TIDMHUW
RNS Number : 0628A
Helios Underwriting Plc
25 September 2020
25 September 2020
Helios Underwriting plc
( ' Helios ' or ' the Company ' )
Interim Results for the Six Months Ended 30 June 2020
Helios Underwriting plc, the unique investment vehicle which
acquires and consolidates underwriting capacity at Lloyd's,
announces its unaudited results for the six months ended 30 June
2020.
Nigel Hanbury, Chief Executive, provides the following
overview:
"These interim results reflect syndicate Covid losses recognised
during the period, but our exposure on the 2020 open underwriting
year has been greatly reduced through quota share reinsurance.
"Our pro-forma Adjusted NAV per share remains robust, reflecting
the quality of our portfolio and has increased to GBP2.07 per
share.
"Current market conditions have opened up an exciting window of
opportunity for Helios: the opportunity to increase our retained
exposure by reducing the quota share cession and through targeted
acquisitions of LLV's. We have an attractive pipeline of these,
which we are actively evaluating. We also continue to explore
options to finance the additional capital required, including a
potential fundraising."
SUMMARY FINANCIAL INFORMATION
6 months to 30th Year to
June 31 (st) December
2020 2019 2019
GBP000's GBP000's GBP000's
Underwriting profits 154 1,610 3,261
Other income 850 469 2,557
Costs (1,112) (1,326) (3,391)
---------- ---------- ------------------
Operating profit for the period
before impairment (108) 753 2,427
---------- ---------- ------------------
Profit after tax (96) 648 4,054
Earnings per share -0.55p 4.51p 25.64p
Adjusted Net Asset Value per GBP2.07 GBP1.91 GBP2.06
Share
-- Operating loss before impairment is GBP108,000 (30 June 2019 - a profit of GBP753,000)
-- Reduction in underwriting profits from the syndicate
participations reflects the losses recognised from the Covid-19
pandemic in this period
-- The cumulative premium rate increase achieved by underwriters
since 1 (st) January 2018 is 28%, which together with greater
discipline encouraged by the Franchise Board at Lloyd's, has
improved the prospects for profitable underwriting
-- The Adjusted Net Asset Value per share is GBP2.07 per share
(31 (st) December 2019 - GBP2.06 per share)
The underwriting result has been impacted by the losses arising
from the Covid-19 coronavirus pandemic. Losses of GBP5m (7% of
capacity) have been reserved for Covid-19 by the supported
syndicates as at 30th June 2020, of which 85% attaches to the 2019
year. The quota share reinsurers share GBP3.5m of this loss so the
impact on the underwriting profits was GBP1.5m. The disputes over
business interruption coverage are largely outside Lloyds and are
not expected to impact the portfolio. The mid point forecast for
the 2019 year of account as at 30 (th) June 2020 is a loss of 1.6%,
having reserved the Covid 19 losses that have been incurred. We
have a stop loss reinsurance protection for the 2019 year on which
we do not expect to have to make a claim.
The current turmoil is taking place against the backdrop of the
greatest positive momentum the Directors have seen in both
insurance and reinsurance pricing for many years. The improvement
in underwriting conditions is now accelerating on top of an
aggregate rate increase during 2019 of 5.4% (2018: 3.5%) following
catastrophe losses in 2017, 2018 and 2019. Cumulative rate
increases since 1 (st) January 2018 are 28%. We have been advised
of further pre-emptions of approximately GBP9.5m from our supported
syndicates to take advantage of improved market conditions.
Underwriting Profits and Window of Market Opportunity
The underwriting profits generated from the proportion of the
capacity portfolio retained by Helios reflects the results of the
underlying syndicates. The profitability of the syndicates has been
affected by the following:
-- The losses from Covid-19 have been recognised during the period.
-- The premium rate increases that have been achieved are being
reflected in the underlying results as reported in the Lloyds
market results.
A window of opportunity has been opened which is exciting for
Helios:
-- Our strategy of building a portfolio of syndicate capacity
continues to rely on the flow of LLVs for sale at reasonable
prices.
-- The pre-emptions, if fully taken up will increase the portfolio by approximately 13%.
-- There is an opportunity to increase the capacity retained by
Helios shareholders by reducing the quota share cession.
The exposure on the 2020 open underwriting year has been reduced
by 70% through quota share reinsurance. The quota share reinsurers
fund their share of the capital requirements and pay Helios a fee
and a profit commission. Stop loss reinsurance is bought for the
remaining 30% to limit the Group's exposure in the event of large
underwriting losses. Our costs should not increase at the same
pace.
The Pro-forma Adjusted Net Asset Value per share is GBP2.07p per
share (Dec 2019 - GBP2.06p per share). It is expected that there
will continue to be demand for the top syndicates that make up a
significant proportion of the Helios Capacity Fund at the Lloyds
Capacity Auctions that take place later this year.
For further information, please contact:
Helios Underwriting plc
Nigel Hanbury - Chief Executive 07787 530 404 /
nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer 07754 965 917
Shore Capital
Robert Finlay 020 7408 4080
David Coaten
Buchanan
Helen Tarbet / Henry Wilson / George Beale 07872 604 453
020 7466 5111
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.
