R&q Insurance Share Discussion Threads

[red ninja] 01/8/2021 11:47

William Spiegel on Directors Talk (more condense than Investor Meets Company) worth a listen :-

[red ninja] 29/7/2021 16:08

There is synergy between the Programme Management and the Legacy Run Off.

The idea is the increasing profits from the Program Management will be used to acquire
more legacy run off insurance funds as legacy run off is capital hungry.
Currently the Legacy Run Off has been funded by equity issues which is dilutive or unsecured debt issues. In the future hopefully Programme Management should provide increasing funds for this as profits from this side of the business grow.

[superadams] 29/7/2021 15:41

Many thanks Breezer and Red Ninja. I am a holder but am tempted to build my position now you guys have made it clear what they do. The Program management looks a brilliant idea. Sort of white label insurance.

[red ninja] 29/7/2021 13:03

Investor Meets Company has the presentation of the last results William Spiegel (CEO) and Tom Solomon (CFO) explain some of what RQIH is about and where it is going.

[red ninja] 29/7/2021 12:59

Mmm, it's true that Programme Management is growing quickly, but RQIH has two main businesses Programme Management and Legacy Run Off.

I believe Legacy Run Off is still the largest business in term of profits and capital employed although that may change in the years to come.

In Legacy Run Off, they take over old insurance business and the related assets and they then process them to clear remaining claim, litigation issues at the end of the process there should be a net cash pile.

Generally they are looking for around 15% return on legacy run off so they build that in to the price they pay for an old insurance business in run off. They may in the end make a little bit more or less than 15%. Legacy run off ties up cash which can be released when the run off is complete.

[breezer_42] 29/7/2021 11:36

Superadams - Program Management is pretty simple. R&Q has regulatory approval to write insurance pretty much worldwide, so anyone who wants to start a new consumer-facing insurance business without wanting to spend the money and time to clear the massive regulatory hurdles and become an insurer can just do so under R&Q's umbrella. R&Q charges them 5% of the premium for this - e.g. if your house insurance costs you £100, R&Q will get £5.

It then re-insures most of this risk so it's not on the hook itself.

It's capital light, well protected by regulation and reputation (huge barriers to entry), and growing fast in a massive market.

This is the key business frankly, as with $1.5bn of Gross Written Premium (conservatively) expected in 2023, that's $75m of fees R&Q earns, most of which will feed through to operating profit - Probably about $50m. Look at adj. group operating income in FY20: £16m...so we have a group that is easily on track to more than triple its EBIT in a couple of years.

[alter ego] 29/7/2021 11:06

I see mainly off book trades being reported this morning using London Stock Exchange reporting of trades. Not entirely sure what the mechanism is but it's described as OTC (over the counter) trading. Anyone better informed?

[40 fathoms] 29/7/2021 10:38

Superadams, I agree with your view it is not the most straight forward business model or narrative to unpick and no doubt that puts many people off.

Maybe someone should have a word with IR, they don't appear to understand the power of the word "disruptive " ... If they plaster that everywhere we would no doubt see a better price reaction to an excellent business update.

[superadams] 29/7/2021 10:16

I think the simple answer is that most people, including me, don't really have a clue what the company does and how it makes its money.

[red ninja] 29/7/2021 10:05

Good programme management update, but it would be nice to have a bit of market recognition.

[alter ego] 29/7/2021 08:25

agree. happy to hold

[40 fathoms] 29/7/2021 08:21

A fantastic update, hard not to be happy with that. Another stock on AIM that is astonishes me that no one really follows. When you look at the dross that seems to get people excited and then you look at something like this which grows like a weed and is market dominant in a highly protected and regulated niche ... I just shake my head.

[edmonda] 29/7/2021 07:58

Another encouraging update today, on Program Management division where the Chairman says there is 'continued strong momentum and growth' . Its now up to 67 progams and $1.8bn Contracted Premium.

