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Interim results for the six months ended 30 June 2014

26 August, 2014

The Board of Randall & Quilter (AIM: RQIH), the specialist non-life insurance investor, service provider and underwriting manager, is pleased to announce its Group interim results for the six months ended 30 June 2014.


  • Total Group income of £35.1m (2013: £26.2m)
  • Loss before tax of £0.6m* (2013: profit of £3.0m**)
  • Basic earnings per share of (0.9p) (2013: 4.0p)
  • Cash distribution of 3.4p per share (2013: 3.4p) through proposed R/S share scheme
  • Undiscounted net tangible asset value per share of 109.4p (31 Dec 2013: 116.4p)

* Prior to exceptional costs of £250k in relation to proposed acquisition of Accredited
** After deduction of minority interest relating to syndicate 3330 of £992k


  • Near doubling of the capacity of Syndicate 1991 to £150m with strong support from all previous capital providers as well as Qatar Re, who joined for the 2014 year of account.
  • Active period for acquisitions including a Bermuda captive, a Black Lung Trust, an Isle of Man insurer, a broker runoff and a retrospective reinsurance.
  • Successful refinancing of the Group’s credit facilities with the Royal Bank of Scotland providing a 5 year term with up to £35m of available facilities; current drawn position of £22m. New structure to reflect and support legacy insurance acquisitions and Funds at Lloyd’s provision.
  • Proposed acquisition of Accredited Surety and Casualty, an A- rated US carrier to support the growth of fee based underwriting management model.
  • Receipt of over $8m from creditor positions on the Integrity insurance estate.
  • Awarded contract to provide outsourcing support for a prospective new syndicate.
  • Further contract wins in credit control, binder management and claims servicing.


  • Insurance Investments Division – a higher operating result of £1.6m* (H1 13: £0.8m**) with higher investment income of 2.0% (H1 13: 1.2%) and a higher contribution from new legacy transactions offsetting a lower profit from the insurance debt purchase activity and weaker syndicate results. Reserve releases from the run-off insurance companies were similar to the prior year.
  • Insurance Services Division – an operating profit of £3.8m (H1 13: £6.3m). A strong performance in the UK operations was offset by a lower result in the US, which did not benefit from the exceptional level of credit write backs it experienced in the prior period.
  • Underwriting Management Division – an operating loss of £0.7m (H1 13: operating profit of £0.1m) primarily due to a reduction of profit commission under the provisions of the s.102 RITC agreement following an increase in legal expense reserves.

Commenting on the results, Ken Randall, Chairman and Chief Executive Officer said:

“We anticipated that 2014 was going to be challenging from a financial perspective, most especially in the first half which is always impacted by the second half income bias in our service businesses, the timing of the actuarial reviews of our runoff portfolios and April bonus payments. Delays in the completion of certain anticipated legacy transactions due to extended regulatory and counterparty processes, together with time and expenses incurred on the Accredited acquisition process also affected the result.

Whilst financial performance was weak in the first half, as flagged in the AGM trading update, 2014 has seen many positive developments. We have progressed a number of legacy insurance transactions in the first six months of the year, using our newly enhanced and flexible legacy platforms, and the newly refinanced bank facility provides valuable additional long term investment capacity for our healthy ongoing pipeline.

The proposed acquisition of Accredited is an exciting development for us and will bring the Group its first ‘A’ rated carrier. We anticipate building on Accredited’s existing business platform over the medium term with the intention of developing a substantial and sustainable fee based model for the Underwriting Management Division.

We are delighted to have been selected as outsourcing provider to assist in the planned launch of a new syndicate supported by third party capital.

Losses from our Lloyd’s syndicate participations were largely as expected given the well flagged expense drag of Syndicate 1991 during the premium income build up stage. We were not successful in getting an early determination of a life settlement claim in former Syndicate 102 which worsened the result as a significant additional legal expense reserve was required to prepare for a hearing scheduled for 2015.

The core UK services businesses performed well during the period and a broker runoff acquisition benefited the result further. The US business suffered from new business delays and from the lack of exceptional credit write backs which had improved the prior year result.

The Underwriting Management operations generally performed in line with expectations though the legal expense reserve increase relating to former Syndicate 102 also impacted profit commissions, further lowering the overall result.

Whilst growing premium income in s.1991 remains slow, the first half result was in line with expectations. The legal expense reserve increase in former s.102 had a negative impact on the first half year results, however, legal advice remains positive as regards our prospects for a successful outcome in this matter.

New business wins in the UK service business have been pleasing, especially in credit control and broker runoff, and we expect these to have a favourable impact over the coming months. The US service business remains challenging, though the second half should be significantly better. Over the medium term, the considerable efforts expended in launching our new healthcare related initiatives are expected to bring material improvements in financial performance.

Investment markets were relatively benign in the first half and our performance was strong relative to our peers despite our much shorter interest rate duration in a period of falling rates when duration benefitted performance. The outlook however looks more challenging with low yields, compressed credit spreads and fully valued equity markets.

The faster than expected settlement of US asbestos claims may impact reserve setting at the year-end given a reliance on ‘survival ratios’. We have engaged independent actuarial consultants to perform a granular ground up analysis on a number of key accounts. Whilst this initial analysis has yielded favourable results to date, we should caution that some deterioration may materialise, though this would be largely mitigated by the reinsurance coverage.

The second half of the year is expected to be considerably stronger, driven by increased service and fee income. As a consequence, we still anticipate that our full year results will meet market expectations, although this is inevitably contingent on completing a number of well progressed legacy transactions before year end.

We are pleased to announce a proposed interim return of cash of 3.4p per share payable in October. We remain committed to maintaining total distributions to shareholders of 8.4p per share for 2014 and, as operational progress converts into revenue and profit growth, to resuming growth in annual distributions from 2015 onwards.

Our strategy remains firmly rooted in acquiring value enhancing legacy assets, growing our niche service businesses and leveraging our underwriting platforms to secure meaningful fee income. At the same time, we do not expect to increase our underwriting exposure further and we anticipate our associated capital deployment will naturally reduce from late 2015”.

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Interim results for the six months ended 30 June 2014

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