Helios Underw Regulatory News (HUW)

Hampden Underwriting plc

("Hampden Underwriting" or the "Company")

Preliminary results for the year ended 31 December 2012

Hampden Underwriting, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces its preliminary results for the year ended 31 December 2012.

Highlights

·; Premium written during the period totalled £9.1m

·; Net profit of £763,000

·; Earnings per share 9.92p

·; Net assets increased to £9.1m

·; Net assets per share of £1.07

Commenting upon these results Chairman, Sir Michael Oliver said:

"The profit after tax for the year ended 31 December 2012 shows a marked improvement on 2011. In last year's report I mentioned that the time was now right for expansion. This we have done with a 35% increase in underwriting. Plans continue to develop and we look forward to informing shareholders as and when they reach fruition."

Enquiries:

Chairman's Statement

During the year the Board was pleased to welcome Nigel Hanbury in the role of Chief executive. Nigel brings a wealth of experience in underwriting at Lloyd's, and we now look forward to a period of increased activity.

The profit after tax of £763k for the year ended 31 December 2012 compares with a loss after taxation of £387k for 2011. This result includes a net credit of £487k in respect of goodwill arising on the three acquisitions made in the year. Excluding this the profit after tax for the year of £276k still shows a marked improvement on 2011.

The 2010 underwriting year of account closed at 31 December 2012 with a profit of £459k, compared to a profit of £831k for the 2009 year of account at 31 December 2011. This represents a profit of 2.55% on capacity (Lloyd's overall market result was 2.49%) compared to a profit of 18.27% for the 2009 account which was a percentage point above the Lloyd's market average result for 2009.

Net assets have increased to 107p per share and when the unamortised value of capacity is added back it shows a value of 119p.

In last year's report I mentioned that the time was now right for expansion. This we have done with a 35% increase in underwriting between the 2012 and 2013 underwriting years of account. This growth has been achieved through the acquisition of three Namecos at what we believe to be acceptable prices in a market that continues to offer profitable opportunities. This brings the total number of Namecos under 100% ownership to seven.

A by product of purchasing Namecos is not only to enable increased underwriting in 2013 but also to increase exposure to their open years of 2010 (now closed), 2011 and 2012 which are at varying degrees of maturity at the time of purchase. Of course a price is paid for these open years but the company benefits from any improvements between the acquisition date and closure. The total amount of premium limit purchased last year over the three open years is in excess of £13m.

Furthermore all of the underwriting vehicles own significant Funds at Lloyd's. Following a beauty parade of various asset managers this cash has now been invested through two fund managers: the Trojan Fund managed by Troy and the Ruffer Total and Absolute Return Funds managed by Ruffer. The Trojan Fund's investment objective is to achieve growth in capital and income in real terms over the long term through substantially investing in UK and Overseas equities and fixed interest securities but it has the ability/is authorized to invest in all asset classes. The Ruffer funds aim to preserve capital and achieve low volatility with positive returns from an actively managed portfolio of different asset classes including equities bonds and currencies. The investment of these assets gives the shareholder the ability to obtain an investment return as well as a return from taking underwriting risk. Over many years this double use of assets has been one of the attractions of investing at Lloyd's. The total amount of the investments in these funds at HUW Plc. and its subsidiaries, at the time of going to press, is approximately £8.1m or about 95p per share. There are additional cash amounts yet to be invested or earmarked for day to day cash requirements amounting to 7p per share.

Plans continue to develop and we look forward to informing shareholders as and when they reach fruition. However we are pleased our Lloyd's advisor is seeing clear signs of an improvement in property and casualty insurance rates which is offsetting, to some degree, the new competition from the capital markets which are competing for reinsurance business such as through the issuance of Catastrophe Bonds and other structures which is likely to have an adverse effect on reinsurance rates for the June and July renewals.

Finally, in last year's report we mentioned the possibility of paying a dividend. The Board has concluded that in the current climate our resources are better deployed within our core business. However, we have agreed to buy back some of our shares each year where the Board feels it is prudent to do so.

Sir Michael Oliver

Non-executive Chairman

28 May 2013

Lloyd's Advisers' Report

2012 review and outlook for 2013

Total insured losses for the global insurance industry from natural catastrophes in 2012 totalled $71bn, with man-made disasters costing an additional $6bn. Overall insured losses were still above the average of recent years but at $77bn declined significantly from the total of $126bn in 2011. Most of the losses in 2012 arose from Hurricane Sandy, which made landfall in Atlantic City, New Jersey on 29 October 2012. The Insurance Information Institute estimates that insurance companies will pay $18.8bn in claims from Sandy, making it the third costliest storm in US history, after Hurricane Katrina in 2005 ($48.7bn) and Hurricane Andrew in 1992 ($25.6bn).

