REG - Helios Underwriting - Final results for the year ended 31 December 2023
30/05/2024 07:00
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RNS Number : 3591Q Helios Underwriting Plc 30 May 2024
30(th) May 2024
Helios Underwriting plc
Final results for the year ended 31 December 2023
Significant rise in profits and distributions driven by outstanding Lloyd's
market conditions
Helios Underwriting ('Helios' or the 'Company'), the only publicly traded
investment company offering instant access to a diverse portfolio at Lloyd's
of London, the world's largest insurance market, is pleased to announce its
audited financial results for the year ended 31 December 2023.
Helios has positioned itself to maximise growth opportunities by doubling the
size of its capacity portfolio over the last two years to £507 million for
2024, as the market experiences outstanding financial performance underpinned
by strong pricing and underwriting discipline.
Full year 2023: key financial highlights
• Gross premium written increased by 26% to £308m (2022:£244m)
• Capacity portfolio at Lloyd's of £507m, up 63% (2022: £311m)
• Capacity portfolio combined ratio of 86% 2022 (2022: 96%)
• Profit before tax of £22.7m (2022 - loss of £3.9m)
• £18m profit from the revaluation of capacity (2022: £2.7m)
• Total comprehensive profit of £29.9m (2022: loss of £0.1m)
• 25% increase in net tangible asset value at £1.89p per share
(2022: £1.51p)
• Issue of $75m Unsecured Loan Notes with a rating of A- by KBRA
• Earnings per share 22p (2022 - Loss (3.08)p)
• Dividend and total return of capital of 19p (2022: 3p) of which a
base cash dividend of 6p will be paid
Chief Executive, Martin Reith, commented:
"Helios is the smartest way to invest at Lloyd's of London and the excellent
2023 financial performance reflects the strength of our unique proposition,
our continued strategic delivery and some of the best underwriting conditions
the market has experienced in a generation.
"We have focused on growing scale and relevance to ensure we maximise these
market opportunities: we have grown by 63% in the past year alone, across all
parts of the portfolio and through increased fee income. We continue to
actively seek out new opportunities to expand our presence by supporting the
best management teams and new ventures at Lloyd's where our capacity, insights
and experience add real value.
"Lloyd's is the home of insurance innovation, providing solutions for many of
the world's most pressing issues - from climate change, to the energy
transition, and cyber risks. I'm proud of the way Helios has developed into a
key partner for syndicates at Lloyd's and the pre-eminent provider of private
capital into the market.
"Looking ahead I am excited by further unlocking the potential of Helios and I
am confident in our ability to capitalise on the market opportunities and
continue to offer uncorrelated returns by generating long-term growth and
regular income for our investors."
For more information, please contact:
Helios Underwriting plc
Martin Reith (Chief Executive) +44 (0)203 965 6441
Arthur Manners (Chief Financial Officer)
FTI Consulting
Ed Berry +44 (0)7703330199
Nathan Hambrook-Skinner +44 (0)7977817092
Tom O'Brien +44 (0)7929021492
Helios Underwriting plc
Preliminary results for the year ended 2023
Chairman's statement
Improved rating delivers improved profitability
"We are confident that the Helios portfolio will deliver value to
shareholders."
Michael Wade
Non-executive Chairman
£22.7m
Profit before tax - £22.7m (2022: loss of £3.9m)
£18m
Gain on revaluation capacity £18m (2022: £2.7m)
£29.9m
Total comprehensive profit of £29.9m (2022 loss: £0.1m)
£1.89
Net asset value at £1.89 per share (2022: £1.51)
19p
Return of capital in 2023 and 2024 expected to be
19p per share
6p
A final dividend of 6p per share is being recommended (2022: 3p)
Growth in retained capacity.
132% CAGR
2024 392
2023 245
2022 178
2021 99
In summary
• Gross premium written increased by 26% to £308m
• Profit before tax of £22.7m - (2022: loss of £3.9m)
• Profit from the revaluation of capacity £18.0m - (2022: profit of
£2.7m)
• Total comprehensive profit of £29.9m (2022: loss of £0.1m)
• 25% increase in net tangible asset value at £1.89 per share
(2022: £1.51)
• Capacity portfolio combined ratio of 86%
• Earnings per share 22p
• Dividend and total return of capital of 19p of which a base cash
dividend of 6p will be paid (2022: 3p)
I am delighted to be able to report a significant improvement in the
profitability of the Company as the growth in the retained capacity over the
last three years has started to deliver the expected profitability and growth
in shareholder value.
The Lloyd's market has continued to regain its strength and profitability;
these results are the beginning of a period where we can see attractive
pipeline returns derived from our spread portfolio of syndicate participations
through ownership of subsidiary corporate members of Lloyd's.
The net asset value ("NAV") of the Company has grown from a combination of
underwriting profitability, investment income returns and the increasing value
of the Lloyd's syndicate portfolio where we have capacity value and
pre-emption rights.
Return of Capital
The Company is committed to returning capital to its shareholders and does so
by way of dividends and share buy-backs. In 2023 a total of £5.5m was
returned to shareholders comprising a base dividend of 3p per share (£2.3m)
and the buying back of 2.24m shares, for a total consideration of £3.2m in
2023 at an average price that has been accretive to net asset value per share.
In 2024, the Board is proposing to further enhance capital returns to
shareholders. A base dividend of 6p per share (£4.5m) is proposed together
with a further buy back of shares of value up to £3.7m by 31 December 2024.
This, alongside the £1m in share-buyback already completed, will result in
the total capital returned to shareholders in 2024 being up to £9.0m.
The aggregate capital returned to shareholder in 2023 and 2024 is expected to
be up to £14.5m - 19p per share.
This return of capital reflects the Board's confidence in future cash flow and
the prospects for profitable underwriting. The Board believes that the
illiquidity in the Company's shares can create significant volatility in the
share price and some liquidity provided by the Company through share buybacks
will assist in managing trading in the shares.
There will be the option to take new ordinary shares in lieu of the base
dividend.
Capacity Portfolio
The information on the capacity portfolio will enable analysts to estimate
pipeline profits from the 2022 and 2023 Lloyd's underwriting year of accounts
within the notes to the accounts. We anticipate attractive results receivable
in the 2025 and 2026 calendar years.
As we commence 2024, shareholders should be encouraged to note, as explained
further in our Chief Executive's Report, Helios now manages over £500m of the
Capacity Portfolio across 40 syndicates, of which 77% is retained for our
shareholders and 23% acting for third party capital providers and where Helios
will generate fees and commissions.
The freehold capacity on well-established syndicates at Lloyd's continues to
form the cornerstone of the capacity portfolio. When these syndicates wish to
grow their businesses, the existing owners of the capacity have pre-emptive
rights to receive additional capacity pro rata to the scale of increase in the
underlying business. The additional capacity is free of acquisition cost and
the value of this additional capacity increases our asset valuation, albeit
requiring additional capital to meet Funds at Lloyd's. During 2023, the value
of the capacity fund increased by 32% from the free capacity offered from
pre-emptions, from capacity acquired with the acquisition of LLVs and from an
increase in the average prices traded at the Lloyd's auctions in 2023.
Helios actively manages capital. We have a number of strategic options we can
turn to increase or decrease our exposure. Fee income remains an attractive
earnings stream which complements our underwriting returns. For the 2024 Year
of Account we launched a "sidecar" facility for third party capital that can
access the Helios Capacity Portfolio. As the market cycle evolves, we evaluate
opportunities to maintain underwriting exposure and cede risk for fees.
Performance
It is important to understand that there is a three-year delay in the
realisation of underwriting profits in our accounts so at the moment we are
benefiting from the profits realised from the 2021 and 2022 underwriting
years. In addition, the benign catastrophe year in 2023 has allowed the 2023
Year of Account to recognise an underwriting profit at 12 months of £7.7m
(2022: loss of £9.5m), which has contributed to the overall result.
The results for the year ended 31 December 2023 show an operating profit for
the year of £22.7m (2022: loss of £3.9m) and total comprehensive income of
£29.9m The net asset value of the Group is £1.89 per share (2022: £1.51).
Summary financial information
Year to 31 December
2023 2022
£'000 £'000
Gross written premium 307,770 244,614
Net earned premium 200,980 150,393
Underwriting profits 31,560 116
Other income 4,130 2,458
Total costs (12,986) (6,527)
Profit before Tax 22,705 (3,953)
Revaluation of syndicate capacity 17,987 2,670
Tax (10,831) 1,184
Total comprehensive income 29,861 (99)
Earnings per share 21.56p (3.08)p
NTAV - £ per share 1.89 1.51
During 2023, the opportunity to raise long-term debt and raised $75m with a
seven-year term and a fixed coupon of 9.5% (currently a net cost of
approximately £5.7m per annum). This additional finance allowed us to
re-finance some existing bank Funds at Lloyd's facilities and it further
assists in matching our asset base to the underlying insurance exposures which
are mainly in US dollars. We would expect that this additional finance will be
lodged as funds at Lloyd's to support underwriting in the future.
Board Changes
My sincere thanks to my predecessor Michael Cunningham for his wise
custodianship of the Helios Board and assisting me to take over as your
Chairman last June. In addition to the retirement of Michael Cunningham, the
Duke of Norfolk left the Board in April and we thank him for his service and
independent counsel. We have appointed a specialist search firm to assist us
in bringing two new independent Non-executive Directors where there are skill
sets of risk and audit respectively.
Future prospects
We envisage further opportunities during 2024 and into 2025 and will position
the portfolio accordingly. We expect the majority of the syndicates we support
to pre-empt in order to benefit from the attractive rating environment and
market discipline. In addition, we are evaluating new opportunities for Helios
that will give shareholders further diversification. It is our hope that, with
these prospects, the AIM stock market will value more appropriately and
attract better liquidity for our shares.
Michael Wade
Non-executive Chairman
29 May 2024
Chief Executive Officer's review
Helios has evolved into a hard hitting preferred capital provider at Lloyd's
"Substantial increase in profitability and the growth in the capacity
portfolio driving value"
Martin Reith
Chief Executive Officer
£42.7m
Portfolio underwriting result of £42.7m (2022: £2.0m)
£29.9m
Total comprehensive income £29.9m (2022: loss of £0.1m)
£1.89
Net asset value £1.89 (2022: £1.51)
25%
Growth in Net Asset value
34%
Growth in net earned premium (2022: 117%)
86%
Combined ratio for the overall portfolio
Operating profit
• Capacity Portfolio £507m
• Revaluation of Capacity - Gain of £18m
• Dividend per share - 6p
• Return of capital per share 19p
• Debt raise $75m
• Earnings Per Share 22p
• Net Tangible assets £140m/GWP £308m
The Lloyd's insurance market is experiencing the most attractive underwriting
conditions for a generation with record profits for 2023 driven by disciplined
underwriting and investment returns. The market reported a net combined ratio
of 84%, £5.2bn investment returns and delivering profits of £10.7bn. The
market has witnessed significant premium growth from pricing correction and
new opportunities and for 2024; the expectation is to write £60bn, up 11%
from 2023.
In an increasingly challenging global environment - politically,
environmentally and fiscally - we continue to scrutinise and assess likely
impacts and adjust our stance accordingly. The market is still in the grip of
a peril from Russia's invasion of Ukraine and Israel's' continuing military
action in Gaza. Casualty reserves and adequacy remain a concern with rising
inflation, albeit mitigated to some extent by the rise in interest rates.
The market continues to focus on becoming more efficient with a steadfast
focus on underwriting discipline and increased adoption of digitalisation. The
arrival of technology, enriching the underwriting process, will create new
opportunities to evaluate more risks faster and more efficiently. As
technology enhances and enriches the process of underwriting risks at Lloyd's,
this could create an opportunity to further increase participation in the
future. The bifurcation of the lead/follow will create new opportunities where
we expect to benefit across our portfolio.
Changes in 2024 planned capacity by 2022 combined ratio quartile (%)
Helios Lloyd's
First quartile
52%
6%
Second quartile
44%
(5%)
Third quartile
49%
7%
Fourth quartile
15%
13%
2024 Capacity by 2022 Quartile
First Quartile, 24%
Second Quartile, 26%
Third Quartile, 13%
Fourth Quartile, 17%
New, 20%
Once again, Helios has sought to position the portfolio to maximise market
opportunities. Market discipline and pricing adequacy remains strong and the
capacity portfolio has doubled over the past two years and stands at £507m
for 2024. Our portfolio, increasingly diversified and volatility managed, is
seeing growth across all sectors of the portfolio.
Overall, we have grown by 63% from 2023 in to 2024, increasing our retained
position and growing our fee earning aspect with third party capital. Our
strategy is to manage a diversified portfolio of underwriting capacity. During
this year, the Helios-retained capacity has grown from £245m to £392m, a 60%
increase. We have built our portfolio across the 4 quartiles as illustrated in
the chart above. Helios has increased the proportion of capacity in each of
the top three Lloyd's quartiles by over 40%. This growth rate is significantly
higher than that of the entire Lloyd's market.
There is little doubt that our impact and relevance is growing in the market.
We are often approached to support new syndicates and lead their funds at
Lloyd's placement. We have been able to grow beyond the pre-emption amounts in
some occasions, benefiting from our market-wide relationships.
Our analytical skills continue to grow as we interrogate our portfolio using
data and analytics to ensure balance, capital management and curation. Since
the last report, I am delighted to welcome Jen Tan as our Head of Portfolio
Strategy, Michelle Faithful as our syndicate and portfolio analyst and our new
Chief Operating Officer, Adhiraj Maitra. These are significant developments
that will position us well to develop our cycle managed strategies.
You will see later in this report some greater granularity around our
portfolio characteristics.
As we look forward, we shall continue to tailor the portfolio, using data and
analytics, to optimise opportunities mindful of market conditions and
origination opportunities. We are in active discussions with Lloyd's to ensure
we are in tune with the market's ambitions, views and strategies as we seek
opportunities to optimise the portfolio and to access the market beyond the
current capacity portfolio.
We have evolved to become a hard-hitting preferred Funds at Lloyd's capital
provider deploying significant capacity and capital on opportunities that meet
or exceed our return requirements. We try to be innovative and creative,
working with our portfolio to determine new ways to build our relationships
and relevance. At the heart of what we do is supporting extraordinary
Executives across management and underwriting. They are the ones that build
and drive their businesses and Helios supports them in that quest with access
to knowledgeable committed capital.
Our share price performance remains disappointing and not reflective of the
Company's performance. It is clear we need to sharpen our messaging and
communication to ensure that our various stakeholders and audiences understand
our value proposition.
The Board is committed to returning capital to shareholders and we are
confident that we shall be able to make significant strides in this respect.
Helios punches above its weight given the staff numbers and impact. My sincere
thanks to the Helios team for all their hard work and welcome to those new
joiners.
Martin Reith
Chief Executive Officer
29 May 2024
Portfolio Management report
Introduction
While we continue to work closely with our Members Agents, the growth of the
Company, in particular the Portfolio Management function, has allowed us to
develop in-house analytical capabilities.
Our portfolio management and strategy is rooted in a rigorous interrogation
process for syndicate selection. This involves a thorough examination of
multiple aspects for every syndicate in our portfolio. We review business
plans in detail, evaluating every aspect from financial projections to
strategic directions. We also use different data and analytical tools (e.g.
stress and scenario tests) to evaluate the impact of a syndicate's potential
impact on the overall portfolio and make informed decisions. This is an
evolving process and we are looking to introduce stochastic modelling
techniques in the business as usual evaluation process.
We aim to optimise and diversify the portfolio, ensuring we have a balanced
mix of syndicates capable of withstanding market losses and with the intention
of providing consistent superior performance.
The final decision to include a syndicate in our portfolio rests with the
Board, ensuring accountability and alignment with our overall strategy.
We actively monitor performance and adjust our strategies as necessary,
tailoring our portfolio in response to market conditions and pricing.
