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London-listed R&Q has unveiled a restructuring of its management team and raised £49.3mn this morning in a significant equity placing that will support its new focus on providing fronting services as well as its traditional legacy acquisitions.
R&Q – whose market capitalisation was circa £130mn before the announcement – will have around £47mn after fees to inject into two of its main operating subsidiaries: it’s US nationwide licenced insurer Accredited Surety & Casualty and its Malta-domiciled carrier, R&Q Insurance Malta.
It represents a near 40 percent expansion of its capital base and has been supported by both existing shareholders – such as largest shareholder, Phoenix – and new institutions.
At 129p, the issue price is a 12 percent discount to last night’s closing price of 146.5p.
£30mn will be injected into R&Q Malta to bolster its balance sheet and support discussions to secure an A- rating, believed to be from AM Best.
“The credit rating and increased size will, in turn, open up further MGA/programme business with higher commission rates”, explained the firm, adding that it should also assist with some legacy transactions, such as loss portfolio transfers”, explained the firm today.
A further $25mn will go into Accredited, which will raise the Florida-headquartered insurer into AM Best’s size “7” category “opening up larger loss portfolio transfer opportunities and programme business alike”.
Size 7 is defined as insurers with $50-$100mn of net assets.
Earlier this year, R&Q sold its Lloyd’s managing agency to the US health insurance group Converys for $23mn and is in the process of streamlining its existing business around 1) legacy acquisitions and management and 2) providing program and MGA services, more frequently referred to as “fronting”.
With the explosion of interest in MGAs and many reinsurers keen to get closer to the ultimate customer, R&Q has the ability to provide licenced paper in both the EU and the US.
Ken Randall, the founding chairman and CEO of the group, also confirmed that he will step down as CEO next summer to be succeeded by CFO Tom Booth.
The company said this morning that a new CFO will be appointed.
Alan Quilter will also step down from his role of chief operating officer to become deputy chairman.
All three executives have participated in the offering.
Randall welcomed the capital raise this morning as a significant step in the group’s development.
“We believe this capital raise will represent a step change in the Group’s profile, providing enhanced access to quality business through balance sheet strength. The significant opportunities available to the Group in both of our core operations are now able to be fully harnessed and we look forward to the future with added confidence,” he commented.