Strong progress against strategic objectives demonstrated by 112% growth in recurring Fee Income to a record $53.1 million
R&Q Insurance Holdings Ltd (AIM: RQIH) (“R&Q” or the “Group”), the leading non-life global specialty insurance company focusing on the Program Management and Legacy Insurance businesses, today announces its results for the half year ended 30 June 2022.
Strategic and Governance Update
- Raised $130 million via a placing, including a $34 million Firm Issuance in June followed by a Conditional Issuance and Open Offer for the remaining $96 million in July (the “Fundraise”), demonstrating strong shareholder support for our strategy
- Significant progress made in executing against all 5 pillars of our 5-year strategy to become a recurring fee-based, capital-lighter business with increased returns on equity and growing shareholder dividends
- Appointment of Robert Legget as the Senior Independent Director on 26 August as part of our ongoing plans to enhance our Board composition. The Board plans to introduce an Independent Non-Executive Chair as soon as possible with the appointment of further Independent Non-Executive Directors in due course
H1 2022 Financial Highlights
Program Management
- Gross Written Premium of $807.3 million (H1 2021: $444.8 million, an 82% increase)
- Fee Income (incl. Tradesman stake) of $44.3 million (H1 2021: $25.1 million, a 76% increase); Fee Income (excl. Tradesman stake) increased 105%
- Pre-Tax Operating Profit of $23.3 million (H1 2021: $9.9 million, a 136% increase)
- Pre-Tax Operating Profit Margin of 54.0% (H1 2021: 39.9%, a 14.1 percentage point increase)
Legacy Insurance
- Completed two transactions with Gross Reserves Acquired of $5.3 million (transactions are seasonally active in Q4)
- Reserves Under Management of $386.6 million
- Fee Income of $8.8 million
- Pre-Tax Operating Loss of $26.7 million as the business transitions to an annual recurring, fee-based revenue model
Group
- Total Fee Income of $53.1 million (H1 2021: $25.1 million, a 112% increase)
- Pre-Tax Operating Loss of $24.3 million; results impacted by Legacy Insurance revenue model transition
- An interim dividend for H1 2022 will not be declared; dividend strategy is to pay out 25 ‒ 50% of Pre-Tax Operating Profit
- Unrealised net investment losses of $88 million; unrealised investment gains/losses always excluded from Pre-Tax Operating Profit as they are non-economic and unlikely to be realised due to the high credit quality fixed income portfolio and the Group’s asset-liability management strategy
Operational Highlights
- Continued focus on cost control with Fixed Operating Expenses increasing only 3% year-over-year at constant foreign exchange rates and down 3% when accounting for foreign exchange movements
- Operational improvement programme underway with c. $10 million of the total $20 ‒ 25 million investment deployed since 2021, with the remainder to be incurred in H2 2022 and 2023
- This investment in automation and technology processes is expected to generate approximately $10 million of recurring annual cost efficiencies by 2024
Outlook
- Program Management expected to achieve $1.75 billion of Gross Written Premium in 2022
- Five programs launched post 30 June 2022 expected to generate c. $250 million of annualised Gross Written Premium
- Further pipeline of 13 programs in advanced due diligence totalling an additional c. $225 million of expected annualised Gross Written Premium
- Fee Income equal to c. 5% of ceded Gross Written Premium
- Legacy Insurance transaction execution continues to have heavy weighting towards Q4
- Strong pipeline of over $1 billion in gross reserves
- Over $1 billion of capacity in Gibson Re
- Fee Income equal to 4.25% of Reserves Under Management
- R&Q reiterates guidance of achieving in excess of $90 million Pre-Tax Operating Profit in 2024
William Spiegel, Executive Chairman of R&Q, commented:
“I am pleased to report another six months of progress against our 5-year strategy. These results showcase excellent underlying momentum in executing our 5-pillar strategy as we continue our transformation into a fee-based, capital-lighter business. This transformation is evidenced by the significant growth in recurring Fee Income, which has more than doubled from last year and now represents over 60% of our Gross Operating Income, a proxy for revenue. We also re-iterate our confidence in achieving in excess of $90 million of Pre-Tax Operating Profit in 2024. As a result of our strategy, R&Q will deliver more predictable earnings, with increased returns on equity and growing sustainable shareholder dividends over time."
Click here for the full press release and financial statement.
Investor presentation
Our shareholders presentation and accompanying video is available here.
