R&q Insurance Share Discussion Threads

[simon gordon] 14/12/2021 06:14

Bit more Googling and turns out that Clear Blue pulled the sale in August:

The Insurer - 31/8/21

Clear Blue pulls sales process as PE bids fall short of expectations

Clear Blue and its majority owner Pine Brook have cancelled the Evercore-run sales process for the hybrid fronting carrier after final bids from private equity firms didn’t match expectations based on its growth trajectory, The Insurer can reveal.

It is thought that there were at least six bidders in the final stages of the process, with sources linking private equity firms Warburg Pincus, Centerbridge Partners, Gallatin Point Capital, Atlas Merchant Capital and New Mountain Capital as well as special purpose acquisition companies (SPACs) including one set up by Cohen & Co.

While it is believed there were several bids in the range of $500mn to $650mn, a combination of the unappealing deal structure of the higher bids and cash bids that were below expectations led the seller to reconsider pushing for a transaction at this point.

As previously reported, Clear Blue is on a strong growth trajectory after last year writing premium volumes of $745mn, up from $600mn in 2019.

This year the Jerome Breslin-led company is thought to have initially budgeted $1bn of gross written premium (GWP) on its quartet of carrier subsidiaries, which provide both admitted and E&S capabilities, based on the pipeline of deals at the start of 2021.

However, a number of recent major wins including the Risk Point dealers’ open lot program, the total GWP for 2021 could be well north of $1.1bn, with the expectation that based on the growth of current and pipeline deals GWP could be up by a further 30 percent in 2022.

That would mean that Clear Blue had almost doubled its top line in two years, with further Ebitda growth leaving a bigger base for the business to be valued on.

The higher levels of projected growth are likely to have raised the price expectation of the seller to the top of the range or beyond.

But sources have previously highlighted the challenge for hybrid fronting carriers in communicating the value of projected earnings and growth to potential buyers.

Although Clear Blue is technically an insurance company with a balance sheet and an AM Best A- rating, its model of retaining almost no underwriting risk means that it is more likely to be valued on a multiple of Ebitda.

By contrast, traditional carriers are valued as a multiple of book value – an approach that may even apply to some of Clear Blue’s peers that have adopted a model where they retain a significant portion of the risk.

The company’s main source of revenue is the fronting fees it charges, which are typically set at 5-6 percent of premium volume.

Premium written and fees generated earn into revenue and Ebitda over time. That means there is a lag in GAAP reported numbers as fees earn over the average policy term such that current growth rates may not reflect in Ebitda for a year or more.

As a result, Clear Blue’s Ebitda numbers on which a sale valuation would be based do not fully reflect the rapid growth that has seen the company become the biggest of the new wave of fronting specialists launched in recent years.

This publication previously reported that the company was initially likely to be budgeting in the region of $30mn of Ebitda this year, which could equate to a valuation of around $600mn based on a top end 20x multiple.

Despite the pulled sales process, the expectation is that Clear Blue will continue to consider approaches. With strong SPAC interest it is likely to continue evaluating that as an option, as well as other public routes to provide a liquidity event for Pine Brook.

Clear Blue, Warburg Pincus, Centerbridge, Gallatin Point, Atlas Merchant, New Mountain and Cohen & Co did not immediately respond to a request for comment.

[simon gordon] 13/12/2021 17:39

Been a bit of churn at the upper levels of Accredited America. Todd Campbell the President and CEO joined Builders Insurance Group in April and has recently poached two senior Accredited executives to join him: Antonio Barner and Brent Johnson.

It looks like Campbell built up Accredited and then Pat Rastiello joined in 2020 to head up E&S. Then in March 2021 the two Accredited wings were united under Accredited America and Rastiello became President and CEO.

Rastiello looks a top of the game player and will hopefully take Accredited to the next level. Some shake out as some of Todd's team follow him to Builders who are also based in Atlanta.

Accredited America - 8/3/21:

R&Q Consolidates its US program businesses

Following its recent entry into the US E&S market, Randall & Quilter Investment Holdings Ltd (R&Q) has consolidated its two US program operations as Accredited America under the leadership of former Aon executive Pat Rastiello.

