Randall & Quilter Investment Holdings Ltd. · OTC:RQIHF
Randall & Quilter Investment — H1 2022 Earnings Presentation
28 slides from Randall & Quilter Investment's earnings presentation, Sep 5, 2022
Slide 1: H1 2022 Results Investor Presentation
H1 2022 Results Investor Presentation A Global Specialty Insurance Group Evolving…Building…Growing
Slide 2: Important Notice
Important Notice This document contains statements that are, or may be deemed to be, “forward-looking statements”. Forward-looking statements give the Company’s current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly
Slide 3: Executing On The New Strategy
Executing On The New Strategy
Slide 4: Momentum In Executing Strategy To Transform R&Q Into A Fee-Based, Capital-Lighter Business
Momentum In Executing Strategy To Transform R&Q Into A Fee-Based, Capital- Lighter Business In 2021, R&Q introduced a 5-year strategy to deliver a) more predictable earnings, b) increased returns on equity and c) growing and sustainable shareholder dividends over time Old - Capital-Intensive Busines
Slide 5: R&Q Is Becoming A Recurring Fee-Based Specialty Insurer
R&Q Is Becoming A Recurring Fee-Based Specialty Insurer R&Q is strongly positioned to deliver attractive and sustainable shareholder dividends over the longer term Overview Financial Model Key Statistics ▪ Provide insurance licenses ✓ Fee Income based on ~5% of ceded ✓ GWP of $807m in H1 2022 connec
Slide 6: The Strategy Has 5 Key Pillars
The Strategy Has 5 Key Pillars 5-pillars to the 5-year strategy, with a focus on long-term value creation rather than short-term accounting profits ENHANCING INCREASING FEE AUTOMATING ENGAGING ACTING TRANSPARENCY INCOME/CAPITAL- PROCESSES EMPLOYEES RESPONSIBLY LIGHTER MODEL Economic driven Focus on
Slide 7: Significant Progress Has Already Been Made Against The 5-Pillars
Significant Progress Has Already Been Made Against The 5-Pillars ENHANCING INCREASING FEE AUTOMATING ENGAGING ACTING TRANSPARENCY INCOME/CAPITAL- PROCESSES EMPLOYEES RESPONSIBLY ✓ Re-defined KPIs to focus LIGHTER MODEL ✓ Investing $20-25m to ✓ Expanding our talent ✓ Focusing on behavioural on cash e
Slide 8: Fee Income Now Represents 61% of Gross Operating Income
Fee Income Now Represents 61% of Gross Operating Income Strong execution already delivering results – our Fee Income would represent a 102% CAGR over 3 years FY 2019 Gross Operating Income Growth in Fee Income ($m) 14% 106.2 12% Legacy Insurance 17.6 74% 102% CAGR 10.4 Tradesman Stake Underwriting I
Slide 9: New Legacy Business Model Drives Higher Returns On Equity
New Legacy Business Model Drives Higher Returns On Equity In FY 2021, R&Q ceded four transactions to Gibson Re under the new model, which should a) produce the same level of profit, b) require ~$100m of less capital, c) reduce earnings volatility and d) realise significantly higher returns on equity
Slide 10: Creating Operating Leverage By Improving Processes and Automation
Creating Operating Leverage By Improving Processes and Automation Investing in process improvements, automation and technology; Investment of ~$20-25m (~$10m accrued to date) is expected to yield scalability with ~$10m of annual cost efficiencies by 2024 (~3-year payback) Historical Underinvestment
Slide 11: R&Q Has Limited Exposure To Broader Industry Risks
R&Q Has Limited Exposure To Broader Industry Risks R&Q is a specialty insurer with a business profile that significantly reduces its exposure to macroeconomic challenges Industry Observations Impact to R&Q ▪ Market yield on fixed income portfolio (proxy for reinvestment) is 4% vs ~1.5% last year ▪ O
Slide 12: Confidence In Outlook – Clear Building Blocks To Achieving >$90m of PTOP In 2024
Confidence In Outlook – Clear Building Blocks To Achieving >$90m of PTOP In 2024 ▪ $807m of GWP in H1 2022; expected to meet target of $1.75b in FY 2022 Program ▪ Pipeline is strong with ~ $475m of annualised GWP Management ▪ Margins in excess of 50%, with further operating leverage to drive scale b
Slide 13: H1 2022 Results
» » H1 2022 Results ReQ) INSURANCE HOLDINGS
Slide 14: Highlights – Strong Program Management Results / Legacy Insurance Transformation
Highlights – Strong Program Management Results / Legacy Insurance Transformation Operating results reflect strong performance in Program Management and a period of transition for Legacy Insurance; IFRS results primarily impacted by unrealised losses on the investment portfolio % Management Discussio
