TIDMHUW
RNS Number : 1119A
Helios Underwriting Plc
28 May 2021
Helios Underwriting plc
("Helios" or the "Company")
Final results for the year ended 31 December 2020
Helios, the unique investment vehicle which acquires and
consolidates underwriting capacity at Lloyd's, is pleased to
announce its audited final results for the year ended 31 December
2020.
Highlights
-- 5.7% outperformance against Lloyd's market
-- 31% increase in the capacity portfolio from five acquisitions
made in 2020 for a total consideration of GBP10m
-- A total of GBP75m of new capital raised in 2020 and 2021 to
take advantage of unique window of opportunity
-- Profit before impairments and tax for the year of GBP336,000
(2019: GBP2,427,000) reflecting poor underwriting conditions and
the impact of COVID-19 losses
-- Basic earnings per share of 1.59p (2019: 25.64p)
-- Net tangible asset value of GBP1.51 per share (2019 restated:
GBP1.91 per share) reflecting the impact of the November 2020
equity raise
-- Capacity portfolio has been increased by 60% to GBP110m for
2021 year of account (2020 year of account: GBP69m)
-- Covid-19 impact has added losses of 7% capacity but is
expected to fall mainly on 2019 year of accounts
-- Stop loss in 2021 continues to protect the downside and
provides underwriting capital support
-- Recommended total dividend for 2020 of 3.0p per share (2019: nil)
-- Discussions with the vendors are continuing and outline terms
have been agreed with eight LLV's which in the aggregate own
GBP10.9m capacity.
-- The improvement in market conditions has resulted in a
reduction in the discounts that are being achieved relative to the
Humphrey valuation. Vendor expectations of value have increased and
other purchasers have been encouraged to pay higher prices given
the improved prospects.
Helios Group Summary Profits
2020 2019
GBP'000 GBP'000
Underwriting profits 639 3,261
Total other income 2,887 2,557
Total costs (3,190) (3,391)
Profit before impairments and tax
for the year 336 2,427
Profit before tax 301 4,054
Earnings per share
Basic 1.59p 25.64p
Diluted 1.55p 25.86p
Nigel Hanbury, Chief Executive, commented:
"Whilst the results for 2020 were impacted by the poor
underwriting conditions and the impact of Covid-19, which severely
tested the insurance industry, Helios has nevertheless continued to
pursue its growth strategy. We successfully raised GBP75m of new
capital to acquire LLVs and take up pre-emption capacity.
"We have grown our portfolio of capacity for 2021 to GBP110m by
acquiring five LLV's in 2020, taking up freehold capacity offered
for nil cost by way of pre-emptions and building stakes on
syndicates with good prospects offering tenancy capacity. We
increased the value of the capacity fund by 17% to GBP30.8m as
pre-emption capacity acquired for no cost increased the value of
the portfolio by GBP2.4m.
"It is pleasing to note that we outperformed the Lloyd's market
by 5.7%.
"Looking ahead, the strong upward momentum in premium rates on
renewal business is expected to continue and should continue to
enhance the underwriting performance in 2021 and 2022. We see
opportunity for further growth and we intend to continue to take
advantage of the improving market environment, whilst judiciously
optimising our portfolio to enhance value for shareholders."
For further information, please contact:
Helios Underwriting plc
Nigel Hanbury - Chief Executive +44 (0)7787 530 404 / nigel.hanbury@huwplc.com
Arthur Manners - Chief Financial Officer +44 (0)7754 965 917
Shore Capital (Nomad and Broker)
Robert Finlay +44 (0)20 7601 6100
David Coaten
Willis Re Securities (Financial Adviser)
Alastair Rodger +44 (0)20 3124 6033
Quentin Perrot +44 (0)20 3124 6499
Buchanan (PR)
Helen Tarbet / Henry Wilson / George Beale +44 (0)7872 604 453
+44 (0)20 7466 5111
About Helios
Helios provides a limited liability direct investment into the
Lloyd's insurance market and is quoted on the London Stock
Exchange's AIM market (ticker: HUW). Helios trades within the
Lloyd's insurance market writing approximately GBP110m of capacity
for the 2021 account. The portfolio provides a good spread of
business being concentrated in property insurance and reinsurance.
For further information please visit www.huwplc.com .
Chairman's statement
Michael Cunningham
Non-executive Chairman
In summary
-- Profit before tax and impairments of GBP336,000 (2019: GBP2,427,000)
-- Net tangible asset value at GBP1.51 per share (2019 restated:
GBP1.91) reflecting the impact of the November 2020 equity
raise
-- A final dividend of 3p per share is being recommended (2019: GBPnil)
-- Capital employed per share of GBP1.70
-- The capacity portfolio has been increased to GBP110m for 2021 year of account
-- Five LLVs were acquired in 2020 (four in 2019) for a total
consideration of GBP10m (GBP10m in 2019)
-- Cumulative rate increases since 1 January 2018 in excess of 30% for the Helios portfolio
-- The gain on bargain purchases, acquiring assets at below
their fair value, contributed GBP1.3m to operating profits (2019:
GBP1.7m)
-- COVID-19 impact has added losses of 7% capacity but is
expected to fall mainly on 2019 year of accounts
-- Pre-emption capacity acquired for no cost increased the value of the portfolio by GBP2.4m
Summary
Your Board announces the results for 2020. The profit for the
year is GBP336,000 (2019: GBP2,427,000), whilst the net tangible
asset value of the Group is GBP1.51 per share (2019 restated:
GBP1.91). These figures have been significantly impacted by the
poor underwriting conditions and by the impact of COVID-19 losses.
In its wake, the expectation of improved underwriting margins has
allowed the Group to raise GBP75m of new capital to take advantage
of the better trading conditions. The Group's strategy of building
a fund of capacity on the better syndicates at Lloyd's by acquiring
LLVs and by taking up pre-emption capacity offered by our supported
syndicates has been successfully achieved.
We are now three years into a market showing greater discipline,
with rates rising steeply across many lines of business during
2020. Over the past 12 quarters, we have seen premium rates on
renewal business rise cumulatively by more than 30% for the
portfolio. Rate changes for the three months ended 31 March 2021
remained encouraging, with further average rate increase of 13%.
This strong momentum is expected to continue through 2021 and
should continue to enhance the underwriting performance in 2021 and
2022.
Following COVID-19 the global insurance industry has been
undergoing a process of adjustment and modernisation, driven by the
overriding need for sustainable and profitable growth. Despite
this, several important challenges remain including the uncertainty
over the ultimate costs of COVID-19 related claims, the pandemic's
recessionary impact on the sector, and low investment yields.
Lloyd's of London estimates that the global insurance industry will
pay around US$203bn in claims. The assessment by our supported
syndicates has identified those lines of business most likely to be
impacted and these losses have been reserved as at December
2020.
Strategy
The building of a portfolio of participations on leading Lloyd's
syndicates remains the strategic objective of the Group. During
2020 the key developments were:
-- building the portfolio of capacity to GBP110m for 2021 by
acquiring five LLVs in 2020, taking up freehold capacity offered
for nil cost by way of pre-emptions amounting to GBP10.7m and
building stakes on syndicates with good prospects offering tenancy
capacity;
-- maintaining the quality of the portfolio and the
outperformance of the underwriting results average against the
Lloyd's market as a whole;
-- reducing the use of quota share reinsurance as the capital
raised in November 2020 was used to re-finance the underwriting
capital provided by the reinsurers;
-- providing an income generating investment of Lloyd's
underwriting capacity thereby generating returns in capital value
and dividend income for shareholders; and
-- providing a cost-efficient platform for participation at
Lloyd's benefitting from no profit commission potentially payable
to Lloyd's members' agent and taking advantage of increased scale
and, therefore, cost efficiencies.
LLVs acquired
During 2020 a further five corporate members were acquired.
Summary of acquisitions
----------- --------------------------------------------
Humphrey Discount
Consideration Capacity value to
GBPm GBPm GBPm Humphrey
----------- ------------- -------- -------- ---------
N408 1.1 1.1 1.3 23%
N544 1.6 1.4 1.9 16%
NJ Hanbury 4.7 4.0 6.1 23%
L084 2.2 3.3 3.0 27%
N510 0.7 1.1 0.9 22%
----------- ------------- -------- -------- ---------
10.2 10.9 13.2 23%
----------- ------------- -------- -------- ---------
The five (four in 2019) acquisitions in 2020 were purchased for
a total consideration of GBP10m (GBP10m in 2019), of which GBP4.7m
(GBP3.6m in 2019) was attributed to the value of capacity acquired.
The improved prospects for underwriting profitability after four
years of marginal results at Lloyd's have increased the competition
for the available LLVs. We will continue to build on the quality of
the capacity portfolio as it is essential to acquire and retain the
participations on the better managed syndicates.
Net tangible asset value per share
The growth in the net asset value per share remains a key
management metric for determining growth in value to
shareholders.
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Net tangible 18,948 6,970
Fair value and capacity (WAV) 30,826 26,350
--------------------------------------------------------- -------- --------
49,774 33,320
--------------------------------------------------------- -------- --------
Shares in issue (Note 21) 33,012 17,489
Net tangible asset value per share (GBP) (2019 restated) 1.51 1.91
--------------------------------------------------------- -------- --------
The Board has decided that making "management adjustments" to
the net asset value per share was no longer appropriate.
a) Value of capacity - the accounting policy has been changed so
that the full fair value of the capacity fund has been included in
the balance sheet as at 31 December 2020.
b) Group letters of credit - previously incorrectly included as
a "management adjustment" as it was considered an "off-balance
sheet" asset when a reserve was already held in the balance
sheet.
Therefore the net tangible asset value per share as at 31
December 2019 has been restated to GBP1.91 - previously GBP2.07 per
share. The capital raise and acquisition of an LLV for shares in
November 2020 has increased the number of shares in issue and has
reduced the net asset value per share.
The capital employed per share, the assets used to generate
earnings which exclude the deferred tax liability on capacity value
is as follows:
2020
GBP'000
--------------------------------- --------
Net assets 50,549
Deferred tax provision 5,559
Capital employed 56,108
Shares in issue (Note 21) 33,012
Capital employed per share (GBP) 1.70
--------------------------------- --------
The deferred tax provision on capacity value could potentially
be incurred should the entire portfolio be sold. Given the strategy
of the Group to grow the capacity fund, there is no intention to
realise the full value of the portfolio. The capital employed by
share is 19p higher than the net asset value per share.
The value of capacity is subject to fluctuation and reflects the
activity in the capacity auctions held in the autumn of each
year.
Dividend
The Board is recommending the payment of a 3.0p final dividend
for the year ended 31 December 2020 (2019: final dividend of
GBPnil). The Company is implementing a new dividend policy where it
intends to pay a sustainable annual ordinary dividend, of 3p per
ordinary share, supplemented by special dividends from time to
time. The Board continues to recognise the importance of income
returns to shareholders.
Outlook
The COVID-19 coronavirus pandemic has been the catalyst for
further pressure to increase the rates and improve underwriting
discipline. The global pandemic impacted a number of lines of
business, most notably the contingency book where claims that arose
from cancelled or postponed events were quickly settled.
It should not be forgotten that the current turmoil is happening
against the backdrop of the greatest momentum we have seen in
(re)insurance pricing for many years. Recent events have
accelerated the premium rate rises.
The importance of having sufficient diversification within the
portfolio to absorb shock losses is critical to the success of the
portfolio. We do this by being partnered with the highest quality
underwriting businesses at Lloyd's.
Reflecting on 2020, we began the year on a strong footing, ready
to respond to the improved rating environment and with the
syndicates in our portfolio having remediated underperforming areas
of their books. Further rating and underwriting actions were taken
in March to respond to the economic effects of the pandemic,
particularly in recession-exposed lines, as rates began to increase
more sharply in almost every class of business.
The COVID-19 pandemic has tested the insurance industry and the
insurers' role in protecting society against risk and unforeseen
events. It has also demonstrated the need for collaboration across
the industry and government to deliver solutions that protect
populations from the biggest threats of our time, from pandemics to
natural catastrophes, and from climate change to cyber-attack and
terrorism.
We see opportunity for good growth in 2021 in classes where the
strong stance taken by Lloyd's over several planning cycles has
positively and materially impacted pricing. We expect to continue
to take advantage of the improving market environment, while
continuing to judiciously optimise the portfolio.
Board
2020 has, again, demonstrated that value can be created from
implementing the strategy of building a capacity fund from the
acquisition of LLVs at below fair value. The increase in the value
of the capacity portfolio has contributed to the growth of the
Company. Our strategy of reducing risk has been successful in
insulating the Company from severe losses. The Executive team is to
be congratulated on achieving an excellent result in the
circumstances.
Throughout this year the Board and management have adapted well
to working together in this virtual environment. I would like to
thank my fellow Board members for their deep commitment to the
business and our stakeholders. We have benefited from the expertise
of Jeremy Evans since Helios was established in 2006 and we thank
him for his valued contribution. In line with our Board composition
strategy we have to ensure the Board has access to the relevant
skills and experience to support and challenge management as it
executes our growth strategy. We are pleased to have appointed Tom
Libassi and Martin Reith to the Board, both of whom have a wealth
of insurance industry expertise.
Michael Cunningham
Non-executive Chairman
27 May 2021
Chief Executive's review
Continue to build a portfolio of capacity
"Our reinsurance has mitigated the COVID-19 losses and has
managed the volatility of the portfolio."
Nigel Hanbury
Chief Executive
In summary
-- Net tangible asset value at GBP1.51 per share (2019: GBP1.91)
-- 60% increase in the capacity portfolio to GBP110m of capacity for 2021 underwriting year
-- 183% increase in retained capacity at the outset of the underwriting year to GBP58.7m
-- Negative goodwill of GBP1.3m contributing to shareholder value
-- The results of capacity portfolio have for the last three
closed years of account outperformed the results of the Lloyd's
market by an average of 6.0%
Highlights
-- The strategy of building a quality portfolio of syndicate
capacity continues successfully as the portfolio increased from
GBP69m to GBP110m - a 60% increase.
-- Quota share reinsurance has provided finance for acquisitions
and has mitigated the loss from catastrophe losses and COVID-19 in
2018, 2019 and 2020. The capacity ceded to reinsurers for 2021
underwriting year is GBP52m - 47% of the overall portfolio, a
reduction from the previous years where 70% of the risk was
ceded.
-- Consequently, the retained capacity increases at the outset
of the underwriting year to GBP59m from GBP21m, an increase of
183%.
-- Helios' portfolio underwriting results for 2018 underwriting
year outperformed Lloyd's return on capacity by 5.6% and by an
average of 6.0% for the last three closed underwriting years of
account demonstrating the quality of the portfolio.
-- The improvement in underwriting conditions is continuing into
2021 after 12 consecutive quarters of price increases. Producing
overall rate increases in excess of 30% for syndicates within the
capacity portfolio. The losses arising from COVID-19 and the
frequency of catastrophe losses in 2020 have accelerated
improvements in terms and conditions.
-- With the prospect of improving underwriting returns, together
with the opportunity to continue to build the capacity portfolio,
Helios is well placed to deliver value to shareholders in the
future.
-- Discussions with the vendors are continuing and outline terms
have been agreed with eight LLV's which in the aggregate own
GBP10.9m capacity.
-- The improvement in market conditions has resulted in a
reduction in the discounts that are being achieved relative to the
Humphrey valuation. Vendor expectations of value have increased and
other purchasers have been encouraged to pay higher prices given
the improved prospects.
Acquisition Strategy - Update
Helios has recently written to approximately 1,000 owners of
LLVs asking them whether they would be interested in receiving an
offer from Helios to buy their LLV. Helios has received indications
of interest from over 100 such owners and discussions are
continuing with 50 interested parties. Outline terms have been
agreed with owners who own GBP10.9m of capacity and the legal
process is continuing with these vendors.
This project to approach the owners of LLV's directly has the
advantage of:
-- Raising the profile of Helios as a potential purchaser of LLV's.
-- Allowing owners of LLV's who were potentially considering
ceasing underwriting at Lloyd's to have the opportunity to realise
the value of their investment quickly.
-- It will allow vendors a tax efficient exit if they wish to cease underwriting.
-- It will be an on-going exercise to offer owners of LLV's an
alternative to investing at Lloyd's by taking Helios shares as part
of the consideration.
The price expectations of vendors has increased with the
improved market conditions and the discounts achievable against the
Humphrey valuations has narrowed. In addition, the potential
increase in the rate of corporation tax to 25% will have to be
applied to the capacity value within an LLV. This will reduce the
accounting fair value for the acquisition and will reduce the
negative goodwill booked in the future.
Capacity value
The value of the portfolio of the syndicate capacity remains the
major asset of the Group and an important factor in delivering
overall returns to shareholders. The growth in the net asset value
("NAV"), being the value of the net tangible assets of the Group,
together with the current value of the portfolio capacity, is a key
management metric in determining growth in value to
shareholders.
2020 2019
GBPm GBPm
----------------------------------- ----- -----
Freehold capacity with value 83.9 57.8
Relationship capacity 26.4 11.3
----------------------------------- ----- -----
110.3 69.1
----------------------------------- ----- -----
Value of portfolio 30.8 26.4
Value per GBP of freehold capacity 37p 46p
----------------------------------- ----- -----
The average price per GBP of freehold capacity fell to 37p per
GBP of capacity as capacity on higher value syndicates was sold and
replaced by larger stakes on syndicates with lower prices. In
addition, the relationship capacity on "nil value"/non-traded
syndicates continued to grow with the participation on syndicates
4242, 5623 and 5886.
From 31 December 2020 the full value of capacity is carried in
the balance sheet removing the need to make presentational
adjustments to the capacity value shown in the statutory balance
sheet.
Fair value
Capacity (WAV)
GBPm GBPm
----------------------------------------- -------- -----------
At 1 January 2020 69.1 26.4
Capacity acquired with LLVs 10.9 4.9
Pre-emption capacity 10.7 2.4
Capacity sold at auction (2.4) (1.8)
Capacity purchased at auction 13.2 0.5
Tenancy capacity 8.0 0.0
----------------------------------------- -------- -----------
Other capacity movements/change in value 0.9 (1.5)
----------------------------------------- -------- -----------
At 31 December 2020 110.3 30.8
----------------------------------------- -------- -----------
% growth 60% 17%
----------------------------------------- -------- -----------
The portfolio's syndicates offered pre-emption increases in
capacity totalling GBP10.7m (2019: GBP5.6m) for no cost to take
advantage of the improving market conditions. This free capacity on
syndicates that have values at auction increased the value of the
fund by GBP2.4m (2019: GBP2.5m).
We again took advantage of the strong market in the capacity
auctions and sold capacity on the higher value syndicates to
balance the portfolio and to realise some additional cash of
GBP1.8m (2019: GBP0.9m) and acquired capacity on lower priced
syndicates such as syndicates 2010 and 2121 where capacity of
GBP13.2m was acquired for GBP0.5m and which could increase in value
in the future.
We continued to actively manage the syndicates' participations
shedding participations on syndicates from LLVs acquired, taking a
new participation of GBP8m on the Beat syndicate 4242 and
increasing the participation on the Beazley Tracker syndicate 5623
by GBP2m and the Blenheim syndicate 5886 by GBP3m.
The Board recognises that the average prices derived from the
annual capacity auctions managed by the Corporation of Lloyd's
could be subject to material change if the level of demand for
syndicate capacity reduces or if the supply of capacity for sale
should increase.
A sensitivity analysis of the potential change to the NAV per
share from changes to the value of the capacity portfolio is set
out below:
Revised
Capacity NAV
value per share
---------------- -------- ----------
Current value 30,827 1.51
Decrease of 10% 27,744 1.41
Increase of 10% 33,909 1.60
---------------- -------- ----------
Each 10% reduction in the capacity values at the 2021 auctions
will reduce the NAV by approx. 10p per share (2019: 15p per share).
The increase in capital base has reduced the impact on NAV per
share from changes in capacity value. Any reduction in the value
will be mitigated by any pre-emption capacity on syndicates that
have a value at auction.
Underwriting result
The calendar year underwriting profit from the Helios retained
capacity for 2020 has been generated from the portfolio of
syndicate results from the 2018 to 2020 underwriting years as
follows:
Underwriting year contribution
2020 2019
Underwriting year GBP'000 GBP'000
------------------ -------- --------
2017 - 2,726
2018 1,691 1,349
2019 339 (814)
2020 (1,391) -
------------------ -------- --------
639 3,261
------------------ -------- --------
While 2020 will forever be remembered as the "year of COVID-19",
which incurred losses for Lloyd's of GBP3.4bn, the year was also
the fifth largest catastrophe year on record, with 28 insured
events costing the market GBP2.5bn (2019: GBP1.8bn) of claims net
of reinsurance. By way of comparison, in 2017 (the year of
Hurricanes Harvey, Irma and Maria), there were 18 of these insured
events.
The COVID-19 losses of GBP3.4bn added 13.3% to the market's
combined operating ratio of 110.3%. The investment return for the
Lloyd's market was 2.9% (2018: 4.8%); 2020 was an overall positive
year for investments despite the losses incurred in the first
quarter. The Lloyd's market experienced a weighted average increase
in prices on renewal business of approximately 10.8% in 2020 (2019:
5.4%). In addition, several syndicates exited or severely curbed
their risk appetites in poor performing lines, as Lloyd's continued
its activity to support the market in closing the performance
gap.
During 2020, the 2018 underwriting year midpoint loss estimate
reduced from 3.61% return on capacity to a final loss of 0.3%
outperforming the average of the Lloyd's market by 5.6%. The
midpoint estimate for the 2019 underwriting year at 31 December
2020 was a loss of 2.15% (2018: 3.6%). Given that losses from
COVID-19 of 7% of capacity for the Helios portfolio have
predominantly fallen on the 2019 underwriting year, the small
improvement in the midpoint estimate is pleasing. There remains
considerable uncertainty as to the final extent of the COVID-19
losses, not just from the possible extension of social restrictions
adding to event cancellation and liability losses but also from
ongoing discussions on coverage issues on insurance and reinsurance
contracts.
