Last checked at 28 Jul 2014 07:01
Hiscox Ltd interim results
For the six months ended 30 June 2014
"A strong start"
H1 2014 | H1 2013 | |
Gross premiums written | £978.9m | £1,017.9m |
Net premiums earned | £643.5m | £628.7m |
Profit before tax | £124.6m | £180.7m |
Earnings per share | 36.4p | 42.4p |
Interim dividend per share | 7.5p | 7.0p |
Net asset value per share | 425.6p | 393.3p |
Group combined ratio | 82.0% | 74.7% |
Return on equity (annualised) | 18.9% | 25.8% |
Investment return (annualised) | 2.0% | 1.5% |
Reserve releases | £90.0m | £73.6m |
Foreign exchange impact | £(16.4)m | £34.9m |
Highlights
· Strong start to the year with gross premiums written growing by 4.6% in local currency
· Profit before tax of £124.6m impacted by £51m foreign exchange swing (from 2013)
· The long-term investment in Hiscox's retail businesses continues to deliver good profitable growth
· Acquisition of DirectAsia complete
· Hiscox London Market performs well, benefitting from product diversity
· Hiscox Re premium income down by 21.6% (13.0% in local currency) as pressure on rates continues
· Dividend increase of 7.1% per share
Bronek Masojada, Chief Executive Officer, Hiscox Ltd, commented
"It has been a great start - at constant exchange rates the Group made a similar profit to last year. Falling rates and deteriorating terms and conditions are putting pressure on the market. We've seen this before, but our discipline and strategy of balance is designed to absorb these conditions. We will seize opportunities as they present themselves in our specialty lines and maintain our discipline in the face of increasingly strong headwinds."
ENDS
Contacts:
Hiscox
| |
Jeremy Pinchin, Company Secretary, Bermuda | +1 441 278 8300 |
Kylie O'Connor, Head of Communications, London | +44 (0) 20 7448 6656 |
Brunswick | |
Tom Burns, Fiona Micallef-Eynaud | +44 (0)20 7404 5959 |
Notes to editors
About Hiscox
Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting divisions in the Group - Hiscox Retail (which includes Hiscox UK and Europe, Hiscox Guernsey, Hiscox USA and subsidiary brand, DirectAsia), Hiscox London Market and Hiscox Re. Through its retail businesses in the UK, Europe and the US Hiscox offers a range of specialist insurance for professionals and business customers, as well as homeowners. Hiscox underwrites internationally traded, bigger ticket business and reinsurance through Hiscox London Market and Hiscox Re.
For further information visit www.hiscoxgroup.com.
Chairman's statement
It is very pleasing to report another good profit, £124.6 million in the first half. Despite the early impact of the UK floods and storms the Group benefited from a benign global catastrophe claims environment. The top-line is up 4.6% in local currency but down 3.8% in Sterling following a substantial (21.6%) but expected, reduction in reinsurance income, much of which was offset by good growth through our regional distribution network in the USA, Europe and UK. We have also been affected by foreign exchange movements which, unlike the first half of 2013, have gone against us. It has been a strong start to the year, however we still have a hurricane season to face and earthquakes can happen at any time.
We expect the current soft market to deteriorate further, particularly for larger insurance lines and catastrophe reinsurance. However opportunities continue to present themselves as we pursue our strategy of building balance and diversity in the specialist insurance market. We have good underlying growth in many of these areas, a testament to our long-term investment in the brand.
Results
The half-year result to 30 June 2014 was a pre-tax profit of £124.6 million (2013: £180.7 million). Gross written premiums reduced to £978.9 million (2013: £1,017.9 million). Net earned premiums were £643.5 million (2013: £628.7 million). The Group was impacted by foreign exchange losses of £16.4 million (2013: gains of £34.9 million). The net combined ratio was 82.0% (2013: 74.7%). Earnings per share were 36.4p (2013: 42.4p) and net assets per share grew to 425.6p (2013: 393.3p). The annualised return on equity was 18.9% (2013: 25.8%).
Dividend, balance sheet and capital management
The Board of Hiscox Ltd has declared an interim dividend for 2014 of 7.5p per share (2013: 7.0p) an increase of 7.1%. The record date for the dividend will be 8 August and the payment date will be 17 September.
The Board proposes to offer again a scrip dividend alternative in respect of the interim dividend, subject to the terms and conditions of Hiscox Ltd's Scrip Dividend Alternative. On 11 August a circular will be sent to shareholders with details of the scrip dividend. The final date for making elections in order to be eligible to receive new shares in respect of the interim dividend will be 27 August 2014.
During the period the Group returned capital via a special distribution of £128 million and consolidated its share capital on 18 March, reducing the number of ordinary shares by 11% from 355,203,587 to 316,131,192 (excluding Treasury shares). A final dividend equivalent of 14p per share was paid to coincide with the return of capital, resulting in a total distribution (including interim) to shareholders of £200 million. There is no guarantee of future special distributions however.
Net asset value per share has increased by 5.8% from the year end, and the balance sheet remains strong.
Rates
After a difficult January, rates in reinsurance continue to decline. The market, already affected by a benign period for catastrophe claims, continues to adjust to new competition. During the 1 April renewals Japanese earthquake rates fell by around 15 percent. Rates for US property catastrophe business were down on average by 15%. Rates for international business reduced by around 8%.
Rates in insurance lines are either broadly stable or softening. We have transferred some of our catastrophe exposure to areas where rates are healthy, particularly in binding authority property business written in the London Market.
Business segments
During 2013 the Group restructured its Reinsurance business written by the London, Bermuda and Paris teams and combined them into one operating unit, Hiscox Re. In addition we introduced a single management structure for UK and Europe and brought all retail business under one umbrella. From 1 January 2014 the Group commenced reporting and monitoring its performance along this structure.
· Hiscox Retail: Our retail business areas or local specialty lines, including Hiscox UK and Europe and Hiscox International combine to form Hiscox Retail. Hiscox International comprises Hiscox Guernsey, Hiscox USA and the newly acquired DirectAsia.
· Hiscox London Market: This segment now includes internationally traded insurance lines only. Reinsurance lines have been combined with our Bermudian product lines to form Hiscox Re.
· Hiscox Re: Reinsurance written by the teams in London, Bermuda and Paris.
· The Corporate Centre division has remained unchanged.
There is no impact to the overall profit before tax or the net asset value of the Group for this restatement.
I cover each segment in turn below:
Hiscox Retail
The Hiscox Retail segment comprises Hiscox UK and Europe, and Hiscox International.
Hiscox UK and Europe
This division provides personal lines cover - from high-value household, fine art and collectibles to luxury motor - and commercial insurance for small and medium sized businesses, typically operating in white collar industries. These products are distributed via brokers and through a growing network of partnerships. We distribute cover for some simple risks direct-to-consumer in the UK, France and Germany.
Gross written premiums | £309.4 million (2013: £295.1 million) |
Profit before tax | £26.3 million (2013: £44.4 million) |
Combined ratio | 92.9% (2013: 87.9%) |
Hiscox UK and Europe delivered a good result despite the floods and storms in the UK and a small impact from foreign exchange.
In February Steve Langan was promoted to Managing Director of the newly created division, Hiscox UK and Europe, taking on responsibility for the oversight of Europe in addition to the UK and Ireland.
Hiscox UK and Ireland
Premium income grew by 3.4% to £212.6 million (2013: £205.5 million). The regional network of offices across the UK continues to perform very well, producing good growth and excellent business retention of over 90%. As mentioned previously an emphasis on performance has led to a further reduction of our business with Dual, an independent managing agent.
Overall, the UK experienced a return to normality in claims frequency after a quiet 2013, with the storms and floods in January and February impacting profits. Our brand is built on our claims promise, so we are happy to prove our worth when our clients need us.
Hiscox has been raising concerns over Flood Re, the Government's insurance scheme for those at flood risk. We believe the industry is building a problem for the future as too many people will be excluded from the scheme, including many of our customers. Floods are devastating, high profile events, and when the next major one occurs insurers will bear the brunt of the blame for the scheme's shortcomings.
Today we launch our new Cyber and Data Risks product, which will support those affected by cyber crimes practically as well as financially. Cover includes access to a formidable panel - from lawyers to IT forensic experts - who will be available to help customers get back on their feet.
We continue to invest heavily in marketing and see real value in building a strong brand. Our 'Small and The Brave' commercial lines campaign continues to deliver good new business for our direct-to-consumer channel and Hiscox UK will return to TV in the autumn.
As announced previously the UK is undertaking a major IT project to replace the legacy system that supports underwriting, policy administration and claims. Progressing according to plan, we expect the project to cost £45 million over four to five years.
Hiscox was recognised for our investment in training and our focus on professional exams as a chartered insurer, winning the Investing in the Profession award at the British Insurance Awards.
Hiscox Europe
Gross written premiums grew by 8.0% to £96.8 million (2013: £89.6 million), driven mainly by further progress in specialist commercial business and technology, media and directors and officers' lines. Growth was particularly good in Germany as relationships with new broker networks start to deliver. Our businesses in the Benelux and Spain have also done well. In Spain a focus on service and broker relations has improved retention. During the period we intensified efforts around our small office product, building on success we have seen in the UK and Ireland.
Hiscox Europe also benefited from a sustained focus on improving expenses and another largely benign period for claims, after having paid a small number of losses from the European hailstorms which devastated many parts of Northern Germany, France and the Benelux.