Accredited America is the new brand name for both R&Q’s established admitted program arm and its recently launched E&S business, which underwrites non-admitted program business via the Arizona-domiciled and A.M. Best A- (Excellent) rated Accredited Specialty Insurance Company (ASIC).

Accredited provides fronting capacity for MGAs and sits between them and their reinsurers, which supply the underwriting capital. The program market is thought to be expanding rapidly as MGAs become an increasingly popular platform for entrepreneurial underwriters and reinsurers keen to access business directly.

Rastiello – who joined the London-listed group last year and has spearheaded ASIC’s recent launch – will now also lead the group’s admitted program arm, Accredited Surety and Casualty Company (ASCC).

Supporting Rastiello as Accredited America president is a three-person senior management team consisting of Tony Barner as SVP and CUO in charge of admitted business; Paul Amrose as SVP and CUO, E&S property; and Dawn Puro as SVP and CUO, E&S casualty.

Speaking today, Rastiello commented: “A single brand and management structure for R&Q Accredited’s admitted and non-admitted business provides greater clarity and purpose to all our stakeholders, including our clients and prospective client MGAs, reinsurers and our highly valued broker partners.”

He continued: “I am delighted and honoured to lead the new Accredited America platform which further enhances our market presence and will provide the structure to continue our strong growth momentum and to continue delivering on behalf of our MGA clients.”

[simon gordon] 12/12/2021 12:08

Mentioned in this webinar is that more Tradesman like deals are in the pipeline....

Burns & Wilcox - 12/5/21:

Paul Smith hosts a Carrier Q&A discussion with Patrick Rastiello, President and CEO, Accredited America. With over 40 years of experience in the insurance market, Patrick brings a wealth of insight on the current environment into the conversation.

During this webinar, we discussed:

-Market conditions
-Technology’s impact on the underwriting process
-Forecasts into the months ahead

[simon gordon] 10/12/2021 19:04

It looked in September that the share was primed to run after c.25m were exchanged, primarily around 170p. Then a seller appeared three weeks ago and this week 2.3m went for 173p.

Newflow wise, there should be some news on Legacy deals in the coming weeks and another Program update in February.

If a massive block goes through in the coming days, weeks or months then it could be the signal that a run to 250p might be about to begin.

Jingle Bells!!!


free stock charts from uk.advfn.com

[geraldus] 10/12/2021 17:02

Excellent posts here of late.Getting the best out of a BB.Due for a turn upwards soon.Gla.

[simon gordon] 10/12/2021 14:17

Capital Access - 10/12/21:

Growth Continues Apace

R&Q has released a very brief but exciting 9-month trading update for its Program Management business, confirming it added a further $200m to Contracted Premium in September alone (the last update showed $1.8bn at the end of August), taking the total to $2bn at the 30th September quarter end.

Contracted Premium is a key forward-looking metric, as it represents the annual Gross Written Premium that the Managing General Agent (MGA) partners believe their programs will generate when they reach maturity. That is, in the unlikely event that R&Q fails to sign up any new programs, within a few short years GWP would likely reach close to $2bn: in fact, in the half year results management raised its 2023 Gross Written Premium target to “at least $1.75bn” from $1.5bn, reflecting the growth in Contracted Premium. This quarterly update represents another material step towards that goal.

For an idea of how this filters down to fee income: On $1.75bn of GWP a 5% program fee, assuming a 95% retention rate, would result in fee income of c.$83m. This does not include the fee income from Randall & Quilter’s 40% interest in Tradesman, which was c.$12m annualised in 1H21.

Over the 9 months to 30th September, Gross Written Premium increased by an astonishing 81% to $714m, and fee income rose 138% to $39m.

There were 70 active programs at the quarter end, 31 more than at 3Q20, and a further five programs were added after in October and November, taking the total to 75.

The $39m of fee income was particularly impressive in the context of only $16m having been generated in the first 9 months of 2020. This underscores the strong growth potential of this business.

We believe there has been significant shareholder churn since the dividend policy was changed and the new strategy announced, and this may not yet be over. At present, however, it seems likely to us that the market has not yet woken up to the benefits that could come from this change – which is already cementing R&Q’s transition towards a fee-based, capital light business model that generates predictable, recurring revenues and offers significant growth potential.

