Randall & Quilter Investment Holdings Ltd. · OTC:RQIHF
Randall & Quilter Investment — R&Q Investment Holdings — H1 2021 Earnings Presentation
24 slides from Randall & Quilter Investment's earnings presentation, Sep 6, 2021
Slide 1: H1 2021 Update Investor Presentation
H1 2021 Update Investor Presentation STRATEGY I INNOVATION I EXPERTISE A history of success A future of opportunity A leading non-life global specialty insurance company | WWW.RQIH.COM |
Slide 2: Strategic Update
STRATEGY I INNOVATION I EXPERTISE STRATEGIC UPDATE | WWW.RQIH.COM | 1
Slide 3: R&Q is simplifying and enhancing its business model
R&Q IS SIMPLIFYING AND ENHANCING ITS BUSINESS MODEL STRATEGY I INNOVATION I EXPERTISE R&Q is moving from a complex, balance sheet intensive business to a more simplified and predictable fee- based model with the launch of Gibson Re and our Legacy Insurance Asset Management business1 Old Complicated
Slide 4: R&Q is becoming an annual recurring fee business
R&Q IS BECOMING AN ANNUAL RECURRING FEE BUSINESS STRATEGY I INNOVATION I EXPERTISE R&Q is executing on its 5-year strategy of increasing Fee Income Legacy Insurance Program Management MGA Investments ✓ Launched Legacy Insurance ✓ Increasing target Gross Written ✓ 40% ownership of Tradesman Asset Man
Slide 5: Legacy insurance market is experiencing significant secular growth
LEGACY INSURANCE MARKET IS EXPERIENCING SIGNIFICANT SECULAR GROWTH STRATEGY I INNOVATION I EXPERTISE R&Q continues to see significant opportunities in the legacy market R&Q Net Reserves Acquired Active and Growing Market >$1.1b ✓ A key provider of capital management solutions to insurance industry ✓
Slide 6: Gibson Re transforms Legacy Insurance into an asset manager
GIBSON RE TRANSFORMS LEGACY INSURANCE INTO AN ASSET MANAGER STRATEGY I INNOVATION I EXPERTISE Legacy Insurance will have a more predictable and higher quality revenue stream ~$300m of On-Demand Capital1 Improves Capital Efficiency ▪ Legacy Insurance is fully funded for 3 years ▪ Reduces the need
Slide 7: Gibson Re will reinsure 80% of R&Q's future legacy transactions
GIBSON RE WILL REINSURE 80% OF R&Q’S FUTURE LEGACY TRANSACTIONS STRATEGY I INNOVATION I EXPERTISE Gibson Re leverages R&Q’s origination, underwriting and claims capabilities and pays annual recurring fees as a percentage of reserves to R&Q Simplified Structure Key Economics ✓ Gibson Ltd has raised ~
Slide 8: R&Q will replace upfront underwriting income with recurring fees
R&Q WILL REPLACE UPFRONT UNDERWRITING INCOME WITH RECURRING FEES STRATEGY I INNOVATION I EXPERTISE 80% of upfront Underwriting Income will be replaced with stable, annual recurring fees of ~$50m by year 3; reduces future equity capital needs Illustrative R&Q Gross Operating Income on Future Legacy K
Slide 9: R&Q's outlook for future fee income is robust
R&Q’s OUTLOOK FOR FUTURE FEE INCOME IS ROBUST STRATEGY I INNOVATION I EXPERTISE Assuming Gibson Re is fully utilised and we achieve our Program Management targets, we expect Fee Income of at least $140m by 2023 ~3x increase in Fee Income ($m) 160 >140 140 120 50 100 80 40 60 50 40 20 0 H1 2021 Fee I
Slide 10: Gibson Re changes timing of revenue, but increases earnings quality
GIBSON RE CHANGES TIMING OF REVENUE, BUT INCREASES EARNINGS QUALITY STRATEGY I INNOVATION I EXPERTISE R&Q expects episodic, capital-intensive Underwriting Income to be replaced by predictable annual recurring Fee Income, while growing dividends ▪ Our business continues to perform in-line with market
Slide 11: Our business is a combination of a fee business and a specialty insurer
OUR BUSINESS IS A COMBINATION OF A FEE BUSINESS AND A SPECIALTY INSURER STRATEGY I INNOVATION I EXPERTISE Fee Businesses Underwriting Program Management Legacy Insurance Legacy Insurance Corporate / Other Asset Management Retention Annual Recurring Fee Annual Recurring Fee Underwriting and Corporate
Slide 12: H1 2021 Results
STRATEGY I INNOVATION I EXPERTISE H1 2021 RESULTS | WWW.RQIH.COM | 11
