On 20 October 2023, R&Q Insurance Holdings Ltd (AIM-RQIH) (“R&Q”) announced the proposed Sale of Accredited to Onex Corporation (the “Announcement”). Capitalised terms used, but not defined, in this announcement have the meaning given to such terms in the Announcement. The full announcement can be found here.
As explained in the Announcement, the transaction is conditional on R&Q shareholder and regulatory approval as well as customary consents from certain R&Q debt providers. R&Q continues to work expediently towards satisfying these conditions and closing of the Sale is expected to occur in late Q1 2024 or early Q2 2024.
In the Announcement, R&Q provided a brief summary of its future strategy for R&Q Legacy, on the assumption that the Sale achieves a successful conclusion. Although completion of the Sale continues to be conditional on the factors noted above, the Board recognises shareholders’ interest in better understanding the profile of R&Q Legacy as a standalone business. Accordingly, R&Q today announces the publication of a presentation on R&Q Legacy (the “Presentation”) which can be found on this website here.
The Presentation provides further detail on R&Q’s envisaged strategy, market position and financial objectives as a refocused global legacy company, should the Sale successfully close.
As previously announced, upon closing of the Sale, Jeff Hayman will act as Chairman and Interim Chief Executive Officer of R&Q and Paul Bradbrook, currently Chief Accounting Officer of R&Q, will become Chief Financial Officer of R&Q and a member of the Board, subject to customary approvals.
The Presentation also outlines R&Q Legacy’s wider management team and its significant collective experience. The management team is excited by the growth opportunity it sees within R&Q Legacy’s addressable market.
In the Presentation, management has set out three strategic priorities through which it believes R&Q Legacy can deliver growth and value creation:
- Grow fee income
- Reduce expenses
- Decrease balance sheet volatility
Underpinning these priorities are strategic initiatives currently underway to de-risk the R&Q Legacy portfolio including:
- A possible LPT (Loss Portfolio Transfer) or ADC (Adverse Development Cover) on certain portfolios
- The sale of non-core assets
- The sale, or securitization, of back book legacy liabilities
In the Presentation, R&Q provides an associated plan for the R&Q Legacy business, although it should be stressed that the ability of R&Q Legacy to achieve such objectives depends on many factors, including not least a successful closing of the Sale and the paydown of R&Q debt. This plan includes that:
- The refocused business and strategy is expected to deliver operating profitability by full year 2025
- Fee income is targeted to be doubled in 2025 compared to H1 2023 annualised
- Expenses are anticipated to be reduced by 15% to 20% in 2025 relative to an adjusted annualised H1 2023 expense base that includes certain assumptions around Legacy’s standalone cost structure
- As R&Q returns to profitability, it will review its dividend policy, subject to constraints due to relationships with lenders, regulators and preferred shareholders
The Presentation also outlines R&Q’s expectation of $100m+ of cumulative surplus capital to be generated over the next ~5 years as claims payments are made, releasing capital held against reserves. This is in addition to the estimated $40m - $80m of additional collateral R&Q will be required to hold against existing legacy exposure retained by Accredited, which R&Q expects to be released and available over the next 5+ years as the underlying exposures are reduced and eliminated.
Jeff Hayman, Chairman of R&Q, said: “We recognise the importance of giving our shareholders a clear vision around R&Q’s future as a refocused global legacy company, should the proposed Sale of Accredited to Onex achieve a successful conclusion. The Presentation further outlines our belief that R&Q can build significant value as a standalone legacy business and the clear strategy we have to return the business to operating profitability, materially reduce balance sheet volatility and establish a stronger capital position.
"Building our Reserves Under Management is an important part of this strategy, and we have also provided detail on the strength of our management team and their extensive experience in non-life run-off, our large and addressable market opportunity and the active nature of our pipeline. We look forward to continuing to engage with all of our stakeholders.”
As stated above, the plan is based on many assumptions, including shareholder and regulatory approvals of our proposed Sale and consent from our lenders. A more detailed explanation of the Sale is included in our announcement of 20 October 2023. The Presentation should be read in conjunction with that announcement.
Click here for the full press release.
