Last checked at 25 Sep 2020 07:00
25 September 2020
Helios Underwriting plc
('Helios' or 'the Company')
Interim Results for the Six Months Ended 30 June 2020
Helios Underwriting plc, the unique investment vehicle which acquires and consolidates underwriting capacity at Lloyd's, announces its unaudited results for the six months ended 30 June 2020.
Nigel Hanbury, Chief Executive, provides the following overview:
"These interim results reflect syndicate Covid losses recognised during the period, but our exposure on the 2020 open underwriting year has been greatly reduced through quota share reinsurance.
"Our pro-forma Adjusted NAV per share remains robust, reflecting the quality of our portfolio and has increased to £2.07 per share.
"Current market conditions have opened up an exciting window of opportunity for Helios: the opportunity to increase our retained exposure by reducing the quota share cession and through targeted acquisitions of LLV's. We have an attractive pipeline of these, which we are actively evaluating. We also continue to explore options to finance the additional capital required, including a potential fundraising."
SUMMARY FINANCIAL INFORMATION | |||
| 6 months to 30th June | Year to 31st December | |
| 2020 £000's | 2019 £000's | 2019 £000's |
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Underwriting profits | 154 | 1,610 | 3,261 |
Other income | 850 | 469 | 2,557 |
Costs | (1,112) | (1,326) | (3,391) |
Operating profit for the period before impairment | (108) | 753 | 2,427 |
Profit after tax | (96) | 648 | 4,054 |
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|
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Earnings per share | -0.55p | 4.51p | 25.64p |
Adjusted Net Asset Value per Share | £2.07 | £1.91 | £2.06 |
· Operating loss before impairment is £108,000 (30 June 2019 - a profit of £753,000)
· Reduction in underwriting profits from the syndicate participations reflects the losses recognised from the Covid-19 pandemic in this period
· The cumulative premium rate increase achieved by underwriters since 1st January 2018 is 28%, which together with greater discipline encouraged by the Franchise Board at Lloyd's, has improved the prospects for profitable underwriting
· The Adjusted Net Asset Value per share is £2.07 per share (31st December 2019 - £2.06 per share)
The underwriting result has been impacted by the losses arising from the Covid-19 coronavirus pandemic. Losses of £5m (7% of capacity) have been reserved for Covid-19 by the supported syndicates as at 30th June 2020, of which 85% attaches to the 2019 year. The quota share reinsurers share £3.5m of this loss so the impact on the underwriting profits was £1.5m. The disputes over business interruption coverage are largely outside Lloyds and are not expected to impact the portfolio. The mid point forecast for the 2019 year of account as at 30th June 2020 is a loss of 1.6%, having reserved the Covid 19 losses that have been incurred. We have a stop loss reinsurance protection for the 2019 year on which we do not expect to have to make a claim.
The current turmoil is taking place against the backdrop of the greatest positive momentum the Directors have seen in both insurance and reinsurance pricing for many years. The improvement in underwriting conditions is now accelerating on top of an aggregate rate increase during 2019 of 5.4% (2018: 3.5%) following catastrophe losses in 2017, 2018 and 2019. Cumulative rate increases since 1st January 2018 are 28%. We have been advised of further pre-emptions of approximately £9.5m from our supported syndicates to take advantage of improved market conditions.
Underwriting Profits and Window of Market Opportunity
The underwriting profits generated from the proportion of the capacity portfolio retained by Helios reflects the results of the underlying syndicates. The profitability of the syndicates has been affected by the following:
· The losses from Covid-19 have been recognised during the period.
· The premium rate increases that have been achieved are being reflected in the underlying results as reported in the Lloyds market results.
A window of opportunity has been opened which is exciting for Helios:
· Our strategy of building a portfolio of syndicate capacity continues to rely on the flow of LLVs for sale at reasonable prices.
· The pre-emptions, if fully taken up will increase the portfolio by approximately 13%.
· There is an opportunity to increase the capacity retained by Helios shareholders by reducing the quota share cession.
The exposure on the 2020 open underwriting year has been reduced by 70% through quota share reinsurance. The quota share reinsurers fund their share of the capital requirements and pay Helios a fee and a profit commission. Stop loss reinsurance is bought for the remaining 30% to limit the Group's exposure in the event of large underwriting losses. Our costs should not increase at the same pace.
The Pro-forma Adjusted Net Asset Value per share is £2.07p per share (Dec 2019 - £2.06p per share). It is expected that there will continue to be demand for the top syndicates that make up a significant proportion of the Helios Capacity Fund at the Lloyds Capacity Auctions that take place later this year.
For further information, please contact:
Helios Underwriting plc
Nigel Hanbury - Chief Executive 07787 530 404 / nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer 07754 965 917
Shore Capital
Robert Finlay 020 7408 4080
David Coaten
Buchanan
Helen Tarbet / Henry Wilson / George Beale 07872 604 453
020 7466 5111
About Helios
Helios provides a limited liability direct investment into the Lloyd's insurance market and is quoted on the London Stock Exchange's AIM market (ticker: HUW). Helios trades within the Lloyd's insurance market writing approximately £70m of capacity for the 2020 account. The portfolio provides a good spread of business being concentrated in property insurance and reinsurance. For further information please visit www.huwplc.com.
Financial results summary
Six months ended 30 June 2020
| 6 months to 30 June 2020 | 6 months to 30 June 2019 | Year to 31 December 2019 |
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Underwriting profits | 154 | 1,610 | 3,261 |
Other Income |
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Fees from reinsurers | 400 | 249 | 235 |
Corporate reinsurance recoveries | 202 | (205) | (358) |
Goodwill on bargain purchase | 172 | 285 | 1,707 |
Investment income | 76 | 140 | 972 |
Total Other Income | 850 | 469 | 2,557 |
Costs |
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|
|
Pre - acquisition | (9) | (2) | (859) |
Stop loss costs | (181) | (182) | (200) |
Operating costs | (922) | (1,142) | (2,332) |
Total Costs | (1,112) | (1,326) | (3,391) |
Operating profit before impairments of goodwill and capacity | (108) | 753 | 2,427 |
Impairment charge for capacity | - | - | 1,860 |
Tax | 12 | (105) | (233) |
Profit for the period/year | (96) | 648 | 4,054 |
Period to 30th June 2020
Underwriting Year | Helios retained capacity at 30 June 2020 £m | Portfolio mid point forecasts | Total profit/(loss) currently estimated £'000 | Helios Profits £'000 |
2018 | 27.6 | -3.1% | (856) | 439 |
2019 | 23.3 | -1.6% | (373) | 101 |
2020 | 21.1 | - | - | (386) |
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|
| 154 |
Period to 30th June 2019
Underwriting Year | Helios retained capacity at 30 June 2018 £m | Portfolio mid point forecasts | Total profit/(loss) currently estimated £'000 | Helios Profits £'000 |
2017 | 28.9 | -7.4% | (2,139) | 1,048 |
2018 | 18.7 | -3.6% | (673) | 681 |
2019 | 16.1 | - | - | (119) |
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| 1,610 |
Year to 31 December 2019
Underwriting Year | Helios retained capacity at 31 December 2018 £m | Portfolio mid point forecasts | Total profit/(loss) currently estimated £'000 | Helios Profits £'000 |
2017 | 36.2 | -4.8% | (1,748) | 2,725 |
2018 | 21 | -3.6% | (758) | 1,349 |
2019 | 18.3 | - | - | (814) |
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| 3,261 |
Summary Balance Sheet
The summary Group balance sheet excludes items relating to syndicate participations. See Note 15 for further information.
