R&q Insurance Share Discussion Threads

[controlledmadness] 23/10/2023 13:26

Simon
A very good post but I do nut see how R&Q is responsible for maintaining the rating ot Accredited.
If they sell R&Q america the owner of Accredited then the new owners become liable to maintain the rating.
Why does R&Q have to give Accredited part of the money that they get to maintain the rating. Surely the buyers are responsible?
So actually the sale is for 200 million (or maybe 170 million)

[simon gordon] 23/10/2023 11:28

They raised £103m at 105p just over a year ago.

What a money pit:

"In the event that Accredited does not retain a fully independent rating, the Board is clear in its view that there is a significant risk that AM Best will downgrade Accredited. Such a downgrade would have a detrimental impact on Accredited's ability to successfully operate its business, particularly in the United States where an 'A-' financial strength rating is a minimum requirement from Accredited's counterparties. The Board therefore believes that a downgrade would have material implications on R&Q's ability to continue as a going concern.

Additionally, the Board is of the view that the current financial leverage of R&Q is unsustainable and if the Sale were not to proceed and the Available Net Cash Proceeds were not available to facilitate a material de-leveraging of R&Q, R&Q may not be able to continue to satisfy or obtain waivers on the covenant requirements for its existing debt facilities or repay certain of its debt facilities as they become due. A potential default or cross-default by R&Q on its existing debt facilities may lead its lenders to take action to protect their interests by requiring collateral or enforcing their security over certain R&Q assets, resulting in a materially worse outcome for R&Q and its shareholders.

The Sale constitutes a fundamental change of business and under the AIM Rules for Companies, Rule 15 will apply. The closing of the Sale is therefore conditional on the approval by a majority of shareholders at a Special General Meeting. The Special General Meeting of R&Q's shareholders is expected to take place by the end of the year."


Are they going to reinsure the existing book:

"In parallel to executing its organic plan, the Board will also continue to explore potential transactions to de-risk and reduce volatility in R&Q Legacy's balance sheet or otherwise maximise value to stakeholders."


Artemis - 23/10/23

Shedding the Accredited program management business should put the R&Q legacy business on stronger footing and result in a return to the firms historical focus, but under a new strategy of utilising third-party capital to support the majority of the run-off risk underwriting it enters into.

The performance of the first vintage of the Gibson Re legacy reinsurance sidecar is therefore going to be critical, as R&Q will need to be able to demonstrate that it delivers the returns investors expect, or raising a second vintage could prove a challenge for the company.

[simon gordon] 23/10/2023 09:43

It's a good deal for the CEO and CFO. Shareholders turned down their last deal at 170p. Now they're left with a loss making black box.

[controlledmadness] 23/10/2023 09:37

Seems a lot of smoke for a bad deal. Why do R&Q make a capital donation to keep the rating so in fact you can reduce the amount being paid.
The shareholders get nothing.
Market conclusion is obvious that this is a bad deal.

[edmonda] 20/10/2023 21:35

late Friday news via RNS ....

[controlledmadness] 20/10/2023 12:56

Is the board still functioning ?

[scandinvestor] 06/10/2023 20:44

Interesting view, but it looks like they built the business on the legacy deals so Accredited would not have grown without that.

[petomi] 29/9/2023 15:48

Indeed the legacy business is a mess. Ironic that about a year ago Phoenix requisitioned a meeting to reinstate Ken Randall who as I recall was the architect of the original legacy business which has harboured so many problems



I haven't looked at the results in detail but the Accredited PM business looks to be doing well so let's hope there's value to be unlocked there. Presumably that's why the price has recovered well today after the initial sharp markdown

GLA

[simon gordon] 29/9/2023 06:14

What a car crash! Once Accredited is sold, it looks like all that's left will be a toxic book of reserve losses.

[edmonda] 04/7/2023 14:20

Discussions are indeed underway to unlock value at R&Q Insurance, and looking at other completed deals Equity Dev's analyst sees potential scope to realise a net return above current market value.

Read / hear new note:

[red ninja] 01/7/2023 08:15

The old management took on the asbestos legacy rundown and did not adequately deal with it. It was a ticking time bomb.

However, I don't think they have explained their strategy for the future, as in why sell Progamme Management , it easily seems the most attractive part of the company.

[scandinvestor] 30/6/2023 15:07

Obviously changing accounting standards hasn’t helped, but the argument that the failure of RQ is due to the old management is wearing decidedly thin.

[red ninja] 30/6/2023 07:40

William Speigel was seen as a star performer to get him in they gave him £2 million in shares and a good package. The problems with legacy are not his fault, but the old regime of Quilter and Randall.

[scandinvestor] 29/6/2023 21:48

Someone’s making good money here, but it’s not the shareholders!

[simon gordon] 29/6/2023 19:52

This is nuts...

