Randall & Quilter Investment Holdings will merge its wholly owned subsidiary, Sandell Re, with Tradesman Program Managers, in return for a 35 percent interest in the combined entity.
The transaction, which is subject to the approval of the Bermuda Monetary Authority, will give R&Q an interest in the combined business with an initial book value of $43.4 million, equal to the estimated book value of Sandell at completion. Proforma pre-tax earnings of the combined business for full year 2020 are estimated to be $17.2 million.
Ken Randall and Stewart Ritchie will join the board of the newly combined business as representatives of R&Q. Following the completion of the transaction the group will deconsolidate Sandell and reflect its 35 percent equity interest in the enlarged Tradesman Group on its balance sheet.
Tradesman is a New York based managing general agent (MGA) which underwrites construction-related liability insurance, known as the ARTISAN Contractors’ General Liability insurance programme. It is currently owned by Daniel Hickey, chief executive of Tradesman Program Managers and various affiliated entities and individuals.
The insurance policies are issued by Accredited Surety & Casualty Company, R&Q’s A- 9 rated subsidiary, which is authorised to issue policies in all 50 states and the District of Columbia.
In the year to 31 December 2019 Tradesman generated earnings before interest, tax depreciation and amortisation of $8.06 million, an increase of 99 percent from 2018.
Sandell was acquired by the group in October 2019 for $25 million and has been one of the reinsurers of the ARTISAN Contractors’ General Liability programme since its inception in 2017. As at 31 December 2019, Sandell Re had total assets of $116.7 million, and incurred a loss for the year of $1.3 million after making a $3 million provision against third party loans and strengthening reserves on acquired legacy portfolios by $2.6 million.
Ken Randall, executive chairman of R&Q, called it “a fantastic deal for both parties,” noting it enables the group to acquire a significant and valuable minority interest in a fast-growing New York based MGA, which will be immediately accretive to the group’s post tax earnings.
The deal secures ongoing programme management fees for Accredited, estimated at $6 million for 2020, and significantly reduces the group’s live underwriting risk exposure from the ARTISAN programme, he said. It also demonstrates the group’s ability to deliver shareholder value through its legacy acquisition strategy, with Sandell having been acquired for just $25 million in late 2019.
Tradesman’s owners gain access to the expertise and management within the R&Q Group and participate in the underwriting results of Tradesman Program, having aligned with the risk assumed by the reinsurer panel.
Randall said the growth of Tradesman’s ARTISAN Program will continue to drive value for Accredited’s fee-based programme management business and the Sandell risk carrier. “Tradesman’s ARTISAN Program has experienced consistent and profitable growth since its launch in November 2017,” he said. “In 2020 gross premiums written by Tradesman are expected to reach $120 million,, with plans to expand their offering into other, related lines of business. We strongly believe that this partnership with Tradesman and, in due course with other MGAs, will help us to deliver exceptional results for our shareholders, agents and reinsurers.”
Hickey added: “R&Q, through Accredited Surety & Casualty, have been great partners in the growth of our programme since inception.”
Randall & Quilter Investment Holdings, Sandell Re, Tradesman Program Managers, Ken Randall, Stewart Ritchie, Daniel Hickey