ADV.L Regulatory News (ADV)

28 Jul 2008 07:00



Advent Capital (Holdings) PLC

("Advent" or the "Company")

London - 28 July 2008

Advent, the specialist Lloyd's insurer, today reports its results for the six months ended 30 June 2008.

Key highlights 

Profit before tax of £1.6 million (2007: £6.7 million).

Second quarter profit before tax of £7.1 million (2007: £6.2 million) reflects the reduced frequency of single risk property losses since the first quarter.

Net improvements in prior years' claims reserves of £0.7 million. 

Gross premiums written, excluding the reinsurance to close premium, increased by 25.0% to £111.7 million (2007: £89.3 million).

Competitive market conditions continue within expectations. 

Financial summary 

	Six months (unaudited)
	2008	2007	Year  2007	Year 2006	Year 2005
	£'000	£'000	£'000	£'000	£'000
Gross premiums written	150,238	96,072	126,912	115,356	100,550
Net premiums written	121,854	76,658	106,199	88,201	62,949
Net premiums earned	85,138	42,577	95,984	81,694	65,070
Underwriting profit (loss)	894	4,416	20,912	21,064	(78,098)
Profit (loss) before tax	1,598	6,740	25,161	22,853	(74,185)
Profit (loss) after tax	1,175	3,457	19,192	16,011	(51,922)
Return on equity	1.1%	3.9%	21.6%	25.1%	(68.4%)

  

	Six months (unaudited)
	2008	2007 Restated	Year 2007 Restated	Year 2006 Restated	Year 2005 Restated
	£'000	£'000	£'000	£'000	£'000
Per share amounts (1)
Earnings (loss)  - basic and diluted	2.9p	8.5p	47.2p	43.3p	(303p)
Dividend	12.5p	-	-	-	27.5p
Net assets	257p	228p	267p	219p	160p
Net tangible assets	240p	208p	249p	199p	136p

Operating ratios
Claims ratio	83% (2)	66%	50%	53%	191%
Expense ratio	16% (2)	11%	28%	21% (3)	29%
Combined ratio	99% (2)	77%	78%	74% (3)	220%
Net notified loss ratio	17%	11%	32%	17%	134%
(by year of account)

(1)  per share amounts restated for the share consolidation of 10 old ordinary shares of 5p each for 1 new ordinary share of 50p each on 23 June 2008

(2) claims ratio of 71%, expense ratio of 27% and combined ratio of 98% excluding impact of reinsurance to close (RITC) premium

(3) expense ratio of 30% and combined ratio of 83% excluding foreign exchange profit of £7.0 million

Advent Capital (Holdings) PLC
Keith Thompson		020 7743 8200
Chief Operating Officer
Trevor Ambridge Chief Financial Officer		020 7743 8200
Neil Ewing Investor Relations		020 7743 8250
Fox-Pitt Kelton Cochran Caronia Waller
Simon Law		020 7763 6023
Jonny Franklin-Adams		020 7763 6029
Pelham Public Relations
Polly Fergusson		020 7743 6362
Damian Beeley		020 3178 2253

  Financial Review

For the six months ended 30 June 2008, the Company's profit before tax was £1.6 million compared with £6.7 million for the first half of 2007.  

For the second quarter of 2008, the Company's pre-tax profit of £7.1 million reflected the reduction in frequency of significant single risk property losses from those experienced in the first quarter, up from £6.2 million in the second quarter of 2007.

Estimated aggregate single risk property losses were in excess of US$6 billion for the first half of 2008. For the first six months of 2008, the Company recorded single risk property losses, net of reinsurance recoveries and reinstatement premiums, of £9.8 million from these and other events (first quarter of 2008: £7.9 million).

The results for the first half of 2008 reflect:

Underwriting profit of £1.8 million from the 2008 year of account after single risk property losses of £5.0 million from Severstal, BHP Billiton and other insureds. In the absence of additional significant single risk property losses during the second half of 2008, the Company would expect most of these losses to be contained within business plan losses for the full year 2008. 

Underwriting profit of £0.3 million from the 2007 year of account after single risk property losses of £4.8 million, principally recorded in the first quarter of 2008.

Underwriting loss of £0.7 million from the 2006 and prior years of account primarily due to reductions in ultimate premium estimates for the 2006 year of account.

Improvement in prior years' claims of £0.7 million (2007: £0.1 million).

Earnings per share of 2.9p for the first half of 2008 reflected the impact of single risk property losses principally incurred in the first quarter of 2008, compared with restated earnings per share of 8.5p in 2007.

For the six months ended 30 June 2008, the Company had an underwriting profit of £0.9 million and a combined ratio of 99.0% compared with an underwriting profit of £4.4 million and a combined ratio of 89.6% in 2007.  Excluding the RITC premium from the 2005 year of account of £34.2 million (2007: £6.8 million from the 2004 year of account), the combined ratio for the first half of 2008 was 98.2% (2007: 87.9%) on net earned premium of £51.1 million. The underwriting profit for the first half of 2008 was adversely impacted by higher frequency of single risk property losses, net of reinsurance recoveries and reinstatement premiums of £9.8 million.

Underwriting Review

For the six months ended 30 June 2008, gross premiums written, excluding the RITC premium, increased by 25.0% to £111.7 million from £89.3 million in 2007, reflecting the Company's increased share of Syndicate 780's capacity to 100% in 2008 from 83.7% in 2007 (£16.7 million) and premium growth (£5.7 million). Advent Re wrote gross premiums of £7.1 million (US$14.1 million) in the first half of 2008 up from £6.3 million (US$12.4 million) in 2007.