All flagged up in Equity Development's recent research note, and underpins their 240p / share fair value (versus 165p last close). Read it here:

[red ninja] 17/7/2021 09:09

Bricknell Insurance Holdings have cut their holding by 3.8341 % and the price has not crashed so looks like another big player has picked them up maybe in an agreed direct
sale :-



Note, Bricknell Insurance Holdings is a vehicle of 777 Partners (777 Partners is a Miami based private investment firm that invests across a number of high growth attractive verticals with a strong focus on financial services).

hxxps://www.777part.com/about-us/

[speedsgh] 29/6/2021 11:45

Distribution of Annual Report & Accounts -

Direct link to RQIH 2020 annual report -

[rik shaw] 28/6/2021 07:53

Slater Holdings notification this morning, so they see value here.

[red ninja] 22/6/2021 08:33

So Phoenix Asset Management have trimmed their holding by 1.466%, still the price appears to be strengthening so looks like their is demand for the shares from other big players.

[breezer_42] 04/6/2021 12:52

DBADVN,
Understood! Yes, it's certainly a big ask. I remember when they started the PM business though, the were scoffed at when they revealed their growth projections for it. Now they're arguably quite a way ahead of those "bullish" projections! So I'm in the same boat as you - I think they can pull it off.

[dbadvn] 04/6/2021 12:27

Don't know if cjac is on this board but would value his opinion if he is.

[dbadvn] 04/6/2021 12:26

breezer,
if RQIH were in the tech sector it would certainly be roaring ahead.

I think its just the belief in management ability to make the roadmap a reality that holds it back.

I hold because I think they will, and one day the market will recognise that.

[red ninja] 04/6/2021 12:19

Well in truth RQIH have cut the dividend from around 10p to 4p so they have chosen a middle path, more growth but still some dividend.

They were managing slow capital growth before the pandemic, but the cash raising at 135p in April 2020 was disappointing, but then again maybe the best option in a pandemic. The new strategy with more unsecured debt offering is less dilutive, but has other risks. I believe the loan notes interest rate rises to some degree with inflation.

[alter ego] 04/6/2021 11:55

Agree breezer_42, a static company paying steady dividends will never show any capital gain. It might suit someone who just wants income but I like my returns to come for more than one source.

[breezer_42] 04/6/2021 11:48

^ I don't understand this view. It's cheap because it's growing? Tell that to Tesla and Amazon.

It's always swallowed capital to grow, and has always done dilutive fundraises whilst paying dividends. Raising money to give it back as dividends is nonsensical and wasteful.

The difference now is that management has given us a roadmap to get out of this cycle, whereby the PM business, which will according to their guidance probably make $50m in 2023 (compared to £16m for the GROUP in 2020!) will start to pay for some of this growth.

Ignore this at your peril imo.

[dbadvn] 04/6/2021 11:32

The underlying issue is the balance between cash generation, borrowing and the ability to grow the business to scale through acquisition of closed book / run off business.

Basically for or the next few years it is going to swallow capital to grow .

Its cheap for a reason.

[red ninja] 04/6/2021 10:21

When we tipped Randall & Quilter in October 2019 we said it looked cheap on a price-to-earnings ratio of 10 and a yield of 5.2pc and speculated that some investors had shied away because of the complexity of some of its insurance operations.

Either way, regrettably, the shares have merely become cheaper still, partly because in its annual results published last month it said it would cut its dividend from next year, even though it raised the 2020 payment by 5pc to 4p. Its new policy is to pay 25pc-50pc of profits as a dividend, against last year’s 56pc.

“We think it is important to have a policy that allows for an appropriate balance of reinvestment in our business and dividends to shareholders, as well as one that minimises the need to raise external capital,” R&Q said.

Shareholders reacted by knocking 5.8pc from its market value. One, Gervais Williams of Premier Miton, said he was “disappointed and surprised” by the dividend cut.

There is cash on the balance sheet and no change in my confidence about the company’s ability to generate cash in the coming years,” he said. “Its potential has not changed one iota and we may well add to our holding at some stage.” We will hold.