Financial results summary
Six months ended 30 June 2020
6 months 6 months Year to 31
to 30 June to 30 June December
2020 2019 2019
Underwriting profits 154 1,610 3,261
Other Income
Fees from reinsurers 400 249 235
Corporate reinsurance
recoveries 202 (205) (358)
Goodwill on bargain purchase 172 285 1,707
Investment income 76 140 972
Total Other Income 850 469 2,557
Costs
Pre - acquisition (9) (2) (859)
Stop loss costs (181) (182) (200)
Operating costs (922) (1,142) (2,332)
Total Costs (1,112) (1,326) (3,391)
Operating profit before
impairments of goodwill
and capacity (108) 753 2,427
Impairment charge for
capacity - - 1,860
Tax 12 (105) (233)
Profit for the period/year (96) 648 4,054
============ ============ ===========
Period to 30 (th) June 2020
Helios retained Total profit/(loss)
capacity at currently Helios
30 June 2020 Portfolio mid estimated Profits
Underwriting Year GBPm point forecasts GBP'000 GBP'000
2018 27.6 -3.1% (856) 439
2019 23.3 -1.6% (373) 101
2020 21.1 - - (386)
------------------ --------------- ---------------- ------------------- --------
154
------------------ --------------- ---------------- ------------------- --------
Period to 30 (th) June 2019
Helios retained Total profit/(loss)
capacity at currently Helios
30 June 2018 Portfolio mid estimated Profits
Underwriting Year GBPm point forecasts GBP'000 GBP'000
------------------ --------------- ---------------- ------------------- --------
2017 28.9 -7.4% (2,139) 1,048
2018 18.7 -3.6% (673) 681
2019 16.1 - - (119)
------------------ --------------- ---------------- ------------------- --------
1,610
------------------ --------------- ---------------- ------------------- --------
Year to 31 December 2019
Helios retained
capacity at Total profit/(loss)
31 December currently Helios
2018 Portfolio mid estimated Profits
Underwriting Year GBPm point forecasts GBP'000 GBP'000
------------------ --------------- ---------------- ------------------- --------
2017 36.2 -4.8% (1,748) 2,725
2018 21 -3.6% (758) 1,349
2019 18.3 - - (814)
------------------ --------------- ---------------- ------------------- --------
3,261
------------------ --------------- ---------------- ------------------- --------
Summary Balance Sheet
The summary Group balance sheet excludes items relating to
syndicate participations. See Note 15 for further information.
6 Months to June 2020 6 Months to June 2019 Year to 31 December 2019
GBP'000 GBP'000 GBP'000
------------------ --------------------- ----------------------- ------------------------
Intangible assets 21,655 16,490 21,178
Funds at Lloyd's 8,989 10,850 13,520
Other cash 1,156 2,018 3,013
Other assets 8,179 8,391 10,120
------------------ --------------------- ----------------------- ------------------------
Total assets 39,979 37,749 47,831
------------------ --------------------- ----------------------- ------------------------
Deferred tax 3,686 2,134 3,292
Borrowings- 2,000 1,034 2,001
------------------ --------------------- ----------------------- ------------------------
Other liabilities 1,118 4,865 6,144
------------------ --------------------- ----------------------- ------------------------
Total liabilities 6,804 8,033 11,437
------------------ --------------------- ----------------------- ------------------------
Syndicate equity (5,123) (8,648) (8,244)
------------------ --------------------- ----------------------- ------------------------
Total equity 28,052 21,068 28,150
------------------ --------------------- ----------------------- ------------------------
Summary Group Cash Flow
The summary group cash flow sheet excludes items relating to
syndicate participations. See Note 15 for further information.
6 months 6 months Year to 31
to 30 June to 30 June December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Opening Balance (free cash) 3,028 9,717 9,717
Income
Acquired on acquisition 280 119 2,045
Distribution of profits (net
of tax retentions) 54 1,165 1,724
Transfers from Funds at Lloyds' 4,252 1,512 4,178
Investment income 28 43 178
Other income - - 911
Sale of investments - - 2,014
Borrowings 2,000 (8,162) 2,000
Expenditure
Operating costs (inc Hampden
/ Nomina fees) (406) (469) (2,392)
Reinsurance Cost (353) (531) -
Payable funds for acquisitions - - -
Payments to QS reinsurers - - (465)
Acquisition of LLV's (4,875) (428) (4,897)
Transfers to Funds at Lloyds' (750) (778) (1,137)
Tax (102) (36) (833)
Dividends paid - - (529)
Revolving credit facility
repayment (2,000) - (9,214)
Share buy backs - (133) (287)
Closing balance 1,156 2,019 3,013
------------ ------------ -----------
Adjusted NAV
6 months 6 months Year to 31
to 30 June to 30 June December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Net tangible assets 6,397 4,578 6,970
Group letters of
credit 2,916 1,762 2,850
Value of capacity
(WAV) 26,827 21,077 26,350
------------ ------------ -----------
36,140 27,417 36,170
------------ ------------ -----------
Share in issue
- on the market 17,478 14,348 17,489
Shares in issue
- total of on the
market and JSOP
shares 17,978 14,848 17,989
Adjusted net asset
value per share
GBP - on the market 2.07 1.91 2.07
Adjusted net asset
value per share
GBP - on the market
and JSOP shares 2.01 1.85 2.01
Interim condensed consolidated statement of comprehensive
income
Six months ended 30 June 2020
6 months
ended 6 months 12 months
30 June ended 30 ended
2020 June 2019 31 December
Unaudited Unaudited 2019 Audited
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ------ ---------- ---------- -------------
Gross premium written 4 36,950 29,552 55,470
Reinsurance premium ceded (11,575) (9,380) (13,210)
------------------------------------------- ------ ---------- ---------- -------------
Net premium written 4 25,375 20,172 42,260
------------------------------------------- ------ ---------- ---------- -------------
Change in unearned gross premium provision 5 (7,700) (4,625) (60)
