Bermudian specialist non-life re/insurance investor Randall & Quilter Investment Holdings Ltd. (R&Q) has reported its results for the first half of 2019, which saw the company’s profit after tax increase more than six-fold to £32.6 million.
Operating profit (continuing) similarly increased almost four times over compared with the first six months of 2018, growing from £10.1 million to £37.7 million.
Ken Randall, Executive Group Chairman at R&Q, said that the improved performance reflected the completion of legacy deals that were carried over from 2018.
These notably included the acquisition of GLOBAL U.S. Holdings, Inc. and its subsidiary GLOBAL Reinsurance Corporation of America (Global Re) and retro-active reinsurance of Schools Association for Excess Risk (SAFER).
“Our traditional Legacy business continues to thrive with five Legacy acquisitions and three Legacy reinsurances completed in the period,” said Randall. “We are seeing a growing number of larger deal opportunities as the demand for Legacy solutions continues to grow.”
R&Q’s H1 results were also enhanced by the company’s strong investment performance during the period, with total income at £16 million, versus only £5.4 million for the whole of 2018.
“The investment markets were positive in the first half year, enabling us to recover all unrealised losses sustained in the final weeks of 2018,” Randall went on. “We continue to invest in high grade securities and the growth in our insurance float (£729m at 30 June 2019 vs £584m a year earlier) should ameliorate some of the impact of declining interest rates over the longer term.”
He continued: “The investment result for the first half of 2019 was an average yield of 2.3% against just 0.7% at the same stage in 2018. We have overhauled our investment portfolio by disposing of almost all equity investments, rationalising our third party investment managers and reducing investment management expenses.”
R&Q’s management believes that the company’s full-year results for 2019 will be in line with market expectations, and is optimistic about its medium and long term prospects, with a strong pipeline of new transactions expected in the second half of the year.
In addition to new acquisitions and reinsurance deals, R&Q plans to continue exploring potential side-car arrangements with third party capital to finance larger acquisitions.
Accredited, R&Q’s program management division, also continued to see strong growth in the first half of the year in both the US and Europe.
In some jurisdictions, especially in Europe, Accredited benefited from the retrenchment of a number of former program specialists as a consequence of their weak balance sheets, low credit ratings and inferior underwriting standards.
“The earnings profile of the Program commissions gives us good visibility of future earnings,” Randall noted, “which complements the less predictable (‘lumpy’) earnings from R&Q’s Legacy acquisitions business.”
Estimated contracted future business for Accredited has now reached in excess of $800 million per annum, up from $500 million last year, and R&Q anticipates that this will grow to more than $1 billion per annum during 2020.
“This was an exceptional six months for the Group,” Randall concluded. “We have successfully re-engineered the R&Q business over the last three years to enable the Group to focus on Legacy and Program Management.”
“The business has the infrastructure, management and technical capacity to handle further expansion and we believe there are excellent growth opportunities in each of our core business segments,” he continued.
“The Board is pleased with the progress we have made over the last three years with the simplification of our business and believes that the Group is very well positioned to exploit exciting prospects for future growth.”