[red ninja] 10/12/2021 12:22

From RQIH linkedin feed just makes the point of high quality employees :-

Randall & Quilter Investment Holdings Ltd.
2,134 followers
1h • 1 hour ago

Huge congratulations to Dawn H. Puro, Chief Underwriting Officer (Casualty) for Accredited America, who was honored yesterday in a virtual ceremony by Business Insurance as a ‘2021 Woman to Watch’.

This award celebrates Dawn’s exceptional work with clients and her market leadership within the commercial insurance industry. It is a reflection of all the excellent work she has done for us at R&Q and the inspiration that her career can provide to the next generation of female leaders.

[simon gordon] 10/12/2021 10:33

According to the Barclays note (20/1/21) insurance brokers are rated 18x.

The reason for RQIH's historically low rating has been the capital intensive Legacy division which they reckon at tops could be rated 11x.

From 2023 they will be an almost pure asset manager / broker. Because they will still hold some of the book in Legacy and Program 15x seems a decent target with 13x maybe appropriate as the market acknowledges the changed risk profile.

If they can get the ILS market securitising some of Program maybe that could allow them to grow without writing more onto their book? They become a pure originator. It's a $100bn market and they've got 2% currently, maybe over time they can get to between 5% and 10% with the ILS market allowing them to do it within the constraints of the current balance sheet. Could they also get a cut in the ILS set up? I'm just speculating on this angle as I know little of the insurance industry.

[simon gordon] 09/12/2021 21:16

At the beginning of the year in their initiation note Barclays had Program forecasted for 2021 as follows:

-GWP: $861m
-Fee Income: $39m
-Contracted Premium: $1.35bn

...and for 2022:

-GWP: $1.1bn
-Fee Income: $54m
-Contracted Premium: $1.6bn

With the final quarter to be accounted for it looks like they will smash the 2021 forecast based off the first three quarters:

-GWP: $714m
-Fee Income: $39m
-Contracted Premium: +$2bn to November 2021

Executing wonderfully!

[simon gordon] 09/12/2021 12:10

Morningstar - 9/12/21:

BARCLAYS RAISES RANDALL & QUILTER TARGET TO 267 (245) PENCE - 'OVERWEIGHT'

[simon gordon] 08/12/2021 10:37

Artemis:

What are insurance-linked securities (or ILS)?

Insurance linked securities, or ILS, are essentially financial instruments which are sold to investors and whose value is affected by an insured loss event. The term insurance-linked security (ILS) encompasses the ILS asset class, which consists of catastrophe bonds, collateralized reinsurance instruments and other forms of risk-linked securitization.

Insurance-linked securities (ILS) are investment assets generally thought to have little to no correlation with the wider financial markets as their value is linked to insurance-related, non-financial risks such as natural disasters, other insurable specialty risks and life and health insurance risks including mortality or longevity.

As securities, some insurance-linked securities (mainly catastrophe bonds) can be and are traded among investors and on the secondary-market.

They allow insurance and reinsurance carriers to transfer risk to the capital markets and raise capital or capacity. They also allow life insurers to release the value in their policies by packaging them up and issuing them as asset-backed notes.

The market for insurance-linked securities (ILS) emerged in the mid-1990’s as a mechanism for insurance and reinsurance companies to access the deepest and most liquid pool of capital available, the global capital markets.

Now an established alternative asset class, insurance-linked securities (ILS) are typically invested in by large institutional investors such as pension funds, sovereign wealth funds, multi-asset investment firms and funds, endowments, as well as some family office investors.

As well as forming part of the spectrum of pure reinsurance risk transfer tools available to the global insurance market, insurance-linked securities (ILS) are also used by some large corporates to access insurance capacity from the capital markets, as well as by governments to secure disaster risk financing.

[alter ego] 08/12/2021 07:53

rns today

"William Spiegel, Executive Group Chairman, commented: "We are pleased to report another strong quarter of growth in our Program Management business. Our pipeline of opportunities remains robust, and we remain focused on developing strategic partnerships with leading MGAs, highly-rated reinsurers and the ILS markets in both Europe and the US."