We continue to invest in our direct operations in Europe where we see good opportunity in the small business product area.
Hiscox International
This division comprises Hiscox Guernsey, Hiscox USA and DirectAsia.
Gross written premiums | £146.4 million (2013: £128.4 million) |
Profit before tax | £11.1 million (2013: £14.5 million) |
Combined ratio | 92.1% (2013: 85.0%) |
Hiscox Guernsey
Hiscox Guernsey underwrites kidnap and ransom, as well as personal accident, terrorism and fine art risks.
Despite the competitive market, Guernsey continues to perform well with gross written premiums only down slightly to £34.0 million (2013: £35.8 million). We are maintaining market share in kidnap and ransom business where clients benefit from our expertise and exclusive relationship with Control Risks. Hiscox Guernsey remains focused on distributing specialist products worldwide.
Overall, Hiscox Guernsey has had an uneventful period for claims, however, we have provided for a small impact from repatriation claims due to the recent violence in Iraq.
As well as investing in new marketing and underwriting talent we have brought together different teams across the Group that focus on special risks, including kidnap and ransom and executive security, in a structure designed to boost local and global collaboration.
Hiscox USA
Hiscox USA underwrites the small to mid market commercial segment through brokers and directly to businesses online and over the phone.
We had another good start, increasing premiums by 16.4% to £107.8 million (2013: £92.6 million) 25.4% in local currency, with continued good claims experience. Every product area grew premium income well except for the property division where the team remains disciplined in the face of strong competition.
In kidnap and ransom we have been creating new opportunities with smaller sized clients, outside of the saturated market for larger risks. We are also now offering general liability and crime as stand-alone products, giving customers the type of flexibility they increasingly want.
We are seeing strong demand for our core errors and omissions and directors and officers products where we continue to differentiate with our brand and service model.
Ongoing investment in building the Hiscox brand in the US is delivering results with direct-to-consumer policy numbers nearly doubling in 12 months to 65,000. The direct business has also focused on driving growth from our distribution partners by improving service and hunting for new opportunities. These relationships include companies such as Geico and Progressive, who like our specialist expertise in insuring smaller enterprises.
DirectAsia.com
At the end of March Hiscox completed the acquisition of DirectAsia, a direct-to-consumer business in Singapore, Hong Kong and Thailand. DirectAsia sells predominantly motor insurance with ancillary lines in travel, healthcare and life. Hiscox acquired its combined debt and equity of approximately US$38 million for a total consideration of US$55 million plus earn out over four years. DirectAsia is Hiscox's first business in Asia and builds on its other direct-to-consumer operations in Europe and the US.
In its first three months as part of the Hiscox Group, DirectAsia continues to make good progress, growing premium income healthily to £4.6 million.
Hiscox London Market
This segment uses the global licences, distribution network and credit rating available through Lloyd's to insure clients throughout the world.
Gross written premiums | £251.7 million (2013: £248.1 million) |
Profit before tax | £24.8 million (2013: £48.1 million) |
Combined ratio | 87.2% (2013: 67.0%) |
Hiscox London Market performed well despite strong competition in many lines. Profits were hit by an adverse foreign exchange movement and some medium sized losses in the marine and energy business.
Excluding any impact from foreign exchange movements, growth was a pleasing 7.9%, driven mainly by opportunities in property lines including binding authority business in the US and international property.
Terrorism business reduced as the team remains disciplined in the face of strong competition. Political unrest and sanctions in Russia has also had an impact on the political risks team as less business comes to the market.
We continue to grow the extended warranty business, particularly in China through our partnership with underwriting agency White Oak. Our automotive physical damage business, also with White Oak, has benefited from rate increases due to a hardening market mainly in the US. Given its increasing importance to our business, Hiscox recently acquired a 10% stake in White Oak and Richard Watson, our Chief Underwriting Officer, has now joined the White Oak Board.
We continue to develop our e-trading proposition. Our US-focused marine employers' liability and small value household products are both now sold in this way, and we plan to roll out our terrorism product later this year.
Our London Market business is hunting for opportunities, recently adding a business development executive in Brazil, after similar success in the US. After significantly boosting our casualty team with over seven new hires over the past 18 months this area is performing well, opening up new areas for Hiscox in what remains a challenging market. This includes a new management liability team focused on building our US and international directors' and officers' liability business, and we have also bolstered our contingency and personal accident teams.
Despite the deteriorating Costa Concordia market loss, Hiscox remains well reserved and well reinsured. Our net loss remains unchanged at $19 million.
Hiscox was awarded 'Insurer of the Year' at the Reactions London Market awards.
Hiscox Re
The Hiscox Re segment comprises the Group's reinsurance businesses in London, Paris and Bermuda, Insurance Linked Security (ILS) activity and the Bermudian healthcare business.
Gross written premiums | £271.5 million (2013: £346.3 million) |
Profit before tax | £75.6 million (2013: £65.6 million) |
Combined ratio | 41.8% (2013: 56.6%) |
Hiscox Re increased profits by 15.2% despite the challenging market. Careful risk selection meant we avoided some of the larger losses in the market and were helped by the absence of any major global catastrophes. However, Hiscox Re does have a small exposure to the February snowstorms in Japan.
Rates in reinsurance have succumbed to pressure from increased competition and a benign period for catastrophes. Gross written premiums reduced as predicted, due to this soft market and our disciplined response.
Our established relationships are serving us well. The team is using their extensive market knowledge to develop new products and these are being well received in the market. Hiscox has a strong track record of underwriting on behalf of others and we continue to enjoy good support from our quota share business partners who like our underwriting expertise and our focus on profit over volume. As a business we have the flexibility to respond to market changes; underwriting in the conventional way, using quota share arrangements or via the Insurance Linked Securities (ILS) market.
Our ILS strategy continues to develop following the launch in January of our two funds - Select and Diversified - under the Chairmanship of Alan Cossar, former Chairman of the Bermuda Monetary Authority. We are seeking new investors in these funds, and are working on a number of potentially bespoke portfolios on behalf of third parties.
Investments
The investment performance for the first six months has been much as we expected, given the ongoing low level of interest rates and bond yields and the more subdued returns from equity markets. Following the £178 million return of capital to shareholders in April, assets under management at 30 June 2014 reduced to £2,996 million (2013: £3,153 million) and our investment result, before derivatives, was £30.1 million (2013: £23.3 million), 2.0% on an annualised basis (2013:1.5%).
In contrast to the corresponding period last year the majority of our investment income has come from our fixed income portfolios, albeit that the returns achieved remain modest in absolute terms. Most investors have been surprised by the decline in bond yields in the early part of the year and, despite being short duration, our portfolios enjoyed some of that benefit. The majority of the return however, came from the allocation to non government bonds where credit spreads continued to narrow. Not surprisingly our risk asset portfolio has made a smaller impact but remains a useful contributor to performance.
Our concerns about rising yields have proved unfounded as yet but the timing of the first upward move in official interest rates is clearly under discussion in the US and is more imminent in the UK. We therefore continue to be cautious about taking much duration risk. Investment grade credit remains our preferred source of seeking some extra income and corporate bonds now comprise 32% of the bond portfolios. In a world where monetary policy has boosted most asset values, equities remain relatively attractive, particularly on a longer term view and we are maintaining our allocation.
Outlook
The benign claims environment is masking the underlying deterioration in rates and conditions for big ticket insurance and reinsurance. We expect a more normal claims pattern will resume and there will be less money across the market to pay for the losses. Reducing prices represents a challenge for our supporting brokers as they see their margins squeezed and they look for ways to share the pain, asking for increased remuneration from us. We prefer to invest in new products and markets helping us and them to win new business, rather than squeezing the same lemon.
We will continue to navigate these waters as we always have: reducing where competition drives rates to unhealthy levels, and increasing our specialist and direct-to-consumer lines. Our diversity by geography and product allows us options. We continue to invest in the brand, good underwriting and our people. Over 40 years' experience tells me that sticking to what we know and doing it well will deliver long term value for customers, shareholders and staff.
