12th Nov 2020 11:49
(Alliance News) - Conduit Holdings Ltd confirmed Thursday it is going ahead with the newly formed reinsurance firm's USD1.1 billion initial public offering.
That will make it the third largest IPO in London so far in 2020, after THG Holdings PLC and Calisen PLC.
Net proceeds from the IPO on the London Main Market, expected to occur in December, will be used to write reinsurance in line with the company's business plan, Conduit said.
The money raised will be used to capitalise the company to a level such that its capitalisation will meet the levels required for the purposes of its targeted AM Best rating of A-.
Conduit is a newly established reinsurance underwriting business focused on producing strong risk adjusted returns from a diversified and focused business plan. The business has been formed to capitalise on what the company's founders, Neil Eckert and Trevor Carvey believe to be an "exceptional market opportunity".
Eckert, who will be Conduit's executive chair, said: "Trevor and I have traded in hard markets before, but we believe these are exceptional times by any standards and a really opportunistic time to launch a new reinsurance company bringing fresh capital and a very focused business plan to the market. We are enthused by the industry support we have had whilst developing our ideas for Conduit and look forward to opening for business."
Conduit expects to write reinsurance in the Property, Casualty and Specialty classes.
"Years of high insured losses, diminished reserves and the more recent losses and industry strain caused by Covid-19 and severe capacity shortages in certain classes of insurance and reinsurance have produced major corrections in reinsurance pricing and policy," Conduit said.
Carvey, the proposed chief executive, added: "We will be targeting an Excess of Loss and Quota Share book of treaty reinsurance business across Property, Specialty and Casualty lines. We are excited by a market where there is so much price improvement across so many classes. For the first time in a long while we think a well-capitalised new entrant can come into the market and successfully target quality business in scale and at historically attractive rates."
Conduit expects to generate significant returns for its shareholders and to provide an ongoing and progressive dividend. The company is targeting a dividend as soon as during the 2021 financial year of approximately 5% to 6% of equity capital, allocated between an interim and final distribution.
"Conduit will manage its balance sheet efficiently and in the long term may return excess capital through special dividends or share buybacks where appropriate," the company added.
Jefferies International and Panmure Gordon will act as joint global co-ordinators and joint bookrunners, while Kinmont and GC Securities will act as joint financial advisers.
By Paul McGowan; [email protected]
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