R&Q acquires 35% stake in MGA Tradesman in exchange for Sandell Re

Randall & Quilter Investment Holdings (R&Q) has reached an agreement to merge its wholly owned subsidiary Sandell Re with New York-based managing general agent (MGA) Tradesman Program Managers in return for a 35 percent interest in the combined entity.

Bermuda-based Sandell Re was acquired by R&Q in October 2019 for $25 million and has been one of the reinsurers of the ARTISAN Contractors’ General Liability programme since its inception in 2017. As at 31 December 2019, Sandell Re had total assets of $116.7 million and incurred a loss for the year of $1.3 million after making a $3 million provision against third party loans and strengthening reserves on acquired legacy portfolios by $2.6 million.

Following the completion of the transaction, R&Q will deconsolidate Sandell and reflect its 35 percent equity interest in the enlarged Tradesman Group on its balance sheet.

The initial book value of R&Q’s interest in the combined business will be $43.4 million, which is equal to the estimated book value of Sandell Re at completion. Proforma pre-tax earnings of the combined business for full year 2020 are estimated to be $17.2 million.

The transaction is subject to the approval of the Bermuda Monetary Authority.

Ken Randall and Stewart Ritchie will join the board of the newly combined business as representatives of R&Q.

Randall, executive chairman of R&Q, said: “This is a fantastic deal for both parties. It enables the Group to acquire a significant and valuable minority interest in a fast-growing New York based Managing General Agent which will be immediately accretive to the Group’s post tax earnings. It secures ongoing programme management fees for Accredited, estimated at $6m for 2020. It significantly reduces the Group’s live underwriting risk exposure from the ARTISAN programme. It demonstrates the Group’s ability to deliver shareholder value through its legacy acquisition strategy with Sandell having been acquired for just $25m in late 2019."

“For the owners of Tradesman, it provides access to the expertise and management within the R&Q Group, facilitates participation in the profitable underwriting results from the Tradesman Programme and creates alignment with the risk assumed by the reinsurer panel."

Randall added: “The growth of Tradesman’s ARTISAN Programme has, and will continue to be, a tremendous driver of value both for Accredited’s fee-based programme management business and through our strategic minority interest in the Sandell risk carrier. Tradesman’s ARTISAN Programme has experienced consistent and profitable growth since its launch in November 2017. In 2020 gross premiums written by Tradesman are expected to reach $120m, with plans to expand their offering into other, related lines of business. We strongly believe that this partnership with Tradesman and, in due course with other Managing General Agents, will help us to deliver exceptional results for our shareholders, agents and reinsurers.”

Daniel Hickey Jr., CEO of Tradesman Program Managers, commented: “We are thrilled to partner with R&Q on this transaction which aligns the interests of Tradesman and R&Q in the development and growth of Tradesman’s business and programs, Accredited’s US program management business and Sandell Re as one of our reinsurance panel members. R&Q, through Accredited Surety & Casualty have been great partners in the growth of our program since inception and we look forward to continued success going forward.”