Robert Childs
28 July 2014
Condensed consolidated interim income statement
For the six month period ended 30 June 2014
Note | 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to31 Dec 2013 | |
£000 | £000 | £000 | ||
Income | ||||
Gross premiums written | 7 | 978,932 | 1,017,944 | 1,699,478 |
Outward reinsurance premiums | (246,340) | (247,709) | (328,364) | |
Net premiums written | 732,592 | 770,235 | 1,371,114 | |
Gross premiums earned | 797,117 | 788,857 | 1,598,879 | |
Premiums ceded to reinsurers | (153,646) | (160,143) | (315,568) | |
Net premiums earned | 643,471 | 628,714 | 1,283,311 | |
Investment result | 10 | 29,218 | 25,118 | 59,809 |
Other revenues | 11 | 9,093 | 9,927 | 20,905 |
Revenue | 681,782 | 663,759 | 1,364,025 | |
Expenses | ||||
Claims and claim adjustment expenses | (280,684) | (290,545) | (572,440) | |
Reinsurance recoveries | 33,089 | 54,750 | 53,161 | |
Claims and claim adjustment expenses, net of reinsurance | (247,595) | (235,795) | (519,279) | |
Expenses for the acquisition of insurance contracts | (149,304) | (148,454) | (305,777) | |
Operational expenses | 11 | (141,461) | (130,220) | (276,965) |
Foreign exchange (losses)/gains | 20 | (16,415) | 34,870 | (9,890) |
Total expenses | (554,775) | (479,599) | (1,111,911) | |
Results of operating activities | 127,007 | 184,160 | 252,114 | |
Finance costs | 12 | (3,175) | (3,843) | (7,176) |
Share of profit/(loss) of associates after tax | 788 | 377 | (400) | |
Profit before tax | 124,620 | 180,694 | 244,538 | |
Tax expense | 13 | (4,774) | (22,592) | (6,780) |
Profit for the period (all attributable to owners of the Company) | 119,846 | 158,102 | 237,758 | |
Earnings per share on profit attributable to owners of the Company | ||||
Basic | 15 | 36.4p | 42.4p | 66.3p |
Diluted | 15 | 34.8p | 40.7p | 63.5p |
The notes to the condensed consolidated interim financial statements are an integral part of this document. |
Condensed consolidated interim statement of comprehensive income
For the six month period ended 30 June 2014, after tax
| 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to31 Dec 2013 | |
£000 | £000 | £000 | ||
Profit for the period | 119,846 | 158,102 | 237,758 | |
Other comprehensive income | ||||
Items never reclassified to profit and loss | ||||
Actuarial (losses)/gains on defined benefit plan | (1,558) | 9,538 | 9,775 | |
Income tax relating to components of other comprehensive income | 374 | (2,478) | (2,865) | |
(1,184) | 7,060 | 6,910 | ||
Items that may be reclassified to profit and loss: | ||||
Exchange differences on translating foreign operations | (22,941) | 47,966 | (2,030) | |
Income tax relating to components of other comprehensive income | - | - | - | |
(22,941) | 47,966 | (2,030) | ||
Other comprehensive (loss)/income net of tax | (24,125) | 55,026 | 4,880 | |
Total comprehensive income for the year (all attributable to owners of the Company) | 95,721 | 213,128 | 242,638 | |
The notes to the condensed consolidated interim financial statements are an integral part of this document. |
Condensed consolidated interim balance sheet
At 30 June 2014
Note | 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
£000 | £000 | £000 | ||
Assets | ||||
Intangible assets | 91,896 | 69,811 | 72,720 | |
Property, plant and equipment | 21,395 | 17,335 | 20,219 | |
Investment in associates | 10,229 | 9,431 | 7,754 | |
Deferred tax | 30,862 | 25,500 | 32,123 | |
Deferred acquisition costs | 230,892 | 218,204 | 197,628 | |
Financial assets carried at fair value | 18 | 2,563,129 | 2,617,314 | 2,585,054 |
Reinsurance assets | 14 | 513,957 | 639,145 | 458,822 |
Loans and receivables including insurance receivables | 591,474 | 654,788 | 493,419 | |
Current tax asset | - | 1,513 | 3,530 | |
Cash and cash equivalents | 452,708 | 556,948 | 564,375 | |
Total assets | 4,506,542 | 4,809,989 | 4,435,644 | |
Equity and liabilities | ||||
Shareholders' equity | ||||
Share capital | 19,852 | 20,770 | 20,854 | |
Share premium | 6,942 | 942 | 4,953 | |
Contributed surplus | 89,864 | 89,864 | 89,864 | |
Currency translation reserve | (260) | 72,677 | 22,681 | |
Non controlling interest | 866 | - | - | |
Retained earnings | 1,215,189 | 1,205,490 | 1,271,109 | |
Total equity | 1,332,453 | 1,389,743 | 1,409,461 | |
Employee retirement benefit obligation | 6,512 | 5,918 | 4,366 | |
Deferred tax | 50,719 | 110,982 | 75,946 | |
Insurance liabilities | 14 | 2,739,838 | 2,918,881 | 2,609,121 |
Financial liabilities | 18 | - | 9 | 229 |
Current tax | 32,801 | 44,501 | 32,383 | |
Trade and other payables | 344,219 | 339,955 | 304,138 | |
Total liabilities | 3,174,089 | 3,420,246 | 3,026,183 | |
Total equity and liabilities | 4,506,542 | 4,809,989 | 4,435,644 |
The notes to the condensed consolidated interim financial statements are an integral part of this document. |
Condensed consolidated interim statement of changes in equity
For the six month period ended 30 June 2014
Share capital | Share premium | Contributed surplus | Currency translation reserve | Non controlling interest | Retained earnings | Total | |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Balance at 1 January 2014 | 20,854 | 4,953 | 89,864 | 22,681 | - | 1,271,109 | 1,409,461 |
Total recognised comprehensive income for the period (all attributable to owners of the company) | - | - | - | (22,941) | - | 118,662 | 95,721 |
Employee share options: | |||||||
Equity settled share based payments | - | - | - | - | - | 7,479 | 7,479 |
Proceeds from shares issued | 30 | 992 | - | - | - | - | 1,022 |
Deferred and current tax | - | - | - | - | - | 777 | 777 |
C/D Share scheme: | |||||||
Return of capital, special distribution (note 17) | - | (35) | - | - | - | (126,049) | (126,084) |
Final dividend equivalent (note 17) | - | - | - | - | - | (49,728) | (49,728) |
Share consolidation and subdivision (note 17) | (1,032) | 1,032 | - | - | - | - | - |
Shares purchase by Trust (note 17) | - | - | - | - | - | (7,061) | (7,061) |
Acquisition of DirectAsia (note 22) | - | - | - | - | 866 | - | 866 |
Balance at 30 June 2014 | 19,852 | 6,942 | 89,864 | (260) | 866 | 1,215,189 | 1,332,453 |
The notes to the condensed consolidated interim financial statements are an integral part of this document. |
Condensed consolidated interim statement of changes in equity
For the six month period ended 30 June 2013
Share capital | Share premium | Contributed surplus | Currency translation reserve | Non controlling interest | Retained earnings | Total |
| |
£000 | £000 | £000 | £000 | £000 | £000 | £000 |
| |
Balance at 1 January 2013 | 20,703 | 41,313 | 245,005 | 24,711 | - | 1,033,634 | 1,365,366 |
|
Total recognised comprehensive income/(expense) for the period (all attributable to owners of the company) | - | - | - | 47,966 | - | 165,162 | 213,128 |
|
| ||||||||
Employee share options: |
| |||||||
Equity settled share based payments | - | - | - | - | - | 5,096 | 5,096 |
|
Proceeds from shares issued | 67 | 2,082 | - | - | - | - | 2,149 |
|
Deferred and current tax | - | - | - | - | - | 1,598 | 1,598 |
|
B Share scheme: |
| |||||||
Return of capital, special distribution (note 17) | - | (42,453) | (107,718) | - | - | - | (150,171) |
|
Final dividend equivalent (note 17) | - | - | (47,423) | - | - | - | (47,423) |
|
Balance at 30 June 2013 | 20,770 | 942 | 89,864 | 72,677 | - | 1,205,490 | 1,389,743 |
|
| ||||||||
| ||||||||
The notes to the condensed consolidated interim financial statements are an integral part of this document. | ||||||||
Condensed consolidated interim statement of changes in equity
For the year ended 31 December 2013
| Share capital | Share premium | Contributed surplus | Currency translation reserve | Non controlling interest | Retained earnings | Total |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Balance at 1 January 2013 | 20,703 | 41,313 | 245,005 | 24,711 | - | 1,033,634 | 1,365,366 |
Total recognised comprehensive income/(expense) for the period (all attributable to owners of the company) | - | - | - | (2,030) | - | 244,668 | 242,638 |
Employee share options: | |||||||
Equity settled share based payments | - | - | - | - | - | 12,523 | 12,523 |
Proceeds from shares issued | 133 | 3,990 | - | - | - | - | 4,123 |
Deferred and current tax | - | - | - | - | - | 5,030 | 5,030 |
B Share scheme: | |||||||
Return of capital, special distribution (note 17) | - | (42,453) | (107,718) | - | - | - | (150,171) |
Final dividend equivalent (note 17) | - | - | (47,423) | - | - | - | (47,423) |
Shares issued in relation to scrip dividend | 18 | 2,103 | - | - | - | - | 2,121 |
Dividends paid to owners of the company (note 16) | - | - | - | - | - | (24,746) | (24,746) |
Balance at 31 December 2013 | 20,854 | 4,953 | 89,864 | 22,681 | - | 1,271,109 | 1,409,461 |
The notes to the condensed consolidated interim financial statements are an integral part of this document.
