Interim Results 2012

Randall & Quilter Investment Holdings plc

("Randall & Quilter" or the "Group")

Interim results for the six months ended 30 June 2012

6 September 2012

The Board of Randall & Quilter (AIM: RQIH), the specialist non-life insurance investor, service provider and underwriting manager, is pleased to announce its Group interim results for the six months ended 30 June 2012.

FINANCIAL HIGHLIGHTS

·; Total Group income up 34% at £25.3m (2011: £18.8m)

·; Profit before tax up 56% at £4.6m* (2011: £3.0m)

·; Basic earnings per share up 53% at 8.9p (2011: 5.8p)

·; 6% increase in cash distribution to 3.4p per share (2011: 3.2p) through proposed J/K share scheme

·; Undiscounted net tangible asset value per share of 106.7p (31 Dec 2011: 107.3p)

DIVISIONAL PERFORMANCE

·; Strong performance in the Insurance Investments Division with an operating profit of £6.4m* (2011: £3.2m), driven by the run-off syndicate results and an H1 investment return of 2.7% (2011: 2.5%)

·; Improved operating profits in the Insurance Services and Captive divisions of £2.3m and £0.5m respectively (2011: £2.0m and £0.1m**)

·; A positive underlying operating result in the Underwriting Management Division (excluding the losses from the discontinued Canadian MGA)

·; Further potential expansion into the live market following 'in principle' approval from Lloyd's for the launch of our own 'first party' R&Q syndicate from January 2013

·; Agreement in principle reached with the Ace Group to resolve all outstanding legal disputes in relation to R&Q Re (US)

* After deduction of minority interest relating to syndicate 3330

** Excludes goodwill impairment

Commenting on the results, Ken Randall, Chairman and Chief Executive Officer said:

"This is a pleasing set of interim results during a period when the Group also achieved a number of significant operational milestones. Our Lloyd's and non-USA run-off businesses continue to deliver good results. The claims run-off within our US subsidiaries has tended to be more volatile but the agreement reached with the Ace group as to a framework for the resolution of all outstanding legal disputes removes this source of uncertainty for the Group. The Group has made a number of attractive portfolio and insurance debt acquisitions and the deal pipeline remains very active.

Randall & Quilter has made significant progress in fulfilling its ambition to become a growing force in the active insurance market by successfully expanding its managing general agent and 'live' servicing operations, and receiving an 'in-principle' approval from Lloyd's for the establishment of the Group's 'first party' syndicate for the 2013 underwriting year.

Regulatory changes and the low yields available on fixed income investments continue to affect the Group but are being effectively managed. The Group's traditional run-off core remains in good shape and the newer Underwriting Management and Captives divisions offer significant growth potential. We look forward to the future with confidence."

Enquiries:

Company: Randall & Quilter Investment Holdings plc

Tom Booth Tel: 020 7780 5895

Nominated Advisor Numis Securities Limited

& Joint Broker: Stuart Skinner (Nominated Advisor) Tel: 020 7260 1314

Charlie Farquhar (Broker) Tel: 020 7260 1233

Joint Broker: Shore Capital Stockbrokers Ltd

Dru Danford Tel: 020 7408 4090

Stephane Auton Tel: 020 7408 4090

Corporate & Financial PR: FTI

Neil Doyle/Ed Berry Tel: 020 7269 7237/7297

The Chairman's Statement, Business Review and Highlights of Accounts are attached. The full interim results for the six months ended 30 June 2012 will be sent to shareholders shortly and will be available on the Company's website at www.rqih.com.

Notes to Editors:

Since formation, Randall & Quilter has pursued a buy and build strategy to create a comprehensive range of investment activities and services in the global non-life insurance market and is focused on the following four core areas:

- Insurance Investments;

- Insurance Services;

- Underwriting Management; and

- Captives.

