R&Q program management value creation “becoming more tangible”: Numis

Randall & Quilter (R&Q)’s expanding program management business Accredited will likely see contracted premium reach $1.78bn by the end of 2022, according to Numis Securities.

Numis said this would represent growth of 39 percent compared with the $1.28bn disclosed by R&Q as of December 2020, which itself marked an increase of 14 percent compared with August 2020.

Contracted premiums is a measurement of expected future gross written premium that will result in commission income to Accredited.

In 2020, Accredited added 18 new deals, including five in Q4, that helped push contracted premium up 52 percent to $1.28bn and gross written premium up 46 percent to $538.9mn.

“The recent expansion into the US excess and surplus lines market will likely be an important growth driver. Contracted premium income is the key driver of value being created in the program management business,” Numis said.

The analysts said a contracted premium income of $1.78bn at the end of 2022 would be in line with R&Q’s target of $1.5bn to $2bn by 2022/23.

Citing the potential $640mn sale valuation of US program manager Clear Blue – revealed by this publication in March – Numis said it was increasing its suggested price-to-earnings multiple for R&Q’s program management business from 11x to 16x.

“We think the potential sale value for Clear Blue could be meaningful for the implied valuation of R&Q’s program management business, particularly given the similarities between the two businesses in terms of written premium volume and growth rate,” Numis said.

“As R&Q’s program management businesses continues its successful expansion, we think value creation is becoming more tangible and is only partially reflected in the current share price. We reiterate our Buy rating,” the analysts added.

As previously reported by this publication, 2020 was a highly active year for the Accredited platform – whose parent R&Q also has an established legacy acquisition arm – with the fourth quarter also seeing the firm enter the US E&S program management market.

The new programs added in 2020 took the total to 48 at year-end, and in a recent regulatory filing, R&Q said that it has a strong pipeline for the year ahead.

US programs

Accredited Specialty Insurance Company secured its A- AM Best rating at the end of last year.

Its Florida-domiciled US admitted carrier Accredited Surety and Casualty Company recently agreed new program partnerships with Tradesman Program Managers, Comprehensive Real Estate Solutions and Novum Underwriting Partners.

Last month R&Q consolidated its two US program operations as Accredited America under the leadership of former Aon executive Pat Rastiello.

New European programs

R&Q’s European program management platform Accredited Insurance (Europe) Ltd (AIEL) was also active in the fourth quarter.

It entered into partnerships with Global Litigation Limited for an after-the-event insurance offering, and Optio Underwriting Limited in professional indemnity insurance.

In the recent market update, AIEL CEO Colin Johnson said the additions to the platform’s MGA stable highlight the diverse nature of its business.

“Our new partners have very strong reputations in their respective markets, and we look forward to working with them. Whilst both are written out of our UK branch, we are seeing a number of exciting opportunities across Europe and expect to announce further partnerships in the near future,” he said.