Randall & Quilter launches sidecar as moves to a fee-based model
Non-life legacy business specialist Randall & Quilter (R&Q) Investment Holdings has launched a new sidecar with about $300 million of capital. Bermuda-domiciled Gibson Re will allow R&Q to support some $2 billion of reserves, it announced.
Gibson Re will reinsure 80% of all of R&Q’s new qualifying legacy transactions for three
years, with R&Q participating in 20% “to promote alignment of interest”. R&Q will also receive annual recurring fees of 4.25% of Gibson Re’s reserves for at least six years. The sidecar will transform legacy Insurance into a recurring fee-based business.
Assuming the sidecar’s capital is fully utilised by 2023, it expects run-rate group fee income of more than $140 million and group pre-tax operating profit of over $90m.
The launch came as R&Q announced its half-year results that showed a pre-tax operating loss of $23.5m. However, that would disappear if including two signed legacy insurance transactions with $23 million of underwriting profit expected to close in the second half.
Program management gross written premium of $890 million and fee income of $50 million (H1 2021 annualised) were both up – 80% and 135%, respectively – from the same period last year. Program management pre-tax operating profit of $20 million (H1 2021 annualised) and the pre-tax operating profit margin of 40% were also both up, from $1.6m and 7.5%. R&Q’s Program management gross written premium target for the financial year 2023 was increased from $1.5 billion to $1.75 billion.
The year has seen R&Q complete eight legacy insurance transactions, while the company reported a legacy insurance pipeline of over $1 billion of reserves.
“Over the course of 2021, we have successfully implemented a key component of our five-year strategy – developing a more fee-based business. Our announcement of the formation of Gibson Re starts the transformation of R&Q’s legacy insurance business from being balance sheet intensive with episodic earnings to a more capital-light and predictable, largely recurring fee-based model,” said William Spiegel, executive chairman of R&Q. “Our legacy insurance business now joins our program management business in generating most of its future revenues from annual recurring fees.
“R&Q is repositioning the business to become an asset manager for legacy insurance business, focusing on our core strengths of insurance origination, underwriting and claims management. This change reduces our reliance on the capital markets to support our growth.”