The Group currently:

- has a portfolio of ten insurance companies in run-off (from the UK, US and Europe) with net assets of c.£85.9m as at 30 June 2012;

- acquires and manages a portfolio of insurance receivables, with a carrying cost of c. £8.1m as at 30 June 2012;

- has wide service capability in both the 'live' and 'run-off' markets;

- has a team of approximately 400 insurance professionals based in the UK, USA, Bermuda, Canada and Gibraltar; and

- provides 'turnkey' management services to Lloyd's syndicate 1897, manages two RITC ('run-off') syndicates and owns and operates four MGAs.

The Group was founded by Ken Randall, Executive Chairman and Chief Executive, and Alan Quilter, Chief Operating Officer, who both have extensive experience in the industry including as Head of Regulation of Lloyd's and as Head of the Market Financial Services Group respectively.

Chairman's Statement and Business Review

For the six months ended 30 June 2012

Summary of Results

Divisional Performance

* After deduction of Minority Interests relating to Syndicate 3330

** Prior to goodwill write-off

Chairman's Statement

The Group delivered a strong pre-tax profit of £4.6m* for the half year, significantly higher than H1 2011 (£3.0m). Whilst in large part this was due to the excellent result in the Insurance Investments Division ('IID'), there was improved performance across all four divisions.

The Group's tax charge was very low at £0.2m as a substantial part of the Group's profits in the period were generated in R&Q Re Bermuda and other IID companies with accumulated tax losses. Basic earnings per share were 8.9p (2011: 5.8p).

In line with our progressive distribution policy, we are pleased to announce a proposed 3.4p per share return of cash, representing a 6% increase on the prior year (see note 1 below).

Net tangible assets per share of 106.7p were higher than at 30 June 2011 (105.9p) but slightly lower than at the year end, as a result of: (i) the final 2011 distribution of 4.9p (paid to shareholders on 11 June); (ii) the net liabilities assumed in the acquisitions of two MGA businesses during the period; and (iii) an actuarial loss arising from lower discount rates and improvements in life expectancy in the Group's closed defined benefit pension scheme.

Note 1: Further details of the proposed J/K share scheme are outlined in a circular posted to shareholders today with payment due on or around 7 November, 2012 to those shareholders on the register as at 11 October, 2012.

Insurance Investments Division

In terms of divisional performance, IID delivered an outstanding result due primarily to very strong contributions from the two managed run-off syndicates at Lloyd's. The higher than anticipated six months' investment return of 2.7% in the Group's owned insurance companies was also a contributing factor. The agreement of a framework (subject to detailed terms being finalised) for the resolution of all legal disputes with the Ace Group as regards R&Q Re (US) moreover removes a source of uncertainty for the Group .

The extraction of an aggregate £6m of capital from three of our owned insurance companies during the period; Chevanstell, La Licorne and R&Q Insurance (Guernsey) is proof of our continued focus on releasing cash from our owned insurance companies for reinvestment.

We are also expecting to announce further activity from our acquisition pipeline during the coming months.

Insurance Services Division

The Insurance Services Division ('ISD') produced an operating profit of over £2.3m during the first six months, an 18.5% improvement on 2011, despite further restructuring charges during the period as we continued to rebalance staffing levels in both the US and UK. As reported this time last year, operating expenses are typically higher in the first half of the year, reflecting the timing of annual bonus payments. Furthermore, a number of the service companies, especially those providing broker services have an income bias to the second half of the year. A number of new business cross-selling initiatives across the ISD have been successful, especially with the larger UK insurance groups and the benefit of these will also be weighted towards the second half of the year.

Captives Division

The operating performance of the Captives Division of £0.5m was considerably stronger than in 2011 (£0.1m). This is proof of the return on our recent geographical expansion and the successes of the captive formation and acquisition initiatives, which bring revenue to the division from the provision of structuring and management services.

Underwriting Management Division

The Underwriting Management Division ('UMD') produced a reduced operating loss of under £1.0m during the period (2011: loss of £1.5m). After adjusting for the operating losses and closure costs relating to the Canadian MGA, which totalled £1.1m, the underlying result was positive, helped by a strong result from our Lloyd's Managing Agency operations. Our continuing MGA platform is however also making good progress, especially R&Q Marine Services, the newly acquired specialist yacht and associated trades MGA.

