REG - R&Q Insurance Hldgs - R&Q raises up to $60 million of new equity

R&Q Insurance HoldingsAnnouncement

12/06/2023 07:00

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RNS Number : 3246C  R&Q Insurance Holdings Ltd  12 June 2023

 

R&Q Insurance Holdings Ltd

 

R&Q raises up to $60 million of new equity into the Group; completes
internal reorganisation to separate Program Management and Legacy Insurance;
provides an update on strategic alternatives being explored; and provides an
update on Q1 Program Management trading

 

12 June 2023

 

R&Q Insurance Holdings Ltd, (AIM-RQIH) ("R&Q" or the "Group"), the
leading non-life global specialty insurance company focusing on Program
Management ("Accredited") and Legacy Insurance ("R&Q Legacy") businesses,
announces a capital raise of $50 million of non-voting, perpetual preferred
equity issued by Randall & Quilter PS Holdings Inc., an indirect
wholly-owned subsidiary of R&Q (the "R&Q PS Investment"), from
investment funds affiliated with one of its largest shareholders, Scopia
Capital Management ("Scopia"), with the opportunity to increase the amount of
equity raised to $60 million. The preferred stock will, in certain
circumstances, be exchangeable at Scopia's election into new ordinary shares
of R&Q at 60.98p (representing a 10% premium to the 20-day volume weighted
average price prior to the date of the Agreement).

 

Further to R&Q's announcement on 4 April 2023 on its strategic initiative
to separate Accredited and R&Q Legacy, R&Q has received all necessary
approvals to complete this internal reorganisation. Accredited and R&Q
Legacy will now operate under two separate holding companies within the Group.
This separation is part of the requirement for Accredited to receive its own
separate subgroup financial strength rating from AM Best.

 

Furthermore, as also announced on 4 April 2023, R&Q continues to explore
strategic transactions with third parties as part of the separation to enable
Accredited to operate independently. A process is underway for the potential
sale of Accredited with interest expressed from a number of parties. In
addition, a variety of strategic alternatives are being explored in relation
to R&Q Legacy.

 

The proceeds from the R&Q PS Investment will be used to increase the
capitalization of R&Q Legacy, which is providing reinsurance support for
completed legacy transactions originated by Accredited. Proceeds will also be
used for general corporate purposes due to Accredited no longer paying
intra-group dividends to R&Q as part of a requirement to secure its
financial strength rating from AM Best.

 

Q1 Program Management Update

 

R&Q announces strong results for Accredited in Q1 2023:

 

·      Q1 2023 Gross Written Premium ('GWP') of $0.5 billion (Q1 2022:
$0.4 billion), a 34% increase

 

·      Q1 2023 Program Fee Income of $22 million (Q1 2022: $18 million),
a 24% increase

 

·      Accredited continues to partner with leading Managing General
Agents in Europe, the UK and the US, and has added five new programs in 2023.
Accredited maintains a strong pipeline and expects to add additional
partnerships over the remainder of the year

 

William Spiegel, Chief Executive Officer, commented: "This additional capital,
alongside our completed internal reorganisation, means Accredited and R&Q
Legacy can be established as stand-alone entities within R&Q. 2023 has
seen Accredited continue its strong momentum and leadership position in the
program market, achieving a record first quarter in terms of GWP and Fee
Income. For the 12 months ended 31 March 2023, Accredited's GWP is ~$2.0
billion, an increase of ~$200 million from year end 2022 where we reported GWP
of $1.8 billion. We are currently working very closely with AM Best to secure
a subgroup rating for Accredited and have completed the key reorganisational
requirements. R&Q Legacy has seen three transactions signed or completed
this year and has a strong pipeline of transactions to grow Reserves Under
Management beyond $1.0 billion. R&Q Legacy continues to focus its efforts
on its key areas of strength, medium sized legacy transactions, while
exploring potential further corporate liability opportunities. I am pleased
with the progress we are making to enable both Accredited and R&Q Legacy
to maximise their potential by having the right ownership and capital
structures in place."

