TIDMHUW
RNS Number : 7354A
Helios Underwriting Plc
26 May 2023
Helios Underwriting plc
("Helios" or the "Company")
Final results for the year ended 31 December 2022
Increased Retained Capacity Provides Strong Platform for
Growth
Helios, the investment vehicle which builds shareholder value
through exposure to Lloyd's, is pleased to announce its audited
final results for the year ended 31 December 2022. Performance has
been robust against the backdrop of another challenging year for
the global Lloyd's market and Helios is well positioned to maximise
the opportunities on offer in this disciplined market.
Highlights
-- Gross written premium increased by 131% to GBP244m (2021:
GBP106m) reflecting the increase in the capacity portfolio
-- Retained capacity for 2023 open underwriting year increased
by 34% to GBP238.0m (2022 year of account: GBP171.9m)
-- Net tangible asset value of GBP1.52 per share (2021: GBP1.57 per share)
-- Total comprehensive loss for the year of GBP1.3m (2021: +GBP4.9m)
-- 117% growth in net earned premium (2021: 42%)
-- Final dividend of 3p per share is being recommended (2021: 3p)
-- Pro forma combined ratio of 93%
-- Cumulative rate increases since 1 January 2017 in excess of 50% for the Helios portfolio
-- Board augmented and strengthened with additional experience and expertise
o Martin Reith appointed Chief Executive
o Nigel Hanbury will continue to provide guidance as Executive
Deputy Chairman
o Michael Wade nominated Chairman Designate to be appointed
following the AGM
Helios Group Summary Profits
2022 2021
GBP'000 GBP'000
Gross written premium 244,614 106,058
Underwriting profits 116 3,401
Total other income 1,242 2,700
Total costs (6,527) (6,746)
Revaluation of syndicate
capacity 2,670 8,132
Tax 1,184 (2,555)
Total comprehensive
income (1,315) 4,932
Earnings per share
Basic (4.87)p (0.75)p
Diluted (4.87)p (0.75)p
Martin Reith, Chief Executive, commented:
"We have successfully steered the Company through another
challenging year with 2022 proving to be one of the most difficult
in recent memory following a string of unforeseen events, including
interest rate hikes, natural disasters and Russia's invasion of
Ukraine.
"Whilst the headline results show a pre-tax loss, that should
not obscure the underlying achievements during the period. Our
retained capacity grew by 34% in 2022 to GBP238m, during an active
year of acquiring blue-chip syndicates across the volatility
spectrum, which we expect will yield attractive underwriting
returns in the years to come.
"Despite the wider macro-economic conditions, we remain
confident that Helios is well positioned to capitalise on the
current hard market and deliver significant returns for
shareholders, thanks to the improving reinsurance market
conditions, our enhanced positioning and the increasingly positive
landscape for underwriting."
For further information, please contact:
Helios Underwriting plc
Martin Reith - CEO
Nigel Hanbury - Executive +44 (0)7720 292 505
Deputy Chairman
+44 (0)7787 530 404
Arthur Manners - Chief Financial
Officer +44 (0)7754 965 917
Numis (Nomad and Broker)
Giles Rolls / Charles Farquhar +44 (0)20 7260 1000
Buchanan (PR)
Helen Tarbet / George Beale +44 (0)207 466 5000
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 GBP297m of capacity
for the 2023 account. The portfolio provides a good spread of
business being concentrated in specialty insurance and reinsurance.
For further information please visit www.huwplc.com.
Chairman's statement
Total comprehensive loss of GBP1.2m (2021 profit: GBP4.9m)
Net tangible asset value at GBP1.52 per share (2021:
GBP1.57)
A final dividend of 3p per share is being recommended (2021:
3p)
In summary
-- Gross premium written increased by 131%
-- Total comprehensive loss of GBP(1.3)m (2021: profit of GBP4.9m)
-- Net tangible asset value at GBP1.52 per share (2021: GBP1.57)
-- Pro forma combined ratio of 93%
-- A final dividend of 3p per share is being recommended (2021: 3p)
-- Cumulative rate increases since 1 January 2017 in excess of 50% for the Helios portfolio
The results for the year ended 31 December 2022 show a total
comprehensive loss for the year of GBP1.3m (2021: a profit of
GBP4.9m), and the net tangible asset value of the Group is GBP1.52
per share (2021: GBP1.57). Although these results show a pre-tax
loss, they do not reflect the successful trading that has taken
place over the last few years. Moreover, the results have been
skewed by the steps Helios has taken to position our portfolio to
yield significant returns from our retained capacity in this
exciting and disciplined market.
Our retained capacity grew substantially into 2022 and also into
2023; however, only a proportion of these premiums are earned in
the first 12 months and the expected profits are earned in the
succeeding years. Add in the impact of the macro-economic
environment, interest rate hikes and the mark to market accounting
principles, natural catastrophe losses including Hurricane Ian and
Russia's invasion of Ukraine - which have all served to dampen our
returns. Nevertheless, the Board believes that we are at the point
of the underwriting cycle where the prospects for underwriting
profitability are much improved and the better overall landscape
for underwriting is likely to be extended following the change in
the reinsurance market conditions at the end of last year and
continued market discipline.
It is important to understand that there is a three-year lag in
the recognition of underwriting profits in our accounts so at the
moment we are impacted by the growth of the Helios share of the
capacity portfolio in 2022, which is showing a loss at 12 months.
This loss on the larger portfolio has distorted overall results as
the contribution from the profits recognised in the 2020 and 2021
underwriting years have been overshadowed.
Lloyd's has announced a combined ratio of 91% and is expecting
better results in the next few years, particularly as the
prospective investment returns are expected to make a significant
contribution in the future. The Helios portfolio pro forma combined
ratio of 93% has broadly matched the performance of Lloyd's.
Our strategy is to continue to build a "blue chip" portfolio of
underwriting capacity and during this year the Helios-retained
capacity fund has grown from GBP172m to GBP238m.
Approximately half of the fund is comprised of freehold capacity
on well-established syndicates at Lloyd's. When these syndicates
wish to grow their businesses, the existing owners of the capacity
have pre-emptive rights to receive additional capacity pro rata to
the scale of increase in the underlying business. The additional
capacity is free and the value of this additional capacity
increases our asset valuation but additional capital is required to
meet funds at Lloyd's. The small reduction in overall auction
prices last year has reduced the benefit of the incremental value
of the pre-emption rights.
Earlier in the cycle we reduced underwriting risk through "quota
share reinsurance" which transfers the underwriting risk to a third
party. In past years, as much as 70% of the fund has been passed to
reinsurers for which Helios receives a fee. We are now at the stage
in the cycle where the market has become more profitable and so the
underwriting risk retained by Helios has been increased and the
amount ceded to reinsurers has reduced to 26% of the overall
portfolio. We have also been able to reduce risk through stop loss
policies to protect against large unexpected losses. To date we
have not needed to draw on these facilities.
Helios actively manages capital. We have a number of dials we
can turn to increase or decrease our exposure. Fee income remains a
core and attractive earnings stream that complements our
underwriting returns. As the market cycle evolves, we evaluate
opportunities to retain underwriting exposure or cede risk for
fees.
There is no doubt that over the years the nature of the
underwriting risk has changed and frequency of large losses is up,
and in addition, we have to contemplate the ravages of climate
change, a pandemic and the Russian invasion of Ukraine.
Summary financial information
Year to 31 December
---------------------
2022 2021
GBP'000 GBP'000
---------------------------------- ---------- ---------
Gross written premium 244,614 106,058
Net earned premium 150,393 69,406
Underwriting profits 116 3,401
Other income 1,242 2,700
Total costs (6,527) (6,746)
Revaluation of syndicate capacity 2,670 8,132
Tax 1,184 (2,555)
---------------------------------- ---------- ---------
Total comprehensive income (1,315) 4,932
---------------------------------- ---------- ---------
NTAV - GBP per share 1.52 1.57
---------------------------------- ---------- ---------
A further capital raising was completed last year to raise
GBP12m largely from a new institutional investor. These funds have
been used to fund the growth of the capacity fund.
Dividend
The Board recommends a 3p dividend in line with the existing
policy.
There will be the option to take new ordinary shares in lieu of
the dividend.
The payment of this dividend reflects the Board's confidence in
future cash flow despite the pre-tax loss this year.
The opportunity
Helios represents an opportunity for investors to access an
uncorrelated asset class across a managed portfolio. Capital is
deployed across a diversified portfolio of syndicates offering a
favourable risk/return. Private capital is a significant feature of
the Lloyd's market, representing approx. 8.5% of market capacity
for 2023 (or GBP4bn). Lloyd's has clearly stated that it values
private capital but Lloyd's 2025 vision states that it must be
"re-energised and provided on a more flexible and efficient basis".
Helios is positioning itself to be that efficient access point and
is uniquely able to drive third party investment into Lloyd's.
The future strategy will exploit this opportunity to bring
increased predictability to both cash flow and dividends. This is
an exciting time for our Company and we look forward to many years
of profitable trading despite the dire economic outlook that
engulfs the world at this time.
Board changes
I am delighted in the changes to the leadership roles at
Helios.
I welcome the appointment of Martin Reith as Chief Executive as
his extensive experience in the Lloyd's market in building
successful businesses will be invaluable to Helios in the
future.
I am delighted that Nigel Hanbury has agreed to become Executive
Deputy Chairman and would like to thank him for his contribution to
the business as Chief Executive since 2012. He built the capacity
fund to GBP297m during the soft market, taking advantage of the
improved market so that Helios now has the opportunity to deliver
excellent growth in shareholder value. We expect to be able to
benefit from Nigel's extensive experience in the management of
third party capital at Lloyd's in the future.
I have been a Board member since Helios was founded in 2007 when
it was listed on AIM and have latterly served as Chairman. It is
the appropriate time for me to retire and I am delighted that
Michael Wade has agreed to become a Director and take over as
Chairman at the end of the Annual General Meeting in June.
Michael Wade has enjoyed a long career at Lloyd's including
forming one of the first Lloyd's corporate capital vehicles in 1993
(CLM Insurance Fund plc) and later acted for UK pension funds via
Rostrum Group investing in listed Lloyd's firms. He has served on
the Council and Committee of Lloyd's. Currently, Michael is also
non-executive chairman of Howden Tiger Capital Markets UK and a
senior advisor to Mitsui Sumitomo Insurance. I am sure that
Michael's wealth of experience in the insurance world will benefit
the Company in the future.
I congratulate the executive team in delivering a top class
portfolio of upper quartile investments in leading syndicates. In
addition, your Non-executive Directors have played an important
part in developing the future strategy.
Future prospects
We envisage further growth over 2023 and into 2024 and will
position the portfolio accordingly. We expect the majority of the
syndicates we support to pre-empt in order to benefit from the
attractive rating environment and market discipline. In addition,
we are in discussions with a number of new opportunities for Helios
that will give us further diversification.
It is likely we shall seek support from third party capital to
allow us to maximise these opportunities for appropriate fees and
commissions. We believe this will help us to continue to deliver
superior returns and generate repeatable income while managing
volatility.
Michael Cunningham
Non-executive Chairman
25 May 2023
Chief Executive Officer's review
Net tangible asset value GBP1.52 (2021: GBP1.57)
Rate increases since 2017 in excess of 55%
117% growth in net earned premium (2021: 42%)
93% pro forma combined ratio for the overall portfolio is in
line with the overall Lloyd's market combined ratio of 91.9%
Helios is perfectly positioned to maximise the opportunities
available in the market and Lloyd's remains well positioned to
deliver profits:
-- Lloyd's financial position, with a solid capital base and
robust risk management framework has never been better. This
enables the market to manage risks effectively and respond to
unexpected events
-- Lloyd's reputation for innovation and adaptability means that
it is quick to embrace new technologies such as the use of data
analytics and machine learning to assess risk and provide more
accurate pricing and enriched decision making
-- Lloyd's global reach is unparalleled with a presence in more
than 200 countries and territories allowing access to a wide range
of customers and markets
A constant focus from Lloyd's over the past 18 months or so has
been the requirement for syndicates to ensure risk adjusted rate
change keeps apace with inflation. As a consequence, price
increases rather than a major drive for exposure growth have been a
particularly strong driver of recent premium growth.
Across the market, a high proportion of syndicates reported a
year on year deterioration in profitability and results at
individual syndicate level for some were more volatile in a year
marked by significant cat events. Historically we have seen reserve
redundancy and subsequent releases as losses have perfected over
time. We are confident we shall see similar trends.
Helios remains a highly efficient and unique business that
offers investors exposure to a diversified portfolio of top
performing syndicates.
Helios is delighted that Martin Reith has been appointed as
Chief Executive Officer ('CEO'). Nigel Hanbury will remain on the
Board as Executive Deputy Chairman, so that the Board can continue
to benefit from his leadership and his extensive knowledge of
Lloyd's.
Q&A with new CEO Martin Reith
Plans for the company over the next year and beyond:
Helios has been positioned to maximise the opportunities this
market has to offer. Our portfolio in 2023 has a larger retained
capacity (up 38% from 2022), across a well balanced volatility
managed portfolio. We are witnessing market discipline and pricing
adequacy that should yield some attractive underwriting returns.
Beyond this year, we intend to grow our capacity over both freehold
and relationship syndicates always with an eye to backing the the
best syndicates we can access. We shall also look at ways to shift
the quality of our earnings as we increase the fees and commissions
we can generate from our tenancy positions.
What experiences do you bring to Helios:
I started my career at Lloyd's in 1984 and have had significant
experience across underwriting, management and leadership. In 2001,
I founded and was the CEO of Ascot Underwriting which continues to
be a force in the market today. I have had experience raising
capital, I have sat on the Group Holding's Board of AmWINS Group
Inc, a major US wholesale broker, I have also been involved with an
ILS fund. I believe I therefore bring a broad range of skills and
experience to the role. In fact I feel it is a rather suitable
evolution. I may not longer be at the coal face assessing and
pricing risk, rather I am seeking to support those that I believe
do an outstanding job in this area.
What do I feel are Helios' biggest achievements for this
year:
Under Nigel's leadership, we have curated an outstanding
portfolio in the most capital efficient manner. We have increased
our retained capacity in order to benefit from the exceptional
market conditions. We have also sought to broaden the syndicates we
support and in turn the lines of business we are exposed to such
that we now participate on risks that haven't naturally gravitated
to Lloyds. Across the majority of our key metrics, we are showing
we are receiving more premium but for less exposure. Risk adjusted
rate change is key to ensure we keep apace with inflation in
addition to the pricing correction.
How has the outlook for (re)insurers changed because of the
recent macroeconomic environment:
There are two key aspects: inflation and interest rates. It is
vital the impact of inflation is not underestimated and that
appropriate steps are taken to ensure pricing keeps ahead of
inflation. Across our portfolio we have sought to understand how
each syndicate is dealing with this issue. In addition, reserves
need to be checked and claims settled quickly to ensure inflation
does not undervalue the held reserves.
To help dampen inflation, we have seen the increase of interest
rates. This is most welcome to allow improvement in the returns on
the assets held by syndicates and by Helios. Now we are hopeful
that we shall see underwriting profits and investment returns
generate shareholder value.
What are the biggest opportunities for Helios:
Helios has a unique position in the market. It is a highly
regarded business that has access to an extraordinary portfolio.
Through management's curation, we have historically outperformed
the market. We are ideally positioned to maximise the rewards of
this market - our efficient capital ratio, our volatility
management, our wish to increase repeatable non-risk fee income and
that we are often sought out to validate and seed fund new
syndicate starts, sets us aside. We are also the only publicly
listed consolidator of private capital in Lloyd's and we shall
continue to build on our access in this way.
As we enjoy the opportunities of a hard market, it should be no
surprise that our portfolio is at the cutting edge of shaping and
driving market discipline. That is how we have positioned
Helios.
Closing remarks:
I am very excited to be leading Helios and my thanks to Nigel
Hanbury and Arthur Manners for their support. They have built a
fabulous business and I am honoured to help write the next chapter.
I am delighted that Nigel has agreed to take up the role of
Executive Deputy Chairman. He and I will work very closely over the
coming months. Arthur remains as CFO and I look forward to working
in lock-step with him.
Strategy
The building of a portfolio of participations on leading Lloyd's
syndicates remains the strategic objective of the Group. During
2022, the key developments were:
-- building the portfolio of capacity to GBP297m for 2023,
taking up freehold capacity offered for nil cost by way of
pre-emptions amounting to GBP21.7m and building stakes on
syndicates with good prospects offering tenancy capacity;
-- maintaining the quality of the portfolio and getting access
to the better-managed syndicates at Lloyd's;
-- taking advantage of the underwriting cycle and increasing the
capacity retained by Helios as the prospects for improved
underwriting margins remain;
-- providing an income generating investment of Lloyd's
underwriting capacity, thereby generating returns in capital value
and dividend income for shareholders;
-- providing a cost-efficient platform for participation at
Lloyd's, benefiting from no profit commission potentially payable
to Lloyd's members' agent and taking advantage of increased scale
and, therefore, cost efficiencies;
-- improving shareholder returns by use of excess of loss
reinsurance funds at Lloyd's arrangements; and
-- growth of the capacity fund to be funded by third party capital for 2024.
