TIDMHUW
RNS Number : 2795O
Helios Underwriting Plc
29 May 2020
Helios Underwriting plc
("Helios" or the "Company")
Final results for the year ended 31 December 2019
Highlights
-- 31% increase in the capacity portfolio from the four
acquisitions in the year and a further acquisition in year 2020 to
date
-- Profit before impairments and tax for the year of GBP2,427,000 (2018: GBP608,000)
-- Basic earnings per share of 25.64p (2018: 3.14p)
-- Helios retained capacity for 2020 open underwriting year of
GBP20.7m (2019 year of account: GBP15.8m)
-- Adjusted net asset value of GBP2.06 per share (2018: GBP1.90 per share)
-- Stop loss in 2020 continues to protect the downside and
provides underwriting capital support
Year ended Year ended Year ended
31 December 31 December 31 December
2019 2018 2017
------------------------------------- ------------ ------------ ------------
Profit/(loss) before impairments
and tax (GBP'000) 2,427 608 (406)
Adjusted net asset value per share
- basic (GBP) 2.06 1.90 1.60
Value of capacity fund (WAV) (GBP'm) 26.4 20.7 13.0
Growth in capacity (GBPm) 69.1 52.6 41.0
------------------------------------- ------------ ------------ ------------
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information please contact:
Helios Underwriting plc
Nigel Hanbury - Chief Executive 07787 530404 /
nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer 07754 965 917
Shore Capital
Robert Finlay/David Coaten 020 7408 4090
About Helios
Helios provides a limited liability direct investment into the
Lloyd's insurance market and is quoted on the London Stock
Exchange's AIM market (ticker: HUW). Helios trades within the
Lloyd's insurance market writing approximately GBP70m of capacity
for the 2020 account. The portfolio provides a good spread of
business being concentrated in property insurance and reinsurance.
For further information please visit www.huwplc.com.
Summary
-- Profit before tax and impairments of GBP2,427,000 (2018: GBP608,000)
-- Adjusted net asset value at GBP2.06 per share (2018: GBP1.90)
-- The capacity portfolio has been increased to GBP70m for 2020 year of account
-- Four LLV's were acquired in 2019 (six in 2018) for a total
consideration of GBP10m (GBP12m in 2018)
-- The value of the fund increased to GBP26.4m, an increase of 28%.
-- The gain on bargain purchases, acquiring assets at below
their fair value, contributed GBP1.7m to operating profits (2018:
GBP1.2m)
-- In view of the COVID-19 uncertainty, no final dividend is being recommended (2018: 3.0p)
-- Too early to quantify COVID-19 impact but is expected to fall
mainly on 2019 year of accounts
-- Pre-emption capacity acquired for no cost increased the value of the portfolio by GBP2.5m
Your Board announces the results for 2019 which shows a
significant increase in profitability and shareholder value as we
were again able to acquires LLV's at below fair value and as the
value of the capacity fund increased during the year. The Group's
strategy of building a fund of capacity on the better syndicates at
Lloyd's by acquiring LLV's and by taking up pre-emption capacity
offered by our supported syndicates has increased shareholder
value. The profit before impairment for the year is GBP2,427,000
(2018: 608,000), whilst the adjusted net asset value of the Group
is GBP2.06 per share (2018: GBP1.90).
We are now part way through a broad-based turn in the market,
with rates rising steeply across many lines of business. Over the
past two years, we have seen premium rates on renewal business rise
cumulatively by more than 10% for half of our book. Rate changes
for the three months ended 31 March 2020 were particularly
encouraging, with an average rate increase of 8%. This strong
momentum is expected to continue and should result in an improved
underwriting performance in 2020, with further improvement expected
in 2021.
The COVID-19 pandemic has created turbulence in financial
markets and economic uncertainty which will impact individuals and
businesses. The full impact of this on the insurance industry,
including the Lloyd's market, is uncertain. The initial assessment
by supported syndicates has identified those lines of business most
likely to be impacted, however the full extent of the losses and
the impact upon pricing will become clearer as the year progresses.
We will regularly monitor developments in this area.
Strategy
The building of a portfolio of participations on leading Lloyd's
syndicates remains the strategic objective of the Group. During
2019 the key developments were:
-- building the portfolio of capacity to GBP70m for 2020 by
acquiring four new subsidiaries in 2019 and a further one LLV in
the year to date;
-- The value of the capacity fund increasing by 28% to GBP26.4m
as pre-emption capacity acquired for no cost increased the value of
the portfolio by GBP2.5m;
-- maintaining the quality of the portfolio and the
outperformance of the underwriting results average against the
Lloyd's market as a whole; and
-- continuing to use quota share reinsurance to reduce the risk
from underwriting and to assist in the financing of the
underwriting capital of the portfolio.
Capacity acquired
During 2019 a further four corporate members were acquired and a
single LLV has been bought to date in 2020. The increase in the
capacity for the 2017 to 2019 years of account is shown below.
Summary of acquisitions
---------------------------------------------
Cash Humphrey Discount
consideration Capacity Value to
GBPm GBPm GBPm Humphrey
---------------------------- -------------- -------- -------- ---------
Nameco No 409 Limited 1.3 1.1 1.6 19%
Nameco No 1113 Limited 2.0 2.0 2.7 26%
Catbang 926 Limited 5.6 4.1 6.7 16%
Whittle Martin Underwriting
Ltd 1.2 1.4 1.4 14%
---------------------------- -------------- -------- -------- ---------
Total for 2019 10.1 8.6 12.5 19%
---------------------------- -------------- -------- -------- ---------
The four (six in 2018) acquisitions in 2019 were purchased for a
total consideration of GBP10m (GBP12m in 2018), of which GBP3.6m
(GBP4.3m in 2018) was attributed to the value of capacity acquired.
Since the beginning of 2020 the number of LLVs available for sale
has remained steady. The effect of the losses from the last three
years and the prospective loss from the COVID-19 pandemic increases
the prospect of acquiring further LLVs at lower prices. We will
continue to build on the quality of the capacity portfolio as it is
essential to acquire and retain the participations on the better
managed syndicates.
Adjusted net asset value per share
2019 2018
GBP'000 GBP'000
--------------------------- -------- --------
Net assets less intangible
assets 6,970 4,994
Group letters of credit 2,768 1,744
Fair value of capacity
(WAV) 26,350 20,638
--------------------------- -------- --------
36,088 27,376
--------------------------- -------- --------
Shares in issue (Note
21) 17,489 14,441
Adjusted net asset value
per share (GBP) 2.06 1.90
--------------------------- -------- --------
The adjusted net asset value per share has increased by 8.4%
(18% in 2018). The value of the portfolio of capacity has increased
with significant contribution being made by the pre-emption of free
capacity taken up which contributed GBP2.5m to the increase in
value. The capital raise and acquisition of an LLV for shares in
July 2019 has increased the number of shares in issue. The value of
capacity is subject to fluctuation and reflects the activity in the
capacity auctions held in the autumn of each year.
Dividend
The Board is not recommending the payment of a final dividend
for the year ended 31 December 2019 (2018: final dividend of 3.0p).
The Board considers that the dividend policy should reflect the
requirement to maintain its available cash resources given the
uncertainty for the potential funding of the COVID-19 and other
losses in the immediate future. However, the Board continues to
recognise the importance of capital returns to shareholders and
will review the situation at the interim stage.
Outlook
The COVID-19 coronavirus pandemic will be a manageable loss for
the property and casualty insurance and reinsurance industry,
unless there is some kind of structural change to drive the cost to
the sector much higher.
It should not be forgotten that the current turmoil is happening
against the backdrop of the greatest momentum we have seen in
(re)insurance pricing for many years. Recent events are
accelerating the premium rate rises.
The importance of having sufficient diversification within the
portfolio to absorb shock losses is critical to the success of the
portfolio. We do this by being partnered with the highest quality
underwriting businesses at Lloyd's. Bad things happen and the
insurance industry exists to pay claims when they do. This is a
very challenging time for everyone. Our company has successfully
navigated these periods before and we believe they will do so again
coming out stronger on the other side.
Board
2019 has demonstrated that value can be created from
implementing the strategy of building a capacity fund from the
acquisition of LLV's at below fair value. The increase in the value
of the capacity fund has contributed to the growth of the Company.
Our strategy of reducing risk has been successful in insulating the
Company from severe losses. The Executive team is to be
congratulated on achieving an excellent result in the
circumstances.
Michael Cunningham
Non-executive Chairman
28 May 2020
Chief Executive's review
Summary
-- Adjusted net asset value at GBP2.06p per share (2018: GBP1.90), a 8.4% increase
-- 32% increase in the capacity portfolio to GBP69m of capacity for 2020 underwriting year
-- Negative goodwill of GBP1.7m contributing to shareholder value
-- The results of capacity portfolio have for the last three
closed years of account out-performed the results of the Lloyd's
market by an average of 6.3%.
Highlights
-- The strategy of building a quality portfolio of syndicate
capacity continues successfully as the portfolio increased from
GBP53m to GBP69m - a 31% increase.
-- Quota share reinsurance has provided finance for acquisitions
and has mitigated the loss from catastrophe losses in 2017, 2018
and 2019.
-- The value of the capacity portfolio has increased to GBP26.4m
(2018: GBP21.0m) a 28% increase.
-- Helios' portfolio underwriting results for 2017 underwriting
year outperformed Lloyd's return on capacity by 3.3% and by an
average of 6.3% for the last three closed underwriting years of
account demonstrating the quality of the portfolio.
-- The improvement in underwriting conditions is now
accelerating on top of aggregate rate increase during 2019 of 5.4%
(2018: 3.5%) following catastrophe losses in 2017, 2018 and
2019.
-- With the prospect of improving underwriting returns, together
with the opportunity to continue to build the capacity portfolio,
Helios is well placed to deliver value to shareholders in the
future.
Building the capacity fund
The size of the capacity portfolio increased by 31% to GBP69.1m
and its value by 28% to GBP26.4m in 2019. This was achieved by:
-- The purchase of a further four corporate members. The flow of
vehicles for sale increased as existing owners wish to cease
underwriting and during 2019 GBP8.5m (2018: GBP14.7m) of capacity
was added. The assets were acquired at below fair value creating
negative goodwill of GBP1.7m. Given the flow of LLVs for sale at
the current time and the uncertainty surrounding the COVID-19
losses, the level of discount to fair value should be able to be
maintained.
-- The portfolio's syndicates offered pre-emption increases in
capacity totalling GBP5.6m for no cost to take advantage of the
improving market conditions. This free capacity on syndicates that
have values at auction increased the value of the fund by
GBP2.5m.
-- We took advantage of the strong market in the capacity
auctions and sold capacity on certain syndicates to balance the
portfolio and to realise some additional cash of GBP0.9m.
-- We continued to actively manage the syndicates'
participations shedding participations on syndicates' from LLV's
acquired and deploying capital on the Beazley Tracker syndicate
5623 and the Blenheim syndicate 5886.
The average price per GBP of capacity fell slightly as
proportion of capacity on "nil value"/non traded syndicates
increased with the participation on syndicates 5623 and 5886.
The value of the portfolio of the syndicate capacity remains the
major asset of the Group and an important factor in delivering
overall returns to shareholders. The growth in the adjusted net
asset value ("ANAV"), 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 of Lloyd's
could be subject to material change if the level of demand for
syndicate capacity reduces or if the supply of capacity for sale
should increase. In 2019, the average prices of capacity traded in
the capacity auctions remained stable at 38p per GBP of capacity
after adjusting for the additional capacity created from the
pre-emptions. The Directors have noted the recent significant
reduction in price to book values of the London listed Lloyd's
insurers and believe that the reduction in the valuation multiples
could be reflected in the average price of capacity in the Capacity
Auctions to held in October 2020.
A sensitivity analysis of the potential change to the ANAV per
share from changes to the value of the capacity portfolio is set
out below:
Revised
Capacity ANAV
value per share
---------------- -------- ----------
Current value 26,350 2.06
Decrease of 10% 23,715 1.91
Decrease of 20% 21,080 1.76
---------------- -------- ----------
Each 10% reduction in the capacity values at the 2020 auctions
will reduce the ANAV by approx. 15p per share. Any reduction in the
value will be mitigated by any pre-emption capacity on syndicates
that have a value at auction that is offered and taken up for nil
value.
The accounting policy requires an assessment of the carrying
value of each syndicate participation against the latest average
auction prices. The impairment credit for this year of GBP1.9m
(2018: loss of GBP281,000) arises as fair value of the syndicate
capacity held on the balance sheet has been revised upwards.
These movements in the carrying value of capacity have no impact
on cash flow.
2019
---------------------
Fair value
Capacity (WAV)
GBPm GBPm
-------------------------------- -------- -----------
At 1 January 2019 52.6 20.6
Capacity acquired with LLVs 8.5 3.6
Pre-emption capacity 5.6 2.5
Capacity sold at auction (1.6) (0.9)
Other capacity movements/change
in value 4.0 0.6
-------------------------------- -------- -----------
At 31 December 2019 69.1 26.4
-------------------------------- -------- -----------
% Growth 31% 28%
-------------------------------- -------- -----------
Value per GBP of capacity (p)
2019 38.20
2018 39.30
2017 31.59
2016 45.71
2015 41.86
2014 36.02
2013 36.72
Underwriting result
The calendar year underwriting profit from the Helios retained
capacity for 2019 has been generated from the portfolio of
syndicate results from the 2017 to 2019 underwriting years as
follows:
Underwriting year contribution
2019 2018
Underwriting year GBP'000 GBP'000
------------------ -------- --------
2016 - 1,580
2017 2,726 912
2018 1,349 (1,709)
2019 (814) -
------------------ -------- --------
3,261 783
------------------ -------- --------
2019 again saw some significant catastrophic losses for the
insurance industry and so too for the Lloyd's market, with notable
losses in the second half of 2019 including Typhoons Faxai and
Hagibis (in Japan) as well as Hurricane Dorian (impacting the
Bahamas). Insured losses arising from catastrophic events cost the
Lloyd's market GBP1.8bn, net of reinsurance, in 2019 (2018:
GBP2.9bn).The investment return for the Lloyd's market was 4.8%
(2018: 0.7%), reflecting a buoyant year in financial markets which
has improved the overall underwriting return for the year.
The Lloyd's market experienced a weighted average increase in
prices on renewal business of approximately 5.4% in 2019. In
addition, several syndicates exited or severely curbed their risk
appetites in poor performing lines, as Lloyd's began to ramp up its
activity to support the market in closing the performance gap.
During 2019, the 2017 underwriting year midpoint loss estimate
reduced from 8.6% return on capacity to a final loss of 4.7%
outperforming the average of the Lloyd's market by over 3%. The
overall return on capacity for 2017 benefited from the increased
investment returns in last 12 months. The midpoint estimate for the
2018 underwriting year at 31 December 2019 was a loss of 3.61%
(2017: 3.5%). The small deterioration of the 2018 mid-point
estimate over the year was caused by reserve increases on short
tail lines from losses that occurred in 2018 and this mid-point
estimate is outperforming the Lloyd's market result by over 2%.
Nevertheless, we would expect the 2018 underwriting year forecast
to improve over the next 12 months to make a contribution to 2020
calendar year underwriting profits.
The 2019 underwriting year result at 12 months represents a loss
of 3% (2017: loss -8%) on the retained capacity. Following the
recent receipt of the first estimates of the 2019 year of account
we are pleased that the Helios midpoint loss of 3.5% is
outperforming Lloyd's by 40 basis points. It is expected that that
a significant proportion of the losses arising from COVID 19 will
attach to the 2019 underwriting year and therefore there remains
considerable uncertainty regarding the eventual outcome for this
underwriting year.
The improvement in the underwriting environment is accelerating
in 2020 as the losses from COVID-19 pandemic are assessed.
Other income
Helios generates additional income at Group level from the
following:
2019 2018
GBP'000 GBP'000
--------------------------------- -------- --------
Fees from reinsurers 235 575
Corporate reinsurance recoveries (357) 366
Gain on bargain purchases 1,707 1,184
Investment income 972 (246)
--------------------------------- -------- --------
Total other income 2,557 1,879
--------------------------------- -------- --------
Fees from reinsurers have reduced with two underwriting years
now currently forecast to be loss making, no profit commission has
been accrued.
The Group has reinsurance policies at member level where any
expected underwriting year losses can be recovered up to the level
of indemnity for the member. For the 2017 and 2018 years of
account, an assessment has been made of the likely year of account
loss and a potential reinsurance recovery of GBP0.6m (2018 - GBP1m)
has been made, hence the reduction in the estimate of the
accrual.
During the year the four acquisitions were acquired for a total
consideration of GBP10.1m (2018 - GBP12.2m), a discount of 19%
(2018 -14%) to the Humphrey valuations which generated negative
goodwill of GBP1.7m in the year.
Investment income includes the gain on the sale of capacity
during the year of GBP0.9m.
Total costs
The costs of the Group comprise the operating expenses and the
cost of the stop loss protection bought to mitigate the downside
from large underwriting losses.
2019 2018
GBP'000 GBP'000
---------------- -------- --------
Pre-acquisition 859 56
Stop loss costs 200 296
Operating costs 2,332 1,702
---------------- -------- --------
Total costs 3,391 2,054
---------------- -------- --------
The profits that are recognised in the LLV's acquired in the
year are included in the Underwriting result and the
pre-acquisition element is reversed out and is treated as an
expense.
The reduction in stop loss arises from a prior year adjustment
of GBP0.2m relating to the quota share arrangements.
The Operating Costs include gains and losses on conversion of
balance sheet currency balances and a swing in the FX charge of
GBP0.7m in the year accounts for the increase in operating costs.
The underlying operating costs of the business remain at GBP2m.
Quality of portfolio
We continue to focus ruthlessly on the quality syndicates. In
order to maintain the quality we strive to acquire LLVs with
portfolios that comprise quality syndicates, thereby having to pay
the average auction prices. Participations on weaker syndicates in
acquired portfolios are sold or discarded to maintain the overall
quality. The seven largest participations with the leading managing
agents at Lloyd's account for 76% of the portfolio. These
participations in syndicates managed by these managing agents
represent shares in the better managed businesses at Lloyd's.
Capacity
Syndicate Managing Agent GBP'000 Total
---------------------------------- --------------------------- -------- -----
510 Tokio Marine Kiln Ltd 13,077 19%
623 Beazley Furlonge Limited 9,572 14%
33 Hiscox Syndicates Limited 8,358 12%
Managing Agency Partners
2791 Ltd 6,298 9%
609 Atrium Underwriters Limited 5,717 8%
Blenheim Underwriting
5886 Limited 5,333 8%
ERS Syndicate Management
218 Ltd 5,115 7%
---------------------------------- --------------------------- -------- -----
Subtotal 53,470 76%
---------------------------------- --------------------------- -------- -----
Other 16,730 24%
---------------------------------- --------------------------- -------- -----
Total (includes post balance sheet
acquisition) 70,200 100%
---------------------------------- --------------------------- -------- -----
The underwriting results of the Helios portfolio have on average
outperformed the Lloyd's market average. Helios' average return on
capacity over the last three closed years is 4.8% and is on average
6.3% higher than the average of the Lloyd's market over that
period. This material outperformance cannot be expected to be
maintained.
The combined ratio of the portfolio (before Helios corporate
costs) has been 5.5% lower than the Lloyd's market on average over
the last three calendar years. These incremental returns
demonstrate the diversity and breadth of underwriting expertise
within the businesses comprising the portfolio of syndicate
capacity.
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. 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 LLVs 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. Further
capacity was ceded to quota share reinsurers in 2018 from the
capacity acquired during the year as the reinsurers provided their
share of the necessary underwriting capital immediately; this
assisted in the funding of the acquisitions made.
The profits from the capacity on the older years are retained
100% by Helios.
Year of account - GBPm
----------------------------
2017 2018 2019 2020
----------------------------------- ------ ------ ----- -----
Helios capacity at outset 9.9 12.3 15.8 20.7
Retained capacity in year 1 1.8 6 6.4 0.3
Retained capacity in years 2 and 3 24.5 9.2 1.1 -
----------------------------------- ------ ------ ----- -----
Helios retained capacity 36.2 27.5 23.3 21.0
% of off-risk capacity
Ceded capacity at outset 22.8 28.7 36.8 48.4
Further capacity ceded to QS 2.6 9.5 2.1 0.8
----------------------------------- ------ ------ ----- -----
Total capacity ceded 25.4 38.2 38.9 49.1
----------------------------------- ------ ------ ----- -----
Current total capacity 62.7 65.8 62.2 70.2
Helios share of total capacity 58% 42% 37% 30%
----------------------------------- ------ ------ ----- -----
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 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 the catastrophe risk scenarios ("CRS") prescribed by
Lloyd's.
The individual syndicate net exposures will depend on the
business underwritten during the year and the reinsurance
protections purchased at syndicate level.
The aggregate exceedance probability ("AEP") assesses the
potential impact on balance sheet across the portfolio from either
single or multiple large losses with a probability of occurring
greater than once in a 30-year period.
