Randall & Quilter Investment Holdings has reached an agreement to merge its wholly-owned subsidiary, Sandell Re, with Tradesman Program Managers in return for a 35 percent interest in the combined entity.
The transaction is subject to the approval of the Bermuda Monetary Authority (BMA).
The initial book value of R&Q’s interest in the combined business will be $43.4 million, which is equal to the estimated book value of Sandell at completion. Proforma pre-tax earnings of the combined business for the full year 2020 are estimated to be $17.2 million.
As part of the deal, Ken Randall and Stewart Ritchie will be joining the board of the newly combined business as representatives of R&Q.
Based in New York, Tradesman is a managing general agent which underwrites construction-related liability insurance known as the ARTISAN Contractors’ General Liability insurance programme through insurance policies which are issued by Accredited Surety and Casualty Company , R&Q’s A- 9 rated subsidiary.
It is currently owned by Daniel Hickey Jr., the CEO of Tradesman, and various affiliated entities and individuals.
In the year to 31 December 2019, Tradesman generated earnings before interest, tax depreciation and amortisation of $8.06 million, an increase of 99 percent from 2018.
Sandell was acquired by the group in October 2019 for $25 million
and has been one of the reinsurers of the ARTISAN Contractors’ General Liability programme since its inception in 2017.
As at 31 December 2019, Sandell Re had total assets of $116.7 million and incurred a loss for the year of $1.3 million after making a $3 million provision against third party loans and strengthening reserves on acquired legacy portfolios by $2.6 million.
Following the completion of the transaction, the group will deconsolidate Sandell and reflect its 35 percent equity interest in the enlarged Tradesman group on its balance sheet.
Commenting on the proposed merger, Ken Randall, executive chairman of R&Q, said it was a “fantastic deal for both parties”.
He explained: “For the owners of Tradesman, it provides access to the expertise and management within the R&Q Group, facilitates participation in the profitable underwriting results from the Tradesman programme and creates alignment with the risk assumed by the reinsurer panel.”
“The growth of Tradesman’s ARTISAN programme has and will continue to be a tremendous driver of value both for Accredited’s fee-based programme management business and through our strategic minority interest in the Sandell risk carrier. Tradesman’s ARTISAN programme has experienced consistent and profitable growth since its launch in November 2017,” Randall added.
Daniel Hickey Jr., CEO of Tradesman, commented: “We are thrilled to partner with R&Q on this transaction which aligns the interests of Tradesman and R&Q in the development and growth of Tradesman’s business and programmes, Accredited’s US programme management business and Sandell Re as one of our reinsurance panel members.”