The 2020 underwriting year result at 12 months represents an
accounting loss of 4.6% (2019: loss 3%) on the retained capacity.
Following the recent receipt of the first estimates of the 2020
year of account we are pleased that the Helios midpoint profit of
0.6% is outperforming Lloyd's by 25 basis points. The 2020 year is
still on risk and events during the remaining months of 2021 will
determine the overall result for the 2020 underwriting year.
Other income
Helios generates additional income at Group level from the
following:
2020 2019
GBP'000 GBP'000
--------------------------------- -------- --------
Fees from reinsurers 334 235
Corporate reinsurance recoveries (282) (357)
Gain on bargain purchases 1,260 1,707
Investment income 1,575 972
--------------------------------- -------- --------
Total other income 2,887 2,557
--------------------------------- -------- --------
Fees from reinsurers reflect the fee payable on the Funds at
Lloyd's provided but as the two open underwriting years are now
currently recognising losses, no profit commission has been
accrued.
The reinsurance recoveries accrued on the 2018 underwriting year
proved to be higher than required as the 2018 underwriting year
closed with a final result of 0.3%. No recoveries have been accrued
for the 2019 underwriting year following the review of holding
these intragroup reinsurance policies.
During the year the five LLVs were acquired for a total
consideration of GBP10.2m (2019: GBP10.1m), a discount of 23%
(2019:19%) to the Humphrey valuations which generated negative
goodwill of GBP1.3m (2019: GBP1.7m) in the year.
Investment income includes the gain on the sale of capacity
during the year of GBP1.4m. As the capacity portfolio is now held
at full value in the balance sheet, any future disposals of
capacity is likely only provide additional cash resources to the
Group.
Total costs
The costs of the Group comprise the operating expenses and the
cost of the stop loss protection bought to mitigate the downside
from large underwriting losses.
2020 2019
GBP'000 GBP'000
---------------- -------- --------
Pre-acquisition 92 859
Stop loss costs 1,097 200
Operating costs 2,001 2,332
---------------- -------- --------
Total costs 3,190 3,391
---------------- -------- --------
The profits that are recognised in the LLVs acquired in the year
are included in the underwriting result and the pre-acquisition
element relating to the results from the new acquisitions before
they were acquired by the Group is reversed out and is treated as
an expense.
The increase in the stop loss costs reflects the larger
portfolio reinsured and a provision for GBP0.3m relating to the
value of the intragroup reinsurance policies. The corporate
reinsurance policies include Group letters of credit relating to
reinsurance policies of LLVs that have been acquired in the past.
As at 31 December 2020, the value of these Group letters of credit
was GBP7.0m. These reinsurance policies provide third party Funds
at Lloyd's ("FAL") for certain LLVs which, as off-balance sheet
items, are not included on the balance sheets of LLVs. On
acquisition of these LLVs, an assessment of the fair value of the
assets acquired was made, including the assets provided by these
reinsurance policies and a reserve at consolidation level was made
to reflect the value of the third party FAL provided. A further
provision is required to reflect the fair value of these policies.
These intragroup reinsurance policies do not provide an indemnity
from outside the Group and therefore the benefit of these policies
is being reassessed.
The operating costs remain at GBP2m and are not expected to
materially increase with the increase in the size of the capacity
portfolio.
Quality of portfolio
We continue to focus ruthlessly on the best syndicates.
Therefore, we strive to acquire LLVs with portfolios that comprise
quality syndicates, thereby having to pay the average auction
prices. Participations on weaker syndicates in acquired portfolios
are sold or discarded. The ten largest participations with the
leading managing agents at Lloyd's account for 75% of the
portfolio. Participations in syndicates managed by these managing
agents represent shares in the better managed businesses at
Lloyd's.
2020
---------------
Capacity
Syndicate Managing agent GBP'000 Total
--------- ---------------------------- -------- -----
510 Tokio Marine Kiln Ltd 16,781 15%
623 Beazley Furlonge Limited 12,983 12%
33 Hiscox Syndicates Limited 8,702 8%
2010 Lancashire 8,095 7%
4242 Beat/Asta 8,014 7%
609 Atrium Underwriters Limited 6,779 6%
218 ERS Syndicate Management Ltd 6,479 6%
2791 Managing Agency Partners Ltd 5,845 5%
2121 Argenta 4,723 4%
5623 Beazley 4,688 4%
--------- ---------------------------- -------- -----
Subtotal 83,089 75%
--------- ---------------------------- -------- -----
Other 27,173 25%
--------- ---------------------------- -------- -----
Total 110,262 100%
--------------------------------------- -------- -----
The underwriting results of the Helios portfolio have on average
outperformed the Lloyd's market for the last three closed
underwriting years by 6.0%. This material outperformance cannot be
expected to be maintained.
The combined ratio for the Helios portfolio was 103.1% (2019:
95.6%) with the Lloyd's market as a whole reporting its fourth
consecutive year of loss with a combined ratio of 110.3%. Over the
past four years Helios' calendar year combined ratio (before
corporate costs) has outperformed Lloyd's by 6.65 percentage points
a year with an average combined ratio of 101.05% compared with
107.7% for the overall Lloyd's market. These incremental returns
demonstrate the diversity and breadth of underwriting expertise
within the businesses comprising the portfolio of syndicate
capacity.
Reinsurance quota share
The use of quota share reinsurance to provide access to the
Lloyd's underwriting exposures for reinsurers and private capital
has not been expanded in 2021. The core of the panel of reinsurers
remains XL Group plc and Everest Reinsurance Bermuda Limited.
This reinsurance has successfully reduced the exposure of Helios
shareholders in recent years and assists in the financing of the
underwriting capital. Helios has reduced the proportion of the
capacity portfolio ceded for 2021 year of account. As market
conditions continue to improve the Board will consider reducing the
cession further thereby increasing the Group's share of the
underwriting. The capital raised recently could be used to increase
the Group's share of the overall portfolio in this way.
The table shows that the Helios retained capacity increases
significantly in years 2 and 3 as further LLVs are acquired, and
the older years are not reinsured. Capacity on underwriting years
after 18 months of development is substantially "off risk" as the
underlying insurance contracts have mostly expired.
The profits from the capacity on the older years are retained
100% by Helios.
Year of account - GBPm
----------------------------------- ----------------------------
Helios retained capacity 2018 2019 2020 2021
----------------------------------- ------ ----- ----- ------
Helios capacity at outset 12.3 15.8 20.7 58.7
Retained capacity in year 1 6 6.4 10.1 -
Retained capacity in years 2 and 3 17.7 9.2 - -
----------------------------------- ------ ----- ----- ------
Helios retained capacity 36.0 31.3 30.8 58.7
----------------------------------- ------ ----- ----- ------
% of off-risk capacity
Ceded capacity at outset 28.7 36.8 48.4 51.6
Further capacity ceded to QS 9.5 2.1 0.8 0.0
----------------------------------- ------ ----- ----- ------
Total capacity ceded 38.2 38.9 49.1 51.6
----------------------------------- ------ ----- ----- ------
Current total capacity 74.3 70.3 80.0 110.3
Helios share of total capacity 48% 45% 39% 53%
----------------------------------- ------ ----- ----- ------
Risk management
Helios continues to ensure that the portfolio is well
diversified across classes of businesses and managing agents at
Lloyd's.
The biggest single risk faced by insurers arises from the
possibility of mispricing insurance on a large scale. The past four
underwriting years, 2017 to 2020, have demonstrated this material
risk as the under-pricing has resulted in loss making or marginally
profitable years. This mispricing risk is mitigated by the
diversification of the syndicate portfolio and by the depth and
diversity of management experience within the syndicates that
Helios supports. The recent correction in terms and conditions and
the actions of Lloyd's to force syndicates to remediate
underperforming areas of their books demonstrate the mispricing
that has prevailed over the past few years. These management teams
have weathered multiple market cycles and the risk management
skills employed should reduce the possibility of substantial
under-reserving of previous year underwriting.
We assess the downside risk in the event of a major loss through
the monitoring of the aggregate net losses estimated by managing
agents to the catastrophe risk scenarios ("CRS") prescribed by
Lloyd's.
The individual syndicate net exposures will depend on the
business underwritten during the year and the reinsurance
protections purchased at syndicate level.
The aggregate exceedance probability ("AEP") assesses the
potential impact on balance sheet across the portfolio from either
single or multiple large losses with a probability of occurring
greater than once in a 30-year period.
In addition, Helios purchases stop loss reinsurance for its 53%
(2020 YOA: 30%) share of the portfolio with an indemnity of 10% of
its share of the capacity and a claim can be made if the loss for
the year of account at 36 months exceeds 5% of capacity.
The impact on the net asset value of Helios from the disclosed
large loss scenarios are as follows:
Impact
on Net
Asset Value
---------------------------------------------- ------------
AEP 1 in 30 - whole world natural catastrophe (15.3)%
AEP 1 in 30 US/GOM windstorm (8.0)%
Terrorism (4.4)%
US / Canada Earthquake (4.4)%
---------------------------------------------- ------------
The assessment of the impact of the specified events is net of
all applicable quota share and stop loss reinsurance contracts but
before the likely profits to be generated from the balance of the
portfolio in any year.
Capital position
The underwriting capital required by Lloyd's for the Helios
portfolio comprises the funds to support the Economic Capital
Requirement of the portfolio and the Solvency II adjustments is as
follows:
2020 2019
Underwriting capital as at 31 December GBPm GBPm
--------------------------------------- ----- -----
Quota share reinsurance panel 27.3 26.7
Excess of loss reinsurance 8.1
Helios own funds 27.6 15.3
--------------------------------------- ----- -----
Total 63.0 42.0
--------------------------------------- ----- -----
Capacity as at 1 January 110.3 70.2
Economic Capital Requirement 58.2 35.2
Solvency II and other adjustments 4.8 6.8
--------------------------------------- ----- -----
63.0 42.0
--------------------------------------- ----- -----
The available funds to support Helios' share of the underwriting
have been supplemented by the capital raised in November 2020 and
by entering into an excess of loss reinsurance agreements for all
trading Helios LLV. These policies provide GBP8.1m of FAL to Helios
at a cost of GBP900k per year. The FAL provided by reinsurers will
only be exposed to loss if all the Helios "own FAL" is eroded.
Therefore, this FAL sits on the top of the Helios capital stack has
very limited exposure. This is a form of "non-recourse borrowing"
as there is no contractual requirement to repay the reinsurers if a
claim is made and their FAL is eroded.
In addition to the current funds lodged at Lloyd's, Helios has
available the following facilities to provide additional resources
to fund the necessary capital requirements:
-- a bank revolving credit bank facility of GBP4m; and
-- the stop loss reinsurance contracts for the 2019 and 2020
years of account could provide additional underwriting capital of
approximately GBP11m.
Environmental, social and governance responsibility
Helios aims to meet its expectations of its shareholders and
other stakeholders in recognising, measuring and managing the
impacts of its business activities. As Helios manages a portfolio
of Lloyd's syndicate capacity, it has no direct responsibility for
the management of those businesses. Each managing agent has
responsibility for the management of those businesses, their staff
and employment policies and the environmental impact.
We support the Environmental, Social and Governance (ESG)
strategy of Lloyd's who have outlined their ambition to integrate
sustainability into all of Lloyd's business activities. They have
committed to engaging widely with stakeholders across the Lloyd's
market to further develop and operationalise their ESG strategy,
policies and processes. It is their intention to build a framework
to help insurance businesses in the market to integrate ESG
principles into their business activities over the next 18 months.
Examples of the policies are to ask Lloyd's managing agents to
provide no new insurance cover in respect of thermal coal-fired
power plants, thermal coal mines, oil sands or new Arctic energy
exploration activities from 1 January 2022.
The Board is committed to a high standard of corporate
governance and is compliant with the principles of the Quoted
Companies Alliance's Corporate Governance Code (the "QCA Code").
The Directors have complied with their responsibilities under
Section 172 of the Companies Act 2006 which requires them to act in
the way they consider, in good faith, would be most likely to
promote the success of the Company for the benefit of its members
as a whole.
Nigel Hanbury
Chief Executive
27 May 2021
Lloyd's Adviser's report - Hampden Agencies
COVID-19 accelerates a "market hardening" in most lines of
business and geographies
Helios outperforms Lloyd's with a combined ratio of 103.1% in
2020 (Lloyd's: 110.3%)
The quality of the Helios portfolio of syndicates was again
demonstrated in 2020 with Helios reporting a combined ratio of
103.1% (2019: 95.6%) while the Lloyd's market as a whole reported
its fourth consecutive year of loss with a combined ratio of
110.3%. Over the past four years, Helios' calendar year combined
ratio (before corporate costs) has outperformed Lloyd's by 6.7
percentage points a year with an average combined ratio of 101.0%
compared with 107.7% for the overall Lloyd's market.
With the closure of the 2018 account at 31 December 2020 the
Helios portfolio has outperformed Lloyd's for the tenth successive
three-year account result, reporting a loss of 0.3% on capacity
compared with the Lloyd's market average result which was a loss of
5.9% on capacity. The 2018 account improved by 3.3 percentage
points from the estimate at Q4 2019 benefiting from prior year
releases which totalled 3.5% of capacity.
Rates began to recover in 2018 from the "soft market" conditions
of generally declining rates which had started in 2013 in most
classes of property and casualty insurance and reinsurance.
However, the level of rate rises was modest when set against the
natural catastrophe losses from Hurricanes Harvey, Irma and Maria
the previous year. The muted recovery in rates in 2018,
particularly in insurance, is shown by Marsh's Global Insurance
Index which increased by 2.1% at Q4 2018 and Guy Carpenter's US
Property Catastrophe Rate-on-Line Index which increased by 7.5%,
the first rate increase since 2012.
The 2018 account suffered from the fourth highest total of
insured natural catastrophe losses estimated by Swiss Re Sigma at
$94bn in 2020 dollars. Major losses in the year included Hurricanes
Michael and Florence in the US and a record level of losses from
wildfires in California as well as Typhoons Jebi and Trami in
Japan. The main impact of COVID-19 is on the 2019 account but
losses of 1.3% of capacity were included in the 2018 account result
for Helios principally from UK property insurance business
interruption claims from the Supreme Court judgment on business
written in 2018 as well as some event cancellation claims. Argenta
Syndicate 2121 is remaining open for the 2018 account due to
uncertainty around the final outcome of COVID-19 claims and to
maintain equity between years of account. Helios' share for 2018 of
Syndicate 2121 is only 1.4% of the portfolio - the forecast loss is
in a range of 5% to 15% of capacity on Syndicate 2121.
2019 was notable for an accelerating momentum of rate increases
in most classes of the insurance market. Marsh's Global Insurance
Index rose by 10.6% at Q4 2019 which at that time was the largest
increase in the Index. However reinsurance rate increases
moderated, with Guy Carpenter's US Property Rate-on-Line Index
increasing by only 2.6%. Alternative capital which had increased in
quantum by 78% between 2013 and 2017 continued to suppress the
level of rate increases in the reinsurance sector.
Owing to the absence of severe hurricanes in the US, in contrast
to the previous two years, insured major losses totalled $60bn in
2019, below the annual average of $75bn in the previous ten years.
For the second year running Japan was struck by two severe
typhoons, Hagibis and Faxai, with the largest insured loss totals
of $8bn and $7bn respectively of all disaster events around the
world, according to Swiss Re Sigma. Most of the insured losses from
Typhoon Hagibis were due to flood. The 2019 hurricane season was
notable for Hurricane Dorian which was the costliest natural
disaster event ever for the Bahamas with total insured losses of
$4.5bn in the Bahamas and North Carolina.
The chart below shows the return on capacity of the Helios
portfolio compared with Lloyd's for the last four closed years from
2015 to 2018. The chart also includes the midpoint open year
estimate for the 2019 year of account as at the end of Q1 2021.
This open year estimate is a loss of 1.6% of capacity (Lloyd's
market average is a loss of 4.8% of capacity) and includes
estimates from five acquisitions made by Helios during 2020. We
expect an improvement in this estimate when the result is declared
as at the end of 2021, but do not expect prior year reserve
releases or the investment return component to be as strong as for
the 2018 account. The first set of estimates for the 2020 Account
is a mid-point profit for the Helios portfolio of 0.6% of capacity.
Lloyd's Market Average is a profit of 0.4% of capacity.
The main impact of COVID-19 is on the 2019 account
The COVID-19 pandemic has caused insurance losses totalling 13.3
percentage points measured by combined ratio for Lloyd's in 2020.
Much of these losses will fall on the 2019 year of account which
for Helios is estimated at 7.0% of capacity. The 2019 year of
account for Helios has been pushed into a loss because of COVID-19.
Excluding COVID-19 the estimate for Helios at Q8 would have been a
profit of 4.8% of capacity.
Lloyd's ultimate net loss from COVID-19 is estimated at GBP3.6bn
although 67% of the losses at year end are IBNR reflecting clear
uncertainty. This estimate has increased from the initial estimated
range of GBP2.5bn to GBP3.5bn published in May 2020. If social
distancing continues until June 2021 the net loss is estimated to
increase further to GBP3.8bn. Gross ultimate losses are estimated
at GBP6.2bn with added uncertainty on how insured losses will be
treated for the purposes of reinsurance on UK exposed business
following the UK's Supreme Court judgement.
The PRA stress tested the entire UK insurance sector in relation
to COVID-19 and in a letter to CEOs dated 17 June 2020 stated that
"our analysis showed that the sector was robust to downside
stresses". Since March and April 2020, a series of wordings have
been published by the Lloyd's Market Association for different
classes of businesses making provision for communicable disease
exposure to be excluded.
Almost 50% of Lloyd's losses relate to contingency (event
cancellation). Syndicates have exposure to sports events, music
concerts and trade conferences worldwide, but mainly in the UK,
Europe and US. It is expected that losses will continue to be
incurred on business written up to March 2020 as long as the
pandemic continues (Aon estimates around 10% of policies did not
have an exclusion). All new business in this class has the
communicable disease exclusion and rates are rising from 25% up to
100%.
Lloyd's total exposure to UK business interruption claims on
property policies is GBP530m with the UK Supreme Court ruling that
in the majority of cases insurers were held liable to pay business
interruption claims. However UK property is not a significant class
of business for Lloyd's, accounting for only 2.6% of premiums,
though there is exposure through property reinsurance. More
significant is US property business which accounts for 18.5% of
premiums. However the wordings are generally stronger with most
small and middle market US commercial policies having a virus
exclusion. Some policies give clear business interruption coverage
and these are being settled. In others, policyholders are using
filings in both Federal and State courts to determine claims
coverage.
Although concerns remain, court decisions have largely favoured
insurers with Federal courts dismissing 93% of 232 cases brought so
far and State courts dismissing 52% of the 56 cases brought.
Lloyd's syndicates have been involved in ten cases and have been
successful in eight Federal cases although two State cases have
been unfavourable. It is expected that litigation will take some
time to conclude which could have an impact on some syndicates'
ability to close their 2019 account. However, the uncertainty is
another factor in maintaining the momentum of rate increases.
Risk is being repriced as fundamentals change
The turn in the market is unlike previous cycles where
constraints in the supply of capital led to a repricing of
business. The impact of COVID-19 has reinforced the market
hardening and is expected to be significant and long lasting in all
lines of business and geographies. We consider that the reason why
rates are rising despite (i) demand being tempered by recession and
(ii) the abundance of industry capital is due to a range of factors
which has forced underwriters to reassess and reprice risk.
Global premiums grew by 4% in 2020
The world economy contracted by 5.2% in 2020, the largest
decline since World War II with the US contracting slightly less at
4.9%. A sharp rebound in real GDP growth is projected for 2021 by
6.2%, which would be the highest level of growth since 1984 and
possibly even 1950. While the economic recession constrained demand
in certain classes of business, such as motor, workers'
compensation, business interruption, contingency and travel, global
premiums grew by 4% in 2020, according to Swiss Re, with rate rises
more than compensating for reduced exposures due to COVID-19.
Industry capital remains abundant
The US property/casualty industry policyholders' surplus
increased by 2.0% at Q3 2020 to a record high of $865.1bn. Global
reinsurer capital, using data from the broker Aon, also rose by 4%
to a record $650bn over the year to 31 December 2020 driven by a
combination of (i) a capital market recovery following the COVID-19
shock to asset prices in Q1, (ii) new equity issuance from existing
companies totalling $15bn and (iii) US dollar depreciation. The
alternative capital sector of the market fell back by $1bn to $94bn
comprising 13.8% of global reinsurer capital although deployable
capital is somewhat lower due to the retention of collateral from
large loss events. Guy Carpenter reported that excess reinsurance
capacity rebounded to 2018 levels with roughly 12% coming from new
entrants.
The accumulation of major losses in 2020 has added further
pressure to rate increases
The accumulation of major losses in 2020 has added further
pressure to rate increases with Swiss Re reporting that 2020 was
the fifth worst year for global catastrophes with insured losses
estimated at $89bn, which was above the ten-year average of $79bn a
year. Secondary perils (such as severe convective storms or
wildfires) are in the spotlight causing over 70% ($57bn) of insured
natural catastrophe losses in 2020 and have been associated with an
increase in frequency of losses with a new record of 28 events
causing insured losses of $1bn or more in 2020.
In the US, insured natural catastrophe losses at $65bn were the
third worst year after 2017 and 2005. The largest insured losses
affecting Helios' 2020 account were from Hurricane Laura at 2.4% of
capacity followed by a US Midwest Derecho storm at 1.9% of capacity
and Hurricane Sally. COVID-19 losses on business written until
March 2020 account for an estimated 2.3% of capacity. Some claims
from the February 2021 Winter Storm Uri, estimated to have caused
insured losses of between $10bn and $15bn mainly in Texas, will
impact the 2020 account.
Momentum of insurance and reinsurance rate increases accelerated
in 2020
The momentum of rate increases accelerated in 2020 and this has
continued in the first quarter of 2021. In addition to rate
increases there has been a heightened focus on restricting terms
and conditions which had been broadened in the soft market years.