In addition, Helios purchases stop loss reinsurance for its 30%
share of the portfolio with an indemnity of 10% of its share of the
capacity and a claim can be made if the loss for the year of
account at 36 months exceeds 5% of capacity.
Capital position
The underwriting capital required by Lloyd's for the Helios
portfolio comprises the funds to support the Economic Capital
Requirement of the portfolio and the Solvency II adjustments is as
follows:
Underwriting capital 2019 2018
as at 31 December GBPm GBPm
----------------------------- ----- -----
Reinsurance panel 26.7 24.5
Helios own funds 13.5 8.3
Group letters of credit 1.8 2.2
----------------------------- ----- -----
Total 42.0 35.0
----------------------------- ----- -----
Capacity as at 1 January
2020 70.2 52.6
Economic capital requirement 35.2 27.3
Solvency II and other
adjustments 6.8 7.7
----------------------------- ----- -----
42.0 35.0
----------------------------- ----- -----
In addition to the current funds lodged at Lloyd's, Helios has
available the following facilities to provide additional resources
to fund the necessary capital requirements:
-- A bank revolving credit bank facility of GBP4m of which GBP2.0m has been drawn down, and
-- The stop loss reinsurance contracts for the 2019 and 2020
years of account could provide additional underwriting capital of
approximately GBP5m.
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
28 May 2020
Lloyd's Advisers' Report - Hampden Agencies
Helios Outperforms Lloyd's with a Combined Ratio of 95.6% in
2019 (Lloyd's 102.1%)
The quality of the Helios portfolio of syndicates was again
demonstrated in 2019 with Helios reporting a combined ratio of
95.6% (2018: 98.6%) despite the Lloyd's market as a whole reporting
its third consecutive year of loss with a combined ratio of 102.1%.
Over the past four years Helios' calendar year combined ratio
(before corporate costs) has outperformed Lloyd's by 5.7 percentage
points a year with an average combined ratio of 98.9% compared with
104.6% for the overall Lloyd's market. The chart below shows the
combined ratio of the Helios portfolio compared with Lloyd's from
2016 to 2019.
With the closure of the 2017 Account at 31 December 2019 the
Helios portfolio has outperformed Lloyd's for the ninth successive
three year account result, reporting a loss of 4.7% on capacity
compared with the Lloyd's market average result which was a loss of
8.0% on capacity. The 2017 Account improved by 4.6 percentage
points from the estimate at Q4 2018 benefitting from prior year
releases which totalled 4.3% of capacity.
Trading conditions continued to be difficult in most classes of
business in 2017 but the main reason for the loss was the highest
ever level of global insured losses from natural catastrophes
initially estimated by Swiss Re at $144bn (revised in 2019 Dollars
to $151bn). Hurricanes Harvey, Irma and Maria struck the US and the
Caribbean in quick succession resulting in combined insured losses
of $92bn while separate wildfire outbreaks led to record losses of
$13bn across northern and southern California in October and
December 2017.
The table below shows the return on capacity of the Helios
portfolio compared with Lloyd's for the last four closed years from
2014 to 2017. The table below also includes the open year estimate
for the 2018 year of account as at the end of Q4 2019. This open
year estimate is a loss of 3.6% of capacity (Lloyd's Market Average
is a loss of 5.7% of capacity) and includes estimates from four
acquisitions made by Helios during 2019, but excludes the
acquisition of Nameco 408 Limited on 29 January 2020. We expect an
improvement in this estimate when the result is declared as at the
end of 2020, but do not expect prior year reserve releases or the
investment return component to be as strong as for the 2017
Account.
The 2018 Account suffered from the fourth highest total of
insured natural catastrophe losses estimated by Swiss Re Sigma at
$93bn in 2019 dollars compared with its estimate a year earlier of
$85bn. Major losses in the year included Hurricanes Michael and
Florence in the US, a record level of losses from wildfires in
California as well as Typhoons Jebi and Trami in Japan.
Updated estimates are expected to be released by Lloyd's on 27
May 2020 as at Q1 2020 for the 2018 Account together with a first
set of estimates for the 2019 year of account, which will include
an initial assessment of losses from COVID-19.
Helios Combined Ratio Compared with Lloyd's: 2016-2019 (%)
2019
Helios 95.6
Lloyd's 102.1
2018
Helios 98.6
Lloyd's 104.5
2017
Helios 106.9
Lloyd's 114.0
2016
Helios 94.6
Lloyd's 97.9
Helios Return on Capacity Compared with Lloyd's: 2014-2017 and
2018 (est. at 2019 Q4)
2018 estimate at Q8
Helios (3.6)
Lloyd's (5.7)
2017 (added value 3.3)
Helios (4.7)
Lloyd's (8.0)
2016 (added value 11.7)
Helios 8.6
Lloyd's (3.1)
2015 (added value 7.9)
Helios 14.1
Lloyd's 6.2
2014 (added value 5.9)
Helios 16.6
Lloyd's 10.7
"Loss Creep" from 2017/2018 Catastrophe Losses
What has been unusual about loss development for the major
losses in 2017 and 2018 is the level of adverse development with
the latest industry loss estimates being significantly higher than
initial estimates. The latest estimate of insured losses from
Typhoon Jebi, the most powerful typhoon to hit Japan in September
2018 is $13bn which compares with initial estimates from the
catastrophe modelling company, AIR, of $3.4bn, an increase of 3.8
times.
Based on estimated insured losses from Property Claims Services
the 2018 Hurricanes Michael and Florence could cost insurers 2
times and 1.8 times initial loss estimates while 2017's Hurricane
Irma could cost 1.7 times initial estimates. Much of the reason for
the "loss creep" for Hurricanes Irma and Michael was due to
legislation in Florida known as Assignment of Benefits, where the
policyholder can assign post loss benefits from their insurance
policy to a third party. New legislation to control this practice
was signed into law in Florida on 1 July 2019, which should reduce
costs for insurers in that state from future hurricanes by
requiring assignees to reasonably price their work combined with
revisions to the costs chargeable by plaintiff lawyers.
Major losses in 2019 were below the 10-year Average
Owing to the absence of severe hurricanes in the US, in contrast
to the previous two years, insured major losses totalled $60bn in
2019, below the annual average of $75bn in the previous ten years.
For the second year running Japan was struck by two severe
typhoons, Hagibis and Faxai, with the largest insured loss totals
of $8bn and $7bn respectively of all disaster events around the
world, according to Swiss Re Sigma. Most of the insured losses from
Typhoon Hagibis were due to flood. The 2019 hurricane season was
notable for Hurricane Dorian which maintained Category 5 winds for
the longest duration on record and for the Bahamas was the
costliest natural disaster event ever with total insured losses of
$4.5bn in the Bahamas and North Carolina.
The COVID-19 "Insurance Event" is expected to mostly impact the
2019 Account
We are currently in the middle of the COVID-19 pandemic which
was first identified in Wuhan, China in early December 2019. There
is considerable uncertainty about the ultimate level of insured
losses arising from COVID-19 as unlike a natural catastrophe, it is
spread worldwide, has a multi-class impact and is occurring over a
long period.
The uncertainty is reflected in a wide range of insured loss
estimates. The broker, Willis Towers Watson (WTW), estimated that
insured losses could range from $11bn in an optimistic scenario to
$140bn in a worst case scenario, with 96m deaths. US analyst,
Dowling & Partners, estimates insured losses in a range of
$40bn-$80bn with reinsurers' share being 40%-60% of industry
losses. We expect some complexity in establishing what is covered
and what is not covered in property catastrophe treaties which may
mitigate losses assumed by reinsurers.
Lloyd's announced on 14 May 2020 preliminary estimated insurance
losses (Scenario C submitted by Managing Agents assuming social
distancing restrictions continue until 30 June 2020) of GBP2.35bn
net of reinsurance with a Reinsurance Recovery Ratio of 48% of
gross losses. The direct impact on Lloyd's will largely be felt by
the 2019 year of account which we estimate may bear 75% of the
insured losses with 25% on the 2020 Account. Based on this split
implies an estimated loss of 5.7% of capacity on the 2019 Account
and 1.8% of capacity on the 2020 Account. Lloyd's has indicated
that with estimated downside uncertainty insured losses could
increase by 49% to reach GBP3.5bn, which is manageable and just
under Lloyd's insured losses of GBP3.8bn from Hurricanes, Harvey,
Irma and Maria in 2017.
The main classes affected by COVID-19 claims at Lloyd's are
event cancellation, property with affirmative business interruption
cover, property treaty, political risks and trade credit. In
addition, liability classes are expected to be affected together
with a second order impact from recession related claims. Liability
classes which may be affected include directors and officers
(D&O), general liability (GL), errors and omissions (E&O),
employment practices liability (EPL) and workers' compensation.
In the US there is uncertainty for property insurers in relation
to Business Interruption cover with currently eight states
proposing bills that would retroactively change policy wordings and
require insurers to pay business interruption claims despite
exclusionary language. The standard ISO property insurance wording
in the US is clear that a physical loss is required for a business
interruption claim to be made and also excludes loss owing to a
virus or bacteria. It is expected that ultimately contract wordings
will be upheld with Article 1 of the US Constitution effectively
prohibiting states from interfering with private contracts. There
is precedent in the US for contract wordings being challenged. In
Louisiana after Hurricane Katrina the state tried to force
homeowners' insurers to pay claims irrespective of whether their
loss was caused by wind driven rain (covered) or flood (not
covered). This was challenged by a number of insurers in the courts
and the contract language was upheld.
The impact of COVID-19 on the 2019 Account may turn a modest
profit into a small loss but there are material variables which
will depend on a range of factors not least the duration of
lockdown and its impact on the economy. However there may be a
beneficial impact on claims owing to the reduction in economic
activity as a result of government imposed lock downs. Specific
classes which are currently benefiting from reduced frequency
include auto and workers' compensation. In addition, owing to
courts being closed, the plaintiff bar is more amenable to
settlements and mediations and has less need to source claims owing
to the inventory being built up from COVID-19.
Momentum of Insurance Price Rises Began to Accelerate in the
Second Half of 2019
2019 was notable for positive and accelerating momentum in rate
increases in most classes of the insurance market and this
continues for 2020 with a consequence of COVID-19 being a
heightened focus on restricting terms and conditions which had been
broadened in the soft market years.
US business remains the predominant market for Lloyd's with
around 50% of premiums being denominated in dollars. Using data
from the Council of Insurance Agents and Brokers (CIAB) property
and casualty insurance rates have now increased for nine successive
quarters to Q4 2019 with average premium increases across all size
accounts being 7.5%, the highest since 2003 (the rate increase a
year earlier during Q4 2018 was 2.4%).
Segments where rate increases are more significant include US
public D&O pricing with Aon reporting rate increases of 69.7%
in the third quarter of 2019 compared with a year earlier while the
US excess and surplus lines market also showed an acceleration in
the level of rate increases in the second half of 2019. The E&S
market is particularly important for Lloyd's which has the largest
market share of all insurers in 2018 of 23.6%, the next largest
being AIG with 7.1%. The latest report from AmWINS, the largest
independent wholesale broker in the US, placing $15bn of premiums,
shows property rates up by 17.9% in Q4 2019 and casualty rates up
by 14.5%.
Global insurance rates are accelerating too with broker Marsh
estimating that rates rose by 10.6% in Q4 2019 compared with 2.4%
in the same quarter a year earlier. This is the largest increase in
the Marsh Global Insurance Market Index which covers 90% of Marsh's
business since inception of the index in 2012.
Reduced Willingness to Deploy Capital is Contributing to
Improved Market Conditions
Historically, the insurance cycle has typically been a classic
supply led cycle, where pricing is driven more by changes in supply
to the market than changes in demand. At year end 2019 both the
insurance and reinsurance markets had abundant capital and
therefore in theory plentiful supply of underwriting capacity.
The US property/casualty industry policyholders' surplus
increased by 14.2% in 2019 to a record high of $847.8bn at 31
December 2019. Global reinsurer capital also rose by 7% to a record
$625bn over the year to 31 December 2019. For the first time since
2008, the alternative capital sector of the market fell back by
$2bn to $95bn comprising 15.2% of global reinsurer capital using
data from broker, Aon, whose calculation is a broad measure of
reinsurer capital available including alternative reinsurance
capital. However, Aon estimated that as much as $15bn of
alternative capital was trapped in loss reserves and buffers and
therefore unavailable as collateral in 2020.
The reason we believe there was a higher level of rate rises in
the second half of 2019 is improved underwriting discipline
measured by the willingness to deploy capital. This is highlighted
by the actions of a number of larger global insurers including
Lloyd's:
-- The Lloyd's Performance Management Directorate focused its
business plan approval process for 2019 on scrutiny of eight
classes of business market wide which had been underperforming
along with scrutiny of each syndicate's bottom decile
underperforming business. The result was the removal of around $4bn
of underperforming business from the Lloyd's market for 2019. A
measure of the improved discipline at Lloyd's is the fact that 15
syndicates ceased trading in 2018 and 2019.
-- US insurer, AIG, made fundamental changes to its underwriting
strategy in 2019 which included reducing its property gross limits
from $2.5bn to $750m to along with reducing casualty gross limits
from $250m to $100m.
-- Other significant insurer books being re-underwritten include
FM Global, the second largest US commercial property insurer and
Swiss Re Corporate Solutions.
Insurance Rating Momentum Continues in 2020
The momentum of rate rises continues in 2020 with broker Marsh
reporting the tenth successive quarter of rate increases which
averaged 13.9% for Q1 2020 compared with 10.6% for Q4 2019. Rising
rates are now being accompanied by narrower terms and conditions
with broker WTW reporting that coverage terms and conditions are
now under scrutiny and in some cases intense scrutiny.
Twice a year WTW publishes its Marketplace Realities Report
which examines market conditions and their expectation of rate
changes in 28 insurance classes of business. In its spring update
published in May 2020, it predicts that for the first time since it
started publishing this Report not a single line of business is
expected to show overall decreases with a net plus 23 out of 28
classes showing rate increases. In comparison, in Spring 2017 this
measure was negative four when six classes showed rate increases
compared with ten showing rate decreases.
Capital Flow into Reinsurance Pauses Leading to Higher Rate
Increases in 2020
The level of catastrophe losses in 2017 and 2018 as well as
"loss creep" has led to a pause in the flow of institutional
capital into the collateralised reinsurance market. Reinsurance
broker Guy Carpenter estimated that alternative capital grew by
150% between 2012 and 2018 and this was accompanied by a 27% fall
in global property catastrophe pricing over this period. Since the
beginning of 2019 investors in Insurance Linked Securities funds
are being more discerning about which funds they back. The most
notable exit is CatCo Investment Management which was bought by US
insurance company, Markel in 2015 but was put into orderly run off
and ceased writing new business in July 2019. At its peak CatCo had
$6.6bn of assets under management but as of Q1 2020 its assets had
reduced to $2.7bn.
So far in 2020 we have seen higher rate increases in the
reinsurance market than in 2019 with Guy Carpenter's Global Rate
Online Index rising by 5% at 1 January (1.1% at 1 January 2019) and
its US rate online index by 9% (3% at 1 January 2019). More
significant rate increases were seen at the 1 April Japanese
property renewals where loss affected wind and flood treaties saw
rate increases of between 30% and 50% according to broker Willis
Re, while loss free layers were up by between 10% and 35%.
We expect the impact of COVID-19 will increase pressure for
reinsurance rate increases at this years' midyear renewals in June
and July and at 1 January 2021. Increased demand for risk transfer
from insurers may be met by reduced supply if alternative capital
pulls back further. Reasons for reduced supply may be a combination
of COVID-19 being another instance of exposure to non-modelled
perils leading to further trapped collateral and the re-pricing of
asset markets curtailing available assets for investment in the
Insurance Linked Securities sector.
The Impact of COVID-19 on the Economy Will Affect Demand for
Insurance
The strength of the economy drives the property/casualty
insurance industry with net written premiums, a proxy for demand,
tracking nominal GDP growth fairly well other than in "hard
markets". In 2019, US property/casualty insurers' net earned
premiums grew by 4.8% benefiting from rate increases and out-pacing
nominal GDP growth of 4.2% for the year.
The COVID-19 pandemic is expected to result in two quarters of
economic contraction before recovery later in the year with Wells
Fargo Securities estimating the second quarter will see GDP reduce
in the US by 22.3% compared with the 4.8% contraction in the first
quarter. We expect a fall in demand for insurance although previous
economic downturns have been associated with varied growth
experience. Some industries will be particularly adversely affected
due to COVID-19 such as aviation and hospitality while there has
been a sharp fall in energy exposures owing to the reduction in the
oil price.
In the last six recessions in the US net written premium has
contracted in three of the recessions but risen in the other three.
US insurance analyst, Dowling & Partners, states that its
working assumption is that "whatever the premium decline, the
decline in losses will be greater from lower loss costs". In
general, non-life insurance has defensive qualities in today's
challenging environment compared with other industries as demand is
less sensitive to macroeconomic conditions.
Declining Investment Returns Favour Underwriting Discipline
At a time of low and declining interest rates the only way to
make an acceptable return on equity for investors is to make an
underwriting profit. In March 2020 the US Federal Reserve made two
emergency rate reductions in its Fed Funds Rate totalling 1.5%
which is now targeted at 0% to 0.25% and has coincided with
reductions in yield across all durations of the yield curve.
As of 1 May 2020 the two year Treasury Yield had reduced to 0.2%
from 2.31% a year ago with most insurers now having low yielding
bonds for years to come on premiums received in 2020 and from
maturing bonds held in technical reserves releasing cash for
reinvestment. Some insurers have also reported investment losses in
the first quarter of 2020 which are greater than their estimated
losses from COVID-19 meaning that pressures from both the asset and
liability sides of the balance sheet are likely to lead to improved
underwriting discipline.
Future Prospects for the Helios Portfolio
The Helios portfolio continues to focus in 2020 on quality
Lloyd's syndicates with a key success characteristic being focus on
profit over growth. Over 46% of the portfolio measured by capacity
is on syndicates graded "AA" or "A" by Hampden. Quality syndicates
which are able to conserve capital in soft market years are also in
a better position to take advantage in the current upturn in rates
and expected profitability.
Despite the current constraints on the economy from COVID-19 we
expect the upward price trend in insurance rates in the second half
of 2019 and reinsurance rates in the first half of 2020 to be
maintained for the remainder of 2020 and into 2021. Importantly
rate rises are being accompanied by tighter terms and conditions.
What matters to profitability is the price of insurance per unit of
exposure and this has been and is continuing to rise.
Assuming the extreme scenario business interruption issues are
resolved successfully, COVID-19 should be a manageable loss to the
Lloyd's market. It is usually a good time to take underwriting risk
when insurers raise capital after an event and risk awareness is
heightened. In recent weeks we have seen a number of insurance
companies raise new equity and debt capital to replenish COVID-19
losses and fund future growth opportunities and we suspect there
are more capital raisings in the pipeline. Helios has a strong
record of outperformance of Lloyd's overall leaving its portfolio
of syndicates in an excellent position to take advantage of current
market conditions which have improved significantly over the past
12 months.
Summary financial information
The information set out below is a summary of the key items that
the Board assesses in estimating the financial position of the
Group. Given the Board has no active role in the management of the
syndicates within the portfolio, the following approach is
taken:
A) It relies on the quarterly syndicate forecasts to assess its
share of the underlying profitability of the syndicates within the
portfolio.
B) It calculates the amounts due to/from the quota share
reinsurers in respect of their share of the profits/losses as well
as fees and commissions due.
C) An adjustment is made to exclude pre-acquisition profits on companies bought in the year.
D) Costs relating to stop loss reinsurance and operating costs are deducted.
Year to 31 December
---------------------
2019 2018
GBP'000 GBP'000
------------------------------------------------------- ---------- ---------
Underwriting profit 3,261 783
------------------------------------------------------- ---------- ---------
Other income:
- fees from reinsurers 235 575
- corporate reinsurance policies (357) 366
- goodwill on bargain purchase 1,707 1,184
- investment income 972 (246)
------------------------------------------------------- ---------- ---------
Total other income 2,557 1,879
------------------------------------------------------- ---------- ---------
Costs:
- pre-acquisition (859) (56)
- stop loss costs (200) (296)
- operating costs (2,332) (1,702)
------------------------------------------------------- ---------- ---------
Total costs (3,391) (2,054)
------------------------------------------------------- ---------- ---------
Operating profit/(loss) before impairments of goodwill
and capacity 2,427 608
Impairment charge - capacity 1,860 (281)
Tax (233) 129
------------------------------------------------------- ---------- ---------
Profit/(loss) for the year 4,053 456
------------------------------------------------------- ---------- ---------
Year to 31 December 2019
Helios
retained
capacity Total % earned
at profit/(loss) in the
31 December Portfolio currently 2019 Helios
2019 midpoint estimated calendar profits
Underwriting year GBPm forecasts GBP'000 year GBP'000
------------------ ------------ ---------- -------------- --------- --------
2017 36.2 (4.8)% (1,748) 156% 2,726
2018 21.0 (3.6)% (758) 178% 1,349
2019 18.3 N/A - - (814)
------------------ ------------ ---------- -------------- --------- --------
3,261
------------------ ------------ ---------- -------------- --------- --------
Year to 31 December 2018
Helios
retained
capacity % earned
at Total profit in the
31 December Portfolio currently 2018 Helios
2018 midpoint estimated calendar profits
Underwriting year GBPm forecasts GBP'000 year GBP'000
------------------ ------------ ---------- ------------ --------- --------
2016 33.9 8.6% 2,915 54% 1,580
2017 28.2 (8.2%) (2,312) 39% 912
2018 18.3 N/A - - (1,709)
------------------ ------------ ---------- ------------ --------- --------
783
------------------ ------------ ---------- ------------ --------- --------
Summary balance sheet
See Note 28 for further information.