| 6 Months to June 2020 £'000 |
6 Months to June 2019 £'000 | Year to 31 December 2019 £'000 |
Intangible assets | 21,655 | 16,490 | 21,178 |
Funds at Lloyd's | 8,989 | 10,850 | 13,520 |
Other cash | 1,156 | 2,018 | 3,013 |
Other assets | 8,179 | 8,391 | 10,120 |
Total assets | 39,979 | 37,749 | 47,831 |
Deferred tax | 3,686 | 2,134 | 3,292 |
Borrowings- | 2,000 | 1,034 | 2,001 |
Other liabilities | 1,118 | 4,865 | 6,144 |
Total liabilities | 6,804 | 8,033 | 11,437 |
Syndicate equity | (5,123) | (8,648) | (8,244) |
Total equity | 28,052 | 21,068 | 28,150 |
Summary Group Cash Flow
The summary group cash flow sheet excludes items relating to syndicate participations. See Note 15 for further information.
| 6 months to 30 June 2020 £'000 | 6 months to 30 June 2019 £'000 | Year to 31 December 2019 £'000 |
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Opening Balance (free cash) | 3,028 | 9,717 | 9,717 |
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Income |
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Acquired on acquisition | 280 | 119 | 2,045 |
Distribution of profits (net of tax retentions) | 54 | 1,165 | 1,724 |
Transfers from Funds at Lloyds' | 4,252 | 1,512 | 4,178 |
Investment income | 28 | 43 | 178 |
Other income | - | - | 911 |
Sale of investments | - | - | 2,014 |
Borrowings | 2,000 | (8,162) | 2,000 |
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Expenditure |
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Operating costs (inc Hampden / Nomina fees) | (406) | (469) | (2,392) |
Reinsurance Cost | (353) | (531) | - |
Payable funds for acquisitions | - | - | - |
Payments to QS reinsurers | - | - | (465) |
Acquisition of LLV's | (4,875) | (428) | (4,897) |
Transfers to Funds at Lloyds' | (750) | (778) | (1,137) |
Tax | (102) | (36) | (833) |
Dividends paid | - | - | (529) |
Revolving credit facility repayment | (2,000) | - | (9,214) |
Share buy backs | - | (133) | (287) |
Closing balance | 1,156 | 2,019 | 3,013 |
Adjusted NAV
| 6 months to 30 June 2020 £'000 | 6 months to 30 June 2019 £'000 | Year to 31 December 2019 £'000 |
Net tangible assets | 6,397 | 4,578 | 6,970 |
Group letters of credit | 2,916 | 1,762 | 2,850 |
Value of capacity (WAV) | 26,827 | 21,077 | 26,350 |
| 36,140 | 27,417 | 36,170 |
Share in issue - on the market | 17,478 | 14,348 | 17,489 |
Shares in issue - total of on the market and JSOP shares | 17,978 | 14,848 | 17,989 |
Adjusted net asset value per share £ - on the market | 2.07 | 1.91 | 2.07 |
Adjusted net asset value per share £ - on the market and JSOP shares | 2.01 | 1.85 | 2.01 |
Interim condensed consolidated statement of comprehensive income
Six months ended 30 June 2020
|
Note | 6 months ended 30 June 2020 Unaudited £'000 | 6 months ended 30 June 2019 Unaudited £'000 | 12 months ended 31 December 2019 Audited £'000 |
Gross premium written | 4 | 36,950 | 29,552 | 55,470 |
Reinsurance premium ceded |
| (11,575) | (9,380) | (13,210) |
Net premium written | 4 | 25,375 | 20,172 | 42,260 |
Change in unearned gross premium provision | 5 | (7,700) | (4,625) | (60) |
Change in unearned reinsurance premium provision | 5 | 3,837 | 2,767 | 488 |
| 5 | (3,863) | (1,858) | 428 |
Net earned premium | 3,4 | 21,512 | 18,314 | 42,688 |
Net investment income | 6 | 1,174 | 1,491 | 2,335 |
Other underwriting income |
| 400 | 252 | 417 |
Gain on bargain purchase | 12 | 172 | 285 | 1,707 |
Other income |
| - | 13 | 432 |
Revenue |
| 23,258 | 20,355 | 47,579 |
Gross claims paid |
| (16,380) | (17,242) | (34,107) |
Reinsurers' share of gross claims paid |
| 3,784 | 3,890 | 8,237 |
Claims paid, net of reinsurance |
| (12,596) | (13,352) | (25,870) |
Change in provision for gross claims | 5 | (5,927) | 1,337 | (3,758) |
Reinsurers' share of change in provision for gross claims | 5 | 2,162 | (1,036) | 2,004 |
Net change in provision for claims | 5 | (3,765) | 301 | (1,754) |
Net insurance claims and loss adjustment expenses | 4 | (16,361) | (13,051) | (27,624) |
Expenses incurred in insurance activities |
| (6,166) | (5,786) | (15,764) |
Other operating expenses |
| (839) | (765) | (1,764) |
Operating expenses |
| (7,005) | (6,551) | (17,528) |
Operating profit before impairments of goodwill and capacity | 4 | (108) | 753 | 2,427 |
Impairment of goodwill |
| - | - | - |
Impairment of syndicate capacity |
| - | - | - |
Profit before tax |
| (108) | 753 | 4,287 |
Income tax charge | 7 | 12 | (105) | (233) |
Profit for the period |
| (96) | 648 | 4,054 |
Other comprehensive income |
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|
|
|
Foreign currency translation differences |
| - | - | - |
Income tax relating to the components of other comprehensive income |
| - | - | - |
Other comprehensive income for the period, net of tax |
| - | - | - |
Total other comprehensive income for the period |
| (96) | 648 | 4,054 |
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Profit for the period attributable to owners of the Parent |
| (96) | 648 | 4,054 |
Total comprehensive income for the period attributable to owners of the Parent |
| (96) | 648 | 4,054 |
Earnings per share attributable to owners of the Parent |
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Basic | 8 | -0.55p | 4.51p | 25.64p |
Diluted | 8 | -0.52p | 4.36p | 24.86p |
The profit attributable to owners of the Parent and earnings per share set out above are in respect of continuing operations.
