Completing separation of group businesses

R&Q’s US$60m equity issue is key to its plan to separate its legacy and program management operations. It enables its PM business (Accredited) to access an AM Best rating on a standalone basis, without any issues related to reliance upon the group balance sheet. 

The new funds assist that clean break by (a) increasing the capitalisation of R&Q Legacy, which is providing reinsurance support for completed legacy transactions originated by Accredited and (b) generating cash for general corporate purposes.

R&Q intends to accelerate strategic options. These may include sale of all or part of Accredited - disposal of a controlling interest could enhance that entity’s standalone financial rating. The terms are likely to benefit from a positive Q1 performance: a 34% y-o-y increase in Gross Written Premium to US$0.5bn and 24% growth in Program Fee Income.

Results for the 12 months to end December 2022 will be announced on 26 June and should provide greater clarity on the capital structures of the two independent businesses. The latest announcement matches management’s plans to increase operational focus and revenue transparency, both of which should help underpin an appraisal of underlying value.