REG - Lancashire Hld Ltd - Final Results <Origin Href="QuoteRef">LRE.L</Origin> - Part 6
12/02/2015 07:01
- Part 6: For the preceding part double click ID:nRSL6930Ee
8.0 25.3 - 6.3 20.0 -
In favour of derivative contracts 1.5 1.7 - 0.7 0.8 -
FAL 6.9 167.5 15.8 14.2 152.6 14.9
Syndicate accounts 6.9 89.6 - 16.4 123.9 -
Total 24.3 338.3 15.8 42.4 327.0 14.9
23. Share capital
Authorised ordinary shares of $0.50 each Number $m
As at 31 December 2014 and 2013 3,000,000,000 1,500.0
Allocated, called up and fully paid Number $m
As at 31 December 2012 168,602,427 84.3
Shares issued 16,843,382 8.4
As at 31 December 2013 185,445,809 92.7
Shares issued 6,666,789 3.4
As at 31 December 2014 192,112,598 96.1
Own shares Number held $m Number held $m Total number $m
in treasury in trust of own shares
As at 31 December 2012 5,810,583 40.7 1,320,486 16.4 7,131,069 57.1
Shares distributed (435,120) (3.0) (2,276,285) (30.1) (2,711,405) (33.1)
Shares donated to trust (1,862,138) (13.1) 1,862,138 25.9 - 12.8
As at 31 December 2013 3,513,325 24.6 906,339 12.2 4,419,664 36.8
Shares distributed (666,434) (5.0) (1,643,647) (21.6) (2,310,081) (26.6)
Shares repurchased 2,498,433 25.0 - - 2,498,433 25.0
Shares donated to trust (2,394,377) (16.8) 2,394,377 24.9 - 8.1
As at 31 December 2014 2,950,947 27.8 1,657,069 15.5 4,608,016 43.3
The number of common shares in issue with voting rights (allocated share capital less shares held in treasury) as at 31
December 2014 was 189,161,651 (31 December 2013 - 181,932,484).
On 7 August 2013, LHL issued 16,843,382 new common shares. As a result of these shares being issued, a total of $203.5
million was raised, $8.4 million of which was included in share capital and $195.1 million of which was included in share
premium, net of $5.3 million of offering expenses.
During 2014, the Group issued new common shares to satisfy the cashless exercises of warrants as follows:
Shares issued Number of shares issued $m
23 May 2014 2,077,605 1.1
13 June 2014 1,759,974 0.9
3 July 2014 2,829,210 1.4
Total 6,666,789 3.4
Of the shares issued on 23 May 2014 and 13 June 2014, per the table above 3,837,579 were issued to satisfy Richard
Brindle's warrant exercises (refer to note 27 for further information on related party transactions).
Share repurchases
At the AGM held on 30 April 2014, the Group's shareholders approved a renewal of the Repurchase Programme authorising the
repurchase of a maximum of 18,544,580 shares, with such authority to expire on the conclusion of the 2015 AGM or, if
earlier, fifteen months from the date the resolution approving the Repurchase Programme was passed.
Shares have been repurchased by the Group under share repurchase authorisation as follows:
Own shares Number of shares cancelled Number of shares transferred to treasury shares Weighted average share price $m
As at 31 December 2013 and 2012 27,541,552 10,513,326 £4.16 273.0
Repurchased - 2,498,433 £6.27 25.0
Shares distributed - (666,434) £4.77 (4.9)
Shares donated to trust - (2,394,377) £4.61 (16.8)
As at 31 December 2014 27,541,552 9,950,948 £4.26 276.3
At the balance sheet date $nil (31 December 2013 - $nil) remained to be settled.
In 2014 the trustees of the EBT acquired nil shares (2013 - nil) in accordance with the terms of the trust and distributed
1,643,647 (2013 - 2,276,285). There were no unsettled balances in relation to EBT purchases at either balance sheet date.
