TIDM32OW
RNS Number : 2198Q
Brit Limited
17 February 2023
Brit LIMITED
PRESS RELEASE
17 February 2023
UNAUDITED Full Year results for the Year ended 31 December
2022
a strong and ROBUST UNDERWRITING result AND SIGNIFICANT
GROWTH
Key points
-- Combined ratio (1) of 96.6% (2021: 95.7%) and an underwriting
profit of $95.4m (2021: $90.6m).
-- GWP of $3,970.0m, an increase of 24.7% over 2021 ($3,238.3m) at constant rates of exchange.
-- Risk adjusted premium rates increases on renewal business of
12.4% (2021: 12.9%), giving an compound increase since 1 January
2018 of 54.1%.
-- A strong full year attritional ratio (1) of 51.0% (2021: 47.7%).
-- Major losses of $338.5m, impacting the CoR by 12.0pps (2021: $324.4m / 15.5pps).
-- Investment return (2) of -$132.1m or -2.3%, including $131.5m
of unrealised losses, reflecting the market conditions (2021: gains
of $171.9m or +3.3%).
-- Result on ordinary activities before tax and FX of -$92.8m
(2021: +$247.1m) and result after tax of -$96.3m (2021:
+$236.9m).
-- Return on net tangible assets of -3.6%(3) (2021: +19.4%).
-- Cap ital position remains strong, with our capital surplus
increasing to $709.8m (2021: $617.9m). Strong capital ratio (4) of
152.8% (2021: 139.1%).
-- A highly successful second year of trading for Ki, recording
GWP of $834.1m (2021: $395.6m), an increase at constant FX rates of
115.4%, and a combined ratio of 99.4%.
-- Key developments include:
o Agreed the sale of our Ambridge MGA companies to Amynta
Group;
o Executed our catastrophe strategy;
o Relaunched our Data and Digital strategy, supported by our new
CTO and CDO; and
o Continued to focus on our customers through claims innovation,
including deploying our algorithm to enable a faster claims
response following Hurricane Ian, and by launching the Direct Pay
payment solution in the US.
Martin Thompson, Group Chief Executive Officer (5) ,
commented:
'In late October, Matthew Wilson took the decision to step down
from his roles of Group CEO and Executive Chairman of Ki to focus
on his health and his family. Matthew leaves a business that is in
good shape and I am excited about our potential and how much more
we have to achieve.
I am pleased to report that our strategy has delivered a
resilient underwriting performance for 2022 with a combined ratio
of 96.6%. In a year that saw significant losses arising from
natural catastrophes and the Ukraine crisis, this is a robust
result and testament to our underwriting discipline, further
evidenced by our healthy attritional ratio.
Alongside delivering a profitable underwriting result, we were
able to grow our premium written to $3,970.0m, an increase of 24.7%
at constant rates of exchange. This growth reflects a combination
of both new business and rate increases across our direct and
reinsurance portfolios as well as Ki's continued expansion. Ki
continues to develop at pace and has already gained significant
traction in the market, writing $834.1m of premium in 2022 and
reporting a very creditable combined ratio of 99.4%. We are hugely
optimistic about the prospects for Ki in 2023 and beyond as we
continue to see growing demand for its capacity and consistently
high broker engagement with its digital business model.
Brit's result for all operations before FX and tax was a loss of
$92.8m and our return on net tangible assets was -3.6%. This
reflected our underwriting profit offset by negative investment
return, corporate expenses and finance costs.
During the year we also made progress with our technology and
data strategy. This will be a priority in the coming year and will
help shape Brit as a lead underwriter of the future. This strategy
will see us deliver an innovative, data-driven and technology
enabled platform that empowers our underwriting and claims teams to
thrive.
The major loss events of 2022 bought into sharp focus the
crucial role insurance plays in times of crisis, and our ability to
deliver a best-in-class claims service continues to be a core
focus. We have supported our clients when they need it most, with
innovation at the heart of our claims approach. In the immediate
aftermath of Hurricane Ian, using our proprietary machine learning
algorithm in tandem with ultra-high-resolution aerial imagery, we
were able to make our first claim payments one week after the
event.
Going into 2023, the industry faces a number of challenges and
uncertainties, driven by the volatile geopolitical and economic
landscapes, including ongoing inflationary pressures. Wider
challenges also continue to exist such as the potential for
increased frequency and magnitude of major loss events, excess
capacity, the cost of doing business in the London Market, and
increased competition. However, against this backdrop we believe
Brit is uniquely placed. We have enviable scale and reputation as a
lead market, a clear digital and data strategy that will make us
more efficient and easier to do business with, and a proven
commitment to investing in innovative solutions that improve
outcomes for our customers. Underpinning this is a differentiated
culture and some of the industry's best talent, taken together we
are excited about how Brit is positioned to respond to the
opportunities and challenges ahead.'
Notes
1 The calculation of the 2021 underwriting ratios contains an adjustment
whereby the premium paid for the loss portfolio reinsurance ($344.1m)
is added back to premium earned net of reinsurance, with an equal
and opposite adjustment to net claims incurred. The benefit of a
$35.0m reserve release resulting from the additional protection
afforded by the contract is included in the calculation. This contract
was endorsed in 2022, which is reflected in the 2022 ratio calculations,
with a return premium ($37.2m) deducted from premium earned net
of reinsurance, with an equal and opposite adjustment to net claims
incurred, and with the resulting reserve strengthening of $0.7m
included in the calculation. The Directors believe that the ratios
when calculated after these adjustments present a more consistent
and understandable view of the Group's performance.
2 Inclusive of return on investment related derivatives, return on
associates and after deducting investment management expenses.
3 Return on net tangible assets (RoNTA) shows the return generated
by our operations for the owners of Brit Limited before foreign
exchange movements, compared to the adjusted net tangible assets
deployed in our business attributable to them. The impact of the
Group's defined benefit pension schemes are excluded from the calculation.
Adjusted net tangible assets are defined as total equity, less intangible
assets net of the deferred tax liability on those intangible assets,
less non-controlling interest.
4 The capital ratio is calculated as total available resources divided
by management entity capital requirements. The management entity
capital requirement is the capital required for business strategy
and regulatory requirements.
5 Mr Thompson was appointed as Group Chief Executive Officer on 31
October 2022. His appointment is subject to regulatory approval.
For further information, please contact:
+44 (0) 20 3857
Antony E Usher, Group Financial Controller, Brit Limited 0000
+44 (0) 20 3727
Edward Berry, FTI Consulting 1046
+44 (0) 20 3727
Tom Blackwell, FTI Consulting 1051
Disclaimer
This press release does not constitute or form part of, and
should not be construed as, an offer for sale or subscription of,
or solicitation of any offer or invitation or advice or
recommendation to subscribe for, underwrite or otherwise acquire or
dispose of any securities (including share options and debt
instruments) of the Company nor any other body corporate nor should
it or any part of it form the basis of, or be relied on in
connection with, any contract or commitment whatsoever which may at
any time be entered into by the recipient or any other person, nor
does it constitute an invitation or inducement to engage in
investment activity under Section 21 of the Financial Services and
Markets Act 2000 (FSMA). This document does not constitute an
invitation to effect any transaction with the Company or to make
use of any services provided by the Company. Past performance
cannot be relied on as a guide to future performance.
Brit at a Glance
Brit is a market leader in global specialty insurance and
reinsurance, writing a broad range of commercial insurance. Brit is
a highly regarded and an influential name in the Lloyd's market and
we pride ourselves on our specialist underwriting and claims
expertise.
We operate globally via a combination of our own international
distribution network that benefits from Lloyd's global licences,
and through our broker partners. Our underwriting capabilities are
underpinned by a strong financial position, our underwriting
expertise and discipline and customer service, enhanced by a data
led approach and strong focus on innovation.
We have a strong track record and are passionate about our
business, our people and our clients and we have focused on
cultivating a franchise that is built on delivering exceptional
service. Our culture is centred on achievement and we have
established a framework that identifies and rewards strong
performance.
Brit is a member of the Fairfax Financial Holdings Limited group
of companies (Fairfax). The Fairfax financial result for the six
months ended 30 June 2022, published on 28 July 2022, includes the
Brit financial result.
www.britinsurance.com
The Fairfax Group
Since June 2015, Brit has been a member of the Fairfax Financial
Holdings Limited group (Fairfax), a Canadian company whose shares
are listed on the Toronto Stock Exchange ( www.fairfax.ca ).
At 31 December 2022, Fairfax owned 86.2% of Brit Limited while
the remaining 13.8% was owned by OMERS Administration Corporation
(OMERS), the defined benefit pension plan for municipal sector
employees in the Province of Ontario, Canada . Fairfax has the
option to purchase OMERS' interest in Brit at certain dates
commencing in October 2023.
We believe that Fairfax is an excellent partner for Brit,
enabling us to enhance our global product offering. It provides us
with a strong and stable base for long-term growth and provides us
with opportunities to expand our underwriting and distribution
channels, combined with the freedom to pursue our own identity,
philosophy and ambitions.
Business Review
Overview
For the twelve months to 31 December 2022, Brit returned a CoR
of 96.6% (2021: 95.7%) and an underwriting profit of $95.4m (2021:
$90.6m).
The underlying quality of our result has increased significantly
compared to 2021. The 2022 CoR of 96.6% was achieved despite a
marginal strengthening of 0.2pps to prior year reserves (2021:
4.8pps benefit), and in the absence of a loss portfolio reinsurance
benefit (2021: 1.7pps). The impact of major loss in 2022 was
reduced, despite another year of significant catastrophe activity
and significant market losses, reflecting our focus on managing our
exposures and the benefit of our reinsurance programme.
Our premium growth in 2022 was also significant, with GWP
increasing by 24.7% at constant FX rates to $3,970.0m (2021:
$3,238.3m). Our retention ratio, the proportion of our premium that
renews, remained stable at 83.7% (2021: 83.7%). Across all lines,
we have retained our underwriting discipline and remain prepared to
discontinue accounts that we believe are inadequately priced or
outside of our appetite.
Ki has continued to outperform its growth plans and has had a
successful second year of trading.
Market conditions
The market has continued to benefit from strengthening premium
rates during 2022. Brit achieved an overall risk adjusted rate
increase of 12.4% (2021: 12.9%). All Divisions achieved rate
increases, with the largest increases achieved in Financial and
Professional, Programmes and Facilities, Property Treaty, Ambridge
Re and Ambridge Specialty.
