REG - R&Q Insurance Hldgs - Program Management Update and Sale of Tradesman

R&Q Insurance HoldingsAnnouncement

23/02/2023 07:00

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RNS Number : 8251Q  R&Q Insurance Holdings Ltd  23 February 2023

 

R&Q Insurance Holdings Ltd

("R&Q", the "Company" or the "Group")

 

FY 2022 Program Management Update and Sale of Minority Stake in Tradesman

 

 

23 February 2023

 

R&Q Insurance Holdings Ltd, (AIM-RQIH), the leading non-life global
specialty insurance company focusing on Program Management and Legacy
Insurance businesses, announces its Program Management update for the twelve
months ending 31 December 2022. R&Q also announces that it has reached an
agreement to sell its 40% minority holding in the New York-based Managing
General Agent TPM Holdings USA, LLC, ('Tradesman').

 

FY 2022 Program Management Update

 

·      Record year for R&Q Accredited in 2022 with strong growth in
Gross Written Premium and Fee Income

 

·      FY 2022 Gross Written Premium ('GWP') of $1.8 billion (FY 2021:
$1.0 billion), an 80% increase

 

·      FY 2022 Program Fee Income of $80.0 million (FY 2021: $45.0
million), a 78% increase(1)

 

Sale of 40% Stake in Tradesman

 

R&Q's 40% ownership of Tradesman is being acquired by Roosevelt Road
Capital Partners, LLC, the controlling 60% shareholder of Tradesman, which is
majority owned by Daniel Hickey, Jr., the CEO of Tradesman. The total
consideration is $47 million, subject to post-closing adjustments based on
2022 audited financials of Tradesman. Approximately $41 million of the
consideration will be paid in cash upon closing of the transaction and another
$6 million will be paid in the form of a 2-year promissory note.  R&Q
will use the proceeds from the transaction for general corporate purposes and
to pay down debt.

 

R&Q's share of profits from Tradesman represented $11.2 million and $5.2
million for financial year 2021 and half year 2022, respectively. The
investment in Tradesman was held at $21.5m as of 30 June 2022. Tradesman is
expected to earn $26.5 million in EBITDA in 2022, which could be reduced by up
to $9 million if the maximum contingent commissions(2) became payable to
reinsurers should the program underperform expectations. Tradesman had net
debt at 31 December 2022 of $67 million.

 

R&Q will have made 3.7x its initial investment of $25 million from the
acquisition of Sandell Re Ltd. in 2019, which was subsequently converted into
a 40% stake in Tradesman, including $46 million of dividends received to date.
As a result of the transaction, R&Q will no longer be liable for nor
benefit from any contingent commissions to or from reinsurers.

 

The transaction is expected to complete in Q1 2023, pending Tradesman's lender
approvals.

 

William Spiegel, Executive Group Chairman, commented:

 

"2022 was an outstanding and record year for our Program Management business,
and I am pleased that we have exceeded our target to deliver $1.75 billion in
Gross Written Premium, despite the exchange rate headwinds of a strong US
dollar on our European business. We have now firmly established R&Q
Accredited as a scale player and leading partner in both the US and Europe. As
we outlined in our recent update, the team has maintained momentum into 2023
and we continue to see a strong pipeline of potential partnerships. At the
same time, we will retain our highly disciplined approach to MGA selection and
reinsurance partnerships, seeking to work only with high quality MGAs and
reinsurers while ensuring we maintain a well-balanced and diversified
portfolio.

 

Tradesman is a high-quality MGA with whom we have had a long-term profitable
partnership. Our decision to reduce our exposure to certain Tradesman programs
as part of our ongoing active portfolio management meant our minority
investment was no longer strategic and we believe its long-term ownership
better fits with its existing management team. Given the compelling nature of
the offer, we believe the transaction is an excellent outcome for all parties.
R&Q still provides program management services to one of Tradesmen's
programs and we look forward to supporting them as a partner on future
endeavors."

 

(1) Program Fee Income is on a written basis and excludes our share of
earnings from minority stakes in MGAs.

(2) Contingent commissions represent a variable percentage of premium payable
to / receivable from reinsurers based upon the underwriting performance of the
program.

 

Ends

 

 Enquiries to:

 

R&Q Insurance Holdings Ltd
 William Spiegel                    Tel: 0207 780 5850
 Tom Solomon                        Tel: 0207 780 5850

 Numis Securities Limited (Nominated Advisor and Joint Broker)
 Giles Rolls                        Tel: 020 7260 1000
 Charles Farquhar                   Tel: 020 7260 1000

 Barclays Bank PLC (Joint Broker)

 Andrew Tusa                        Tel: 020 7632 2322

 Richard Bassingthwaighte           Tel: 020 7632 2322

 FTI Consulting

 Tom Blackwell / Shipra Khanna      Tel: 020 3727 1051

Enquiries to:

R&Q Insurance Holdings Ltd
 William Spiegel                    Tel: 0207 780 5850
 Tom Solomon                        Tel: 0207 780 5850

 Numis Securities Limited (Nominated Advisor and Joint Broker)
 Giles Rolls                        Tel: 020 7260 1000
 Charles Farquhar                   Tel: 020 7260 1000

 Barclays Bank PLC (Joint Broker)

 Andrew Tusa                        Tel: 020 7632 2322

 Richard Bassingthwaighte           Tel: 020 7632 2322

 FTI Consulting

 Tom Blackwell / Shipra Khanna      Tel: 020 3727 1051

 

 

 

Notes to Editors:

 

About R&Q

 

R&Q is a global non-life specialty insurance company. We operate two core
businesses: Program Management and Legacy Insurance. Both these businesses are
leaders in their respective markets.

 

Our approach is to deploy our origination and underwriting capabilities,
alongside our licensed and rated carriers in the US, EU, and the UK, to
generate attractive fee returns in Program Management and Legacy Insurance.

 

Legal Entity Identifier (LEI): 2138006K1U38QCGLFC94

 

Website: www.rqih.com (http://www.rqih.com)

 

 

The information contained within this announcement was deemed by the Company
to constitute inside information as stipulated under the UK Market Abuse
Regulation. With the publication of this announcement, this information is now
considered to be in the public domain.

 

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