RNS Number : 2398E
Hampden Underwriting Plc
25 September 2008
Hampden Underwriting PLC ("Hampden Underwriting" or the "Company")
Interim results for the six months ended 30 June 2008
Hampden Underwriting, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces
its unaudited results for the six months ended 30 June 2008.
Highlights
* Commenced underwriting with an allocated capacity of �5.1m.
* Premium written during the period totalled �2.8m.
* Group's first acquisition of a Lloyd's corporate member during the period.
* Net assets increased to �7.2m.
Commenting upon these results the Chairman, Sir Michael Oliver, said:
"While it's too early to comment on the likely result for the 2008 year of account, the Group has had a satisfactory result for the six
month period. The insurance industry has generally fared well through the global crisis and Lloyd's continues to outperform its peer groups.
We expect Lloyd's to continue to remain an attractive investment for 2009 and beyond."
Hampden Underwriting Jeremy Evans 020 7863 6567
Smith & Williamson Corporate Finance Azhic Basirov 020 7131 4000
Limited David Jones
Joanne du Plessis
Cardew Group Tim Robertson 0207930 0777
Shan Shan
Willenbrock
David Roach
Chairman's statement
The Group's first period of underwriting has resulted in a profit before tax of �148,000. This has been achieved despite the fact that
the first six months underwriting has been hit by costs which are unlikely to recur in the second half of the year. This is typical of any
new start up in the Lloyd's market.
The above together with the investment income generated from the funds held by the group has contributed to a satisfactory result for
the period.
It is too early to comment on the likely result for the 2008 year of account which will be dependent on major loss activity, in
particular the insured loss from Hurricane Ike, which may be the third largest insured hurricane loss in history.
The recent turmoil in the credit markets has precipitated the difficulties encountered by the world's largest property/casualty
insurance group, which has obtained a loan from the Federal Reserve Bank of New York of $85bn. Together with losses from Hurricane Ike
estimated at up to $18bn, there are grounds for improved profit potential for 2009 and 2010 on the syndicates backed by the Company at
Lloyd's. This is supported by the fact that Managing Agency Partners, which manages the second best performing syndicate in the Company's
portfolio, Syndicate 2791, has recently announced that it proposes to renew its "sidecar" reinsurance Syndicate 6103 for a third year. The
business case is based on reinsurance rates remaining steady for 2009, which we view as a conservative assumption.
So far, the insurance industry, with some notable exceptions, has fared well through the global credit crisis. The operating performance
of Lloyd's continues to outperform its peer groups with an 84% combined ratio on an annual accounted basis for the 2007 financial year. The
syndicates on which we participate have historically outperformed the Lloyd's average by a considerable margin. Lloyd's has emerged since
2002 and particularly since the establishment of the Franchise Performance Board in 2003 with its reputation enhanced and we expect this to
continue with Lloyd's remaining an attractive investment for 2009 and beyond.
Condensed Group Income Statement
Six months ended 30 June 2008
6 months ended 30 June 4 months ended 31
December
2008 2007
Note �'000 �'000
Gross premium written 2,788 -
Reinsurance premium ceded (562) -
Net premiums written 2,226 -
Change in unearned gross (1,940) -
premium provision
Change in unearned reinsurance 395 -
premium provision
(1,545) -
Net earned premium 2 681 -
Net investment income 2,3 195 174
Other income 2,9 23 -
Revenue 899 174
Gross claims paid (120) -
Reinsurance share of gross 17 -
claims paid
Claims paid, net of (103) -
reinsurance
Change in provision for gross (359) -
claims
Reinsurance share of change in 32 -
provision for gross claims
Net change in provision for (327) -
claims
Net insurance claims and loss 2 (430) -
adjustment expenses
Expenses incurred in insurance 2 (165) -
activities
Other operating expenses 2 (156) (85)
Operating expenses (321) (85)
Operating profit before tax 2 148 89
Income tax expense 4 (40) (27)
Profit attributable to equity 8 108 62
shareholders
Earnings per share
attributable to equity
shareholders
Basic and diluted 5 1.46p 0.83p
The profit and earnings per share set out above are in respect of continuing operations.