The compound risk adjusted rate increase since 1 January 2018
now totals a very strong +54.1%. Rating increases since 2020 by
portfolio are as follows:
2020 2021 2022
% % %
Financial and Professional
Liability 11.9 39.8 30.8
Programmes and Facilities 7.4 7.7 10.9
Property 13.7 8.4 7.6
Specialty 13.0 8.6 6.7
Ambridge Speciality 15.1 16.1 8.0
Ambridge Transactional - 18.4 0.7
----- ----- -----
Direct portfolios 11.7 15.4 14.4
----- ----- -----
Casualty Treaty 5.1 6.3 3.5
Property Treaty 8.8 7.9 9.9
Ambridge Re 9.0 6.6 9.4
----- ----- -----
Reinsurance portfolios 8.5 7.8 7.1
----- ----- -----
TOTAL 10.6 12.9 12.4
----- ----- -----
The economic environment and the impact of inflation
Brit has carefully considered the impact of the higher levels of
inflation. Increased focus has been placed on ensuring Brit's
pricing models adequately address current inflationary trends.
Feeding into these models is an enhanced framework assessing the
key drivers of claim settlement costs for each class of
business.
Our reserves continue to be set at a margin above the actuarial
estimate which is set on a best estimate basis. As part of the
year-end reserving exercise, the impact of inflation has been
considered in detail by the Actuarial team to ensure that
assumptions are consistent with our forward looking expectations
for claims inflation. Various techniques have been considered in
line with guidance from Lloyd's and regulators.
Major loss activity
-- Natural catastrophe s
2022 again witnessed a high level of natural catastrophe
activity, with insured losses estimated at over $140bn, marginally
below 2021 levels (source: Gallagher Re). Activity was dominated by
Hurricane Ian, accounting for 39% of the loss figure, while it was
another year where climate change, exposure growth and inflation
had a significant influence . Of the last six years, only 2019 has
recorded insured natural catastrophe losses of under $100bn.
Major natural catastrophe losses amounted to $306.6m and added
10.9pps to the Brit CoR in 2022 (2021: $296.2m/15.5pps), driven by
Hurricane Ian ($280.2m net), Australian floods ($16.9m net) and
winter storm Elliott ($9.5m net).
-- Russian invasion of Ukraine
Brit has been shocked and horrified by the unfolding events in
Ukraine. Brit's thoughts are with the Ukrainian people and
especially with our Fairfax colleagues based there. Following the
invasion, Brit took the decision to cancel or non-renew all
(re)insurances of entities domiciled in Russia, entities with risk
locations solely in Russia, and Russian owned assets and
entities.
Losses arising from the Russian Invasion of Ukraine totalled
$31.9m net, or 1.1 CoR percentage points. This follows an
assessment of direct exposures within the Terrorism, Casualty
Treaty, Marine War, Contingency and Political and Credit Risk
classes, along with potential secondary impacts. Brit does not
write Aviation business. Given the ongoing nature of the event ,
neither the duration nor the ultimate outcome can be predicted with
any certainty, and we continue to monitor the situation
closely.
COVID-19
In 2022 there has been no material movement in overall reserves
held for COVID-19 related claims. We have experienced an increase
in incurred claims and a corresponding reduction in the provision
for incurred but not reported claims.
Supporting our customers
Our customers are our priority. When a customer has a claim, we
understand they are facing difficult and unexpected challenges.
They expect the insurance they have purchased to respond and
deliver when they need it most. We see each and every claim as an
opportunity to deliver the claims service our customers need to
move forward with their lives.
The Brit claims team have maintained a focus on responding to
our customers and pursuing opportunities to reduce claims lifecycle
and bring claims to resolution at every opportunity through
innovation and technology:
-- Claims response to Hurricane Ian
Brit continues to lead the London Market in its use of
geospatial technology to advance property claims adjusting
capabilities post catastrophe and in normal course claims response.
In the immediate aftermath of Hurricane Ian, using our proprietary
machine learning algorithm in tandem with ultra-high-resolution
aerial imagery to accelerate the accurate identification of US
property damage, we were able to virtually adjust and approve
claims payments directly from our offices in London. This enabled
us to make our earliest claim payment on 8 October 2022, helping
the impacted families and businesses. This represents a lifecycle
of natural catastrophe impact to payment of approximately one
week.
-- Direct Pay solution
In March 2022, we launched the Direct Pay payment solution in
the US, with very favourable feedback from customers, coverholders
and brokers. In partnership with Visa, Mastercard and Vitesse,
Direct Pay offers our customers the ability to receive claims
payments securely and instantly to their bank cards. This follows
the successful 2021 adoption of Direct Pay solution in the UK.
Other underwriting developments
-- E xecution of catastrophe strategy
In recent years the market has experienced a level of
catastrophe activity significantly in excess of historical levels.
We have reviewed the catastrophe strategy of our US Property
portfolio, focusing on Property Treaty, Property Facilities and
Property Open Market. As a result, we have focused on achieving
minimum rate requirements, have successfully increased inflationary
guards and minimum valuations, and have redistributed capacity away
from cat intensive regions. The changes are also expected to reduce
reliance on reinsurance which is increasingly expensive given the
scarcity of capacity in the hardening market.
The actions are expected to result in a gross exposure reduction
for Property Catastrophe across the portfolios of Syndicate 2987
and Syndicate 2988. Syndicate 2988 has exited direct Property
business and is focused on writing Property Binders and Property
Open Market only via inwards Syndicate 2987 quota shares to benefit
from Syndicate 2987's actions and more diversified portfolio.
-- Senior underwriting appointments
In 2022, we have continued to strengthen our underwriting teams
with some experienced new hires. This has included Cyber, Accident
and Health, North American Open Market Property and Property
Facilities (Flood and Transportation).
-- Continued portfolio management
Where classes remain challenging, we have continued to take
action to improve our performance and maintained our rigorous risk
selection criteria. During 2022, we ceased writing Ambridge
Property Facultative and Property Liability US SCGL.
-- 2023 business planning
In 2023, Lloyd's market stamp capacity is projected to grow to
GBP48bn ($57.7bn), an increase of c.20% over 2022 levels.
For 2023, Brit (Syndicates 2987, 2988 and 1618 collectively) has
a stamp capacity of GBP3,410.2m ($4,102.2m), a 33.3% increase over
2022. This makes Brit one of the fastest growing large managing
agents in the market, demonstrating the value and strength of Brit
to the Lloyd's Market.
Syndicate 2987's capacity is planned to grow by 27.6% over the
2022 year of account with a commensurate top line increase. As in
previous years, we continue to actively manage the portfolios by
segmenting classes into 'high performing', 'core', 'managed
growth', 'overseas distribution' and 'portfolio management'. Growth
(excluding RARC) is driven primarily by the 'high performing' and
'core' segments, while the largest increases in RARC are targeted
on the weakest performing segments of the portfolio.
Syndicate 2988's capacity is planned to grow by 21.0% over the
2022 year of account. The 2023 plan promotes continued
diversification of the Syndicate's portfolio, focusing on growth in
the 'high performing' segment together with managed shifts in
income across the portfolio in such a way as to generate a better
balance between Property, Specialty, and Casualty lines. Growth in
Syndicate 2988 premium is largely a function of greater penetration
into Syndicate 2987's business plus selective growth of existing
business.
Syndicate 1618's GWP is planned to continue to grow in its third
year of trading. The first two years of trading have been a great
success and its plan for 2023 reflects its rapid progress to date
and the significant opportunity that the Ki model presents. Growth
is planned to come from a combination of renewals in its existing
portfolio and greater penetration into the follow market.
Brit's non-catastrophe reinsurance renewals at 1 January have
been successfully completed, with the erosion of coverage minimised
despite challenging market conditions. The cost has increased in
several lines, but within our business planning assumptions.
Brit's main catastrophe protections renew at 1 April and
discussions are currently underway with our reinsurance partners.
Currently, we do not foresee any material challenges in placing the
required protections.
-- Brit Private Client
Brit Private Client took overall first place in the Highpoint
High Net Worth Insurer Survey. This survey has been running for
eight years and canvassed feedback from 100+ brokers in the UK,
covering new business, underwriters, documentation, quality of
cover, claims handling, renewals, and market position. Out of the
ten insurers covered by the survey, Brit came first or second in
all the categories. This significant achievement in just 18 months
since launch shows that our proposition of underwriting, claims and
service excellence has been welcomed by the market.
Review of o ther key business developments during 2022
Other key strategic developments during 2022 have included:
-- Ambridge sale agreement and our US strategy
On 7 January 2023 Brit entered into an agreement to sell
Ambridge Group to Amynta Group. The Company will receive
approximately $400m on closing, comprising of cash of $275m and a
promissory note of approximately $125m. An additional $100m may be
receivable, subject to a clawback based on 2023 performance targets
of Ambridge. Closing of the transaction is subject to customary
closing conditions, including regulatory approvals, and is expected
to occur in the second quarter of 2023.
Ambridge is a leading global Managing General Underwriter,
offering a broad range of transactional, specialty casualty, cyber,
professional liability, and reinsurance coverages. Ambridge places
over $600m of gross premium written on behalf of Brit and a number
of highly rated global insurers. Jess Pryor, Executive Chairman of
Ambridge, and Jeff Cowhey, Chief Executive Officer of Ambridge,
will continue to lead the Company. We look forward to continuing
our underwriting relationship with Ambridge after the sale.
-- Senior Corporate appointments
-- Group CEO and Executive Chairman of Ki: On 12 September,
Matthew Wilson resumed his role as Group CEO and Executive Chairman
of Ki Group, following a leave of absence in September 2021 to
undergo treatment for health reasons. On 31 October, Matthew took
the decision to step down from his roles at Brit to focus on his
health and his family. He will continue to work within the Fairfax
Group as an Executive Advisory Director.
Matthew has been succeeded by Martin Thompson, who acted as
Interim CEO during Matthew's leave of absence.
-- Bilge Mert, Chief Technology Officer (CTO), began her role in
January 2022. Bilge is responsible for leading Brit's technology
and data strategy to further advance the business' focus on
delivering an innovative, data-driven and technology empowered
platform for underwriting, claims and operations. Bilge is
supported by Kanika Chaganty, Chief Data Officer (CDO), who also
joined in January 2022 and is responsible for leading Brit's data
strategy and leveraging its data and analytics capabilities to
support Brit's digital vision.