Quality of portfolio
The portfolio has been positioned to maximise underwriting
returns and the favourable market conditions we are enjoying in
2023 and beyond. There has been increased focus and curation from
the 2022 to 2023 portfolio with an emphasis on:
-- reducing exposure to natural catastrophe;
-- growth into specialty lines;
-- targeting risks and classes that diversify the portfolio;
-- building relationships with syndicates that attract non-correlating exposure; and
-- identifying new relationship capacity with excellent growth prospects.
As a consequence, we can report favourable development across
all our key exposure metrics with an increase in our direct
insurance premium and a reduction in the reinsurance portfolio.
While we continue to work with our reinsurers to manage the
volatility ofour portfolio, the amount we have decided to retain is
up some 38%, and our overall capacity into 2023 up by 25%, to just
shy of GBP300m.
We have created new relationships with syndicates that accept
risks that don't naturally gravitate to the London market and, in
turn, this has allowed us to develop greater ESG awareness and
opportunity.
The Lloyd's market is in robust shape with discipline and
pricing shaping an impressive performance. While a few lines have
reported a slowing in price correction, the drive to implement risk
adjusted rate change and simple pricing correction remains strong.
As a consequence, price increases, rather than a major drive for
exposure growth, have led the substantial premium growth the market
has witnessed.
Add "uncertainty" into the mix and the demand and desire for
buyers to buy comprehensive cover in a market exercising judicious
capacity deployment, all of this leads to increased demand.
Helios' portfolio consists of some of the top-performing and
market-leading syndicates that help shape and drive demand. We are
ideally and deliberately positioned to maximise the returns this
market has to offer.
We continue to focus ruthlessly on the best syndicates. The
portfolio now comprises an even split between syndicates where we
have "freehold rights" - rights to participate pro-rata on the
future growth of the syndicate and "tenancy rights" where we are
offered participation on an annual basis.
FREEHOLD CAPACITY
Freehold
Managing agent Syndicate GBP'000
------------------ --------- --------
Beazley 623 27.5
Tokio Marine 510 27.1
ERS 218 17.6
Atrium 609 17.1
Hiscox 33 14.4
MAP 2791 11.4
Blenheim 5886 9.1
Cathedral 2010 7.0
QBE 386 2.9
Chaucer - Nuclear 1176 2.9
S.A. Meacock 727 2.6
Other syndicates 7.7
------------------ --------- --------
Total capacity 147.3
------------------ --------- --------
TENANCY CAPACITY
Freehold
Managing agent Syndicate GBP'000
--------------------- --------- --------
Dale Partners (Asta) 1729 20.0
Blenheim 5886 17.7
Beazley 5623 17.6
Flux - Accrisure 1985 16.9
CFC 1988 15.0
Arch 1955 12.5
MCI SIAB 1902 10.7
Beat (Asta) 4242 10.6
Apollo 1971 10.0
Apollo 1969 10.0
MIC Global 5183 5.0
Other syndicates 3.4
--------------------- --------- --------
Total capacity 149.4
--------------------- --------- --------
Total portfolio 296.7
--------------------- --------- --------
Freehold syndicates - Participations in syndicates managed by
these managing agents represent shares in the well-established and
better-managed businesses at Lloyd's. We strive to acquire LLVs
with portfolios that comprise these quality syndicates, thereby
having to pay the average auction prices to get access. This
proportion of the portfolio provides diversified exposure to
syndicates that have experienced underwriting teams,
well-established portfolios where each management team allocates
capital to the business areas with the better risk adjusted
returns.
Tenancy syndicates - We have a mix of longstanding relationship
capacity and those syndicates where we are supporting for the first
time. In reality, while we hope to have secured capacity over the
long term, this is opportunistic capacity that we have identified
and that adds to our overall portfolio construction.
Curation of the portfolio
The table shows the movement in the portfolio to the opening
position for the 2023 year of account. The portfolio has been
actively managed during the year to achieve the following:
Freehold Tenancy Total Capacity
------------------------- -------- ------- --------------
Start 1 January 2022 YOA 144.8 87.9 232.7
Pre-emptions 21.7 14.8 36.6
New syndicates - 49.4 49.4
Auction - sales (31.6) - (31.6)
Auction - buy 14.8 - 14.8
Increase in tenancy - 22.4 22.4
Acquisitions 4.9 0.8 5.7
Discarded capacity (7.5) (25.4) (32.8)
------------------------- -------- ------- --------------
Start 1 January 2023 YOA 147.3 149.4 296.7
------------------------- -------- ------- --------------
% increase 2% 70% 27%
------------------------- -------- ------- --------------
Pre-emptions - GBP37m - the syndicates' supported grew their
businesses on average by 16% for the 2023 year of account and we
took up these pre-emptions for no cost.
New syndicates - GBP49m - new participations on four syndicates
for 2023: Arch, Flux, CFC, MIC Global.
Auction sales - GBP32m - sold capacity on Beazley 623 and Tokio
Marine 510 to get better balance in the portfolio and to raise some
cash. In addition, we decided to reduce our exposure on syndicate
Cathedral 2010, to reduce the catastrophe exposure and come off
Argenta syndicate 2121 entirely.
Auction - buy - GBP15m - we again took advantage of
lower-than-expected prices on syndicates to purchase GBP10m of
capacity on the motor syndicate 218 - which will benefit from the
improved investment returns in the future.
Increase in tenancy - GBP22m - increased participations on
syndicates Beazley 5623, Apollo 1971, Apollo 1960 and Dale
1729.
Acquisitions - GBP5m - the capacity acquired supplemented the
existing freehold capacity participations.
Discarded capacity - GBP33m - to reduce the catastrophe
exposure, we came off most of the SPA Cat syndicates (6104, 6107,
6117) and reduced our participations on syndicates with
higher-than-average exposure.
Portfolio underwriting result
The portfolio achieved a pro forma combined ratio of 93% in
comparison with the combined ratio for the Lloyd's market of 91.9%.
The combined ratio has been calculated by applying the 2022 Helios
capacity to the 2022 combined ratios of syndicates supported to
estimate a pro forma Helios combined ratio. This removes the
distortion of the significant growth in the portfolio to
demonstrate the underlying quality of the portfolio.
The chart shows quartile ranking of the Helios supported
syndicates within the universe of all syndicates at Lloyd's. It
shows that over 50% of the Helios portfolio is ranked in the first
and second quartile of Lloyd's syndicates.
Quartile 1 - 22%
Quartile 2 - 36%
Quartile 3 - 16%
Quartile 4 - 26%
The calendar year underwriting profit from the Helios retained
capacity for 2022 has been generated from the portfolio of
syndicate results from the 2020 to 2022 underwriting years as
follows:
Portfolio underwriting result
2020 2021 2022 Total
--------------------------------------------- ----- ----- ----- -----
Portfolio capacity by underwriting year GBPm 121.2 150.8 238.4
Gross underwriting result GBPm 7.2 7.9 (9.5) 5.6
Investment income GBPm (2.5) (1.0) - (3.5)
Portfolio result by underwriting year GBPm 4.7 6.9 (9.5) 2.1
Helios retained % 59% 66% 75%
Helios share of the portfolio result GBPm 2.8 4.5 (7.1) 0.21
--------------------------------------------- ----- ----- ----- -----
The strategy to take advantage of the excellent underwriting
conditions, to grow the capacity portfolio and to increase the
Helios share of the capacity portfolio has impacted the overall
result for 2022 for two reasons:
a) The growth in the capacity portfolio to GBP238m for 2022, a
97% increase from the 2020 portfolio has resulted in the 2022
underwriting year loss at the 12-month stage having a
disproportionate impact on the Helios share of the result.
b) Helios' increased share of the portfolio, increasing to 75%
for the 2022 underwriting year, has also had a negative impact on
the overall result for calendar year 2022.
The 2022 underwriting year result at 12 months represents an
accounting loss of 4.1% (2021: loss of 3.9%) on the retained
capacity of GBP178m (2021: GBP99m). The Lloyd's market incurred
major losses of 12.7% (2021: 11.2%) of net earned premium so a
further year of significant major losses for the market. Major
claims in 2022 for the insurance industry is estimated to amount to
$130m and include natural catastrophe losses such as Hurricane Ian,
Hurricane Fiona and Australian Floods, as well as non-natural
catastrophe losses such as those arising from the conflict in
Ukraine. Two supported syndicates had material exposure to the
natural catastrophes during the year and these losses have been
fully recognised in the year.
The negative investment returns on the assets managed by the
syndicates have arisen from mark-to-market accounting rules
requiring them to mark the value of assets down to reflect
prevailing market conditions - in this case, rising interest rates.
However, this loss is expected to reverse out in 2023 as higher
interest rates lead to greater investment returns on the syndicate
assets.
During 2022, the 2020 underwriting year mid-point profit
improved to a profit of 3.1% (2021: profit of 1.0%), outperforming
the average of the Lloyd's market by 2.2%. Given that losses from
COVID-19 of 10% of capacity for the Helios portfolio have
predominantly fallen on the 2020 underwriting year, the overall
profit is encouraging. The mid-point estimate for the 2021
underwriting year at 31 December 2022 is a profit of 2.4% (2021:
profit of 1.9%).
We would expect the GAAP earnings in 2023 from the 2022 and 2021
underwriting years to make a significant contribution to Helios'
earnings both from the profitability in the underlying portfolios
and as positive investment returns are recognised.
We would expect the gap in relative performance to narrow over
the next 18 months as it has done in the past. The syndicates
supported by third party capital have been more conservative in
their published estimates over the 36 months to the close of the
year of account due to the transparency of each syndicate
result.
Other income
Helios generates additional income at Group level from the
following:
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Fees from reinsurers 562 616
Corporate reinsurance recoveries 33 (372)
Gain on bargain purchases - 1,219
Investment income 647 1,237
--------------------------------- -------- --------
Total other income 1,242 2,700
--------------------------------- -------- --------
The investment returns on the assets managed by the supported
syndicates are included in the overall portfolio underwriting
result.
Investment
return
Financial investments GBP'000 GBP'000 Yield
---------------------------- ------- ---------- ------
Syndicate investment assets 152,242 (3,423) (2.2%)
Group investment assets 73,771 647 0.1%
226,013 (2,776) (1.2%)
---------------------------- ------- ---------- ------
Helios' share of the syndicate investments incurred a loss in
the year of 2.2% as interest rates increased and this has masked
the improvement in underwriting margins. Group investment funds
remained in cash and targeted investments were made, which made a
small positive return. These funds have now been fully invested in
a short duration bond portfolio. The Group's share of the syndicate
investments is expected to continue to increase to reflect the
growth of the capacity portfolio.
Fees from the quota share reinsurers reflect the fee payable on
the funds at Lloyd's provided and profit commission relating to the
2020 and 2021 year of account has been accrued.
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.
2022 2021
GBP'000 GBP'000
------------------ -------- --------
Pre-acquisition 46 1,271
Reinsurance costs 1,261 1,871
Operating costs 5,220 3,604
------------------ -------- --------
Total costs 6,527 6,746
------------------ -------- --------
The reinsurance costs include the stop loss premiums and the
cost of the excess of loss funds at Lloyd's facilities that are
expected to improve the returns generated by Helios' shareholders.
The stop loss costs incurred in 2022 have been partially deferred
to reflect the exposure of the portfolio that extends over two
years. GBP22.7m of additional underwriting capital was sourced in
2023 through a reinsurance contract at a cost of GBP2.0m.
The operating costs include the transaction costs of a material
acquisition that did not proceed. The internal infrastructure of
the business will be expanded in 2023 given the overall growth of
the fund.
Net tangible asset value per share
The growth in the net asset value per share remains a key
management metric for determining growth in value to
shareholders.
2022 2021
GBP'000 GBP'000
----------------------------------------- -------- --------
Net tangible assets 55,743 46,856
Fair value and capacity (WAV) 59,967 59,796
----------------------------------------- -------- --------
115,710 106,652
----------------------------------------- -------- --------
Shares in issue (Note 21) 76,218 67,786
Net tangible asset value per share (GBP) 1.52 1.57
----------------------------------------- -------- --------
The capital employed per share, the assets used to generate
earnings which exclude the deferred tax liability on capacity value
is as follows:
2022
GBP'000
----------------------------------------- --------
Net assets 115,710
Deferred tax provision on capacity value 14,139
Capital employed 129,849
Shares in issue (Note 21) 76,218
Capital employed per share (GBP) 1.70
----------------------------------------- --------
The deferred tax provision on capacity value could potentially
be incurred should the entire portfolio be sold. Given the strategy
of the Group to grow the capacity fund, there is no intention to
realise the full value of the portfolio. The capital employed by
share is 18p (2021: 22p) higher than the net tangible asset value
per share.
The value of capacity is subject to fluctuation and reflects the
activity in the capacity auctions held in the autumn of each
year.
Capacity value
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 net asset value
("NAV"), 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.
2022 2021
GBPm GBPm
----------------------------------- ----- -----
Freehold capacity with value 147.3 144.8
Relationship capacity 149.4 87.9
----------------------------------- ----- -----
296.7 232.7
----------------------------------- ----- -----
Value of portfolio 60.0 59.9
Value per GBP of freehold capacity 41p 41p
----------------------------------- ----- -----
The average price per GBP of freehold capacity has remained at
41p per GBP of capacity as the pre-emptions offered increased the
value of the portfolio while the decline in average prices
partially offset this increase. In addition, the relationship
capacity on "nil value"/non-traded syndicates continued to grow as
Helios is able to demonstrate long term commitment to providing
third party capital to growing syndicates.
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.
A sensitivity analysis of the potential change to the NAV per
share from changes to the value of the capacity portfolio is set
out below:
Revised
Capacity NTAV
value per share
--------------------- -------- ----------
Current value - GBPm 60.0 1.52
Decrease of 10% 54.0 1.46
Increase of 10% 66.0 1.58
--------------------- -------- ----------
Each 10% reduction in the capacity values at the 2023 auctions
will reduce the NAV by approx. 6p per share (2021: 7p per share).
The increase in capital base has reduced the impact on NAV per
share from changes in capacity value. Any reduction in the value
will be mitigated by any pre-emption capacity on syndicates that
have a value at auction.
Acquisition strategy
Helios acquired three LLVs in 2022 (2021: 28) a reduction in the
activity of the previous year following the uncertainty created by
the war in Ukraine. We will continue to approach the owners of LLVs
directly, which has the advantage of:
-- raising the profile of Helios as a potential purchaser of LLVs;
-- allowing owners of LLVs who were potentially considering
ceasing underwriting at Lloyd's to have the opportunity to realise
the value of their investment quickly;
-- allowing vendors a tax efficient exit if they wish to cease underwriting; and
-- being an ongoing exercise to offer owners of LLVs an
alternative to investing at Lloyd's by taking Helios shares as part
of the consideration.
The ongoing conflict in Ukraine has created material
uncertainties in establishing fair value of an LLV, and, therefore,
GBP0.5m of the agreed consideration has been deferred pending the
final 2021 year of account result of syndicates within the
portfolio acquired that could have material exposure to events in
Ukraine.
During 2022, a further three LLV's were acquired.
Summary of acquisitions Goodwill
----- --------------------------------------------- ------------------
Total Humphrey Discount
consideration Capacity value to
GBPm GBPm GBPm Humphrey Negative Positive
----- -------------- -------- -------- --------- -------- --------
2022 5.7 5.7 6.3 10% 374
2021 27.3 34.8 28.9 6% 1,219 319
2020 10.2 10.9 13.2 23% 1,260 -
----- -------------- -------- -------- --------- -------- --------
The three (2021: 28) acquisitions in 2022 were purchased for a
total consideration of GBP5.7m (2021: GBP27.3m), of which GBP2.6m
(2021: GBP18m) was attributed to the value of capacity acquired.
The marginal result for 2022 for Lloyd's has delayed the
recognition of profits in the LLVs and consequently some positive
goodwill has been recognised. 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.
Reinsurance quota share
The use of quota share reinsurance to provide access to the
Lloyd's underwriting exposures for reinsurers and private capital
has not been expanded in 2021. The core of the panel of reinsurers
remains XL Group plc and Everest Reinsurance Bermuda Limited.
This reinsurance has successfully reduced the exposure of Helios
shareholders in recent years and assists in the financing of the
underwriting capital. Helios has again reduced the proportion of
the capacity portfolio ceded for the 2023 year of account.
We expect to increase the participation of third party capital
to support the growth of the capacity fund in 2024.
