Quality building rapidly
The core strategy to build two complementary divisions and income streamslooks well on track. A strong first half was driven by Legacy deals - announced
in FY18, which obtained final approval in H1 - and a £16.0m boost from
investment income (FY18: £5.0m). That is a reminder that Legacy transactions
can be very profitable, but their timing unpredictable. We believe that makes
recent rapid growth in Program Management especially important.
Contracted new Program Management business scaling rapidly
Program Management’s strong recent growth has built estimated future gross written
premiums to approaching $800m pa from contracts secured to date. That effectively
creates high-quality regular commission income, which will attain full to speed over the
next 12-18 months. That represents a steady, growing revenue base and outlook.
Interims boosted by Legacy deals completed in the period
Headline figures make good reading although specific Legacy deals are one-off boosts,
so not an indication for H2. PBT was £33.1m (H1 18 continuing: £7.8m) and basic EPS
19.2p (H1 18 continuing: 3.6p). There was a 13% increase in NTA/share to 133.2p
(H1 18: 117.6p) and a 12.5% return on tangible equity (H1 18: 6.8%).
We have marginally increased our FY19e forecast for better than expected investment
returns, although assume an H2 contribution of c £4m. Completion of Legacy deals is
also inherently tricky to predict. FY19e includes the $25m acquisition of Sandell Re, which should receive approval from the Bermuda regulator in H2. Previous acquisitions have been delayed, notably the US$80.5m Global Re deal, announced in Sep 2018, which received approval from the New York regulator in May 2019.
Further Legacy deals await approval
The Legacy division completed five new acquisitions and three reinsurances in H1. The
Program Management division launched ten new contracts in the USA and Europe. Both divisions report strong new business pipelines.
The proposed interim distribution 3.8p/share (H1 2018: 3.6p) paid from capital, so taxfree to UK private investors; a prospective 5.8% yield based on 9.5p/share payment.
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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