Interim condensed consolidated statement of financial position
Six months ended 30 June 2020
|
Note | 6 months ended 30 June 2020 Unaudited £'000 | 6 months ended 30 June 2019 Unaudited £'000 | 12 months ended 31 December 2019 Audited £'000 |
Assets |
|
| - |
|
Intangible assets |
| 21,655 | 16,490 | 21,178 |
Financial assets at fair value through profit or loss |
| 64,143 | 56,507 | 67,141 |
Reinsurance assets: |
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- reinsurers' share of claims outstanding | 5 | 28,141 | 21,233 | 25,760 |
- reinsurers' share of unearned premium | 5 | 9,195 | 7,163 | 5,023 |
Other receivables, including insurance and reinsurance receivables |
| 52,799 | 50,717 | 47,726 |
Deferred acquisition costs |
| 6,853 | 6,228 | 6,641 |
Prepayments and accrued income |
| 882 | 701 | 432 |
Cash and cash equivalents |
| 8,501 | 6,997 | 6,037 |
Total assets |
| 192,169 | 166,036 | 179,938 |
Liabilities |
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Insurance liabilities: |
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- claims outstanding | 5 | 99,758 | 80,204 | 95,616 |
- unearned premium | 5 | 35,961 | 30,631 | 26,522 |
Deferred income tax liabilities |
| 3,686 | 2,134 | 3,292 |
Borrowings |
| 2,000 | 1,034 | 2,000 |
Other payables, including insurance and reinsurance payables |
| 20,841 | 27,468 | 18,040 |
Accruals and deferred income |
| 1,871 | 3,497 | 6,320 |
Total liabilities |
| 164,117 | 144,968 | 151,790 |
Equity |
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|
Equity attributable to owners of the Parent: |
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|
Share capital | 11 | 1,839 | 1,510 | 1,839 |
Share premium | 11 | 18,938 | 15,387 | 18,938 |
Other reserves - treasury shares | 11 | (50) | (50) | (50) |
Retained earnings |
| 7,325 | 4,221 | 7,421 |
Total equity |
| 28,052 | 21,068 | 28,148 |
Total liabilities and equity |
| 192,169 | 166,036 | 179,938 |
The Financial Statements were approved and authorised for issue by the Board of Directors on 24 September 2020, and were signed on its behalf by:
Nigel Hanbury
Chief Executive
The notes are an integral part of these Financial Statements.
Interim condensed consolidated statement of changes in equity
Six months ended 30 June 2020
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|
| Attributable to owners of the Parent | ||||
Consolidated |
Note | Share capital £'000 | Share premium £'000 | Other reserves £'000 | Retained earnings £'000 | Total £'000 | |
At 1 January 2020 |
| 1,839 | 18,938 | (50) | 7,421 | 28,148 | |
Total comprehensive income for the year: |
| - | - | - | - | - | |
Profit for the year |
| - | - | - | (96) | (96) | |
Other comprehensive income, net of tax |
| - | - | - | - | - | |
Total comprehensive income for the year |
| - | - | - | (96) | (96) | |
Transactions with owners: |
| - | - | - | - | - | |
Dividends paid | 9 | - | - | - | - | - | |
Company buy back of shares | 11 | - | - | - | - | - | |
Total transactions with owners |
| - | - | - | - | - | |
At 30 June 2020 |
| 1,839 | 18,938 | (50) | 7,325 | 28,052 | |
At 1 January 2019 |
| 1,510 | 15,387 | (50) | 4,198 | 21,045 | |
Total comprehensive income for the year: |
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|
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|
|
| |
Profit for the year |
| - | - | - | 648 | 648 | |
Other comprehensive income, net of tax |
| - | - | - | 39 | 39 | |
Total comprehensive income for the year |
| - | - | - | 687 | 687 | |
Transactions with owners: |
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|
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| |
Dividends paid |
| - | - | - | (530) | (530) | |
Share issue |
| - | - | - | (134) | (134) | |
Total transactions with owners |
| - | - | - | (664) | (664) | |
At 30 June 2019 |
| 1,510 | 15,387 | (50) | 4,221 | 21,068 | |
At 1 January 2019 |
| 1,510 | 15,387 | (50) | 4,198 | 21,045 | |
Total comprehensive income for the year: |
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|
|
|
|
| |
Profit for the year |
| - | - | - | 4,054 | 4,054 | |
Other comprehensive income, net of tax |
| - | - | - | - | - | |
Total comprehensive income for the year |
| - | - | - | 4,054 | 4,054 | |
Transactions with owners: |
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|
|
|
|
| |
Dividends paid |
| - | - | - | (529) | (529) | |
Company buy back of shares | 11 | - | - | - | (302) | (302) | |
Share issue | 11 | 329 | 3,551 | - | - | 3,880 | |
Total transactions with owners |
| 329 | 3,551 | - | (831) | 3,049 | |
At 31 December 2019 |
| 1,839 | 18,938 | (50) | 7,421 | 28,148 | |
Interim condensed consolidated statement of cash flows
Six months ended 30 June 2020
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Note | 6 months ended 30 June 2020 Unaudited £'000 | 6 months ended 30 June 2019 Unaudited £'000 | 12 months ended 31 December 2019 Audited £'000 |
Cash flows from operating activities |
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|
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Profit before tax |
| (108) | 753 | 4,287 |
Adjustments for: |
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- Other comprehensive income, gross of tax |
| - | - | - |
- Interest received |
| (45) | (39) | (235) |
- Investment income | 6 | (1,136) | (1,416) | (1,248) |
- Recognition of negative goodwill |
| (172) | (285) | (1,707) |
- Goodwill on bargain purchase |
| - | - | - |
- Impairment of goodwill |
| - | - | - |
- (Profit)/loss on sale of intangible assets |
| - | - | (898) |
- Impairment of intangible assets |
| - | - | (1,860) |
- Goodwill on acquisition |
| - | - | - |
Changes in working capital: |
| - |
|
|
- change in fair value of financial assets held at fair value through profit or loss |
| (79) | 17 | (659) |
- decrease/(increase) in financial assets at fair value through profit or loss |
| 4,171 | 2,928 | (3,010) |
- (increase)/decrease in other receivables |
| (3,863) | 5,278 | 18,823 |
- (increase)/decrease in other payables | - | (1,193) | 1,240 | (6,783) |
- net decrease/(increase) in technical provisions |
| 5,059 | (5,504) | (6,473) |
Cash generated/(utilised) from operations |
| 2,634 | 2,972 | 237 |
Income tax paid |
| - | - | (1,119) |
Net cash inflow from operating activities |
| 2,634 | 2,972 | (882) |
Cash flows from investing activities |
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|
|
|
Interest received |
| 45 | 39 | 235 |
Investment income |
| 1,136 | 1,416 | 1,248 |
Purchase of intangible assets |
| - | - | (22) |
Proceeds from disposal of intangible assets |
| - | - | 932 |
Acquisition of subsidiaries, net of cash acquired |
| (1,218) | (806) | (1,493) |
Net cash (outflow)/inflow from investing activities |
| (37) | 649 | 900 |
Cash flows from financing activities |
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|
|
|
Net proceeds from issue of ordinary share capital |
| - | - | 1,844 |
Buy back of ordinary share capital |
| (133) | (134) | (302) |
Payment for company buy back of shares |
| - | - | 2,000 |
Proceeds from borrowings |
| - | (8,162) | (9,196) |
Repayment of borrowings |
| - | - | - |
Dividends paid to owners of the Parent |
| - | (530) | (529) |
Net cash outflow from financing activities |
| (133) | (8,826) | (6,183) |
Net (decrease)/increase in cash and cash equivalents |
| 2,464 | (5,205) | (6,165) |
Cash and cash equivalents at beginning of period |
| 6,037 | 12,202 | 12,202 |
Cash and cash equivalents at end of period |
| 8,501 | 6,997 | 6,037 |
Cash held within the syndicates' accounts is £7,345,000 (2019: £4,979,000) of the total cash and cash equivalents held at the end of the period £8,501,000 (2019: £6,997,000). The cash held within the syndicates' accounts is not available to the Group to meet its day-to-day working capital requirements.
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial Statements.
