Half Yearly Report

RNS Number : 9269O

Hampden Underwriting Plc

26 September 2013

 



26 September 2013

Hampden Underwriting plc

("Hampden Underwriting" or the "Company")

Interim results for the six months ended 30 June 2013

Hampden Underwriting plc, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces its unaudited results for the six months ended 30 June 2013.

Highlights

·      Premium written during the period totalled £7.2m (an increase of 42% over the same period last year).

·      Net profit of £462,000 (compared to a profit of £247,000 over the same period last year).

·      Earnings per share of 5.42p (compared to 3.33p over the same period last year).

·      Net assets increased to £9.6m from £9.1m at 31 December 2012.

Commenting upon these results Chairman, Sir Michael Oliver said:

"The six months ended 30 June 2013 shows some significantly improved figures.  This has occurred both as a result of good overall results in the Lloyd's market and the benefit of our acquisitions of Lloyd's Limited Liability Vehicles, made over the last few years, delivering a performance commensurate with the Directors' expectations at the time of purchase."

For further information please contact:

Hampden Underwriting	Nigel Hanbury	[e-mail]
Smith & Williamson Corporate Finance	David Jones	020 7131 4000

Chairman's Statement

The six months ended 30 June 2013 shows some significantly improved figures.  This has occurred both as a result of good overall results in the Lloyd's market and the benefit of our acquisitions of Lloyd's Limited Liability Vehicles (LLVs), made over the last few years, delivering a performance commensurate with the Directors' expectations at the time of purchase.

Over the comparable period last year, premium written is up 42% and net profit is up from £247,000 to £462,000.  Earnings per share stand at 5.42p compared to 3.33p and net assets have increased to £9.6m from £9.1m at 31 December 2012.

Our investment portfolio is now invested in long term low volatility funds which have performed within expected parameters and more details of this will be set out in our next annual report.

In July we were able to announce the signing of a quota share arrangement, in effect a reinsurance of half our 2013 year of account portfolio in exchange for a fee and a ratcheted performance based profit commission.  This has released £4.1m of capital to HUW which had previously been allocated as Funds at Lloyd's.  The plan is to put this capital back to work with new underwriting capacity and we are currently negotiating on three possible acquisitions.  We will be actively seeking more should suitable opportunities present themselves.

There are a number of potentially rewarding uses of our capital but the acquisition of further LLVs would seem the most attractive for the time being. As and when we are successful we will make the appropriate announcements.

Sir Michael Oliver

Non-executive Chairman

25 September 2013

Condensed Consolidated Statement of Comprehensive Income

		6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
		2013	2012	2012
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Gross premium written		7,158	5,043	9,141
Reinsurance premium ceded		(1,634)	(1,201)	(1,820)
Net premiums written		5,524	3,842	7,321
Change in unearned gross premium provision		(1,626)	(1,337)	(405)
Change in unearned reinsurance premium provision		689	565	52
		(937)	(772)	(353)
Net earned premium	2	4,587	3,070	6,968
Net investment income	4	24	204	429
Other underwriting  income		26	-	-
Other income		110	-	568
		160	204	997
Revenue		4,747	3,274	7,965
Gross claims paid		(2,855)	(2,133)	(4,685)
Reinsurance share of gross claims paid		549	416	930
Claims paid, net of reinsurance		(2,306)	(1,717)	(3,755)
Change in provision for gross claims		4	193	229
Reinsurance share of change in provision for gross claims		(95)	(179)	24
Net change in provision for claims		(91)	14	253
Net insurance claims and loss adjustment expenses	2	(2,397)	(1,703)	(3,502)
Expenses incurred in insurance activities	2	(1,300)	(916)	(2,743)
Other operating expenses	2	(448)	(321)	(866)
Operating expenses		(1,748)	(1,237)	(3,609)
Operating profit before tax	2	602	334	854
Income tax expense	5	(140)	(87)	(91)
Profit attributable to equity shareholders	10	462	247	763
Earnings per share attributable to equity shareholders
Basic and diluted	6	5.42p	3.33p	9.92p

