R&Q Insurance Holdings is raising up to $60 million in new equity through a preferred arrangement with one of its shareholders Scopia Capital Management, while also having announced the completion of an internal separation of its its Program Management business, Accredited, and its Legacy Insurance business.
R&Q has actually confirmed raising $50 million through the issuance of non-voting, perpetual preferred equity by a new subsidiary Randall & Quilter PS Holdings Inc.
The capital has been raised from investment funds affiliated with one of its largest shareholders, Scopia Capital Management, but there is also an opportunity to increase the amount of equity raised to $60 million, the company said.
This newly issued preferred stock will, in some circumstances, be exchangeable if Scopia chooses, into new ordinary shares of R&Q at 60.98p, which represents a 10% premium to the 20-day volume weighted average price prior.
Interestingly, R&Q noted that the proceeds of this equity raise will be used to “increase the capitalization of R&Q Legacy, which is providing reinsurance support for completed legacy transactions originated by Accredited.”
Proceeds are also set to be used for general corporate purposes.
R&Q also said today that it now has approval to separate its Program Management business, Accredited, and its Legacy Insurance business, which had been announced back in April.
As a result, Accredited and R&Q Legacy will now operate under two separate holding companies, and R&Q said this move is a requirement for Accredited to receive its own separate subgroup financial strength rating from AM Best.
In addition, R&Q is still looking at the potential for a strategic transaction with a third party as part of the separation, which would enable Accredited to operate independently.
The company said that a process is now underway for the potential sale of Accredited, and that interest has been expressed by a number of parties.
On top of this, a variety of strategic alternatives are being explored in relation to R&Q Legacy, the company said.
R&Q also announced some further data on Accredited’s program management business, saying that Q1 2023 saw the unit writing $0.5 billion of GWP, up from Q1 2022’s $0.4 billion, a 34% increase.
As a result, Q1 2023 Program Fee Income reached $22 million, up from Q1 2022’s $18 million, a 24% increase
Accredited has added five new programs in 2023, R&Q said, while maintaining a strong pipeline with more partnerships expected to be added later this year.
William Spiegel, Chief Executive Officer, commented, “This additional capital, alongside our completed internal reorganisation, means Accredited and R&Q Legacy can be established as stand-alone entities within R&Q.
“2023 has seen Accredited continue its strong momentum and leadership position in the program market, achieving a record first quarter in terms of GWP and Fee Income. For the 12 months ended 31 March 2023, Accredited’s GWP is ~$2.0 billion, an increase of ~$200 million from year end 2022 where we reported GWP of $1.8 billion. We are currently working very closely with AM Best to secure a subgroup rating for Accredited and have completed the key reorganisational requirements.
“R&Q Legacy has seen three transactions signed or completed this year and has a strong pipeline of transactions to grow Reserves Under Management beyond $1.0 billion. R&Q Legacy continues to focus its efforts on its key areas of strength, medium sized legacy transactions, while exploring potential further corporate liability opportunities.
“I am pleased with the progress we are making to enable both Accredited and R&Q Legacy to maximise their potential by having the right ownership and capital structures in place.”