Change in unearned reinsurance premium
provision 5 3,837 2,767 488
------------------------------------------- ------ ---------- ---------- -------------
5 (3,863) (1,858) 428
------------------------------------------- ------ ---------- ---------- -------------
Net earned premium 3,4 21,512 18,314 42,688
Net investment income 6 1,174 1,491 2,335
Other underwriting income 400 252 417
Gain on bargain purchase 12 172 285 1,707
Other income - 13 432
------------------------------------------- ------ ---------- ---------- -------------
Revenue 23,258 20,355 47,579
------------------------------------------- ------ ---------- ---------- -------------
Gross claims paid (16,380) (17,242) (34,107)
Reinsurers' share of gross claims
paid 3,784 3,890 8,237
------------------------------------------- ------ ---------- ---------- -------------
Claims paid, net of reinsurance (12,596) (13,352) (25,870)
------------------------------------------- ------ ---------- ---------- -------------
Change in provision for gross claims 5 (5,927) 1,337 (3,758)
Reinsurers' share of change in provision
for gross claims 5 2,162 (1,036) 2,004
------------------------------------------- ------ ---------- ---------- -------------
Net change in provision for claims 5 (3,765) 301 (1,754)
------------------------------------------- ------ ---------- ---------- -------------
Net insurance claims and loss adjustment
expenses 4 (16,361) (13,051) (27,624)
------------------------------------------- ------ ---------- ---------- -------------
Expenses incurred in insurance activities (6,166) (5,786) (15,764)
Other operating expenses (839) (765) (1,764)
------------------------------------------- ------ ---------- ---------- -------------
Operating expenses (7,005) (6,551) (17,528)
------------------------------------------- ------ ---------- ---------- -------------
Operating profit before impairments
of goodwill and capacity 4 (108) 753 2,427
Impairment of goodwill - - -
Impairment of syndicate capacity - - -
------------------------------------------- ------ ---------- ---------- -------------
Profit before tax (108) 753 4,287
Income tax charge 7 12 (105) (233)
------------------------------------------- ------ ---------- ---------- -------------
Profit for the period (96) 648 4,054
------------------------------------------- ------ ---------- ---------- -------------
Other comprehensive income
Foreign currency translation differences - - -
Income tax relating to the components
of other comprehensive income - - -
------------------------------------------- ------ ---------- ---------- -------------
Other comprehensive income for the
period, net of tax - - -
------------------------------------------- ------ ---------- ---------- -------------
Total other comprehensive income for
the period (96) 648 4,054
------------------------------------------- ------ ---------- ---------- -------------
Profit for the period attributable
to owners of the Parent (96) 648 4,054
------------------------------------------- ------ ---------- ---------- -------------
Total comprehensive income for the
period attributable to owners of the
Parent (96) 648 4,054
------------------------------------------- ------ ---------- ---------- -------------
Earnings per share attributable to
owners of the Parent
Basic 8 -0.55p 4.51p 25.64p
Diluted 8 -0.52p 4.36p 24.86p
------------------------------------------- ------ ---------- ---------- -------------
The profit attributable to owners of the Parent and earnings per
share set out above are in respect of continuing operations.
Interim condensed consolidated statement of financial
position
Six months ended 30 June 2020
6 months
ended 6 months 12 months
30 June ended 30 ended
2020 June 2019 31 December
Unaudited Unaudited 2019 Audited
Note GBP'000 GBP'000 GBP'000
------------------------------------------ ------ ---------- ---------- -------------
Assets -
Intangible assets 21,655 16,490 21,178
Financial assets at fair value through
profit or loss 64,143 56,507 67,141
Reinsurance assets:
- reinsurers' share of claims outstanding 5 28,141 21,233 25,760
- reinsurers' share of unearned premium 5 9,195 7,163 5,023
Other receivables, including insurance
and reinsurance receivables 52,799 50,717 47,726
Deferred acquisition costs 6,853 6,228 6,641
Prepayments and accrued income 882 701 432
Cash and cash equivalents 8,501 6,997 6,037
------------------------------------------ ------ ---------- ---------- -------------
Total assets 192,169 166,036 179,938
------------------------------------------ ------ ---------- ---------- -------------
Liabilities
Insurance liabilities:
- claims outstanding 5 99,758 80,204 95,616
- unearned premium 5 35,961 30,631 26,522
Deferred income tax liabilities 3,686 2,134 3,292
Borrowings 2,000 1,034 2,000
Other payables, including insurance
and reinsurance payables 20,841 27,468 18,040
Accruals and deferred income 1,871 3,497 6,320
------------------------------------------ ------ ---------- ---------- -------------
Total liabilities 164,117 144,968 151,790
------------------------------------------ ------ ---------- ---------- -------------
Equity
Equity attributable to owners of the
Parent:
Share capital 11 1,839 1,510 1,839
Share premium 11 18,938 15,387 18,938
Other reserves - treasury shares 11 (50) (50) (50)
Retained earnings 7,325 4,221 7,421
------------------------------------------ ------ ---------- ---------- -------------
Total equity 28,052 21,068 28,148
------------------------------------------ ------ ---------- ---------- -------------
Total liabilities and equity 192,169 166,036 179,938
------------------------------------------ ------ ---------- ---------- -------------
The Financial Statements were approved and authorised for issue
by the Board of Directors on 24 September 2020, and were signed on
its behalf by:
Nigel Hanbury
Chief Executive
The notes are an integral part of these Financial
Statements.