This has included communicable disease exclusions and clarity in
all policies as to whether coverage is provided for a cyber event
to avoid "silent cyber" exposures. By 1 July 2021 all Lloyd's
policies must either exclude or provide affirmative coverage for
cyber. Willis Re reports that in some cases reinsurers are agreeing
customised language to align with original policy language.
Lloyd's in its 2020 annual results reported 13 quarters of rate
increases with double digit rate increases continuing in the first
quarter of 2021. In 2020, risk adjusted rate increases on renewal
business averaged 10.8% in all classes for the full year, an
increase from the 8.7% reported for the first half in its interim
results. In the two years since 2018, rates are up by 16.8%
compound and combined with a remediation of underperforming
business with volumes down by 19.8% over the same period the
attritional loss ratio has improved by 5.7% points to 51.9% in 2020
and to 49% on continuing business only. Lloyd's has also succeeded
in reducing acquisition costs by 2% points from 39.2% to 37.2% over
the same period.
So far in 2021 we have seen rate increases in the reinsurance
market at similar levels to 2020 with Guy Carpenter's Global
Rate-on-Line Index rising by 4.5% at 1 January (5% at 1 January
2020) and its US Rate-on-Line Index by between 10% and 15%
(compared with an average of 12% in 2020, which was the highest
increase since 2006). US property catastrophe reinsurance rates are
now at levels last seen in 2013 when the soft market began. At 1
April 2021 Guy Carpenter reports Japanese excess of loss wind rates
up by between 5% and 12% with more limit being purchased and rates
reaching a 25-year high. US reinsurance rates are on a par with
rates in 2013 whilst global reinsurance rates require further
increases of 24% to reach 2013 levels.
US commercial insurance pricing is rising at the fastest rate
since 2003 measured by the CLIPS Index
We continue to view insurance rates as more attractive than
reinsurance rates. US commercial insurance pricing is experiencing
the highest annual rate increases in Q4 2020 averaging 11% since
Willis Towers Watson launched its CLIPS Index in 2003. The CLIPS
Index is based on both new and renewal business data from carriers.
Large accounts showed rate increases well into double digits,
middle sized accounts in double digits, while small accounts were
more muted. The highest level of rate increases was in excess
liability and directors and officers.
Broker Marsh estimates that global insurance rates rose by 22%
in 2020 compared with 11% in the same quarter a year earlier. This
is the largest increase in the Marsh Global Insurance Market Index
since inception of the index in 2012. Momentum is being maintained
in 2021 with rates having risen for 14 successive quarters and rate
increases averaging 18% in Q1 2021. Global property insurance was
up 15%, global financial and professional lines up 40%, while
global casualty rates were up 6% on average.
Rate expectations for remainder of 2021
Our view is that the risk reward ratio continues to improve with
most insurance and reinsurance classes benefiting from a market in
which brokers and buyers are expecting to pay rate increases. Twice
a year Willis Towers Watson publishes its Marketplace Realities
Report which examines market conditions and its expectation of rate
changes in 31 insurance classes of business. In its spring update
published in April 2021, it predicts that not a single line of
business is expected to show an overall decrease with a record 30
out of 31 classes showing rate increases. In comparison, in spring
2017 ten classes showed rate decreases. Seven classes were mix/flat
and only six classes showed rate increases.
For the third report in succession, Willis Towers Watson has no
line of business showing a rate decrease but there are signs that
the quantum of rate increases is tapering with Willis Towers Watson
commenting that: "A two-tiered market has emerged, one for better
risks, one for poorer. Each tier can expect to pay more for
insurance in 2021, but those in the better tier will suffer
considerably less."
At a time of ultra-low interest rates, combined with uncertainty
of reserve adequacy on the more recent accident years for Lloyd's
US competitors, the only way to make an acceptable return on equity
for investors is to make an underwriting profit. Our view therefore
is that these two factors provide strong grounds for the current
insurance market conditions to endure.
Investment yields are very low compared with historical
levels
In March 2020 the US Federal Reserve made two emergency rate
reductions in its Fed Funds Rate totalling 1.5% which is now
targeted at 0% to 0.25% and has coincided with reductions in yield
across all durations of the yield curve. As of 3 May 2020 the
two-year Treasury Yield had reduced marginally to 0.16% from 0.19%
a year ago with most insurers now having low yielding bonds for
years to come on premiums received in 2020.
We consider that Lloyd's syndicates remain conservatively
reserved benefiting from the annual external actuarial sign off
that reserves are at a minimum, at a best estimate and on average
materially higher. Lloyd's reported in its 2020 results that its
reserve margin above actuarial best estimate increased by GBP200m
in 2020 to a GBP2.8bn surplus. However, US industry reserves may
now be deficient with "social inflation" eroding reserves as
litigation costs rise due to increases in the largest US jury
verdicts. US analyst VJ Dowling considers that more recent accident
years may ultimately prove to be deficient maintaining pressure for
higher rates suggesting that "if not already in the restoration
phase of the reserving cycle where reserves are built up, the US
property casualty industry will soon enter this phase". Aon's
latest US P&C Industry Statutory Reserve Study estimated that
commercial lines underwriting was under-reserved by $14.2bn at year
end 2019, an increase compared with $8.5bn a year earlier.
Future prospects for the Helios portfolio
The Helios portfolio continues to focus on quality Lloyd's
syndicates with a key success characteristic being managing the
cycle. For 2021 35.5% of Helios' capacity is in syndicates graded
AA or A by Hampden. In the more difficult soft market conditions
during the period 2013 to 2019 this was evidenced by a focus on
profit over growth. Quality syndicates which are able to conserve
capital in soft market years are also in a better position to take
maximum advantage of the current upturn in rates and expected
profitability while being given greater freedom to do so by Lloyd's
Performance Management Directorate.
In 2021 the Helios syndicates are in an excellent position to
capitalise on hard market conditions in most of the insurance
classes with growth in projected written premiums in the 2021
Syndicate Business Plans averaging 25%, reflecting the scale of the
opportunity. What matters to profitability is the price of
insurance per unit of exposure and this has been and is continuing
to rise. The industry is resetting the clearing price for risk in
both insurance and reinsurance which we expect will lead to a
period of sustained profitability.
Summary financial information
The information set out below is a summary of the key items that
the Board assesses in estimating the financial position of the
Group. Given the Board has no active role in the management of the
syndicates within the portfolio, the following approach is
taken:
A) It relies on the quarterly syndicate forecasts to assess its
share of the underlying profitability of the syndicates within the
portfolio.
B) It calculates the amounts due to/from the quota share
reinsurers in respect of their share of the profits/losses as well
as fees and commissions due.
C) An adjustment is made to exclude pre-acquisition profits on companies bought in the year.
D) Costs relating to stop loss reinsurance and operating costs are deducted.
Year to 31 December
---------------------
2020 2019
GBP'000 GBP'000
---------------------------------------------------- ---------- ---------
Underwriting profit 639 3,261
---------------------------------------------------- ---------- ---------
Other income:
- fees from reinsurers 334 235
- corporate reinsurance policies (282) (357)
- goodwill on bargain purchase 1,260 1,707
- investment income 1,575 972
---------------------------------------------------- ---------- ---------
Total other income 2,887 2,557
---------------------------------------------------- ---------- ---------
Costs:
- pre-acquisition (92) (859)
- stop loss costs (1,097) (200)
- operating costs (2,001) (2,332)
---------------------------------------------------- ---------- ---------
Total costs (3,190) (3,391)
---------------------------------------------------- ---------- ---------
Operating profit before impairments of goodwill and
capacity 336 2,427
Impairment charge - capacity - 1,860
Tax (35) (233)
---------------------------------------------------- ---------- ---------
Profit for the year 301 4,054
---------------------------------------------------- ---------- ---------
Year to 31 December 2020
Helios
retained
capacity
at
31 December Portfolio Helios
2020 midpoint profits
Underwriting year GBPm forecasts GBP'000
------------------ ------------ ---------- --------
2018 36.1 (0.3)% 1,691
2019 31.3 (2.2)% 339
2020 30.8 N/A (1,391)
------------------ ------------ ---------- --------
639
------------------ ------------ ---------- --------
Year to 31 December 2019
Helios
retained
capacity
at
31 December Portfolio Helios
2019 midpoint profits
Underwriting year GBPm forecasts GBP'000
------------------ ------------ ---------- --------
2017 36.2 (4.8)% 2,726
2018 21.0 (3.6)% 1,349
2019 18.3 N/A (814)
------------------ ------------ ---------- --------
3,261
------------------ ------------ ---------- --------
Summary balance sheet
See Note 28 for further information.
2020 2019
GBP'000 GBP'000
----------------------- -------- --------
Intangible assets 31,601 21,178
Funds at Lloyd's 19,713 13,520
Other cash 4,961 3,028
Other assets 12,731 10,105
----------------------- -------- --------
Total assets 69,006 47,831
----------------------- -------- --------
Deferred tax 6,492 3,292
Borrowings 4,000 2,000
Other liabilities 2,222 6,145
----------------------- -------- --------
Total liabilities 12,714 11,437
----------------------- -------- --------
Total syndicate equity (5,743) (8,246)
----------------------- -------- --------
Total equity 50,549 28,148
----------------------- -------- --------
Cash flow
Year to
Year to 31 December
31 December 2019
2020 restated
Analysis of free working capital GBP'000 GBP'000
------------------------------------------------ ------------ ------------
Opening balance (free cash) 3,028 9,717
Income
Cash acquired on acquisition 632 2,045
Distribution of profits (net of tax retentions) 120 1,724
Transfers from Funds at Lloyd's 4,901 4,178
Other income 248 178
Proceeds from the sale of capacity 1,649 911
Proceeds from the issue of shares 11,283 2,014
Borrowings 2,000 2,000
Expenditure
Operating costs (2,810) (2,377)
Payments to QS reinsurers - (465)
Acquisition of LLVs (6,075) (4,897)
Transfers to Funds at Lloyd's (9,733) (1,137)
Tax (282) (833)
Dividends paid - (529)
Repayment of borrowings - (9,214)
Share buybacks - (287)
------------------------------------------------ ------------ ------------
Closing balance 4,961 3,028
------------------------------------------------ ------------ ------------
(Restated)
Year to Year to
31 December 31 December
2020 2019
Net tangible assets GBP'000 GBP'000
--------------------------------------------------------- ------------ ------------
Net assets less intangible assets 18,948 6,970
Fair value of capacity (WAV) 30,826 26,350
--------------------------------------------------------- ------------ ------------
49,774 33,320
--------------------------------------------------------- ------------ ------------
Shares in issue - on the market (Note 21) 33,012 17,489
Shares in issue - total of on the market and JSOP shares
(Note 21) 33,512 17,989
Net tangible asset value per share GBP - on the market 1.51 1.91
Net tangible asset value per share GBP - on the market
and JSOP shares 1.49 1.85
--------------------------------------------------------- ------------ ------------
Consolidated statement of comprehensive income
Year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
----------------------------------------------------- ---- ------------ ------------
Gross premium written 6 68,263 55,470
Reinsurance premium ceded 6 (17,660) (13,210)
----------------------------------------------------- ---- ------------ ------------
Net premium written 6 50,603 42,260
----------------------------------------------------- ---- ------------ ------------
Change in unearned gross premium provision 7 (2,481) (60)
Change in unearned reinsurance premium provision 7 647 488
----------------------------------------------------- ---- ------------ ------------
Net change in unearned premium and reinsurance
provision 7 (1,834) 428
----------------------------------------------------- ---- ------------ ------------
Net earned premium 5,6 48,769 42,688
Net investment income 8 2,006 2,335
Other underwriting income 420 417
Gain on bargain purchase 22 1,260 1,707
Other income 1,399 432
----------------------------------------------------- ---- ------------ ------------
Revenue 5,085 47,579
----------------------------------------------------- ---- ------------ ------------
Gross claims paid (38,496) (34,107)
Reinsurers' share of gross claims paid 9,967 8,237
----------------------------------------------------- ---- ------------ ------------
Claims paid, net of reinsurance (28,529) (25,870)
----------------------------------------------------- ---- ------------ ------------
Change in provision for gross claims 7 (8,255) (3,758)
Reinsurers' share of change in provision for gross
claims 7 2,704 2,004
----------------------------------------------------- ---- ------------ ------------
Net change in provision for claims 7 (5,551) (1,754)
----------------------------------------------------- ---- ------------ ------------
Net insurance claims incurred and loss adjustment
expenses 6 (34,080) (27,624)
----------------------------------------------------- ---- ------------ ------------
Expenses incurred in insurance activities (17,916) (15,764)
Other operating expenses (1,522) (1,764)
----------------------------------------------------- ---- ------------ ------------
Total expenses 9 (19,438) (17,528)
----------------------------------------------------- ---- ------------ ------------
Operating profit before impairments of goodwill
and capacity 6 336 2,427
Impairment of syndicate capacity 13 - 1,860
----------------------------------------------------- ---- ------------ ------------
Profit before tax 336 4,287
----------------------------------------------------- ---- ------------ ------------
Income tax credit 10 (35) (233)
----------------------------------------------------- ---- ------------ ------------
Profit for the year 301 4,054
----------------------------------------------------- ---- ------------ ------------
Other comprehensive income
Foreign currency translation differences - -
Revaluation of syndicate capacity 5,604 -
Deferred tax relating to the components of other
comprehensive income (1,622) -
----------------------------------------------------- ---- ------------ ------------
Other comprehensive income for the year, net of
tax 3,982 -
----------------------------------------------------- ---- ------------ ------------
Total comprehensive income for the year 4,283 4,054
----------------------------------------------------- ---- ------------ ------------
Profit for the year attributable to owners of
the Parent 301 4,054
----------------------------------------------------- ---- ------------ ------------
Total comprehensive income for the year attributable
to owners of the Parent 4,283 4,054
----------------------------------------------------- ---- ------------ ------------
Earnings per share attributable to owners of the
Parent
Basic 11 1.59p 25.64p
Diluted 11 1.55p 24.86p
----------------------------------------------------- ---- ------------ ------------
The profit attributable to owners of the Parent, the total
comprehensive income and the earnings per share set out above are
in respect of continuing operations.
The notes are an integral part of these Financial
Statements.
Consolidated statement of financial position
At 31 December 2020
31 December 31 December
2020 2019
Note GBP'000 GBP'000
------------------------------------------------------- ----- ----------- -----------
Assets
Intangible assets 13 31,601 21,178
Financial assets at fair value through profit
or loss 15 85,277 67,141
Deferred income tax asset - -
Reinsurance assets:
- reinsurers' share of claims outstanding 7 30,781 25,760
- reinsurers' share of unearned premium 7 6,028 5,023
Other receivables, including insurance and reinsurance
receivables 16 58,348 47,726
Deferred acquisition costs 17 7,726 6,641
Prepayments and accrued income 1,176 432
Cash and cash equivalents 8,495 6,037
------------------------------------------------------- ----- ----------- -----------
Total assets 229,432 179,938
------------------------------------------------------- ----- ----------- -----------
Liabilities
Insurance liabilities:
- claims outstanding 7 113,371 95,616
- unearned premium 7 32,356 26,522
Deferred income tax liabilities 18 6,507 3,292
Borrowings 19 4,000 2,000
Other payables, including insurance and reinsurance
payables 20 19,356 18,040
Accruals and deferred income 3,293 6,320
------------------------------------------------------- ----- ----------- -----------
Total liabilities 178,883 151,790
------------------------------------------------------- ----- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 3,393 1,839
Share premium 21 35,525 18,938
Revaluation reserve 3,982 -
Other reserves - treasury shares (JSOP) (50) (50)
Retained earnings 7,699 7,421
------------------------------------------------------- ----- ----------- -----------
Total equity 50,549 28,148
------------------------------------------------------- ----- ----------- -----------
Total liabilities and equity 229,432 179,938
------------------------------------------------------- ----- ----------- -----------
Parent Company statement of financial position
At 31 December 2020
31 December 31 December
2020 2019
Note GBP'000 GBP'000
---------------------------------------------- ---- ----------- -----------
Assets
Investments in subsidiaries 14 41,233 33,329
Financial assets at fair value through profit
or loss 15 - -
Other receivables 16 20,796 11,704
Cash and cash equivalents 4,106 2,191
---------------------------------------------- ---- ----------- -----------
Total assets 66,135 47,224
---------------------------------------------- ---- ----------- -----------
Liabilities
Borrowings 19 4,000 2,000
Other payables 20 3,892 7,735
---------------------------------------------- ---- ----------- -----------
Total liabilities 7,892 9,735
---------------------------------------------- ---- ----------- -----------
Equity
Equity attributable to owners of the Parent:
Share capital 21 3,393 1,839
Share premium 21 35,525 18,938
---------------------------------------------- ---- ----------- -----------
38,918 20,777
---------------------------------------------- ---- ----------- -----------
Retained earnings:
At 1 January 16,712 11,754
Profit for the year attributable to owners of
the Parent 2,636 5,789
Other changes in retained earnings (23) (831)
At 31 December 19,325 16,712
---------------------------------------------- ---- ----------- -----------
Total equity 58,243 37,489
---------------------------------------------- ---- ----------- -----------
Total liabilities and equity 66,135 47,224
---------------------------------------------- ---- ----------- -----------
Consolidated statement of changes in equity
Year ended 31 December 2020
Attributable to owners of the
Parent
------------------------------------------------------
Other
Share Share reserves Retained Total
capital premium Revaluation (JSOP) earnings equity
Note GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 1 January 2019 1,510 15,387 - (50) 4,198 21,045
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year:
Profit for the year - - - - - -
Other comprehensive income,
net of tax - - - - 4,054 4,054
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year - - - - 4,054 4,054
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - - (529) (529)
Company buyback of ordinary
shares 21, 23 - - - - (302) (302)
Share issue, net of transaction
cost 21 329 3,551 - - - 3,880
Other comprehensive income,
net of tax - - - - - -
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total transactions with
owners 329 3,551 - - (831) 3,049
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 31 December 2019 1,839 18,938 - (50) 7,421 28,148
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 1 January 2020 1,839 18,938 - (50) 7,421 28,148
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year:
Profit for the year - - - - 301 301
Other comprehensive income,
net of tax - - 3,982 - - 3,982
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total comprehensive income
for the year - - 3,982 - 301 4,283
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Transactions with owners:
Dividends paid 12 - - - - - -
Company buyback of ordinary
shares 21, 23 - - - - (23) (23)
Share issue, net of transaction
cost 21 1,554 16,587 - - - 18,141
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Total transactions with
owners 1,554 16,587 - - (23) 18,118
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
At 31 December 2020 3,393 35,525 3,982 (50) 7,699 50,549
-------------------------------- ------ -------- --------- ----------- --------- --------- --------
Parent Company statement of changes in equity
Year ended 31 December 2020
Share Share Retained Total
capital premium earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2019 1,510 15,387 11,754 28,651
Total comprehensive income for the
year:
Profit for the year - - 5,789 5,789
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - 5,789 5,789
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - (529) (529)
Company buyback of ordinary shares 21, 23 - - (302) (302)
Share issue, net of transaction costs 329 3,551 - 3,880
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners 329 3,551 (831) 3,049
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2019 1,839 18,938 16,712 37,489
-------------------------------------- ------ -------- -------- --------- --------
At 1 January 2020 1,839 18,938 16,712 37,489
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year:
Profit for the year - - 2,636 2,636
Other comprehensive income, net of
tax - - - -
-------------------------------------- ------ -------- -------- --------- --------
Total comprehensive income for the
year - - 2,636 2,636
-------------------------------------- ------ -------- -------- --------- --------
Transactions with owners:
Dividends paid 12 - - - -
Company buyback of ordinary shares 21, 23 - - (23) (23)
Share issue, net of transaction costs 1,554 16,587 - 18,141
-------------------------------------- ------ -------- -------- --------- --------
Total transactions with owners 1,554 16,587 (23) 18,118
-------------------------------------- ------ -------- -------- --------- --------
At 31 December 2020 3,393 35,525 19,325 58,243
-------------------------------------- ------ -------- -------- --------- --------
Consolidated statement of cash flows
Year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
----------------------------------------------------- ---- ------------ ------------
Cash flows from operating activities
Profit before tax 336 4,287
Adjustments for:
- interest received 8 (156) (235)
- investment income 8 (1,318) (1,248)
- gain on bargain purchase 22 (1,260) (1,707)
- impairment of goodwill 22 - -
- profit on sale of intangible assets (1,775) (898)
- impairment of intangible assets 13 - (1,860)
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss 8 (297) (657)
- increase in financial assets at fair value through
profit or loss (7,768) (3,010)
- decrease in other receivables 4,491 18,823
- decrease in other payables (4,706) (6,785)
- net decrease in technical provisions (650) (6,473)
----------------------------------------------------- ---- ------------ ------------
Cash (used in)/from operations (13,103) 237
----------------------------------------------------- ---- ------------ ------------
Income tax paid (312) (1,119)
----------------------------------------------------- ---- ------------ ------------
Net cash used in operating activities (13,415) (882)
----------------------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 8 156 235
Investment income 8 1,318 1,248
Purchase of intangible assets 13 (186) (22)
Proceeds from disposal of intangible assets 1,779 932
Acquisition of subsidiaries, net of cash acquired (364) (1,493)
----------------------------------------------------- ---- ------------ ------------
Net cash from investing activities 2,703 900
----------------------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 11,193 1,844
Payment for Company buyback of shares 24 (23) (302)
Proceeds from borrowings 19 2,000 2,000
Repayment of borrowings 19 - (9,196)
Dividends paid to owners of the Parent 12 - (529)
----------------------------------------------------- ---- ------------ ------------
Net cash from financing activities 13,170 (6,183)
----------------------------------------------------- ---- ------------ ------------
Net increase/(decrease) in cash and cash equivalents 2,458 (6,165)
Cash and cash equivalents at beginning of year 6,037 12,202
----------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of year 8,495 6,037
----------------------------------------------------- ---- ------------ ------------
Cash held within the syndicates' accounts is GBP4,961,000 (2019:
GBP3,009,000) of the total cash and cash equivalents held at the
year end of GBP8,495,000 (2019: GBP6,037,000). The cash held within
the syndicates' accounts is not available to the Group to meet its
day-to-day working capital requirements.