-- Data and digital strategy
We have continued to evolve our technology and digital
strategies. Following the appointment in early 2022 of our new CTO
and CDO, a review of our digital and data strategy was undertaken.
Our ambition is to deliver a digital and data driven technology
platform that improves our underwriting performance over the long
term, and future proofs Brit's position as an innovative leader in
the market. This will be achieved through a modern and flexible
technology architecture, strong partnership with the business
functions and key talent with digital and data skills. Our strategy
focuses on four pillars: Data Modernisation, Digital Foundations,
Digital Underwriting, and Finance Modernisation. The roadmap will
be phased and prioritised in line with the Brit strategy starting
with building the foundations and implementation of the Digital
Underwriting capabilities.
-- Brit Group Services Limited Defined Benefits Pension Scheme - bulk annuity contract
In December 2022, the Trustee of the Scheme purchased a bulk
annuity ('buy-in') policy with a specialist insurer for a premium
of GBP105.2m ($126.5m) . This policy, which replaces the majority
of the Schemes investments, matches the benefits due to all scheme
members and provides the income to the Scheme to fund payments as
they fall due. Following this transaction, the Scheme retains a
surplus of $24.8m ($16.1m net of deferred tax). This contract
provides added security to members, while reducing the risk of Brit
being required to provide further funding to support member
benefits. No decision has been made as to whether the scheme will
proceed to a full buy-out at some point in the future.
Ki, the first algorithmically driven Lloyd's of London
syndicate
In its second year Ki continued its strong growth trajectory,
more than doubling its GWP to $834.1m, establishing itself at a
sustainable scale and confirming the huge potential of the business
model. We are extremely proud to report that Ki also delivered an
underwriting profit in 2022, with a COR of 99.4% despite the impact
of Hurricane Ian and earnings drag as it continues to grow. This
combination of stellar growth and profitability demonstrates the
truly differentiated value of Ki's digital, data driven business
model.
Ki embraces all that is represented by 'The Future at Lloyd's'
by bringing data, technology, innovation, and artificial
intelligence to the fore in the complex world of commercial and
specialty underwriting. Ki is backed by its capital partners,
Blackstone Tactical Opportunities (Blackstone) and Fairfax.
Ki has built a platform that is unique in the Lloyd's market,
combining algorithmic underwriting with digital distribution to
offer a compelling proposition to Lloyd's brokers and clients. The
speed and certainty with which Ki offers follow capacity has been
embraced by our brokers and demand for our capacity continues to
rapidly grow.
Built on strong foundations developed in partnership with Google
Cloud and University College London's Computer Science Department,
we have continued to develop differentiated technology in our
broker platform and proprietary underwriting and risk models. Our
in-house team of leading data scientists and engineers has
developed new capabilities at pace, bringing new products to our
platform and driving even greater service to brokers and control of
our underwriting portfolio. It is this spirit of continuous
improvement that defines the business.
Our technology is partnered with a strong underwriting culture,
with a focus on sustainable profitability and discipline embedded
in the business. The Portfolio Underwriting function at Ki is
focused on managing our portfolio as well as servicing our brokers
and clients to ensure we remain focused on the fundamentals of
specialty insurance.
Against the backdrop of a challenging year with multiple
catastrophic events around the globe, Ki's full year 2022
performance is especially pleasing and demonstrates strong control
over catastrophe risk. The business has delivered a full year
combined ratio of 99.4% (2021: 113.6%) in just its second year of
operation.
Ki has scaled ahead of plan with growth of 115.4 % in GWP at
constant FX rates, rising to $834.1m (2021: $395.6m). This reflects
continued, growing support from the Lloyd's broking community for
our unique offering and the favourable trading conditions.
Underwriting profitability was achieved against the backdrop of
significant catastrophe activity in 2022, with Ki exposed to gross
losses from Hurricane Ian, the Australian floods, Ukraine, and
winter storm Elliott. The net impact of these events was reduced by
our catastrophe reinsurance programme and whole account quota
share, resulting in a major loss ratio of 9.7% (2021: 16.0%).
Ki's core proposition of expense efficiency delivered through a
digital business model has been successfully demonstrated, with a
total operating expense ratio of 34.6% (2021: 44.0%). This is
despite the continued impact of earnings drag and start-up
expenses.
The net attritional loss ratio is 54.3% (2021: 53.4%). This
reflects the latest reserving position on the 2021 and 2022 years
of account, including provision for excess inflation and reserve
risk.
In November 2022, Ki increased its sustainability linked 'Funds
at Lloyd's' letter of credit agreement to $180.0m with new and
existing banking partners. The facility, which is structured to
support Syndicate 1618 as Ki grows, is linked to the ESG rating of
Ki's 'Funds at Lloyd's' investment portfolios and Syndicate 1618's
assets, with its pricing depending on the compliance of Ki's
investment portfolios with ESG targets. This builds on the
investment guidelines Ki has established for its third-party
managers, which incorporate ESG principles and targets, and will
help Ki build a sustainable footprint.
Ki has continued to invest in the wider global community,
funding the planting of approximately 117,000 trees, and sponsoring
four women to take nano-degrees in computer coding and data, hiring
three permanently.
Ki has also continued to invest in its team, and the quality of
talent attracted from both the tech and insurance industries is
testament to Ki's exciting vision. We have hired 56 people during
2022, including six apprentices and supporting six masters
students.
We enter 2023 hugely optimistic about the prospects for Ki and
anticipate continued growth. We have proven our ability to return
an underwriting profit as a technology-led insurer, are seeing
growing demand for our capacity and are enjoying consistently high
engagement with our digital business model. Our technology
continues to develop at pace and our talented people are stronger
than ever.
Further information can be found at www.ki-insurance.com .
Financial Performance Review
Key Performance Indicators
At Brit we monitor and measure our performance by reference to
certain key performance indicators (KPIs). These KPIs are used by
us to manage our business and allow us to see, at a glance, how we
are performing.
Our four KPIs show the returns that we are generating, the
performance of our underwriting activities, our investment
portfolio, and our financial strength . The development of our KPIs
over the five years (set out below) reflects our focus on
underwriting performance and improving underwriting market
conditions, together with the challenges presented by the increased
frequency and severity of catastrophe events, COVID-19, and the
increase in investment market volatility.
Business KPI Commentary Track record
area
Overall Return on RoNTA shows the return generated by our 2022 (3.6)%
performance net tangible operations for the owners of Brit Limited 2021 19.4%
assets (RoNTA) before foreign exchange movements, compared 2020 (20.1)%
to the adjusted net tangible assets deployed 2019 18.9%
in our business attributable to them. 2018 (15.2)%
The impact of the Group's defined benefit
pension schemes are excluded from both
the return and the assets in the calculation.
In 2022, our RoNTA in respect of continuing
and discontinued operations combined was
(3.6)%, reflecting a positive underwriting
result, offset by negative investment
return.
This return resulted in a five-year average
RoNTA of (0.1)%. RoNTA for 2022 after
foreign exchange movements was (4.5)%
(2021: 18.2 %).
---------------- ------------------------------------------------ --------------
Underwriting Combined The combined ratio is our key underwriting 2022 96.6%
ratio metric and measures the profitability 2021 95.7%
of our underwriting. It shows how much 2020 112.7%
of every $1 of premium is spent in the 2019 95.8%
total costs of sourcing and underwriting 2018 103.2%
the business and settling claims. A combined
ratio under 100% indicates underwriting
profitability.
Our combined ratio in 2022 was 96.6%,
12.0pps of which was in respect of major
losses (including 1.1pps arising from
the Russian invasion of Ukraine). It also
included a 0.2pps increase in ultimate
claim estimates for prior years Over the
past five years, we have delivered an
average combined ratio of 100.8% despite
the impact of COVID-19 and extreme catastrophe
years of 2017 and 2018. Excluding COVID-19
related claims, our five-year average
combined ratio was 97.4%. Our 2022 combined
ratio in respect of continuing business
was 96.9% (2021: 97.0%).
---------------- ------------------------------------------------ --------------
Investment Investment We assess the performance of our investment 2022 (2.3)%
management return portfolio by comparing the return generated 2021 3.3%
by our invested assets, net of external 2020 1.0%
investment related expenses, against the 2019 3.6%
average value of those invested assets. 2018 (2.0)%
Our investment strategy takes a long-term
view of markets, which can lead to significant
variations in our year-on-year return
figures. Over the past five years, we
have delivered an average investment return
of 0.7%.
---------------- ------------------------------------------------ --------------
Capital Capital The capital ratio measures our financial 2022 152.8%
management ratio strength position by comparing our available 2021 139.1%
capital resources to the capital we need 2020 122.1%
to hold to meet our management entity 2019 128.4%
capital requirements. 2018 130.4%
Our financial position remains strong.
At 31 December 2022, Group capital resources
totalled $2,053.0m giving surplus management
capital of $709.8m (2021: $617.9m), or
52.8% (2021: 39.1%) over our Group management
capital requirement. During the period,
our capital requirements reduced from
$1,581.6m to $1,343.2m, primarily reflecting
increased requirements resulting from
growth in our 2023 underwriting plans,
offset by reduction in capital requirements
due to increases in interest rates.
---------------- ------------------------------------------------ --------------
Overview of Results
The Group's income statement, re-analysed to show the key
components of our result, is set out below:
2022 2021 2020 2019 2018
$m $m $m $m $m
Gross written premium 3,970.0 3,238.3 2,424.4 2,293.5 2,239.1
Net written premium 3,146.4 1,998.3 1,775.6 1,656.2 1,482.4
Net earned premium 2,866.9 1,754.3 1,710.7 1,641.9 1,468.0
Underwriting result 95.4 90.6 (217.3) 69.7 (52.4)
Return on invested assets,
net of fees (132.1) 171.9 44.6 148.1 (83.3)
Gain on deconsolidation - - -
of subsidiaries - 19.8
Gain on business combination - 6.1 - 10.2 -
Corporate expenses (56.9) (44.7) (23.6) (20.3) (20.0)
Finance costs (20.1) (18.3) (23.6) (23.7) (18.8)
Other items 20.9 21.7 (15.6) 0.3 (3.4)
-------- -------- -------- -------- --------
(Loss)/profit on ordinary
activities before tax and
FX (92.8) 247.1 (235.5) 184.3 (177.9)
FX movements (15.1) (19.8) 5.0 2.0 (12.4)
(Loss)/profit on ordinary
activities before tax (107.9) 227.3 (230.5) 186.3 (190.3)
Tax 11.6 9.6 (1.5) (6.4) 23.8
(Loss)/profit after tax (96.3) 236.9 (232.0) 179.9 (166.5)
(Loss)/profit after tax
- continuing operations (118.0) 212.3
(Loss)/profit after tax
- discontinued operations 21.7 24.6
-------- --------
(Loss)/profit after tax
- total (96.3) 236.9
Group performance
Our 2022 result reflected premium growth, a positive and
resilient underwriting result (a strong attritional performance,
partly offset by major loss activity including losses arising from
the Russian invasion of Ukraine ), and a negative investment
return.