Condensed Group Balance Sheet
At 30 June 2008
30 June 31 December
2008 2007
Note �'000 �'000
Assets
Intangible assets 1,052 981
Financial investments 4,213 2,486
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims 416 -
- Reinsurers' share of unearned premiums 184 -
Other receivables, including insurance 1,278 112
receivables
Prepayments and accrued income 303 -
Cash and cash equivalents 4,037 3,552
Total assets 11,483 7,131
Liabilities
Insurance liabilities
- Claims outstanding 2,272 -
- Unearned premiums 1,124 -
Other payables, including insurance payables 798 40
Accruals and deferred income 30 -
Current income tax liabilities 72 27
Deferred income tax liabilities 15 -
Total liabilities 4,311 67
Shareholders' equity
Share capital 7 741 741
Share premium 7 6,261 6,261
Retained earnings 8 170 62
Total shareholders' equity 7,172 7,064
Total liabilities and shareholders' equity 11,483 7,131
Condensed Group Cash Flow Statement
Six months ended 30 June 2008
6 months 4 months ended 31
ended 30 December
June
2008 2007
�'000 �'000
Cash flow from operating activities
Results of operating activities 148 89
Recognition of negative goodwill (23) -
Amortisation of intangible assets 4 -
Change in fair value of investments 38 (101)
recognised in the income statement
Changes in working capital:
Increase in other receivables (1,469) (112)
Increase in other payables 803 40
Net increase in technical provisions 2,796 -
Net cash inflow/(outflow) from operating 2,297 (84)
activities
Cash flows from investing activities
Purchase of intangible assets - (981)
Purchase of financial investments (1,727) (2,385)
Acquisition of subsidiary, net of cash (85) -
acquired
Net cash used in investing activities (1,812) (3,366)
Cash flows from financing activities
Net proceeds from issue of ordinary share - 7,002
capital
Net cash used in financing activities - 7,002
Net increase in cash, cash equivalents and 485 3,552
bank overdrafts
Cash, cash equivalents and bank overdrafts at 3,552 -
beginning of period
Cash, cash equivalents and bank overdrafts at 4,037 3,552
end of period
Condensed Group Statement of Changes in Shareholders' Equity
Six months ended 30 June 2008
Ordinary Share Share Premium Retained Earnings Total
Capital
�'000 �'000 �'000 �'000
At 1 January 2008 741 6,261 62 7,064
Profit for the period - - 108 108
attributable to equity
shareholders
At 30 June 2008 741 6,261 170 7,172
Notes to the Interim Financial Statements
Six months ended 30 June 2008
1. Accounting policies
Basis of preparation
The Interim Financial Statements have been prepared using accounting policies consistent with International Financial Reporting
Standards (IFRSs) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
The Interim Financial Statements are prepared for the six months ended 30 June 2008. These are the first set of Interim Financial
Statements prepared by the Group.
The Interim Financial Statements incorporate the results of Hampden Underwriting plc and Hampden Corporate Member Limited for the six
months ended 30 June 2008 and the results of Nameco (No. 365) Limited for the five months ended 30 June 2008.
The Interim Financial Statements are unaudited, but have been subject to review by the Group's auditors. The Interim Financial
Statements have been prepared in accordance with the accounting policies adopted for the period ended 31 December 2007.
The comparative figures are based upon the Group Financial Statements for the period ended 31 December 2007 and represent the period
from admission to AIM to 31 December 2007. The Group Financial Statements for the period ended 31 December 2007 have been reported on by the
Group's auditors and were delivered to the Registrar of Companies on 8 April 2008.
