R&Q Insurance shares dive after anticipating significant loss for 2023
R&Q Insurance Holdings shares fell ~45% after the London-listed insurer disclosed that it will report a significant pretax loss for 2023 due to adverse development in its legacy business and a material increase in corporate costs in relation to the sale of Accredited, which was announced last year.
The legacy business is expected to realize adverse development of 23% of the group’s net reserves for 2023, which the company said includes the $64.2 million of adverse reserve development identified at the half year. This primarily relates to tail claim development as well as inflation and abuse claim development across the portfolio.
The company is also announcing that it has agreed to sell all the interests held by R&Q and its affiliates in the joint venture between Obra and R&Q, Sag Main, to Obra Capital. The joint venture was established in 2022 to hold entities with legacy non-insurance corporate liabilities to which R&Q would provide management services.
Under the terms of the agreement, R&Q Solutions and R&Q Re will transfer their collective 49% interest in the venture to Obra. The fee income received by R&Q in 2023 was $7 million. As consideration, R&Q will receive from Obra cash of $27 million alongside the transfer and delivery of $3 million of preference shares held by Obra in Randall & Quilter PS Holdings Inc.
The proceeds will be used for a combination of paying down the group’s revolving credit facility and retaining cash in regulated entities.
“We are pleased with the strong return on our investment in the Joint Venture, and this agreement is in line with our objective of realizing value from within our Legacy Insurance business. Although we believe that the corporate liabilities market continues to represent an attractive long-term opportunity, developing regulations, including potential changes around capital requirements, have reduced the strategic attractiveness of direct equity participation in joint ventures of this type for R&Q. However, R&Q’s expertise in the management of long-tail liabilities means that servicing and advisory opportunities will continue to exist in this space and the provision of solutions for corporations seeking to manage such liabilities will continue to represent a large and addressable target market for R&Q Legacy.” – eff Hayman, Chairman of R&Q.