Interim condensed consolidated statement of changes in
equity
Six months ended 30 June 2020
Attributable to owners
of the Parent
----------------------------------------------------
Share Share Other Retained
capital premium reserves earnings Total
Consolidated Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- --------- ---------- --------- --------
At 1 January 2020 1,839 18,938 (50) 7,421 28,148
Total comprehensive income for -
the year: - - - -
Profit for the year - - - (96) (96)
Other comprehensive income, net -
of tax - - - -
-------------------------------- ------ -------- --------- ---------- --------- --------
Total comprehensive income for
the year - - - (96) (96)
-------------------------------- ------ -------- --------- ---------- --------- --------
Transactions with owners: - - - - -
Dividends paid 9 - - - - -
Company buy back of shares 11 - - - - -
-------------------------------- ------ -------- --------- ---------- --------- --------
Total transactions with owners - - - - -
At 30 June 2020 1,839 18,938 (50) 7,325 28,052
-------------------------------- ------ -------- --------- ---------- --------- --------
At 1 January 2019 1,510 15,387 (50) 4,198 21,045
Total comprehensive income for
the year:
Profit for the year - - - 648 648
Other comprehensive income, net
of tax - - - 39 39
-------------------------------- ------ -------- --------- ---------- --------- --------
Total comprehensive income for
the year - - - 687 687
-------------------------------- ------ -------- --------- ---------- --------- --------
Transactions with owners:
Dividends paid - - - (530) (530)
Share issue - - - (134) (134)
-------------------------------- ------ -------- --------- ---------- --------- --------
Total transactions with owners - - - (664) (664)
-------------------------------- ------ -------- --------- ---------- --------- --------
At 30 June 2019 1,510 15,387 (50) 4,221 21,068
-------------------------------- ------ -------- --------- ---------- --------- --------
At 1 January 2019 1,510 15,387 (50) 4,198 21,045
Total comprehensive income for
the year:
Profit for the year - - - 4,054 4,054
Other comprehensive income, net -
of tax - - - -
-------------------------------- ------ -------- --------- ---------- --------- --------
Total comprehensive income for
the year - - - 4,054 4,054
-------------------------------- ------ -------- --------- ---------- --------- --------
Transactions with owners:
Dividends paid - - - (529) (529)
Company buy back of shares 11 - - - (302) (302)
Share issue 11 329 3,551 - - 3,880
-------------------------------- ------ -------- --------- ---------- --------- --------
Total transactions with owners 329 3,551 - (831) 3,049
-------------------------------- ------ -------- --------- ---------- --------- --------
At 31 December 2019 1,839 18,938 (50) 7,421 28,148
-------------------------------- ------ -------- --------- ---------- --------- --------
Interim condensed consolidated statement of cash flows
Six months ended 30 June 2020
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
Note 2020 2019 Unaudited 2019
Unaudited GBP'000 Audited
GBP'000 GBP'000
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash flows from operating activities
Profit before tax (108) 753 4,287
Adjustments for:
- Other comprehensive income, gross
of tax - - -
- Interest received (45) (39) (235)
- Investment income 6 (1,136) (1,416) (1,248)
- Recognition of negative goodwill (172) (285) (1,707)
- Goodwill on bargain purchase - - -
- Impairment of goodwill - - -
- (Profit)/loss on sale of intangible
assets - - (898)
- Impairment of intangible assets - - (1,860)
- Goodwill on acquisition - - -
Changes in working capital: -
* change in fair value of financial assets held at fair
value through profit or loss (79) 17 (659)
* decrease/(increase) in financial assets at fair value
through profit or loss 4,171 2,928 (3,010)
- (increase)/decrease in other receivables (3,863) 5,278 18,823
- (increase)/decrease in other payables - (1,193) 1,240 (6,783)
- net decrease/(increase) in technical
provisions 5,059 (5,504) (6,473)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash generated/(utilised) from operations 2,634 2,972 237
-------------------------------------------------------------- ------ ---------- --------------- ------------
Income tax paid - - (1,119)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Net cash inflow from operating activities 2,634 2,972 (882)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash flows from investing activities
Interest received 45 39 235
Investment income 1,136 1,416 1,248
Purchase of intangible assets - - (22)
Proceeds from disposal of intangible
assets - - 932
Acquisition of subsidiaries, net of
cash acquired (1,218) (806) (1,493)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Net cash (outflow)/inflow from investing
activities (37) 649 900
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash flows from financing activities
-------------------------------------------------------------- ------ ---------- --------------- ------------
Net proceeds from issue of ordinary
share capital - - 1,844
Buy back of ordinary share capital (133) (134) (302)
Payment for company buy back of shares - - 2,000
Proceeds from borrowings - (8,162) (9,196)
Repayment of borrowings - - -
Dividends paid to owners of the Parent - (530) (529)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Net cash outflow from financing activities (133) (8,826) (6,183)
-------------------------------------------------------------- ------ ---------- --------------- ------------
Net (decrease)/increase in cash and
cash equivalents 2,464 (5,205) (6,165)
Cash and cash equivalents at beginning
of period 6,037 12,202 12,202
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash and cash equivalents at end of
period 8,501 6,997 6,037
-------------------------------------------------------------- ------ ---------- --------------- ------------
Cash held within the syndicates' accounts is GBP7,345,000 (2019:
GBP4,979,000) of the total cash and cash equivalents held at the
end of the period GBP8,501,000 (2019: GBP6,997,000). The cash held
within the syndicates' accounts is not available to the Group to
meet its day-to-day working capital requirements.
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial
Statements.
Notes to the financial statements
Six months ended 30 June 2020
1. General information
The Company is a public limited company quoted on AIM. The
Company was incorporated in England, is domiciled in the UK and its
registered office is 40 Gracechurch Street, London EC3V 0BT. The
Company participates in insurance business as an underwriting
member at Lloyd's through its subsidiary undertakings.
2. Accounting policies
Basis of preparation
The Condensed Consolidated Interim Financial Statements have
been prepared using accounting policies consistent with
International Financial Reporting Standards (IFRSs) and in
accordance with International Accounting Standard (IAS) 34 Interim
Financial Reporting, as adopted by the European Union.
The Condensed Consolidated Interim Financial Statements are
prepared for the six months ended 30 June 2020.
The Condensed Consolidated Interim Financial Statements for the
six months ended 30 June 2020 and 2019 are unaudited, but have been
subject to review by the Group's auditors. The Condensed
Consolidated Interim Financial Statements have been prepared in
accordance with the accounting policies adopted for the year ended
31 December 2019, and the adoption of new and amended standards as
set out further below.
The Condensed Consolidated Interim 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, Nameco (No 408) Limited, RBC CEES
Trustee Limited, Helios UTG Partner Limited, 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. (Note 10).
The underwriting data on which these Condensed Consolidated
Interim Financial Statements are based upon has been supplied by
the managing agents of those syndicates which the Group supports.
The data supplied is the 100% figures for each syndicate. The Group
has applied its share of the syndicate participations to the gross
figures to derive its share of the syndicates transactions, assets
and liabilities.
Significant accounting policies
The Condensed Consolidated Interim Financial Statements have
been prepared under the historical cost convention as modified by
the revaluation of the financial assets at fair value through the
profit and loss. The same accounting policies, presentation and
methods of computation are followed in these Condensed Consolidated
Interim Financial Statements as were applied in the preparation of
the Group Financial Statements for the year ended 31 December
2020.
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 predominately 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 period beginning before 1 January 2023. Consequently, the
Group has a single date of initial application for IFRS 9 in it's
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).
