R&q Insurance Share Discussion Threads

[this_is_me] 04/6/2020 09:14

It doesn't satisfy Me - I see it as a waste of money; just cancel the dividend and be honest about it, rather than try to pull the wool over the eyes of the naïve.

[jonwig] 04/6/2020 07:06

@ This_ ... that's not the point: the regulators are keen for anything insurance-based to retain cash. This is a way of satisfying them and shareholders at the same time.

RQ have said this is expected to be a one-off.

[jonwig] 04/6/2020 07:03

Another legacy transaction, and this confirms the statement in the recent results;

This deal is indicative of a growing trend amongst established insurers and reinsurers to work with the major legacy players to address reserve volatility. Moreover, with the increasing pressure from the COVID-19 pandemic on carriers' capital and rating requirements we are seeing a significant increase in demand for R&Q's structured approach to assuming legacy liabilities. The pipeline remains very healthy and we expect to finalise further deals in the coming weeks regardless of the continuing disruption caused by the COVID-19 lockdown."

[this_is_me] 04/6/2020 06:18

Don't be daft! You are going to end up with owning the same % of the company as before. What difference is that going to make to you?

[alter ego] 03/6/2020 11:39

Yes, it says the decision to issue shares was a balancing act between shareholders interests and avoiding conflict with Financial Regulators. Seems a sensible compromise to me.

[speedsgh] 03/6/2020 11:31

This article suggests that Ken Randall has stated that the bonus share issue is a one-off and they will return to cash payments in the current FY...

Randall and Quilter balances regulatory and investor demands -

IC VIEW
Growth in MGA business should help offset some of the lumpiness of legacy premium income. While there is more pressure on the group to preserve cash, its ample reserves are encouraging for the continuation of distributions this year. Buy.

[red ninja] 02/6/2020 08:25

Investor Presentation For Final Results can be found in :-

www.rqih.com/investors/shareholder-information/investor-presentations/

[red ninja] 01/6/2020 19:20

Jonwig,

Yes, "Adjust downwards" = ex-div

[this_is_me] 01/6/2020 13:46

Yes the "script dividend" is just a waste of administration money.

[jonwig] 01/6/2020 13:45

@ Red - yes, the Program part is no surprise and it's good to have guidance on that renewed.

It's perfectly possible that they want to have as much cash in their current account as possible, since legal and other delays are expected with the virus. I don't mind 1:22 in a rising share price but wouldn't be too glad if the results had done the opposite!
("Adjust downwards" = ex-div?)

[red ninja] 01/6/2020 12:08

The Program part is as expected, from last interims :-

"In 2018 we reported that Accredited had contracted with MGAs with expected future premium income of approximately $500m per annum. Estimated contracted future business has now reached in excess of $800m per annum and we anticipate this will grow to more than $1bn per annum during 2020. As explained, we have invested heavily to ensure that we have the necessary infrastructure and staff to support this high growth and there is an inevitable deferral before we are able to take full credit for the earned commissions - although the nature of the earnings profile means that we have good visibility of future commission earnings over the next two years. We anticipate the Group's Program business will move into profit in the middle of 2020 with earnings growing strongly thereafter."

The script dividend isn't that a bit pointless. I mean they give us an extra 1 share for every 22 we hold and then the value and share price should adjust downwards accordingly.

[jonwig] 01/6/2020 07:04

Very solid!
Here's a link:



Goodwill on bargain purchase comes in at £71.3m (2018: £6.0m) but profit for year is only £38.8m (2018, £7.8m) so has the program business been a loss?
It looks so, as they talk about its "Economic EBITDA"! However, it's expected to be profitable from this year on.

[rik shaw] 01/6/2020 06:23

Look like solid results

019 Highlights

-- Group
-- Pre-Tax Profit up 180% to GBP40.1 million (2018: GBP14.3 million) (continuing operations)

-- After-Tax Profit up 399% to GBP38.9 million (2018: GBP7.8 million)

-- 13% growth in Net Asset Value per Share (including return to shareholders) (2018: 12%)(1)

-- Net Asset Value per Share of 148.1p (2018: 139.4p)

-- Earnings per Share (basic) up 269% to 21.4p (2018: 5.8p)

-- Bonus shares to be issued of 1 share for every 22 existing shares which brings the total distribution to approximately 9.9p per share (2018: 9.2p)

[speedsgh] 30/4/2020 16:19

New Equity Development flash note released today...

