# R&Q Insurance raises up to $60 million of new equity into the Group

- Link: https://www.directorstalkinterviews.com/rq-insurance-raises-up-to-60-million-of-new-equity-into-the-group/4121121476
- Published: 2023-06-12T07:08:14+01:00
- Author: Emily Johnson

**R&Q Insurance Holdings Ltd**, ([LON:RQIH](https://www.directorstalkinterviews.com/company/randall-quilter/rqih.l)),
the leading non-life global specialty insurance company focusing on Program Management
and Legacy Insurance businesses, has announced a capital raise of $50 million of
non-voting, perpetual preferred equity issued by Randall & Quilter PS Holdings Inc.,
an indirect wholly-owned subsidiary of R&Q (the “R&Q PS Investment”), from investment
funds affiliated with one of its largest shareholders, Scopia Capital Management,
with the opportunity to increase the amount of equity raised to $60 million. The
preferred stock will, in certain circumstances, be exchangeable at Scopia’s election
into new ordinary shares of R&Q at 60.98p (representing a 10% premium to the 20-
day volume weighted average price prior to the date of the Agreement).

Further to R&Q’s announcement on 4 April 2023 on its strategic initiative to separate
Accredited and R&Q Legacy, R&Q has received all necessary approvals to complete 
this internal reorganisation. Accredited and R&Q Legacy will now operate under two
separate holding companies within the Group. This separation is part of the requirement
for Accredited to receive its own separate subgroup financial strength rating from
AM Best.

Furthermore, as also announced on 4 April 2023, R&Q continues to explore strategic
transactions with third parties as part of the separation to enable Accredited to
operate independently. A process is underway for the potential sale of Accredited
with interest expressed from a number of parties. In addition, a variety of strategic
alternatives are being explored in relation to R&Q Legacy.

The proceeds from the R&Q PS Investment will be used to increase the capitalization
of R&Q Legacy, which is providing reinsurance support for completed legacy transactions
originated by Accredited. Proceeds will also be used for general corporate purposes
due to Accredited no longer paying intra-group dividends to R&Q as part of a requirement
to secure its financial strength rating from AM Best.

**Q1 Program Management Update**

R&Q Insurance announces strong results for Accredited in Q1 2023:

·      Q1 2023 Gross Written Premium (‘GWP’) of $0.5 billion (Q1 2022: $0.4 billion),
a 34% increase

·      Q1 2023 Program Fee Income of $22 million (Q1 2022: $18 million), a 24% increase

·      Accredited continues to partner with leading Managing General Agents in Europe,
the UK and the US, and has added five new programs in 2023. Accredited maintains
a strong pipeline and expects to add additional partnerships over the remainder 
of the year

> **William Spiegel**, **Chief Executive Officer**, commented: “This additional 
> capital, alongside our completed internal reorganisation, means Accredited and
> R&Q Legacy can be established as stand-alone entities within R&Q. 2023 has seen
> Accredited continue its strong momentum and leadership position in the program
> market, achieving a record first quarter in terms of GWP and Fee Income. For the
> 12 months ended 31 March 2023, Accredited’s GWP is ~$2.0 billion, an increase 
> of ~$200 million from year end 2022 where we reported GWP of $1.8 billion. We 
> are currently working very closely with AM Best to secure a subgroup rating for
> Accredited and have completed the key reorganisational requirements. R&Q Legacy
> has seen three transactions signed or completed this year and has a strong pipeline
> of transactions to grow Reserves Under Management beyond $1.0 billion. R&Q Legacy
> continues to focus its efforts on its key areas of strength, medium sized legacy
> transactions, while exploring potential further corporate liability opportunities.
> I am pleased with the progress we are making to enable both Accredited and R&Q
> Legacy to maximise their potential by having the right ownership and capital structures
> in place.”

**Details of the R&Q PS Investment**

Under the terms of the agreement relating to the R&Q PS Investment, Scopia has conditionally
subscribed for a new series of preferred stock issued by Randall & Quilter PS Holdings
Inc. (“R&Q PS”) for an aggregate subscription price of US$50 million. On issue, 
the Preferred Stock will be perpetual and non-voting. The Preferred Stock will remain
outstanding unless and until it is either so exchanged or redeemed, in each case
subject to satisfaction of certain conditions as described below.

Once issued, the Preferred Stock will, in certain circumstances, be exchangeable
at Scopia’s election into new ordinary shares of R&Q at a 10% premium to the 20-
day volume weighted average price prior to the date of the Agreement, or 60.98p (
an “Exchange”). Any such Exchange will be conditional upon, among other things, 
Scopia obtaining any necessary regulatory approvals and receipt of any required 
R&Q shareholder approval.

The Preferred Stock is redeemable by R&Q PS in certain limited circumstances, including,
at Scopia’s election, where Accredited is sold outside of the Group, where there
is no transaction for the separation of Accredited from the Group within twelve 
months from the date of issue of the Preferred Stock, where R&Q does not obtain 
the required R&Q shareholder approval for an Exchange within 15 months from the 
date of issue of the Preferred Stock or where an Exchange has not taken place within
24 months of the date of issue of the Preferred Stock. No redemption can take place
while the Group has any outstanding indebtedness senior to the Preferred Stock unless
the consent of R&Q’s then lenders is obtained for such redemption. Any redemption
shall take place at a price which is equal to the value of the initial investment
increased by a 12 per cent annual return on the Preferred Stock (subject to an increase
to 20% in certain circumstances, including the failure to obtain the approval of
the R&Q shareholders in connection with an Exchange) or, if greater, the implied
value of the ordinary shares which Scopia would have received upon the Exchange 
of the Preferred Stock determined at the time of such redemption event.

Following the issue of the Preferred Stock and prior to any exchange or redemption
of the Preferred Stock, R&Q Insurance has agreed to allow Scopia to nominate one
person as a director to the R&Q board for so long as Scopia owns at least 15 per
cent of the ordinary shares of R&Q (on an as exchanged and fully diluted basis) 
or, should Scopia so elect, to appoint such number of directors as is proportionate
to Scopia’s aggregate pro rata ownership of ordinary shares on an as exchanged and
fully diluted basis. Any such persons’ ongoing appointment to the R&Q board shall
be subject to R&Q’s bye-laws, and therefore will be subject to re-election at R&
Q annual general meeting.

Scopia’s acquisition of the Preferred Stock is conditional upon R&Q obtaining the
required consent of its lenders to the issue of the Preferred Stock.

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