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

Enjoyed this article?

Don't miss out on the knowledge and insights to be gained from our daily news and features.

Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.

Support independent journalism and stay informed with stories that matter to you.

Subscribe now and get 50% off your first year!

Four time-saving tips for automating your investment portfolio
Partner Content
In today's fast-paced investment landscape, time is a valuable commodity. Fortunately, w...
Etoro
Advertisement

Related Stories

Netflix NT drama series Territory to debut in October

Netflix NT drama series Territory to debut in October

Netflix is set to launch its next blockbuster Australian drama seri...

American Express to pay $8m fine over inappropriate targeting of co-branded David Jones credit cards

American Express to pay $8m fine over inappropriate targeting of co-branded David Jones credit cards

American Express Australia (Amex) has been ordered to pay an $8 mil...

Results from Juukan Gorge show 47,000 years of Aboriginal heritage destroyed in mining blast

Results from Juukan Gorge show 47,000 years of Aboriginal heritage destroyed in mining blast

Aboriginal and Torres Strait Islander readers are advised this arti...

From Michael Hill to Adore Beauty, retailers rise on positive sales results

From Michael Hill to Adore Beauty, retailers rise on positive sales results

A handful of retailers including jeweller Michael Hill Internationa...