R&Q sells Lloyd’s managing agency for $22.6m to US insurer Coverys

Randall and Quilter Investment Holdings (R&Q) has reached an agreement with US medical professional liability insurer Coverys to sell the entire share capital of its Lloyd's managing agency for $22.6 million.

The sale of R&Q Managing Agency (RQMA) to the Boston, Massachusetts-based insurer is subject to regulatory approval by Lloyd’s and the Prudential Regulation Authority, expected to be received in late 2017, according to the statement.

"The proposed sale of our Lloyd's managing agency is a significant milestone in the Group's decision to simplify its operations and focus on our core areas of legacy acquisitions and management and the provision of services to our live underwriting partners," Ken Randall, R&Q chairman and CEO, commented.

The net proceeds of the sale will be deployed to help finance the legacy transaction pipeline, especially in the US and Lloyd’s, and to generate valuable commission income from the use of accredited and Malta’s direct licenses, it said.

R&Q stated that the sale is part of its strategy to simplify the group’s operations to focus on its core, high growth activities, including - the acquisition/assumption of run-off portfolios; and the use of its licensed companies in the US and EU as conduits for niche and profitable books of P&C business, primarily to highly rated reinsurers.

Randall said: "The proposed sale will enable us to focus further on our core operations where we remain excited about the growth potential in the current year and beyond, underpinning the Group’s financial performance and distribution policy."

"R&Q Managing Agency Ltd is a well-developed and scalable platform and we are confident it will prosper under the stewardship of Coverys. We have enjoyed working with Coverys for several months to assist in the further development of their business in the London market. There is a good cultural 'fit' between the two organisations and we look forward to continuing the relationship in respect of Syndicate 3330 and exploring opportunities to work together in the future."

On completion, the agreement involves the cash payment by Coverys to R&Q of $22.6 million, which after costs and related incentive payments, will result in estimated net proceeds to R&Q of £13.9 million. This is expected to generate a gain of approximately £12.6m over the carrying cost of RQMA in the group’s 2016 audited accounts.

According to the company, the profits attributable to RQMA in the last audited accounts as at December 31, 2016 were £0.3 million and the value of the RQMA related assets was £1.3 million. The sale of RQMA will be materially positive to the group in the current year. In addition, the group is expected to make cost savings in other parts of the group which supported RQMA and these savings are likely to offset the loss of estimated RQMA related profit in 2018.

"Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA," said Gregg Hanson, CEO and president of Coverys. "The acquisition additionally allows Coverys to assist new underwriting syndicates that seek to launch their business at Lloyd’s, while also maintaining business operations for existing syndicates. We are excited to enter the London marketplace and will look to RQMA’s industry knowledge and expertise to guide us in this prestigious market."

RQMA manages Syndicate 1991, a Lloyd's syndicate with capacity of circa £127 million writing niche small and medium-sized enterprises property and casualty business, mostly through delegated underwriting authorities. Syndicate 1991 has the benefit of a wide range of primarily third-party industry and private capital support.

RQMA also manages Syndicate 3330, which provides reinsurance to-close and other reinsurance solutions for legacy business within Lloyd's. Syndicate 3330’s capital support is provided entirely by the Group. Post the sale of RQMA, the Group intends to continue to support and grow this legacy focused syndicate through a proposed separate management agreement with the new Coverys owned agency.

RQMA also provides back office support to Syndicate 2088, which is managed by XL Catlin and backed by China Re.

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