In contrast to 2011, which was affected by international losses, principally in Japan, New Zealand and Thailand, 2012 was much more benign with the largest non-US insured loss being the earthquakes in Italy costing $1.6bn in May 2012 and the January 2012 capsize of the cruise liner, Costa Concordia, which is expected to cost insurers more than $1bn. As a market, Lloyd's net ultimate claims at 31 December 2012 for catastrophe losses during 2012 are estimated at £1.8bn, which is just above the 15 year average of £1.4bn but like the insurance industry as a whole a significant reduction on the record claims suffered in 2011 of £4.7bn.

Despite Hurricane Sandy and claims from the summer drought in the corn belt of the US, the underwriting results of the US property/casualty insurance industry improved in 2012 with net losses from underwriting reducing to $16.7bn from $36.2bn in 2011. Net investment gains (income and realised capital gains) enabled an improved overall net profit after tax of $33.5bn compared with $19.5bn in 2011.

Capital remains strong for both insurers and reinsurers. At Lloyd's total net resources increased by 6% in 2012 to a record £20.2bn with the solvency surplus improving by 4%, also to a record £3.1bn. The policyholders' surplus of the US property/casualty industry, a proxy for underwriting capacity, grew by $33.1bn in 2012 to a record $586.9bn. Reinsurance capital also grew to a record $505bn at year end 2012, an increase of 11% or $50bn since the end of 2011, according to reinsurance broker, Aon Benfield.

Demand measured by premium has grown over the long term, being linked to growth in GDP and levels of insurance penetration. During the Great Recession of 2007-2009 US net written insurance premiums fell by an aggregate 6.8%, the first three year decline since 1930-1933. Growth in overall net written premiums, a proxy for demand, accelerated to 4.3% in 2012 from 3.4% in 2011 with insurers writing predominantly commercial lines showing greater increases of 5.7%. The demand component has been boosted by a combination of increasing premium rates and a recovering US economy contributing to organic growth. Encouragingly, net written premium has now overtaken its previous peak set in 2006.

The insurance pricing cycle is typically supply led with demand playing a limited role. However, in this cycle deficient demand has had a greater impact than normal since 2007 as organic growth opportunities have largely not been available to use up surplus capital. The strength of the economic recovery remains uncertain in Lloyd's principal market, the US.

Sluggish economic conditions are expected to continue to have an impact on the demand for insurance and therefore organic growth opportunities. However, it is encouraging that US real GDP growth accelerated to 2.5% in the first quarter of 2013 compared with 0.4% in the final quarter of 2012.

It is possible that we may have seen the bottom of the cycle in 2011 when the US property/casualty industry reported a combined ratio of 106.3%, the worst ratio since 2002 with the bottom of the previous cycle having been in 2001 when the combined ratio was 115.8%. US property/casualty industry net written premium growth in 2013 is expected to be the strongest since 2004 driven by a mixture of organic growth and a broad and sustained increase in pricing. A M Best is projecting net written premium growth of 4.5% for 2013.

Insurers and reinsurers have three main sources of earnings. These are the potential for underwriting profit on earned income from the current year, the potential for releases from reserves on business written in prior years and finally investment income and realised gains. In our view, the principal reason why pricing is recovering on US insurance business is the investment environment. The Federal Reserve is actively signalling that it is determined to keep interest rates low until unemployment drops below 6.5% or until inflation expectations exceed 2.5%.

The treasury yield curve remains close to its most depressed level in at least 45 years. Investment income has further reduced due to a combination of lower yields and a reduction in the average maturity of insurers' bond portfolios which, according to the Insurance Information Institute based on A M Best data, has fallen from 7.32 years in 2006 to 6.45 years in 2011. The duration of bond investments for Lloyd's syndicates is even lower at 1.7 years.

The significance of the fall in bond years can be seen from the fact that a US five year treasury bond could have been bought with a yield of 5% in July 2007, yet when that bond matured in July 2012 the reinvestment yield available was only 0.6%.

The trend in declining yields from 2007 can be seen in the chart below which shows both the two year and five year US treasury from 2005 to May 2013. At the time of writing the two year is yielding 0.23% and the five year 0.79%.

US treasury bond yields

The investment component of the return on equity by line of business is particularly important in capital intensive lines such as reinsurance, or casualty business where claims may not be paid out for a number of years. Apart from controlling expenses, the main way for insurance company managements to compensate for this "lost investment income" is to encourage their underwriters to put rates up.