2020 2021 2022 2023
-------------------------------- ----- ----- ----- -----
Total capacity ceded - GBPm 49.1 51.5 60.8 58.3
Current total capacity - GBPm 121.2 150.8 238.4 296.7
Helios' share of total capacity 59% 66% 75% 80%
-------------------------------- ----- ----- ----- -----
Risk management
Helios continues to ensure that the portfolio is well
diversified across classes of businesses and managing agents at
Lloyd's.
The biggest single risk faced by insurers arises from the
possibility of mispricing insurance on a large scale. The recent
correction in terms and conditions and the actions of Lloyd's to
force syndicates to remediate underperforming areas of their books
demonstrate the mispricing that has prevailed over the past few
years. The results of this remediation work by Lloyd's is starting
to be reflected in the results announced by the syndicates
supported.
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. There
is acceptance that catastrophe exposures were generally
under-priced and hence the syndicate managers have been reducing
their catastrophe exposures. The broad reinsurance market
correction is a fundamental shift in risk versus return metrics
presenting opportunities to pivot the portfolio in the future.
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 the 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 80%
(2022 YOA: 75%) 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 7.5% of capacity.
The impact on the net asset value of Helios from the disclosed
large loss scenarios are as follows:
Expected loss Impact on net
as % of capacity asset value
------------------- ---------------
2023 2022 2023 2022
---------------------------------------------- --------- -------- ------- ------
AEP 1 in 30 - whole world natural catastrophe 14.3% 18.6% 11.4% 10.3%
AEP 1 in 30 US/GOM windstorm 10.2% 12.8% 11.4% 9.0%
Terrorism 8.4% 11.4% 11.4% 9.0%
Cyber - cloud cascade 8.3% 8.3% 11.4% 9.0%
---------------------------------------------- --------- -------- ------- ------
The assessment of the impact of the specified events is net of
all applicable quota share, stop loss reinsurance contracts and
corporation tax but before the likely profits to be generated from
the balance of the portfolio in any year. Notwithstanding the
reduction in the natural catastrophe exposure in the 2023
portfolio, the impact on net assets has increased as the retained
capacity has increased. The similarity on the impact on the net
assets from a loss arises as the expected loss will result in only
a net retention from the stop loss of 7.5% 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:
2023 2022
Underwriting capital on underwriting year GBPm GBPm
------------------------------------------ ----- -----
Quota share reinsurance panel 27.8 26.1
Excess of loss funds at Lloyd's 41.2 20.0
Helios' own funds 58.3 43.3
------------------------------------------ ----- -----
Total 127.3 89.4
------------------------------------------ ----- -----
Capacity as at 1 January 296.6 232.7
Economic capital requirement 125.7 90.9
Solvency and other adjustments 0.7 (1.5)
------------------------------------------ ----- -----
126.4 89.4
------------------------------------------ ----- -----
Capital ratio 43% 38%
------------------------------------------ ----- -----
Environmental, social and governance responsibility
On 23 March 2023, the Board approved an environmental, social
and governance (ESG) policy statement. Helios offers investors
exposure to a diversified portfolio of syndicates at Lloyd's of
London. As a consequence, Helios is inexorably aligned to the
approach Lloyd's takes with regard to the society as a whole in
addition to those adopted by the various managing agencies.
As we construct our portfolio each year, considerable emphasis
is given to understanding individual syndicate actions with regard
to ESG. This includes an understanding of the risks contemplated as
well as the ESG initiatives adopted within the respective
businesses and their management teams.
We support the ESG strategy of Lloyd's, who has outlined their
ambition to integrate sustainability into all of Lloyd's business
activities. Lloyd's has stated that embedding ESG across the market
and corporation is a top priority and is interwoven with their
purpose of creating a better world. Helios fully supports Lloyd's
approach and oversight of the market. More information can be found
at:
https://www.lloyds.com/about-lloyds/responsible-business/esgreport2021.
Helios is committed to diversity and maintaining an inclusive
workplace culture where everyone of any background is able to
contribute in full to the success of our business. Helios believes
that a commitment to protecting diversity is not only morally
imperative but an excellent business strategy. While Helios'
workforce is very small, we actively engage with our outsource
partners, ensuring our ESG principles are maintained. In addition,
Helios is expecting to be a signature to the UN Principles For
Responsible Investment (www.unpri.org) and we strive to adopt the
six key principles for responsible investment.
The Board is committed to a high standard of corporate
governance and is compliant with the principles of the Quoted
Companies Alliance's Corporate Governance Code (the "QCA Code").
The Directors have complied with their responsibilities under
Section 172 of the Companies Act 2006 which requires them to act in
the way they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of its members
as a whole.
Martin Reith
Chief Executive Officer
25 May 2023
Lloyd's Advisers' report - Hampden Agencies
Hard insurance market conditions persist - reinsurance now a
genuinely hard market for the first time since 2006
The hard insurance pricing environment continued in 2022 in most
classes with Lloyd's reporting rate increases for 20 consecutive
quarters, which have compounded over this period by 44.5%. At 1
January 2023, the reinsurance renewals were the most challenging
for buyers in a generation against a backdrop of 2022 being the
second year in succession suffering insured losses from natural
catastrophes of well above $100bn, while rising bond yields during
2022 curtailed reinsurers' risk appetite owing to mark to market
losses on their investment portfolios.
The cycle in insurance and reinsurance is a classic supply led
cycle with pricing driven more by changes in supply than demand.
The impact of inflation increased demand from insurers for risk
transfer to reinsurers with additional limit required of up to
$30bn. Combined with a change in the supply of capital, which was
reduced by up to $50bn, the supply/demand imbalance at 1 January
2023 was estimated at $50bn to $80bn by US insurance analyst
Dowling & Partners.
The impact of the supply/demand imbalance led to a hard reset of
the property catastrophe reinsurance market with several years'
worth of re-underwriting being achieved in a single renewal at 1
January 2023. A re-acceleration of property insurance rate rises
has followed with insurers having to bear not only higher
reinsurance rates but tighter terms and conditions. US property
insurance rates have risen by 17% in Q1 2023 compared with 11% the
previous quarter according to Marsh, the world's largest
broker.
Helios gross written premium growth
Helios reports strong profitable growth in gross written premium
to GBP244.6m for 2022 (GBP106.1m in 2021). In a period of strong
underwriting conditions, Helios' growth in gross written premium
was 130.6% compared with Lloyd's growth in the same period of
19.0%. During 2022, in addition to rate increases, growth benefited
from premium increases owing to inflation particularly in the
property classes as well as foreign exchange movements with the US
dollar gaining by 11.1% against pound sterling ending the year at
$1.20:GBP1.
In common with other suppliers of third party capital, Helios
has the agility to optimise its returns over the insurance cycle by
growing strongly in the current hardening market conditions through
acquisitions of corporate members, negotiating leasehold
participations on syndicates and acquiring capacity at Lloyd's
annual capacity auctions with portfolio allocation decisions being
taken in house by Helios' management team. Helios' growth has been
significantly above the industry average, seeking to maximise
premium volume when rates are rising. Since the bottom of the soft
market in 2017, Helios' gross written premium has grown by just
over seven fold.
Over the past five years, Helios' calendar year net combined
ratio (before corporate costs) has outperformed Lloyd's by three
percentage points a year, with an average combined ratio of 97.5%
compared with 100.5% for the overall Lloyd's market. The chart
below shows the combined ratio of the Helios portfolio compared
with Lloyd's from 2018 to 2022.
However, for the second year running, Helios underperformed
Lloyd's net combined ratio, which was 91.9% in 2022 (93.5% in
2021), the best year since 2015, owing to the new business expense
strain of increasing gross written premiums which were not fully
earned in 2022. Helios' net combined ratio was 96.4% in 2022 (93.9%
in 2021). The growth in the capacity portfolio in 2022 has had a
disproportionate impact in the combined ratio.
Helios' combined ratio compares favourably with both insurance
and reinsurance peer groups. A preliminary estimate of United
States property/casualty insurers by AM Best was a combined ratio
of 102.7% in 2022, while a basket of 19 reinsurance companies in
reinsurance brokers Aon's Reinsurance Aggregate reported an average
combined ratio of 96.2% in 2022.
2020 account closed year
With the closure of the 2020 account at 31 December 2022 the
Helios portfolio has outperformed Lloyd's for the 12th successive
three-year account result, reporting a profit of 3.1% on capacity
compared with the Lloyd's market average result which was a profit
of 0.9% on capacity.
Covid-19 claims for Helios cost 3% of capacity. Covid-19 claim
estimates overall were stable over 12 months, though property
reinsurance losses from Covid-19 deteriorated. Lloyd's maintains
strong reserves with a market aggregate IBNR of GBP0.7bn (22% of
net ultimate loss of GBP3.2bn).
The improvement in the final 12 months was lower than in
previous years, owing to a deterioration in the investment return
largely from unrealised mark to market losses in syndicates' bond
portfolios.
2020 was another year of above average catastrophe claims. A
very active hurricane season with a record number of named storms
only caused moderate insured losses of USD 20bn, including
Hurricanes Sally and Laura. The year was also hit by Covid-19
claims, a $7bn mid-west Derecho and the Texas freeze, Uri, which
occurred in February 2021 with losses going back to the 2020
Account. Swiss Re reported that global insured losses from natural
catastrophes were $81bn in 2020 with an additional $8bn from
man-made disasters. Total insured losses of $89bn made 2020 the
sixth highest on record with 70% of the natural catastrophe insured
losses resulting mostly from severe convective storms and
wildfires. These events, known as secondary perils, have increased
in frequency and are associated with the effect of climate
change.
2021 account open year
The 2021 open year estimate is a profit of 2.4% of capacity at
Q8 (Lloyd's market average is a profit of 4.2% of capacity) and
includes estimates from the 28 acquisitions made by Helios during
2021.
2021 was another year when catastrophe events were above
average. Swiss Re reported insured losses totalling $119bn, the
fifth highest on record, with the rise in insured losses
maintaining a long-term trend based on ten year moving averages of
5% to 7% growth annually.
Secondary perils, including floods, were at the forefront,
accounting for more than 70% of all insured losses with the
European flood Bernd in July causing insured losses above $10bn,
the same as Winter Storm Uri in February in the US. The main loss
event of 2021 was Hurricane Ida, a category four hurricane which
was the second most damaging hurricane to make landfall in
Louisiana on record behind Hurricane Katrina in 2005, with insured
losses estimated at $30bn-$32bn. There were 21 named storms in the
2021 hurricane season, less than the record 30 in 2020.
The 2021 account will also be affected by insured claims from
the conflict in Ukraine, which began in February 2022, most of
which we expect to fall into the 2021 account. Exposed classes
include aviation, marine, political violence, political risk and
trade credit. Lloyd's increased reserves at the 2022 year end to
GBP1.4bn, but 90% is IBNR, in particular from aviation
business.
2022 account so far
The first set of estimates for the 2022 account are released at
the end of May 2023.
At $125bn, global insured losses from natural catastrophes in
2022 were the fourth highest on record. Each region of the world
suffered a major event. Hurricane Ian, which made landfall in
Florida on 28 September 2022 (insured losses estimated in a range
of $50bn to $65bn by Swiss Re), was the year's biggest loss event,
and ranks as the second-costliest insurance natural catastrophe
loss ever on record after Hurricane Katrina.
Lloyd's estimates net Hurricane Ian losses at GBP2bn (compared
with Lloyd's December 2022 guidance in the range of $2.3bn to $3bn)
which is within its range of modelled outcomes and is equivalent to
a market share of the total industry loss of between 3% and 5%.
This estimate is lower than the average market share of major
recent North American hurricanes since 2017 of 6.5%. As well as
Hurricane Ian, major claims included Hurricane Fiona, Australian
floods as well as losses from the war in Ukraine.
Today, average annual industry losses from natural catastrophes
of more than $100bn are standard. Last year's outcome continued a
run of elevated global insured losses since 2017 after a benign
2012-2016 period, reaffirming an average annual growth rate of 5-7%
in losses in place since 1992. This trend is expected to continue,
driven by growing loss severity on account of rising property and
values-at-risk exposures, continued urban sprawl, economic growth
and a backdrop of hazard intensification owing to climate change
effects.
Guy Carpenter reported that reinsurance market conditions began
to harden more materially in 2022 with property capacity becoming
constricted since 1 January 2022 and inflation became a significant
factor in renewal discussions. Its US Property Catastrophe Rate On
Line Index increased by 15% for January through July renewals, the
most significant change since 2006, bringing rates back to 2009
levels, while its Global Rate On Line Index increased by 10.8%.
Market conditions in 2023
Insurers and reinsurers are now seeing annual industry losses of
$100bn or more as standard with this level having been reached in
five years since 1970 and in three of the past five years (2017,
2021 and 2022). Growth in insured values from inflation has boosted
demand for cover while supply has been constrained owing to a
reduction in risk appetite on the part of capital providers. In
addition, interest rate increases to combat inflation have
increased the cost of capital and reduced the value of financial
assets, further limiting supply. Against this backdrop, at 1
January 2023 property catastrophe reinsurance rates rose to close
to 20 year highs.
Primary insurance rate increases have continued so far in 2023
with the Marsh Global Insurance Market Index up 4% in Q1 2023, the
same as in Q4 2022. US property rate increases re-accelerated for
the second quarter running to 17%, up from 11% the previous
quarter. Casualty pricing was up by 2% and financial and
professional lines liability insurance rates continued to fall by
13% compared with 10% in Q4 2022.
The pace of rate increases continued to slow for cyber insurance
due to increased competition with rates up by 11% compared with 28%
in the previous quarter. Lloyd's mandated a new cyber war
exclusion, effective from 31 March 2023, in order to manage
potential systemic loss. The most competitive area of the market is
now Directors and Officers' liability business with more
capacity-chasing premium following multiple years of price
increases until 2022. Aon's D&O Pricing Index was down 24.9% in
Q1 2023.
Marsh's Global Insurance Market Index shows the annual change in
rate over the previous four quarters. The compounded rate change
since Q1 2017 is now up 59% at Q1 2023.
Guy Carpenter reported that the 1 January 2023 property
reinsurance renewals were one of the most challenging for buyers
with reinsurers focusing on both attachment points and coverage as
well as rate. Its US Property Catastrophe Rate On Line Index
increased by 30.1% for January, a new all-time high, while its
Global Property Catastrophe Reinsurance Rate On Line Index rose by
27.5%, shown in the chart below, which now brings the index to a
similar level to 2006. We also show the compounded rate increase
since 2017, which is 65%.
Reinsurance market conditions remained challenging for buyers at
the 1 April renewals. Risk appetite for property catastrophe
reinsurance remains constrained. Reinsurers continue to push for
structural changes and tightened terms and conditions. Limited new
capital has entered the market to support property catastrophe
risks. In Japan, property cat rates were up 15% to 25%. The impact
of rate increases on ceded premiums was mitigated by higher
retentions.
At 1 April the supply/demand imbalance remains. Gallagher Re
noted "capital supply remained constrained with few signs of fresh
capital entering the market and existing reinsurers being impacted
by mark to market losses. The hopes of some buyers that new
capacity might enter the market at this renewal along with signs of
amelioration in hardening Terms and Conditions would emerge were
unfulfilled".
With 1 April reinsurance renewals now complete, attention now
turns to the mid-year renewals and specifically Florida for 1 July
where a very challenging renewal is anticipated for the specialist
homeowners writers, particularly in light of the opportunities
elsewhere in the market.
Market Outlook
Our view at Hampden is that the supply of capital is the
critical factor in the rating environment which drives underwriting
margins. The market is not without challenges. Inflation, rising
bond yields, climate change, cyber threats, liability reserves,
economic uncertainty, sovereign debt, bank deposits and the impact
of Ukraine are key concerns, but all these factors contribute to
restricted risk appetite which is a favourable backdrop. Premiums
overall and across most classes continue to rise relative to
exposure enabling catastrophe losses to be absorbed and still make
an underwriting profit. We remain positive in our market outlook
for favourable market conditions to continue throughout 2023.
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 financial information provided by each
syndicate.
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
---------------------
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- ---------- ---------
Underwriting profit 116 639
------------------------------------------------------------- ---------- ---------
Other income:
- fees from reinsurers 562 616
- corporate reinsurance policies 33 (372)
- goodwill on bargain purchase - 1,219
- investment income 647 1,237
------------------------------------------------------------- ---------- ---------
Total other income 1,242 2,700
------------------------------------------------------------- ---------- ---------
Costs:
- pre-acquisition (46) (1,271)
- stop loss costs (1,261) (1,871)
- operating costs (5,220) (3,604)
------------------------------------------------------------- ---------- ---------
Total costs (6,527) (6,746)
------------------------------------------------------------- ---------- ---------
Operating profit before impairments of goodwill and
capacity (5,169) (645)
Tax 1,852 211
Revaluation of syndicate capacity 2,670 8,132
Income tax relating to the components of other comprehensive
income (668) (2,766)
------------------------------------------------------------- ---------- ---------
Comprehensive income (1,315) 4,932
------------------------------------------------------------- ---------- ---------
Year to 31 December 2022
Helios
retained
capacity
at
31 December Portfolio Helios
2022 midpoint profits
Underwriting year GBPm forecasts GBP'000
------------------ ------------ ---------- --------
2020 72.0 3.1% 2,647
2021 99.3 2.4% 4,546
2022 177.6 N/A (7,077)
------------------ ------------ ---------- --------
116
------------------ ------------ ---------- --------
Year to 31 December 2021
Helios
retained
capacity
at
31 December Portfolio Helios
2021 midpoint profits
Underwriting year GBPm forecasts GBP'000
------------------ ------------ ---------- --------
2019 67.4 2.7% 4,092
2020 66.6 0.97% 2,915
2021 93.6 N/A (3,606)
------------------ ------------ ---------- --------
3,401
------------------ ------------ ---------- --------
Summary balance sheet (excluding assets and liabilities held by
syndicates)
See Note 28 for further information.