Our 2021 result reflected solid a strong attritional
performance, prior year reserve releases (partly resulting from a
loss portfolio reinsurance), good investment return and a gain on
the deconsolidation of subsidiaries, partly offset by major loss
activity and the continued impact of COVID-19.
The result on ordinary activities for 2022 before tax and FX was
a loss of $92.8m (2021: profit of $247.1m), after FX but before tax
was a loss of $107.9m (2021: $227.3m) and after tax was a loss of
$96.3m (2021: profit of $ 236.9m).
The result after tax attributable to continuing operations was a
loss of $118.0m (2021: profit of $212.3m) and the result
attributable to discontinued operations was a profit of $21.7m
(2021: profit of $24.6m). The entities generating the profit
attributable to discontinued operations are classified as held for
sale and are expected to be deconsolidated in the second quarter of
2023.
Return on adjusted net tangible assets (RoNTA), excluding the
effects of FX, was negative 3.6% (2021: positive 19.4%). RoNTA for
2022 after including foreign exchange movements was negative 4.5 %
(2021: positive 18.2%).
Performance measures
In addition to our KPIs, we have other measures that offer
further insight into the detail of our performance. These measures
include:
-- Premium related: Risk adjusted rate change (RARC); Retention rate;
-- Claims related: Claims ratio; Attritional claims ratio; Major
claims ratio; Reserve release ratio; and
-- Underwriting expense related: Expense ratio; Commission
expense ratio; Operating expense ratio.
The performance measures set out below are for continuing and
discontinued business combined. Ratios for continuing business are
included where they differ from those for the combined
business.
Underwriting
Overview
Our underwriting result for the year was a profit of $95.4m
(2021: $90.6m ) and our combined ratio was 96.6% (2021: 95.7%). The
premiums, claims and expenses components of this result are
examined below.
Premiums written
Our gross premium written (GWP) across our key reporting
segments is as follows:
Growth
2022 2021 Growth at constant
$m $m % FX rates
%
--------- -------- --------
Core underwriting 3,116.8 2,834.1 10.0 11.7
Other underwriting 19.1 8.6 122.1 164.9
3,135.9 2,842.7 10.3 12.2
Ki 834.1 395.6 110.8 115.4
Group total 3,970.0 3,238.3 22.6 24.7
Note 1: The 2021 figures have been re-analysed to reflect the
changes to the underwriting class monitoring structure introduced
in 2022.
GWP, analysed by portfolio, is as follows:
Growth
Portfolio 2022 2021 Growth at constant
$m $m % FX rates
%
Direct underwriting portfolios:
Financial and Professional Liability 767.1 603.9 27.0 30.1
Programmes and Facilities 881.0 658.2 33.8 34.7
Property 636.6 478.8 33.0 37.7
Specialty 481.8 398.1 21.0 24.6
Ambridge Specialty 79.8 62.7 27.3 27.3
Ambridge Transactional 106.6 108.6 (1.8) 2.2
2,952.9 2,310.3 27.8 30.7
Reinsurance underwriting portfolios:
Casualty Treaty 416.9 299.8 39.1 40.6
Property Treaty 399.9 384.5 4.0 5.1
Ambridge Re 184.1 175.5 4.9 4.9
1,000.9 859.8 16.4 17.4
Underwriting classes in run-off (10.1) 60.1 (116.8) (117.1)
Other underwriting 26.3 8.1 224.7 164.9
Total 3,970.0 3,238.3 22.6 24.7
Note 1: To aid comparability, the 2021 figures have been
re-presented to reflect the changes to the underwriting class
monitoring structure introduced for 2022.
Gross written premium (GWP) increased by 22.6% to $3,970.0 m
(2021: $3,238.3m). At constant exchange rates, the increase was
24.7%. Our core underwriting segment increased by 10.0% to
$3,116.8m (2021: $2,834.1m), while Ki, in its second year of
underwriting, continued to gain significant traction, writing
$834.1m (2021: $395.6m), an increase of 110.8%. Our other
underwriting segment increased by 122.1% to $19.1m (2021:
$8.6m).
The drivers of the increase in Group GWP, which was in line with
expectations, were as follows:
-- Current year premiums: Increases in our core segment were
driven by Programmes and Facilities, Casualty Treaty, Financial and
Professional Liability, Property and Specialty. These increases
reflected the strong rating environment and targeted growth as we
capitalise on market opportunities, partially offset by our
withdrawal from a number of underperforming classes, and the
non-renewal of certain accounts due to poor performance or pricing
inadequacy. Within Ki, premium growth was seen across all
portfolios, especially Property, Financial and Professional
Liability and Financial and Professional Liability, reflecting rate
increases and new business opportunities.
-- Prior year premium development: The book again experienced
favourable development on prior year premiums, at a similar rate to
that experienced in 2021. This resulted in a year-on-year increase
of $17.6m (2021: $6.5m).
-- Foreign exchange: The impact of foreign exchange resulted in
a $58.9m year-on-year reduction in premium, which reflects the
movement during 2022 of the US dollar against a number of
currencies in which the Group writes business.
Premium rate change
Measure Commentary Track record
Risk adjusted The risk adjusted rate change (RARC) shows whether 2022 12.4%
rate change premium rates are increasing, reflecting a hardening 2021 12.9%
market, or decreasing, reflecting a softening market. 2020 10.6
A hardening market is one indicator of increasing %
profitability. The data reflects internal estimates 2019 5.9%
by Brit's underwriters, based on available year-on-year 2018 3.7%
underlying renewal data after allowing for changes
to terms and conditions. Generally, no adjustment
is made to the figures to reflect the impact of
inflation beyond the level of inflation in the
underlying exposure measure used in pricing.
In 2022, we achieved an overall RARC of 12.4%,
bringing the compound RARC since 1 January 2018
to 54.1%.
--------------------------------------------------------- -------------
2022 saw a continued positive rate environment, with an overall
risk adjusted premium rate increase of 12.4% across the portfolio
(2021: 12.9%). The compound increase since 1 January 2018 now
totals 54.1%.
In 2022, direct business premium rates increased by 14.4% (2021:
15.4%), while reinsurance business increased by 7.1% (2021: 7.8%).
All portfolios achieved rate increases, with the largest achieved
in Financial and Professional Liability, Programmes and Facilities,
Property Treaty and Ambridge Re.
Retention rate
Measure Commentary Track record
Retention The retention rate shows the proportion of our 2022 83.7%
rate business that renews, on a premium weighted basis, 2021 83.7%
compared to the previous year. 2020 76.1%
2019 78.0%
2018 80.2%
---------------------------------------------------- -------------
Our retention rate for the period was unchanged 83.7 % (2021:
83.7 %). We continue to improve our performance by exiting
underperforming business and increasing lines on high performing
accounts.
Outwards reinsurance
Our reinsurance expenditure in 2022 was $823.6m or 20.7 % of GWP
(2021: $ 1,240.0m /38.3%), a decrease of $416.4m .
The 2021 reinsurance expenditure included:
-- A loss portfolio reinsurance contract with RiverStone
Managing Agency Limited (for and on behalf of Lloyd's syndicate
3500). Excluding this transaction, reinsurance expenditure was
$895.9m or 27.7% of GWP.
-- $93.0m in respect of a new multi-year XL contract supported
by the Brit-sponsored Cat Bond issued in late 2020 by a segregated
cell of Sussex UK, additional Cyber protections, and the
reinsurance programme for Ki.
The 2022 figure included a return premium of $37.2m following an
endorsement to the 2021 loss portfolio reinsurance contract.
In 2022, there was a measured reduction in proportional
reinsurance purchased following a decision to retain a greater
amount of our most profitable lines while maintaining comprehensive
cover. This was partially offset by inwards premium growth in
portfolios covered by adjustable excess of loss contracts and
proportional reinsurance treaties. Ki's reinsurance expenditure
also increased reflecting its premium growth.
Net earned premium
Net earned premium (NEP) in 2022 increased by 63.4% to $2,866.9m
(2021: $1,754.3m) . At constant exchange rates, the increase was
67.0%. Excluding the impact of the 2021 loss portfolio reinsurance
contract and subsequent endorsement, which impacted core
underwriting , NEP increased by 34.9%.
Brit's core underwriting increased by 46.6 % to $2,283.4m (2021:
$1,557.7m) and Ki increased by 205.7% to $506.3m (2021: $165.6m).
Other underwriting increased by 149.0% to $77.2m (2021: $31.0m). T
hese movements reflected premium growth and lower reinsurance
spend.
Claims
Measure Commentary Track record
Claims ratio The claims ratio measures the performance of the 2022 63.2%
whole underwriting book, encompassing risks written 2021 58.4%
in the current year and in prior years. 2020 72.4%
2019 55.7%
2018 63.7%
----------------------------------------------------- -------------
The claims ratio can be further analysed into its underlying
components, as follows:
Measure Commentary Track record
Attritional The a ttritional claims ratio measures the performance 2022 51.0%
claims ratio of the underlying underwriting book by measuring 2021 47.7%
the effect of attritional claims. 2020 52.5%
2019 54.8%
2018 56.7%
-------------------------------------------------------- -------------
Major claims The major claims ratio measures the effect of claims 2022 12.0%
ratio arising from major losses on our performance. 2021 15.5%
2020 23.7%
The 2022 ratio reflects the impact of catastrophe 2019 3.8%
events of 10.9pps and claims of 1.1pps arising 2018 13.0%
from the Russian invasion of Ukraine (2021: 14.2pps
from catastrophe events and 1.3pps from COVID-19
related claims).
