Randall & Quilter Inv Hldgs Ltd – RQIH – Interim results

Randall & Quilter Inv Hldgs Ltd – RQIH – Interim results

Randall & Quilter Investment Holdings Ltd. (AIM-RQIH), the non-life global specialty insurance company focusing on the Program Management and Legacy Insurance businesses, announces the Group's results for the six months ended 30 June 2020 ("H1 2020").


H1 2020 Highlights



§ Pre-Tax Operating Profit increased 30% to £10.4m (H1 2019: £8.0m)

§ Profit Before Tax of £0.6m (H1 2019: £33.1m)

§ Proposed Interim Distribution per Share of 3.8p (H1 2019: 3.8p)


Program Management

§ Contracted Premium increased 95% to $925m (30 June 2019: $475m)

§ Economic Commissions Revenue grew 88% to $10.7m (H1 2019: $5.7m)

§ Economic EBITDA gain (loss) of $0.8m (H1 2019: $(0.3)m)

§ 10 new programs added, increasing total active programs to 36 at period end



§ Net Reserves Acquired increased 81% to £267m (H1 2019: £148m)

§ Operating Return on Tangible Capital of 17.7% (H1 2019: 14.1%)

§ Operating Return on Tangible Equity of 23.3% (H1 2019: 16.4%)

§ Completed nine transactions across seven different jurisdictions


Balance Sheet

§ Cash and Investments increased 5% to £772m (YE 2019: £737m)

§ Net Asset Value per Share increased 3% to 151.5p (YE 2019: 147.2p)


Franchise and Platform

§ Raised $100m of new equity, strengthening our capital base and increasing our Group Solvency Ratio to 191%

§ Bolstered leadership with key hires: Deputy Executive Chairman, Group CFO and CEO of US Excess & Surplus Lines (E&S)

§ Expanded our footprint and capabilities including launching a US E&S carrier, establishing new branches in the UK and Italy to strengthen our Program Management offering, and securing licenses to write third-party Legacy business in Bermuda

§ Invested in a growing MGA, Tradesman Program Managers, LLC, securing Program Management fees and adding valuable investment


Summary Financial Performance (see Notes for definitions)


(£m, except where noted)

H1 2020

H1 2019


Group Results

Pre-Tax Operating Profit




Profit Before Tax




Investment Portfolio Book Yield




Earnings per Share




Distribution per Share




Business Segment Metrics

Program Management ($m)

Contracted Premium (period end)




Gross Written Premium




Economic Commission Income




Economic EBITDA





Net Reserves Acquired




Operating Return on Tangible Capital




Operating Return on Tangible Equity




30 Jun 2020

31 Dec 2019


Balance Sheet Items

Cash and Investments




Total Equity




Net Asset Value per Share






Commenting on the results for the year, Ken Randall, Alan Quilter and William Spiegel, said:


"Our first half 2020 financial results were impacted by Covid-19 due to the already announced reduction in total investment returns, delays in on-boarding new Program Management business and by a change in the mix of Legacy transactions, resulting in Profit Before Tax of £0.6 million. Nonetheless we continued to generate strong operating performance in both Program Management and Legacy translating into Group Pre-Tax Operating Profit of £10.4 million, a 30% increase compared with H1 2019. The Board expects that fiscal year 2020 results will be in line with market expectations.


Our Program Management business achieved meaningful growth and generated record results across all key metrics. Over the past 12 months we have expanded our MGA relationships by adding 10 new programs, bringing the total number of active programs to 36 at 30 June 2020. Our Contracted Premium, an indicator of future annual Gross Written Premium, increased by 95% year-over-year to $925 million. In the first half of 2020, Gross Written Premium grew by 43% to $247.2 million, and Economic Commission Income increased by 88% to $10.7 million. This strong revenue performance enabled us to generate positive Economic EBITDA of $0.8 million and a margin of 7.5% compared with a loss in H1 2019. As we grow Gross Written Premium, we are beginning to witness the benefits of scale in our profit margin. We continued to grow in H2 2020, so far adding four new programs, increasing our total number of programs to 40 and Contracted Premium to $1.1 billion. We also agreed to take a 35% interest in one of our existing MGA partners, Tradesman Program Managers LLC, which not only solidified our partnership but should prove to be a valuable investment for the Group.


Our Legacy business completed a record nine transactions in seven jurisdictions in H1 2020. From those nine deals we acquired Net Reserves of £267.3 million, an increase of 81% over H1 2019. Our mix of business in H1 2020 skewed towards larger reinsurance deals with counter-parties such as Renaissance Reinsurance, Allianz and Houston International Insurance Group, whereas our mix of business in H1 2019 was heavily influenced by the Global Re acquisition. We target returns of at least 15% in all Legacy transactions regardless of the accounting treatment of reinsurance and acquisitions. In H1 2020, we produced solid Operating Returns on Tangible Capital and Equity of 17.7% and 23.3%, respectively. Our growth has continued into the second half of the year with four additional transactions already signed and we have several other deals under exclusivity.


Our investment portfolio is comprised almost entirely of high-quality fixed-income investments. Only 3% of our portfolio is invested in below investment grade bonds, and the portfolio has a duration of 1.7 years. However, as a consequence of negative market reactions to the economic uncertainty that prevailed during the early months of the pandemic, we recognised £(7.1) million of net realised and unrealised Losses in H1 2020 compared with £8.8 million of gains in H1 2019. These losses in H1 2020 substantially reversed themselves in the second half of the year.


We are pleased to announce that the Board has recommended an interim distribution to shareholders of 3.8p per share in cash. We are proud of R&Q's consistent record of distributions to our shareholders.


In 2020 we have been active in continuing to build and develop our platform, bolstering our management team and expanding our footprint and capabilities. We recruited a Deputy Executive Chairman, a Group CFO and a CEO of US Excess & Surplus Lines. We also launched our US Excess & Surplus Lines company, set up new branches in the UK and Italy to strengthen our Program Management offering, and raised $100 million of equity for growth, including establishing these initiatives as well as for funding of Legacy transactions.


Despite unprecedented challenges introduced by Covid-19, we have had minimal disruptions to our operations. Importantly, we are excited by the opportunities available to us in the current market. Covid-19 and other market events have generated significant losses for the insurance industry, creating a "hardening" insurance environment and increasing the demand for our Legacy and Program Management solutions. We have a strong balance sheet, expertise, relationships and the track-record to capture the additional growth in front of us. However, as is our tradition, we will be patient and disciplined as we continue to grow our business."

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