2022 2021
GBP'000 GBP'000
----------------------- -------- --------
Intangible assets 61,434 60,889
Funds at Lloyd's 73,771 43,589
Other cash 10,254 16,178
Other assets 6,909 5,517
----------------------- -------- --------
Total assets 152,368 126,173
----------------------- -------- --------
Deferred tax 11,228 11,887
Borrowings 15,000 -
Other liabilities 3,839 3,052
----------------------- -------- --------
Total liabilities 30,067 14,939
----------------------- -------- --------
Total syndicate equity (5,123) (3,488)
----------------------- -------- --------
Total equity 117,178 107,746
----------------------- -------- --------
Cash flow
Year to 31 December
---------------------
2022 2021
Analysis of free working capital GBP'000 GBP'000
------------------------------------------------ ---------- ---------
Opening balance (free cash) 16,178 4,961
Income
Cash acquired on acquisition 123 1,939
Distribution of profits (net of tax retentions) 2,736 475
Transfers from funds at Lloyd's 4,772 336
Other income 280 95
Proceeds from the sale of capacity 5,372 -
Proceeds from the issue of shares 12,421 53,231
Borrowings 15,000 -
Cancelled reinsurance policy refunds 1,628 6,964
Expenditure
Operating costs (4,099) (3,702)
Reinsurance costs (5,005) -
Purchase of capacity (321) (2,663)
Acquisition of LLVs (4,877) (26,529)
Transfers to funds at Lloyd's (31,578) (12,270)
Tax (342) (641)
Dividends paid (2,034) (2,018)
Repayment of borrowings - (4,000)
------------------------------------------------ ---------- ---------
Closing balance 10,254 16,178
------------------------------------------------ ---------- ---------
Year to 31 December
---------------------
2022 2021
Net tangible assets GBP'000 GBP'000
--------------------------------------------------------- ---------- ---------
Net assets less intangible assets 57,211 46,856
Fair value of capacity (WAV) 59,967 59,796
--------------------------------------------------------- ---------- ---------
117,178 106,652
--------------------------------------------------------- ---------- ---------
Shares in issue - on the market (Note 21) 76,218 67,786
Shares in issue - total of on the market and JSOP shares
(Note 21) 77,318 68,886
Net tangible asset value per share GBP - on the market 1.54 1.57
Net tangible asset value per share GBP - on the market
and JSOP shares 1.52 1.55
--------------------------------------------------------- ---------- ---------
Combined ratio summary of Helios Portfolio (see
Note 6) 2022 2021
--------------------------------------------------- -------- --------
Net premiums earned 156,606 92,692
Net insurance claims (96,796) (54,086)
Operating expenses included in underwriting result (54,210) (32,921)
---------------------------------------------------- -------- --------
Insurance result 5,600 5,685
---------------------------------------------------- -------- --------
Combined ratio 96.4% 93.9%
---------------------------------------------------- -------- --------
Change in Accounting Policy to UK GAAP
Helios is currently required to prepare its financial statements
using International Financial Reporting Standards (IFRS) The
implementation of the IFRS 17: Insurance Contracts standard came
into force for accounting periods commencing on 1 January 2023 for
listed insurance companies in the UK. For Helios it will not be
possible to adopt IFRS 17 as Lloyd's has yet to mandate that all
syndicates prepare their financial information using IFRS 17 and as
Helios relies on the syndicates supported to provide the necessary
financial information, Helios is considering adopting an
alternative accounting framework.
For illustration purposes the table below presents the changes
that would be necessary if the Group were to adopt UK GAAP. The
single most significant change is to the approach of recognising
income is in respect of the treatment of Negative Goodwill.
Negative Goodwill arises on the acquisition of LLV's when the
consideration paid is less than the fair value of the LLV acquired.
Under UK GAAP the negative goodwill will not be recognised in full
immediately but will be amortised over three years in the
future.
The table below shows the potential impact on the 2022 and 2021
financial statements of adopting UK GAAP.
Impact of UK GAAP on Amortisation of Negative Goodwill
Year to 31 December
----------------------
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- ---------- ----------
Underwriting profit 116 639
------------------------------------------------------------- ---------- ----------
Other income:
- fees from reinsurers 562 616
- corporate reinsurance policies 33 (372)
- goodwill on bargain purchase - 1,219
- investment income 647 1,237
------------------------------------------------------------- ---------- ----------
Total other income 1,242 2,700
------------------------------------------------------------- ---------- ----------
Costs:
- pre-acquisition (46) (1,271)
- stop loss costs (1,261) (1,871)
- operating costs (5,220) (3,604)
------------------------------------------------------------- ---------- ----------
Total costs (6,527) (6,746)
------------------------------------------------------------- ---------- ----------
Operating profit before impairments of goodwill and
capacity (5,169) (645)
Tax 1,852 211
Revaluation of syndicate capacity 2,670 8,132
Income tax relating to the components of other comprehensive
income (668) (2,766)
------------------------------------------------------------- ---------- ----------
Comprehensive income (1,315) 4,932
------------------------------------------------------------- ---------- ----------
Add back goodwill on bargain purchase - (1,219)
Charge goodwill amortisation 1,278 1,062
------------------------------------------------------------- ---------- ----------
Adjusted comprehensive (loss)/income (37) 4,775
------------------------------------------------------------- ---------- ----------
Basic - weighted average number of shares in issue 68,168,599 58,058,164
Diluted weighted average number of shares in issue 69,292,082 58,783,369
------------------------------------------------------------- ---------- ----------
IFRS EPS
Basic (loss)/earnings per share (p) (4.87) (0.75)
Diluted (loss)/earnings per share (p) (4.87) (0.75)
------------------------------------------------------------- ---------- ----------
UK GAAP EPS
Basic (loss)/earnings per share (p) (2.99) (1.02)
Diluted (loss)/earnings per share (p) (2.99) (1.02)
------------------------------------------------------------- ---------- ----------
Further information will be provided when the new accounting
policy is adopted.
Consolidated statement of comprehensive income - Year ended 31
December 2022
Year ended Year ended
31 December 31 December
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------- ---- ------------ ------------
Gross premium written 6 244,615 106,058
Reinsurance premium ceded 6 (56,977) (26,935)
---------------------------------------------------- ---- ------------ ------------
Net premium written 6 187,638 79,123
---------------------------------------------------- ---- ------------ ------------
Change in unearned gross premium provision 7 (45,723) (11,201)
Change in unearned reinsurance premium provision 7 8,478 1,484
---------------------------------------------------- ---- ------------ ------------
Net change in unearned premium and reinsurance
provision 7 (37,245) (9,717)
---------------------------------------------------- ---- ------------ ------------
Net earned premium 5,6 150,393 69,406
Net investment income 8 (2,776) 568
Other underwriting income 1,127 723
Gain on bargain purchase 22 - 1,219
Other income (399) (82)
---------------------------------------------------- ---- ------------ ------------
Revenue 148,345 71,834
---------------------------------------------------- ---- ------------ ------------
Gross claims paid (66,652) (46,478)
Reinsurers' share of gross claims paid 15,832 11,328
---------------------------------------------------- ---- ------------ ------------
Claims paid, net of reinsurance (50,820) (35,150)
---------------------------------------------------- ---- ------------ ------------
Change in provision for gross claims 7 (63,339) (15,796)
Reinsurers' share of change in provision for gross
claims 7 18,320 6,204
---------------------------------------------------- ---- ------------ ------------
Net change in provision for claims 7 (45,019) (9,592)
---------------------------------------------------- ---- ------------ ------------
Net insurance claims incurred and loss adjustment
expenses 6 (95,839) (44,742)
---------------------------------------------------- ---- ------------ ------------
Expenses incurred in insurance activities (53,828) (25,407)
Other operating expenses (3,847) (2,330)
---------------------------------------------------- ---- ------------ ------------
Total expenses 9 (57,675) (27,737)
---------------------------------------------------- ---- ------------ ------------
Operating profit before impairments of goodwill
and capacity 6 (5,169) (645)
Income tax credit 10 1,852 211
---------------------------------------------------- ---- ------------ ------------
Loss for the year (4,262) (434)
---------------------------------------------------- ---- ------------ ------------
Other comprehensive income
Revaluation of syndicate capacity 2,670 8,132
Deferred tax relating to the components of other
comprehensive income (668) (2,766)
---------------------------------------------------- ---- ------------ ------------
Other comprehensive income for the year, net of
tax 2,002 5,366
---------------------------------------------------- ---- ------------ ------------
Total comprehensive (loss)/income for the year (1,315) 4,932
---------------------------------------------------- ---- ------------ ------------
Loss for the year attributable to owners of the
Parent (3,317) (434)
---------------------------------------------------- ---- ------------ ------------
Total comprehensive (loss)/income for the year
attributable to owners of the Parent (1,315) 4,932
---------------------------------------------------- ---- ------------ ------------
Loss per share attributable to owners of the Parent
Basic 11 (4.87)p (0.75)p
Diluted 11 (4.87)p (0.74)p
---------------------------------------------------- ---- ------------ ------------
The 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
2022
Company number: 05892671
31 December 31 December
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------- ----- ----------- -----------
Assets
Intangible assets 13 61,434 60,889
Financial assets at fair value through profit
or loss 15 226,013 153,844
Reinsurance assets:
- reinsurers' share of claims outstanding 7 80,726 53,433
- reinsurers' share of unearned premium 7 21,333 10,538
Other receivables, including insurance and reinsurance
receivables 16 147,676 87,859
Deferred acquisition costs 17 24,991 13,615
Prepayments and accrued income 5,076 799
Cash and cash equivalents 25,300 24,624
------------------------------------------------------- ----- ----------- -----------
Total assets 592,549 405,601
------------------------------------------------------- ----- ----------- -----------
Liabilities
Insurance liabilities:
- claims outstanding 7 272,015 186,653
- unearned premium 7 114,663 59,611
Deferred income tax liabilities 18 11,312 11,965
Borrowings 19 15,000 -
Other payables, including insurance and reinsurance
payables 20 54,893 34,927
Accruals and deferred income 7,488 4,699
------------------------------------------------------- ----- ----------- -----------
Total liabilities 475,371 297,855
------------------------------------------------------- ----- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 7,774 6,931
Share premium 21 98,268 86,330
Revaluation reserve 11,350 9,348
Other reserves - treasury shares (JSOP) (110) (110)
Retained earnings (104) 5,247
------------------------------------------------------- ----- ----------- -----------
Total equity 117,178 107,746
------------------------------------------------------- ----- ----------- -----------
Total liabilities and equity 592,549 405,601
------------------------------------------------------- ----- ----------- -----------
The Financial Statements were approved and authorised for issue
by the Board of Directors on 25 May 2023, and were signed on its
behalf by:
Martin Reith
Chief Executive Officer
25 May 2023
The notes are an integral part of these Financial
Statements.
Parent Company statement of financial position - At 31 December
2022
Company number: 05892671
31 December 31 December
2022 2021
Note GBP'000 GBP'000
------------------------------------------------- ---- ----------- -----------
Assets
Investments in subsidiaries 14 65,546 71,362
Financial assets at fair value through profit
or loss 15 731 285
Other receivables 16 74,783 38,496
Cash and cash equivalents 9,348 14,094
------------------------------------------------- ---- ----------- -----------
Total assets 150,408 124,237
------------------------------------------------- ---- ----------- -----------
Liabilities
Borrowings 19 15,000 -
Other payables 20 5,130 3,864
------------------------------------------------- ---- ----------- -----------
Total liabilities 20,130 3,864
------------------------------------------------- ---- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 7,774 6,931
Share premium 21 98,268 86,330
------------------------------------------------- ---- ----------- -----------
106,042 93,261
------------------------------------------------- ---- ----------- -----------
Retained earnings:
At 1 January 27,112 19,325
(Loss)profit for the year attributable to owners
of the Parent (842) 9,805
Other changes in retained earnings (2,034) (2,018)
------------------------------------------------- ---- ----------- -----------
At 31 December 24,236 27,112
------------------------------------------------- ---- ----------- -----------
Total equity 130,278 120,373
------------------------------------------------- ---- ----------- -----------
Total liabilities and equity 150,408 124,237
------------------------------------------------- ---- ----------- -----------
The Financial Statements were approved and authorised for issue
by the Board of Directors on 25 May 2023, and were signed on its
behalf by:
Martin Reith
Chief Executive Officer
25 May 2023
The notes are an integral part of these Financial
Statements.
Consolidated statement of changes in equity - Year ended 31
December 2022
Attributable to owners of the
Parent
------------------------------------------------------
Other
Share Share reserves Retained Total
capital premium Revaluation (JSOP) earnings equity
Note GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 1 January 2021 3,393 35,525 3,982 (50) 7,699 50,549
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year:
Loss for the year - - - - (434) (434)
Other comprehensive income,
net of tax - - 5,366 - - 5,366
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year - - 5,366 - (464) 4,932
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - - (2,018) (2,018)
Company buyback of ordinary
shares 21, 23 - - - - - -
Share issue, net of transaction
cost 21 3,538 50,805 - (60) - 54,283
Other comprehensive income,
net of tax - - - - - -
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total transactions with owners 3,538 50,805 - (60) (2,018) 52,265
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 31 December 2021 6,931 86,330 9,348 (100) 5,247 107,746
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 1 January 2022 6,931 86,330 9,348 (110) 5,247 107,746
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year:
Loss for the year - - - - (3,317) (3,317)
Other comprehensive income,
net of tax - - 2,002 - - 2,947
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year - - 2,002 - (3,317) (1,315)
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - - (2,034) (2,034)
Company buyback of ordinary
shares 21, 23 - - - - - -
Share issue, net of transaction
cost 21 843 11,938 - - - 12,781
Other comprehensive income,
net of tax - - - - - -
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total transactions with owners 843 11,938 - - (2,034) 10,747
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 31 December 2022 7,774 98,268 11,350 (110) (104) 117,178
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
The notes are an integral part of these Financial
Statements.
Parent Company statement of changes in equity -
Year ended 31 December 2022
Share Share Retained Total
capital premium earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2021 3,393 35,525 19,325 58,243
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year:
Profit for the year - - 9,805 9,805
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - 9,805 9,805
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - (2,018) (2,018)
Company buyback of ordinary shares 21, 23 - - - -
Share issue, net of transaction costs 3,538 50,805 - 54,343
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners 3,538 50,805 (2,018) 52,325
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2021 6,931 86,330 27,112 120,373
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2022 6,931 86,330 27,112 120,373
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year:
Loss for the year - - (842) (842)
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - (842) (842)
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - (2,034) (2,034)
Company buyback of ordinary shares 21, 23 - - - -
Share issue, net of transaction costs 843 11,938 - 12,781
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners 843 11,938 (2,034) 10,747
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2022 7,774 98,268 24,236 130,278
-------------------------------------- ------ -------- -------- --------- --------
The notes are an integral part of these Financial
Statements.
Consolidated statement of cash flows - Year ended 31 December
2022
Year ended Year ended
31 December 31 December
2022 2021
Note GBP'000 GBP'000
----------------------------------------------------- ---- ------------ ------------
Cash flows from operating activities
Loss before tax (5,169) (645)
Adjustments for:
- interest received 8 (520) (17)
- investment income 8 (2,350) (1,549)
- gain on bargain purchase 22 - (1,219)
- profit on sale of intangible assets (262) (12)
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss 8 4,490 1,316
- increase in financial assets at fair value through
profit or loss (66,153) (31,436)
- Increase/(decrease) in other receivables (65,566) 1,162
- Increase/(decrease) in other payables 15,600 (3,800)
- net increase in technical provisions 92,262 18,285
----------------------------------------------------- ---- ------------ ------------
Cash used in operations (27,668) (17,915)
----------------------------------------------------- ---- ------------ ------------
Income tax paid (166) (675)
----------------------------------------------------- ---- ------------ ------------
Net cash used in operating activities (27,834) (18,590)
----------------------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 8 520 17
Investment income 8 2,350 1,549
Purchase of intangible assets 13 (696) (2,984)
Proceeds from disposal of intangible assets 5,373 1,809
Acquisition of subsidiaries, net of cash acquired (4,784) (13,255)
----------------------------------------------------- ---- ------------ ------------
Net cash from investing activities 2,763 (12,864)
----------------------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 12,781 53,601
Proceeds from borrowings 19 15,000 -
Repayment of borrowings 19 - (4,000)
Dividends paid to owners of the Parent 12 (2,034) (2,018)
----------------------------------------------------- ---- ------------ ------------
Net cash from financing activities 25,747 47,583
----------------------------------------------------- ---- ------------ ------------
Net increase in cash and cash equivalents 676 16,129
Cash and cash equivalents at beginning of year 24,624 8,495
----------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of year 25,300 24,624
----------------------------------------------------- ---- ------------ ------------
Cash held within the syndicates' accounts is GBP15,046,000
(2021: GBP8,446,000) of the total cash and cash equivalents held at
the year end of GBP25,300,000 (2021: GBP24,624,000). 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.