The Insurer - 29/6/23:

R&Q CEO Spiegel ranks as best-paid London insurance CEO despite record 2022 loss

[controlledmadness] 29/6/2023 16:24

So seeing Accredited profit was around 55 million , what would accredited fetch if sold?
My guess is around 1 billion as its still growing.

[simon gordon] 29/6/2023 16:10

Top,

Legacy crushing them, lucky they had Accredited, otherwise they'd be bust.

Slater really dropped the ball by turning down 170p, thought the Wall Street boys were turning him over, when in fact they were saving shareholders bacon.

[topvest] 29/6/2023 09:17

Truly dreadful results. I had a lucky escape with this.

[edmonda] 14/6/2023 11:08

New research note out from Equity Dev on the equity raise by R&Q Insurance in context of the strategic reshaping of the Group.

Read it and hear audio summary below:

[simon gordon] 12/6/2023 06:10

Jeez, it looks like shareholders are going to be stuck with Legacy.

"A process is underway for the potential sale of Accredited with interest expressed from a number of parties. In addition, a variety of strategic alternatives are being explored in relation to R&Q Legacy."

[archy147] 06/6/2023 14:22

Probably because I couldn't take any more and sold out a few days ago.

Don't you just hate it when that happens?

[superadams] 06/6/2023 14:20

Why the current strength I wonder ?

[foreverbull] 23/5/2023 16:15

Any news??

[foreverbull] 04/5/2023 05:05

Does this mean "Stay away from this stock for a while until there's clearer direction in terms of both group restructuring and profitability"?

[simon gordon] 03/5/2023 17:02

The Insurer - 2/5/23:

R&Q working with Howden Tiger, Fenchurch, Barclays and Numis on strategic review

London-listed R&Q has retained a number of advisors – including Howden Tiger, Fenchurch Advisory, Numis Securities and Barclays Bank – as it explores a strategic review of the business, The Insurer understands.

The appointments come as R&Q pursues plans to separate its program management and fronting arm Accredited from its struggling legacy business.

Sources have told this publication the advisors are working on a variety of different options for the future of R&Q as well as the prospect of a bifurcation of the company.

It is understood the advisors are also exploring the potential for a capital raise which may be required to appease rating agency concerns ahead of any potential split of the company progressing.

When announced on 4 April, R&Q said the legal reorganisation of the company would be subject to regulatory and lender consents which it said it expects to obtain in Q2 2023.

AM Best put R&Q’s rating under review with negative implications following the announcement of its tabled plans to split its two business units. At the same time R&Q warned investors that it would post a heavy loss for 2022 as it deferred its reporting for the previous year until June.

The expected $30mn-$40mn operating loss for 2022 is being driven by a $55mn-$60mn loss in R&Q’s legacy operations, which AM Best said will likely lead to a material weakening of the group’s risk-adjusted capitalisation.

Corporate expenses added $35mn to the “preliminary and unaudited” figures for 2022
while its program management arm Accredited is in profit to the tune of $55mn-$60mn.

As this publication reported, the announcement was effectively a profits warning as the stock is lightly covered and corporate broker Numis previously projected a smaller full-year operating loss of $19mn.

The share price tumbled following the announcement and has since remained close to a historic low, closing on Friday at 60.98 pence a share – which values R&Q at around £200mn.

Under the stewardship of William Spiegel, who was parachuted in to succeed the retiring founder Ken Randall in 2022, R&Q has witnessed a failed buy-out at 175 pence a share, heavy losses, a defeated shareholder activist campaign, an almost entirely new leadership team and an emergency equity issue to prevent an AM Best downgrade.

R&Q is understood to have a long-standing relationship with Fenchurch Advisory, with the firm last year advising the company in its defence against shareholder Phoenix Asset Management’s attempt to requisition management changes.

Barclays Bank has acted as the joint bookrunner and joint broker on a number of transactions undertaken by R&Q, including on its recent disposal of its stake in Tradesman.

Numis Securities Limited – which is acting as nominated adviser (NOMAD), joint broker, and financial adviser in the strategic review – has also worked with R&Q in the past on a number of transactions. It has acted as R&Q’s NOMAD on the group’s activities, strategies and performance for several years.

R&Q split

Putting forward the rationale for a split, Spiegel said it is now in R&Q shareholders’ interests for Accredited to “stand on its own”.

Accredited – which provides fronting services to MGA carriers in the US and Europe and depends on a minimum A- financial strength rating – has grown to $1.8bn in 2022 and fee income of $80mn.

However, it currently relies on rated insurance company entities which currently also house and write R&Q’s legacy business.

R&Q has laid the blame for its 2022 loss squarely on its legacy business and its failure to complete enough transactions – with gross reserves acquired in 2022 standing at just $70mn, significantly down on previous years – as well as projections for its legacy sidecar Gibson Re.

R&Q and Howden Tiger declined to comment on this article.

Barclays Bank, Fenchurch Advisory and Numis were approached for comment.