R&Q Insurance Regulatory News (RQIH)

Randall & Quilter Investment Holdings Ltd.

Randall and Quilter to sell Lloyd's Managing Agency to Coverys

23 June 2017

R&Q Investment Holdings Ltd ('R&Q' or 'the Group') is pleased to announce that it has reached agreement to sell the entire share capital of its Lloyd's managing agency, R&Q Managing Agency Ltd ('RQMA') to Coverys, a leading provider of medical professional liability insurance based in Boston, Massachusetts. The sale remains subject to regulatory change of control approval by Lloyd's and the PRA, anticipated to be received in late 2017.

The sale follows the previously announced decision to simplify the Group's operations to focus on its core, high growth activities which include: (i) the acquisition/assumption of run-off portfolios; and (ii) 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.

On completion, the agreement involves the cash payment by Coverys to R&Q of $22.6m, which after costs and related incentive payments, will result in estimated net proceeds to R&Q of £13.9m. This is expected to generate a gain of approximately £12.6m over the carrying cost of RQMA in the Group's 2016 audited accounts. The profits attributable to RQMA in the last audited accounts as at 31/12/16 were £0.3m and the value of the RQMA related assets was £1.3m. The sale of RQMA will be materially EPS and NTA accretive 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.

The net proceeds of the sale will be deployed to help finance the ever growing 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.

RQMA manages Syndicate 1991, a Lloyd's syndicate with capacity of circa £127m writing niche SME 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, a syndicate that 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; the syndicate managed by XL Catlin and backed by China Re.

Ken Randall, R&Q chairman and CEO, commented: "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."

"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."

"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."

"Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA," says Gregg L 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."

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About Coverys

Coverys is a leading provider of medical professional liability insurance for physician, hospitals, dentists, podiatrists, and advanced practice providers. Coverys gets consistent recognition for its superior financial performance by inclusion in the Ward's 50 for the past seven years. Coverys emphasizes proactive risk mitigation and patient safety programs that help clients anticipate, identify and manage risk to reduce errors and improve outcomes.

About R&Q

Randall & Quilter pursues a buy and build strategy and has created a comprehensive range of investment activities and services in the global non-life insurance market.

R&Q is focused on the following three areas:

· Insurance Investments

· Insurance Services

· Underwriting Management

The Group:

· provides a range of services to both the live and legacy (re)insurance markets to support growing businesses and address complex and challenging run-off issues;

· employs over 400 insurance professionals based in the UK, US, Bermuda, and Europe with wide service capability in both the 'live' and 'run-off' markets;

· owns and manages a portfolio of insurance companies, both active and in run-off, in the UK, US and Europe with net assets of £161m as at 31 December 2016;

· owns an admitted P&C Insurer, A- rated by AM Best, with licenses throughout the US; owns a Bermuda Class 3A insurance company;

· launched Syndicate 1991, which commenced underwriting from January 1, 2013 and has an agreed capacity of £127m for 2017, manages one RITC ('run-off') syndicate, 3330, and owns and operates an MGA platform;

· acquires and manages a portfolio of insurance receivables, with a carrying cost of £5.6m as at 31 December 2016

The Group was founded by Ken Randall and Alan Quilter in 1991.

Legal Entity Identifier (LEI): 2138006K1U38QCGLFC94

Website: www.rqih.com