Buying up closed books of policies may have provided the kicker to Randall & Quilter’s (RQIH) operating profits during the first half, but the insurer is looking to squeeze more cash out of managed general agent (MGA) contracts. Joint founder and executive chairman Ken Randall says MGAs, which act as a “counter-balance to the lumpiness” of legacy business, could eventually contribute the lion’s share of income.
MGA contracts had amassed estimated contracted future business of more than $800m (£650m) a year by the end of June, but given the lengthy approval process for new business, the division made a loss of £2.3m. However, management expects contracted business to top $1bn next year, turning the division profitable in mid-2020.
Five legacy acquisitions were made and three reinsurances, including its largest ever legacy transaction via the $81m purchase of Global Re. Management says it is open to partnering with third parties to finance further deals. A superior investment return of 2.3 per cent – up from 0.7 per cent in the prior year – also boosted the top line, although this is not expected to repeat during the second half.
Analysts at Numis forecast adjusted pre-tax profits of £42.5m and earnings per share of 19p for 2019, up on £14.3m and 7.8p in the prior year.
| RANDALL & QUILTER (RQIH) | ||||
| ORD PRICE: | 168p | MARKET VALUE: | £328m | |
| TOUCH: | 165-170p | 12-MONTH HIGH: | 197p | LOW: 147p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 154p | NET CASH: | £273m | |
| Half-year to 30 Jun | Gross written premiums (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 158 | 7.8 | 5.2 | 3.6 |
| 2019 | 226 | 33.1 | 19.2 | 3.8 |
| % change | +43 | - | - | +6 |
| Ex-div: | tba | |||
| Payment: | 9 Oct |
