Following a lackluster start to the highly anticipated 2024 initial public offering (IPO) season, insurers considering going public will be assessing their options. Specialty insurer Fortegra withdrew from its plans to list on Wednesday, indicating investor caution and companyi nsurance
trepidation. Other insurers considering public debuts may interpret Fortegra’s move negatively, as at least one insurer seems to have been hedging its bets in a buyer’s market, given that two of the three specialty insurers that listed the previous year did not perform well.
Recent rumors about a possible reverse merger between Aspen and SiriusPoint, supported by Apollo, were brought up by one IPO researcher.
“That could be a sign that Apollo recognizes that the public market is not as receptive as it would like, and it might be good to have an alternative in mind,” said Nick Einhorn, vice president of research at Renaissance Capital, to Insurance Business. “Fortegra’s postponements and the poor
performance of those two deals late last year is a sign that the market is not especially strong for insurance IPOs, but I do not think it means that investors would not be interested in a good company coming at an attractive valuation.” Aspen, which did not respond to requests for comment, has filed IPO paperwork.
IPO activity has been sluggish.insurance
but 2024 has been predicted to be a comparable hotbed of activity. With $5.1 billion in total proceeds raised across industries thus far, 2024 is expected to surpass the $7.7 billion slump of 2022 for the entire year. Apart from Aspen, Slide Insurance and Accelerant have reportedly signaled public intent. Outside of insurance, hotly tipped names to watch include Stripe, Reddit, and Shein.
However, according to Einhorn, investor excitement has not yet reached the “unbridled exuberance” of 2020 and 2021.
The reason Fortegra rejected an IPO was insurance
“prevailing market conditions,” which the insurer also mentioned in its announcement about the withdrawal of the IPO on Wednesday. The insurer also mentioned the “high value” that owners Tiptree and Warburg Pincus placed on the business. Tiptree, who owns more than half of Fortegra
had a market cap of just over $700 million on Wednesday. Following the announcement that the IPO was canceled, Tiptree’s share price fell more than 12%, indicating that its supporters had high expectations for the listing. The market cap of the majority owner of Fortegra, Tiptree, was $605 million on Thursday afternoon.
The company was trying to convince investors that they manage this model well, that they have had success with it, and that they were good at identifying the right partners to bring on to their distribution platform. “If you look at where the IPO was being pitched, Tiptree’s ownership, and
Tiptree’s own market cap, it is pretty clear that the proposed equity valuation was higher than what it was being valued at within Tiptree,” Einhorn said. Fortegra’s business model, which primarily relies on managing general agents (MGAs), may have contributed to public investor skepticism.
After setting terms and then pulling the plug in 2021, Fortegra raised $200 million from Warburg Pincus in exchange for a 24% stake in the company. It is unclear if Fortegra will try again at listing
later this year. The specialty insurer declined to comment further when approached by Insurance Business. This direction change represents the second time that Fortegra has rethought public plans.
The results of the 2023 specialty insurer IPOs were mixed.insurance
Fidelis Insurance (Fidelis), Hamilton Insurance Group (Hamilton), and Skyward Specialty were the three specialty insurers that went public in 2023. Fidelis and Hamilton have both been trading at or below offer price, and Hamilton’s “riskier” investment strategy may not have resonated with public
shareholders. Together, the three specialty insurers that went public in 2023 have averaged a 30% return from offer, according to Renaissance Capital, driven by Skyward Specialty’s performance.
Why Skyward Specialty made sense for investors insurance
The insurer was the first to launch a US IPO last year, and it has since traded 100% above its IPO price of $15. In addition, Skyward Specialty boasts the distinction of being the third most
successful IPO of all time and the most successful US financial services IPO of the year. These factors may offer prospective listing insurers some hope
“We want to see more people replicate what we did – it certainly helps when you have good performing companies in the public market, we want to be compared against good performing
companies,” said Andrew Robinson, CEO of Skyward Specialty, to Insurance Business. “It is certainly something I hope for, but it is hard to know, because with every company you have your market
backdrop and then every company has its own story.” Robinson also described Skyward Specialty’s “formula for success” as delivering on results promises and telling a compelling story on technology, talent, and diversification.