Similarly, excluding the RITC premium, net premiums written increased by 24.3% to £87.6 million from £70.5 million in 2007, and net premiums earned increased by 39.8% to £50.9 million from £36.4 million in 2007.

Insurance Segment Review

	30 June 2008
	Non-Marine	Property
	Reinsurance	Insurance	Marine	Syn 2	Total
	£'000	£'000	£'000	£'000	£'000
Gross premiums written	116,591	15,374	17,746	527	150,238
Net premiums written	96,167	10,652	14,466	569	121,854
Net premiums earned	62,722	13,247	8,600	569	85,138
Net claims incurred	(53,888)	(12,771)	(3,490)	(580)	(70,729)
Net underwriting result	8,834	476	5,110	(11)	14,409
Acquisition costs	(4,088)	(3,436)	(1,987)	(79)	(9,590)
Operating costs	(2,518)	(510)	(588)	(309)	(3,925)
Underwriting profit (loss)	2,228	(3,470)	2,535	(399)	894
Claims ratio	85.9%	96.4%	40.6%	102.0%	83.1%
Acquisition costs	6.5%	25.9%	23.1%	13.9%	11.3%
Operating costs	4.0%	3.9%	6.8%	54.3%	4.6%
Expense ratio	10.5%	29.8%	29.9%	68.2%	15.9%
Combined ratio	96.4%	126.2%	70.5%	170.2%	99.0%
Adjusted combined ratio excluding effect of RITC premium	92.2%	126.2%	70.5%	170.2%	98.2%

 

	30 June 2007
	Non-Marine	Property
	Reinsurance	Insurance	Marine	Syn 2	Total
	£’000	£’000	£’000	£’000	£’000
Gross premiums written	64,538	16,388	14,953	193	96,072
Net premiums written	50,937	12,699	12,590	432	76,658
Net premiums earned	24,004	12,085	6,056	432	42,577
Net claims incurred	(18,132)	(5,279)	(4,546)	761	(27,196)
Net underwriting result	5,872	6,806	1,510	1,193	15,381
Acquisition costs	(2,887)	(3,499)	(1,227)	(29)	(7,642)
Operating costs	(2,211)	(562)	(512)	(38)	(3,323)
Underwriting result	774	2,745	(229)	1,126	4,416
Claims ratio	75.5%	43.7%	75.1%	(176.2)%	63.9%
Acquisition costs	12.0%	29.0%	20.3%	6.7%	17.9%
Operating costs	9.2%	4.7%	8.4%	8.8%	7.8%
Expense ratio	21.2%	33.7%	28.7%	15.5%	25.7%
Combined ratio	96.7%	77.4%	103.8%	(160.7)%	89.6%
Adjusted combined ratio excluding effect of RITC premium	95.7%	77.4%	103.8%	(160.7)%	87.9%

 

Non-Marine Reinsurance

For the six months ended 30 June 2008, the Non-Marine Reinsurance account had an underwriting profit of £2.2 million and combined ratio of 96.4% which includes single risk property losses, net of reinsurance recoveries and reinstatement premiums of £5.4 million, principally incurred in the first quarter. This compares with an underwriting profit of £0.8 million and combined ratio of 96.7% in 2007, which included losses from European Windstorm Kyrill, Australian storms and UK floods of £4.1 million. Excluding the RITC premium the combined ratio was 92.2% for the first half of 2008 (2007: 95.7%).

Syndicate 780

The rating environment through 1 July 2008 was in line with our expectations. Rates in all regions of the USA are under pressure with rates for regional non coastal exposures down 15% to 20% on average. Rates for coastal exposures are holding up as well as could be expected given the lack of catastrophe activity. Florida rates remain good although they are down 10% to 15% this year following significant increases in the last two years. Risk excess business is under some pressure but, with significant loss activity in 2008, any further rate reductions should be limited. Non USA catastrophe rates have held up better than expected with moderate reductions of between 3% and 5%.   In general, the market has held firm on terms and conditions, particularly deductibles.

Advent Re

For the six months ended 30 June 2008, Advent Re had an underwriting profit of £0.3 million on 2007 policies which expired 31 March 2008. It wrote US$13.2 million (£6.6 million) of premiums, net of brokerage, in the first half of 2008, up from US$11.5 million (£5.8 million) in 2007, with 72% of policies expiring on 31 December 2008 and 28% of policies expiring in the first half of 2009.

The risks written consist of Original Loss Warranty (OLW) policies for 38% of premiums written and traditional Ultimate Net Loss (UNL) policies for 62% of premiums written. The attachment points for the OLW's are in line with 2007.  The UNL policies are underwritten with the intention of responding to similar levels of market loss as the OLW policies, recognising that this is modelled data and the attachment points are estimates in terms of the probability and size of the market loss.  

No underwriting profit has been earned from the 2008 contracts as we maintain conservative loss ratios reflecting Advent Re's exposure to catastrophe risk and the US hurricane season in particular.

Property Insurance

For the six months ended 30 June 2008, the Property Insurance account had an underwriting loss of £3.5 million and combined ratio of 126.2% which includes single risk property losses, net of reinsurance recoveries, of £4.4 million, principally incurred in the first quarter. This compares with an underwriting profit of £2.7 million and combined ratio of 77.4% in 2007.

