Equitas wipes out R&Q profits

Run off specialist Randall & Quilter’s huge payout to Equitas after losing its long court battle, cut its annual profits from £8.76m last year to just £0.26m.

Financial highlights (2009 in brackets)

• Total Group income up 17% at £26.4m (£22.5m)
• Profit before tax of £0.26m (£8.76m)
• Net assets of £74.8m (£80.9m)
• Total Group net investment income of £11.4m (£12.0m)
• Net insurance provisions released of £1.6m (£8.3m),

Ken Randall, chairman and chief executive officer said: "The Group as a whole delivered a small pre-tax profit of £0.26m in 2009 and maintained its total dividend for the year at 7.0p per share (equivalent to a yield of 6.5% as at 28 April).

“This was achieved despite the substantial settlement paid to Equitas, continued volatility in the investment markets and tougher trading conditions in the run-off servicing arena. It is proof therefore of the strength of our diversified business model.

Acquisitions

“During 2009 Randall & Quilter re-emerged as an active acquirer of run-off portfolios and I am pleased to report that the outlook for our investment activities remains encouraging.

“In particular, we are pursuing a number of attractive opportunities to purchase reinsurance debt and to manage and capitalise specialist Lloyd's syndicates, including providing RITC for open year syndicates.

“As well as increasing the efficiency and marketing of our core run-off service operations to counter competitive pressures, we have firmly established the Group in broker run-off and expanded our live' market services offering to help drive the Service division's future organic growth.

Return to profit

“We expect that profitability of the Insurance Services division will be restored in 2010 and the foundations laid for future growth. We also continue to pursue the purchase of a number of complementary service businesses in the UK, US and beyond.

“The establishment of the new 'Captives' and 'Underwriting Management' divisions shows the ability of the Group to identify new and exciting areas for growth and I am delighted that we have made further substantial progress in developing these operations since the year end.

Equitas impact

“Though the outcome of the dispute with Equitas was clearly disappointing and had a significant impact on the 2009 results, it has at the same time removed a long standing source of legal and financial uncertainty from the Group.

“Overall, the business remains in good shape and I am very optimistic about the Group's prospects. Whilst investment returns within our insurance companies will inevitably remain subdued in the near term, I expect to report further expansion during the year in each segment of our business and reflecting our overall confidence, our objective is to grow total distributions per share by at least 5% per annum from the current base of 7.0p, absent unforeseen circumstances".