Overview of our portfolio
The Capacity Portfolio is positioned to maximise underwriting returns, and
take advantage of favourable market conditions we are enjoying in 2023 and
beyond. There has been increased focus and curation from the 2022 to 2023
portfolio with an emphasis on:
• managing exposure to natural catastrophe;
• growth into specialty lines;
• targeting risks, classes and geographies that diversify the
portfolio;
• building relationships with syndicates that attract
non-correlating exposure; and
• identifying new relationship capacity with excellent growth
prospects.
The chart below is an illustration of the process followed in reviewing new
opportunities for the Helios Capacity Portfolio.
Evaluation process
Initial review
• Submission review
• Meetings with syndicate and brokers
• Q&A sessions
Syndicate deep dive
• Business plan review
• Historical performance analysis
• Capital modelling
• Syndicate scoring
• Performance and volatility modelling
Portfolio impact
• Financial projection
• Portfolio mix
• Large loss exposure
• Aggregation / Diversification
• Stress testing
• Portfolio modelling
Decision making
• Recommendation presented to the Portfolio Management Committee
• Decision approved by the CEO and Board
2024 Portfolio Review
Helios' capacity portfolio has grown from £311m for 2023 year of account
("YOA") to £507m for 2024 YOA. This 63% increase has been achieved through
growth beyond pre-emptions in several syndicates, cementing that demand and
desire to have Helios capital.
The addition of eight new syndicates has generated further diversification on
the portfolio and an increase in classes of business and expansion into
geographical areas where we historically had limited exposure.
We actively seek out new, niche and high-quality syndicates that may become
difficult to access in the future.
Freehold syndicates - Participations in syndicates managed by these managing
agents represent shares in the long-established businesses at Lloyd's. We
strive to acquire LLVs with portfolios that comprise these quality syndicates,
thereby having to pay the average auction prices to get access. This
proportion of the portfolio provides diversified exposure to syndicates that
have experienced underwriting teams and well-established portfolios where each
management team allocates capital to the business areas with the better risk
adjusted returns.
Number of syndicates
Established New
2022 25 3 28
2023 27 5 32
2024 30 10 40
Growth in capacity £m
Retained capacity Third party capacity
2022 182 63 245
2023 245 66 311
2024 392 115 507
Tenancy syndicates - We have a mix of longstanding relationship capacity and
syndicates that we are supporting for the first time. In reality, while we
hope to have secured capacity over the long term, we need to renew for each
YOA and that adds to our overall portfolio construction.
Curation of the portfolio
The table shows the movement in the portfolio to position for the 2024 year of
account. The portfolio has been actively managed during the year to achieve
the following:
Freehold Tenancy Total
capacity capacity capacity
2023 YOA capacity 147.3 155.5 310.8
Acquisitions 7.4 0.7 8.1
Pre-emptions 14.7 27.1 41.8
New syndicates - 100.8 100.8
Auction - buy 6.5 - 6.5
Portfolio management - 55.8 55.8
Discarded capacity - (8.6) (8.6)
2024 YOA capacity 175.9 331.2 507.1
% increase 19% 113% 63%
Pre-emptions - £41.8m - the syndicates supported grew their businesses on
average by 13% for the 2024 year of account and we took up these pre-emptions
for no cost.
New syndicates - We have been active in supporting leading management teams
wanting to take advantage of the Lloyd's licences and infrastructure to start
new syndicates that either have a unique proposition or will be underwriting
existing portfolios with a profitable track record. It is essential for the
new opportunities to have strategic alignment with the Helios Capacity
Portfolio, increase diversification and meet our risk appetite requirements.
Details of some of the syndicates (new and established) added to our portfolio
are outlined below.
We invested in Wildfire Defense Syndicate 1996 (WDS). This new Syndicate in a
Box focuses on loss prevention and is committed to reducing wildfire losses
across the insurance industry focusing initially on California. The WDS's
response actions on properties threatened by wildfires lead to significant
savings. It prevents structures from being lost to wildfires, which in turn
reduces carbon emissions from structure combustion and reconstruction.
Nephila 2358, two new Special Purpose Arrangements (Envelop 1925 and AdA 1492)
and two Syndicates in a Box (Volante 2358 and Parsyl 1796) were also added to
our portfolio in 2023.
In 2024, we provided further capital support to four new Syndicates in a Box
with different and uncorrelated risk profiles.
We made a strategic investment by providing capital to MCI Syndicate 1966, an
innovative venture that was officially launched in April of 2024.
Syndicate 1966 is unique in that it introduces a revolutionary new product
that offers insurance for clinical trial funding, specifically designed for
the rapidly growing biotechnology industry. This product is not just an
insurance policy, it is a tool that has the potential to greatly impact the
future of medical research and development.
The syndicate leverages advanced technology, employing an Artificial
Intelligence (AI) model, to predict the success rate of clinical trials. This
predictive model is a key aspect of their business strategy, as it allows for
more accurate and efficient allocation of resources. By doing so, Syndicate
1966 not only mitigates risks but also actively promotes medical innovation.
The other three new additions, namely NormanMax 3939, Agile 2427 and African
Specialty Risk 2454 (ASR), have all demonstrated a consistent proven track
record of profitability through their MGA historical performance.
NormanMax offers a unique parametric product that is light on our portfolio.
On the other hand, Agile predominantly underwrite Australian and New Zealand
risks.
ASR specialises in insuring African countries. These geographic focuses brings
a level of diversification to our portfolio, as it strays from more common
regions of our existing portfolio.
Therefore, these syndicates are expected to not only contribute positively to
our bottom line but also bring about strategic advantages in terms of
portfolio diversification.
Auction - buy - £6.5m - we again took advantage of lower-than-expected prices
on certain syndicates to purchase additional capacity. These syndicates have
good prospects in the future, particularly for gains on the price on capacity
rights.
Acquisitions - £8.1m - the capacity acquired supplemented the existing
freehold capacity participations.
Portfolio management - £55.8m - Helios leveraged its strong relationships
with the syndicates it supports to increase participation in several
high-performing syndicates, beyond pre-emptions, in order to benefit from
favourable market conditions.
Discarded capacity - £8.6m - as part of the portfolio evaluation and
monitoring, we reduced our participations on specific syndicates to aid the
balance and contributions across the portfolio.
Declined opportunities: We have seen and declined a number of opportunities
where we are unconvinced of the strategic direction, projected financial
performance or scope of cover.
Mix of syndicates
Helios is a true spread vehicle with a portfolio across 40 syndicates. Among
these, 63% are established syndicates (>three years of underwriting); 22%
have less than three years of operating experience and 15% are new syndicates
which commenced business operations in 2024.
The number of new syndicates supported in 2024 increased as Helios looked to
optimise in the current strong market. Helios is presented with many new
opportunities; each of these are thoroughly evaluated and analysed before any
support decisions are made. We have declined opportunities which are not
aligned with the Company's strategic objectives for the portfolio and
cautiously allocate small capacity support on new syndicates.
Beazley 623, 32.7m
TMK 510, 30.3m
Apollo 1969, 25.5m
Arch 1955, 20.0m
Atrium 609, 19.5m
Hiscox 33, 15.4m
Beat 4242,15.0m
Agile 2427, 15.0m
MCI 1902, 12.6m
Dale 1729, 25.1m
Flux 1985, 20.0m
ERS 218,17.7m
CFC 1988, 15.1m
Envelop 1925, 12.5m
WDS 1996, 9.5m
ADA 1492, 8.5m
Lancashire 2010 7.3m
Blenheim 5886, 30.8m
NormanMax 3939, 12.0m
Parsyl 1796, 7.0m
Other participations totalling 36.2m
Beazley 5623, 27.0m
Apollo 1971, 25.0m
Nephila 2358, 20.0m
MAPL 2791, 16.4m
MCI 2 CTF, 15.0m
Hiscox 6104, 10.0m
ASR, 5.8m
Financial analysis
Portfolio underwriting result
The portfolio achieved a net combined ratio of 86% in comparison with the
combined ratio for the Lloyd's market of 84%. The portfolio's combined ratio
is affected by the early earning development of new syndicates and their
inherently cautious loss ratios. However, if we exclude the new syndicates,
the established ones within the portfolio align with the market. Over time, as
these new syndicates mature and their earnings grow, we expect the associated
combined ratios to improve.
Established syndicate, 63%
Less than three years, 22%
New, 15%
2023 Helios calendar year net combined ratio analysis Total New Established Freehold Tenancy
syndicates syndicates
Capacity % 11.2% 88.8% 62.3% 37.7%
Net claims ratio 49.4% 55.1% 48.9% 48.1% 51.4%
Acquisition cost ratio 25.8% 25.4% 25.9% 26.6% 24.6%
Expenses ratio 10.6% 16.6% 10.0% 11.2% 9.7%
Net combined ratio (NCOR) 85.8% 97.1% 84.8% 85.9% 85.6%
Result £m* 42.7 1.1 41.6 28.2 14.5
* Before Helios reinsurance and expenses.
Portfolio underwriting result
The contribution from the 2021,2022 and 2023 years of account to the
underwriting result for the capacity portfolio in 2023 is as follows:
2021 2022 2023 2023 2022
Total Total
Portfolio capacity by underwriting year £m 157.3 245.2 310.8
Gross underwriting result £m 4.6 21.6 5.9 32.1 5.6
Investment income £m 5.2 3.6 1.8 10.6 -3.5
Portfolio result by underwriting year £m 9.8 25.2 7.7 42.7 2.1
Gross result as % of capacity 5.9% 10.4% 2.5%
Retained capacity £m 105.8 184.5 244.5
Helios retained % 67% 75% 79%
Helios share of the portfolio result £m 6.8 19.0 5.8 31.6 0.1
Financial Analysis
The strategy to take advantage of the excellent underwriting conditions, to
grow the capacity portfolio over the last three years and to increase retained
Helios share of the capacity portfolio has increased capacity portfolio
underwriting result to £42.7m (2022: £2.1m).
a) The growth in the capacity portfolio to £245m for 2023 year of
account and the improved pricing has contributed an underwriting profit of
£25.3m.
b) Helios' increased share of the portfolio for the 2023 underwriting
year, increasing to 79%, has made a contribution of £5.8m in 2023 (2022: loss
of £7.1m), given the lower incidence of catastrophe losses that were incurred
by the supported syndicates.
The development of the earned profits by year of account is shown below.
As a % of capacity 2021 2022 2023
Portfolio profits/(losses) bought forward 0.9% (4.0%) -
Portfolio profits earned in the year 5.9% 10.4% 2.7%
Final result/cumulative profits earned to date 6.8% 6.5% 2.7%
Final result/mid-point estimates as at 31 December 6.8% 8.1% 12.0%
During 2023, the 2021 underwriting year result improved from a mid-point
result as at 31 December 2022 of 2.4% to a final result of 6.8%, an
improvement of 4.4%. There remains uncertainty over the reserves required for
the aviation losses incurred in Ukraine. Syndicate 609 - Atrium - has kept the
2021 year of account open, pending the ongoing discussions regarding the
potential liability for the aviation losses.
The 2022 year of account was impacted by Hurricane Ian - an insured industry
loss of USD55bn which resulted in a loss to the portfolio of 6.1%. Having
booked this loss, the mid-point estimate for the 2022 underwriting year at 31
December 2023 is a profit of 8.1% which is expected to improve in 2024, with
the remaining profits from this year of account to be earned in 2024. The
mid-point estimate for 2023 has initially been reported at 12.0%, an
underwriting year that was not materially impacted by catastrophe events. This
absence of large losses allowed profits to be recognised at the 12-month stage
and the initial mid-point result for 2023 is very promising.
We expect the GAAP earnings in 2024 from the 2023 and 2022 underwriting years
to make a significant contribution to Helios' earnings, both from the
profitability in the underlying portfolios and with further positive
investment returns continuing to be recognised.
Insurance price index (base year 2017 = 100)
2017 100
2018 103
2019 109
2020 121
2021 134
2022 144
2023 151
The Lloyd's market has been in remediation and market-wide pricing correction
since 2018 and we have seen seven consecutive years of rate hardening. The
2023 Lloyd's result was the best in recent history, achieving a combined ratio
of 84%, evidencing the current rate levels are adequate and resilient to loss
activities.
Net combined ratio (%)
Helios Lloyd's
2023* 86
2023* 84
2022 93
2022 92
2021 94
2021 94
2020 103
2020 110
The below chart shows the return on capital for the Helios capacity portfolio
against the returns that could be achieved by the aggregate for capital
provided to Lloyd's to support underwriting. Helios portfolio's return on
capital outperforms that of Lloyd's by an average of 9.0% over the last four
years.
Source: Corporation of Lloyd's
Return on Capital Helios vs Lloyd's Market Performance (%)
Helios Lloyd's of London Helios relative performance
Return on capital has been calculated as:
Helios - The YOA return* on the opening capacity for that YOA as a percentage
of the previous year's calendar year* closing Funds at Lloyd's (including
reinsurance and solvency adjustments).
Lloyd's - The YOA return* as a percentage of FAL, calculated as the calendar
year* closing members, Funds at Lloyd's*.
* Calendar year has been used as a proxy for the YOA capital support.
* YOA return includes prior year movements.
Other income
Helios generates additional income at Group level from the following:
2023 2022
£'000 £'000
Fees from reinsurers 1,408 562
Corporate reinsurance policies - 33
Amortisation of goodwill 619 1,216
Investment income 2,103 647
Total other income 4,130 2,458
The investment returns on the assets managed by the supported syndicates are
included in the overall portfolio underwriting result.
Financial investments £'000 Investment Yield
return
£'000
Syndicate investment assets 217,444 10,373 4.7%
Group investment assets 70,754 2,103 3.0%
288,198 12,476 4.3%
Helios' share of the syndicate investments have generated an investment return
of 4.7% (2022: loss of 2.2%) and the yields on our investment funds have also
improved. These investment funds are now fully invested in a short duration
bond portfolio. The share of the syndicate investments have increased by 42%
in the year and this is expected to continue to increase, reflecting the
growth of the capacity portfolio.
Fees from the quota share reinsurers reflect the fee payable on the Funds at
Lloyd's provided and profit commission relating to profits earned on the 2021,
2022 and 2023 years of account has been accrued.
Total costs
The total costs comprise the cost of the stop loss protection bought to
mitigate the downside from large underwriting losses, the cost of providing
recourse and non-recourse debt to assist in the financing of the capital
requirements of the retained capacity and the operating expenses.
2023 2022
£'000 £'000
Pre-acquisition 494 46
Portfolio stop loss 2,561 1,002
Portfolio funds at Lloyd's Financing 3,112 1,446
Operating costs 6,818 4,033
Total costs 12,985 6,527
The stop loss costs incurred in 2022 have been partially deferred to reflect
the exposure of the portfolio that extends over two years. The increased the
charge in 2023 reflects the continuation of the spreading of the costs over
two years and as the retained capacity increased in 2023. The stop loss
provides short-term financing to fund a loss in excess of 7.5% of capacity.
The financing of the retained capacity using excess of loss and bank
facilities is also spread over two years. £41m of additional underwriting
capital was sourced in 2023 through a reinsurance contract and a £15m bank
facility at a cost of £2.8m.
The operating costs have increased as the portfolio management skills have
been expanded following the appointment of Martin Reith. In addition, the 2023
costs include a bonus accrual of £1.25m and a provision for FX losses of
£0.9m.
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.
2023 2022
£'000 £'000
Net tangible assets 57,665 55,743
Fair value and capacity ("WAV") 82,436 59,967
140,101 115,710
Shares in issue (Note 21) 74,186 76,218
Net tangible asset value per share (£) 1.89 1.51
The capital employed per share, the assets used to generate earnings which
exclude the deferred tax liability on capacity value, is as follows:
2023 2022
£'000 £'000
Net assets 140,101 115,710
Deferred tax provision on capacity value 20,136 14,139
Capital employed 160,237 129,849
Shares in issue (Note 21) 74,186 76,218
Capital employed per share (£) 2 2
The deferred tax provision on capacity value could potentially be incurred
should the entire portfolio be sold. The capital employed by share is 32p
(2022: 18p), higher than the net tangible 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.
