Insurer will issue new shares to generate capital

Specialist insurer Ecclesiastical Insurance Office will raise £40.8m to act as a buffer against higher capital requirements under the European Commission’s pending Solvency II capital adequacy regime.

The insurer will issue 40 million new non-cumulative irredeemable preference (NCIP) shares, priced at £1.02 a share, which will be admitted for trading on the London Stock Exchange today.

Ecclesiastical, led by chief executive Michael Tripp, placed the shares to strengthen the company’s capital position and ensure a continuing buffer against any increase in minimum regulatory capital requirements once Solvency II is implemented.

The company believes the capital boost is likely to enable the firm to sustain good growth as it provides additional resources. It could also allow the company to take advantage of any improvement in insurance market conditions.

The insurer added that in recent years, it has acquired a number of brokers to diversify its earnings stream. The proceeds of the placing will allow it to look for additional opportunities to diversify earnings.

Some believe it is unlikely Ecclesiastical’s peers will follow suit.

“Most UK-listed insurers say they are well prepared for Solvency II and well progressed in demonstrating that they have adequate enterprise risk management to use their own Solvency calculation,” Numis Securities analyst Richard Gradidge said.

He added that most UK-listed firms were opting to retain surplus capital to tackle Solvency II uncertainty, instead of returning it to shareholders through buy-backs, as many peers in non-affected countries are doing.