Rates, terms and conditions are under pressure in most geographical territories, with the exception of UK and Australia, where rates have begun to increase on some property lines. Generally, the non marine property market remains increasingly competitive, but in line with expectations.

Marine

For the six months ended 30 June 2008, the Marine account had an underwriting profit of £2.5 million and a combined ratio of 70.5%, as the Energy account continued to perform in accordance with expectations. This compares with an underwriting loss of £0.2 million and combined ratio of 103.8% in 2007, principally due to the late advice of a Hurricane Rita energy claim of £2.2 million.

Rates are in line with expectations with rate decreases of 10% to 20% on Gulf of Mexico exposed business and rate decreases of 20% elsewhere. Terms and conditions are generally holding. 

Syndicate 2

For the six months ended 30 June 2008, Syndicate 2 had an underwriting loss of £0.4 million compared with an underwriting profit of £1.2 million in 2007. The underwriting loss in 2008 principally resulted from a new claims advice on the 1999 year of account. The 2007 result reflected favourable development on 2001 and prior years' aviation and energy claims.

Advent Underwriting Limited is considering the closure of the 2001 and 2002 years of account and is currently consulting with all syndicate capital providers to establish whether this is achievable.

Syndicate 780 - Net notified loss ratio at 6 months (excluding IBNR)

Year of account	1993	1994	1995	1996	1997	1998	1999	2000
% net notified	6.3%	17.0%	4.2%	8.8%	7.2%	17.7%	15.2%	8.4%
Year of account	2001	2002	2003	2004	2005	2006	2007	2008
% net notified	12.2%	2.0%	4.6%	8.9%	12.6%	4.6%	10.5%	17.1%

The 2008 net notified loss ratio of 17.1% reflects the single risk property losses incurred in the first quarter. The 2007 net notified loss ratio included incurred losses on Kyrill but did not include the Australian storms and UK floods.

Catastrophe Exposure

At 30 June 2008, the Company's consolidated exposure to any one of the major Lloyd's Realistic Disaster Scenarios (RDS), from Syndicate 780 and Advent Re, is summarised below:

	Industry	30 June 2008	30 June 2008	1 January 2008	1 January 2008
	Loss	Gross loss	Net loss	Gross loss	Net loss
Catastrophe Event	US$bn	£m	£m	£m	£m
Gulf of Mexico Windstorm	113	91.7	41.6	83.7	38.3
USA North East Windstorm	74	76.7	36.7	72.6	35.2
Los Angeles Earthquake	74	70.1	36.7	69.1	32.6
European Windstorm	31	68.6	34.1	66.1	34.6
Japan Earthquake	51	47.0	30.2	32.4	26.6

The Gulf of Mexico catastrophe event, before consideration of Syndicate 780 and Advent Re's catastrophe margins, would result in an estimated after tax loss of £34.2 million or 32.7% of shareholders' equity (1 January 2008: £30.7 million and 28.3% respectively).

Expenses

For the six months ended 30 June 2008, the operating expense ratio (excluding acquisition costs and profit/loss on exchange) as a percentage of net earned premiums, excluding RITC, was 8.1%, compared with 9.9% in 2007, reflecting savings on reduced Lloyd's central charges and the on increase net premiums earned. 

Investment Return

For the six months ended 30 June 2008, the investment return decreased to £5.1 million (2007: £6.1 million), reflecting the sharply lower interest rates in the United States and slightly lower interest rates in the United Kingdom, offset by an increase in the Company's cash and investments of £51.0 million since 30 June 2007.

The Syndicate's US dollar investment portfolio duration has been maintained short, at approximately 0.7 years. It is wholly invested in government or government guaranteed securities, with an overall return on US bonds of 1.4% for the first half of 2008 (annualised return of 2.8%). Neither the syndicates nor the Company invest in asset backed or mortgage backed securities (ABS and MBS), equities or derivatives. Certain overseas deposits managed by Lloyd's (over which the Company has no investment control) have invested in corporate bonds and ABS as referred to in note 5 to the financial statements.

Advent Re's funds (included in corporate balances below) continued to be invested mainly in short term US treasury bills held in trust accounts as collateral for cedents' policy limits. The investment return for the first half of 2008 was £0.3 million (annualised return of 2.2%) reflecting sharply lower US interest rates.

Our investment mix as at 30 June 2008 is shown below.

			30 June  2008	31 December 2007
	Syndicate	Corporate	Total	Total
Investment mix	£'000	£'000	£'000	£'000
Government debt securities	152,500	110,089	262,589	219,654
Cash and cash equivalents	15,693	18,067	33,760	26,978
Overseas deposits and money market funds	8,171	-	8,171	20,172
Total	176,364	128,156	304,520	266,804

The increase in cash and investments from £266.8 million at 31 December 2007 to £304.5 million at 30 June 2008 reflects the increase in the Company's share of Syndicate 780's 2005 year of account assets reinsured into the 2006 year of account and the collection of Syndicate 780's outstanding losses on the closure of the 2005 year of account from third party names.

  Capital Management

		30 June  2008		31 December 2007
		£'000		£'000
Long term debt - subordinated - senior		25,766 22,270		25,085 22,262
		48,036		47,347
Shareholders' equity		104,554		108,398
Debt to equity ratio		46%		44%
Debt to total capital ratio		31%		30%
Interest coverage		2 x		7 x

The Company continues to maintain its debt to total capital ratio below 35% in accordance with its stated policy.

