

The company said that capital raised would be put to work in “expanding our existing business lines, entering new business lines, forming new joint ventures, or acquiring books of business from other companies.”

That offering was set to raise roughly $1 billion, but now that the shares have been priced at $166 per share, which was just under 1% up on the June 1st close of $164.91 that was mentioned in the public offering document, the amount that could be raised has risen a little.

The public offering consists of 5.5 million public shares, which at the $166 per share price could raise $913 million.

Alongside that, the underwriters of the offering have an option to take an allotment of 825,000 additional shares, so potentially this could raise $137 million more.

Finally, key investor insurer State Farm is set to make a $75 million further investment in RenRe as part of the capital raise.

So, all in, RenRe could benefit from $1.125 billion of fresh capital, to put to work on securing new business opportunities and readying itself for potentially profitable reinsurance opportunities at the end of the year.

The company said that the offering is expected to close on June 5th 2020, subject to customary closing conditions.

RenRe’s capital raise is the biggest seen so far and will likely trigger others to follow-suit.

While there have been forecasts that new reinsurance start-ups may be seen, given the hardening market environment, there is a particularly strong opportunity for respected underwriters to grow their own capital base at this time to capitalise on the way rates are moving.

This includes through raising more third-party capital from investors as well and given RenRe’s activity in the ILS space it is likely the company also raises fresh inflows from ILS investors as we move towards the end of year renewals, as well.

In a sign of just how attractive an investment in RenRe could be at this time, the pricing of the share offering at $166 per share is already almost 5% below yesterday’s closing price of $173.53.