R&q Insurance Share Discussion Threads

[masurenguy] 10/1/2022 08:09

Hi Simon, Thanks for the link. I note that I had also missed out JO Hambro Capital Mgmt too.
This is the updated major shareholder position extracted from your link.

Brickell PC Insurance Holdings LLC: 58,423,064: 21.23%
Phoenix Asset Management Partners Limited: 28,379,076: 10.31%
Slater Investments: 22,176,334: 8.06%
J O Hambro Capital Management Ltd: 18,703,662: 6.80%
Aberdeen Standard Investments: 18,199,562: 6.61%
Premier Miton Group plc 17,102,184: 6.21%
Hudson Structured Capital Management: 11,779,119: 4.28%

Happy, and prosperous, new year to you too.

[masurenguy] 09/1/2022 15:43

Cheers jon - name duplication can get quite confusing at times especially in this case since the Phoenix Group is focused upon the management of legacy insurance brands and policies.

[jonwig] 09/1/2022 14:56

Mas "Phoenix Asset management" is not connected with Phoenix Group, and is unquoted.

It's amazing how many companies use the word "Phoenix" in their name!

[masurenguy] 09/1/2022 13:58

An interesting institutional shareholding register. Phoenix is one of my top 6 holdings and they have cut their stake here by circa 40%, from 18.3% to 10.8%, during 2021 although they currently still remain the largest shareholder. Conversely, Mark Slater has been building a position here over the past few months. I have no current position but have added RQIH to my watchlist.

Current Major Institutional shareholders

Phoenix Asset Management: 29.70m: 10.79%
Slater Investments: 22.18m: 8.06%
J.O. Hambro Capital Management: 19.31m: 7.02%
Abrdn Investment Management: 17.51m: 6.36%
Miton Asset Management: 16.87m: 6.13%
Chelverton Asset Management: 9.35m: 3.40%
Amati Global Investors: 5.93m: 2.15%
Gresham House Asset Management: 5.22m: 1.90%
Franklin Templeton Fund Management: 5.05m: 1.84%
AXA Investment Managers UK: 2.98m: 1.08%

Top 10 Institutional Holders: 48.73%

[simon gordon] 24/12/2021 17:23

Legacy run-off specialist Riverstone bought by CVC for $700m earlier this year:

Insurance Journal - 24/8/21

CVC Capital Completes $700M Purchase of RiverStone Europe from Fairfax



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About RiverStone International

RiverStone International is an industry-leading acquirer and reinsurer of legacy and discontinued insurance business. Operating in the UK company and Lloyd’s of London markets, RiverStone International has transacted a wide variety of deals – from insurance and reinsurance portfolio transfers to company purchases, acquiring over US$7 billion of liabilities since 2010 and with around US$4 billion of liabilities currently under management. RiverStone International’s highly skilled and tenured professionals employ ownership, accountability, commitment, and an open and flexible approach to all transactions to provide transactional certainty, deliver desired outcomes and maintain clients’ reputations.



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[simon gordon] 19/12/2021 15:02

RQIH briefly mentioned at 6.38:

Interactive Investor - 15/12/21

Gervais Williams: my four dividend stocks for 2022

[simon gordon] 17/12/2021 18:19

RQIH's management are in a different league. They make very clear the risks and are transparent. Imagine if Google one day killed TONIC's ad feed!! I've no idea if it could happen but it's happened to a competitor. One company in the scene closed their domain name parking division because morally they couldn't face themselves anymore knowing some people were being scammed. Who knows, they might get lucky and it rolls without any controversy. If it did blow up the share would collapse violently. I don't think they are set up to handle a black swan and they've increased their risk with their new dynamic strategy.

RQIH's new strategy in Legacy actually de-risks the equity, improves the quality of the earnings and greatly enhances expansion of future earnings. The management here are very high caliber. I think William Spiegel's strategy is superb and should deliver good returns. Hopefully, it won't become a PI darling as that just draws in hot temperamental money. It will be the big institutional money that will power the share higher if they execute on the 2023 goals and or exceed them.

[martindjzz] 17/12/2021 17:53

Hi Simon and thanks for the helpful article on CNIC. It is obviously very important to have faith in what the management is saying and that is one of my reasons for joining the R&Q party.

[simon gordon] 17/12/2021 17:10

Hi Martin

I see that you bought into CNIC recently. I was in it but sold when I became more conscious that the Marketing earnings are not of a particularly high quality, hence forward guidance is not hard boiled, they can't forecast clearly because TONIC could see a fall off in Google pricing in the click of a button, it's the dodgy end of internet advertising. The Cookies change is good for CNIC but I don't like the line that the earnings are recurring, which they are in Services but in Marketing they are not, they have no control on the pricing, Google is their biggest customer.