[simon gordon] 06/12/2021 14:25

Profile in the WSJ Private Equity Pro from 2012:

RISING STAR: Pine Brook's Spiegel Proves That Nice Guys Can Finish First

Laura Kreutzer November 26, 2012

William Spiegel learned the importance of hard work early in his life.

"My dad [would say]: 'If you ever find yourself in a situation with your job that you have completed your task and you have nothing more to do, go find a broom and sweep,' " said the 50-year-old managing director at Pine Brook, a New York-based firm focused on midmarket investments in financial services and energy.

That work ethic, combined with an affability he attributes partly to his Canadian heritage, often helped Mr. Spiegel win over not only his own colleagues to his investment ideas but also management teams and other investors. "He's got an incredible sense of energy and an incredible desire to learn and move things forward," said Howard Newman, the firm's president and chief executive, who jokingly compared Mr. Spiegel to the Energizer Bunny. Mr. Newman adds that those qualities are important to a firm like Pine Brook, which often commits hundreds of millions of dollars to create a company from scratch.

Back in early 2007, for example, Mr. Spiegel was presented with an investment opportunity in an insurance business within Lloyds of London . Although two of the three business lines up for sale didn't appeal to Pine Brook, Mr. Spiegel saw promise in the third, which bought insurance companies or syndicates that were no longer underwriting new policies. Ultimately, however, he needed to convince Lloyds to give the company a license to create an independent runoff business within Lloyds, something that the London financial giant had never done before. After months of back and forth, Syndicate Holding Corp. was launched in May 2007 and, over the past four years, the business has averaged a more than 30% annual return on equity.

"William saw an opportunity that was not readymade," said Mr. Newman. "It wasn't even Play-Doh; it was the stuff before Play-Doh."

Mr. Spiegel's persuasive powers also proved useful in the establishment of mortgage insurer Essent Guaranty Ltd. In late 2007, Mr. Spiegel saw an opportunity to create a new mortgage insurance business, as many veteran insurers reeled from losses stemming from the collapse of the subprime market. He recruited Mark Casale , a former president of mortgage insurer Radian Guaranty , to help with diligence. Although Mr. Casale admits he was skeptical at first, Mr. Spiegel ultimately convinced him of the potential payoff in creating a new market entrant with a clean, well-capitalized balance sheet. In 2008, they launched Essent with $500 million in capital and installed Mr. Casale as chief executive.

Mr. Spiegel's affable nature and sense of vision not only helped the company attract other investors besides Pine Brook, but also helped smooth things over when disagreements arose, according to Mr. Casale. For example, in 2009, not long after Essent launched, the company was presented with a deal that would have brought in revenue, but Essent's management team didn't believe it would serve the company's long-term interest. Although some of Essent's other investors wanted the company to do the deal, Mr. Spiegel persuaded them to back off.

Ultimately, the original vision paid off, according to Mr. Casale, who said that since it wrote its first policy in 2010, Essent has grown to $10 billion of insurance in force, a common metric for measuring mortgage insurers. He also estimates that it makes up about 10% of the mortgage insurance market.

"[William] helped preach patience with other investors and even with the management team," said Mr. Casale. "When you're a manager building an organization with as large a scale as ours, the last thing you need is pressure from investors."

Career Path

William Spiegel helped launch Pine Brook in 2006 after President and Chief Executive Howard Newman tried unsuccessfully to recruit him to head the financial services group at Warburg Pincus a few years earlier. Before that, Mr. Spiegel was with Cypress Group, where he managed the firm's investments in financial services and health care from 1994 until 2006.

Education

Mr. Spiegel earned his undergraduate degree in economics from the London School of Economics, a master's in economics from the University of Western Ontario and a master's in business adminstration from the University of Chicago.

Personal

Although he played hockey in his youth, Mr. Spiegel currently prefers tennis, downhill skiing and jogging.

[simon gordon] 04/12/2021 12:24

Exponential View podcast - 17/11/21:

The AI Revolution is Just Beginning (with Nathan Benaich and Ian Hogarth)

Investors Nathan Benaich and Ian Hogarth co-author the influential, annual “State of AI” report. They join Azeem Azhar to discuss breakout developments in disparate fields, from defense to medical biology. And they offer their take on the flood of new investments into AI and how we can best keep the technology safe for humanity.