2019 2018
GBP'000 GBP'000
----------------------- -------- --------
Intangible assets 21,178 16,051
Funds at Lloyd's 13,520 8,388
Other cash 3,028 9,717
Other assets 10,105 10,156
----------------------- -------- --------
Total assets 47,831 44,312
----------------------- -------- --------
Deferred tax 3,292 2,569
Borrowings 2,000 9,196
Other liabilities 6,145 3,891
----------------------- -------- --------
Total liabilities 11,437 15,656
----------------------- -------- --------
Total syndicate equity (8,246) (7,611)
----------------------- -------- --------
Total equity 28,148 21,045
----------------------- -------- --------
Cash flow
Year Year
to to
31 December 31 December
2019 2018
Analysis of free working capital GBP'000 GBP'000
------------------------------------------------ ------------ ------------
Opening balance (free cash) 9,717 1,078
Income
Cash acquired on acquisition 2,045 1,057
Distribution of profits (net of tax retentions) 1,724 3,887
Transfers from Funds at Lloyd's 4,178 14,880
Other income 178 323
Proceeds from the sale of capacity 911 65
Proceeds from the issue of shares 2,014 -
Borrowings 2,000 9,196
Expenditure
Operating costs (2,377) (1,778)
Payable funds for acquisitions - (721)
Payments to QS reinsurers (465) (1,918)
Acquisition of LLVs (4,897) (10,859)
Transfers to Funds at Lloyd's (1,137) (3,212)
Tax (833) (766)
Dividends paid (529) (219)
Repayment of borrowings (9,214) (1,094)
Share buy backs (287) (202)
------------------------------------------------ ------------ ------------
Closing balance 3,013 9,717
------------------------------------------------ ------------ ------------
Year Year
to to
31 December 31 December
2019 2018
Adjusted NAV GBP'000 GBP'000
--------------------------------------------------------- ------------ ------------
Net assets less intangible assets 6,970 4,994
Group letter of credit 2,768 1,744
Fair value of capacity (WAV) 26,350 20,638
--------------------------------------------------------- ------------ ------------
36,088 27,376
--------------------------------------------------------- ------------ ------------
Shares in issue - on the market (Note 21) 17,489 14,441
Shares in issue - total of on the market and JSOP shares
(Note 21) 17,989 14,941
Adjusted net asset value per share GBP - on the market 2.06 1.90
Adjusted net asset value per share GBP - on the market
and JSOP shares 2.01 1.83
--------------------------------------------------------- ------------ ------------
Consolidated statement of comprehensive income - Year ended 31
December 2019
Year Year
ended ended
31 December 31 December
2019 2018
Note GBP'000 GBP'000
----------------------------------------------------- ---- ------------ ------------
Gross premium written 6 55,470 38,703
Reinsurance premium ceded 6 (13,210) (7,675)
----------------------------------------------------- ---- ------------ ------------
Net premium written 6 42,260 31,028
----------------------------------------------------- ---- ------------ ------------
Change in unearned gross premium provision 7 (60) (360)
Change in unearned reinsurance premium provision 7 488 284
----------------------------------------------------- ---- ------------ ------------
Net change in unearned premium provision 7 428 (76)
----------------------------------------------------- ---- ------------ ------------
Net earned premium 5,6 42,688 30,952
Net investment income 8 2,335 295
Other underwriting income 417 266
Gain on bargain purchase 22 1,707 1,184
Other income 432 (184)
----------------------------------------------------- ---- ------------ ------------
Revenue 47,579 32,513
----------------------------------------------------- ---- ------------ ------------
Gross claims paid (34,107) (23,631)
Reinsurers' share of gross claims paid 8,237 4,859
----------------------------------------------------- ---- ------------ ------------
Claims paid, net of reinsurance (25,870) (18,772)
----------------------------------------------------- ---- ------------ ------------
Change in provision for gross claims 7 (3,758) (1,109)
Reinsurers' share of change in provision for
gross claims 7 2,004 909
----------------------------------------------------- ---- ------------ ------------
Net change in provision for claims 7 (1,754) (200)
----------------------------------------------------- ---- ------------ ------------
Net insurance claims incurred and loss adjustment
expenses 6 (27,624) (18,972)
----------------------------------------------------- ---- ------------ ------------
Expenses incurred in insurance activities (15,764) (11,696)
Other operating expenses (1,764) (1,237)
----------------------------------------------------- ---- ------------ ------------
Operating expenses 9 (17,528) (12,933)
----------------------------------------------------- ---- ------------ ------------
Operating profit before impairments of goodwill
and capacity 6 2,427 608
Impairment of syndicate capacity 13 1,860 (281)
----------------------------------------------------- ---- ------------ ------------
Profit before tax 4,287 327
----------------------------------------------------- ---- ------------ ------------
Income tax credit 10 (233) 129
----------------------------------------------------- ---- ------------ ------------
Profit for the year 4,054 456
----------------------------------------------------- ---- ------------ ------------
Other comprehensive income
Foreign currency translation differences - -
Income tax relating to the components of other
comprehensive income - -
----------------------------------------------------- ---- ------------ ------------
Other comprehensive income for the year, net
of tax - -
----------------------------------------------------- ---- ------------ ------------
Total comprehensive income for the year 4,054 456
----------------------------------------------------- ---- ------------ ------------
Profit for the year attributable to owners of
the Parent 4,054 456
----------------------------------------------------- ---- ------------ ------------
Total comprehensive income for the year attributable
to owners of the Parent 4,054 456
----------------------------------------------------- ---- ------------ ------------
Earnings per share attributable to owners of
the Parent
Basic 11 25.64p 3.14p
Diluted 11 24.86p 3.03p
----------------------------------------------------- ---- ------------ ------------
The profit/(loss) attributable to owners of the Parent, the
total comprehensive income and the 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
2019
31 December 31 December
2019 2018
Note GBP'000 GBP'000
---------------------------------------------------- ----- ----------- -----------
Assets
Intangible assets 13 21,178 16,051
Financial assets at fair value through profit
or loss 15 67,141 58,075
Deferred income tax asset - -
Reinsurance assets:
- reinsurers' share of claims outstanding 7 25,760 22,698
- reinsurers' share of unearned premium 7 5,023 4,057
Other receivables, including insurance and
reinsurance receivables 16 47,726 52,938
Deferred acquisition costs 17 6,641 6,782
Prepayments and accrued income 432 439
Cash and cash equivalents 6,037 12,202
---------------------------------------------------- ----- ----------- -----------
Total assets 179,938 173,242
---------------------------------------------------- ----- ----------- -----------
Liabilities
Insurance liabilities:
- claims outstanding 7 95,616 88,032
- unearned premium 7 26,522 24,772
Deferred income tax liabilities 18 3,292 2,635
Borrowings 19 2,000 9,196
Other payables, including insurance and reinsurance
payables 20 18,040 25,321
Accruals and deferred income 6,320 2,241
---------------------------------------------------- ----- ----------- -----------
Total liabilities 151,790 152,197
---------------------------------------------------- ----- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 1,839 1,510
Share premium 21 18,938 15,387
Other reserves - treasury shares (JSOP) (50) (50)
Retained earnings 7,421 4,198
---------------------------------------------------- ----- ----------- -----------
Total equity 28,148 21,045
---------------------------------------------------- ----- ----------- -----------
Total liabilities and equity 179,938 173,242
---------------------------------------------------- ----- ----------- -----------
The Financial Statements were approved and authorised for issue
by the Board of Directors on 28 May 2020, and were signed on its
behalf by:
Nigel Hanbury
Chief Executive
28 May 2020
The notes are an integral part of these Financial
Statements.
Parent Company statement of financial position - At 31 December
2019
Company number: 05892671
31 December 31 December
2019 2018
Note GBP'000 GBP'000
---------------------------------------------- ---- ----------- -----------
Assets
Investments in subsidiaries 14 33,329 24,559
Financial assets at fair value through profit
or loss 15 - -
Other receivables 16 8,151 6,693
Cash and cash equivalents 2,191 8,430
---------------------------------------------- ---- ----------- -----------
Total assets 43,671 39,682
---------------------------------------------- ---- ----------- -----------
Liabilities
Borrowings 19 2,000 9,196
Other payables 20 4,182 1,835
---------------------------------------------- ---- ----------- -----------
Total liabilities 6,182 11,031
---------------------------------------------- ---- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 1,839 1,510
Share premium 21 18,938 15,387
---------------------------------------------- ---- ----------- -----------
20,777 16,897
---------------------------------------------- ---- ----------- -----------
Retained earnings:
At 1 January 11,754 7,712
Profit for the year attributable to owners of
the Parent 5,789 4,463
Other changes in retained earnings (831) (421)
---------------------------------------------- ---- ----------- -----------
At 31 December 16,712 11,754
---------------------------------------------- ---- ----------- -----------
Total equity 37,489 28,651
---------------------------------------------- ---- ----------- -----------
Total liabilities and equity 43,671 39,682
---------------------------------------------- ---- ----------- -----------
Consolidated statement of changes in equity - Year ended 31
December 2019
Attributable to owners of
the Parent
-----------------------------------------
Other
Share Share reserves Retained Total
capital premium (JSOP) earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- --------- --------- --------- --------
At 1 January 2018 1,510 15,387 (50) 4,198 21,045
-------------------------------- ------ -------- --------- --------- --------- --------
Total comprehensive income for
the year:
Profit for the year - - - 456 456
Other comprehensive income,
net of tax - - - - -
-------------------------------- ------ -------- --------- --------- --------- --------
Total comprehensive income for
the year - - - 456 456
-------------------------------- ------ -------- --------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - (219) (219)
Company buy back of ordinary
shares 21, 23 - - - (202) (202)
Share issue, net of transaction
costs 21 - - - - -
-------------------------------- ------ -------- --------- --------- --------- --------
Total transactions with owners - - - (421) (421)
-------------------------------- ------ -------- --------- --------- --------- --------
At 31 December 2018 1,510 15,387 (50) 4,198 21,045
-------------------------------- ------ -------- --------- --------- --------- --------
At 1 January 2019 1,510 15,387 (50) 4,198 21,045
-------------------------------- ------ -------- --------- --------- --------- --------
Total comprehensive income for
the year:
Profit for the year - - - - -
Other comprehensive income,
net of tax - - - 4,054 4,054
-------------------------------- ------ -------- --------- --------- --------- --------
Total comprehensive income for
the year - - - 4,054 4,054
-------------------------------- ------ -------- --------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - (529) (529)
Company buy back of ordinary
shares 21, 23 - - - (302) (302)
Share issue, net of transaction
cost 21 329 3,551 - - 3,880
Other comprehensive income,
net of tax - - - - -
-------------------------------- ------ -------- --------- --------- --------- --------
Total transactions with owners 329 3,551 - (831) 3,049
-------------------------------- ------ -------- --------- --------- --------- --------
At 31 December 2019 1,839 18,938 (50) 7,421 28,148
-------------------------------- ------ -------- --------- --------- --------- --------
Parent Company statement of changes in equity - Year ended 31
December 2019
Share Share Retained Total
capital premium earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2018 1,510 15,387 7,712 24,609
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year:
Profit for the year - - 4,463 4,463
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - 4,463 4,463
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - (219) (219)
Company buy back of ordinary shares 21, 23 - - (202) (202)
Share issue, net of transaction costs - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners - - (421) (421)
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2018 1,510 15,387 11,754 28,651
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2019 1,510 15,387 11,754 28,651
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year:
Profit for the year - - 5,789 5,789
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - 5,789 5,789
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - (529) (529)
Company buy back of ordinary shares 21, 23 - - (302) (302)
Share issue, net of transaction costs 329 3,551 - 3,880
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners 329 3,551 (831) 3,049
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2019 1,839 18,938 16,712 37,489
-------------------------------------- ------ -------- -------- --------- --------
Consolidated statement of cash flows - Year ended 31 December
2019
Year ended Year ended
31 December 31 December
2019 2018
Note GBP'000 GBP'000
----------------------------------------------------- ---- ------------ ------------
Cash flows from operating activities
Profit before tax 4,287 327
Adjustments for:
- interest received 8 (235) (144)
- investment income 8 (1,248) (841)
- gain on bargain purchase 22 (1,707) (1,184)
- impairment of goodwill 22 - -
- profit on sale of intangible assets (898) (125)
- impairment of intangible assets 13 (1,860) 281
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss 8 (657) 490
- increase in financial assets at fair value through
profit or loss (3,010) 10,585
- decrease/(increase) in other receivables 18,823 (7,113)
- (decrease)/increase in other payables (6,785) 3,955
- net (decrease)/increase in technical provisions (6,473) 2,162
----------------------------------------------------- ---- ------------ ------------
Cash generated from/(used in) operations 237 8,393
----------------------------------------------------- ---- ------------ ------------
Income tax paid (1,119) (962)
----------------------------------------------------- ---- ------------ ------------
Net cash from/(used in) operating activities (882) 7,431
----------------------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 8 235 144
Investment income 8 1,248 841
Purchase of intangible assets 13 (22) -
Proceeds from disposal of intangible assets 932 86
Acquisition of subsidiaries, net of cash acquired (1,493) (6,825)
----------------------------------------------------- ---- ------------ ------------
Net cash from/(used in) investing activities 900 (5,754)
----------------------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 1,844 -
Payment for Company buy back of shares 24 (302) (202)
Proceeds from borrowings 19 2,000 9,196
Repayment of borrowings 19 (9,196) (1,094)
Dividends paid to owners of the Parent 12 (529) (219)
----------------------------------------------------- ---- ------------ ------------
Net cash from financing activities (6,183) 7,681
----------------------------------------------------- ---- ------------ ------------
Net (decrease)/increase in cash and cash equivalents (6,165) 9,358
Cash and cash equivalents at beginning of year 12,202 2,844
----------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of year 6,037 12,202
----------------------------------------------------- ---- ------------ ------------
Cash held within the syndicates' accounts is GBP3,009,000 (2018:
GBP2,485,000) of the total cash and cash equivalents held at the
year end of GBP6,037,000 (2018: GBP12,202,000). 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.
Parent Company statement of cash flows - Year ended 31 December
2019
Year ended Year ended
31 December 31 December
2019 2018
Note GBP'000 GBP'000
----------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Profit before tax 5,543 4,204
Adjustments for:
- investment income - -
- dividends received (8,336) (8,079)
- impairment of investment in subsidiaries 14 1,394 2,506
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss - -
- decrease in financial assets at fair value through
profit or loss - 1
- increase/(decrease) in other receivables 925 (601)
- Increase in other payables 2,346 2,182
----------------------------------------------------- ------ ------------ ------------
Net cash from operating activities 1,872 213
----------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Investment income - -
Dividends received 8,336 8,079
Acquisition of subsidiaries 14, 22 (8,128) (12,142)
Amounts owed by subsidiaries 25 (2,136) 3,617
----------------------------------------------------- ------ ------------ ------------
Net cash used in investing activities (1,928) (446)
----------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Net proceeds from the issue of ordinary share
capital 1,844 -
Payment for Company buy back of shares 24 (302) (202)
Proceeds from borrowings 19 2,000 9,196
Repayment of borrowings 19 (9,196) (1,094)
Dividends paid to owners of the Parent 12 (529) (219)
----------------------------------------------------- ------ ------------ ------------
Net cash (used in)/from financing activities (6,183) 7,681
----------------------------------------------------- ------ ------------ ------------
Net (increase)/decrease in cash and cash equivalents (6,239) 7,448
Cash and cash equivalents at beginning of year 8,430 982
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at end of year 2,191 8,430
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents comprise cash at bank and in hand.
Notes to the Financial Statements - Year ended 31 December
2019
1. General information
The Company is a public limited company listed on AIM. The
Company was incorporated in England and is domiciled in the UK and
its registered office is 40 Gracechurch Street, London EC3V 0BT.
These Financial Statements comprise the Company and its
subsidiaries (together referred to as the "Group"). The Company
participates in insurance business as an underwriting member at
Lloyd's through its subsidiary undertakings.
2. Significant accounting policies
The principal accounting policies adopted in the preparation of
the Group and Parent Company Financial Statements (the "Financial
Statements") are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated.
Basis of preparation
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and
interpretations issued by the IFRS Interpretations Committee
("IFRIC") as adopted by the European Union ("EU"), and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
No statement of comprehensive income is presented for Helios
Underwriting plc, as a Parent Company, as permitted by Section 408
of the Companies Act 2006.
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.
Use of judgements and estimates
The preparation of Financial Statements in conformity with IFRS
requires the use of judgements, estimates and assumptions in the
process of applying the Group's accounting policies 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 amounts, events or
actions, actual results may ultimately differ from these estimates.
Further information is disclosed in Note 3.
The Group participates in insurance business through its Lloyd's
member subsidiaries. Accounting information in respect of syndicate
participations is provided by the syndicate managing agents and is
reported upon by the syndicate auditors.
Going concern
The Group and the Company have net assets at the end of the
reporting period of GBP28,148,000 and GBP37,489,000,
respectively.
The Company's subsidiaries participate as underwriting members
at Lloyd's on the 2017, 2018 and 2019 years of account, as well as
any prior run-off years, and they have continued this participation
since the year end on the 2020 year of account. This underwriting
is supported by Funds at Lloyd's totalling GBP15,315,000 (2018:
GBP10,578,000), letters of credit provided through the Group's
quota share reinsurance agreements totalling GBP26,742,000 (2018:
GBP24,544,000) and solvency credits issued by Lloyd's totalling
GBP80,000 (2018: GBPnil).
The Directors have a reasonable expectation that the Group and
the Company have adequate resources to meet their underwriting and
other operational obligations for the foreseeable future.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the annual Financial Statements. In
arriving at this assessment the directors have taken into account
the matters referred to in note 29, in respect of the impact of
COVID-19 on the Groups activities.
International Financial Reporting Standards
Adoption of new and revised standards
During the current year, the Group and the Company adopted all
the new and revised IFRS, amendments and interpretations that are
relevant to its operations and are effective for accounting periods
beginning on 1 January 2019, except for IFRS 9 "Financial
Instruments" effective from 1 January 2018, for which a temporary
exemption has been applied by the Group, as explained further
below. These are set out below and did not have a material impact
on the accounting policies of the Group and the Company:
-- IFRS 16 "Leases", issued on 13 January 2016 (effective 1 January 2019).
-- Amendments to IFRS 9: Prepayment Features with Negative
Compensation, issued on 12 October 2017 (effective date 1 January
2019).
-- Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures, issued on 12 December 2017 (effective date 1
January 2019).
-- IFRS 23 "Uncertainty over Income Tax Treatments", issued on 7
June 2017 (effective date 1 January 2019).
-- Annual improvements to IFRS 2015-2017 Cycle, issued on 12
December 2017 (effective date 1 January 2019).
-- Amendments to IAS 19: Plan Amendment, Curtailment or
Settlement, issued on 7 February 2017 (effective date 1 January
2019).
Temporary exemptions from IFRS 9 "Financial Instruments"
(effective 1 January 2018)
The effective date of IFRS 9 "Financial Instruments" is January
2018. An insurer that has not previously adopted any version of
IFRS 9, including the requirements for the presentation of gains
and losses on financial liabilities designated as at fair value
through profit or loss and whose activities are predominantly
connected with insurance as its annual reporting date that
immediately precedes 1 April 2016 (or a later date as specified in
paragraph 20G of IFRS 4), may apply IAS 39 "Financial Instruments:
Recognition and Measurement", rather than IFRS 17 "Insurance
Contracts".
The Group has applied the temporary exemption from IFRS 9 as its
activities are predominantly connected with insurance and it has
not previously adopted any version of IFRS 9, including the
requirements for the presentation of gains and losses on financial
liabilities designated at fair value through profit or loss, for
annual periods beginning before 1 January 2023. Consequently, the
Group has a single date of initial application for IFRS 9 in its
entirely, being 1 January 2023.
New standards, amendments and interpretations not yet
adopted
At the date of authorisation of these Financial Statements, the
following standards, amendments and interpretations were in issue
but not yet effective:
(i) Adopted by the EU
Amendments:
-- Amendments to IAS 1 and IAS 8: Definition of Material, issued
on 31 October 2018 (effective 1 January 2020).
