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(Sharecast News) - R&Q Insurance has successfully raised $50m in non-voting, perpetual preferred equity through its subsidiary, Randall & Quilter PS Holdings, it announced on Monday, alongside strong first-quarter trading.
The AIM-traded firm said the fresh funds were provided by Scopia Capital Management, one of its largest shareholders, with the potential to increase the equity raised to $60m.
It said the preferred stock issued to Scopia could be exchanged into new ordinary shares of R&Q at a premium of 10% to the 20-day volume-weighted average price prior to the agreement, at Scopia's discretion.
The funds raised would primarily be used to bolster the capitalisation of R&Q Legacy - a division of R&Q Insurance that provides reinsurance support for completed legacy transactions originating from Accredited, another subsidiary of R&Q.
Additionally, the capital would be allocated for general corporate purposes, as Accredited would no longer pay intra-group dividends to R&Q in order to secure its financial strength rating from AM Best.
R&Q said it had now obtained all necessary approvals to complete an internal reorganisation, as it announced on 4 April.
As part of that initiative, Accredited and R&Q Legacy would operate under separate holding companies within the R&Q Group.
That separation was a prerequisite for Accredited to receive its own subgroup financial strength rating from AM Best.
Additionally, R&Q said it was continuing to explore strategic transactions with third parties to enable Accredited to operate independently.
A potential sale of Accredited was being considered, and there had been expressed interest from multiple parties, the board claimed.
Additionally, various strategic alternatives were being explored for R&Q Legacy.
In terms of operational performance, R&Q reported strong results for Accredited in the first quarter of 2023.
Gross written premiums reached $0.5bn , indicating a 34% increase compared to the same period last year.
Programme fee Income also rose by 24% to $22m during the same period.
Accredited maintained partnerships with leading managing general agents in Europe, the UK, and the US and successfully added five new programmes in 2023.
The company said it was expecting to establish further partnerships throughout the rest of the year due to a robust pipeline of opportunities.
"This additional capital, alongside our completed internal reorganisation, means Accredited and R&Q Legacy can be established as stand-alone entities within R&Q," said executive chairman William Spiegel.
"2023 has seen Accredited continue its strong momentum and leadership position in the programme market, achieving a record first quarter in terms of gross written premiums and fee income.
"We are currently working very closely with AM Best to secure a subgroup rating for Accredited and have completed the key reorganisational requirements."
Spiegel noted that R&Q Legacy had seen three transactions signed or completed this year, and had a strong pipeline of transactions to grow reserves under management beyond $1bn.
"R&Q Legacy continues to focus its efforts on its key areas of strength, medium sized legacy transactions, while exploring potential further corporate liability opportunities.
"I am pleased with the progress we are making to enable both Accredited and R&Q Legacy to maximise their potential by having the right ownership and capital structures in place."
At 0850 BST, shares in R&Q Insurance Holdings were up 0.87% at 57.9p.
Reporting by Josh White for Sharecast.com.
