R&Q Insurance Holdings has announced an agreement to sell its joint venture (JV) interest in Sag Main to its JV partner Obra.
The non-life speciality insurance company has also provided a trading update and details on the sale of its program management business (Accredited).
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As per the agreement, R&Q Solutions and R&Q Re (Bermuda) will transfer their combined 49% stake in the JV to Obra.
Sag Main, established in 2022, was designed to manage entities with legacy non-insurance corporate liabilities, with R&Q offering management services.
In 2023, R&Q reported fee income of $7m from Sag Main.
The sale will result in R&Q receiving $27m in cash and $3m in preference shares from Obra.
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By GlobalDataR&Q said it plans to use the proceeds for reducing the group’s revolving credit facility and boosting cash reserves within regulated entities.
R&Q chairman Jeff Hayman said: “We are pleased with the strong return on our investment in the joint venture, and this agreement is in line with our objective of realizing value from within our Legacy Insurance business. Although we believe that the corporate liabilities market continues to represent an attractive long-term opportunity, developing regulations, including potential changes around capital requirements, have reduced the strategic attractiveness of direct equity participation in joint ventures of this type for R&Q.
“However, R&Q’s expertise in the management of long-tail liabilities means that servicing and advisory opportunities will continue to exist in this space and the provision of solutions for corporations seeking to manage such liabilities will continue to represent a large and addressable target market for R&Q Legacy.”
The sale of Accredited, part of R&Q’s strategy to separate its legacy insurance and program management businesses, is now expected to conclude in the second quarter of 2024.
The agreement with Onex, valued at an enterprise value of $465m, was initially made in October 2023.
R&Q’s year-end 2023 trading update revealed reserves under management at approximately $1bn, which will decrease by around $670m post-sale of the corporate liabilities JV.
The company has also indicated an expected adverse development of roughly 23% of the group’s net reserves for the year ending 31 December 2023.
This is attributed to tail claim development, inflation, and abuse claim development within the portfolio.
Preliminary and unaudited figures suggest R&Q will incur a significant pre-tax loss for the year, driven by the adverse reserve development in its legacy segment and increased corporate costs associated with the sale of Accredited.