(ii) Not adopted by the EU
Standards:
-- IFRS 17 "Insurance Contracts", issued on 18 May 2017 (effective date 1 January 2023).
Amendments:
-- Amendments to References to the Conceptual Framework in IFRS,
issued on 29 March 2017 (effective date 1 January 2020).
-- Amendment to IFRS 3 "Business Combinations", issued on 22
October 2018 (effective 1 January 2020).
-- Amendment to IAS 1 "Presentation of Financial Statements":
Classification of Liabilities as Current or Non-current, issued on
23 January 2020 (effective date 1 January 2022).
Principles of consolidation, business combinations and
goodwill
(a) Consolidation and investments in subsidiaries
The Group Financial Statements incorporate the Financial
Statements of Helios Underwriting plc, the Parent Company, and its
directly and indirectly held subsidiaries being Hampden Corporate
Member Limited, Nameco (No. 917) Limited, Nameco (No. 229) Limited,
Nameco (No. 518) Limited, Nameco (No. 804) Limited, Halperin
Underwriting Limited, Bernul Limited, Nameco (No. 311) Limited,
Nameco (No. 402) Limited, Updown Underwriting Limited, Nameco (No.
507) Limited, Nameco (No. 76) Limited, Kempton Underwriting
Limited, Devon Underwriting Limited, Nameco (No. 346) Limited,
Pooks Limited, Charmac Underwriting Limited, Nottus (No 51)
Limited, Chapman Underwriting Limited, Llewellyn House Underwriting
Limited, Advantage DCP Limited, Romsey Underwriting Limited, Nameco
(No. 409) Limited, Nameco (No. 1113) Limited, Catbang 926 Limited,
Whittle Martin Underwriting Limited, RBC CEES Trustee Limited (see
Notes 14 and 23), Helios UTG Partner Limited, Nomina No 035 LLP,
Nomina No 342 LLP, Nomina No 380 LLP, Nomina No 372 LLP,
Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP, Nomina No
505 LLP and Nomina No 321 LLP (Note 14).
The Financial Statements for all of the above subsidiaries are
prepared for the year ended 31 December 2019 under UK GAAP.
Consolidation adjustments are made to convert the subsidiary
Financial Statements prepared under UK GAAP to IFRS so as to align
accounting policies and treatments.
No income statement is presented for Helios Underwriting plc as
permitted by Section 408 of the Companies Act 2006. The profit
after tax for the year of the Parent Company was GBP5,789,000
(2018: profit GBP4,463,000).
Subsidiaries are entities over which the Group has the power to
govern the financial and operating policies generally accompanying
a shareholding or partnership participation of more than one half
of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases.
Intra-group transactions, balances and unrealised gains on
intra-group transactions are eliminated.
In the Parent Company's Financial Statements, investments in
subsidiaries are stated at cost and are reviewed for impairment
annually or when events or changes in circumstances indicate the
carrying value to be impaired.
(b) Business combinations and goodwill
The Group uses the acquisition method of accounting to account
for the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Acquisition costs are expensed as incurred.
The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is
capitalised and recorded as goodwill. Following initial
recognition, goodwill is measured at cost less accumulated
impairment losses. Goodwill is tested for impairment annually or if
events or changes in circumstances indicate that the carrying value
may be impaired and recognised directly in the consolidated income
statement. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly as revenue in the consolidated income statement
as a gain on bargain purchase. The gain on bargain purchase is
recognised within the operating profit, as acquiring LLVs at a
discount to their net asset fair value is an important part of the
predominant strategy for the Company.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as Nigel Hanbury.
Foreign currency translation
Items included in the Financial Statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The Financial Statements are presented in thousands of
pounds sterling, which is the Group's functional and presentational
currency. All amounts have been rounded to the nearest thousand,
unless otherwise indicated.
Foreign currency transactions and non-monetary assets and
liabilities, including deferred acquisition costs and unearned
premiums, are translated into the functional currency using annual
average rates of exchange prevailing at the time of the transaction
as a proxy for the transactional rates. The translation difference
arising on non-monetary asset items is recognised in the
consolidated income statement.
Certain supported syndicates have non-sterling functional
currencies and any exchange movement that they would have reflected
in other comprehensive income as a result of this has been included
within profit before tax at consolidation level, to be consistent
with the Group's policy of using sterling as the functional
currency.
Monetary items are translated at period-end rates; any exchange
differences arising from the change in rates of exchange are
recognised in the consolidated income statement of the year.
Underwriting
Premiums
Gross premium written comprises the total premiums receivable in
respect of business incepted during the year, together with any
differences between booked premiums for prior years and those
previously accrued, and includes estimates of premiums due but not
yet receivable or notified to the syndicates on which the Group
participates, less an allowance for cancellations. All premiums are
shown gross of commission payable to intermediaries and exclude
taxes and duties levied on them.
Unearned premiums
Gross premium written is earned according to the risk profile of
the policy. Unearned premiums represent the proportion of gross
premium written in the year that relates to unexpired terms of
policies in force at the end of the reporting period calculated on
a time apportionment basis having regard, where appropriate, to the
incidence of risk. The specific basis adopted by each syndicate is
determined by the relevant managing agent.
Deferred acquisition costs
Acquisition costs, which represent commission and other related
expenses, are deferred over the period in which the related
premiums are earned.
Reinsurance premiums
Reinsurance premium costs are allocated by the managing agent of
each syndicate to reflect the protection arranged in respect of the
business written and earned.
Reinsurance premium costs in respect of reinsurance purchased
directly by the Group are charged or credited based on the annual
accounting result for each year of account protected by the
reinsurance.
Claims incurred and reinsurers' share
Claims incurred comprise claims and settlement expenses (both
internal and external) occurring in the year and changes in the
provisions for outstanding claims, including provisions for claims
incurred but not reported ("IBNR") and settlement expenses,
together with any other adjustments to claims from previous years.
Where applicable, deductions are made for salvage and other
recoveries.
The provision for claims outstanding comprises amounts set aside
for claims notified and IBNR. The amount included in respect of
IBNR is based on statistical techniques of estimation applied by
each syndicate's in-house reserving team and reviewed, in certain
cases, by external consulting actuaries. These techniques generally
involve projecting from past experience the development of claims
over time to form a view of the likely ultimate claims to be
experienced for more recent underwriting, having regard to
variations in the business accepted and the underlying terms and
conditions. The provision for claims also includes amounts in
respect of internal and external claims handling costs. For the
most recent years, where a high degree of volatility arises from
projections, estimates may be based in part on output from the
rating and other models of the business accepted, and assessments
of underwriting conditions.
The reinsurers' share of provisions for claims is based on
calculated amounts of outstanding claims and projections for IBNR,
net of estimated irrecoverable amounts, having regard to each
syndicate's reinsurance programme in place for the class of
business, the claims experience for the year and the current
security rating of the reinsurance companies involved. Each
syndicate uses a number of statistical techniques to assist in
making these estimates.
Accordingly, the two most critical assumptions made by each
syndicate's managing agent as regards claims provisions are that
the past is a reasonable predictor of the likely level of claims
development and that the rating and other models used, including
pricing models for recent business, are reasonable indicators of
the likely level of ultimate claims to be incurred.
The level of uncertainty with regard to the estimations within
these provisions generally decreases with time since the underlying
contracts were exposed to new risks. In addition, the nature of
short-tail risks, such as property where claims are typically
notified and settled within a short period of time, will normally
have less uncertainty after a few years than long-tail risks, such
as some liability businesses where it may be several years before
claims are fully advised and settled. In addition to these factors
if there are disputes regarding coverage under policies or changes
in the relevant law regarding a claim this may increase the
uncertainty in the estimation of the outcomes.
The assessment of these provisions is usually the most
subjective aspect of an insurer's accounts and may result in
greater uncertainty within an insurer's accounts than within those
of many other businesses. The provisions for gross claims and
related reinsurance recoveries have been assessed on the basis of
the information currently available to the directors of each
syndicate's managing agent. However, ultimate liability will vary
as a result of subsequent information and events and this may
result in significant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in
prior years are reflected in the Financial Statements for the
period in which the adjustments are made. The provisions are not
discounted for the investment earnings that may be expected to
arise in the future on the funds retained to meet the future
liabilities. The methods used, and the estimates made, are reviewed
regularly.
Quota share reinsurance
Under the Group's quota share reinsurance agreements, 70% of the
2018, 2019 and 2020 underwriting year of insurance exposure is
ceded to the reinsurers. Amounts payable to the reinsurers are
included within "reinsurance premium ceded" in the consolidated
income statement of the year and amounts receivable from the
reinsurers are included within "reinsurers' share of gross claims
paid" in the consolidated income statement of the year.
Unexpired risks provision
Provision for unexpired risks is made where the costs of
outstanding claims, related expenses and deferred acquisition costs
are expected to exceed the unearned premium provision carried
forward at the end of the reporting period. The provision for
unexpired risks is calculated separately by reference to classes of
business that are managed together, after taking into account
relevant investment return. The provision is made on a
syndicate-by-syndicate basis by the relevant managing agent.
Closed years of account
At the end of the third year, the underwriting account is
normally closed by reinsurance into the following year of account.
The amount of the reinsurance to close premium payable is
determined by the managing agent, generally by estimating the cost
of claims notified but not settled at 31 December, together with
the estimated cost of claims incurred but not reported ("IBNR") at
that date and an estimate of future claims handling costs. Any
subsequent variation in the ultimate liabilities of the closed year
of account is borne by the underwriting year into which it is
reinsured.
The payment of a reinsurance to close premium does not eliminate
the liability of the closed year for outstanding claims. If the
reinsuring syndicate was unable to meet any obligations, and the
other elements of Lloyd's chain of security were to fail, then the
closed underwriting account would have to settle any outstanding
claims.
The Directors consider that the likelihood of such a failure of
the reinsurance to close is extremely remote and consequently the
reinsurance to close has been deemed to settle the liabilities
outstanding at the closure of an underwriting account. The Group
will include its share of the reinsurance to close premiums payable
as technical provisions at the end of the current period and no
further provision is made for any potential variation in the
ultimate liability of that year of account.
Run-off years of account
Where an underwriting year of account is not closed at the end
of the third year (a "run-off" year of account) a provision is made
for the estimated cost of all known and unknown outstanding
liabilities of that year. The provision is determined initially by
the managing agent on a similar basis to the reinsurance to close.
However, any subsequent variation in the ultimate liabilities for
that year remains with the corporate member participating therein.
As a result, any run-off year will continue to report movements in
its results after the third year until such time as it secures a
reinsurance to close.
Net operating expenses (including acquisition costs)
Net operating expenses include acquisition costs, profit and
loss on exchange and other amounts incurred by the syndicates on
which the Group participates.
Acquisition costs, comprising commission and other costs related
to the acquisition of new insurance contracts, are deferred to the
extent that they are attributable to premiums unearned at the end
of the reporting period.
Investment income
Interest receivable from cash and short-term deposits and
interest payable are accrued to the end of the period.
Dividend income from financial assets at fair value through
profit or loss is recognised in the income statement when the
Group's right to receive payments is established.
Syndicate investments and cash are held on a pooled basis, the
return from which is allocated by the relevant managing agent to
years of account proportionate to the funds contributed by the year
of account.
Other operating expenses
All expenses are accounted for on an accruals basis.
Intangible assets: syndicate capacity
Syndicate capacity is an intangible asset which represents costs
incurred in the Corporation of Lloyd's auctions in order to acquire
rights to participate on syndicates' years of account.
At the individual subsidiary company level, the syndicate
capacity is stated at cost, less any provision for impairment at
initial recognition, and amortised on a straight line basis over
the useful economic life, which is estimated to be five years (up
to 2014: estimated to be seven years). No amortisation is charged
until the following year when underwriting commences in respect of
the purchased syndicate participation.
At the consolidation level, the Group's accounting policy for
the year 2014 was consistent with the accounting policy of the
subsidiaries as described above. As of 1 January 2015, the Group
changed its accounting policy for accounting for the intangible
asset, syndicate capacity, as set out below:
The syndicate capacity represents the cost of purchasing the
Group's participation in the combined syndicates. The capacity is
capitalised at cost in the statement of financial position. It has
an indefinite useful life and is carried at cost less accumulated
impairment. It is annually tested for impairment for each syndicate
by reference to the weighted average value at Lloyd's auctions and
expected future profit streams to be earned by those syndicates in
which the Group participates and provision is made for any
impairment in the consolidated income statement.
Financial assets
(a) Classification
The Group classifies its financial assets in the following
categories: at fair value through profit or loss, and loans and
receivables. The classification depends on the purpose for which
the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition. The
Group does not make use of the held-to-maturity and
available-for-sale classifications.
(i) Financial assets at fair value through profit or loss
All financial assets at fair value through profit or loss are
categorised as designated at fair value through profit or loss upon
initial recognition because they are managed and their performance
is evaluated on a fair value basis in accordance with the Company's
documented investment strategy. Information about these financial
assets is provided internally on a fair value basis to the Group's
key management.
The Group's investment strategy is to invest and evaluate their
performance with reference to their fair values. Assets in this
category are classified as current assets if expected to be settled
within 12 months; otherwise, they are classified as
non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are classified as current assets, except for
maturities greater than 12 months after the reporting period. The
latter ones are classified as non-current assets.
The Group's loans and receivables comprise "other receivables,
including insurance and reinsurance receivables" and "cash and cash
equivalents".
The Parent Company's loans and receivables comprise "other
receivables" and "cash and cash equivalents".
(b) Recognition, derecognition and measurement
Regular purchases and sales of financial assets are recognised
on the trade date, being the date on which the Group commits to the
purchase or sale of the asset. Financial assets are derecognised
when the right to receive cash flows from the financial assets has
expired or is transferred and the Group has transferred
substantially all its risks and rewards of ownership.
Financial assets at fair value through profit or loss are
initially recognised at fair value and transaction costs incurred
expensed in the income statement.
Loans and receivables are initially recognised at fair value
plus transaction costs and are subsequently carried at amortised
cost less any impairment losses.
Fair value estimation
The fair value of financial assets at fair value through profit
or loss which are traded in active markets is based on quoted
market prices at the end of the reporting period. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service or regulatory agency and those prices represent actual and
regular occurring market transactions on an arm's length basis. The
quoted market price used for financial assets at fair value through
profit or loss held by the Group is the current bid price.
The fair value of financial assets at fair value through profit
or loss that are not traded in an active market is determined by
using valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as
little as possible on entity-specific estimates.
Unrealised gains and losses arising from changes in the fair
value of the financial assets at fair value through profit or loss
are presented in the income statement within "net investment
income".
The fair values of short-term deposits are assumed to
approximate to their book values. The fair values of the Group's
debt securities have been based on quoted market prices for these
instruments.
(c) Impairment
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a "loss event") and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
Asset carried at amortised cost
For loans and receivables, the amount of the loss is measured as
the difference between the asset's carrying amount and the present
value of the estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial
asset's original effective interest rate. The carrying amount of
the asset is reduced and the amount of the loss is recognised in
profit or loss. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis
of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or
loss.
Cash and cash equivalents
For the purposes of the statements of cash flows, cash and cash
equivalents comprise cash and short-term deposits at bank.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings, using the
effective interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. To the extent
that there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services, and amortised over the period of
the facility to which it relates.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
Borrowing costs
Borrowing costs are recognised in the income statement in the
period in which they are incurred.
Joint Share Ownership Plan ("JSOP")
On 14 December 2017, the Company issued and allotted 500,000 new
ordinary shares of GBP0.10 each ("ordinary shares"). The new
ordinary shares have been issued at a subscription price of 133.5p
per ordinary share, being the closing price of an ordinary share on
13 December 2017, pursuant to the Helios Underwriting plc
employees' Joint Share Ownership Plan (the "Plan").
The new ordinary shares have been issued into the respective
joint beneficial ownership of (i) each of the participating
Executive Directors as shown in Note 23 and (ii) the Trustee of RBC
CEES Trustee Limited (the "Trust") and are subject to the terms of
joint ownership agreements ("JOAs") respectively entered into
between the Director, the Company and the Trustee. The nominal
value of the new ordinary shares has been paid by the Trust out of
funds advanced to it by the Company with the additional
consideration of 123.5p left outstanding until such time as new
ordinary shares are sold. The Company has waived its lien on the
shares such that there are no restrictions on their transfer.
The terms of the JOAs provide, inter alia, that if jointly owned
shares become vested and are sold, the proceeds of sale will be
divided between the joint owners so that the participating Director
receives an amount equal to any growth in the market value of the
jointly owned ordinary shares above the greater of either:
(a) the initial market value (133.5p per share), less a
"carrying cost" (equivalent to simple interest at 4.5% per annum on
the initial market value accruing over the three years from the
date of award) and the Trust receives the initial market value of
the jointly owned shares plus the carrying cost; or
(b) if higher, 150p (so that the participating Director will
only ever receive value if the share sale price exceeds this).
The vesting of the award will be subject to performance
conditions measured over the three calendar years from the award
date.
A proportion of the jointly owned shares shall vest pro rata to
the percentage by which the average return on capacity of the last
three closed underwriting years of account of the Helios Capacity
Portfolio outperforms on average the return on capacity of the
Lloyd's market (the "Performance Percentage") over the performance
period such that:
(i) if the Performance Percentage is 4% or greater, all of the
jointly owned shares shall vest; and
(ii) if the Helios Capacity Portfolio fails to outperform the
return on capacity of the Lloyd's market, none of the jointly owned
shares shall vest; but
(iii) if the Performance Percentage is between 0% and 4%, a
proportion of the jointly owned shares shall vest pro rata on a
straight line basis.
The Plan was established and approved by resolution of the
Remuneration Committee of the Company on 13 December 2017 and
provides for the acquisition by employees, including Executive
Directors, of beneficial interests as joint owners (with the Trust)
of ordinary shares in the Company upon the terms of a JOA. The
terms of the JOA provide that if the jointly owned shares become
vested and are sold, the proceeds of sale will be divided between
the joint owners on the terms set out above.
Current and deferred tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case tax is also recognised
in other comprehensive income or directly in equity,
respectively.
Current tax
The current income tax charge is calculated on the basis of the
tax laws enacted at the balance sheet date in the countries where
the Company and its subsidiaries operate and generate taxable
income. Management establishes provisions when appropriate, on the
basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred tax is provided in full, using the balance sheet
liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the
Financial Statements.
However, if the deferred tax arises from initial recognition of
an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the end of the reporting
period and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
Other payables
These present liabilities for services provided to the Group
prior to end of the financial year which are unpaid. These are
classified as current liabilities, unless payment is not due within
12 months after the reporting date. They are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest method.
Share capital and share premium
Ordinary shares are classified as equity.
The difference between the fair value of the consideration
received and the nominal value of the share capital issued is taken
to the share premium account. Incremental costs directly
attributable to the issue of shares or options are shown in equity
as a deduction, net of tax, from proceeds.
Where the Company buys back its own ordinary shares on the
market, and these are held in treasury, the purchase is made out of
distributable profits and hence shown as a deduction from the
Company's retained earnings.
Dividend distribution policy
Dividend distribution to the Company's shareholders is
recognised in the Group's and the Parent Company's Financial
Statements in the period in which the dividends are approved by the
Company's shareholders.
3. Key accounting judgements and estimation uncertainties
In applying the Company's accounting policies, the Directors are
required to make judgements, estimates and assumptions in
determining the carrying amounts of assets and liabilities. These
judgements, estimates and assumptions are based on the best and
most reliable evidence available at the time when the decisions are
made, and are based on historical experience and other factors that
are considered to be applicable. Due to the inherent subjectivity
involved in making such judgements, estimates and assumptions, the
actual results and outcomes may differ. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised, if the revision affects only that period, or
in the period of the revision and future periods, if the revision
affects both current and future periods.
The measurement of the provision for claims outstanding is the
most significant judgement involving estimation uncertainty
regarding amounts recognised in these Financial Statements in
relation to underwriting by the syndicates and this is disclosed
further in Notes 4 and 7.
The management and control of each syndicate is carried out by
the managing agent of that syndicate, and the Company looks to the
managing agent to implement appropriate policies, procedures and
internal controls to manage each syndicate.
The key accounting judgements and sources of estimation
uncertainty set out below therefore relate to those made in respect
of the Company only, and do not include estimates and judgements
made in respect of the syndicates.
Purchased syndicate capacity
Estimating value in use
Where an indication of impairment of capacity values exists, the
Directors will carry out an impairment review to determine the
recoverable amount, which is the higher of fair value less cost to
sell and value in use. The value in use calculation requires an
estimate of the future cash flows expected to arise from the
capacity and a suitable discount rate in order to calculate present
value.
Assessing indicators of impairment
In assessing whether there have been any indicators of
impairment of assets, the Directors consider both external and
internal sources of information such as market conditions,
counterparty credit ratings and experience of recoverability.
