Randall & Quilter reports record pre-tax operating profit

Specialty non-life insurance company Randall & Quilter reported a record pre-tax operating profit in its results on Monday, driven by “strong” operating results across its business segments.

The AIM-traded firm said its pre-tax operating profit was up 102% year-on-year at £16m, which the board put down to a year of accelerated growth across the business.

It said fee income totalled £18.8m in the year ended 31 December, representing 17% of gross operating income.

Operating earnings per share came in at 5.9p, which was an increase of 38%.

Profit before tax was down 21%, however, at £30.2m, which the company said reflected a reduction in net intangibles due to the mix of legacy insurance transactions.

Randall & Quilter said its programme management segment was profitable for the first time in 2020, earning pre-tax operating profit of $3.4m at a 14.3% margin.

A total of 18 new programmes were signed in the year, increasing total programs to 48, driving a 46% increase in gross written premium to $538.9m.

The firm said it was on course to achieve its previously-announced target of at least $1.5bn of gross written premium in 2023.

Its legacy insurance segment, meanwhile, had a “record year”, executing on 19 deals and delivering a 46% increase in pre-tax operating profit to £38.1m.

The company said business was continuing to be written at “attractive” returns, with its operating return on tangible equity coming in at 14.8%, and its five-year average return standing at 20.2%.

Randall & Quilter said capital remained “strong”, with a preliminary group solvency ratio of 202% against its target of 150%.

The board declared a final cash dividend of 0.2p per share, for a total cash distribution for the year of 4p per share.

It also announced a new progressive dividend policy with a payout ratio of between 25% and 50% of pre-tax operating profit, a proxy of cash earnings, reflecting current growth opportunities and a balance of reinvesting and growing dividends.

The firm said it intended to grow its annual dividend from 4p per share.

A total of £173m of capital was raised for growth during the year, with the company’s senior leadership strengthened with key hires including executive chairman, group chief financial officer, chief executive officer of US programme management, and a chief human resources officer.

Randall & Quilter said it expanded its footprint and capabilities by launching a US E&S programme management business, and increased its exposure to fee-related profits through its investment in Tradesman, a managing general agent to which it was providing programme management services.

“We remain in the enviable position of competing in growing markets that offer us the opportunity to reinvest our capital at high rates of return, creating long term shareholder value,” said executive chairman William Spiegel.

“With significant growth opportunities in front of us, our business will continue to consume capital over the near term, particularly our legacy insurance business.

“Over time, however, we expect our programme management business to create enough free cash flow to make us capital self-sufficient.”

At 0907 BST, shares in Randall & Quilter were down 7.89% at 157.5p.