Parent Company statement of cash flows - Year ended 31 December
2022
Year ended Year ended
31 December 31 December
2022 2021
Note GBP'000 GBP'000
----------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
(Loss)/profit before tax (842) 9,222
Adjustments for:
- investment income 108 262
- dividends received - -
- impairment of investment in subsidiaries 14 7,218 (11,192)
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss - -
- increase in financial assets at fair value through
profit or loss (446) (285)
- (decrease)/increase in other receivables (241) 66
- increase/(decrease) in other payables 918 (28)
----------------------------------------------------- ------ ------------ ------------
Net cash from operating activities 6,715 (1,955)
----------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Investment income (108) (263)
Dividends received - -
Acquisition of subsidiaries 14, 22 (5,352) (22,523)
Amounts owed by subsidiaries 25 (31,748) (12,854)
----------------------------------------------------- ------ ------------ ------------
Net cash used in investing activities (37,208) (35,640)
----------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Net proceeds from the issue of ordinary share
capital 12,781 53,601
Payment for Company buyback of shares 24 - -
Proceeds from borrowings 19 15,000 -
Repayment of borrowings 19 - (4,000)
Dividends paid to owners of the Parent 12 (2,034) (2,018)
----------------------------------------------------- ------ ------------ ------------
Net cash from financing activities 25,747 47,583
----------------------------------------------------- ------ ------------ ------------
Net (decrease)/increase in cash and cash equivalents (4,746) 9,988
Cash and cash equivalents at beginning of year 14,094 4,106
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at end of year 9,348 14,094
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial
Statements.
Notes to the Financial Statements - Year ended 31 December
2022
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
UK adopted IAS and interpretations issued by the IFRS
Interpretations Committee ("IFRIC") as adopted by the UK
international accounting standards, 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 GBP117,178,000 and GBP130,278,000
respectively.
The Company's subsidiaries participate as underwriting members
at Lloyd's on the 2020, 2021 and 2022 years of account, as well as
any prior run-off years, and they have continued this participation
since the year end of the 2023 year of account. This underwriting
is supported by funds at Lloyd's totalling GBP99,840,000 (2021:
GBP48,913,000), letters of credit provided through the Group's
reinsurance agreements totalling GBP27,818,000 (2021:
GBP37,032,000) and solvency credits issued by Lloyd's totalling
GBP1,331,000 (2021: GBP239,000).
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.
International Financial Reporting Standards
Adoption of new and revised standards
In the current year, the Group has applied new IFRSs and
amendments to IFRSs issued by the IASB that are mandatory for an
accounting period that begins on or after 1 January 2022.
Amendments to IFRS 3 "Business Combinations" - Reference to the
Conceptual Framework. IFRS 3 is updated so that it refers to the
2018 Conceptual Framework instead of the 1989 Framework. They also
add to IFRS 3 a requirement that, for transactions and other events
within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37
or IFRIC 21 to identify the liabilities it has assumed in a
business combination. Lastly, they add to IFRS 3 an explicit
statement that an acquirer does not recognise contingent assets
acquired in a business combination.
Amendments to IAS 16 "Property, Plant and Equipment". The
changes introduced amend the standard to prohibit deducting from
the cost of an item of property, plant and equipment any proceeds
from selling items produced while bringing that asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management. Instead, an entity recognises
the proceeds from selling such items, and the cost of producing
those items, in profit or loss.
Amendments to IAS 37 "Provisions Contingent Liabilities and
Contingent Assets". The changes specify that the "cost of
fulfilling" a contract comprises the "costs that relate directly to
the contract". Costs that relate directly to a contract can either
be incremental costs of fulfilling that contract or an allocation
of other costs that relate directly to fulfilling contracts.
Annual Improvements to IFRS Standards 2018-2020 Cycle. The
pronouncement contains amendments to four International Financial
Reporting Standards (IFRS 1, IFRS 9, IFRS 16 and IAS 41) as result
of the IASB's annual improvements project.
There is no material impact on the accounts from adopting the
above for the year ended 31 December 2022.
New standards, amendments and interpretations not yet
adopted
A number of new standards and amendments adopted by the UK, as
well as standards and interpretations issued by the IASB but not
yet adopted by the UK, have not been applied in preparing the
Consolidated Financial Statements.
The Group does not plan to adopt these standards early; instead
it will apply them from their effective dates as determined by
their dates of UK endorsement. The Group continues to review the
upcoming standards to determine their impact.
IFRS 9 "Financial Instruments" (IASB effective date 1 January
2018) has not been applied under IFRS 4 amendment option to defer
until IFRS 17 comes into effect on 1 January 2023.
IFRS 17 "Insurance Contracts" (IASB effective date 1 January
2023).
IAS 1 "Presentation of Financial Statements" - classification of
liabilities as current or non-current (IASB effective date 1
January 2023).
IAS 8 "Accounting Policies, Changes in Accounting Estimates and
Errors" (IASB effective date 1 January 2023).
IAS 12 "Income Taxes" - deferred tax related to assets and
liabilities arising from a single transaction (IASB effective date
1 January 2023).
IFRS 9 "Financial Instruments" (IASB effective date 1 January
2018) has not been applied under the IFRS 4 amendment option. IFRS
9 provides a reform of financial instruments accounting to
supersede IAS 39 "Financial Instruments: Recognition and
Measurement".
Applying IFRS 9 "Financial Instruments" with IFRS 4 "Insurance
Contracts" contained an optional temporary exemption from applying
IFRS 9 for entities whose predominant activity is issuing contracts
within the scope of IFRS 4. The Group meets the eligibility
criteria and has taken advantage of this temporary exemption not to
apply this standard until the effective date of IFRS 17.
IFRS 17 "Insurance Contracts" (IASB effective date 1 January
2023) - This replaces IFRS 4 and requires an IFRS reporter to
measure insurance contracts using updated estimates and assumptions
that reflect the timing of cash flows and any uncertainty relating
to insurance contracts. It also requires that profits are
recognised as insurance services are delivered (rather than when
premiums are received) and for the IFRS reporter to provide
information about insurance contract profits the company expects to
recognise in the future.
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.
The Financial Statements for all of the above subsidiaries are
prepared for the year ended 31 December 2022 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 loss after
tax for the year of the Parent Company was GBP842,000 (2021: profit
GBP9,805,000).
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, as this is an important
part of the predominant strategy for the Group. Insurance
liabilities are not discounted on acquisition when calculating
their fair value, as these liabilities will likely all crystallise
within three years due to the accounting framework Lloyd's
syndicates operate under. Accordingly, any discount applied to
insurance liabilities will not be material.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision makers.
The chief operating decision makers, who are responsible for
allocating resources and assessing performance of the operating
segments, have been identified as Nigel Hanbury and Martin
Reith.
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 statement of comprehensive income.
Certain supported syndicates have non-sterling functional
currencies and any exchange movement that they would have been
reflected in other comprehensive income. As a result, 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
2020 underwriting year, an average of 47% of the 2021 underwriting
year and an average of 26% of the 2022 underwriting year of
insurance exposure is ceded to the reinsurers. Amounts payable to
the reinsurers are included within "reinsurance premium ceded" in
the consolidated statement of comprehensive income of the year and
amounts receivable from the reinsurers are included within
"reinsurers' share of gross claims paid" in the consolidated
statement of comprehensive income 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
With effect from 31 December 2020, the Group changed this policy
so that syndicate capacity is revalued on a regular basis to its
fair value which the Directors believe to be the average weighted
value achieved in the Lloyd's auction process. The increase in
value of syndicate capacity between its fair value and its cost
less impairment is taken to the revaluation reserve through the
statement of other comprehensive income net of any tax effect, as
required by IAS 38.
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 Group'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 16 August 2021, the Company issued and allotted 600,000 new
ordinary shares of GBP0.10 each ("ordinary shares"). The new
ordinary shares have been issued at a subscription price of 155p
per ordinary share, being the closing price of an ordinary share on
16 August 2021, 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 JTC
Employee Solutions 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 145p 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 the amount initially provided by the
participating Director plus any growth in the market value of the
jointly owned ordinary shares above a target share price of 174.8p
(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 relating to growth in net tangible asset value per share
measured over the three calendar years from the net tangible asset
per share disclosed as at 31 December 2021 of 151p.
The percentage of jointly owned shares that vest shall be
dependent on the average growth in net tangible asset value per
share during the three financial years ending 31 December 2023. The
vesting percentage shall be determined on the average growth in net
tangible asset value per share. If the average growth in net
tangible asset value does not exceed 5%, then no awards vest, and
if the average growth in net tangible asset value exceeds 20% or
above, then 100% of the awards vest.
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.
Long Term Incentive Plan ("LTIP")
In 2022, the Company operated the Helios Underwriting Plc Long
Term Incentive Plan ("LTIP"). On 16 December 2022, the Company
granted 571,427 (see note 23) awards under the LTIP in the form of
a nil-cost options.
The awards for the Executive Directors totalled 571,427. The
vesting period for the awards is three years subject to continued
service and the achievement of specific performance conditions. If
the options remain unexercised after a period of ten years from the
date of grant, the options expire.
The awards' performance conditions set threshold (30%) to
stretch (60%) targets in respect of the Company's total shareholder
return ("TSR") over the three year period following the grant of
the awards. No portion of the awards shall vest unless the
Company's TSR at the end of the performance period reaches the
threshold target, for which one quarter of the awards would vest,
rising on a straight line basis to full vesting of the awards for
the Company's TSR over the performance period being equal to the
stretch target or better. In the case of Executive Directors, any
vested shares will be subject to a two-year holding period.
The fair value of the LTIP awards is calculated using a Monte
Carlo (Stochastic) model taking into account the terms and
conditions of the awards granted.
No options were exercised during the year. The weighted average
remaining life of the options is 9.96 years.
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 Group 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 Group only, and do not include estimates and judgements made
in respect of the syndicates.
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 syndicate's 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 2020 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 obligations 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
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- ---------
Claims outstanding - 98,332 95,723 39,265 38,695 272,015
------------------- --------- -------- --------- --------- -------- ---------
No stated
maturity 0-1 year 1-3 years 3-5 years >5 years Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- --------
Claims outstanding 3 64,445 66,161 27,329 28,715 186,653
------------------- --------- -------- --------- --------- -------- --------
(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
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 38,125 42,837 45,204 17,617 8,126 151,909
Deposits with ceding undertakings - - 300 - 33 333
Reinsurers' share of claims
outstanding 3,478 25,787 47,259 171 3,989 80,684
Reinsurance debtors 756 674 1,957 19 226 3,632
Cash at bank and in hand 1,374 419 13,148 1 104 15,046
---------------------------------- -------- -------- -------- -------- --------- --------
43,733 69,717 107,868 17,808 12,478 251,603
---------------------------------- -------- -------- -------- -------- --------- --------
BBB or
AAA AA A lower Not rated Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 22,984 30,330 33,663 16,070 6,588 109,635
Deposits with ceding undertakings 3 - 597 - 20 620
Reinsurers' share of claims
outstanding 1,085 16,276 31,285 707 4,033 53,386
Reinsurance debtors 46 773 1,882 212 379 3,292
Cash at bank and in hand 675 117 7,597 19 39 8,447
---------------------------------- -------- -------- -------- -------- --------- --------
24,793 47,496 75,024 17,008 11,059 175,380
---------------------------------- -------- -------- -------- -------- --------- --------
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
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 151,909 - - - - 151,909
Deposits with ceding undertakings 333 - - - - 333
Reinsurers' share of claims
outstanding 80,684 - - - (18) 80,666
Reinsurance debtors 3,632 4,162 56 23 - 7,873
Cash at bank and in hand 15,046 - - - - 15,046
Insurance and other debtors 88,144 5,625 1,494 717 (10) 171,774
---------------------------------- ------------- --------- --------- -------- -------- --------
415,551 9,787 1,550 740 (28) 427,600
---------------------------------- ------------- --------- --------- -------- -------- --------
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
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 109,635 - - - - 109,635
Deposits with ceding undertakings 620 - - - - 620
Reinsurers' share of claims
outstanding 53,386 - - - (13) 53,373
Reinsurance debtors 3,292 2,691 66 111 - 6,160
Cash at bank and in hand 8,447 - - - - 8,447
Insurance and other debtors 88,144 2,833 835 672 (13) 92,471
---------------------------------- ------------- --------- --------- -------- -------- --------
263,524 5,524 901 783 (26) 270,706
---------------------------------- ------------- --------- --------- -------- -------- --------
(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
2022 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 60,777 317,487 13,921 35,008 12,988 440,181
Total liabilities (68,185) (324,039) (18,413) (27,310) (7,557) (445,504)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (7,408) (6,552) (4,492) 7,698 5,631 (5,123)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
GBP USD EUR CAD Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 45,145 191,697 9,537 24,446 8,603 279,428
Total liabilities (52,934) (194,965) (12,655) (18,028) (4,334) (282,916)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (7,789) (3,268) (3,118) 6,418 4,269 (3,488)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
The impact of a 5% change in exchange rates between GBP and
other currencies would be GBP114,000 on shareholders' funds (2021:
GBP209,000).
(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 2020, 2021
and 2022 years of account.
The Group has strategic collateralised quota share arrangements
in place in respect 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.
(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 2022 is GBP90.9m (2021:
GBP65.3m), 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
(Guernsey based protected cell managed by HIPCC), the Group's funds
at Lloyd's calculation benefits from an aggregate GBP27.8m (2021:
GBP37.0m) letter of credit ("LOC") acceptable to Lloyd's, on behalf
of XL Re Limited 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 on pages 34 and 35.
At 31 December 2022, the corporate member subsidiaries had an
agreed Economic Capital Assessment ("ECA") requirement of GBP125.7m
(2021: GBP90.9m) to support their underwriting on the 2023 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 2022, the agreed ECA requirements for
the Group were 43% (2021: 38%) of the capacity for the following
year of account.
5. Segmental information
Nigel Hanbury and Martin Reith are the Group's chief operating
decision makers. 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 2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 150,393 - - 150,393
Net investment income (3,928) 1,152 - (2,776)
Other income 533 - 195 728
Net insurance claims and loss adjustment
expenses (93,876) - (1,963) (95,839)
Expenses incurred in insurance activities (52,507) - (1,321) (53,828)
Other operating expenses (126) - (3,721) (3,847)
Gain on bargain purchase (Note 22) - - - -
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - - -
------------------------------------------- -------------- ----------- ----------- --------
Loss before tax 489 1,152 (6,810) (5,169)
------------------------------------------- -------------- ----------- ----------- --------
Other
Syndicate Investment corporate
participation management activities Total
Year ended 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 69,406 - - 69,406
Net investment income 185 383 - 568
Other income 119 - 522 641
Net insurance claims and loss adjustment
expenses (42,423) - (2,319) (44,742)
Expenses incurred in insurance activities (24,491) - (916) (25,407)
Other operating expenses (267) - (2,063) (2,330)
Gain on bargain purchase (Note 22) - - 1,219 1,219
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - - -
------------------------------------------- -------------- ----------- ----------- --------
Loss before tax 2,529 383 (3,557) (645)
------------------------------------------- -------------- ----------- ----------- --------
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 2022
other corporate activities totalling GBP1,964,000 (2021:
GBP2,319,000 - 2019, 2020 and 2021 years of account) represents the
2020, 2021 and 2022 years of account net Group quota share
reinsurance premium recoverable from 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 statement of comprehensive income of the year.