If the story starts going sour it will probably be because of the factors mentioned in this article:



I tried to speak to the writer at Domain Name Wire but he wouldn't speak to me. I didn't speak to the company as I'm not enamoured by the way they explain their story. TONIC pricing has been strong, hence the share moving from 90s to 140s. Quite a few brokers are behind the story with 200p+ target prices. It may continue to run but watch out if it starts stalling. Bottom line is I couldn't work out the risk on their Marketing (Team Internet) earnings and pulled the plug on my investment.

Good fortune.

[alun rm] 17/12/2021 16:41

Thanks for posting Martin. I hope you can offer some industry expertise on the thread as we go forward.

[martindjzz] 17/12/2021 13:08

I’m a retired veteran of the industry with a good understanding of Program Management as RQIH describes it. Until today I chose not to have any of my investment portfolio in the general insurance sector but having now spent hours going through several articles mentioned on this BB (thank you all) and the material on their own website I think the case for investing in RQIH is quite compelling. Anyway having bought in a couple of tranches I now have 4pct of my self managed portfolio in it. My guess is that for some time yet, most PIs will still be put off by the complexity of the business and/or the price spread.

[simon gordon] 16/12/2021 19:08

RQIH flagged as a share idea on this webinar, it's the final one at 1.01:

Vox Markets - 15/12/21

Special Xmas ‘stock picking’ forum

[simon gordon] 16/12/2021 09:48

Pure Programs - 8/12/21:

PURE Programs Continues to Add Capacity Through Partnership with R&Q Accredited America




PURE Programs, LLC., is a managing general underwriter offering specialized Excess & Surplus (E&S) insurance and risk management solutions for PURE members and other responsible high net worth families whose complex exposures do not qualify for coverage from an admitted insurer. PURE Programs shares much of the infrastructure behind its admitted affiliate, PURE Insurance, including world-class risk management and claims services as well as electronic billing and policy delivery, in order to provide an exceptional experience for policyholders and their brokers.

The PURE Group is one of the leading writers of high net worth insurance in the United States. The company has grown organically by more than 20% in each of the past twelve years and has inforce premiums of more than $1 billion. The PURE Group creates specialized insurance solutions and offers coverages including: Homeowners; Automobile; Personal Excess Liability; Jewelry, Art & Collections; Fraud and Cyber Fraud; Watercraft; and Flood. The company is headquartered in White Plains, New York with ten offices across the United States. The PURE Group employs approximately 800 people writing business in 49 states and the District of Columbia.

[simon gordon] 15/12/2021 17:33

RQIH shareholder Hudson Structured's CEO Michael Millette in this video talks about the structural reasons why legacy run-off is a growth industry and there are twelve operators in the field, R&Q is mentioned but not discussed, 8.10 minutes in on the video:

Artemis BS - 26/5/20

Michael Millette, Founder & Managing Partner at Hudson Structured Capital Management, a specialist alternative asset manager with a focus on sourcing insurance and reinsurance linked returns for its investors, joined us for our latest video interview.

[simon gordon] 14/12/2021 06:14

Bit more Googling and turns out that Clear Blue pulled the sale in August:

The Insurer - 31/8/21

Clear Blue pulls sales process as PE bids fall short of expectations

Clear Blue and its majority owner Pine Brook have cancelled the Evercore-run sales process for the hybrid fronting carrier after final bids from private equity firms didn’t match expectations based on its growth trajectory, The Insurer can reveal.

It is thought that there were at least six bidders in the final stages of the process, with sources linking private equity firms Warburg Pincus, Centerbridge Partners, Gallatin Point Capital, Atlas Merchant Capital and New Mountain Capital as well as special purpose acquisition companies (SPACs) including one set up by Cohen & Co.

While it is believed there were several bids in the range of $500mn to $650mn, a combination of the unappealing deal structure of the higher bids and cash bids that were below expectations led the seller to reconsider pushing for a transaction at this point.

As previously reported, Clear Blue is on a strong growth trajectory after last year writing premium volumes of $745mn, up from $600mn in 2019.

This year the Jerome Breslin-led company is thought to have initially budgeted $1bn of gross written premium (GWP) on its quartet of carrier subsidiaries, which provide both admitted and E&S capabilities, based on the pipeline of deals at the start of 2021.

