Non-life specialty insurer R&Q Insurance Holdings has just confirmed that it has entered into a conditional agreement to sell its Accredited program Management business to private equity investment manager Onex Corporation.
The sale was expected as R&Q had previously stated it was in advanced talks regarding a potential sale of its program management unit, Accredited.
The agreement that has been reached will see Onex Corporation buying 100% of the equity interest in Randall & Quilter America Holding Inc., which the holding company of Accredited
Closing the deal is conditional on R&Q shareholder approval, regulatory approval and customary consents from certain R&Q debt providers, the company explained.
R&Q said that the sale of Accredited is at an enterprise value of $465m, which represents an expected equity value of approximately $438 million.
While R&Q’s net cash proceeds from the sale are expected to be approximately $300 million, with proceeds available to use straight away on the closing are expected to be between approximately $170 million and $210 million.
This sale will also drive a leadership change at R&Q, as the deal with Onex is conditional on R&Q’s Chief Executive Officer, William Spiegel, and Chief Financial Officer, Thomas Solomon transferring to Accredited upon its closing.
R&Q’s Group Non-Executive Chairman Jeff Hayman will act as Chairman and Interim Chief Executive Officer of R&Q after the sale, while the R&Q Board will start a process to find a new Chief Executive Officer of R&Q.
Meanwhile, Paul Bradbrook, currently Chief Accounting Officer of R&Q, will become its CFO and a member of the Board of Directors.
The move will reposition R&Q as a specialist legacy insurance business with operations in Bermuda, Europe, the US and the UK.
By selling the program management business, R&Q expects to undertake a “material de-leveraging” and will continue to pursue a strategy of transitioning to a capital efficient and stable recurring fee-based business model, with the Gibson Re legacy reinsurance sidecar seen as a core component of this transition.
Jeff Hayman, Chairman of R&Q, commented on the sale news, “The Non-Executive Directors unanimously recommend the sale of Accredited to Onex. We believe this transaction represents the best possible outcome for R&Q’s stakeholders, enabling R&Q to realise value for a business we have grown from a standing start in 2017 while allowing Accredited to maintain its essential independent financial strength rating of ‘A-‘ under new ownership. Onex has an extensive track record of successfully investing in businesses across the insurance value chain, making them the ideal partner for Accredited to continue its growth trajectory as a leading transatlantic program manager.
“The Sale will generate meaningful net cash proceeds which will facilitate a material de-leveraging of the Group while also strengthening its liquidity and working capital position, which will support R&Q’s ongoing commitments and requirements. Furthermore, the Sale will create a simpler and better capitalised R&Q which will be positioned to continue to execute the existing strategy of transitioning to a capital efficient and stable recurring fee-based business model.
“R&Q is a longstanding leader in the legacy market, with an established platform, more than $1.1 billion of Reserves Under Management and an over 30-year history of executing innovative transactions. The landmark deal earlier this year to acquire and professionally manage the non-insurance legacy liabilities of MSA Safety now means R&Q Legacy earns fees from two distinct but complementary pools of liabilities: traditional insurance reserves and corporate non-insurance liabilities. The Sale will allow us to refocus fully on this business, while our materially de-leveraged balance sheet, alongside our ability to deploy third-party capital via Gibson Re, will enable us to pursue our pipeline opportunities with renewed confidence. While we have more work to do, including implementing further operational improvements, we now have a clear pathway towards a sustainably profitable legacy business.”
Adam Cobourn, Managing Director of Onex Partners, added, “We are pleased to have the opportunity to establish Accredited as an independent, market-leading program management platform. Accredited has all the ingredients for success as a hybrid carrier, including a talented management team, a well-diversified and high-quality book of business, strong reinsurer relationships and robust underwriting and risk management protocols. It will be well positioned for responsible growth with a strong balance sheet and backing from Onex Partners. Investing in the insurance industry has been a core strength for Onex for many years. We look forward to supporting Accredited’s management team in this next phase of growth.”