-------------------------------------------------------- -------------
Reserve The r eserve release ratio measures the performance 2022 0.2%
release of reserves held on the statement of financial 2021 (4.8)%
ratio position at the start of the year. A negative ratio 2020 (3.7)%
indicates an overall net release, which means that 2019 (2.8)%
prior year claims are performing better than estimated 2018 (6.0)%
at the start of the year. A positive ratio indicates
that over the course of the year, the amount required
to meet those prior year claims has increased.
-------------------------------------------------------- -------------
Our underlying claims performance in 2022 remained strong, with
an attritional claims ratio of 51.7% (2021: 47.7%).
We continue to see strong underlying performance across our
portfolios, with strong pricing and targeted growth in our
high-performing segments . The 2022 ratio reflects the impact of
increased economic uncertainty, including the impact of inflation.
The 2021 attritional ratio benefited from the effects of COVID-19
related restrictions, such as reduced volumes of commercial
activity and the suspension of court hearings.
Major losses 2022 2021
$m $m
----------------------------------------------------- ---------
Australian Floods 16.9 -
Hurricane Ian 280.2 -
Winter Storm Elliott 9.5 -
Texas winter storms - 77.7
Hurricane Ida - 200.5
European floods (Bernd) - 18.0
---------
Total before Russia/Ukraine and COVID-19
related losses 306.6 296.2
Claims arising from the Russian invasion of Ukraine 31.9 -
COVID-19 related losses - 28.2
--------- ---------
Total 338.5 324.4
-------------------------------------------------------
CoR impact 12.0 pps 15.5 pps
-------------------------------------------------------
As part of our standard reserving process, we marginally
strengthened our overall net reserves established for prior year
claims by $6.8m, the equivalent of a combined ratio increase of
0.2pps (2021: release of $100.1m, reduction of 4.8pps), $0.7m of
which resulted from the 2022 endorsement of the 2021 loss portfolio
reinsurance. The remaining $6.1m reflected the current economic
conditions and the potential impact of inflation. The 2022 figure
includes releases across Property, Specialty (principally Marine),
Property Treaty and Ambridge Transactional, offset by strengthening
in Programs and Facilities (principally Property Liability US),
Financial and Professional Liability (principally PI US and
Healthcare) and Casualty Treaty (principally LT Risk), and Ki.
The 2021 release reflected favourable claims experience across
more recent underwriting years (principally Property, Specialty and
Ambridge Transactional, Casualty Treaty and Property Treaty), a
release of $12.3m in respect of 2020 COVID-19 related claim
estimates, the continued overall net favourable development of
other prior year catastrophe events, and a release of $35.0m
reflecting the additional reinsurance protection afforded by the
loss portfolio reinsurance with RiverStone.
Our financial position remains strong and we continue to operate
a robust reserving process.
Underwriting expenses
Our expense ratio was 33.4% (2021: 37.3%).
Measure Commentary Track record
Expense The expense ratio measures the cost we incur to 2022 33.4%
ratio acquire every $1 of premium. There are two key 2021 37.3%
components to this - commission expenses and operating 2020 40.3%
expenses. Our 2022 expense ratio in respect of 2019 40.1%
continuing business was 33.7% (2021: 38.6%). 2018 39.5%
-------------------------------------------------------- -------------
The expense ratio can be further analysed into its underlying
components, as follows:
Measure Commentary Track record
Commission The commission expense ratio measures our distribution 2022 23.5%
expense costs and shows how much of every $1 of premium 2021 25.2%
ratio is paid to acquire our business. Our 2022 commission 2020 26.5%
expense ratio in respect of continuing business 2019 27.1%
was 25.1% (2021: 27.4%). 2018 27.6%
------------------------------------------------------- -------------
Operating The operating expense ratio helps us understand 2022 9.9%
expense how much it costs us to support the underwriting 2021 12.1%
ratio activities. This ratio shows how much of every 2020 13.8
$1 of premium we spend supporting our underwriting %
activities. Our 2022 operating expense ratio in 2019 13.0%
respect of continuing business was 8.6% (2021: 2018 11.9%
11.2%).
------------------------------------------------------- -------------
Commission costs were $664.4m and the commission expense ratio
was 23.5% (2021: $528.4m/25.2%). This $136.0m increase was driven
by the increase in NEP, while the decrease in the ratio principally
reflects a continued drive to reduce overall acquisition costs in
the current strong market. Commission costs for continuing business
were $710.0m (2021: $574.6m) and for discontinued business were a
credit of $45.6m (2021: credit of $46.2m).
Our expenses are analysed below.
Operating expense ratio
Our operating expense ratio decreased to 9.9% (2021: 12.1%). The
ratio consists of the following components, each of these is
discussed in the sections below.
-- Underwriting related operating expenses for 2022 were $323.7m
and contributed 11.4pps to the operating expense ratio (2021:
$312.8m/14.9pps).
-- Underwriting related fee and commission income totalled
$42.9m, reducing the operating expense ratio by 1.5pps (2021:
$56.6m/2.7pps). These amounts are included in the operating expense
ratio as the expenses incurred in generating these fees are
included within underwriting expenses.
-- Losses on other financial liabilities were $1.3m, with no
impact on the ratio (2021: gains of $2.5m, decreasing the ratio by
0.1pps). These amounts are included in the operating expense ratio
as they represent the underwriting result in Brit's consolidated
income statement attributable to third party capital providers.
Expenses
Total expenses during 2022 increased by 6.5% to $380.6m (2021:
$357.5m). At constant rates of exchange, the increase was 14.7%,
reflecting that the majority of our expense base is in Sterling.
The main contributors to this increase were staff costs, reflecting
headcount growth, bonus accrual, and regulatory charges and levies.
These increases also include the costs resulting from the growth of
Ki.
At 31 December 2022, Group headcount was 969 (2021: 854). The
increase was primarily due to the growth of Ki, targeted
underwriting expansion in favourable market conditions and the
related growth of support functions. These were partly offset by
reductions resulting from the withdrawal from certain classes of
business.
The allocation of expenses within the Consolidated Income
Statement and the Segmental Information is as follows:
Disclosure of expenses 2022 2021
$m $m
Acquisition costs and other insurance related
expenses - continuing business 255.4 251.6
Other expenses - continuing business 56.9 44.7
------ ------
Total expenses - continuing business 312.3 296.3
Acquisition costs and other insurance related
expenses - continuing business 68.3 61.2
------ ------
Total expenses 380.6 357.5
------ ------
Other income
Other income totalled $63.8 m (2021: $ 78.3 m), as set out
below:
Other income 2022 2021
$m $m
Fee and commission income (Note 1) - continuing
operations 12.3 14.7
Change in value of ultimate parent company shares
(Note 2) 20.9 21.7
------ ------
Total other income - continuing operations 33.2 36.4
Fee and commission income (Note 1) - discontinued
operations 30.6 41.9
------ ------
Total other income 63.8 78.3
------ ------
Note 1: Total fee and commission income is included within our
underwriting result and our combined and expense ratios.
Note 2: Change in value of ultimate parent company shares is
included within our corporate result.
Fees and commissions generated by the Group's underwriting
management activities decreased in 2022 by 24.2% to $42.9m (2021:
$56.6m). The decrease primarily reflects reduced third party
commission received by Ambridge, partly offset by increased fees
generated by Camargue.
Included in other income was a gain of $20.9m (2021: $21.7m) in
respect of the change in value of shares held by Brit in its
ultimate parent.
Gains on other financial liabilities
The statement of financial position of the Group includes
liabilities representing third party investors' share in structured
undertakings consolidated by the Group, namely Sussex Capital.
Changes in the value of these liabilities during the year are
recorded in the Group's consolidated income statement as
'(losses)/gains on other financial liabilities'.
In 2022, the income statement impact was a loss of $1.3m (2021:
gain of $2.5m). Brit allocates these gains/losses to its
underwriting result.
Return on invested assets
The investment portfolio is managed, for the most part, by
Hamblin Watsa Investment Counsel Limited, a Fairfax subsidiary with
an excellent long-term track record, whose sole business is
managing investment portfolios of Fairfax group companies. They are
supported by a number of external managers covering core fixed
income and specialised credit mandates.
The return on our invested assets was a negative $132.1m or
(2.3)% (2021: positive $171.9m /3.3%). This result is analysed
below:
Investment return 2022 2021
$m $m
Income 86.1 58.4
Realised (losses)/gains (75.2) 59.4
Unrealised (losses)/gains (131.5) 63.6
-------- -------
Investment return before fees (120.6) 181.4
Investment management fees (13.8) (14.2)
-------- -------
Investment return, net of fees (134.4) 167.2
Investment related derivative return 0.8 3.0
Return on associated undertakings 1.5 1.7
-------- -------
Total return (132.1) 171.9
-------- -------
Total return (2.3)% 3.3%
-------- -------
Of the investment return, $0.1m (2021: nil) related to
discontinued operations.
Equity markets had a tumultuous year as concerns around the
persistence of inflation and the impact on growth of central bank
measures were compounded by the impact of the Russian invasion of
Ukraine and continued Chinese lockdowns. Despite the general
negative sentiment, our equity portfolio outperformed the market
and generated a positive return of $12.7m (2021: $125.9m ),
benefiting from a value focused approach . Our return on fund
investments was a negative $11.3m (2021: gain of $59.8m).
The fixed income portfolio generated a loss of $132.3m (2021:
loss of $4.8m), which included unrealised losses of $150.0m, as
income was offset by capital losses. These unrealised losses are
expected to unwind as the portfolio matures. The US government bond
yield curve rose across all tenors, with the two-year yield
increasing from 0.73% to 4.43%, the five-year yield increasing from
1.26% to 4.00% and the ten-year yield increasing from 1.51% to
3.88%. Investment grade credit and high yield spreads widened over
the twelve months as inflation remained elevated and the US Federal
Reserve Bank entered an aggressive rate rising cycle, raising rates
425bps over the year, including four consecutive 75bps hikes.
Investment grade spreads in the US widened from 0.49% to 0.90% and
in Europe from 0.78% to 1.56%, while high yield spreads in the US
widened from 2.83% to 4.68% and in Europe widened from 3.12% to
4.90%.