[simon gordon] 01/12/2021 10:07

Tech fund manager Ben Rogoff's outlook chimes with William Spiegel's strategic initiatives on data and automation:

‘If we’re right, the role of technology will be elevated to a whole new level,’ he said. ‘We’re at the front end of businesses beginning to be transformed. AI represents the same level of opportunity and threat that the internet did 20 years ago. Those that embrace it, make data-driven decisions and automate as many processes as possible will thrive and those that don’t will probably go out of business.’

-

From the 2020 Prelims:

Automation

There are many manual and repetitive tasks in the insurance businesses that should be automated by "digital workers". Automating these tasks allows "human workers" to do what humans do best - think! This emerging field of automation improves the efficiency, productivity and therefore happiness of an employee base. To put this in context, ~60% of all jobs have 30% of tasks that can be automated. Applying automation to our business will us allow us to scale in a sustainable manner as we automate workflow processes such as MGA audits, contract wordings and certain aspects of diligence. We are beginning to engage with the leading players in this area.


Data

There is a growing awareness that - "Every company is a data company"; whether it is a restaurant, an airline or an insurance company, the uniqueness of a company is its "own data" and how it uses that data to better understand its markets and improve its decision making. R&Q is no different and we are starting the cultural journey of defining ourselves as a "data company competing in program management and legacy insurance". Our goal is to proactively use our own data to enhance, for example, our claims decision making and legacy acquisition pricing, by leveraging machine learning and artificial intelligence as part of our core competencies.

====

Excellent column on Ben's thinking:

Citywire - 30/11/21

Polar Capital's Rogoff: Tech saved the world – and will dominate returns again

[simon gordon] 30/11/2021 17:55

"It's about execution. Bright ideas are slightly more common than people think. Execution of bright ideas is extremely rare."

Terry Smith

=

-Progam: executing ahead of expectations.

-Legacy (Gibson Re): still a baby.

[simon gordon] 28/11/2021 14:46

Another senior hire in Legacy - joined in October:

Paul Donovan

Global Head of Legacy Operations

-Prior to R&Q he was Chief Operations and Risk Officer at the Vibe Syndicate.



------

Edit: it looks like he came with the Vibe Syndicate purchase, December 2020.

[simon gordon] 23/11/2021 20:17

Interesting piece by the same author as the previous article:

Artemis - 15/10/20

Third-party capital can play dual-role at R&Q, in program business & legacy

....On the program management side, alternative capital is seen as one of the reinsurance capital sources that can support its growing program business, under the Accredited brand.

The appetite to access high-quality underwritten business through managed programs is clear in the ILS market and at this time it can provide an additional and often complementary, sometimes diversifying source of risk premiums to add to the collateralised reinsurance portfolio built through renewal business.

This is where the dual-role comes in, as for R&Q the same sources of alternative capital can help to drive efficiencies to both sides of its strategy, benefiting the legacy transaction flow, while also providing efficient reinsurance capital to support the MGA’s and brokers its program management side works with.

Which also means, if R&Q can harness third-party capital successfully, it could offer multiple strands and strategies to investors, from the legacy side and the program side and perhaps even a combined strategy where shorter-tailed business on the program side can help to offset some of the tail effects of the legacy portfolios assumed.

Which is why its ambitions in this area make a lot of sense. Although the company is likely to face the same challenges everyone has right now when it comes to capital raising.

But laying the foundations for a more full-featured third-party capital strategy will likely reap dividends for R&Q as and when investor appetite for direct access to insurance-linked returns resurges post-pandemic, as it’s expected to do.

[simon gordon] 23/11/2021 19:55

Some interesting comments on Gibson RE and Program in this interview with William Spiegel in September:

Artemis - 6/9/21

Gibson Re sidecar “not changing the recipe book” at R&Q: Spiegel

....R&Q has elected not to own its collateralised reinsurance sidecar vehicle, which is a little unusual as most sponsors tend to own the special purpose structure and the investors purely allocate their capital to it.

But in the case of Gibson Re Ltd., it has been set up by the third-party investors, along with a second Bermuda based company Gibson Ltd. as a kind of manager.

Spiegel sees this as strategically the right thing to have done for R&Q.