6. Operating (loss)/profit before impairments of goodwill and
capacity
Pre-
acquisition Corporate Other
** reinsurance corporate Total
Underwriting year of account* GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------ ---------- --------
2020
Year ended 31 December and prior 2021 2022 Sub-total
2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 1,138 15,099 234,712 250,949 (6,334) - - 244,615
Reinsurance ceded 589 (2,994) (54,594) (56,999) 1,283 - (1,261) (56,977)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 1,727 12,105 180,118 193,950 (5,051) - (1,261) 187,638
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 5,911 56,042 94,653 156,606 (4,952) - (1,261) 150,393
Other income (2,496) (1,046) 22 (3,520) 263 562 647 (2,048)
Net insurance claims
incurred and loss
adjustment expenses 3,804 (30,920) (69,680) (96,796) 2,887 (1,964) 33 (95,839)
Operating expenses (2,523) (17,172) (34,515) (54,210) 1,756 - (5,220) (57,675)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating (loss)/profit
before impairments
of goodwill and
capacity 4,696 6,904 (9,520) 2,080 (46) (1,401) (5,802) (5,169)
Quota share adjustment (2,049) (2,358) 2,443 (1,964) - 1,964 - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating (loss)/profit
before impairments
of goodwill and
capacity, after
quota share adjustment 2,647 4,546 (7,077) 116 (46) 562 (5,801) (5,169)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Included within operating expenses of GBP5,220 are one off
aborted acquisition fees of GBP700,000 and bank loan finance costs
used to support the groups underwriting of GBP891,000.
* 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.
Pre-
acquisition Corporate Other
** reinsurance corporate Total
Underwriting year of account* GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------ ---------- --------
2019
Year ended 31 December and prior 2020 2021 Sub-total
2021 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 721 11,712 122,179 134,612 (28,554) - - 106,058
Reinsurance ceded (713) (2,569) (28,909) (32,191) 7,126 - (1,871) (26,935)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 8 9,143 93,270 102,421 (21,427) - (1,871) 79,123
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 3,426 40,573 48,693 92,692 (21,415) - (1,871) 69,406
Other income 206 (166) (3) 37 (681) 616 2,456 2,428
Net insurance claims
incurred and loss
adjustment expenses 5,113 (22,945) (36,256) (54,088) 12,037 (2,319) (372) (44,742)
Operating expenses (2,261) (12,406) (18,254) (32,921) 8,788 - (3,604) (27,737)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating (loss)/profit
before impairments
of goodwill and
capacity 6,484 5,056 (5,820) 5,720 (1,271) (1,703) (3,391) (645)
Quota share adjustment (2,392) (2,141) 2,214 (2,319) - 2,319 - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating (loss)/profit
before impairments
of goodwill and
capacity, after
quota share adjustment 4,092 2,915 (3,606) 3,401 (1,271) 616 (3,391) (645)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
* 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 2021 113,371 30,781 82,590
Increase in reserves arising from acquisition
of subsidiary undertakings 57,941 15,405 42,537
Movement of reserves 15,796 6,204 9,592
Other movements (455) 1,043 (1,499)
---------------------------------------------- -------- ----------- --------
At 31 December 2021 186,653 53,433 133,220
---------------------------------------------- -------- ----------- --------
At 1 January 2022 186,653 53,433 133,220
Increase in reserves arising from acquisition
of subsidiary undertakings 10,888 3,177 7,711
Movement of reserves 63,339 18,320 45,019
Other movements 11,135 5,796 5,339
---------------------------------------------- -------- ----------- --------
At 31 December 2022 272,015 80,726 191,289
---------------------------------------------- -------- ----------- --------
Included within other movements are the 2019 and prior years'
claims reserves reinsured into the 2020 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 2021 32,356 6,028 26,328
Increase in reserves arising from acquisition
of subsidiary undertakings 15,649 3,095 12,553
Movement of reserves 11,201 1,484 9,717
Other movements 405 (69) 475
---------------------------------------------- -------- ----------- --------
At 31 December 2021 59,611 10,538 49,073
---------------------------------------------- -------- ----------- --------
At 1 January 2022 59,611 10,538 49,073
Increase in reserves arising from acquisition
of subsidiary undertakings 2,846 493 2,352
Movement of reserves 45,723 8,478 37,245
Other movements 6,483 1,824 4,660
---------------------------------------------- -------- ----------- --------
At 31 December 2022 114,663 21,333 93,330
---------------------------------------------- -------- ----------- --------
Included within other movements are the 2018 and prior years'
claims reserves reinsured into the 2019 year of account on which
the Group does not participate and currency exchange
differences.
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 2022.
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 GBP27,202,000 (2021: GBP18,665,000);
-- a 10% increase/decrease in the managing agents' calculation
of net claims reserves will decrease/increase the Group's pre-tax
profits by GBP19,129,000 (2021: GBP13,322,000); and
-- a 10% increase/decrease in the run-off year net claims
reserves will decrease/increase the Group's pre-tax profits by
GBP22,000 (2021: GBP43,000).
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 After After Profit
Underwriting one two three four five six seven eight nine ten on RITC
pure year* year years years years years years years years years years received
------------- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
2013 23 41 41 40 40 39 38 38 37 37 4
2014 22 38 40 40 40 39 39 39 38 6
2015 20 39 42 41 40 40 40 40 6
2016 24 51 52 51 50 50 50 4
2017 52 75 78 77 76 76 3
2018 42 71 75 72 71 5
2019 39 74 72 69 4
2020 52 90 90
2021 60 101
2022 97
------------- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Claims development - net
GBPm
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
After After After After After After After After After After Profit
Underwriting one two three four five six seven eight nine ten on RITC
pure year* year years years years years years years years years years received
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
2013 20 36 35 34 34 34 33 33 33 33 5
2014 19 33 34 34 34 33 33 33 33 5
2015 17 33 36 35 35 34 34 34 4
2016 19 41 41 41 40 40 39 4
2017 34 53 55 54 53 53 3
2018 30 52 54 53 52 4
2019 28 55 54 52 6
2020 39 67 67
2021 42 73
2022 70
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
* Including the new acquisitions during 2022.
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
2022 2021
GBP'000 GBP'000
------------------------------------------------------ ------------ ------------
Investment income 2,350 1,549
Realised (losses)/profits on financial assets at fair
value through profit or loss (1,021) 392
Unrealised losses on financial assets at fair value
through profit or loss (4,490) (1,316)
Investment management expenses (134) (74)
Bank interest 519 17
------------------------------------------------------ ------------ ------------
Net investment income (2,776) 568
------------------------------------------------------ ------------ ------------
9. Operating expenses (excluding goodwill and capacity
impairment)
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- ------------ ------------
Expenses incurred in insurance activities:
Acquisition costs 47,897 20,299
Change in deferred acquisition costs (10,163) (2,358)
Administrative expenses 15,287 7,466
Other 807 -
------------------------------------------------------------- ------------ ------------
53,828 25,407
------------------------------------------------------------- ------------ ------------
Other operating expenses:
- exchange differences (644) 32
- Directors' remuneration 718 582
- Staff costs 196 -
- acquisition costs in connection with the new subsidiaries
acquired in the year 422 319
- Bank charges 292 56
- loan interest and charges 891 74
- professional fees 1,662 967
- administration and other expenses 166 187
Auditors' remuneration:
- audit of the Parent Company and Group Financial Statements 55 54
- audit of subsidiary company Financial Statements 42 49
- underprovision of prior year audit fee - -
- audit related assurance services 46 -
------------------------------------------------------------- ------------ ------------
3,846 2,329
------------------------------------------------------------- ------------ ------------
Operating expenses 57,674 27,737
------------------------------------------------------------- ------------ ------------
The Group has three employees other than the Directors of the
Company.
Details of the Directors' remuneration are disclosed below:
Year ended Year ended
31 December 31 December
2022 2021
Directors' remuneration GBP GBP
---------------------------------------- ------------ ------------
Arthur Manners 182,000 212,000
Edward William Fitzalan-Howard 30,000 26,000
Jeremy Evans (resigned 6 February 2021) - 2,000
Michael Cunningham 40,000 34,000
Andrew Christie 33,000 28,000
Nigel Hanbury 208,000 246,000
Martin Reith (appointed 21 April 2021) 200,000 17,000
Tom Libassi (appointed 21 April 2021) 25,000 17,000
---------------------------------------- ------------ ------------
Total 718,000 582,000
---------------------------------------- ------------ ------------
The Deputy Chairman, Nigel Hanbury, and the Finance Director,
Arthur Manners, had a bonus incentive scheme during 2022 in
addition to their basic remuneration. The above figures for Nigel
Hanbury and Arthur Manners include an accrual for the year of
GBP48,000 and GBP42,000 respectively (2021: GBP139,000 for Nigel
Hanbury and GBP119,000 Arthur Manners) in respect of this
scheme.
No other Directors derive other benefits, pension contributions
or incentives from the Group. Nigel Hanbury and Arthur Manners have
share interests in the Joint Share Ownership Plan and the Long Term
Incentive Plan (see note 23).
Included in the above were fees of GBP175,000 for Martin Reith,
prior to his appointment as Chief Executive Officer.
10. Income tax charge
(a) Analysis of tax credit in the year
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
------------------- ------------ ------------
Current tax:
- current year (84) 340
- prior year (53) (35)
- foreign tax paid 5 61
------------------- ------------ ------------
Total current tax (132) 366
------------------- ------------ ------------
Deferred tax:
- current year (1,564) (577)
- prior year (156) -
------------------- ------------ ------------
Total deferred tax (1,720) (577)
------------------- ------------ ------------
Income tax credit (1,852) (211)
------------------- ------------ ------------
(b) Factors affecting the tax credit for the year
Tax for the year is the same as (2021: the same as) the standard
rate of corporation tax in the UK of 19% (2021: 19%).
The differences are explained below:
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Loss before tax (5,169) (645)
---------------------------------------------------------- ------------ ------------
Tax calculated as loss before tax multiplied by the
standard rate of corporation tax in the UK of 19% (2021:
19%) (982) (123)
Tax effects of:
- prior year adjustments (209) (35)
- rate change and other adjustments (502) (299)
- permanent disallowances (164) 184
- foreign taxes 5 61
- other - -
---------------------------------------------------------- ------------ ------------
Tax credit for the year (1,852) (211)
---------------------------------------------------------- ------------ ------------
The results of the Group's participation on the 2020, 2021 and
2022 years of account and the calendar year movement on 2019 and
prior run-offs will not be assessed for tax until the years ended
2023, 2024 and 2025 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 UK Government announced on 3 March 2021 its intention to
increase the UK rate of corporation tax to 25% from 19% from 1
April 2023. This was legislated on 10 June 2021. If a deferred tax
balance, this has been calculated with reference to the
substantively enacted rates as required under FAS 12.
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
2022 2021
------------------------------------------------------ -------------- ------------
Loss for the year after tax attributable to ordinary
equity holders of the Parent GBP(4,262,000) GBP(434,000)
------------------------------------------------------ -------------- ------------
Basic - weighted average number of ordinary shares* 68,168,599 58,058,164
------------------------------------------------------ -------------- ------------
Adjustments for calculating the diluted earnings per
share:
Treasury shares (JSOP scheme), Note 21 1,100,000 1,100,000
Long term incentive plan (LTIP) 571,427 -
------------------------------------------------------ -------------- ------------
Diluted - weighted average number of ordinary shares* 69,292,082 58,783,369
------------------------------------------------------ -------------- ------------
Basic loss per share (4.87)p (0.75)p
------------------------------------------------------ -------------- ------------
Diluted loss per share (4.87)p (0.75)p
------------------------------------------------------ -------------- ------------
* Used as the denominator in calculating the basic earnings per
share, and diluted earnings per share, respectively.
** Diluted loss per share is not permitted to be reduced from the basic loss per share.
12. Dividends paid or proposed
A dividend of GBP2,034,000 was paid during the year (2021:
GBP2,018,000).
A final dividend of 3p is being proposed in respect of the
financial year ended 31 December 2022.
Event Date
Ex-Dividend Date 8 June 2023
Record Date 9 June 2023
Payment Date 13 July 2023
13. Intangible assets
Syndicate
Goodwill capacity Total
GBP'000 GBP'000 GBP'000
-------------------------------------- -------- --------- --------
Cost
At 1 January 2021 775 30,826 31,601
Additions 319 2,664 2,983
Disposals - - -
Acquired with subsidiary undertakings - 18,173 18,173
Revaluation - 8,132 8,132
-------------------------------------- -------- --------- --------
At 31 December 2021 1,094 59,795 60,889
-------------------------------------- -------- --------- --------
At 1 January 2022 1,094 59,795 60,889
Additions 374 322 696
Disposals - (5,635) (5,635)
Acquired with subsidiary undertakings - 2,814 2,814
Revaluation - 2,670 2,670
-------------------------------------- -------- --------- --------
At 31 December 2022 1,468 59,966 61,434
-------------------------------------- -------- --------- --------
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
2022 2021
GBP'000 GBP'000
------ ----------- -----------
Total 65,546 71,362
------ ----------- -----------
During 2022 an impairment charge of GBP7,218,000 was recognised
on the cost of investments in subsidiaries and included in the
Parent income statement.
In addition the company acquired three new subsidiaries for a
total consideration of GBP1,402,000.
At 31 December 2022, 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 2022 2021
Company or partnership interest ownership ownership Principal activity
----------------------------------- ---------------- ---------- ---------- ---------------------------
Lloyd's of London corporate
Nameco (No. 917) 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
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% 100% vehicle
Lloyd's of London corporate
Nameco (No. 1113) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Catbang 926 Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Whittle Martin Underwriting Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 408) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nomina No 084 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 510) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 544) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
N J Hanbury Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1011) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1111) Limited Direct 100% 100% vehicle
Nomina No 533 LLP Indirect 100% 100% Corporate partner
North Breache Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Lloyd's of London corporate
G T C Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Hillnameco Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 2012) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1095) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
New Filcom Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Kemah Lime Street Capital Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1130) Limited Direct 100% 100% vehicle
Nomina No 070 LLP Indirect 100% 100% Corporate partner
Lloyd's of London corporate
Nameco (No 389) Limited Direct 100% 100% vehicle
Nomina No 469 LLP Indirect 100% 100% Corporate partner
Nomina No 536 LLP Indirect 100% 100% Corporate partner
Lloyd's of London corporate
Nameco (No 301) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1232) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Shaw Lodge Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Queensberry Underwriting Direct 100% 100% vehicle
Nomina No 472 LLP Indirect 100% 100% Corporate partner
Nomina No 110 LLP Indirect 100% 100% Corporate partner
Lloyd's of London corporate
Chanterelle Underwriting Limited Direct 100% 100% vehicle
Kunduz LLP Indirect 100% 100% Corporate partner
Lloyd's of London corporate
Exalt Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 1110) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Clifton 2011 Limited Direct 100% 100% vehicle
Nomina No 378 LLP Indirect 100% 100% Corporate partner
Gould Scottish Limited Partnership Indirect 100% 100% Corporate partner
Lloyd's of London corporate
Harris Family UTG Limited Direct 100% - vehicle
Lloyd's of London corporate
Whitehouse Underwriting Limited Direct 100% - vehicle
Lloyd's of London corporate
Risk Capital UTG Limited Direct 100% - vehicle
----------------------------------- ---------------- ---------- ---------- ---------------------------
For details of all new acquisitions made during the year 2022,
refer to Note 22(a).
(i) Helios UTG Partner Limited, a subsidiary of the Company,
owns 100% of Salviscount LLP, Inversanda LLP, Fyshe Underwriting
LLP, Nomina No 505 LLP, Nomina No 321 LLP Nomina No 084 LLP, Nomina
No 533 LLP, Nomina No 070 LLP, Nomina No 469 LLP, Nomina No 536
LLP, Nomina No 472 LLP, Nomina No 110 LLP, Kunduz LLP. Nomina No
348 LLP and Gould Scottish Limited Partnership. The cost of
acquisition of these LLPs is accounted for in Helios UTG Partner
Limited, their immediate parent company.
(ii) RBC CEES Trustee Limited was an 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
2022 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 18,750 3,794 12,913 2,043
Debt securities and other fixed income securities 132,032 39,187 92,845 -
Participation in investment pools 598 112 463 23
Loans and deposits with credit institutions 263 73 - 190
Derivatives 267 146 121 -
Other investments 1,063 1,063 - -
Funds at Lloyd's 73,040 73,040 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 226,013 117,415 106,342 2,256
-------------------------------------------------- -------- -------- -------- --------
Total Level Level Level
2021 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 15,288 3,339 9,960 1,989
Debt securities and other fixed income securities 93,548 33,244 60,263 41
Participation in investment pools 511 161 330 20
Loans and deposits with credit institutions 245 64 - 181
Derivatives 43 36 7 -
Other investments 905 905 - -
Funds at Lloyd's 43,304 43,304 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 153,844 81,053 70,560 2,231
-------------------------------------------------- -------- -------- -------- --------
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 GBPnil (2021: GBP1,481,000) 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
2022 2021
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Holdings in collective investment schemes - Level 2 731 285
---------------------------------------------------- ----------- -----------
Total - market value 731 285
---------------------------------------------------- ----------- -----------
16. Other receivables
31 December 31 December
2022 2021
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 64,852 32,566
Arising out of reinsurance operations 59,714 37,128
Other debtors 23,110 18,165
------------------------------------------- ----------- -----------
Total 147,676 87,859
------------------------------------------- ----------- -----------
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
GBPnil (2021: GBPnil) which are not expected to be wholly recovered
within one year.