At previous cycle turning points, reserve deteriorations have followed periods of reserve releases. Currently reserve releases continue to be made, although they have been reducing since 2008 for US insurers and are expected to taper off in 2013 and 2014.

Global reinsurance rates were stable at 1 January 2013 despite the losses from Hurricane Sandy. The reinsurance broker, Guy Carpenter, reported that renewals for loss free accounts varied between down by 2.5% to up by 2.5% for US property catastrophe reinsurance with loss impacted catastrophe programmes experiencing increases, although the level of these increases varied widely. Reinsurance pricing at 1 April 2013 Asian renewals were stable to falling marginally.

The most significant issue affecting the reinsurance industry in 2013 is the convergence of traditional and alternative sources of reinsurance capital with Guy Carpenter calculating that non-traditional capacity now makes up an estimated 14% of global property catastrophe limit. Alternative capital/reinsurance structures typically offer a collateralised quota share reinsurance through a variety of mechanisms designed for investors seeking catastrophe risk. At the time of writing the market is in a state of flux in advance of the 1 June and 1 July renewal seasons for reinsurance business. However, early indications are that there will be rate reductions of 10% or more, which will have a particular impact on what have been attractive margins for Florida reinsurance business, for example.

In contrast we are now seeing a sustained upturn in property and casualty insurance rates in the US, which does not suffer from the ease of entry from alternative sources of capital seen in the reinsurance sector. After nearly eight years of decreases the first increase we saw was in the third quarter of 2011 and by the fourth quarter of 2012 rates were up by an average of 5% using data supplied by the Council of Insurance Agents and Brokers, the largest increase since late 2003. Rate rises continued in the first quarter of 2013, averaging 5.2%. The President/CEO, Ken Crerar, commented, "Carriers backed off risky business, tightened underwriting and pressed for higher pricing and deductibles on renewal." Lloyd's received 41% of its income from US and Canada in 2012 and as the market leader in excess and surplus (the "E&S") lines business is expected to be a major beneficiary from a hardening US insurance market leading to business migrating back to the E&S market from the US admitted market.

Following Hurricanes Katrina, Rita and Wilma in 2005, US reinsurance rates have been among the most attractive of any class of business. What we are seeing now in the current market place is potentially a healthy rebalancing in the relative attractiveness of writing insurance business compared to reinsurance business which, if sustained, would suggest that overall, the insurance cycle has turned the corner. However, from a reinsurance perspective, reducing reinsurance rates should improve the margins of insurers but reduce the attractiveness of writing reinsurance business. Time will tell whether the alternative sources of capital which have entered the industry will sustain their provision of capital post a major loss and prove dependable for insurers.

Hampden Underwriting's 2012 results

The traditional method for comparing the performance of competing insurance businesses is an analysis of the combined ratio, which is the sum of net claims and expenses divided by net earned premium. The combined ratio of Hampden Underwriting's portfolio for 2012 was 93% which compares favourably with industry peer groups, outperforming the 2012 results of the US property/casualty industry, US reinsurers and European reinsurers.

Syndicate profit distributions

Profit distributions from Hampden Underwriting's portfolio of syndicates continue to be made by reference to the traditional three year accounts. Using this measure of performance Hampden Underwriting's portfolio marginally outperformed the Lloyd's result as a percentage of capacity on the 2010 account at 31 December 2012 with a profit of 2.55% (Lloyd's 2.49%) and is estimated to outperform Lloyd's on the 2011 account with a profit of 5.08% at the mid-point estimate (Lloyd's 0.96%). At this early stage of development of the 2012 account the mid-point estimate is a profit of 4.75% (Lloyd's 4.2%).

Hampden Underwriting's capital position

Net tangible assets per share fell marginally by 1.4% during 2012, principally as a result of the three acquisitions made in the year. Including the acquisitions, net tangible assets increased from £6.43m at year end 2011 to £7.3m at year end 2012 and continue to provide a capital surplus compared with the Lloyd's minimum capital requirement as at November 2012, which was £6.99m.

Hampden Underwriting's portfolio for 2013

Hampden Underwriting's portfolio for 2013 continues to provide a good spread of business across managing agents and classes of business with motor and liability providing a balance to the catastrophe exposed reinsurance and property business, as well as contributing through diversification to lower capital requirements. 28.2% of the capacity is in the three syndicates rated "A" by Hampden Agencies, being Syndicates 386, 609 and 2791, with Syndicate 2791 being the largest holding at 15.1% of capacity. The top ten syndicates comprise 82.2% of the portfolio. No new syndicates were joined for 2013.

