Last checked at 27 Sep 2019 07:00
Helios Underwriting plc
("Helios" or the "Company")
Interim results for the six months ended 30 June 2019
Helios Underwriting plc, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces its unaudited results for the six months ended 30 June 2019.
The highlights are as follows:
·; The operating profits before goodwill and impairment are £753,000 (30 June 2018 - £153,000)
·; The increase in underwriting profits from the syndicate participations reflects the improved underwriting conditions and the investment returns at syndicate level generated from the reduction in bond yields.
·; 61% increase in the retained capacity on 2017 and 2018 underwriting years have contributed to the increase in profitability.
·; Two acquisitions have been completed in 2019 with capacity of £3.0m. There are now 25 Limited Liability Vehicles (LLV's) for sale (Sept 2018 - 15 for sale). There have been 45 (2018 - 35) LLV's offered for sale so far in 2019 of which 25 (2018 - 15) remain unsold.
·; 2019 to date has experienced lower than average loss activity which has benefited the result for the half year.
·; The premium rate increases achieved by underwriters over the last 18 months together with greater discipline encouraged by the Franchise Board at Lloyds in underwriting profitable portfolios should improve profitability in the future.
·; Basic Earnings per share is 4.51p (30 June 2018 - 1.25p)
·; The Adjusted Net Asset Value per share is £1.91 (31st December 2018 - £1.90p per share)
SUMMARY FINANCIAL INFORMATION | |||
| 6 months to 30th June | Year to 31st December | |
| 2019 £000's | 2018 £000's | 2018 £000's |
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Underwriting profits | 1,610 | 741 | 783 |
Other income | 469 | 18 | 1,879 |
Costs | (1,326) | (606) | (2,054) |
Operating profit for the period before impairment of goodwill and capacity | 753 | 153 | 608 |
Profit after tax | 648 | 182 | 456 |
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Earnings per share | 4.51p | 1.20p | 3.14p |
Adjusted Net Asset Value per Share | £1.90 | £1.61 | £1.90 |
A window of opportunity has been opened which is exciting for Helios. Smaller investors are finding their costs increasing which, when combined with an expectation of lower returns which can partially explain the increased flow. There are no accurate statistics as to the age of the 'decision makers' within the community of LLV owners but the directors feel that many are aged and executor sales are a common feature. The complexity inherent in the business of running an LLV, more onerous regulatory requirements, rising costs and falling profits is a powerful incentive to put a vehicle up for sale.
Helios remains one of very few 'consolidators' of LLV's in the Lloyds market and the only one quoted on The London Stock Exchange. To date we have bought 36 such vehicles over a number of years. However, we are now seeing a significantly increased flow of attractive targets. The lack of buyers and increased supply is leading to prices that are more competitive.
Underwriting Profits
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 have recovered as:
·; The loss activity has been muted in the first half of the year
·; The premium rate increases that have been achieved are being reflected in the underlying results
·; The investment returns at syndicate level have benefitted from the fall in bond yields and a benign equity market in the first six months of the year.
Increase in Retained Capacity
Over the last 12 months we have taken advantage of this opportunity by acquiring a further 8 LLV's increasing the Capacity Fund to £55m. The additional capacity acquired on the "older" underwriting years has increased the capacity retained by Helios by over 60%. This increase in the retained capacity has made a significant contribution to the underwriting profits recognised on these older years. Although both 2017 and 2018 underwriting years are forecast to be loss making, both these years will contribute to profits in this calendar year.
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| Year of account - £m | ||
Year 3 £m | Year 2 £m | Year 1 £m | |
Helios Retained Capacity at 30th June 2019 | 28.9 | 18.7 | 16.1 |
Helios Retained Capacity at 30th June 2018 | 17.9 | 11.6 | 12.3 |
Year on Year Increase | 11.0 | 7.1 | 3.8 |
% Increase | 61% | 61% | 31% |
Capacity acquired
Since the beginning of 2019, two corporate members have been acquired to date, and this has increased the capacity for the 2017 to 2019 years of account as follows:
| Year of account - £m | ||
2017 | 2018 | 2019 | |
Capacity at 1 January 2019 | 53.1 | 55.7 | 52.6 |
Acquired during 2019 | 3.0 | 3.3 | 3.1 |
Capacity at 26th September 2019 | 56.1 | 59.0 | 55.7 |
Helios Retained Capacity | 30.7 | 20.7 | 16.7 |
Proportion of Capacity retained | 55% | 35% | 30% |
Our strategy of building a portfolio of syndicate capacity continues to rely on the flow of LLV's for sale at reasonable prices. We continue to remain selective on the vehicles acquired and several have been sold recently at prices that were unattractive to us.
We continue to reduce our exposure by 70% on the open underwriting year 2018 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. As the size of our capacity fund increases more reinsurance can be ceded which in turn should increase our flow of fees and profit commission. Our costs should not increase at the same pace.
The Pro-forma Adjusted Net Asset Value per share is £1.80 per share (Dec 2018 - £1.90 per share) reflecting the Placing and Open Offer that was completed in July 2019 and the acquisition of Nameco (No. 1113) Limited. The funds received from the fundraising will allow Helios to continue to acquire LLV's selectively as well as fund the additional capacity that will be available from syndicate pre-emptions for 2020 underwriting year. 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.
In August 2019, the Company commenced a program of buying back its own shares and to date has acquired 124,500 shares at an average price of 112.7p, a significant discount to Adjusted Net Asset Value. We expect to continue this share buyback program.
The Board currently expects that the syndicate results for the 2017 and 2018 underwriting years will exceed current mid-point forecasts published by the managing agents, which should make a meaningful contribution to the Helios full year result.
