Everest Re targets renewals growth with up to $1.5bn equity capital raise

Bermuda-based insurer and reinsurer Everest Re Group sees a clear opportunity for expansion at the upcoming reinsurance renewals, launching an equity capital raise that was quickly upsized and could provide the firm close to $1.5 billion in new firepower.

Everest Re launched an equity capital raise late yesterday, saying it would target the issuance of 3,000,000 new common shares, while underwriters of the deal would have an option to purchase up 450,000 additional shares.

Soon after though, Everest Re came back to price its share issuance, at $360.00 per share price before underwriting discounts and commission.

At that level, based on the initially forecast share numbers, that would have been a maximum equity capital raise of roughly $1.24 billion.

But, Everest Re also upsized the amount of shares to be issued, to become an offering of 3,600,000 common shares, as well as an underwriters option to purchase up to 540,000 more.

At that level, the equity capital raise will secure Everest Re close to $1.5 billion of growth capital to fuel expansion into the hard market environment.

Everest Re said that the funds will be used for general corporate purposes, that might include expansion into its existing lines of business.

It implies a desire to maximise the mid-year reinsurance renewal opportunity while pricing remains hard.

Recently, Everest Re’s Group COO and Head of Reinsurance Jim Williamson said he expected the economics of business written will be “outstanding” at June 1st.

With the legislative reforms now in place for Florida and capital expected to continue building across the industry, it’s perhaps the case that this year’s Florida renewals may be the best on offer, significant hurricane activity aside.

Analysts have responded positively, boosting their share price forecasts for Everest Re and KBW’s team commented that the share offering, “reflects the likely strong property-catastrophe reinsurance growth opportunities at mid-year reinsurance renewals, keeping us optimistic on all property-catastrophe exposed Bermudian (re)insurers.”

It’s going to be interesting to see whether Everest Re’s late move to raise capital in advance of the renewals could trigger any capital raises from other players, or whether it’s deemed too late unless the preparatory work had already been done.