Condensed consolidated interim cash flow statement
For the six month period ended 30 June 2014
Note | 6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | |
£000 | £000 | £000 | ||
Profit before tax | 124,620 | 180,694 | 244,538 | |
Adjustments for: | ||||
Interest and equity dividend income | (21,471) | (22,261) | (42,571) | |
Interest expense | 12 | 3,175 | 3,843 | 7,176 |
Net fair value (gains)/losses on financial assets and liabilities | (6,090) | 2,324 | (14,847) | |
Depreciation and amortisation | 6,158 | 4,399 | 9,650 | |
Charges in respect of share based payments | 7,479 | 5,096 | 12,523 | |
Profit from sale of subsidiary | - | - | (1,536) | |
Other non-cash movements | (1,400) | 2,112 | 925 | |
Effect of exchange rate fluctuations on cash presented separately | 12,563 | (23,691) | 491 | |
Changes in operational assets and liabilities: | ||||
Insurance and reinsurance contracts | 13,062 | 45,601 | 70,576 | |
Financial assets and liabilities carried at fair value | (12,327) | (136,747) | (170,889) | |
Other assets and liabilities | (22,403) | (1,956) | 4,321 | |
Cash flows from operations | 103,366 | 59,414 | 120,357 | |
Cash paid to the defined benefit pension scheme | - | - | (1,800) | |
Interest received | 19,420 | 23,124 | 41,494 | |
Equity dividends received | 1,097 | 961 | 789 | |
Interest paid | (3,007) | (2,633) | (5,229) | |
Current tax paid | (23,021) | (3,931) | (39,712) | |
Net cash flows from operating activities | 97,855 | 76,935 | 115,899 | |
Cash flow from the purchase and sale of a subsidiary, net of cash balance | 22 | (1,277) | - | 20,940 |
Cash flow from the sale and purchase of associates | (2,103) | - | 600 | |
Cash flows from the purchase of property, plant and equipment | (2,414) | (2,154) | (4,545) | |
Cash flows from the purchase of intangible assets | (9,314) | (3,741) | (9,594) | |
Net cash flows from investing activities | (15,108) | (5,895) | 7,401 | |
Proceeds from the issue of ordinary shares | 1,022 | 2,149 | 4,123 | |
Distributions paid to owners of the Company | 16,17 | (175,812) | (197,594) | (220,219) |
Share purchase | 17 | (7,061) | - | - |
Net cash flows from financing activities | (181,851) | (195,445) | (216,096) | |
Net decrease in cash and cash equivalents | (99,104) | (124,405) | (92,796) | |
Cash and cash equivalents at 1 January | 564,375 | 657,662 | 657,662 | |
Net decrease in cash and cash equivalents | (99,104) | (124,405) | (92,796) | |
Effect of exchange rate fluctuations on cash and cash equivalents | (12,563) | 23,691 | (491) | |
Cash and cash equivalents at end of period | 21 | 452,708 | 556,948 | 564,375 |
The notes to the condensed consolidated interim financial statements are an integral part of this document. | ||||
Notes to the condensed consolidated interim financial statements
1. Reporting entity |
Hiscox Ltd (the 'Company') is a public limited company registered and domiciled in Bermuda. The condensed consolidated interim financial statements for the Company as at, and for the six months ended, 30 June 2014 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in associates. The Chairman's statement accompanying these condensed consolidated interim financial statements forms the Interim Management Report for the half year ended 30 June 2014. The Directors of Hiscox Ltd are listed in the Group's 2013 Report and Accounts. A list of current Directors is maintained and available for inspection at the registered office of the Company located at 4th Floor, Wessex House, 45 Reid Street, Hamilton, HM 12, Bermuda.
|
2. Basis of preparation |
These condensed consolidated interim financial statements have been prepared in accordance with the Listing Rules issued by the Financial Conduct Authority. The information presented herein does not include all of the disclosures typically required for full consolidated financial statements. Consequently these financial statements should be read in conjunction with the full consolidated financial statements of the Group as at, and for the year ended, 31 December 2013 which are available from the Company's registered office or at www.hiscoxgroup.com. Except where otherwise indicated, all amounts are presented in Pounds Sterling and rounded to the nearest thousand. After making enquiries, the Directors have an expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason the condensed consolidated interim financial statements have been prepared on a going concern basis and are prepared on the historical cost basis except that pension scheme assets included in the measurement of the employee retirement benefit obligation, and certain financial instruments including derivative instruments are measured at fair value. Taxes on income for the interim period are accrued using the estimated effective tax rate that would be applicable to estimated total annual earnings. The independent auditors have reported on the Group's full consolidated financial statements as at, and for the year ended, 31 December 2013. The report of the independent auditors was not qualified. The amounts presented for the 30 June 2014 and 30 June 2013 periods are unaudited. These condensed consolidated interim financial statements were approved on behalf of the Board of Directors by the Chief Executive, B E Masojada and the Chief Financial Officer, S J Bridges. Accordingly the Half Yearly Report to the London Stock Exchange was approved for issue on Monday, 28 July 2014 following receipt of confirmation from the auditors that they had reviewed the final content.
|
3. Accounting policies and methods of computation |
The accounting policies applied in these condensed consolidated interim financial statements are consistent with those applied by the Group in its consolidated financial statements as at, and for the year ended, 31 December 2013. The consolidated financial statements as at, and for the year ended, 31 December 2013 were compliant with International Financial Reporting Standards as adopted by the European Union and in accordance with the provisions of the Bermuda Companies Act 1981. The Interim Report is compliant with IAS 34 Interim Financial Reporting as adopted by the European Union. In preparing these interim financial statements, Management make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by Management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2013.
|
4. Financial, insurance and other risk management | |||||
The Group's financial, insurance and other risk management objectives and policies are consistent with that disclosed in note 3 of the full consolidated financial statements as at, and for the year ended, 31 December 2013. The principal risks and uncertainties are unchanged and may be summarised as insurance risk, equity price risk, interest rate risk, liquidity risk, credit risk, currency risk, capital risk and operational risk. The Group continues to monitor all aspects of its financial risk appetite and the resultant exposure taken with caution, and has consequently suffered insignificant defaults on investments held, and other third-party balances during the period under review. As detailed in note 18, the Group's investment allocation is broadly comparable to that at 31 December 2013 as outlined in the Group Report and Accounts. The Group also continues to be mindful of the processes required for establishing the reliability of fair values obtained for some classes of financial assets affected by ongoing periods of diminished liquidity. In order to assist users, the Group has disclosed the measurement attributes of its investment portfolio in a fair value hierarchy in note 19 in accordance with IFRS 13 Fair Value Measurement. The Group remains susceptible to fluctuations in rates of foreign exchange, in particular between Pound Sterling and the US Dollar. Strong treasury management has ensured that the Group's balance sheet remains well capitalised and its operations are financed to accommodate foreseen liquidity demands together with a high level of capital sufficient to meet future catastrophe obligations even if difficult investment market conditions were to prevail for a period of time.
| |||||
5. Seasonality and weather | |||||
Historically the Group's most material exposure to catastrophe losses on certain lines of business such as reinsurance inwards and marine and major property risk have been greater during the second half of the calendar year, broadly in line with the most active period of the North Atlantic hurricane season. In contrast, a majority of gross premium income written in these lines of business occurs during the first half of the calendar year. The Group actively participates in many regions and if any catastrophic events do occur, it is likely that the Group will share some of the market's losses. Consequently, the potential for significantly greater volatility in expected returns remains during the second half of the year. Details of the Group's recent exposures to these classes of business are disclosed in the Group's 2013 Report and Accounts. | |||||
6. Related-party transactions | |||||
Transactions with related parties during the period are consistent in nature and scope with those disclosed in note 38 of the Group's 2013 Report and Accounts. | |||||
7. Operating segments | |||||
The Group's operating segment reporting follows the organisational structure and management's internal reporting systems, which form the basis for assessing the financial reporting performance of, and allocation of resource to each business segment. During 2013 the Group restructured its Reinsurance business written by the London, Bermuda and Paris teams and combined them into one operating unit, Hiscox Re. In addition we introduced a single management structure for UK and Europe and brought all retail businesses under one umbrella. From 1 January 2014 the Group commenced reporting and monitoring its performance along these new reporting lines. The changes from the 2013 structure comprised: - Separating the London market business unit into insurance and reinsurance lines, forming the London Market Insurance division and combining the reinsurance business with Hiscox Bermuda to make Hiscox Re; - Bringing together Hiscox UK and Europe with Hiscox Guernsey, Hiscox US and the newly acquired DirectAsia business to form Hiscox Retail; - The Corporate Centre division has remained unchanged.
As a consequence of the change in reportable segments, the corresponding operating results and combined ratios for earlier periods presented have been restated on a comparable basis. There is no impact to the overall profit before tax or the net asset value of the Group for prior periods.
The Group's four revised primary business segments are identified as follows:
Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Guernsey and Asia retail business divisions. Hiscox UK and Europe underwrite European personal and commercial lines of business through Hiscox Insurance Company Limited, together with the fine art and non-US household insurance business written through Syndicate 33. In addition, the UK includes elements of specialty and international employees and officers' insurance written by Syndicate 3624.
Hiscox International comprises the specialty and fine art lines written through Hiscox Insurance Company (Guernsey) Limited, and the motor business written via DirectAsia, together with US commercial, property and specialty business written by Syndicate 3624 and Hiscox Insurance Company Inc. via the Hiscox USA business division.