For further information please contact:
Helios Underwriting plc
Nigel Hanbury - Chief Executive 020 7863 6655 / nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer 07754 965 917
Shore Capital
Robert Finlay/David Coaten 020 7408 4090
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 £56m of capacity for the 2019 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 2019
| 6 months to 30 June 2019 | 6 months to 30 June 2018 | Year to 31 December 2018 |
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Underwriting profits | 1,610 | 741 | 783 |
Other Income |
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Fees from reinsurers | 249 | 400 | 575 |
Corporate reinsurance recoveries | (205) | (179) | 366 |
Goodwill on bargain purchase | 285 | - | 1,184 |
Investment income | 140 | (203) | (246) |
Total Other Income | 469 | 18 | 1,879 |
Costs |
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Pre - acquisition | (2) | - | (56) |
Stop loss costs | (182) | (30) | (296) |
Operating costs | (1,142) | (576) | (1,702) |
Total Costs | (1,326) | (606) | (2,054) |
Operating profit before impairments of goodwill and capacity | 753 | 153 | 608 |
Impairment charge for capacity | - | 82 | (281) |
Tax | (105) | (53) | 129 |
Profit for the period/year | 648 | 182 | 456 |
Period to 30th June 2019
Underwriting Year | Helios retained capacity at 30 June 2019 £m | Portfolio mid point forecasts | Total profi/(loss)t currently estimated £'000 | Earned profit/(loss) at 31 December 2018 | Helios Profits £'000 |
2017 | 28.9 | (7.4%) | (2,139) | (3,753) | 1,048 |
2018 | 18.7 | (3.6%) | (673) | (2,624) | 681 |
2019 | 16.1 | - | - | - | (119) |
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| 1,610 |
Period to 30th June 2018
Underwriting Year | Helios retained capacity at 30 June 2017 £m | Portfolio mid point forecasts | Total profit currently estimated £'000 | Earned profit/(loss) at 31 December 2017 | Helios Profits £'000 |
2016 | 17.8 | 5.40% | 952 | 142 | 366 |
2017 | 12 | (7.4)% | (888) | (1,797) | 510 |
2018 | 12.3 | N/A |
| - | (135) |
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| 741 |
Year to 31 December 2018
Underwriting Year | Helios retained capacity at 31 December 2017 £m | Portfolio mid point forecasts | Total profit currently estimated £'000 | Earned profit/(loss) at 31 December 2017 | Helios Profits £'000 |
2016 | 33.9 | 8.6% | 2,915 | (429) | 1,580 |
2017 | 28.2 | (8.2%) | (2,312) | (4,539) | 912 |
2018 | 18.3 | - | - | - | (1,709) |
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| 783 |
Summary Balance Sheet
The summary Group balance sheet excludes items relating to syndicate participations. See Note 15 for further information.
| 6 Months to June 2019 £'000 |
6 Months to June 2018 £'000 | Year to 31 December 2018 £'000 |
Intangible assets | 16,490 | 12,257 |
16,051 |
Funds at Lloyd's | 10,850 | 7,785 | 8,388 |
Other cash | 2,018 | 4,480 | 9,717 |
Other assets | 8,391 | 4,479 | 10,156 |
Total assets | 37,749 | 29,001 | 44,312 |
Deferred tax | 2,134 | 2,094 | 2,569 |
Borrowings | 1,034 | - | 9,196 |
Other liabilities | 4,865 | 2,504 | 3,891 |
Total liabilities | 8,033 | 4,598 | 15,656 |
Syndicate equity | (8,648) | (3,430) | (7,611) |
Total equity | 21,068 | 20,973 | 21,045 |
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 2019 £'000 | 6 months to 30 June 2018 £'000 | Year to 31 December 2018 £'000 |
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Opening Balance (free cash) | 9,717 | 1,078 | 1,078 |
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Income |
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Acquired on acquisition | 119 | - | 1,057 |
Distribution of profits (net of tax retentions) | 1,165 | 3,177 | 3,887 |
Transfers from Funds at Lloyds' | 1,512 | 3,887 | 14,880 |
Investment income | 43 | 8 | - |
Other income | - | - | 323 |
Sale of investments | - | - | 65 |
Borrowings | (8,162) | (1,094) | 9,196 |
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Expenditure |
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Operating costs (inc Hampden / Nomina fees) | (469) | (447) | (1,778) |
Reinsurance Cost | (531) | (122) | - |
Payable funds for acquisitions | - | - | (721) |
Payments to QS reinsurers | - | (1,279) | (1,918) |
Acquisition of LLV's | (428) | - | (10,859) |
Transfers to Funds at Lloyds' | (778) | (728) | (3,212) |
Tax | (37) | - | (766) |
Dividends paid | - | - | (219) |
Revolving credit facility repayment | - | - | (1,094) |
Share buy backs | (133) | - | (202) |
Closing balance | 2,019 | 4,480 | 9,717 |
Adjusted NAV
| Proforma June 2019 - after Equity Raise | Equity Raise and Acquisition Adjustments | 6 months to 30 June 2019 £'000 | 6 months to 30 June 2018 £'000 | Year to 31 December 2018 £'000 |
Net tangible assets | 6,800 | 2,222 | 4,578 | 8,716 | 4,994 |
Group letters of credit | 2,845 | 1,083 | 1,762 | 1,711 | 1,744 |
Value of capacity (WAV) | 22,182 | 1,105 | 21,077 | 13,046 | 20,638 |
| 31,827 | 4,410 | 27,417 | 23,473 | 27,376 |
Share in issue - on the market | 17,635 | - | 14,348 | 14,604 | 14,441 |
Shares in issue - total of on the market and JSOP shares | - | - | 14,848 | - | 14,941 |
Adjusted net asset value per share £ - on the market | 1.80 | - | 1.91 | 1.61 | 1.90 |
Adjusted net asset value per share £ - on the market and JSOP shares |
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- | 1.85 | - | 1.83 |
Interim condensed consolidated statement of comprehensive income
Six months ended 30 June 2019
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Note | 6 months ended 30 June 2019 Unaudited £'000 | 6 months ended 30 June 2018 Unaudited £'000 | 12 months ended 31 December 2018 Audited £'000 |
Gross premium written | 4 | 29,552 | 20,647 | 38,703 |
Reinsurance premium ceded |
| (9,380) | (6,043) | (7,675) |
Net premium written | 4 | 20,172 | 14,604 | 31,028 |
Change in unearned gross premium provision | 5 | (4,625) | (3,793) | (360) |
Change in unearned reinsurance premium provision | 5 | 2,767 | 1,946 | 284 |
| 5 | (1,858) | (1,847) | (76) |
Net earned premium | 3,4 | 18,314 | 12,757 | 30,952 |
Net investment income | 6 | 1,491 | (87) | 295 |
Other underwriting income |
| 252 | - | 266 |
Gain on bargain purchase | 12 | 285 | - | 1,184 |
Other income |
| 13 | 344 | (184) |
Revenue |
| 20,355 | 13,014 | 32,513 |
Gross claims paid |
| (17,242) | (10,543) | (23,631) |
Reinsurers' share of gross claims paid |
| 3,890 | 2,083 | 4,859 |
Claims paid, net of reinsurance |
| (13,352) | (8,460) | (18,772) |
Change in provision for gross claims | 5 | 1,337 | 4,255 | (1,109) |
Reinsurers' share of change in provision for gross claims | 5 | (1,036) | (4,320) | 909 |
Net change in provision for claims | 5 | 301 | (65) | (200) |
Net insurance claims and loss adjustment expenses | 4 | (13,051) | (8,525) | (18,972) |
Expenses incurred in insurance activities |
| (5,786) | (3,992) | (11,696) |
Other operating expenses |
| (765) | (344) | (1,237) |
Operating expenses |
| (6,551) | (4,336) | (12,933) |
Operating profit before impairments of goodwill and capacity | 4 | 753 | 153 | 608 |
Impairment of goodwill |
| - | - | - |
Impairment of syndicate capacity |
| - | 82 | (281) |
Profit before tax |
| 753 | 235 | 327 |
Income tax charge | 7 | (105) | (53) | 129 |
Profit for the period |
| 648 | 182 | 456 |
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 |
| 648 | 182 | 456 |
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Profit for the period attributable to owners of the Parent |
| 648 | 182 | 456 |
Total comprehensive income for the period attributable to owners of the Parent |