31 December 31 December
2022 2021
Company GBP'000 GBP'000
---------------------------------------- ----------- -----------
Receivables from subsidiaries (Note 25) 73,505 37,290
Other debtors 1,278 1,206
Prepayments - -
---------------------------------------- ----------- -----------
Total 74,783 38,496
---------------------------------------- ----------- -----------
Included within receivables are amounts totalling GBP100,000
(2021: GBP100,000), which are not expected to be recoverable within
one year.
17. Deferred acquisition costs
31 December 31 December
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
At 1 January 13,615 7,726
Increase arising from acquisition of subsidiary undertakings
(Note 22) 664 3,966
Movement in deferred acquisition costs 10,163 2,358
Other movements 549 (435)
------------------------------------------------------------- ----------- -----------
At 31 December 24,991 13,615
------------------------------------------------------------- ----------- -----------
18. Deferred tax
Group
Deferred tax is calculated in full on temporary differences
using a tax rate of 25% on deferred tax assets and deferred tax
liabilities (2021: 25% on deferred tax assets and 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 2021 5,891 616 6,507
On acquisition of subsidiary undertakings 4,683 (1,414) 3,269
Revaluation of capacity 2,766 - 2,766
Prior period adjustment (489) - (489)
Credit for the year 489 (577) (88)
------------------------------------------ --------- ------------- --------
At 31 December 2021 13,340 (1,375) 11,965
------------------------------------------ --------- ------------- --------
At 1 January 2022 13,340 (1,375) 11,965
On acquisition of subsidiary undertakings 686 (287) 399
Revaluation of capacity 668 - 668
Prior period adjustment (156) - (156)
Credit for the year (401) (1,163) 1,564
------------------------------------------ --------- ------------- --------
At 31 December 2022 14,137 (2,825) 11,312
------------------------------------------ --------- ------------- --------
Company
The Company had no deferred tax assets or liabilities (2021:
GBPnil), as disclosed in Note 10.
19. Borrowings
31 December 31 December
2022 2021
Group and Company GBP'000 GBP'000
------------------------------- ----------- -----------
Secured - at amortised cost - -
Bank revolving credit facility 15,000 -
------------------------------- ----------- -----------
15,000 -
------------------------------- ----------- -----------
Current 15,000 -
Non-current - -
------------------------------- ----------- -----------
15,000 -
------------------------------- ----------- -----------
Bank loan
(a) Revolving credit/loan facility
On 21 December 2021, a new sterling revolving loan facility
("RLF") was agreed with Barclays Bank Plc to the value of GBP15m.
The interest is 4.2% per annum. On 21 March 2022, the full GBP15m
was drawn down. Reconciliation of movements of liabilities to cash
flows arising from financing activities: The facility is secured
over the assets of the Company
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 2021 4,000 38,918 (50) 11,681 54,549
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - - - - -
Proceeds from loans and borrowings - 54,343 (60) - 54,283
Payments for Company buyback of ordinary
shares (Note 24) - - - - -
Repayment of borrowings (4,000) - - - (4,000)
Dividend paid - - - (2,018) (2,018)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows (4,000) 54,343 (60) (2,018) 48,265
----------------------------------------- ----------- --------- --------- --------- --------
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* - - - 4,932 4,932
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2021 - 93,261 (110) 14,595 107,746
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2021.
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 2022 - 93,261 (110) 14,595 107,746
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 12,781 - - 12,781
Proceeds from loans and borrowings 15,000 - - - 15,000
Payments for Company buyback of ordinary
shares (Note 24) - - - - -
Repayment of borrowings - - - - -
Dividend paid - - - (2,034) (2,034)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows 15,000 12,781 - (2,034) 25,747
----------------------------------------- ----------- --------- --------- --------- --------
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* - - - (1,315) (1,315)
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2022 15,000 106,042 (110) 11,246 132,178
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2022.
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 2021 4,000 38,918 - 19,325 62,243
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 54,343 - - 54,343
Proceeds from loans and borrowings - - - - -
Payments for Company buyback of ordinary
shares (Note 24) - - - - -
Repayment of borrowings (4,000) - - - (4,000)
Dividend paid - - - (2,018) (2,018)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows (4,000) 54,343 - (2,018) 48,325
----------------------------------------- ----------- --------- --------- --------- --------
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* - - - 9,805 9,805
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2021 - 93,261 - 27,112 120,373
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2021.
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 2022 - 93,261 - 27,112 120,373
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 12,781 - - 12,781
Proceeds from loans and borrowings 15,000 - - - 15,000
Payments for Company buyback of ordinary
shares (Note 24) - - - - -
Repayment of borrowings - - - - -
Dividend paid - - - (2,034) (2,034)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows 15,000 12,781 - (2,034) 25,747
----------------------------------------- ----------- --------- --------- --------- --------
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* - - - (842) (842)
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2022 15,000 106,042 - 24,236 145,278
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2022.
20. Other payables
31 December 31 December
2022 2021
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 3,509 2,606
Arising out of reinsurance operations 42,700 23,957
Corporation tax payable - 185
Other creditors 8,684 8,179
------------------------------------------- ----------- -----------
54,893 34,927
------------------------------------------- ----------- -----------
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
2022 2021
Company GBP'000 GBP'000
----------------------------- ----------- -----------
Payable to subsidiaries 3,128 2,959
Accruals and deferred income 2,002 904
----------------------------- ----------- -----------
5,130 3,863
----------------------------- ----------- -----------
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 31 December 2021 69,305,381 6,821 110 86,330 93,261
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium at 31 December 2022 77,737,372 7,664 110 98,268 106,042
-------------------------------------- ---------- -------- -------------- -------- --------
During the year, the Company issued a further 8,431,991
shares.
(i) Number of shares
2022 2021
------------------------------------------------------ ---------- ----------
Allotted, called up and fully paid ordinary shares:
- on the market 76,218,203 67,786,212
- Company buyback of ordinary shares held in treasury
(Note 24) 419,169 419,169
------------------------------------------------------ ---------- ----------
76,637,372 68,205,381
Uncalled and partly paid ordinary shares under the
JSOP scheme (ii) (Note 23) 1,100,000 1,100,000
------------------------------------------------------ ---------- ----------
77,737,372 69,305,381
------------------------------------------------------ ---------- ----------
(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:
(a) 2022 acquisitions
In 2022 the Company acquired three Limited Liability vehicles,
all of which are incorporate in England and Wales and are corporate
members of Lloyd's.
Harris Whitehouse
Family Underwriting Risk Capital
UTG Limited Limited UTG Limited Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------- ------------ --------
2022 acquisition date 6 Dec 29 Dec 31 Dec
--------------------------------- ------------ ------------- ------------ --------
Intangible assets 23 1 46 70
Uplift to fair value 216 503 2,025 2,744
------------------------------------- ------------ ------------- ------------ --------
239 504 2,071 2,814
--------------------------------- ------------ ------------- ------------ --------
Financial investments 501 1,212 4,303 6,016
Deferred income tax asset - - - -
Reinsurers' share of insurance
liabilities:
- reinsurers' share of
outstanding claims 367 617 2,192 3,176
- reinsurers' share of
unearned premium 50 103 340 493
Other receivables, including
insurance receivables 992 845 7,349 9,186
Deferred acquisition costs 70 125 470 665
Prepayments and accrued
income 6 6 41 53
Cash and cash equivalents 66 57 445 568
Insurance liabilities:
- claims outstanding (1,020) (1,938) (7,929) (10,887)
- unearned premiums (281) (528) (2,037) (2,846)
Deferred income tax liabilities (54) (126) (509) (689)
Other payables, including
insurance payables (993) (505) (5,817) (7,315)
Accruals and deferred income (32) (54) (119) (205)
------------------------------------- ------------ ------------- ------------ --------
Total fair value acquired (89) 318 800 1,029
------------------------------------- ------------ ------------- ------------ --------
Net consideration - 427 976 1,403
------------------------------------- ------------ ------------- ------------ --------
Positive goodwill on acquisition 89 109 176 374
Negative goodwill on acquisition - - - -
--------------------------------- ------------ ------------- ------------ --------
Capacity acquired
--------------------------------- ------------ ------------- ------------ --------
2020 underwriting year 504 899 4,156 5,559
------------------------------------- ------------ ------------- ------------ --------
2021 underwriting year 518 902 4,360 5,780
------------------------------------- ------------ ------------- ------------ --------
2022 underwriting year 540 952 4,185 5,677
------------------------------------- ------------ ------------- ------------ --------
Had the Limited Liability Vehicles been consolidated from 1
January 2022, the consolidated statement of comprehensive income
would show net earned premium of GBP155,345,000 and a loss after
tax of GBP4,275,000.
Costs incurred in connection with the three acquisitions
totalling GBP38,000 (2021: GBP447,000) have been recognised in the
consolidated statement of comprehensive income.
(b) 2021 acquisitions
In 2021 the Company acquired 28 Limited Liability vehicles, all
of which are incorporate in England and Wales and are corporate
members of Lloyd's.
Nameco Nameco North Nameco Nameco Kemah
(No (No Nomina Breach GTC Hill (No (No New Lime
1011) 1111) No 533 UW UW Nameco 2012) 1095) Filcom Street
Limited Limited LLP Limited Limited Limited Limited Limited Limited Capital Total
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
2021
acquisition
date 21 Sept 21 Sept 21 Sept 21 Sept 22 Sept 22 Sept 23 Sept 24 Sept 29 Sept 30 Sept
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Intangible
assets - 2 199 5 68 10 - 251 - 1 536
Uplift to fair
value 602 213 225 1,814 532 467 490 1,167 227 226 5,963
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
602 215 424 1,819 600 477 490 1,418 227 227 6,499
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Financial
investments 1,014 390 683 3,499 1,224 966 1,349 1,957 1,349 508 12,939
Deferred
income tax
asset - - - - - - - - - - -
Reinsurers'
share
of insurance
liabilities:
-reinsurers'
share
of
outstanding
claims 425 251 292 1,431 504 478 639 974 658 339 5,991
-reinsurers'
share
of unearned
premium 72 46 58 274 103 96 112 187 156 63 1,167
Other
receivables,
including
insurance
receivables 1,152 425 354 5,933 847 728 771 3,095 677 304 14,286
Deferred
acquisition
costs 101 55 74 380 145 126 137 252 160 67 1,497
Prepayments
and accrued
income 9 4 4 37 9 9 8 17 7 9 113
Cash and cash
equivalents 191 69 89 455 539 259 258 388 637 428 3,313
Insurance
liabilities:
- claims
outstanding (1,705) (791) (1,105) (6,502) (1,904) (1,686) (2,251) (3,307) (2,004) (996)
- unearned
premiums (417) (219) (283) (1,643) (554) (493) (528) (991) (587) (264) (5,979)
Deferred
income tax
liabilities (151) (53) (57) (516) (170) (117) (123) (335) (57) (57) (1,636)
Other
payables,
including
insurance
payables (297) (397) (160) (1,071) (562) (658) (430) (1,486) (448) (472) (5,981)
Accruals and
deferred
income (43) (23) (29) (118) (43) (43) (49) (71) (85) (39) (543)
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Total fair
value
acquired 953 (28) 344 3,978 738 142 383 2,098 690 117 9,415
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Consideration 891 - 280 3,857 696 100 360 2,024 651 145 9,004
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Positive
goodwill
on
acquisition - 28 - - - - - - - 28 56
Negative
goodwill
on
acquisition (62) - (64) (121) (42) (42) (23) (74) (39) - (467)
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Capacity
acquired
2019
underwriting
year 1,027 481 562 4,235 1,262 1,091 1,457 2,019 1,108 649 13,891
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
2020
underwriting
year 968 495 609 3,890 1,225 1,139 1,181 2,185 1,183 504 13,380
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
2021
underwriting
year 949 556 682 3,935 820 1,006 618 2,914 364 502 12,347
-------------- ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- -------
Had the Limited Liability Vehicles been consolidated from 1
January 2020, the consolidated statement of comprehensive income
would show net earned premium of GBP90,820,000 and a profit after
tax of GBP819,000.
Costs incurred in connection with the twenty eight acquisitions
totalling GBP447,000 (2020: GBP114,000) have been recognised in the
consolidated income statement.
Nameco Nameco Nameco Nameco
(No Nomina (No Nomina Nomina Queens- (No (No Shaw
Brought 1130) No 070 389) No 469 No 536 berry 301) 1232) Lodge
forward Limited LLP Limited LLP LLP UW Limited Limited Limited Total
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
2021
acquisition
date 30 Sept 30 Sept 05 Oct 06 Oct 06 Oct 09 Oct 13 Oct 13 Oct 15 Oct
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Intangible
assets 536 - 456 4 159 430 29 15 1 - 1,630
Uplift to fair
value 5,963 311 100 1,017 149 405 1,048 771 381 23 10,168
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
6,499 311 556 1,021 308 835 1,077 786 382 23 11,798
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Financial
investments 12,939 661 957 1,780 639 1,573 1,690 1,394 679 495 22,807
Deferred
income tax
asset - - - - - - - - - - -
Reinsurers'
share
of insurance
liabilities:
-reinsurers'
share
of
outstanding
claims 5,991 370 409 847 343 873 876 655 358 134 10,858
-reinsurers'
share
of unearned
premium 1,167 76 75 169 63 141 200 120 66 45 2,122
Other
receivables,
including
insurance
receivables 14,286 1,075 780 2,266 323 896 1,145 1,503 640 180 23,094
Deferred
acquisition
costs 1,497 96 109 205 71 168 232 145 78 51 2,653
Prepayments
and accrued
income 113 7 9 13 4 14 11 10 6 1 188
Cash and cash
equivalents 3,313 189 181 271 93 298 279 164 102 131 5,021
Insurance
liabilities:
- claims
outstanding (22,251) (1,286) (1,561) (2,984) (1,081) (2,958) (2,935) (2,330) (1,138) (418) (38,942)
- unearned
premiums (5,979) (364) (470) (824) (288) (651) (903) (580) (315) (164) (10,538)
Deferred
income tax
liabilities (1,636) (78) (56) (319) (37) (101) (262) (241) (118) (6) (2,854)
Other
payables,
including
insurance
payables (5,979) (950) (262) (500) (163) (446) (674) (757) (531) (158) (10,422)
Accruals and
deferred
income (543) (34) (40) (70) (31) (59) (79) (55) (34) (30) (975)
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Total fair
value
acquired 9,415 73 687 1,875 244 585 657 814 175 284 14,809
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Consideration 9,004 31 645 1,829 223 543 674 818 195 209 14,171
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Positive
goodwill
on
acquisition 56 - - - - - 17 4 20 - 97
Negative
goodwill
on
acquisition (467) (42) (42) (46) (21) (42) - - - (75) (735)
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Capacity
acquired
2019
underwriting
year 13,891 784 990 1,637 620 1,922 1,860 1,343 699 267 24,014
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
2020
underwriting
year 13,380 835 1,048 1,795 648 1,412 2,054 1,261 713 296 23,411
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
2021
underwriting
year 12,347 653 1,044 2,005 494 1,512 2,211 1,364 683 355 22,668
-------------- -------- ------- ------- ------- ------- ------- ------- -------- -------- -------- --------
Nameco
Nomina Nomina Chant- Exalt (No Clifton Nomina Gould
Brought No 472 No 110 erelle Kunduz UW 1110) 2011 No 348 Scottish
forward LLP LLP UW LLP Limited Limited Limited LLP Limited Total
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
2021
acquisition
date 19 Nov 23 Nov 26 Nov 15 Dec 20 Dec 21 Dec 22 Dec 24 Dec 31 Dec
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Intangible
assets 1,630 169 436 - 171 21 - 22 744 358 3,551
Uplift to fair
value 10,168 100 100 1,473 150 418 1,530 684 - - 14,623
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
11,798 269 536 1,473 321 439 1,530 706 744 358 18,174
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Financial
investments 22,807 478 1,156 4,471 740 893 2,733 1,087 1,462 - 35,827
Deferred
income tax
asset - - - - - - - - - - -
Reinsurers'
share
of insurance
liabilities:
-reinsurers'
share
of
outstanding
claims 10,858 268 526 638 351 505 918 727 613 - 15,404
- reinsurers'
share
of unearned
premium 2,122 48 99 231 56 96 188 154 104 - 3,098
Other
receivables,
including
insurance
receivables 23,094 245 677 2,598 365 585 2,499 741 1,023 116 31,943
Deferred
acquisition
costs 2,652 57 123 318 82 146 281 166 140 - 3,965
Prepayments
and accrued
income 188 3 10 31 4 9 16 8 9 - 278
Cash and cash
equivalents 5,021 81 270 1,406 110 573 831 687 221 6 9,206
Insurance
liabilities:
- claims
outstanding (38,942) (839) (1,850) (5,175) (1,173) (1,765) (3,798) (2,132) (2,269) - (57,943)
- unearned
premiums (10,538) (220) (487) (1,285) (299) (544) (1,037) (671) (569) - (15,650)
Deferred
income tax
liabilities (2,854) (25) (44) (368) (38) (105) (388) (171) (74) - (4,067)
Other
payables,
including
insurance
payables (10,422) (116) (334) (1,440) (184) (419) (622) (1,076) (318) (1) (14,932)
Accruals and
deferred
income (975) (25) (47) (91) (45) (65) (77) (79) (44) (16) (1,464)
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Total fair
value
acquired 14,809 224 635 2,807 290 348 3,074 147 1,042 463 23,839
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Consideration 14,171 190 560 2,662 220 410 3,083 298 910 435 22,939
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Positive
goodwill
on
acquisition 97 - - - - 62 9 151 - - 319
Negative
goodwill
on
acquisition (735) (34) (75) (145) (70) - - - (132) (28) (1,219)
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
Capacity
acquired
2019
underwriting
year 24,014 470 1,126 3,212 714 1,207 2,057 1,378 1,238 672 36,086
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
2020
underwriting
year 23,411 495 1,099 3,081 655 1,207 2,398 1,492 1,256 711 35,736
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
2021
underwriting
year 22,668 475 773 3,108 640 1,186 2,300 1,558 1,308 766 34,784
-------------- -------- ------- ------- ------- ------- ------- -------- -------- ------- -------- --------
23. Share option plans
(i) Joint Share Ownership Plan ("JSOP")
500,000 shares have been vested as at 31 December 2021.
