Further strong momentum in PM division reported

The consistent performance by R&Q’s Program Management (PM) division puts it comfortably on track to achieve its stated targets and our forecasts. As an operationally geared operation, we anticipate a notable step-up in profitability as Gross Written Premium (GWP) builds on the back of a larger program base.

A positive Group outlook is supported by the creation, announced in September, of Gibson Re, a ‘sidecar’ which transforms the group’s Legacy division into a what is effectively an asset manager, generating fee income by assembling legacy portfolios and managing them on behalf of third parties.

PM continues to deliver, while the creation of the new restructured Legacy division will move its contribution away from substantial but opaque, deal-by-deal based profits. Progressively, R&Q’s rating will shift to an EBIT multiple for both divisions, although the latter will really kick-in as Gibson Re’s book scales up over the next 12 months.

We maintain our 240p/share fair value assumption on the back of this latest, encouraging update on progress.