2008 Business Plan

The first half is the key underwriting period for Syndicate 780 with premiums written of £104.4 million. At business plan exchange rates of US$1.92, premiums written of £106.3 million are ahead of plan premiums of £101.8 million at this stage. Premiums written for the Reinsurance account were ahead of plan by £10.9 million reflecting the syndicate's focus on developing its non USA catastrophe exposed business with premiums written in excess of plan by £6.4 million and an increase of £3.0 million in the US catastrophe book. This resulted in increases in peak catastrophe zone exposures in the Gulf of Mexico and Japan to 19.9% and 16.7% of capacity at 1 July 2008 compared with plan of 18.9% and 12.5% respectively. Premiums written by the Property Insurance division are below plan by £6.4 million reflecting increasingly competitive market conditions in the insurance market. Premiums written for the Marine account are in line with plan at £16.4 million.

The premiums underwritten of £104.4 million consist of £84.0 million recognised as premiums written in these interim statements and £20.5 million which is in respect of "premiums written but unincepted" business, principally relating to Property Insurance binders, where the premiums will be recognised in the second half of 2008.

We have submitted the 2009 preliminary business plan of Syndicate 780 which remains focused on the existing lines of business and recognises, in the absence of any major catastrophes, the continued pressures of the pricing environment and therefore reduced profit potential. The 2009 plan has forecast gross premium income of £117 million (at exchange rates of US$1.99 and Cdn$2.04). Further review will take place prior to finalising our 2009 premium forecasts in October taking into account prevailing market conditions.

Outlook

As expected, market conditions are increasingly competitive in our principal lines of business, affecting rates and premium signings, particularly in the Property Insurance and Energy accounts. Our 2008 business plans for Syndicate 780 and Advent Re reflected our expectation of softer market conditions albeit we believe that underwriting profitability remains at attractive levels. We have made good progress in the development of our worldwide, non USA exposed reinsurance book. Terms and conditions are holding, particularly in the Reinsurance account. 

We are now entering the US windstorm season with experts predicting greater than normal levels of hurricane activity. During the last two years, we have experienced attritional catastrophe activity but no major catastrophe events. There are no guarantees that these relatively benign catastrophe conditions will continue. We are involved in writing insurance and reinsurance business which is exposed to catastrophes such that, if there are any major catastrophe events in the second half of 2008, you can expect us to be involved.

I am very pleased to announce that the Board of Directors of Advent Underwriting has approved the appointments of Duncan Lummis, as Chief Underwriting Officer of Advent Underwriting and Darren Stockman, as Active Underwriter of Syndicate 780. They have both been appointed to that company's Board of Directors. Duncan and Darren both have 20 years experience with the Company and I am confident that they have the abilities to manage and develop our underwriting business in the future.

Advent is well positioned in these competitive and challenging markets. Our underwriting business has lived through many challenges over the past 33 years and our experienced management and underwriting team is well prepared to operate in what is clearly a highly competitive pricing environment. We continue to maintain our focus on underwriting profitability while remaining alert to the changing business environment that our Lloyd's and Bermuda operations may have to contend with.

Brian F Caudle

Chairman

25 July 2008

  CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2008 

	Note		Six months				Year
			2008		2007		2007
			(unaudited)		(unaudited)		(audited)
			£'000		£'000		£'000
Income
Gross premiums earned			58,317		44,990		113,400
Reinsurance to close premium			34,246		6,765		6,698
Reinsurance premium ceded			(7,425)		(9,178)		(24,114)
Net premiums earned	4		85,138		42,577		95,984
Investment income	5		5,062		6,053		13,141
Other operating income			237		309		483
Total Income			90,437		48,939		109,608
Expenses
Claims incurred	4		(39,180)		(20,041)		(41,121)
Reinsurance to close claims	4		(34,246)		(6,765)		(6,698)
Reinsurance recoveries	4		2,697		(390)		(614)
Acquisition costs			(9,590)		(7,642)		(18,921)
Underwriting expenses			(4,126)		(3,607)		(8,655)
Profit (loss) on exchange			(32)		316		868
Corporate costs			(2,359)		(1,836)		(4,748)
Total Expenses			(86,836)		(39,965)		(79,889)
Operating Result			3,601		8,974		29,719
Interest on debt			(2,003)		(2,234)		(4,558)
Profit before tax			1,598		6,740		25,161
Tax	7		(423)		(3,283)		(5,969)
Profit for the period attributable to ordinary shareholders			1,175		3,457		19,192
Earnings per ordinary share (restated)
- Basic and diluted	6		2.9p		8.5p		47.2p

  CONSOLIDATED BALANCE SHEET

At 30 June 2008

	Note		30 June				31 December
			2008		2007		2007
			(unaudited)		(unaudited)		(audited)
					Restated
			£'000		£'000		£'000
Assets
Cash and cash equivalents	5		33,760		137,537		26,978
Financial investments at fair value	5		270,760		115,941		239,826
Other receivables			5,640		10,043		4,345
Insurance and reinsurance assets
- Reinsurers' share of outstanding claims	4		18,877		21,335		18,176
- Reinsurers' share of unearned premiums	4		17,701		14,692		1,058
- Debtors arising from insurance and reinsurance operations			98,480		79,915		48,060
Deferred tax asset			15,242		18,371		15,665
Property and equipment			524		704		651
Intangible assets	8		6,938		7,835		7,210
Total assets			467,922		406,373		361,969
Equity
Share capital	6		20,329		20,329		20,329
Share premium account			60,662		60,662		60,662
Capital redemption reserve			21,065		21,065		21,065
Other reserves			(2,603)		(2,773)		(2,666)
Retained earnings (deficit)			5,101		(6,727)		9,008
Total shareholders' equity			104,554		92,556		108,398
Liabilities
Insurance and reinsurance liabilities
- Outstanding claims	4		203,768		171,226		163,764
- Unearned premiums	4		84,496		68,639		31,136
- Creditors arising out of insurance and reinsurance operations			19,418		17,560		6,442
Trade and other payables			7,650		10,188		4,882
Long term debt	6		48,036		46,204		47,347
Total liabilities			363,368		313,817		253,571
Total liabilities and shareholders' equity			467,922		406,373		361,969

