Randall & Quilter Investment Holdings Ltd (LON:RQIH) is the topic of conversation when DirectorsTalk caught up with Nick Johnson, Director, Insurance Research at Numis Securities. Nick discusses the launch of Gibson Re, R&Q’s Program Management business, and the positive outlook for the company in terms of dividend growth and higher quality recurring revenue.
Q1: How will Randall & Quilter benefit from the recent launch of collateralised reinsurer Gibson Re?
A1: Recurring fee income from Gibson Re will significantly improve earnings visibility for R&Q’s legacy insurance business, whilst also providing a platform for growth without additional shareholder capital. Over time this should allow a greater proportion of internally generated capital to be reinvested in growing other parts of the business or making distributions to shareholders.
Q2: How is the Program Management business currently performing and what is the outlook?
A2: The sign-up of MGAs in the program management business has exceeded expectations and is now being converted into strong fee income growth. There remains very good inbuilt growth from this conversion process and there is no sign yet that sign-ups of new MGAs is slowing down, so there is there is still of lot of fee income growth yet to emerge in program management.
Q3: Where do you see the dividend going in the next 3 to 4 years?
A3: We think Randall & Quilter’s ambition to grow the dividend can be delivered, underpinned by medium term earnings growth and improving internal capital generation from the transition to fee income. We expect the dividend to be significantly higher in three years’ time.
Q4: Has your forecast changed?
A4: Our operating profit forecasts for FY21 and FY22 have come down due to the lag in Gibson Re fee income offsetting the upfront reduction in R&Q’s economic interest in legacy insurance. This effect balances out in FY23, by which time the majority of R&Q’s revenue will be recurring fees and therefore much higher quality than in previous years.
Randall & Quilter Investment Holdings Ltd (LON:RQIH), headquartered and operating in Bermuda with extensive operations in the US and Europe, is a leading provider of finality solutions for run-off portfolios and global program capacity for MGAs and their reinsurers. R&Q has a proven track record over three decades of acquiring discontinued books of non-life business and non-life (re)insurance companies and captives in run-off.