Return of capital to shareholders
The Company returns capital to shareholders by way of dividends and share
buy-backs.
2023 2024 Total
£m Pence per Pence per £m Pence per
share £m share share
Share buyback - Actual 3.2 4 0.8 1 4.0 5
- Proposed 3.7 5 3.7 5
Dividend 2.3 3 2.3 3
- Actual
- Proposed 4.5 6 4.5 6
Total 5.5 7 9.0 12 14.5 19
The Company returns capital to shareholders by way of dividends and share
buy-backs. In 2023 a total of £5.5m was returned to shareholders comprising a
base dividend of 3p per share and the buying back of shares of £2.3m in 2023
at an average price of £1.42p per share thereby enhancing shareholder value.
In 2024 it is proposed to increase the capital returned to shareholders to
£9.0m. A base dividend of 6p per share (£4.5m) is proposed together with a
further buy back of shares of up to £3.7m by 31 December 2024.
The aggregate capital returned to shareholder in 2023 and 2024 is expected to
be £14.5m - 19p per share.
Capacity value
The value of the portfolio of the syndicate capacity remains the major asset
of Helios 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 Company, together with the current value of the
portfolio capacity, is a key management metric in determining growth in value
to shareholders.
Freehold Value of Value
capacity capacity per £ of
£m £m capacity
Capacity value at 31 Dec 2022 147.3 60.0 41p
Capacity acquired with LLVs in 2023 7.4 3.5
Value of pre-emption capacity 14.7 7.0
Acquisition of capacity in the capacity auction 6.5 0.4
Increase in portfolio value - 11.5
Capacity value as at 31 Dec 2023 175.9 82.4 47p
The average price per £ of freehold capacity has increased by 15% to 47p per
£ of capacity, reflecting the demand from third party capital for access to
the syndicates offering freehold capacity. In addition, the pre-emptions
offered increased the value of the portfolio by £7m.
Impact on net asset value £m
Value of pre-emption capacity 7.0
Increase in portfolio value 11.5
18.5
Deferred tax provision - 25% (4.6)
Net increase in tangible net assets 13.9
Number of shares in issue 74.2
Increase in net asset value per share 18.74
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:
Capacity Revised
value NTAV
£m per share
Current value - £m 82.4 1.89
Decrease of 10% 74.2 1.81
Increase of 10% 90.6 1.97
Each 10% reduction in the capacity values at the 2024 auctions will reduce the
NAV by approximately 8p per share (2022: 6p 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.
Acquisition strategy
Helios acquired four LLVs in 2023 (2022: three), maintaining an interest in
the market for the sale of LLVs in 2023. Given that the improvement in market
conditions is now being reflected in the syndicate underwriting results - the
interest in the small numbers of LLVs for sale has increased. We will continue
to communicate with the owners of LLVs, which has the advantage of:
• raising the profile of Helios;
• allowing owners of LLVs who were potentially considering ceasing
underwriting at Lloyd's to have the opportunity to realise the value of their
investment quickly;
• allowing vendors a tax-efficient exit if they wish to cease
underwriting.
Risk Management
During 2023, a further four LLVs were acquired.
Summary of acquisitions Goodwill
Total Capacity Humphrey Discount to Negative Positive
consideration £m value Humphrey £'000 £'000
£m £m
2023 7.1 8.2 8.0 12% 364
2022 5.7 5.7 6.3 10% 374
2021 27.3 34.8 28.9 6% 1,219 319
The four (2022: three) acquisitions in 2023 were purchased for a total
consideration of £7.1m (2022: £5.7m), of which £3.2m (2022: £2.6m) was
attributed to the value of capacity acquired. Although the LLVs acquired in
2023 were at discount to Humphrey's, subsequently the availability of LLVs at
reasonable value has diminished. As the prospect for profitable underwriting
has increased, there is greater interest in the LLVs that are available for
sale.
The goodwill that is recognised on an acquisition is now amortised in the
Financial Statements over three years and in 2023 £619,000 of negative
goodwill has been amortised in 2023.
Third party capital
Underwriting capital provided by third parties will form an increasing part of
the capital stack of the Helios Capacity Portfolio. Helios has used quota
share reinsurance for a number of years to provide access to the Lloyd's
underwriting exposures for reinsurers and for the 2024 year of account third
party members provided a new source of capital to support the capacity
portfolio.
2023 2024
Current total capacity - £m QS 66.3 63.5
reinsurers
Third party capital - 51.7
Total third party capital 66.3 115.2
Helios Capacity Fund - total capacity 310.8 507.1
Helios' share of capacity fund 79% 77%
Third party capital has successfully reduced the exposure of Helios
shareholders in recent years and assists in the financing of the underwriting
capital. Helios has almost doubled the third party capacity support for the
capacity portfolio in 2024 to £115m. It is expected that the support from
third party capital will further increase for the 2025 year of account.
For the 2024 year of account, a new structure of participation was offered to
existing private capital participants. In conjunction with Argenta Private
Capital Limited, its clients were offered the opportunity to participate on
the Helios Capacity Portfolio MAPA, including participations on freehold
syndicates without having to fund the upfront cost of the freehold capacity
rights. Helios is renting the freehold capacity rights to these capital
providers with the intention of improving the return on capital for these
investors.
The concept of offering private capital participations on the Helios Capacity
Portfolio was evolved by setting up ten new LLVs to commence trading for the
2024 year of account with an allocation of the Helios Capacity Portfolio that
was initially funded by Helios.
These new LLVs were then offered for sale by Argenta Private Capital and all
these LLVs have either been sold or are under offer and the Helios initial
funding will be refunded. Helios intention is to retain an LLV with capacity
of £4.7m so that Helios staff can commit funds at Lloyd's by way of a
deferred bonus scheme to participate on the Helios MAPA.
Issue of A-rated - $75m Unsecured Loan Notes
In December 2023, the Company issued $75m of Unsecured Loan Notes with a
rating of A- by KBRA. This loan has a fixed coupon on 9.5% and is repayable
after seven years in December 2030. The debt was raised to replace an existing
£15m bank facility that was used to assist in the financing of funds at
Lloyd's, to fund future underwriting capital requirements and provide general
liquidity in the business.
The Notes have a covenant whereby if debt exceeds more than 40% gross assets,
then a proportion of the free cash flow has to be utilised to pay down the
debt so that the gross asset test is no longer exceeded. See Summary Financial
Information for further analysis.
Risk management
At Helios, the effective management of risk is central to our business. We are
committed to maintaining a robust risk management framework, which includes
comprehensive strategies, policies and procedures to manage risk across all
levels of our operations.
Our team has regular communication with syndicates to understand how they
manage a wide range of risks, including underwriting, operational, market,
credit and liquidity risks. We also understand the importance of stress
testing and scenario analysis in managing risk. We regularly conduct these
exercises to assess the resilience of the Helios Capacity Portfolio under
different conditions. The results of these analyses are used to inform our
strategic decision making and capital allocation processes.
Designing and implementing an effective risk management framework is a
continuous process, and we are committed to its ongoing development to ensure
that it remains fit for purpose as our business evolves. We are confident that
our approach to risk management positions us well to mitigate potential risks
and capitalise on opportunities as they arise.
Strategic risk
We construct the portfolio for each year while considering a number of key
strategic risks. First and foremost, we review performance to date and the
strategic direction across the portfolio for future underwriting. Against this
we assess in light of our own view of risk, market conditions, pricing
adequacy, vulnerability to shock and attritional loss while managing the
capital to achieve a diversified, volatility managed and optimised portfolio
The maintenance and construction of a portfolio of Lloyd's syndicates remains
the strategic objective of the Group. Participations can vary as will the mix
in order to optimise the portfolio. The 2023 and 2024 portfolios were built
against a backdrop of exceptional market conditions.
Liquidity risk
Liquidity risk is the risk that a company may not be able to meet short-term
financial demands. Liquidity risk for an insurance capital provider like
Helios can arise from numerous factors. Large claim payouts following a
significant loss event which requires further funding of funds at Lloyd's to
cover expected syndicate losses can strain cash reserves. Helios financial
demands might necessitate asset liquidation, potentially leading to losses in
unfavourable market conditions. Large losses could cause breaches of loan
covenants, triggering further liquidity pressure. An inability to promptly pay
out claims could harm reputation and potentially lead to future business
losses.
To mitigate liquidity strains, Helios has arranged short-term financing of
£35m for 2024 (2023: £24m) as part of the stop loss reinsurance for its 69%
(2023 YOA: 80%) share of the portfolio. The facility can be drawn down if the
solvency loss for the 2024 year of account exceeds 7.5% of capacity at any
quarter end. In addition, Helios has a committed bank facility of £10m to
assist in any short-term financing requirements.
To mitigate these risks, Helios maintains a robust liquidity risk management
framework, which includes maintaining sufficient cash reserves, diversifying
our portfolio, implementing a comprehensive reinsurance programme, regularly
stress testing for large loss scenarios and maintaining strong relationships
with reinsurers, lenders and investors.
Underwriting risk
Underwriting risk can arise from inaccurate risk assessment by our syndicates
leading to insufficient premiums, more frequent or severe claims than
expected, inadequate pricing due to outdated models or market pressure and
changes in claim trends post-underwriting due to legal, societal or economic
shifts. These can cause a mismatch between premiums charged and claims made.
When assessing a syndicate, it is essential for us that they have effective
risk management in place to mitigate underwriting risks. This includes setting
appropriate underwriting guidelines, using updated and accurate pricing models
and diversifying the risks underwritten to avoid concentration in high-risk
areas. Furthermore, syndicates will need to prove to us that prudent
underwriting practices and rigorous claims management are in place to control
underwriting risk. Helios will also need to be satisfied that adequate
reinsurance has been arranged by the syndicates.
At Helios, we are proactive in monitoring the rating environment for each
class of our business. We understand that in the dynamic market conditions of
today, pricing adequacy can vary significantly across different business
classes. Therefore, we use advanced analytical tools and techniques to keep a
close eye on the pricing environment across all our business classes. If we
identify a class with low pricing adequacy, we are quick to respond, reducing
our participation in that class to manage risk and protect our portfolio. This
approach allows us to ensure that we maintain a healthy balance in our
portfolio, optimising our returns while managing risk effectively. 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 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. The results of this remediation work by
Lloyd's is starting to be reflected in the results announced by the syndicates
supported.
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. There is acceptance that
catastrophe exposures were generally under-priced and hence the syndicate
managers have been reducing their catastrophe exposures. The broad reinsurance
market correction is a fundamental shift in risk versus return metrics
presenting opportunities to pivot the portfolio in the future.
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
the 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 with an indemnity of £35m
(2022 YOA: £24m) 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 7.5% of capacity.
The impact on the net asset value of Helios from the disclosed large loss
scenarios are as follows:
Expected loss Impact on
as % of capacity net asset value
2024 2023 2024 2023
AEP 1 in 30 - whole world natural catastrophe 16.2% 14.3% 15.6% 11.4%
AEP 1 in 30 US/GOM windstorm 10.5% 10.2% 15.6% 11.4%
Terrorism 7.6% 8.4% 15.6% 11.4%
Cyber - cloud cascade 8.2% 6.8% 15.6% 11.4%
The assessment of the impact of the specified events is net of all applicable
quota share, stop loss reinsurance contracts and corporation tax but before
the likely profits to be generated from the balance of the portfolio in any
year. Notwithstanding the reduction in the natural catastrophe exposure in the
2023 portfolio, the impact on net assets has increased as the retained
capacity has increased. The similarity on the impact on the net assets from a
loss arises as the expected loss will result in only a net retention from the
stop loss of 7.5% of capacity.
The graph below shows the impact of the largest losses over the past five
years on the Helios portfolio. It gives an indication of the size of insurance
market-wide insured loss against the Helios portfolio aggregate losses
incurred by supported syndicates at the time of the loss (shown as a
percentage of capacity). Despite these major losses, Helios' return on
capacity remains positive for each year in the given five-year period, ranging
from 3% in 2019 to 12% in 2023*, demonstrating the strength and resilience of
the portfolio. The coronavirus loss incurred a loss of 7.4% of 2022 capacity,
the largest impact recently.
Largest major losses 2019-2023
Industry insured loss ($bn) Loss to Helios as a % of capacity
* 2022 and 2023 positive returns are based on the latest syndicate
forecasts.
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 are as follows:
Underwriting capital on underwriting year 2024 2023
£m £m
Third party capital 31.3 27.8
Excess of loss Funds at Lloyd's 25.8 41.2
Helios' own funds 69.9 60.4
Solvency credits 47.0 0.7
Total 173.7 129.1
Capacity as at 507.1 310.8
Economic capital assessment (ECA) 172 127.8
Capital ratio 35% 41%
The capital ratio has benefited from the growth of the portfolio and this
reduction in the capital ratio to 35% is expected to reverse over the next few
years. The increase in the solvency credits to £47m reflects the recognised
but undistributed syndicate profits as at the end of the year that is
currently being used as Funds at Lloyd's to support underwriting requirements.
If solvency credits are utilised to support current underwriting capital
requirements, any solvency deficits arising from losses in the current year
would have to be funded by Helios.
Environmental, social and governance ("ESG") responsibility
Strategy
Helios offers investors exposure to a diversified portfolio of syndicates at
Lloyd's of London. As a consequence, Helios is inexorably aligned to the
approach Lloyd's takes with regard to the society as a whole in addition to
those adopted by the various managing agencies.
Helios currently does not underwrite any risk. We participate in risks written
by the syndicates operating in the market, providing private capital support.
However, we recognise our responsibility to all our stakeholders and the wider
communities in which we do business, and we choose to hold ourselves to high
standards of humanity, respect, honesty, individuality and empowerment.
The overarching aim is to generate lasting value through the adoption of
sustainable approaches that balance environmental stewardship, social
responsibility and sound governance, alongside our remit to achieve sound
financial performance.
As a key principle, we aim to take a balanced and reasonable approach to
assessing ESG risks as the legal and regulatory frameworks evolve globally.
Complying with its regulatory obligations in the UK is of utmost importance,
while also recognising its fiduciary duty to its investors to provide
investment management services within this evolving framework.
To assist us on this roadmap, we are now a signatory to the UN Principles for
Responsible Investment and we strive to adopt the six key principles for
responsible investment. Furthermore, we have identified the following tenets
to help realise our long-term ESG strategy.
Governance practices
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.
Further information is provided on page 21 in this report and accounts.
Additionally, for portfolio management we operate a "three lines of defence"
risk governance model.
First line of defence:
The first line of defence includes the portfolio management team involved in
business as usual ("BAU") monitoring of risks on the portfolio, data analysis
and assessment of new opportunities. This is led by our Head of Portfolio
Strategy.
Key considerations are given to human rights related breaches, any regulatory
fines and compliance to regulatory requirements when selecting
syndicates/partners for our portfolio.
Environmental, social and governance ("ESG") responsibility
Second line of defence:
A working group reviews the information received, any early warning indicators
and impact on our portfolio. This group is chaired by the Head of Portfolio
Strategy and includes our Head of Distribution and other stakeholders in the
business. This group provides oversight and challenge to the first line,
reviews overall impact on the portfolio and reviews reputational credentials
of the new partners.
Third line of defence:
An independent Committee of key Executives chaired by the CEO reviews the
recommendations of the working group before a final decision is taken on the
opportunities.
Social responsibility initiatives
• Community engagement activities and philanthropic endeavours form
a key area of focus for Helios. A new charity policy was developed in 2023 and
we have sponsored several projects that ranged from supporting local
communities to collaborating projects aimed at addressing societal and local
issues.
• Diversity and inclusion initiatives are essential for fostering an
environment where everyone feels valued, respected and empowered. This is a
key metric for our success. While Helios' workforce is small and growing, we
aim to organically promote and provide equitable opportunities for growth and
success to not only employees but also external partners, where possible.
