New capital underpins ambitious growth strategy

Recent newsflow illustrates the gathering momentum behind R&Q’s growth. Negotiations are well underway for substantial legacy purchases, other transactions await regulatory approval, and both have been secured by the latest fundraising. Along with an equity issue in May, that means R&Q has added over US$200m in new capital this year.

The company intends to continue to capitalise upon the hardening insurance environment. The stronger balance sheet is reflected in the recent reiteration and extension of AM Best ratings to new Group entities.

R&Q has agreed to issue US$107.75m of 13-year unsecured subordinated notes. This will build its regulatory capital and put the finance in place to support its ongoing plans for both Program Management and Legacy. It continues to report strong demand for its solutions in both divisions.

The notes provide long-term cost of capital certainty, improve the group’s regulatory capital position, and enable it to grow by writing additional business. We have adjusted our forecasts to reflect the coupon, although not yet the income from prospective growth, which we anticipate will generate considerably higher returns (c. 20% RoC).

The forecast FY20e distribution of 9.5p is 3.3% up y-o-y, divisional forecasts are comfortably being met, and prospects are underpinned by balance sheet strength and recent investment. RQIH’s current value at just 1.2x NAV is well below the average of 2.3x for Speciality Insurers over the past five years. Even moving to a conservative 25% discount to the peer group average would put RQIH shares at c 216p.