Proposed Transaction Update

Financials Acquisition Corp

21 June 2023

 

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21 June 2023

Financials Acquisition Corp

(the "Company")

Proposed Transaction Update and Proposed Extension of Business Combination Deadline

Today, Financials Acquisition Corp (the "Company"), a special purpose acquisition company, announces that it will be seeking shareholder approval to amend its Articles of Association to extend the deadline by which it may complete a Business Combination (as such term is defined below) to 31 December 2023, amongst other matters (the "Extension"). Notice of Extraordinary General Meeting is expected to be circulated by the Company in due course. It is currently expected that the Extraordinary General Meeting will be held on 10 July 2023.

The Company was formed for the purpose of entering into a business combination with a technology enabled company or business operating principally in (or adjacent to) the insurance or broader financial services industry ("Business Combination"). The Company has, since the date of its initial public offering in April 2022, engaged with a select number of opportunities about a potential Business Combination in the insurance or broader financial services industries.

The Company has recently identified a Business Combination opportunity that it proposes to pursue, which could involve the Company raising additional capital and becoming a listed operating company deploying funds into the Lloyds of London insurance market for reinsurance purposes (the "Proposed Transaction"). Proposals in relation to the Proposed Transaction are at an early stage and, while there is no certainty that any such transaction can be completed, the Company remains confident that with the benefit of this extension it would be able to complete this or another Business Combination.

During the Company's search process it became clear that the global specialty insurance market and specifically risk underwritten in the Lloyd's market offered some of most attractive risk adjusted returns globally. The Company notes that since 2017 rates have been hardening in this market rising on average by over 70% adjusted for inflation. The Company notes that this hardening market has been driven by core claims inflation, large losses from Covid-19, natural catastrophes, Ukrainian war and capital markets uncertainty. The Company notes that the market as a whole has also been benefitting from improved efficiency driven by both technology and the work of the Lloyd's management team.

The Company further notes that over the last year Lloyd's has created a new structure, London Bridge 2 PCC Ltd, which allows easier access for institutional capital into the market. This, combined with the Company's management team, board of director and advisor relationships within the market leads the Company to believe that it can create an efficient vehicle for investors to access attractive returns without paying significant goodwill or adding further fee structures. Upon completion of the Proposed Transaction, the Company's core strategy will be to focus on the Lloyd's market, and understands that it will be one of the only Main Market listed companies in London with such a core focus.

It is the Company's intention that the portfolio of insurance risk will be curated to provide optimum diversification and hence capital leverage. The Company's management team has relationships with some of the best underwriters in the market and has selected a group of core and seed syndicates to work with. Combined with treaty reinsurance programs written with select participants in the market the Company expects to have access to up to £1bn of capacity into the 2024 underwriting year of account and the Company notes that this portfolio is forecast to have a lower level of natural catastrophe exposure (particularly in the US).

The Company notes that the market as a whole produced 91.9% combined ratio in 2022 despite significant large losses. The Company further notes that since then, rates have risen another 9% on average, which suggests that there will be an improvement on last year's results. With a capital requirement forecast below 50% and with the current level of risk-free rate investment returns over the next five years the Company will be targeting an average return on equity of more than 20%. Upon completion of the Proposed Transaction the ratio of price to net asset value of the transaction is expected to be under 1.1x net of expenses.

Given the opportunity that it has identified, the Company is seeking plans to raise substantial funds beyond its existing amounts held in escrow to support the Proposed Transaction. Existing shareholders (other than the Sponsor Entities) will have the opportunity to redeem their Ordinary Shares in the event that the shareholder resolution relating to the Extension is approved and they will also have a further opportunity to redeem their Ordinary Shares upon completion of the Proposed Transaction. It is the Board's current intention that non-redeeming shareholders will be entitled to receive their pro-rata (post redemptions) share of a 200,000 bonus pool of new Ordinary Shares on completion of the Proposed Transaction. The Company's existing Cornerstone Investors (as such term is defined in the Company's prospectus dated 7 April 2022) have indicated that they would be supportive of the Proposed Transaction.

Enquiries:

FGS Global - Financial PR Adviser
Conor McClafferty
Charlie Chichester
[phone]
[e-mail]

The Company's LEI is 254900SWRQCI5ZUQEF15.

 

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