Cash and cash equivalents comprise cash at bank and in hand.
Parent Company statement of cash flows
Year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
----------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Profit before tax 2,490 5,543
Adjustments for:
- investment income 28 -
- dividends received (3,654) (8,336)
- impairment of investment in subsidiaries 14 37 1,394
Changes in working capital:
- change in fair value of financial assets held
at fair value through profit or loss - -
- decrease in financial assets at fair value through
profit or loss - -
- increase in other receivables 1,433 925
- (decrease)/increase in other payables (3,618) 2,346
----------------------------------------------------- ------ ------------ ------------
Net cash from operating activities (3,284) 1,872
----------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Investment income (28) -
Dividends received 3,654 8,336
Acquisition of subsidiaries 14, 22 (2,208) (8,128)
Amounts owed by subsidiaries 25 940 (2,136)
----------------------------------------------------- ------ ------------ ------------
Net cash used in investing activities (7,971) (1,928)
----------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Net proceeds from the issue of ordinary share
capital 11,193 1,844
Payment for Company buyback of shares 24 (23) (302)
Proceeds from borrowings 19 2,000 2,000
Repayment of borrowings 19 - (9,196)
Dividends paid to owners of the Parent 12 - (529)
----------------------------------------------------- ------ ------------ ------------
Net cash from/(used in) financing activities 13,170 (6,183)
----------------------------------------------------- ------ ------------ ------------
Net decrease/(increase) in cash and cash equivalents 1,915 (6,239)
Cash and cash equivalents at beginning of year 2,191 8,430
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at end of year 4,106 2,191
----------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial
Statements.
Notes to the Financial Statements - Year ended 31 December
2020
1. General information
The Company is a public limited company listed on AIM. The
Company was incorporated in England and is domiciled in the UK and
its registered office is 40 Gracechurch Street, London EC3V 0BT.
These Financial Statements comprise the Company and its
subsidiaries (together referred to as the "Group"). The Company
participates in insurance business as an underwriting member at
Lloyd's through its subsidiary undertakings.
2. Significant accounting policies
The principal accounting policies adopted in the preparation of
the Group and Parent Company Financial Statements (the "Financial
Statements") are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated.
Basis of preparation
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and
interpretations issued by the IFRS Interpretations Committee
("IFRIC") as adopted by the European Union ("EU"), and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
No statement of comprehensive income is presented for Helios
Underwriting plc, as a Parent Company, as permitted by Section 408
of the Companies Act 2006.
The Financial Statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets
at fair value through profit or loss.
Use of judgements and estimates
The preparation of Financial Statements in conformity with IFRS
requires the use of judgements, estimates and assumptions in the
process of applying the Group's accounting policies that affect the
reported amounts of assets and liabilities at the date of the
Financial Statements and the reported amounts of revenues and
expenses during the reporting year. Although these estimates are
based on management's best knowledge of the amounts, events or
actions, actual results may ultimately differ from these estimates.
Further information is disclosed in Note 3.
The Group participates in insurance business through its Lloyd's
member subsidiaries. Accounting information in respect of syndicate
participations is provided by the syndicate managing agents and is
reported upon by the syndicate auditors.
Going concern
The Group and the Company have net assets at the end of the
reporting period of GBP50,549,000 and GBP58,243,000
respectively.
The Company's subsidiaries participate as underwriting members
at Lloyd's on the 2018, 2019 and 2020 years of account, as well as
any prior run-off years, and they have continued this participation
since the year end on the 2021 year of account. This underwriting
is supported by Funds at Lloyd's totalling GBP26,440,000 (2019:
GBP15,315,000), letters of credit provided through the Group's
reinsurance agreements totalling GBP39,536,000 (2019:
GBP26,742,000) and solvency credits issued by Lloyd's totalling
GBP107,000 (2019: GBP80,000).
The Directors have a reasonable expectation that the Group and
the Company have adequate resources to meet their underwriting and
other operational obligations for the foreseeable future.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the annual Financial Statements. In
arriving at this conclusion the Directors have taken into account
the impact of COVID-19 both on the operating activities of the
Group and on the Lloyd's market.
International Financial Reporting Standards
Adoption of new and revised standards
In the current year, the Group has applied new IFRSs and
amendments to IFRSs issued by the IASB that are mandatory for an
accounting period that begins on or after 1 January 2020.
IFRS 16 Amendments, Leases COVID 19 Related Rent Concessions:
Lessees are provided with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification. The Group
has not applied this exemption and the amendment has not had an
impact on the Consolidated Financial Statements.
IFRS 3 Amendments, Business Combinations: The amendment is aimed
at resolving the difficulties that arise when an entity determines
whether it has acquired a business or a group of assets. The
amendments provide further clarity on what constitutes an acquired
business, and this clarification has not impacted the Group's
recognition of acquired business in the year and has not had an
impact on the Consolidated Financial Statements.
IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark
Reform: The amendments deal specifically with interest rate hedge
accounting and is the first phase of change relating to interest
rate benchmark reform and the replacement of LIBOR. The Group has
not been impacted by these amendments for hedge accounting.
IAS 1 and IAS 8 Amendments, Definition of Material: The
amendments clarify the definition of "material" and align the
definition used in the Conceptual Framework and the standards
themselves. Information is material if omitting, misstating or
obscuring it could reasonably be expected to influence decisions
that the primary users of general purpose financial statements make
on the basis of those financial statements, which provide financial
information about a specific reporting entity. The Financial
Statements have been prepared in accordance with this
clarification.
New standards, amendments and interpretations not yet
adopted
A number of new standards and amendments adopted by the EU, as
well as standards and interpretations issued by the IASB but not
yet adopted by the EU, have not been applied in preparing the
Consolidated Financial Statements.
The Group does not plan to adopt these standards early; instead
it will apply them from their effective dates as determined by
their dates of EU endorsement. The Group continues to review the
upcoming standards to determine their impact.
IFRS 9 "Financial Instruments" (IASB effective date 1 January
2018) has not been applied under the IFRS 4 amendment option to
defer until IFRS 17 comes into effect on 1 January 2023.
IFRS 17 "Insurance Contracts" (IASB effective date 1 January
2023).
IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark
Reform Phase 2 (IASB effective date 1 January 2021).
Amendments to IFRS 3 "Business Combinations", IAS 16 "Property,
Plant and Equipment" and IAS 37 "Provisions, Contingent Liabilities
and Contingent Assets" (IASB effective date 1 January 2022).
IAS 1 Presentation of Financial Statements Amendments,
Classification of Liabilities as Current or Non-current (IASB
effective date 1 January 2023).
IAS 8 Accounting Policies Amendments, Changes in Accounting
Estimates and Errors (IASB effective date 1 January 2023).
IFRS 9 "Financial Instruments" (IASB effective date 1 January
2018) has not been applied under the IFRS 4 amendment option. IFRS
9 provides a reform of financial instruments accounting to
supersede IAS 39 "Financial Instruments: Recognition and
Measurement". Applying IFRS 9 "Financial Instruments" with IFRS 4
"Insurance Contracts" contained an optional temporary exemption
from applying IFRS 9 for entities whose predominant activity is
issuing contracts within the scope of IFRS 4. The Group meets the
eligibility criteria and has taken advantage of this temporary
exemption not to apply this standard until the effective date of
IFRS 17.
Principles of consolidation, business combinations and
goodwill
(a) Consolidation and investments in subsidiaries
The Group Financial Statements incorporate the Financial
Statements of Helios Underwriting plc, the Parent Company, and its
directly and indirectly held subsidiaries.
The Financial Statements for all of the above subsidiaries are
prepared for the year ended 31 December 2020 under UK GAAP.
Consolidation adjustments are made to convert the subsidiary
Financial Statements prepared under UK GAAP to IFRS so as to align
accounting policies and treatments.
No income statement is presented for Helios Underwriting plc as
permitted by Section 408 of the Companies Act 2006. The profit
after tax for the year of the Parent Company was GBP2,636,000
(2019: GBP5,789,000).
Subsidiaries are entities over which the Group has the power to
govern the financial and operating policies generally accompanying
a shareholding or partnership participation of more than one half
of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases.
Intra-group transactions, balances and unrealised gains on
intra-group transactions are eliminated.
In the Parent Company's Financial Statements, investments in
subsidiaries are stated at cost and are reviewed for impairment
annually or when events or changes in circumstances indicate the
carrying value to be impaired.
(b) Business combinations and goodwill
The Group uses the acquisition method of accounting to account
for the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Acquisition costs are expensed as incurred.
The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is
capitalised and recorded as goodwill. Following initial
recognition, goodwill is measured at cost less accumulated
impairment losses. Goodwill is tested for impairment annually or if
events or changes in circumstances indicate that the carrying value
may be impaired and recognised directly in the consolidated income
statement. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly as revenue in the consolidated income statement
as a gain on bargain purchase. The gain on bargain purchase is
recognised within the operating profit, as acquiring LLVs at a
discount to their net asset fair value, as is an important part of
the predominant strategy for the Company. Insurance liabilities are
not discount on acquisition, when calculating their fair value,
these liabilities will likely all crystallise within three years
due to the accounting framework Lloyd's syndicate operate under.
Accordingly, any discount applied to insurance liabilities will not
be material.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as Nigel Hanbury.
Foreign currency translation
Items included in the Financial Statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The Financial Statements are presented in thousands of
pounds sterling, which is the Group's functional and presentational
currency. All amounts have been rounded to the nearest thousand,
unless otherwise indicated.
Foreign currency transactions and non-monetary assets and
liabilities, including deferred acquisition costs and unearned
premiums, are translated into the functional currency using annual
average rates of exchange prevailing at the time of the transaction
as a proxy for the transactional rates. The translation difference
arising on non-monetary asset items is recognised in the
consolidated income statement.
Certain supported syndicates have non-sterling functional
currencies and any exchange movement that they would have reflected
in other comprehensive income as a result of this has been included
within profit before tax at consolidation level, to be consistent
with the Group's policy of using sterling as the functional
currency.
Monetary items are translated at period-end rates; any exchange
differences arising from the change in rates of exchange are
recognised in the consolidated income statement of the year.
Underwriting
Premiums
Gross premium written comprises the total premiums receivable in
respect of business incepted during the year, together with any
differences between booked premiums for prior years and those
previously accrued, and includes estimates of premiums due but not
yet receivable or notified to the syndicates on which the Group
participates, less an allowance for cancellations. All premiums are
shown gross of commission payable to intermediaries and exclude
taxes and duties levied on them.
Unearned premiums
Gross premium written is earned according to the risk profile of
the policy. Unearned premiums represent the proportion of gross
premium written in the year that relates to unexpired terms of
policies in force at the end of the reporting period calculated on
a time apportionment basis having regard, where appropriate, to the
incidence of risk. The specific basis adopted by each syndicate is
determined by the relevant managing agent.
Deferred acquisition costs
Acquisition costs, which represent commission and other related
expenses, are deferred over the period in which the related
premiums are earned.
Reinsurance premiums
Reinsurance premium costs are allocated by the managing agent of
each syndicate to reflect the protection arranged in respect of the
business written and earned.
Reinsurance premium costs in respect of reinsurance purchased
directly by the Group are charged or credited based on the annual
accounting result for each year of account protected by the
reinsurance.
Claims incurred and reinsurers' share
Claims incurred comprise claims and settlement expenses (both
internal and external) occurring in the year and changes in the
provisions for outstanding claims, including provisions for claims
incurred but not reported ("IBNR") and settlement expenses,
together with any other adjustments to claims from previous years.
Where applicable, deductions are made for salvage and other
recoveries.
The provision for claims outstanding comprises amounts set aside
for claims notified and IBNR. The amount included in respect of
IBNR is based on statistical techniques of estimation applied by
each syndicate's in-house reserving team and reviewed, in certain
cases, by external consulting actuaries. These techniques generally
involve projecting from past experience the development of claims
over time to form a view of the likely ultimate claims to be
experienced for more recent underwriting, having regard to
variations in the business accepted and the underlying terms and
conditions. The provision for claims also includes amounts in
respect of internal and external claims handling costs. For the
most recent years, where a high degree of volatility arises from
projections, estimates may be based in part on output from the
rating and other models of the business accepted, and assessments
of underwriting conditions.
The reinsurers' share of provisions for claims is based on
calculated amounts of outstanding claims and projections for IBNR,
net of estimated irrecoverable amounts, having regard to each
syndicate's reinsurance programme in place for the class of
business, the claims experience for the year and the current
security rating of the reinsurance companies involved. Each
syndicate uses a number of statistical techniques to assist in
making these estimates.
Accordingly, the two most critical assumptions made by each
syndicate's managing agent as regards claims provisions are that
the past is a reasonable predictor of the likely level of claims
development and that the rating and other models used, including
pricing models for recent business, are reasonable indicators of
the likely level of ultimate claims to be incurred.
The level of uncertainty with regard to the estimations within
these provisions generally decreases with time since the underlying
contracts were exposed to new risks. In addition, the nature of
short-tail risks, such as property where claims are typically
notified and settled within a short period of time, will normally
have less uncertainty after a few years than long-tail risks, such
as some liability businesses where it may be several years before
claims are fully advised and settled. In addition to these factors
if there are disputes regarding coverage under policies or changes
in the relevant law regarding a claim this may increase the
uncertainty in the estimation of the outcomes.
The assessment of these provisions is usually the most
subjective aspect of an insurer's accounts and may result in
greater uncertainty within an insurer's accounts than within those
of many other businesses. The provisions for gross claims and
related reinsurance recoveries have been assessed on the basis of
the information currently available to the directors of each
syndicate's managing agent. However, ultimate liability will vary
as a result of subsequent information and events and this may
result in significant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in
prior years are reflected in the Financial Statements for the
period in which the adjustments are made. The provisions are not
discounted for the investment earnings that may be expected to
arise in the future on the funds retained to meet the future
liabilities. The methods used, and the estimates made, are reviewed
regularly.
Quota share reinsurance
Under the Group's quota share reinsurance agreements, 70% of the
2019 and 2020 underwriting years, and an average of 47% of the 2021
underwriting year of insurance exposure is ceded to the reinsurers.
Amounts payable to the reinsurers are included within "reinsurance
premium ceded" in the consolidated income statement of the year and
amounts receivable from the reinsurers are included within
"reinsurers' share of gross claims paid" in the consolidated income
statement of the year.
Unexpired risks provision
Provision for unexpired risks is made where the costs of
outstanding claims, related expenses and deferred acquisition costs
are expected to exceed the unearned premium provision carried
forward at the end of the reporting period. The provision for
unexpired risks is calculated separately by reference to classes of
business that are managed together, after taking into account
relevant investment return. The provision is made on a
syndicate-by-syndicate basis by the relevant managing agent.
Closed years of account
At the end of the third year, the underwriting account is
normally closed by reinsurance into the following year of account.
The amount of the reinsurance to close premium payable is
determined by the managing agent, generally by estimating the cost
of claims notified but not settled at 31 December, together with
the estimated cost of claims incurred but not reported ("IBNR") at
that date and an estimate of future claims handling costs. Any
subsequent variation in the ultimate liabilities of the closed year
of account is borne by the underwriting year into which it is
reinsured.
The payment of a reinsurance to close premium does not eliminate
the liability of the closed year for outstanding claims. If the
reinsuring syndicate was unable to meet any obligations, and the
other elements of Lloyd's chain of security were to fail, then the
closed underwriting account would have to settle any outstanding
claims.
The Directors consider that the likelihood of such a failure of
the reinsurance to close is extremely remote and consequently the
reinsurance to close has been deemed to settle the liabilities
outstanding at the closure of an underwriting account. The Group
will include its share of the reinsurance to close premiums payable
as technical provisions at the end of the current period and no
further provision is made for any potential variation in the
ultimate liability of that year of account.
Run-off years of account
Where an underwriting year of account is not closed at the end
of the third year (a "run-off" year of account) a provision is made
for the estimated cost of all known and unknown outstanding
liabilities of that year. The provision is determined initially by
the managing agent on a similar basis to the reinsurance to close.
However, any subsequent variation in the ultimate liabilities for
that year remains with the corporate member participating therein.
As a result, any run-off year will continue to report movements in
its results after the third year until such time as it secures a
reinsurance to close.
Net operating expenses (including acquisition costs)
Net operating expenses include acquisition costs, profit and
loss on exchange and other amounts incurred by the syndicates on
which the Group participates.
Acquisition costs, comprising commission and other costs related
to the acquisition of new insurance contracts, are deferred to the
extent that they are attributable to premiums unearned at the end
of the reporting period.
Investment income
Interest receivable from cash and short-term deposits and
interest payable are accrued to the end of the period.
Dividend income from financial assets at fair value through
profit or loss is recognised in the income statement when the
Group's right to receive payments is established.
Syndicate investments and cash are held on a pooled basis, the
return from which is allocated by the relevant managing agent to
years of account proportionate to the funds contributed by the year
of account.
Other operating expenses
All expenses are accounted for on an accruals basis.
Intangible assets: syndicate capacity
For the year ended 31 December 2019 the cost of acquiring
syndicate capacity was carried at cost less impairment as the
directors considered that useful life of syndicate capacity was
indefinite.
With effect from 31 December 2020, the Group has changed this
policy so that syndicate capacity is revalued on a regular basis to
its fair value which the directors believe to be the average
weighted value achieved in the Lloyd's auction process. The
increase in value of syndicate capacity between its fair value and
its cost less impairment is taken to the revaluation reserve
through the comprehensive income statement net of any tax effect,
as required by IAS 38.
In accordance IAS 8 this change in policy has been treated as a
perspective change and the prior year comparison figures have not
been altered.
Financial assets
(a) Classification
The Group classifies its financial assets in the following
categories: at fair value through profit or loss, and loans and
receivables. The classification depends on the purpose for which
the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition. The
Group does not make use of the held-to-maturity and
available-for-sale classifications.
(i) Financial assets at fair value through profit or loss
All financial assets at fair value through profit or loss are
categorised as designated at fair value through profit or loss upon
initial recognition because they are managed and their performance
is evaluated on a fair value basis in accordance with the Company's
documented investment strategy. Information about these financial
assets is provided internally on a fair value basis to the Group's
key management.
The Group's investment strategy is to invest and evaluate their
performance with reference to their fair values. Assets in this
category are classified as current assets if expected to be settled
within 12 months; otherwise, they are classified as
non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are classified as current assets, except for
maturities greater than 12 months after the reporting period. The
latter ones are classified as non-current assets.
The Group's loans and receivables comprise "other receivables,
including insurance and reinsurance receivables" and "cash and cash
equivalents".
The Parent Company's loans and receivables comprise "other
receivables" and "cash and cash equivalents".
(b) Recognition, derecognition and measurement
Regular purchases and sales of financial assets are recognised
on the trade date, being the date on which the Group commits to the
purchase or sale of the asset. Financial assets are derecognised
when the right to receive cash flows from the financial assets has
expired or is transferred and the Group has transferred
substantially all its risks and rewards of ownership.
Financial assets at fair value through profit or loss are
initially recognised at fair value and transaction costs incurred
expensed in the income statement.
Loans and receivables are initially recognised at fair value
plus transaction costs and are subsequently carried at amortised
cost less any impairment losses.
Fair value estimation
The fair value of financial assets at fair value through profit
or loss which are traded in active markets is based on quoted
market prices at the end of the reporting period. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service or regulatory agency and those prices represent actual and
regular occurring market transactions on an arm's length basis. The
quoted market price used for financial assets at fair value through
profit or loss held by the Group is the current bid price.
The fair value of financial assets at fair value through profit
or loss that are not traded in an active market is determined by
using valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as
little as possible on entity-specific estimates.
Unrealised gains and losses arising from changes in the fair
value of the financial assets at fair value through profit or loss
are presented in the income statement within "net investment
income".
The fair values of short-term deposits are assumed to
approximate to their book values. The fair values of the Group's
debt securities have been based on quoted market prices for these
instruments.
(c) Impairment
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a "loss event") and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
Asset carried at amortised cost
For loans and receivables, the amount of the loss is measured as
the difference between the asset's carrying amount and the present
value of the estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial
asset's original effective interest rate. The carrying amount of
the asset is reduced and the amount of the loss is recognised in
profit or loss. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis
of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or
loss.
Cash and cash equivalents
For the purposes of the statements of cash flows, cash and cash
equivalents comprise cash and short-term deposits at bank.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings, using the
effective interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. To the extent
that there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services, and amortised over the period of
the facility to which it relates.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
Borrowing costs
Borrowing costs are recognised in the income statement in the
period in which they are incurred.
Joint Share Ownership Plan ("JSOP")
On 14 December 2017, the Company issued and allotted 500,000 new
ordinary shares of GBP0.10 each ("ordinary shares"). The new
ordinary shares have been issued at a subscription price of 133.5p
per ordinary share, being the closing price of an ordinary share on
13 December 2017, pursuant to the Helios Underwriting plc
employees' Joint Share Ownership Plan (the "Plan").
The new ordinary shares have been issued into the respective
joint beneficial ownership of (i) each of the participating
Executive Directors as shown in Note 23 and (ii) the Trustee of RBC
CEES Trustee Limited (the "Trust") and are subject to the terms of
joint ownership agreements ("JOAs") respectively entered into
between the Director, the Company and the Trustee. The nominal
value of the new ordinary shares has been paid by the Trust out of
funds advanced to it by the Company with the additional
consideration of 123.5p left outstanding until such time as new
ordinary shares are sold. The Company has waived its lien on the
shares such that there are no restrictions on their transfer.
The terms of the JOAs provide, inter alia, that if jointly owned
shares become vested and are sold, the proceeds of sale will be
divided between the joint owners so that the participating Director
receives an amount equal to any growth in the market value of the
jointly owned ordinary shares above the greater of either:
(a) the initial market value (133.5p per share), less a
"carrying cost" (equivalent to simple interest at 4.5% per annum on
the initial market value accruing over the three years from the
date of award) and the Trust receives the initial market value of
the jointly owned shares plus the carrying cost; or
(b) if higher, 150p (so that the participating Director will
only ever receive value if the share sale price exceeds this).