However, a number of recent major wins including the Risk Point dealers’ open lot program, the total GWP for 2021 could be well north of $1.1bn, with the expectation that based on the growth of current and pipeline deals GWP could be up by a further 30 percent in 2022.

That would mean that Clear Blue had almost doubled its top line in two years, with further Ebitda growth leaving a bigger base for the business to be valued on.

The higher levels of projected growth are likely to have raised the price expectation of the seller to the top of the range or beyond.

But sources have previously highlighted the challenge for hybrid fronting carriers in communicating the value of projected earnings and growth to potential buyers.

Although Clear Blue is technically an insurance company with a balance sheet and an AM Best A- rating, its model of retaining almost no underwriting risk means that it is more likely to be valued on a multiple of Ebitda.

By contrast, traditional carriers are valued as a multiple of book value – an approach that may even apply to some of Clear Blue’s peers that have adopted a model where they retain a significant portion of the risk.

The company’s main source of revenue is the fronting fees it charges, which are typically set at 5-6 percent of premium volume.

Premium written and fees generated earn into revenue and Ebitda over time. That means there is a lag in GAAP reported numbers as fees earn over the average policy term such that current growth rates may not reflect in Ebitda for a year or more.

As a result, Clear Blue’s Ebitda numbers on which a sale valuation would be based do not fully reflect the rapid growth that has seen the company become the biggest of the new wave of fronting specialists launched in recent years.

This publication previously reported that the company was initially likely to be budgeting in the region of $30mn of Ebitda this year, which could equate to a valuation of around $600mn based on a top end 20x multiple.

Despite the pulled sales process, the expectation is that Clear Blue will continue to consider approaches. With strong SPAC interest it is likely to continue evaluating that as an option, as well as other public routes to provide a liquidity event for Pine Brook.

Clear Blue, Warburg Pincus, Centerbridge, Gallatin Point, Atlas Merchant, New Mountain and Cohen & Co did not immediately respond to a request for comment.

[simon gordon] 13/12/2021 17:39

Been a bit of churn at the upper levels of Accredited America. Todd Campbell the President and CEO joined Builders Insurance Group in April and has recently poached two senior Accredited executives to join him: Antonio Barner and Brent Johnson.

It looks like Campbell built up Accredited and then Pat Rastiello joined in 2020 to head up E&S. Then in March 2021 the two Accredited wings were united under Accredited America and Rastiello became President and CEO.

Rastiello looks a top of the game player and will hopefully take Accredited to the next level. Some shake out as some of Todd's team follow him to Builders who are also based in Atlanta.

Accredited America - 8/3/21:

R&Q Consolidates its US program businesses

Following its recent entry into the US E&S market, Randall & Quilter Investment Holdings Ltd (R&Q) has consolidated its two US program operations as Accredited America under the leadership of former Aon executive Pat Rastiello.

Accredited America is the new brand name for both R&Q’s established admitted program arm and its recently launched E&S business, which underwrites non-admitted program business via the Arizona-domiciled and A.M. Best A- (Excellent) rated Accredited Specialty Insurance Company (ASIC).

Accredited provides fronting capacity for MGAs and sits between them and their reinsurers, which supply the underwriting capital. The program market is thought to be expanding rapidly as MGAs become an increasingly popular platform for entrepreneurial underwriters and reinsurers keen to access business directly.

Rastiello – who joined the London-listed group last year and has spearheaded ASIC’s recent launch – will now also lead the group’s admitted program arm, Accredited Surety and Casualty Company (ASCC).

Supporting Rastiello as Accredited America president is a three-person senior management team consisting of Tony Barner as SVP and CUO in charge of admitted business; Paul Amrose as SVP and CUO, E&S property; and Dawn Puro as SVP and CUO, E&S casualty.

Speaking today, Rastiello commented: “A single brand and management structure for R&Q Accredited’s admitted and non-admitted business provides greater clarity and purpose to all our stakeholders, including our clients and prospective client MGAs, reinsurers and our highly valued broker partners.”

He continued: “I am delighted and honoured to lead the new Accredited America platform which further enhances our market presence and will provide the structure to continue our strong growth momentum and to continue delivering on behalf of our MGA clients.”

[simon gordon] 12/12/2021 12:08

Mentioned in this webinar is that more Tradesman like deals are in the pipeline....

Burns & Wilcox - 12/5/21:

Paul Smith hosts a Carrier Q&A discussion with Patrick Rastiello, President and CEO, Accredited America. With over 40 years of experience in the insurance market, Patrick brings a wealth of insight on the current environment into the conversation.