Cash and cash equivalents generated interest of $10.3m (2021:
$0.5m). Our approach to cash management during the year has, and
continues to be, to limit the amount of operational cash and to
maximise amounts held within short-term government bills, stepping
into the higher yields.
At 31 December 2022, the running yield (expressed as yield as a
percentage of invested assets) of our total portfolio was 4.0%
(2021: 0.9%). This has increased over 2022 in line with the
increase in the yield curve in the US resulting in better forward
looking income to the portfolio, providing a balance to mark to
market movements.
In 2022, o ur share of the net profit of our associated
undertaking, Sutton Special Risk Inc. , was $1.5m (2021: $1.2m) .
Sutton Special Risk Inc. is a leading Canada-based managing general
underwriter specialising in Accident & Health business in which
Brit acquired a 49% share on 2 January 2019. In 2021, a further
$0.5m return was recognised from Camargue Underwriting Managers
(Proprietary) Limited, a leading South African managing general
underwriter, which became a 100% subsidiary of the Group and ceased
to be an associated undertaking on 4 October 2021 .
Gain on deconsolidation of subsidiaries
No subsidiaries were deconsolidated in 2022. In 2021, a gain of
$19.8m arose from:
-- The sale of the Commonwealth Insurance Company of America (gain of $3.7m);
-- The sale of Scion Underwriting Services Inc. (gain of $18.3m); and
-- The deconsolidated of North America Property Insurance Series
2017 Account A-3 (a segregated account within Versutus Limited)
(loss of $2.2m).
Gain on a business combination
No business combinations were effected in 2022. In 2021, a gain
of $6.1m arose on the acquisition of the remaining 50% of the share
capital of Camargue .
Foreign exchange
We manage our currency exposures to mitigate the impact on
solvency rather than to achieve a short-term impact on earnings. We
experienced a foreign exchange loss of $15.1m in 2022 (2021: loss
of $19.8m), reflecting the movement of the US dollar against other
currencies in which we trade and hold assets, and the impact of FX
related derivatives purchased by the Group.
The allocation of the FX result within the Consolidated Income
Statement is as follows:
Foreign exchange gains and (losses) 2022 2021
$m $m
Net foreign exchange (losses)/gains - continuing
operations (30.4) (1.4)
Net foreign exchange (losses)/gains - discontinued
operations 1.8 0.3
(Losses)/gains on derivative contracts - FX related
instruments 13.5 (18.7)
------- -------
(15.1) (19.8)
------- -------
Tax
Our tax on ordinary activities for 2022 resulted in a tax credit
of $ 11.6 m (2021: tax credit of $9.6m), based on a Group loss
before tax of $107.9m (2021: profit before tax of $227.3m), of
which $0.1m related to continuing operations (2021: $12.0m) and
$11.5m related to discontinued operations (2021: $(2.4)m). This
credit comprised a current tax credit of $ 3.4 m and a deferred tax
credit of $ 8.2 m. The deferred tax credit reflects the change in
the UK tax rate from 19% to 25% from 1 April 2023 in accordance
with the Finance Act 2021 which was substantially enacted on 24 May
2021.
The Group is liable to taxes on its corporate income in a number
of jurisdictions where its companies carry on business, most
notably the UK, Germany, and the US. Corporate profits and losses
in Bermuda are exempt from tax. The tax charge is calculated in
each legal entity across the Group and then consolidated.
Therefore, the Group effective rate is sensitive to the location of
taxable profits and is a composite tax rate reflecting the mix of
tax rates in those jurisdictions.
The 2022 Group rate varies from the weighted average rate in
those jurisdictions due to a number of factors. The principal
factors are an increase of $ 19.9 m in the unrecognised deferred
tax asset in respect of undeclared Lloyd's syndicate years of
account and current tax losses, and the impact of the change in the
UK tax rate used for the calculation of deferred taxes, from 19%
for brought forward balances to 25% for carried forward balances
due to the increase in the UK corporation tax rate to 25% from 1
April 2023 which was substantively enacted on 24 May 2021. The rate
is further influenced by the impact of prior year adjustments, US
state taxes, US losses not recognised, exempt income such as
dividend income, disallowable expenses and by non-UK taxes arising
in our Lloyd's syndicates.
Financial position and capital strength
Overview
Our business is underwritten principally through our
wholly-aligned Lloyd's Syndicate 2987, and through Ki Syndicate
1618, which benefit from Lloyd's ratings of A (Excellent) from A.M.
Best, AA- (Very Strong) from Fitch and A+ (Strong) from Standard
& Poor's.
Our financial position remains strong, with our capital surplus
increasing by $91.9m in the year. At 31 December 2022, Group
capital resources totalled $2,053.0 m (2021: $2,199.5m), giving
surplus management capital of $ 709.8 m (2021: $617.9m), or 52.8%
(2021: 39.1%) over our Group management capital requirement of
$1,343.2m (2021: $1,581.6m).
Brit has in place a $550m (2021: $450m) revolving credit
facility (RCF), the expiration date of which is 31 December 2025.
Under our capital policy we have identified a maximum of $300.0m
(2021: $250.0m) of this facility to form part of our capital
resources, with the balance available for liquidity funding. At 31
December 2022, the cash drawings on the facility were $10.0m (2021:
$45.0m) and a $100.0m uncollateralised letter of credit (LoC) was
in place (2021: $130.0m/uncollateralised) to support our
underwriting activities. At the date of this report, cash drawings
had reduced to nil and the $100.0m uncollateralised LoC remained in
place.
At 31 December 2022, Ki Financial Ltd, together with Sussex Re
and Ki Member Ltd, has a $180.0m LoC facility (2021: $130.0m) to
provide a proportion of the Funds at Lloyd's for Syndicate 1618
through a segregated account of Sussex Re. The facility was fully
utilised at 31 December 2022 (2021: $130.0m fully utilised).
In addition, we have in issue GBP135.0m of 3.6757% subordinated
debt with a carrying value of GBP135.0m/ $162.4m (31 December 2021:
GBP135.0m/$182.9m). This instrument, which is listed on the London
Stock Exchange, was issued in December 2005, matures on 9 December
2030.
At 31 December 2022, our gearing ratio was 17.6% (2021: 20.0
%).
Brit's invested assets (financial investments, investments in
associates, cash and cash equivalents and derivative contracts) at
31 December 2022 were $ 6,011.3 m (31 December 2021: $ 5,546.2
m).
Our asset allocation, on both a look-through basis and statutory
disclosure basis, is set out in the tables below:
31 December 2022 Statutory basis
Equity Debt Specialised Cash Associated Investment Assets Total
securities securities Loan investment and cash undertakings Derivatives held invested
instruments funds equivalents (net) for assets
sale (look-through)
$m $m $m $m $m $m $m $m $m
---------- ---------- ------------ ----------- ----------- ------------ ----------- ------ --------------
Government debt
securities - 2,644.5 - 29.8 - - - - 2,674.3
Corporate debt
securities - 1,301.0 - 14.4 - - - - 1,315.4
Structured products - - - 18.7 - - - - 18.7
Loan instruments - - 34.6 8.8 - - - - 43.4
Equity securities 544.1 - - 313.4 - 15.2 - - 872.7
Alternative - - - - - - - - -
investments
Cash and cash
equivalents - - - 4.8 941.3 - - 138.1 1,084.2
Investment
Look-through related
basis derivatives - - - (1.7) - - 4.3 - 2.6
---------- ---------- ------------ ----------- ----------- ------------ ----------- ------
Total invested
assets (statutory) 544.1 3,945.5 34.6 388.2 941.3 15.2 4.3 138.1 6,011.3
---------- ---------- ------------ ----------- ----------- ------------ ----------- ------
31 December 2021 Statutory basis Total
invested
assets
(look-through)
Equity Debt Specialised Cash Associated Investment
securities securities Loan investment and undertakings Derivatives
instruments funds cash (net)
equivalents
$m $m $m $m $m $m $m $m
---------- ---------- ------------ ----------- ----------- ------------ -----------
Government
Look-through debt
basis securities - 2,232.6 - 21.8 - - - 2,254.4
Corporate debt
securities - 907.2 - 10.9 - - - 918.1
Structured products - - - 21.3 - - - 21.3
Loan instruments - - 38.3 3.0 - - - 41.3
Equity securities 480.1 - - 261.6 - 15.0 - 756.7
Alternative - - - - - - - -
investments
Cash and cash
equivalents - - - 39.0 1,510.3 - - 1,549.3
Investment related
derivatives - - - (0.8) - - 5.9 5.1
------------ -----------
Total invested
assets (statutory) 480.1 3,139.8 38.3 356.8 1,510.3 15.0 5.9 5,546.2
---------- ---------- ------------ ----------- ----------- ------------ -----------
Brit held a short duration position over 2022 which limited mark
to market losses on the fixed income portfolio.
We increased our duration and credit allocation in the second
half of the year as spreads widened and interest rates have risen,
creating more attractive opportunities. The allocation to credit
risk, is primarily defensive, focused on high quality, investment
grade non-cyclical companies. Equity allocations are invested in a
portfolio of both listed and private (non-listed) equities and
funds.
The assets remain primarily invested in cash and fixed income
securities (2022: $5,117.3m or 85.1 % of the portfolio; 2021:
$4,763.1m or 85.9% of the portfolio). The fixed income portfolio is
short dated, with a majority allocation to government bills.
Corporate bonds and other loan instruments represent 22.6% (2021:
17.3%) of the total portfolio with 2.6 pps (2021: 2.1pps) of this
figure being below investment grade.
The exposure to equities, funds and structured products has
increased (2022: $891.4m or 14.8% of the portfolio; 2021: $778.0m
or 14.0% of the portfolio), due to additional purchases in Q4.
The duration of our portfolio at 31 December 2022 was 1.7 years
(2021: 1.5 years), which is shorter than the duration of our
liabilities. US rates rose across the curve over 2022, as the Fed
rose rates in response to persistent inflation.
At 31 December 2022, 71.5% of our invested assets were rated of
A- or higher (2021: 75.4%). An analysis of the credit quality of
our invested assets is set out below:
Principal risks and uncertainties
Risk Management Framework
Brit delivers shareholder value by actively seeking and
accepting risk within agreed limits. Risk management at Brit is a
continuous process that links directly to the organisation's
business and risk management strategies and the associated Board
risk tolerances.