Whilst the costs and operational strain which the industry has experienced as a result of Solvency II continue, Lloyd's implementation project is nearing a conclusion and we believe that maintaining the necessary controls and systems (so called "business as usual") will be less resource intensive than the initial documentation and implementation exercise.

The recent approval in principle from Lloyd's for the launch of the Group's 'first party' syndicate from 1 January 2013 is an exciting development and further consolidates our growing position in the live insurance market.

Other Corporate

Central corporate costs of just under £2m in the first half year were in line with expectations but higher than in 2011 which benefited from a recovery of legal costs and damages following the resolution of the Seaton & Stonewall litigation.

Regulatory change and compliance with the new solvency standards being introduced continue to affect the Group. In order to alleviate the cost and management burden and to maximise capital diversification credits, we are accelerating plans to consolidate our owned insurance companies. New proposed group supervision rules have led us to consider the most appropriate structure and domicile for the Group overall, balancing operational and capital efficiency as well as regulatory access. As our plans become more advanced, we will provide further updates but we are hopeful that any restructuring will provide the Group with an effective, sustainable and competitive platform.

Outlook

Overall, the outlook remains promising. We anticipate a good second half performance across the four divisions and expect that the full year result will meet management's expectations.

Further detail on the financial and operating performance of the divisions is provided below:

Insurance Investments Division

* After deduction of Minority Interests relating to Syndicate 3330

** Insurance companies only

The Insurance Investment Division's performance was extremely strong in the period, producing an operating profit of £6.5m* (2011: £3.2m).

Investment income of £5.6m for the insurance companies represented a 2.7% return (2011: £5.4m, 2.5%). A more detailed analysis of performance and holdings is provided below.

RQLM's income, which is mostly related to the acquisition and management of claims against insolvent insurance companies, was significantly higher in the period as a result of some significant dividends on our existing insurance debt portfolio. The carrying value at the period end was virtually unchanged at £8.1m, following a number of additional claims purchases. The pipeline for new acquisitions continues to look positive.

Reserve releases from the owned insurance companies of £4.1m (2011: £3.1m) were once again strong as a result of a combination of commutation activity and successful subrogation recoveries, especially in R&Q Re (UK), Chevanstell and R&Q Re (Belgium). The resolution of the various disputes with the Ace group in respect of R&Q Re (US) is a constructive solution requiring concessions on both sides. The settlement, the detailed terms for which are in the process of being finalised, will eliminate an area of uncertainty for the Group. Our active claims management in this company continued with the settlement of over $22m of claims during the period. We have also begun to make good progress on the reinsurance collections following the significant claims activity in the latter part of 2011.

As is customary, we are hopeful that further commutation and settlement activity, particularly in our UK portfolios, will produce further releases by the year end. Even after the extraction of c.£6m (£5.3m net of the acquisition cost of Northern Foods Insurance), the net assets of the Group's ten owned insurance companies at 30 June 2012 was £85.9m, a small rise on the 2011 year end value.

Operating expenses rose to £10.1m (2011: £6.8m) as a result of: (i) the fact that the acquisition costs relating to dividends received from the insurance debt portfolio are treated as an operating expense and were significantly higher than in 2011; (ii) the establishment of the new intermediate holding company and the transfer into the division of the costs of the acquisition team, including their annual bonuses; (iii) additional expenses relating to special claims projects in certain of the owned insurance companies; (iv) legal costs relating to the Ace dispute; (v) acquisition related costs, including in respect of the reinsurance to close of Syndicate 1208; and (vi) the impact of a full period of the running costs of Principle Insurance, which was acquired at the end of 2011.

There was a small amount of 'goodwill on bargain purchase' of £298k in the period arising from the acquisition of Northern Foods Insurance at a discount to book value. Northern Foods Insurance has subsequently been amalgamated into R&Q Insurance (Guernsey).