The underwriting data on which these Interim Financial Statements are based upon has been supplied by the managing agents of those
syndicates which the Group supports. The data supplied is the 100% figures for each syndicate. The Group has applied its share of the
syndicate participations to the gross figures to derive its share of the syndicates transactions, assets and liabilities. The underwriting
transactions in respect of Syndicate 2020 have not been included in these Interim report and accounts as these figures are not available to
the Board. The directors are of the opinion that the exclusions of these underwriting transactions do not materially affect the results for
the period or the Group's condensed balance sheet.
Significant accounting policies
The Interim Financial Statements have been prepared under the historical cost convention. The same accounting policies, presentation and
methods of computation are followed in these Interim Financial Statements as were applied in the preparation of the Group Financial
Statements for the period ended 31 December 2007.
The Group will adopt International Financial Reporting Standard (IFRS) 4 Insurance Contracts for the first time in 2008 as the Group
commenced underwriting on 1 January 2008. There is no impact of that change in accounting policy on these Interim Financial Statements. Full
details will be included in the Group Financial Statements for the year ended 31 December 2008.
2. Segmental information
Primary segment information
The Group has three primary segments which represent the primary way in which the Group is managed:
* Syndicate participation;
* Investment management;
* Other corporate activities.
6 months ended 30 June 2008 Syndicate Investment Other corporate activities Total
participation management
�'000 �'000 �'000 �'000
Net earned premium 681 - - 681
Net investment income 8 187 - 195
Other income (note 9) - - 23 23
Net insurance claims and loss (430) - - (430)
adjustment expenses
Expenses incurred in insurance (165) - - (165)
activities
Other operating expenses - - (156) (156)
Results of operating 94 187 (133) 148
activities
4 months ended 31 December Syndicate Investment Other corporate activities Total
2007 participation management
�'000 �'000 �'000 �'000
Net earned premium - - - -
Net investment income - 174 - 174
Other income - - - -
Net insurance claims and loss - - - -
adjustment expenses
Expenses incurred in insurance - - - -
activities
Other operating expenses - - (85) (85)
Results of operating - 174 (85) 89
activities
Secondary segment information
The Group does not have any secondary segments as it considers all of its activities to arise from trading within the UK.
3. Net investment income
6 months ended 30 4 months ended 31
June December 2007
2008
�'000 �'000
Investment income at fair 79 -
value through income statement
Realised gains on financial 46 -
investments at fair value
through income statement
Unrealised gains on financial - 101
investments at fair value
through income statement
Bank interest 70 73
Net investment income 195 174
4. Income tax expense
6 months ended 30 June 4 months ended 31 December
2008 2007
�'000 �'000
Current tax 40 27
Income tax expense at 28% 40 27
(2007: 30%)
5. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
The Group has no dilutive potential ordinary shares.
Earnings per share have been calculated in accordance with IAS 33.
Reconciliation of the earnings and weighted average number of shares used in the calculation is set out below.
6 months 4 months ended 31 December 2007
ended 30
June
2008
Profit for the period (�) 108,000 61,676
Weighted average number of 7,413,376 7,413,376
shares in issue
Basic and diluted earnings per 1.46 0.83
share (p)
6. Dividends
No equity dividends were proposed, declared or paid in the period (2007 - �Nil).
7. Share capital and share premium
Ordinary Preference Share Total
Share Capital
Capital
Authorised �'000 �'000 �'000
Ordinary shares of 10p each 2,950 50 3,000
and preference shares of 50p
each at 1 January 2008
Ordinary shares of 10p each 2,950 50 3,000
and preference shares of 50p
each at 30 June 2008
Allotted, called up and fully Ordinary Share Preference Share Premium Total
paid Capital Share �'000 �'000
�'000 Capital
�'000
Ordinary share capital, 741 - 6,261 7,002
preference share capital and
share premium at 1 January
2008
Ordinary share capital, 741 - 6,261 7,002
preference share capital and
share premium at 30 June 2008
8 Retained earnings
30 June 31 December
2008 2008
�*000 �*000
At 1 January 2008 62 -
Profit attributable to equity shareholders 108 62
At 30 June 2008 170 62
9. Acquisition of Nameco (No. 365) Limited
On 31 January 2008 Hampden Underwriting plc acquired 100% of the issued share capital of �1 ordinary shares of Nameco (No. 365) Limited
for �158,700. Nameco (No. 365) Limited is incorporated in England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the purchase method of accounting. After the alignment of accounting policies and other
adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of the net assets was
�181,880. Negative goodwill of �23,180 arose on acquisition and has been immediately recognised as other income in the income statement.
