R&Q records $33.3m loss for 2022
R&Q Insurance Holdings has reported a $33.3 million pre-tax loss in 2022, as its legacy business recorded a one-time $32 million adverse development.
R&Q, which has completed its separation into two legal entities and is exploring strategic possibilities with third parties, said the charge contributed to a $56.6 million loss of the legacy business.
It said the $32 million of adverse development primarily from older transactions and reflected the first full year of a transition to a capital efficient annual recurring, fee-based revenue model from a balance sheet intensive, Day-1 gain model.
The loss in the legacy business offset a strong performance in R&Q’s Accredited unit, which reported gross written premium of $1.8 billion, up from $1 billion, fee income excluding MGA stakes of $80 million, up from $44.9 million and a pre-tax operating profit of $55.7 million compared to $20.6 million in 2021.
R&Q Legacy said it had completed four transactions while exercising discipline in a soft market with gross Reserves Acquired of $68.8 million compared to $735.0 million in 2021.
Reserves under management were $395.6 million, but these rose to more than $1 billion due to an MSA Safety transaction involving non-insurance liabilities that closed in January 2023.
Fee Income was $12.1 million compared to no income in 2021.
The company said it incurred one off cash charges of about $50 million primarily associated with $28 million in one-off historic legal matters associated with older legacy transactions and discontinued programmes, $14 million in automation spend which should yield meaningful productivity savings starting in 2024 and $8 million in advisory costs associated with shareholder activism and sale process.
William Spiegel (pictured), chief executive officer of R&Q, said: “While our Pre-Tax Operating Loss of $33.3 million is driven primarily by $32 million of adverse development in R&Q Legacy, at an underlying level our performance reflects two businesses at different stages of their development.
“Accredited continued to grow and reported record results while R&Q Legacy reported a loss but has shown good execution against its transition plan to become a more capital efficient business.”
He added: “We announced in April 2023 that the Board had concluded that it was in shareholders’ best interests to evaluate strategic options that allowed for a separation of Accredited and R&Q Legacy. We have two great businesses, but they operate in different parts of the insurance ecosystem, require different skill sets and expertise, and have different rating and regulatory needs.
“We are now in a position where each has the scale, maturity, and brand strength to stand on its own. By separating these businesses, we can ensure both have the right level of management focus and appropriate capital structures to achieve their full potential.
“Looking ahead, we are confident the outlook is strong for Accredited and R&Q Legacy. Both businesses have excellent pipelines and, while we remain highly disciplined, we are confident of growing Gross Written Premium and Reserves Under Management in each business respectively.”