Notes to the financial statements
Six months ended 30 June 2020
1. General information
The Company is a public limited company quoted on AIM. The Company was incorporated in England, is domiciled in the UK and its registered office is 40 Gracechurch Street, London EC3V 0BT. The Company participates in insurance business as an underwriting member at Lloyd's through its subsidiary undertakings.
2. Accounting policies
Basis of preparation
The Condensed Consolidated Interim Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, as adopted by the European Union.
The Condensed Consolidated Interim Financial Statements are prepared for the six months ended 30 June 2020.
The Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2020 and 2019 are unaudited, but have been subject to review by the Group's auditors. The Condensed Consolidated Interim Financial Statements have been prepared in accordance with the accounting policies adopted for the year ended 31 December 2019, and the adoption of new and amended standards as set out further below.
The Condensed Consolidated Interim incorporate the Financial Statements of Helios Underwriting plc, the Parent Company, and its directly and indirectly held subsidiaries being Hampden Corporate Member Limited, Nameco (No. 917) Limited, Nameco (No. 229) Limited, Nameco (No. 518) Limited, Nameco (No. 804) Limited, Halperin Underwriting Limited, Bernul Limited, Nameco (No. 311) Limited, Nameco (No. 402) Limited, Updown Underwriting Limited, Nameco (No. 507) Limited, Nameco (No. 76) Limited, Kempton Underwriting Limited, Devon Underwriting Limited, Nameco (No. 346) Limited, Pooks Limited, Charmac Underwriting Limited, Nottus (No 51) Limited, Chapman Underwriting Limited, Llewellyn House Underwriting Limited, Advantage DCP Limited, Romsey Underwriting Limited, Nameco (No 409) Limited, Nameco (No 1113) Limited, Catbang 926 Limited, Whittle Martin Underwriting, Nameco (No 408) Limited, RBC CEES Trustee Limited, Helios UTG Partner Limited, Nomina No 035 LLP, Nomina No 342 LLP, Nomina No 372 LLP, Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP, Nomina No 505 LLP and Nomina No 321 LLP. (Note 10).
The underwriting data on which these Condensed Consolidated Interim Financial Statements are based upon has been supplied by the managing agents of those syndicates which the Group supports. The data supplied is the 100% figures for each syndicate. The Group has applied its share of the syndicate participations to the gross figures to derive its share of the syndicates transactions, assets and liabilities.
Significant accounting policies
The Condensed Consolidated Interim Financial Statements have been prepared under the historical cost convention as modified by the revaluation of the financial assets at fair value through the profit and loss. The same accounting policies, presentation and methods of computation are followed in these Condensed Consolidated Interim Financial Statements as were applied in the preparation of the Group Financial Statements for the year ended 31 December 2020.
During the current year, the Group and the Company adopted all the new and revised IFRS, amendments and interpretations that are relevant to its operations and are effective for accounting periods beginning on 1 January 2019. Except for IFRS 9 "Financial Instruments" effective from 1 January 2018, for which a temporary exemption has been applied by the Group, as explained further below. These are set out below and did not have a material impact on the accounting policies of the Group and the Company:
• IFRS 16 "Leases", issued on 13 January 2016 (effective 1 January 2019).
• Amendments to IFRS 9: Prepayment Features with Negative Compensation, issued on 12 October 2017, (effective date 1 January 2019).
• Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures, issued on 12 December 2017, (effective date 1 January 2019).
• IFRS 23 "Uncertainty over Income Tax Treatments", issued on 7 June 2017, (effective date 1 January 2019).
• Annual improvements to IFRS 2015-2017 Cycle, issued on 12 December 2017, (effective date 1 January 2019).
• Amendments to IAS 19: Plan Amendment, Curtailment or Settlement, issued on 7 February 2017, (effective date 1 January 2019).
Temporary exemptions from IFRS 9 "Financial Instruments", (effective 1 January 2018)
The effective date of IFRS 9 Financial Instruments is January 2018. An insurer that has not previously adopted any version of IFRS 9, including the requirements for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss and whose activities are predominantly connected with insurance as its annual reporting date that immediately precedes 1 April 2016 (or a later date as specified in paragraph 20G of IFRS 4), may apply IAS 39 - Financial Instruments: Recognition and Measurement, rather than IFRS 17 - Insurance Contracts.
The Group has applied the temporary exemption from IFRS 9 as its activities are predominately connected with insurance and it has not previously adopted any version of IFRS 9, including the requirements for the presentation of gains and losses on financial liabilities designated at fair value through profit or loss, for annual period beginning before 1 January 2023. Consequently, the Group has a single date of initial application for IFRS 9 in it's entirely, being 1 January 2023.
New standards, amendments and interpretations not yet adopted.
At the date of authorisation of these Financial Statements, the following standards, amendments and interpretations were in issue but not yet effective:
(i) Adopted by the EU
Amendments:
• Amendments to IAS 1 and IAS 8: Definition of Material, issued on 31 October 2018, (effective 1 January 2020).
• Amendments to References to the Conceptual Framework in IFRS, issued on 29 March 2017, (effective date 1 January 2020).
(ii) Not adopted by the EU
Standards:
• IFRS 17 "Insurance Contracts", issued on 18 May 2017, (effective date 1 January 2023).
Amendments:
• Amendment to IFRS 3 Business Combinations, issued on 22 October 2018, (effective 1 January 2020).
• Amendment to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non- Current, issued on 23 January 2020, (effective date 1 January 2022)
3. Segmental information
Nigel Hanbury is the Group's chief operating decision-maker. He has determined its operating segments based on the way the Group is managed, for the purpose of allocating resources and assessing performance.
The Group has three segments that represent the primary way in which the Group is managed, as follows:
• syndicate participation;
• investment management; and
• other corporate activities.
6 months ended 30 June 2020 Unaudited | Syndicate participation £'000 | Investment management £'000 | Other corporate activities £'000 | Total £'000 |
Net earned premium | 22,133 | - | (621) | 21,512 |
Net investment income | 1,171 | 3 | - | 1,174 |
Other income | - | - | 400 | 400 |
Net insurance claims and loss adjustment expenses | (16,361) | - | - | (16,361) |
Expenses incurred in insurance activities | (5,842) | - | (324) | (6,166) |
Other operating expenses | - | - | (839) | (839) |
Goodwill on bargain purchase | - | - | 172 | 172 |
Impairment of goodwill | - | - | - | - |
Impairment of syndicate capacity | - | - | - | - |
Profit before tax | 1,101 | 3 | (1,212) | (108) |
6 months ended 30 June 2019 Unaudited | Syndicate participation £'000 | Investment management £'000 | Other corporate activities £'000 | Total £'000 |
Net earned premium | 19,754 | - | (1,440) | 18,314 |
Net investment income | 1,491 | - | - | 1,491 |
Other income | - | - | 265 | 265 |
Net insurance claims and loss adjustment expenses | (13,051) | - | - | (13,051) |
Expenses incurred in insurance activities | (5,472) | - | (314) | (5,786) |
Other operating expenses | - | - | (765) | (765) |
Goodwill on bargain purchase | - | - | 285 | 285 |
Impairment of goodwill | - | - | - | - |
Impairment of syndicate capacity | - | - | - | - |
Profit before tax | 2,722 | - | (1,969) | 753 |
12 months ended 31 December 2019 Audited | Syndicate participation £'000 | Investment management £'000 | Other corporate activities £'000 | Total £'000 |
Net earned premium | 42,688 | - | - | 42,688 |
Net investment income | 2,387 | (52) | - | 2,335 |
Other income | 254 | - | 595 | 849 |
Net insurance claims and loss adjustment expenses | (26,265) | - | (1,359) | (27,624) |
Expenses incurred in insurance activities | (15,367) | - | (397) | (15,764) |
Other operating expenses | (114) | - | (1,650) | (1,764) |
Gain on bargain purchase | - | - | 1,707 | 1,707 |
Impairment of goodwill | - | - | - | - |
Impairment of syndicate capacity | - | - | 1,860 | 1,860 |
Profit before tax | 3,583 | (52) | 756 | 4,287 |
The Group does not have any geographical segments as it considers all of its activities to arise from trading within the UK.