Recoverability of receivables
The Company establishes a provision for receivables that are
estimated not to be recoverable. When assessing recoverability,
factors such as the ageing of the receivables, past experience of
recoverability and the credit profile of individual or groups of
customers are all considered.
4. Risk management
The majority of the risks to the Group's future cash flows arise
from each subsidiary's participation in the results of Lloyd's
syndicates. As detailed below, these risks are mostly managed by
the managing agents of the syndicates. The Group's role in managing
these risks, in conjunction with its subsidiaries and members'
agent, is limited to a selection of syndicate participations,
monitoring the performance of the syndicates and the purchase of
appropriate member level reinsurance.
Risk background
The syndicates' activities expose them to a variety of financial
and non-financial risks. The managing agent is responsible for
managing the syndicate's exposure to these risks and, where
possible, introducing controls and procedures that mitigate the
effects of the exposure to risk. For the purposes of setting
capital requirements for the 2017 and subsequent years of account,
each managing agent will have prepared a Lloyd's capital return
("LCR") for the syndicate to agree capital requirements with
Lloyd's based on an agreed assessment of the risks impacting the
syndicate's business and the measures in place to manage and
mitigate those risks from a quantitative and qualitative
perspective. The risks described below are typically reflected in
the LCR and typically the majority of the total assessed value of
the risks concerned is attributable to insurance risk.
The insurance risks faced by a syndicate include the occurrence
of catastrophic events, downward pressure on pricing of risks,
reductions in business volumes and the risk of inadequate
reserving. Reinsurance risk arises from the risk that a reinsurer
fails to meet its share of a claim. The management of the
syndicate's funds is exposed to investment risk, liquidity risk,
credit risk, currency risk and interest rate risk (as detailed
below), leading to financial loss. The syndicate is also exposed to
regulatory and operational risks including its ability to continue
to trade. However, supervision by Lloyd's and the Prudential
Regulation Authority provides additional controls over the
syndicate's management of risks.
The Group manages the risks faced by the syndicates on which its
subsidiaries participate by monitoring the performance of the
syndicates it supports. This commences in advance of committing to
support a syndicate for the following year, with a review of the
business plan prepared for each syndicate by its managing agent. In
addition, quarterly reports and annual accounts, together with any
other information made available by the managing agent, are
monitored and if necessary enquired into. If the Group considers
that the risks being run by the syndicate are excessive, it will
seek confirmation from the managing agent that adequate management
of the risk is in place and, if considered appropriate, will
withdraw support from the next year of account. The Group also
manages its exposure to insurance risk by purchasing appropriate
member level reinsurance.
(a) Syndicate risks
(i) Liquidity risk
The syndicates are exposed to daily calls on their available
cash resources, principally from claims arising from its insurance
business. Liquidity risk arises where cash may not be available to
pay obligation when due, or to ensure compliance with the
syndicate's obligations under the various trust deeds to which it
is party.
The syndicates aim to manage their liquidity position so that
they can fund claims arising from significant catastrophic events,
as modelled in their Lloyd's realistic disaster scenarios
("RDS").
Although there are usually no stated maturities for claims
outstanding, syndicates have provided their expected maturity of
future claims settlements as follows:
No stated
maturity 0-1 year 1-3 years 3-5 years >5 years Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- ---------
Claims outstanding - 34,942 32,517 14,985 13,172 95,616
------------------- --------- -------- --------- --------- -------- ---------
No stated
maturity 0-1 year 1-3 years 3-5 years >5 years Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- --------
Claims outstanding 2 33,228 30,565 12,299 11,938 88,032
------------------- --------- -------- --------- --------- -------- --------
(ii) Credit risk
Credit ratings to syndicate assets (Note 28) emerging directly
from insurance activities which are neither past due nor impaired
are as follows:
BBB or
AAA AA A lower Not rated Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 8,027 16,601 15,456 7,825 5,704 53,613
Deposits with ceding undertakings - - - - 8 8
Reinsurers' share of claims
outstanding 1,328 5,459 16,603 38 2,227 25,655
Reinsurance debtors 15 306 1,037 32 822 2,212
Cash at bank and in hand 47 52 2,045 428 437 3,009
---------------------------------- -------- -------- -------- -------- --------- --------
9,417 22,418 35,141 8,323 9,198 84,497
---------------------------------- -------- -------- -------- -------- --------- --------
BBB or
AAA AA A lower Not rated Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 9,081 13,725 13,812 6,557 6,506 49,681
Deposits with ceding undertakings - - - - 6 6
Reinsurers' share of claims
outstanding 1,225 4,453 14,818 19 2,063 22,578
Reinsurance debtors 27 170 871 1 251 1,320
Cash at bank and in hand 106 132 1,629 291 327 2,485
---------------------------------- -------- -------- -------- -------- --------- --------
10,439 18,480 31,130 6,868 9,153 76,070
---------------------------------- -------- -------- -------- -------- --------- --------
Syndicate assets (Note 28) emerging directly from insurance
activities, with reference to their due date or impaired, are as
follows:
Past due but not impaired
-----------------------------------------------------------------
Between
Neither 6 months Greater
past due Less than and 1 than 1
nor impaired 6 months year year Impaired Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 53,613 - - - - 53,613
Deposits with ceding undertakings 8 - - - - 8
Reinsurers' share of claims
outstanding 25,655 49 - - (5) 25,699
Reinsurance debtors 2,212 575 45 23 - 2,855
Cash at bank and in hand 3,009 - - - - 3,009
Insurance and other debtors 40,566 1,018 243 254 (6) 42,075
---------------------------------- ------------- --------- --------- -------- -------- --------
125,063 1,642 289 277 (11) 127,259
---------------------------------- ------------- --------- --------- -------- -------- --------
Past due but not impaired
-----------------------------------------------------------------
Between
Neither 6 months Greater
past due Less than and 1 than 1
nor impaired 6 months year year Impaired Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 49,681 - - - - 49,681
Deposits with ceding undertakings 6 - - - - 6
Reinsurers' share of claims
outstanding 22,578 123 - - (3) 22,698
Reinsurance debtors 1,320 538 12 14 - 1,884
Cash at bank and in hand 2,485 - - - - 2,485
Insurance and other debtors 42,984 813 171 225 (6) 44,187
---------------------------------- ------------- --------- --------- -------- -------- --------
119,054 1,474 183 239 (9) 120,941
---------------------------------- ------------- --------- --------- -------- -------- --------
(iii) Interest rate equity price risk
Interest rate risk and equity price risk are the risks that the
fair value of future cash flows of financial instruments will
fluctuate because of changes in market interest rates and market
prices, respectively.
(iv) Currency risk
The syndicates' main exposure to foreign currency risk arises
from insurance business originating overseas, primarily denominated
in US dollars. Transactions denominated in US dollars form a
significant part of the syndicates' operations. This risk is, in
part, mitigated by the syndicates maintaining financial assets
denominated in US dollars against its major exposures in that
currency.
The table below provides details of syndicate assets and
liabilities (Note 28) by currency:
GBP USD EUR CAD Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 21,981 90,359 6,318 10,303 3,412 132,373
Total liabilities (31,604) (91,559) (4,976) (8,652) (4,183) (140,974)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (9,623) (1,200) 1,342 1,651 (771) (8,601)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
GBP USD EUR CAD Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2018 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 19,637 85,608 7,108 9,780 6,797 128,930
Total liabilities (26,707) (89,915) (7,421) (6,805) (5,693) (136,541)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (7,070) (4,307) (313) 2,975 1,104 (7,611)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
The impact of a 5% change in exchange rates between GBP and
other currencies would be GBP51,000 on shareholders' funds (2018:
GBP27,000).
(v) Reinsurance risk
Reinsurance risk to the Group arises where reinsurance contracts
put in place to reduce gross insurance risk do not perform as
anticipated, result in coverage disputes or prove inadequate in
terms of the vertical or horizontal limits purchased. Failure of a
reinsurer to pay a valid claim is considered a credit risk, which
is detailed separately below.
The Group currently has reinsurance programmes on the 2017, 2018
and 2019 years of account.
The Group has strategic collateralised quota share arrangements
in place in respect of 70% of its underwriting business with XL Re
Limited, Bermudan reinsurer Everest Reinsurance Bermuda Limited
(part of global NYSE-quoted insurer Everest Re Group Limited),
Guernsey reinsurer Polygon Insurance Co Limited and other private
shareholders through HIPCC Limited - Cell 6.
(b) Group risks - corporate level
(i) Investment, credit, liquidity and currency risks
The other significant risks faced by the Group are with regard
to the investment of funds within its own custody. The elements of
these risks are investment risk, liquidity risk, credit risk,
interest rate risk and currency risk. To mitigate this, the surplus
Group funds are deposited with highly rated banks and fund
managers. The main liquidity risk would arise if a syndicate had
inadequate liquid resources for a large claim and sought funds from
the Group to meet the claim. In order to minimise investment risk,
credit risk and liquidity risk, the Group's funds are invested in
readily realisable short-term deposits. The Group's maximum
exposure to credit risk at 31 December 2019 is GBP27.2m (2018:
GBP28.3m), being the aggregate of the Group's insurance
receivables, prepayments and accrued income, financial assets at
fair value, and cash and cash equivalents, excluding any amounts
held in the syndicates. The syndicates can distribute their results
in sterling, US dollars or a combination of the two. The Group is
exposed to movements in the US dollar between the balance sheet
date and the distribution of the underwriting profits and losses,
which is usually in the May following the closure of a year of
account. The Group does not use derivative instruments to manage
risk and, as such, no hedge accounting is applied.
As a result of the specific nature and structure of the Group's
collateralised quota share reinsurance arrangements through Cell 6,
the Group's Funds at Lloyd's calculation benefits from an aggregate
GBP26.7m (2018: GBP24.5m) letter of credit ("LOC") acceptable to
Lloyd's, on behalf of XL Re Limited, Everest Reinsurance Bermuda
Limited, Polygon Insurance Co Limited (the reinsurers) and other
private shareholders. The LOC is pledged in aggregate to the
relevant syndicates through Lloyd's and thus Helios Underwriting
plc is not specifically exposed to counterparty credit risk in this
matter. Should the bank's LOC become unacceptable to Lloyd's for
any reason, the reinsurer is responsible under the terms of the
contract for making alternative arrangements. The contract is
annually renewable and the Group has a contingency plan in place in
the event of non-renewal under both normal and adverse market
conditions.
(ii) Market risk
The Group is exposed to market and liquidity risk in respect of
its holdings of syndicate participations. Lloyd's syndicate
participations are traded in the Lloyd's auctions held in September
and October each year. The Group is exposed to changes in market
prices and a lack of liquidity in the trading of a particular
syndicate's capacity could result in the Group making a loss
compared to the carrying value when the Group disposes of
particular syndicate participations.
(iii) Regulatory risks
The Company's subsidiaries are subject to continuing approval by
Lloyd's to be a member of a Lloyd's syndicate. The risk of this
approval being removed is mitigated by monitoring and fully
complying with all requirements in relation to membership of
Lloyd's. The capital requirements to support the proposed amount of
syndicate capacity for future years are subject to the requirements
of Lloyd's. A variety of factors are taken into account by Lloyd's
in setting these requirements including market conditions and
syndicate performance and, although the process is intended to be
fair and reasonable, the requirements can fluctuate from one year
to the next, which may constrain the volume of underwriting a
subsidiary of the Company is able to support.
The Company is subject to the AIM Rules. Compliance with the AIM
Rules is monitored by the Board.
Operational risks
As there are relatively few transactions actually undertaken by
the Group, there are only limited systems and operational
requirements of the Group and therefore operational risks are not
considered to be significant. Close involvement of all Directors in
the Group's key decision making and the fact that the majority of
the Group's operations are conducted by syndicates provide control
over any remaining operational risks.
Capital management objectives, policies and approach
The Group has established the following capital management
objectives, policies and approach to managing the risks that affect
its capital position:
-- to maintain the required level of stability of the Group,
thereby providing a degree of security to shareholders;
-- to allocate capital efficiently and support the development
of the business by ensuring that returns on capital employed meet
the requirements of the shareholders; and
-- to maintain the financial strength to support increases in
the Group's underwriting through acquisition of capacity in the
Lloyd's auctions or through the acquisition of new
subsidiaries.
The Group's capital management policy is to hold a sufficient
level of capital to allow the Group to take advantage of market
conditions, particularly when insurance rates are improving, and to
meet the Funds at Lloyd's ("FAL") requirements that support the
corporate member subsidiaries' current and future levels of
underwriting.
Approach to capital management
The capital structure of the Group consists entirely of equity
attributable to equity holders of the Company, comprising issued
share capital, share premium and retained earnings as disclosed in
the statements of changes in equity.
At 31 December 2019, the corporate member subsidiaries had an
agreed FAL requirement of GBP39,368,000 (2018: GBP32,688,000) to
support their underwriting on the 2020 year of account (2019 year
of account). The funds to support this requirement are held in
short-term investment funds and deposits or provided by the quota
share reinsurance capital providers by way of an LOC. The FAL
requirements are formally assessed and funded twice yearly and must
be met by the corporate member subsidiaries to continue
underwriting. At 31 December 2019, the agreed FAL requirements for
the Group were 56.96% (2018: 62%) of the capacity for the following
year of account.
5. Segmental information
Nigel Hanbury is the Group's chief operating decision-maker. He
has determined its operating segments based on the way the Group is
managed, for the purpose of allocating resources and assessing
performance.
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 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 42,688 - - 42,688
Net investment income 2,387 (52) - 2,335
Other income 254 - 595 849
Net insurance claims and loss adjustment
expenses (26,265) - (1,359) (27,624)
Expenses incurred in insurance activities (15,367) - (397) (15,764)
Other operating expenses (114) - (1,650) (1,764)
Gain on bargain purchase (Note 22) - - 1,707 1,707
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - 1,860 1,860
------------------------------------------- -------------- ----------- ----------- --------
Profit before tax 3,583 (52) 756 4,287
------------------------------------------- -------------- ----------- ----------- --------
Other
Syndicate Investment corporate
participation management activities Total
Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 30,749 - 203 30,952
Net investment income 586 (291) - 295
Other income (330) - 412 82
Net insurance claims and loss adjustment
expenses (18,972) - - (18,972)
Expenses incurred in insurance activities (11,359) - (337) (11,696)
Other operating expenses (302) - (935) (1,237)
Gain on bargain purchase (Note 22) - - 1,184 1,184
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - (281) (281)
------------------------------------------- -------------- ----------- ----------- --------
Profit before tax 372 (291) 246 327
------------------------------------------- -------------- ----------- ----------- --------
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 insurance claims and loss adjustment expenses within 2019
other corporate activities totalling GBP1,359,000 (net earned
premium within 2018: GBP203,000 - 2016, 2017 and 2018 years of
account) presents the 2017, 2018 and 2019 years of account net
Group quota share reinsurance premium recoverable to HIPCC Limited
(Note 25). This net quota share reinsurance premium recoverable is
included within "net insurance claims incurred and loss adjustments
expenses" in the consolidated income statement of the year.
6. Operating profit before impairments of goodwill and
capacity
Underwriting year of account*
----------------------------------------- ------------ ------------ ---------- --------
2017 Pre- Corporate Other
Year ended 31 December and prior 2018 2019 Sub-total acquisition reinsurance corporate Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 1,031 5,891 54,656 61,578 (6,108) - - 55,470
Reinsurance ceded (116) (1,444) (13,003) (14,563) 1,553 - (200) (13,210)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 915 4,447 41,653 47,015 (4,555) - (200) 42,260
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 3,526 21,772 22,156 47,454 (4,566) - (200) 42,688
Other income 1,574 615 339 2,527 (550) 235 2,679 4,891
Net insurance claims
incurred and loss
adjustment expenses 893 (12,854) (16,276) (28,237) 2,329 (1,359) (358) (27,624)
Operating expenses (1,535) (6,823) (8,767) (17,125) 1,929 - (2,332) (17,528)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill
and capacity 4,458 2,710 (2,548) 4,620 (858) (1,124) (211) 2,427
Quota share adjustment (1,733) (1,361) 1,735 (1,359) - 1,359 - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill
and capacity, after
quota share adjustment 2,725 1,349 (813) 3,261 (858) 235 (211) 2,427
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
* 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' agent's
charges.
Underwriting year of account*
-----------------------------------------
2016 Pre- Corporate Other
Year ended 31 December and prior 2017 2018 Sub-total acquisition reinsurance corporate Total
2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 1,333 6,253 45,283 52,869 (14,166) - - 38,703
Reinsurance ceded 81 (954) (9,840) (10,713) 3,131 203 (296) (7,675)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 1,414 5,299 35,443 42,156 (11,035) 203 (296) 31,028
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 4,912 19,457 18,903 43,272 (12,227) 203 (296) 30,952
Other income 335 (261) (120) (46) 94 575 938 1,561
Net insurance claims
incurred and loss
adjustment expenses 1,220 (11,035) (16,204) (26,019) 6,681 - 366 (18,972)
Operating expenses (2,949) (6,076) (7,602) (16,627) 5,396 - (1,702) (12,933)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill
and capacity 3,518 2,085 (5,023) 580 (56) 778 (694) 608
Quota share adjustment (1,938) (1,173) 3,314 203 - (203) - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill
and capacity, after
quota share adjustment 1,580 912 (1,709) 783 (56) 575 (694) 608
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
* 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' agent's
charges.
Pre-acquisition relates to the element of results from the new
acquisitions before they were acquired by the Group.
7. Insurance liabilities and reinsurance balances
Movement in claims outstanding
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ----------- --------
At 1 January 2018 59,833 14,836 44,997
Increase in reserves arising from acquisition
of subsidiary undertakings 25,576 6,969 18,607
Movement of reserves 1,109 909 200
Other movements 1,514 (16) 1,530
---------------------------------------------- -------- ----------- --------
At 31 December 2018 88,032 22,698 65,334
---------------------------------------------- -------- ----------- --------
At 1 January 2019 88,032 22,698 65,334
Increase in reserves arising from acquisition
of subsidiary undertakings 11,792 2,730 9,062
Movement of reserves 3,758 2,004 1,754
Other movements (7,966) (1,672) (6,294)
---------------------------------------------- -------- ----------- --------
At 31 December 2019 95,616 25,760 69,856
---------------------------------------------- -------- ----------- --------
Included within other movements are the 2016 and prior years'
claims reserves reinsured into the 2017 year of account on which
the Group does not participate and currency exchange
differences.
Movement in unearned premium
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ----------- --------
At 1 January 2018 15,916 2,354 13,562
Increase in reserves arising from acquisition
of subsidiary undertakings 8,042 1,322 6,720
Movement of reserves 360 284 76
Other movements 454 97 357
---------------------------------------------- -------- ----------- --------
At 31 December 2018 24,772 4,057 20,715
---------------------------------------------- -------- ----------- --------
At 1 January 2019 24,772 4,057 20,715
Increase in reserves arising from acquisition
of subsidiary undertakings 3,380 1,182 2,197
Movement of reserves 60 488 (428)
Other movements (1,690) (704) (985)
---------------------------------------------- -------- ----------- --------
At 31 December 2019 26,522 5,023 21,499
---------------------------------------------- -------- ----------- --------
Assumptions, changes in assumptions and sensitivity
As described in Note 4, the majority of the risks to the Group's
future cash flows arise from its subsidiaries' participation in the
results of Lloyd's syndicates and are mostly managed by the
managing agents of the syndicates. The Group's role in managing
these risks, in conjunction with the Group's members' agent, is
limited to a selection of syndicate participations and monitoring
the performance of the syndicates and their managing agents.
The amounts carried by the Group arising from insurance
contracts are calculated by the managing agents of the syndicates,
derived from accounting information provided by the managing agents
and reported upon by the syndicate auditors.
The key assumptions underlying the amounts carried by the Group
arising from insurance contracts are:
-- the claims reserves calculated by the managing agents are accurate; and
-- the potential deterioration of run-off year results has been
fully provided for by the managing agents.
There have been no changes in assumptions in 2019.
The amounts carried by the Group arising from insurance
contracts are sensitive to various factors as follows:
-- a 10% increase/decrease in the managing agents' calculation of gross claims reserves will decrease/increase the Group's pre-tax profits by GBP9,562,000 (2018: GBP8,803,000);
-- a 10% increase/decrease in the managing agents' calculation
of net claims reserves will decrease/increase the Group's pre-tax
profits by GBP6,986,000 (2018: GBP6,533,000); and
-- a 10% increase/decrease in the run-off year net claims
reserves will decrease/increase the Group's pre-tax profits by
GBPnil (2018: GBP7,000).
The 10% movement has been selected to give an indication of the
possible variations in the assumptions used.