-- Amendments to References to the Conceptual Framework in IFRS,
issued on 29 March 2017, (effective date 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:
-- 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)
3. 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
6 months ended 30 June 2020 Unaudited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------------- ----------- ----------- --------
Net earned premium 22,133 - (621) 21,512
Net investment income 1,171 3 - 1,174
Other income - - 400 400
Net insurance claims and loss adjustment
expenses (16,361) - - (16,361)
Expenses incurred in insurance activities (5,842) - (324) (6,166)
Other operating expenses - - (839) (839)
Goodwill on bargain purchase - - 172 172
Impairment of goodwill - - - -
Impairment of syndicate capacity - - - -
------------------------------------------ -------------- ----------- ----------- --------
Profit before tax 1,101 3 (1,212) (108)
------------------------------------------ -------------- ----------- ----------- --------
Other
Syndicate Investment corporate
participation management activities Total
6 months ended 30 June 2019 Unaudited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------------- ----------- ----------- --------
Net earned premium 19,754 - (1,440) 18,314
Net investment income 1,491 - - 1,491
Other income - - 265 265
Net insurance claims and loss adjustment
expenses (13,051) - - (13,051)
Expenses incurred in insurance activities (5,472) - (314) (5,786)
Other operating expenses - - (765) (765)
Goodwill on bargain purchase - - 285 285
Impairment of goodwill - - - -
Impairment of syndicate capacity - - - -
------------------------------------------ -------------- ----------- ----------- --------
Profit before tax 2,722 - (1,969) 753
------------------------------------------ -------------- ----------- ----------- --------
Other
Syndicate Investment corporate
participation management activities Total
12 months ended 31 December 2019 Audited 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 - - 1,707 1,707
Impairment of goodwill - - - -
Impairment of syndicate capacity - - 1,860 1,860
------------------------------------------ -------------- ----------- ----------- --------
Profit before tax 3,583 (52) 756 4,287
------------------------------------------ -------------- ----------- ----------- --------
The Group does not have any geographical segments as it
considers all of its activities to arise from trading within the
UK.
No major customers exceed 10% of revenue.
Net earned premium within 2020 other corporate activities
totalling GBP621,000 (2019: 1,440,000 - 2017, 2018 and 2019 years
of account) represents the 2018, 2019 and 2020 years of account net
Group quota share reinsurance premium payable to Hampden Insurance
Guernsey PCC Limited - Cell 6. This net quota share reinsurance
premium payable is included within "reinsurance premium ceded" in
the Consolidated Statement of Comprehensive Income of the
period.
4. Operating profit before impairments of goodwill and
capacity
Underwriting year of account*
-------------------------------------------
2018 and Pre- Corporate Other
6 months ended 30 prior 2019 2020 Sub-total acquisition reinsurance corporate Total
June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Gross premium written 115 4,439 32,491 37,045 (95) - - 36,950
Reinsurance ceded (131) (1,089) (9,578) (10,798) 24 (621) (181) (11,575)
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Net premium written (16) 3,350 22,913 26,247 (70) (621) (181) 25,375
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Net earned premium 1,519 15,105 5,756 22,380 (66) (621) (181) 21,512
Other income 702 301 102 1,105 (7) 400 248 1,746
Net insurance claims
and loss adjustment
expenses (401) (10,523) (5,686) (16,610) 47 - 202 (16,361)
Operating expenses (581) (4,092) (1,427) (6,100) 17 - (922) (7,005)
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity 1,239 791 (1,255) 775 (9) (221) (653) (108)
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Quota share adjustment (800) (690) 869 (621) - 621 - -
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity
after quota share
adjustment 439 101 (386) 154 (9) 400 (653) (108)
----------------------- -------- --------- --------- ----------- ------------ ------------ ---------- --------
Underwriting year of account*
---------------------------------------------
2017 and Pre- Corporate Other
6 months ended 30 prior 2018 2019 Sub-total acquisition reinsurance corporate Total
June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Gross premium written 669 4,017 24,993 29,679 (127) - 29,552
Reinsurance ceded (132) (930) (6,731) (7,793) 36 (1,440) (182) (9,380)
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Net premium written 536 3,088 18,262 21,886 (91) (1,440) (182) 20,172
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Net earned premium 2,103 12,936 4,987 20,026 (90) (1,440) (182) 18,314
Other income 934 319 130 1,383 (16) 249 425 2,042
Net insurance claims
and loss adjustment
expenses (656) (7,879) (4,369) (12,904) 58 - (205) (13,051)
Operating expenses (717) (3,605) (1,133) (5,455) 46 - (1,142) (6,551)
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity 1,664 1,771 (385) 3,050 (2) (1,191) (1,104) 753
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Quota share
adjustment (616) (1,090) 266 (1,440) - 1,440 - -
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity
after quota share
adjustment 1,048 681 (119) 1,610 (2) 249 (1,104) 753
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Underwriting year of account*
---------------------------------------------
2017 Pre- Corporate Other
12 months ended 31 and prior 2018 2019 Sub-total acquisition reinsurance corporate Total
December 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) (1,443) (13,003) (14,563) 1,553 - (200) (13,210)
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Net premium written 914 4,447 41,653 47,015 (4,555) - (200) 42,260
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Net earned premium 3,526 21,772 22,157 47,545 (4,566) - (200) 42,688
Other income 1,574 615 339 2,527 (551) 235 2,679 4,891
Net insurance claims
and loss adjustment
expenses 893 (12,854) (16,276) (28,237) 2,329 (1,359) (358) (27,624)
Operating expenses (1,535) (6,823) (8,768) (17,125) 1,929 - (2,332) (17,528)
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity 4,458 2,710 (2,548) 4,620 (859) (1,124) (221) 2,426
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Quota share
adjustment (1,733) (1,361) 1,734 (1,359) - 1,359 - -
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity
after quota share
adjustment 2,725 1,349 (814) 3,261 (859) 235 (211) 2,426
--------------------- ---------- --------- --------- ----------- ------------ ------------ ---------- --------
Pre-acquisition relates to the element of results from the new
acquisitions before they were acquired by the Group.
* The underwriting year of account results represent the Group's
share of the syndicates' results by underwriting year of account
before corporate member level reinsurance and members' agents
charges.