The following table explains the fair value adjustments made to the carrying values of the major categories of assets and liabilities at the
date of acquisition.
Carrying value Adjustments Fair value
�'000 �'000 �'000
Intangible assets 2 73 75
Financial investments 557 - 557
Reinsurance share of insurance 209 - 209
liabilities
Other receivables, including 340 - 340
insurance receivables
Prepayments and accrued income 42 - 42
Cash and cash equivalents 74 - 74
Insurance liabilities (885) - (885)
Other payables, including insurance (203) - (203)
payables
Accruals and deferred income (12) - (12)
Deferred income tax liabilities (15) - (15)
Net assets acquired 109 73 182
Satisfied by:
Cash and cash equivalents 159 - 159
Positive/(negative) goodwill 50 - (23)
The profit of Nameco (No. 365) Limited for the period since the acquisition date to 30 June 2008 is �6,000.
The group revenue and profit for the period would have been �871,000 and �109,000 respectively if the acquisition date of Nameco (No.
365) Limited had been 1 January 2008.
10. Related party transactions
The table set out below illustrates the Parent Company inter-company balances at the period end.
30 June 31 December
2008 2007
Company �'000 �'000
Balances due from Group companies at the period
end:
Hampden Corporate Member Limited 3,123 3,040
Nameco (No. 365) Limited 120 -
Total 3,243 3,040
Hampden Underwriting plc has provided an inter-company loan to Hampden Corporate Member Limited, a 100% subsidiary of the company. The
amount outstanding as at 30 June 2008 is �3,123,000 (2007: �3,040,000). Interest is charged on the loan at base rate plus 0.125%. The loan
is repayable on three months notice provided it does not jeopardise the ability of Hampden Corporate Member Limited to meet its liabilities
as they fall due.
Hampden Underwriting plc has provided an intercompany loan to Nameco (No. 365) Limited, a 100% subsidiary of the Company. The amount
outstanding as at 30 June 2008 is �122,000 (2007: �nil). Interest is charged on the loan at base rate plus 0.125%. The loan is repayable on
three months' notice provided it does not jeopardise the ability of Nameco (No. 365) Limited to meet its liabilities as they fall due.
Hampden Underwriting plc and Hampden Corporate Member Limited, a 100% subsidiary of the company, have entered into a management
agreement with Nomina plc. Jeremy Richard Holt Evans, a Director of Hampden Underwriting plc and Hampden Corporate Member Limited is also a
Director of Nomina plc. Under the agreement, Nomina plc provides management and administration, financial tax and accounting services to the
Group for an annual fee of �10,000. No fees have been paid by the Group in the period.
Hampden Corporate Member Limited, a 100% subsidiary of the company, has entered into a member's agent agreement with Hampden Agencies
Limited. Jeremy Richard Holt Evans, a Director of Hampden Underwriting plc and Hampden Corporate Member Limited, and Sir James Michael
Yorrick Oliver, a Director of Hampden Underwriting plc, are also a Directors of Hampden Capital plc which controls Hampden Agencies Limited.
Under the agreement, Hampden Corporate Member Limited will pay Hampden Agencies Limited a fee of 1% of capacity (capped at �250,000) and a
profit commission on a sliding scale from 1% of net profit up to a maximum of 10%. No amounts have been paid by Hampden Corporate Member
Limited in the period.