“It’s more efficient for us to put the 20% on our own balance-sheet, not own the sidecar. The sidecar is a separate entity owned by the investors but the relationship is a quota share basis, so any deal we do they will do as well,” he explained.

“That’s part of all of our deals. There should be no cherry-picking and all the deals will be done 80/20 and there will be no change in our underwriting and investment standards.”

The goal is clearly to turn Gibson Re into a sidecar that gets renewed to recapitalise R&Q’s legacy dealmaking firepower as and when needed, to ensure it can always have access to the funds to continue building out its legacy premium and investment portfolios.

Which is why Spiegel sees the sidecar as something permanent, a shift in the business model and one that should see R&Q increasingly reliant on third-party investor capital to support its legacy business.

He told us, “What I do see is that Gibson Re 2, is raised in three years, or however long it takes to put the money to work, and then Gibson Re 3, and it becomes a permanent part of our strategy of continuing to make us a capital-lighter business model.”

“But we need to do a good job,” he said. “This is not a strategy where, the market’s hard and let’s raise a sidecar. Both of our markets have secular growth and in a capital intensive business with secular growth you need access to additional forms of financing and that’s what this is.

“We hope this will be a permanent part of what we do going forward.”

We asked Spiegel whether R&Q has ambitions to tap into third-party investor appetite on the program management and fronting side of its business as well, given that is also fee income based and could also benefit from taking greater ownership of the reinsurance capital supporting those programs.

“I think there is an opportunity,” Spiegel said. “We are the paper for about $900m annualised of gross written paper today and we’ve made it clear to the market we should be at $1.75 billion in 2023.

“We have access to and control a lot of premiums, so is there a way to have a sidecar set up so third-party investors have direct access to the MGA’s we work with? There could be.

“That’s certainly something that’s on our mind but it didn’t have the same level of need, because we’re taking less than 10% and there’s a lot of quota share support, whereas legacy was all on our balance-sheet and it was very capital intensive.”

Getting over the drag of the public-market balance-sheet seems to have been key for R&Q in this transition and Spiegel feels the company’s shareholders should start to think differently about the company now.

“I think they should. They should think about us as an asset manager and a fee-based business and not a balance-sheet business,” he commented. Adding that, “We’re hoping we can move the business to more of an asset management business and more of an asset management multiple.”

Valuation of the business is clearly on Spiegel’s mind and his forecasts for the share price have been bullish historically. It’s going to be interesting to see how the market takes to this new model, given shareholders funds are now perhaps more important for the corporate side, than the underwriting side.

It may take shareholders a little time to come to terms with this, but the potential to lean on efficient capital market funding to support a growing legacy portfolio could come with rewards, as long as the business acquired and written is of high-quality and earns out profitably with no negative surprises.

But there is no temptation here to try and compete for the very largest legacy and run-off market deals, Spiegel said.

“I think if we wanted to we could. But we really like the niche that we’re in, which is the small to mid-sized deals where we have a big competitive advantage.

“If you look at who’s done deals over the last five years, we’ve done more than any other legacy firm and that’s because we do the small to mid-sized deals and we’ve got a good recipe book.

“One of the reasons investors supported us in Gibson is that we’re not changing the recipe book. So, this isn’t about let’s change the deals that we’re doing at all, it’s actually let’s do more of what we’re doing,” he remarked.

On the investor side, unsurprisingly Spiegel wouldn’t be drawn on naming the backers of Gibson Re sidecar, but he’s pleased with the names he’s secured as capital partners it seems.

Explaining that, “They’re very sophisticated insurance investors and that gave us great comfort because it was people that really understood the business. As an asset manager you’re always better off if your investors really understand your business.

“This is a very sophisticated group and we’re very happy to partner with them and hope they will grow with us.”

On the size of the sidecar, at $300 million, which was smaller than the initial sidecar proposals at R&Q had been contemplating, as we covered back in July, Spiegel said the capital raised was designed to match the business opportunities the company realistically believes it can win.

“We raised what we felt we could deploy. This wasn’t an AUM game at all for us. We’ve seen the demand for our capital and we sized this to take advantage of the opportunities over the next three years,” he said.

