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Darag raises capital for M&A firepower

German run-off (re)insurer Darag is poised to announce that it has raised EUR60mn of new capital from a consortium of investors that will effectively triple the size of its capital base, The Insurance Insider understands.

Darag's private equity backer Augur Capital has been seeking an injection of fresh capital in order to fuel the company's growth strategy.

And the (re)insurer has successfully raised EUR60mn that will increase its capital base to EUR85mn, according to sources.

Under the proposed terms of the capital raise, three new investors, including a European and US pension fund, will join Augur as long-term shareholders.

The capital injection will come in several tranches depending on deal flow and is subject to the usual approvals.

However, despite the EUR60mn of new share capital, it is understood that Augur will remain the majority shareholder.

The privately held Darag reported total book value of EUR26mn at the end of 2011 in its annual accounts.

Though a relative newcomer to the third-party legacy space, the company completed transactions in 2011 that added some EUR43mn to its loss reserves, pushing its total reserves past the EUR100mn mark.

The sales pitch pointed to this rapid growth while making a big play of its pipeline of acquisitions to justify the hefty premium.

Sources in the sector have said the process initially included approaching rival run-off buyers, though it is thought other run-off executives viewed the proposed valuation and emphasis on pipeline prospects with scepticism.

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