Nameco (No. 365) Limited has entered into a management agreement with Nomina Plc and a members agent agreement with Hampden Agencies
Limited. Under its management agreement Nameco (No. 365) Limited pays Nomina Plc �2,625 (2007: �2,625) for management and admiinstration,
financial, tax and accounting services. Under the members agencies agreement Nameco (No. 365) Limited will pay Hampden Agencies Lmited a fee
of �4,000 plus 0.25% of capacity and a profit commission on a sliding scale from 1% of net profit up to a maximum of 10%.
Hampden Underwriting plc has entered into a company secretarial agreement with Hampden Legal plc. Under the agreement, Hampden Legal plc
provides company secretarial services to the Group for an annual fee of �38,000. During the period, company secretarial fees of �18,000
(2007: �12,000) were charged to Hampden Underwriting plc. Hampden Holdings Limited has a controlling interest in both Hampden Legal Plc and
Hampden Capital Plc.
11. Syndicate participations
The syndicates and members' agent pooling arrangements ("MAPA") in which the Company's subsidiaries participate as corporate members of
Lloyd's as are follows:
Allocated capacity
Year of account
2006 2007 2008
Syndicate or Managing or Members' Agent �'000 �'000 �'000
MAPA Number
218 Equity Syndicates Management Limited 38,850 40,792 40,792
510 RJ Kiln & Co. Limited 44,000 45,000 36,000
609 Atrium Underwriters Limited 45,000 45,000 45,000
623 Beazley Furlonge Limited 45,198 42,673 40,145
1200 Heritage Managing Agency Limited 36,000 21,445 21,507
2020 Wellington U/W Agencies Limited 46,321 - -
6104 Hiscox Syndictes Limited - - 100,000
7200 Members' Agents Pooling Arrangement 15,150 16,059 14,964
7201 Members' Agents Pooling Arrangement 80,382 85,204 79,368
7202 Members' Agents Pooling Arrangement 29,460 30,638 28,687
7203 Members' Agents Pooling Arrangement 5,626 4,889 4,539
7208 Members' Agents Pooling Arrangement 5,000,000
Total 385,987 331,700 5,411,002
For the 2006 and 2007 years of account, the participation is through Nameco (No 365) Limited.
12. Group owned net assets
The Group balance sheet includes the following assets and liabilities held by the syndicates on which the Group participates. These
assets are subject to trust deeds for the benefit of the relevant syndicates' insurance creditors. The table below shows the split of the
Group balance sheet between group and syndicate assets and liabilities.
30 June 2008 31 December 2007
Group Syndicate Total Group Syndicate Total
�'000 �'000 �'000 �'000 �'000 �'000
Assets
Intangible assets 1,052 - 1,052 981 - 981
Financial investments 2,337 1,876 4,213 2,486 - 2,486
Reinsurance share of insurance
liabilities
- Reinsurers' share of - 416 416 - - -
outstanding claims
- Reinsurers' share of - 184 184 - - -
unearned premiums
Other receivables, including 77 1,201 1,278 112 - 112
insurance receivables
Prepayments and accrued income 33 270 303 - - -
Cash and cash equivalents 3,750 287 4,037 3,552 - 3,552
Total assets 7,249 4,234 11,483 7,131 - 7,131
Liabilities
Insurance liabilities
- Claims outstanding - 2,272 2,272 - - -
- Unearned premiums - 1,124 1,124 - - -
Other payables, including 57 741 798 40 - 40
insurance payables
Accruals and deferred income 21 9 30
Current income tax liabilities 72 - 72 27 - 27
Deferred income tax 15 - 15 - - -
liabilities
Total liabilities 165 4,146 4,311 67 - 67
Shareholders' equity
Share capital 741 - 741 741 - 741
Share premium 6,261 - 6,261 6,261 - 6,261
Retained earnings 82 88 170 62 - 62
Total shareholders' equity 7,084 88 7,172 7,064 - 7,064
Total liabilities and 7,249 4,234 11,483 7,131 - 7,131
shareholders' equity
This information is provided by RNS
The company news service from the London Stock Exchange
END
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