The vesting of the award will be subject to performance
conditions measured over the three calendar years from the award
date.
A proportion of the jointly owned shares shall vest pro rata to
the percentage by which the average return on capacity of the last
three closed underwriting years of account of the Helios capacity
portfolio outperforms on average the return on capacity of the
Lloyd's market (the "Performance Percentage") over the performance
period such that:
(i) if the Performance Percentage is 4% or greater, all of the
jointly owned shares shall vest; and
(ii) if the Helios capacity portfolio fails to outperform the
return on capacity of the Lloyd's market, none of the jointly owned
shares shall vest; but
(iii) if the Performance Percentage is between 0% and 4%, a
proportion of the jointly owned shares shall vest pro rata on a
straight line basis.
The Plan was established and approved by resolution of the
Remuneration Committee of the Company on 13 December 2017 and
provides for the acquisition by employees, including Executive
Directors, of beneficial interests as joint owners (with the Trust)
of ordinary shares in the Company upon the terms of a JOA. The
terms of the JOA provide that if the jointly owned shares become
vested and are sold, the proceeds of sale will be divided between
the joint owners on the terms set out above.
Current and deferred tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case tax is also recognised
in other comprehensive income or directly in equity,
respectively.
Current tax
The current income tax charge is calculated on the basis of the
tax laws enacted at the balance sheet date in the countries where
the Company and its subsidiaries operate and generate taxable
income. Management establishes provisions when appropriate, on the
basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred tax is provided in full, using the balance sheet
liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the
Financial Statements.
However, if the deferred tax arises from initial recognition of
an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the end of the reporting
period and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
Other payables
These present liabilities for services provided to the Group
prior to end of the financial year which are unpaid. These are
classified as current liabilities, unless payment is not due within
12 months after the reporting date. They are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest method.
Share capital and share premium
Ordinary shares are classified as equity.
The difference between the fair value of the consideration
received and the nominal value of the share capital issued is taken
to the share premium account. Incremental costs directly
attributable to the issue of shares or options are shown in equity
as a deduction, net of tax, from proceeds.
Where the Company buys back its own ordinary shares on the
market, and these are held in treasury, the purchase is made out of
distributable profits and hence shown as a deduction from the
Company's retained earnings.
Dividend distribution policy
Dividend distribution to the Company's shareholders is
recognised in the Group's and the Parent Company's Financial
Statements in the period in which the dividends are approved by the
Company's shareholders.
3. Key accounting judgements and estimation uncertainties
In applying the Company's accounting policies, the Directors are
required to make judgements, estimates and assumptions in
determining the carrying amounts of assets and liabilities. These
judgements, estimates and assumptions are based on the best and
most reliable evidence available at the time when the decisions are
made, and are based on historical experience and other factors that
are considered to be applicable. Due to the inherent subjectivity
involved in making such judgements, estimates and assumptions, the
actual results and outcomes may differ. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised, if the revision affects only that period, or
in the period of the revision and future periods, if the revision
affects both current and future periods.
The measurement of the provision for claims outstanding is the
most significant judgement involving estimation uncertainty
regarding amounts recognised in these Financial Statements in
relation to underwriting by the syndicates and this is disclosed
further in Notes 4 and 7.
The management and control of each syndicate is carried out by
the managing agent of that syndicate, and the Company looks to the
managing agent to implement appropriate policies, procedures and
internal controls to manage each syndicate.
The key accounting judgements and sources of estimation
uncertainty set out below therefore relate to those made in respect
of the Company only, and do not include estimates and judgements
made in respect of the syndicates.
4. Risk management
The majority of the risks to the Group's future cash flows arise
from each subsidiary's participation in the results of Lloyd's
syndicates. As detailed below, these risks are mostly managed by
the managing agents of the syndicates. The Group's role in managing
these risks, in conjunction with its subsidiaries and members'
agent, is limited to a selection of syndicate participations,
monitoring the performance of the syndicates and the purchase of
appropriate member level reinsurance.
Risk background
The syndicates' activities expose them to a variety of financial
and non-financial risks. The managing agent is responsible for
managing the syndicate's exposure to these risks and, where
possible, introducing controls and procedures that mitigate the
effects of the exposure to risk. For the purposes of setting
capital requirements for the 2017 and subsequent years of account,
each managing agent will have prepared a Lloyd's capital return
("LCR") for the syndicate to agree capital requirements with
Lloyd's based on an agreed assessment of the risks impacting the
syndicate's business and the measures in place to manage and
mitigate those risks from a quantitative and qualitative
perspective. The risks described below are typically reflected in
the LCR and typically the majority of the total assessed value of
the risks concerned is attributable to insurance risk.
The insurance risks faced by a syndicate include the occurrence
of catastrophic events, downward pressure on pricing of risks,
reductions in business volumes and the risk of inadequate
reserving. Reinsurance risk arises from the risk that a reinsurer
fails to meet its share of a claim. The management of the
syndicate's funds is exposed to investment risk, liquidity risk,
credit risk, currency risk and interest rate risk (as detailed
below), leading to financial loss. The syndicate is also exposed to
regulatory and operational risks including its ability to continue
to trade. However, supervision by Lloyd's and the Prudential
Regulation Authority provides additional controls over the
syndicate's management of risks.
The Group manages the risks faced by the syndicates on which its
subsidiaries participate by monitoring the performance of the
syndicates it supports. This commences in advance of committing to
support a syndicate for the following year, with a review of the
business plan prepared for each syndicate by its managing agent. In
addition, quarterly reports and annual accounts, together with any
other information made available by the managing agent, are
monitored and if necessary enquired into. If the Group considers
that the risks being run by the syndicate are excessive, it will
seek confirmation from the managing agent that adequate management
of the risk is in place and, if considered appropriate, will
withdraw support from the next year of account. The Group also
manages its exposure to insurance risk by purchasing appropriate
member level reinsurance.
(a) Syndicate risks
(i) Liquidity risk
The syndicates are exposed to daily calls on their available
cash resources, principally from claims arising from its insurance
business. Liquidity risk arises where cash may not be available to
pay obligations when due, or to ensure compliance with the
syndicate's obligations under the various trust deeds to which it
is party.
The syndicates aim to manage their liquidity position so that
they can fund claims arising from significant catastrophic events,
as modelled in their Lloyd's realistic disaster scenarios
("RDS").
Although there are usually no stated maturities for claims
outstanding, syndicates have provided their expected maturity of
future claims settlements as follows:
No stated
maturity 0-1 year 1-3 years 3-5 years >5 years Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- ---------
Claims outstanding 72 40,003 38,451 18,340 16,505 113,371
------------------- --------- -------- --------- --------- -------- ---------
No stated
maturity 0-1 year 1-3 years 3-5 years >5 years Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- --------- --------- -------- --------
Claims outstanding - 34,942 32,517 14,985 13,172 95,616
------------------- --------- -------- --------- --------- -------- --------
(ii) Credit risk
Credit ratings to syndicate assets (Note 28) emerging directly
from insurance activities which are neither past due nor impaired
are as follows:
BBB or
AAA AA A lower Not rated Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 10,098 20,099 22,142 8,378 4,840 65,557
Deposits with ceding undertakings - - - - 7 7
Reinsurers' share of claims
outstanding 1,204 8,240 18,217 531 2,538 30,730
Reinsurance debtors 12 450 1,277 169 408 2,316
Cash at bank and in hand 12 96 3,346 41 39 3,534
---------------------------------- -------- -------- -------- -------- --------- --------
11,326 28,885 44,982 9,119 7,832 102,144
---------------------------------- -------- -------- -------- -------- --------- --------
BBB or
AAA AA A lower Not rated Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- --------- --------
Financial investments 8,027 16,601 15,456 7,825 5,704 53,613
Deposits with ceding undertakings - - - - 8 8
Reinsurers' share of claims
outstanding 1,328 5,459 16,603 38 2,227 25,655
Reinsurance debtors 15 306 1,037 32 822 2,212
Cash at bank and in hand 47 52 2,045 428 437 3,009
---------------------------------- -------- -------- -------- -------- --------- --------
9,417 22,418 35,141 8,323 9,198 84,497
---------------------------------- -------- -------- -------- -------- --------- --------
Syndicate assets (Note 28) emerging directly from insurance
activities, with reference to their due date or impaired, are as
follows:
Past due but not impaired
-----------------------------------------------------------------
Between
Neither 6 months Greater
past due Less than and 1 than 1
nor impaired 6 months year year Impaired Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 65,557 - - - - 65,557
Deposits with ceding undertakings 7 - - - - 7
Reinsurers' share of claims
outstanding 30,730 - - - (10) 30,720
Reinsurance debtors 2,316 1,153 57 21 - 3,547
Cash at bank and in hand 3,534 - - - - 3,534
Insurance and other debtors 49,373 1,453 458 300 (10) 51,574
---------------------------------- ------------- --------- --------- -------- -------- --------
151,517 2,606 515 321 (20) 154,939
---------------------------------- ------------- --------- --------- -------- -------- --------
Past due but not impaired
-----------------------------------------------------------------
Between
Neither 6 months Greater
past due Less than and 1 than 1
nor impaired 6 months year year Impaired Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- --------- --------- -------- -------- --------
Financial investments 53,613 - - - - 53,613
Deposits with ceding undertakings 8 - - - - 8
Reinsurers' share of claims
outstanding 25,655 49 - - (5) 25,699
Reinsurance debtors 2,212 575 45 23 - 2,855
Cash at bank and in hand 3,009 - - - - 3,009
Insurance and other debtors 40,566 1,018 243 254 (6) 42,075
---------------------------------- ------------- --------- --------- -------- -------- --------
125,063 1,642 289 277 (11) 127,259
---------------------------------- ------------- --------- --------- -------- -------- --------
(iii) Interest rate equity price risk
Interest rate risk and equity price risk are the risks that the
fair value of future cash flows of financial instruments will
fluctuate because of changes in market interest rates and market
prices, respectively.
(iv) Currency risk
The syndicates' main exposure to foreign currency risk arises
from insurance business originating overseas, primarily denominated
in US dollars. Transactions denominated in US dollars form a
significant part of the syndicates' operations. This risk is, in
part, mitigated by the syndicates maintaining financial assets
denominated in US dollars against its major exposures in that
currency.
The table below provides details of syndicate assets and
liabilities (Note 28) by currency:
GBP USD EUR CAD Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2020 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 29,186 106,692 6,092 13,633 4,823 160,426
Total liabilities (38,021) (109,050) (6,177) (10,180) (2,741) (166,169)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (8,835) (2,358) (85) 3,453 2,082 (5,743)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
GBP USD EUR CAD Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019 converted converted converted converted converted converted
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 21,981 90,359 6,318 10,303 3,412 132,373
Total liabilities (31,604) (91,559) (4,976) (8,652) (4,183) (140,974)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
(Deficiency)/surplus of assets (9,623) (1,200) 1,342 1,651 (771) (8,601)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
The impact of a 5% change in exchange rates between GBP and
other currencies would be GBP153,000 on shareholders' funds (2019:
GBP51,000).
(v) Reinsurance risk
Reinsurance risk to the Group arises where reinsurance contracts
put in place to reduce gross insurance risk do not perform as
anticipated, result in coverage disputes or prove inadequate in
terms of the vertical or horizontal limits purchased. Failure of a
reinsurer to pay a valid claim is considered a credit risk, which
is detailed separately below.
The Group currently has reinsurance programmes on the 2018, 2019
and 2020 years of account.
The Group has strategic collateralised quota share arrangements
in place in respect of 70% of its underwriting business with XL Re
Limited, Bermudan reinsurer Everest Reinsurance Bermuda Limited
(part of global NYSE-quoted insurer Everest Re Group Limited),
Guernsey reinsurer Polygon Insurance Co Limited and other private
shareholders through HIPCC Limited.
(b) Group risks - corporate level
(i) Investment, credit, liquidity and currency risks
The other significant risks faced by the Group are with regard
to the investment of funds within its own custody. The elements of
these risks are investment risk, liquidity risk, credit risk,
interest rate risk and currency risk. To mitigate this, the surplus
Group funds are deposited with highly rated banks and fund
managers. The main liquidity risk would arise if a syndicate had
inadequate liquid resources for a large claim and sought funds from
the Group to meet the claim. In order to minimise investment risk,
credit risk and liquidity risk, the Group's funds are invested in
readily realisable short-term deposits. The Group's maximum
exposure to credit risk at 31 December 2020 is GBP37.4m (2019:
GBP27.4m), being the aggregate of the Group's insurance
receivables, prepayments and accrued income, financial assets at
fair value, and cash and cash equivalents, excluding any amounts
held in the syndicates. The syndicates can distribute their results
in sterling, US dollars or a combination of the two. The Group is
exposed to movements in the US dollar between the balance sheet
date and the distribution of the underwriting profits and losses,
which is usually in the May following the closure of a year of
account. The Group does not use derivative instruments to manage
risk and, as such, no hedge accounting is applied.
As a result of the specific nature and structure of the Group's
collateralised quota share reinsurance arrangements through Cell 6,
the Group's Funds at Lloyd's calculation benefits from an aggregate
GBP39.5m (2019: GBP26.7m) letter of credit ("LOC") acceptable to
Lloyd's, on behalf of XL Re Limited, Everest Reinsurance Bermuda
Limited, Polygon Insurance Co Limited (the reinsurers) and other
private shareholders. The LOC is pledged in aggregate to the
relevant syndicates through Lloyd's and thus Helios Underwriting
plc is not specifically exposed to counterparty credit risk in this
matter. Should the bank's LOC become unacceptable to Lloyd's for
any reason, the reinsurer is responsible under the terms of the
contract for making alternative arrangements. The contract is
annually renewable and the Group has a contingency plan in place in
the event of non-renewal under both normal and adverse market
conditions.
(ii) Market risk
The Group is exposed to market and liquidity risk in respect of
its holdings of syndicate participations. Lloyd's syndicate
participations are traded in the Lloyd's auctions held in September
and October each year. The Group is exposed to changes in market
prices and a lack of liquidity in the trading of a particular
syndicate's capacity could result in the Group making a loss
compared to the carrying value when the Group disposes of
particular syndicate participations.
(iii) Regulatory risks
The Company's subsidiaries are subject to continuing approval by
Lloyd's to be a member of a Lloyd's syndicate. The risk of this
approval being removed is mitigated by monitoring and fully
complying with all requirements in relation to membership of
Lloyd's. The capital requirements to support the proposed amount of
syndicate capacity for future years are subject to the requirements
of Lloyd's. A variety of factors are taken into account by Lloyd's
in setting these requirements including market conditions and
syndicate performance and, although the process is intended to be
fair and reasonable, the requirements can fluctuate from one year
to the next, which may constrain the volume of underwriting a
subsidiary of the Company is able to support.
The Company is subject to the AIM Rules. Compliance with the AIM
Rules is monitored by the Board.
Operational risks
As there are relatively few transactions actually undertaken by
the Group, there are only limited systems and operational
requirements of the Group and therefore operational risks are not
considered to be significant. Close involvement of all Directors in
the Group's key decision making and the fact that the majority of
the Group's operations are conducted by syndicates provide control
over any remaining operational risks.
Capital management objectives, policies and approach
The Group has established the following capital management
objectives, policies and approach to managing the risks that affect
its capital position:
-- to maintain the required level of stability of the Group,
thereby providing a degree of security to shareholders;
-- to allocate capital efficiently and support the development
of the business by ensuring that returns on capital employed meet
the requirements of the shareholders; and
-- to maintain the financial strength to support increases in
the Group's underwriting through acquisition of capacity in the
Lloyd's auctions or through the acquisition of new
subsidiaries.
The Group's capital management policy is to hold a sufficient
level of capital to allow the Group to take advantage of market
conditions, particularly when insurance rates are improving, and to
meet the Funds at Lloyd's ("FAL") requirements that support the
corporate member subsidiaries' current and future levels of
underwriting.
Approach to capital management
The capital structure of the Group consists entirely of equity
attributable to equity holders of the Company, comprising issued
share capital, share premium and retained earnings as disclosed in
the statements of changes in equity.
At 31 December 2020, the corporate member subsidiaries had an
agreed ECA requirement of GBP58.2m (2019: GBP39.4m) to support
their underwriting on the 2021 year of account (2020 year of
account). The funds to support this requirement are held in
short-term investment funds and deposits or provided by the quota
share reinsurance capital providers by way of an LOC. The FAL
requirements are formally assessed and funded twice yearly and must
be met by the corporate member subsidiaries to continue
underwriting. At 31 December 2020, the agreed ECA requirements for
the Group were 53% (2019: 57%) of the capacity for the following
year of account.
5. Segmental information
Nigel Hanbury is the Group's chief operating decision-maker. He
has determined its operating segments based on the way the Group is
managed, for the purpose of allocating resources and assessing
performance.
The Group has three segments that represent the primary way in
which the Group is managed, as follows:
-- syndicate participation;
-- investment management; and
-- other corporate activities.
Other
Syndicate Investment corporate
participation management activities Total
Year ended 31 December 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 48,769 - - 48,769
Net investment income 2,126 (120) - 2,006
Other income 101 - 1,718 1,819
Net insurance claims and loss adjustment
expenses (33,990) - (90) (34,080)
Expenses incurred in insurance activities (17,573) - (343) (17,916)
Other operating expenses 203 - (1,725) (1,522)
Gain on bargain purchase (Note 22) - - 1,260 1,260
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - - -
------------------------------------------- -------------- ----------- ----------- --------
Profit before tax (364) (120) 820 336
------------------------------------------- -------------- ----------- ----------- --------
Other
Syndicate Investment corporate
participation management activities Total
Year ended 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ----------- ----------- --------
Net earned premium 42,688 - - 42,688
Net investment income 2,387 (52) - 2,335
Other income 254 - 595 849
Net insurance claims and loss adjustment
expenses (26,265) - (1,359) (27,624)
Expenses incurred in insurance activities (15,367) - (397) (15,764)
Other operating expenses (114) - (1,650) (1,764)
Gain on bargain purchase (Note 22) - - 1,707 1,707
Impairment of goodwill - - - -
Impairment of syndicate capacity (see Note
13) - - 1,860 1,860
------------------------------------------- -------------- ----------- ----------- --------
Profit before tax 3,583 (52) 756 4,287
------------------------------------------- -------------- ----------- ----------- --------
The Group does not have any geographical segments as it
considers all of its activities to arise from trading within the
UK.
No major customers exceed 10% of revenue.
Net insurance claims and loss adjustment expenses within 2020
other corporate activities totalling GBP90,000 (2019: GBP1,359,000
- 2017, 2018 and 2019 years of account) presents the 2018, 2019 and
2020 years of account net Group quota share reinsurance premium
recoverable to HIPCC Limited (Note 25). This net quota share
reinsurance premium recoverable is included within "net insurance
claims incurred and loss adjustments expenses" in the consolidated
income statement of the year.
6. Operating profit before impairments of goodwill and
capacity
Underwriting year of account*
----------------------------------------- ------------ ------------ ---------- --------
2018 Pre- Corporate Other
Year ended 31 December and prior 2019 2020 Sub-total acquisition reinsurance corporate Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 348 6,105 69,693 76,146 (7,883) - - 68,263
Reinsurance ceded 202 (1,410) (16,817) (18,025) 1,462 - (1,097) (17,660)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 550 4,695 52,876 58,121 (6,421) - (1,097) 50,603
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 3,116 24,807 27,759 55,682 (5,816) - (1,097) 48,769
Other income 1,242 585 604 2,431 (515) 334 2,835 5,085
Net insurance claims
incurred and loss
adjustment expenses 579 (17,074) (21,386) (37,881) 4,174 (90) (283) (34,080)
Operating expenses (1,473) (7,373) (10,657) (19,503) 2,065 - (2,000) (19,438)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity 3,464 945 (3,680) 729 (92) 244 (545) 336
Quota share adjustment (1,773) (606) 2,289 (90) - 90 - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity, after
quota share adjustment 1,691 339 (1,391) 639 (92) 334 (545) 336
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
* The underwriting year of account results represent the Group's
share of the syndicates' results by underwriting year of account
before corporate member level reinsurance and members' agent's
charges.
Underwriting year of account*
----------------------------------------- ------------ ------------ ---------- --------
2017 Pre- Corporate Other
Year ended 31 December and prior 2018 2019 Sub-total acquisition reinsurance corporate Total
2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Gross premium written 1,031 5,891 54,656 61,578 (6,108) - - 55,470
Reinsurance ceded (116) (1,444) (13,003) (14,563) 1,553 - (200) (13,210)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net premium written 915 4,447 41,653 47,015 (4,555) - (200) 42,260
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Net earned premium 3,526 21,772 22,156 47,454 (4,566) - (200) 42,688
Other income 1,574 615 339 2,527 (550) 235 2,679 4,891
Net insurance claims
incurred and loss
adjustment expenses 893 (12,854) (16,276) (28,237) 2,329 (1,359) (358) (27,624)
Operating expenses (1,535) (6,823) (8,767) (17,125) 1,929 - (2,332) (17,528)
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity 4,458 2,710 (2,548) 4,620 (858) (1,124) (211) 2,427
Quota share adjustment (1,733) (1,361) 1,735 (1,359) - 1,359 - -
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
Operating profit
before impairments
of goodwill and
capacity, after
quota share adjustment 2,725 1,349 (813) 3,261 (858) 235 (211) 2,427
------------------------ ---------- -------- -------- --------- ------------ ------------ ---------- --------
* The underwriting year of account results represent the Group's
share of the syndicates' results by underwriting year of account
before corporate member level reinsurance and members' agent's
charges.
Pre-acquisition relates to the element of results from the new
acquisitions before they were acquired by the Group.