Dividends
The Board of Directors have authorised the following dividends:
Type Per share amount Record date Payment date $m
Final $0.10 22 Mar 2013 17 Apr 2013 19.2
Special $1.05 22 Mar 2013 17 Apr 2013 201.4
Interim $0.05 23 Aug 2013 25 Sep 2013 10.5
Special $0.45 29 Nov 2013 20 Dec 2013 94.5
Final $0.10 21 Mar 2014 16 Apr 2014 21.1
Special $0.20 21 Mar 2014 16 Apr 2014 42.1
Interim $0.05 29 Aug 2014 24 Sep 2014 10.4
Special $1.20 28 Nov 2014 19 Dec 2014 247.4
24. Other reserves
Other reserves represent the Group's restricted shares, options and warrants. Changes in the number of restricted shares,
options and management warrants held by employees are disclosed in note 6. The changes in the number of warrants held by
non-employees are as follows:
Number of Number of Number of
Founder warrants Lancashire ordinary
Foundation warrants warrants
Outstanding at 31 December 2012 19,803,572 648,143 2,350,000
Exercised (728,785) - -
Outstanding and exercisable as at 31 December 2013 19,074,787 648,143 2,350,000
Exercised (4,042,108) - -
Outstanding and exercisable as at 31 December 2014 15,032,679 648,143 2,350,000
Weighted average exercise price as at 31 December 2014 $5.00 $4.73 $5.00
2014 2013
Weighted average remaining contractual life 1.0 year 2.0 years
Weighted average share price at date of exercise during the year $11.25 $12.17
The fair value of all warrants granted was $2.62 per warrant. The exercise price of the Lancashire Foundation warrants was
automatically adjusted for dividends declared prior to the vesting date. Refer to note 6 for further details. This did not
apply to the Founder warrants as they were fully vested at the date of grant and exercisable upon issuance.
25. Lease commitments
The Group has payment obligations in respect of operating leases for certain items of office equipment and office space.
Operating lease expenses for the year were $3.8 million (2013 - $2.4 million). Future minimum lease payments under
non-cancellable operating leases are as follows:
2014 2013
$m $m
Due in less than one year 1.1 2.9
Due between one and five years 11.4 6.9
Due in more than five years 41.2 -
Total 53.7 9.8
During 2014, the Group entered into a new lease agreement for larger office premises in the UK and assigned the leases in
relation to the existing office premises in the UK to a third party who assumed responsibility for payments. Under the
terms of the lease assignment the Group retains liability for lease payments in the event that the assignee and the
assignee's guarantor fail to meet their obligations under the assignment agreements. The new lease agreement contains a
break date of April 2029 and is guaranteed by the Group.
26. Earnings per share
The following reflects the profit and share data used in the basic and diluted earnings per share computations:
2014 2013
$m $m
Profit for the year attributable to equity shareholders of LHL 229.3 222.5
2014 2013
Number Number
of shares of shares
Basic weighted average number of shares 185,558,086 169,270,681
Dilutive effect of RSS 2,442,255 3,431,739
Dilutive effect of warrants 10,112,990 17,788,368
Diluted weighted average number of shares 198,113,331 190,490,788
Earnings per share 2014 2013
Basic $1.24 $1.31
Diluted $1.16 $1.17
Equity based compensation awards are only treated as dilutive when their conversion to common shares would decrease
earnings per share or increase loss per share from continuing operations. Unvested restricted shares without performance
criteria are therefore included in the number of potentially dilutive shares. Incremental shares from ordinary restricted
share options where relevant performance criteria have not been met are not included in the calculation of dilutive shares.
In addition, where options are anti-dilutive, they are not included in the number of potentially dilutive shares.
27. Related party disclosures
The consolidated financial statements include LHL and the entities listed below:
Name Principal Business Domicile
Subsidiaries1
LICL General insurance business Bermuda
SML2 Insurance management services Bermuda
KCML3 Insurance management services Bermuda
Lutine4 Non trading Bermuda
KCMMSL Support services United Kingdom
LIHL Holding company United Kingdom
LIMSL Insurance mediation activities United Kingdom
LISL Support services United Kingdom
LUK General insurance business United Kingdom
LMSCL Support services Canada
CCIL5 Holding company United Kingdom
CCHL Investment company United Kingdom
CCL Holding company United Kingdom
CCL 1998 Lloyd's corporate member United Kingdom
CCL 1999 Non trading United Kingdom
CCL 20005 Holding company United Kingdom
CCML5 Non trading United Kingdom
CCSL Support services United Kingdom
CUL Lloyd's managing agent United Kingdom
Associates
AHL6 Holding company Bermuda
AHL II7 Holding company Bermuda
SHL8 Holding company Bermuda
KHL Holding company Bermuda
Other controlled entities
LHFT Trust United States
EBT Trust Jersey
(1) Unless otherwise stated, the Group owns 100 per cent of the ordinary share capital and voting rights in
its subsidiaries listed.
(2) SML was liquidated on 12 August 2014.
(3) 92.68 per cent owned by the Group.
(4) Lutine was dissolved on 29 May 2014.
