TIDMHUW
RNS Number : 7375F
Hampden Underwriting Plc
29 May 2013
Hampden Underwriting plc
("Hampden Underwriting" or the "Company")
Preliminary results for the year ended 31 December 2012
Hampden Underwriting, which provides investors with a limited
liability direct investment into the Lloyd's insurance market,
announces its preliminary results for the year ended 31 December
2012.
Highlights
-- Premium written during the period totalled GBP9.1m
-- Net profit of GBP763,000
-- Earnings per share 9.92p
-- Net assets increased to GBP9.1m
-- Net assets per share of GBP1.07
Commenting upon these results Chairman, Sir Michael Oliver
said:
"The profit after tax for the year ended 31 December 2012 shows
a marked improvement on 2011. In last year's report I mentioned
that the time was now right for expansion. This we have done with a
35% increase in underwriting. Plans continue to develop and we look
forward to informing shareholders as and when they reach
fruition."
Enquiries:
Hampden Underwriting Nigel Hanbury nigel.hanbury@hampdenplc.com
------------------------------ --------------- -----------------------------
Smith & Williamson Corporate
Finance David Jones 020 7131 4000
------------------------------ --------------- -----------------------------
Chairman's Statement
During the year the Board was pleased to welcome Nigel Hanbury
in the role of Chief executive. Nigel brings a wealth of experience
in underwriting at Lloyd's, and we now look forward to a period of
increased activity.
The profit after tax of GBP763k for the year ended 31 December
2012 compares with a loss after taxation of GBP387k for 2011. This
result includes a net credit of GBP487k in respect of goodwill
arising on the three acquisitions made in the year. Excluding this
the profit after tax for the year of GBP276k still shows a marked
improvement on 2011.
The 2010 underwriting year of account closed at 31 December 2012
with a profit of GBP459k, compared to a profit of GBP831k for the
2009 year of account at 31 December 2011. This represents a profit
of 2.55% on capacity (Lloyd's overall market result was 2.49%)
compared to a profit of 18.27% for the 2009 account which was a
percentage point above the Lloyd's market average result for
2009.
Net assets have increased to 107p per share and when the
unamortised value of capacity is added back it shows a value of
119p.
In last year's report I mentioned that the time was now right
for expansion. This we have done with a 35% increase in
underwriting between the 2012 and 2013 underwriting years of
account. This growth has been achieved through the acquisition of
three Namecos at what we believe to be acceptable prices in a
market that continues to offer profitable opportunities. This
brings the total number of Namecos under 100% ownership to
seven.
A by product of purchasing Namecos is not only to enable
increased underwriting in 2013 but also to increase exposure to
their open years of 2010 (now closed), 2011 and 2012 which are at
varying degrees of maturity at the time of purchase. Of course a
price is paid for these open years but the company benefits from
any improvements between the acquisition date and closure. The
total amount of premium limit purchased last year over the three
open years is in excess of GBP13m.
Furthermore all of the underwriting vehicles own significant
Funds at Lloyd's. Following a beauty parade of various asset
managers this cash has now been invested through two fund managers:
the Trojan Fund managed by Troy and the Ruffer Total and Absolute
Return Funds managed by Ruffer. The Trojan Fund's investment
objective is to achieve growth in capital and income in real terms
over the long term through substantially investing in UK and
Overseas equities and fixed interest securities but it has the
ability/is authorized to invest in all asset classes. The Ruffer
funds aim to preserve capital and achieve low volatility with
positive returns from an actively managed portfolio of different
asset classes including equities bonds and currencies. The
investment of these assets gives the shareholder the ability to
obtain an investment return as well as a return from taking
underwriting risk. Over many years this double use of assets has
been one of the attractions of investing at Lloyd's. The total
amount of the investments in these funds at HUW Plc. and its
subsidiaries, at the time of going to press, is approximately
GBP8.1m or about 95p per share. There are additional cash amounts
yet to be invested or earmarked for day to day cash requirements
amounting to 7p per share.
Plans continue to develop and we look forward to informing
shareholders as and when they reach fruition. However we are
pleased our Lloyd's advisor is seeing clear signs of an improvement
in property and casualty insurance rates which is offsetting, to
some degree, the new competition from the capital markets which are
competing for reinsurance business such as through the issuance of
Catastrophe Bonds and other structures which is likely to have an
adverse effect on reinsurance rates for the June and July
renewals.
Finally, in last year's report we mentioned the possibility of
paying a dividend. The Board has concluded that in the current
climate our resources are better deployed within our core business.
However, we have agreed to buy back some of our shares each year
where the Board feels it is prudent to do so.
Sir Michael Oliver
Non-executive Chairman
28 May 2013
Lloyd's Advisers' Report
2012 review and outlook for 2013
Total insured losses for the global insurance industry from
natural catastrophes in 2012 totalled $71bn, with man-made
disasters costing an additional $6bn. Overall insured losses were
still above the average of recent years but at $77bn declined
significantly from the total of $126bn in 2011. Most of the losses
in 2012 arose from Hurricane Sandy, which made landfall in Atlantic
City, New Jersey on 29 October 2012. The Insurance Information
Institute estimates that insurance companies will pay $18.8bn in
claims from Sandy, making it the third costliest storm in US
history, after Hurricane Katrina in 2005 ($48.7bn) and Hurricane
Andrew in 1992 ($25.6bn).
In contrast to 2011, which was affected by international losses,
principally in Japan, New Zealand and Thailand, 2012 was much more
benign with the largest non-US insured loss being the earthquakes
in Italy costing $1.6bn in May 2012 and the January 2012 capsize of
the cruise liner, Costa Concordia, which is expected to cost
insurers more than $1bn. As a market, Lloyd's net ultimate claims
at 31 December 2012 for catastrophe losses during 2012 are
estimated at GBP1.8bn, which is just above the 15 year average of
GBP1.4bn but like the insurance industry as a whole a significant
reduction on the record claims suffered in 2011 of GBP4.7bn.
Despite Hurricane Sandy and claims from the summer drought in
the corn belt of the US, the underwriting results of the US
property/casualty insurance industry improved in 2012 with net
losses from underwriting reducing to $16.7bn from $36.2bn in 2011.
Net investment gains (income and realised capital gains) enabled an
improved overall net profit after tax of $33.5bn compared with
$19.5bn in 2011.
Capital remains strong for both insurers and reinsurers. At
Lloyd's total net resources increased by 6% in 2012 to a record
GBP20.2bn with the solvency surplus improving by 4%, also to a
record GBP3.1bn. The policyholders' surplus of the US
property/casualty industry, a proxy for underwriting capacity, grew
by $33.1bn in 2012 to a record $586.9bn. Reinsurance capital also
grew to a record $505bn at year end 2012, an increase of 11% or
$50bn since the end of 2011, according to reinsurance broker, Aon
Benfield.
Demand measured by premium has grown over the long term, being
linked to growth in GDP and levels of insurance penetration. During
the Great Recession of 2007-2009 US net written insurance premiums
fell by an aggregate 6.8%, the first three year decline since
1930-1933. Growth in overall net written premiums, a proxy for
demand, accelerated to 4.3% in 2012 from 3.4% in 2011 with insurers
writing predominantly commercial lines showing greater increases of
5.7%. The demand component has been boosted by a combination of
increasing premium rates and a recovering US economy contributing
to organic growth. Encouragingly, net written premium has now
overtaken its previous peak set in 2006.
The insurance pricing cycle is typically supply led with demand
playing a limited role. However, in this cycle deficient demand has
had a greater impact than normal since 2007 as organic growth
opportunities have largely not been available to use up surplus
capital. The strength of the economic recovery remains uncertain in
Lloyd's principal market, the US.
Sluggish economic conditions are expected to continue to have an
impact on the demand for insurance and therefore organic growth
opportunities. However, it is encouraging that US real GDP growth
accelerated to 2.5% in the first quarter of 2013 compared with 0.4%
in the final quarter of 2012.
It is possible that we may have seen the bottom of the cycle in
2011 when the US property/casualty industry reported a combined
ratio of 106.3%, the worst ratio since 2002 with the bottom of the
previous cycle having been in 2001 when the combined ratio was
115.8%. US property/casualty industry net written premium growth in
2013 is expected to be the strongest since 2004 driven by a mixture
of organic growth and a broad and sustained increase in pricing. A
M Best is projecting net written premium growth of 4.5% for
2013.
Insurers and reinsurers have three main sources of earnings.
These are the potential for underwriting profit on earned income
from the current year, the potential for releases from reserves on
business written in prior years and finally investment income and
realised gains. In our view, the principal reason why pricing is
recovering on US insurance business is the investment environment.
The Federal Reserve is actively signalling that it is determined to
keep interest rates low until unemployment drops below 6.5% or
until inflation expectations exceed 2.5%.
The treasury yield curve remains close to its most depressed
level in at least 45 years. Investment income has further reduced
due to a combination of lower yields and a reduction in the average
maturity of insurers' bond portfolios which, according to the
Insurance Information Institute based on A M Best data, has fallen
from 7.32 years in 2006 to 6.45 years in 2011. The duration of bond
investments for Lloyd's syndicates is even lower at 1.7 years.
The significance of the fall in bond years can be seen from the
fact that a US five year treasury bond could have been bought with
a yield of 5% in July 2007, yet when that bond matured in July 2012
the reinvestment yield available was only 0.6%.
The trend in declining yields from 2007 can be seen in the chart
below which shows both the two year and five year US treasury from
2005 to May 2013. At the time of writing the two year is yielding
0.23% and the five year 0.79%.
US treasury bond yields
The investment component of the return on equity by line of
business is particularly important in capital intensive lines such
as reinsurance, or casualty business where claims may not be paid
out for a number of years. Apart from controlling expenses, the
main way for insurance company managements to compensate for this
"lost investment income" is to encourage their underwriters to put
rates up.
At previous cycle turning points, reserve deteriorations have
followed periods of reserve releases. Currently reserve releases
continue to be made, although they have been reducing since 2008
for US insurers and are expected to taper off in 2013 and 2014.
Global reinsurance rates were stable at 1 January 2013 despite
the losses from Hurricane Sandy. The reinsurance broker, Guy
Carpenter, reported that renewals for loss free accounts varied
between down by 2.5% to up by 2.5% for US property catastrophe
reinsurance with loss impacted catastrophe programmes experiencing
increases, although the level of these increases varied widely.
Reinsurance pricing at 1 April 2013 Asian renewals were stable to
falling marginally.
The most significant issue affecting the reinsurance industry in
2013 is the convergence of traditional and alternative sources of
reinsurance capital with Guy Carpenter calculating that
non-traditional capacity now makes up an estimated 14% of global
property catastrophe limit. Alternative capital/reinsurance
structures typically offer a collateralised quota share reinsurance
through a variety of mechanisms designed for investors seeking
catastrophe risk. At the time of writing the market is in a state
of flux in advance of the 1 June and 1 July renewal seasons for
reinsurance business. However, early indications are that there
will be rate reductions of 10% or more, which will have a
particular impact on what have been attractive margins for Florida
reinsurance business, for example.
In contrast we are now seeing a sustained upturn in property and
casualty insurance rates in the US, which does not suffer from the
ease of entry from alternative sources of capital seen in the
reinsurance sector. After nearly eight years of decreases the first
increase we saw was in the third quarter of 2011 and by the fourth
quarter of 2012 rates were up by an average of 5% using data
supplied by the Council of Insurance Agents and Brokers, the
largest increase since late 2003. Rate rises continued in the first
quarter of 2013, averaging 5.2%. The President/CEO, Ken Crerar,
commented, "Carriers backed off risky business, tightened
underwriting and pressed for higher pricing and deductibles on
renewal." Lloyd's received 41% of its income from US and Canada in
2012 and as the market leader in excess and surplus (the "E&S")
lines business is expected to be a major beneficiary from a
hardening US insurance market leading to business migrating back to
the E&S market from the US admitted market.
Following Hurricanes Katrina, Rita and Wilma in 2005, US
reinsurance rates have been among the most attractive of any class
of business. What we are seeing now in the current market place is
potentially a healthy rebalancing in the relative attractiveness of
writing insurance business compared to reinsurance business which,
if sustained, would suggest that overall, the insurance cycle has
turned the corner. However, from a reinsurance perspective,
reducing reinsurance rates should improve the margins of insurers
but reduce the attractiveness of writing reinsurance business. Time
will tell whether the alternative sources of capital which have
entered the industry will sustain their provision of capital post a
major loss and prove dependable for insurers.
Hampden Underwriting's 2012 results
The traditional method for comparing the performance of
competing insurance businesses is an analysis of the combined
ratio, which is the sum of net claims and expenses divided by net
earned premium. The combined ratio of Hampden Underwriting's
portfolio for 2012 was 93% which compares favourably with industry
peer groups, outperforming the 2012 results of the US
property/casualty industry, US reinsurers and European
reinsurers.
Syndicate profit distributions
Profit distributions from Hampden Underwriting's portfolio of
syndicates continue to be made by reference to the traditional
three year accounts. Using this measure of performance Hampden
Underwriting's portfolio marginally outperformed the Lloyd's result
as a percentage of capacity on the 2010 account at 31 December 2012
with a profit of 2.55% (Lloyd's 2.49%) and is estimated to
outperform Lloyd's on the 2011 account with a profit of 5.08% at
the mid-point estimate (Lloyd's 0.96%). At this early stage of
development of the 2012 account the mid-point estimate is a profit
of 4.75% (Lloyd's 4.2%).
Hampden Underwriting's capital position
Net tangible assets per share fell marginally by 1.4% during
2012, principally as a result of the three acquisitions made in the
year. Including the acquisitions, net tangible assets increased
from GBP6.43m at year end 2011 to GBP7.3m at year end 2012 and
continue to provide a capital surplus compared with the Lloyd's
minimum capital requirement as at November 2012, which was
GBP6.99m.
Hampden Underwriting's portfolio for 2013
Hampden Underwriting's portfolio for 2013 continues to provide a
good spread of business across managing agents and classes of
business with motor and liability providing a balance to the
catastrophe exposed reinsurance and property business, as well as
contributing through diversification to lower capital requirements.
28.2% of the capacity is in the three syndicates rated "A" by
Hampden Agencies, being Syndicates 386, 609 and 2791, with
Syndicate 2791 being the largest holding at 15.1% of capacity. The
top ten syndicates comprise 82.2% of the portfolio. No new
syndicates were joined for 2013.
Top ten syndicates for 2013
2013 2013 HCM
---------- ---------------------------- ------------ ---------- ---------- ---------------
Syndicate Portfolio 2013 HCM
---------- ---------------------------- ------------ ---------- ---------- ---------------
Capacity Capacity Portfolio
%
---------- ---------------------------- ------------ ---------- ---------- ---------------
Syndicate Managing Agent GBP'000s GBP'000s of Total Largest Class
---------- ---------------------------- ------------ ---------- ---------- ---------------
Managing Agency Partners
2791 Ltd 511,018.4 1,942.5 15.1 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
510 RJ Kiln & Co Ltd 1,063,790.9 1,815.6 14.1 US$ Property
---------- ---------------------------- ------------ ---------- ---------- ---------------
US$ Non-Marine
623 Beazley Furlonge Ltd 224,998.6 1,428.2 11.1 Liability
---------- ---------------------------- ------------ ---------- ---------- ---------------
Atrium Underwriters
609 Ltd 419,734.3 1,292.8 10.0 Energy
---------- ---------------------------- ------------ ---------- ---------- ---------------
33 Hiscox Syndicate Ltd 950,000.0 10,42.6 8.1 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
Pembroke Managing Agency
6110 Ltd 45,000.0 724.5 5.6 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
Equity Syndicate Management
218 Ltd 437,624.0 715.3 5.6 Motor
---------- ---------------------------- ------------ ---------- ---------- ---------------
Catlin Underwriting
6111 Agencies Ltd 85,694.1 680.5 5.3 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
Canopius Managing Agents
958 Ltd 220,000.0 523.3 4.1 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
Cathedral Underwriting
2010 Ltd 350,015.9 423.5 3.3 Reinsurance
---------- ---------------------------- ------------ ---------- ---------- ---------------
Subtotal 10,588.8 82.2
---------- ---------------------------- ------------ ---------- ---------- ---------------
Total 12,882.3 100.00
---------- ---------------------------- ------------ ---------- ---------- ---------------
The two largest classes of business remain reinsurance and US
dollar property insurance. Casualty and UK motor exposures provide
balance against the more volatile property catastrophe
exposures.
Risk management
The two major risks faced by insurers and reinsurers are
deficient loss reserves and inadequate pricing, which, taken
together, account for over 40% of insurer impairments according to
A M Best. The pricing cycle is easier to identify in real time. The
reserving cycle is more difficult to identify in real time as
typically reserving standards slip after a period of reserve
releases and there is a lag before this is recognised. Hampden
Agencies approaches the management of portfolio risk by
diversifying across classes of business, syndicates and managing
agents and importantly understanding the cycle management and
reserving strategy of each syndicate as well as the rate
environment.
We also assess the downside in the event of a major loss through
monitoring the aggregate losses estimated by managing agents to
realistic disaster scenarios. Risk is assessed in the context of
potential return with catastrophe exposure being actively managed
dependent on market conditions.
Hampden Underwriting's largest modelled exposures net of
reinsurance as a percentage of gross premiums are similar for 2013
compared with 2012. The largest remains a major windstorm in the
north-east of the US at 29.7% of gross premium, net of reinsurance.
The next highest is the Gulf of Mexico windstorm at 28.9% net.
Consolidated statement of comprehensive income
Year ended 31 December 2012
Year ended Year ended
31 December 31 December
2012 2011
Note GBP'000 GBP'000
--------------------------------------------- ----- ------------ ------------
Gross premium written 9,141 7,715
Reinsurance premium ceded (1,820) (1,445)
--------------------------------------------- ----- ------------ ------------
Net premiums written 7,321 6,270
Change in unearned gross premium provision (405) 238
Change in unearned reinsurance premium
provision 52 (17)
--------------------------------------------- ----- ------------ ------------
(353) 221
--------------------------------------------- ----- ------------ ------------
Net earned premium 6,968 6,491
Net investment income 3 429 247
Other income - 22
Goodwill on bargain purchase 568 -
--------------------------------------------- ----- ------------ ------------
997 269
--------------------------------------------- ----- ------------ ------------
Revenue 7,965 6,760
--------------------------------------------- ----- ------------ ------------
Gross claims paid (4,685) (4,726)
Reinsurers' share of gross claims paid 930 842
--------------------------------------------- ----- ------------ ------------
Claims paid, net of reinsurance (3,755) (3,884)
--------------------------------------------- ----- ------------ ------------
Change in provision for gross claims 229 (1,115)
Reinsurers' share of change in provision
for gross claims 24 486
--------------------------------------------- ----- ------------ ------------
Net change in provision for claims 253 (629)
--------------------------------------------- ----- ------------ ------------
Net insurance claims and loss adjustment
expenses (3,502) (4,513)
Expenses incurred in insurance activities (2,743) (2,277)
Other operating expenses (866) (574)
--------------------------------------------- ----- ------------ ------------
Operating expenses (3,609) (2,851)
--------------------------------------------- ----- ------------ ------------
Operating profit/(loss) before tax 4 854 (604)
Income tax (charge)/credit (91) 217
--------------------------------------------- ----- ------------ ------------
Profit/(loss) and total comprehensive
income attributable to equity shareholders 763 (387)
--------------------------------------------- ----- ------------ ------------
Earnings/(loss) per share attributable
to equity shareholders
Basic and diluted 5 9.92p (5.22)p
--------------------------------------------- ----- ------------ ------------
The profit/(loss) attributable to equity shareholders and
earnings/(loss) per share set out above are in respect of
continuing operations.
The accounting policies and notes are an integral part of these
Financial Statements.
Consolidated statement of financial position
At 31 December 2012
31 December 31 December
2012 2011
Note GBP'000 GBP'000
------------------------------------------- ----- ------------ ------------
Assets
Intangible assets 6 1,797 1,052
Deferred income tax assets - -
Reinsurance assets:
- reinsurers' share of claims outstanding 4,323 3,044
- reinsurers' share of unearned premium 590 409
Other receivables, including insurance
receivables 9,343 6,628
Prepayments and accrued income 1,216 842
Financial assets at fair value 7 20,978 13,675
Cash and cash equivalents 1,444 3,020
------------------------------------------- ----- ------------ ------------
Total assets 39,691 28,670
------------------------------------------- ----- ------------ ------------
Liabilities
Insurance liabilities:
- claims outstanding 19,814 14,234
- unearned premium 4,624 3,137
Deferred income tax liabilities 938 415
Other payables, including insurance
payables 4,589 2,911
Accruals and deferred income 631 488
------------------------------------------- ----- ------------ ------------
Total liabilities 30,596 21,185
------------------------------------------- ----- ------------ ------------
Shareholders' equity
Share capital 8 853 741
Share premium 8 6,996 6,261
Retained earnings 1,246 483
------------------------------------------- ----- ------------ ------------
Total shareholders' equity 9,095 7,485
------------------------------------------- ----- ------------ ------------
Total liabilities and shareholders'
equity 39,691 28,670
------------------------------------------- ----- ------------ ------------
Consolidated statement of cash flows
Year ended 31 December 2012
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
--------------------------------------------- ------------------- ------------
Cash flows from operating activities
Results of operating activities 854 (604)
Interest received (27) (4)
Investment income (320) (275)
Goodwill on bargain purchase (568) -
Impairment of goodwill 81 -
Loss on sale of intangible assets 1 11
Amortisation of intangible assets 314 270
Income tax paid (179) (16)
Change in fair value of investments (128) (5)
Changes in working capital:
- decrease/(increase) in other receivables 2,225 (530)
- (decrease)/increase in other payables (1,046) 3
- net (decrease)/increase in technical
provisions (2,991) 454
--------------------------------------------- ------------------- ------------
Net cash outflow from operating activities (1,784) (696)
--------------------------------------------- ------------------- ------------
Cash flows from investing activities
Interest received 27 4
Investment income 321 275
Purchase of intangible assets (217) (49)
Proceeds from disposal of intangible assets 51 -
Purchase of financial assets at fair value 854 166
Acquisition of subsidiaries, net of cash (828) -
acquired
--------------------------------------------- ------------------- ------------
Net cash inflow from investing activities 208 396
--------------------------------------------- ------------------- ------------
Net decrease in cash and cash equivalents (1,576) (300)
Cash and cash equivalents at beginning
of year 3,020 3,320
--------------------------------------------- ------------------- ------------
Cash and cash equivalents at end of year 1,444 3,020
--------------------------------------------- ------------------- ------------
Statements of changes in shareholders' equity
Year ended 31 December 2012
Attributable to owners of the parent
---------------------------------------------------------
Ordinary Preference Share Retained
share share capital premium earnings Total
capital
Consolidated GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- -------------- --------- --------- --------
At 1 January 2011 741 - 6,261 870 7,872
Loss and total comprehensive
income for the year - - - (387) (387)
-------------------------------- --------- -------------- --------- --------- --------
At 31 December 2011 741 - 6,261 483 7,485
-------------------------------- --------- -------------- --------- --------- --------
At 1 January 2012 741 - 6,261 483 7,485
Share issue 112 - 735 - 847
Profit and total comprehensive
income for the year - - - 763 763
-------------------------------- --------- -------------- --------- --------- --------
At 31 December 2012 853 - 6,996 1,246 9,095
-------------------------------- --------- -------------- --------- --------- --------
Notes to the financial statements
Year ended 31 December 2012
1. Accounting policies
The principal accounting policies adopted in the preparation of
the financial information set out in this announcement are set out
in the full financial statements for the year ended 31 December
2012 (the "Financial Statements").
Basis of preparation
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") endorsed by
the European Union ("EU"), IFRIC interpretations and those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS.
The Financial Statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets
at fair value through profit or loss. A summary of the more
important Group accounting policies is set out below.
The preparation of Financial Statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
Financial Statements and the reported amounts of revenues and
expenses during the reporting year. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from these
estimates.
The Group participates in insurance business through its Lloyd's
corporate member subsidiaries. Accounting information in respect of
syndicate participations is provided by the syndicate managing
agents and is reported upon by the syndicate auditors.
International Financial Reporting Standards
There are no IFRS or IFRIC interpretations that are effective
for the first time for the financial year beginning on or after 1
January 2012 that had a material impact on the Group's Financial
Statements.
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after 1
January 2012 and have not been applied in preparing these Financial
Statements. None of these is expected to have a significant effect
on the financial statements of the Group:
-- Amendment to IAS 1 "Financial Statement Presentation"
regarding other comprehensive income. The main change resulting
from these amendments is a requirement for entities to group items
presented in "other comprehensive income" ("OCI") on the basis of
whether they are potentially reclassifiable to profit or loss
subsequently (reclassification adjustments). The amendments do not
address which items are presented in OCI.
-- IAS 19 "Employee Benefits" was amended in June 2011. The
amendments eliminate the option to defer the recognition of gains
and losses, known as the "corridor method"; streamline the
presentation of changes in assets and liabilities arising from
defined benefit plans, including requiring re-measurements to be
presented in other comprehensive income; and enhance the disclosure
requirements for defined benefit plans, providing better
information about the characteristics of defined benefit plans and
the risks that entities are exposed to through participation in
those plans.
-- IFRS 7 "Financial Instruments: Disclosures" was amended for
asset and liability offsetting. This amendment requires disclosure
of information that will enable users of financial statements to
evaluate the effect or potential effect of netting arrangements,
including rights of set-off associated with the entity's recognised
financial assets and recognised financial liabilities, on the
entity's financial position. The amendment is effective for the
accounting period beginning on or after 1 January 2013, subject to
endorsement by the EU.
-- IFRS 10 "Consolidated Financial Statements" builds on
existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within
the consolidated financial statements of the Parent Company. The
standard provides additional guidance to assist in the
determination of control where this is difficult to assess. The
Group intends to adopt IFRS 10 no later than the accounting period
beginning on or after 1 January 2013.
-- IFRS 11 "Joint Arrangements" provides for a more realistic
reflection of joint arrangements by focusing on the rights and
obligations of the arrangement, rather than its legal form. There
are two types of joint arrangement; joint operations and joint
ventures. Joint operations arise where a joint operator has rights
to the assets and obligations relating to the arrangement and
therefore accounts for its share of assets, liabilities, revenue
and expenses. Joint ventures arise where the joint venture has
rights to the net assets of the arrangement and therefore equity
accounts for its interest. Proportional consolidation of joint
ventures is no longer allowed. The Group intends to adopt IFRS 11
no later than the accounting period beginning on or after 1 January
2013.
-- IFRS 12 "Disclosures of Interests in Other Entities" includes
the disclosure requirements for all forms of interests in entities,
including joint arrangements, associates, special purpose vehicles
and other off Statement of Financial Position vehicles. The Group
intends to adopt IFRS 12 no later than the accounting period
beginning on or after 1 January 2013.
-- Amendments to IFRS 10 "Consolidated Financial Statements",
IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests
in Other Entities" provide additional transition relief to IFRS
10,11 and 12 by limiting the requirement to provide adjusted
comparative information to only the preceding comparative period.
For disclosures related to unconsolidated structured entities, the
amendments will remove the requirement to present comparative
information for periods before IFRS 12 is first applied. The Group
intends to adopt the amended standards no later than the accounting
period beginning on or after 1 January 2013, subject to endorsement
by the EU.
-- IFRS 13 "Fair Value Measurement" aims to provide consistency
and reduce complexity by providing a precise definition of fair
value and a single source of fair value measurement and disclosure
requirements for use across IFRS. The requirements do not extend
the use of fair value accounting but provide guidance on how it
should be applied where its use is already required or permitted by
other IFRS.
-- IAS 27 "Separate Financial Statements" replaces the current
version of IAS 27 "Consolidated and Separate Financial Statements"
as a result of the issue of IFRS 10. The revised standard includes
the requirements relating to separate financial statements. The
Group intends to adopt IAS 27 (revised) no later than the
accounting period beginning on or after 1 January 2013.
-- IAS 28 "Investments in Associates and Joint Ventures"
replaces the current version of IAS 28 "Investments in Associates"
as a result of the issue of IFRS 11. The revised standard includes
the requirements for associates and joint ventures that have to be
equity accounted following the issue of IFRS 1. The Group intends
to adopt IAS 28 (revised) no later than the accounting period
beginning on or after 1 January 2013.
-- IFRS 9 "Financial Instruments" addresses the classification,
measurement and recognition of financial assets and financial
liabilities. It replaces parts of IAS 39 that relate to the
classification and measurement of financial instruments. IFRS 9
requires financial assets to be classified into two measurement
categories: those measured as at fair value and those measured at
amortised cost. The determination is made at initial recognition.
The classification depends on the entity's business model for
managing its financial instruments and the contractual cash flow
characteristics for the instrument. For financial liabilities, the
standard retains most of the IAS 39 requirements. The main change
is that, in cases where the fair value option is taken for
financial liabilities, the part of a fair value change due to an
entity's own credit risk is recorded in other comprehensive income
rather than the income statement, unless this creates an accounting
mismatch. The Group is yet to assess IFRS 9's full impact and
intends to adopt IFRS 9 no later than the accounting period
beginning on or after 1 January 2015, subject to endorsement by the
EU. The Group will also consider the impact of the remaining phases
of IFRS 9 when completed by the Board.
-- Amendments to IAS 32 "Financial Instruments: Presentation"
add application guidance to address inconsistencies identified in
applying some of the criteria when offsetting financial assets and
financial liabilities. This includes clarifying the meaning of
"currently has a legally enforceable right of set-off" and that
some gross settlement systems may be considered equivalent to net
settlement. The Group is yet to assess the full impact of the
amendments to IAS 32 and intends to adopt the amended standard no
later than the accounting period beginning on or after 1 January
2014.
"Annual Improvements 2009-2011 Cycle" sets out amendments to
various IFRS as follows:
-- An amendment to IFRS 1 "First-time Adoption" clarifies whether an entity may apply IFRS 1:
(a) if the entity meets the criteria for applying IFRS 1 and has
applied IFRS 1 in a previous reporting period; or
(b) if the entity meets the criteria for applying IFRS 1 and has
applied IFRS in a previous reporting period when IFRS 1 did not
exist.
-- The amendment to IFRS 1 also addresses the transitional
provisions for borrowing costs relating to qualifying assets for
which the commencement date for capitalisation was before the date
of transition to IFRS.
-- An amendment to IAS 1 "Presentation of Financial Statements"
clarifies the requirements for providing comparative
information:
(a) for the opening statement of financial position when an
entity changes accounting policies, or makes retrospective
restatements or reclassifications; and
(b) when an entity provides Financial Statements beyond the
minimum comparative information requirements.
-- An amendment to IAS 16 "Property, Plant and Equipment"
addresses a perceived inconsistency in the classification
requirements for servicing equipment.
-- An amendment to IAS 32 "Financial Instruments: Presentation"
addresses perceived inconsistencies between IAS 12 "Income Taxes"
and IAS 32 with regard to recognising the consequences of income
tax relating to distributions to holders of an equity instrument
and to transaction costs of an equity transaction.
-- An amendment to IAS 34 "Interim Financial Reporting"
clarifies the requirements on segment information for total assets
and liabilities for each reportable segment.
The Group is yet to assess the full impact of these amendments
and intends to adopt the amended standards no later than the
accounting period beginning on or after 1 January 2013, subject to
endorsement by the EU.
Amendments to IFRS 10 "Consolidated Financial Statements", IFRS
12 "Disclosure of Interests in Other Entities" and IAS 27 "Separate
Financial Statements" define an investment entity and introduce an
exception to consolidating particular subsidiaries for investment
entities. These amendments require an investment entity to measure
those subsidiaries at fair value through profit or loss in
accordance with IFRS 9 "Financial Instruments" in its consolidated
and separate Financial Statements. The amendments also introduce
new disclosure requirements for investment entities in IFRS 12 and
IAS 27. The Company is yet to assess the full impact of these
amendments and intends to adopt the amended standards no later than
the accounting period beginning on or after 1 January 2014, subject
to endorsement by the EU.
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Company.
2. Segmental information
The Group has three segments that represent the primary way in
which the Group is managed:
-- syndicate participation;
-- investment management; and
-- other corporate activities.
Other corporate
Syndicate Investment
participation management activities Total
Year ended 31 December 2012 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------- ------------- ---------------- --------
Net earned premium 6,968 - - 6,968
Net investment income 405 24 - 429
Other income - - 568 568
Net incurred insurance claims
and loss adjustment expenses (3,502) - - (3,502)
Expenses incurred in insurance
activities (2,743) - - (2,743)
Amortisation of syndicate capacity - - (192) (192)
Other operating expenses (303) - (371) (674)
------------------------------------ -------------- ------------- ---------------- --------
Results of operating activities 825 24 5 854
------------------------------------ -------------- ------------- ---------------- --------
Other corporate
Syndicate Investment
participation management activities Total
Year ended 31 December 2011 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------- ------------- ---------------- --------
Net earned premium 6,491 - - 6,491
Net investment income 245 2 - 247
Other income 22 - - 22
Net incurred insurance claims
and loss adjustment expenses (4,513) - - (4,513)
Expenses incurred in insurance
activities (2,277) - - (2,277)
Amortisation of syndicate capacity - - (158) (158)
Other operating expenses (192) - (224) (416)
------------------------------------ -------------- ------------- ---------------- --------
Results of operating activities (224) 2 (382) (604)
------------------------------------ -------------- ------------- ---------------- --------
The Group does not have any geographical segments as it
considers all of its activities to arise from trading within the
UK.
No major customers exceed 10% of revenue.
3. Net investment income
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Investment income 320 275
Realised gains on financial assets at fair value
through profit or loss 3 74
Unrealised gains on financial assets at fair
value through profit or loss 128 5
Investment management expenses (49) (111)
Bank interest 27 4
-------------------------------------------------- ------------ ------------
Net investment income 429 247
-------------------------------------------------- ------------ ------------
4. Operating profit/(loss) before tax
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Operating profit/(loss) before tax is stated
after charging/(crediting):
Directors' remuneration 84 65
Exchange differences 125 (19)
Amortisation of intangible assets 314 270
Acquisition costs in connection with the new 45 -
subsidiaries acquired in the year
Impairment of goodwill 81 -
Goodwill on bargain purchase (568) -
Auditors' remuneration:
- audit of the Parent Company and Group Financial
Statements 25 25
- audit of subsidiary company Financial Statements 14 8
- services relating to taxation - -
- other services pursuant to legislation - -
- other services - -
---------------------------------------------------- ------------ ------------
The Group has no employees other than the Directors of the
Company.
Year ended Year ended
31 December 31 December
2012 2011
Directors' remuneration GBP GBP
------------------------- ------------ ------------
Sir Michael Oliver 20,000 20,000
Andrew Leslie 15,000 15,000
Jeremy Evans 15,000 15,000
Michael Cunningham 15,000 15,000
Nigel Hanbury 18,750 -
------------------------- ------------ ------------
Total 83,750 65,000
------------------------- ------------ ------------
Directors' remuneration comprises only Directors' fees. The
Chief Executive, Nigel Hanbury, has a bonus incentive scheme. No
bonus has been paid during the year. No other Directors derive
other benefits, pension contributions or incentives from the Group.
At 31 December 2012 no share options were held by the Directors
(2011: nil).