Environmental initiatives and risk management
In the current model, Helios supports the Lloyd's market i.e. syndicates via
third party capital. We have a share of the entire portfolio of syndicates we
participate in and do not have the ability to select specific risks within a
portfolio. The portfolio is a mix of syndicates - including both
well-established top quartile performers and new entrants.
While we do not directly and exclusively participate in thermal coal-fired
plants, thermal coal mines, oil sands or Arctic energy exploration, we may
have indirect exposure through participation in syndicates operating in the
Lloyd's market.
We expect that every syndicate in the market is aligned with the expectations
set by Lloyd's on ESG. We understand this is a transitional process but, where
they fail to meet minimum standards, we will review our involvement in those
operations.
To summarise, as an organisation that is evolving, we recognise responsibility
to our stakeholders and the wider community and are committed to taking a
balanced and sustainable approach to developing and implementing our ESG
strategy that is aligned with the regulatory expectations in the jurisdictions
we operate in.
Catastrophe risk scenarios ("CRS") - net of syndicate reinsurance (%)
AEP 1 in 30 - whole world natural catastrophes
2024 16.2
2023 14.3
AEP 1 in 30 - US/GOM windstorm
2024 10.5
2023 10.2
RDS terrorism - Rockefeller Center
2024 7.8
2023 8.4
Cyber - cloud cascade
2024 8.3
2023 6.8
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 financial information provided by each syndicate.
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
2023 2022
£'000 £'000
Underwriting profit 31,560 116
Other income:
- fees from reinsurers 1,408 562
- corporate reinsurance policies - 33
- goodwill on bargain purchase - -
Amortisation of Goodwill 619 1,216
- investment income 2,103 647
Total other income 4,130 2,458
Costs:
- pre-acquisition (494) (46)
- stop loss costs (4,138) (1,261)
- operating costs (8,353) (5,220)
Total costs (12,985) (6,527)
Operating profit before impairments of goodwill and capacity 22,704 (3,953)
Tax (6,334) 1,852
Revaluation of syndicate capacity 17,987 2,670
Income tax relating to the components of other comprehensive income (4,497) (668)
Comprehensive income/loss 29,861 (99)
Year to 31 December 2023
Underwriting year Helios Portfolio Helios
retained mid-point profits
capacity at forecasts £'000
31 December
2023
£m
2021 102.3 6.8% 6,831
2022 180.9 8.1% 18,949
2023 244.5 12% 5,780
31,560
Year to 31 December 2022
Underwriting year Helios Portfolio Helios
retained mid-point profits
capacity at forecasts £'000
31 December
2022
£m
2020 72.0 3.1% 2,647
2021 99.3 2.4% 4,546
2022 177.6 5.8% (7,077)
116
Summary balance sheet (excluding assets and liabilities held by syndicates)
See Note 28 for further information
2023 2022
£'000 £'000
Intangible assets 82,117 59,375
Funds at Lloyd's 70,754 73,771
Other cash 40,913 10,254
Other assets 4,876 6,909
Total assets 198,660 150,309
Deferred tax 22,277 11,228
Borrowings 59,055 15,000
Other liabilities 12,081 3,839
Total liabilities 93,413 30,067
Total syndicate equity 34,854 (5,123)
Total equity 140,101 115,119
Cash flow
Year to 31 December
Analysis of free working capital 2023 2022
£'000 £'000
Opening Balance 10,254 16,178
Distribution of profits (net of tax retentions & QS Payments ) 2,530 2,736
Transfers from Funds at Lloyd's 9,984 4,772
Other income 2,727 280
Sale / Purchase of capacity (500) 5,051
Operating costs (inc Hampden / Nomina fees) (7,716) (4,099)
Reinsurance costs (3,520) (3,377)
Tax (236) (342)
Return of capital to shareholders (5,181) (2,034)
Transfers to Funds at Lloyd's (4,331) (31,578)
Free cash Flow (6,243) (16,170)
Senior debt principal 59,055 15,000
Repayment of Borrowings (15,000) -
Proceeds from issue of shares - 12,421
Acquisitions (7,153) (4,754)
Net cash flow in the year 30,659 (5,924)
Balance carried forward 40,913 10,254
Asset value calculation 2023 2022
Net Assets 140,101 117,178
Add Total Debt 59,055 15,000
Add Deferred Tax on Intangible Asset 20,136 14,139
Asset Value 219,293 146,317
Debt ratio 27% 10%
Summary Financial Information
Year to 31 December
Net tangible assets 2023 2022
£'000 £'000
Net assets less intangible assets 57,665 55,152
Fair value of capacity ("WAV") 82,436 59,967
140,100 115,119
Shares in issue - on the market (Note 21) 74,186 76,218
Shares in issue - total of on the market and JSOP shares (Note 21) 75,286 77,318
Net tangible asset value per share £ - on the market 1.89 1.51
Net tangible asset value per share £ - on the market and JSOP shares 1.86 1.49
Combined ratio summary of Helios' portfolio (see Note 6) 2023 2022
Net premiums earned 219,440 156,606
Net insurance claims (107,909) (96,796)
Operating expenses included in underwriting result (79,405) (54,210)
Insurance result 32,126 5,600
Combined ratio 85.4% 96.4%
Consolidated statement of comprehensive income - Year ended 31 December 2023
Note Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Technical account
Gross premium written 6 307,770 244,615
Reinsurance premium ceded 6 (79,531) (56,977)
Net premium written 6 228,239 187,638
Change in unearned gross premium provision 7 (30,420) (45,723)
Change in unearned reinsurance premium provision 7 3,161 8,478
Net change in unearned premium and reinsurance provision 7 (27,259) (37,245)
Net earned premium 5,6 200,980 150,393
Net investment income 8 11,073 (3,442)
Other underwriting income 888 1,127
Revenue 212,941 148,078
Gross claims paid (92,697) (66,652)
Reinsurers' share of gross claims paid 21,722 15,832
Claims paid, net of reinsurance (70,975) (50,820)
Change in provision for gross claims 7 (33,429) (63,339)
Reinsurers' share of change in provision for gross claims 7 (2,000) 18,320
Net change in provision for claims 7 (35,429) (45,019)
Net insurance claims incurred and loss adjustment expenses 6 (106,404) (95,839)
Expenses incurred in insurance activities (79,236) (53,828)
Total technical account 9 27,301 (1,589)
Non-technical account
Net investment income 8 1,986 666
Other income (63) (399)
Other operating expenses (7,138) (3,847)
Total non-technical account 9 (5,215) (3,580)
Operating profit before impairments of goodwill and capacity 6 22,086 (5,169)
Amortisation of goodwill 619 1,216
Profit/(loss) before tax 22,705 (3,953)
Income tax (charge)/credit 10 (6,334) 1,852
Profit/(loss) for the year 16,371 (2,101)
Other comprehensive income
Revaluation of syndicate capacity 17,987 2,670
Deferred tax relating to the components of other comprehensive income (4,497) (668)
Other comprehensive income for the year, net of tax 13,490 2,002
Total comprehensive income/(loss) for the year 29,861 (99)
Profit/(loss) for the year attributable to owners of the Parent 16,371 (2,101)
Total comprehensive income/(loss) for the year attributable to owners of the 29,861 (99)
Parent
Profit/(loss) per share attributable to owners of the Parent
Basic 11 21.56p (3.08)p
Diluted 11 20.85p (3.08)p
The profit/(loss) attributable to owners of the Parent, the total
comprehensive income/(loss) 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 2023
Company number: 05892671
Note 31 December 31 December
2023 2022
£'000 £'000
Assets
Intangible assets:
- Capacity 13 82,436 59,966
- Positive goodwill 13 348 482
- Negative goodwill 13 (667) (1,073)
Financial assets at fair value through profit or loss 15 288,198 226,013
Reinsurance assets:
- reinsurers' share of claims outstanding 7 83,008 80,726
- reinsurers' share of unearned premium 7 23,962 21,333
Other receivables, including insurance and reinsurance receivables 16 172,932 147,676
Cash and cash equivalents 66,812 25,300
Prepayments and accrued income 7,281 5,076
Deferred acquisition costs 17 32,291 24,991
Total assets 756,601 590,490
Liabilities
Equity
Equity attributable to owners of the Parent:
Share capital 21 7,795 7,774
Share premium 21 98,596 98,268
Revaluation reserve 24,840 11,350
Other reserves - treasury shares (JSOP and LTIP) 190 (110)
Retained earnings 8,680 (2,163)
Total equity 140,101 115,119
Technical provisions
- claims outstanding 7 309,188 272,015
- unearned premium 7 143,610 114,663
Deferred income tax liabilities 18 22,335 11,312
Borrowings 19 59,055 15,000
Other payables, including insurance and reinsurance payables 20 70,594 54,893
Accruals and deferred income 11,718 7,488
Total liabilities 616,500 475,371
Total liabilities and equity 756,601 590,490
The Financial Statements were approved and authorised for issue by the Board
of Directors on 29 May 2024, and were signed on its behalf by:
Martin Reith
Chief Executive Officer
29 May 2024
The notes are an integral part of these Financial Statements.
Parent Company statement of financial position - At 31 December 2023
Company number: 05892671
Note 31 December 31 December
2023 2022
£'000 £'000
Assets
Investments in subsidiaries 14 80,005 65,546
Financial assets at fair value through profit or loss 15 898 731
Other receivables 16 74,120 74,783
Cash and cash equivalents 40,596 9,348
Total assets 195,619 150,408
Liabilities
Borrowings 19 59,055 15,000
Other payables 20 8,847 5,130
Total liabilities 67,902 20,130
Equity
Equity attributable to owners of the Parent:
Share capital 21 7,795 7,774
Share premium 21 98,596 98,268
Other reserves 300 -
106,691 106,042
Retained earnings:
At 1 January 24,236 27,112
Profit/(loss) for the year 2,318 (842)
Other changes in retained earnings (5,528) (2,034)
At 31 December 21,026 24,236
Total equity 127,717 130,278
Total liabilities and equity 195,619 150,408
The Financial Statements were approved and authorised for issue by the Board
of Directors on 29 May 2024, and were signed on its behalf by:
Martin Reith
Chief Executive Officer
29 May 2024
The notes are an integral part of these Financial Statements.
Consolidated statement of changes in equity - Year ended 31 December 2023
Attributable to owners of the Parent
Note Share Share Revaluation Other Retained Total
capital premium reserve reserves earnings equity
£'000 £'000 (JSOP) £'000 £'000
£'000
At 1 January 2022 6,931 86,330 9,348 (110) 1,972 104,471
Total comprehensive income for the year:
Loss for the year - - - - (2,101) (2,101)
Other comprehensive income, net of tax - - 2,002 - - 2,002
Total comprehensive income for the year - - 2,002 - (2,101) (99)
Transactions with owners:
Dividends paid 12 - - - - (2,034) (2,034)
Company buyback of ordinary shares 21, 23 - - - - - -
Share issue, net of transaction cost 21 843 11,938 - - - 12,781
Other comprehensive income, net of tax - - - - - -
Total transactions with owners 843 11,938 - - (2,034) 10,747
At 31 December 2022 7,774 98,268 11,350 (110) (2,163) 115,119
At 1 January 2023 7,774 98,268 11,350 (110) (2,163) 115,119
Total comprehensive income for the year:
Loss for the year - - - - 16,371 16,371
Other comprehensive income, net of tax - - 13,490 - - 13,490
Total comprehensive income for the year - - 13,490 - 16,371 29,861
Transactions with owners:
Dividends paid 12 - - - - (2,319) (2,319)
Company buyback of ordinary shares 21, 23 - - - - (3,209) (3,209)
Share issue, net of transaction cost 21 21 328 - 300 - 649
Other comprehensive income, net of tax - - - - - -
Total transactions with owners 21 328 - 300 (5,528) (4,879)
At 31 December 2023 7,795 98,596 24,840 190 8,680 140,101
The notes are an integral part of these Financial Statements.
Parent Company statement of changes in equity - Year ended 31 December 2023
Note Share Share Other reserves (JSOP) Retained Total
capital premium
£'000 earnings equity
£'000 £'000 £'000 £'000
At 1 January 2022 6,931 86,330 - 27,112 120,373
Total comprehensive income for the year:
Profit/(loss) for the year - - - (842) (842)
Other comprehensive income, net of tax - - - - -
Total comprehensive income/(loss) for the year - - - (842) (842)
Transactions with owners:
Dividends paid 12 - - - (2,034) (2,034)
Company buyback of ordinary shares 21, 23 - - - - -
Share issue, net of transaction costs 843 11,938 - - 12,781
Total transactions with owners 843 11,938 - (2,034) 10,747
At 31 December 2022 7,774 98,268 - 24,236 130,278
At 1 January 2023 7,774 98,268 - 24,236 130,278
Total comprehensive income for the year:
Profit for the year - - - 2,318 2,318
Other comprehensive income, net of tax - - - - -
Total comprehensive income for the year - - - 2,318 2,318
Transactions with owners: - - - (3,209) (3,209)
Dividends paid 12 - - - (2,319) (2,319)
Company buyback of ordinary shares 21, 23 - - - - -
Share issue, net of transaction costs 21 328 300 - 649
Total transactions with owners 21 328 300 5,528 (4,879)
At 31 December 2023 7,795 98,596 300 21,026 127,717
The notes are an integral part of these Financial Statements.
Consolidated statement of cash flows - Year ended 31 December 2023
Note Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash flows from operating activities
Profit/(loss) before tax 22,705 (3,953)
Adjustments for:
- interest received 8 (2,036) (520)
- Interest paid on borrowings 1,622 797
- investment income 8 (6,026) (2,350)
- amortisation of goodwill 22 (619) (1,216)
- profit on sale of intangible assets 30 (262)
Changes in working capital:
- change in fair value of financial assets held at fair value through profit 8 (5,570) 4,490
or loss
- increase in financial assets at fair value through profit or loss (54,799) (66,153)
- decrease in other receivables (18,862) (65,566)
- increase in other payables 16,730 15,600
- net increase in technical provisions 50,330 92,262
Cash generated by/(used in) in operations 3,505 (26,871)
Income tax paid (602) (166)
Net cash generated/(used in) operating activities 2,903 (27,037)
Cash flows from investing activities
Interest received 8 2,036 520
Investment income 8 6,026 2,350
Purchase of intangible assets 13 (500) (696)
Proceeds from disposal of intangible assets 34 5,373
Acquisition of subsidiaries, net of cash acquired (6,540) (4,784)
Net cash from investing activities 1,056 2,763
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 649 12,781
Buyback of ordinary share capital (3,209) -
Proceeds from borrowings 19 59,055 15,000
Repayment of borrowings 19 (15,000) -
Interest paid on borrowings (1,622) (797
Dividends paid to owners of the Parent 12 (2,319) (2,034)
Net cash from financing activities 37,554 24,950
Net increase in cash and cash equivalents 41,513 676
Cash and cash equivalents at beginning of year 25,299 24,624
Cash and cash equivalents at end of year 66,812 25,300
Analysis of changes in net debt
At 1 January 2023 Cash flows Acquired with Subsidiaries At 31 December
2023
£000 £000 £000 £000
Cash at bank and in hand 25,299 40,808 705 66,812
Cash and cash equivalents 25,299 40,808 705 66,812
Revolving Loan Facility (15,000) 15,000 - -
Unsecured debt - (59,055) - (59,055)
Total 10,299 (3,247) 705 7,757
Cash held within the syndicates' accounts is £25,899 (2022: £15,046,000) of
the total cash and cash equivalents held at the year end of £61,078,000
(2022: £25,300,000). The cash held within the syndicates' accounts is not
available to the Group to meet its day-to-day working capital requirements.
Cash and cash equivalents comprise cash at bank and in hand.
The notes are an integral part of these Financial Statements.
