R&Q hails 2020 as the “year of accelerated growth”
Randall & Quilter Investment Holdings saw its pre tax profit dip slightly in 2020, but insisted the business has now laid the foundations for accelerated growth going forward, with its programme management business achieving profitability for the first time.
R&Q reported a profit before tax of £30.2 million for the full year 2020, compared to £38.1 million in 2019, a decrease of 21 percent. R&Q attributed this decline to a reduction in net intangibles due to the mix of legacy insurance transactions.
Its programme management operation earned pre-tax operating profit of $3.4 million, having made a $1.8 million loss the previous year. The business signed up 18 new programmes, increasing total programmes to 48.
This drove a 46 percent increase in gross written premium (GWP) to $538.9 million, up from $368.9 million in 2019. R&Q argued the business is on course to achieve its previously announced target of at least $1.5 billion of GWP in 2023.
The legacy insurance business also had a record year, executing on 19 deals and delivering a 46 percent increase in pre-tax operating profit to £38.1 million, up from £26.1 million the previous year.
William Spiegel, R&Q’s executive chairman, admitted 2020 had been a challenging year, with the pandemic testing the resilience of both its employees and its business model. “Our team responded with agility and confidence in a dynamic market environment and this was demonstrated by our record 2020 operating results,” he said.
He insisted R&Q had recognised quickly that COVID-19 would result in significant structural changes in its markets, creating attractive and accretive opportunities for the business. R&Q raised £173 million of new capital to take advantage of these opportunities, he said.
Spiegel said for R&Q 2020 is best described as a year of accelerated growth. “With both of our businesses profitable, we now have the foundation to continue accelerating our growth and delivering sustainable earnings in the years to come,” he explained. “We also added a complementary business to programme management when we made a 35 percent investment in Tradesman Program Managers, one of our core MGA programme management partners. This investment increases our exposure to fee-related profits and we anticipate exploring further opportunities to emulate this approach with other MGAs to whom we provide programme management services.”
Spiegel said R&Q will continue to consume capital over the near term, particularly in the legacy insurance business, but predicted that over time “we expect our programme management business to create enough free cash flow to make us capital self-sufficient.”
Despite still being capital consumptive as a business, R&Q is adopting a progressive cash dividend policy, with a payout ratio of between 25 percent and 50 percent of its pre-tax operating profit, he added.
“While the precise payout percentage may vary year on year, we intend to grow the total amount of the annual cash dividend from the FY 2020 level of four pence per share,” Spiegel said. “This dividend policy will allow us the flexibility to carefully balance the allocation of our capital between reinvesting in profitable opportunities, providing an attractive and growing dividend to our shareholders and minimising the need to raise external capital.”
