R&q Insurance Share Discussion Threads

[eekorehc] 20/4/2012 11:29

From a tip sheet

Randall & Quilter has also today announced it has reached an agreement for a $2.7 million acquisition of Trimac Acceptance Ltd, a Barbados domiciled captive insurer which has been in run-off since 1996. This has an adjusted net asset value of $2.9 million, with Randall & Quilter adding that it "will optimise operational and capital efficiency through a novation to a group owned cell within our Bermudian captive management operations... Will receive a fee for this novation from the Trimac group. The Trimac group will also transfer sufficient cash into the cell to cover held reserves and collateral requirements and will provide the cell with a full indemnity for any future claims deterioration".

Balance Sheet & Shareholder Distribution...

At the year-end cash totalled £37.18 million and net tangible asset value per share was 107.3p, up from 95.9p a year earlier – with the company emphasising it "has internal resources to take advantage of the current pipeline of legacy insurance acquisition opportunities". It also proposes to pay out 4.9p per share in cash to all shareholders .due course"), which will take its full-year distributions to 8.1p per share - an increase of more than 10% compared to 2010.

Evaluation...

The shares .trade at 106p – a discount to the end-2011 net tangible asset value and capitalising the company at £52.4 million. Given the asset backing, strong and growing profitability and 7.6% yield (likely above 8% for the current year), I continue to concur with the company's joint broker, Shore Capital, that "the stock rating has yet to reflect the value latent in the various run-offs within Randall & Quilter's portfolio nor the value being created for shareholders within the 'live' market units". As both an income and growth play, . "buy".

[adam] 20/4/2012 10:17

Agree with most of the comments. They state that one of their bigger concerns in regarding Capital Obligations for US subsidiaries and new rules on that. I take it to mean CRR (Capital Resource Requirements) and GENPRU 2.2? So they are concerned that they will have to find more or different regulatory capital? They say FSA inscrutable on this and looking at other structures. So how big a risk is this? Is it just a question of they will be able to find away round it with a bit of financial engineering or that it is a potential bomb?

[lord gnome] 19/4/2012 09:21

That's the way I see this share SteMiS. Safe little number with a better return than cash in the bank with the opportunity for capital upside at some time in the future. A widows and orphans stock.

[stemis] 19/4/2012 09:16

Earnings aren't really much of an indicator of valuation in companies like RQIH, because of the lumpiness of profit recognition. What is important is tNAV and yield. The current price is a 2% discount to tNAV and a yield of 7.7%.

However fwiw, the 'dividend' of 8.1p (although its done as a capital distribution) is less than consensus forecast of 8.34p. Profit also seems to be down on forecast, although its hard to know what is and isn't included in forecasts.

Performance is the usual curates egg. Disappointing losses in the underwriting management and captives divisions where they seemt to be putting a lot of investment. Run off and insurance services are where they continue to make the money.

If the discount to tNAV remains at this level then shareholders will benefit from the dividend and from future increases in tNAV. Dividend is likely to be up by at least 5% next year.

Back to sleep for another year.

[jonwig] 19/4/2012 08:05

The goodwill impairment, relating to R&Q Re US was commented on in the Group's recent trading update. The impairment arises due to the continued low market yields on high quality fixed income securities and the acceleration in settlement of known claims during 2011 which resulted in much lower than anticipated cash and investment balances by year end. The impairment has not arisen due to any change in expectations of the performance of any of the Group's operating companies and has not impacted the Group's net tangible asset value per share. The Group does not carry any other goodwill attributable to insurance company subsidiaries in its financial statements.

They headline NTAV of course.
It doesn't give me much concern, though low yields on government bonds are a bane to all insurers.

[lord gnome] 19/4/2012 07:43

The goodwill impairment is old news, but not nice nevertheless. What is nice is the 10% increase in the final dividend. Looks solid enough going forward and the yield is very tasty. Another acquisition as well. Not that I understand a word of the jargon, but I assume it will be good news and should be profitable.

[18bt] 19/4/2012 07:36

Complex results today, which bear greater study. At first sight look good, but will need to study the goodwill impariment more closely.

