A record FY19 result and strong pipeline
Impressive FY19 results met expectations via a combination of record Legacy deals and growth in the scale, product range and geographical reach of Program Management income. The latter is key, as this builds a base for future growth in complementary, visible, and reproducible fee-based revenues and commissions.Group revenues are defensive, so R&Q takes a pragmatic view regarding the short-term impact of economic turmoil on its business. It sees some potential for Covid-19 delays in securing both legacy deals and new programs this year but, conversely, for insurance industry disruption to drive business in its direction.
R&Q looks well set, based on business booked in FY19 and Q1 2020 and underlying growth in program activity. Premium and commission income is fully visible 12-18 months after business is booked and, as it builds, is likely to reduce the proportion related to legacy income. The latter is deal-based, so difficult to predict, but potentially highly profitable.
Record performance is a direct result of the strategic refocus, now into its third year, on two complementary, high growth specialty insurance activities: legacy purchases and program management. That has created a prospective mix of capital growth (in Legacy division) and steady, visible fee income (Program Management).
Simply rerating to sector levels indicates in the region of a 66% undervaluation at present. Underpinned by a historic NAV / share of 148p that is only slightly below the current share price despite the clear growth opportunities, and with a record of attractive shareholder distributions.
Gallagher (Arthur J.) is a holding company. Through its subsidiaries, the company provides insurance brokerage, consulting and third party claims settlement and administration services to both domestic and international entities. The company's segments are: brokerage, which is primarily comprised of its retail and wholesale insurance brokerage operations; risk management, which provides contract claim settlement and administration services for enterprises and public entities that choose to self-insure their property/casualty coverages and for underwriting enterprises that choose to outsource their property/casualty claims departments; and corporate, which manages its clean energy and other investments.
Brown & Brown is an insurance agency, wholesale brokerage, insurance programs and service organization. The company's segments are: Retail, which provides a range of insurance products and services, and non-insurance risk-mitigating products; National Programs, which provides professional liability and related package products, a range of insurance products, and flood coverage, and targeted products and services; Wholesale Brokerage, which markets and sells excess and surplus commercial and personal lines insurance; and Services, which provides insurance-related services, including third-party claims administration and medical utilization management services, as well as Medicare Set-aside services.
Marsh & McLennan Companies is a holding company. Through its subsidiaries, the company provides clients advice and solutions in risk, strategy and people. The company provides analysis, advice and transactional capabilities to clients. The company conducts business through two segments: Risk and Insurance Services, which includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions) as well as insurance and reinsurance broking and services; and Consulting, which includes health, wealth and career services and products, and other management, economic and brand consulting services.
Randall & Quilter Investment Holdings is a holding and investment company. Through its subsidiaries, Co. acts as owners and managers of insurance companies, live and in run-off, as underwriting managers for insurers, as participators and managers of Lloyd's syndicates, as purchasers of insurance receivables and as service providers to the non-life insurance market. Co.'s has 3 segments: insurance investments which acquires and assumes legacy portfolios, insurance debt and provides capital support to Lloyd's syndicates; insurance services which provides insurance related services; and underwriting management, which provides management to Lloyd's syndicates and operates underwriting entities.
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