The results from our three syndicate participations were excellent, generating operating profits of over £5.3m (2011: £1.4m). Our 55% net participation on run-off Syndicate 3330 (which reinsured the open years of the former 1208 syndicate earlier this year) was especially strong following the release of the risk premium as well as specific reserve savings. There was also a good contribution from our 20% share on run-off Syndicate 102, mostly relating to recoveries we were pursuing through the US legal system on certain viatical claims. Our 8% share of turnkey Syndicate 1897 produced a modest loss as the syndicate had a small number of significant marine and energy losses and a subdued level of earned premium during the period.

Investment Income

Investment income of £5.6m (2.7%) from the Group's owned insurance companies was very pleasing. During the period we also implemented investment strategies to reduce duration significantly and increase asset diversification.

Investment markets were once again turbulent during the first half of 2012 as the Euro crisis and continued economic weakness dominated sentiment. Overall however it was a good period for fixed income investors as yields continued to fall and credit spreads narrowed as investors sought to increase returns.

The Group's return also benefited from the realisation of a substantial portion of its portfolio of bank perpetual securities at prices above 2011 year end values.

The investment allocation for the Group's owned insurance companies by asset class at 30 June 2012 was as follows:

*almost exclusively Residential Mortgage Backed Securities

Invested funds as at 30 June 2012 were £208m equivalent, comprising of $233m, £47m, €12m and A$ 5m. The non-Sterling assets closely matched the currencies of the non-Sterling net insurance liabilities.

The credit ratings of the debt securities held by the Group at 30 June 2012 were as follows:

Overall the duration of the investment portfolio is now under one year given that a significant portion of the assets are invested in floating rate securities.

During July and August, we sold over half of the remaining bank perpetuals at above 30 June 2012 prices and intend to have no residual investment in these securities by year end. In mid-July we also sold $50m of the Group's longer dated US Municipal securities and we invested the proceeds in a portfolio of AAA and AA US Collateralised Loan Obligations, thereby completing our investment repositioning to floating rate securities with excellent credit ratings yet attractive yields.

Q3 investment performance to date has been strong and the Group's running investment yield remains just under 3%. Whilst we have mitigated interest rate risk substantially through the recent portfolio restructuring, we are of course still exposed to the on-going risk-on/risk-off volatility affecting credit spreads. We have however kept maturities short and increased asset diversification to lessen the potential mark-to-market impact of this volatility.

Insurance Services Division

The ISD operating profit of £2.3m was in line with expectations and above H1 2011 (£2.0m).

Total income increased to £17.0m (2011: £15.3m), primarily as a result of higher income in the US services operations where the owned US insurance company service revenue is now recognised.

UK Broker Services revenue was broadly flat. Commission income on reinsurance collections and new business is however weighted towards the second half of the year and the outlook looks promising. The broker run-offs we have acquired continue to perform well and we now have considerable scale and efficiency in this area. We are also creating new solutions to support the recent FSA regulations on broker solvency, which should bring additional income opportunities.

In UK Claims and Reinsurance Management Services, allowing for the substantial profit commission on the now discontinued Advent syndicate run-off contract which benefited the 2011 figures, there was an underlying increase in revenue. This increase was attributable to the success we have had with the larger UK based insurance groups, which are increasingly focused on reducing costs by outsourcing specialist work. Traditional run-off portfolio management contracts remain scarce however due to the fact that the vast majority of run-off portfolios are being acquired by specialist groups with in-house resource and due to the prevalence of solvent schemes. This reduction in available run-off contracts further supports our decision to diversify into the 'live' market.

UK Liquidity Management revenue rose by over 15% in the period to £1.2m on the back of new credit control service contracts.

The share of external income overall remained high at close to 60% despite the absence of profit commission on the Advent run-off syndicate and higher internal revenue arising from the inclusion of the servicing of our own US insurance companies. The share from 'live' servicing was also strong and we continue to focus on subscription market business, especially Lloyd's, where our services offer a highly cost effective alternative to internal resourcing by individual syndicate managers.