Hiscox London Market comprises the internationally traded insurance business written by the Group's London based underwriters via Syndicate 33, including lines in property, marine and energy, casualty and other specialty insurance lines. In addition, the segment includes elements of business written by Syndicate 3624 being auto physical damage, auto extended warranty and aviation business. Hiscox Re is the Reinsurance division of the Hiscox Group, combining the underwriting platforms in Bermuda, London and Paris. The segment comprises the performance of Hiscox Insurance Company (Bermuda) Limited with the reinsurance contracts written by Syndicate 33. In addition, the healthcare and casualty reinsurance contracts written in the Bermuda hub on Syndicate capacity are also included. The segment also captures the performance of Kiskadee, the Hiscox Group's Insurance Linked Securities business. Corporate Centre comprises the investment return, finance costs and administrative costs associated with Group management activities. Corporate Centre also includes the majority of foreign currency items on economic hedges and intragroup borrowings. These relate to certain foreign currency items on economic hedges and intragroup borrowings, further details of these can be found in note 13 of the Group's Report and Accounts for the year ended 31 December 2013. Corporate Centre forms a reportable segment due to its investment activities which earn significant external returns. | |||||
6 months ended 30 June 2014 | |||||
Hiscox Retail | Hiscox London Market | Hiscox Re | Corporate centre | Total | |
£000 | £000 | £000 | £000 | £000 | |
Gross premiums written | 455,775 | 251,700 | 271,457 | - | 978,932 |
Net premiums written | 418,029 | 189,463 | 125,100 | - | 732,592 |
Net premiums earned | 373,352 | 163,078 | 107,041 | - | 643,471 |
Investment result | 8,368 | 6,070 | 11,169 | 3,611 | 29,218 |
Other revenues | 3,499 | 1,852 | 3,458 | 284 | 9,093 |
Revenue | 385,219 | 171,000 | 121,668 | 3,895 | 681,782 |
Claims and claim adjustment expenses, net of reinsurance | (152,678) | (81,269) | (13,648) | - | (247,595) |
Expenses for the acquisition of insurance contracts | (96,555) | (41,491) | (11,258) | - | (149,304) |
Operational expenses | (96,003) | (16,877) | (16,881) | (11,700) | (141,461) |
Foreign exchange losses | (2,981) | (6,556) | (3,597) | (3,281) | (16,415) |
Total expenses | (348,217) | (146,193) | (45,384) | (14,981) | (554,775) |
Results of operating activities | 37,002 | 24,807 | 76,284 | (11,086) | 127,007 |
Finance costs | - | (24) | (718) | (2,433) | (3,175) |
Share of profit of associates after tax | 373 | - | - | 415 | 788 |
Profit/(loss) before tax | 37,375 | 24,783 | 75,566 | (13,104) | 124,620 |
100% ratio analysis* | |||||
Claims ratio (%) | 40.7 | 48.5 | 12.4 | - | 37.9 |
Expense ratio (%) | 51.2 | 34.4 | 25.8 | - | 41.8 |
Combined ratio excluding foreign exchange impact (%) | 91.9 | 82.9 | 38.2 | - | 79.7 |
Foreign exchange impact (%) | 0.8 | 4.3 | 3.6 | - | 2.3 |
Combined ratio (%) | 92.7 | 87.2 | 41.8 | - | 82.0 |
Total assets | 1,494,074 | 1,008,195 | 1,670,010 | 334,263 | 4,506,542 |
Total liabilities | 1,284,804 | 982,020 | 819,243 | 88,022 | 3,174,089 |
6 months ended 30 June 2013, restated | |||||
Hiscox Retail | Hiscox London Market | Hiscox Re | Corporate centre | Total | |
£000 | £000 | £000 | £000 | £000 | |
Gross premiums written | 423,505 | 248,110 | 346,329 | - | 1,017,944 |
Net premiums written | 385,592 | 187,586 | 197,057 | - | 770,235 |
Net premiums earned | 342,587 | 149,507 | 136,620 | - | 628,714 |
Investment result | 12,418 | 66 | 4,318 | 8,316 | 25,118 |
Other revenues | 3,369 | 3,670 | 2,602 | 286 | 9,927 |
Revenue | 358,374 | 153,243 | 143,540 | 8,602 | 663,759 |
Claims and claim adjustment expenses, net of reinsurance | (129,142) | (61,029) | (45,624) | - | (235,795) |
Expenses for the acquisition of insurance contracts | (87,058) | (42,476) | (18,920) | - | (148,454) |
Operational expenses | (85,589) | (14,438) | (17,879) | (12,314) | (130,220) |
Foreign exchange gains | 2,247 | 12,815 | 5,438 | 14,370 | 34,870 |
Total expenses | (299,542) | (105,128) | (76,985) | 2,056 | (479,599) |
Results of operating activities | 58,832 | 48,115 | 66,555 | 10,658 | 184,160 |
Finance costs | - | (25) | (966) | (2,852) | (3,843) |
Share of profit of associates after tax | - | - | - | 377 | 377 |
Profit before tax | 58,832 | 48,090 | 65,589 | 8,183 | 180,694 |
100% ratio analysis* | |||||
Claims ratio (%) | 37.2 | 38.7 | 33.7 | - | 36.8 |
Expense ratio (%) | 50.6 | 37.0 | 26.9 | - | 41.4 |
Combined ratio excluding foreign exchange impact (%) | 87.8 | 75.7 | 60.6 | - | 78.2 |
Foreign exchange impact (%) | (0.7) | (8.7) | (4.0) | - | (3.5) |
Combined ratio (%) | 87.1 | 67.0 | 56.6 | - | 74.7 |
Total assets | 1,507,354 | 1,008,438 | 1,815,204 | 478,993 | 4,809,989 |
Total liabilities | 1,283,613 | 994,544 | 1,032,226 | 109,863 | 3,420,246 |
Year ended 31 December 2013, restated | |||||
Hiscox Retail | Hiscox London Market | Hiscox Re | Corporate centre | Total | |
£000 | £000 | £000 | £000 | £000 | |
Gross premiums written | 819,388 | 468,587 | 411,503 | - | 1,699,478 |
Net premiums written | 751,144 | 359,941 | 260,029 | - | 1,371,114 |
Net premiums earned | 711,081 | 303,251 | 268,979 | - | 1,283,311 |
Investment result | 19,134 | 6,262 | 14,381 | 20,032 | 59,809 |
Other revenues | 7,841 | 6,426 | 5,485 | 1,153 | 20,905 |
Revenue | 738,056 | 315,939 | 288,845 | 21,185 | 1,364,025 |
Claims and claim adjustment expenses, net of reinsurance | (299,781) | (136,788) | (82,710) | - | (519,279) |
Expenses for the acquisition of insurance contracts | (188,414) | (86,108) | (31,255) | - | (305,777) |
Operational expenses | (184,348) | (27,981) | (41,027) | (23,609) | (276,965) |
Foreign exchange losses | (3,911) | (1,873) | (3,308) | (798) | (9,890) |
Total expenses | (676,454) | (252,750) | (158,300) | (24,407) | (1,111,911) |
Results of operating activities | 61,602 | 63,189 | 130,545 | (3,222) | 252,114 |
Finance costs | - | (45) | (1,563) | (5,568) | (7,176) |
Share of profit of associates after tax | (423) | - | - | 23 | (400) |
Profit/(loss) before tax | 61,179 | 63,144 | 128,982 | (8,767) | 244,538 |
100% ratio analysis* | |||||
Claims ratio (%) | 41.6 | 43.5 | 30.9 | - | 39.8 |
Expense ratio (%) | 52.1 | 36.8 | 26.4 | - | 42.3 |
Combined ratio excluding foreign exchange impact (%) | 93.7 | 80.3 | 57.3 | - | 82.1 |
Foreign exchange impact (%) | 0.6 | 1.1 | 1.6 | - | 0.9 |
Combined ratio (%) | 94.3 | 81.4 | 58.9 | - | 83.0 |
Total assets | 1,456,419 | 967,951 | 1,591,638 | 419,636 | 4,435,644 |
Total liabilities | 1,281,106 | 953,263 | 751,797 | 40,017 | 3,026,183 |
* The Group's percentage participation in Syndicate 33 can fluctuate from year to year and consequently, presentation of the ratios at the 100% level removes any distortions arising therefrom.
