QBE launches $1.3 billion raise to shore up capital

QBE launches $1.3 billion raise to shore up capital

QBE Insurance (ASX: QBE) will dilute more than 12 per cent of its ownership as it rattles the tin to secure $1.32 billion in extra capital.

Australia's second-largest global insurer believes the capital raising will give it the strength to withstand "severe market downside scenarios".

QBE has announced plans today for a $1.2 billion institutional placement at $8.25 per share, representing a 9.4 per cent discount to the last closing price on Thursday.

The placement is due for completion tomorrow, and will be followed up by a US$75 million (AUD$117 million) share purchase plan (SPP) that will close on 11 May.

The announcement follows a period of strengthened insurance trading conditions in the quarter to March, with QBE recording a 9 per cent rise in its gross written premium to more than US$4.5 billion (AUD$7 billion).

But the group's prescribed capital amount (PCA) multiple has gone down over the past three months following the payment of dividends and a negative investment return of almost US$500 million (AUD$781 million).

This investment loss was due to extreme volatility across all asset classes, including a material increase in global fixed income credit spreads and significant declines in equity markets.

Through today's announced capital raising the insurer intends to lift its PCA multiple from 1.6x to 1.9x, thus boosting its liquidity to around US$1.8 billion (AUD$2.8 billion) and giving QBE the flexibility to bring gearing back to its 25-35 per cent internal benchmark.

"Despite the extraordinarily difficult landscape, QBE commenced the year with strong pricing momentum and underlying premium growth," says QBE CEO Pat Regan.

"The capital plan we have outlined positions us to navigate this period of extreme uncertainty with demonstrable strength and gives us the flexibility to pursue organic growth opportunities that may arise over the medium term."

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Business News Australia

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Deliver on sustainable business promises with Modern Group’s WincovER rating
Partner Content
As a business owner, you’ll know that sustainability is a core part of developing...
Modern Group
Advertisement

Related Stories

Engineering powerhouse enstruct to be acquired by Canada's WSP

Engineering powerhouse enstruct to be acquired by Canada's WSP

An Australian structural and civil engineering company with a proli...

Healius appoints new CEO, sells Montserrat Day Hospitals for $139m

Healius appoints new CEO, sells Montserrat Day Hospitals for $139m

Healius (ASX: HLS) has today announced Maxine Jaquet will become th...

BlueScope Steel and former GM found guilty of cartel conduct

BlueScope Steel and former GM found guilty of cartel conduct

The Federal Court has found BlueScope Steel (ASX: BSL) and its...

Queensland doubles down on The Star with $100m fine and on-hold licence suspension

Queensland doubles down on The Star with $100m fine and on-hold licence suspension

The Star Entertainment Group (ASX: SGR) has been hit with a $1...