ADV.L Regulatory News (ADV)

14 Feb 2007 07:00

Advent Capital (Holdings) PLC14 February 2007 Advent Capital (Holdings) PLC ("Advent" or the "Company") Preliminary Results and Trading Update Advent, the specialist Lloyd's insurer, is pleased to announce its preliminary2006 results, an update of the forecast results of Syndicate 780, the Lloyd'sbusiness managed by its wholly owned subsidiary, Advent Underwriting Limited,and an update on its key business segments following the 1 January 2007 renewalseason. Full details of the Company's final 2006 results, including its auditedfinancial statements, will be released to the market on Friday 23 February 2007. 2006 Preliminary Results (unaudited) • Financial summary 2006 2005 Profit (loss) before tax £22.2m (£74.8m)Profit (loss) after tax £15.4m (£52.5m)Net premiums earned £81.7m £65.1mCombined ratio 74% (1) 220%Earnings (loss) per share 4.2p (30.6p)Return on equity 24.0% (69.1%)Net assets per share 21.7p 15.7p (2)Net tangible assets per share 19.9p 13.3p (2) (1) Combined ratio of 83% excluding foreign exchange gain of £7.0 million (2) Net assets per share of 17.3p and net tangible assets per share of 15.8p post January 2006 capital raising For the year ended 31 December 2006, the Company's profit before tax was £22.2million, reflecting a benign claims environment, compared with a loss before taxof £74.8 million for the year ended 31 December 2005, which reflected the impactof Hurricanes Katrina, Rita and Wilma with an aggregate net loss, net ofreinsurance recoveries and reinstatement premiums, of £79.7 million. The significant improvement in 2006 results compared with 2005 is due to higherearned premiums from the Company's increased share of Syndicate 780's supportedcapacity in 2006 and the absence of any significant catastrophe events. The2006 results include a reduction in adverse development on claims, net ofreinstatement premiums, to £7.3 million for 2006 from £8.4 million in 2005.Adverse development in 2006 includes £6.2 million relating to the 2005hurricanes and the balance from prior years' attritional losses (2005: £11.5million from the 2004 hurricanes offset by favourable development on 2003 andprior). Other factors include a foreign exchange gain on the Company's US dollardenominated net liabilities of £4.0 million, largely offset by a write off ofunearned reinsurance cost of £1.5 million from bringing forward the renewal ofSyndicate 780's main reinsurance programmes from 1 April to 1 January and bonusexpense, through the technical account and corporate costs, of £2.0 million asSyndicate 780's 2006 annually accounted results exceeded the threshold level forAdvent Underwriting's employee bonus plan. Syndicate results update The unaudited forecast results for Syndicate 780 are shown below. Year of Current forecast result Previous forecast result Advent syndicate Account participation 2004 Loss (18.9)% Loss (17.5%) to (22.5%) £102.7 m 2005 Loss (70%) to (80%) Loss (72.5%) to (82.5%) £82.0 m An initial forecast for the 2006 year of account would normally be made in thesecond quarter of this year. It is felt that an early indication of thepotential result is appropriate, recognising that the forecast result will beaffected as the remaining premium income is earned in 2007. Year of Current forecast result Previous forecast result Advent syndicate Account participation 2006 Profit 20% to 25% N/A £122.8 m A substantial proportion of the losses arising from the Company's share of the2004 and 2005 years of account have already been reflected in the results to 31December 2005 and the nine month results to 30 September 2006. January 2007 renewals Syndicate 780 had budgeted to underwrite approximately 50% of its 2007 planpremium income at the commencement of the 2007 underwriting year and has largelymet this objective during the renewal season. Key Points • Rates are holding for peak catastrophe territories • Downward pressure on rates for non peak catastrophe territories with terms and conditions holding • Syndicate's gross exposures on catastrophe exposed accounts reduced • The market continues to display a reasonably disciplined approach to underwriting although we are seeing increased competition • Market conditions were in line with management's expectations Syndicate 780 writes approximately two thirds of its Non Marine Reinsuranceaccount at 1 January 2007. Premiums written for both the Treaty and Assumedaccounts were on plan. We have targeted the Property Insurance account for growth in 2007. Business isless concentrated at 1 January 2007 than for the reinsurance book with premiumswritten to date currently running at approximately 70% of plan. We expect thatas sectors targeted for growth come up for renewal, premiums written willincrease in line with our plan. The State of Florida recently announced that they will be increasing the levelof catastrophe cover under the Florida Hurricane Catastrophe Fund which acts asan alternative to traditional reinsurance. Our Florida related reinsurancepremiums represents less than 2% of the syndicate's plan premium income for 2007and therefore, we do not expect any financial impact to be material. Historically, Syndicate 780 has purchased the majority of its reinsurance at 1April. For 2007, given the high degree of uncertainty regarding both potentialcapacity and price for reinsurance, we decided to bring forward to 1 January therenewal of our major placements. We were successful in obtaining all of thecover we wanted at the same or lower attachment points. The cost for theprogramme is anticipated to be approximately 10% to 15% in excess of plan butthis is largely as a result of our additional purchases and better coverobtained. The expiring reinsurance covers were terminated at 31 December 2006,resulting in a write off of unearned reinsurance cost of £1.5 million. Wednesday 14 February 2007 For further information please contact: Advent Capital HoldingsKeith Thompson Tel: 020 7743 8200Chief Operating Officer Trevor Ambridge Tel: 020 7743 8200Chief Financial Officer Neil Ewing Tel: 020 7743 8250Investor Relations and Analysis Pelham Public Relations Tel: 020 7743 6670Charles VivianGavin Davis This information is provided by RNS The company news service from the London Stock Exchange