8. Net asset value per share | ||||||
30 June 2014 | 30 June 2013 | 31 Dec 2013 | ||||
Net asset value (total equity) | NAV per share pence | Net asset value (total equity) | NAV per share pence | Net asset value (total equity) | NAV per share pence | |
£000 | £000 | £000 | ||||
Net asset value | 1,332,453 | 425.6 | 1,389,743 | 393.3 | 1,409,461 | 402.2 |
Net tangible asset value | 1,240,557 | 396.2 | 1,319,932 | 373.5 | 1,336,741 | 381.4 |
The net asset value per share is based on 313,090,274 shares (30 June 2013: 353,371,246; 31 December 2013: 350,460,458), being the adjusted number of shares in issue at each reference date. Net tangible assets comprise total equity excluding intangible assets. |
9. Return on equity | ||||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||
£000 | £000 | £000 | ||
Profit for the period | 119,846 | 158,102 | 237,758 | |
Opening shareholders' equity | 1,409,461 | 1,365,366 | 1,365,366 | |
Adjusted for the time weighted impact of capital distributions and issuance of shares | (86,855) | (63,100) | (134,580) | |
Adjusted opening shareholders' equity | 1,322,606 | 1,302,266 | 1,230,786 | |
Annualised return on equity (%) | 18.9 | 25.8 | 19.3 | |
10. Investment result | ||
i. | Analysis of investment result | |
The total investment result for the Group before taxation comprises: | 6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 |
£000 | £000 | £000 | |
Investment income including interest receivable | 21,471 | 22,261 | 42,571 |
Net realised gains on financial investments at fair value through profit or loss | 1,657 | 5,181 | 2,391 |
Net fair value gains/(losses) on financial investments at fair value through profit or loss | 6,987 | (4,133) | 13,962 |
Investment result - financial assets | 30,115 | 23,309 | 58,924 |
Fair value (losses)/gains on derivative financial instruments | (897) | 1,809 | 885 |
Total result | 29,218 | 25,118 | 59,809 |
Investment expenses are presented within other expenses (note 11). | ||||||||
ii. | Annualised investment yields | |||||||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||||||
£000 | £000 | £000 | ||||||
Return £000 | Yield % | Return £000 | Yield % | Return £000 | Yield % | |||
Debt and fixed income securities | 21,211 | 1.8 | 1,603 | 0.1 | 17,105 | 0.7 | ||
Equities and shares in unit trusts | 7,914 | 7.2 | 20,304 | 20.4 | 39,289 | 18.3 | ||
Deposits with credit institutions/cash and cash equivalents | 990 | 0.4 | 1,402 | 0.5 | 2,530 | 0.5 | ||
30,115 | 2.0 | 23,309 | 1.5 | 58,924 | 1.9 | |||
11. Other revenues and operational expenses | |||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | |
£000 | £000 | £000 | |
Agency related income | 4,277 | 3,018 | 7,100 |
Profit commission | 4,313 | 5,836 | 9,161 |
Other underwriting income and insurance linked fund | (286) | 265 | 1,832 |
Other income | 789 | 808 | 2,812 |
Other revenues | 9,093 | 9,927 | 20,905 |
Wages and salaries | 49,081 | 49,339 | 101,780 |
Social security costs | 9,052 | 9,470 | 20,498 |
Pension cost - defined contribution | 3,713 | 3,399 | 6,593 |
Pension cost - defined benefit | 274 | 468 | 1,000 |
Share based payments | 7,479 | 5,096 | 12,523 |
Marketing expenses | 15,151 | 15,014 | 30,550 |
Investment expenses | 1,865 | 1,823 | 3,833 |
Depreciation and amortisation | 6,158 | 4,399 | 9,650 |
Other expenses | 48,688 | 41,212 | 90,538 |
Operational expenses | 141,461 | 130,220 | 276,965 |
12. Finance costs | ||||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||
£000 | £000 | £000 | ||
Interest and expenses associated with bank borrowings | 905 | 1,253 | 2,457 | |
Interest and charges associated with Letters of Credit | 1,952 | 2,064 | 4,050 | |
Interest charges on experience account | 318 | 526 | 669 | |
3,175 | 3,843 | 7,176 | ||
As at 30 June 2014, the total amount drawn by way of Letter of Credit to support the Funds at Lloyd's requirement was $338 million (30 June 2013: $308 million, 31 December 2013: $333 million). |
13. Tax expense | |
The Company and its subsidiaries are subject to enacted tax laws in the jurisdictions in which they are incorporated and domiciled. The amounts charged in the condensed consolidated income statement comprise the following: | |
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | |||
£000 | £000 | £000 | |||
Current tax | |||||
Expense for the year | 31,552 | 43,941 | 65,950 | ||
Adjustments in respect of prior years | (2,121) | 3,071 | 6,475 | ||
Total current tax | 29,431 | 47,012 | 72,425 | ||
Deferred tax | |||||
Credit for the year | (24,328) | (24,900) | (49,865) | ||
Adjustments in respect of prior years | (329) | 480 | (7,500) | ||
Effect of rate change | - | - | (8,280) | ||
Total deferred tax | (24,657) | (24,420) | (65,645) | ||
Total tax charged to the income statement | 4,774 | 22,592 | 6,780 | ||
The Group records its income tax expense based on the expected effective rate for the full year. | |||||
14. Insurance liabilities and reinsurance assets | |||||
6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to 31 Dec 2013 | |||
£000 | £000 | £000 | |||
Gross | |||||
Claims and claim adjustment expenses outstanding | 1,804,902 | 2,005,852 | 1,853,062 | ||
Unearned premiums | 934,936 | 913,029 | 756,059 | ||
Total insurance liabilities, gross | 2,739,838 | 2,918,881 | 2,609,121 | ||
Recoverable from reinsurers | |||||
Claims and claim adjustment expenses outstanding | 322,946 | 460,900 | 359,946 | ||
Unearned premiums | 191,011 | 178,245 | 98,876 | ||
Total reinsurers' share of insurance liabilities | 513,957 | 639,145 | 458,822 | ||
Net | |||||
Claims and claim adjustment expenses outstanding | 1,481,956 | 1,544,952 | 1,493,116 | ||
Unearned premiums | 743,925 | 734,784 | 657,183 | ||
Total insurance liabilities, net | 2,225,881 | 2,279,736 | 2,150,299 | ||
Net claims and claim adjustment expenses include releases of £90m (30 June 2013: £74m, 31 December 2013: £140m) of reserves established in prior reporting periods. | ||||||||||||
The development of net claims reserves by accident years are detailed below. | ||||||||||||
Insurance claims and claims expenses reserves - net at 100% | ||||||||||||
Accident year ending 31 December ** | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | Total | |
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||
Estimate of ultimate claims costs as adjusted for foreign exchange*: | ||||||||||||
at end of accident year** | 644,622 | 507,508 | 665,426 | 739,813 | 667,677 | 784,521 | 977,869 | 762,718 | 736,204 | 373,149 | 6,859,507 | |
one period later** | 738,573 | 497,050 | 603,114 | 660,576 | 560,180 | 692,659 | 912,873 | 680,832 | 685,781 | - | 6,031,638 | |
two periods later** | 728,953 | 480,650 | 583,154 | 656,679 | 534,494 | 653,593 | 868,584 | 663,187 | - | - | 5,169,294 | |
three periods later** | 705,593 | 440,209 | 556,610 | 619,874 | 535,964 | 638,927 | 860,474 | - | - | - | 4,357,651 | |
four periods later** | 696,028 | 456,519 | 551,958 | 588,408 | 529,588 | 624,374 | - | - | - | - | 3,446,875 | |
five periods later** | 696,575 | 445,253 | 527,060 | 581,887 | 531,493 | - | - | - | - | - | 2,782,268 | |
six periods later** | 676,548 | 438,389 | 522,438 | 577,605 | - | - | - | - | - | - | 2,214,980 | |
seven periods later** | 668,322 | 438,473 | 514,859 | - | - | - | - | - | - | - | 1,621,654 | |
eight periods later** | 660,913 | 436,056 | - | - | - | - | - | - | - | - | 1,096,969 | |
nine periods later** | 660,137 | - | - | - | - | - | - | - | - | - | 660,137 | |
Current estimate of cumulative claims | 660,137 | 436,056 | 514,859 | 577,605 | 531,493 | 624,374 | 860,474 | 663,187 | 685,781 | 373,149 | 5,927,115 | |
Cumulative payments to date | (601,346) | (417,951) | (471,832) | (524,505) | (446,554) | (471,405) | (637,077) | (387,515) | (237,106) | (54,020) | (4,249,311) | |
Liability recognised at 100% level | 58,791 | 18,105 | 43,027 | 53,100 | 84,939 | 152,969 | 223,397 | 275,672 | 448,675 | 319,129 | 1,677,804 | |
Liability recognised in respect of prior accident years at 100% level | 50,884 | |||||||||||
Total net liability to external parties at 100% | 1,728,688 | |||||||||||
* The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 30 June 2014.
** With the exception of the most recent development data for each accident year, which only relates to the six months ending 30 June 2014, the term period refers to one full calendar year.
Reconciliation of 100% disclosures above to Group's share - net | |||||||||||||||
Accident year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | Total | ||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||
Current estimate of cumulative claims | 660,137 | 436,056 | 514,859 | 577,605 | 531,493 | 624,374 | 860,474 | 663,187 | 685,781 | 373,149 | 5,927,115 | ||||
Less: attributable to external Names | (157,801) | (89,850) | (99,035) | (101,148) | (80,097) | (83,406) | (110,665) | (76,129) | (73,906) | (39,680) | (911,717) | ||||
Group share of current ultimate claims estimate | 502,336 | 346,206 | 415,824 | 476,457 | 451,396 | 540,968 | 749,809 | 587,058 | 611,875 | 333,469 | 5,015,398 | ||||
Cumulative payments to date | (601,346) | (417,951) | (471,832) | (524,505) | (446,554) | (471,405) | (637,077) | (387,515) | (237,106) | (54,020) | (4,249,311) | ||||
Less: attributable to external Names | 142,622 | 85,340 | 89,518 | 89,842 | 66,615 | 58,130 | 83,124 | 39,743 | 18,895 | 3,803 | 677,632 | ||||
Group share of cumulative payments | (458,724) | (332,611) | (382,314) | (434,663) | (379,939) | (413,275) | (553,953) | (347,772) | (218,211) | (50,217) | (3,571,679) | ||||
Liability for 2005 to 2014 accident yearsrecognised on Group's balance sheet | 43,612 | 13,595 | 33,510 | 41,794 | 71,457 | 127,693 | 195,856 | 239,286 | 393,664 | 283,252 | 1,443,719 | ||||
Liability for accident years before 2005 recognised on Group's balance sheet | 38,237 | ||||||||||||||
Total Group liability to external parties included in the balance sheet, net† | 1,481,956 | ||||||||||||||
† This represents the claims element of the Group's insurance liabilities and reinsurance assets.