| 648 | 182 | 456 |
Earnings per share attributable to owners of the Parent |
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Basic | 8 | 4.51p | 1.25p | 3.14p |
Diluted | 8 | 4.36p | 1.20p | 3.03p |
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 2019
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Note | 6 months ended 30 June 2019 Unaudited £'000 | 6 months ended 30 June 2018 Unaudited £'000 | 12 months ended 31 December 2018 Audited £'000 |
Assets |
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Intangible assets |
| 16,490 | 12,257 | 16,051 |
Financial assets at fair value through profit or loss |
| 56,507 | 41,711 | 58,075 |
Reinsurance assets: |
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- reinsurers' share of claims outstanding | 5 | 21,233 | 14,164 | 22,698 |
- reinsurers' share of unearned premium | 5 | 7,163 | 4,791 | 4,057 |
Other receivables, including insurance and reinsurance receivables |
| 50,717 | 36,179 | 52,938 |
Deferred acquisition costs |
| 6,228 | 4,382 | 6,782 |
Prepayments and accrued income |
| 701 | 642 | 439 |
Cash and cash equivalents |
| 6,997 | 8,039 | 12,202 |
Total assets |
| 166,036 | 122,165 | 173,242 |
Liabilities |
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Insurance liabilities: |
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- claims outstanding | 5 | 80,204 | 55,685 | 88,032 |
- unearned premium | 5 | 30,631 | 20,773 | 24,772 |
Deferred income tax liabilities |
| 2,134 | 2,094 | 2,635 |
Borrowings |
| 1,034 | - | 9,196 |
Other payables, including insurance and reinsurance payables |
| 27,468 | 21,509 | 25,321 |
Accruals and deferred income |
| 3,497 | 1,131 | 2,241 |
Total liabilities |
| 144,968 | 101,192 | 152,197 |
Equity |
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Equity attributable to owners of the Parent: |
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Share capital | 11 | 1,510 | 1,510 | 1,510 |
Share premium | 11 | 15,387 | 15,387 | 15,387 |
Other reserves - treasury shares | 11 | (50) | (50) | (50) |
Retained earnings |
| 4,221 | 4,126 | 4,198 |
Total equity |
| 21,068 | 20,973 | 21,045 |
Total liabilities and equity |
| 166,036 | 122,165 | 173,242 |
The Financial Statements were approved and authorised for issue by the Board of Directors on 26 September 2019, and were signed on its behalf by:
Nigel Hanbury
Chief Executive
Interim condensed consolidated statement of changes in equity
Six months ended 30 June 2019
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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 2019 |
| 1,510 | 15,387 | (50) | 4,198 | 21,045 | |
Total comprehensive income for the year: |
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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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Dividends paid | 9 | - | - | - | (530) | (530) | |
Company buy back of shares | 11 | - | - | - | (134) | (134) | |
Total transactions with owners |
| - | - | - | (664) | (664) | |
At 30 June 2019 |
| 1,510 | 15,387 | (50) | 4,221 | 21,068 | |
At 1 January 2018 |
| 1,510 | 15,387 | (50) | 4,163 | 21,010 | |
Total comprehensive income for the year: |
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Profit for the year |
| - | - | - | 182 | 182 | |
Other comprehensive income, net of tax |
| - | - | - | - | - | |
Total comprehensive income for the year |
| - | - | - | 182 | 182 | |
Transactions with owners: |
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Dividends paid |
| - | - | - | (219) | (219) | |
Share issue |
| - | - | - | - | - | |
Total transactions with owners |
| - | - | - | (219) | (219) | |
At 30 June 2018 |
| 1,510 | 15,387 | (50) | 4,126 | 20,973 | |
At 1 January 2018 |
| 1,510 | 15,387 | (50) | 4,163 | 21,010 | |
Total comprehensive income for the year: |
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Profit for the year |
| - | - | - | 456 | 456 | |
Other comprehensive income, net of tax |
| - | - | - | - | - | |
Total comprehensive income for the year |
| - | - | - | 456 | 456 | |
Transactions with owners: |
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Dividends paid |
| - | - | - | (219) | (219) | |
Company buy back of shares | 11 | - | - | - | (202) | (202) | |
Share issue | 11 | - | - | - | - | - | |
Total transactions with owners |
| - | - | - | (421) | (421) | |
At 31 December 2018 |
| 1,510 | 15,387 | (50) | 4,198 | 21,045 | |
Interim condensed consolidated statement of cash flows
Six months ended 30 June 2019
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Note | 6 months ended 30 June 2019 Unaudited £'000 | 6 months ended 30 June 2018 Unaudited £'000 | 12 months ended 31 December 2018 Audited £'000 |
Cash flows from operating activities |
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Profit before tax |
| 753 | 235 | 327 |
Adjustments for: |
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- Other comprehensive income, gross of tax |
| - | - | - |
- Interest received |
| (39) | (6) | (144) |
- Investment income | 6 | (1,416) | (100) | (841) |
- Recognition of negative goodwill |
| (285) |
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- Goodwill on bargain purchase |
| - | - | (1,184) |
- Impairment of goodwill |
| - | - | - |
- (Profit)/loss on sale of intangible assets |
| - | - | (125) |
- Impairment of intangible assets |
| - | (82) | 281 |
- Goodwill on acquisition |
| - | - | - |
Changes in working capital: |
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- change in fair value of financial assets held at fair value through profit or loss |
| 17 | (46) | 490 |
- (increase)/decrease in financial assets at fair value through profit or loss |
| 2,928 | 7,248 | 10,585 |
- (increase)/decrease in other receivables |
| 5,278 | (3,566) | (7,113) |
- (increase)/decrease in other payables |
| 1,240 | 3,775 | 3,955 |
- net (increase)/decrease in technical provisions |
| (5,504) | (1,056) | 2,162 |
Cash generated/(utilised) from operations |
| 2,972 | 6,402 | 8,393 |
Income tax paid |
| - | - | (962) |
Net cash inflow from operating activities |
| 2,972 | 6,402 | 7,431 |
Cash flows from investing activities |
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Interest received |
| 39 | 6 | 144 |
Investment income |
| 1,416 | 100 | 841 |
Purchase of intangible assets |
| - | - | - |
Proceeds from disposal of intangible assets |
| - | - | 86 |
Acquisition of subsidiaries, net of cash acquired |
| (806) | - | (6,825) |
Net cash inflow from investing activities |
| 649 | 106 | (5,754) |
Cash flows from financing activities |
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Net proceeds from issue of ordinary share capital |
| - | - | - |
Buy back of ordinary share capital |
| (134) | - | - |
Payment for company buy back of shares |
| - | - | (202) |
Proceeds from borrowings |
| (8,162) | (1,094) | 9,196 |
Repayment of borrowings |
| - | - | (1,094) |
Dividends paid to owners of the Parent |
| (530) | (219) | (219) |
Net cash outflow from financing activities |
| (8,826) | (1,313) | 7,681 |
Net increase in cash and cash equivalents |
| (5,205) | 5,195 | 9,358 |
Cash and cash equivalents at beginning of period |
| 12,202 | 2,844 | 2,844 |
Cash and cash equivalents at end of period |
| 6,997 | 8,039 | 12,202 |
Cash held within the syndicates' accounts is £4,979,000 (2018: £3,900,000) of the total cash and cash equivalents held at the end of the period £6,997,000 (2018: £8,039,000). 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.