No major customers exceed 10% of revenue.
Net earned premium within 2020 other corporate activities totalling £621,000 (2019: 1,440,000 - 2017, 2018 and 2019 years of account) represents the 2018, 2019 and 2020 years of account net Group quota share reinsurance premium payable to Hampden Insurance Guernsey PCC Limited - Cell 6. This net quota share reinsurance premium payable is included within "reinsurance premium ceded" in the Consolidated Statement of Comprehensive Income of the period.
4. Operating profit before impairments of goodwill and capacity
| Underwriting year of account* |
|
|
|
| |||
6 months ended 30 June 2020 | 2018 and prior £'000 |
2019 £'000 |
2020 £'000 |
Sub-total £'000 | Pre- acquisition £'000 | Corporate reinsurance £'000 | Other corporate £'000 | Total £'000 |
Gross premium written | 115 | 4,439 | 32,491 | 37,045 | (95) | - | - | 36,950 |
Reinsurance ceded | (131) | (1,089) | (9,578) | (10,798) | 24 | (621) | (181) | (11,575) |
Net premium written | (16) | 3,350 | 22,913 | 26,247 | (70) | (621) | (181) | 25,375 |
Net earned premium | 1,519 | 15,105 | 5,756 | 22,380 | (66) | (621) | (181) | 21,512 |
Other income | 702 | 301 | 102 | 1,105 | (7) | 400 | 248 | 1,746 |
Net insurance claims and loss adjustment expenses | (401) | (10,523) | (5,686) | (16,610) | 47 | - | 202 | (16,361) |
Operating expenses | (581) | (4,092) | (1,427) | (6,100) | 17 | - | (922) | (7,005) |
Operating profit before impairments of goodwill and capacity | 1,239 | 791 | (1,255) | 775 | (9) | (221) | (653) | (108) |
Quota share adjustment | (800) | (690) | 869 | (621) | - | 621 | - | - |
Operating profit before impairments of goodwill and capacity after quota share adjustment | 439 | 101 | (386) | 154 | (9) | 400 | (653) | (108) |
| Underwriting year of account* |
|
|
|
| |||
6 months ended 30 June 2019 | 2017 and prior £'000 |
2018 £'000 |
2019 £'000 |
Sub-total £'000 | Pre- acquisition £'000 | Corporate reinsurance £'000 | Other corporate £'000 | Total £'000 |
Gross premium written | 669 | 4,017 | 24,993 | 29,679 | (127) | - |
| 29,552 |
Reinsurance ceded | (132) | (930) | (6,731) | (7,793) | 36 | (1,440) | (182) | (9,380) |
Net premium written | 536 | 3,088 | 18,262 | 21,886 | (91) | (1,440) | (182) | 20,172 |
Net earned premium | 2,103 | 12,936 | 4,987 | 20,026 | (90) |
(1,440) | (182) | 18,314 |
Other income | 934 | 319 | 130 | 1,383 | (16) | 249 | 425 | 2,042 |
Net insurance claims and loss adjustment expenses | (656) | (7,879) | (4,369) | (12,904) | 58 | - | (205) | (13,051) |
Operating expenses | (717) | (3,605) | (1,133) | (5,455) | 46 | - | (1,142) | (6,551) |
Operating profit before impairments of goodwill and capacity | 1,664 | 1,771 | (385) | 3,050 | (2) | (1,191) | (1,104) | 753 |
Quota share adjustment | (616) | (1,090) | 266 | (1,440) | - | 1,440 | - | - |
Operating profit before impairments of goodwill and capacity after quota share adjustment | 1,048 | 681 | (119) | 1,610 | (2) | 249 | (1,104) | 753 |
| Underwriting year of account* |
|
|
|
| |||
12 months ended 31 December 2019 | 2017 and prior £'000 |
2018 £'000 |
2019 £'000 |
Sub-total £'000 | Pre- acquisition £'000 | Corporate reinsurance £'000 | Other corporate £'000 | Total £'000 |
Gross premium written | 1,031 | 5,891 | 54,656 | 61,578 | (6,108) | - | - | 55,470 |
Reinsurance ceded | (116) | (1,443) | (13,003) | (14,563) | 1,553 | - | (200) | (13,210) |
Net premium written | 914 | 4,447 | 41,653 | 47,015 | (4,555) | - | (200) | 42,260 |
Net earned premium | 3,526 | 21,772 | 22,157 | 47,545 | (4,566) | - | (200) | 42,688 |
Other income | 1,574 | 615 | 339 | 2,527 | (551) | 235 | 2,679 | 4,891 |
Net insurance claims and loss adjustment expenses | 893 | (12,854) | (16,276) | (28,237) | 2,329 | (1,359) | (358) | (27,624) |
Operating expenses | (1,535) | (6,823) | (8,768) | (17,125) | 1,929 | - | (2,332) | (17,528) |
Operating profit before impairments of goodwill and capacity | 4,458 | 2,710 | (2,548) | 4,620 | (859) | (1,124) | (221) | 2,426 |
Quota share adjustment | (1,733) | (1,361) | 1,734 | (1,359) | - | 1,359 | - | - |
Operating profit before impairments of goodwill and capacity after quota share adjustment | 2,725 | 1,349 | (814) | 3,261 | (859) | 235 | (211) | 2,426 |
Pre-acquisition relates to the element of results from the new acquisitions before they were acquired by the Group.
* The underwriting year of account results represent the Group's share of the syndicates' results by underwriting year of account before corporate member level reinsurance and members' agents charges.
5. Insurance liabilities and reinsurance balances
Movement in claims outstanding
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2020 | 95,616 | 25,760 | 69,856 |
Increase in reserves arising from acquisition of subsidiary undertakings | 2,036 | 505 | 1,531 |
Movement of reserves | 5,927 | 2,162 | 3,765 |
Other movements | (3,821) | (286) | (3,535) |
At 30 June 2020 | 99,758 | 28,141 | 71,617 |
Movement in unearned premium
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2020 | 26,522 | 5,023 | 21,499 |
Increase in reserves arising from acquisition of subsidiary undertakings | 530 | 92 | 438 |
Movement of reserves | 7,700 | 3,837 | 3,863 |
Other movements | 1,209 | 243 | 966 |
At 30 June 2020 | 35,961 | 9,195 | 26,766 |
Included within other movements are the 2017 and prior years' claims reserves reinsured into the 2018 year of account on which the Group does not participate and currency exchange differences.
