Half Yearly Report

RNS Number : 3804N

Hampden Underwriting Plc

28 September 2012

 



28 September 2012

Hampden Underwriting plc

("Hampden Underwriting" or the "Company")

Interim results for the six months ended 30 June 2012

Appointment of CEO

Hampden Underwriting plc, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces its unaudited interim results for the six months ended 30 June 2012 and the appointment of a Chief Executive Officer.

Highlights

●          Premium written during the period totalled £5.0m (an increase of 10% over the same period last year)

●          Net profit of £247,000 (compared to a loss of £536,000 over the same period last year)

●          Earnings per share of 3.33p (compared to (7.23)p over the same period last year)

●          Net assets increased to £7.7m

●          Nigel Hanbury appointed as CEO and his NameCo 917 to be acquired by the Company for shares

Commenting upon these results, Sir Michael Oliver, Chairman, said:

"It gives me great pleasure to be able to report a profit of £247,000 at the half year as opposed to a loss of £536,000 over the same period last year.  This is of course largely due to the lack of catastrophe losses in the first six months of 2012 and it remains our intention to pay an interim dividend later in the year.  I am also delighted to be able to say that we have appointed Nigel Hanbury as Chief Executive Officer.  Many of our shareholders will know Nigel well from his time as CEO and then Chairman of Hampden Agencies and I am sure that his drive and enthusiasm will be brought to his new role."

For further information please contact:

Hampden Underwriting	Jeremy Evans	020 7863 6567
Smith & Williamson Corporate Finance	David Jones	020 7131 4000

Additional information

Nigel John Hanbury (aged 55) currently owns (directly and indirectly) 147,685 ordinary shares in the Company; on completion of the proposed acquisition by the Company of Nameco (No. 917) Limited ("NameCo 917"), it is expected that he will own (indirectly) a further 1,113,572 ordinary shares.  Under the terms of his service agreement with the Company, he will be entitled to an annual salary of £75,000 and a bonus of 15% of the amount by which the audited annual net profit of the Company exceeds £500,000.  He is currently a director/partner of the following companies/partnerships: Nomina No.084 LLP; ALM Ltd; NJ Hanbury Ltd; Upperton Holdings Ltd; Hanbury Trading Ltd; Pooks Ltd; Nameco (No. 917) Ltd; Headwinds Investments plc; PF Hanbury & Son; Capital Holdings Ltd; Hampden Insurance Protected Cell Company (Guernsey) Ltd, and has been a director of the following companies in the last five years: Hampden Agencies Ltd; Hampden Capital plc; Red Squirrel Survival Trust Ltd; Syndicate 138 Ltd.

NameCo 917 is a corporate member of Lloyd's which the Company has agreed (subject to regulatory approval) to acquire from Upperton Holdings Limited (which itself is wholly-owned by Nigel Hanbury) for a consideration of 1,113,572 new ordinary shares in the Company.  The 2012 underwriting capacity of Nameco 917 is £1.7 million; this compares with Hampden Underwriting's 2012 capacity of £9.3 million.  Nameco 917 is advised by Hampden Agencies and participates in a spread of Lloyd's syndicates similar to Hampden Underwriting's own participation.  In the year ended 31 December 2011, Nameco 917 made a profit before tax of £0.1 million on gross premiums written of £1.2 million and had net assets of £1.8 million at that date (this is before a post year-end dividend of £0.7 million).  Hampden Underwriting will contribute an estimated further £0.5 million in cash to its funds at Lloyd's to support the Company's enlarged underwriting activities.

Chairman's Statement

It gives me great pleasure to be able to report a profit of £247,000 at the half year as opposed to a loss of £536,000 over the same period last year.  This is of course largely due to the lack of catastrophe losses in the first six months of 2012 and it remains our intention to pay an interim dividend later in the year.

