REG - R&Q Insurance Hldgs - Update on Proposed Sale of Accredited

R&Q Insurance HoldingsAnnouncement

14/11/2023 07:15

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RNS Number : 3010T  R&Q Insurance Holdings Ltd  14 November 2023

 

 

 

R&Q Insurance Holdings Limited

 

Update on Proposed Sale of Accredited

 

14 November 2023

 

On 20 October 2023, R&Q Insurance Holdings Ltd (AIM-RQIH) ("R&Q")
announced the proposed Sale of Accredited to Onex Corporation (the
"Announcement"). Capitalised terms used, but not defined, in this announcement
have the meaning given to such terms in the Announcement. The full
announcement can be found here: https://www.rqih.com/news
(https://www.rqih.com/news)

 

As explained in the Announcement, the transaction is conditional on R&Q
shareholder and regulatory approval as well as customary consents from certain
R&Q debt providers. R&Q continues to work expediently towards
satisfying these conditions and closing of the Sale is expected to occur in
late Q1 2024 or early Q2 2024.

 

In the Announcement, R&Q provided a brief summary of its future strategy
for R&Q Legacy, on the assumption that the Sale achieves a successful
conclusion. Although completion of the Sale continues to be conditional on the
factors noted above, the Board recognises shareholders' interest in better
understanding the profile of R&Q Legacy as a standalone business.
Accordingly, R&Q today announces the publication of a presentation on
R&Q Legacy (the "Presentation") which can be found on R&Q's website
via the link:

 

https://www.rqih.com/investors/shareholder-information/investor-presentations/
(https://www.rqih.com/investors/shareholder-information/investor-presentations/)

 

The Presentation provides further detail on R&Q's envisaged strategy,
market position and financial objectives as a refocused global legacy company,
should the Sale successfully close.

 

As previously announced, upon closing of the Sale, Jeff Hayman will act as
Chairman and Interim Chief Executive Officer of R&Q and Paul Bradbrook,
currently Chief Accounting Officer of R&Q, will become Chief Financial
Officer of R&Q and a member of the Board, subject to customary approvals.
The Presentation also outlines R&Q Legacy's wider management team and its
significant collective experience. The management team is excited by the
growth opportunity it sees within R&Q Legacy's addressable market. In the
Presentation, management has set out three strategic priorities through which
it believes R&Q Legacy can deliver growth and value creation:

·      Grow fee income

·      Reduce expenses

·      Decrease balance sheet volatility

 

Underpinning these priorities are strategic initiatives currently underway to
de-risk the R&Q Legacy portfolio including:

·      A possible LPT (Loss Portfolio Transfer) or ADC (Adverse
Development Cover) on certain portfolios

·      The sale of non-core assets

·      The sale, or securitization, of back book legacy liabilities

 

In the Presentation, R&Q provides an associated plan for the R&Q
Legacy business, although it should be stressed that the ability of R&Q
Legacy to achieve such objectives depends on many factors, including not least
a successful closing of the Sale and the paydown of R&Q debt. This plan
includes that:

·      The refocused business and strategy is expected to deliver
operating profitability by full year 2025

·      Fee income is targeted to be doubled in 2025 compared to H1 2023
annualised

·      Expenses are anticipated to be reduced by 15% to 20% in 2025
relative to an adjusted annualised H1 2023 expense base that includes certain
assumptions around Legacy's standalone cost structure

·      As R&Q returns to profitability, it will review its dividend
policy, subject to constraints due to relationships with lenders, regulators
and preferred shareholders

 

The Presentation also outlines R&Q's expectation of $100m+ of cumulative
surplus capital to be generated over the next ~5 years as claims payments are
made, releasing capital held against reserves. This is in addition to the
estimated $40m - $80m of additional collateral R&Q will be required to
hold against existing legacy exposure retained by Accredited, which R&Q
expects to be released and available over the next 5+ years as the underlying
exposures are reduced and eliminated.

 

Jeff Hayman, Chairman of R&Q, said: "We recognise the importance of giving
our shareholders a clear vision around R&Q's future as a refocused global
legacy company, should the proposed Sale of Accredited to Onex achieve a
successful conclusion. The Presentation further outlines our belief that
R&Q can build significant value as a standalone legacy business and the
clear strategy we have to return the business to operating profitability,
materially reduce balance sheet volatility and establish a stronger capital
position. Building our Reserves Under Management is an important part of this
strategy, and we have also provided detail on the strength of our management
team and their extensive experience in non-life run-off, our large and
addressable market opportunity and the active nature of our pipeline. We look
forward to continuing to engage with all of our stakeholders."