Parent Company statement of cash flows - Year ended 31 December 2023
Note Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Cash flows from operating activities
Profit/(loss) before tax 2,318 (842)
Adjustments for:
- investment income 65 108
- dividends received - -
- impairment of investment in subsidiaries 14 (8,063) 7,218
Changes in working capital:
- change in fair value of financial assets held at fair value through profit - -
or loss
- increase in financial assets at fair value through profit or loss (167) (446)
- (decrease) in other receivables (5,184) (241)
- increase in other payables 3,741 918
Net cash (used in)/from operating activities (7,290) 6,715
Cash flows from investing activities
Investment income (65) (108)
Dividends received - -
Acquisition of subsidiaries 14, 22 (7,268) (5,352)
Amounts owed by subsidiaries 25 6,695 (31,748)
Net cash used in investing activities (638) (37,208)
Cash flows from financing activities
Net proceeds from the issue of ordinary share capital 649 12,781
Payment for Company buyback of shares 24 (3,209) -
Proceeds from borrowings 19 59,055 15,000
Repayment of borrowings 19 (15,000) -
Dividends paid to owners of the Parent 12 (2,319) (2,034)
Net cash from financing activities 39,176 25,747
Net increase/(decrease) in cash and cash equivalents 31,248 (4,746)
Cash and cash equivalents at beginning of year 9,348 14,094
Cash and cash equivalents at end of year 40,596 9,348
Analysis of changes in net debt
At 1 January 2023 Cash flows Acquired with Subsidiaries At 31 December
2023
£000 £000 £000 £000
Cash at bank and in hand 9,347 32,171 (923) 40,596
Cash and cash equivalents 9,347 32,171 (923) 40,596
Revolving Loan Facility (15,000) 15,000 - -
Unsecured debt - (59,055) - (59,055)
Total (5,653) (11,884) (923) (18,459)
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 2023
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 1st Floor, 33 Cornhill, London, United Kingdom EC3V 3ND. These Financial
Statements comprise the Company and its subsidiaries (together referred to as
the "Group"). The Group participates in insurance business as an underwriting
member at Lloyd's through its subsidiary undertakings.
2. Significant accounting policies
The Financial Statements have been prepared under the historical cost
convention as modified by the revaluation of the financial assets at fair
value through the statement of comprehensive income.
The 31 December 2022 Financial Statements were prepared in accordance
International Financial Reporting Standards (IFRSs). The 31 December 2023
Financial Statements have been prepared in accordance with United Kingdom
Accounting Standards (UK GAAP), including FRS 102 "The Financial Reporting
Standard applicable in the UK and Republic of Ireland" and FRS 103 "Insurance
Contracts".
The reason for this change in reporting framework is that it is not possible
for the Directors to obtain financial information in respect of the underlying
syndicate participations that would be required to comply with IFRS 17
"Insurance Contracts" which is effective under IFRS for accounting periods
beginning on or after 1 January 2023 (see note 29).
The same accounting policies, presentation and methods of computation are
followed in these Condensed Consolidated Interim Financial Statements as were
applied in the preparation of the Group Financial Statements for the year
ended 31 December 2022 except the following as a result of the conversion from
IFRS to UK GAAP:
• positive goodwill which is taken to the consolidated statement of
financial position (CSOFP) is now amortised over the its estimated useful life
of three years (see Note 29); and
• goodwill on bargain purchases which was taken straight to the
consolidated statement of comprehensive income (CSOCI) under IFRS is now
capitalised and taken the CSOFP and amortised over its estimated useful life
of three years (see Note 29).
Basis of preparation
These Financial Statements have been prepared in accordance with United
Kingdom Accounting Standards ("UK GAAP"), including FRS 102 "The Financial
Reporting Standard applicable in the UK and Republic of Ireland" and FRS 103
"Insurance Contracts" and the Companies Act 2006 and Schedule 3 of the Large
and Medium sized Companies and Groups (Accounts and Reports) Regulations,
relating to insurance.
The 31 December 2022 and these Financial Statements were prepared under
International Financial Reporting Standards (IFRSs) and the prior period
figures have been amended to reflect the changes in the reporting framework
(see note 29).
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 UK GAAP 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 £140,101,000 and £127,717,000 respectively.
The Company's subsidiaries participate as underwriting members at Lloyd's on
the 2021, 2022 and 2023 years of account, as well as any prior run-off years,
and they have continued this participation since the year end on the 2024 year
of account. This underwriting is supported by funds at Lloyd's totalling
£173,700,000 (2022: £99,840,000), letters of credit provided through the
Group's reinsurance agreements totalling £31,576,000 (2022: £27,818,000) and
solvency credits issued by Lloyd's totalling £46,988,000 (2022: £1,331,000).
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.
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 2023 under UK GAAP.
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 £2,318,000 (2022: loss of £842,000).
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 amortised on a straight line basis
over three years. Insurance liabilities are not discounted on acquisition when
calculating their fair value, as these liabilities will likely all crystallise
within three years due to the accounting framework Lloyd's syndicates 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 Martin Reith.
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 statement of comprehensive income.
Certain supported syndicates have non-sterling functional currencies and any
exchange movement that they would have been reflected in other comprehensive
income. As a result, 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, 47% of the 2021
underwriting year, an average of 26% of the 2022 underwriting year and an
average of 23% of the 2023 underwriting year of account insurance exposure is
ceded to the reinsurers. Amounts payable to the reinsurers are included within
"reinsurance premium ceded" in the consolidated statement of comprehensive
income of the year and amounts receivable from the reinsurers are included
within "reinsurers' share of gross claims paid" in the consolidated statement
of comprehensive income 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)
Expenses incurred in insurance activities 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
With effect from 31 December 2020, the Group 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 statement of other comprehensive income net of any tax effect.
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 Group'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 16 August 2021, the Company issued and allotted 600,000 new ordinary shares
of £0.10 each ("ordinary shares"). The new ordinary shares have been issued
at a subscription price of 155p per ordinary share, being the closing price of
an ordinary share on 16 August 2021, 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 JTC Employee Solutions 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 145p
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 the
amount initially provided by the participating Director plus any growth in the
market value of the jointly owned ordinary shares above a target share price
of 174.8p (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 relating to
growth in net tangible asset value per share measured over the three calendar
years from the net tangible asset per share disclosed as at 31 December 2021
of 151p.
The percentage of jointly owned shares that vest shall be dependent on the
average growth in net tangible asset value per share during the three
financial years ending 31 December 2023. The vesting percentage shall be
determined on the average growth in net tangible asset value per share. If the
average growth in net tangible asset value does not exceed 5%, then no awards
vest, and if the average growth in net tangible asset value exceeds 20% or
above, then 100% of the awards vest.
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.
Long Term Incentive Plan ("LTIP")
In 2022, the Company operated the Helios Underwriting plc Long Term Incentive
Plan ("LTIP"). On 16 December 2022, the Company granted 571,427 (see note 23)
awards under the LTIP in the form of a nil-cost options. Under the same plan,
the company granted a further 491,227 on 30 May 2023.
The awards' performance conditions set threshold (30%) to stretch (60%)
targets in respect of the Company's total shareholder return ("TSR") over the
three year period following the grant of the awards. No portion of the awards
shall vest unless the Company's TSR at the end of the performance period
reaches the threshold target, for which one quarter of the awards would vest,
rising on a straight line basis to full vesting of the awards for the
Company's TSR over the performance period being equal to the stretch target or
better. In the case of Executive Directors, any vested shares will be subject
to a two-year holding period.
On 5 April 2023 a further 875,000 awards were made under the company's LTIP,
with the terms set out below.
The awards' performance conditions set threshold (50%) to stretch (100%)
targets in respect of the Company's total shareholder return ("TSR") over the
five year period following the grant of the awards. No portion of the awards
shall vest unless the Company's TSR at the end of the performance period
reaches the threshold target, for which one quarter of the awards would vest,
rising on a straight line basis to full vesting of the awards for the
Company's TSR over the performance period being equal to the stretch target or
better. In the case of Executive Directors, any vested shares will be subject
to a two-year holding period.
The awards for the Executive Directors totalled 1,937,656. The vesting period
for the awards is three or five years subject to continued service and the
achievement of specific performance conditions. If the options remain
unexercised after a period of ten years from the date of grant, the options
expire.
The fair value of the LTIP awards is calculated using a Monte Carlo
(Stochastic) model taking into account the terms and conditions of the awards
granted.
No options were exercised during the year.
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 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 Group 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 Group 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 syndicate's 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 2020 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:
2023 No stated 0-1 year 1-3 years 3-5 years >5 years
maturity £'000 £'000 £'000 £'000 Total
£'000 £'000
Claims outstanding - 108,318 106,266 48,169 46,435 309,188
2022 No stated 0-1 year 1-3 years 3-5 years >5 years Total
maturity £'000 £'000 £'000 £'000 £'000
£'000
Claims outstanding - 98,332 95,723 39,265 38,695 272,015
(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:
2023 AAA AA A BBB or lower Not rated Total
£'000 £'000 £'000 £'000 £'000 £'000
Financial investments 54,386 56,026 71,762 25,079 9,885 217,138
Deposits with ceding undertakings - - 261 - 45 306
Reinsurers' share of claims outstanding 1,933 32,553 44,102 53 4,314 82,955
Reinsurance debtors 363 1,245 3,084 2 341 5,035
Cash at bank and in hand 988 111 24,615 1 184 25,899
57,670 89,935 143,824 25,135 14,769 331,333
2022 AAA AA A BBB or lower Not rated Total
£'000 £'000 £'000 £'000 £'000 £'000
Financial investments 38,125 42,837 45,204 17,617 8,126 151,909
Deposits with ceding undertakings - - 300 - 33 333
Reinsurers' share of claims outstanding 3,478 25,787 47,259 171 3,989 80,684
Reinsurance debtors 756 674 1,957 19 226 3,632
Cash at bank and in hand 1,374 419 13,148 1 104 15,046
43,733 69,717 107,868 17,808 12,478 251,603
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
2023 Neither Less than Between Greater Impaired Total
past due 6 months 6 months than 1 year £'000 £'000
nor impaired £'000 and 1 year £'000
£'000 £'000
Financial investments 217,138 - - - - 217,138
Deposits with ceding undertakings 306 - - - - 306
Reinsurers' share of claims outstanding 82,954 12 - - (18) 82,948
Reinsurance debtors 5,036 4,275 212 136 (1) 9,658
Cash at bank and in hand 25,899 - - - - 25,899
Insurance and other debtors 199,880 7,496 1,904 1,195 (17) 210,458
531,213 11,783 2,116 1,331 (36) 546,407
Past due but not impaired
2022 Neither Less than Between Greater Impaired Total
past due 6 months 6 months than 1 year £'000 £'000
nor impaired £'000 and 1 year £'000
£'000 £'000
Financial investments 151,909 - - - - 151,909
Deposits with ceding undertakings 333 - - - - 333
Reinsurers' share of claims outstanding 80,684 - - - (18) 80,666
Reinsurance debtors 3,632 4,162 56 23 - 7,873
Cash at bank and in hand 15,046 - - - - 15,046
Insurance and other debtors 163,948 5,625 1,494 717 (10) 171,774
415,551 9,787 1,550 740 (28) 427,600
(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:
2023 GBP USD EUR CAD Other Total
£'000 £'000 £'000 £'000 £'000 £'000
Total assets 77,449 402,699 19,131 46,009 12,653 557,941
Total liabilities (84,389) (377,445) (20,791) (33,521) (6,941) (523,087)
(Deficiency)/surplus of assets (6,940) 25,254 (1,660) 12,488 5,712 34,854
2022 GBP USD EUR CAD Other Total
£'000 £'000 £'000 £'000 £'000 £'000
Total assets 60,777 317,487 13,921 35,008 12,988 440,181
Total liabilities (68,185) (324,039) (18,413) (27,310) (7,557) (445,504)
(Deficiency)/surplus of assets (7,408) (6,552) (4,492) 7,698 5,631 (5,123)
The impact of a 5% change in exchange rates between GBP and other currencies
would be £2,090,000 on shareholders' funds (2022: £114,000).
(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 2021, 2022 and 2023
years of account.
The Group has strategic collateralised quota share arrangements in place in
respect 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 2023 is £116.5m (2022: £90.9m), 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 (Guernsey based protected
cell managed by HIPCC), the Group's funds at Lloyd's calculation benefits from
an aggregate £31.6m (2022: £27.8m) letter of credit ("LOC") acceptable to
Lloyd's, on behalf of XL Re Limited, Everest Reinsurance Bermuda Limited, 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 on
pages 34 and 35
At 31 December 2023, the corporate member subsidiaries had an agreed Economic
Capital Assessment ("ECA") requirement of £172.0m (2022: £125.7m) to support
their underwriting on the 2023 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
2023, the agreed ECA requirements for the Group were 35% (2022: 43%) of the
capacity for the following year of account
5. Segmental information
Martin Reith 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.
The tables below contain the aggregated technical and non-technical accounts.
Year ended 31 December 2023 Syndicate Investment Other Total
participation management corporate £'000
£'000 £'000 activities
£'000
Net earned premium 212,120 - (11,141) 200,980
Net investment income 11,204 1,855 - 13,059
Other (loss)/income (532) - 1,357 825
Net insurance claims and loss adjustment expenses (106,404) - - (106,404)
Expenses incurred in insurance activities (76,985) - (2,251) (79,236)
Other operating expenses (97) - (7,041) (7,138)
Amortisation of goodwill - - 619 619
Impairment of syndicate capacity (see Note 13) - - - -
Profit before tax 39,307 1,855 (18,457) 22,705
Year ended 31 December 2022 Syndicate Investment Other Total
participation management corporate £'000
£'000 £'000 activities
£'000
Net earned premium 150,393 - - 150,393
Net investment income (3,928) 1,152 - (2,776)
Other income 533 - 195 728
Net insurance claims and loss adjustment expenses (93,876) - (1,963) (95,839)
Expenses incurred in insurance activities (52,507) - (1,321) (53,828)
Other operating expenses (126) - (3,721) (3,847)
Amortisation of goodwill - - 1,216 1,216
Impairment of syndicate capacity (see Note 13) - - - -
Loss before tax 489 1,152 (5,594) (3,953)
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.