Brit's Risk Management Framework (RMF) applies a consistent
methodology and structure to how risks are identified, measured,
managed and monitored. This process enables us to protect
policyholders and maximise shareholder value by ensuring the risk
and capital implications of business strategy are well
understood.
The RMF has the following key elements:
-- Identification: Risk events, risks and relevant controls are
identified and classified. This is a continuous process which
considers any emerging and existing risks. The risk register sets
out the significant risks faced by the business and identifies the
potential impact and likelihood of each risk.
-- Measurement: Risks are assessed and quantified and controls
are evaluated. This is done through a combination of stochastic
modelling techniques, stress and scenario analysis, reverse stress
testing and qualitative assessment using relevant internal and
external data.
-- Management: The information resulting from risk
identification and measurement is used to improve how the business
is managed.
A key part of the RMF is the setting of risk tolerances and risk
appetite. Risk tolerances are set by the Board and represent the
maximum amount of risk Brit is willing to accept to meet its
strategic objectives. Risk appetite is set by management and
reflects the maximum amount of risk that Brit wishes to take in the
current market environment. The actual amount of risk taken is
monitored against the tolerances and appetites on an ongoing
basis.
The RMF, including the risk tolerances and appetite, reflects
Brit's strategy and seeks to ensure that risk is accepted in the
areas which are expected to maximise shareholder value whilst
continuing to protect policyholders against extreme events. The
process applies to both the Brit Group and to the individual
underwriting entities (such as Lloyd's syndicates).
The Risk Management function, led by the Chief Risk Officer
(CRO), monitors whether Brit is operating within the risk tolerance
levels approved by the Board. This includes assessments of any new
strategic initiatives and the principal risks and uncertainties
faced by the business as detailed below.
All Brit staff are involved in ensuring there is an appropriate
risk culture which promotes the identification and management of
risk. Brit's risk culture aims to ensure the risk and capital
implications of decisions are understood and there is open
communication about risks and issues in all areas of the
business.
Brit's approach to risk management is designed to encourage
clear decision-making as to which risks Brit takes and how these
are managed based on the potential strategic, commercial,
financial, compliance and legal implications of these risks.
The sections below set out the approach to risk governance, and
the key risks identified, measured and managed under the RMF.
Risk Governance
The Board is responsible for overseeing our risk management and
internal control systems, which management is responsible for
implementing.
Brit maintains a strong risk governance framework using Risk
Oversight Committees and Audit Committees whose membership consists
of independent non-executive Directors. The Board, Risk and Audit
Committee agendas are designed to ensure all significant areas of
risk are reported on and discussed. The Risk Oversight Committees
monitor and review the risk profile and the effectiveness of all
risk management activities and, in particular, monitor adherence to
agreed risk limits.
Brit operates a three lines of defence model for governing risk.
Within the first line of defence individual risk committees monitor
day-to-day risk control activities. The risk management function,
as a second line of defence, provides oversight over business
processes and sets out policies and procedures. Internal Audit, as
a third line of defence, provides independent assurance and
monitors the effectiveness of the risk management processes.
Our Internal Audit function provides assurance to the Risk
Oversight Committees, Audit Committees and Boards, while external
experts are regularly used for independent assessments.
Key risks
The RMF categorises the risks to Brit as follows:
-- Overarching risk: strategic, earnings and solvency; and
-- Individual risk categories: insurance, market, liquidity, credit and operational and group.
Insurance risk is the key driver of our Group capital
requirements.
The key risks and uncertainties are set out in the following
table and the principal risks in the current environment are set
out below.
Risk category Risk Description
Insurance Underwriting - pricing Emerging experience is inconsistent
with the assumptions (e.g. inflation)
and pricing models used.
----------------------- ---------------------------------------------
Underwriting - natural Natural catastrophe events, including
catastrophe the impact of climate risk, impacting
Brit's (re)insureds, leading to large
volumes of claims.
----------------------- ---------------------------------------------
Reserving Prior year reserves are insufficient
to cover claims (net of reinsurance)
e.g. due to higher than anticipated
inflation
----------------------- ---------------------------------------------
Investment Investment market Invested assets adversely affected by
risk changes in economic variables, such
as interest rates, inflation, bond yields,
equity returns, credit spreads, credit
ratings.
----------------------- ---------------------------------------------
Operational and People Failure to attract, motivate and retain
group key Directors, senior underwriters,
senior management, and other key personnel,
on whom our future success is substantially
dependent.
----------------------- ---------------------------------------------
Emerging risks
Brit undertakes a formal emerging risk review annually with the
results reported to the Risk Oversight Committees and included in
Brit's Own Risk and Solvency Assessment (ORSA) and Commercial
Insurer's Solvency Self-Assessment (CISSA) reports of the
underwriting entities. The review is an important part of the risk
identification aspect of the RMF and includes horizon scanning of
the internal and external risk environment to identify potential
new or developing risks to Brit. These risks can then be included
in the risk register and managed appropriately as required.
Current emerging risks include:
-- Climate change related financial risks
Climate change has been recognised as an emerging risk in the
ORSA since 2014 and has been an area of focus since having been
identified as a high priority by Brit's 2018 emerging risks
analysis. Its potential impact on the insurance industry is an area
of focus for the wider insurance market and its regulators.
The financial risks to insurers may include the potential for
increased frequency and severity of weather-related natural
catastrophes, for example, hurricanes and wildfires. In line with
recent years, 2022 experienced material losses from catastrophe
activity globally, with Hurricane Ian being the most material event
to Brit.
The three main areas of risk identified for Brit are natural
catastrophes, liability claims and investment losses. Scenario
analysis has been performed on all three risk types to identify the
most material risk types as well as the most exposed segments
within each risk.
-- Geopolitical related risks
Geopolitical events, such as Russia's invasion of Ukraine, have
the potential to cause insurance losses and disruption to financial
markets. This may impact various subsidiary undertakings within the
Group which could in turn impact the future income from those
entities. There may also be a potential impact on the operational
costs of the Group attributable to the downstream effects of high
inflation. The Group continues to monitor developments closely.
Brit has direct exposures to the Russia-Ukraine conflict within
the Terrorism, Casualty Treaty, Marine War, Contingency and
Political and Credit Risk classes, along with potential secondary
impacts on classes such as Cyber.
-- Global economic environment related risks
Inflation in the USA and the UK has reached 40-year highs and
interest rates worldwide have risen. Recessions are expected in a
number of advanced economies, which may impact the frequency and
cost of claims, investment results, the likelihood of counterparty
defaults and the potential for operational risk events. Brit
continues to actively monitor and respond to changes in the
economic environment.
Brit has considered the impact of the increased level of
inflation and the economic downturn. Increased focus has been
placed on ensuring Brit's pricing models adequately address current
inflationary trends. Feeding into these models is an enhanced
framework assessing the key drivers of claim settlement costs for
each class of business. Inflationary impacts were also considered
during the year end reserving process.
We remain cognisant of the impact of inflation on the underlying
portfolio, with work being undertaken collaboratively across
Underwriting, Actuarial, Risk and Claims to quantify the impact,
mitigate the impact of inflation on profitability and to ensure it
has been appropriately considered in our ongoing business and 2023
business plan. We continue to review the key drivers of claim
settlement costs and frequency by class of business, which in turn
will further inform any required recalibration of our pricing
models. Our reserves continue to be set at a margin above the
actuarial best estimate and incorporate our current view of social
and economic inflation.
Financial information and availability of accounts
The financial information set out above is unaudited and does
not constitute the Company's statutory accounts for the years ended
31 December 2022 or 2021. The 2022 financial information is derived
from the Company's unaudited 2022 statutory accounts and the 2021
financial information is derived from Company's 2021 statutory
accounts.
Statutory accounts for 2021 have been delivered to the Registrar
of Companies. The auditor has reported on those accounts; its
report was unqualified and did not contain statements under Section
498(2) or (3) of the Companies Act 2006.
The audited statutory accounts for 2022 are expected to be
available on the Company's website no later than 20 March 2023. An
announcement will be made when they are available. The Directors do
not anticipate any modification or emphasis of matter paragraph in
the auditor's report required to be included with the statutory
accounts for 2022.
The statutory accounts for 2022 will be delivered to the
Registrar of Companies following the Company's annual general
meeting.
The unaudited preliminary results were approved by the Board on
17 February 2023.
Responsibility statement of the Directors
The Directors confirm that, to the best of their knowledge:
-- The unaudited consolidated financial statements, contained
within the Company's 2022 unaudited statutory accounts, which have
been prepared in accordance with UK-adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006, give a true and fair view of the assets,
liabilities, financial position, and profit or loss of the Group;
and
-- The Strategic Report, contained within the Company's 2022
unaudited statutory accounts, includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
Martin Thompson Gavin Wilkinson
Group Chief Executive Officer* Group Chief Financial Officer
15 February 2023 15 February 2023
* Mr Thompson was appointed as Group Chief Executive Officer on
31 October 2022. His appointment is subject to regulatory
approval.
