R&Q Insurance Holdings has unveiled its financial results for the first half of 2023, concluding on June 30.
In the Accredited sector, the gross written premiums (GWP) soared to US$1.1 billion, marking a substantial 34% increase from H1 2022's US$0.8 billion. Additionally, fee income for R&Q also saw a rise, reaching US$46.2 million, up by 18% from H1 2022's US$39.1 million.
The pre-tax operating profit reached US$28.6 million, exhibiting an 86% increase from H1 2022's US$15.4 million. Meanwhile, the pre-tax operating profit margin stood at 57%, reflecting a significant 13.4% increase from H1 2022's 43.6%.
In the R&Q Legacy division, the company took note of a major transaction that was completed involving non-insurance liabilities within a seasonally quiet market. Gross reserves acquired amounted to US$695 million, showing a substantial rise from H1 2022's US$5.3 million. Reserves under management, on the other hand, expanded to US$1.1 billion from June 30, 2022’s US$0.4 billion, marking a notable 172% increase.
Despite the lower fee carried by MSA Safety compared to Gibson Re on reserves under management due to no tail risk exposure, fee income saw an increase, reaching US$9.7 million, up by 10% from H1 2022's US$8.8 million. However, there was a pre-tax operating loss before adverse reserve development of US$24.2 million, and a loss of US$64.2 million including US$40 million of adverse reserve development attributed primarily to older transactions in Lloyd’s.
Considering the group's performance, the total fee income amounted to US$55.9 million, indicating a 17% increase from H1 2022's US$47.9 million. However, there was a pre-tax operating loss of US$18 million before accounting for R&Q Legacy adverse development and a loss of US$58 million including the US$40 million of R&Q Legacy adverse reserve development.
Noteworthy non-recurring items included a non-cash income of US$1.8 million primarily associated with net unrealized investment gains net of fair market value impact on legacy reserves, along with extraordinary cash income of US$4.1 million.
Operationally, R&Q maintained its focus on cost control, with a notable 8% year-over-year decrease in R&Q legacy fixed operating expenses. An operational improvement program has been in full swing, with around US$20 million of the planned total US$20 million to US$25 million investment already deployed since 2021, and the remainder expected to be incurred in H2 2023. The company's investment in automation and technological processes is projected to yield significant productivity efficiencies by the end of 2024.
Looking ahead, R&Q underscored its commitment to the separation of R&Q Legacy and Accredited, with advanced discussions regarding the potential sale of Accredited announced on Sept. 22. Post the reporting period, Accredited has approved five programs with approximately US$227 million in annualized GWP. Furthermore, R&Q Legacy has three deals in advanced stages, representing over US$100 million in reserves, and an identified pipeline of approximately US$800 million in reserves.
“As we said in our 2022 full year results announcement, R&Q is undergoing a multi-year operational turnaround aimed at creating a stronger, sustainable, and more efficient business. We are well underway with this program and continued to make good progress in the first half of 2023. A key part of this is to become a simpler and more focused company with a more appropriate capital structure. Separating the ownership of R&Q Legacy and Accredited is an important step in accomplishing this and, as announced on September 22, 2023, we are in advanced discussions with a party regarding the potential sale of Accredited,” R&Q CEO William Spiegel said.
“Looking ahead, we continue to focus on maximizing value for our shareholders and other stakeholders. Both of our businesses have bright futures, and our strategic objective is to give each the footing it needs to pursue its business model with confidence,” Spiegel said.
In its last financial report for last year, the non-life specialty insurance company posted an IFRS loss after tax worth US$297 million, which is double the loss recorded in 2021.
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