R&Q CEO reports ‘excellent pipeline’ for new deals
Bermuda-based Randall & Quilter (R&Q) is growing in legacy acquisitions and programme underwriting management and CEO Ken Randall prepared the market for upcoming new transactions.
“I am pleased to report that we have an excellent pipeline of new business in both program underwriting management and legacy acquisitions,” Randall said while presenting the 2017 results. “2017 saw a further increase in the profit contribution from legacy acquisitions. Program underwriting management business has been building steadily, especially towards the end of the year and we anticipate strong future profit growth from this business area, as commission earnings from new program launches gain momentum from the end of 2018 and beyond,” Randall added.
In 2017, R&Q grew the operating profit to £27.9 million from £10.4 million in 2016. After tax, profits grew to £23.0 million from £8.3 million over the period.
R&Q made 19 legacy acquisitions in 2017 and two Lloyd’s reinsurance to close deals. The company has strengthened its balance sheet in 2017 raising a total of £65 million of new capital.
“As a Group we have always seized upon opportunities which inevitably come from market turbulence and this is certainly true today as we witness major upheavals in the global insurance industry - especially those arising out of the challenges posed by Brexit and the emergence of new technologies,” Randall said.
R&Q continues to see opportunities in the run-off business from insurers that have ceased underwriting, pointing to the announcements in the first quarter by the New Zealand insurance group CBL and the Danish insurer Alpha to stop underwriting as examples.
Additional business drivers are onerous capital and reporting obligations from Solvency II regulations as well as the US tax reforms and OECD tax policies which could have a significant impact on some self-insurance entities, not least those that are off-shore, Randall noted.
Furthermore, there are increasing opportunities emerging from industry M&A where acquirers of business decide to sell “run- off” books with a view to freeing up capital as well as renewed opportunities in Lloyd’s run off business, Randall said.
The programme underwriting management pipeline is also “strong” and Randall anticipates “a lot of new activity in 2018 in both Europe and the US”.
Market disruption and the apparent retrenchment of some existing US providers is providing R&Q with new opportunities in the US and the typical size of transactions the company is negotiating is increasing significantly, according to the statement.
In Europe, Solvency II has exposed a number of undercapitalised fronting specialists. “Brexit”, and the current uncertainty over how it will impact financial services is creating new opportunities for R&Q which owns a European insurer, R&Q Malta licenced to operate across the European Union and which will continue to do so after “Brexit”, Randall noted.
New Fintech/InsureTech initiatives are creating a disruptive force that is encouraging industry entrepreneurs to establish new platforms and ways of writing business, Randall said. Typically, this is in the form of managing general agencies (MGAs) and R&Q’s insurance platforms can provide the infrastructure to support these new businesses and act as a conduit between them and their re/insurance capital, he noted.
In 2017, R&Q signed 3 programme partnerships in Europe and 5 in the US. In 2018, the company anticipates signing a further 6 partnerships in Europe and a further 6 in the US.
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