 

As stated above, the plan is based on many assumptions, including shareholder
and regulatory approvals of our proposed Sale and consent from our lenders.
A more detailed explanation of the Sale is included in our announcement of 20
October 2023.  The Presentation should be read in conjunction with that
announcement.

 

Ends

 

 Enquiries to:

R&Q Insurance Holdings Ltd

 Tel: +44 (0)20 7780 5850

 Jeff Hayman

 William Spiegel

 Tom Solomon

 Fenchurch Advisory Partners LLP (Financial
 Adviser)                              Tel: +44
 (0)20 7382 2222

 Kunal Gandhi

 Brendan Perkins

 John Sipp

 Richard Locke

 Tihomir Kerkenezov

 Barclays Bank PLC (Financial Adviser and Joint
 Broker)                          Tel: +44 (0)20 7632
 2322

 Gary Antenberg

 Richard Bassingthwaighte

 Grant Bickwit

 Howden Tiger (Financial Adviser)

 Tel : +44 (0)20 7398 4888

 Rob
 Bredahl

 Leo
 Beckham

 Deutsche Numis (Nominated Adviser and Joint
 Broker)                           Tel : +44 (0)20
 7260 1000

 Charles
 Farquhar

 Giles
 Rolls

 FTI
 Consulting
     Tel: +44 (0)20 3727 1051

 Tom
 Blackwell

 

 

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

 

Forward-Looking Statements

 

This announcement contains forward-looking statements with respect to R&Q
and its industries, that reflect its current views with respect to future
events and financial performance. Statements that are not historical facts,
including statements about R&Q's beliefs, plans or expectations, are
forward-looking statements. These statements are based on current plans,
estimates and expectations, all of which involve risk and uncertainty.
Statements that include the words "expect," "intend," "plan," "believe,"
"project," "anticipate," "may", "could" or "would" or similar statements of a
future or forward-looking nature identify forward-looking statements. Actual
results may differ materially from those included in such forward-looking
statements and therefore you should not place undue reliance on them.

 

A non-exclusive list of the important factors that could cause actual results
to differ materially from those in such forward-looking statements includes:
(a) changes in the size of claims relating to natural or man-made catastrophe
losses due to the preliminary nature of some reports and estimates of loss and
damage to date; (b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of reinsurance placed by
R&Q with third parties, or other amounts due to R&Q; (d) changes in
the projected amount of ceded reinsurance recoverables and the ratings and
credit worthiness of reinsurers; (e) actual loss experience from insured or
reinsured events and the timing of claims payments being faster or the receipt
of reinsurance recoverables being slower than anticipated; (f) increased
competition on the basis of pricing, capacity, coverage terms or other factors
such as the increased inflow of third party capital into reinsurance markets,
which could harm R&Q's ability to maintain or increase its business
volumes or profitability; (g) greater frequency or severity of claims and loss
activity than R&Q's underwriting, reserving or investment practices
anticipated based on historical experience or industry data; (h) changes in
the global financial markets, including the effects of inflation on R&Q's
business, including on pricing and reserving, increased government involvement
or intervention in the financial services industry and changes in interest
rates, credit spreads, foreign currency exchange rates and future volatility
in the world's credit, financial and capital markets that adversely affect the
performance and valuation of R&Q's investments, financing plan and access
to such markets or general financial condition; (i) changes in ratings, rating
agency policies or practices; (j) the potential for changes to methodologies,
estimations and assumptions that underlie the valuation of R&Q's financial
instruments that could result in changes to investment valuations; (k) changes
to R&Q's assessment as to whether it is more likely than not that it will
be required to sell, or has the intent to sell, available-for-sale debt
securities before their anticipated recovery; (l) the ability of R&Q's
subsidiaries to pay dividends; (m) the potential effect of legislative or
regulatory developments in the jurisdictions in which R&Q operates, such
as those that could impact the financial markets or increase their respective
business costs and required capital levels, including but not limited to
changes in regulatory capital balances that must be maintained by operating
subsidiaries and governmental actions for the purpose of stabilising the
financial markets; (n) the actual amount of new and renewal business and
acceptance of products and services, including new products and services and
the materialisation of risks related to such products and services; (o)
changes in applicable tax laws, tax treaties or tax regulations or the
interpretation or enforcement thereof; (p) the effects of mergers,
acquisitions, divestitures and retrocession.

 

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