5. Insurance liabilities and reinsurance balances
Movement in claims outstanding
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
At 1 January 2020 95,616 25,760 69,856
Increase in reserves arising from acquisition of
subsidiary undertakings 2,036 505 1,531
Movement of reserves 5,927 2,162 3,765
Other movements (3,821) (286) (3,535)
------------------------------------------------- -------- ----------- --------
At 30 June 2020 99,758 28,141 71,617
------------------------------------------------- -------- ----------- --------
Movement in unearned premium
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
At 1 January 2020 26,522 5,023 21,499
Increase in reserves arising from acquisition of
subsidiary undertakings 530 92 438
Movement of reserves 7,700 3,837 3,863
Other movements 1,209 243 966
------------------------------------------------- -------- ----------- --------
At 30 June 2020 35,961 9,195 26,766
------------------------------------------------- -------- ----------- --------
Included within other movements are the 2017 and prior years'
claims reserves reinsured into the 2018 year of account on which
the Group does not participate and currency exchange
differences.
Movement in claims outstanding
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
At 1 January 2019 88,032 22,698 65,334
Increase in reserves arising from acquisition of
subsidiary undertakings 1,974 552 1,422
Movement of reserves (1,337) (1,036) (301)
Other movements (8,465) (981) (7,484)
------------------------------------------------- -------- ----------- --------
At 30 June 2019 80,204 21,233 58,971
------------------------------------------------- -------- ----------- --------
Movement in unearned premium
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
At 1 January 2019 24,772 4,057 20,715
Increase in reserves arising from acquisition of
subsidiary undertakings - - -
Movement of reserves 4,625 2,767 1,858
Other movements 1,234 339 895
------------------------------------------------- -------- ----------- --------
At 30 June 2019 30,631 7,163 23,468
------------------------------------------------- -------- ----------- --------
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 claims outstanding
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
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
------------------------------------------------- -------- ----------- --------
Movement in unearned premium
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- ----------- --------
At 1 January 2019 24,772 4,057 20,715
Increase in reserves arising from acquisition of
subsidiary undertakings 3,379 1,182 2,197
Movement of reserves 60 488 (428)
Other movements (1,689) (704) (985)
------------------------------------------------- -------- ----------- --------
At 31 December 2019 26,522 5,023 21,499
------------------------------------------------- -------- ----------- --------
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.
6. Net investment income
6 months
ended 6 months 12 months
30 June ended ended 31
2020 Unaudited 30 June December
GBP'0 2019 Unaudited 2019 Audited
00 GBP'000 GBP'000
---------------------------------------------- --------------- ---------------- -------------
Investment income 1,136 1,416 1,248
Realised (losses)/gains on financial assets
at fair value through profit or loss 126 17 262
Unrealised (losses)/gains on financial assets
at fair value through profit or loss (133) 18 657
Investment management expenses - 1 (67)
Bank interest 45 39 235
---------------------------------------------- --------------- ---------------- -------------
Net investment income 1,174 1,491 2,335
---------------------------------------------- --------------- ---------------- -------------
7. Income tax charge
Analysis of tax charge/(credit) in the period
6 months 6 months 12 months
ended ended ended 31
30 June 30 June December
2020 Unaudited 2019 Unaudited 2019 Audited
GBP'000 GBP'000 GBP'000
------------------ --------------- ---------------- -------------
Income tax credit (12) 105 233
------------------ --------------- ---------------- -------------
The income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used is 19.00% (2019: 19.00%). Material disallowed terms have been
adjusted for in the income tax calculation.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders after tax by the weighted
average number of ordinary shares outstanding during the
period.
Diluted earnings per share is calculated by dividing the net
profit attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the period, 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:
6 months 6 months 12 months
ended 30 ended 30 ended 31
June 2020 June 2019 December
Unaudited Unaudited 2019 Audited
------------------------------------------------- ---------- ----------- -------------
Profit for the year after tax attributable
to ordinary equity holders of the parent (96,000) 648,000 4,054,000
------------------------------------------------- ---------- ----------- -------------
Basic - weighted average number of ordinary
shares* 17,978,841 14,356,224 15,809,376
------------------------------------------------- ---------- ----------- -------------
Adjustments for calculating the diluted earnings
per share: Treasury shares (JSOP scheme) 500,000 500,000 500,000
------------------------------------------------- ---------- ----------- -------------
Diluted - weighted average number of shares* 17,478,841 14,856,224 15,044,433
------------------------------------------------- ---------- ----------- -------------
Basic earnings per share (0.55p) 4.51p 3.14p
------------------------------------------------- ---------- ----------- -------------
Diluted earnings per share (0.52p) 4.36p 3.03p
------------------------------------------------- ---------- ----------- -------------
* Used as the denominator in calculating the basic earnings per
share, and diluted earnings per share, respectively.
9. Dividends paid or proposed
It was proposed and agreed at the AGM on 25 June 2020 that no
dividend will be payable in 2020 (2019: 3p).
10. Investments in subsidiaries
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------------- -------- -------- -----------
Total 45,335 25,905 32,901
--------------------------------------------------------------------------------- -------- -------- -----------
30 June 30 June 31 December
Direct/indirect 2020 2019 2019
Company or partnership interest ownership ownership ownership Principal activity
---------------------- ---------------- ---------- ----------- ------------- -------------------------------
Hampden Corporate Lloyd's of London corporate
Member Limited Direct 100% 100% 100% vehicle
Nameco (No. 365) Lloyd's of London corporate
Limited Direct - 100% 100% vehicle
Nameco (No. 605) Lloyd's of London corporate
Limited Direct - 100% 100% vehicle
Nameco (No. 321) Lloyd's of London corporate
Limited Direct - 100% 100% vehicle
Nameco (No. 917) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 229) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 518) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 804) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Halperin Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Lloyd's of London corporate
Bernul Limited Direct 100% 100% 100% vehicle
Nameco (No. 311) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 402) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Updown Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 507) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 76) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Kempton Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Devon Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No. 346) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Lloyd's of London corporate
Pooks Limited Direct 100% 100% 100% vehicle
Charmac Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
RBC CEES Trustee Joint Share Ownership
Limited Direct 100% 100% 100% Plan
Lloyd's of London corporate
Nottus (No 51) Limited Direct 100% 100% 100% vehicle
Chapman Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Helios UTG Partner
Limited Direct 100% 100% 100% Corporate partner
Lloyd's of London corporate
Nomina No 035 LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Nomina No 342 LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Nomina No 372 LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Salviscount LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Inversanda LLP Indirect 100% 100% 100% vehicle
Fyshe Underwriting Lloyd's of London corporate
LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Nomina No 505 LLP Indirect 100% 100% 100% vehicle
Lloyd's of London corporate
Nomina No 321 LLP Direct 100% 100% - vehicle
Llewellyn House
Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Lloyd's of London corporate
Advantage DCP Limited Direct 100% 100% 100% vehicle
Romsey Underwriting Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No 409) Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Nameco (No 1113 Lloyd's of London corporate
Limited Direct 100% 100% 100% vehicle
Lloyd's of London corporate
Catbang 926 Limited Direct 100% 100% 100% vehicle
Whittle Martin Lloyd's of London corporate
Underwriting Direct 100% 100% 100% vehicle
Nameco (No 408) Lloyd's of London corporate
Limited Direct 100% - - vehicle
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.