7. Insurance liabilities and reinsurance balances
Movement in claims outstanding
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ----------- --------
At 1 January 2019 88,032 22,698 65,334
Increase in reserves arising from acquisition
of subsidiary undertakings 11,792 2,730 9,062
Movement of reserves 3,758 2,004 1,754
Other movements (7,966) (1,672) (6,294)
---------------------------------------------- -------- ----------- --------
At 31 December 2019 95,616 25,760 69,856
---------------------------------------------- -------- ----------- --------
At 1 January 2020 95,616 25,760 69,856
Increase in reserves arising from acquisition
of subsidiary undertakings 17,737 3,592 14,145
Movement of reserves 8,255 2,704 5,551
Other movements (8,237) (1,275) (6,962)
---------------------------------------------- -------- ----------- --------
At 31 December 2020 113,371 30,781 82,590
---------------------------------------------- -------- ----------- --------
Included within other movements are the 2017 and prior years'
claims reserves reinsured into the 2018 year of account on which
the Group does not participate and currency exchange
differences.
Movement in unearned premium
Gross Reinsurance Net
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ----------- --------
At 1 January 2019 24,772 4,057 20,715
Increase in reserves arising from acquisition
of subsidiary undertakings 3,380 1,182 2,197
Movement of reserves 60 488 (428)
Other movements (1,690) (704) (985)
---------------------------------------------- -------- ----------- --------
At 31 December 2019 26,522 5,023 21,499
---------------------------------------------- -------- ----------- --------
At 1 January 2020 26,522 5,023 21,499
Increase in reserves arising from acquisition
of subsidiary undertakings 4,679 613 4,066
Movement of reserves 2,481 647 1,834
Other movements (1,326) (255) (1,071)
---------------------------------------------- -------- ----------- --------
At 31 December 2020 32,356 6,028 26,328
---------------------------------------------- -------- ----------- --------
Assumptions, changes in assumptions and sensitivity
As described in Note 4, the majority of the risks to the Group's
future cash flows arise from its subsidiaries' participation in the
results of Lloyd's syndicates and are mostly managed by the
managing agents of the syndicates. The Group's role in managing
these risks, in conjunction with the Group's members' agent, is
limited to a selection of syndicate participations and monitoring
the performance of the syndicates and their managing agents.
The amounts carried by the Group arising from insurance
contracts are calculated by the managing agents of the syndicates,
derived from accounting information provided by the managing agents
and reported upon by the syndicate auditors.
The key assumptions underlying the amounts carried by the Group
arising from insurance contracts are:
-- the claims reserves calculated by the managing agents are accurate; and
-- the potential deterioration of run-off year results has been
fully provided for by the managing agents.
There have been no changes in assumptions in 2020.
The amounts carried by the Group arising from insurance
contracts are sensitive to various factors as follows:
-- a 10% increase/decrease in the managing agents' calculation
of gross claims reserves will decrease/increase the Group's pre-tax
profits by GBP11,337,000 (2019: GBP9,562,000);
-- a 10% increase/decrease in the managing agents' calculation
of net claims reserves will decrease/increase the Group's pre-tax
profits by GBP8,259,000 (2019: GBP6,986,000); and
-- a 10% increase/decrease in the run-off year net claims
reserves will decrease/increase the Group's pre-tax profits by
GBP4,000 (2019: GBPnil).
The 10% movement has been selected to give an indication of the
possible variations in the assumptions used.
Analysis of gross and net claims development
The tables below provide information about historical gross and
net claims development:
Claims development - gross
GBPm
------------- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
After After After After After After After After After After Profit
Underwriting one two three four five six seven eight nine ten on RITC
pure year* year years years years years years years years years years received
------------- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
2011 22 34 34 34 33 33 32 32 31 31 2
2012 22 31 30 29 29 29 28 28 28 3
2013 16 27 27 26 25 25 24 24 2
2014 15 26 26 26 26 25 25 4
2015 14 27 27 26 26 26 4
2016 17 33 34 33 32 2
2017 35 50 52 51 3
2018 28 47 49
2019 25 45
2020 28
------------- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Claims development - net
GBPm
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
After After After After After After After After After After Profit
Underwriting one two three four five six seven eight nine ten on RITC
pure year* year years years years years years years years years years received
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
2011 19 30 30 29 28 28 27 27 27 27 3
2012 18 27 26 25 25 24 24 24 24 3
2013 14 24 23 23 22 22 21 21 3
2014 13 23 23 22 22 21 21 3
2015 13 23 23 23 23 22 3
2016 14 27 27 27 26 3
2017 25 37 39 38 2
2018 22 36 37
2019 18 34
2020 20
------------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
* Including the new acquisitions during 2020.
At the end of the three years syndicates are normally reinsured
to close. Participations on subsequent years on syndicates may
therefore change. The above table shows nine years of development
and how the reinsurance to close received performed.
8. Net investment income
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Investment income 1,318 1,248
Realised losses on financial assets at fair value through
profit or loss 288 262
Unrealised losses on financial assets at fair value
through profit or loss 297 657
Investment management expenses (53) (67)
Bank interest 156 235
---------------------------------------------------------- ------------ ------------
Net investment income 2,006 2,335
---------------------------------------------------------- ------------ ------------
9. Operating expenses (excluding goodwill and capacity
impairment)
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------- ------------ ------------
Expenses incurred in insurance activities:
Acquisition costs 13,215 11,238
Change in deferred acquisition costs (387) 231
Administrative expenses 5,039 4,234
Other 49 61
------------------------------------------------------------- ------------ ------------
17,916 15,764
------------------------------------------------------------- ------------ ------------
Other operating expenses:
- exchange differences 106 125
- Directors' remuneration 398 414
- acquisition costs in connection with the new subsidiaries
acquired in the year 72 156
- professional fees 439 530
- administration and other expenses 395 437
Auditors' remuneration:
- audit of the Parent Company and Group Financial Statements 47 41
- audit of subsidiary company Financial Statements 43 42
- underprovision of prior year audit fee 2 -
- audit related assurance services 20 19
------------------------------------------------------------- ------------ ------------
1,522 1,764
------------------------------------------------------------- ------------ ------------
Operating expenses 19,438 17,528
------------------------------------------------------------- ------------ ------------
The Group has no employees other than the Directors of the
Company.
Details of the Directors' remuneration are disclosed below:
Year ended Year ended
31 December 31 December
2020 2019
Directors' remuneration GBP GBP
------------------------------- ------------ ------------
Arthur Manners 128,333 154,167
Edward William Fitzalan-Howard 18,000 18,000
Jeremy Evans 15,000 15,000
Michael Cunningham 20,000 20,000
Andrew Christie 15,000 15,000
Nigel Hanbury 201,667 191,667
------------------------------- ------------ ------------
Total 398,000 413,834
------------------------------- ------------ ------------
The Chief Executive, Nigel Hanbury, and the Finance Director,
Arthur Manners, had a bonus incentive scheme during 2020 in
addition to their basic remuneration. The above figures for Nigel
Hanbury and Arthur Manners include an accrual for the year of
GBP116,500 and GBP58,500 respectively (2019: GBP112,500 for Nigel
Hanbury and GBP90,000 Arthur Manners) in respect of this
scheme.
No other Directors derive other benefits, pension contributions
or incentives from the Group. During 2017, a Joint Share Ownership
Plan was implemented as an incentive scheme for the Chief
Executive, Nigel Hanbury, and the Finance Director, Arthur Manners
(see Note 23).
10. Income tax charge
(a) Analysis of tax credit in the year
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------- ------------ ------------
Current tax:
- current year (297) 497
- prior year 161 (76)
- foreign tax paid 45 33
------------------- ------------ ------------
Total current tax (91) 454
------------------- ------------ ------------
Deferred tax:
- current year 203 (169)
- prior year (77) (52)
------------------- ------------ ------------
Total deferred tax 126 (221)
------------------- ------------ ------------
Income tax expense 35 233
------------------- ------------ ------------
(b) Factors affecting the tax credit for the year
Tax for the year is the same as (2019: the same as) the standard
rate of corporation tax in the UK of 19% (2019: 19%).
The differences are explained below:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Profit before tax 336 4,287
---------------------------------------------------------- ------------ ------------
Tax calculated as profit before tax multiplied by the
standard rate of corporation tax in the UK of 19% (2019:
19%) 64 814
Tax effects of:
- prior year adjustments 84 (128)
- rate change and other adjustments (189) (140)
- permanent disallowances 68 (346)
- goodwill on bargain purchase not subject to tax - -
- foreign taxes 45 33
- other (37) -
---------------------------------------------------------- ------------ ------------
Tax credit for the year 35 233
---------------------------------------------------------- ------------ ------------
The results of the Group's participation on the 2018, 2019 and
2020 years of account and the calendar year movement on 2017 and
prior run-offs will not be assessed for tax until the years ended
2021, 2022 and 2023 respectively, being the year after the calendar
year result of each run-off year or the normal date of closure of
each year of account. Full provision is made as part of the
deferred tax provisions for underwriting profits/(losses) not yet
subject to corporation tax.
The Group has GBP2,809,000 (2019: GBP1,551,000) taxable losses
carried forward, to which GBP1,106,000 (2019: GBP289,000) has been
recognised as a deferred tax asset and has been offset against
deferred tax liabilities of the same nature as disclosed in Note
18.
The Company has GBP1,302,000 (2019: GBP1,262,000) of tax losses
to carry forward to which no deferred tax asset has been recognised
due to the uncertainty of the future taxable profits, as disclosed
in Note 18.
11. Earnings per share
Basic earnings per share is calculated by dividing the net
profit attributable to ordinary equity holders of the Company after
tax by the weighted average number of ordinary shares outstanding
during the period.
Diluted earnings per share is calculated by dividing the net
profit attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the year, plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
Earnings per share has been calculated in accordance with IAS 33
"Earnings per Share".
The earnings per share and weighted average number of shares
used in the calculation are set out below:
Year ended Year ended
31 December 31 December
2020 2019
------------------------------------------------------- ------------ ------------
Profit for the year after tax attributable to ordinary
equity holders of the Parent GBP301,000 GBP4,054,000
------------------------------------------------------- ------------ ------------
Basic - weighted average number of ordinary shares* 18,921,902 15,809,376
------------------------------------------------------- ------------ ------------
Adjustments for calculating the diluted earnings per
share:
Treasury shares (JSOP scheme), Note 21 500,000 500,000
------------------------------------------------------- ------------ ------------
Diluted - weighted average number of ordinary shares* 19,412,902 16,309,376
------------------------------------------------------- ------------ ------------
Basic earnings/(loss) per share 1.59p 25.64p
------------------------------------------------------- ------------ ------------
Diluted earnings/(loss) per share 1.55p 24.86p
------------------------------------------------------- ------------ ------------
* Used as the denominator in calculating the basic earnings per
share, and diluted earnings per share, respectively.
12. Dividends paid or proposed
No dividend was paid during the year (2019: GBP529,000).
A final dividend of 3p is being proposed in respect of the
financial year ended 31 December 2020.
13. Intangible assets
Syndicate
Goodwill capacity Total
GBP'000 GBP'000 GBP'000
-------------------------------------- -------- --------- --------
Cost
At 1 January 2019 775 17,298 18,073
Additions - 21 21
Disposals - (352) (352)
Impairment - - -
Acquired with subsidiary undertakings - 3,598 3,598
-------------------------------------- -------- --------- --------
At 31 December 2019 775 20,565 21,340
-------------------------------------- -------- --------- --------
At 1 January 2020 775 20,565 21,340
Additions - 186 186
Disposals - (520) (520)
Acquired with subsidiary undertakings - 4,991 4,991
Revaluation - 5,604 5,604
-------------------------------------- -------- --------- --------
At 31 December 2020 775 30,826 31,601
-------------------------------------- -------- --------- --------
Impairment
At 1 January 2019 - 2,022 2,022
Impairment for the year - (1,860) (1,860)
Disposals - - -
-------------------------------------- -------- --------- --------
At 31 December 2019 - 162 162
-------------------------------------- -------- --------- --------
At 1 January 2020 - 162 162
Impairment for the year - (162) (162)
Disposals - - -
-------------------------------------- -------- --------- --------
At 31 December 2020 - - -
-------------------------------------- -------- --------- --------
Net book value
At 31 December 2019 775 20,403 21,178
-------------------------------------- -------- --------- --------
At 31 December 2020 775 30,826 31,601
-------------------------------------- -------- --------- --------
Note 22 sets out the details of the entities acquired by the
Group during the year, the fair value adjustments and the goodwill
arising.
14. Investments in subsidiaries
31 December 31 December
2020 2019
GBP'000 GBP'000
------ ----------- -----------
Total 41,233 33,329
------ ----------- -----------
During 2019 an impairment charge of GBP1,394,000 was recognised
on the cost of investments in subsidiaries and included in the
Parent income statement.
At 31 December 2020, the Company owned 100% of the following
companies and limited liability partnerships, either directly or
indirectly. All subsidiaries are incorporated in England and Wales
and their registered office address is at 40 Gracechurch Street,
London EC3V 0BT, apart from RBC CEES Trustee Limited, which is
incorporated in Jersey and its registered office address is Gaspé
House, 66-72 Esplanade, Jersey JE2 3QT.
Direct/indirect 2020 2019
Company or partnership interest ownership ownership Principal activity
------------------------------ ---------------- ---------- ---------- ---------------------------
Hampden Corporate Member Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 917) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 229) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 518) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 804) Limited Direct - 100% vehicle
Halperin Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Bernul Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 311) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 402) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Updown Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 507) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 76) Limited Direct 100% 100% vehicle
Kempton Underwriting Lloyd's of London corporate
Limited Direct - 100% vehicle
Lloyd's of London corporate
Devon Underwriting Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 346) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Pooks Limited Direct 100% 100% vehicle
Charmac Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Joint Share Ownership
RBC CEES Trustee Limited(ii) Direct 100% 100% Plan
Lloyd's of London corporate
Nottus (No 51) Limited Direct 100% 100% vehicle
Chapman Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Llewellyn House Underwriting Lloyd's of London corporate
Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Advantage DCP Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Romsey Underwriting Limited Direct 100% 100% vehicle
Helios UTG Partner Limited(i) Direct 100% 100% Corporate partner
Lloyd's of London corporate
Nomina No 035 LLP Indirect - 100% vehicle
Lloyd's of London corporate
Nomina No 342 LLP Indirect - 100% vehicle
Lloyd's of London corporate
Nomina No 372 LLP Indirect - 100% vehicle
Lloyd's of London corporate
Salviscount LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Inversanda LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Fyshe Underwriting LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 505 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nomina No 321 LLP Indirect 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 409) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No. 1113) Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Catbang 926 Limited Direct 100% 100% vehicle
Lloyd's of London corporate
Whittle Martin Underwriting Direct 100% 100% vehicle
Lloyd's of London corporate
Nameco (No 408) Limited Direct 100% - vehicle
Lloyd's of London corporate
Nomina No 084 LLP Indirect 100% - vehicle
Lloyd's of London corporate
Nameco (No 510) Limited Direct 100% - vehicle
Lloyd's of London corporate
Nameco (No 544) Limited Direct 100% - vehicle
Lloyd's of London corporate
N J Hanbury Limited Direct 100% - vehicle
------------------------------ ---------------- ---------- ---------- ---------------------------
For details of all new acquisitions made during the year 2020
refer to Note 22(a).
(i) Helios UTG Partner Limited, a subsidiary of the Company,
owns 100% of Salviscount LLP, Inversanda LLP, Fyshe Underwriting
LLP, Nomina No 505 LLP, Nomina No 321 LLP and Nomina No 084 LLP.
The cost of acquisition of these LLPs is accounted for in Helios
UTG Partner Limited, their immediate parent company. On 31 December
2020, Helios UTG Partner Limited sold 100% of is ownership in
Nomina No 035 LLP, Nomina No 342 LLP and Nomina No 372 LLP for
GBPnil gains or losses.
On 21 February 2019, the Company sold its shares in Dumasco
Limited (a dormant company) for GBPnil gains or losses. On 27
November 2019, the Company sold its shares in Nameco (No. 321)
Limited, Nameco (No. 365) Limited and Nameco (No. 605) Limited for
GBPnil gains or losses. On 31 December 2020, the Company sold its
share in Kempton Underwriting Limited and Nameco (No 804) Limited
for GBPnil gains or losses.
(ii) RBC CEES Trustee Limited was an incorporated entity in year
2017 to satisfy the requirements of the Joint Share Ownership Plan
(see Note 23).
15. Financial assets at fair value through profit or loss
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: The fair value of financial instruments traded in
active markets (such as publicly traded securities) is based on
quoted market prices (unadjusted) at the end of the reporting
period. The quoted market price used for financial assets held by
the Group is the current bid price. These instruments are included
in Level 1.
Level 2: The fair value of financial instruments that are not
traded in an active market is determined using valuation techniques
which maximise the use of observable market data inputs, either
directly or indirectly (other than quoted prices included within
Level 1) and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in Level
2.
Level 3: If one or more of the significant inputs is not based
on observable market data, the instrument is included in Level 3.
This is the case for unlisted equity securities.
The Group held the following financial assets carried at fair
value on the statement of financial position:
Total Level Level Level
2020 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 11,104 2,878 7,140 1,086
Debt securities and other fixed income securities 53,950 19,569 34,381 -
Participation in investment pools 219 43 134 42
Loans and deposits with credit institutions 198 87 105 6
Derivatives 115 77 38 -
Other investments 7 7 - -
Funds at Lloyd's 19,684 19,684 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 85,277 42,345 41,798 1,134
-------------------------------------------------- -------- -------- -------- --------
Total Level Level Level
2019 1 2 3
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- --------
Shares and other variable yield securities
and units in unit trusts 9,116 3,202 5,632 282
Debt securities and other fixed income securities 43,659 12,827 30,832 -
Participation in investment pools 621 156 358 107
Loans and deposits with credit institutions 201 106 90 5
Derivatives 47 13 34 -
Other investments 7 7 - -
Funds at Lloyd's 13,490 13,490 - -
-------------------------------------------------- -------- -------- -------- --------
Total - fair value 67,141 29,801 36,946 394
-------------------------------------------------- -------- -------- -------- --------
Funds at Lloyd's represent assets deposited with the Corporation
of Lloyd's to support the Group's underwriting activities as
described in the accounting policies. The Group entered into a
Lloyd's Deposit Trust Deed which gives Lloyd's the right to apply
these monies in settlement of any claims arising from the
participation on the syndicates. These monies can only be released
from the provision of this Deed with Lloyd's express permission and
only in circumstances where the amounts are either replaced by an
equivalent asset, or after the expiration of the Group's
liabilities in respect of its underwriting.
In addition to funds held by Lloyd's shown above, letters of
credit totalling GBP6,971,000 (2019: GBP2,917,000) are also held as
part of the Group's Funds at Lloyd's.
The Directors consider any credit risk or liquidity risk not to
be material.
Company
Financial assets at fair value through profit or loss are shown
below:
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ----------- -----------
Holdings in collective investment schemes - -
----------------------------------------- ----------- -----------
Total - market value - -
----------------------------------------- ----------- -----------
16. Other receivables
31 December 31 December
2020 2019
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 15,280 13,171
Arising out of reinsurance operations 27,306 22,115
Other debtors 15,762 12,440
------------------------------------------- ----------- -----------
Total 58,348 47,726
------------------------------------------- ----------- -----------
The Group has no analysis of other receivables held directly by
the syndicates on the Group's behalf (see Note 27). None of the
Group's other receivables are past their due date and all are
classified as fully performing.
Included within the above receivables are amounts totalling
GBP7,001,000 (2019: GBP3,164,000) which are not expected to be
wholly recovered within one year.
31 December 31 December
2020 2019
Company GBP'000 GBP'000
---------------------------------------- ----------- -----------
Receivables from subsidiaries (Note 25) 20,473 11,357
Other debtors 323 347
Prepayments - -
---------------------------------------- ----------- -----------
Total 20,796 11,704
---------------------------------------- ----------- -----------
Included within receivables are amounts totalling GBP100,000
(2019: GBP100,000), which are not expected to be recoverable within
one year.
17. Deferred acquisition costs
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
At 1 January 6,641 6,782
Increase arising from acquisition of subsidiary undertakings
(Note 22) 1,018 2,532
Movement in deferred acquisition costs 387 (230)
Other movements (320) (2,443)
------------------------------------------------------------- ----------- -----------
At 31 December 7,726 6,641
------------------------------------------------------------- ----------- -----------
18. Deferred tax
Group
Deferred tax is calculated in full on temporary differences
using a tax rate of 19% on deferred tax assets and deferred tax
liabilities (2019: 17% on deferred tax assets and 19% on deferred
tax liabilities). The movement on the deferred tax liability
account is shown below:
Timing
differences
Valuation on
of underwriting
capacity results Total
Deferred tax liabilities GBP'000 GBP'000 GBP'000
------------------------------------------ --------- ------------- --------
At 1 January 2019 2,950 (315) 2,635
On acquisition of subsidiary undertakings 878 - 878
Prior period adjustment (52) - (52)
Credit for the year 356 (525) (169)
------------------------------------------ --------- ------------- --------
At 31 December 2019 4,132 (840) 3,292
------------------------------------------ --------- ------------- --------
At 1 January 2020 4,132 (840) 3,292
On acquisition of subsidiary undertakings 1,427 1,662 3,089
Prior period adjustment (77) - (77)
Credit for the year 77 126 203
------------------------------------------ --------- ------------- --------
At 31 December 2020 5,559 948 6,507
------------------------------------------ --------- ------------- --------
Company
The Company had no deferred tax assets or liabilities (2019:
GBPnil), as disclosed in Note 10.
19. Borrowings
31 December 31 December
2020 2019
Group and Company GBP'000 GBP'000
------------------------------- ----------- -----------
Secured - at amortised cost
Bank revolving credit facility 4,000 2,000
------------------------------- ----------- -----------
4,000 2,000
------------------------------- ----------- -----------
Current 4,000 2,000
Non-current - -
------------------------------- ----------- -----------
4,000 2,000
------------------------------- ----------- -----------
Bank loan
(a) Revolving credit/loan facility
On 21 April 2016, the Company registered a security charge with
Companies House against a prospective revolving credit facility
("RCF"). During the year ended 31 December 2017, the Company agreed
an RCF with the National Westminster Bank Plc to the value of
GBP2,000,000, secured against all of the assets of the Group. On 22
November 2017, GBP1,094,000 was drawn down and repaid in full on 22
June 2018. The charge registered with National Westminster Bank Plc
has now been fully satisfied.