Slide 15: Program Management – Top / Bottom Line Continue To Grow Rapidly
Program Management – Top / Bottom Line Continue To Grow Rapidly GWP and Fee Income up significantly; Scale benefits demonstrated in increase in margins to 54% % Management Discussion & Analysis ($m) H1 2022 H1 2021 Change Number of Programs 75 60 25% ▪ GWP and Fee Income grew 82% and 76%, respective
Slide 16: Legacy Insurance – Transitioning To Fee Income With $387M of RUM
Legacy Insurance – Transitioning To Fee Income With $387M of RUM Operating results are not comparable to prior period due to ceding 80% of Underwriting Income to Gibson Re in exchange for annual recurring Fee Income % Management Discussion & Analysis ($m) H1 2022 H1 2021 Change Deals Completed 2 8 N
Slide 17: Strong Focus On Cost Control
Strong Focus On Cost Control Fixed Operating Expenses have grown 3% year-over-year at constant FX rates (down 3% including FX movements); Non-core costs reflect primarily the investment in the automation programme, which is expected to yield ~$10m in annual cost efficiencies by 2024 Fixed Operating
Slide 18: High Quality Investment Portfolio And Solid Book Income Return
High Quality Investment Portfolio And Solid Book Income Return 95% of portfolio invested in high quality, investment grade assets with a shorter duration than liabilities with opportunity to reinvest in higher interest rate environment Investment Portfolio By Asset Class H1 2022 Results ▪ Portfolio
Slide 19: Adopting US GAAP Starting In 2023
Adopting US GAAP Starting In 2023 The Group will be voluntarily changing its basis of accounting from IFRS to the Generally Accepted Accounting Principles in the United States of America (“US GAAP”) and will present its consolidated financial statements in US GAAP effective 1 January 2023 ▪ The reas
Slide 20: Looking Ahead With Confidence
Looking Ahead With Confidence
Slide 21: R&Q Is A Unique Specialty Insurance Company
R&Q Is A Unique Specialty Insurance Company Execution of strategy to transform into a fee-based, capital-lighter business has excellent momentum 1 A market leader in both 7 Well capitalised to take Program Management advantage of the growth and Legacy Insurance opportunities Conservative investment
Slide 22: Industry Overview
» » Industry Overview ReQ) INSURANCE HOLDINGS
Slide 23: Program Management: Favourable Growth Dynamics Remain
Program Management: Favourable Growth Dynamics Remain Large market segment with long-term structural tailwinds that support continued growth and the ability to increase our market share Significant Growth of Independent Reinsurers’ Demand for Premiums Independent Program Managers MGAs in the US1 Gro
Slide 24: Legacy Insurance: Significant Growth Catalysts To Drive Fee Income
Legacy Insurance: Significant Growth Catalysts To Drive Fee Income Global P&C run-off liabilities are estimated to be $864b, with strong secular tailwinds for growth and profitability, but significant capital has entered the legacy insurance market over the past few years Large Market Opportunity wh
Slide 25: Financial Information
» » Financial Information ReQ) INSURANCE HOLDINGS
Slide 26: Reconciliation of Management to IFRS-Based Financials
Reconciliation of Management to IFRS-Based Financials ($m) H1 2022 H1 2021 ($m) H1 2022 YE 2021 Pre-Tax Operating Profit (24.3) (23.5) Tangible Net Asset Value 368.3 359.6 Net Intangibles1 (4.9) (3.3) Unearned Program Fee Income1 (33.2) (20.0) Net Unrealised/Realised Gain/(Loss)2 (100.0) (6.5)
Slide 27: Consolidating Segment Financials
Consolidating Segment Financials ($m) Program Management Legacy Insurance Corp / Other Total H1 2022 Fee Income1 44.3 8.8 0.0 53.1 Underwriting Income2 (2.1) (3.4) 0.0 (5.5) Investment Income3 1.0 6.7 0.0 7.7 Gross Operating Income4 43.2 12.1 0.0 55.3 Fixed Operating Expenses5 (19.9) (38.8) (6.7) (6
Slide 28: End Notes
End Notes ▪ Pre-Tax Operating Profit is a measure of how the Group’s core businesses performed adjusted for Unearned Program Fee Income, intangibles created in Legacy Insurance acquisitions, net realised and unrealised investment gains on fixed income assets, exceptional foreign exchange net gains u
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