The operating profit of £2.3m in the core UK Claims and Reinsurance Management Services operations was considerably higher than 2011 (£1.0m) and represented a 25% operating margin. This shows the clear benefit of recent cost reduction measures. Operating profits in UK Broker Services were broadly unchanged in the period as were the small operating losses in the UK Liquidity Management operations, which were partially due to further cost reduction measures.

The US Services operations produced a small operating loss of £0.2m as a result of anticipated lower income on certain existing contracts and delayed new business income, as well as restructuring costs. We are continuing to work towards improving the sustainability of revenue by securing multi-year assignments and building on our expertise in workers' compensation loss mitigation and medical malpractice portfolio management. The 2011 operating results in the US are not comparable given that they benefited from a write-back of legal costs and damage awards in relation to the Seaton & Stonewall case against Cavell USA.

Overall, our scale and expertise in niches such as broker run-off and liquidity management, and in the US, in medical malpractice and workers' compensation claims, position us well for future growth in the ISD. We continue however to focus on the consolidation and re-engineering of the division's operations and cost control. We look forward to a good second half, particularly from the UK Broker Services and Liquidity Management operations as the contribution from new business income increases.

Captives Division

* Net cost of captive development

The Captives division performed well during the period with operating profits of £0.5m (2011: £0.1m) and income of £3.2m (2011: £1.6m). Much of the revenue increase came from the newly acquired operations in Norway and the US but there was also good organic growth in Bermuda and Gibraltar.

There was a strong operating performance from the Bermuda based operations at R&Q Quest due to revenue from management and structuring of the newly acquired captives as well as new client wins. The Norwegian business also had a good first half and Gibraltar benefited from new assignments coming on stream.

The US business is performing in line with expectations and we remain hopeful of securing the management of medical related risk retention groups which could produce significant additional income. The US is also generating opportunities for our Bermudian operations, in particular through the US farming cooperative initiative which uses our Bermudian cell infrastructure.

The Nordic joint venture, which we have previously announced was to be discontinued incurred costs of £0.1m in the period, primarily relating to severance payments.

The outlook for the remainder of the year and beyond looks positive and we are pleased that we are beginning to see the impact of recent investment coming through in the various operational platforms. We continue to capitalise on the successful joint marketing initiative with the IID to late stage captives seeking an exit and to assess the potential benefits of further geographical expansion.

Underwriting Division

The UMD generated an operating loss of just under £1.0m on revenue of £5.9m (2011: (£1.5m), £1.3m). Adjusting for the operating losses and closure costs of the Canadian MGA, the division made a small operating profit.

The Group's Lloyd's Managing Agency operations had a good start to the year with strong fee income from the three managed syndicates and a profit commission of £0.6m on the two run-off syndicates. This resulted in income of £3.6m and an operating profit of £1.6m (2011: £1.2m, (£0.5m) respectively).

The MGA commission income was significantly higher than in previous periods at over £2.0m (2011: £0.2m) on premium income of £14.3m (2011: £0.9m) as a result primarily of the addition of R&Q Marine Services, the new Yachts and Marine Trades MGA. Income also grew in the other MGAs as capacity and distribution were improved. Excluding Canada, the operating result was impacted by the anticipated losses at Synergy where cost and capacity issues have now been addressed following its acquisition by the Group earlier in the year. We look forward to the remainder of 2012 with confidence now that Canada has been discontinued and as capacity improvements and scale in the other MGAs bring improved financial performance.

As has already been commented on, the division was impacted once again by on-going costs associated with compliance with Solvency II but we should soon be into maintenance, or 'business as usual' rather than implementation phase. The expected increase in the scale of our operations should also alleviate the future burden and residual costs retained by the managing agency.