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15. Earnings per share | |||||||||||||||
Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and held in treasury as own shares. | |||||||||||||||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | |||||||||||||
Profit for the period attributable to owners of the Company (£000) | 119,846 | 158,102 | 237,758 | ||||||||||||
Weighted average number of ordinary shares in issue (thousands) | 329,341 | 372,914 | 358,652 | ||||||||||||
Basic earnings per share (pence per share) | 36.4p | 42.4p | 66.3p | ||||||||||||
Diluted Diluted earnings per share is calculated by adjusting the assumed conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares, share options and awards. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. If the inclusion of potentially issuable shares would decrease the loss per share, the potentially issuable shares are excluded from the diluted earnings per share calculation. | |||
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | |
Profit for the period attributable to owners of the Company (£000) | 119,846 | 158,102 | 237,758 |
Weighted average number of ordinary shares in issue (thousands) | 329,341 | 372,914 | 358,652 |
Adjustment for share options (thousands) | 14,553 | 15,993 | 15,860 |
Weighted average number of ordinary shares for diluted earnings per share (thousands) | 343,894 | 388,907 | 374,512 |
Diluted earnings per share (pence per share) | 34.8p | 40.7p | 63.5p |
Diluted earnings per share has been calculated after taking account of outstanding options under both employee share schemes and also SAYE schemes.
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16. Dividends paid to owners of the Company |
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||
£000 | £000 | £000 | ||
Interim dividend for the year ended: | ||||
- | 31 December 2013 of 7.0p (net) per share | - | - | 24,746 |
- | - | 24,746 | ||
The final dividend equivalent for the year ended 31 December 2013 was paid as part of the C/D Share Scheme (2012: B Share Scheme), see note 17. 261,555,693 C and 93,647,894 D Shares of 50p each were issued, of which 14p per share was in lieu of a final dividend of a cash value of £49,728,000. During 2013, the final dividend equivalent for the year ended 31 December 2012 was settled as 395,188,526 B Shares of 50p each, of which 12p per share was issued in lieu of a final cash dividend of £47,423,000. The interim dividend for 2013 was either paid in cash or issued as a scrip dividend at the option of the shareholder. The interim dividend for the year ended 31 December 2013 was paid in cash of £22,625,000 and 324,261 shares for the scrip dividend. An interim dividend of 7.5p (net) per ordinary share has been declared payable on 17 September 2014 to shareholders registered on 8 August 2014 in respect of the six months to 30 June 2014 (30 June 2013: 7.0p (net) per ordinary share). A scrip dividend alternative will be offered to the owners of the Company. The dividend was declared in Bermuda on 25 July 2014 and accordingly has not been included as a distribution or liability in this interim consolidated financial information in accordance with IAS 10 Events after the balance sheet date.
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17.Share Capital
The amounts presented in the equity structure of the Group above relate to Hiscox Ltd, the legal parent company. At 30 June 2014, there are approximately 12.6 million ordinary shares held in Treasury.
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On 24 February 2014, the Group announced its intention to return approximately £178 million of share capital, which included a final dividend equivalent of 14.0p per share, £49,728,000, to shareholders by way of a C/D Share issue. This was also combined with a consolidation of Hiscox's existing shares as described below. This was subsequently approved by the shareholders at an Extraordinary General Meeting held on 18 March 2014. C/D Shares were issued on 19 March 2014 to existing shareholders on the basis of one C/D share (at the choice of the shareholder) for each ordinary share held on 18 March 2014. Each C share enabled the shareholder to receive a dividend of 50p per share at 9 April 2014. Alternatively the shareholder could elect to receive a D Share of 50p which were sold for 50 pence each to UBS Limited, pursuant to the purchase offer on 7 April 2014. Following the purchase of the D Shares by UBS Limited from shareholders, UBS exercised its put option and the Group was required to purchase the D Shares for 50p per share. There were no C/D Shares outstanding at 30 June 2014 as all shares had been redeemed and cancelled. Total capital of £175,812,000 has been returned to shareholders, of which £35,000, has been charged against share premium and the remaining £175,777,000 has been charged against retained earnings. An additional £1,789,000 of C shares were distributed to the Employee Benefit Trust. The amount is not reported as a distribution as the trust forms part of the consolidated result. To ensure the return of capital maintained the net tangible asset per share pre and post the return of capital, a share consolidation was also performed. Each existing ordinary share in Hiscox Ltd was subdivided into 89 ordinary shares of par value 500/7921p each and then these were further subdivided so that 100 of such shares were consolidated into one new share of 6 2474/7921p. Finally the 6 2474/7921p share was split into one new ordinary share of 6p and one deferred share of 2474/7921p. The deferred shares carried almost no economic benefit and no voting rights and had no value. The deferred shares were purchased and cancelled by the Group on 9 April 2014.
Share repurchase The Trustees of the Group's Employee Benefit Trust purchased Hiscox Ltd shares through the market during the period to facilitate the settlement of vesting awards under the Group's performance share plan. As the trust is consolidated into the Group financial results, these purchases have been accounted for in the same way as treasury shares and have been charged against retained earnings. The shares are held by the Trustees for the beneficiaries of the trust. |
18. Financial assets and liabilities | ||||
i. | Analysis of financial assets carried at fair value | |||
30 June 2014 | 30 June 2013 | 31 Dec 2013 | ||
£000 | £000 | £000 | ||
Debt and fixed income securities | 2,312,367 | 2,372,699 | 2,335,829 | |
Equities and shares in unit trusts | 223,001 | 212,123 | 223,024 | |
Deposits with credit institutions | 8,216 | 11,464 | 6,240 | |
Total investments | 2,543,584 | 2,596,286 | 2,565,093 | |
Insurance linked fund | 19,377 | 20,007 | 19,917 | |
Derivative financial instruments | 168 | 1,021 | 44 | |
Total financial assets carried at fair value | 2,563,129 | 2,617,314 | 2,585,054 | |
ii. | Analysis of financial liabilities | ||||
30 June 2014 £000 | 30 June 2013£000 | 31 Dec 2013£000 | |||
Derivative financial instruments | - | 9 | 229 | ||
Total financial liabilities | - | 9 | 229 | ||
iii. | Investment and cash allocation | |||||||||
30 June 2014 | 30 June 2013 | 31 Dec 2013 | ||||||||
£000 | % | £000 | % | £000 | % | |||||
Debt and fixed income securities | 2,312,367 | 77.2 | 2,372,699 | 75.3 | 2,335,829 | 74.6 | ||||
Equities and shares in unit trusts | 223,001 | 7.4 | 212,123 | 6.7 | 223,024 | 7.1 | ||||
Deposits with credit institutions/cash andcash equivalents | 460,924 | 15.4 | 568,412 | 18.0 | 570,615 | 18.3 | ||||
Total | 2,996,292 | 3,153,234 | 3,129,468 | |||||||
iv. | Investment and cash allocation by currency | ||||
30 June 2014% | 30 June 2013% | 31 Dec 2013% | |||
Sterling | 24.0 | 26.3 | 25.4 | ||
US Dollars | 59.5 | 59.0 | 59.8 | ||
Euro and other currencies | 16.5 | 14.7 | 14.8 | ||
19. Fair value measurements In accordance with IFRS 13 Fair Value Measurement, the fair value of financial instruments based on a three-level fair value hierarchy that reflects the significance of the inputs used in measuring the fair value, is set out below: |
As at 30 June 2014 | Level 1 | Level 2 | Level 3 | Total |
£000 | £000 | £000 | £000 | |
Debt and fixed income securities | 419,601 | 1,892,766 | - | 2,312,367 |
Equities and shares in unit trusts | - | 208,249 | 14,752 | 223,001 |
Deposits with credit institutions | 8,216 | - | - | 8,216 |
Insurance linked fund | - | - | 19,377 | 19,377 |
Derivative financial instruments | - | 168 | - | 168 |
Total | 427,817 | 2,101,183 | 34,129 | 2,563,129 |
As at 30 June 2013 | Level 1 £000 | Level 2 £000 | Level 3 £000 | Total £000 |
Debt and fixed income securities | 836,982 | 1,535,717 | - | 2,372,699 |
Equities and shares in unit trusts | - | 198,469 | 13,654 | 212,123 |
Deposits with credit institutions | 11,464 | - | - | 11,464 |
Insurance linked fund | - | - | 20,007 | 20,007 |
Derivative financial instruments | - | 1,021 | - | 1,021 |
Total | 848,446 | 1,735,207 | 33,661 | 2,617,314 |
As at 31 December 2013 | Level 1 £000 | Level 2 £000 | Level 3 £000 | Total £000 | |
Debt and fixed income securities | 875,882 | 1,459,947 | - | 2,335,829 | |
Equities and shares in unit trusts | - | 208,960 | 14,064 | 223,024 | |
Deposits with credit institutions | 6,240 | - | - | 6,240 | |
Insurance linked fund | - | - | 19,917 | 19,917 | |
Derivative financial instruments | - | 44 | - | 44 | |
Total | 882,122 | 1,668,951 | 33,981 | 2,585,054 | |
In addition, the contingent consideration payable of £470,000 in respect of the DirectAsia acquisition is measured at fair value based on Level 3 inputs, see note 22. There was no such balance in 2013.
