Hiscox could explore a non-preemptive equity raise to brave potential business turbulence related to COVID-19, according to three sector bankers.
The specialist non-life insurer could raise a couple of hundred million, for example, by placing some 10% of its issued share capital, the first banker suggested. Hiscox has a market cap of just over GBP 2bn.
In a best-case scenario, Hiscox might not need fresh equity capital, even if it were to lose money this year, the second banker said. The size of its coronavirus bill will dictate whether it needs to tap markets, he argued.
Hiscox has been commented by investors as a candidate that might be looking to refinance in some way, the third banker said.
Last week, Hiscox estimated it may pay up to GBP 175m in coronavirus-related claims if restrictions on travel and mass gatherings persist. However, the level of exposure to business interruption claims is limited for Hiscox Europe and negligible in the US, it said.
Hiscox faces potential legal action from UK businesses over business interruption claims, as reported. The insurer has publicly stated that its core small commercial package policies do not cover for business interruption by COVID-19. The company may also face reputational risk if it does not pay any claims, the second banker indicated.
In a worst-case scenario, Hiscox could need GBP 200m of capital, in which case it might choose to raise a bit more, for example, GBP 250m-GBP 300m, the first banker said.