$100m new equity to support expansion -

[speedsgh] 30/4/2020 07:26

Great post, Jon. The ages of Messrs R & Q is something that has not been lost on me, although I have to admit that my holding is substantially smaller than it was 12 months ago after selling down a fair portion in Oct last year as a holding here no longer really fits the remit.

[jonwig] 30/4/2020 06:01

Unlike quite a lot of investors, I rarely get exercised about being excluded from share issues. In this case, it's been made clear that R&Q wants to be able to move quickly when opportunity arises. Similarly Brickell wants to have a substantial stake in R&Q which couldn't be built up by market purchases of existing shares without shifting the price.

I also suspect that in due course R&Q will be absorbed into a US group (Messrs R and Q are not so young).


As for dividends paid in cash or in shares, again I'm ultimately indifferent. Suppose the dividend equates to a proportion p of the company's current value, V. Then the xd value of the company reduces to V*(1 - p); your total value is:

V*(1 - p) + V*p = V.

If the same dividend is paid in new shares, your new value per share is

(1 + p)*V/(1 + p) = V.

(Taxation is the same either way.)

Some investment gurus (eg. Terry Smith) are against the payment of dividends and recommend instead that you just sell some shares if you need cash. I don't go quite that far.

On the final point about share values (post #798) it's true that historically R&Q hasn't been brilliant all the way back to IPO. It had a pretty serious stumble in the US a few years ago and only found its current strategy after that episode. I'd like to think the future is pretty bright, and that this is one company where there's a net positive from the virus.

[red ninja] 29/4/2020 14:11

It's true RQIH has paid good capital returns.

However, against IPO price in 2007 at 125p, the current placing price at 135p hardly shows stellar share price growth.

Last cash placing was at 153p so placing price has gone down since last year.

However, maybe this just reflects the financial crisis due to Covid-19

[jagzoil] 29/4/2020 08:02

I don't think RQIH is a share for you then.

[this_is_me] 29/4/2020 07:29

The main reason that I have made money is buying low and selling high.

Why is it that good management seems to do the opposite? Is it because they are suckered by their 'advisors' in the City?

If everyone gets additional shares it is just the same as a share split rather than a dividend.

[jagzoil] 29/4/2020 07:16

Have you not ever received a high yield dividend? RQIH have paid good divs over the years which has benefited me greatly.

[jonwig] 29/4/2020 07:00

Here's the announcement in full;



More detail on Covid, including:

... we believe the impact of the pandemic on the wider insurance industry will create considerable future opportunity for the Group. Our existing legacy books have limited exposure to unexpired risk, our program management portfolios are largely reinsured with highly rated counterparties, ...

and:

... the Group expects to continue its history of paying a return to shareholders, although this year, in light of the wider macro environment this will be in the form of additional ordinary shares.

[this_is_me] 29/4/2020 06:36

Issuing shares at the current share price, let alone at a discount, is just daft. In any case I always vote against anything involving a placing or the authority to do so since I have never seen one that is to the advantage of current shareholders like myself. Not that one has ever been voted down.

No wonder we read:

"Josh Wander, Founder and Managing Partner at 777 Partners commented:

"We are excited...."

I would be at getting such a good deal.

[jonwig] 24/4/2020 06:15

Yes, the first time they've mentioned covi I think: "Our legacy pipeline across the Group remains strong despite the current turmoil from COVID-19 and we look forward to closing more transactions in the coming months."

Companies in distress are probably a lot more likely to rid themselves of these legacy problems and transfer them at a loss to R&Q.

[this_is_me] 24/4/2020 06:09

Business as usual for RQIH and still doing small buy backs at the current share price.