During this webinar, we discussed:

-Market conditions
-Technology’s impact on the underwriting process
-Forecasts into the months ahead

[simon gordon] 10/12/2021 19:04

It looked in September that the share was primed to run after c.25m were exchanged, primarily around 170p. Then a seller appeared three weeks ago and this week 2.3m went for 173p.

Newflow wise, there should be some news on Legacy deals in the coming weeks and another Program update in February.

If a massive block goes through in the coming days, weeks or months then it could be the signal that a run to 250p might be about to begin.

Jingle Bells!!!


free stock charts from uk.advfn.com

[geraldus] 10/12/2021 17:02

Excellent posts here of late.Getting the best out of a BB.Due for a turn upwards soon.Gla.

[simon gordon] 10/12/2021 14:17

Capital Access - 10/12/21:

Growth Continues Apace

R&Q has released a very brief but exciting 9-month trading update for its Program Management business, confirming it added a further $200m to Contracted Premium in September alone (the last update showed $1.8bn at the end of August), taking the total to $2bn at the 30th September quarter end.

Contracted Premium is a key forward-looking metric, as it represents the annual Gross Written Premium that the Managing General Agent (MGA) partners believe their programs will generate when they reach maturity. That is, in the unlikely event that R&Q fails to sign up any new programs, within a few short years GWP would likely reach close to $2bn: in fact, in the half year results management raised its 2023 Gross Written Premium target to “at least $1.75bn” from $1.5bn, reflecting the growth in Contracted Premium. This quarterly update represents another material step towards that goal.

For an idea of how this filters down to fee income: On $1.75bn of GWP a 5% program fee, assuming a 95% retention rate, would result in fee income of c.$83m. This does not include the fee income from Randall & Quilter’s 40% interest in Tradesman, which was c.$12m annualised in 1H21.

Over the 9 months to 30th September, Gross Written Premium increased by an astonishing 81% to $714m, and fee income rose 138% to $39m.

There were 70 active programs at the quarter end, 31 more than at 3Q20, and a further five programs were added after in October and November, taking the total to 75.

The $39m of fee income was particularly impressive in the context of only $16m having been generated in the first 9 months of 2020. This underscores the strong growth potential of this business.

We believe there has been significant shareholder churn since the dividend policy was changed and the new strategy announced, and this may not yet be over. At present, however, it seems likely to us that the market has not yet woken up to the benefits that could come from this change – which is already cementing R&Q’s transition towards a fee-based, capital light business model that generates predictable, recurring revenues and offers significant growth potential.

[red ninja] 10/12/2021 12:22

From RQIH linkedin feed just makes the point of high quality employees :-

Randall & Quilter Investment Holdings Ltd.
2,134 followers
1h • 1 hour ago

Huge congratulations to Dawn H. Puro, Chief Underwriting Officer (Casualty) for Accredited America, who was honored yesterday in a virtual ceremony by Business Insurance as a ‘2021 Woman to Watch’.

This award celebrates Dawn’s exceptional work with clients and her market leadership within the commercial insurance industry. It is a reflection of all the excellent work she has done for us at R&Q and the inspiration that her career can provide to the next generation of female leaders.

[simon gordon] 10/12/2021 10:33

According to the Barclays note (20/1/21) insurance brokers are rated 18x.

The reason for RQIH's historically low rating has been the capital intensive Legacy division which they reckon at tops could be rated 11x.

From 2023 they will be an almost pure asset manager / broker. Because they will still hold some of the book in Legacy and Program 15x seems a decent target with 13x maybe appropriate as the market acknowledges the changed risk profile.

If they can get the ILS market securitising some of Program maybe that could allow them to grow without writing more onto their book? They become a pure originator. It's a $100bn market and they've got 2% currently, maybe over time they can get to between 5% and 10% with the ILS market allowing them to do it within the constraints of the current balance sheet. Could they also get a cut in the ILS set up? I'm just speculating on this angle as I know little of the insurance industry.

[simon gordon] 09/12/2021 21:16

At the beginning of the year in their initiation note Barclays had Program forecasted for 2021 as follows:

-GWP: $861m
-Fee Income: $39m
-Contracted Premium: $1.35bn

...and for 2022:

-GWP: $1.1bn
-Fee Income: $54m
-Contracted Premium: $1.6bn

With the final quarter to be accounted for it looks like they will smash the 2021 forecast based off the first three quarters:

-GWP: $714m
-Fee Income: $39m
-Contracted Premium: +$2bn to November 2021

Executing wonderfully!