Frankfurt, Oct. 18 (AFP): Munich Re, the world’s leading reinsurer, unveiled Friday its biggest capital increase ever in a bid to strengthen financial reserves, weakened after five successive quarters of losses, and restore its credit rating.
Munich Re said in a statement it would issue a total 50.9 million new shares, raising “at least” 3.8 billion euros ($4.4 billion) in fresh capital in order to replenish the reserves it needs to underwrite business.
The issue means Munich Re is increasing its capital by more than a quarter — the reinsurer currently has 178.8 million shares in issue and a market capitalisation of 17.2 billion euros.
It is the biggest capital increase “proportionally speaking, possibly since the San Francisco earthquake of 1906,” chairman Hans-Juergen Schinzler told a telephone news conference.
The capital increase is to take the form of a so-called rights issue, with the new shares offered to existing shareholders at a ratio of two new shares for every seven currently held.
Between October 28 and November 10, the shares would be offered at a price of “at least 75 euros each”, which represented a discount of about 23 per cent compared with the closing price of Munich Re shares at 98 euros on Thursday.
Shareholders who decide not to exercise their rights would be allowed to trade those rights on the stock exchange between October 28 and November 6.
The new shares would be entitled to the full 2003 dividend.
Nevertheless, investors were not happy with the news, and Munich Re shares fell to an intraday low of 94.41 euros on the Frankfurt stock exchange, a drop of 3.59 euros or 3.66 per cent on the day.
Munich Re’s main shareholder Allianz, which holds a stake of 13.6 per cent, planned to participate in the capital increase and would take up “at least half” of the shares it was entitled to.
On that basis, its stake in Munich Re would be reduced to an estimated 12.5 per cent, an Allianz spokesman said.