Will the Class of 2005 see a wave of IPOs?
Investors in a wave of new Bermuda reinsurers may have their hopes pinned on making solid returns when the start-up companies take the big step to sell shares publicly, but there also doesn't appear to be any hurry to get the “Class of 2005” on the IPO runway.
The amount of time insurers take to jump into the public market can vary. Ram Re, a financial guaranty reinsurer that announced on 10 February plans to sell its shares publicly, took eight years to take the step. Partner Re, in contrast, formed as a specialised catastrophe reinsurer in November 1993, and pursued a public offering immediately.John Berger, chief executive of new reinsurer Harbor Point, said a company's decision to go public was largely based on timing and market forces. “Things happen so quickly I would not discount any reasonable possibilities. We could remain independent or make acquisitions: I would put them all out there as reasonable outcomes.”
“The plan for the most part is to get the business running and seasoned,” Brent Slade, development director of West End Capital Management, said. West End led investment in new reinsurer Flagstone. Slade said an IPO wasn't on the cards for Flagstone in the coming year, “There is decent capital looking at this space, I'm not sure any (in the Class of 2005) will have to access capital markets for the next year.”
Ed Noonan, chief executive of Validus Re, speaking generally, said he expects the Class of 2005 will eventually pursue initial public offerings. “One of the things that seems clear after the events of 2005,” he said, “is that if you are in this sector you need access to the public markets.”
But Robert Hartwig, chief economist with New York's Insurance Information Institute, warned not to count on the 2005 companies following the same path as the earlier Bermuda insurers, because of an unprecedented influx of capital. “Some may be surprised at how quickly capital entered and some may be surprised at how quickly it exits,” Dr Hartwig said.