Global Re acquisition on track for H1 2019

Randall & Quilter Investment Holdings Limited (R&Q) is a long-established UK and US insurance business led by an experienced team. 

We have adjusted forecasts to reflect the revised timing of the Global Re acquisition. As the expected completion of a major acquisition has shifted by a few weeks, from late December to early January, it will now benefit H1 2019 not FY18. In all other respects everything remains on track.

Closure does matter, as the acquisition of GLOBAL Reinsurance Corporation of America (Global Re) is the largest transaction legacy/business combination R&Q has undertaken to date. It will acquire Global Re, a New York domiciled reinsurance company in run-off, from AXA for c $80.5m in cash funded from available cash and debt facilities. The price is a small discount to net assets and R&Q expects it to have material impact on its results, based upon its own reserve assessment and anticipated operational synergies.   

The exact timing of legacy deals is inherently difficult to predict, but the group’s track record is strong, completing 34 deals in the last two financial years. It confirmed that the Global Re acquisition remains on track, backed by strong new business pipelines for both further legacy acquisitions and its programme management business in the USA and Europe. Re the latter, R&Q anticipates that by the year end it will have signed contracts with managing general agents expected to generate c $500m pa of future gross written premiums. 

Our forecasts now reflect the shift of the contribution from Global Re into next year. The FY19e multiple is attractive, with the yield well covered and tax-free to UK private investors as a distribution of capital.