In my statement to you in the 2011 annual report and accounts, I said that we had made a good start and that now was the time for expansion.  Since the Company floated on AIM in 2007, it has weathered the Lloyd's cycle with the worst year on record in 2011 and some profitable years in 2008 and 2009.  The Company has fulfilled its stated prospectus objective by underwriting though Hampden MAPAs and also making some very successful acquisitions of existing NameCos.

The Board is currently comprised of non-executive directors and we consider that there is a need for a full-time executive to take the Company to the next steps in its development.  I am therefore very pleased to be able to say that Nigel Hanbury has been appointed Chief Executive Officer with immediate effect.  Nigel has also agreed to sell his NameCo 917 to the Company in exchange for shares.  The price of this acquisition, which will increase our underwriting capacity by £1.7 million, is based on net asset value and so there should be no NAV dilution for existing shareholders.  The new shares will rank pari passu in all respects with existing shares and, when they are issued, Nigel's shareholding (direct and indirect) in the Company will increase to approximately 15%.

Many of you will know Nigel from his time as CEO and then Chairman of Hampden Agencies and I am delighted to welcome him to the Board as CEO.  I am sure that his drive and enthusiasm will be brought to his new role.

Sir Michael Oliver

Non-executive Chairman

27 September 2012

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2012

		6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
		2012	2011	2011
	Note	£'000	£'000	£'000
Gross premium written		5,043	4,571	7,715
Reinsurance premium ceded		(1,201)	(1,056)	(1,445)
Net premiums written		3,842	3,515	6,270
Change in unearned gross premium provision		(1,337)	(840)	238
Change in unearned reinsurance premium provision		565	423	(17)
		(772)	(417)	221
Net earned premium	2	3,070	3,098	6,491
Net investment income	4	204	148	247
Other underwriting income		-	-	-
Other income	2	-	17	22
		204	165	269
Revenue		3,274	3,263	6,760
Gross claims paid		(2,133)	(1,940)	(4,726)
Reinsurance share of gross claims paid		416	270	842
Claims paid, net of reinsurance		(1,717)	(1,670)	(3,884)
Change in provision for gross claims		193	(1,671)	(1,115)
Reinsurance share of change in provision for gross claims		(179)	543	486
Net change in provision for claims		14	(1,128)	(629)
Net insurance claims and loss adjustment expenses	2	(1,703)	(2,798)	(4,513)
Expenses incurred in insurance activities	2	(916)	(889)	(2,277)
Other operating expenses	2	(321)	(310)	(574)
Operating expenses		(1,237)	(1,199)	(2,851)
Operating profit/(loss) before tax	2	334	(734)	(604)
Income tax (expense)/credit	5	(87)	198	217
Profit/(loss) attributable to equity shareholders	9	247	(536)	(387)
Earnings per share attributable to equity shareholders
Basic and diluted	6	3.33p	(7.23)p	(5.22)p

The profit/(loss) and earnings per share set out above are in respect of continuing operations.

The accounting policies and notes are an integral part of these Interim Financial Statements.

Condensed Consolidated Statement of Financial Position

At 30 June 2012

		30 June	30 June	31 December
		2012	2011	2011
	Note	£'000	£'000	£'000
Assets
Intangible assets		909	1,123	1,052
Deferred income tax assets		-	12	-
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	3	2,702	2,974	3,044
- Reinsurers' share of unearned premiums	3	992	884	409
Other receivables, including insurance receivables		6,598	7,095	6,628
Prepayments and accrued income		1,045	1,026	842
Financial assets at fair value		14,091	13,162	13,675
Cash and cash equivalents		3,526	4,566	3,020
Total assets		29,863	30,842	28,670
Liabilities
Insurance liabilities
- Claims outstanding	3	12,853	14,068	14,234
- Unearned premiums	3	4,603	4,411	3,137
Deferred income tax liabilities		417	457	415
Other payables, including insurance payables		3,814	3,843	2,911
Accruals and deferred income		444	727	488
Total liabilities		22,131	23,506	21,185
Shareholders' equity
Share capital	8	741	741	741
Share premium	8	6,261	6,261	6,261
Retained earnings	9	730	334	483
Total shareholders' equity		7,732	7,336	7,485
Total liabilities and shareholders' equity		29,863	30,842	28,670