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2008

	Share capital	Share premium	Capital re-demption reserve	Other reserves	Retained earnings	30 June 2008 (unaudited)  Total	30 June 2007 (unaudited) Total	31 Dec  2007 (audited) Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January	20,329	60,662	21,065	(2,666)	9,008	108,398	88,986	88,986
Profit  for the period	-	-	-	-	1,175	1,175	3,457	19,192
Dividends Share based payments	- -	- -	- -	- 63	(5,082) -	(5,082) 63	- 113	- 220
Balance at end of period	20,329	60,662	21,065	(2,603)	5,101	104,554	92,556	108,398

  CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2008

	Note		Six months				Year
			2008		2007		2007
			(unaudited)		(unaudited)		(audited)
					Restated
			£'000		£'000		£'000
Cash flows from operating activities	9		6,572		(4,208)		(117,799)
Interest paid			(2,048)		(2,252)		(4,563)
Income tax			-		-		133
			4,524		(6,460)		(122,229)
Cash flows from investing activities
Interest received			2,302		2,633		7,926
Purchase of property and equipment			(44)		(290)		(373)
			2,258		2,343		7,553
Net increase (decrease) in cash and cash equivalents			6,782		(4,117)		(114,676)
Cash and cash equivalents at 1 January			26,978		141,654		141,654
Cash and cash equivalents at end of period	5		33,760		137,537		26,978

  NOTES TO THE INTERIM FINANCIAL STATEMENTS

These interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended 31 December 2007 as set out on pages 41 to 79 of the 2007 Report and Accounts.

These interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting.  The policies utilised are also consistent with those set out on pages 46 to 49 of the Company's consolidated financial statements for the year ended 31 December 2007.

Cash and cash equivalents at 30 June 2007 have been restated consistent with their presentation in the 2007 Report and Accounts to include in financial investments certain syndicate overnight sweep cash accounts where the custodian and manager had invested aggregate underlying deposits in longer term investments.

Status of the interim financial statements

The interim financial statements have been reviewed by the Company's auditors PricewaterhouseCoopers LLP. These interim financial statements do not constitute accounts as defined in section 240 of the Companies Act 1985 ("the Act").

The results for the year ended 31 December 2007 are based on the Company's statutory accounts which received an unqualified audit opinion from the Company's auditors, and did not contain a statement under section 237(2) or (3) of the Act. The Company's Report and Accounts for the year ended 31 December 2007 have been filed with the Registrar of Companies.

  2. FOREIGN EXCHANGE RISK MANAGEMENT

The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the preparation of these financial statements were:

	30 June 2008				30 June 2007				31 December 2007
	Period		Period		Period		Period		Period		Period
	average		end		average		end		average		end
	rate		rate		rate		rate		rate		rate
US dollar	1.98		1.99		1.97		2.01		2.00		1.99
Euro	1.29		1.26		1.48		1.49		1.46		1.36
Canadian dollar	1.99		2.02		2.24		2.13		2.15		1.96

The Company had foreign exchange gains and losses which were recorded in the consolidated income statement as follows:

	Six  months 2008		Six  months 2007		Year 2007
	£'000		£'000		£'000
Underwriting activities	201		284		937
Corporate activities	(233)		32		(69)
Net gain (loss)	(32)		316		868

At 30 June 2008, the Company's asset and liability positions in its major foreign currencies were as follows:

	30 June 2008 (unaudited)
	US$m	£m	CDN$m	€m
Total assets	553.5	167.8	25.0	12.0
Total liabilities	(550.1)	(66.8)	(19.6)	(12.8)
Net assets (net liabilities)	3.4	101.0	5.4	(0.8)

	31 December 2007 (audited)
	US$m	£m	CDN$m	€m
Total assets	402.8	141.4	18.5	12.4
Total liabilities	(384.9)	(45.1)	(13.2)	(13.0)
Net assets (net liabilities)	17.9	96.3	5.3	(0.6)

  3. OPERATING RESULTS

	Six  months		Six  months		Year
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Underwriting profit
Syndicate 780 - Non-Marine
Underwriting Year of Account
2008 - open	1,769		-		-
2007 - open	267		(401)		12,652
2006 - open	(717)		3,396		2,281
2005 and prior closed	-		661		(258)
Total Syndicate 780	1,319		3,656		14,675
Syndicate 2 - Marine
Underwriting Year of Account
2002 - run-off	13		(180)		91
2001 - run-off	(412)		1,306		1,370
Total Syndicate 2	(399)		1,126		1,461
Advent Re	(26)		(366)		4,944
Company level reinsurance	-		-		(168)
Underwriting profit	894		4,416		20,912
Managing Agency
Agency fees	23		178		237
Recharges to Syndicates	214		131		246
	237		309		483
Other
Investment result	5,062		6,053		13,141
Interest expense	(2,003)		(2,234)		(4,558)
Corporate costs	(2,359)		(1,836)		(4,748)
Corporate foreign exchange (loss)	(233)		32		(69)
Profit before tax	1,598		6,740		25,161

4. INSURANCE RISK MANAGEMENT 

Insurance segment results

The underwriting results of Advent Re are included in the Non-Marine Reinsurance segment. Acquisition costs consisting of direct brokerage commissions, are allocated to each segment on a direct basis while operating costs, including underwriting costs, are allocated based on gross premiums written.