Movement in claims outstanding
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2019 | 88,032 | 22,698 | 65,334 |
Increase in reserves arising from acquisition of subsidiary undertakings | 1,974 | 552 | 1,422 |
Movement of reserves | (1,337) | (1,036) | (301) |
Other movements | (8,465) | (981) | (7,484) |
At 30 June 2019 | 80,204 | 21,233 | 58,971 |
Movement in unearned premium
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2019 | 24,772 | 4,057 | 20,715 |
Increase in reserves arising from acquisition of subsidiary undertakings | - | - | - |
Movement of reserves | 4,625 | 2,767 | 1,858 |
Other movements | 1,234 | 339 | 895 |
At 30 June 2019 | 30,631 | 7,163 | 23,468 |
Included within other movements are the 2016 and prior years' claims reserves reinsured into the 2017 year of account on which the Group does not participate and currency exchange differences.
Movement in claims outstanding
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2019 | 88,032 | 22,698 | 65,334 |
Increase in reserves arising from acquisition of subsidiary undertakings | 11,792 | 2,730 | 9,062 |
Movement of reserves | 3,758 | 2,004 | 1,754 |
Other movements | (7,966) | (1,672) | (6,294) |
At 31 December 2019 | 95,616 | 25,760 | 69,856 |
Movement in unearned premium
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2019 | 24,772 | 4,057 | 20,715 |
Increase in reserves arising from acquisition of subsidiary undertakings | 3,379 | 1,182 | 2,197 |
Movement of reserves | 60 | 488 | (428) |
Other movements | (1,689) | (704) | (985) |
At 31 December 2019 | 26,522 | 5,023 | 21,499 |
Included within other movements are the 2016 and prior years' claims reserves reinsured into the 2017 year of account on which the Group does not participate and currency exchange differences.
6. Net investment income
| 6 months ended 30 June 2020 Unaudited £'000 |
6 months ended 30 June 2019 Unaudited £'000 | 12 months ended 31 December 2019 Audited £'000 |
Investment income | 1,136 | 1,416 | 1,248 |
Realised (losses)/gains on financial assets at fair value through profit or loss | 126 | 17 | 262 |
Unrealised (losses)/gains on financial assets at fair value through profit or loss | (133) | 18 | 657 |
Investment management expenses | - | 1 | (67) |
Bank interest | 45 | 39 | 235 |
Net investment income | 1,174 | 1,491 | 2,335 |
7. Income tax charge
Analysis of tax charge/(credit) in the period
| 6 months ended 30 June 2020 Unaudited £'000 |
6 months ended 30 June 2019 Unaudited £'000 | 12 months ended 31 December 2019 Audited £'000 |
Income tax credit | (12) | 105 | 233 |
The income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 19.00% (2019: 19.00%). Material disallowed terms have been adjusted for in the income tax calculation.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders after tax by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
Earnings per share has been calculated in accordance with IAS 33 "Earnings per share".
The earnings per share and weighted average number of shares used in the calculation are set out below:
| 6 months ended 30 June 2020 Unaudited
|
6 months ended 30 June 2019 Unaudited
| 12 months ended 31 December 2019 Audited
|
Profit for the year after tax attributable to ordinary equity holders of the parent | (96,000) | 648,000 | 4,054,000 |
Basic - weighted average number of ordinary shares* | 17,978,841 | 14,356,224 | 15,809,376 |
Adjustments for calculating the diluted earnings per share: Treasury shares (JSOP scheme) | 500,000 | 500,000 | 500,000 |
Diluted - weighted average number of shares* | 17,478,841 | 14,856,224 | 15,044,433 |
Basic earnings per share | (0.55p) | 4.51p | 3.14p |
Diluted earnings per share | (0.52p) | 4.36p | 3.03p |
* Used as the denominator in calculating the basic earnings per share, and diluted earnings per share, respectively.
9. Dividends paid or proposed
It was proposed and agreed at the AGM on 25 June 2020 that no dividend will be payable in 2020 (2019: 3p).
10. Investments in subsidiaries
| 30 June 2020 £'000 | 30 June 2019 £'000 | 31 December 2019 £'000 | ||||||
Total | 45,335 | 25,905 | 32,901 | ||||||
| Company or partnership | Direct/indirect interest | 30 June 2020 ownership |
30 June 2019 ownership |
31 December 2019 ownership | Principal activity | |||
| Hampden Corporate Member Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 365) Limited | Direct | - | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 605) Limited | Direct | - | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 321) Limited | Direct | - | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 917) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 229) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 518) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 804) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Halperin Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Bernul Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 311) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 402) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Updown Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 507) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 76) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Kempton Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Devon Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No. 346) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Pooks Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Charmac Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| RBC CEES Trustee Limited | Direct | 100% | 100% | 100% | Joint Share Ownership Plan | |||
| Nottus (No 51) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Chapman Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Helios UTG Partner Limited | Direct | 100% | 100% | 100% | Corporate partner | |||
| Nomina No 035 LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nomina No 342 LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nomina No 372 LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Salviscount LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Inversanda LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Fyshe Underwriting LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nomina No 505 LLP | Indirect | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nomina No 321 LLP | Direct | 100% | 100% | - | Lloyd's of London corporate vehicle | |||
| Llewellyn House Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Advantage DCP Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Romsey Underwriting Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No 409) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No 1113 Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Catbang 926 Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Whittle Martin Underwriting | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle | |||
| Nameco (No 408) Limited | Direct | 100% | - | - | Lloyd's of London corporate vehicle | |||
Helios UTG Partner Limited, a subsidiary of the Company, owns 100% of Nomina No 035 LLP, Nomina No 342 LLP, Nomina No 372 LLP, Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP, Nomina No 505 LLP and Nomina No 321 LLP. The cost of acquisition of these LLPs is accounted for in Helios UTG Partner Limited, their immediate Parent Company.
RBC CEES Trustee Limited is a newly incorporated entity in year 2017 to satisfy the requirements of the Joint Share Ownership Plan.
For details of all new acquisitions in the 6 months to 30 June 2020, refer to note 12.
11. Share capital and share premium
| Number of shares (i) | Ordinary share capital £'000 | Partly paid ordinary share capital £'000 | Share premium £'000 | Total £'000 |
Ordinary shares of 10p each and share premium at 1 January 2019 | 15,104,240 | 1,460 | 50 | 15,387 | 16,897 |
Ordinary shares of 10p each and share premium at 31 December 2019 | 18,390,906 | 1,789 | 50 | 15,387 | 16,897 |
Ordinary shares of 10p each and share premium at 1 January 2020 | 18,390,906 | 1,789 | 50 | 15,387 | 16,897 |
Ordinary shares of 10p each and share premium at 30 June 2020 | 18,390,906 | 1,789 | 50 | 15,387 | 16,897 |
(i) Number of shares
| 30 June 2020 | 31 December 2019 |
Allotted, called up and fully paid ordinary shares: |
|
|
On the market | 17,478,028 | 17,488,628 |
Company buy back of ordinary shares held in treasury | 412,878 | 402,278 |
| 17,890,906 | 17,890,906 |
Uncalled and partly paid ordinary share under the JSOP scheme (ii) | 500,000 | 500,000 |
| 18,390,906 | 18,390,906 |
(ii) The partly paid ordinary shares are not entitled to dividend distribution rights during the year.