The recent 'in principle' approval from Lloyd's for the launch of a new R&Q 'first party' syndicate is an exciting development not just for the UMD but for the entire Group. The proposed underwriting team has an excellent track record and its focused and specialist approach to delegated authority selection and management represents an attractive proposition. A significant amount of energy and resource is currently being expended in ensuring the syndicate is approved and fully operational for a 1 January 2013 start.

Return of Cash via a J/K Share Scheme

The Return of Value, details of which are outlined in a circular posted to shareholders today, will give shareholders the option of receiving their payment as capital or income and provides a more flexible and efficient mechanism of returning capital. The payment of 3.4p per share is anticipated to be made through the scheme on or around 7 November 2012 to those shareholders on the register at 5.00 p.m. on 11 October 2012.

The proposed return of cash to shareholders through a J/K share scheme comes in a period when the Group successfully managed to release capital from three of its insurance investments.

The proposed Return of Value is in place of the interim dividend for the 2012 year but the Group may choose to make future returns of value in addition or instead of ordinary dividend payments, whilst maintaining its stated policy to grow total distributions to shareholders by at least 5% per annum from the revised base level of 7.4p per share in 2009.

Litigation

During the period, we reached an agreement in principle to resolve all of our outstanding legal cases with various companies of the ACE Group ('ACE') including litigation that the Group filed against various ACE subsidiaries in May 2012 in the Supreme Court of New York. The settlement will resolve all of ACE's various legal disputes against the Group. The issues are complex and they arise from the accumulation of a number of separate disputes. We continue to work through the detail with ACE and anticipate finalising the agreement in the near future.

Outlook

Overall, the outlook remains promising. We anticipate a good second half performance across the four divisions and that the full year result will meet management's expectations.

We expect that the Insurance Investments Division will benefit from more commutation activity in the second half as well as completion of further run-off acquisitions from our active pipeline. The global fixed income investment markets however remain challenging and though recent portfolio restructuring has resulted in a running yield close to 3% with very low duration, we are not immune from future credit market volatility. We expect a stronger second half in the Insurance Services Division and continuation of the improved trading in the Captives and Underwriting Management divisions.

Meanwhile, we retain our focus on managing costs and improving the quality of earnings in our service operations, realising cash from our insurance investments, building income in our MGA businesses and successfully launching the new R&Q syndicate for a January 2013 start.

K E Randall

Chairman and Chief Executive Officer

05 September 2012

Condensed Consolidated Income Statement

For the six months ended 30 June 2012

Condensed Consolidated Statement of Financial Position

As at 30 June 2012

Company number 03671097

Approved by the Board on 05 September 2012

K E Randall T A Booth

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2012

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2012

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2012

Notes to the Interim Financial Statements

For the six months ended 30 June 2012

1. Basis of preparation

The condensed interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The condensed interim financial statements for the 2012 and 2011 half years are unaudited, but have been subject to review by the Company's auditors.

The comparative figures for the year ended 31 December 2011 are based upon the consolidated Group financial statements. These accounts have been reported on by the Company's auditors and have been delivered to the Registrar of Companies on 30 June 2012.

2. Significant accounting policies

The condensed interim financial statements have been prepared under the historical cost convention, except that financial assets are stated at their fair value.

The accounting policies adopted in the preparation of the interim condensed interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2011. There have been no amendments to accounting policies as a result of new standards or interpretations that have become effective during 2012.

3. Segmental information

The Group's segments represent the level at which financial information is reported to the Board, being the chief operating decision maker as defined in IFRS 8. The reportable segments have been identified as follows:-

• Insurance Investments, which acquires legacy portfolios and insurance debt and provides capital support to the Group's managed Lloyd's Syndicates

• Insurance Services, which provides insurance related services to both internal and external clients in the insurance market

• Captives, which manages captive and insurance company operations

• Underwriting Management, which provides management to Lloyd's syndicates and operates other underwriting entities

• Other corporate activities, which primarily includes the Group holding company and other minor subsidiaries which fall outside of the segments above

Segment result for the six months ended 30 June 2012