Strong start for Randall & Quilter

15/05/2008 Robert Tyerman

Insurance run-off specialist Randall & Quilter Investment Holdings seeks expansion after lifting operating profits 68 per cent to £8.7 million.

Pre-tax profits at the recent AIM entrant fell last year from £38.6 million to £8.7 million, but the 2006 figures include £35.9 million of negative goodwill on insurance company acquisitions. Headed by Lloyd’s veteran Ken Randall, Randall & Quilter increased total income nearly 18 per cent to £27 million in 2007 and paid claims up from £12 million to £28 million, net of nearly trebled reinsurance of £34 million.

The company, which buys solvent non-life insurers writing no new business but running off old policies, obtained an £11 million release from one of them, Chevanstell, after claims commutations and liability reduction, and reached an ‘amicable settlement’ of a breach of warranty dispute with Chevanstell’s vendor. Randall & Quilter also manages run-off portfolios for other insurers, including Lloyd’s syndicates, and acquires reinsurance receivables to realise for cash.

The company established a division last year to provide services to reinsurance brokers in the run-off and has received authorisation to set up its own reinsurance arm in the insurance tax haven of Bermuda. Randall & Quilter ended last year with investments worth £272.5 million, including £85 million cash and says it continued to receive ‘positive’ investment returns in the first quarter of 2008.

Randall says two US insurance companies filed a complaint in New York against himself and a company subsidiary, alleging fraudulent misrepresentation. Randall and the subsidiary have begun counter proceedings in England.

He says directors believe the US claim is ‘vexatious and without merit’. Having taken ‘appropriate legal advice’, they are ‘satisfied’ they are unlikely to have any liability.

Randall argues the present climate of falling insurance premiums is benign for run-off business, which is counter-cyclical and says the company is looking at new acquisition opportunities. At 139.5p, valuing the company at £78 million, the shares have specialist appeal.

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