 

Details of the R&Q PS Investment

 

Under the terms of the agreement relating to the R&Q PS Investment (the
"Agreement"), Scopia has conditionally subscribed for a new series of
preferred stock (the "Preferred Stock") issued by Randall & Quilter PS
Holdings Inc. ("R&Q PS") for an aggregate subscription price of US$50
million. On issue, the Preferred Stock will be perpetual and non-voting. The
Preferred Stock will remain outstanding unless and until it is either so
exchanged or redeemed, in each case subject to satisfaction of certain
conditions as described below.

 

Once issued, the Preferred Stock will, in certain circumstances, be
exchangeable at Scopia's election into new ordinary shares of R&Q at a 10%
premium to the 20-day volume weighted average price prior to the date of the
Agreement, or 60.98p (an "Exchange"). Any such Exchange will be conditional
upon, among other things, Scopia obtaining any necessary regulatory approvals
and receipt of any required R&Q shareholder approval.

 

The Preferred Stock is redeemable by R&Q PS in certain limited
circumstances, including, at Scopia's election, where Accredited is sold
outside of the Group, where there is no transaction for the separation of
Accredited from the Group within twelve months from the date of issue of the
Preferred Stock, where R&Q does not obtain the required R&Q
shareholder approval for an Exchange within 15 months from the date of issue
of the Preferred Stock or where an Exchange has not taken place within 24
months of the date of issue of the Preferred Stock. No redemption can take
place while the Group has any outstanding indebtedness senior to the Preferred
Stock unless the consent of R&Q's then lenders is obtained for such
redemption. Any redemption shall take place at a price which is equal to the
value of the initial investment increased by a 12 per cent annual return on
the Preferred Stock (subject to an increase to 20% in certain circumstances,
including the failure to obtain the approval of the R&Q shareholders in
connection with an Exchange) or, if greater, the implied value of the ordinary
shares which Scopia would have received upon the Exchange of the Preferred
Stock determined at the time of such redemption event.

 

Following the issue of the Preferred Stock and prior to any exchange or
redemption of the Preferred Stock, R&Q has agreed to allow Scopia to
nominate one person as a director to the R&Q board for so long as Scopia
owns at least 15 per cent of the ordinary shares of R&Q (on an as
exchanged and fully diluted basis) or, should Scopia so elect, to appoint such
number of directors as is proportionate to Scopia's aggregate pro rata
ownership of ordinary shares on an as exchanged and fully diluted basis. Any
such persons' ongoing appointment to the R&Q board shall be subject to
R&Q's bye-laws, and therefore will be subject to re-election at R&Q
annual general meeting.

 

Scopia's acquisition of the Preferred Stock is conditional upon R&Q
obtaining the required consent of its lenders to the issue of the Preferred
Stock.

 

Ends

 

 Enquiries to:

 

R&Q Insurance Holdings Ltd
 William Spiegel                    Tel: +44 020 7780 5850
 Tom Solomon                        Tel: +44 020 7780 5850

 Numis Securities Limited (Nominated Adviser and Joint Broker)
 Giles Rolls                        Tel: +44 020 7260 1000
 Charles Farquhar                   Tel: +44 020 7260 1000

 Barclays Bank PLC (Joint Broker)

 Andrew Tusa                        Tel: +44 020 7632 2322

 FTI Consulting (Media Relations)

 Tom Blackwell / Shipra Khanna      Tel: +44 020 3727 1051

 

Enquiries to:

R&Q Insurance Holdings Ltd
 William Spiegel                    Tel: +44 020 7780 5850
 Tom Solomon                        Tel: +44 020 7780 5850

 Numis Securities Limited (Nominated Adviser and Joint Broker)
 Giles Rolls                        Tel: +44 020 7260 1000
 Charles Farquhar                   Tel: +44 020 7260 1000

 Barclays Bank PLC (Joint Broker)

 Andrew Tusa                        Tel: +44 020 7632 2322

 FTI Consulting (Media Relations)

 Tom Blackwell / Shipra Khanna      Tel: +44 020 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)

 

This announcement contains inside information as stipulated under the UK
market abuse regulation no 596/2014, which is part of English law by virtue of
the European (withdrawal) act 2018, as amended.  On publication of this
announcement via a regulatory information service, this information is
considered to be in the public domain.

 

 

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