R&q Insurance Share Discussion Threads

[jonwig] 09/7/2020 07:02

breezer - thanks for comment. For some reason I haven't seen the company's presentation, but the same points are covered in the Hardman analysis.

[breezer_42] 08/7/2020 13:18

Interestingly if you look at pg 14 of their latest presentation they give some idea on how to think of thge valuation, basically giving management's view on which peers each business resembles, explaining the levels at which those peers are valued, and then explaining that R&Qs business lines actually outperform the peers:

The Program Management business is most similar to global Insurance Brokerage businesses (a list of brokers is in the appendix)
- Annual recurring fee-based business
- High pre-tax margins
- Scalable with limited capital required for growth
- Key performance indicators for Insurance Brokers are growth in Revenue and EBITDA as well as EBITDA margin
- Over the past 5-years, publicly traded insurance brokers have traded at 3.6x LTM Revenue and 16.4x LTM EBITDA

The Legacy business is most similar to global Specialty Insurance companies (a list of Specialty Insurers is in the appendix)
- High and stable returns on capital and equity
- Strong, non-cyclical growth
- Key performance indicator for Speciality Insurance companies is Return on Net Asset Value
- Over the past 5-years, Specialty Insurance companies have traded at 1.99x Net Asset Value.

Our businesses have higher growth and stronger returns than the comparable companies
Program Management has a 280% CAGR (’17-’19) in Commission Revenue vs insurance broker average of 8%
Legacy has a 5-year Operating RoAE of 20.2% vs Specialty Insurance companies average ROAE of 9.4%

[jonwig] 08/7/2020 11:43

Yes, it's sponsored research. I'm not happy with lumping RQIH int a 'sector' - it doesn't fit well with general (or Lloyd's) insurers.

[red ninja] 08/7/2020 10:51

It reads well, but I believe it is research paid for by RQIH so not independent.

I see ED state RQIH is 66% undervalued in comparison with sector, but if you raise cash at 135p a share, you can't really expect investors to chase them too far above that level.

[edmonda] 07/7/2020 15:48

Record FY19 results from Randall & Quilter saw a combination of strong Legacy deals and growth in the scale, product range and reach of Program Management.

Group looks well set / able to benefit from covid disruption to insurance, and its shares appear materially (2/3) undervalued v sector and prospects.

Read new detailed research note from Equity Development here:

[bisiboy] 27/6/2020 17:33

reason is to keep retail funds sweet. they can class shares as income and distribute more as a result. otherwise I agree pointless exercise unless the future growth in dividends per share is higher than it would otherwise have been.

[red ninja] 24/6/2020 12:27

A trade at 12:06 for 3.5 million at 174p today looks like a buy and a vote of confidence.

Note, I say buy as on HL platform it gave me a buy price at around 174p today.

[jonwig] 06/6/2020 11:48

According to their RNS, Invesco sold about 10.8m shares on 03/06 and told the market on 04/06.

The five biggest trades late on Friday 05/06 totalled some 9m shares. I wonder if those were Invesco's, late reported? (You can't definitely stamp them as buys.)

Anyway, 9m shares is 4.2%, so we may get another RNS if somebody else is involved.

[red ninja] 06/6/2020 11:31

I notice that about 9 million RQIH shares bought just after 4pm on Friday (in several trades).

Possibly Invesco selling out their remaining stake in RQIH ?

[jonwig] 05/6/2020 07:41

Yes, actually shows why not paying a cash dividend is a good thing (maybe should make it standard). These legacy deals book a big upfront profit but cost cash long before it starts coming back.

[rik shaw] 05/6/2020 07:20

Another acquisition

[this_is_me] 04/6/2020 22:56

Yes didn't affect the price. They must have found a home for them.

[speedsgh] 04/6/2020 19:04

Invesco have reduced from 9.49% to 4.40%...

[pldazzle] 04/6/2020 11:08

alter ego - that's a fallacy. If Company X pays (say) £1m in dividends and has 100m shares, the shareholders get a div of 1p/share. If Company X then issues 1m bonus shares, the div reduces to 0.99p(approx) per share. If you held 1000 shares, you now hold 1010 shares and get exactly the same dividend as before.

[alter ego] 04/6/2020 10:47

well you obviously cannot please everyone, but I'll take all the future dividends on those extra shares as adequate compensation for the loss on one cash dividend payment.

[this_is_me] 04/6/2020 10:14

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 08:06

@ 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 08:03

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 07:18

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 12:39

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 12:31

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 09:25

Investor Presentation For Final Results can be found in :-

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

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

Jonwig,

Yes, "Adjust downwards" = ex-div

[this_is_me] 01/6/2020 14:46

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

[jonwig] 01/6/2020 14:45

@ 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?)