Rating concerns over R&Q equity raise
The refusal by shareholders to sanction the sale of Bermudian-based Randall & Quilter Investment Holdings Ltd has had a negative impact on the ratings assigned to the company and three of its subsidiaries by AM Best.
The ratings agency has revised the implications of the under review status to negative from developing for the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of wholly-owned subsidiaries Accredited Surety and Casualty Company Inc, Accredited Specialty Insurance Company, and Accredited Insurance (Europe) Limited.
Concurrently, AM Best has revised the implications of the under review status to negative from developing for the long-term ICR of “bbb-” (Good) of R&Q, the non-operating holding company of the group.
The agency said the credit ratings reflect R&Q’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating actions follow the announcement last week that R&Q’s shareholders did not approve the required special resolutions for the proposed acquisition of R&Q by Brickell PC Insurance Holdings LLC.
The acquisition agreement included the issue of $100 million of convertible preference shares to Brickell, which would have mitigated the impact of an expected IFRS loss for 2021 of between $135 million and $145 million on R&Q’s capital base.
Subsequently, R&Q announced its intention to raise $100 million through an equity raise, which is expected to complete on July 12.
The revision of the implications of the under review status to negative from developing reflects the risk that the equity raise will not complete and that R&Q’s risk-adjusted capitalisation will not return to historical levels, the agency said.
The ratings will remain under review until AM Best has certainty around R&Q’s capital position.