A new sterling revolving loan facility ("RLF") was agreed with
Barclays Bank Plc during the year ended 31 December 2019 to the
value of GBP4m, of which GBP2m was available for general corporate
purposes and acquisitions and the remaining GBP2m was available for
use only in a large loss scenario, secured against all of the
assets of Helios Underwriting plc.
On 19 December 2019, GBP2,000,000 was drawn down on the RLF. The
maturity of the RLF was three months from the initial date of the
drawdown, being 19 March 2020. On 19 March 2020, the RLF was
extended by three months to 19 June 2020. On 29 July 2020, a
further GBP2,000,000 was drawn down on the RLF. The RLF incurs
interest at the following rates:
-- drawn amounts: 3% per annum over LIBOR; and
-- undrawn amount: 1% fixed per annum.
Total arrangement fees of GBP15,000 were paid to Barclays Bank
Plc during the year for the creation of the RLF.
(b) Bank loan
On 14 November 2018, the Company agreed a short-term loan with
National Westminster Bank Plc. The maturity of the loan was the
later of 31 January 2019 and two months after the loan is drawn. On
7 December 2018, GBP8,162,000 was drawn down. The loan was repaid
in full on 1 January 2019. The short-term loan incurred interest on
drawn amounts at 2.5% per annum over LIBOR.
An arrangement fee of GBP41,000 was paid during the year 2018 to
the National Westminster Bank Plc.
Reconciliation of movements of liabilities to cash flows arising
from financing activities:
Liabilities Equity
----------------------------------------- ----------- ------------------------------- --------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 1 January 2019 9,196 16,897 (50) 4,198 30,241
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 3,880 - - 3,880
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buyback of ordinary
shares (Note 24) - - - (302) (302)
Repayment of borrowings (9,196) - - - (9,196)
Dividend paid - - - (529) (529)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows (7,196) 3,880 - (831) (4,147)
----------------------------------------- ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Changes in fair value - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Other changes:
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total equity related other changes* - - - 4,054 4,054
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2019 2,000 20,777 (50) 7,421 30,148
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2019.
Liabilities Equity
----------------------------------------- ----------- ------------------------------- --------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 1 January 2020 2,000 20,777 (50) 7,421 30,148
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 18,141 - - 18,141
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buyback of ordinary
shares (Note 24) - - - (23) (23)
Repayment of borrowings - - - - -
Dividend paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows 2,000 18,141 - (23) 20,118
----------------------------------------- ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Changes in fair value - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Other changes:
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total equity related other changes* - - - 4,283 4,283
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2020 4,000 38,918 (50) 11,681 54,549
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the consolidated profit for the year 2020.
Liabilities Equity
----------------------------------------- ----------- --------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 1 January 2019 9,196 16,897 - 11,754 37,847
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 3,880 - - 3,880
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buyback of ordinary
shares (Note 24) - - - (302) (302)
Repayment of borrowings (9,196) - - - (9,196)
Dividend paid - - - (529) (529)
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows (7,196) 3,880 - (831) (4,147)
----------------------------------------- ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Changes in fair value - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Other changes: - - - - -
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total liability related other changes - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total equity related other changes* - - - 5,789 5,789
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2019 2,000 20,777 - 16,712 39,489
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2019.
Liabilities Equity
----------------------------------------- ----------- ------------------------------- --------
Other
loans Share
and capital/ Other Retained
borrowings premium reserves earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 1 January 2020 2,000 20,777 - 16,713 39,490
----------------------------------------- ----------- --------- --------- --------- --------
Changes from financing cash flows
Proceeds from issue of share capital
(Note 21) - 18,141 - - 18,141
Proceeds from loans and borrowings 2,000 - - - 2,000
Payments for Company buyback of ordinary
shares (Note 24) - - - (23) (23)
Repayment of borrowings - - - - -
Dividend paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total changes from financing cash
flows 2,000 18,141 - (23) 20,118
----------------------------------------- ----------- --------- --------- --------- --------
Effect of changes in foreign exchange
rates - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Changes in fair value - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Other changes: - - - - -
Liability related - - - - -
Other expense - - - - -
Interest expense - - - - -
Interest paid - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Total liability related other changes - - - 2,636 2,636
----------------------------------------- ----------- --------- --------- --------- --------
Total equity related other changes* - - - - -
----------------------------------------- ----------- --------- --------- --------- --------
Balance at 31 December 2020 4,000 38,918 - 19,326 62,244
----------------------------------------- ----------- --------- --------- --------- --------
* The equity related other changes relate to the Company's profit for the year 2020.
20. Other payables
31 December 31 December
2020 2019
Group GBP'000 GBP'000
------------------------------------------- ----------- -----------
Arising out of direct insurance operations 2,752 2,090
Arising out of reinsurance operations 12,348 10,970
Corporation tax payable 288 545
Other creditors 3,968 4,435
------------------------------------------- ----------- -----------
19,356 18,040
------------------------------------------- ----------- -----------
The Group has no analysis of other payables held directly by the
syndicates on the Group's behalf (see Note 27).
31 December 31 December
2020 2019
Company GBP'000 GBP'000
----------------------------- ----------- -----------
Payable to subsidiaries 3,328 3,553
Accruals and deferred income 564 4,182
----------------------------- ----------- -----------
3,892 7,735
----------------------------- ----------- -----------
All payables above are due within one year.
21. Share capital and share premium
Partly
Number Ordinary paid ordinary
of share share Share
shares capital capital premium Total
(i) GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 31 December 2019 18,390,906 1,789 50 18,938 20,777
-------------------------------------- ---------- -------- -------------- -------- --------
Ordinary shares of 10p each and share
premium
at 31 December 2020 33,931,345 3,343 50 35,525 38,918
-------------------------------------- ---------- -------- -------------- -------- --------
During the year, the Company issued a further 15,540,439 shares
and brought back 16,891 shares.
(i) Number of shares
2020 2019
------------------------------------------------------ ---------- ----------
Allotted, called up and fully paid ordinary shares:
- on the market 33,012,176 17,488,628
- Company buyback of ordinary shares held in treasury
(Note 24) 419,169 402,278
------------------------------------------------------ ---------- ----------
33,431,345 17,890,906
Uncalled and partly paid ordinary shares under the
JSOP scheme (ii) (Note 23) 500,000 500,000
------------------------------------------------------ ---------- ----------
33,931,345 18,390,906
------------------------------------------------------ ---------- ----------
(ii) The partly paid ordinary shares are not entitled to
dividend distribution rights during the year.
22. Acquisition of Limited Liability Vehicles
Acquisitions of Limited Liability Vehicles are accounted for
using the acquisition method of accounting.
Where the comparison of the consideration paid to the fair value
of net assets acquired gives rise to a negative goodwill this is
recognised in the revenue in the consolidated income statement as a
gain on bargain purchase (negative goodwill). The below table shows
the summary of the gain on bargain purchase and the impairment of
goodwill as follows:
2020 2019
Gain on Gain on
bargain bargain
purchase purchase
Company or partnership GBP'000 GBP'000
---------------------------- --------- ---------
Nameco (No. 409) Limited - 214
Nameco (No. 1113) Limited - 255
Catbang 926 Limited - 1,036
Whittle Martin Underwriting - 202
Nameco (No 408) Limited 167 -
Nomina No 084 LLP 374 -
Nameco (No 510) Limited 70 -
Nameco (No 544) Limited 127 -
N J Hanbury Limited 522 -
---------------------------- --------- ---------
1,260 1,707
---------------------------- --------- ---------
Further details of individual acquisitions are shown below:
(a) 2020 acquisitions
Nameco (No. 408) Limited
On 28 January 2020, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No. 408) Limited for a total
consideration of GBP1,007,000. Nameco (No. 408) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the provisional fair value
of the net assets was GBP1,174,000. Negative goodwill of GBP167,000
arose on acquisition and has been immediately recognised as
goodwill on bargain purchase in the income statement. The following
table explains the provisional fair value adjustments made to the
carrying values of the major categories of assets and liabilities
at the date of acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 477 477
Financial assets at fair value through profit
or loss 1,172 - 1,172
Reinsurance assets:
- reinsurers' share of claims outstanding 504 - 504
- reinsurers' share of unearned premium 92 - 92
Other receivables, including insurance and reinsurance
receivables 1,417 - 1,417
Deferred acquisition cost 137 - 137
Prepayments and accrued income 10 - 10
Cash and cash equivalents 390 - 390
Insurance liabilities:
- claims outstanding (2,035) - (2,035)
- unearned premium (532) - (532)
Deferred income tax liabilities - (91) (91)
Other payables, including insurance and reinsurance
payables (325) - (325)
Accruals and deferred income (42) - (42)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 788 386 1,174
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,007 - 1,007
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,007 - 1,007
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 219 (386) (167)
------------------------------------------------------- -------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,304,321 1,142,830 1,086,270
------------------ ----------- ----------- -----------
The net earned premium and profit/(loss) of Nameco (No. 408)
Limited for the period since the acquisition date to 31 December
2020 are GBP831,000 and GBP47,000, respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
408) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Nameco (No. 510) Limited
On 27 November 2020, Helios Underwriting plc acquired 100% of
the issued share capital of Nameco (No. 510) Limited for a total
consideration of GBP628,000. Nameco (No. 510) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP698,000. Negative goodwill of GBP70,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 662 662
Financial assets at fair value through profit
or loss 2,067 - 2,067
Reinsurance assets:
- reinsurers' share of claims outstanding 818 - 818
- reinsurers' share of unearned premium 179 - 179
Other receivables, including insurance and reinsurance
receivables 1,769 - 1,769
Deferred acquisition cost 278 - 278
Prepayments and accrued income 15 - 15
Cash and cash equivalents 232 - 232
Insurance liabilities:
- claims outstanding (3,541) - (3,541)
- unearned premium (1,145) - (1,145)
Deferred income tax liabilities - (126) (126)
Other payables, including insurance and reinsurance
payables (449) - (449)
Accruals and deferred income (61) - (61)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 162 536 698
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Shares 657 - 657
Loan paid on acquisition (29) - (29)
------------------------------------------------------- -------- ----------- ----------
Total consideration 628 - 628
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 466 (536) (70)
------------------------------------------------------- -------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,024,104 981,944 1,087,690
------------------ ----------- ----------- -----------
The net earned premium and profit/(loss) of Nameco (No. 510)
Limited for the period since the acquisition date to 31 December
2020 are GBP86,000 and (GBP3,000), respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
510) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Nameco (No. 544) Limited
On 27 November 2020, Helios Underwriting plc acquired 100% of
the issued share capital of Nameco (No. 544) Limited for a total
consideration of GBP1,602,000. Nameco (No. 544) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP1,729,000. Negative goodwill of GBP127,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 1 679 680
Financial assets at fair value through profit
or loss 2,437 - 2,437
Reinsurance assets:
- reinsurers' share of claims outstanding 1,282 - 1,282
- reinsurers' share of unearned premium 221 - 221
Other receivables, including insurance and reinsurance
receivables 3,675 227 3,902
Deferred acquisition cost 304 - 304
Prepayments and accrued income 25 - 25
Cash and cash equivalents 606 - 606
Insurance liabilities:
- claims outstanding (5,351) - (5,351)
- unearned premium (1,343) - (1,343)
Deferred income tax liabilities (2) (172) (174)
Other payables, including insurance and reinsurance
payables (780) - (780)
Accruals and deferred income (80) - (80)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 995 734 1,729
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,200 - 1,200
Shares 404 - 404
Loan paid on acquisition (2) - (2)
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,602 - 1,602
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 607 (734) (127)
------------------------------------------------------- -------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,691,130 1,683,122 1,411,844
------------------ ----------- ----------- -----------
The net earned premium and profit/(loss) of Nameco (No. 544)
Limited for the period since the acquisition date to 31 December
2020 are GBP110,000 and (GBP4,000), respectively.
Negative goodwill has arisen on the acquisition of Nameco (No.
544) Limited as a result of the purchase consideration being in
excess of the fair value of net assets acquired.
Nomina No 084 LLP
On 27 November 2020, Helios UTG Partner Limited, a 100%
subsidiary of the Company, became a 100% corporate partner in
Nomina No 084 LLP for a total consideration of GBP2,207,000. Nomina
No 084 LLP is incorporated in England and Wales and is a corporate
member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP2,581,000. Negative goodwill of GBP374,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 1,371 - 1,371
Financial assets at fair value through profit
or loss 1,541 314 1,855
Reinsurance assets:
- reinsurers' share of claims outstanding 510 - 510
- reinsurers' share of unearned premium 83 - 83
Other receivables, including insurance and reinsurance
receivables 1,192 1,243 2,435
Deferred acquisition cost 129 - 129
Prepayments and accrued income 15 - 15
Cash and cash equivalents 256 - 256
Insurance liabilities:
- claims outstanding (2,602) - (2,602)
- unearned premium (679) - (679)
Deferred income tax liabilities (3) (236) (239)
Other payables, including insurance and reinsurance
payables (486) - (486)
Accruals and deferred income (67) - (67)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 1,260 1,321 2,581
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Shares 2,207 - 2,207
------------------------------------------------------- -------- ----------- ----------
Total consideration 2,207 - 2,207
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 947 (1,321) (374)
------------------------------------------------------- -------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 2,206,124 1,936,166 3,307,751
------------------ ----------- ----------- -----------
The net earned premium and profit/(loss) of Nomina No 084 LLP
for the period since the acquisition date to 31 December 2020 are
GBP153,000 and (GBP6,000), respectively.
Negative goodwill has arisen on the acquisition of Nomina No 084
LLP Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
N J Hanbury Limited
On 27 November 2020, Helios Underwriting plc acquired 100% of
the issued share capital of N J Hanbury Limited for a total
consideration of GBP4,706,000. N J Hanbury Limited is incorporated
in England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP5,228,000. Negative goodwill of GBP522,000 arose on
acquisition and has been immediately recognised as goodwill on
bargain purchase in the income statement. The following table
explains the fair value adjustments made to the carrying values of
the major categories of assets and liabilities at the date of
acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 11 1,790 1,801
Financial assets at fair value through profit
or loss 2,957 - 2,957
Reinsurance assets:
- reinsurers' share of claims outstanding 478 - 478
- reinsurers' share of unearned premium 38 - 38
Other receivables, including insurance and reinsurance
receivables 3,636 2,669 6,305
Deferred acquisition cost 170 - 170
Prepayments and accrued income 31 - 31
Cash and cash equivalents 359 - 359
Insurance liabilities:
- claims outstanding (4,208) - (4,208)
- unearned premium (983) - (983)
Deferred income tax liabilities (120) (847) (967)
Other payables, including insurance and reinsurance
payables (682) - (682)
Accruals and deferred income (71) - (71)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 1,616 3,612 5,228
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Repayment of loan 1,026 - 1,026
Shares 3,680 - 3,680
------------------------------------------------------- -------- ----------- ----------
Total consideration 4,706 - 4,706
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 3,090 (3,612) (522)
------------------------------------------------------- -------- ----------- ----------
2018 year 2019 year 2020 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 3,583,052 3,443,135 3,981,639
------------------ ----------- ----------- -----------
The net earned premium and profit/(loss) of N J Hanbury Limited
for the period since the acquisition date to 31 December 2020 are
GBP223,000 and GBP20,000, respectively.
Negative goodwill has arisen on the acquisition of N J Hanbury
Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Had the Limited Liability Vehicles been consolidated from 1
January 2020, the consolidated statement of comprehensive income
would show net earned premium of GBP7,219,000 and a profit after
tax of GBP135,000.
Costs incurred in connection with the five acquisitions
totalling GBP114,000 (2019: GBP100,000) have been recognised in the
consolidated income statement.
(b) 2019 acquisitions
Nameco (No 409) Limited
On 6 February 2019, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No 409) Limited for a total
consideration of GBP1,346,000. Nameco (No 409) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP1,561,000. Negative goodwill of GBP214,000 arose on
acquisition which has been recognised as an intangible asset and
will be assessed at each period end for impairment. The following
table explains the fair value adjustments made to the carrying
values of the major categories of assets and liabilities at the
date of acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 11 429 440
Financial assets at fair value through profit
or loss 1,379 - 1,379
Reinsurance assets:
- reinsurers' share of claims outstanding 621 - 621
- reinsurers' share of unearned premium 95 - 95
Other receivables, including insurance and reinsurance
receivables 1,749 - 1,749
Deferred acquisition cost 141 - 141
Prepayments and accrued income 10 - 10
Cash and cash equivalents 341 - 341
Insurance liabilities:
- claims outstanding (2,148) - (2,148)
- unearned premium (492) - (492)
Deferred income tax liabilities (2) (81) (84)
Other payables, including insurance and reinsurance
payables (452) - (452)
Accruals and deferred income (38) - (38)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 1,213 347 1,561
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,346 - 1,346
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,346 - 1,346
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 133 (347) (214)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,194,112 1,230,299 1,069,040
------------------ ----------- ----------- -----------
The net earned premium and profit of Nameco (No 409) Limited for
the period since the acquisition date to 31 December 2019 are
GBP811,000 and GBP110,000, respectively.
Negative goodwill has arisen on the acquisition of Nameco (No
409) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Nameco (No 1113) Limited
On 17 July 2019, Helios Underwriting plc acquired 100% of the
issued share capital of Nameco (No 1113) Limited for a total
consideration of GBP2,036,000. Nameco (No 1113) Limited is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP2,291,000. Negative goodwill of GBP253,000 arose on
acquisition which has been recognised as an intangible asset and
will be assessed at each period end for impairment. The following
table explains the fair value adjustments made to the carrying
values of the major categories of assets and liabilities at the
date of acquisition.
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 7 1,105 1,112
Financial assets at fair value through profit
or loss 1,191 - 1,191
Reinsurance assets:
- reinsurers' share of claims outstanding 693 - 693
- reinsurers' share of unearned premium 70 - 70
Other receivables, including insurance and reinsurance
receivables 1,985 1,083 3,068
Deferred acquisition cost 83 - 83
Prepayments and accrued income 18 - 18
Cash and cash equivalents 177 - 172
Insurance liabilities:
- claims outstanding (2,202) - (2,202)
- unearned premium (647) - (647)
Deferred income tax liabilities - (416) (416)
Other payables, including insurance and reinsurance
payables (755) - (755)
Accruals and deferred income (102) - (102)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 518 1,773 2,291
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 2,036 - 2,036
------------------------------------------------------- -------- ----------- ----------
Total consideration 2,036 - 2,036
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 1,518 (1,773) (255)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,796,419 2,035,238 1,994,276
------------------ ----------- ----------- -----------
The net earned premium and profit of Nameco (No 1113) Limited
for the period since the acquisition date to 31 December 2019 are
GBP498,000 and GBP104,000, respectively.
Negative goodwill has arisen on the acquisition of Nameco (No
1113) Limited as a result of the purchase consideration being at a
discount to the fair value of net assets acquired.
Catbang 926 Limited
On 19 December 2019, Helios Underwriting plc acquired 100% of
the issued share capital of Catbang 926 Limited for a total
consideration of GBP5,575,000. Catbang 926 Limited is incorporated
in England and Wales and is a corporate member of Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP6,611,000. Negative goodwill of GBP1,035,000 arose on
acquisition which has been recognised as an intangible asset and
will be assessed at each period end for impairment. The following
table explains the fair value adjustments made to the carrying
values of the major categories of assets and liabilities at the
date of acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets - 1,444 1,444
Financial assets at fair value through profit
or loss 4,228 - 4,228
Reinsurance assets:
- reinsurers' share of claims outstanding 840 - 840
- reinsurers' share of unearned premium 381 - 381
Other receivables, including insurance and reinsurance
receivables 5,643 - 5,643
Deferred acquisition cost 466 - 466
Prepayments and accrued income 24 - 24
Cash and cash equivalents 2,261 - 2,261
Insurance liabilities:
- claims outstanding (5,310) - (5,310)
- unearned premium (1,602) - (1,602)
Deferred income tax liabilities (26) (274) (300)
Other payables, including insurance and reinsurance
payables (1,304) - (1,304)
Accruals and deferred income (160) - (160)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 5,441 1,170 6,611
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 5,575 - 5,575
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 5,575 - 5,575
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 134 (1,170) (1,036)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 4,076,102 4,076,102 4,076,102
------------------ ----------- ----------- -----------
The net earned premium and loss of Catbang 926 Limited for the
period since the acquisition date to 31 December 2019 are GBP94,000
and GBP17,000, respectively.
Negative goodwill has arisen on the acquisition of Catbang 926
Limited as a result of the purchase consideration being in excess
of the fair value of net assets acquired.
Whittle Martin Underwriting
On 20 December 2019, Helios Underwriting plc acquired 100% of
the issued share capital of Whittle Martin Underwriting for a total
consideration of GBP1,207,000. Whittle Martin Underwriting is
incorporated in England and Wales and is a corporate member of
Lloyd's.
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of the net
assets was GBP1,409,000. Negative goodwill of GBP201,000 arose on
acquisition which has been recognised as an intangible asset and
will be assessed at each period end for impairment. The following
table explains the fair value adjustments made to the carrying
values of the major categories of assets and liabilities at the
date of acquisition:
Carrying
value Adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- ----------- ----------
Intangible assets 40 562 602
Financial assets at fair value through profit
or loss 1,240 - 1,240
Reinsurance assets:
- reinsurers' share of claims outstanding 574 - 574
- reinsurers' share of unearned premium 117 - 117
Other receivables, including insurance and reinsurance
receivables 2,004 - 2,004
Deferred acquisition cost 188 - 188
Prepayments and accrued income 10 - 10
Cash and cash equivalents 256 - 256
Insurance liabilities:
- claims outstanding (2,132) - (2,132)
- unearned premium (639) - (639)
Deferred income tax liabilities - (107) (107)
Other payables, including insurance and reinsurance
payables (660) - (660)
Accruals and deferred income (44) - (44)
------------------------------------------------------- -------- ----------- ----------
Net assets acquired 954 455 1,409
------------------------------------------------------- -------- ----------- ----------
Satisfied by:
Cash and cash equivalents 1,207 - 1,207
Loan paid on acquisition - - -
------------------------------------------------------- -------- ----------- ----------
Total consideration 1,207 - 1,207
------------------------------------------------------- -------- ----------- ----------
Negative goodwill 253 (455) (202)
------------------------------------------------------- -------- ----------- ----------
2017 year 2018 year 2019 year
of account of account of account
------------------ ----------- ----------- -----------
Capacity acquired 1,372,272 1,443,031 1,363,831
------------------ ----------- ----------- -----------
The net earned premium and loss of Whittle Martin Underwriting
for the period since the acquisition date to 31 December 2019 are
GBP38,000 and GBP4,000, respectively.