Notes to the financial statements
Six months ended 30 June 2019
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 2019.
The Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2019 and 2018 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 2018, 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. 365) Limited, Nameco (No. 605) Limited, Nameco (No. 321) Limited, Nameco (No. 917) Limited, Nameco (No. 229) Limited, Nameco (No. 518) Limited, Nameco (No. 804) Limited, Halperin Underwriting Limited, Bernul Limited, Dumasco 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, RBC CEES Trustee Limited, Helios UTG Partner Limited, Nomina No 035 LLP, Nomina No 342 LLP, Nomina No 380 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 2018.
During the year ended 31 December 2018 and the current period, 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 2018 and 1 January 2019 respectively, apart from IFRS 9 "Financial Instruments", for which a temporary exemption has been applied by the Group, as explained further below.
Temporary exemptions from IFRS 9 "Financial Instruments", (effective 1 January 2018)
The effective date of IFRS 9 Financial Instruments is 1 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 at 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 for 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 2022. Consequently, the Group has a single date of initial application for IFRS 9 in it's entirely, being 1 January 2022.
The new standards and amendments to standards and interpretations effective from 1 January 2019, as disclosed in the Annual Report for the year ended 31 December 2018, have not had an impact on the Groups accounting policies and hence no significant impact on the Condensed Consolidated Interim Financial Statements at 30 June 2019.
New Standards effective from 1 January 2019:
Adopted by the EU
• IFRS 16 "Leases", issued on 13 January 2016 (effective 1 January 2019).
• IFRS 23 "Uncertainty over Income Tax Treatments", issued on 7 June 2017, (effective date 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).
• 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).
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 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 |
6 months ended 30 June 2018 Unaudited | Syndicate participation £'000 | Investment management £'000 | Other corporate activities £'000 | Total £'000 |
Net earned premium | 14,012 | - | (1,255) | 12,757 |
Net investment income | (102) | 15 | - | (87) |
Other income | - | - | 344 | 344 |
Net insurance claims and loss adjustment expenses | (8,525) | - | - | (8,525) |
Expenses incurred in insurance activities | (2,851) | - | (1,141) | (3,992) |
Other operating expenses | - | - | (344) | (344) |
Goodwill on bargain purchase | - | - | - | - |
Impairment of goodwill | - | - | - | - |
Impairment of syndicate capacity | - | - | 82 | 82 |
Profit before tax | 2,534 | 15 | (2,314) | 235 |
12 months ended 31 December 2018 Audited | Syndicate participation £'000 | Investment management £'000 | Other corporate activities £'000 | Total £'000 |
Net earned premium | 30,749 | - | 203 | 30,952 |
Net investment income | 586 | (291) | - | 295 |
Other income | (330) | - | 412 | 82 |
Net insurance claims and loss adjustment expenses | (18,972) | - | - | (18,972) |
Expenses incurred in insurance activities | (11,359) | - | (337) | (11,696) |
Other operating expenses | (302) | - | (935) | (1,237) |
Gain on bargain purchase | - | - | 1,184 | 1,184 |
Impairment of goodwill | - | - | - | - |
Impairment of syndicate capacity | - | - | (281) | (281) |
Profit before tax | 372 | (291) | 246 | 327 |
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 2019 other corporate activities totalling £1,440,000 (2018:1,255,000 - 2016, 2017 and 2018 years of account) represents the 2017, 2018 and 2019 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 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* |
|
|
|
| |||
6 months ended 30 June 2018 | 2016 and prior £'000 |
2017 £'000 |
2018 £'000 |
Sub-total £'000 | Pre- acquisition £'000 | Corporate reinsurance £'000 | Other corporate £'000 | Total £'000 |
Gross premium written | 337 | 2,940 | 17,370 | 20,647 | - | - | - | 20,647 |
Reinsurance ceded | 103 | (542) | (4,319) | (4,758) | - | (1,255) | (30) | (6,043) |
Net premium written | 440 | 2,398 | 13,051 | 15,888 | - | (1,255) | (30) | 14,604 |
Net earned premium | 1,764 | 8,511 | 3,767 | 14,042 | - | (1,255) | (30) | 12,757 |
Other income | 195 | (139) | 3 | 59 | - | 400 | (202) | 257 |
Net insurance claims and loss adjustment expenses | (333) | (4,581) | (3,432) | (8,346) | - | - | (179) | (8,525) |
Operating expenses | (608) | (2,362) | (790) | (3,760) | - | - | (576) | (4,336) |
Operating profit before impairments of goodwill and capacity | 1,017 | 1,430 | (452) | 1,995 | - | (855) | (987) | 153 |
Quota share adjustment | (651) | (920) | 317 | (1,254) | - | 1,254 | - | - |
Operating profit before impairments of goodwill and capacity after quota share adjustment | 366 | 510 | (135) | 741 | - | 399 | (987) | 153 |
| Underwriting year of account* |
|
|
|
| |||
12 months ended 31 December 2018 | 2016 and prior £'000 |
2017 £'000 |
2018 £'000 |
Sub-total £'000 | Pre- acquisition £'000 | Corporate reinsurance £'000 | Other corporate £'000 | Total £'000 |
Gross premium written | 1,333 | 6,253 | 45,283 | 52,869 | (14,166) | - | - | 38,703 |
Reinsurance ceded | 81 | (954) | (9,840) | (10,713) | 3,131 | 203 | (296) | (7,675) |
Net premium written | 1,414 | 5,299 | 35,443 | 42,156 | (11,035) | 203 | (296) | 31,028 |
Net earned premium | 4,912 | 19,457 | 18,903 | 43,272 | (12,227) | 203 | (296) | 30,952 |
Other income | 335 | (261) | (120) | (46) | 94 | 575 | 938 | 1,561 |
Net insurance claims and loss adjustment expenses | 1,220 | (11,035) | (16,204) | (26,019) | 6,681 | - | 366 | (18,972) |
Operating expenses | (2,949) | (6,076) | (7,602) | (16,627) | 5,396 | - | (1,702) | (12,933) |
Operating profit before impairments of goodwill and capacity | 3,518 | 2,085 | (5,023) | 580 | (56) | 778 | (694) | 608 |
Quota share adjustment | (1,938) | (1,173) | 3,314 | 203 | - | (203) | - | - |
Operating profit before impairments of goodwill and capacity after quota share adjustment | 1,580 | 912 | (1,709) | 783 | (56) | 575 | (694) | 608 |
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 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 2015 and prior years' claims reserves reinsured into the 2016 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 2018 | 59,833 | 14,836 | 44,997 |
Increase in reserves arising from acquisition of subsidiary undertakings | - | - | - |
Movement of reserves | (4,255) | (4,320) | 65 |
Other movements | 107 | 3,648 | (3,541) |
At 30 June 2018 | 55,685 | 14,164 | 41,521 |
Movement in unearned premium
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2018 | 15,916 | 2,354 | 13,562 |
Increase in reserves arising from acquisition of subsidiary undertakings | - | - | - |
Movement of reserves | 3,793 | 1,946 | 1,847 |
Other movements | 1,064 | 491 | 573 |
At 30 June 2018 | 20,773 | 4,791 | 15,982 |
Included within other movements are the 2013 and prior years' claims reserves reinsured into the 2014 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 2018 | 59,833 | 14,836 | 44,997 |
Increase in reserves arising from acquisition of subsidiary undertakings | 25,576 | 6,969 | 18,607 |
Movement of reserves | 1,109 | 909 | 200 |
Other movements | 1,514 | (16) | 1,530 |
At 31 December 2018 | 88,032 | 22,698 | 65,334 |
Movement in unearned premium
| Gross £'000 | Reinsurance £'000 | Net £'000 |
At 1 January 2018 | 15,916 | 2,354 | 13,562 |
Increase in reserves arising from acquisition of subsidiary undertakings | 8,042 | 1,322 | 6,720 |
Movement of reserves | 360 | 284 | 76 |
Other movements | 454 | 97 | 357 |
At 31 December 2018 | 24,772 | 4,057 | 20,715 |
Included within other movements are the 2015 and prior years' claims reserves reinsured into the 2016 year of account on which the Group does not participate and currency exchange differences.
