R&Q completes largest legacy acquisition since 2006
Randall & Quilter’s (R&Q) recent acquisition of Cyprus-domiciled legacy business Flagstone Alliance Insurance and Reinsurance (FAIR) from Validus is the most significant for the run-off specialist since 2006, according to Tom Booth, its group chief financial officer.
“FAIR is the most significant legacy related acquisition the R+Q Group has made since 2006 both in terms of consideration and, Lloyd's RITCs apart, the level of net insurance reserves assumed,” he said.
“Again, outside of Lloyd's and the captives we have acquired at least, the business assumed, whilst in run-off is more recent than many of the existing portfolios. It is, however, primarily London broker-based business which we are very familiar with.”
FAIR, which commenced underwriting in 2000, went into run-off in 2010 and comprises primarily international reinsurance business with net reserves of $16.4 million equivalent as at June 30, 2013. The consideration payable by R&Q in cash from existing resources is c.$24.1 million, a discount to the estimated adjusted net asset value of $28.1 million.
The business, which is domiciled in Cyprus, will be managed by R&Q and assets will be held in UK based banks and custodian accounts. However, according to Booth, FAIR’s country of domicile was not a consideration in the acquisition.
“FAIR's country of domicile wasn’t an important factor when considering the acquisition, however, being with the EEA, Cyprus benefits from the Europe wide cross border merger and portfolio transfer mechanisms which afford us consolidation options to bring about operational and capital efficiencies,” said Booth. “Given the Cypriot financial crisis, we will continue to hold FAIR's assets in the UK.”
Commenting on the announcement, Ken Randall, chief executive officer of Randall & Quilter, said: “We are delighted to have acquired FAIR from the Validus Group after an extensive due diligence process. This purchase demonstrates our commitment to seeking out legacy portfolios which meet our return and pay-back criteria.”
R&Q recently raised £25 million which enabled the company to conclude the FAIR deal.
“We are focused on our niche areas in the legacy sector and believe that our capital base and efficient infrastructure places us well to benefit from the numerous opportunities in the pipeline,” said Booth. “We have also proven our ability to access capital and execute some larger transactions. We will be looking towards Europe, the major captive domiciles, Bermuda and the US for future acquisitions.”