For catastrophe exposed business, including multiple peril coverage, the Company recognises premiums as earned based on the underlying exposure to catastrophe. As a result, a greater proportion of premium income on catastrophe exposed business is earned in the second half of the year when the company is exposed to greater risk of hurricane related losses.

The reinsurance to close (RITC) premium and claims are included in the Non Marine Reinsurance segment and are valued at the RITC transaction date of 1 January 2008. Subsequent movements in premiums and claims from the RITC are reflected in the segments to which they relate in claims incurred and reinsurance recoveries on the income statement.

	Non-Marine		Property
	Re-insurance		Insurance		Marine		Syndicate 2		Total
	£'000		£'000		£'000		£'000		£'000
Six months 2008 (unaudited)
Gross premiums written	116,591		15,374		17,746		527		150,238
Net premiums written	96,167		10,652		14,466		569		121,854
Net premiums earned	62,722		13,247		8,600		569		85,138
Net claims incurred	(53,888)		(12,771)		(3,490)		(580)		(70,729)
Acquisition costs	(4,088)		(3,436)		(1,987)		(79)		(9,590)
Operating expenses	(2,739)		(539)		(622)		(226)		(4,126)
Profit (loss) on exchange	221		29		34		(83)		201
Underwriting profit (loss)	2,228		(3,470)		2,535		(399)		894
Combined ratio	96.4%		126.2%		70.5%		170.2%		99.0%

	Non-Marine		Property
	Re-insurance		Insurance		Marine		Syndicate 2		Total
	£'000		£'000		£'000		£'000		£'000
Six months 2007 (unaudited)
Gross premiums written	64,538		16,388		14,953		193		96,072
Net premiums written	50,937		12,699		12,590		432		76,658
Net premiums earned	24,004		12,085		6,056		432		42,577
Net claims incurred	(18,132)		(5,279)		(4,546)		761		(27,196)
Acquisition costs	(2,887)		(3,499)		(1,227)		(29)		(7,642)
Operating expenses	(2,322)		(590)		(538)		(157)		(3,607)
Profit on exchange	111		28		26		119		284
Underwriting profit (loss)	774		2,745		(229)		1,126		4,416
Combined ratio	96.7%		77.4%		103.8%		(160.7)%		89.6%

	Non-Marine		Property
	Re-insurance		Insurance		Marine		Syndicate 2		Total
	£'000		£'000		£'000		£'000		£'000
Year 2007 (audited)
Gross premiums written	75,966		31,723		18,691		532		126,912
Net premiums written	61,292		27,785		16,461		661		106,199
Net premiums earned	57,862		24,358		13,103		661		95,984
Net claims incurred	(28,645)		(14,499)		(6,497)		1,208		(48,433)
Acquisition costs	(8,495)		(7,431)		(2,915)		(80)		(18,921)
Underwriting expenses	(4,899)		(2,046)		(1,204)		(506)		(8,655)
Profit on exchange	456		191		112		178		937
Underwriting profit	16,279		573		2,599		1,461		20,912
Combined ratio	71.9%		97.6%		80.2%		(120.9%)		78.2%

  

Provision for claims

(a) Net incurred claims	Six months		Six months		Year
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Claims incurred
- Gross paid claims	37,616		45,399		75,354
- Change in provision for claims	1,564		(25,358)		(34,233)
	39,180		20,041		41,121
Reinsurance Recoveries
- Received	(6,328)		(11,031)		(14,013)
- Change in provision	3,631		11,421		14,627
	(2,697)		390		614
Reinsurance to close claims (net)	34,246		6,765		6,698
Net incurred claims	70,729		27,196		48,433

(b) Outstanding claims and unearned premiums	Unearned		Claims		Total
	Premiums		outstanding
	£'000		£'000		£'000
Gross
At 1 January 2008 (audited)	31,136		163,764		194,900
Exchange adjustments			(119)		(119)
Movement in provisions
- current year	53,360		39,265		92,625
- reinsurance to close claims			38,561		38,561
- prior year			(87)		(87)
- paid claims			(37,616)		(37,616)
At 30 June 2008 (unaudited)	84,496		203,768		288,264
Reinsurance amount
At 1 January 2008 (audited)	1,058		18,176		19,234
Exchange adjustments			17		17
Movement in provisions
- current year	16,643		2,134		18,777
- reinsurance to close claims recoveries			4,315		4,315
- prior year			563		563
- paid recoveries			(6,328)		(6,328)
At 30 June 2008 (unaudited)	17,701		18,877		36,578
Net
At 30 June 2008 (unaudited)	66,795		184,891		251,686
At 31 December 2007 (audited)	30,078		145,588		175,666
At 30 June 2007 (unaudited)	53,947		149,891		203,838

For the six months ended 30 June 2008, improvement in prior years' claims, net of reinsurance recoveries and reinstatement premiums, amounted to £0.7 million (2007: improvement of £0.1 million).