Top ten syndicates for 2013

The two largest classes of business remain reinsurance and US dollar property insurance. Casualty and UK motor exposures provide balance against the more volatile property catastrophe exposures.

Risk management

The two major risks faced by insurers and reinsurers are deficient loss reserves and inadequate pricing, which, taken together, account for over 40% of insurer impairments according to A M Best. The pricing cycle is easier to identify in real time. The reserving cycle is more difficult to identify in real time as typically reserving standards slip after a period of reserve releases and there is a lag before this is recognised. Hampden Agencies approaches the management of portfolio risk by diversifying across classes of business, syndicates and managing agents and importantly understanding the cycle management and reserving strategy of each syndicate as well as the rate environment.

We also assess the downside in the event of a major loss through monitoring the aggregate losses estimated by managing agents to realistic disaster scenarios. Risk is assessed in the context of potential return with catastrophe exposure being actively managed dependent on market conditions.

Hampden Underwriting's largest modelled exposures net of reinsurance as a percentage of gross premiums are similar for 2013 compared with 2012. The largest remains a major windstorm in the north-east of the US at 29.7% of gross premium, net of reinsurance. The next highest is the Gulf of Mexico windstorm at 28.9% net.

Consolidated statement of comprehensive income

Year ended 31 December 2012

The profit/(loss) attributable to equity shareholders and earnings/(loss) per share set out above are in respect of continuing operations.

The accounting policies and notes are an integral part of these Financial Statements.

Consolidated statement of financial position

At 31 December 2012

Consolidated statement of cash flows

Year ended 31 December 2012

Statements of changes in shareholders' equity

Year ended 31 December 2012

Notes to the financial statements

Year ended 31 December 2012

1. Accounting policies

The principal accounting policies adopted in the preparation of the financial information set out in this announcement are set out in the full financial statements for the year ended 31 December 2012 (the "Financial Statements").

Basis of preparation

The Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") endorsed by the European Union ("EU"), IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of financial assets at fair value through profit or loss. A summary of the more important Group accounting policies is set out below.

The preparation of Financial Statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.

The Group participates in insurance business through its Lloyd's corporate member subsidiaries. Accounting information in respect of syndicate participations is provided by the syndicate managing agents and is reported upon by the syndicate auditors.

International Financial Reporting Standards

There are no IFRS or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012 that had a material impact on the Group's Financial Statements.

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012 and have not been applied in preparing these Financial Statements. None of these is expected to have a significant effect on the financial statements of the Group:

·; Amendment to IAS 1 "Financial Statement Presentation" regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in "other comprehensive income" ("OCI") on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

·; IAS 19 "Employee Benefits" was amended in June 2011. The amendments eliminate the option to defer the recognition of gains and losses, known as the "corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring re-measurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans.

·; IFRS 7 "Financial Instruments: Disclosures" was amended for asset and liability offsetting. This amendment requires disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. The amendment is effective for the accounting period beginning on or after 1 January 2013, subject to endorsement by the EU.

·; IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the Parent Company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Group intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2013.

·; IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of joint arrangement; joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint venture has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The Group intends to adopt IFRS 11 no later than the accounting period beginning on or after 1 January 2013.

·; IFRS 12 "Disclosures of Interests in Other Entities" includes the disclosure requirements for all forms of interests in entities, including joint arrangements, associates, special purpose vehicles and other off Statement of Financial Position vehicles. The Group intends to adopt IFRS 12 no later than the accounting period beginning on or after 1 January 2013.

·; Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests in Other Entities" provide additional transition relief to IFRS 10,11 and 12 by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. The Group intends to adopt the amended standards no later than the accounting period beginning on or after 1 January 2013, subject to endorsement by the EU.

·; IFRS 13 "Fair Value Measurement" aims to provide consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other IFRS.

·; IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial Statements" as a result of the issue of IFRS 10. The revised standard includes the requirements relating to separate financial statements. The Group intends to adopt IAS 27 (revised) no later than the accounting period beginning on or after 1 January 2013.

·; IAS 28 "Investments in Associates and Joint Ventures" replaces the current version of IAS 28 "Investments in Associates" as a result of the issue of IFRS 11. The revised standard includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 1. The Group intends to adopt IAS 28 (revised) no later than the accounting period beginning on or after 1 January 2013.

