R&Q returns to profit thanks to legacy acquisitions

Randall & Quilter (R&Q), a Bermuda-based specialist non-life insurance investor, has reported a pre-tax profit of £2.8 million for 2015, a dramatic improvement from its loss of £1.6 million in 2014.

R&Q attributed the increase in profit to a very strong contribution from legacy acquisitions including the largest Part VII transfer the group has completed to date.

It said that the second half of 2015 “was probably the most challenging period in the investment markets since 2008” and it coincided with a continuing weak underwriting environment. Despite these factors, it said the board is pleased to announce full year profits are in line with its revised expectations.

At the end of 2015, the group commuted the cover between R&Q Re (US) and Ace, replacing it with what it called “a much simpler contract” with an expanded limit of $46 million.

“Importantly the commutation facilitates improved operational and investment flexibility which has led to an increase in the company’s statutory surplus and a more positive outlook,” said R&Q.

The board is proposing to maintain distributions for the year at 8.4p per share with a final proposed distribution of 5p, reflecting the improved financial performance in the second half of the year, significant cash inflows in the final months of 2015, partly as a result of a reduced capital requirement related to the Group’s live underwriting, and a positive outlook for 2016 as a whole.

R&Q also posted positive movements in run-off portfolios with strong net reserve release of £9.5m (2014: £2.4m, adjusted for retrospective premium).

It also had continued strong performance in the UK operations of the insurance services division, particularly broker run-off and premium credit control services.

Ken Randall, chairman and chief executive officer, R&Q, said: “I am pleased to report that the Group delivered a significantly stronger performance during the second half of the year with full year profits in line with Board expectations at the date of the interim results. Completion of further legacy transactions during the period was the primary driver and the business overall performed in line with expectations.

“This profitable trading, coupled with strong cash generation means that distributions per share have been maintained at 8.4p for the full year with a final payment of 5.0p due in early June, subject to customary approvals.”

He added: The Board remains fully committed to improving the financial performance of the Group. The simplification of the Group’s business model is underway with certain non-core operations having been identified for disposal to enable a renewed focus on our core business areas in which we are most confident of sustainable and profitable growth, notably the acquisition of run-off portfolios and further development of its niche UK services.”

R&Q successfully completed the sale of the R&Q Marine Services MGA to Hiscox at a premium to its carried value and of the Synergy book to Plum Underwriting during early 2016. It also has continued interest in its Lloyd’s turnkey capability.