6. Net investment income
| 6 months ended 30 June 2019 Unaudited £'000 |
6 months ended 30 June 2018 Unaudited £'000 | 12 months ended 31 December 2018 Audited £'000 |
Investment income | 1,416 | 100 | 841 |
Realised (losses)/gains on financial assets at fair value through profit or loss | 17 | (38) | (145) |
Unrealised (losses)/gains on financial assets at fair value through profit or loss | 18 | (155) | (490) |
Investment management expenses | 1 | - | (55) |
Bank interest | 39 | 6 | 144 |
Net investment income | 1,491 | (87) | 295 |
7. Income tax charge
Analysis of tax charge/(credit) in the period
| 6 months ended 30 June 2019 Unaudited £'000 |
6 months ended 30 June 2018 Unaudited £'000 | 12 months ended 31 December 2018 Audited £'000 |
Income tax charge | 105 | 53 | (129) |
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% (2018: 19.25%). 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 2019 Unaudited
|
6 months ended 30 June 2018 Unaudited
| 12 months ended 31 December 2018 Audited
|
Profit for the year after tax attributable to ordinary equity holders of the parent | 648,000 | £182,000 | £456,000 |
Basic - weighted average number of ordinary shares* | 14,356,224 | 14,604,240 | 14,544,433 |
Adjustments for calculating the diluted earnings per share: Treasury shares (JSOP scheme) | 500,000 | 500,000 | 500,000 |
Diluted - weighted average number of shares* | 14,856,224 | 15,104,240 | 15,044,433 |
Basic earnings per share | 4.51p | 1.25p | 3.14p |
Diluted earnings per share | 4.36p | 1.20p | 3.03p |
* Used as the denominator in calculating the basic earnings per share, and diluted earnings per share, respectively.
9. Dividends paid or proposed
A total dividend of 3p per fully paid ordinary share being 1.5p final dividend and 1.5p special dividend was proposed and agreed at the AGM on 28 June 2019 (2018: 1.5p), amounting to a total of £530,000. The eligible shares for the dividend entitlement were 17,635,128 fully paid ordinary shares as at 18 July 2019 (note 16). The dividend was provided for and recognised in the payables in the Statement of Financial Position as at 30 June 2019. The dividend payment was settled on 31 July 2019.
10. Investments in subsidiaries
| 30 June 2019 £'000 | 30 June 2018 £'000 | 31 December 2018 £'000 |
Total | 25,905 | 15,456 | 24,559 |
Company or partnership | Direct/indirect interest | 30 June 2019 ownership |
30 June 2018 ownership |
31 December 2018 ownership | Principal activity |
Hampden Corporate Member Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle |
Nameco (No. 365) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle |
Nameco (No. 605) Limited | Direct | 100% | 100% | 100% | Lloyd's of London corporate vehicle |
Nameco (No. 321) Limited | Direct | 100% | 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 |
Dumasco Limited | Direct | - | 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% | Lloyd's of London corporate vehicle |
Nomina No 505 LLP | Indirect | 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% | Lloyd's of London corporate vehicle |
Advantage DCP Limited | Direct | 100% | - | 100% | Lloyd's of London corporate vehicle |
Romsey Underwriting Limited | Direct | 100% | - | 100% | Lloyd's of London corporate vehicle |
Nameco (No. 409) 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.
On 21 February 2019 the Company sold its 500 Ordinary £1 shares in Dumasco Limited at the nominal value of £500.
For details of all new acquisitions in the 6 months to 30 June 2019, refer to note 12.
For details of all new acquisitions made during the post balance sheet period refer to note 16.
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 2018 | 15,104,240 | 1,460 | 50 | 15,387 | 16,897 |
Ordinary shares of 10p each and share premium at 31 December 2018 | 15,104,240 | 1,460 | 50 | 15,387 | 16,897 |
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 30 June 2019 | 15,104,240 | 1,460 | 50 | 15,387 | 16,897 |
(i) Number of shares
| 30 June 2019 | 31 December 2018 |
Allotted, called up and fully paid ordinary shares: |
|
|
On the market | 14,348,462 | 14,440,962 |
Company buy back of ordinary shares held in treasury (iii) | 255,778 | 163,278 |
| 14,604,240 | 14,604,240 |
Uncalled and partly paid ordinary share under the JSOP scheme (ii) | 500,000 | 500,000 |
| 15,104,240 | 15,104,210 |
In July 2019 the Company issued additional ordinary shares, as disclosed in note 16.
(ii) The partly paid ordinary shares are not entitled to dividend distribution rights during the year.
(iii) Treasury shares: purchase of own shares:
During the period, the Company bought back some of its own ordinary shares on the market and these are held in treasury, as detailed below:
| Number of shares | Market value consideration price | Nominal value 10p each |
Year end 31 December 2018 | 163,278 | 202,598 | 16,328 |
Movement in the Treasury share buy backs during the 6 months to 30 June 2019 | 92,500 | 134,000 | 9,250 |
Total as at 30 June 2019 | 255,778 | 336,598 | 25,578 |
The retained earnings for the 6 months ended 30 June 2019 have been reduced by £134,000, being the consideration paid on the market for these shares, as shown in the consolidated statement of changes in equity.
