Randall Quilter Investment Holdings Ltd. announced it has reached agreement to sell the entire share capital of its Lloyd’s managing agency, RQ Managing Agency Ltd. (RQMA), to Coverys, a provider of medical professional liability insurance based in Boston, Mass.
The sale remains subject to regulatory change of control approval by Lloyd’s and the UK’s Prudential Regulation Authority, anticipated to be received in late 2017, said Bermuda-based RQ in a statement.
The agreement entails a cash payment by Coverys to RQ of $22.6 million, which after costs and related incentive payments, will result in estimated net proceeds to RQ of £13.9 million ($17.6 million).
This is expected to generate a gain of approximately £12.6 million ($14.3 million) over the carrying cost of RQMA in the group’s 2016 audited accounts. The profits attributable to RQMA in the last audited accounts at Dec. 31, 2016 were £300,000 ($380,049) and the value of the RQMA related assets was £1.3 million ($1.7 million).
The sale of RQMA will be “materially accretive” to earnings per share (EPS) and net tangible assets (NTA) for RQ in the current year, the company continued. In addition, the group expects to make cost savings in other parts of the company which supported RQMA. These savings are likely to offset the loss of an estimated RQMA profit in 2018, RQ said.
RQMA’s 2 Syndicates
In a statement, Coverys described RQMA as a turnkey managing agency, which assists new syndicates in launching their underwriting businesses at Lloyd’s of London while delivering operating services necessary for the underwriting and maintenance of existing syndicates, including RQMA’s Syndicate 1991 and Syndicate 3330.
Syndicate 1991 has capacity of circa £127 million ($160.9 million), writing niche property and casualty business for small and medium enterprises (SMEs), mostly through delegated underwriting authorities, RQ said, explaining that the syndicate benefits from a wide range of primarily third-party industry and private capital support.
RQMA also manages Syndicate 3330, which provides reinsurance-to-close and other reinsurance solutions for legacy business within Lloyd’s, said RQ, noting that the syndicate’s capital support is provided entirely by the group. After the sale of RQMA, RQ said it intends to continue to support and grow this legacy focused syndicate through a proposed separate management agreement with the new Coverys-owned agency. RQMA also provides back office support to Syndicate 2088, the syndicate managed by XL Catlin and backed by China Re.
RQ said the sale follows its previously announced decision to focus on core, high growth activities, which include: 1) the acquisition/assumption of run-off portfolios; and 2) the use of its licensed companies in the U.S. and EU as conduits for niche and profitable books of PC business, primarily to highly rated reinsurers.
The company said net proceeds of the sale will be deployed to help finance the company’s growing legacy transaction pipeline, especially in the U.S. and Lloyd’s.
“The proposed sale of our Lloyd’s managing agency is a significant milestone in the group’s decision to simplify its operations and focus on our core areas of legacy acquisitions and management and the provision of services to our live underwriting partners,” said Ken Randall, RQ chairman and CEO.
“RQ Managing Agency Ltd. is a well-developed and scalable platform and we are confident it will prosper under the stewardship of Coverys,” he said, noting that good “cultural fit” between the two organizations.
“Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA,” says Gregg L Hanson, CEO and president of Coverys.
“The acquisition additionally allows Coverys to assist new underwriting syndicates that seek to launch their business at Lloyd’s, while also maintaining business operations for existing syndicates,” Hanson added. “We are excited to enter the London marketplace and will look to RQMA’s industry knowledge and expertise to guide us in this prestigious market.”
Hanson said the company “seized this opportunity to expand our non-insurance services in addition to leveraging the knowledge and experience of RQMA’s leadership team.”
Coverys will acquire RQMA’s full staff and business operations, including its turnkey business for new syndicates, and the continued responsibility to support the syndicates under management.
Source: RQ Investment Holdings