RBC CEES Trustee Limited is a newly incorporated entity in year
2017 to satisfy the requirements of the Joint Share Ownership
Plan.
For details of all new acquisitions in the 6 months to 30 June
2020, refer to note 12.
11. Share capital and share premium
Partly
Ordinary share paid ordinary Share
Number of capital share capital premium Total
shares (i) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----------- -------------- -------------- -------- --------
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 15,387 16,897
----------------------------------------------------- ----------- -------------- -------------- -------- --------
Ordinary shares of 10p each and share premium at 1
January 2020 18,390,906 1,789 50 15,387 16,897
Ordinary shares of 10p each and share premium at 30
June 2020 18,390,906 1,789 50 15,387 16,897
----------------------------------------------------- ----------- -------------- -------------- -------- --------
(i) Number of shares
30 June 2020 31 December 2019
------------------------------------------------------------------- ------------ ----------------
Allotted, called up and fully paid ordinary shares:
On the market 17,478,028 17,488,628
Company buy back of ordinary shares held in treasury 412,878 402,278
------------------------------------------------------------------- ------------ ----------------
17,890,906 17,890,906
------------------------------------------------------------------- ------------ ----------------
Uncalled and partly paid ordinary share under the JSOP scheme (ii) 500,000 500,000
------------------------------------------------------------------- ------------ ----------------
18,390,906 18,390,906
------------------------------------------------------------------- ------------ ----------------
(ii) The partly paid ordinary shares are not entitled to
dividend distribution rights during the year.
12. Acquisition of Limited Liability Vehicles
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 GBP1,008,000. Nameco (No. 408) 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 GBP1,180,000. Negative goodwill of GBP172,000 arose on
acquisition which has been 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 - 477 477
Financial assets at fair value through profit or loss 1,174 - 1,174
Reinsurance assets:
- reinsurers' share of claims outstanding 505 - 505
- reinsurers' share of unearned premium 92 - 92
Other receivables, including insurance and reinsurance receivables 1,418 - 1,418
Deferred acquisition cost 138 - 138
Prepayments and accrued income 10 - 10
Cash and cash equivalents 390 - 390
Insurance liabilities:
- claims outstanding (2,035) - (2,035)
- unearned premium (532) - (532)
Deferred income tax liabilities (1) (91) (92)
Other payables, including insurance and reinsurance payables (326) - (326)
Accruals and deferred income (39) - (39)
------------------------------------------------------------------- -------------- ----------- ----------
Net assets acquired 794 386 1,180
------------------------------------------------------------------- -------------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,008 - 1,008
Loan paid on acquisition - - -
------------------------------------------------------------------- -------------- ----------- ----------
Total consideration 1,008 - 1,008
------------------------------------------------------------------- -------------- ----------- ----------
Negative goodwill 214 386 (172)
------------------------------------------------------------------- -------------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,304,321 1,142,830 1,086,270
------------------ ----------- ----------- -----------
The net earned premium and profit of Nameco (No. 408) Limited
for the period since the acquisition date to 30 June 2020 are
GBP356,000 and GBP33,000 respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
408) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
13. Related party transactions
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 GBP152,000 (2019:
GBP180,000).
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. The total fees payable for
2020 are GBP135,000 (2019: GBP225,000).
A number of subsidiary companies have entered into quota share
reinsurance contracts for the 2018, 2019 and 2020 years of account
with protected cell companies of Hampden Insurance PCC (Guernsey)
Limited. The quota share percentages for the above years was
70%
Nigel Hanbury, a Director of Helios Underwriting plc and its
subsidiary companies, is also a director and majority shareholder
in Hampden Insurance Guernsey PCC Limited. Hampden Capital plc, a
substantial shareholder in Helios Underwriting plc, is also a
substantial shareholder in Hampden Insurance Guernsey PCC Limited -
Cell 6. Under quota share agreements between Cell 6 and certain
Helios subsidiaries, the Group accrued a net reinsurance premium
recovery of GBP4,453,000 (2019: GBP3,968,000) during the
period.
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 (being Nigel Hanburys
share) in respect of the business relating to Helios will be repaid
to Helios for the business transacted for the 2020 and subsequent
underwriting years.
14. Ultimate controlling party
The Directors consider that the Group has no ultimate
controlling party.
