R&q Insurance Share Discussion Threads

[hybrasil] 24/10/2023 18:35

Yes a friend sent me that article.
I made good money historically from R&Q. Having read that article I decided it was barge pole material

[simon gordon] 24/10/2023 16:02

Here's how the Insurer is covering it, article is paywalled:

R&Q sells the Accredited crown jewels but proceeds represent only half of debt

The $465mn enterprise value put on Accredited in its proposed sale to Onex Partners appears to be broadly in line with expectations, but net cash proceeds available to R&Q after the deal closes may cover as little as half of the beleaguered parent’s debt, analysis by The Insurer shows.

[catabrit] 24/10/2023 14:35

Yeah, spot on. None of the newcomers have done well. Enstar have bossed it and that is probably because they have been in the game for thirty years and own 30% of the stock.

[foreverbull] 24/10/2023 14:31

I think the problem with legacy business is they may have priced the acquisitions aggressively which is haunting them now....

[catabrit] 24/10/2023 13:53

Market is saying TBV is likely lower as liabilities have not been priced properly. I would rather own Enstar Group at 0.9x book and likely lower when you take into account their conservatism.

[willemers0n] 24/10/2023 13:47

Agree not uncommon to trade below book, and anything below <0.5 book generally pricing as highly distressed. Interesting to note, 3mn shares traded since yesterday on a float of approx. 374mn or 0.8% - illiquid small cap. Someone could come in and be comfortable at 0.6x book following de-levering and that's be a 2x from here. But ofc it's insurance and not even mgmt seem to know where liabilities are landing...

[willemers0n] 24/10/2023 11:25

Indeed, but at 20 pence a share, it's now trading at 0.31 P/book or .21 P/ tangible book. They're getting $50mn working cap and liquidity for RQ next 18 months operations, plus that's assuming the top end of $80mn in collateral for RQ legacy liabilities and only $170mn de-levering. They're also injecting $76mn equity to Accredited ex-post transaction, so RQ should still own a stake in accredited right? Unless they're quite listerally asset stripping and leaving a doomed ship, in which case they'll have lawsuits coming their way from main shareholders. Would love ppls thoughts

[catabrit] 24/10/2023 11:10

Legacy insurance run by a management team with little skin in the game seldom ends well.

[spectoacc] 24/10/2023 10:39

"simon gordon23 Oct '23 - 14:53 - 1444 of 1447
0 0 0
If this goes to zero, Slater will have lost £82m by turning down 170p. Phoenix about £26m. What a dog's dinner."


Isn't as if they weren't warned. Never ceases to amaze me how badly "OPM" gets managed.

[catabrit] 23/10/2023 18:51

Sadly this is what happens when you buy something you know little about. I put this on the watchlist after it was recommended to me on Twitter. I did about an hour of work on it at 50p ish and put it in the too hard pile. For me, legacy insurance with zero competitive advantage is a no-go area almost at any price. Especially if there’s no real alignment.

[simon gordon] 23/10/2023 16:12

Edward,

According to R&Q's website they are still a holder.

[edwardt] 23/10/2023 16:08

phoenix sold out a while back i recall

[simon gordon] 23/10/2023 14:53

If this goes to zero, Slater will have lost £82m by turning down 170p. Phoenix about £26m. What a dog's dinner.

[simon gordon] 23/10/2023 14:49

Control,

There is quite a bit of debt in preference shares to be paid off, including a recent raise of $60m. It looks like most of the money from the sale is going to pay off debt.

The toxic Legacy book has destroyed all the value in the company.

If Gibson RE 1 doesn't work out they are stuffed.

It would have been best if they could have sold Legacy and kept Accredited, obviously nobody wants to go near it. Slater and Phoenix so screwed up on this one, all the signals were flashing sell at 170p and they said no.

[controlledmadness] 23/10/2023 14:26

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 12:28

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 10:43

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 10:37

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 22:35

late Friday news via RNS ....

[controlledmadness] 20/10/2023 13:56

Is the board still functioning ?

[scandinvestor] 06/10/2023 21:44

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 16:48

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 07:14

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 15:20

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: