TIDMHUW
RNS Number : 6067Z
Helios Underwriting Plc
31 May 2016
Helios Underwriting plc
("Helios" or the "Company")
Final results for the year ended 31 December 2015
Helios is pleased to announce its final results for the year
ended 31 December 2015
Highlights
-- Premium written during the period totalled GBP21.5m (2014: GBP17.1m)
-- Increased use of quota share reinsurance to reduce exposure
-- Reduced exposure has enabled increased capital to be available for acquisitions
-- Six acquisitions of corporate members during the period with
a further two since the year end
-- Profits reduce as levels of reinsurance have increased
-- Operating profit before tax, goodwill and impairment of GBP609,000 (2014: GBP1,351,000)
-- Profit for the year GBP789,000 (2014: GBP2,056,000)
-- Earnings per share of 8.38p (2014: 24.11p)
-- 2013 underwriting year of account profit return on capacity
of 14.20% (2012 underwriting year: 13.01%)
-- Recommended total dividend for this year of 5.0p per share (2014: 5.1p per share)
-- Adjusted net asset value per share (Humphrey & Co
valuation) - GBP1.97 per share (2014: GBP1.72 per share)
-- 30p per share growth (increase in adjusted net assets plus
dividends) in shareholder value represents 17% increase in value to
shareholders
Year ended 31 December
------------------------------------------------------------------- ----------------------------- -------
2016 2015 2014 2013 Change
------------------------------------------------------------------- ------ ------ ------ ----- -------
Adjusted net asset value (Humphrey's Valuation) per share (pence) 197 172 164 +15%
------------------------------------------------------------------- ------ ------ ------ ----- -------
Growth in capacity (GBPm) 28.1 20.5 18.1 +37%
------------------------------------------------------------------- ------ ------ ------ ----- -------
Year ended 31 December
----------------------------- ------------------------------------------------ -------
Total 2015 Total 2014 Adjusted Dividend Change
net asset
----------------------------- ----------- ----------- ----------- --------- -------
Growth in shareholder value
(pence per share) 30 13 2015: 25 2015:5 +131
2014: 8 2014: 5
----------------------------- ----------- ----------- ----------- --------- -------
Year ended 31 December
------------------------------- ------------------------- -------
2015 2014 Change
------------------------------- ------------ ----------- -------
Profit for the year (GBP'000) 30 13 +131
------------------------------- ------------ ----------- -------
Commenting, Sir Michael Oliver, Chairman, said:
"The Board is pleased to report a set of encouraging results for
2015 which reflects the reduced risk profile of the Group and a
focus on increasing the capital available to the Group to fund a
number of advantageous acquisitions of corporate members made
during the year. The Board is also pleased to recommend a final
dividend of 1.5p per share, together with a special dividend of
3.5p per share, making a total of 5p per share."
Commenting, Nigel Hanbury, Chief Executive, said:
"I am delighted to report on a year where we have successfully
managed to control our risk exposure, stay ruthlessly focused on
quality syndicates and significantly expand our portfolio of
corporate members. Our strategy has enabled us to grow our net
asset value per share strongly."
For further information please contact:
Helios
Nigel Hanbury - Chief Executive 020 7863 6655 /
nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer 07754 965917
Stockdale Securities 020 7601 6100
Robert Finlay
Rose Ramsden
Chairman's statement
Your Board is pleased to report a set of encouraging results for
2015 which reflects the reduced risk profile of the Group and a
focus on increasing the capital available to the Group to fund a
number of advantageous acquisitions of corporate members.
Accordingly the profits before tax, goodwill and impairment for the
year were GBP609,000 (2014: GBP1,351,000), whilst the adjusted net
asset value of the Group (Humphrey's Valuation) has increased to
GBP1.97 per share (2014: GBP1.72) - an increase of 15%.
Helios has been reducing its exposure to the underwriting risk
on the portfolio for the last two years and this reduction is
reflected in the reduction in profitability this year. Underwriting
profits of GBP1.4m (2014: GBP0.7m) have been ceded to reinsurers.
In addition the premiums paid for Stop Loss cover increased by
GBP300,000.
The net aggregate contribution made from acquiring companies at
above and below fair value reduced from GBP785,000 to GBP108,000
reflecting the more competitive environment for the buying of
corporate members. The Board is committed to being selective on the
acquisitions made in the future.
Strategy
We have continued to implement our strategy of building the
portfolio of syndicate capacity. During the year the key
developments were:
-- The profit for the year reflects the additional reinsurance
cover bought to reduce the group exposure to large losses.
-- We have changed the accounting policy relating to the
amortisation of capacity value to hold the capacity at fair value
in the balance sheet in the future.
-- The management team has been strengthened by the appointment
of an experienced Finance Director, Arthur Manners.
Capacity acquired
During the year a further six corporate members were acquired
that increased the capacity for 2013 to 2015 years of account, and
a further two corporate members have been bought since 31 December
2015, adding a further GBP4.6m of capacity to the open years. These
companies have increased the capacity underwritten on 2013 to 2016
underwriting years as shown below.
These acquisitions in 2015 and 2016 to date were purchased for a
total consideration of GBP11m, of which GBP3m was satisfied by the
issue of new shares to certain vendors. We continue to grow and
manage the quality of the portfolio of participations on the
leading Lloyd's syndicates.
Year of account - GBPm
2013 2014 2015 2016
------------------------------ ------ ------ ------ -----
Capacity at 1 January 2015 21.2 22.8 20.5 -
Acquired during 2015 5.8 6.3 6.3 -
------------------------------ ------ ------ ------ -----
Capacity at 31 December 2015 27.0 29.1 26.8 28.1
Acquired to date in 2016 - 5.2 4.5 4.6
------------------------------ ------ ------ ------ -----
Current total capacity 27.0 34.4 31.3 32.7
------------------------------ ------ ------ ------ -----
Underwriting result
The calendar year profits for 2015 have been generated from
profits recognised in the portfolio from the 2013 and 2014
underwriting years. During 2015, the 2013 underwriting year
mid-point estimates increased from 8.1% return on capacity to a
final result of 14.1%. The mid-point estimate for the 2014
underwriting year is currently 8.7% and this year has made a
healthy contribution to the 2015 result. As expected, the 2015
underwriting result has not made a significant contribution during
the first 12 months but given the benign claims environment for the
2015 underwriting year to date, it should provide additional
recognised profits for the next two financial years.
Capacity value
The Board has taken the view that it is appropriate to carry the
value of the capacity acquired on the balance sheet at fair value
at the date of acquisition. The building of a portfolio of
participations on leading Lloyd's syndicates remains the strategic
objective. Therefore the Board decided that it was not appropriate
to amortise the cost of the capacity acquired and instead to change
the accounting policy to include an impairment test will be carried
out at each reporting date to assess whether the current value
exceeds the value carried in the balance sheet. The 2014 results
have been restated for this accounting policy.
Reinsurance
The proportion of the portfolio supported by the reinsurance
market has increased and now the participants in the panel include
private capital. By broadening the access to the Helios portfolio
to private capital, we have expanded the potential pool of capital
available to support the growth of the portfolio in the future. We
expect to continue to use this source of financing in the
future.
The reinsurers assist in the financing of their share of the
underwriting capital required for the corporate members by
providing letters of credit as Funds at Lloyd's amounting to GBP11m
at 31 December 2015.
Dividend
Following another successful year, the Board is pleased to
recommend that the final dividend remains the same as last year at
1.5p per share which, together with a special dividend of 3.5p per
share (2014: 3.6p), totals 5p per share (2014: 5.1p). The special
dividend equates to approximately 20% of the 1.8m cash released
from the 2013 year of account. These dividends will be payable to
shareholders on the register on 28 June 2016. As last year, the
Board will put in place a Scrip Dividend Scheme to give
shareholders the opportunity to elect receive dividends in the form
of new ordinary shares instead of cash. If approved the dividend
will be paid in a single payment or share issue on 6 July 2016.
Sir Michael Oliver
Non-executive Chairman
27 May 2016
Chief Executive's review
Growth in capacity through acquisitions
The strategy of building a portfolio of underwriting capacity at
Lloyd's has continued through the purchase of further corporate
members. There remains a steady flow of vehicles for sale as
existing owners wish to cease underwriting due to a change of
circumstances. This acquisition strategy has increased the
portfolio from GBP13m at the start of the 2013 underwriting year to
GBP33m currently. Since 1 January 2015 over GBP10m of capacity has
been acquired. We remain selective on the purchases and have
encountered increasing competition from other potential purchasers.
There remains a risk to the implementation of our strategy if
suitable vehicles are not available at attractive prices.
Quality of portfolio
We continue to focus ruthlessly on the quality syndicates. So
participations on weaker syndicates in acquired portfolios are sold
to maintain the overall quality. The seven largest syndicate
participations account for over 70% of the portfolio. These
syndicates are managed by the leading managing agents at Lloyd's
and represent shares in the better managed businesses at
Lloyd's.
The underwriting results of the Helios portfolio have
consistently outperformed the Lloyd's market average. Helios'
average return on capacity over the last four years is 11% and is
on average 3% higher than the average of the Lloyd's market.
The combined ratio of the portfolio (before Helios corporate
costs) has been 4% higher on average over the last four calendar
years. These incremental returns demonstrate the diversity and the
breadth of underwriting expertise within the businesses comprising
the portfolio of syndicate capacity.
Helios portfolio
Top seven syndicates for 2016
2016 Helios 2016
portfolio Helios
capacity portfolio
Syndicate Managing agent GBP'000 % of total Largest class
---------- ------------------------------------- ------------ ------------ -------------------------
510 Tokio Marine Kiln Syndicates Ltd 4,494 16.0 US$ Property
2791 Managing Agency Partners Limited 3,412 12.1 Reinsurance
623 Beazley Furlonge Limited 3,318 11.8 US$ Non-Marine Liability
609 Atrium Underwriters Limited 2,586 9.2 US$ Property
33 Hiscox Syndicates Limited 2,277 8.1 US$ Property
6117/1910 Asta Managing Agency Limited 2,713 9.7 Reinsurance
6111 Catlin Underwriting Agencies Limited 1,548 5.5 Reinsurance
---------- ------------------------------------- ------------ ------------ -------------------------
Subtotal 20,348 72.4
------------------------------------------------- ------------ ------------ -------------------------
Other 7,747 27.6
------------------------------------------------- ------------ ------------ -------------------------
Total 2016 Helios portfolio 28,095 100.0
------------------------------------------------- ------------ ------------ -------------------------
Source: 2016 syndicate capacities sourced from Lloyd's.
Reinsurance quota share
The use of quota share reinsurance to provide access to the
Lloyd's underwriting exposures for reinsurers and private capital
has been expanded. For the 2016 underwriting year the panel of
reinsurers was expanded to include private capital, a potential
significant source of underwriting capital in the future. The core
of the panel of reinsurers remains XL Group plc and Everest
Reinsurance Bermuda Limited.
This reinsurance reduces the exposure of the portfolio and
assists in the financing of the underwriting capital. Helios will
seek to reinsure a significant proportion of the capacity at the
start of the underwriting year to mitigate the open year
underwriting exposures. For corporate members acquired during the
year, a proportion of the "on-risk" capacity will be ceded to
reinsurers whilst the capacity on older years will be retained 100%
by Helios. Therefore the proportion of the overall capacity that
Helios retains is expected to rise as further corporate members are
acquired in the future. The profits earned after the company has
been acquired will be recognised by Helios.
The table shows that the Helios retained capacity increases
significantly in Years 2 and 3 as further corporate members are
acquired and the older years are not reinsured. Capacity on
underwriting years after 18 months of development is substantially
"off risk" as the underlying insurance contracts have mostly
expired. Therefore the profits from the capacity on the older years
are retained 100% by Helios. The proportion of overall capacity
retained by Helios for the 2015 and 2016 underwriting years is
expected to increase to approximately 50% as further corporate
members are acquired.
Year of account - GBPm
-----------------------------
2013 2014 2015 2016
------------------------------------ ------ ------ ------ -----
Helios capacity at outset 6.4 5.4 6.1 8.4
Retained capacity in Yr 1 3.9 2.4 4.5 1.4
Retained capacity in Yr 2 and Yr 3 10.3 11.5 4.5 -
------------------------------------ ------ ------ ------ -----
Helios retained capacity 20.6 19.5 15.1 9.8
------------------------------------ ------ ------ ------ -----
% of "off-risk" capacity 50% 60% 30% 0%
------------------------------------ ------ ------ ------ -----
Ceded capacity at outset 6.4 12.7 14.3 19.7
Further capacity ceded to QS - 2.2 1.8 3.2
------------------------------------ ------ ------ ------ -----
Total capacity ceded 6.4 14.9 16.2 22.9
------------------------------------ ------ ------ ------ -----
Current total capacity 27.0 34.4 31.3 32.7
------------------------------------ ------ ------ ------ -----
Helios share of total capacity 76% 57% 48% 30%
------------------------------------ ------ ------ ------ -----
Development of profit estimates
As Helios has no active involvement in the underwriting or
management of the syndicates on which it participates, it relies on
information on forecast profitability of the portfolio that is
released on a quarterly basis by the managing agents of the
syndicates. The managing agents have traditionally been
conservative in the estimation of the profitability of a year of
account, waiting until the development of the underlying reserves
for the claims can be assessed with greater certainty.
The capacity acquired on the "off-risk years" that is retained
100% by Helios contributes a significant part of the profits of the
Group. The chart below indicates that a significant proportion of
the improvement in the estimates of profitability of syndicates are
declared by the managing agents in the last 12 months to the close
of an underwriting year. Helios benefits from the conservative
nature of the managing agents.
Risk management
Helios continues to ensure that the portfolio is well
diversified across classes of businesses and managing agents at
Lloyd's.
The purchase of quota share reinsurance cedes 70% of the risk on
the younger or "on-risk" years which has remained consistent for
the last three years. The market conditions continue to soften as
the incidence of insured natural disasters and large loss events
has been below normal expectations. This has allowed the insurance
industry to generate adequate returns on capital and thereby
attract new capital to the industry.
There is today a strong consensus in the insurance industry that
it would take a catastrophe, or series of catastrophes, on a very
large scale to materially turn the market for short tail lines of
business. The high aggregation of coastal exposures in the US and
other developed markets is one reason why such massive dislocations
cannot be ruled out.
The biggest single risk faced by insurers arises from the
possibility of mispricing insurance on a large scale. This is
mitigated by the diversification of the syndicate portfolio and by
the depth of management experience within the syndicates that
Helios supports. These management teams have weathered multiple
market cycles and the risk management skills employed should reduce
the possibility of substantial under-reserving of previous year
underwriting.
We assess the downside risk in the event of a major loss through
the monitoring of the aggregate net losses estimated by managing
agents to realistic disaster scenarios ("RDSs") prescribed by
Lloyd's. The RDS events comprise 16 compulsory events to assess the
potential impact across the portfolio from the type of event
proscribed. The nature and the size of the prescribed events have
remained similar and the individual syndicate net exposures will
depend on the business underwritten during the year and the
reinsurance protections purchased at syndicate level.
The estimated aggregate net largest exposure for the Helios
portfolio, before quota share and stop loss reinsurance, remains
two separate hurricanes to affect the US Northeast Coast. The
aggregate net loss has reduced to 23% (2015: 28%) of stamp capacity
as the syndicates have reduced both their gross and net exposures.
All the largest natural catastrophes would be substantial insured
losses in excess of US$100bn, events that would generate a great
deal of publicity.
Helios continues to buy stop loss reinsurance that will reduce
the impact of a significant loss to the portfolio.
Capacity value
The value of the portfolio of the syndicate capacity remains an
important factor in delivering overall returns to shareholders. The
Enterprise value, being the value of the net tangible assets of the
Group, together with the current value of the portfolio capacity,
is a key management metric in determining growth in value to
shareholders.
The Board recognises that the average prices derived from the
annual capacity auctions managed by the Corporation at Lloyd's
could be subject to material change if the level of demand for
syndicate capacity reduces. Notwithstanding the average prices
derived from the auction process, each of the syndicates will have
a track record of trading profitability and generating cash.
The impairment charge for this year of GBP63,000 indicates a
small reduction in the fair value of the syndicate capacity as a
result of the fluctuations in the auction values of the syndicates
in the portfolio.
Capital position
The underwriting capital for the Helios portfolio is supplied as
follows:
Underwriting
capital as at
31 December
2015
GBPm
--------------------------
Reinsurance panel 10.8
Helios 3.9
------------------- -----
Total 14.7
------------------- -----
Helios has generated free cash of GBP1.8m in 2016 from the
distribution of its share of the final underwriting profits for the
2013 underwriting year and early releases from the 2014 and 2015
years. These profits have assisted in funding the recent
acquisitions and will provide working capital for the next 12
months. A bank facility is in place to fund cash shortfalls.
Corporate costs
Given the reduction in risk assumed and the associated reduction
in underwriting profits, it remains essential to manage the central
costs of Helios effectively. The fees and profit commissions
receivable from the reinsurance panel offset a proportion of the
costs incurred.
Corporate, social and environmental responsibility
Helios aims to meet its expectations of its shareholders and
other stakeholders in recognising, measuring and managing the
impacts of its business activities. As Helios manages a portfolio
of Lloyd's syndicate capacity, it has no direct responsibility for
the management of those businesses. Each managing agent has
responsibility for the management of those businesses, their staff
and employment policies and the environmental impact.
Therefore, the Board does not consider it appropriate to monitor
or report any performance indicators in relation to corporate,
social or environmental matters.
Nigel Hanbury
Chief Executive
27 May 2016
Lloyd's Advisers' report - Hampden Agencies
With the closure of the 2013 Account at 31 December 2015 Lloyd's
has now reported twelve consecutive years of underwriting profits
for private capital. The 2013 three year account result for the
Helios portfolio was 14.2% of capacity, which compares with the
average for the portfolio of syndicates supported by private
capital of 12.5% of capacity.
Underwriting profitability is set to continue for both the 2014
and 2015 Accounts with the mid-point estimate for the Helios
portfolio at Q8 on 2014 being 8.9% of capacity, a 0.4% improvement
on 2013 at the same stage. The 2013 result and estimates for 2014
and 2015 have benefitted from below average major loss activity.
Global insured major losses, according to Swiss Re Sigma, were
$37bn in 2015, $44bn in 2014 and $45bn in 2013; these were
significantly below the ten year average of $62bn a year. For 2016
Hampden has a target profit, excluding prior years, of 0% to 5% of
capacity assuming a long term average for catastrophe losses.
The Insurance Market in 2016
So far in 2016 the trend of rate reductions have continued in
most classes of business other than motor. Overall, market
conditions are the most competitive in Lloyd's since the late 1990s
when Lloyd's reported four consecutive years of underwriting losses
on a three year account basis.
Property catastrophe reinsurance rates at 1 January 2016 have
now declined for four years in succession. Guy Carpenter estimates
rates reduced by 5% to 8% compared with reductions of over 11% a
year earlier.
Property and casualty insurance rates in the United States began
to decline during the first quarter of 2015. This has continued for
a fifth successive quarter with the Council of Insurance Agents and
Brokers reporting rate reductions of 3.7% in Q1 2016, the largest
fall since reductions started in Q1 2015. The impact of rate
reductions has reduced net written premium growth for the full year
2015 to only 2.7%, which is lagging nominal GDP growth of 3.5%.
We are now at the 'soft market' stage in the insurance cycle
when we expect the outperformance of quality syndicates relative to
the Lloyd's average to increase compared with the 'hard market'
years. Key success characteristics of quality syndicates include a
focus on conservative reserving, often above the best estimate
recommended by external actuaries, and a willingness to walk away
from under-priced business rather than chase growth in premium
income.
The Investment Environment
Our view is that disciplined underwriters can make a profit in
today's market. Importantly, underwriting discipline is reinforced
by two key factors which were not present in the late 1990s. First,
the investment environment. Low and declining bond yields now offer
little protection to sub-par underwriting. We think it is no
coincidence that the US industry made underwriting profits in eight
years out of ten in the 1950s when the US Treasury 10-year yield
averaged 3.2% and so far this decade the average yield is 2.5% with
underwriting profits being made three years out of six.
Second, the process of setting regulatory capital for insurers
has become much more robust with the introduction by the Prudential
Regulatory Authority of the Solvency II regime which was fully
implemented by Lloyd's for the 2016 year. Syndicates are required
to calculate their own capital requirements to Solvency II
standards. Capital requirements are therefore a risk sensitive
measure with the two most important risks of insurers being
underwriting risk and reserving risk. The Lloyd's capital
requirements have been on an upward trend as a percentage of net
earned premiums as the margin for achieving underwriting
profitability has reduced as rates have declined.
Supply of Capital Close to All Time Highs
Good underwriting results continue to attract capital to the
insurance industry searching for yield. Much of this is
'alternative capital' and focused on reinsurance business through
short-term structures such as catastrophe bonds and collateralised
reinsurance. During 2015 alternative capital continued to grow and
now accounts for 19% of total dedicated reinsurance capital
according to broker, Guy Carpenter. The market share of alternative
capital has increased by 138% since 2008 and has exacerbated the
level of rate reductions in particular for property catastrophe
reinsurance business. Since 2008 Aon Benfield estimates that total
reinsurance capital has increased by 55% although it fell back
marginally by 2% to $565bn at 31 December 2015.
Balance of Power Shifting to Net Buyers of Reinsurance
With net written premium growth slowing down and underwriting
margins being squeezed by a combination of reducing rates and
increased expenses, one way to mitigate downside risk is to buy
more reinsurance. The balance of power has continued to shift to
net buyers of reinsurance from the sellers of reinsurance. One
benefit of current market conditions is that syndicates have been
able to secure a fuller reinsurance programme at more reasonable
cost than in previous years in 2016.
Reserve Strength is Becoming Increasingly Important
Bottom line results in the current rating environment are
becoming increasingly dependent on conservative reserving, given
the modest forecast for pure year underwriting return. We consider
the Helios portfolio of syndicates to be conservatively reserved
overall with the last three year account closed result for 2013
including a prior year release of 4.7% of capacity from the 2012
and prior years.
We have analysed the reserve strength of the 2016 Helios
portfolio of freehold syndicates (excluding Special Purpose
Syndicates which have a limited tenure) at the closure of the 2013
Account into the 2014 Account of those syndicates. The ratio of
Incurred but Not Reported reserves to Net Outstanding Claims
reserves was 115% at the closure of the 2013 Account of these
syndicates into the 2014 Account. There will be two further
calendar years of development before the 2016 Account receives its
share of 2015 and prior year reserves so this measure is a proxy
for future reserve strength. The 115% ratio compares favourably
with an equivalent figure for private capital syndicates of 72% in
2007 and only 45% in 2004. However, over this period, we would
expect part of the increase in IBNR to be due to the "tail" of
claims settlement getting longer; Lloyd's reports that coverholder
business which has a longer "tail" has increased from 25% to 32% of
Lloyd's income between 2002 and 2015.
Conservative reserving we believe has an additional benefit in
that it reinforces pricing discipline in today's more challenging
underwriting conditions. This is particularly important in
liability business where under-reserving can lead to under-pricing
business which in turn becomes under--reserved. A relatively modest
pure year underwriting loss can then be magnified by prior year
deteriorations which on liability business can be for three or more
years.
Our Approach in This Market - A Focus on Quality
Our approach in this market is to focus syndicate portfolios on
quality syndicates. The Helios portfolio for 2016 continues to
provide a good spread of business across managing agents and
classes of business. The two largest classes of business remain
reinsurance at 28.6% and US dollar property insurance at 17.7%
shown in the 'doughnut' chart below. Liability and motor exposures
provide balance against the more volatile property catastrophe
exposures as well as contributing through diversification to lower
capital requirements.
The measure of quality assessed by Hampden is the grading we
assign each year to syndicates. Syndicates graded 'D' are not
recommended for support while the four positive gradings range from
'AA' (Excellent), 'A' (Very Good), 'B' (Good) and 'C' (Market
Average).
Helios continues to focus its portfolio on the quality
syndicates which have traditionally outperformed in difficult
times. The Helios portfolio contains 55% by underwriting capacity
in syndicates graded 'AA' and 'A' by Hampden.
Hampden Agencies
27 May 2016
Consolidated statement of comprehensive income
Year ended 31 December 2015
Restated
Year ended Year ended
31 December 31 December
2015 2014
Note GBP'000 GBP'000
----------------------------------------------------------------------------- ----- ------------- -------------
Gross premium written 6 21,511 17,062
Reinsurance premium ceded (5,582) (3,418)
----------------------------------------------------------------------------- ----- ------------- -------------
Net premium written 6 15,929 13,644
----------------------------------------------------------------------------- ----- ------------- -------------
Change in unearned gross premium provision 7 (162) (243)
Change in unearned reinsurance premium provision 7 93 (28)
----------------------------------------------------------------------------- ----- ------------- -------------
(69) (271)
--------------------------------------------------------------------------------------------------- -------------
Net earned premium 5,6 15,860 13,373
Net investment income 8 255 516
Other income 392 150
----------------------------------------------------------------------------- ----- ------------- -------------
Revenue 16,507 14,039
----------------------------------------------------------------------------- ----- ------------- -------------
Gross claims paid (9,349) (7,435)
Reinsurers' share of gross claims paid 1,650 1,375
----------------------------------------------------------------------------- ----- ------------- -------------
Claims paid, net of reinsurance (7,699) (6,060)
----------------------------------------------------------------------------- ----- ------------- -------------
Change in provision for gross claims 615 464
Reinsurers' share of change in provision for gross claims (431) (319)
----------------------------------------------------------------------------- ----- ------------- -------------
Net change in provision for claims 7 184 145
----------------------------------------------------------------------------- ----- ------------- -------------
Net insurance claims and loss adjustment expenses 6 (7,515) (5,915)
----------------------------------------------------------------------------- ----- ------------- -------------
Expenses incurred in insurance activities (7,571) (5,800)
Other operating expenses (812) (973)
----------------------------------------------------------------------------- ----- ------------- -------------
Operating expenses 9 (8,383) (6,773)
----------------------------------------------------------------------------- ----- ------------- -------------
Operating profit before goodwill and impairment 6 609 1,351
Goodwill on bargain purchase 20 244 785
Impairment of goodwill 20 (136) -
Impairment of syndicate capacity 13 (63) 25
----------------------------------------------------------------------------- ----- ------------- -------------
Profit before tax 654 2,161
Income tax charge 10 135 (105)
----------------------------------------------------------------------------- ----- ------------- -------------
Profit for the year 789 2,056
----------------------------------------------------------------------------- ----- ------------- -------------
Other comprehensive income for the year, net of tax 121 -
----------------------------------------------------------------------------- ----- ------------- -------------
Total comprehensive income for the year 910 2,056
----------------------------------------------------------------------------- ----- ------------- -------------
Profit for the year attributable to owners of the Parent 789 2,056
----------------------------------------------------------------------------- ----- ------------- -------------
Total comprehensive income for the year attributable to owners of the Parent 910 2,056
----------------------------------------------------------------------------- ----- ------------- -------------
Earnings per share attributable to owners of the Parent
Basic and diluted 11 8.38p 24.11p
----------------------------------------------------------------------------- ----- ------------- -------------
The profit attributable to owners of the Parent and earnings per
share set out above are in respect of continuing operations.
The notes are an integral part of these Financial
Statements.
Consolidated statement of financial position
At 31 December 2015
Restated
31 31
December December
2015 2014
Note GBP'000 GBP'000
------------------------------------------------------------------------- ---------- ----------
Assets
Intangible assets 13 8,511 6,368
Reinsurance assets:
- reinsurers' share of claims outstanding 7 5,657 4,682
- reinsurers' share of unearned premium 7 1,501 1,014
Other receivables, including insurance and reinsurance receivables 15 20,427 16,379
Prepayments and accrued income 3,070 2,067
Financial assets at fair value through profit or loss 16 31,797 22,977
Cash and cash equivalents 3,634 3,605
-------------------------------------------------------------------- --- ---------- ----------
Total assets 74,597 57,092
-------------------------------------------------------------------- --- ---------- ----------
Liabilities
Insurance liabilities:
- claims outstanding 7 32,985 26,179
- unearned premium 7 11,169 8,005
Deferred income tax liabilities 14 3,172 2,352
Other payables, including insurance and reinsurance payables 18 9,360 6,213
Accruals and deferred income 1,488 1,475
-------------------------------------------------------------------- --- ---------- ----------
Total liabilities 58,174 44,224
-------------------------------------------------------------------- --- ---------- ----------
Equity
Equity attributable to owners of the Parent:
Share capital 19 1,050 853
Share premium 19 9,901 6,996
Other reserves 121 -
Retained earnings 5,351 5,019
-------------------------------------------------------------------- --- ---------- ----------
Total equity 16,423 12,868
-------------------------------------------------------------------- --- ---------- ----------
Total liabilities and equity 74,597 57,092
-------------------------------------------------------------------- --- ---------- ----------
The Financial Statements were approved and authorised for issue
by the Board of Directors on 27 May 2016, and were signed on its
behalf by:
Nigel Hanbury
Chief Executive
The notes are an integral part of these Financial
Statements.
Consolidated statement of changes in equity
Year ended 31 December 2015
Attributable to owners of the Parent restated
Share Share Other Retained
capital premium reserves earnings Total
Consolidated Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 1 January 2014 as originally reported 21 853 6,996 - 1,977 9,826
Effect of change in accounting policy 21 - - - 1,370 1,370
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 1 January 2014 as restated 21 853 6,996 - 3,347 11,196
Profit for the year as restated 21 - - - 2,056 2,056
Dividends paid 12 - - - (384) (384)
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 31 December 2014 as restated 853 6,996 - 5,019 12,868
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 1 January 2015 as originally reported 21 853 6,996 - 2,636 10,485
Effect of change in accounting policy 21 - - - 2,383 2,383
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 1 January 2015 as restated 21 853 6,996 - 5,019 12,868
Profit for the year - - - 789 789
Other comprehensive income, net of tax - - 121 - 121
Dividends paid 12 - - - (457) (457)
Share issue 19 197 2,905 - - 3,102
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
At 31 December 2015 1,050 9,901 121 5,351 16,423
------------------------------------------ ------- --------- ---------- ---------- ---------- ---------
The consolidated profit for the year 2014 and retained earnings
as at 1 January 2014 and 31 December 2014 have been restated to
reflect the effects of the change in the Group's accounting policy
in accounting for intangible assets, syndicate capacity (refer to
Note 21).
Other comprehensive income comprises of foreign currency
translation differences of GBP149,000, net of tax relating to these
items of GBP28,000.
Consolidated statement of cash flows
Year ended 31 December 2015
Restated
Year ended
Year ended 31 December 31 December
2015 2014
Note GBP'000 GBP'000
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash flows from operating activities
Profit before tax 654 2,161
Adjustments for:
Other comprehensive income, gross of tax 149 -
- interest received (60) (2)
- investment income 8 (926) (435)
- goodwill on bargain purchase 20 (244) (785)
- impairment of goodwill 20 136 -
- profit on sale of intangible assets (120) (157)
- impairment of intangible assets 13 63 (25)
Changes in working capital:
- change in fair value of financial assets held at fair value
through profit or loss 8 360 156
- decrease in financial assets at fair value through profit or loss 1,020 6,829
- decrease/(increase) in other receivables 709 (2,413)
- increase in other payables 11 1,164
- net decrease in technical provisions (50) (109)
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash generated from operations 1,702 6,384
--------------------------------------------------------------------- ------- ----------------------- -------------
Income tax paid 161 (33)
--------------------------------------------------------------------- ------- ----------------------- -------------
Net cash inflow from operating activities 1,863 6,351
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash flows from investing activities
Interest received 60 2
Investment income 926 435
Purchase of intangible assets 13 (2) (439)
Proceeds from disposal of intangible assets 24 504
Acquisition of subsidiaries, net of cash acquired (2,521) (3,930)
--------------------------------------------------------------------- ------- ----------------------- -------------
Net cash inflow from investing activities (1,513) (3,428)
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash flows from financing activities
Dividends paid to owners of the Parent 12 (321) (384)
--------------------------------------------------------------------- ------- ----------------------- -------------
Net cash outflow from financing activities (321) (384)
--------------------------------------------------------------------- ------- ----------------------- -------------
Net increase in cash and cash equivalents 29 2,539
Cash and cash equivalents at beginning of year 3,605 1,066
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash and cash equivalents at end of year 3,634 3,605
--------------------------------------------------------------------- ------- ----------------------- -------------
Cash held within the syndicates' accounts is GBP1,411,000 (2014:
GBP1,059,000) of the total cash and cash equivalents held at the
year end of GBP3,634,000 (2014: GBP3,605,000). The cash held within
the syndicates' accounts is not available to the Group to meet its
day-to-day working capital requirements.
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial
Statements.
Notes to the financial statements
Year ended 31 December 2015
1. General information
The Company is a public limited company listed on AIM and
incorporated and domiciled in the UK.
2. 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 statement for the year ended 31 December 2015
(the "Financial Statements"). These policies have been consistently
applied to all the years presented, unless otherwise stated.
Change in accounting policy
As of 1 January 2015 the Group changed its accounting policy for
the accounting for intangible assets, syndicate capacity. The new
accounting policy has been applied retrospectively. For details of
this change, refer to this accounting policy as disclosed further
below and Note 21.
Basis of preparation
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by
the European Union ("EU"), IFRS Interpretations Committee ("IFRIC")
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
3. Segmental information
The Group has three segments that represent the primary way in
which the Group is managed, as follows:
-- syndicate participation;
-- investment management; and
-- other corporate activities.
Other
Syndicate Investment corporate
participation management activities Total
Year ended 31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- --------------- ------------ ------------ ---------
Net earned premium 16,914 - (1,054) 15,860
Net investment income 250 5 - 255
Other income - - 392 392
Net insurance claims and loss adjustment expenses (7,515) - - (7,515)
Expenses incurred in insurance activities (7,178) - (393) (7,571)
Other operating expenses 35 - (847) (812)
Goodwill on bargain purchase - - 244 244
Impairment of goodwill - - (136) (136)
Impairment of syndicate capacity (see Note 13) - - (63) (63)
--------------------------------------------------- --------------- ------------ ------------ ---------
Profit before tax 2,506 5 (1,857) 654
--------------------------------------------------- --------------- ------------ ------------ ---------
Other
Syndicate Investment corporate
participation management activities Total
Restated year ended 31 December 2014 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- --------------- ------------ ------------ ---------
Net earned premium 13,837 - (464) 13,373
Net investment income 473 43 - 516
Other income - - 150 150
Net insurance claims and loss adjustment expenses (5,915) - - (5,915)
Expenses incurred in insurance activities (5,471) - (329) (5,800)
Other operating expenses - (973) (973)
Goodwill on bargain purchase - - 785 785
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note 13) - - 25 25
--------------------------------------------------- --------------- ------------ ------------ ---------
Profit before tax 2,924 43 (806) 2,161
--------------------------------------------------- --------------- ------------ ------------ ---------
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.
Net earned premium within 2015 other corporate activities
totalling GBP1,054,000 (2014: GBP465,000 - 2013 and 2014 years of
account) presents the 2013, 2014 and 2015 years of account net
Group quota share reinsurance premium payable to Hampden Insurance
Guernsey PCC Limited - Cell 6. This net quota share reinsurance
premium payable is included within "reinsurance premium ceded" in
the Consolidated Income Statement of the year.
All of the Group's Limited Liability Vehicles transferred their
capacity to Nameco (No 917) Limited for the 2016 underwriting year
of account. Therefore, Nameco (No 917) Limited is the only Limited
Liability Vehicle to enter into a reinsurance contract with Hampden
Insurance Guernsey PCC Limited - Cell 6 for the 2016 underwriting
year of account.
4. Operating profit before goodwill and impairment
Underwriting year of account*
------------------------------------------------
Year ended 2013 Pre- Corporate Other
31 December and prior 2014 2015 Sub-total acquisition reinsurance corporate Total
2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Gross
premium
written (25) 2,362 21,331 23,668 (2,157) - - 21,511
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Net premium
written (148) 2,009 17,607 19,468 (1,735) (1,397) (407) 15,929
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Net earned
premium 712 9,092 9,475 19,279 (1,615) (1,397) (407) 15,860
Other
income 170 62 22 254 (80) 382 91 647
Net
insurance
claims and
loss
adjustment
expenses 1,414 (4,190) (5,468) (8,244) 726 3 - (7,515)
Operating
expenses (706) (3,160) (3,962) (7,828) 779 - (1,334) (8,383)
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Operating
profit
before
goodwill
and
impairment 1,590 1,804 67 3,461 (190) (1,012) (1,650) 609
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Quota share
adjustment (392) (950) (55) (1,397) - 1,397 - -
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Operating
profit
before
goodwill
and
impairment
after
quota
share
adjustment 1,198 854 12 2,064 (190) 385 (1,650) 609
------------ ---------- ---------- ---------- ------------ ------------ ------------ ----------- ---------
Underwriting year of account*
-------------------------------------------------
Restated
year ended 2012 Pre- Corporate Other
31 December and prior 2013 2014 Sub-total acquisition reinsurance corporate Total
2014 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Gross
premium
written 107 1,574 16,655 18,336 (1,274) - - 17,062
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Net premium
written 89 1,373 13,858 15,320 (1,049) (627) - 13,644
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Net earned
premium 744 6,603 7,706 15,053 (1,053) (627) - 13,373
Other income 257 110 47 414 (93) - 345 666
Net
insurance
claims and
loss
adjustment
expenses 980 (3,088) (4,282) (6,390) 476 (1) - (5,915)
Operating
expenses (532) (2,205) (3,106) (5,843) 445 - (1,375) (6,773)
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Operating
profit
before
goodwill
and
impairment 1,449 1,420 365 3,234 (225) (628) (1,030) 1,351
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Quota share
adjustment - (468) (253) (721) - 721 - -
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
Operating
profit
before
goodwill
and
impairment
after quota
share
adjustment 1,449 952 112 2,513 (225) 93 (1,030) 1,351
------------- ----------- ---------- ---------- ------------ ------------- ------------- ----------- ---------
* The underwriting year of account results represent the Group's
share of the syndicates' results by underwriting year of account
before corporate member level reinsurance and members' agents
charges.
Pre-acquisition relates to the element of results from the new
acquisitions before they were acquired by the Group.
5. Net investment income
Year ended Year ended
31 December 31 December
2015 2014
GBP'000 GBP'000
Investment income 926 435
Realised gains on financial assets at fair value through profit or loss (327) 279
Unrealised losses on financial assets at fair value through profit or loss (360) (156)
Investment management expenses (44) (44)
Bank interest 60 2
---------------------------------------------------------------------------- ------ -------------
Net investment income 255 516
---------------------------------------------------------------------------- ------ -------------
6. Operating expenses (excluding goodwill and amortisation)
Year ended Year ended
31 December 31 December
2015 2014
GBP'000 GBP'000
---------------------------------------------------------------------------------------- -------------
Expenses incurred in insurance activities 7,571 5,800
Exchange differences 35 22
Directors' remuneration 195 238
Acquisition costs in connection with the new subsidiaries acquired in the year 91 51
Professional fees 405 505
Administration and other expenses 17 75
Auditors' remuneration:
- audit of the Parent Company and Group Financial Statements 49 30
- audit of subsidiary company Financial Statements - 32
- audit related assurance services 20 20
-------------------------------------------------------------------------------- ------ -------------
Operating expenses 8,383 6,773
-------------------------------------------------------------------------------- ------ -------------
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders after tax by the weighted
average number of ordinary shares outstanding during the
period.
Diluted earnings per share is calculated by dividing the net
profit attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the year, plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
The Group has no dilutive potential ordinary shares.
Earnings per share has been calculated in accordance with IAS 33
"Earnings per share".
The earnings per share and weighted average number of shares
used in the calculation are set out below:
Restated
Year ended Year ended
31 December 31 December
2015 2014
---------------------------------------------------------------------------------- -------------
Profit for the year after tax attributable to ordinary shareholders GBP789,000 GBP2,056,000
--------------------------------------------------------------------- ----------- -------------
Weighted average number of shares in issue 9,411,794 8,526,948
--------------------------------------------------------------------- ----------- -------------
Basic and diluted earnings per share 8.38p 24.11p
--------------------------------------------------------------------- ----------- -------------
The basic and diluted earnings per share as originally reported
for the year ended 31 December 2014 was 12.23p, based on a profit
for the year after tax attributable to ordinary shareholders of
GBP1,043,000. The weighted average number of shares in issue for
the year ended 31 December 2014 remained unchanged.
8. Intangible assets
Restated
Syndicate Restated
Goodwill capacity Total
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ----------- ---------
Cost
At 1 January 2014 - 4,750 4,750
Additions - 439 439
Disposals - (724) (724)
Impairment - - -
Acquired with subsidiary undertakings - 2,127 2,127
--------------------------------------- --------- ----------- ---------
At 31 December 2014 - 6,592 6,592
--------------------------------------- --------- ----------- ---------
At 1 January 2015 - 6,592 6,592
Additions 136 2 138
Disposals - (61) (61)
Impairment (136) - (136)
Acquired with subsidiary undertakings - 2,265 2,265
--------------------------------------- --------- ----------- ---------
At 31 December 2015 - 8,798 8,798
--------------------------------------- --------- ----------- ---------
Impairment (Note 21)
At 1 January 2014 - 249 249
Impairment for the year - (25) (25)
Disposals - - -
--------------------------------------- --------- ----------- ---------
At 31 December 2014 - 224 224
--------------------------------------- --------- ----------- ---------
At 1 January 2015 - 224 224
Impairment for the year - 63 63
Disposals - - -
--------------------------------------- --------- ----------- ---------
At 31 December 2015 - 287 287
--------------------------------------- --------- ----------- ---------
Net book value
As at 31 December 2013 - 4,501 4,501
As at 31 December 2014 - 6,368 6,368
--------------------------------------- --------- ----------- ---------
As at 31 December 2015 - 8,511 8,511
--------------------------------------- --------- ----------- ---------
Note 20 sets out the details of the entities acquired by the
Group during the year, the fair value adjustments and the goodwill
arising.
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 will be posted to
shareholders shortly and further copies will be available from the
Company's registered office: 40 Gracechurch Street, London EC3V 0BT
and on the Company's website www.huwplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKODBABKDFPB
(END) Dow Jones Newswires
May 31, 2016 02:00 ET (06:00 GMT)
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