12. Acquisition of Limited Liability Vehicles
Nameco (No. 408) Limited
On 28 January 2020, Helios Underwriting plc acquired 100% of the issued share capital of Nameco (No. 408) Limited for a total consideration of £1,008,000. Nameco (No. 408) Limited is incorporated in England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the acquisition method of accounting. After the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of the net assets was £1,180,000. Negative goodwill of £172,000 arose on acquisition which has been recognised as goodwill on bargain purchase in the income statement. The following table explains the fair value adjustments made to the carrying values of the major categories of assets and liabilities at the date of acquisition:
| Carrying value £'000 | Adjustments £'000 | Fair value £'000 |
Intangible assets | - | 477 | 477 |
Financial assets at fair value through profit or loss | 1,174 | - | 1,174 |
Reinsurance assets: |
|
|
|
- reinsurers' share of claims outstanding | 505 | - | 505 |
- reinsurers' share of unearned premium | 92 | - | 92 |
Other receivables, including insurance and reinsurance receivables | 1,418 | - | 1,418 |
Deferred acquisition cost | 138 | - | 138 |
Prepayments and accrued income | 10 | - | 10 |
Cash and cash equivalents | 390 | - | 390 |
Insurance liabilities: |
|
|
|
- claims outstanding | (2,035) | - | (2,035) |
- unearned premium | (532) | - | (532) |
Deferred income tax liabilities | (1) | (91) | (92) |
Other payables, including insurance and reinsurance payables | (326) | - | (326) |
Accruals and deferred income | (39) | - | (39) |
Net assets acquired | 794 | 386 | 1,180 |
Satisfied by: |
|
|
|
Cash and cash equivalents | 1,008 | - | 1,008 |
Loan paid on acquisition | - | - | - |
Total consideration | 1,008 | - | 1,008 |
Negative goodwill | 214 | 386 | (172) |
| 2018 year of account | 2019 year of account | 2020 year of account |
Capacity acquired | 1,304,321 | 1,142,830 | 1,086,270 |
The net earned premium and profit of Nameco (No. 408) Limited for the period since the acquisition date to 30 June 2020 are £356,000 and £33,000 respectively.
Negative goodwill has arisen on the acquisition of Nameco (No. 408) Limited as a result of the purchase consideration being at a discount to the fair value of net assets acquired.
13. Related party transactions
Helios Underwriting plc and its subsidiaries have entered into a management agreement with Nomina plc. Jeremy Evans, a Director of Helios Underwriting plc and its subsidiary companies, is also a Director of Nomina plc. Under the agreement, Nomina plc provides management and administration, financial, tax and accounting services to the Group for an annual fee of £152,000 (2019: £180,000).
The Limited Liability Vehicles have entered into a members' agent agreement with Hampden Agencies Limited. Jeremy Evans, a Director of Helios Underwriting plc and its subsidiary companies, is also a director of Hampden Capital plc, which controls Hampden Agencies Limited. Under the agreement, the Limited Liability Vehicles will pay Hampden Agencies Limited a fee based on a fixed amount, which will vary depending upon the number of syndicates the Limited Liability Vehicles underwrite on a bespoke basis, and a variable amount depending on the level of underwriting through the members' agent pooling arrangements. The total fees payable for 2020 are £135,000 (2019: £225,000).
A number of subsidiary companies have entered into quota share reinsurance contracts for the 2018, 2019 and 2020 years of account with protected cell companies of Hampden Insurance PCC (Guernsey) Limited. The quota share percentages for the above years was 70%
Nigel Hanbury, a Director of Helios Underwriting plc and its subsidiary companies, is also a director and majority shareholder in Hampden Insurance Guernsey PCC Limited. Hampden Capital plc, a substantial shareholder in Helios Underwriting plc, is also a substantial shareholder in Hampden Insurance Guernsey PCC Limited - Cell 6. Under quota share agreements between Cell 6 and certain Helios subsidiaries, the Group accrued a net reinsurance premium recovery of £4,453,000 (2019: £3,968,000) during the period.
In addition, HIPCC provide stop loss, portfolio stop loss and HASP reinforce policies for the company.
HIPCC Limited acts as an intermediary for the reinsurance products purchased by Helios. An arrangement has been put in place so that 51% of the profits generated by HIPCC (being Nigel Hanburys share) in respect of the business relating to Helios will be repaid to Helios for the business transacted for the 2020 and subsequent underwriting years.
14. Ultimate controlling party
The Directors consider that the Group has no ultimate controlling party.
15. Syndicate participations
The syndicates and members' agent pooling arrangements ("MAPA") in which the Company's subsidiaries participate as corporate members of Lloyd's are as follows:
Syndicate or MAPA number | Managing or members' agent | Allocated capacity per year of account | |||
2017 £ | 2018] £ | 2019 £ | 2020 £ | ||
33 | Hiscox Syndicates Limited | 5,764,233 | 8,019,797 | 7,031,021 | 8,339,667 |
218 | ERS Syndicate Management Limited | 3,620,739 | 5,104,083 | 5,108,619 | 5,108,619 |
308 | Tokio Marine Kiln Syndicates Limited | 132,000 | - | - | - |
318 | Beaufort Underwriting Agency Limited | 866,250 | 866,250 | 836,250 | - |
386 | QBE Underwriting Limited | 1,322,097 | 1,291,391 | 1,295,773 | 1,295,772 |
510 | Tokio Marine Kiln Syndicates Limited | 11,843,732 | 11,850,400 | 11,865,468 | 13,051,289 |
557 | Tokio Marine Kiln Syndicates Limited | 1,844,203 | 1,526,776 | 1,512,922 | 2,269,384 |
609 | Atrium Underwriters Limited | 4,722,562 | 5,058,275 | 5,069,124 | 5,700,796 |
623 | Beazley Furlonge Limited | 6,951,965 | 8,057,318 | 8,428,557 | 9,544,350 |
727 | S A Meacock & Company Limited | 1,586,583 | 1,586,582 | 1,586,582 | 1,436,179 |
1176 | Chaucer Syndicates Limited | 1,168,400 | 1,448,810 | 1,449,906 | 1,419,908 |
1200 | Argo Managing Agency Limited | 136,305 | 57,857 | 57,143 | - |
1729 | Asta Managing Agency Limited | 329,996 | 324,634 | 55,810 | 2,867 |
1884 | Charles Taylor Managing Agency Limited | 217,500 | - | - | - |
1969 | Apollo Syndicate Management Limited | 616,462 | 131,082 | - | - |
1991 | R&O Managing Agency Limited | 222,228 | - | - | - |
2010 | Cathedral Underwriting Limited | 2,127,335 | 2,127,332 | 2,130,071 | 2,129,005 |
2014 | Pembroke Managing Agency Limited | 2,279,023 | 547,449 | 92,192 | - |
2121 | Argenta Syndicate Management Limited | 885,082 | 1,003,093 | 1,003,093 | 1,253,868 |
2525 | Asta Managing Agency Limited | 332,794 | 432,632 | 467,270 | 535,460 |
