R&Q raises £16.9m; eyes growth in Malta, US and seeks more acquisitions

Randall & Quilter Investment Holdings (R&Q), the non-life insurance and investment specialist, has conditionally raised £16.9 million through a placing of new ordinary shares, which it plans to use to boost its operations in Malta and the US and to make further acquisitions.

The company said that a total of 14,423,591 new ordinary shares in the company have been placed by Numis Securities at a price of 117 pence per placing raising total gross proceeds of approximately £16.9 million. These represent approximately 20 per cent of the issued ordinary share capital of R&Q prior to the placing.

The placing price represents a discount of approximately 2.9 per cent to the closing price of 120.5 pence on 27 February 2017.

R&Q said it is raising the extra cash as it continues to simplify its business model. This would include growing its core legacy acquisition activity and fronting fee generation in accredited and R&Q Insurance (Malta), which would receive a £3 million capital contribution. This would will increase its statutory surplus to approximately £42.5 million and allow a further €5 million Tier 2 capital issue.

It would also give its A- rated US carrier Accredited $3.5 million, which would increase its statutory surplus to approximately $26 million, which will push Accredited into the size ‘6’ category ($25 million to $50 million), an important threshold to meet most major US brokers’ approved security lists.

It would use the remaining £10.3 million for other pipeline legacy acquisitions or novations. Approximately £0.6 million of the gross proceeds will be used to pay fees and expenses incurred in connection with the placing (including broking commissions and other fees).

Ken Randall, group chairman and chief executive, said: "We are pleased to have received excellent investor support for this placing to pursue the many exciting growth opportunities available to the group. Our refocused strategy on driving commission income from writing niche books of business using our licensed carriers in the US and Europe and largely reinsuring it to highly rated and collateralized reinsurance markets is gaining excellent momentum with a number of already executed transactions.

"At the same time, our legacy acquisition business goes from strength to strength, with new product and reach in the US, Bermuda and Europe as well as our traditional UK core. 2016 was an excellent year for acquisition activity and I am pleased to confirm that the pipeline for 2017 is even stronger.

"Our average deal size, whilst focused on small to medium sized entities, is also increasing. We expect to deploy this capital efficiently, driving value for shareholders. The uncertainties created by the future of the Brexit negotiations have, if anything, increased the opportunities for a group such as ours and we believe will continue to do so."

The company also said that it expects that its 2016 results to be at least in line with expectations driven by strong legacy activity, especially in the US with an anticipated book value per share in the range of 106 pence to 110 pence with net tangible assets anticipated to be in the range of £61 million to £65 million.

It added that it is still looking at selling off certain non-core business units, which could result in a material one-off gain for the group.

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