Negative goodwill has arisen on the acquisition of Whittle
Martin Underwriting as a result of the purchase consideration being
at a discount to the fair value of net assets acquired.
23. Joint Share Ownership Plan ("JSOP")
No shares have been vested as at 31 December 2020.
Effect of the transactions
The beneficial interests of the Executives following the
transaction will be as follows:
2020 2019
-------------------------------------- --------------------------------------
Interests Interests
in jointly in jointly
owned owned
ordinary Other ordinary Other
shares interests shares interests
issued in issued in
under ordinary Total under ordinary Total
Director JSOP shares shareholding JSOP shares shareholding
--------------- ----------- ---------- ------------- ----------- ---------- -------------
Arthur Manners 200,000 162,292 909,868 200,000 162,292 362,292
Nigel Hanbury 300,000 4,027,640 9,227,294 300,000 4,027,640 4,327,640
--------------- ----------- ---------- ------------- ----------- ---------- -------------
The new ordinary shares will rank pari passu with the Company's
existing issued ordinary shares. The Company's issued share capital
following Admission will comprise 18,390,905 ordinary shares with
voting rights and no restrictions on transfer and this figure may
be used by shareholders as the denominator for the calculations by
which they will determine if they are required to notify their
interest in, or a change to their interest in, the Company under
the Disclosure Guidance and Transparency Rules.
The JSOP is to be accounted for as if it were a premium priced
option, and therefore Black Scholes mathematics have been applied
to determine the fair value. As the performance condition will
eventually be trued up, a calculation of the fair value based on an
algebraic Black Scholes calculation of the value of the "as if"
option discounted for the risk of forfeiture or non-vesting is
reasonable. The discount factors are for the risk that an employee
leaves and forfeits the award or the failure to meet the
performance condition with the result the JSOP awards do not vest
in full or at all.
The basic Black Scholes calculation is based on the following
six basic assumptions:
(a) market value of a share at the date of grant (133.5p);
(b) expected premium or threshold price of a share (141.4p);
(c) expected life of the JSOP award;
(d) risk-free rate of capital;
(e) expected dividend yield; and
(f) expected future volatility of a Helios share.
Date of grant 13.12.17
------------------------------------------------ --------
(a) Share price 133.5p
(b) Exercise price 141.4p
(c) Expected life (years) 3
(d) Risk-free rate 1.00%
(e) Expected dividend yield (continuous payout) 4.20%
(f) Volatility 20.00%
Exponential constant 2.72
------------------------------------------------ --------
Black Scholes option value 9.3
------------------------------------------------ --------
The fair value has been discounted by 50% for the risk that some
of the awards will be forfeited and not vest, giving a fair value
of 4.6p per share. The total fair value per share of 4.6p times the
number of JSOP awards (500,000 being ordinary shares, Note 21)
gives a total fair value of GBP23,150. The amount is to be charged
as an expense and spread over three years, being the years 2018 to
2020.
24. Treasury shares: purchase of own shares
During the year, the Company bought back some of its own
ordinary shares on the market and these are held in treasury, as
detailed below:
Market
value Market Nominal
consideration price value
Number paid per share 10p each
Date of shares GBP GBP GBP
----------------------- ---------- -------------- ---------- ---------
As at 1 January 2020 402,278 504,127 40,228
28 January 2020 10,600 14,151 1.335 1,060
27 November 2020 6,291 8,398 1.335 629
As at 31 December 2020 419,169 526,676 41,917
----------------------- ---------- -------------- ---------- ---------
The retained earnings have been reduced by GBP527,000, being the
consideration paid on the market for these shares, as shown in the
consolidated and Parent Company statements of changes in
equity.
The Company cannot exercise any rights over these bought back
and held in treasury shares, and has no voting rights. No dividend
or other distribution of the Company's assets can be paid to the
Company in respect of the treasury shares that it holds.
As at 31 December 2020, the 419,169 own shares bought back
represent 1.25% of the total allotted, called up and fully paid
ordinary shares of the Company of 33,431,345 (Note 21).
25. Related party transactions
Helios Underwriting plc has inter-company loans with its
subsidiaries which are repayable on three months' notice provided
it does not jeopardise each company's ability to meet its
liabilities as they fall due. All inter-company loans are therefore
classed as falling due within one year. The amounts outstanding as
at 31 December are set out below:
31 December 31 December
2020 2019
Company GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Balances due from/(to) Group companies at the year end:
Hampden Corporate Member Limited 82 154
Nameco (No. 917) Limited 6,589 3,855
Nameco (No. 229) Limited 2 (2)
Nameco (No. 518) Limited 11 8
Nameco (No. 804) Limited - (65)
Halperin Underwriting Limited 10 8
Bernul Limited 82 77
Nameco (No. 311) Limited 25 22
Nameco (No. 402) Limited (134) (135)
Updown Underwriting Limited 5 (1)
Nameco (No. 507) Limited 87 87
Nameco (No. 76) Limited (129) (130)
Kempton Underwriting Limited (1) (3)
Devon Underwriting Limited 27 29
Nameco (No. 346) Limited (613) (727)
Pooks Limited 167 163
Charmac Underwriting Limited (429) (369)
Nottus (No 51) Limited (11) (25)
Chapman Underwriting Limited 473 111
Llewellyn House Underwriting Limited 44 8
Advantage DCP Limited (1,555) (1,607)
Romsey Underwriting Limited 5,082 1,646
Nameco (No. 409) Limited 413 86
Nameco (No. 1113) Limited (456) (489)
Catbang 926 Limited 766 3,518
Whittle Martin Underwriting 479 776
Nameco (No. 408) Limited 469 -
Nameco (No. 510) Limited 689 -
Nameco (No. 544) Limited 637 -
N J Hanbury Limited 550 -
Helios UTG Partner Limited 3,784 759
RBC CEES Trustee Limited - 50
-------------------------------------------------------- ----------- -----------
Net amount 17,145 7,804
-------------------------------------------------------- ----------- -----------
Receivable from subsidiaries 20,473 11,357
Payable from subsidiaries (3,328) (3,553)
-------------------------------------------------------- ----------- -----------
17,145 7,804
-------------------------------------------------------- ----------- -----------
Helios Underwriting plc and its subsidiaries have entered into a
management agreement with Nomina plc. Jeremy Evans, who resigned as
a Director of the Company on 6 February 2021, is a director of
Nomina plc. Under the agreement, Nomina plc provides management and
administration, financial, tax and accounting services to the Group
for an annual fee of GBP145,000 (2019: GBP146,000).
The Limited Liability Vehicles have entered into a members'
agent agreement with Hampden Agencies Limited. Jeremy Evans, who
resigned as a Director of Helios Underwriting plc on 7 February
2021, is a director of the Company's subsidiary companies and is
also a director of Hampden Capital plc, which controls Hampden
Agencies Limited. Under the agreement the Limited Liability
Vehicles will pay Hampden Agencies Limited a fee based on a fixed
amount, which will vary depending upon the number of syndicates the
Limited Liability Vehicles underwrite on a bespoke basis, and a
variable amount depending on the level of underwriting through the
members' agent pooling arrangements. In addition, the Limited
Liability Vehicles will pay profit commission on a sliding scale
from 1% of the net profit up to a maximum of 10%. The total fees
payable for 2020 are set out below:
31 December 31 December
2020 2019
Company GBP'000 GBP'000
------------------------------------- ----------- -----------
Nameco (No. 917) Limited 59 67
Nameco (No. 346) Limited 13 23
Charmac Underwriting Limited - 2
Nottus (No 51) Limited - 2
Chapman Underwriting Limited 20 22
Llewellyn House Underwriting Limited - -
Advantage DCP Limited 9 10
Romsey Underwriting Limited 22 35
Nameco (No. 409) Limited 6 8
Nameco (No. 1113) Limited 14 1
Catbang 926 Limited 14 31
Whittle Martin Underwriting 7 11
Nameco (No. 408) Limited 7 -
Nameco (No. 510) Limited 7 -
Nameco (No. 544) Limited 8 -
N J Hanbury Limited 1 -
Salviscount LLP - 4
Inversanda LLP - -
Fyshe Underwriting LLP - -
Nomina No 505 LLP - 2
Nomina No 321 LLP 5 6
Nomina No 084 LLP 1 -
------------------------------------- ----------- -----------
Total 193 224
------------------------------------- ----------- -----------
The Group entered into quota share reinsurance contracts for the
2018, 2019, 2020 and 2021 years of account with HIPCC Limited. The
Limited Liability Vehicles' underwriting year of account quota
share participations are set out below:
Company or partnership 2018 2019 2020 2021
------------------------------------- ---- ---- ---- ----
Hampden Corporate Member Limited - - - -
Nameco (No. 365) Limited - - - -
Nameco (No. 605) Limited - - - -
Nameco (No. 321) Limited - - - -
Nameco (No. 917) Limited 70% 70% 70% 59%
Nameco (No. 229) Limited - - - -
Nameco (No. 518) Limited - - - -
Nameco (No. 804) Limited - - - -
Halperin Underwriting Limited - - - -
Bernul Limited - - - -
Dumasco Limited - - - -
Nameco (No. 311) Limited - - - -
Nameco (No. 402) Limited - - - -
Updown Underwriting Limited - - - -
Nameco (No. 507) Limited - - - -
Nameco (No. 76) Limited - - - -
Kempton Underwriting Limited - - - -
Devon Underwriting Limited 70% - - -
Nameco (No. 346) Limited 70% 70% 70% 60%
Pooks Limited 70% - - -
Charmac Underwriting Limited 70% - - -
Nottus (No 51) Limited 70% - - -
Chapman Underwriting Limited 70% 70% 70% 68%
Helios UTG Partner Limited - - - -
Nomina No 035 LLP - - - -
Nomina No 342 LLP - - - -
Nomina No 380 LLP - - - -
Nomina No 372 LLP - - - -
Salviscount LLP 70% - - -
Inversanda LLP 70% - - -
Fyshe Underwriting LLP 70% - - -
Nomina No 505 LLP 70% - - -
Llewellyn House Underwriting Limited 70% - - -
Advantage DCP Limited - 70% 70% 54%
Romsey Underwriting Limited 70% 70% 70% 48%
Nomina No 321 LLP 70% 70% 70% 35%
Nameco (No. 409) Limited 70% 70% 70% 44%
Nameco (No. 1113) Limited - 70% 70% 46%
Catbang 926 Limited - - 70% 60%
Whittle Martin Underwriting - - 70% 48%
Nameco (No. 408) Limited - - - 53%
Nameco (No. 510) Limited - - - -
Nameco (No. 544) Limited - - - -
N J Hanbury Limited - - - -
Nomina No 084 LLP - - - -
------------------------------------- ---- ---- ---- ----
Nigel Hanbury, a Director of Helios Underwriting plc and its
subsidiary companies, is also a director and majority shareholder
in HIPCC Limited. Hampden Capital, a substantial shareholder in
Helios Underwriting plc, is also a substantial shareholder in HIPCC
Limited - Cell 6. Under the agreement, the Group accrued a net
reinsurance premium recovery of GBP4,741,000 (2019: GBP4,551,000)
during the year.
In addition, HIPCC provides stop loss, portfolio stop loss and
HASP reinforce policies for the Company.
HIPCC Limited acts as an intermediary for the reinsurance
products purchased by Helios. An arrangement has been put in place
so that 51% of the profits generated by HIPCC in respect of the
business relating to Helios will be repaid to Helios for the
business transacted for the 2020 and subsequent underwriting years.
The consideration paid to Nigel Hanbury of GBP100,000 reflects the
HIPCC income that he is expected to forgo.
Nigel Hanbury was the sole shareholder of Nameco (No 1113)
Limited, which was acquired by the Company on 17 July 2019 in
exchange for 1,590,769 shares in the Company, a total consideration
of GBP2,036,000 (see Note 22).
Nigel Hanbury was the majority shareholder of Upperton Limited,
which in turn was the sole shareholder of N J Hanbury Limited,
which was acquired by the Company on 27 November 2020 in exchange
for 3,066,752 shares in the Company, a total consideration of
GBP3,680,000 (see Note 22).
Nigel Hanbury was 40% owner of Nomina No 084 LLP, which was
acquired by the Helios UTG Partner Limited (a subsidiary of the
Company) on 27 November 2020 in exchange for 1,025,786 shares in
the Company, a total consideration of GBP2,036,000 (see note
22).
Arthur Manners was the sole shareholder of Nameco (No 510)
Limited, which was acquired by the Company on 27 November 2020 in
exchange for 547,576 shares in the company, a total consideration
of GBP657,000 (see note 22).
During 2019, the following Directors received dividends, in line
with their shareholdings held:
Shareholding
at date Dividend
dividend received
declared 31 July
28 June 2019
Director 2019 GBP
---------------------------------------------------- ------------ ---------
Nigel Hanbury (either personally or has an interest
in) 2,436,871 73,106
Andrew Christie 12,166 365
Jeremy Evans 58,670 1,760
Arthur Manners 133,334 4,000
Edward Fitzalan-Howard (appointed 1 January 2018) 333,333 10,000
Michael Cunningham 37,167 1,115
---------------------------------------------------- ------------ ---------
Related Party disclose the acquisition of SID Arthur
Manners.
26. Ultimate controlling party
The Directors consider that the Group has no ultimate
controlling party.
27. Syndicate participations
The syndicates and members' agent pooling arrangements ("MAPA")
in which the Company's subsidiaries participate as corporate
members of Lloyd's are as follows:
Allocated capacity per year
of account
-----------------------------------------------
Syndicate
or 2021 2020 * 2019 * 2018
MAPA number Managing or members' agent GBP GBP GBP GBP
------------ ------------------------------------ ----------- ---------- ---------- ----------
33 Hiscox Syndicates Limited 8,701,668 8,697,873 7,325,844 8,354,200
218 ERS Syndicate Management Limited 6,478,828 5,900,943 5,901,060 5,896,524
Tokio Marine Kiln Syndicates
308 Limited - - - -
Beaufort Underwriting Agency
318 Limited 742,948 150,000 836,250 866,250
386 QBE Underwriting Limited 1,434,079 1,365,177 1,365,180 1,360,797
Tokio Marine Kiln Syndicates
510 Limited 16,780,613 13,642,803 12,379,884 12,364,816
Tokio Marine Kiln Syndicates
557 Limited 3,177,784 2,969,384 2,122,922 2,136,776
609 Atrium Underwriters Limited 6,779,365 6,205,260 5,501,013 5,490,164
623 Beazley Furlonge Limited 12,982,891 10,685,023 9,456,718 9,041,504
727 S A Meacock & Company Limited 1,048,498 2,048,498 2,181,026 2,181,026
958 Canopius Managing Agents Limited - - - -
1176 Chaucer Syndicates Limited 2,563,237 2,563,238 2,593,236 2,592,140
1200 Argo Managing Agency Limited - - 57,397 58,111
1729 Asta Managing Agency Limited - 4,096 90,318 360,221
Charles Taylor Managing Agency
1884 Limited - - - -
1910 Asta Managing Agency Limited - - - -
Apollo Syndicate Management
1969 Limited 400,001 - - 131,082
1991 Covery's Managing Agency Limited - - - -
2010 Cathedral Underwriting Limited 8,095,459 2,635,873 2,589,260 2,586,521
2014 Pembroke Managing Agency Limited - - 184,534 644,994
Argenta Syndicate Management
2121 Limited 4,723,104 1,503,868 1,003,093 1,003,093
2525 Asta Managing Agency Limited 689,091 637,609 512,869 475,051
2689 Asta Managing Agency Limited - 2,377 145,853 586,706
2791 Managing Agency Partners Limited 5,845,085 6,695,085 6,892,527 6,877,501
2988 Brit Syndicates Limited - - 23,461 247,848
4242 Asta Managing Agency Limited 8,013,778 15,894 321,154 385,199
4444 Canopius Managing Agents Limited - - - 1,205,277
5623 Beazley Furlonge Limited 4,688,357 2,839,943 - -
Amtrust Syndicate Limited Syndicates
5820 Limited - - - -
5886 Asta Managing Agency Limited 11,047,742 6,173,502 554,077 467,960
6103 Managing Agency Partners Limited 2,290,041 1,734,879 1,663,522 1,808,645
6104 Hiscox Syndicates Limited 1,427,825 1,427,825 1,522,434 1,647,436
6107 Beazley Furlonge Limited 1,287,436 1,287,435 1,482,427 1,169,554
Catlin Underwriting Agencies
6111 Limited - - - 249,065
6117 Argo Managing Agency Limited 1,064,471 803,055 3,573,409 4,100,230
6123 Asta Managing Agency Limited - - 6,406 12,369
------------ ------------------------------------ ----------- ---------- ---------- ----------
Total 110,262,301 79,989,640 70,285,874 74,301,060
------------ ------------------------------------ ----------- ---------- ---------- ----------
* Including the new acquisitions in 2019.
28. Group-owned net assets
The Group statement of financial position includes the following
assets and liabilities held by the syndicates on which the Group
participates. These assets are subject to trust deeds for the
benefit of the relevant syndicates' insurance creditors. The table
below shows the split of the statement of financial position
between Group and syndicate assets and liabilities:
31 December 2020 31 December 2019
----------------------------- -----------------------------
Group Syndicate Total Group Syndicate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- --------- -------- -------- --------- --------
Assets
Intangible assets 31,601 - 31,601 21,178 - 21,178
Financial assets at fair value
through profit or loss 19,713 65,564 85,277 13,520 53,621 67,141
Deferred income tax asset - - - - - -
Reinsurance assets:
- reinsurers' share of claims
outstanding 61 30,720 30,781 61 25,699 25,760
- reinsurers' share of unearned
premium - 6,028 6,028 - 5,023 5,023
Other receivables, including
insurance and reinsurance receivables 12,008 46,340 58,348 10,044 37,682 47,726
Deferred acquisition costs - 7,726 7,726 - 6,641 6,641
Prepayments and accrued income 662 514 1,176 - 432 432
Cash and cash equivalents 4,961 3,534 8,495 3,028 3,009 6,037
--------------------------------------- -------- --------- -------- -------- --------- --------
Total assets 69,006 160,426 229,432 47,831 132,107 179,938
--------------------------------------- -------- --------- -------- -------- --------- --------
Liabilities
Insurance liabilities:
- claims outstanding - 113,371 113,371 - 95,616 95,616
- unearned premium - 32,356 32,356 - 26,522 26,522
Deferred income tax liabilities 6,492 15 6,507 3,292 - 3,292
Borrowings 4,000 - 4,000 2,000 - 2,000
Other payables, including insurance
and reinsurance payables 364 18,992 19,356 1,051 16,989 18,040
Accruals and deferred income 1,858 1,435 3,293 5,094 1,226 6,320
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities 12,714 166,169 178,883 11,437 140,353 151,790
--------------------------------------- -------- --------- -------- -------- --------- --------
Equity attributable to owners
of the Parent
Share capital 3,393 - 3,393 1,839 - 1,839
Share premium 35,525 - 35,525 18,938 - 18,938
Other reserves (50) - (50) (50) - (50)
Retained earnings 17,424 (5,743) 11,681 15,667 (8,246) 7,421
--------------------------------------- -------- --------- -------- -------- --------- --------
Total equity 56,292 (5,743) 50,549 36,394 (8,246) 28,148
--------------------------------------- -------- --------- -------- -------- --------- --------
Total liabilities and equity 69,006 160,426 229,432 47,831 132,107 179,938
--------------------------------------- -------- --------- -------- -------- --------- --------
Below is an analysis of the free working capital available to
the Group:
31 December 31 December
2020 2019
Group GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Funds at Lloyd's supplied by:
Quota share reinsurers 39,536 26,742
Stop loss reinsurers 6,971 1,826
Group owned 19,469 13,490
---------------------------------------------------- ----------- -----------
Total Funds at Lloyd's supplied (excluding solvency
credits) 65,976 42,058
---------------------------------------------------- ----------- -----------
Group funds available:
Financial assets (Note 28) 19,713 13,520
Cash (Note 28) 4,961 3,028
---------------------------------------------------- ----------- -----------
Total funds 24,674 16,548
---------------------------------------------------- ----------- -----------
Less Group Funds at Lloyd's (19,469) (13,490)
---------------------------------------------------- ----------- -----------
Free working capital 5,205 3,058
---------------------------------------------------- ----------- -----------
29. Events after the financial reporting period
Dividend
In respect of the year ended 31 December 2020 a final dividend
of 3p per fully paid ordinary share (note 21) amounting to a total
dividend of GBP2,033,000 is to be proposed at the Annual General
Meeting on 29 June 2021. These Financial Statements do not reflect
this dividend payable.
Fund raise
In April 2021 the Company issued 34,241,887 new ordinary shares
to be admitted to trading on AIM comprising 6,037,625 placing
shares, 27,375,000 subscription shares and the 829,262 open offer
shares for which valid applications were received under an open
offer.
Following the issue, the Company has 67,754,063 ordinary shares
in issue admitted to trading on AIM (excluding the 419,169 ordinary
shares held in treasury and which do not carry voting rights).
The total proceeds received for the issue of shares was
GBP57,439,244. The costs incurred in the fund raise totalled
GBP1,413,585.
30. Financial Statements
The financial information set out in this announcement does not
constitute statutory accounts but has been extracted from the
Group's Financial Statements which have not yet been delivered to
the Registrar. The Group's annual report will be posted to
shareholders shortly and further copies will be available from the
Company's registered office: 40 Gracechurch Street, London EC3V 0BT
and on the Company's website www.huwplc.com.
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