[stemis] 05/3/2012 10:18

"The Group's progressive distribution policy is also unaffected and the total distributions to shareholders in respect of the 2011 financial year will be in line with expectations. "

[lord gnome] 05/3/2012 07:48

Yes, good news from RQIH. The company seems to be making all the right moves, so once the market improves the shares should really start to motor. In the meantime, I'll keep taking the dividends.

[18bt] 05/3/2012 07:20

Good trading update today. Not worried about the impairment - it sounds totally plausible and quite comforting that the CFO spotted it. I've only seen one broker's forecast on Digital Look, but this must put 2011 PBT around £8.5m to give a current PER of 8.5x and a yield of 7.5%. The yield on the finalk alone to be paid June is c3.4%.

[alter ego] 02/3/2012 09:25

The trick here is showing a surplus once all the claims have been settled - just like any other insurance operation really - so you have to trust that when they take over a book of outstanding claims, they pay just enough to guarantee a profit when it's all done and dusted.

[labatie] 02/3/2012 08:51

Thanks jonwig.

Whatever it is that RQIH actually does, they're plainly good at it!

[jonwig] 02/3/2012 07:17

"Reinsurance-to-Close" - in case anyone's wondering (as I was) it's explained here:

[red ninja] 10/2/2012 16:50

Speedsgh

thanks

[speedsgh] 10/2/2012 16:32

Founded in 1992 by executive chairman and chief executive Ken Randall and finance director Alan Quilter, Randall & Quilter makes its money by offering services to insurers and reinsurers and through the ownership of reinsurance companies in run-off. It has proved a profitable investment for us over the past year as we have banked dividends of 7.65p a share in June and October and the shares have also increased 9p from the price we paid last February. Combined the investment has returned a healthy 18.3 per cent.

The investment case remains solid when you consider that the shares trade on a hefty 33 per cent discount to the company's last reported net asset value (NAV). Add in a rolling yield of 7.7 per cent and they remain an income buy.

[red ninja] 10/2/2012 16:18

What did the review say ?

[18bt] 10/2/2012 16:11

IC Review of 2011 Bargain Portfolio?

[lord gnome] 10/2/2012 12:43

Signs of life today?

[lord gnome] 26/1/2012 21:21

Old news 18BT. It was announced last September. Today was the completion date.

[18bt] 26/1/2012 18:21

Surprised no reaction here to Tawa's acquisition of Whittington

[jonwig] 26/1/2012 10:32

Thanks - never saw the thread. Will add it to Favs.

Incidentally, B P Marsh [BPM] came to notice this week on an article in IC. They hold a stake in RQIH but some more interesting insurance assets such as Hyperion.

[stemis] 26/1/2012 09:39

I started a thread on TMF about 4 months ago



Price has fallen back a little since then and they've made a few acquisitions

19 Oct - Principle (a run off of the Takaful motor insurance business) for £4.34m
1 Dec - Synergy (HNW managing general agent) for an undisclosed amount (i.e. not a lot)
23 Dec - Yatch and Marine Trades Portfolio for a nominal consideration

All good bolt on stuff.

[jonwig] 26/1/2012 09:07

"That will do for me."

Me too, I think. Those are the same criteria as mine. Thanks.

[lord gnome] 26/1/2012 08:44

Hi jonwig. I hold these in my high yield portfolio that helps to supplement my pension. I bought in at 91p in Dec 2010 so although they haven't done much capital-wise, I have collected my dividends. The NAV is around 145 if memory serves, so they are well-padded. I missed a glorious opportunity to trade these when they shot up to 130 during a share buy-back period, but other than that I reckon this is a stock where you sit back and collect an ever-increasing dividend. That will do for me.

[jonwig] 26/1/2012 08:38

Lord G - interesting what stock screens throw up!

There are serious issues with some of these companies - PSPI, GVC and possibly NARS, CNKS which the article does caution about. Of the four, NARS is the only one I'd look twice at.

Are there any issues with RQIH? I haven't found any, though actually understanding what they do might put some off. And they don't actually seem to pay a dividend - it's a different balance sheet exercise. They've certainly got the distributable reserves to pay a plain old divi.

Of course, I'm fishing for views here ... whether to invest in RQIH or not.