Analysis of gross and net claims development
The tables below provide information about historical gross and
net claims development:
Claims development - gross
GBPm
------------- --------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
After After After After After After After After Profit
Underwriting After two three four five six seven eight nine on RITC
pure year* one year years years years years years years years years received
------------- --------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
2011 19 29 29 29 28 28 28 27 27 2
2012 19 27 27 26 26 25 25 25 3
2013 14 24 24 23 22 22 21 2
2014 14 23 24 23 23 23 4
2015 13 25 25 24 24 4
2016 16 31 32 31
2017 33 48 51
2018 25 42
2019 22
------------- --------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Claims development - net
GBPm
------------- ---------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
After After After After After After After After Profit
Underwriting After two three four five six seven eight nine on RITC
pure year* one year years years years years years years years years received
------------- ---------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
2011 16 25 25 25 24 24 23 23 23 2
2012 16 23 23 22 22 21 21 21 3
2013 12 21 20 20 19 19 19 3
2014 12 20 20 20 20 19 3
2015 11 21 21 21 21 3
2016 13 25 26 25
2017 23 36 37
2018 19 31
2019 16
------------- ---------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
* Including the new acquisitions during 2019.
At the end of the three years syndicates are normally reinsured
to close. Participations on subsequent years on syndicates may
therefore change. The above table shows nine years of development
and how the reinsurance to close received performed.
8. Net investment income
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Investment income 1,248 841
Realised losses on financial assets at fair value through
profit or loss 262 (145)
Unrealised losses on financial assets at fair value
through profit or loss 657 (490)
Investment management expenses (67) (55)
Bank interest 235 144
---------------------------------------------------------- ------------ ------------
Net investment income 2,335 295
---------------------------------------------------------- ------------ ------------
9. Operating expenses (excluding goodwill and capacity
impairment)
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------------- ------------ ------------
Expenses incurred in insurance activities:
Acquisition costs 11,238 8,231
Change in deferred acquisition costs 231 120
Administrative expenses 4,234 3,447
Other 61 (102)
------------------------------------------------------------- ------------ ------------
15,764 11,696
------------------------------------------------------------- ------------ ------------
Other operating expenses:
- Exchange differences 125 (324)
- Directors' remuneration 414 341
- Acquisition costs in connection with the new subsidiaries
acquired in the year 156 144
- Professional fees 530 624
- Administration and other expenses 392 353
Auditors' remuneration:
- audit of the Parent Company and Group Financial Statements 57 33
- audit of subsidiary company Financial Statements 48 40
- underprovision of prior year audit fee 15 8
- audit related assurance services 27 18
------------------------------------------------------------- ------------ ------------
1,764 1,237
------------------------------------------------------------- ------------ ------------
Operating expenses 17,528 12,933
------------------------------------------------------------- ------------ ------------
The Group has no employees other than the Directors of the
Company.
Details of the Directors' remuneration are disclosed below:
Year ended Year ended
31 December 31 December
2019 2018
Directors' remuneration GBP GBP
------------------------------- ------------ ------------
Arthur Manners 154,167 128,000
Edward William Fitzalan-Howard 18,000 15,000
Jeremy Evans 15,000 15,000
Michael Cunningham 20,000 20,000
Andrew Christie 15,000 15,000
Nigel Hanbury 191,667 148,000
------------------------------- ------------ ------------
Total 413,834 341,000
------------------------------- ------------ ------------
The Chief Executive, Nigel Hanbury, and the Finance Director,
Arthur Manners, had a bonus incentive scheme during 2019 in
addition to their basic remuneration. The above figures for Nigel
Hanbury and Arthur Manners include an accrual for the year of
GBP50,000 each (2018: GBP50,000 each for Nigel Hanbury and Arthur
Manners) in respect of this scheme. However, during the year 2019,
a bonus was paid to these two Directors, being GBP112,500 to Nigel
Hanbury and GBP90,000 to Arthur Manners, in respect of year
2018.
No other Directors derive other benefits, pension contributions
or incentives from the Group. During 2017, a Joint Share Ownership
Plan was implemented as an incentive scheme for the Chief
Executive, Nigel Hanbury, and the Finance Director, Arthur Manners
(see Note 23).
10. Income tax charge
(a) Analysis of tax credit in the year
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------- ------------ ------------
Current tax:
- current year 497 892
- prior year (76) 50
- foreign tax paid 33 88
------------------- ------------ ------------
Total current tax 454 1,030
------------------- ------------ ------------
Deferred tax:
- current year (169) (1,205)
- prior year (52) 46
------------------- ------------ ------------
Total deferred tax (221) (1,159)
------------------- ------------ ------------
Income tax expense 233 (129)
------------------- ------------ ------------
(b) Factors affecting the tax credit for the year
Tax for the year is the same as (2018: lower than) the standard
rate of corporation tax in the UK of 19% (2018: 19%).
The differences are explained below:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Profit before tax 4,287 327
---------------------------------------------------------- ------------ ------------
Tax calculated as profit before tax multiplied by the
standard rate of corporation tax in the UK of 19% (2018:
19%) 814 62
Tax effects of:
- Prior year adjustments (128) 96
- Rate change and other adjustments (140) (53)
- Permanent disallowances (346) (322)
- Goodwill on bargain purchase not subject to tax - -
- Foreign taxes 33 88
- Other - -
---------------------------------------------------------- ------------ ------------
Tax credit for the year 233 (129)
---------------------------------------------------------- ------------ ------------
The results of the Group's participation on the 2017, 2018 and
2019 years of account and the calendar year movement on 2016 and
prior run-offs will not be assessed for tax until the years ended
2020, 2021 and 2022 respectively, being the year after the calendar
year result of each run-off year or the normal date of closure of
each year of account. Full provision is made as part of the
deferred tax provisions for underwriting profits/(losses) not yet
subject to corporation tax.
The Group has GBP1,551,000 (2018: GBP1,723,000) taxable losses
carried forward, to which GBP289,000 (2018: GBP334,000) has been
recognised as a deferred tax asset and has been offset against
deferred tax liabilities of the same nature as disclosed in Note
18.
The Company has GBP1,262,000 (2018: GBP1,389,000) of tax losses
to carry forward to which no deferred tax asset has been recognised
due to the uncertainty of the future taxable profits, as disclosed
in Note 18.
11. Earnings per share
Basic earnings per share is calculated by dividing the net
profit attributable to ordinary equity holders of the Company 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.
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:
Year ended Year ended
31 December 31 December
2019 2018
------------------------------------------------------- ------------ ------------
Profit for the year after tax attributable to ordinary
equity holders of the Parent GBP4,054,000 GBP456,000
------------------------------------------------------- ------------ ------------
Basic - weighted average number of ordinary shares* 15,809,376 14,544,433
------------------------------------------------------- ------------ ------------
Adjustments for calculating the diluted earnings per
share:
Treasury shares (JSOP scheme), Note 21 500,000 500,000
------------------------------------------------------- ------------ ------------
Diluted - weighted average number of ordinary shares* 16,309,376 15,044,433
------------------------------------------------------- ------------ ------------
Basic earnings/(loss) per share 25.64p 3.14p
------------------------------------------------------- ------------ ------------
Diluted earnings/(loss) per share 24.86p 3.03p
------------------------------------------------------- ------------ ------------
The basic and diluted earnings per share for the year 2017 are
the same. The issue of the 500,000 partly paid ordinary shares
(Note 21) gave rise to an anti-dilutive element.
* Used as the denominator in calculating the basic earnings per
share, and diluted earnings per share, respectively.
12. Dividends paid or proposed
A dividend of 3p per share was paid during the year totalling
GBP529,000 (2018: GBP219,000). The dividend was settled in cash
(2018: in cash).
No final dividend is being proposed in respect of the financial
year ending 31 December 2019.
13. Intangible assets
Syndicate
Goodwill capacity Total
GBP'000 GBP'000 GBP'000
-------------------------------------- -------- --------- --------
Cost
At 1 January 2018 756 13,160 13,916
Additions 19 - 19
Disposals - (74) (74)
Impairment - - -
Acquired with subsidiary undertakings - 4,212 4,212
-------------------------------------- -------- --------- --------
At 31 December 2018 775 17,298 18,073
-------------------------------------- -------- --------- --------
At 1 January 2019 775 17,298 18,073
Additions - 21 21
Disposals - (352) (352)
Impairment - - -
Acquired with subsidiary undertakings - 3,598 3,598
-------------------------------------- -------- --------- --------
At 31 December 2019 775 20,565 21,340
-------------------------------------- -------- --------- --------
Impairment
At 1 January 2018 - 1,741 1,741
Impairment for the year - 281 281
Disposals - - -
-------------------------------------- -------- --------- --------
At 31 December 2018 - 2,022 2,022
-------------------------------------- -------- --------- --------
At 1 January 2019 - 2,022 2,022
Impairment for the year - (1,860) (1,860)
Disposals - - -
-------------------------------------- -------- --------- --------
At 31 December 2019 - 162 162
-------------------------------------- -------- --------- --------
Net book value
At 31 December 2018 775 15,276 16,051
-------------------------------------- -------- --------- --------
At 31 December 2019 775 20,403 21,178
-------------------------------------- -------- --------- --------
Note 22 sets out the details of the entities acquired by the
Group during the year, the fair value adjustments and the goodwill
arising.
14. Investments in subsidiaries
31 December 31 December
2019 2018
GBP'000 GBP'000
------ ----------- -----------
Total 33,329 24,599
------ ----------- -----------
During the year 2019 an impairment charge of GBP1,394,000 (2018:
GBP2,506,000) was recognised on the cost of investments in
subsidiaries and included in the Parent income statement.
At 31 December 2019, the Company owned 100% of the following
companies and limited liability partnerships, either directly or
indirectly. All subsidiaries are incorporated in England and Wales
and their registered office address is at 40 Gracechurch Street,
London EC3V 0BT, apart from RBC CEES Trustee Limited, which is
incorporated in Jersey and its registered office address is Gaspé
House, 66-72 Esplanade, Jersey JE2 3QT.
Direct/indirect 2019 2018
Company or partnership interest ownership ownership Principal activity
--------------------------------- ---------------- ---------- ---------- ---------------------------
Lloyd's of London corporate
Hampden Corporate Member Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 917) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 229) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 518) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 804) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Halperin Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Bernul Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 311) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 402) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Updown Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 507) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 76) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Kempton Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Devon Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 346) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Pooks Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Charmac Underwriting Limited Direct 100% 100% vehicle
Joint Share Ownership
RBC CEES Trustee Limited(ii) Direct 100% 100% Plan
Lloyd's of London corporate
Nottus (No 51) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Chapman Underwriting Limited Direct 100% 100% vehicle
Llewellyn House Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Advantage DCP Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Romsey Underwriting Limited Direct 100% 100% vehicle
Helios UTG Partner Limited(i) Direct 100% 100% Corporate partner
Lloyd's of London corporate
Nomina No 035 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 342 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 372 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Salviscount LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Inversanda LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Fyshe Underwriting LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 505 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 321 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 409) Limited Direct 100% - vehicle
Lloyd's of London corporate
Nameco (No. 1113) Limited Direct 100% - vehicle
Lloyd's of London corporate
Catbang 926 Limited Direct 100% - vehicle
Lloyd's of London corporate
Whittle Martin Underwriting Direct 100% - vehicle
--------------------------------- ---------------- ---------- ---------- ---------------------------
For details of all new acquisitions made during the year 2019
refer to Note 22(a).
(i) Helios UTG Partner Limited, a subsidiary of the Company,
owns 100% of Nomina No 035 LLP, Nomina No 342 LLP, Nomina No 372
LLP, Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP,
Nomina No 505 LLP and Nomina No 321 LLP. The cost of acquisition of
these LLPs is accounted for in Helios UTG Partner Limited, their
immediate parent company.
On 21 February 2019, the Company sold its shares in Dumasco
Limited (a dormant company) for GBPnil gains or losses. On 27
November 2019, the Company sold its shares in Nameco (No. 321)
Limited, Nameco (No. 365) Limited and Nameco (No. 605) Limited for
GBPnil gains or losses.
(ii) RBC CEES Trustee Limited was. an newly incorporated entity
in year 2017 to satisfy the requirements of the Joint Share
Ownership Plan (see Note 23).
15. 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: The fair value of financial instruments traded in
active markets (such as publicly traded securities) is based on
quoted market prices (unadjusted) at the end of the reporting
period. The quoted market price used for financial assets held by
the Group is the current bid price. These instruments are included
in Level 1.
Level 2: The fair value of financial instruments that are not
traded in an active market is determined using valuation techniques
which maximise the use of observable market data inputs, either
directly or indirectly (other than quoted prices included within
Level 1) and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in Level
2.
Level 3: If one or more of the significant inputs is not based
on observable market data, the instrument is included in Level 3.
This is the case for unlisted equity securities.
The Group held the following financial assets carried at fair
value on the statement of financial position:
Total Level Level Level
2019 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 9,116 3,202 5,632 282
Debt securities and other fixed income securities 43,659 12,827 30,832 -
Participation in investment pools 621 156 358 107
Loans and deposits with credit institutions 201 106 90 5
Derivatives 47 13 34 -
Other investments 7 7 - -
Funds at Lloyd's 13,490 13,490 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 67,141 29,801 36,946 394
-------------------------------------------------- -------- -------- -------- --------
Total Level Level Level
2018 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 7,806 2,717 4,983 106
Debt securities and other fixed income securities 40,797 13,345 27,452 -
Participation in investment pools 826 304 282 239
Loans and deposits with credit institutions 227 168 10 50
Derivatives 30 24 6 -
Other investments 6 6 - -
Funds at Lloyd's 8,383 8,383 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 58,075 24,947 23,733 395
-------------------------------------------------- -------- -------- -------- --------
Funds at Lloyd's represent assets deposited with the Corporation
of Lloyd's to support the Group's underwriting activities as
described in the accounting policies. The Group entered into a
Lloyd's Deposit Trust Deed which gives Lloyd's 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.
In addition to funds held by Lloyd's shown above, letters of
credit totalling GBP1,826,000 (2018: GBP2,194,000) are also held as
part of the Group's Funds at Lloyd's.
The Directors consider any credit risk or liquidity risk not to
be material.
Company
Financial assets at fair value through profit or loss are shown
below:
31 December 31 December
2019 2018
GBP'000 GBP'000
----------------------------------------- ----------- -----------
Holdings in collective investment schemes - -
----------------------------------------- ----------- -----------
Total - market value - -
----------------------------------------- ----------- -----------
16. Other receivables
31 December 31 December
2019 2018
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 13,171 12,082
Arising out of reinsurance operations 22,115 26,297
Other debtors 12,440 14,559
------------------------------------------- ----------- -----------
Total 47,726 52,938
------------------------------------------- ----------- -----------
The Group has no analysis of other receivables held directly by
the syndicates on the Group's behalf (see Note 27). None of the
Group's other receivables are past their due date and all are
classified as fully performing.
Included within the above receivables are amounts totalling
GBP3,164,000 (2018: GBP2,081,000) which are not expected to be
wholly recovered within one year.
31 December 31 December
2019 2018
Company GBP'000 GBP'000
---------------------------------------- ----------- -----------
Receivables from subsidiaries (Note 25) 7,804 5,668
Other debtors 347 1,025
Prepayments - -
---------------------------------------- ----------- -----------
Total 8,151 6,693
---------------------------------------- ----------- -----------
Included within receivables are amounts totalling GBP100,000
(2018: Nil), which are not expected to be recoverable within one
year.
17. Deferred acquisition costs
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
At 1 January 6,782 4,420
Increase arising from acquisition of subsidiary undertakings
(Note 22) 2,532 3,003
Movement in deferred acquisition costs (230) (120)
Other movements (2,443) (521)
------------------------------------------------------------- ----------- -----------
At 31 December 6,641 6,782
------------------------------------------------------------- ----------- -----------
18. Deferred tax
Group
Deferred tax is calculated in full on temporary differences
using a tax rate of 17% on deferred tax assets and 19% on deferred
tax liabilities (2018: 17% on deferred tax assets and 19% on
deferred tax liabilities). The movement on the deferred tax
liability account is shown below:
Timing
differences
Valuation on
of underwriting
capacity results Total
Deferred tax liabilities GBP'000 GBP'000 GBP'000
------------------------------------------ --------- ------------- --------
At 1 January 2018 2,211 752 2,963
On acquisition of subsidiary undertakings 801 30 831
Prior period adjustment 46 - 46
Credit for the year (108) (1,097) (1,205)
------------------------------------------ --------- ------------- --------
At 31 December 2018 2,950 (315) 2,635
------------------------------------------ --------- ------------- --------
At 1 January 2019 2,950 (315) 2,635
On acquisition of subsidiary undertakings 878 - 878
Prior period adjustment (52) - (52)
Credit for the year 356 (525) (169)
------------------------------------------ --------- ------------- --------
At 31 December 2019 4,132 (840) 3,292
------------------------------------------ --------- ------------- --------
Company
The Company had no deferred tax assets or liabilities (2018:
GBPnil), as disclosed in Note 10.
19. Borrowings
31 December 31 December
2019 2018
Group and Company GBP'000 GBP'000
------------------------------- ----------- -----------
Secured - at amortised cost
Bank revolving credit facility 2,000 9,196
------------------------------- ----------- -----------
2,000 9,196
------------------------------- ----------- -----------
Current 2,000 8,162
Non-current - 1,034
------------------------------- ----------- -----------
2,000 9,196
------------------------------- ----------- -----------
Bank loan
(a) Revolving credit/loan facility
On 21 April 2016, the Company registered a security charge with
Companies House against a prospective Revolving Credit Facility
("RCF"). During the year ended 31 December 2017, the Company agreed
an RCF with the National Westminster Bank Plc to the value of
GBP2,000,000, secured against all of the assets of the Group. On 22
November 2017 GBP1,094,000 was drawn down and repaid in full on 22
June 2018. The charge registered with National Westminster Bank Plc
has now been fully satisfied.
A new sterling Revolving Loan Facility ("RLF") was agreed with
Barclays Bank Plc during the year ended 31 December 2019 to the
value of GBP4m, of which GBP2m was available for general corporate
purposes and acquisitions and the remaining GBP2m was available for
use only in a large loss scenario, secured against all of the
assets of Helios Underwriting plc.
On 19 December 2019 GBP2,000,000 was drawn down on the RLF. The
maturity of the RLF is three months from the initial date of the
drawdown, being 19 December 2019. The RLF incurs interest at the
following rates:
-- drawn amounts: 3% per annum over LIBOR; and
-- undrawn amount: 1% fixed per annum.
Total arrangement fees of GBP30,000 were paid to Barclays Bank
Plc during the year for the creation of the RLF.
(b) Bank loan
On 14 November 2018, the Company agreed a short-term loan with
National Westminster Bank Plc. The maturity of the loan was the
later of 31 January 2019 and two months after the loan is drawn. On
7 December 2018 GBP8,162,000 was drawn down. The loan was repaid in
full on 1 January 2019. The short-term loan incurred interest on
drawn amounts at 2.5% per annum over LIBOR.
An arrangement fee of GBP41,000 was paid during the year 2018 to
the National Westminster Bank Plc.
Reconciliation of movements of liabilities to cash flows arising
from financing activities:
Liabilities Equity
----------- -------------------------------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 1 January 2018 1,094 16,897 (50) 4,163 22,104
------------------------------------------ ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - - - - -
Proceeds from loans and borrowings 9,196 - - - 9,196
Payments for Company buy back of ordinary
shares (Note 24) - - - (202) (202)
Repayment of borrowings (1,094) - - - (1,094)
Dividend paid - - - (219) (219)
------------------------------------------ ----------- --------- --------- --------- --------
Total changes from financing cash
flows 8,102 - - (421) 7,681
------------------------------------------ ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Changes in fair value - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Other changes: - - - - -
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total equity related other changes* - - - 456 456
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 31 December 2018 9,196 16,897 (50) 4,198 30,241
------------------------------------------ ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2018.
Liabilities Equity
----------- -------------------------------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 1 January 2019 9,196 16,897 (50) 4,198 30,241
------------------------------------------ ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 3,880 - - 3,880
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buy back of ordinary
shares (Note 24) - - - (302) (302)
Repayment of borrowings (9,196) - - - (9,196)
Dividend paid - - - (529) (529)
------------------------------------------ ----------- --------- --------- --------- --------
Total changes from financing cash
flows (7,196) 3,880 - (831) (4,147)
------------------------------------------ ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Changes in fair value - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Other changes:
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total equity related other changes* - - - 4,054 4,054
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 31 December 2019 2,000 20,777 (50) 7,421 30,148
------------------------------------------ ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2019.
Liabilities Equity
----------- -------------------------------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 1 January 2018 1,094 16,897 - 7,712 25,703
------------------------------------------ ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - - - - -
Proceeds from loans and borrowings 9,196 - - - 9,196
Payments for Company buy back of ordinary
shares (Note 24) - - - (202) (202)
Repayment of borrowings (1,094) - - - (1,094)
Dividend paid - - - (219) (219)
------------------------------------------ ----------- --------- --------- --------- --------
Total changes from financing cash
flows 8,102 - - (421) 7,681
------------------------------------------ ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Changes in fair value - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Other changes: - - - - -
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total equity related other changes* - - - 4,463 4,463
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 31 December 2018 9,196 16,897 - 11,754 37,847
------------------------------------------ ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2018.