(5) The entities were formally placed in members' voluntary liquidation on 11 December 2014.
(6) AHL was liquidated on 15 October 2014.
(7) AHL II was liquidated on 25 November 2014.
(8) SHL was liquidated on 15 October 2014.
27. Related party disclosures CONTINUED
The Group has issued subordinated loan notes via a trust vehicle - LHFT, refer to note 22. The Group effectively has 100.0
per cent of the voting rights in LHFT. These rights are subject to the property trustee's obligations to seek the approval
of the holders of LHFT's preferred securities in case of default and other limited circumstances where the property trustee
would enforce its rights. While the ability of the Group to influence the actions of LHFT is limited by the trust
agreement, LHFT was set up by the Group with the sole purpose of issuing the subordinated loan notes, is in essence
controlled by the Group, and is therefore consolidated.
The EBT was established to assist in the administration of the Group's employee equity based compensation schemes. While
the Group does not have legal ownership of the EBT and the ability of the Group to influence the actions of the EBT is
limited by the trust deed, the EBT was set up by the Group with the sole purpose of assisting in the administration of
these schemes, is in essence controlled by the Group, and is therefore consolidated.
The Group has a Loan Facility Agreement (the 'Facility') with RBC Cees Trustee Limited, the trustees of the EBT. The
Facility is an interest free revolving credit facility under which the Trustee can request advances on demand, within the
terms of the facility, up to a maximum aggregate of $60.0 million. The Facility may only be used by the Trustees for the
purpose of achieving the objectives of the EBT. During the year ended 31 December 2014, the Group had made advances of $5.0
million (2013 - $10.7 million) to the EBT under the terms of the Facility.
During the year ended 31 December 2014, the Group donated 2,394,377 (2013 - 1,862,138) treasury shares to the EBT at the
prevailing market rate. The total value of the treasury share donation was $24.9 million (2013 - $25.9 million).
LICL holds $346.1 million (2013 - $302.8 million) of cash and cash equivalents and fixed income securities in trust for the
benefit of LUK relating to intra-group reinsurance agreements.
In 2013, members of the Group's senior management team contributed 12.57 per cent of the share capital in KCML. During
2014, LHL and the Group's senior management team purchased shares in KCML from Richard Brindle (see other transactions
below). The senior management team shareholding now represents a minority interest of 7.3 per cent. This investment
represents the non-controlling interest listed in the Group's consolidated balance sheet.
Key management compensation
Remuneration for key management, the Group's Executive and Non-Executive Directors, was as follows:
For the year ended 31 December 2014 2013
$m $m
Short-term compensation1 3.3 8.1
Equity based compensation 7.5 6.7
Directors' fees and expenses 2.2 2.1
Total 13.0 16.9
(1) Includes a credit of $2.3 million relating to the decrease in the UK National Insurance contribution provision in
respect of Richard Brindle's warrants. This is a result of the reduction in the Group's share price prior to the exercise
of his warrants during 2014.
The table above includes short-term compensation of $ 1.8 million and an equity based compensation charge of $3.5 million
relating to the retirement of Richard Brindle, the Group's former CEO. His retirement package also included a cash
settlement of RSS awards amounting to $8.2 million. Dividend equivalents that have been accrued on the RSS awards amounted
to $1.6 million. The settlement of the RSS awards and the dividend equivalent payment are reflected in contributed surplus
within shareholders' equity.
The Directors' fees and expenses includes $0.4 million (2013 - $0.4 million) paid to significant founding shareholders.
Non-Executive Directors do not receive any benefits in addition to their agreed fees and expenses and do not participate in
any of the Group's incentive, performance or pension plans. Neil McConachie left the Company as an employee on 30 June
2012, relinquishing his executive responsibilities and became a Non-Executive Director effective 1 July 2012. He
subsequently relinquished his role as a Non-Executive Director on 30 April 2014. He is able to exercise previously granted
RSS awards when they have vested, subject to the performance conditions being met.
Transactions with Lancashire Foundation
Cash donations to the Lancashire Foundation have been approved by the Board of Directors as follows:
Date $m
23 May 2013 1.4
5 November 2013 2.0
Transactions with associates
In relation to transactions with ARL, the following amounts were included in the consolidated statement of comprehensive
income and the consolidated balance sheet:
As at 31 December 2014 2013
$m $m
Consolidated statement of comprehensive income
Outwards reinsurance premiums 0.6 47.9
Insurance loss and loss adjustment expenses recoverable (6.9) 9.1
Insurance acquisition expenses ceded 0.1 7.1
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