2689 | Asta Managing Agency Limited | 1,537,499 | 398,045 | 32,192 | 2,377 |
2791 | Managing Agency Partners Limited | 6,468,698 | 6,468,694 | 6,480,967 | 6,282,966 |
2988 | Brit Syndicates Limited | 225,687 | 227,127 | 2,740 | - |
4242 | Asta Managing Agency Limited | 288,521 | 348,378 | 253,299 | 3,299 |
4444 | Canopius Managing Agents Limited | 757,008 | 1,177,416 | - | - |
5623 | Beazley Furlonge Limited | 2,250,000 | - | - | 2,250,000 |
5820 | ANV Syndicates Limited | - | - | - | - |
5886 | Asta Managing Agency Limited | 5,623,852 | 453,254 | 536,512 | 5,623,852 |
6103 | Managing Agency Partners Limited | 1,349,391 | 1,287,333 | 1,292,210 | 1,349,391 |
6104 | Hiscox Syndicates Limited | 1,047,395 | 1,112,543 | 1,137,541 | 1,047,395 |
6107 | Beazley Furlonge Limited | 1,026,295 | 1,014,510 | 1,263,800 | 1,026,295 |
6111 | Catlin Underwriting Agencies Limited | 278,279 | 249,065 | - | - |
6117 | Argo Managing Agency Limited | 3,302,839 | 3,472,410 | 3,095,553 | 397,574 |
6123 | Asta Managing Agency Limited | 8,440 | 8,708 | - |
|
7211 | Members' agent pooling arrangement | 11,553 | 121,828 | 120,610 | 130,401 |
7217 | Members' agent pooling arrangement | 18,107 | 19,917 | 29,875 | - |
7227 | Members' agent pooling arrangement | 2,746 | 3,661 | 6,406 | - |
Total |
| 62,710,376 | 65,796,650 | 62,241,506 | 70,200,714 |
16. Group-owned net assets
The Group statement of financial position includes the following assets and liabilities held by the syndicates on which the Group participates. These assets are subject to trust deeds for the benefit of the relevant syndicates' insurance creditors. The table below shows the split of the statement of financial position between Group and syndicate assets and liabilities:
| 30 June 2020 | 30 June 2019 | 31 December 2019 | ||||||
Group £'000 | Syndicate £'000 | Total £'000 | Group £'000 | Syndicate £'000 | Total £'000 | Group £'000 | Syndicate £'000 | Total £'000 | |
Assets |
|
|
|
|
|
|
|
|
|
Intangible assets | 21,655 | - | 21,655 | 16,490 | - | 16,490 | 21,178 | - | 21,178 |
Financial assets at fair value through profit or loss | 8,989 | 55,154 | 64,143 | 10,850 | 45,657 | 56,507 | 13,520 | 53,621 | 67,141 |
Reinsurance assets: | - | - | - |
| - | - | - | - | - |
- reinsurers' share of claims outstanding | 61 | 28,080 | 28,141 | 61 | 21,172 | 21,233 | 61 | 25,699 | 25,760 |
- reinsurers' share of unearned premium | - | 9,195 | 9,195 | - | 7,163 | 7,163 | - | 5,023 | 5,023 |
Other receivables, including insurance and reinsurance receivables | 7,837 | 44,962 | 52,799 | 8,151 | 42,566 | 50,717 | 10,044 | 37,682 | 47,726 |
Deferred acquisition costs | - | 6,853 | 6,853 | - | 6,228 | 6,228 | - | 6,641 | 6,641 |
Prepayments and accrued income | 281 | 601 | 882 | 179 | 522 | 701 | - | 432 | 432 |
Cash and cash equivalents | 1,156 | 7,345 | 8,501 | 2,018 | 4,979 | 6,997 | 3,028 | 3,009 | 6,037 |
Total assets | 39,979 | 152,190 | 192,169 | 37,749 | 128,287 | 166,036 | 47,831 | 132,107 | 179,938 |
Liabilities |
|
|
|
|
|
|
|
|
|
Insurance liabilities: |
|
|
|
|
|
|
|
|
|
- claims outstanding | - | 99,758 | 99,758 | - | 80,204 | 80,204 | - | 95,616 | 95,616 |
- unearned premium | - | 35,961 | 35,961 | - | 30,631 | 30,631 | - | 26,522 | 26,522 |
Deferred income tax liabilities | 3,686 | - | 3,686 | 2,134 | - | 2,134 | 3,292 | - | 3,292 |
Borrowings | 2,000 | - | 2,000 | 1,034 | - | 1,034 | 2,000 | - | 2,001 |
Other payables, including insurance and reinsurance payables | 10 | 20,831 | 20,841 | 1,694 | 25,774 | 27,468 | 1,051 | 16,989 | 18,040 |
Accruals and deferred income | 1,108 | 763 | 1,871 | 3,171 | 326 | 3,497 | 5,094 | 1,226 | 6,320 |
Total liabilities | 6,804 | 157,313 | 164,117 | 8,033 | 136,935 | 144,968 | 11,437 | 140,353 | 151,790 |
Equity attributable to owners of the Parent |
|
|
|
|
|
|
|
|
|
Share capital | 1,839 | - | 1,839 | 1,510 | - | 1,510 | 1,839 | - | 1,839 |
Share premium | 18,938 | - | 18,938 | 15,387 | - | 15,387 | 18,938 | - | 18,938 |
Other reserves | (50) | - | (50) | (50) | - | (50) | (50) | - | (50) |
Retained earnings | 12,448 | (5,123) | 7,325 | 12,869 | (8,648) | 4,221 | 15,667 | (8,246) | 7,421 |
Total equity | 33,175 | (5,123) | 28,052 | 29,716 | (8,648) | 21,068 | 36,394 | (8,246) | 28,148 |
Total liabilities and equity | 39,979 | 152,190 | 192,169 | 37,749 | 128,287 | 166,036 | 47,831 | 132,108 | 179,938 |
17. COVID-19
The COVID-19 pandemic has created turbulence in financial markets and economic uncertainty which will impact individuals and businesses. The full impact of this on the insurance industry, including the Lloyd's market, is uncertain. The initial assessment by supported syndicates has identified those lines of business most likely to be impacted, however the full extent of the losses and the impact upon pricing will become clearer as the year progresses. We will regularly monitor developments in this area and take appropriate actions as needed.
The COVID-19 coronavirus pandemic will be a manageable loss for the property and casualty insurance and reinsurance industry, unless there is some kind of structural change to drive the cost to the sector much higher.
It should not be forgotten that the current turmoil is happening against the backdrop of the greatest momentum we have seen in (re)insurance pricing for many years. Recent events are accelerating the premium rate rises.
The importance of having sufficient diversification within the portfolio to absorb shock losses is critical to the success of the portfolio. We do this by being partnered with the highest quality underwriting businesses at Lloyd's
It is expected that that a significant proportion of the losses arising from COVID-19 will attach to the 2019 underwriting year and therefore there remains considerable uncertainty regarding the eventual outcome for this underwriting year.
The Directors are confident that the business continues to be a going concern as in addition to the current funds lodged at Lloyd's, Helios has available the following facilities to provide additional resources to fund the necessary capital requirements:
• A bank revolving credit bank facility of £4m of which £2.0m has been utilised, and
• The stop loss reinsurance contracts for the 2019 and 2020 years of account could provide additional underwriting capital of approximately £5m.
The Board considers that the dividend policy should reflect the requirement to maintain its available cash resources given the uncertainty for the potential funding of the COVID-19 and other losses in the immediate future and therefore no dividend will be payable.
The Interim Report will be made available in electronic format on the Company's website, www.huwplc.com.