Acquisition of RSL businesses

RNS Number : 5364S

Randall & Quilter Inv Hldgs PLC

13 September 2010

 



Date:	13 September 2010
On behalf of:	Randall & Quilter Investment Holdings plc ("Randall & Quilter" or the "Group")

Randall & Quilter Investment Holdings plc

§ Acquisition of Reinsurance Solutions Limited, Reinsurance Solutions LLC and Excess & Treaty Management Corporation

The Board of Randall & Quilter (AIM: RQIH), the specialist non-life insurance investor, service provider and underwriting manager, is pleased to announce that, subject to regulatory approval, the Group has agreed to acquire Reinsurance Solutions Limited ('RSL UK'), Reinsurance Solutions LLC ('RSL US') their employees  and various other assets and liabilities (collectively 'the RSL businesses') from Guy Carpenter & Company, LLC and Marsh Limited (both wholly owned subsidiaries of Marsh & McLennan Companies, Inc). The total agreed consideration is $10m, payable in cash upon completion of the transaction. The RSL businesses will be acquired on a debt free basis with estimated working capital of c. $2.75m.

The RSL businesses specialise in the provision of administration and consulting services to the active and run-off (re)insurance industry. RSL UK provides broker replacement services for UK insurers and service providers in run-off. RSL US provides insurance consulting and run-off administration services for US based re(insurers), state liquidation departments and regulators.  

The fit with the Group's existing operations in the UK is excellent. As well as bringing the efficiency benefits of scale, RSL UK will further establish Randall & Quilter as a leading player in the broker replacement market. In the U.S., RSL will provide the Group with a substantial third party service business to balance the Group's existing operations, currently focused on managing the three owned insurance company portfolios.

In 2009, the RSL businesses generated fees of over $13m and $1.75m* in pre-tax profit from 85 clients (based on pro-forma unaudited management accounts). There are 75 employees in total; 40 in the US and 35 in the UK.

Following the acquisition, R&Q intends to restructure the RSL businesses, the costs of which will be taken in the current financial year. Given that the likely completion date of the transaction is anticipated to be during the latter part of the year, the restructuring costs and related due diligence costs are expected to result in a small loss from the RSL businesses during 2010. This does not, however, affect the Group's overall guidance for the full year result provided in the interims result statement on 18 August, 2010.   Furthermore, a full contribution from the RSL businesses is expected from 2011, when the acquisition is anticipated to be accretive to earnings per share.

In addition, the Group has agreed to acquire Excess & Treaty Management Corporation ('ETMC') and certain related employees from Guy Carpenter & Company, LLC.

ETMC is a management company for the run-off of the Excess Casualty Reinsurance Association ('ECRA') pool. It will be acquired for a consideration of $1 on a debt free basis and at completion is expected to have c. $9.5m in funding, related to the business' expected future ECRA servicing costs.

Following the acquisition, the Group has also agreed to provide run-off management services using ETMC's employees to the Carpenter Management Corporation in respect of its U.S. based managed run-off pool (the 'CMC Pool')

Commenting on the acquisition, Ken Randall, Chairman and Chief Executive, said:

"We are delighted to have reached agreement with Guy Carpenter to purchase the RSL businesses and ETMC.

"In addition to generating additional sustainable profits for the Group's insurance services division, the RSL businesses will increase the Group's client base and depth of expertise and should generate other cross-selling opportunities.

"We also look forward to managing the ECRA pool and providing services to the CMC Pool, the participants of which are major players in the North American reinsurance market.

"Further updates on obtaining regulatory approval will be given in due course."

* Based on operating income only, i.e. excludes the credit arising from a write back to bad debt provisions in the period of $1.15m.

Enquiries to:

Randall & Quilter Investment Holdings plc

(www.rqih.co.uk)

Tom Booth

Tel: [phone]

Numis Securities Limited

Stuart Skinner (Nominated Advisor)

Tel: [phone]

Charles Farquhar (Broker)

Tel: [phone]

Shore Capital Stockbrokers Limited

Dru Danford / Stephane Auton

Tel: [phone]

Redleaf Communications

r&[e-mail]

Emma Kane/ Alicia Jennings/ Adam Leviton

Tel: [phone]

 Notes to Editors:

Since formation, Randall & Quilter has pursued a buy and build strategy to create a comprehensive range of investment activities and services in the global non-life insurance market and is focused on the following four core areas:

-    Insurance Investments;

-    Insurance Services;

-    Underwriting Management; and

-    Captives

The Group currently has:

-    a portfolio of nine insurance companies in run-off (from the UK, US and Europe) with net assets of c.£74m as at 30 June 2010;

-    wide service capability in both the 'live' and 'run-off' markets

-    a team of approximately 240 insurance professionals based in the UK, USA, Canada and Bermuda; and

-    'in principle' approval by Lloyd's of London to provide 'turnkey' management services to syndicates.

The Group was founded by Ken Randall, Executive Chairman and Chief Executive, and Alan Quilter, Group Finance Director who both have extensive experience in the industry including as Head of Regulation of Lloyd's and as Head of the Market Financial Services Group respectively.

 

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