Summary
- Insurance Australia Group announced today that it has completed A$650 million underwritten institutional placement post NSWCA’s judgement.
- The proceeds would support IAG to maintain balance sheet strength and execute its strategic plans.
- The Sydney-headquartered insurance company intends to raise another A$100 million via SPP.
Insurance Australia Group Limited (ASX:IAG) has today announced the completion of A$650 million underwritten institutional placement, declared on 20 November 2020. The Company is the provider of general insurance along with a complete range of personal and commercial insurance products. The capital raising announcement was part of a response to the judgement passed by the Supreme Court of New South Wales Court of Appeal (NSWCA) related to business interruption insurance test case on 18 November.
Under the placement, the Company will issue ~128.7 million new fully paid ordinary shares at A$5.05 each. The Group received significant interest from domestic and offshore institutional investors.
The qualified shareholders, who bid for an amount below or equal to their ‘pro rata’ share of Placement Shares, were assigned their full bid. IAG would rank allotments for the outstanding shares depending on factors which includes the chances of long-term support, the strategic alignment of the investor along with the timeliness and volume of investors’ bids into the book.
The proceeds raised would support the Company to bolster its balance sheet and places the Company in a strong position to implement its strategic plans.
The shares issued through Placement ranks equally to that of the existing shares of the Company. These shares are likely to settle on 25 November 2020 and would start trading from 26 November 2020 on ASX.
DO READ: IAG braces for A$750 million capital raising after NSW court snub
Share Purchase Plan to Help Raise A$100 million
Insurance Australia Group announced that it would be providing an opportunity to the existing eligible retain shareholders to participate in a Share Purchase Plan (SPP) and raise ~A$100 million.
The eligible shareholders with registered address in Australia and New Zealand on IAG’s register (as at 7.00 PM on 19 November 2020) can apply for A$30,000 shares without any transaction fee or brokerage.
The Company intends to offer the shares under SPP at either the Placement price or a 2% discount to the 5-day volume weighted average price of IAG ordinary shares on the closing date of SPP, whichever will be the lowest.
What was the adverse business interruption test case judgment?
On 20 November 2020, IAG highlighted that it received a small number of business interruption-related claims. However, considering the judgment by NSWCA, the Company estimated the probable claims impact in its reserving position for 1H ending 31 December 2020.
According to the detailed assessment of its underwriting exposure on 31 October 2020, the Company estimates a post-tax provision of nearly A$865 million is needed to reflect the potential impact of the NSWCA judgment. Significant judgment has been implemented to get the provision estimation, which depends on independent peer review plus incorporate a risk margin to obtain a 90% level of confidence for the total outstanding claim liabilities of the Group.
At the time of writing, IAG shares were trading at A$5.150, down 5.678% from its last close.