·; IFRS 9 "Financial Instruments" addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics for the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015, subject to endorsement by the EU. The Group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

·; Amendments to IAS 32 "Financial Instruments: Presentation" add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement. The Group is yet to assess the full impact of the amendments to IAS 32 and intends to adopt the amended standard no later than the accounting period beginning on or after 1 January 2014.

"Annual Improvements 2009-2011 Cycle" sets out amendments to various IFRS as follows:

·; An amendment to IFRS 1 "First-time Adoption" clarifies whether an entity may apply IFRS 1:

(a) if the entity meets the criteria for applying IFRS 1 and has applied IFRS 1 in a previous reporting period; or

(b) if the entity meets the criteria for applying IFRS 1 and has applied IFRS in a previous reporting period when IFRS 1 did not exist.

·; The amendment to IFRS 1 also addresses the transitional provisions for borrowing costs relating to qualifying assets for which the commencement date for capitalisation was before the date of transition to IFRS.

·; An amendment to IAS 1 "Presentation of Financial Statements" clarifies the requirements for providing comparative information:

(a) for the opening statement of financial position when an entity changes accounting policies, or makes retrospective restatements or reclassifications; and

(b) when an entity provides Financial Statements beyond the minimum comparative information requirements.

·; An amendment to IAS 16 "Property, Plant and Equipment" addresses a perceived inconsistency in the classification requirements for servicing equipment.

·; An amendment to IAS 32 "Financial Instruments: Presentation" addresses perceived inconsistencies between IAS 12 "Income Taxes" and IAS 32 with regard to recognising the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction.

·; An amendment to IAS 34 "Interim Financial Reporting" clarifies the requirements on segment information for total assets and liabilities for each reportable segment.

The Group is yet to assess the full impact of these amendments and intends to adopt the amended standards no later than the accounting period beginning on or after 1 January 2013, subject to endorsement by the EU.

Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosure of Interests in Other Entities" and IAS 27 "Separate Financial Statements" define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities. These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9 "Financial Instruments" in its consolidated and separate Financial Statements. The amendments also introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27. The Company is yet to assess the full impact of these amendments and intends to adopt the amended standards no later than the accounting period beginning on or after 1 January 2014, subject to endorsement by the EU.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

2. Segmental information

The Group has three segments that represent the primary way in which the Group is managed:

·; syndicate participation;

·; investment management; and

·; other corporate activities.

The Group does not have any geographical segments as it considers all of its activities to arise from trading within the UK.

No major customers exceed 10% of revenue.

3. Net investment income

4. Operating profit/(loss) before tax

The Group has no employees other than the Directors of the Company.

Directors' remuneration comprises only Directors' fees. The Chief Executive, Nigel Hanbury, has a bonus incentive scheme. No bonus has been paid during the year. No other Directors derive other benefits, pension contributions or incentives from the Group. At 31 December 2012 no share options were held by the Directors (2011: nil).

The Company did not have a Remuneration Committee during the year.

5. Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

The Group has no dilutive potential ordinary shares.

Earnings per share has been calculated in accordance with IAS 33.

Reconciliation of the earnings/(loss) and weighted average number of shares used in the calculation is set out below:

6. Intangible assets

7. Financial assets at fair value through profit or loss

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The Group has no level 3 investments.

As at 31 December 2012, the Group held the following financial assets carried at fair value on the statement of financial position:

Assets measured at fair value

Funds at Lloyd's represents assets deposited with the Corporation of Lloyd's ("Lloyd's") to support the Group's underwriting activities as described in the accounting policies. The Group has entered into a Lloyd's Deposit Trust Deed which gives the Corporation the right to apply these monies in settlement of any claims arising from the participation on the syndicates. These monies can only be released from the provision of this Deed with Lloyd's express permission and only in circumstances where the amounts are either replaced by an equivalent asset, or after the expiration of the Group's liabilities in respect of its underwriting.

The Directors consider any credit risk or liquidity risk not to be material.

The comparative figures have been reclassified to show 'holdings in collective investment schemes' separately from 'shares and other variable' yield securities.

8. Share capital and share premium

During the year 1,113,572 ordinary shares of 10p each were issued for a total consideration of £847,000 as part of the acquisition of Nameco (No. 917) Limited.

9. Financial statements

The financial information set out in this announcement does not constitute statutory accounts but has been extracted from the Group's Financial Statements which have not yet been delivered to the Registrar. The Group's annual report and Financial Statements will be posted to shareholders shortly. Further copies will be available from the Company's registered office: Hampden House, Great Hampden, Great Missenden, Buckinghamshire HP16 9RD and on the Company's website www.hampdenplc.com.