Liabilities Equity
----------- -------------------------------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 1 January 2019 9,196 16,897 - 11,754 37,847
------------------------------------------ ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 3,880 - - 3,880
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buy back of ordinary
shares (Note 24) - - - (302) (302)
Repayment of borrowings (9,196) - - - (9,196)
Dividend paid - - - (529) (529)
------------------------------------------ ----------- --------- --------- --------- --------
Total changes from financing cash
flows (7,196) 3,880 - (831) (4,147)
------------------------------------------ ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Changes in fair value - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Other changes: - - - - -
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
------------------------------------------ ----------- --------- --------- --------- --------
Total equity related other changes* - - - 5,789 5,789
------------------------------------------ ----------- --------- --------- --------- --------
Balance at 31 December 2019 2,000 20,777 - 16,712 39,489
------------------------------------------ ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2018.
20. Other payables
31 December 31 December
2019 2018
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 2,090 1,893
Arising out of reinsurance operations 10,970 12,451
Corporation tax payable 545 726
Other creditors 4,435 10,251
------------------------------------------- ----------- -----------
18,040 25,321
------------------------------------------- ----------- -----------
The Group has no analysis of other payables held directly by the
syndicates on the Group's behalf (see Note 27).
31 December 31 December
2019 2018
Company GBP'000 GBP'000
----------------------------- ----------- -----------
Other creditors - 1,466
Accruals and deferred income 4,181 369
----------------------------- ----------- -----------
4,181 1,835
----------------------------- ----------- -----------
All payables above are due within one year.
21. Share capital and share premium
Partly
Number Ordinary paid ordinary
of share share Share
shares capital capital premium Total
(i) GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 1 January 2018 15,104,240 1,460 50 15,387 16,897
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 31 December 2018 15,104,240 1,460 50 15,387 16,897
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 1 January 2019 15,104,240 1,460 50 15,387 16,897
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 31 December 2019 18,390,906 1,789 50 18,938 20,777
-------------------------------------- ---------- -------- -------------- -------- --------
During the year, the Company issued a further 3,286,666
shares.
(i) Number of shares
2019 2018
-------------------------------------------------------- ---------- ----------
Allotted, called up and fully paid ordinary shares:
- On the market 17,488,628 14,440,962
- Company buy back of ordinary share held in treasury
(Note 24) 402,278 163,278
-------------------------------------------------------- ---------- ----------
17,890,906 14,604,240
Uncalled and partly paid ordinary shares under the JSOP
scheme (ii) (Note 23) 500,000 500,000
-------------------------------------------------------- ---------- ----------
18,390,906 15,104,240
-------------------------------------------------------- ---------- ----------
(ii) The partly paid ordinary shares are not entitled to
dividend distribution rights during the year.
22. Acquisition of Limited Liability Vehicles
Acquisitions of Limited Liability Vehicles are accounted for
using the acquisition method of accounting.
Where the comparison of the consideration paid to the fair value
of net assets acquired gives rise to a negative goodwill this is
recognised in the revenue, in the consolidated income statement as
a gain on bargain purchase (negative goodwill). The below table
shows the summary of the gain on bargain purchase and the
impairment of goodwill as follows:
2019 2018
Gain on 2019 Gain on 2018
bargain Impairment bargain Impairment
purchase of goodwill Total purchase of goodwill Total
Company or partnership GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------------ -------- --------- ------------ --------
Nameco (No. 409) Limited 214 - 214 - - -
Nameco (No. 1113) Limited 255 - 253 - - -
Catbang 926 Limited 1,036 - 1,036 - - -
Whittle Martin Underwriting 202 - 202 - - -
Fyshe Underwriting LLP - - - 34 - 34
Nomina No 505 LLP - - - 38 - 38
Llewellyn House Underwriting
Limited - - - - - -
Advantage DCP Limited - - - 474 - 474
Romsey Underwriting Limited - - - 569 - 569
Nomina No 321 LLP - - - 69 - 69
----------------------------- --------- ------------ -------- --------- ------------ --------
1,707 - 1,707 1,184 - 1,184
----------------------------- --------- ------------ -------- --------- ------------ --------
Further details of individual acquisitions are shown below:
(a) 2019 acquisitions
Nameco (No. 409) Limited
On 6 February 2019, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No. 409) Limited for a total
consideration of GBP1,346,000. Nameco (No. 409) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP1,560,000. Negative goodwill of GBP214,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 11 429 440
Financial assets at fair value through profit
or loss 1,379 - 1,379
Reinsurance assets:
- reinsurers' share of claims outstanding 621 - 621
- reinsurers' share of unearned premium 95 - 95
Other receivables, including insurance and reinsurance
receivables 1,747 - 1,747
Deferred acquisition cost 141 - 141
Prepayments and accrued income 10 - 10
Cash and cash equivalents 341 - 341
Insurance liabilities:
- claims outstanding (2,148) - (2,148)
- unearned premium (492) - (492)
Deferred income tax liabilities (2) (82) (84)
Other payables, including insurance and reinsurance
payables (452) - (452)
Accruals and deferred income (38) - (38)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 1,213 347 1,560
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,346 - 1,346
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,346 - 1,346
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 133 (347) (214)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,194,112 1,230,299 1,069,040
------------------ ----------- ----------- -----------
The net earned premium and profit of Nameco (No. 409) Limited
for the period since the acquisition date to 31 December 2019 are
GBP811,000 and GBP110,000, respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
409) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Nameco (No. 1113) Limited
On 17 July 2019, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No. 1113) Limited for a total
consideration of GBP2,036,000. Nameco (No. 1113) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP2,291,000. Negative goodwill of GBP255,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 7 1,105 1,112
Financial assets at fair value through profit
or loss 1,191 - 1,191
Reinsurance assets:
- reinsurers' share of claims outstanding 693 - 693
- reinsurers' share of unearned premium 70 - 70
Other receivables, including insurance and reinsurance
receivables 1,985 1,084 3,069
Deferred acquisition cost 83 - 83
Prepayments and accrued income 18 - 18
Cash and cash equivalents 177 - 177
Insurance liabilities:
- claims outstanding (2,202) - (2,202)
- unearned premium (647) - (647)
Deferred income tax liabilities - (416) (416)
Other payables, including insurance and reinsurance
payables (755) - (755)
Accruals and deferred income (102) - (102)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 518 1,773 2,291
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 2,036 - 2,036
------------------------------------------------------- -------- ----------- ----------
Total consideration 2,036 - 2,036
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 1,518 (1,773) (255)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,796,419 2,035,238 1,994,276
------------------ ----------- ----------- -----------
The net earned premium and profit of Nameco (No. 1113) Limited
for the period since the acquisition date to 31 December 2019 are
GBP498,000 and GBP104,000, respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
1113) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Catbang 926 Limited
On 19 December 2019, Helios Underwriting plc acquired 100% of
the issued share capital of Catbang 926 Limited for a total
consideration of GBP5,575,000. Catbang 926 Limited is incorporated
in England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP6,611,000. Negative goodwill of GBP1,036,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 1,444 1,444
Financial assets at fair value through profit
or loss 4,228 - 4,228
Reinsurance assets:
- reinsurers' share of claims outstanding 841 - 841
- reinsurers' share of unearned premium 381 - 381
Other receivables, including insurance and reinsurance
receivables 5,642 - 5,642
Deferred acquisition cost 466 - 466
Prepayments and accrued income 24 - 24
Cash and cash equivalents 2,261 - 2,261
Insurance liabilities:
- claims outstanding (5,310) - (5,310)
- unearned premium (1,602) - (1,602)
Deferred income tax liabilities (26) (274) (300)
Other payables, including insurance and reinsurance
payables (1,304) - (1,304)
Accruals and deferred income (160) - (160)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 5,441 1,170 6,611
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 5,575 - 5,575
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 5,575 - 5,575
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 134 (1,170) (1,036)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 4,076,102 4,076,102 4,076,102
------------------ ----------- ----------- -----------
The net earned premium and loss of Catbang 926 Limited for the
period since the acquisition date to 31 December 2019 are GBP94,000
and GBP17,000, respectively.
Negative Goodwill has arisen on the acquisition of Catbang 926
Limited as a result of the purchase consideration being in excess
of the fair value of net assets acquired.
Whittle Martin Underwriting
On 20 December 2019, Helios Underwriting plc acquired 100% of
the issued share capital of Whittle Martin Underwriting for a total
consideration of GBP1,207,000. Whittle Martin Underwriting is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP1,409,000. Negative goodwill of GBP202,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 40 562 602
Financial assets at fair value through profit
or loss 1,240 - 1,240
Reinsurance assets:
- reinsurers' share of claims outstanding 574 - 574
- reinsurers' share of unearned premium 117 - 117
Other receivables, including insurance and reinsurance
receivables 2,004 - 2,004
Deferred acquisition cost 188 - 188
Prepayments and accrued income 10 - 10
Cash and cash equivalents 256 - 256
Insurance liabilities:
- claims outstanding (2,132) - (2,132)
- unearned premium (639) - (639)
Deferred income tax liabilities - (107) (107)
Other payables, including insurance and reinsurance
payables (660) - (660)
Accruals and deferred income (44) - (44)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 954 455 1,409
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,207 - 1,207
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,207 - 1,207
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 253 (455) (202)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,372,272 1,443,031 1,363,831
------------------ ----------- ----------- -----------
The net earned premium and loss of Whittle Martin Underwriting
for the period since the acquisition date to 31 December 2019 are
GBP38,000 and GBP4,000, respectively.
Negative goodwill has arisen on the acquisition of Whittle
Martin Underwriting as a result of the purchase consideration being
at a discount to the fair value of net assets acquired.
(b) 2018 acquisitions
Fyshe Limited
On 31 August 2018, Helios UTG Partner Limited, a 100% subsidiary
of the Company, became a 100% corporate partner in Fyshe LLP for a
total consideration of GBP68,000. Fyshe LLP is incorporated in
England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP102,000. Negative goodwill of GBP34,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 211 211
Financial assets at fair value through profit
or loss 513 - 513
Reinsurance assets:
- reinsurers' share of claims outstanding 261 - 261
- reinsurers' share of unearned premium 41 - 41
Other receivables, including insurance and reinsurance
receivables 324 - 324
Deferred acquisition cost 65 - 65
Prepayments and accrued income 2 - 2
Cash and cash equivalents 90 - 90
Insurance liabilities:
- claims outstanding (929) - (929)
- unearned premium (227) - (227)
Deferred income tax liabilities - (40) (40)
Other payables, including insurance and reinsurance
payables (177) - (177)
Accruals and deferred income (32) - (32)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired (69) 171 102
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 68 - 68
------------------------------------------------------- -------- ----------- ----------
Total consideration 68 - 68
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 137 (171) (34)
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 495,450 486,014 500,150
------------------ ----------- ----------- -----------
The net earned premium and profit of Fyshe for the period since
the acquisition date to 31 December 2018 are GBP133,000 and
GBP6,000, respectively.
Negative goodwill has arisen on the acquisition of Fyshe LLP as
a result of the purchase consideration being at a discount to the
fair value of net assets acquired.
Nomina No 505 LLP
On 25 September 2018, Helios UTG Partner Limited, a 100%
subsidiary of the Company, became a 100% corporate partner in
Nomina No 505 LLP for a total consideration of GBP302,000. Nomina
No 505 LLP is incorporated in England and Wales and is a corporate
member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP340,000. Negative goodwill of GBP38,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 4 287 291
Financial assets at fair value through profit
or loss 916 - 916
Reinsurance assets:
- reinsurers' share of claims outstanding 427 - 427
- reinsurers' share of unearned premium 64 - 64
Other receivables, including insurance and reinsurance
receivables 579 217 796
Deferred acquisition cost 133 - 133
Prepayments and accrued income 7 - 7
Cash and cash equivalents 130 - 130
Insurance liabilities:
- claims outstanding (1,529) - (1,529)
- unearned premium (412) - (412)
Deferred income tax liabilities - (96) (96)
Other payables, including insurance and reinsurance
payables (345) - (345)
Accruals and deferred income (42) - (42)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired (68) 408 340
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 302 - 302
------------------------------------------------------- -------- ----------- ----------
Total consideration 302 - 302
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 370 (408) (38)
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 796,755 852,255 922,937
------------------ ----------- ----------- -----------
The net earned premium and profit of Nomina No 505 Ltd for the
period since the acquisition date to 31 December 2018 are
GBP195,000 and GBP33,000, respectively.
Negative goodwill has arisen on the acquisition of Nomina No 505
LLP as a result of the purchase consideration being at a discount
to the fair value of net assets acquired.
Llewellyn House Underwriting Limited
On 19 October 2018, Helios Underwriting plc acquired 100% of the
issued share capital of Llewellyn House Underwriting Limited for a
total consideration of GBP414,000. Llewellyn House Underwriting
Limited is incorporated in England and Wales and is a corporate
member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP394,000. Goodwill of GBP20,000 arose on acquisition
which has been recognised as an intangible asset and will be
assessed at each period end for impairment. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 48 161 210
Financial assets at fair value through profit
or loss 498 - 498
Reinsurance assets:
- reinsurers' share of claims outstanding 254 - 254
- reinsurers' share of unearned premium 35 - 35
Other receivables, including insurance and reinsurance
receivables 191 - 191
Deferred acquisition cost 57 - 57
Prepayments and accrued income 4 - 4
Cash and cash equivalents 469 - 469
Insurance liabilities:
- claims outstanding (829) - (829)
- unearned premium (221) - (221)
Deferred income tax liabilities - (31) (31)
Other payables, including insurance and reinsurance
payables (207) - (207)
Accruals and deferred income (35) - (36)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 264 130 394
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 414 - 414
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 414 - 414
------------------------------------------------------- -------- ----------- ----------
Goodwill 150 (130) 20
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 520,004 537,937 536,311
------------------ ----------- ----------- -----------
The net earned premium and loss of Llewellyn House Underwriting
Limited for the period since the acquisition date to 31 December
2018 are GBP77,000 and GBP2,000, respectively.
Goodwill has arisen on the acquisition of Llewellyn House
Underwriting Limited as a result of the purchase consideration
being in excess of the fair value of net assets acquired.
Advantage DCP Limited
On 6 December 2018, Helios Underwriting plc acquired 100% of the
issued share capital of Advantage DCP Limited for a total
consideration of GBP1,795,000. Advantage DCP Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP2,000. Negative goodwill of GBP474,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 89 127 216
Financial assets at fair value through profit
or loss 2,341 - 2,341
Reinsurance assets:
- reinsurers' share of claims outstanding 845 - 845
- reinsurers' share of unearned premium 249 - 249
Other receivables, including insurance and reinsurance
receivables 4,771 - 4,771
Deferred acquisition cost 1,367 - 1,367
Prepayments and accrued income 30 - 30
Cash and cash equivalents 335 - 335
Insurance liabilities:
- claims outstanding (4,615) - (4,615)
- unearned premium (2,275) - (2,275)
Deferred income tax liabilities - (23) (23)
Other payables, including insurance and reinsurance
payables (843) - (843)
Accruals and deferred income (129) - (129)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 2,165 104 2,269
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,874 - 1,874
Loan paid on acquisition (79) - (79)
------------------------------------------------------- -------- ----------- ----------
Total consideration (1,795) - (1,795)
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill (370) (104) (474)
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 3,624,169 3,067,408 2,320,000
------------------ ----------- ----------- -----------
The net earned premium and loss of Advantage DCP Limited for the
period since the acquisition date to 31 December 2018 are
GBP226,000 and GBP34,000, respectively.
Negative goodwill has arisen on the acquisition of Advantage DCP
Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Romsey Underwriting Limited
On 6 December 2018, Helios Underwriting plc acquired 100% of the
issued share capital of Romsey Underwriting Limited for a total
consideration of GBP9,400,000. Romsey Underwriting Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP9,969,000. Negative goodwill of GBP569,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 27 3,213 3,240
Financial assets at fair value through profit
or loss 16,928 - 16,928
Reinsurance assets:
- reinsurers' share of claims outstanding 5,022 - 5,022
- reinsurers' share of unearned premium 908 - 908
Other receivables, including insurance and reinsurance
receivables 5,960 - 5,960
Deferred acquisition cost 1,338 - 1,338
Prepayments and accrued income 71 - 71
Cash and cash equivalents 2,771 - 2,771
Insurance liabilities:
- claims outstanding (17,088) - (17,088)
- unearned premium (4,751) - (4,751)
Deferred income tax liabilities (60) (611) (671)
Other payables, including insurance and reinsurance
payables (3,343) - (3,343)
Accruals and deferred income (416) - (416)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 7,367 2,602 9,969
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 9,400 - 9,400
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 9,400 - 9,400
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 2,033 (2,602) (569)
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 10,351,060 10,907,123 10,041,348
------------------ ----------- ----------- -----------
The net earned premium and loss of Romsey Underwriting Limited
for the period since the acquisition date to 31 December 2018 are
GBP478,000 and GBP1,000, respectively.
Negative goodwill has arisen on the acquisition of Romsey
Underwriting Limited as a result of the purchase consideration
being at a discount to the fair value of net assets acquired.
Nomina No 321 LLP
On 28 December 2018, Helios UTG Partner Limited, a 100%
subsidiary of the Company, became a 100% corporate partner in
Nomina No 321 LLP for a total consideration of GBP84,000. Nomina No
321 LLP is incorporated in England and Wales and is a corporate
member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP153,000. Negative goodwill of GBP69,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 94 42 136
Financial assets at fair value through profit
or loss 383 - 383
Reinsurance assets:
- reinsurers' share of claims outstanding 159 - 159
- reinsurers' share of unearned premium 25 - 25
Other receivables, including insurance and reinsurance
receivables 192 55 247
Deferred acquisition cost 43 - 43
Prepayments and accrued income 3 - 3
Cash and cash equivalents 58 - 58
Insurance liabilities:
- claims outstanding (586) - (586)
- unearned premium (157) - (157)
Deferred income tax liabilities - (18) (18)
Other payables, including insurance and reinsurance
payables (119) - (119)
Accruals and deferred income (21) - (21)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 74 79 153
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 84 - 84
------------------------------------------------------- -------- ----------- ----------
Total consideration 84 - 84
------------------------------------------------------- -------- ----------- ----------
Negative Goodwill 10 (79) (69)
------------------------------------------------------- -------- ----------- ----------
2016 year 2017 year 2018 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 287,188 335,353 369,556
------------------ ----------- ----------- -----------
The net earned premium and profit of Nomina No 321 Ltd for the
period since the acquisition date to 31 December 2018 are GBP3,000
and GBPnil, respectively.
Negative goodwill has arisen on the acquisition of Nomina No 321
LLP as a result of the purchase consideration being at a discount
to the fair value of net assets acquired.
Had the Limited Liability Vehicles been consolidated from 1
January 2019, the consolidated statement of comprehensive income
would show net earned premium of GBP43,300,000 and a profit after
tax of GBP4,850,000.
Costs incurred in connection with the six acquisitions totalling
GBP156,000 (2018: GBP145,000) have been recognised in the
consolidated income statement.
23. Joint Share Ownership Plan ("JSOP")
No shares have been vested as at 31 December 2019.
Effect of the transactions
The beneficial interests of the Executives following the
transaction will be as follows:
2019 2018
------------------------------------------ ------------------------------------------
Interests Interests
in jointly Other in jointly Other
owned ordinary interests owned ordinary interests
shares in shares in
issued ordinary Total issued ordinary Total
Director under JSOP shares shareholding under JSOP shares shareholding
--------------- --------------- ---------- ------------- --------------- ---------- -------------
Arthur Manners 200,000 162,292 362,292 200,000 133,334 333,334
Nigel Hanbury 300,000 4,027,640 4,327,640 300,000 2,436,871 2,736,871
--------------- --------------- ---------- ------------- --------------- ---------- -------------
The new ordinary shares will rank pari passu with the Company's
existing issued ordinary shares. The Company's issued share capital
following Admission will comprise 18,390,905 ordinary shares with
voting rights and no restrictions on transfer and this figure may
be used by shareholders as the denominator for the calculations by
which they will determine if they are required to notify their
interest in, or a change to their interest in, the Company under
the Disclosure Guidance and Transparency Rules.
The JSOP is to be accounted for as if it were a premium priced
option, and therefore Black Scholes mathematics have been applied
to determine the fair value. As the performance condition will
eventually be trued up, a calculation of the fair value based on an
algebraic Black Scholes calculation of the value of the "as if"
option discounted for the risk of forfeiture or non-vesting is
reasonable. The discount factors are for the risk that an employee
leaves and forfeits the award or the failure to meet the
performance condition with the result the JSOP awards do not vest
in full or at all.
The basic Black Scholes calculation is based on the following
six basic assumptions:
(a) market value of a share at the date of grant (133.5p);
(b) expected premium or threshold price of a share (141.4p);
(c) expected life of the JSOP award;
(d) risk-free rate of capital;
(e) expected dividend yield; and
(f) expected future volatility of a Helios share.
