The sale follows R&Q’s decision to simplify the group’s operations to focus on its core, high-growth activation, including the acquisition of run-off portfolios, as well as the use of its licensed companies in the US and EU.
The sale remains subject to regulatory change-of-control approval by Lloyd’s and the PRA, anticipated to be received in late 2017.
Once the sale is complete, a cash payment by Coverys of $22.6 million will be paid to R&Q, which, after costs and related incentive payments, will result in estimated net proceeds of £13.9 million.
The net proceeds of the sale will be deployed to help finance R&Q’s legacy transaction pipeline, especially in the US and Lloyd’s, and to generate valuable commission income from the use of Malta’s direct licenses.
The managing agency was formed in 2003 to handle run-off business, and in 2010 it was approved as an agency to manage live syndicates.
Its core business is the management of Syndicate 1991, which writes niche SME property and casualty business, mostly through delegated underwriting authorities.
It also manages Syndicate 3330, which provides reinsurance to close and other reinsurance solutions for legacy business within Lloyd's.
According to Ken Randall, R&Q chair and CEO, the “proposed sale of our Lloyd's managing agency is a significant milestone in the group's decision to simplify its operations and focus on our core areas of legacy acquisitions and management and the provision of services to our live underwriting partners”.
Randall said: “R&Q Managing Agency is a well-developed and scalable platform and we are confident it will prosper under the stewardship of Coverys.”
He continued: “The proposed sale will enable us to focus further on our core operations where we remain excited about the growth potential in the current year and beyond, underpinning the Group’s financial performance and distribution policy.”
Gregg Hanson, CEO and president of Coverys, added: “Through the acquisition, Coverys will inherit the continued responsibility to support the syndicates currently under management with RQMA.”
“The acquisition additionally allows Coverys to assist new underwriting syndicates that seek to launch their business at Lloyd’s, while also maintaining business operations for existing syndicates.”