15. 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
------------------------ -------------------------------------- ----------------------------------------------
2017 2018 (]) 2019 2020
Syndicate or MAPA number Managing or members' agent GBP GBP GBP GBP
------------------------ -------------------------------------- ---------- ---------- ---------- ----------
33 Hiscox Syndicates Limited 5,764,233 8,019,797 7,031,021 8,339,667
218 ERS Syndicate Management Limited 3,620,739 5,104,083 5,108,619 5,108,619
308 Tokio Marine Kiln Syndicates Limited 132,000 - - -
318 Beaufort Underwriting Agency Limited 866,250 866,250 836,250 -
386 QBE Underwriting Limited 1,322,097 1,291,391 1,295,773 1,295,772
510 Tokio Marine Kiln Syndicates Limited 11,843,732 11,850,400 11,865,468 13,051,289
557 Tokio Marine Kiln Syndicates Limited 1,844,203 1,526,776 1,512,922 2,269,384
609 Atrium Underwriters Limited 4,722,562 5,058,275 5,069,124 5,700,796
623 Beazley Furlonge Limited 6,951,965 8,057,318 8,428,557 9,544,350
727 S A Meacock & Company Limited 1,586,583 1,586,582 1,586,582 1,436,179
1176 Chaucer Syndicates Limited 1,168,400 1,448,810 1,449,906 1,419,908
1200 Argo Managing Agency Limited 136,305 57,857 57,143 -
1729 Asta Managing Agency Limited 329,996 324,634 55,810 2,867
1884 Charles Taylor Managing Agency Limited 217,500 - - -
1969 Apollo Syndicate Management Limited 616,462 131,082 - -
1991 R&O Managing Agency Limited 222,228 - - -
2010 Cathedral Underwriting Limited 2,127,335 2,127,332 2,130,071 2,129,005
2014 Pembroke Managing Agency Limited 2,279,023 547,449 92,192 -
2121 Argenta Syndicate Management Limited 885,082 1,003,093 1,003,093 1,253,868
2525 Asta Managing Agency Limited 332,794 432,632 467,270 535,460
2689 Asta Managing Agency Limited 1,537,499 398,045 32,192 2,377
2791 Managing Agency Partners Limited 6,468,698 6,468,694 6,480,967 6,282,966
2988 Brit Syndicates Limited 225,687 227,127 2,740 -
4242 Asta Managing Agency Limited 288,521 348,378 253,299 3,299
4444 Canopius Managing Agents Limited 757,008 1,177,416 - -
5623 Beazley Furlonge Limited 2,250,000 - - 2,250,000
5820 ANV Syndicates Limited - - - -
5886 Asta Managing Agency Limited 5,623,852 453,254 536,512 5,623,852
6103 Managing Agency Partners Limited 1,349,391 1,287,333 1,292,210 1,349,391
6104 Hiscox Syndicates Limited 1,047,395 1,112,543 1,137,541 1,047,395
6107 Beazley Furlonge Limited 1,026,295 1,014,510 1,263,800 1,026,295
6111 Catlin Underwriting Agencies Limited 278,279 249,065 - -
6117 Argo Managing Agency Limited 3,302,839 3,472,410 3,095,553 397,574
6123 Asta Managing Agency Limited 8,440 8,708 -
7211 Members' agent pooling arrangement 11,553 121,828 120,610 130,401
7217 Members' agent pooling arrangement 18,107 19,917 29,875 -
7227 Members' agent pooling arrangement 2,746 3,661 6,406 -
Total 62,710,376 65,796,650 62,241,506 70,200,714
------------------------ -------------------------------------- ---------- ---------- ---------- ----------
16. 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:
30 June 2020 30 June 2019 31 December 2019
------------------------- ----------------------------- ----------------------------- -----------------------------
Group Syndicate Total Group Syndicate Total Group Syndicate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Assets
Intangible assets 21,655 - 21,655 16,490 - 16,490 21,178 - 21,178
Financial assets at fair
value through profit or
loss 8,989 55,154 64,143 10,850 45,657 56,507 13,520 53,621 67,141
Reinsurance assets: - - - - - - - -
- reinsurers' share of
claims outstanding 61 28,080 28,141 61 21,172 21,233 61 25,699 25,760
- reinsurers' share of
unearned premium - 9,195 9,195 - 7,163 7,163 - 5,023 5,023
Other receivables,
including
insurance and
reinsurance
receivables 7,837 44,962 52,799 8,151 42,566 50,717 10,044 37,682 47,726
Deferred acquisition
costs - 6,853 6,853 - 6,228 6,228 - 6,641 6,641
Prepayments and accrued
income 281 601 882 179 522 701 - 432 432
Cash and cash equivalents 1,156 7,345 8,501 2,018 4,979 6,997 3,028 3,009 6,037
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Total assets 39,979 152,190 192,169 37,749 128,287 166,036 47,831 132,107 179,938
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Liabilities
Insurance liabilities:
- claims outstanding - 99,758 99,758 - 80,204 80,204 - 95,616 95,616
- unearned premium - 35,961 35,961 - 30,631 30,631 - 26,522 26,522
Deferred income tax
liabilities 3,686 - 3,686 2,134 - 2,134 3,292 - 3,292
Borrowings 2,000 - 2,000 1,034 - 1,034 2,000 - 2,001
Other payables, including
insurance and
reinsurance
payables 10 20,831 20,841 1,694 25,774 27,468 1,051 16,989 18,040
Accruals and deferred
income 1,108 763 1,871 3,171 326 3,497 5,094 1,226 6,320
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Total liabilities 6,804 157,313 164,117 8,033 136,935 144,968 11,437 140,353 151,790
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Equity attributable to
owners of the Parent
Share capital 1,839 - 1,839 1,510 - 1,510 1,839 - 1,839
Share premium 18,938 - 18,938 15,387 - 15,387 18,938 - 18,938
Other reserves (50) - (50) (50) - (50) (50) - (50)
Retained earnings 12,448 (5,123) 7,325 12,869 (8,648) 4,221 15,667 (8,246) 7,421
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Total equity 33,175 (5,123) 28,052 29,716 (8,648) 21,068 36,394 (8,246) 28,148
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
Total liabilities and
equity 39,979 152,190 192,169 37,749 128,287 166,036 47,831 132,108 179,938
------------------------- -------- --------- -------- -------- --------- -------- -------- --------- --------
17. 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 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 utilised, and
-- The stop loss reinsurance contracts for the 2019 and 2020
years of account could provide additional underwriting capital of
approximately GBP5m.
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.
The Interim Report will be made available in electronic format
on the Company's website, www.huwplc.com .
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END
IR QZLFLBKLFBBE
(END) Dow Jones Newswires
September 25, 2020 02:00 ET (06:00 GMT)
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