Below is an analysis of the Group underwriting by class of business:
Class of business Gross written Gross premiums Gross claims Net operating Reinsurance Total
2023 premiums earned incurred expenses balance £'000
£'000 £'000 £'000 £'000 £'000
Accident and health 4,247 3,801 (1,646) (1,589) (304) 262
Motor - third party liability 5,066 4,620 (3,205) (847) (404) 164
Motor - other classes 18,248 13,795 (8,658) (4,300) (1,461) (624)
Marine, aviation and transport 19,210 17,870 (13,764) (5,806) 697 (1,003)
Fire and other damage to property 87,169 77,541 (29,143) (21,620) (15,069) 11,709
Third party liability 78,291 65,628 (33,477) (20,751) (5,926) 5,474
Credit and suretyship 8,300 7,136 (2,732) (2,326) (1,130) 948
Legal expenses 138 124 (62) (54) (1) 7
Assistance - - - - - -
Miscellaneous 190 131 (107) (84) (2) (62)
Total direct 220,859 190,646 (92,795) (57,377) (23,599) 16,875
Reinsurance inwards 86,911 86,703 (33,331) (21,735) (33,049) (1,412)
Total 307,770 277,349 (126,126) (79,112) (56,648) 15,463
2022 Gross written Gross premiums Gross claims Net operating Reinsurance Total
premiums earned incurred expenses balance £'000
£'000 £'000 £'000 £'000 £'000
Accident and health 3,552 2,871 (1,253) (1,250) (166) 201
Motor - third party liability 4,564 2,222 (1,391) (502) (133) 196
Motor - other classes 8,941 8,097 (5,241) (2,615) 68 309
Marine, aviation and transport 15,677 12,668 (9,183) (4,406) 1,582 661
Fire and other damage to property 64,637 52,689 (29,289) (14,626) (5,373) 3,401
Third party liability 55,307 43,799 (27,586) (13,217) (1,735) 1,261
Credit and suretyship 5,326 4,214 (2,416) (1,255) (148) 395
Legal expenses 120 82 (38) (36) 4 13
Assistance - - - - - -
Miscellaneous (139) (117) (79) (83) (14) (58)
Total direct 158,263 126,759 (76,476) (37,990) (5,915) 6,379
Reinsurance inwards 86,352 72,134 (53,515) (16,737) (8,433) (6,552)
Total 244,615 198,893 (129,991) (54,727) (14,348) (172)
6. Operating (loss)/profit before impairments of goodwill and capacity
The tables below contain the aggregated technical and non-technical accounts:
Underwriting year of account* Pre- Corporate Other Total
acquisition** reinsurance corporate £'000
£'000 £'000 £'000
Year ended 31 December 2023 2021 2022 2023 Sub-total
and prior £'000 £'000 £'000
£'000
Gross premium written 2,009 33,313 276,798 312,120 (4,350) - - 307,770
Reinsurance ceded (1,494) (6,125) (57,624) (65,242) 990 (11,141) (4,138) (79,531)
Net premium written 516 27,188 219,174 246,878 (3,360) (11,141) (4,138) 228,239
Net earned premium 5,799 103,291 110,350 219,440 (3,180) (11,141) (4,138) 200,980
Other income/(loss) 5,188 3,630 1,757 10,575 (202) 1,408 2,103 13,884
Net insurance claims incurred and loss adjustment expenses 2,528 (49,731) (60,706) (107,908) 1,504 - - (106,404)
Operating expenses (3,735) (31,938) (43,732) (79,405) 1,384 - (8,353) (86,374)
Operating profit/(loss) before impairments of goodwill and capacity 9,780 25,252 7,669 42,701 (494) (9,733) (10,388) 22,086
Quota share adjustment (2,949) (6,303) (1,889) (11,141) - 11,141 - -
Operating profit/(loss) before impairments of goodwill and capacity, after 6,831 18,949 5,780 31,560 (494) 1,408 (10,388) 22,086
quota share adjustment
* 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.
Underwriting year of account*
Year ended 31 December 2022 2020 2021 2022 Sub-total Pre- Corporate Other Total
and prior £'000 £'000 £'000 acquisition** reinsurance corporate £'000
£'000 £'000 £'000 £'000
Gross premium written 1,138 15,099 234,712 250,949 (6,334) - - 244,615
Reinsurance ceded 589 (2,994) (54,594) (56,999) 1,283 - (1,261) (56,977)
Net premium written 1,727 12,105 180,118 193,950 (5,051) - (1,261) 187,638
Net earned premium 5,911 56,042 94,653 156,606 (4,952) - (1,261) 150,393
Other (loss)/income (2,496) (1,046) 22 (3,520) 263 562 647 (2,048)
Net insurance claims incurred and loss adjustment expenses 3,804 (30,920) (69,680) (96,796) 2,887 (1,964) 33 (95,839)
Operating expenses (2,523) (17,172) (34,515) (54,210) 1,756 - (5,220) (57,675)
Operating profit/(loss) before impairments of goodwill and capacity 4,696 6,904 (9,520) 2,080 (46) (1,401) (5,802) (5,169)
Quota share adjustment (2,049) (2,358) 2,443 (1,964) - 1,964 - -
Operating profit/(loss) before impairments of goodwill and capacity, after 2,647 4,546 (7,077) 116 (46) 562 (5,801) (5,169)
quota share adjustment
* 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
£'000 £'000 £'000
At 1 January 2022 186,653 53,433 133,220
Increase in reserves arising from acquisition of subsidiary undertakings 10,888 3,177 7,711
Movement of reserves 63,339 18,320 45,019
Other movements 11,135 5,796 5,339
At 31 December 2022 272,015 80,726 191,289
At 1 January 2023 272,015 80,726 191,289
Increase in reserves arising from acquisition of subsidiary undertakings 10,249 2,961 7,288
Movement of reserves 33,429 (2,000) 35,429
Other movements (6,505) 1,321 (7,826)
At 31 December 2023 309,188 83,008 226,180
Included within other movements are the 2020 and prior years' claims reserves
reinsured into the 2021 year of account on which the Group does not
participate and currency exchange differences.
Movement in unearned premium
Gross Reinsurance Net
£'000 £'000 £'000
At 1 January 2022 59,611 10,538 49,073
Increase in reserves arising from acquisition of subsidiary undertakings 2,846 493 2,352
Movement of reserves 45,723 8,478 37,245
Other movements 6,483 1,824 4,660
At 31 December 2022 114,663 21,333 93,330
At 1 January 2023 114,663 21,333 93,330
Increase in reserves arising from acquisition of subsidiary undertakings 4,349 758 3,591
Movement of reserves 30,420 3,161 27,259
Other movements (5,822) (1,290) (4,532)
At 31 December 2023 143,610 23,962 119,648
Included within other movements are the 2019 and prior years' claims reserves
reinsured into the 2020 year of account on which the Group does not
participate and currency exchange differences.
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 2023.
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
£30,919,000 (2022: £27,202,000);
• a 10% increase/decrease in the managing agents' calculation of net
claims reserves will decrease/increase the Group's pre-tax profits by
£22,618,000 (2022: £19,129,000); and
• a 10% increase/decrease in the run-off year net claims reserves
will decrease/increase the Group's pre-tax profits by £65,000 (2022:
£22,000).
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
£m
Underwriting pure year* After After After After After After After After After After Profit
one year two three four five six seven eight nine ten on RITC
years years years years years years years years years received
2014 25 42 43 41 41 41 40 40 40 40 7
2015 23 43 44 42 42 42 41 41 41 6
2016 28 55 56 55 54 54 54 54 4
2017 59 89 92 91 91 90 90 4
2018 49 82 85 83 82 83 4
2019 42 84 82 78 76 4
2020 53 91 93 90 3
2021 60 102 104
2022 96 152
2023 72
Claims development - net
£m
Underwriting pure year* After After After After After After After After After Profit
After two three four five six seven eight nine ten on RITC
one year years years years years years years years years years received
2014 21 37 37 36 35 35 34 34 34 34 5
2015 20 37 37 37 36 35 35 35 35 4
2016 22 43 44 43 42 42 42 42 5
2017 38 58 61 59 59 58 58 3
2018 34 57 59 58 56 56 3
2019 30 60 59 57 56 5
2020 37 64 66 65 1
2021 42 74 75
2022 69 119
2023 60
* Including the new acquisitions during 2023.
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
2023 2022
£'000 £'000
Investment income 6,026 2,350
Realised losses on financial assets at fair value through profit or loss (407) (1,021)
Unrealised profits/(losses) on financial assets at fair value through profit 5,570 (4,490)
or loss
Investment management expenses (166) (134)
Bank interest 2,036 519
Net investment income/(loss) 13,059 (2,776)
Net investment income/(loss) shown above includes both Technical and
Non-Technical investment income/(loss).
9. Operating expenses (excluding goodwill and capacity impairment)
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Expenses incurred in insurance activities:
Acquisition costs 61,964 47,897
Change in deferred acquisition costs (7,038) (10,163)
Administrative expenses 22,903 15,287
Other 1,407 807
79,236 53,828
Other operating expenses:
- exchange differences 181 (644)
- Directors' remuneration 1,938 718
- staff costs 852 196
- acquisition costs in connection with the new subsidiaries acquired in the 276 422
year
- bank charges 40 292
- loan interest and charges 1,721 891
- professional fees 1,611 1,662
- administration and other expenses 357 144
Auditors' remuneration:
- audit of the Parent Company and Group Financial Statements 62 56
- audit of subsidiary company Financial Statements 76 63
- audit related assurance services 24 46
7,138 3,846
Operating expenses 86,374 57,675
The Group has eleven employees other than the Directors of the Company.
Details of the Directors' remuneration are disclosed below:
Directors' remuneration Year ended Year ended
31 December 31 December
2023 2022
£ £
Arthur Manners 490,000 182,000
Edward William Fitzalan-Howard (resigned 19 April 2024) 30,000 30,000
Michael Cunningham (resigned 29 June 2023) 20,000 40,000
Andrew Christie 33,000 33,000
Nigel Hanbury 450,000 208,000
Martin Reith 840,000 200,000
Tom Libassi 25,000 25,000
Michael Wade (appointed 29 June 2023) 50,000 -
Total 1,938,000 718,000
The Deputy Chairman, Nigel Hanbury, the Chief Executive Officer, Martin Reith,
and the Finance Director, Arthur Manners, had a bonus incentive scheme during
2023 in addition to their basic remuneration. The above figures for Nigel
Hanbury, Martin Reith and Arthur Manners include an accrual for the year of
£225,000, 550,000 (of which £100,000 is deferred and 295,000 (of which
£100,000 is deferred) respectively (2022: £48,000 for Nigel Hanbury and
£42,000 Arthur Manners) in respect of this scheme. The deferred bonus will be
used as notional underwriting capital in a proposed staff underwriting
corporate member.
No other Directors derive other benefits, pension contributions or incentives
from the Group. Nigel Hanbury, Martin Reith and Arthurs Manners have share
interests in the Joint Share Ownership Plan and the Long Term Incentive Plan
(see Note 23).
10. Income tax charge
(a) Analysis of tax charge/(credit) in the year
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Current tax:
- current year 84 (84)
- prior year 427 (53)
- foreign tax paid 153 5
Total current tax 664 (132)
Deferred tax:
- current year 4,958 (1,564)
- prior year 712 (156)
Total deferred tax 5,670 (1,720)
Income charge/(credit) credit 6,334 (1,852)
(b) Factors affecting the tax credit for the year
Tax for the year is 25% (2022: 19%), the same as the standard rate of
corporation tax in the UK of 25% (2022: 19%).
The differences are explained below:
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Profit/(loss) before tax 22,705 (5,169)
Tax calculated as loss before tax multiplied by the standard rate of 5,676 (982)
corporation tax in the UK of 25% (2022: 19%)
Tax effects of:
- prior year adjustments (1,038) (209)
- rate change and other adjustments 2,405 (502)
- permanent disallowances (857) (164)
- foreign taxes 153 5
- other 335 -
Tax charge/(credit) for the year 6,334 (1,852)
The results of the Group's participation on the 2021, 2022 and 2023 years of
account and the calendar year movement on 2020 and prior run-offs will not be
assessed for tax until the years ended 2024, 2025 and 2026 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.
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.
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
2023 2022
Profit/(loss) for the year after tax attributable to ordinary equity holders £16,371,000 £(2,101,000)
of the Parent
Basic - weighted average number of ordinary shares* 75,933,065 68,168,599
Diluted - weighted average number of ordinary shares* (includes LTIP and JSOP 78,533,619 69,292,082
- see Note 23)
Basic profit/(loss) per share 21.56p (3.08)p
Diluted profit/(loss) per share** 20.85p (3.08)p
* Used as the denominator in calculating the basic earnings per share,
and diluted earnings per share, respectively.
** Diluted loss per share is not permitted to be reduced from the basic
loss per share.
12. Dividends paid or proposed
A dividend of £2,319,000 was paid during the year (2022: £2,034,000).
A final dividend of 6p is being proposed in respect of the financial year
ended 31 December 2023.
13. Intangible assets
Positive Goodwill Negative Syndicate Total
£'000 Goodwill capacity £'000
£'000 £'000
Cost
At 1 January 2023 553 (3,267) 59,966 57,252
Additions 57 (405) 500 152
Disposals - - (5) (5)
Acquired with subsidiary undertakings - - 3,988 3,988
Revaluation - - 17,987 17,987
At 31 December 2023 610 (3,672) 82,436 79,374
Amortisation
At 1 January 2023 71 (2,194) - (2,123)
Charge for the period 191 (811) - (620)
Disposals - - - -
Acquired with subsidiary undertakings - - - -
At 31 December 2023 262 (3005) - (2,743)
Net Book Value
At 31 December 2022 482 (1,073) 59,966 59,375
At 31 December 2023 348 (667) 82,436 82,117
Note 22 sets out the details of the entities acquired by the Group during the
year, the fair value adjustments and the goodwill arising.
The cost value of the Syndicate Capacity before revaluation is £47,986,000
(2022: £43,503,000).
14. Investments in subsidiaries
31 December 31 December
2023 2022
£'000 £'000
Total 80,005 65,546
During 2023 a reverse impairment charge of £8,063,000 was recognised on the
cost of investments in subsidiaries and included in the Parent income
statement.
In addition, the company acquired four new subsidiaries for a total cash
consideration of £7,244,000 and the issue of 123,457 Ordinary 10p shares for
a total value of £200,000. The company also sold four existing dormant
subsidiaries for a total proceeds of £Nil.
At 31 December 2023 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 and Gould Scottish
Partnership, which is incorporated in Scotland and its registered office is 9
Haymarket Square, Edinburgh, EH3 8RY.
Company or partnership Direct/indirect 2023 2022 Principal activity
interest ownership ownership
Nameco (No. 917) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 346) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Charmac Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
RBC CEES Trustee Limited(ii) Direct 100% 100% Joint Share Ownership Plan
Chapman Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Advantage DCP Limited Direct 100% 100% Lloyd's of London corporate vehicle
Romsey Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Helios UTG Partner Limited(i) Direct 100% 100% Corporate partner
Salviscount LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Inversanda LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Fyshe Underwriting LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Nomina No 505 LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Nomina No 321 LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 409) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1113) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Catbang 926 Limited Direct 100% 100% Lloyd's of London corporate vehicle
Whittle Martin Underwriting Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 408) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No 084 LLP Indirect 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 510) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 544) Limited Direct 100% 100% Lloyd's of London corporate vehicle
N J Hanbury Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1011) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1111) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No 533 LLP Indirect 100% 100% Corporate partner
North Breache Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
G T C Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Hillnameco Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 2012) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1095) Limited Direct 100% 100% Lloyd's of London corporate vehicle
New Filcom Limited Direct 100% 100% Lloyd's of London corporate vehicle
Kemah Lime Street Capital Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1130) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No 070 LLP Indirect 100% 100% Corporate partner
Nameco (No. 389) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No. 469 LLP Indirect 100% 100% Corporate partner
Nomina No. 536 LLP Indirect 100% 100% Corporate partner
Nameco (No. 301) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1232) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Shaw Lodge Limited Direct 100% 100% Lloyd's of London corporate vehicle
Queensberry Underwriting Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No 472 LLP Indirect 100% 100% Corporate partner
Nomina No 110 LLP Indirect 100% 100% Corporate partner
Chanterelle Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Kunduz LLP Indirect 100% 100% Corporate partner
Exalt Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 1110) Limited Direct 100% 100% Lloyd's of London corporate vehicle
Clifton 2011 Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nomina No 378 LLP Indirect 100% 100% Corporate partner
Gould Scottish Limited Partnership Indirect 100% 100% Corporate partner
Harris Family UTG Limited Direct 100% 100% Lloyd's of London corporate vehicle
Whitehouse Underwriting Limited Direct 100% 100% Lloyd's of London corporate vehicle
Risk Capital UTG Limited Direct 100% 100% Lloyd's of London corporate vehicle
Nameco (No. 606) Limited Direct 100% - Lloyd's of London corporate vehicle
Nameco (No. 1208) Limited Direct 100% - Lloyd's of London corporate vehicle
Chorlton Underwriting Limited Direct 100% - Lloyd's of London corporate vehicle
Park Farm Underwriting Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV One Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Two Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Three Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Four Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Five Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Six Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Seven Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Eight Limited Direct 100% - Lloyd's of London corporate vehicle
Helios LLV Nine LLP Indirect 100% - Corporate partner
Helios LLV Ten LLP Indirect 100% - Corporate partner
For details of all new acquisitions made during the year 2023, 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 Nomina No 084 LLP, Nomina No 533 LLP, Nomina No 070 LLP,
Nomina No 469 LLP, Nomina No 536 LLP, Nomina No 472 LLP, Nomina No 110 LLP,
Kunduz LLP. Nomina No 348 LLP and Gould Scottish Limited Partnership. The cost
of acquisition of these LLPs is accounted for in Helios UTG Partner Limited,
their immediate parent company.