The Company cannot exercise any rights over these bought back and held in treasury shares, and has no voting rights. No dividend of other distribution of the Company's assets can be paid to the Company in respect of the treasury shares that it holds.
As at 30 June 2019 the 255,778 own shares bought back represent 1.78% of the total allotted, called up and fully paid ordinary shares of the Company of 14,604,240.
12. Acquisition of Limited Liability Vehicles
Nameco (No. 409) Limited
On 6 February 2019, Helios Underwriting plc acquired 100% of the issued share capital of Nameco (No. 409) Limited for a total consideration of £1,346,000. Nameco (No. 409) 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 £1,631,000. Negative goodwill of £285,000 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 | 11 | 429 | 440 |
Financial assets at fair value through profit or loss | 1,360 | - | 1,360 |
Reinsurance assets: |
|
|
|
- reinsurers' share of claims outstanding | 552 | - | 552 |
- reinsurers' share of unearned premium | 176 | - | 176 |
Other receivables, including insurance and reinsurance receivables | 1,826 | - | 1,826 |
Deferred acquisition cost | 139 | - | 139 |
Prepayments and accrued income | 10 | - | 10 |
Cash and cash equivalents | 336 | - | 336 |
Insurance liabilities: |
|
|
|
- claims outstanding | (1,974) | - | (1,974) |
- unearned premium | (648) | - | (648) |
Deferred income tax liabilities | (2) | (82) | (84) |
Other payables, including insurance and reinsurance payables | (465) | - | (465) |
Accruals and deferred income | (37) | - | (37) |
Net assets acquired | 1,284 | 347 | 1,631 |
Satisfied by: |
|
|
|
Cash and cash equivalents | 1,346 | - | 1,346 |
Loan paid on acquisition | - | - | - |
Total consideration | (1,346) | - | (1,346) |
Negative goodwill | 62 | (347) | (285) |
| 2017 year of account | 2018 year of account | 2019 year of account |
Capacity acquired | 1,194,112 | 1,230,299 | 1,069,040 |
The net earned premium and profit of Nameco (No. 409) Limited for the period since the acquisition date to 30 June 2019 are £349,000 and £7,000 respectively.
Negative goodwill has arisen on the acquisition of Nameco (No. 409) 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 has inter-company loans with its subsidiaries which are repayable on three months' notice provided it does not jeopardise each company's ability to meet its liabilities as they fall due. All inter-company loans are therefore classed as falling due within one year. The amounts outstanding as at 30 June 2019 are set out below:
Company | 30 June 2019 Unaudited £'000 | 30 June 2018 Unaudited £'000 | 31 December 2018 £'000 |
Balances due from/(to) Group companies at the period end: |
|
|
|
Hampden Corporate Member Limited | 66 | (103) | 265 |
Nameco (No. 365) Limited | (47) | (61) | (36) |
Nameco (No. 605) Limited | (104) | (153) | (16) |
Nameco (No. 321) Limited | (21) | (9) | 4 |
Nameco (No. 917) Limited | 3,473 | 6,483 | 3,812 |
Nameco (No. 229) Limited | (20) | (10) | 3 |
Nameco (No. 518) Limited | (14) | (40) | 20 |
Nameco (No. 804) Limited | (114) | 11 | (45) |
Halperin Underwriting Limited | (12) | (29) | 7 |
Bernul Limited | 40 | 13 | 66 |
Dumasco Limited | 38 | (43) | 38 |
Nameco (No. 311) Limited | (4) | (37) | 20 |
Nameco (No. 402) Limited | (164) | (194) | (143) |
Updown Underwriting Limited | (50) | 53 | (21) |
Nameco (No. 507) Limited | 43 | 32 | 91 |
Nameco (No. 76) Limited | (173) | (41) | (141) |
Kempton Underwriting Limited | (30) | 62 | 2 |
Devon Underwriting Limited | 104 | 220 | 138 |
Nameco (No 346) Limited | (336) | (93) | (263) |
Pooks Limited | 197 | 464 | 345 |
Charmac Underwriting Limited | (371) | (378) | (351) |
Nottus (No 51) Limited | 11 | 232 | 35 |
Chapman /underwriting Limited | 403 | 590 | 383 |
Llewellyn House Underwriting Limited | 34 | - | 63 |
Advantage DCP Limited | (1,019) |
| 72 |
Romsey Underwriting Limited | 1,188 |
| 459 |
Nameco (No. 409) Limited | (598) |
|
|
Nomina No 035 LLP | - | - | - |
Nomina No 342 LLP | - | - | - |
Nomina No 380 LLP | - | - | - |
Nomina No 372 LLP | - | - | - |
Salviscount LLP | - | - | - |
Inversanda LLP | - | - | - |
Fyshe UTG LLP | - | - | - |
Nomina No 505 LLP | - | - | - |
Nomina No 321 LLP | - | - | - |
Helios UTG Partner Limited | 777 | 1,113 | 811 |
RBC CEES Trustee Limited | 50 | 50 | 50 |
Total | 3,347 | 8,132 | 5,668 |
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 £180,000 (2018: £160,000).