The Company did not have a Remuneration Committee during the
year.
5. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
earnings/(loss) 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 has been calculated in accordance with IAS
33.
Reconciliation of the earnings/(loss) and weighted average
number of shares used in the calculation is set out below:
Year ended Year ended
31 December 31 December
2012 2011
--------------------------------------------- ------------ -------------
Profit/(loss) for the year GBP763,000 GBP(387,000)
--------------------------------------------- ------------ -------------
Weighted average number of shares in issue 7,691,769 7,413,376
--------------------------------------------- ------------ -------------
Basic and diluted earnings/(loss) per share 9.92p (5.22)p
--------------------------------------------- ------------ -------------
6. Intangible assets
Syndicate
Goodwill capacity Total
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ---------- --------
Cost
At 1 January 2011 - 1,979 1,979
Additions - 49 49
Disposals - (1) (1)
--------------------------------------- --------- ---------- --------
At 31 December 2011 - 2,027 2,027
--------------------------------------- --------- ---------- --------
At 1 January 2012 - 2,027 2,027
Additions 81 218 299
Disposals - (56) (56)
Impairment (81) - (81)
Acquired with subsidiary undertakings - 1,032 1,032
--------------------------------------- --------- ---------- --------
At 31 December 2012 - 3,221 3,221
--------------------------------------- --------- ---------- --------
Amortisation
At 1 January 2011 - 705 705
Charge for the year - 270 270
--------------------------------------- --------- ---------- --------
At 31 December 2011 - 975 975
--------------------------------------- --------- ---------- --------
At 1 January 2012 - 975 975
Charge for the year - 314 314
Disposals - (4) (4)
Acquired with subsidiary undertakings - 139 139
--------------------------------------- --------- ---------- --------
At 31 December 2012 - 1,424 1,424
--------------------------------------- --------- ---------- --------
Net book value
As at 31 December 2011 - 1,052 1,052
--------------------------------------- --------- ---------- --------
As at 31 December 2012 - 1,797 1,797
--------------------------------------- --------- ---------- --------
7. Financial assets at fair value through profit or loss
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data.
The Group has no level 3 investments.
As at 31 December 2012, the Group held the following financial
assets carried at fair value on the statement of financial
position:
Assets measured at fair value
2012 Level 1 Level 2
GBP000 GBP000 GBP000
-------------------------------------------- ------- -------- --------
Shares and other variable yield securities 391 391 -
Debt securities and other fixed income
securities 10,864 10,864 -
Participation in investment pools 847 847 -
Loans guaranteed by mortgage 91 - 91
Holdings in collective investment
schemes 1,211 - 1,211
Deposits with credit institutions 22 - 22
Funds held at Lloyd's 7,173 7,173 -
Other 379 - 379
-------------------------------------------- ------- -------- --------
Total - market value 20,978 19,275 1,703
-------------------------------------------- ------- -------- --------
2011 Level 1 Level 2
GBP000 GBP000 GBP000
-------------------------------------------- ------- -------- --------
Shares and other variable yield securities 202 202 -
Debt securities and other fixed income
securities 7,821 7,821 -
Participation in investment pools 484 484 -
Loans guaranteed by mortgage 81 - 81
Holdings in collective investment
schemes 869 - 869
Deposits with credit institutions 43 - 43
Funds held at Lloyd's 4,090 4,090 -
Other 85 - 85
-------------------------------------------- ------- -------- --------
Total - market value 13,675 12,597 1,078
-------------------------------------------- ------- -------- --------
Funds at Lloyd's represents assets deposited with the
Corporation of Lloyd's ("Lloyd's") to support the Group's
underwriting activities as described in the accounting policies.
The Group has entered into a Lloyd's Deposit Trust Deed which gives
the Corporation the right to apply these monies in settlement of
any claims arising from the participation on the syndicates. These
monies can only be released from the provision of this Deed with
Lloyd's express permission and only in circumstances where the
amounts are either replaced by an equivalent asset, or after the
expiration of the Group's liabilities in respect of its
underwriting.
The Directors consider any credit risk or liquidity risk not to
be material.
The comparative figures have been reclassified to show 'holdings
in collective investment schemes' separately from 'shares and other
variable' yield securities.
8. Share capital and share premium
Ordinary
share Share
capital premium Total
Allotted, called up and fully paid GBP'000 GBP'000 GBP'000
7,413,376 ordinary shares of 10p each
and share premium at 1 January 2012 741 6,261 7,002
Share issue 112 735 847
---------------------------------------- --------- -------- --------
8,526,948 ordinary shares of 10p each
and share premium at 31 December 2012 853 6,996 7,849
---------------------------------------- --------- -------- --------
During the year 1,113,572 ordinary shares of 10p each were
issued for a total consideration of GBP847,000 as part of the
acquisition of Nameco (No. 917) Limited.
9. Financial statements
The financial information set out in this announcement does not
constitute statutory accounts but has been extracted from the
Group's Financial Statements which have not yet been delivered to
the Registrar. The Group's annual report and Financial Statements
will be posted to shareholders shortly. Further copies will be
available from the Company's registered office: Hampden House,
Great Hampden, Great Missenden, Buckinghamshire HP16 9RD and on the
Company's website www.hampdenplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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