(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:
Group Total Level 1 Level 2 Level 3
2023 £'000 £'000 £'000
£'000
Shares and other variable yield securities and units in unit trusts 33,945 9,497 20,809 3,639
Debt securities and other fixed income securities 180,208 48,831 131,378 -
Participation in investment pools 1,459 1,037 407 15
Loans and deposits with credit institutions 1,448 1,446 - 3
Derivatives 78 31 46 -
Other investments 1,120 1,120 - -
Funds at Lloyd's 69,939 69,939 - -
Total - fair value 288,198 131,901 152,639 3,657
Group Total Level 1 Level 2 Level 3
2022 £'000 £'000 £'000
£'000
Shares and other variable yield securities and units in unit trusts 18,751 3,794 12,913 2,044
Debt securities and other fixed income securities 132,031 39,187 92,844 -
Participation in investment pools 597 112 462 23
Loans and deposits with credit institutions 263 73 - 190
Derivatives 267 146 121 -
Other investments 1,064 1,064 - -
Funds at Lloyd's 73,040 73,040 - -
Total - fair value 226,013 117,416 106,340 2,257
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.
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
2023 2022
£'000 £'000
Holdings in collective investment schemes - Level 2 898 731
Total - market value 898 731
16. Other receivables
Group 31 December 31 December
2023 2022
£'000 £'000
Arising out of direct insurance operations 85,360 64,852
Arising out of reinsurance operations 63,563 59,714
Other debtors 24,009 23,110
Total 172,932 147,676
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 £nil (2022:
£nil) which are not expected to be wholly recovered within one year.
Company 31 December 31 December
2023 2022
£'000 £'000
Receivables from subsidiaries (Note 25) 70,062 73,505
Other debtors 2,463 1,278
Prepayments 1,595 -
Total 74,120 74,783
Included within receivables are amounts totalling £nil (2022: £100,000),
which are not expected to be recoverable within one year.
17. Deferred acquisition costs
Group 31 December 31 December
2023 2022
£'000 £'000
At 1 January 24,991 13,615
Increase arising from acquisition of subsidiary undertakings (Note 22) 781 664
Movement in deferred acquisition costs 7,038 10,163
Other movements (519) 549
At 31 December 32,291 24,991
18. Deferred tax
Group
Deferred tax is calculated in full on temporary differences using a tax rate
of 25% on deferred tax assets and deferred tax liabilities (2022: 25% on
deferred tax assets and deferred tax liabilities). The movement on the
deferred tax liability account is shown below:
Deferred tax liabilities Valuation of Timing Total
capacity differences on £'000
£'000 underwriting
results
£'000
At 1 January 2022 13,341 (1,375) 11,965
On acquisition of subsidiary undertakings 686 (287) 399
Revaluation of capacity 668 - 668
Prior period adjustment (156) - (156)
Credit for the year (400) (1,163) (1,564)
At 31 December 2022 14,139 (2,828) 11,311
At 1 January 2023 14,139 (2,828) 11,311
On acquisition of subsidiary undertakings 856 - 856
Revaluation of capacity 4,497 - 4,497
Prior period adjustment 712 - 712
Charge/(credit) for the year (67) 5,025 4,958
At 31 December 2023 20,136 2,199 22,334
Company
The Company had no deferred tax assets or liabilities (2022: £nil), as
disclosed in Note 10.
19. Borrowings
Group and Company 31 December 31 December
2023 2022
£'000 £'000
Secured - at amortised cost 59,055 -
Bank revolving credit facility - 15,000
59,055 15,000
Current - 15,000
Non-current 59,055 -
59,055 15,000
Bank loan
(a) Revolving credit/loan facility
On 21 December 2021, a new sterling revolving loan facility ("RLF") was agreed
with Barclays Bank Plc to the value of £15m. The interest is 4.2% per annum.
On 21 March 2022, the full £15m was drawn down and on the 18 December 2023
the loan was repaid in full.
On 15 December 2023 the Company secured an A - / stable rating from Kroll Bond
Rating Agency LLC, (KBRA) for up to US$100m
seven-year unsecured debt at a fixed coupon of 9.5%. An initial tranche of
US75m of the debt was drawn down on 15 December 2023. The loan is repaid as
one payment in full at the end of the seven year term.
Reconciliation of movements of liabilities to cash flows arising from
financing activities:
The facility is secured over the assets of the Company.
Liabilities Equity
Group Other Share capital/ Other Retained Total
loans and premium reserves earnings £'000
borrowings £'000 £'000 £'000
£'000
Balance at 1 January 2022 - 93,261 (110) 14,595 107,746
Changes from financing cash flows
Proceeds from issue of share capital (Note 21) - 12,781 - - 12,781
Proceeds from loans and borrowings - - - - -
Payments for Company buyback of ordinary shares (Note 24) 15,000 - - - 15,000
Repayment of borrowings - - - - -
Dividend paid - - - (2,034) (2,034)
Total changes from financing cash flows 15,000 12,781 - (2,034) 25,747
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 - - - (1,315) (1,315)
Balance at 31 December 2022 15,000 106,042 (110) 11,246 132,178
* The equity related other changes relate to the consolidated profit
for the year 2022.
Liabilities Equity
Group Other Share capital/ Other Retained Total
loans and premium reserves earnings £'000
borrowings £'000 £'000 £'000
£'000
Balance at 1 January 2023 15,000 106,042 (110) 9,187 130,119
Changes from financing cash flows
Proceeds from issue of share capital (Note 21) - 349 300 - 649
Proceeds from loans and borrowings 59,055 - - - 59,055
Payments for Company buyback of ordinary shares (Note 24) - - - (3,209) (3,209)
Repayment of borrowings (15,000) - - - (15,000)
Dividend paid - - - (2,319) (2,319)
Total changes from financing cash flows 44,055 349 300 (5,528) 39,176
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* - - - 29,861 29,861
Balance at 31 December 2023 59,055 106,391 190 33,520 199,156
* The equity related other changes relate to the consolidated profit
for the year 2023.
Liabilities Equity
Company Other Share capital/ Other Retained Total
loans and premium reserves earnings £'000
borrowings £'000 £'000 £'000
£'000
Balance at 1 January 2022 - 93,261 - 27,112 120,373
Changes from financing cash flows
Proceeds from issue of share capital (Note 21) - 12,781 - - 12,781
Proceeds from loans and borrowings 15,000 - - - 15,000
Payments for Company buyback of ordinary shares (Note 24) - - - - -
Repayment of borrowings - - - - -
Dividend paid - - - (2,034) (2,034)
Total changes from financing cash flows 15,000 12,781 - (2,034) 25,747
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* - - - (842) (842)
Balance at 31 December 2022 15,000 106,042 - 24,236 145,278
* The equity related other changes relate to the Company's profit for
the year 2022.
Liabilities Equity
Company Other Share capital/ Other Retained Total
loans and premium reserves earnings £'000
borrowings £'000 £'000 £'000
£'000
Balance at 1 January 2023 15,000 106,042 - 24,236 145,278
Changes from financing cash flows
Proceeds from issue of share capital (Note 21) - 349 300 - 649
Proceeds from loans and borrowings 59,055 - - - 59,055
Payments for Company buyback of ordinary shares (Note 24) - - - (3,209) (3,209)
Repayment of borrowings (15,000) - - - (15,000)
Dividend paid - - - (2,319) (2,319)
Total changes from financing cash flows 44,055 349 300 (5,528) 39,176
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* - - - 2,318 2,318
Balance at 31 December 2023 59,055 106,391 300 21,026 186,772
* The equity related other changes relate to the Company's profit for
the year 2023.
20. Other payables
Group 31 December 31 December
2023 2022
£'000 £'000
Arising out of direct insurance operations 3,925 3,509
Arising out of reinsurance operations 52,770 42,700
Corporation tax payable - -
Other creditors 13,899 8,684
70,594 54,893
The Group has no analysis of other payables held directly by the syndicates on
the Group's behalf (see Note 27).
Company 31 December 31 December
2023 2022
£'000 £'000
Payable to subsidiaries 5,532 3,128
Other creditors 93 -
Accruals and deferred income 3,222 2,002
8,847 5,130
All payables above are due within one year.
21. Share capital and share premium
Number of Ordinary share Partly Share Total
shares (i) capital paid ordinary premium £'000
£'000 share capital £'000
£'000
Ordinary shares of 10p each and share premium 77,737,372 7,664 110 98,268 106,042
at 31 December 2022
Ordinary shares of 10p each and share premium 77,945,833 7,665 110 98,597 106,391
at 31 December 2023
During the year, the Company issued a further 208,461 ordinary shares of 10p
each. Of the shares issued, 85,004 were in relation to a script dividend and
123,457 were issued in relation to the acquisition of Chorlton Underwriting
Limited. Nil proceeds were received by the company for the issue all these
shares.
(i) Number of shares
2023 2022
Allotted, called up and fully paid ordinary shares:
- on the market 74,186,068 76,218,203
- Company buyback of ordinary shares held in treasury (Note 24) 2,659,765 419,169
76,845,833 76,637,372
Uncalled and partly paid ordinary shares under the JSOP scheme (ii) (Note 23) 1,100,000 1,100,000
77,945,833 77,737,372
(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 goodwill, this is taken to the consolidated statement
of financial position and amortised on a straight line basis over three years.
The below table shows the summary of the gain on bargain purchase and the
impairment of goodwill as follows:
(a) 2023 acquisitions
During the year, the Company has acquired the following Lloyd's Limited
Liability Vehicles either directly, or indirectly:
Nameco Nameco Chorlton Park Farm Total
(No. 606) (No. 1208) UW Limited UW Limited £'000
Limited Limited £'000 £'000
£'000 £'000
2023 acquisition date 2 June 12 June 14 July 20 July
Intangible assets 97 4 - 124 225
Uplift to fair value 761 717 1,227 1,100 3,805
Deferred tax on uplift to fair value (190) (179) (315) (179) (863)
668 542 912 1,045 3,167
Financial investments 1,910 882 2,234 2,360 7,386
Deferred income tax asset - - - - -
Reinsurers' share of insurance liabilities: - - - - -
- reinsurers' share of outstanding claims 421 512 1,050 979 2,962
- reinsurers' share of unearned premium 313 96 172 176 757
Other receivables, including insurance receivables 1,983 832 2,382 3,293 8,490
Deferred acquisition costs 243 98 217 224 782
Prepayments and accrued income 14 8 15 16 53
Cash and cash equivalents 108 84 201 311 704
Insurance liabilities: - - - - -
- claims outstanding (1,683) (1,722) (3,402) (3,443) (10,250)
- unearned premiums (1,882) (563) (915) (989) (4,349)
Deferred income tax liabilities - - - - -
Other payables, including insurance payables (923) (655) (611) (545) (2,734)
Accruals and deferred income (60) (27) (85) (53) (225)
Total fair value acquired 1,112 87 2,170 3,374 6,743
Net consideration 1,169 - 1,997 3,229 6,395
Positive goodwill on acquisition 57 - - - 57
Negative goodwill on acquisition - (87) (173) (145) (404)
Since date of acquisition
Net earned premium 917 839 738 811 3,305
Profit/(loss) 79 132 77 112 400
Capacity acquired
2021 underwriting year 1,465 1,504 1,625 1,874 6,468
2022 underwriting year 1,708 1,526 1,707 1,931 6,872
2023 underwriting year 2,024 1,777 2,065 2,265 8,131
(b) 2022 acquisitions
In 2022 the Company acquired three Limited Liability Vehicles, all of which
are incorporated in England and Wales and are corporate members of Lloyd's.
Harris Family Whitehouse Risk Capital Total
UTG Limited Underwriting UTG Limited £'000
£'000 Limited £'000
£'000
2022 acquisition date 6 Dec 29 Dec 31 Dec
Intangible assets 23 1 46 70
Uplift to fair value 216 503 2,025 2,744
Deferred tax on uplift to fair value (54) (126) (509) (689)
185 378 1,562 2,125
Financial investments 501 1,212 4,303 6,016
Deferred income tax asset - - - -
Reinsurers' share of insurance liabilities:
- reinsurers' share of outstanding claims 367 617 2,192 3,176
- reinsurers' share of unearned premium 50 103 340 493
Other receivables, including insurance receivables 992 845 7,349 9,186
Deferred acquisition costs 70 125 470 665
Prepayments and accrued income 6 6 41 53
Cash and cash equivalents 66 57 445 568
Insurance liabilities:
- claims outstanding (1,020) (1,938) (7,929) (10,887)
- unearned premiums (281) (528) (2,037) (2,846)
Deferred income tax liabilities - - - -
Other payables, including insurance payables (993) (505) (5,817) (7,315)
Accruals and deferred income (32) (54) (119) (205)
Total fair value acquired (89) 318 800 1,029
Net consideration - 427 976 1,403
Positive goodwill on acquisition 89 109 176 374
Negative goodwill on acquisition - - - -
Since date of acquisition
Net earned premium 30 5 - 35
Profit/(loss) (5) - - (5)
Capacity acquired
2020 underwriting year 504 899 4,156 5,559
2021 underwriting year 518 902 4,360 5,780
2022 underwriting year 540 952 4,185 5,677
Had the Limited Liability Vehicles been consolidated from 1 January 2023, the
consolidated statement of comprehensive income would show a net earned premium
of £204,195,000 and a profit after tax of £17,981,000.
Costs incurred in connection with the three acquisitions totalling £40,000
(2022: £38,000) have been recognised in the consolidated statement of
comprehensive income.
23. Share option plans
(i) Joint Share Ownership Plan ("JSOP")
500,000 shares have been vested as at 31 December 2021.
On 16 August 2021, a further 600,000 shares were issued.
Effect of the transactions
The beneficial interests of the Executives are as follows:
2023 2022
Director Interests Other Total Interests Other Total
in jointly interests in shareholding in jointly interests in shareholding
owned ordinary ordinary owned ordinary ordinary
shares issued shares shares issued shares
under JSOP under JSOP
Arthur Manners 477,500 720,009 1,197,509 477,500 720,009 1,197,509
Nigel Hanbury 622,500 8,939,858 9,562,358 622,500 8,939,858 9,562,358
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.
This gave rise to a total fair value amount of £23,148 to be charged as an
expense in the statement of comprehensive income and spread over three years,
being £7,716 in 2018, £7,716 in 2019 and £7,716 in 2020.
(ii) Share-based payments
In 2022, the Company operated the Helios Underwriting plc Long Term Incentive
Plan ("LTIP"). On 16 December 2022, the Company granted 571,427 awards under
the LTIP in the form of a nil-cost options. Under the same plan, the company
granted 491,227 on 30 May 2023.
The awards' performance conditions set threshold (30%) to stretch (60%)
targets in respect of the Company's total shareholder return ("TSR") over the
three-year period following the grant of the awards. No portion of the awards
shall vest unless the Company's TSR at the end of the performance period
reaches the threshold target, for which one quarter of the awards would vest,
rising on a straight line basis to full vesting of the awards for the
Company's TSR over the performance period being equal to the stretch target or
better. In the case of Executive Directors, any vested shares will be subject
to a two-year holding period.
On 5 April 2023 a further 875,000 awards were made under the company's LTIP,
with the terms set out below.
The awards' performance conditions set threshold (50%) to stretch (100%)
targets in respect of the Company's total shareholder return ("TSR") over the
five year period following the grant of the awards. No portion of the awards
shall vest unless the Company's TSR at the end of the performance period
reaches the threshold target, for which one quarter of the awards would vest,
rising on a straight line basis to full vesting of the awards for the
Company's TSR over the performance period being equal to the stretch target or
better. In the case of Executive Directors, any vested shares will be subject
to a two-year holding period.
