Lancashire Holdings raises £277m to take advantage of rate rises

Lancashire Holdings has raised around £277m in a placing to take advantage of rate rises across the majority of its business lines.

The company placed just under 39.6 million new common shares at 700p each, which is a 3.6% discount to the closing share price on Tuesday. It represents approximately 19.5% of Lancashire’s existing issued common share capital.

In a statement announcing the placing late on Tuesday, Lancashire said it plans to use the proceeds to fund organic growth and take advantage of rate rises.

"Lancashire expects these growth opportunities to be strongly aligned to Lancashire’s core areas of underwriting expertise and relationships," it said. "Lancashire’s long-term strategy is to deploy more capital into a ‘hardening’ market, in which pricing strengthens due to market capital constraints, and to lower the amount of capital it deploys in ‘softer’ markets, where pricing is weaker due to an over-supply of risk capital."

The company also provided a brief update on trading, saying that since its update for the first quarter at the end of April, it has continued to trade in line with, or better than, its expectations, with a marked improvement in pricing as the second quarter progresses.

"The Covid-19 pandemic is still an ongoing situation, making it exceptionally difficult to predict what the ultimate impact for the group will be. As previously announced, Lancashire’s provisional loss estimate for Covid-19 is $35m, net of reinsurance and reinstatement provision, based on claims notified and expected to be notified. Lancashire has not seen any trends in claims activity since 30 April 2020 that would indicate any material change to this estimate at this time."

At 1215 BST, the shares were up 10.2% at 800.00p.

JPMorgan Cazenove said: "Unlike its London Market peers (Hiscox and Beazley, who have also raised equity), we do not see Lancashire as having significant exposure to classes of business affected by Covid-19, nor to casualty lines that have been affected by adverse claims trends.

"We therefore see this raise as a stronger-than-expected indication of forward looking growth, and reiterate our overweight rating."