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2012

	6 months ended 30 June	6 months ended  30 June	12 months ended 31 December
Cash flow from operating activities	2012	2011	2011
	£'000	£'000	£'000
Results of operating activities	334	(734)	(604)
Interest received	(15)	(8)	(4)
Investment income	(177)	(118)	(275)
Profit on sale of intangible assets	-	-	11
Amortisation of intangible assets	143	141	270
Change in fair value of investments	2	30	(5)
Changes in working capital:
Increase in other receivables	(173)	(1,181)	(530)
Increase in other payables	772	1,145	3
Net increase in technical provisions	(156)	1,157	454
Income tax paid	-	-	(16)
Net cash inflow/(outflow) from operating activities	730	432	(696)
Cash flows from investing activities
Interest received	15	8	4
Investment income	177	118	275
Purchase of intangible assets	-	9	(49)
Purchase of financial assets at fair value	(416)	679	166
Acquisition of subsidiary, net of cash acquired	-	-	-
Proceeds from disposal of intangible assets	-	-	-
Net cash used in investing activities	(224)	814	396
Cash flows from financing activities
Net proceeds from issue of ordinary share capital	-	-	-
Net cash used in financing activities	-	-	-
Net increase/(decrease) in cash and cash equivalents	506	1,246	(300)
Cash and cash equivalents at beginning of period	3,020	3,320	3,320
Cash, cash equivalents and bank overdrafts at end of period	3,526	4,566	3,020

Condensed Statement of Changes in Shareholders' Equity

Six months ended 30 June 2012

	Ordinary share capital	Share Premium	Retained Earnings	Total
	£'000	£'000	£'000	£'000
At 1 January 2011	741	6,261	870	7,872
Loss for the year attributable to equity shareholders	-	-	(387)	(387)
At 31 December 2011	741	6,261	483	7,485
At 1 January 2012	741	6,261	483	7,485
Profit for the period attributable to equity shareholders	-	-	247	247
At 30 June 2012	741	6,261	730	7,732

Notes to the Interim Financial Statements

Six months ended 30 June 2012

1.  Accounting policies

Basis of preparation

The Interim Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The Interim Financial Statements are prepared for the six months ended 30 June 2012.

The Interim Financial Statements incorporate the results of Hampden Underwriting plc, Hampden Corporate Member Limited, Nameco (No. 365) Limited, Nameco (No. 605) Limited and Nameco (No. 321) Limited.

The Interim Financial Statements are unaudited, but have been subject to review by the Group's auditors. The Interim Financial Statements have been prepared in accordance with the accounting policies adopted for the year ended 31 December 2011.

The comparative figures are based upon the Group Financial Statements for the year ended 31 December 2011, and have been reported on by the Group's auditors and were delivered to the Registrar of Companies on 22 June 2012.

The underwriting data on which these Interim Financial Statements are based upon has been supplied by the managing agents of those syndicates which the Group supports. The data supplied is the 100% figures for each syndicate. The Group has applied its share of the syndicate participations to the gross figures to derive its share of the syndicates transactions, assets and liabilities.

Significant accounting policies

The Interim Financial Statements have been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in these Interim Financial Statements as were applied in the preparation of the Group Financial Statements for the year ended 31 December 2011.

2.  Segmental information

Primary segment information

The Group has three primary segments which represent the primary way in which the Group is managed:

·        Syndicate participation;

·        Investment management;

·        Other corporate activities.