The awards for the Executive Directors are as follows:
Director As at 1 January Awards granted Forfeited Vested/ Outstanding at Exercisable at
2023 during 2023 exercised 31 December 31 December
2023 2023
Arthur Manners 266,666 228,070 - - 494,736 -
Nigel Hanbury 304,761 263,157 - - 567,918 -
Martin Reith - 875,000 - - 875,000 -
The fair value of the LTIP awards is calculated using a Monte Carlo
(Stochastic) model taking into account the terms and conditions of the awards
granted. Each award gives rise to a fair value amount to be charged as an
expense in the statement of comprehensive income and spread over a period as
detailed below:
Director 16 December 5 April 30 May Total
2022 2023 2023
Number of awards granted 571,427 875,000 491,227 1,937,656
The weighted average remaining life of the options 8.86 9.26 9.41
Period of expense
2022 5,123 - - 5,123
2023 124,667 78,170 71,464 274,301
2024 125,008 105,573 122,223 352,804
2025 119,202 105,285 121,889 346,376
2026 - 105,285 50,424 155,709
2027 - 105,285 - 105,285
2028 - 27,402 - 27,402
Total 374,000 527,000 366,000 1,267,000
24. Treasury shares: purchase of own shares
The Company has in previous years bought back some of its own ordinary shares
on the market and these are held in treasury. During 2023, the Company has
bought back a further 2,240,596 shares for a total consideration of
£3,209,000.
The retained earnings have been reduced by a further £3,736,000, 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 2023, the 2,659,765 own shares bought back represent 3.46%
of the total allotted, called up and fully paid ordinary shares of the Company
of 76,845,833 (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
from/(to) subsidiaries exceeding £1m as at 31 December are set out below:
Company 31 December 31 December
2023 2022
£'000 £'000
Nameco (No. 917) Limited 9,355 12,116
Helios UTG Partner Limited 13,618 8,276
Chapman Underwriting Limited 9,663 13,458
Romsey Underwriting Limited 7,001 8,790
Advantage DCP Limited (1,699) (1,659)
Catbang 926 Limited 6,378 7,466
N J Hanbury Limited 2,759 2,789
Queensberry Underwriting Limited 3,164 2,870
Chanterelle Underwriting Limited 1,892 1,838
Clifton 2011 Limited 2,089 1,175
Exalt Underwriting Limited 2,132 1,268
Northbreache Underwriting Limited - 1,119
Harris Family UTG Limited 1,479 583
Risk Capital UTG Limited 2,282 3,624
Nameco (No. 1208) Limited 1,261 -
Park Farm Underwriting Limited (1,578) -
Subsidiaries below £1,000,000 4,734 7,247
Net amount 64,530 70,377
Receivable from subsidiaries 70,062 73,505
Payable from subsidiaries (5,532) (3,128)
64,533 70,377
The Group has entered into quota share reinsurance contracts for the 2021,
2022, 2023 and 2024 years of account with HIPCC Limited. The Limited Liability
Vehicles' underwriting year of account quota share participations are set out
below:
Company or partnership 2021 2022 2023 2024
Nameco (No. 917) Limited 59% 44% 36% 33%
Nameco (No. 346) Limited 60% 65% 38% 31%
Chapman Underwriting Limited 68% 11% 20% 17%
Advantage DCP Limited 54% - - -
Romsey Underwriting Limited 48% 37% 29% 25%
Nomina No 321 LLP 35% - - -
Nameco (No. 409) Limited 44% - - -
Nameco (No. 1113) Limited 46% - - -
Catbang 926 Limited 60% 21% 16% 13%
Whittle Martin Underwriting 48% - - -
Nameco (No. 408) Limited 53% - - -
Nigel Hanbury, a Director of Helios Underwriting plc and its subsidiary
companies, was also a director and majority shareholder in HIPCC Limited until
29 November 2023 when he sold his majority shareholding in full, and resigned
as a director on the same date. Under the agreement, the Group accrued a net
reinsurance premium payable of £6,574,000 (2022: £1,921,000 net reinsurance
premium recovery) during the year.
In addition, HIPCC provides stop loss, portfolio stop loss and HASP
reinsurance 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 £100,000
reflects the HIPCC income that he is expected to forgo. This arrangement was
terminated when Nigel Hanbury sold his shareholding and resigned as a director
in HIPCC.
During 2023, the following Directors received dividends, in line with their
shareholdings held:
Director Shareholding Dividend
at date received
dividend 19 July 2023
declared £
29 June 2023
Nigel Hanbury (either personally or has an interest in) 9,562,358 286,870
Andrew Christie 34,551 1,036
Arthur Manners (either personally or has an interest in) 1,197,509 35,925
Michael Cunningham (resigned 29 June 2024) 286,848 8,605
Tom Libassi (has an interest in) 13,407,000 402,210
Martin Reith 257,727 7,731
Edward Fitzalan Howard, Duke of Norfolk (resigned 19 April 2024) 382,864 11,485
26. Ultimate controlling party
The Directors consider that the Group has no ultimate controlling party.
27. Syndicate participations
The syndicates in which the Company's subsidiaries participate as corporate
members of Lloyd's either directly or through MAPA's are as follows:
Allocated capacity per year of account
Syndicate number Managing or members' agent 2024 2023 2022* 2021*
£000 £000 £000 £000
33 Hiscox Syndicates Limited 15,358 15,358 15,357 15,271
218 IQUW Syndicate Management Limited 17,711 17,711 7,519 7,500
318 Cincinnati Global Underwriting Agency Limited 1,082 862 993 993
386 QBE Underwriting Limited 3,139 3,139 3,067 2,781
510 Tokio Marine Kiln Syndicates Limited 30,294 28,183 34,097 24,257
557 Tokio Marine Kiln Syndicates Limited - - 3,509 3,509
609 Atrium Underwriters Limited 19,528 18,421 13,714 13,168
623 Beazley Furlonge Limited 32,687 28,909 23,293 20,253
727 S A Meacock & Company Limited 2,956 2,956 2,423 2,352
1176 Chaucer Syndicates Limited 2,875 2,875 2,875 2,875
1200 Argo Managing Agency Limited - 55 10,050 -
1699 Asta Managing Agency Limited 5,000 - - -
1729 Dale Managing Agency Limited 25,118 20,094 10,220 247
1796 Asta Managing Agency Limited 7,000 - - -
1902 Asta Managing Agency Limited 12,636 10,688 10,000 -
1925 Apollo Syndicate Management Limited 12,500 - - -
1955 Arch Managing Agency Limited 20,000 12,500 - -
1966 Asta Managing Agency Limited 15,000 - - -
1969 Apollo Syndicate Management Limited 25,499 12,171 5,675 459
1971 Apollo Syndicate Management Limited 25,000 10,000 6,467 -
1985 Asta Managing Agency Limited 20,000 16,874 - -
1988 Asta Managing Agency Limited 15,125 15,000 - -
1996 Polo Managing Agency Limited 9,527 5,988 - -
2010 Lancashire Syndicates Limited 7,338 7,338 10,642 9,999
2024 Probitas Managing Agency Limited 8,522 - - -
2121 Argenta Syndicate Management Limited 5,206 272 10,267 5,697
2358 Nephila Syndicate Managing Agency Limited 20,000 - - -
2427 Asta Managing Agency Limited 15,024 - - -
2454 Apollo Syndicate Management Limited 5,800 - - -
2525 Asta Managing Agency Limited 2,612 2,311 1,856 1,727
2689 Asta Managing Agency Limited 5,477 2,699 10,111 610
2791 Managing Agency Partners Limited 16,422 12,001 10,123 10,112
3939 Apollo Syndicate Management Limited 12,000 - - -
4242 Asta Managing Agency Limited 15,000 10,807 12,987 9,018
4444 Canopius Managing Agents Limited 24 21 20 182
5183 Asta Managing Agency Limited 1,727 5,000 - -
5623 Beazley Furlonge Limited 27,001 17,672 6,894 4,770
5886 Blenheim Underwriting Limited 30,833 27,131 23,165 12,586
6103 Managing Agency Partners Limited 4,150 3,301 3,480 3,149
6104 Hiscox Syndicates Limited 10,000 32 1,774 1,839
6107 Beazley Furlonge Limited 1,550 164 1,682 1,732
6117 Ariel Re Managing Agency Limited 391 265 2,989 2,209
Total 507,112 310,798 245,249 157,295
* Including the new acquisitions in 2023.
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 2023 31 December 2022
Group Syndicate Total Group Syndicate Total
£'000 £'000 £'000 £'000 £'000 £'000
Assets
Intangible assets:
- Capacity 82,436 - 82,436 59,966 - 59,966
- Positive goodwill 348 - 348 482 - 482
- Negative goodwill (667) - (667) (1,073) - (1,073)
Financial assets at fair value through profit or loss 70,754 217,444 288,198 73,771 152,242 226,013
Deferred income tax asset - - - - - -
Reinsurance assets:
- reinsurers' share of claims outstanding 60 82,948 83,008 60 80,666 80,726
- reinsurers' share of unearned premium - 23,962 23,962 - 21,333 21,333
Other receivables, including insurance and reinsurance receivables 357 172,575 172,932 3,103 144,573 147,676
Cash and cash equivalents 40,913 25,899 66,812 10,254 15,046 25,300
Prepayments and accrued income 4,459 2,822 7,281 3,746 1,330 5,076
Deferred acquisition costs - 32,291 32,291 - 24,991 24,991
Total assets 198,660 557,941 756,601 150,309 440,181 590,490
Liabilities
Equity
Equity attributable to owners of the Parent:
Share capital 7,795 - 7,795 7,774 - 7,774
Share premium 98,596 - 98,596 98,268 - 98,268
Revaluation reserve 24,840 - 24,840 11,350 - 11,350
Other reserves - treasury shares (JSOP and LTIP) 190 - 190 (110) - (110)
Retained earnings (26,174) 34,854 8,680 2,960 (5,123) (2,163)
Total equity 105,247 34,854 140,101 120,242 (5,123) 115,119
Insurance liabilities:
- claims outstanding - 309,188 309,188 - 272,015 272,015
- unearned premium - 143,610 143,610 - 114,663 114,663
Deferred income tax liabilities 22,277 58 22,335 11,228 84 11,312
Borrowings 59,055 - 59,055 15,000 - 15,000
Other payables, including insurance and reinsurance payables 6,984 63,610 70,594 157 54,736 54,893
Accruals and deferred income 5,097 6,621 11,718 3,682 3,806 7,488
Total liabilities 93,413 523,087 616,500 30,067 445,304 475,371
Total liabilities and equity 198,660 557,941 756,601 150,309 440,181 590,490
Below is an analysis of the free working capital available to the Group:
Group 31 December 31 December
2023 2022
£'000 £'000
Funds at Lloyd's supplied by:
Reinsurers 31,576 27,818
Other third party 26,995 26,421
Group owned* 69,939 73,040
Total funds at Lloyd's supplied (excluding solvency credits) 128,510 127,279
Group funds available:
Financial assets 70,754 73,771
Cash 40,913 10,254
Total funds 111,667 84,025
Less Group funds at Lloyd's (69,939) (73,040)
Free working capital 41,728 10,985
29. Changes arising from the conversion from IFRS to UK GAAP
The 31 December 2022 Financial Statements were prepared in accordance with
International Financial Reporting Standards ("IFRSs"). The 31 December 2023
Financial Statements have been prepared in accordance with United Kingdom
Accounting Standards ("UK GAAP"), including FRS 102 "The Financial Reporting
Standard applicable in the UK and Republic of Ireland" and FRS 103 "Insurance
Contracts".
The reason for this change in reporting framework is that it is not possible
for the Directors to obtain financial information in respect of the underlying
syndicate participations that would be required to comply with IFRS 17
"Insurance Contracts" which is effective under IFRS for accounting periods
beginning on or after 1 January 2023.
Under IFRS any goodwill on bargain purchases is credited immediately to the
consolidated statement of comprehensive income ("CSOCI"). Any positive
goodwill is taken to the consolidated statement of financial position
("CSOFP") and subject to an annual impairment review. Under UK GAAP, both
goodwill on bargain purchases and positive goodwill are taken to the CSOFP and
amortised over their estimated useful life.
The Directors have concluded an estimated useful life of three years for both
elements of goodwill to be amortised over, which is in line with the usual
life of a Lloyd's underwriting year of account.
The prior period figures have been adjusted to reflect the changes in the
accounting framework as per below:
Total other comprehensive loss £'000
Total other comprehensive loss for the period - as originally reported at 31 (1,315)
December 2022 under IFRS
Impact of IFRS to UK GAAP conversion - bargain purchase goodwill amortisation 1,278
Impact of IFRS to UK GAAP conversion - positive goodwill amortisation (62)
Total other comprehensive loss for the period - at 31 December 2022 under UK (99)
GAAP
Total equity £'000
Total equity - as originally reported at 31 December 2022 under IFRS 117,178
Impact of IFRS conversion to UK GAAP - total bargain purchases goodwill booked (4,182)
to 31 December 2022
Impact of IFRS conversion to UK GAAP - cumulative bargain purchase goodwill 3,108
amortisation to 31 December 2022
Impact of IFRS conversion to UK GAAP - cumulative positive goodwill (985)
amortisation to 31 December 2022
Total equity - at 31 December 2022 under UK GAAP 115,119
Goodwill intangible assets £'000
Positive goodwill - as originally reported at 31 December 2022 under IFRS 1,468
Impact of IFRS conversion to UK GAAP - positive goodwill amortisation to 31 (985)
December 2022
Positive goodwill - as reported at 31 December 2022 under UK GAAP 482
Impact of IFRS conversion to UK GAAP - negative goodwill booked to 31 December (4,182)
2022
Impact of IFRS conversion to UK GAAP - negative goodwill amortisation to 31 3,108
December 2022
Negative goodwill - as reported at 31 December 2022 under UK GAAP (1,073)
Goodwill intangible asset - at 31 December 2022 under UK GAAP (591)
Net tangible assets £'000
Net assets less intangible assets - as originally reported at 31 December 2022 57,211
under IFRS
Impact of IFRS conversion to UK GAAP - total bargain purchases goodwill booked (4,182)
to 31 December 2022
Impact of IFRS conversion to UK GAAP - cumulative bargain purchase goodwill 3,108
amortisation to 31 December 2022
Impact of IFRS conversion to UK GAAP - cumulative positive goodwill (985)
amortisation to 31 December 2022
Net assets less intangible assets - at 31 December 2022 under UK GAAP 55,152
Fair value of capacity (WAV) 59,967
115,119
Shares in issue - on the market (Note 21) 76,218
Shares in issue - total of on the market and JSOP shares (Note 21) 77,318
Net tangible asset value per share £ - on the market 1.51
Net tangible asset value per share £ - on the market and JSOP shares 1.49
30. Events after the financial reporting period
Dividend
In respect of the year ended 31 December 2023, a final dividend of 6p per
fully paid ordinary share (see Note 21) amounting to a total dividend of
£4,451,000, is to be proposed at the Annual General Meeting on 28 June 2024
and paid in July 2024. These Financial Statements do not reflect this dividend
payable.
Sale of subsidiaries
During the year, Helios Underwriting plc set up ten new Limited Liability
Vehicles (see Note 14) of which the following have been sold post-31 December
2023:
Sale date Sale proceeds
£
Helios LLV Nine LLP 13 March 2024 25,000
Helios LLV Three Limited 17 April 2024 5,000
Total sale proceeds 30,000
Share buy backs
The Company bought back a further 540,924 shares for a total consideration of
£811,000 post-31 December 2023.
Key future dates
Date
Date of Announcements of 2023 Final Results 30 May 2024
Ex-dividend date 6 June 2024
Record date 7 June 2024
Payment date for the recommended dividend 12 July 2024
Annual General Meeting 28 June 2024
Announcement of Interim Results 27 September 2024
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