  

The net outstanding claims are further analysed between notified outstanding claims and incurred but not reported claims (IBNR) below:

	30 June		30 June		31 December
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Notified outstanding claims	120,227		101,665		101,901
Claims incurred but not reported	64,664		48,226		43,687
Claims outstanding	184,891		149,891		145,588

The breakdown of the gross and net outstanding claims by category of claims is set out below.

	30 June 2008 (unaudited)				30 June 2007 (unaudited)				31 December 2007 (audited)
	Gross		Net		Gross		Net		Gross		Net
	£'000		£'000		£'000		£'000		£'000		£'000
Large catastrophe provisions	35,704		26,821		46,149		37,143		33,970		27,735
All other short tail provisions	88,589		86,080		52,251		49,273		60,221		57,017
Long-tail provisions (casualty)	36,342		36,342		25,478		25,478		24,640		24,640
Syndicate 2 provisions	43,133		35,648		47,348		37,997		44,933		36,196
Total	203,768		184,891		171,226		149,891		163,764		145,588

Reinsurance recoverable

At 30 June 2008, the Company's reinsurance recoverable on outstanding claims amounted to £18.9 million, an increase of £0.7 million since 31 December 2007, with reinsurers with the following risk ratings by AM Best (or equivalent S&P rating in the absence of an AM Best rating):

Risk Rating		Reinsurance recoverable
		£'000		%
A+		8,515		45.1
Lloyd's		2,808		14.9
A		4,423		23.4
A-		478		2.5
Trust fund backed		1,549		8.2
BBB or below and Non rated		1,104		5.9
Total		18,877		100.0

Included in debtors arising from insurance and reinsurance operations are the following reinsurer balances.

		Syndicate 780		Syndicate 2				Total
		£'000		£'000			£'000
Fully performing		558		526			1,084
Past due		3		967			970
Impaired		4,408		7,122			11,530
Provision for uncollectible reinsurance		(3,249)		(4,088)			(7,337)
Net		1,720		4,527			6,247

  

5. FINANCIAL RISK MANAGEMENT

NET INVESTMENT INCOME	Six  months		Six months		Year
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Investment Income
Interest	5,651		5,942		12,515
Gain on sale of investments	218		191		325
Unrealised gains on investments	42		67		772
	5,911		6,200		13,612
Investment expenses and charges
Investment management expenses	(115)		(47)		(114)
Loss on sale of investments	(216)		(48)		(350)
Unrealised losses on investments	(518)		(52)		(7)
	(849)		(147)		(471)
Net investment income	5,062		6,053		13,141

FINANCIAL INVESTMENTS	30 June 2008		30 June 2007		31 Dec 2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Carrying Value
Debt securities and other fixed income securities
- Government and government guaranteed	262,589		67,184		219,654
- Holdings in collective investment schemes	3,373		45,351		16,118
- Syndicate overseas deposits	4,798		3,406		4,054
	270,760		115,941		239,826
Purchase Price
Debt securities and other fixed income securities
- Government and government guaranteed	262,581		67,151		218,821
- Holdings in collective investment schemes	3,373		45,351		16,118
- Syndicates' overseas deposits	4,798		3,406		4,054
	270,752		115,908		238,993

All debt securities and other fixed income securities are listed on recognised stock exchanges. All financial investments are classified as fair value through income including short term fixed maturity securities. 

At 30 June 2008, Syndicate investments of £49.5 million (31 December 2007: £44.8 million) were held in US Situs and other regulatory deposits available for the payment of claims in those jurisdictions and which are not available for the payment of other claims and obligations.

  

At 30 June 2008, Advent Re had pledged cash and investments of £19.5 million (31 December 2007: £23.0 million) as security for policy limits of contracts written.

CASH AND CASH EQUIVALENTS	30  June		30  June		31  December
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Corporate cash at bank	7,075		14,200		10,760
Corporate funds held by Lloyd's	342		94,366		628
Advent Re cash at bank	10,650		24,560		2,147
Syndicates' cash at bank	9,551		1,951		5,448
Syndicates' deposits with credit institutions	6,142		2,460		7,995
Total cash and cash equivalents	33,760		137,537		26,978

Cash at bank was held with Royal Bank of Scotland and Barclays Bank, both of which are rated AA by Standard & Poor's.

The syndicates' overseas deposits (Joint Asset Trust Funds (JATF)) are managed by Lloyd's. The Company does not have the authority to ensure that its investment policies are complied with. Lloyd's has advised the Company that it has invested the JATF in:

		Company's share £'000
US Government securities		3,417
Corporate bonds rated AAA AA A BBB NR		278 548 313 3 109
Asset backed securities (ABS)		99
Mortgage backed securities (MBS)		19
Cash		12
			4,798

Other than the above investments, over which the Company does not exercise investment authority, the Company only invests in short term government and government guaranteed securities. It does not invest in derivatives, MBS, ABS, equities or corporate bonds given current market conditions.

  6. CAPITAL MANAGEMENT

SHARE CAPITAL	Authorised						Allotted, Called-Up and Fully Paid
	30  June		30  June		31  December		30  June		30 June		31  December
	2008		2007		2007		2008		2007		2007
	£'000		£'000		£'000		£'000		£'000		£'000
Ordinary shares of 5p each (£000)	-		50,000		50,000		-		20,329		20,329
Ordinary shares of 50p each (£000)	50,000		-		-		20,329		-		-
Number of shares ('000s)	100,000		1,000,000		1,000,000		40,657		406,570		406,570

On 23 June 2008, the Company's ordinary shares of 5p each were consolidated on a ratio of 1 new ordinary share of 50p each for 10 old ordinary shares of 5p each approved by shareholders at the Annual General Meeting. Outstanding shares, as options and per share amounts have been retroactively restated to present the comparative information on a consistent basis.