As at 30 June 2014, the Group had no derivative financial liabilities (30 June 2013: £9,000, 31 December 2013: £229,000, both classified as Level 2). The levels of the fair value hierarchy are defined by the standard as follows: |
· | level 1 - fair values measured using quoted prices (unadjusted) in active markets for identical instruments; | |
· | level 2 - fair values measured using directly or indirectly observable inputs or other similar valuation techniques for which all significant inputs are based on market observable data; | |
· | level 3 - fair values measured using valuation techniques for which significant inputs are not based on market observable data. | |
The fair values of the Group's financial assets are based on prices provided by investment managers who obtain market data from numerous independent pricing services. The pricing services used by the investment managers obtain actual transaction prices for securities that have quoted prices in active markets. For those securities which are not actively traded, the pricing services use common market valuation pricing models. Observable inputs used in common market valuation pricing models include, but are not limited to, broker quotes, credit ratings, interest rates and yield curves, prepayment speeds, default rates and other such inputs which are available from market sources. | |||||||||
Investments in mutual funds comprise a portfolio of stock investments in trading entities which are invested in various quoted investments. The fair value of shares in unit trusts are based on the net asset value of the fund reported by independent pricing sources or the fund manager. | |||||||||
Included within Level 1 of the fair value hierarchy are Government bonds, Treasury bills and exchange traded equities which are measured based on quoted prices. Level 2 of the hierarchy contains US Government agencies, corporate securities, asset backed securities and mortgage backed securities. The fair value of these assets are based on the prices obtained from both investment managers and investment custodians as discussed above. The Group records the unadjusted price provided and validates the price through a number of methods including a comparison of the prices provided by the investment managers with the investment custodians and the valuation used by external parties to derive fair value. Quoted prices for US Government agencies and corporate securities are based on a limited number of transactions for those securities and as such the Group considers these instruments to have similar characteristics as those instruments classified as Level 2. Also included within Level 2 are units held in traditional long funds and long and short special funds and over the counter derivatives. Level 3 contains investments in a limited partnership and unquoted equity securities which have limited observable inputs on which to measure fair value. Unquoted equities are initially carried at cost in the absence of observable pricing information, which is deemed to be comparable to fair value. The effect of changing one or more of the inputs used in the measurement of fair value of these instruments to another reasonably possible assumption would not be significant and no further analysis has been performed. The Group invested into the insurance linked fund in December 2012, which is subject to a two-year initial lock-up period. The fund specialises in catastrophe reinsurance opportunities. The fair value of the fund is estimated to be the net asset value reported by the fund administrator at the balance sheet date. This net asset value is based on the fair value of the underlying insurance contracts in the fund which are sensitive to estimates of insurances losses that have occurred. A change in these estimates could have a material impact on the valuation of the fund. In certain cases, the inputs used to measure the fair value of a financial instrument may fall into more than one level within the fair value hierarchy. In this instance, the fair value of the instrument in its entirety is classified based on the lowest level of input that is significant to the fair value measurement. During the period, there were no significant transfers made between Level 1 and Level 2 of the fair value hierarchy. The following table sets forth a reconciliation of opening and closing balances for financial instruments classified under Level 3 of the fair value hierarchy: | |||||||||
2014 | 2013 | ||||||||
Equities and shares in unit trusts £000 | Insurance linked fund £000 | Total £000 | Equities and shares in unit trusts £000 | Insurance linked fund £000 | Total £000 | ||||
Balance at 1 January | 14,064 | 19,917 | 33,981 | 13,535 | 8,098 | 21,633 | |||
Fair value gains or losses through profit or loss | 2,389 | (286) | 2,103 | 36 | 265 | 301 | |||
Foreign exchange losses | (81) | (254) | (335) | 83 | 895 | 978 | |||
Purchases | - | - | - | - | 10,749 | 10,749 | |||
Settlements | (1,620) | - | (1,620) | - | - | - | |||
Balance at 30 June | 14,752 | 19,377 | 34,129 | 13,654 | 20,007 | 33,661 | |||
20. Impact of foreign exchange related items The net foreign exchange (losses)/gains for the year include the following amounts: |
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||
£000 | £000 | £000 | ||
Exchange (losses)/gains recognised in the consolidated income statement | (16,415) | 34,870 | (9,890) | |
Exchange (losses)/gains classified as a separate component of equity | (22,941) | 47,966 | (2,030) | |
Overall impact of foreign exchange related items on net assets | (39,356) | 82,836 | (11,920) | |
The above excludes profit or losses on foreign exchange derivative contracts which are included within the investment result. Net unearned premiums and deferred acquisition costs are treated as non monetary items in accordance with IFRS. As a result, a foreign exchange mismatch arises caused by these items being translated at historical rates of exchange prevailing at the original transaction date and not being retranslated at the end of each period. The impact of this mismatch on the income statement is shown below.
|
6 months to30 June 2014 | 6 months to30 June 2013 | Year to31 Dec 2013 | ||
£000 | £000 | £000 | ||
Opening balance sheet impact of non-retranslation of non-monetary items | (4,790) | (2,674) | (2,674) | |
Gains/(losses) included within profit representing the non-retranslation on non-monetary items | 1,945 | 5,211 | (2,116) | |
Closing balance sheet impact of non-retranslation of non-monetary items | (2,845) | 2,537 | (4,790) | |
21. Condensed consolidated interim cash flow statement The purchase, maturity and disposal of financial assets and liabilities, including derivatives, is part of the Group's insurance activities and is therefore classified as an operating cash flow. Included within cash and cash equivalents held by the Group are balances totalling £114,077,000 (30 June 2013: £104,648,000; 31 December 2013: £113,312,000) not available for use by the Group outside of the Lloyd's Syndicates within which they are held. |
22. Business combinations
DirectAsia
On 31 March 2014, the Group acquired 100% of the share capital and voting rights of Direct Asia Insurance (Holdings) Pte Ltd (DirectAsia) for US$24,575,000 (£14,804,000). In addition the Group purchased the outstanding debt of the company totalling US$31,750,000 (£19,127,000) from the previous owners. DirectAsia's primary business is motor insurance, with ancillary lines in travel, personal accident, healthcare and life. This acquisition provides the Group with a distribution platform in Asia providing opportunities for future growth.
Purchase consideration | £000 | |||
Initial cash consideration | 14,334 | |||
Contingent consideration | 470 | |||
Total purchase consideration | 14,804 | |||
Fair value of net assets acquired | 13,591 | |||
Less Non-controlling interest | (866) | |||
Goodwill | 2,079 | |||
The contingent consideration reflected above of £470,000, represents the current fair value estimate of the expected additional consideration that may be payable to the seller. The contingent consideration is payable based on DirectAsia exceeding certain revenue targets during the first four years post the acquisition.
Whilst the Group acquired 100% of the share capital and voting rights of the parent company Direct Asia Insurance (Holdings) Pte Ltd, within the DirectAsia group there exists an equity interest by a third party. This has been accounted for as a non controlling interest in accordance with IFRS 3. The value of the interest is calculated at fair value.
The assets and liabilities arising from the acquisition are as follows:
Acquiree's carrying amount | Fair value and accounting policy adjustments | Fair value | ||
£000 | £000 | £000 | ||
Intangible assets | 3,257 | 9,799 | 13,056 | |
Property, plant and equipment | 670 | - | 670 | |
Reinsurance assets | 4,678 | - | 4,678 | |
Loans and receivables, including insurance receivables | 5,113 | - | 5,113 | |
Cash and cash equivalents | 32,184 | - | 32,184 | |
Total assets | 45,902 | 9,799 | 55,701 | |
Insurance liabilities | 17,437 | - | 17,437 | |
Trade and other payables | 5,546 | - | 5,546 | |
Long term liabilities | 19,127 | - | 19,127 | |
Total liabilities | 42,110 | - | 42,110 | |
Net assets acquired | 3,792 | 9,799 | 13,591 | |
The assets and liabilities as at the acquisition date are stated at their provisional fair values and may be amended during the year if further evidence of the appropriate fair value is received.
The goodwill shown above is primarily from acquiring the skilled workforce of DirectAsia who will provide insight into operating in these new territories.
DirectAsia contributed a loss of £2,144,000 to the Group's profit before tax for the period between 31 March 2014 and 30 June 2014. If the acquisition of DirectAsia had been completed on the first day of the financial year, the Group result for the period would have been a profit before tax of £122,816,000 and the gross written premium would have been £983,297,000.
Associates
On 11 June 2014 the Group acquired a 10% stake in White Oak Underwriting Agency Limited (White Oak) for £1,700,000. White Oak specialise in auto extended warranty and auto physical damage business.
Additionally, on 28 May 2014, the Group acquired a 10% stake in Carl Rieck GmbH, a German intermediary, for €500,000. Carl Rieck underwrites high net worth private clients, professional indemnity and specialist commercial business.
Directors' responsibilities statement
The Directors confirm, to the best of our knowledge, that the Chairman's statement and condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and the Interim Statement includes a fair review of the information required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority, being: | ||
1. | an indication of important events during the first six months of the current financial year and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and | |
2. | related-party transactions that have taken place in the first six months of the current year and that have materially affected the consolidated financial position or performance of Hiscox Ltd during that period, and any changes in the related party transactions described in the last annual report that could have such a material effect. | |
The individuals responsible for authorising the responsibility statement on behalf of the Board are the Chief Executive, B E Masojada and the Chief Financial Officer, S J Bridges. Accordingly the Half Yearly Report to the London Stock Exchange was approved for issue on Monday, 28 July 2014 following receipt of confirmation from the auditors that they had reviewed the final content. | ||