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. In addition, the Limited Liability Vehicles will pay profit commission on a sliding scale from 1% of the net profit up to a maximum of 10%. The total fees payable for 2019 are set out below:
Company | 30 June 2019 Unaudited £'000 | 30 June 2018 Unaudited £'000 | 31 December 2018 £'000 |
Hampden Corporate Member Limited | - | - | - |
Nameco (No. 365) Limited | - | - | - |
Nameco (No. 605) Limited | - | - | - |
Nameco (No. 321) Limited | - | - | - |
Nameco (No. 917) Limited | 67 | 58 | 57 |
Nameco (No. 229) Limited | - | - | - |
Nameco (No. 518) Limited | - | - | - |
Nameco (No. 804) Limited | - | - | - |
Halperin Underwriting Limited | - | - | - |
Bernul Limited | - | - | - |
Dumasco Limited | - | - | - |
Nameco (No. 311) Limited | - | 10 | - |
Nameco (No. 402) Limited | - | 11 | - |
Updown Underwriting Limited | - | - | - |
Nameco (No. 507) Limited | - | 15 | - |
Nameco (No. 76) Limited | - | 2 | - |
Kempton Underwriting Limited | - | 2 | 7 |
Devon Underwriting Limited | - | 7 | 44 |
Nameco (No 346) Limited | 23 | 44 | 6 |
Pooks Limited | - | 6 | 22 |
Charmac Underwriting Limited | 2 | 22 | 13 |
Nottus (No 51) Limited | 2 | 13 | 8 |
Chapman Underwriting Limited | 22 | - | 54 |
Llewellyn House Underwriting Limited | - | - | 35 |
Advantage DCP Limited | 10 | - | - |
Romsey Underwriting Limited | 35 | - | - |
Nomina No 035 LLP | - | - | - |
Nomina No 342 LLP | - | - | - |
Nomina No 380 LLP | - | - | - |
Nomina No 372 LLP | - | - | 18 |
Salviscount LLP | 4 | 18 | 6 |
Inversanda LLP | - | - | 18 |
Fyshe Underwriting LLP | - | - | 8 |
Nomina No 505 LLP | 2 | - | 14 |
Nomina No 321 LLP | 6 | - | 8 |
Nameco (No. 409) Limited | 8 | - | - |
Helios UTG Partner Limited | - | - | - |
Total | 181 | 208 | 313 |
The Group entered into quota share reinsurance contracts for the 2017, 2018 and 2019 years of account with protected cell companies of Hampden Insurance PCC (Guernsey) Limited. The Limited Liability Vehicles' underwriting year of account quota share participations are set out below:
Company or partnership | 2017 | 2018 | 2019 |
Hampden Corporate Member Limited | - | - | - |
Nameco (No. 365) Limited | - | - | - |
Nameco (No. 605) Limited | - | - | - |
Nameco (No. 321) Limited | - | - | - |
Nameco (No. 917) Limited | 70% | 70% | 70% |
Nameco (No. 229) Limited | - | - | - |
Nameco (No. 518) Limited | - | - | - |
Nameco (No. 804) Limited | - | - | - |
Halperin Underwriting Limited | - | - | - |
Bernul Limited | - | - | - |
Dumasco 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 | 70% | 70% | - |
Nameco (No. 346) Limited | 70% | 70% | 70% |
Pooks Limited | 70% | 70% | - |
Charmac Underwriting Limited | 70% | 70% | - |
Nottus (No 51) Limited | 70% | 70% | - |
Chapman Underwriting Limited | - | 70% | 70% |
Helios UTG Partner Limited | - | - | - |
Nomina No 035 LLP | - | - | - |
Nomina No 342 LLP | - | - | - |
Nomina No 380 LLP | - | - | - |
Nomina No 372 LLP | - | - | - |
Salviscount LLP | 70% | 70% | - |
Inversanda LLP | 70% | 70% | - |
Fyshe Underwriting LLP | - | - | - |
Nomina No 505 LLP | - | - | - |
Llewellyn House Underwriting Limited | - | - | - |
Advantage DCP Limited | - | - | 70% |
Romsey Underwriting Limited | - | - | 70% |
Nomina No 321 LLP | - | - | 70% |
Nameco (No. 409) Limited | - | 70% | 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 the agreement, the Group accrued a net reinsurance premium recovery of £3,968,000 (2018: £5,176,000) during the period.
In July 2019, Nigel Hanbury, a Director of Helios Underwriting Plc has sold to the Group a corporate vehicle, Nameco (No 1113) Limited, refer to note 16.
14. Ultimate controlling party
The Directors consider that the Group has no ultimate controlling party.
14. 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 | |||
2016 £ | 2017] £ | 2018 £ | 2019 £ | ||
33 | Hiscox Syndicates Limited | 4,417,568 | 5,636,551 | 7,461,603 | 6,686,370 |
218 | ERS Syndicate Management Limited | 2,073,904 | 2,738,416 | 4,306,769 | 4,368,248 |
308 | Tokio Marine Kiln Syndicates Limited | 132,000 | 132,000 | - | - |
318 | Beaufort Underwriting Agency Limited | 866,250 | 866,250 | 866,250 | 836,250 |
386 | QBE Underwriting Limited | 1,391,616 | 1,127,934 | 1,171,776 | 1,225,267 |
510 | Tokio Marine Kiln Syndicates Limited | 8,221,084 | 8,891,847 | 9,198,519 | 9,352,291 |
557 | Tokio Marine Kiln Syndicates Limited | 1,028,547 | 830,415 | 650,201 | 650,201 |
609 | Atrium Underwriters Limited | 4,101,838 | 4,160,681 | 4,667,260 | 4,777,862 |
623 | Beazley Furlonge Limited | 5,205,716 | 6,441,574 | 7,635,491 | 8,037,706 |
727 | S A Meacock & Company Limited | 1,078,662 | 1,086,144 | 1,110,693 | 1,140,748 |
1176 | Chaucer Syndicates Limited | 661,905 | 722,837 | 949,535 | 949,535 |
1200 | Argo Managing Agency Limited | 267,554 | 77,143 | - | - |
1729 | Asta Managing Agency Limited | 271,586 | 53,353 | 233,925 | - |
1884 | Charles Taylor Managing Agency Limited | 325,000 | 17,500 | - | - |
1910 | Asta Managing Agency Limited | 1,282,653 | - | - | - |
1969 | Apollo Syndicate Management Limited | 528,396 | 322,343 | 131,082 | - |
1991 | R&O Managing Agency Limited | 455,867 | 551,641 | - | - |
2010 | Cathedral Underwriting Limited | 1,856,032 | 1,851,493 | 1,928,249 | 1,976,199 |
2014 | Pembroke Managing Agency Limited | 2,670,843 | 2,068,606 | 330,000 | - |
2121 | Argenta Syndicate Management Limited | 731,250 | 920,833 | 920,833 | 920,833 |
2525 | Asta Managing Agency Limited | 269,052 | 271,196 | 367,934 | 465,078 |
2689 | Asta Managing Agency Limited | - | 1,432,508 | 350,000 | - |
2791 | Managing Agency Partners Limited | 4,871,833 | 4,945,540 | 5,156,597 | 5,253,593 |
2988 | Brit Syndicates Limited | - | 65,763 | 200,000 | - |
4444 | Canopius Managing Agents Limited | 735,429 | 678,397 | 1,093,635 | - |
5820 | ANV Syndicates Limited | 1,174,479 | - | - | - |
5886 | Asta Managing Agency Limited | - | 108,780 | 154,147 | 207,968 |
6103 | Managing Agency Partners Limited | 268,518 | 302,354 | 1,177,062 | 1,177,062 |
6104 | Hiscox Syndicates Limited | 1,833,266 | 1,008,862 | 1,012,697 | 1,016,516 |
6107 | Beazley Furlonge Limited | 602,183 | 641,390 | 957,286 | 1,180,999 |
6111 | Catlin Underwriting Agencies Limited | 2,528,243 | 278,279 | 249,065 | - |
6117 | Argo Managing Agency Limited | 1,923,344 | 2,924,651 | 3,081,000 | 2,905,074 |
