Randall & Quilter Investment Holdings (R&Q) has announced the sale of its Lloyd’s of London managing agency arm, R&Q Managing Agency Ltd., to Coverys, a step it has taken to simplify its business operations.
Randall & Quilter (R&Q) had previously announced that it would look to simplify its operations to focus on core activities of its run-off acquisition and management business, and the use of its licensed carriers in the U.S. and EU as routes to deliver profitable books of P&C business, largely to highly rated reinsurers.
Coverys is a provider of medical professional liability insurance based in Boston, Massachusetts.
The acquisition of R&Q’s managing agency business will see Coverys paying $22.6m, which is expected to result in estimated net proceeds to R&Q of £13.9m and a gain of approximately £12.6m over the carrying cost of the Managing Agency in R&Q’s 2016 audited accounts.
R&Q said that the sale of the managing agency will be “materially EPS and NTA accretive” to the company and also enable it to make cost savings which will help to offset any loss of profit.
The proceeds of the sale of the business will help finance R&Q’s legacy transaction pipeline, especially in the U.S. and Lloyd’s, and to generate commission income from the use of Accredited and Malta’s direct licenses as fronts for reinsurers.
Ken Randall, R&Q chairman and CEO, commented on the sale of the managing agency; “The proposed sale of our Lloyd’s managing agency is a significant milestone in the Group’s decision to simplify its operations and focus on our core areas of legacy acquisitions and management and the provision of services to our live underwriting partners.
“R&Q Managing Agency Ltd is a well-developed and scalable platform and we are confident it will prosper under the stewardship of Coverys. We have enjoyed working with Coverys for several months to assist in the further development of their business in the London market. There is a good cultural “fit” between the two organisations and we look forward to continuing the relationship in respect of Syndicate 3330 and exploring opportunities to work together in the future.
“The proposed sale will enable us to focus further on our core operations where we remain excited about the growth potential in the current year and beyond, underpinning the Group’s financial performance and distribution policy.”
“Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA,” added Gregg L Hanson, CEO and President of Coverys. “The acquisition additionally allows Coverys to assist new underwriting syndicates that seek to launch their business at Lloyd’s, while also maintaining business operations for existing syndicates. We are excited to enter the London marketplace and will look to RQMA’s industry knowledge and expertise to guide us in this prestigious market.”
R&Q’s managing agency business manages Syndicate 1991, a Lloyd’s syndicate with capacity of circa £127m writing niche SME property and casualty business, largely sourced from delegated underwriting, backed by a wide range of primarily third-party industry and private capital support.
It also manages Syndicate 3330, a syndicate that provides reinsurance-to-close and other reinsurance solutions for Lloyd’s of London legacy business. Capitalised by R&Q itself, the firm intends to continue to support and grow this legacy focused syndicate by entering into a management agreement with the new Coverys owned agency. The managing agency also provides back office support to Syndicate 2088, a syndicate managed by XL Catlin and backed by China Re.
R&Q has recognised that acquiring run-off portfolios and managing them to greater profitability than their previous owners, and putting its licensed carriers to work acquiring re/insurance business for risk capital providers are more profitable in the long-run than its Lloyd’s managing agency work and more focused on the firm’s core areas of expertise.