Consolidated Income Statement
For the year ended 31 December 2022
Year ended Year ended
31 December 31 December
2021
2022 $m
$m
----------------------------------------------- ---- --- -------------- -------------
Continuing Operations
Revenue
Gross premiums written 3,970.0 3,238.3
Less premiums ceded to reinsurers (823.6) (1,240.0)
---------------------------------------------------------- -------------- -------------
Premiums written, net of reinsurance 3,146.4 1,998.3
Gross amount of change in provision for
unearned premiums (303.9) (370.4)
Reinsurers' share of change in provision
for unearned premiums 24.4 126.4
Net change in provision for unearned premiums (279.5) (244.0)
Earned premiums, net of reinsurance 2,866.9 1,754.3
---------------------------------------------------------- -------------- -------------
Investment return (134.5) 167.2
Return on derivative contracts 14.3 (15.7)
Gain on deconsolidation of subsidiaries - 19.8
Gain on business combination - 6.1
Other income 33.2 36.4
(Losses)/gains on other financial liabilities (1.3) 2.5
Total income 2,778.6 1,970.6
---------------------------------------------------------- -------------- -------------
Expenses
Claims incurred:
Claims paid:
Gross amount (1,481.9) (1,321.5)
Reinsurers' share 439.9 437.6
---------------------------------------------------------- -------------- -------------
Claims paid, net of reinsurance (1,042.0) (883.9)
Change in the provision for claims:
Gross amount (993.2) (402.7)
Reinsurers' share 210.2 405.0
---------------------------------------------------------- -------------- -------------
Net change in the provision for claims (783.0) 2.3
Claims incurred, net of reinsurance (1,825.0) (881.6)
Acquisition costs (857.2) (694.2)
Other operating expenses (165.1) (176.7)
Net foreign exchange losses (30.4) (1.4)
Total expenses excluding finance costs (2,877.7) (1,753.9)
---------------------------------------------------------- -------------- -------------
Operating (loss)/profit (99.1) 216.7
Finance costs (20.5) (18.1)
Share of net profit of associates 1.5 1.7
(Loss)/profit on ordinary activities
before tax (118.1) 200.3
Tax credit 0.1 12.0
(Loss)/profit from continuing operations (118.0) 212.3
Discontinued operation
----------------------------------------------- ---- --- -------------- -------------
Profit from discontinued operation, net
of tax 21.7 24.6
---------------------------------------------------------- -------------- -------------
(Loss)/profit for the year (96.3) 236.9
---------------------------------------------------------- -------------- -------------
(Loss)/profit attributable to:
----------------------------------------------- ---- --- -------------- -------------
Owners of the parent (85.2) 248.5
---------------------------------------------------------- -------------- -------------
Non-controlling interests (11.1) (11.6)
---------------------------------------------------------- -------------- -------------
Continuing Operations 3,970.0 3,238.3
---------------------------------------------------------- -------------- -------------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Year ended
31 December Year ended
31 December
2022 2021
$m $m
----------------------------------------------------- --- --- --------------- --------------
(Loss)/profit for the year (96.3) 236.9
Other comprehensive income
Items not to be reclassified to profit or
loss in subsequent periods:
Remeasurements of post-employment benefit
obligations (40.9) 18.7
Deferred tax gain/(loss) relating to remeasurements
of post-employment benefit obligations 14.3 (6.5)
Items that may be reclassified to profit
or loss in subsequent periods:
Change in unrealised foreign currency translation
losses on foreign operations (17.4) (1.1)
Total other comprehensive income (44.0) 11.1
--------------------------------------------------------------- --------------- --------------
Total comprehensive income recognised for
the year (140.3) 248.0
--------------------------------------------------------------- --------------- --------------
Total comprehensive income for the year
attributable to:
Owners of the parent (129.2) 259.6
Non-controlling interests (11.1) (11.6)
------------------------------------------- -------- -------
Total comprehensive income for the year (140.3) 248.0
------------------------------------------- -------- -------
Consolidated Statement of Financial Position
At 31 December 2022
31 December 31 December
2021
2022 $m
$m
-------------------------------------- --- --- ---- -------------- -------------
Assets
Intangible assets 120.0 205.3
Property, plant and equipment 41.8 57.6
Deferred acquisition costs 376.8 321.8
Investment in associated undertaking 15.2 15.0
Reinsurance contracts 2,487.0 2,291.2
Employee benefits 62.4 113.8
Deferred taxation 50.1 47.9
Current taxation 15.5 10.6
Financial investments 4,912.4 4,015.0
Derivative contracts 10.8 15.1
Insurance and other receivables 1,803.3 1,615.3
Assets classified as held for 331.6 -
sale
Cash and cash equivalents 941.3 1,510.3
Total assets 11,168.2 10,218.9
------------------------------------------------------ -------------- -------------
Liabilities and Equity
Liabilities
Insurance contracts 7,779.0 6,532.9
Borrowings 172.4 227.9
Other financial liabilities 92.7 95.8
Provisions 2.2 2.4
Deferred taxation 1.8 12.9
Current taxation 0.5 3.8
Derivative contracts 10.1 12.5
Insurance and other payables 917.1 1,184.1
Liabilities directly associated 49.6 -
with assets classified as held
for sale
Total liabilities 9,025.4 8,072.3
------------------------------------------------------ -------------- -------------
Equity
Called up share capital 10.0 10.0
Share premium 1,432.6 1,432.6
Capital redemption reserve 1.0 1.0
Capital contribution reserve 32.2 28.5
Foreign currency translation reserve (102.6) (85.2)
Retained earnings 395.1 525.5
------------------------------------------------------ -------------- -------------
Total equity attributable to
owners of the parent 1,768.3 1,912.4
Non-controlling interests 374.5 234.2
------------------------------------------------------ -------------- -------------
Total liabilities and equity 11,168.2 10,218.9
------------------------------------------------------ -------------- -------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Year ended
31 December Year ended
31 December
2022 2021
$m $m
------------------------------------------------- --- --- --------------- --------------
Cash flows from operating activities
Cash (used in)/provided by operations (571.3) 622.5
Tax paid (5.1) (8.1)
Interest received 81.1 57.9
Dividends received 8.3 10.1
Purchase of shares for share-based payment
schemes (0.4) (16.9)
Net cash (outflows)/inflows from operating
activities (487.4) 665.5
----------------------------------------------------------- --------------- --------------
Cash flows from investing activities
Purchase of intangible assets (9.2) (12.8)
Purchase of property, plant and equipment (2.1) (1.7)
Disposal of subsidiary undertakings, net
of cash disposed - 31.8
Acquisition of subsidiary undertaking, net
of cash acquired - (6.4)
Dividends from associated undertakings 1.1 0.7
Net cash (outflows)/inflows from investing
activities (10.2) 11.6
----------------------------------------------------------- --------------- --------------
Cash flows from financing activities
Proceeds from issue of shares and other capital
contributions 3.7 406.1
Repayment on revolving credit facility (35.0) (85.0)
Interest paid (11.8) (9.7)
Transactions with non-controlling interests 151.5 124.0
Dividends paid (18.7) (375.0)
Net cash inflows from financing activities 89.7 60.4
----------------------------------------------------------- --------------- --------------
Net decrease in cash and cash equivalents (407.9) 737.5
Cash and cash equivalents at the beginning
of the year 1,510.3 775.7
Effect of exchange rate fluctuations on cash
and cash equivalents (23.0) (2.9)
--------------- --------------
Cash and cash equivalents at the end of
the year 1079.4 1,510.3
----------------------------------------------------------- --------------- --------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Total
Called Foreign attributable
up Capital Capital currency to owners Non-controlling
share Share redemption contribution translation Retained of the interests Total
capital premium reserve reserve reserve earnings parent $m equity
$m $m $m $m $m $m $m $m
-------- --------- ------------ ------------- ------------ --------- ------------- ----------------- --------
At 1 January 2022 10.0 1,432.6 1.0 28.5 (85.2) 525.5 1,912.4 234.2 2,146.6
------------------ -------- --------- ------------ ------------- ------------ --------- ------------- ----------------- --------
(Loss)/profit for
the
year - - - - - (85.2) (85.2) (11.1) (96.3)
Other
comprehensive
income - - - - (17.4) (26.6) (44.0) - (44.0)
------------------ -------- --------- ------------ ------------- ------------ --------- ------------- ----------------- --------
Total
comprehensive
income
recognised - - - - (17.4) (111.8) (129.2) (11.1) (140.3)
Issuance of - - - - - - - - -
share capital
Dividend - - - - - (18.7) (18.7) - (18.7)
Contribution from
parent
in relation to
the acquisition
of the
RiverStone
pension
plan - - - 3.7 - - 3.7 - 3.7
Transactions with
non-controlling
interests - - - - - 0.1 0.1 151.4 151.5
------------------ -------- --------- ------------ ------------- ------------ --------- ------------- ----------------- --------
At 31 December
2022 10.0 1,432.6 1.0 32.2 (102.6) 395.1 1,768.3 374.5 2,142.8
------------------ -------- --------- ------------ ------------- ------------ --------- ------------- ----------------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Total
Called Foreign attributable
up Capital Capital currency to owners Non-controlling
share Share redemption contribution translation Retained of the interests Total
capital premium reserve reserve reserve earnings parent $m equity
$m $m $m $m $m $m $m $m
------------------ --------- --------- ----------- ------------- ------------ --------- ------------- ---------------- ---------
At 1 January 2021 8.6 1,027.9 1.0 - (84.1) 639.2 1,592.6 121.7 1,714.3
---------------------------- --------- --------- ----------- ------------- ------------ --------- ------------- ---------------- ---------
Profit/(loss) for the
year * - - - - - 248.5 248.5 (11.6) 236.9
Other comprehensive
income * - - - - (1.1) 12.2 11.1 - 11.1
---------------------------- --------- --------- ----------- ------------- ------------ --------- ------------- ---------------- ---------
Total comprehensive
income recognised - - - - (1.1) 260.7 259.6 (11.6) 248.0
Reallocation of forfeited
rollover shares to
LTIP schemes - - - - - 0.6 0.6 - 0.6
Issuance of share capital 1.4 404.7 - - - 406.1 - 406.1
Dividend - - - - - (375.0) (375.0) - (375.0)
Contribution from parent
in relation to the
acquisition of the
Riverstone pension
plan - - - 28.5 - - 28.5 - 28.5
Transactions with
non-controlling
interests - - - - - - - 124.1 124.1
---------------------------- --------- --------- ----------- ------------- ------------ --------- ------------- ---------------- ---------
At 31 December 2021 10.0 1,432.6 1.0 28.5 (85.2) 525.5 1,912.4 234.2 2,146.6
---------------------------- --------- --------- ----------- ------------- ------------ --------- ------------- ---------------- ---------
* The statement has been re-presented to include additional line items not reported in the prior year
Nature and Purpose of Group Reserves
Share premium: The balance represents the difference between the price at which shares are issued and
their nominal value, less any distributions made from this account.
Capital redemption reserve: The balance represents the amount by which share capital is diminished in
the event of a share cancellation and is required to be recognised in a legal reserve to maintain the
Group's capital.
Capital contribution reserve: The balance represents the amount by which the Group has benefited from
asset transfers or contributions from the owners of the parent company, for which no shares have been
issued in exchange.
Foreign currency translation reserve: The balance on this reserve represents the foreign exchange differences
arising from the translation of financial statement information of entities within the Group from functional
currencies to the presentational currency of the Group.
Retained earnings: Retained earnings represents the cumulative comprehensive income retained by the
Group after taxation and after any distributions made from this account.
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END
FR DBGDDCBBDGXL
(END) Dow Jones Newswires
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