R&Q flags record year, offloads stake in Tradesman

23rd Feb 2023 11:22

(Sharecast News) - R&Q Insurance updated the market on its programme management performance in 2022 on Thursday, revealing a record year with strong growth in both gross written premiums and fee income.

The AIM-traded company said gross written premiums totalled $1.8bn for the year, an increase of 80%, while the programme fee income was $80m, up 78% on 2021.

It also announced that it had agreed to sell its 40% minority holding in the New York-based managing general agent TPM Holdings USA, also known as Tradesman.

Roosevelt Road Capital Partners, the controlling 60% shareholder, would acquire R&Q's 40% ownership for total consideration of $47m, subject to post-closing adjustments based on Tradesman's 2022 audited financials.

Around $41m would be paid in cash on closing, and another $6m will be paid in the form of a two-year promissory note.

The transaction was expected to complete in the first quarter, pending Tradesman's lender approvals.

R&Q said it would use the proceeds for general corporate purposes, and to pay down debt.

The firm said its share of profits from Tradesman was $11.2m and $5.2m for the 2021 financial year and the first half of 2022, respectively.

The investment in Tradesman was held at $21.5m as at 30 June last year.

Tradesman was expected to earn $26.5m in EBITDA in 2022, which could be reduced by up to $9m if the maximum contingent commissions became payable to reinsurers should the programme underperform expectations.

R&Q said Tradesman had net debt of $67m as at 31 December.

The company said it would have made 3.7x its initial investment of $25m from the acquisition of Sandell Re in 2019, which was subsequently converted into a 40% stake in Tradesman, including $46m of dividends received to date.

"2022 was an outstanding and record year for our programme management business, and I am pleased that we have exceeded our target to deliver $1.75bn in gross written premiums, despite the exchange rate headwinds of a strong US dollar on our European business," said executive group chairman William Spiegel.

"We have now firmly established R&Q Accredited as a scale player and leading partner in both the US and Europe.

"As we outlined in our recent update, the team has maintained momentum into 2023 and we continue to see a strong pipeline of potential partnerships."

At the same time, Spiegel said it would retain its disciplined approach to managing general agent selection and reinsurance partnerships, seeking to work only with high-quality agents and reinsurers while ensuring it maintained a well-balanced portfolio.

"Tradesman is a high-quality managing general agent with whom we have had a long-term profitable partnership.

"Our decision to reduce our exposure to certain Tradesman programmes as part of our ongoing active portfolio management meant our minority investment was no longer strategic and we believe its long-term ownership better fits with its existing management team.

"Given the compelling nature of the offer, we believe the transaction is an excellent outcome for all parties."

At 1512 GMT, shares in R&Q Insurance Holdings were up 7.53% at 82.8p.

Reporting by Josh White for Sharecast.com.