Conduit, a start-up reinsurance company, has raised more than £800m in one of the biggest initial public offerings in London this year.
The flotation highlights how activity in the UK’s equity capital market has picked up after a period of near dormancy during the spring and summer when coronavirus put off many issuers from launching IPOs.
Conduit’s IPO comes about two and a half months after The Hut Group raised £1.9bn in the biggest London IPO of the year. It helped snap a drought between March and September when there were only two such flotations, according to Dealogic data.
Bermuda-based Conduit is one of a wave of new insurance and reinsurance companies hoping to take advantage of strengthening market conditions. Claims stemming from Covid-19 — which range from travel to event cancellation and business interruption — could reach $100bn, according to some estimates.
In response, insurers and reinsurers have started putting their prices up. Conduit has been able to tell investors that, as a start-up, it does not have exposure to Covid-19 claims from this year.
The company’s founders, Neil Eckert and Trevor Carvey, hailed these “exceptional” market conditions, and said the company was aiming for adjusted returns on equity in the mid-teens through the cycle.
“Business conditions in our targeted reinsurance markets have continued to improve during our journey to IPO and we now move on to the launch of the business with confidence,” said Mr Eckert.
Conduit’s IPO, and a handful of others in recent weeks, has helped lift the tally of London IPOs to almost 30, in line with 2019, but down sharply compared with previous years, Dealogic data show.
The company has issued shares at 500p each, raising gross proceeds of £821m. Including the management’s stake, that should give the company a market capitalisation of about £826m when unconditional trading in the shares begins on December 7.
The IPO pushes against the trend of insurance companies leaving the London stock market. The past decade has seen other commercial insurers such as Amlin, Catlin and Novae being taken over. This year, both Hastings and RSA have agreed to be taken private.
The deals have left UK stock market investors with a relatively small number of companies to choose from. There are only three big listed commercial insurers in London: Beazley, Hiscox and Lancashire.
While insurance companies have been moving off the London market, they have come to market in the US. In July, Lemonade, the most prominent of the so-called insurtech companies, floated in New York. Its shares more than doubled on the first day of trading, giving it a market capitalisation of more than $3bn. It was followed last month by Root Insurance, a motor insurance specialist.
Last week Metromile, another US auto insurer, said it would go public via a merger with a special purpose acquisition company.
Conduit was advised by Jefferies and Panmure Gordon.
Get alerts on UK insurance industry when a new story is published