R&Q ups FY profit expectations due to Global Re US acquisition
Bermuda-based R&Q Investment Holdings, an underwriting management and legacy acquisitions specialist, expects full year 2018 profits to substantially exceed market expectations due to significant legacy acquisitions.
R&Q has agreed to acquire Global Re US, its largest legacy acquisition to date. In addition, the company agreed to acquire MPS Risk Solutions.
As the acquisitions are subject to regulatory approval, the higher full year 2018 profit expectation depends on regulatory approval and completion of the acquisition occurring before year-end.
The firm has also secured programme management contracts which are expected to generate gross written premiums (GWP) of $200 million per annum and further contracts are scheduled to be signed before year end which is expected to increase annualised GWP to approaching $500 million per annum.
R&Q noted that new business pipelines for legacy and programme management remain strong, with its post-Brexit solutions generating significant industry interest in programme management.
“These days disposing of legacy portfolios is viewed by the traditional insurance market as mainstream capital management and consequentially demand for run-off solutions is growing as owners and managers of non-life insurers carve out non-performing books of business and seek to achieve greater capital efficiency,” said CEO Ken Randall.
“Following the disposals of our Lloyd’s Managing Agency and Insurance Services business in November 2017 and January 2018 respectively, our focus is now firmly on legacy and programme management.
“Both activities have strong growth potential.
“The proceeds from these disposals, together with the £47 million placing and open offer in November 2017 have been deployed,” Randall noted.
In the first six months of 2018 R&Q recorded a 40 percent year on year increase in pre-tax profit on continuing operations to £7.8 million. Overall, profit after tax declined to £5.0 million from £5.9 million during the period.
Total gross assets grew to £1.14 billion in the first six months of 2018 from £833.6 million in the same period a year ago. During the period, R&Q completed its largest ever legacy reinsurance contract for a premium of $108.5 million and a reinsurance limit of $146 million.
Total net insurance contract provisions increased to £769.1 million from £582.7 million over the period.
In programme management, R&Q has restructured its activities in the US and Europe under the “Accredited” brand. Accredited USA is licensed to write “admitted” insurance business in all 50 states and Accredited Europe is licensed to underwrite in all European member states.
“Profitability in the second half of the year is expected to be strong, even though commission earnings from programme business will not start to contribute in a meaningful way until 2019 and beyond,” Randall said.
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