On 16 August 2021, a further 600,000 shares were issued.
Effect of the transactions
The beneficial interests of the Executives are as follows:
2022 2021
-------------------------------------- --------------------------------------
Interests Interests
in jointly in jointly
owned owned
ordinary Other ordinary Other
shares interests shares interests
issued in issued in
under ordinary Total under ordinary Total
Director JSOP shares shareholding JSOP shares shareholding
--------------- ----------- ---------- ------------- ----------- ---------- -------------
Arthur Manners 477,500 720,009 1,197,509 477,500 709,868 1,187,368
Nigel Hanbury 622,500 8,939,858 9,562,358 622,500 8,927,294 9,549,794
--------------- ----------- ---------- ------------- ----------- ---------- -------------
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 for the new awards is based
on the following six basic assumptions:
(a) market value of a share at the date of grant (155p);
(b) expected premium or threshold price of a share (174.8p);
(c) expected life of the JSOP award (three years);
(d) risk-free rate of capital (1%);
(e) expected dividend yield (1.9%); and
(f) expected future volatility of a Helios share (20%).
The gives a total fair value is to be charged as an expense and
spread over three years, being the years 2022 to 2024.
(ii) Share based payments
In 2022, the Company operated the Helios Underwriting Plc Long
Term Incentive Plan ("LTIP"). On 16 December 2022, the Company
granted 571,427 awards under the LTIP in the form of a nil-cost
options.
The awards for the Executive Directors are as follows:
Awards Outstanding Exercisable
granted at at
during Vested/ 31 December 31 December
Director 2022 Forfeited exercised 2022 2022
--------------- -------- --------- ---------- ------------ ------------
Arthur Manners 266,666 - - 266,666 -
Nigel Hanbury 304,761 - - 304,761 -
--------------- -------- --------- ---------- ------------ ------------
The vesting period for the awards is three years, subject to
continued service and the achievement of specific performance
conditions. If the options remain unexercised after a period of ten
years from the date of grant, the options expire. The awards'
performance conditions set threshold (30%) to stretch (60%) targets
in respect of the Company's total shareholder return ("TSR") over
the three-year period following the grant of the awards. No portion
of the awards shall vest unless the Company's TSR at the end of the
performance period reaches the threshold target, for which one
quarter of the awards would vest, rising on a straight line basis
to full vesting of the awards for the Company's TSR over the
performance period being equal to the stretch target or better. In
the case of Executive Directors, any vested shares will be subject
to a two-year holding period.
The fair value of the LTIP awards is calculated using a Monte
Carlo (Stochastic) model taking into account the terms and
conditions of the awards granted. The inputs into the model
are:
-- Share price at date of grant: 157.5p
-- Exercise price: 0p
-- Risk free rate of interest: 3.3%
-- Expected dividend yield: 0%
-- Expected volatility: 30.78%
-- Expected life: three years
The resulting fair value of 65.44p includes the impact of the
holding period.
No options were exercised during the year. The weighted average
remaining life of the options is 9.96 years.
No charge has been recognised in the Company's income statement
as the amount is immaterial.
24. Treasury shares: purchase of own shares
The Company has in previous years bought back some of its own
ordinary shares on the market and these are held in treasury. No
shares were bought back during 2022.
The retained earnings have been reduced by GBP527,000, 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 2022, the 419,169 own shares bought back
represent 0.55% of the total allotted, called up and fully paid
ordinary shares of the Company of 76,637,372 (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
from/(to) subsidiaries exceeding GBP1,000,000 as at 31 December are
set out below:
31 December 31 December
2022 2021
Company GBP'000 GBP'000
----------------------------------- ----------- -----------
Nameco (No. 917) Limited 12,116 9,338
Helios UTG Partner Limited 8,276 7,930
Chapman Underwriting Limited 13,458 2,554
Romsey Underwriting Limited 8,790 6,412
Advantage DCP Limited (1,659) (1,623)
Catbang 926 Limited 7,466 1,546
N J Hanbury Limited 2,789 -
Queensberry Underwriting Limited 2,870 -
Chanterelle Underwriting Limited 1,838 -
Clifton 2011 Limited 1,175 -
Exalt Underwriting Limited 1,268 -
North Breache Underwriting Limited 1,119 -
Risk Capital UTG Limited 3,624 -
Subsidiaries below GBP1,000,000 7,247 8,174
----------------------------------- ----------- -----------
Net amount 70,377 34,331
----------------------------------- ----------- -----------
Receivable from subsidiaries 73,505 37,290
Payable from subsidiaries (3,128) (2,959)
----------------------------------- ----------- -----------
70,377 34,331
----------------------------------- ----------- -----------
Helios Underwriting plc and its subsidiaries have entered into a
management agreement with Nomina plc. Jeremy Evans, who resigned as
a Director of the Company on 6 February 2021, is 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 GBP224,000 (2021: GBP150,000).
The Limited Liability Vehicles have entered into a members'
agent agreement with Hampden Agencies Limited. Jeremy Evans, who
resigned as a Director of Helios Underwriting plc on 6 February
2021, is a director of the Company's subsidiary companies and 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 2022 are GBP315,000 (2021: GBP478,000). Following
acquisition into the Group, no profit commission is payable on
future underwriting years.
The Group entered into quota share reinsurance contracts for the
2020, 2021, 2022 and 2023 years of account with HIPCC Limited. The
Limited Liability Vehicles' underwriting year of account quota
share participations are set out below:
Company or partnership 2019 2021 2022 2023
----------------------------- ---- ---- ---- ----
Nameco (No. 917) Limited 70% 59% 44% 36%
Nameco (No. 346) Limited 70% 60% 65% 38%
Chapman Underwriting Limited 70% 68% 11% 9%
Advantage DCP Limited 70% 54% - -
Romsey Underwriting Limited 70% 48% 37% 29%
Nomina No 321 LLP 70% 35% - -
Nameco (No. 409) Limited 70% 44% - -
Nameco (No. 1113) Limited 70% 46% - -
Catbang 926 Limited 70% 60% 21% 16%
Whittle Martin Underwriting 70% 48% - -
Nameco (No. 408) Limited - 53% - -
----------------------------- ---- ---- ---- ----
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 GBP1,921,000 (2021: GBP2,703,000)
during the year.
In addition, HIPCC provides 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 forgo.
Nigel Hanbury was the majority shareholder of Upperton Holdings
Limited, which in turn was the sole shareholder of N J Hanbury
Limited, which was acquired by the Company on 27 November 2020 in
exchange for 3,066,752 shares in the Company, a total consideration
of GBP3,680,000.
Nigel Hanbury was 40% owner of Nomina No 084 LLP, which was
acquired by the Helios UTG Partner Limited (a subsidiary of the
Company) on 27 November 2020 in exchange for 1,025,786 shares in
the Company, a total consideration of GBP2,036,000.
Arthur Manners was the sole shareholder of Nameco (No 510)
Limited, which was acquired by the Company on 27 November 2020 in
exchange for 547,576 shares in the Company, a total consideration
of GBP657,000.
During 2022, the following Directors received dividends, in line
with their shareholdings held:
Shareholding
at date Dividend
dividend received
declared 19 July
29 June 2022
Director 2022 GBP
----------------------------------------------------- ------------ ---------
Nigel Hanbury (either personally or has an interest
in) 9,549,794 267,819
Andrew Christie 34,317 1,030
Arthur Manners (either personally or has an interest
in) 1,187,368 21,296
Edward Fitzalan-Howard 382,864 11,486
Michael Cunningham 86,848 2,605
Tom Libassi (has an interest in) 13,407,000 402,210
Martin Reith 130,161 3,905
----------------------------------------------------- ------------ ---------
26. Ultimate controlling party
The Directors consider that the Group has no ultimate
controlling party.
27. Syndicate participations
The syndicates in which the Company's subsidiaries participate
as corporate members of Lloyd's are as follows:
Allocated capacity per year
of account
--------------------------------------------------
Syndicate 2023 2022 2021 * 2019 *
number Managing or members' agent GBP GBP GBP GBP
--------- ------------------------------------ ----------- ----------- ----------- -----------
33 Hiscox Syndicates Limited 14,422,161 14,422,161 14,422,175 14,799,583
218 IQUW Syndicate Management Limited 17,566,674 7,358,070 7,358,077 6,801,863
Cincinnati Global Underwriting
318 Agency Limited 862,407 992,637 992,635 404,687
386 QBE Underwriting Limited 2,918,248 2,850,542 2,591,419 2,537,132
510 Tokio Marine Kiln Syndicates Limited 27,057,292 33,081,528 23,374,379 20,297,450
557 Tokio Marine Kiln Syndicates Limited - 3,458,576 3,458,576 3,329,195
609 Atrium Underwriters Limited 17,095,778 12,732,280 12,248,230 11,123,662
623 Beazley Furlonge Limited 27,510,398 22,303,493 19,550,842 16,670,372
727 S A Meacock & Company Limited 2,648,580 2,170,966 2,107,738 3,161,831
1176 Chaucer Syndicates Limited 2,854,340 2,854,339 2,854,347 2,883,166
1200 Argo Managing Agency Limited 54,999 10,050,000 - 160,714
1729 Asta Managing Agency Limited 19,999,999 10,148,838 131,123 252,810
1902 Asta Managing Agency Limited 10,688,300 10,000,002 - -
1955 Arch Managing Agency Limited 12,500,000 - - -
1969 Apollo Syndicate Management Limited 12,170,742 5,675,170 459,001 50,000
1971 Apollo Syndicate Management Limited 10,000,001 6,467,147 - -
1985 Astra Managing Agency Limited 16,874,190 - - -
1988 Asta Managing Agency Limited 15,000,000 - - -
1991 Coverys Managing Agency Limited - - - -
2010 Lancashire Syndicates Limited 6,978,171 10,331,172 9,730,661 4,321,089
2014 Pembroke Managing Agency Limited - - - -
2121 Argenta Syndicate Management Limited 60,000 10,068,894 5,517,177 2,517,014
2288 Astra Managing Agency Limited - - - 21,860
2525 Asta Managing Agency Limited 1,967,576 1,580,905 1,471,414 1,406,777
2689 Asta Managing Agency Limited 2,600,000 10,025,276 438,655 518,866
2791 Managing Agency Partners Limited 11,402,951 9,618,495 9,618,499 10,703,768
4242 Asta Managing Agency Limited 10,586,722 12,786,684 8,783,066 663,592
4444 Canopius Managing Agents Limited 21,176 20,000 182,189 326,110
5183 Asta Managing Agency Limited 5,000,000 - - -
5623 Beazley Furlonge Limited 17,631,646 6,894,032 4,769,792 2,898,292
5886 Asta Managing Agency Limited 26,805,639 22,875,383 12,375,473 7,504,557
6103 Managing Agency Partners Limited 3,197,178 3,389,701 3,015,443 2,321,087
6104 Hiscox Syndicates Limited - 1,758,333 1,758,333 1,808,317
6107 Beazley Furlonge Limited 103,807 1,621,127 1,620,822 1,865,002
6117 Argo Managing Agency Limited 100,000 2,841,022 1,997,453 1,788,301
6133 Apollo Syndicate Management Limited - - - 14,400
--------- ------------------------------------ ----------- ----------- ----------- -----------
Total 296,678,975 232,700,472 145,101,772 115,745,332
--------- ------------------------------------ ----------- ----------- ----------- -----------
* Including the new acquisitions in 2022.
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 2022 31 December 2021
----------------------------- -----------------------------
Group Syndicate Total Group Syndicate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- --------- -------- -------- --------- --------
Assets
Intangible assets 61,434 - 61,434 60,889 - 60,889
Financial assets at fair value
through profit or loss 73,771 152,242 226,013 43,589 110,255 153,844
Deferred income tax asset - - - - - -
Reinsurance assets:
- reinsurers' share of claims
outstanding 60 80,666 80,726 60 53,373 53,433
- reinsurers' share of unearned
premium - 21,333 21,333 - 10,538 10,538
Other receivables, including
insurance and reinsurance receivables 3,103 144,573 147,676 5,457 82,402 87,859
Deferred acquisition costs - 24,991 24,991 - 13,615 13,615
Prepayments and accrued income 3,746 1,330 5,076 - 799 799
Cash and cash equivalents 10,254 15,046 25,300 16,178 8,446 24,624
--------------------------------------- -------- --------- -------- -------- --------- --------
Total assets 152,368 440,181 592,549 126,173 279,428 405,601
--------------------------------------- -------- --------- -------- -------- --------- --------
Liabilities
Insurance liabilities:
- claims outstanding - 272,015 272,015 - 186,653 186,653
- unearned premium - 114,663 114,663 - 59,611 59,611
Deferred income tax liabilities 11,228 84 11,312 11,887 78 11,965
Borrowings 15,000 - 15,000 - - -
Other payables, including insurance
and reinsurance payables 157 54,736 54,893 445 34,482 34,927
Accruals and deferred income 3,682 3,806 7,488 2,607 2,092 4,699
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities 30,067 445,304 475,371 14,939 282,916 279,855
--------------------------------------- -------- --------- -------- -------- --------- --------
Equity attributable to owners
of the Parent
Share capital 7,774 - 7,774 6,931 - 6,931
Share premium 98,268 - 98,268 86,330 - 86,330
Revaluation reserve 12,295 - 12,295 9,348 - 9,348
Other reserves (110) - (110) (110) - (110)
Retained earnings 4,074 (5,123) (1,049) 8,735 (3,488) 5,247
--------------------------------------- -------- --------- -------- -------- --------- --------
Total equity 122,301 (5,123) 117,178 111,234 (3,488) 107,746
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities and equity 152,368 440,181 592,549 126,173 279,428 405,601
--------------------------------------- -------- --------- -------- -------- --------- --------
Below is an analysis of the free working capital available to
the Group:
31 December 31 December
2022 2021
Group GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Funds at Lloyd's supplied by:
Reinsurers 27,818 37,032
Other third party 26,421 5,609
Group owned* 73,040 43,304
---------------------------------------------------- ----------- -----------
Total funds at Lloyd's supplied (excluding solvency
credits) 127,279 85,945
---------------------------------------------------- ----------- -----------
Group funds available:
Financial assets 73,771 43,589
Cash 10,254 16,178
---------------------------------------------------- ----------- -----------
Total funds 84,025 59,767
---------------------------------------------------- ----------- -----------
Less Group funds at Lloyd's (73,040) (43,304)
---------------------------------------------------- ----------- -----------
Free working capital 10,985 16,463
---------------------------------------------------- ----------- -----------
* Included in 31 December 2022 Group owned funds is the proceeds
from the Barclays GBP15m facility.
29. Events after the financial reporting period
Dividend
In respect of the year ended 31 December 2022, a final dividend
of 3p per fully paid ordinary share (see Note 21) amounting to a
total dividend of GBP2,287,000, is to be proposed at the Annual
General Meeting on 29 June 2023. These Financial Statements do not
reflect this dividend payable.
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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
MSCNKPBPCBKDOPB
(END) Dow Jones Newswires
May 26, 2023 02:00 ET (06:00 GMT)
Helios Underwriting (LSE:HUW)
Historical Stock Chart
From Jun 2024 to Jul 2024
Helios Underwriting (LSE:HUW)
Historical Stock Chart
From Jul 2023 to Jul 2024