EARNINGS PER ORDINARY SHARE	Six  Months		Six  months		Year
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
			Restated		Restated
Profit after tax for the period (£'000)	1,175		3,457		19,192
Weighted average number of shares in issue ('000s)	40,657		40,657		40,657
Basic and diluted earnings per share	2.9p		8.5p		47.2p

Outstanding debt	Issue date	Due date	Callable (by the Company) after	Interest rate	Interest rate (30 June 2008)	30  June 2008 £'000	30  June 2007 £'000	31 December 2007 £'000
Subordinated Notes
US$34 million	3/6/2005	3/6/2035	3/6/2010	3 month LIBOR + 3.90%	6.68%	16,557	16,388	16,546
€12 million	3/6/2005	3/6/2035	3/6/2010	3 month EURIBOR + 3.85%	8.80%	9,209	7,785	8,539
						25,766	24,173	25,085
Senior Notes
US$26 million	16/1/2006	15/1/2026	16/1/2011	3 month LIBOR + 4.50%	7.28%	12,545	12,409	12,540
US$20 million	15/12/2006	15/12/2026	15/12/2011	3 month LIBOR + 4.15%	6.93%	9,725	9,622	9,722
						22,270	22,031	22,262
Total Loan Notes at amortised cost and fair value						48,036	46,204	47,347
Weighted average interest rate, period end						7.30%	9.27%	8.80%

The Subordinated Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).

The Senior Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and subordinated loan notes, and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).

The Subordinated Notes and Senior Notes are listed on the Channel Islands Stock Exchange.

LONG TERM INCENTIVE PLANS

During the first six months of 2008, 45,000 options were cancelled under the 2005 grants at 350p per share and 50,000 options were cancelled under the 2006 grant at 200p per share.

FUNDS AT LLOYD'S (FAL)

The Funds held by Lloyd's represent monies deposited with the Corporation of Lloyd's (Lloyd's) to support the Company's underwriting activities. These Funds are subject to a Lloyd's deposit trust deed which gives Lloyd's the right to apply these monies in settlement of any claims arising from the Company's underwriting at Lloyd's.

In addition to the Company's FAL of £91.2 million at 30 June 2008, a major shareholder, Fairfax Financial Holdings Limited (Fairfax), had deposited FAL of £56.1 million at 30 June 2008 (£56.6 million at 31 December 2007) to support the Company's underwriting for the 2001 to 2005 underwriting years pursuant to a Funding Agreement dated 16 November 2000. With the closure of Syndicate 780's 2005 year of account, £41.7 million of Fairfax's FAL was released on 16 July 2008 leaving £14.4 million to support Syndicate 2's open years of account. Any underwriting profits arising from the business supported by the Fairfax FAL are receivable by the Company which is also responsible for the payment of any losses arising.

The FAL and the overseas deposits are not available for use by the Company for ordinary cash flow purposes.

During June, the Company paid its share of the loss on the 2005 year of account of Syndicate 780 of £29.1 million (at distribution rates of exchange) which was settled from existing FAL funds (£15.2 million), profit distributions on the 2006 and 2007 years of accounts (£12.6 million) and holding company cash of £1.3 million.

  7. INCOME TAXES

	30  June		30  June		31 December
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Analysis of charge in period
UK corporation tax on profit for the period	-		-		-
Adjustment in respect of prior periods	-		-		(20)
Foreign tax	-		-		-
Deferred tax	423		3,283		5,989
Total taxation	423		3,283		5,969

8. INTANGIBLE FIXED ASSETS

	Goodwill on Acquisition		Purchased Capacity - finite life		Purchased Capacity - indefinite life		Total
	£'000		£'000		£'000		£'000
Fair Value
At 30 June 2008 (unaudited)	4,148		95		2,695		6,938
At 31 December 2007 (audited)	4,148		367		2,695		7,210
At 30 June 2007 (unaudited)	4,148		992		2,695		7,835

The consideration paid to third party capital providers of £1.2 million on 30 June 2008 is a finite life asset and accordingly, is amortised to expenses as the gross premium income is earned on the 2007 year of account to which the payment relates.

9.  RECONCILIATION OF PROFIT BEFORE TAX TO NET CASH

INFLOW (OUTFLOW) FROM OPERATING ACTIVITIES

	Six  Months		Six  months		Year
	2008		2007		2007
	(unaudited)		(unaudited)		(audited)
	£'000		£'000		£'000
Profit before tax	1,598		6,740		25,161
Movement in:
- insurance and reinsurance receivables	(67,764)		(32,847)		15,801
- other receivables	(921)		65		3,738
- insurance and reinsurance payables	106,340		33,204		(22,879)
- trade and other payables	2,804		4,417		(1,014)
Interest expense	2,003		2,234		4,558
Investment result	(2,667)		(3,221)		(6,489)
Unrealised investment gains (losses)	172		15		765
Net (purchase) sale of investments	(31,106)		(14,225)		(138,861)
Depreciation	170		148		284
Amortisation of debt issue costs	12		11		22
Amortisation of capacity	272		227		852
Amortisation of share option costs	63		113		220
Foreign exchange movements on financing Dividend payable	678 (5,082)		(1,089) -		43 -
	6,572		(4,208)		(117,799)

ENDIR QELFLVDBEBBE