On the time it could take to deploy the capital, Spiegel added, “I’m hoping we can put the money to work faster, but that isn’t the goal. We might put it out equally over three years, we might put it all out at the end of the third year depending on where the opportunities are.

“Our acquisition approach is unchanged here, we raised what we thought we could invest.”

With the Gibson Re sidecar set to take an 80% share of all legacy deals that meet its requirements, while R&Q’s balance-sheet will get the remaining 20%, both sides will be motivated to ensure the profitability of the business acquired and underwritten.

Spiegel highlighted that the underwriting practices don’t change and neither does the investment side of this business, as legacy and run-off generates significant investable float.

That’s important he feels, commenting, “Everything is aligned. It’s all about alignment of interests, it has to be for the investors.”

Shareholders, analysts and new sidecar investors alike will be watching R&Q’s results closely going forwards, to see how this new strategy beds in and whether the earnings stream is indeed as smooth and predictable as Spiegel hopes for.

[simon gordon] 23/11/2021 06:51

Just started reading Paul Marshall's book - Ten and a Half Lessons from Experience - and these quotes resonated with me in regards to RQIH:

"The greatest opportunities always occur around change. The valuation of a company will not change unless something changes intrinsically about the company (financially, operationally or strategically) or something changes about its economic/financial context (interest rates, growth, volatility, inflation) to create or destroy value.

"Change is embodied in catalysts. These are the events, like takeovers, strategy announcements or new product launches, which announce to the market that something has happened and views need to be revised. That is why so many investors use a model based around 'valuation with a catalyst'."

"Investors respond to stories. Catalysts make the stories concrete. That is the other reason why 'value with a catalyst' is so effective as an investment approach. Provided the stock has a claim to undervaluation and there is a path to how the value can be crystallised, the thesis can be wrapped in a 'story' and passed on (brokered)."

It's a super little book, only six quid:

[simon gordon] 19/11/2021 16:43

William Spiegel - 6/9/21:

"By 2023 expect run-rate Group Fee Income of greater than $140 million and Group Pre-Tax Operating Profit of over $90 million, assuming Gibson Re capital is fully utilised by 2023"

-----

Capital Access note - 9/9/21:

A quick calculation suggests that by year 3, if all capital is deployed but not outperforming the undisclosed performance fee baseline, R&Q’s recurring 4.25% of $1.6bn would represent c.$68m of recurring revenue. Management estimates $50m of recurring fee income by the end of year 2 (FY23), which seems sensible in light of this and the large pipeline R&Q enjoys. It also estimates a further $25m of non-recurring income at that time. This would materially expand the profitability of the group, given that we believe most of it would flow down to pre-tax operating profit.

After 7 years, R&Q is obliged to offer Gibson Re a commutation on the portfolio, but Gibson Re is not obliged to accept. However, R&Q can set the pricing for its offer, which it would ensure generates it a 15% return. Should Gibson Re decline the offer, the vehicle would roll over for another 12 months, at which point the process would be repeated. We wouldn’t be surprised to see the portfolio roll repeatedly as the investors enjoy the benefits of R&Q’s execution and operational abilities.

In due course we would also expect further vehicles to be formed, with significant appetite from investors (all of whom were selected by R&Q to participate due to the vehicle being over-subscribed) and a large and enduring pipeline of potential transactions in the Legacy Insurance market.

-----

I think it's possible that RQIH could smash 2023 by under promising and over delivering.

The operational leverage will be superb when a 2nd sidecar is added. An interesting question is how long it takes to fill a side car.

[red ninja] 19/11/2021 16:22

AM Best Affirms Credit Ratings of Randall & Quilter Investment Holdings Ltd. and Its Subsidiaries

[simon gordon] 18/11/2021 11:48

Little mention in yesterday's Telegraph:

Brendan Gulston, manager of the Gresham House UK Multi-Cap fund, suggested Aim stock Randall & Quilter, an insurer, although investors should note that it is unclear whether it qualifies for IHT relief.

“The company seems very technical, which often acts as a barrier that stops people from investing in it,” Mr Gulston said. “But we think that it presents a very attractive opportunity for capital growth as well as income.” The shares have returned 54pc over the past five years and carry a dividend yield of 2.3pc.