6 months ended 30 June 2012	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	3,070	-	-	3,070
Net investment income	141	63	-	204
Net insurance claims and loss adjustment expenses	(1,703)	-	-	(1,703)
Expenses incurred in insurance activities	(916)	-	-	(916)
Amortisation of syndicate capacity	-	-	(87)	(87)
Other operating expenses	-	-	(234)	(234)
Results of operating activities	592	63	(321)	334

6 months ended 30 June 2011	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	3,098	-	-	3,098
Net investment income	116	32	-	148
Other income	-	-	17	17
Net insurance claims and loss adjustment expenses	(2,798)	-	-	(2,798)
Expenses incurred in insurance activities	(889)	-	-	(889)
Amortisation of syndicate capacity	-	-	(213)	(213)
Other operating expenses	-	-	(97)	(97)
Results of operating activities	(473)	32	(293)	(734)

12 months ended 31 December 2011	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	6,491	-	-	6,491
Net investment income	245	2	-	247
Other income	22	-	-	22
Net insurance claims and loss adjustment expenses	(4,513)	-	-	(4,513)
Expenses incurred in insurance activities	(2,277)	-	-	(2,277)
Amortisation of syndicate capacity	-	-	(158)	(158)
Other operating expenses	(192)	-	(224)	(416)
Results of operating activities	(224)	2	(382)	(604)

Secondary segment information

The Group does not have any secondary segments as it considers all of its activities to arise from trading within the UK.

3.  Insurance liabilities and reinsurance balances

Movement in claims outstanding 

	Gross	Reinsurance	Net
	£'000	£'000	£'000
At 1 January 2012	14,234	3,044	11,190
Movement of reserves	(193)	(179)	(14)
Net exchange differences and changes in syndicate participation	(1,188)	(163)	(1,025)
At 30 June 2012	12,853	2,702	10,151

Movement in unearned premium

	Gross	Reinsurance	Net
	£'000	£'000	£'000
At 1 January 2012	3,137	409	2,728
Movement in premiums earned in the year	1,337	565	772
Net exchange difference and changes in syndicate participation	129	18	111
At 30 June 2012	4,603	992	3,611

4.  Net investment income

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2012	2011	2011
	£'000	£'000	£'000
Investment income at fair value through income statement	177	118	275
Realised gains on financial investments at fair value through income statement	-	-	74
Unrealised gains/(losses) on financial investments at fair value through income statement	20	22	5
Investment management expenses	(8)	-	(111)
Bank interest	15	8	4
Net investment income	204	148	247

5.  Income tax expense

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2012	2011	2011
	£'000	£'000	£'000
Income tax (expense)/credit	(87)	198	217

The income tax credit/(expense) is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 26% (2011: 27%). Material disallowed items have been adjusted for in the income tax calculation.

6.  Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. 

The Group has no dilutive potential ordinary shares.

Earnings per share have been calculated in accordance with IAS 33.

Reconciliation of the earnings and weighted average number of shares used in the calculation is set out below.

	6 months ended 30 June	6 months ended 30 June	12 months  ended 31 December
	2012	2011	2011
	£'000	£'000	£'000
Profit/(loss) for the period	247,000	(536,000)	(387,000)
Weighted average number of shares in issue	7,413,376	7,413,376	7,413,376
Basic and diluted earnings per share (p)	3.33p	(7.23)p	(5.22)p

7.  Dividends

No equity dividends were proposed, declared or paid in the period (2011 - £Nil).

8.  Share capital and share premium

Allotted, called up and fully paid	Ordinary Share  Capital  £'000	Share Premium £'000	Total £'000
7,413,376 ordinary shares of 10p each and share premium at 1 January 2012	741	6,261	7,002
7,413,376 ordinary shares of 10p each and share premium at 30 June 2012	741	6,261	7,002

9.  Retained earnings

	30 June	30 June	31 December
	2012	2011	2011
	£'000	£'000	£'000
Group
At 1 January 2012	483	870	870
Profit/(loss) attributable to equity shareholders	247	(536)	(387)
At 30 June 2012	730	334	483

