Is the insurance company’s IPO being rushed before it even begins? | Insurance business America
Why a company pulled the plug
Insurance News
By Jen Frost
Insurers that had planned an initial public offering will be weighing their options after the hotly-touted initial public offering (IPO) season stalled in 2024.
On Wednesday, the specialist insurer Fortegra withdrew from its stock market plans. Fortegra’s move underscores the company’s nervousness and the caution of market-wide investors and could be seen as a bad sign by other insurance companies that have been anticipating stock market debuts.
At least one other insurer appears to have hedged its bets on a buyer’s market after two of three specialist insurers listed last year failed to meet their target.
An IPO researcher pointed to recent speculation about a possible reverse merger of Aspen with Apollo-backed SiriusPoint.
Aspen declined to comment and has filed IPO documents. However, a deal with NYSE-listed SiriusPoint would give it a different path to market.
“This could be a sign that Apollo recognizes that the public market is not as receptive as it would like and it could be good to have an alternative in mind,” said Nick Einhorn, Renaissance Capital VP Research, to Insurance Business. “Fortegra’s postponements and the poor performance of these two deals late last year are a sign that the market for insurance IPOs is not particularly strong, but I don’t think that means investors wouldn’t be interested in one good company at a good price.” attractive valuation.”
However, the investor hype has not yet reached the “unbridled enthusiasm” of 2020 and 2021, said Einhorn.
How the IPO proceeds developed
With 18 million shares on offer at $15 to $18 each, Fortegra’s owners had targeted a market capitalization (market cap) of $1.5 billion for the specialty insurer. Tiptree, which owns more than half of Fortegra, had a market capitalization of just over $700 million as of Wednesday.
Tiptree’s share price suffered a slump of more than 12% when it was announced that its IPO had failed, suggesting its backers had high hopes for the listing. The market capitalization of Fortegra’s majority owner was $605 million as of Thursday afternoon.
“When you look at the location of the IPO, Tiptree’s ownership structure and Tiptree’s own market capitalization, it’s pretty clear that the proposed stock valuation was higher than what it was valued at at Tiptree,” Einhorn said.
Fortegra’s business model, in which business is conducted largely through management of general agents (MGAs), may have been a reason for public investor skepticism.
“This type of distribution model does not appear to be particularly popular with investors, and the company tried to convince investors that they were good at this model, that they were successful at it, and that they were good at finding the right thing.” Partners that they can bring to their distribution platform,” Einhorn said.
The change in direction is the second time Fortegra has reconsidered public plans. In 2021, the insurer set terms and then pulled the plug.
It is unclear whether Fortegra will make another attempt at listing later this year. When contacted by Insurance Business, the specialty insurer declined to comment further.
The IPOs of specialty insurers in 2023 delivered a mixed result
The three specialty insurers that went public in 2023 were Fidelis Insurance (Fidelis), Hamilton Insurance Group (Hamilton), and Skyward Specialty.
Together, they delivered an average return of 30%, driven by the performance of Skyward Specialty, according to Renaissance Capital. Both Hamilton and Fidelis traded at or below the asking price.
Fidelis’ structure as an accounting firm that handles transactions with its main insurance company may have made investors feel uneasy, Einhorn said. Meanwhile, Hamilton’s “riskier” investment strategy may not have hit the mark with public shareholders.
Why Skyward Specialty made sense for investors
Skyward Specialty may offer a glimmer of hope for would-be insurers.
The insurer became the first company to launch a US IPO last year. Since then, it has traded 100% above its IPO price of $15.
Additionally, Skyward Specialty boasts the most successful U.S. financial services IPO of the year and the third most successful IPO of any company.
The five best US IPOs in 2023
|
Pursue |
sector |
Deal Value ($M) |
Pro Forma Market Cap ($M) |
After-market performance – offer / 1 day |
After-market performance – often / ’23 YEARS |
|---|---|---|---|---|---|
|
RayzeBio Inc |
Healthcare |
357.7 |
1,094.2 |
33.3 |
245.5 |
|
Structure Therapeutics Inc |
Healthcare |
185.3 |
573.0 |
73.3 |
171.7 |
|
Skyward Specialty Insurance Group Inc |
Finance/Fintech |
154.4 |
564.0 |
27.3 |
125.9 |
|
Cava Group Inc |
Catering and accommodation |
365.4 |
2,498.2 |
99.0 |
95.4 |
|
Nextracker Inc |
technology |
734.2 |
3,553.5 |
26.9 |
95.2 |
Source: Keefe, Bruyette & Woods
Skyward Specialty CEO Andrew Robinson told Insurance Business he remains optimistic about insurance listings by 2024, with some “big names” among IPO candidates.
Robinson outlined Skyward Specialty’s “formula for success” as delivering on results promises and telling a compelling story about technology, talent and diversification.
“We want more people to emulate what we’ve done – it certainly helps when there are high-performing companies in the public market. We want to be compared to high-performing companies,” Robinson said. “That’s certainly something I’m hoping for, but it’s hard to say because every company has its market background and every company has its own story.”
Do you have any idea what the cancellation of Fortegra’s IPO means for insurance? Leave a comment below.
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2024-02-09 09:47:35
www.insurancebusinessmag.com
