AM Best has placed the ratings of R&Q and its subsidiaries under review with developing implications, following last week’s announcement that the company will be acquired by one of its major shareholders, in an deal backed by investment group 777 Partners.
The developing implications reflect uncertainties surrounding R&Q’s prospective risk-adjusted capitalisation, and its final ownership structure, analysts explained.
They added that the ratings will remain under review with developing implications until AM Best has sufficient clarity over the group’s rating fundamentals following its acquisition.
Specifically, the rating agency is placing under review the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of Accredited Surety and Casualty Company, Inc. (ASC) (Orlando, FL), Accredited Specialty Insurance Company (ASI) (Phoenix, AZ) and Accredited Insurance (Europe) Limited (AIEL) (Malta).
Concurrently, AM Best has placed under review with developing implications the long-term ICR of “bbb-” (Good) of Randall & Quilter Investment Holdings Ltd. (R&Q) (Bermuda), the non-operating holding company of the group.
These actions follow the announcement on 1 April 2022, that Brickell PC Insurance Holdings LLC (Brickell) will acquire, in cash, the remainder of shares in R&Q that it does not currently own, subject to shareholder and regulatory approval.
AM Best additionally, notes that R&Q plans to issue $100 million of convertible preference shares to Brickell, subject to shareholder approval.
The funding materially restores R&Q’s capital base following an expected IFRS loss for 2021 of $135 million to $145 million, of which $90 million relates to a non-cash charge due to the impairment of an asset relating to a structured reinsurance contract, which is likely to be commuted.
Despite its poor IFRS result for 2021, R&Q’s underlying book of business is performing well, analysts say, and the group has good growth opportunities in its two core business lines. Its business strategy is not expected to change as a result of the change in ownership.
Some commentators have specualted that the IFRS issue and capitalisation may be the actual driver of the sale, as it would seem R&Q might have otherwise needed to find another way to raise more capital.
