R&Q records improved fee income as it works to separate business

The AIM-traded firm said fee income jumped 18% in the six months ended 30 June to $46.2m, while the division’s pre-tax operating profit surged 86% to $28.6m.

Its pre-tax operating profit margin grew 13.4 percentage points to 57.0%.

Looking at its Legacy division, R&Q said it successfully finalised the MSA Safety deal with gross reserves acquired worth $695m - a significant rise from $5.3m in the same period last year.

Reserves under management ballooned to $1.1bn, indicating a 172% boost from 2022's $0.4bn, while fee income saw growth of 10%, settling at $9.7m.

R&Q noted that the MSA Safety transaction incurred a lower fee than Gibson Re due to zero tail risk exposure.

The division’s pre-tax operating loss escalated to $64.2m, encompassing a $40m adverse reserve development primarily from older dealings in Lloyd's.

Total fee income for the group was ahead 17% year-on-year at $55.9m, while the group recorded a pre-tax operating loss for the half-year of $58m, including a $40m negative reserve development from R&Q Legacy.

Non-recurring items comprised a non-cash income of $1.8m, primarily from net unrealised investment gains and an extraordinary cash income of $4.1m.

A concentrated effort on curtailing costs led to R&Q Legacy's fixed operating expenses diminishing by 8% year-on-year.

The board said the company's operational improvement programme was underway, with about $20m already invested.

It said the remaining investment was scheduled for the second half of 2023.

The directors added that by the end of 2024, the firm's technological advancements were projected to foster considerable productivity efficiencies.

Looking ahead, R&Q maintained its emphasis on segregating R&Q Legacy and Accredited, adding that it was in advanced negotiations concerning the possible sale of Accredited, as announced on 22 September.

Since the end of the first half, Accredited had sanctioned five schemes with an estimated annual gross written premium of $227m.

R&Q Legacy was meanwhile on the brink of finalising three deals with reserves exceeding $100m and had identified opportunities with about $800m in reserves.

“As we said in our 2022 full-year results announcement, R&Q is undergoing a multi-year operational turnaround aimed at creating a stronger, sustainable and more efficient business,” said chief executive officer William Spiegel.

“We are well underway with this programme and continued to make good progress in the first half of 2023.

“A key part of this is to become a simpler and more focused company with a more appropriate capital structure.”

Spiegel said separating the ownership of R&Q Legacy and Accredited was an essential step in accomplishing that, and, as the company announced on 22 September, R&Q was currently in advanced discussions with a party regarding the potential sale of Accredited.

“Looking ahead, we continue to focus on maximising value for our shareholders and other stakeholders.

“Both of our businesses have bright futures, and our strategic objective is to give each the footing it needs to pursue its business model with confidence.”

At 1009 BST, shares in R&Q Insurance Holdings were down 0.1% at 56.54p.

Reporting by Josh White for Sharecast.com.