10.  Related party transactions

Hampden Underwriting plc has provided inter-company loans to Hampden Corporate Member Limited, Nameco (No.365) Limited, Nameco (No.605) Limited and Nameco (No. 321) Limited, all 100% subsidiaries of the Company.  Interest is charged on the loans at base rate plus 0.125%. The loans are repayable on three months' notice provided it does not jeopardise the ability of Hampden Corporate Member Limited, Nameco (No.365) Limited,  Nameco (No.605) Limited and Nameco (No.321) Limited to meet their liabilities as they fall due.  The amounts outstanding as at 30 June are set out below:

	30 June	30 June	31 December
	2012	2011	2011
Company	£'000	£'000	£'000
Balances due from Group companies at the period end:
Hampden Corporate Member Limited	3,111	3,715	2,637
Nameco (No. 365) Limited	346	134	345
Nameco (No. 605) Limited	1,100	1,024	1,097
Nameco (No. 321) Limited	319	12	318
Total	4,876	4,885	4,397

Hampden Corporate Member Limited, Nameco (No.365) Limited, Nameco (No.605) Limited and Nameco (No.321) Limited ("Corporate Members") are 100% subsidiaries of the Company and have entered into a management agreement with Nomina plc. Jeremy Richard Holt Evans, a Director of Hampden Underwriting plc and the Corporate Members is also a Director of Nomina plc. Under the agreement, Nomina plc provides management and administration, financial tax and accounting services to the Group for an annual fee of £2,750 (2011: £2,750) per Corporate Member.

The Corporate Members are100% subsidiaries of the Company and have entered into a member's agent agreement with Hampden Agencies Limited. Jeremy Richard Holt Evans, a Director of Hampden Underwriting plc and the Corporate Members and Sir James Michael Yorrick Oliver, a Director of Hampden Underwriting plc, are also Directors of Hampden Capital plc which controls Hampden Agencies Limited. Under the agreement the Corporate Members will pay Hampden Agencies Limited a fee based on a fixed amount, which will vary depending upon the number of syndicates the Corporate Members underwrites on a bespoke basis, and a variable amount depending on the level of underwriting through the members' agent pooling arrangements.  In addition, the Corporate Members will pay profit commission on a sliding scale from 1% of the net profit up to a maximum of 10%.  The total fees payable are set out below:

	30 June	30 June	31 December
	2012	2011	2011
Company	£'000	£'000	£'000
Hampden Corporate Member Limited	51	44	41
Nameco (No. 365) Limited	9	8	10
Nameco (No. 605) Limited	50	21	11
Nameco (No. 321) Limited	16	10	14
Total	126	83	76

Hampden Underwriting plc has entered into a company secretarial agreement with Hampden Legal plc. Under the agreement, Hampden Legal plc provides company secretarial services to the Group for an annual fee of £42,000.  During the period, company secretarial fees of £17,500 (2011: £35,000) were charged to Hampden Underwriting plc. Hampden Holdings Limited has a controlling interest in both Hampden Legal plc and Hampden Capital plc.

11.  Syndicate participations

The syndicates and members' agent pooling arrangements ("MAPA") in which the Company's subsidiaries participate as corporate members of Lloyd's as are follows:

