R&Q suffers $53 million loss on jump in adverse developments
Adverse developments in its legacy business plunged R&Q Insurance holdings to a $53 million loss in the first half of the year compared to a $6.5 million loss a year earlier.
Bermuda-based R&Q Insurance Holdings, which is in advanced talks to sell its programme management business said the $40 million adverse development stemmed primarily from older transactions in Lloyd’s some of which were filed late due to the Covid pandemic while other were higher than expected.
R&Q Legacy recorded a $64.2 million pre-tax loss which offset a $50.2 million pre-tax profit in Accredited, the programme management segment. Corporate and other expenses also cost the company $22.4 million.
For the group, gross premiums written rose to $1.09 billion from $807.3 million and net premiums earned were $81.5 million compared to $33.5 million a year earlier.
Fees and other income rose to $55.9 million from $33.4 million and net investment income was $22 million, compared to $8 million. The company recorded unrealised investment gains of $3.3 million compared to a loss of $100 million in 2022.
However, net incurred losses and loss adjustment expenses soared to $120.3 million compared to a gain of $95.8 million in 2022.
“R&Q is undergoing a multi-year operational turnaround aimed at creating a stronger, sustainable and more efficient business,” said chief executive officer William Spiegel. “We are well underway with this programme and continued to make good progress in the first half of 2023.
“Separating the ownership of Legacy and Accredited is an important step in accomplishing this and, as announced on 22 September 2023, we are in advanced discussions with a party regarding the potential sale of Accredited.”
R&Q said last week that it was in advanced talks with private equity firm Onex Corporation, which currently holds stakes in a number of insurance businesses, including Bermuda-based Convex, for the sale of Accredited.
Spiegel added: “Accredited successfully grew GWP, fee income and pre-tax operating profit and continues to be a leading trans-Atlantic programme manager, with five further programmes approved post this reporting period.
“R&Q Legacy now has reserves under management in excess of $1 billion, most notably executing its first corporate liabilities transaction through the formation of our joint venture with Obra to manage the non-9surance legacy exposures of MSA Safety. While H1 is seasonally quieter, R&Q Legacy continues to have an active pipeline with three deals in advanced stages and over $800 million in reserves identified as opportunities.”
Spiegel said: “As we detailed when we set out our plan to transition R&Q Legacy to a more capital efficient recurring fee-based model, our earnings needed to go through a valley as we implemented this strategy.
“While we are pleased with how R&Q Legacy is executing against its strategy, we are disappointed to have witnessed further adverse reserve development. Excluding this, we would have reported a Group Pre-Tax Operating Loss of $18 million, an improvement on last year’s equivalent, that highlights Accredited’s continued profitable growth and R&Q Legacy’s increased fee income and strong expense management.”