Insurance investor Randall & Quilter (RQIH:AIM) has agreed to buy a non-life business from Royal London Mutual.

The Bermuda-based acquirer will pay £11.9 million for RLGI, a near-12% discount to the £13.5 million its net assets were worth at the end of 2015.

RLGI is in run-off, meaning that it no longer writes new business but still carries liabilities.

The remaining liabilities in the book are policies written for small businesses between 1985 and 1999, which made an £800,000 profit in 2015. The plan is to transfer the business to Malta by the end of 2017.

Web - Randall & Quilter - 9 September 2016

This is Randall & Quilter’s fifth deal in 2016 and will be funded by cash and debt. It also owns books of live policies.

If the regulator approves the agreement, then Randall & Quilter will either service the book until the liabilities expire, or negotiate closing some of that legacy business.

Run-off is a specialist part of the insurance market, but one that has seen activity from companies such as Warren Buffett’s Berkshire Hathaway (BRK:NYSE), which has bought legacy business.

Insurance books closed to new business are usually sold due to a company no longer trading or being acquired. Some books of legacy polices, however, are sold to dodge the regulatory burden of having to hold additional capital against its liabilities.

Shares remained largely flat on the news, edging 0.5% higher to 110p.

Issue Date: 09 Sep 2016