Specialist non-life insurance and reinsurance investor, legacy or run-off transaction service provider and underwriting manager, Randall & Quilter Investment Holdings Ltd. (R&Q), has reported that its first-half 2018 pre-tax profits increased by 40% year-on-year, with full-year profits expected to “substantially exceed market expectations”.
The firm’s solid performance in the first-half of the year is underlined by a 40% increase in pre-tax profits on continuing operations, with a significant legacy acquisition agreed that remains subject to regulatory approval.
This is the recently announced acquisition of Global Re US for £80.5 million from a subsidiary of investment funds managed by AXA Liabilities Managers, which if completed before year-end, is expected to push full-year profits substantially above market expectations.
R&Q has today announced operating profit of £7.9 million for the first-half of 2018, compared with £7.5 million for the same period in 2017. The firm’s pre-tax profit continuing for the first-half of 2018 totals £7.8 million, which represents a 40% increase on the £5.6 million reported a year earlier.
Profit before tax excluding continuing operations reached £5.5 million in H1 2018, which is up on the £5.4 million reported for the first-half of 2017.
R&Q’s total gross assets exceeded £1.13 billion in the first-half of 2018, which is an increase on the £833 million reported in H1 2017, and also higher than the £1.06 billion recorded for the full-year 2017.
H1 2018 cash and investments increased year-on-year to £584 million, while total net insurance contract provisions grew to £769 million, and shareholders’ equity increased to £167 million.
Ken Randall, Group Chairman and Chief Executive Officer (CEO), commented: “I am delighted to report pre-tax profits for continuing operations in the first half of 2018 of £7.8m, a 40% improvement over 2017.
“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 program management. Both activities have strong growth potential. The proceeds from these disposals, together with the £47m placing and open offer in November 2017 have been deployed.”
The acquisition of Global Re US is set to be R&Q’s largest legacy acquisition to date, and the firm also has a number of further transactions, some of which are well advanced.
The firm announced earlier in September that it had completed its largest ever legacy reinsurance for a U.S. Risk Retention Group, which, alongside its acquisition of Global Re US, underlines the fact it is “gaining traction in larger sized deals.”
In the company’s H1 2018 earnings release, Randall continued to explain that by the end of this year, R&Q expects to have secured contracts that will result in future gross written premiums (GWP) of around US$500 million (£379 million) per annum, adding that R&Q is making solid progress towards improving its average commission to 5% of GWP.
In 2017, R&Q reported GWP of roughly £188 million, so the expected growth from contracts it expects to secure is fairly significant.
“This rapid growth is being driven by our comprehensive licences for UK insurers seeking continued access to EU insurance markets. I do, however, stress that there is a natural time lag between securing the business, generating GWP and then “earning” the premiums and commissions.
“Profitability in the second half of the year is expected to be strong, even though commission earnings from program business will not start to contribute in a meaningful way until 2019 and beyond,” said Randall.
