Hudson Structured to invest $20m in legacy & program specialist R&Q

Hudson Structured Capital Management Ltd., the insurance-linked securities (ILS), reinsurance- and transportation- focused investment manager, is making a $20 million equity investment in specialist non-life insurance and reinsurance legacy investor and program manager Randall & Quilter (R&Q) Investment Holdings.

Randall & Quilter (R&Q) is actually raising $100 million through new investments from institutional quality capital sources, with another $80 million being raised from an investment vehicle controlled by Miami-based investment firm, 777 Partners.

777 Partners also has a liking for legacy insurance and reinsurance linked returns, having established Bermuda-based reinsurance company 777 Re Ltd. last year, which is focused on the acquisition of both active and run-off blocks of life insurance and annuity business.

R&Q said it will use the $100 million equity capital injection to help it to capitalise on the “significant opportunities” it sees for its specialty legacy and program management businesses.

Funds managed by Hudson Structured Capital Management Ltd., the ILS and reinsurance focused investor established by Michael Millette, will subscribe for $20 million of new ordinary R&Q shares at a price of £1.35 each.

Hudson Structured has invested in legacy and run-off opportunities before, we understand and has a liking for the way effective managers of run-off books can acquire them at a lower-cost, but then run them more profitably than previous owners to extract a better return from the underlying insurance related risks.

R&Q meanwhile, has entered into some collateralised reinsurance on its own book of business before and has discussed the opportunity of launching a sidecar to bring third-party ILS capital alongside its own to enhance its ability to do legacy deals before as well.

Meanwhile Brickell Insurance Holdings LLC, the investment vehicle controlled by 777 Partners, will subscribe for $80 million of a new series of preferred stock issued by R&Q, at the same price per share.

The subscription price in each case represents a 7.2% discount to the closing mid-market price of 145.5 pence per Ordinary Share on 28 April 2020.

The proceeds are set to be invested in growing R&Q’s program management and legacy businesses.

With scale all-important in the legacy space these days for access to the biggest deals, size does matter. Although, that’s not to say these larger deals are always the best opportunities in that marketplace.

However the program business is an area of growth potential for R&Q and this can be a particularly profitable segment of insurance and reinsurance if approached with a strategy focused on efficiency.

R&Q Executive Directors Ken Randall, Alan Quilter and William Spiegel, commented on the news, “We are extremely pleased to have raised these funds. We have long been clear on the significant opportunities we see for the Group in the two fast growing markets we operate in: program management and legacy. It has become apparent that the market dislocation currently being experienced will only increase demand for these specialist capabilities as the balance sheets of traditional insurance companies come under increased strain. The equity we have secured will enable us to proactively and quickly move to capitalise on these dynamics as the market seeks the solutions R&Q is able to provide.

“777 Partners and Hudson Structured are investment firms we have known and admired for many years, with 777 Partners, through Brickell, already an important stakeholder in R&Q. Both are highly regarded investors within the insurance industry, and their investment is a testament to R&Q’s reputation as a leader in our two specialty insurance businesses.”

Michael Millette, Founder and Managing Partner at Hudson Structured, commented on the investment his firm is making, “Hudson Structured is delighted to join Randall & Quilter as an equity investor. We see exciting growth opportunities in the legacy and program management businesses and believe that R&Q’s management team are well positioned to address them.”

Josh Wander, Founder and Managing Partner at 777 Partners also said, “We are excited to continue to support R&Q’s growth as a world class underwriter and servicer of specialty risk. Since our initial investment, Ken, Alan and now William have consistently validated 777’s strategy of investing in best in class management teams who deploy a thoughtful approach to prudent risks with asymmetric upside. We are confident that fresh, flexible capital will enrich shareholder value by facilitating R&Q’s ability to execute on the boundless opportunity resulting from prevailing market conditions.”