			Allocated capacity Period of account
Syndicate or MAPA Number	Managing or Members' Agent			2010		2011		2012
33	Hiscox Syndicates Limited			138,067		124,261		131,164
218	Equity Syndicates Management Limited			220,092		220,092		198,084
386	QBE Underwriting Limited			26,968		26,968		30,515
510	RJ Kiln & Co. Limited			172,115		172,115		203,247
557	RJ Kiln & Co. Limited			205,000		102,868		102,868
570	Atrium Underwriters Limited			56,931		56,931		-
609	Atrium Underwriters Limited			57,431		57,431		114,362
623	Beazley Furlonge Limited			190,841		190,841		190,841
727	S.A. Meacock & Company Limited			43,348		43,348		43,348
807	R.J. Kiln & Co Limited			39,225		39,225		-
958	Omega Underwriting Agency Limited			118,428		118,428		118,428
1200	Argo Managing Agency Limited			118,915		118,915		118,915
2121	Argenta Syndicate Management Limited			100,000		114,286		114,286
2791	Managing Agency Partners Limited			309,577		309,577		309,577
4040	HCC Underwriting Agency Limited			-		-		-
6103	Managing Agency Partners Limited			235,000		100,000		100,000
6104	Hiscox Syndicates Limited			225,000		100,000		100,000
6105	Ark Syndicate Management Limited			-		87,549		87,549
6106	Amlin Underwriting Limited			175,000		125,000		125,000
6107	Beazley Furlonge Limited			15,000		15,000		15,000
6110	Pembroke Managing Agency Limited			-		-		225,768
6111	Catlin Underwriting Agencies Limited			-		-		180,616
7200	Members' Agents Pooling Arrangement			245,501		237,453		244,223
7201	Members' Agents Pooling Arrangement			1,278,668		1,240,909		1,260,967
7202	Members' Agents Pooling Arrangement			458,211		435,303		443,745
7203	Members' Agents Pooling Arrangement			44,288		42,859		43,509
7208	Members' Agents Pooling Arrangement			5,086,898		4,627,855		4,751,602
7211	Members' Agents Pooling Arrangement			-		-		-
7217	Members' Agents Pooling Arrangement			70,235		53,477		53,477
Total				9,630,739		8,760,691		9,307,091

12.  Group owned net assets

The Group balance sheet 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 Group balance sheet between group and syndicate assets and liabilities.

	30 June 2012			30 June 2011			31 December 2011
	Group	Syndicate	Total	Group	Syndicate	Total	Group	Syndicate	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Assets
Intangible assets	909	-	909	1,123	-	1,123	1,052	-	1,052
Deferred income tax assets	-	-	-	12	-	12	-	-	-
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	-	2,702	2,702	-	2,974	2,974	-	3,044	3,044
- Reinsurers' share of unearned premiums	-	992	992	-	884	884	-	409	409
Other receivables, including insurance receivables	704	5,894	6,598	321	6,774	7,095	421	6,207	6,628
Prepayments and accrued income	27	1,018	1,045	31	995	1,026	41	801	842
Financial assets at fair value	5,562	8,529	14,091	3,674	9,488	13,162	4,090	9,585	13,675
Cash and cash equivalents	2,080	1,446	3,526	3,072	1,494	4,566	2,483	537	3,020
Total assets	9,281	20,582	29,863	8,233	22,609	30,842	8,087	20,583	28,670
Liabilities
Insurance liabilities
- Claims outstanding	-	12,853	12,853	-	14,068	14,068	-	14,234	14,234
- Unearned premiums	-	4,603	4,603	-	4,411	4,411	-	3,137	3,137
Deferred income tax liabilities	417	-	417	655	-	655	415	-	415
Other payables, including insurance payables	737	3,077	3,814	74	3,542	3,616	126	2,785	2,911
Accruals and deferred income	346	98	444	633	94	727	862	(374)	488
Current income tax liabilities	-	-	-	29	-	29	-	-	-
Total liabilities	1,500	20,631	22,131	1,391	22,115	23,506	1,403	19,782	21,185
Shareholders' equity
Share capital	741	-	741	741	-	741	741	-	741
Share premium	6,261	-	6,261	6,261	-	6,261	6,261	-	6,261
Retained earnings	779	(49)	730	(160)	494	334	(318)	801	483
Total shareholders' equity	7,781	(49)	7,732	6,842	494	7,336	6,684	801	7,485
Total liabilities and shareholders' equity	9,828	20,581	29,863	8,233	22,609	30,842	8,087	20,583	28,670

13.  Announcement

A copy of this announcement will be available on the Company's website, www.hampdenplc.com.

 

END

 

 

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