7066 | Members' agent pooling arrangement | 810,356 | 890,580 | 983,154 | - |
7200 | Members' agent pooling arrangement | 204,504 | 163,920 | - | - |
7201 | Members' agent pooling arrangement | 1,046,079 | 866,838 | - | - |
7202 | Members' agent pooling arrangement | 378,539 | 313,269 | - | - |
7203 | Members' agent pooling arrangement | 101,811 | 97,098 | - | - |
7211 | Members' agent pooling arrangement | 175,265 | 192,184 | - | - |
7215 | Members' agent pooling arrangement | 150,917 | 164,129 | - | - |
7217 | Members' agent pooling arrangement | 274,095 | 288,521 | 348,378 | 250,000 |
7227 | Members' agent pooling arrangement | 81,978 | 5,521 | 4,817 | - |
7231 | Members' agent pooling arrangement | - | 240,000 | 240,000 | 286,665 |
Total |
| 54,998,162 | 54,377,341 | 56,937,958 | 53,664,465 |
15. 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 2019 | 30 June 2018 | 31 December 2018 | ||||||
Group £'000 | Syndicate £'000 | Total £'000 | Group £'000 | Syndicate £'000 | Total £'000 | Group £'000 | Syndicate £'000 | Total £'000 | |
Assets |
|
|
|
|
|
|
|
|
|
Intangible assets | 16,490 | - | 16,490 | 12,257 | - | 12,257 | 16,051 | - | 16,051 |
Financial assets at fair value through profit or loss | 10,850 | 45,657 | 56,507 | 8,124 | 33,587 | 41,711 | 8,388 | 49,687 | 58,075 |
Reinsurance assets: |
| - | - |
|
|
| - | - | - |
- reinsurers' share of claims outstanding | 61 | 21,172 | 21,233 | 449 | 13,715 | 14,164 | - | 22,698 | 22,698 |
- reinsurers' share of unearned premium | - | 7,163 | 7,163 | - | 4,791 | 4,791 | - | 4,057 | 4,057 |
Other receivables, including insurance and reinsurance receivables | 8,151 | 42,566 | 50,717 | 3,772 | 32,407 | 36,179 | 10,156 | 42,782 | 52,938 |
Deferred acquisition costs | - | 6,228 | 6,228 | - | 4,382 | 4,382 | - | 6782 | 6,782 |
Prepayments and accrued income | 179 | 522 | 701 | 260 | 382 | 642 | - | 439 | 439 |
Cash and cash equivalents | 2,018 | 4,979 | 6,997 | 4,139 | 3,900 | 8,039 | 9,717 | 2,485 | 12,202 |
Total assets | 37,749 | 128,287 | 166,036 | 29,001 | 93,164 | 122,165 | 44,312 | 128,930 | 173,242 |
Liabilities |
|
|
|
|
|
|
|
|
|
Insurance liabilities: |
|
|
|
|
|
|
|
|
|
- claims outstanding | - | 80,204 | 80,204 | - | 55,685 | 55,685 | - | 88,032 | 88,032 |
- unearned premium | - | 30,631 | 30,631 | - | 20,773 | 20,773 | - | 24,772 | 24,772 |
Deferred income tax liabilities | 2,134 | - | 2,134 | 2,094 | - | 2,094 | 2,569 | 66 | 2,635 |
Borrowings | 1,034 | - | 1,034 | - | - | - | 9,196 | - | 9,196 |
Other payables, including insurance and reinsurance payables | 1,694 | 25,774 | 27,468 | 1,678 | 19,831 | 21,509 | 2,650 | 22,671 | 25,321 |
Accruals and deferred income | 3,171 | 326 | 3,497 | 826 | 305 | 1,131 | 1,241 | 1,000 | 2,241 |
Total liabilities | 8,033 | 136,935 | 144,968 | 4,598 | 96,594 | 101,192 | 15,656 | 136,541 | 152,197 |
Equity attributable to owners of the Parent |
|
|
|
|
|
|
|
|
|
Share capital | 1,510 | - | 1,510 | 1,510 | - | 1,510 | 1,510 | - | 1,510 |
Share premium | 15,387 | - | 15,387 | 15,387 | - | 15,387 | 15,387 | - | 15,387 |
Other reserves | (50) | - | (50) | (50) | - | (50) | (50) | - | (50) |
Retained earnings | 12,869 | (8,648) | 4,221 | 7,556 | (3,430) | 4,126 | 11,809 | (7,611) | 4,198 |
Total equity | 29,716 | (8,648) | 21,068 | 24,403 | (3,430) | 20,973 | 28,656 | (7,611) | 21,045 |
Total liabilities and equity | 37,749 | 128,287 | 166,036 | 29,001 | 93,164 | 122,165 | 44,312 | 128,930 | 173,242 |
16. Events after the financial reporting period
Acquisitions
Nameco (No. 1113) Limited
On 17 July 2019, Helios Underwriting plc acquired 100% of the issued share capital of Nameco (No. 1113) Limited for a total consideration of £2,036,000. Nameco (No. 1113) 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 £2,169,000. Negative goodwill of £133,000 arose on acquisition which will be recognised as goodwill on bargain purchase in the income statement for the year ending 31 December 2019. 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 | 7 | 1,105 | 1,112 |
Financial assets at fair value through profit or loss | 1,542 | - | 1,542 |
Reinsurance assets: |
|
|
|
- reinsurers' share of claims outstanding | 1,000 | - | 1,000 |
- reinsurers' share of unearned premium | 63 | - | 63 |
Other receivables, including insurance and reinsurance receivables | 2,629 | 1,083 | 3,712 |
Deferred acquisition cost | 107 | - | 107 |
Prepayments and accrued income | 23 | - | 23 |
Cash and cash equivalents | 169 | - | 169 |
Insurance liabilities: |
|
|
|
- claims outstanding | (3,425) | - | (3,425) |
- unearned premium | (637) | - | (637) |
Deferred income tax liabilities | (3) | (416) | (419) |
Other payables, including insurance and reinsurance payables | (965) | - | (965) |
Accruals and deferred income | (113) | - | (113) |
Net assets acquired | 397 | 1,772 | 2,169 |
Satisfied by: |
|
|
|
1,590,769 Ordinary 10p shares issued | 2,036 | - | 2,036 |
Loan paid on acquisition | - | - | - |
Total consideration | (2,036) | - | (2,036) |
Negative goodwill | 1,640 | (1,772) | (133) |
| 2017 year of account | 2018 year of account | 2019 year of account |
Capacity acquired | 1,796,419 | 2,035,238 | 1,994,276 |
The purchase consideration was satisfied by the issue of 1,590,769 Ordinary shares of nominal value of 10p each, issued at the share price of £1.28 each.
Issued share capital
On 17 July 2019 the Company issued 1,590,769 ordinary 10p shares as part of the acquisition settlement of Nameco (No.1113) Limited (formally owned by Nigel Hanbury, and director and shareholder of the Company) as explained above.
On 17 July 2019 the Company issued a further 1,695,897 ordinary 10p shares as part of the capital raise and an open offer, bringing the total number of shares in issue (excluding Treasury shares and uncalled partly paid shares) to 17,635,128 at the date of signing these financial statements. The estimate of the costs incurred in relation to the issue of shares at the date of signing these accounts equates to £275,000.
Share buy back
Since the balance sheet date, the Company has continued its share buyback programme. The Company has purchased a further 124,500 shares for a total consideration of £141,000. These shares will be held in Treasury (see note 11)
The Interim Report will be made available in electronic format on the Company's website, www.huwplc.com.