Slide 13: H1 2021 Update
H1 2021 UPDATE STRATEGY I INNOVATION I EXPERTISE Strong growth in Program Management Fee Income. Timing delays in completing Legacy Insurance deals impacted H1 2021 Pre-Tax Operating Profit Group Program Management Timing of Legacy Deals Lead to H1 Loss; Strong Growth in Fee Growing Fee Income and P
Slide 14: Group results impacted by timing of Legacy Insurance transactions
GROUP RESULTS IMPACTED BY TIMING OF LEGACY INURANCE TRANSACTIONS STRATEGY I INNOVATION I EXPERTISE Pre-Tax Operating Loss for H1 2021 was a result of timing of completion of Legacy Insurance transactions; Pipeline remains robust for H2 2021 ($m, except where noted) H1 2021 H1 2020 Management Discuss
Slide 15: Fee income grew 135%
FEE INCOME GREW 135% STRATEGY I INNOVATION I EXPERTISE Strong year-over-year increase in Fee Income led by exceptional growth in Program Management Management Discussion & Analysis ($m) H1 2021 H1 2020 % Change Sources of Gross Operating Income by Type Underwriting Income 19.1 58.8 (68%) Fee Income
Slide 16: Program Management top and bottom line continue to grow rapidly
PROGRAM MANAGEMENT TOP AND BOTTOM LINE CONTINUE TO GROW RAPIDLY STRATEGY I INNOVATION I EXPERTISE Record period for Gross Written Premium and Fee Income; Pre-Tax Operating Profit of $9.9m demonstrates profitability potential as business scales Management Discussion & Analysis ($m) H1 2021 H1 2020 %
Slide 17: Legacy Insurance results impacted by timing; strong pipeline
LEGACY INSURANCE RESULTS IMPACTED BY TIMING; STRONG PIPELINE STRATEGY I INNOVATION I EXPERTISE Legacy Insurance performance negatively impacted due to timing of M&A transactions; however, the pipeline remains extremely strong and full-year performance expected to be on track Management Discussion &
Slide 18: Maintaining high quality, liquid fixed income portfolio
MAINTAINING HIGH QUALITY, LIQUID FIXED INCOME PORTFOLIO STRATEGY I INNOVATION I EXPERTISE 93% invested in investment-grade assets Investment Portfolio By Credit Rating (H1 2021) H1 2021 Results Total: $1,703m ▪ Emphasis remains on high quality, liquid fixed income, 93% 25% 5% investment grade 2% 0%
Slide 19: Five year strategy – capital efficient, fee-oriented, data driven company
FIVE YEAR STRATEGY – CAPITAL EFFICIENT, FEE-ORIENTED, DATA DRIVEN COMPANY STRATEGY I INNOVATION I EXPERTISE Focus on our core strengths of insurance origination, underwriting and claims management; Implemented through four key initiatives 1 ▪ Grow Legacy Insurance Asset Management business Increase
Slide 20: We are a unique specialty insurance company
WE ARE A UNIQUE SPECIALTY INSURANCE COMPANY STRATEGY I INNOVATION I EXPERTISE Program Management and Legacy Insurance are positioned to capitalise on favourable market conditions 1 Market leader in both Strong balance sheet and financial track record 7 Program Management and Legacy Insurance Conserv
Slide 21: Financial Information
FINANCIAL INFORMATION APPENDIX
Slide 22: Group consolidated financials
GROUP CONSOLIDATED FINANCIALS STRATEGY I INNOVATION I EXPERTISE 30 June 31 Dec ($m) H1 2021 H1 2020 % Change ($m) 2021 2020 % Change Tangible Day 1 Gain 26.1 53.6 (51%) Assets Net Earned Premium Cash and Investments 1,716 1,715 0% 16.5 29.0 (43%) Investment in Associates 48 46 4% Net Inv. Income (ex
Slide 23: Segment financials
SEGMENT FINANCIALS STRATEGY I INNOVATION I EXPERTISE Program Legacy Corporate / ($m) Management Insurance Other Total H1 2021 Pre-Tax Operating Profit 9.9 (14.8) (18.6) (23.5) Unearned Program Fee Revenue (5.5) 0.0 0.0 (5.5) Net Intangibles 0.0 (3.3) 0.0 (3.3) Non-Core & Exceptional Items 0.0 0.0 (6
Slide 24: End notes
END NOTES STRATEGY I INNOVATION I EXPERTISE ▪ Pre-Tax Operating Profit or loss is a measure of how the Group’s core businesses performed adjusted for Unearned Program Fee Revenue, intangibles created in Legacy Insurance acquisitions and net realised and unrealised investment gains on fixed income an
R&Q Investment Holdings — H1 2021 Earnings Presentation on 6ix