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

R&Q Insurance HoldingsAnnouncement

12/04/2024 07:00

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RNS Number : 3802K  R&Q Insurance Holdings Ltd  12 April 2024

R&Q Insurance Holdings Ltd

 

Update on Trading, Sale of Accredited and Sale of Interest in Joint Venture

 

12 April 2024

 

R&Q Insurance Holdings Ltd, (AIM-RQIH) ("R&Q" or the "Group"), today
provides the following update on trading, the sale of Accredited and also
announces that it has reached an agreement for Obra Capital, Inc. (together
with its affiliates and funds/clients advised by Obra Capital Management, LLC,
collectively "Obra") to acquire all of the interests held by R&Q and its
affiliates in the Joint Venture between Obra and R&Q, Sag Main Holdings
LLC ("Sag Main", or the "Joint Venture").

 

Sale of Accredited

 

As announced on 20 October 2023, R&Q has entered into a conditional
agreement with funds advised by Onex Corporation to sell 100% of its equity
interest in Randall & Quilter America Holding Inc., the holding company of
the Accredited business.

 

The Sale will enable the Board to undertake a material financial de-leveraging
of R&Q and return the capital solvency position back to target levels,
enhancing the business' ability to execute the Board's existing strategy of
transitioning R&Q Legacy to a capital efficient and stable recurring
fee-based business model.

 

On the basis set out in the circular sent to shareholders on 14 December 2023
and in recent announcements, R&Q continues to work expeditiously towards
achieving satisfaction of the conditions to enable that sale to take place.

 

R&Q continues to expect closing of that sale to occur in Q2 2024.

 

Trading Update

 

R&Q Legacy

 

Reserves Under Management at year-end 2023 are circa $1 billion. This will
reduce by circa $670 million following the sale of the Corporate Liabilities
Joint Venture.

 

Following extensive internal and external reserve reviews R&Q Legacy is
expected to realise adverse development of ~23% of the Group's net reserves
for the year to 31 December 2023, which includes the $64.2 million of adverse
reserve development identified at the half year. This primarily relates to
tail claim development as well as inflation and abuse claim development across
the portfolio.

 

Accredited

 

Accredited is expected to recognise Gross Written Premium of $2.1 billion and
Fee Income (excluding minority stakes in MGAs) of $90 million, which increased
17% and 12.5%, respectively, over the prior year.

 

Group

 

Based on preliminary and unaudited information R&Q anticipates that it
will realise a significant pre-tax loss for the year driven by the adverse
development in Legacy and a material increase in corporate costs in relation
to the Sale of Accredited.

 

Sale of Interest in Joint Venture with Obra

 

The Joint Venture was established in 2022 to hold entities with legacy
non-insurance corporate liabilities to which R&Q would provide management
services.

 

Under the terms of the transaction agreements with Obra, R&Q Solutions LLC
and R&Q Re (Bermuda) Ltd. will transfer their collective 49% interest in
the Joint Venture to Obra. The fee income received by R&Q in 2023 was $7
million. As consideration, R&Q will receive from Obra cash of $27.0
million alongside the transfer and delivery of $3 million of preference shares
held by Obra in Randall & Quilter PS Holdings Inc.

 

The proceeds will be used for a combination of paying down the Group's
Revolving Credit Facility and retaining cash in regulated entities.

 

Commenting on the sale of the joint venture, Jeff Hayman, Chairman of R&Q,
said: "We are pleased with the strong return on our investment in the Joint
Venture, and this agreement is in line with our objective of realizing value
from within our Legacy Insurance business.

 

"Although we believe that the corporate liabilities market continues to
represent an attractive long-term opportunity, developing regulations,
including potential changes around capital requirements, have reduced the
strategic attractiveness of direct equity participation in joint ventures of
this type for R&Q. However, R&Q's expertise in the management of
long-tail liabilities means that servicing and advisory opportunities will
continue to exist in this space and the provision of solutions for
corporations seeking to manage such liabilities will continue to represent a
large and addressable target market for R&Q Legacy."

 

 

-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

 Anusuya Nayar Gupta

 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

 

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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