Date of grant 13.12.17
------------------------------------------------ --------
(a) Share price 133.5p
(b) Exercise price 141.4p
(c) Expected life (years) 3
(d) Risk-free rate 1.00%
(e) Expected dividend yield (continuous payout) 4.20%
(f) Volatility 20.00%
Exponential constant 2.72
------------------------------------------------ --------
Black Scholes option value 9.3
------------------------------------------------ --------
The fair value has been discounted by 50% for the risk that some
of the awards will be forfeited and not vest, giving a fair value
of 4.6p per share. The total fair value per share of 4.6p times the
number of JSOP awards (500,000 being ordinary shares, Note 21)
gives a total fair value of GBP23,150. The amount is to be charged
as an expense and spread over three years, being the years 2018 to
2020.
24. Treasury shares: purchase of own shares
During the year, the Company bought back some of its own
ordinary shares on the market and these are held in treasury, as
detailed below:
Market
value Market Nominal
consideration price value
Number paid per share 10p each
Date of shares GBP GBP GBP
--------------------- ---------- -------------- ---------- ---------
As at 1 January 2019 163,278 202,598 16,328
03/01/2019 10,000 14,000 1.400 1,000
08/01/2019 15,000 21,450 1.430 1,500
11/01/2019 5,000 7,125 1.425 500
16/01/2019 12,500 17,625 1.410 1,250
18/01/2019 25,000 35,625 1.425 2,500
22/01/2019 25,000 35,250 1.410 2,500
16/08/2019 102,000 113,220 1.110 10,200
30/08/2019 15,000 18,000 1.200 1,500
13/09/2019 7,500 9,075 1.210 750
04/10/2019 10,000 12,400 1.240 1,000
09/11/2019 12,000 16,020 1.335 1,200
--------------------- ---------- -------------- ---------- ---------
402,278 502,388 40,228
--------------------- ---------- -------------- ---------- ---------
The retained earnings have been reduced by GBP502,000, being the
consideration paid on the market for these shares, as shown in the
consolidated and Parent Company statements of changes in
equity.
The Company cannot exercise any rights over these bought back
and held in treasury shares, and has no voting rights. No dividend
or other distribution of the Company's assets can be paid to the
Company in respect of the treasury shares that it holds.
As at 31 December 2019, the 402,278 own shares bought back
represent 2.25% of the total allotted, called up and fully paid
ordinary shares of the Company of 17,890,906 (Note 21).
25. Related party transactions
Helios Underwriting plc has inter-company loans with its
subsidiaries which are repayable on three months' notice provided
it does not jeopardise each company's ability to meet its
liabilities as they fall due. All inter-company loans are therefore
classed as falling due within one year. The amounts outstanding as
at 31 December are set out below:
31 December 31 December
2019 2018
Company GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Balances due from/(to) Group companies at the year end:
Hampden Corporate Member Limited 154 265
Nameco (No. 365) Limited - (36)
Nameco (No. 605) Limited - (16)
Nameco (No. 321) Limited - 4
Nameco (No. 917) Limited 3,855 3,812
Nameco (No. 229) Limited (2) 3
Nameco (No. 518) Limited 8 20
Nameco (No. 804) Limited (65) (45)
Halperin Underwriting Limited 8 7
Bernul Limited 77 66
Dumasco Limited - 38
Nameco (No. 311) Limited 22 20
Nameco (No. 402) Limited (135) (143)
Updown Underwriting Limited (1) (21)
Nameco (No. 507) Limited 87 91
Nameco (No. 76) Limited (130) (141)
Kempton Underwriting Limited (3) 2
Devon Underwriting Limited 29 138
Nameco (No. 346) Limited (727) (263)
Pooks Limited 163 345
Charmac Underwriting Limited (369) (351)
Nottus (No 51) Limited (25) 35
Chapman Underwriting Limited 111 383
Llewellyn House Underwriting Limited 8 63
Advantage DCP Limited (1,607) 72
Romsey Underwriting Limited 1,646 459
Nameco (No. 409) Limited 86 -
Nameco (No. 1113) Limited (489) -
Catbang 926 Limited 3,518 -
Whittle Martin Underwriting 776
Helios UTG Partner Limited 759 811
RBC CEES Trustee Limited 50 50
-------------------------------------------------------- ----------- -----------
Total (Note 16) 7,804 5,668
-------------------------------------------------------- ----------- -----------
Helios Underwriting plc and its subsidiaries have entered into a
management agreement with Nomina plc. Jeremy Evans, a Director of
Helios Underwriting plc and its subsidiary companies, is also a
director of Nomina plc. Under the agreement, Nomina plc provides
management and administration, financial, tax and accounting
services to the Group for an annual fee of GBP146,000 (2018:
GBP160,000).
The Limited Liability Vehicles have entered into a members'
agent agreement with Hampden Agencies Limited. Jeremy Evans, a
Director of Helios Underwriting plc and its subsidiary companies,
is also a director of Hampden Capital plc, which controls Hampden
Agencies Limited. Under the agreement the Limited Liability
Vehicles will pay Hampden Agencies Limited a fee based on a fixed
amount, which will vary depending upon the number of syndicates the
Limited Liability Vehicles underwrite on a bespoke basis, and a
variable amount depending on the level of underwriting through the
members' agent pooling arrangements. In addition, the Limited
Liability Vehicles will pay profit commission on a sliding scale
from 1% of the net profit up to a maximum of 10%. The total fees
payable for 2019 are set out below:
31 December 31 December
2019 2018
Company GBP'000 GBP'000
------------------------------------- ----------- -----------
Nameco (No. 917) Limited 67 57
Devon Underwriting Limited - 7
Nameco (No. 346) Limited 23 44
Pooks Limited - 6
Charmac Underwriting Limited 2 22
Nottus (No 51) Limited 2 13
Chapman Underwriting Limited 22 13
Llewellyn House Underwriting Limited - 8
Advantage DCP Limited 10 54
Romsey Underwriting Limited 35 35
Nameco (No. 409) Limited 8 -
Nameco (No. 1113) Limited 1 -
Catbang 926 Limited 31 -
Whittle Martin Underwriting 11 -
Salviscount LLP 4 18
Inversanda LLP - 6
Fyshe Underwriting LLP - 8
Nomina No 505 LLP 2 14
Nomina No 321 LLP 6 8
------------------------------------- ----------- -----------
Total 224 313
------------------------------------- ----------- -----------
The Group entered into quota share reinsurance contracts for the
2017, 2018, 2019 and 2020 years of account with HIPCC Limited -
Cell 6. The Limited Liability Vehicles' underwriting year of
account quota share participations are set out below:
Company or partnership 2017 2018 2019 2020
------------------------------------- ---- ---- ---- ----
Hampden Corporate Member Limited - - - -
Nameco (No. 365) Limited - - - -
Nameco (No. 605) Limited - - - -
Nameco (No. 321) Limited - - - -
Nameco (No. 917) Limited 70% 70% 70% 70%
Nameco (No. 229) Limited - - - -
Nameco (No. 518) Limited - - - -
Nameco (No. 804) Limited - - - -
Halperin Underwriting Limited - - - -
Bernul Limited - - - -
Dumasco Limited - - - -
Nameco (No. 311) Limited - - - -
Nameco (No. 402) Limited - - - -
Updown Underwriting Limited - - - -
Nameco (No. 507) Limited - - - -
Nameco (No. 76) Limited - - - -
Kempton Underwriting Limited - - - -
Devon Underwriting Limited 70% 70% - -
Nameco (No. 346) Limited 70% 70% 70% 70%
Pooks Limited 70% 70% - -
Charmac Underwriting Limited 70% 70% - -
Nottus (No 51) Limited 70% 70% - -
Chapman Underwriting Limited - 70% 70% 70%
Helios UTG Partner Limited - - - -
Nomina No 035 LLP - - - -
Nomina No 342 LLP - - - -
Nomina No 380 LLP - - - -
Nomina No 372 LLP - - - -
Salviscount LLP 70% 70% - -
Inversanda LLP 70% 70% - -
Fyshe Underwriting LLP - 70% - -
Nomina No 505 LLP - 70% - -
Llewellyn House Underwriting Limited - 70% - -
Advantage DCP Limited - - 70% 70%
Romsey Underwriting Limited - 70% 70% 70%
Nomina No 321 LLP - 70% 70% 70%
Nameco (No. 409) Limited - 70% 70% 70%
Nameco (No. 1113) Limited - - 70% 70%
Catbang 926 Limited - - - 70%
Whittle Martin Underwriting - - - 70%
------------------------------------- ---- ---- ---- ----
Nigel Hanbury, a Director of Helios Underwriting plc and its
subsidiary companies, is also a director and majority shareholder
in HIPCC Limited. Hampden Capital, a substantial shareholder in
Helios Underwriting plc, is also a substantial shareholder in HIPCC
Limited - Cell 6. Under the agreement, the Group accrued a net
reinsurance premium recovery of GBP4,551,000 (2018: GBP5,160,000)
during the year.
In addition, HIPCC provide stop loss, portfolio stop loss and
HASP reinforce policies for the company.
HIPCC Limited acts as an intermediary for the reinsurance
products purchased by Helios. An arrangement has been put in place
so that 51% of the profits generated by HIPCC in respect of the
business relating to Helios will be repaid to Helios for the
business transacted for the 2020 and subsequent underwriting years.
The consideration paid to Nigel Hanbury of GBP100,000 reflects the
HIPCC income that he is expected to forego.
Nigel Hanbury was the sole shareholder and a director of Nameco
(No 1113) Limited, which was acquired by the company on 17 July
2019 in exchange for 1,590,769 shares in the company, a total
consideration of GBP2,036,000 (see note 22).
During the year, the following Directors received dividends, in
line with their shareholdings held:
Shareholding
at date Dividend Shareholding Dividend
dividend received at date received
declared 31 July dividend 6 July
28 June 2019 declared 2018
Director 2019 GBP 8 June 2018 GBP
---------------------------------- ------------ --------- ------------ ---------
Nigel Hanbury (either personally
or has an interest in) 2,436,871 73,106 2,436,871 36,553
Andrew Christie 12,166 365 12,166 182
Jeremy Evans 58,670 1,760 58,670 880
Arthur Manners 133,334 4,000 133,334 558
Edward Fitzalan-Howard (appointed
1 January 2018) 333,333 10,000 133,334 5,000
Michael Cunningham 37,167 1,115 37,167 2,000
---------------------------------- ------------ --------- ------------ ---------
26. Ultimate controlling party
The Directors consider that the Group has no ultimate
controlling party.
27. Syndicate participations
The syndicates and members' agent pooling arrangements ("MAPA")
in which the Company's subsidiaries participate as corporate
members of Lloyd's are as follows:
Allocated capacity per year
of account
----------------------------------------------
Syndicate
or MAPA 2020* 2019* 2018 2017
number Managing or members' agent GBP GBP GBP GBP
--------- -------------------------------------- ---------- ---------- ---------- ----------
33 Hiscox Syndicates Limited 8,228,483 6,939,458, 7,915,153 5,689,020
218 ERS Syndicate Management Limited 5,063,490 5,063,490 5,058,954 3,575,610
308 Tokio Marine Kiln Syndicates Limited - - - 132,000
318 Beaufort Underwriting Agency Limited - 836,250 866,250 866,250
386 QBE Underwriting Limited 1,267,435 1,267,436 1,263,054 1,293,760
510 Tokio Marine Kiln Syndicates Limited 12,888,509 11,723,920 11,708,852 11,702,184
557 Tokio Marine Kiln Syndicates Limited 2,254,330 1,502,886 1,516,740 1,834,167
609 Atrium Underwriters Limited 5,570,819 4,957,429 4,946,580 4,618,280
623 Beazley Furlonge Limited 9,346,269 8,257,178 7,893,269 6,809,484
727 S A Meacock & Company Limited 1,393,205 1,544,860 1,544,860 1,544,861
958 Canopius Managing Agents Limited - - - -
1176 Chaucer Syndicates Limited 1,419,908 1,449,906 1,448,810 1,168,400
1200 Argo Managing Agency Limited - 25,000 25,714 104,162
1729 Asta Managing Agency Limited 2,867 28,288 296,252 301,614
1884 Charles Taylor Managing Agency Limited - - - 217,500
1910 Asta Managing Agency Limited - - - -
1969 Apollo Syndicate Management Limited - - 131,082 616,462
1991 Covery's Managing Agency Limited - - - 222,228
2010 Cathedral Underwriting Limited 2,129,005 2,130,071 2,127,332 2,127,335
2014 Pembroke Managing Agency Limited - 32,192 416,184 2,166,374
2121 Argenta Syndicate Management Limited 1,253,868 1,003,093 1,003,093 885,082
2525 Asta Managing Agency Limited 535,460 467,270 432,632 332,794
2689 Asta Managing Agency Limited 2,377 32,192 398,045 1,537,499
2791 Managing Agency Partners Limited 6,193,469 6,391,469 6,379,196 6,379,200
2988 Brit Syndicates Limited - 2,740 227,127 225,687
4242 Asta Managing Agency Limited 3,299 253,299 348,378 288,521
4444 Canopius Managing Agents Limited - - 1,113,184 697,258
5623 Beazley Furlonge Limited 2,250,000 - - -
Amtrust Syndicate Limited Syndicates
5820 Limited - - - -
5886 Asta Managing Agency Limited 5,623,852 536,512 453,254 377,717
6103 Managing Agency Partners Limited 1,319,151 1,263,251 1,258,374 309,458
6104 Hiscox Syndicates Limited 1,021,487 1,112,382 1,087,384 1,323,545
6107 Beazley Furlonge Limited 1,000,000 1,242,551 997,286 681,390
6111 Catlin Underwriting Agencies Limited - - 249,065 278,279
6117 Argo Managing Agency Limited 347,162 3,035,553 3,377,517 3,207,946
6123 Asta Managing Agency Limited - - 8,708 8,440
--------- -------------------------------------- ---------- ---------- ---------- ----------
Total 69,114,446 61,098,676 64,492,329 61,522,507
--------- -------------------------------------- ---------- ---------- ---------- ----------
* Including the new acquisitions in 2019.
28. Group-owned net assets
The Group statement of financial position includes the following
assets and liabilities held by the syndicates on which the Group
participates. These assets are subject to trust deeds for the
benefit of the relevant syndicates' insurance creditors. The table
below shows the split of the statement of financial position
between Group and syndicate assets and liabilities:
31 December 2019 31 December 2018
----------------------------- -----------------------------
Group Syndicate Total Group Syndicate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- --------- -------- -------- --------- --------
Assets
Intangible assets 21,178 - 21,178 16,051 - 16,051
Financial assets at fair value
through profit or loss 13,520 53,621 67,141 8,388 49,687 58,075
Deferred income tax asset - - - - - -
Reinsurance assets:
- reinsurers' share of claims
outstanding 61 25,699 25,760 - 22,698 22,698
- reinsurers' share of unearned
premium - 5,023 5,023 - 4,057 4,057
Other receivables, including
insurance and reinsurance receivables 10,044 37,682 47,726 10,156 42,782 52,938
Deferred acquisition costs - 6,641 6,641 - 6,782 6,782
Prepayments and accrued income - 432 432 - 439 439
Cash and cash equivalents 3,028 3,009 6,037 9,717 2,485 12,202
--------------------------------------- -------- --------- -------- -------- --------- --------
Total assets 47,831 132,107 179,938 44,312 128,930 173,242
--------------------------------------- -------- --------- -------- -------- --------- --------
Liabilities
Insurance liabilities:
- claims outstanding - 95,616 95,616 - 88,032 88,032
- unearned premium - 26,522 26,522 - 24,772 24,772
Deferred income tax liabilities 3,292 - 3,292 2,569 66 2,635
Borrowings 2,000 - 2,000 9,196 - 9,196
Other payables, including insurance
and reinsurance payables 1,051 16,989 18,040 2,650 22,671 25,321
Accruals and deferred income 5,094 1,226 6,320 1,241 1,000 2,241
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities 11,437 140,353 151,790 15,656 136,541 152,197
--------------------------------------- -------- --------- -------- -------- --------- --------
Equity attributable to owners
of the Parent
Share capital 1,839 - 1,839 1,510 - 1,510
Share premium 18,938 - 18,938 15,387 - 15,387
Other reserves (50) - (50) (50) - (50)
Retained earnings 15,667 (8,246) 7,421 11,809 (7,611) 4,198
--------------------------------------- -------- --------- -------- -------- --------- --------
Total equity 36,394 (8,244) 28,148 28,656 (7,611) 21,045
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities and equity 47,831 132,107 179,938 44,312 128,930 173,242
--------------------------------------- -------- --------- -------- -------- --------- --------
Below is an analysis of the free working capital available to
the Group:
31 December 31 December
2019 2018
Group GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Funds at Lloyd's supplied by:
Quota share reinsurers 26,742 24,544
Stop loss reinsurers 1,826 2,195
Group owned 13,490 8,383
---------------------------------------------------- ----------- -----------
Total Funds at Lloyd's supplied (excluding solvency
credits) 42,058 35,122
---------------------------------------------------- ----------- -----------
Group funds available:
Financial assets (Note 28) 13,520 8,388
Cash (Note 28) 3,028 9,717
---------------------------------------------------- ----------- -----------
Total funds 16,548 18,105
---------------------------------------------------- ----------- -----------
Less Group Funds at Lloyd's (13,490) (8,383)
---------------------------------------------------- ----------- -----------
Free working capital 3,058 9,722
---------------------------------------------------- ----------- -----------
29. Events after the financial reporting period
COVID-19
The COVID-19 pandemic has created turbulence in financial
markets and economic uncertainty which will impact individuals and
businesses. The full impact of this on the insurance industry,
including the Lloyd's market, is uncertain. The initial assessment
by supported syndicates has identified those lines of business most
likely to be impacted, however the full extent of the losses and
the impact upon pricing will become clearer as the year progresses.
We will regularly monitor developments in this area and take
appropriate actions as needed.
The COVID-19 coronavirus pandemic will be a manageable loss for
the property and casualty insurance and reinsurance industry,
unless there is some kind of structural change to drive the cost to
the sector much higher.
It should not be forgotten that the current turmoil is happening
against the backdrop of the greatest momentum we have seen in
(re)insurance pricing for many years. Recent events are
accelerating the premium rate rises.
The importance of having sufficient diversification within the
portfolio to absorb shock losses is critical to the success of the
portfolio. We do this by being partnered with the highest quality
underwriting businesses at Lloyd's
It is expected that that a significant proportion of the losses
arising from COVID-19 will attach to the 2019 underwriting year and
therefore there remains considerable uncertainty regarding the
eventual outcome for this underwriting year.
The Directors are confident that the business continues to be a
going concern as in to the current funds lodged at Lloyd's, Helios
has available the following facilities to provide additional
resources to fund the necessary capital requirements:
-- The Board considers that the dividend policy should reflect
the requirement to maintain its available cash resources given the
uncertainty for the potential funding of the COVID-19 and other
losses in the immediate future and therefore no dividend will be
payable.
-- A bank revolving credit bank facility of GBP4m of which GBP2.0m has been drawn down, and
-- The stop loss reinsurance contracts for the 2019 and 2020
years of account could provide additional underwriting capital of
approximately GBP5m.
Share buy backs
Since the year ended 31 December 2019, the Company has
repurchased a further 10,600 ordinary 10p shares for a total
consideration of GBP14,000.
Acquisitions
Nameco (No. 408) Limited
On 28 January 2020, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No. 408) Limited for a total
consideration of GBP1,007,000. Nameco (No. 408) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
After the alignment of accounting policies and other adjustments
to the valuation of assets and liabilities to reflect their fair
value at acquisition, the provisional fair value of the net assets
was GBP1,110,000. Giving rise to negative goodwill of GBP102,883 on
acquisition. The following table explains the provisional fair
value adjustments made to the carrying values of the major
categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 439 439
Financial assets at fair value through profit
or loss 1,220 - 1,220
Reinsurance assets:
- reinsurers' share of claims outstanding 521 - 521
- reinsurers' share of unearned premium 95 - 95
Other receivables, including insurance and reinsurance
receivables 1,636 - 1,636
Deferred acquisition cost 171 - 171
Prepayments and accrued income 11 - 11
Cash and cash equivalents 427 - 427
Insurance liabilities:
- claims outstanding (2,085) - (2,085)
- unearned premium (608) - (608)
Deferred income tax liabilities (3) (84) (87)
Other payables, including insurance and reinsurance
payables (606) - (606)
Accruals and deferred income (24) - (24)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 755 355 1,110
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,007 - 1,007
Loan receivable on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,007 - 1,007
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 252 355 (103)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,187,869 1,304,321 1,142,830
------------------ ----------- ----------- -----------
30. 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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PPUCUAUPUGQR
(END) Dow Jones Newswires
May 29, 2020 02:00 ET (06:00 GMT)
Helios Underwriting (LSE:HUW)
Historical Stock Chart
From May 2024 to Jun 2024
Helios Underwriting (LSE:HUW)
Historical Stock Chart
From Jun 2023 to Jun 2024