Condensed Consolidated Statement of Financial Position

At 30 June 2013

		30 June	30 June	31 December
		2013	2012	2012
		Unaudited	Unaudited	Audited
	Note	£'000	£'000	£'000
Assets
Intangible assets		1,571	909	1,797
Deferred income tax assets		-	-	-
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	3	3,658	2,702	4,323
- Reinsurers' share of unearned premiums	3	1,379	992	590
Other receivables, including insurance receivables		9,285	6,598	9,343
Prepayments and accrued income		1,577	1,045	1,216
Financial assets at fair value	8	19,817	14,091	20,978
Cash and cash equivalents		2,270	3,526	1,444
Total assets		39,557	29,863	39,691
Liabilities
Insurance liabilities
- Claims outstanding	3	17,487	12,853	19,814
- Unearned premiums	3	6,694	4,603	4,624
Deferred income tax liabilities		978	417	938
Other payables, including insurance payables		4,108	3,814	4,589
Accruals and deferred income		733	444	631
Total liabilities		30,000	22,131	30,596
Shareholders' equity
Share capital	9	853	741	853
Share premium	9	6,996	6,261	6,996
Retained earnings	10	1,708	730	1,246
Total shareholders' equity		9,557	7,732	9,095
Total liabilities and shareholders' equity		39,557	29,863	39,691

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2013

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2013	2012	2012
Cash flow from operating activities	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Results of operating activities	602	334	854
Interest received	-	(15)	(27)
Investment income	(49)	(177)	(320)
Goodwill on bargain purchase	-	-	(568)
Impairment of goodwill	-	-	81
Profit on sale of intangible assets	-	-	1
Amortisation of intangible assets	226	143	314
Change in fair value of investments	93	2	(128)
Changes in working capital:
(Increase)/decrease in other receivables	(303)	(173)	2,225
(Decrease)/increase in other payables	(479)	772	(1,046)
Net increase in technical provisions	(381)	(156)	(2,991)
Income tax paid	(93)	-	(179)
Net cash (outflow)/inflow from operating activities	(384)	730	(1,784)
Cash flows from investing activities
Interest received	-	15	27
Investment income	49	177	321
Purchase of intangible assets	-	-	(217)
Sale/(purchase) of financial assets at fair value	1,161	(416)	854
Acquisition of subsidiary, net of cash acquired	-	-	(828)
Proceeds from disposal of intangible assets	-	-	51
Net cash used in investing activities	1,210	(224)	208
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	826	506	(1,576)
Cash and cash equivalents at beginning of period	1,444	3,020	3,020
Cash, cash equivalents and bank overdrafts at end of period	2,270	3,526	1,444

Condensed Statement of Changes in Shareholders' Equity

For the six months ended 30 June 2013

	Ordinary share capital	Share Premium	Retained Earnings	Total
	£'000	£'000	£'000	£'000
At 1 January 2013	853	6,996	1,246	9,095
Profit for the period attributable to equity shareholders	-	-	462	462
At 30 June 2013	853	6,996	1,708	9,557

For the six months ended 30 June 2012

	Ordinary share capital	Share Premium	Retained Earnings	Total
	£'000	£'000	£'000	£'000
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

For the twelve months ended 31 December 2012

	Ordinary share capital	Share Premium	Retained Earnings	Total
	£'000	£'000	£'000	£'000
At 1 January 2012	741	6,261	483	7,485
Share issue	112	735	-	847
Profit for the year attributable to equity shareholders	-	-	763	763
At 31 December 2012	853	6,996	1,246	9,095

Notes to the Interim Financial Statements

Six months ended 30 June 2013

1.   Accounting policies

Basis of preparation

The Condensed Consolidated 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 Condensed Consolidated Interim Financial Statements are prepared for the six months ended 30 June 2013.

The Condensed Consolidated Interim Financial Statements incorporate the results of Hampden Underwriting plc, Hampden Corporate Member Limited, Nameco (No. 365) Limited, Nameco (No. 605) Limited, Nameco (No. 321) Limited, Nameco (No. 917) Limited, Nameco (No. 229) Limited and Nameco (No. 518) Limited.

The Condensed Consolidated 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 2012.

The comparative figures are based upon the Group Financial Statements for the year ended 31 December 2012, and have been reported on by the Group's auditors and were delivered to the Registrar of Companies on 27 June 2013.

The underwriting data on which these Condensed Consolidated 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 Condensed Consolidated Interim Financial Statements have been prepared under the historical cost convention. 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 2012.  The new standards and amendments to standards and interpretations effective after 1 January 2013, as disclosed in the Annual Report for the year ended 31 December 2012, have not had a significant impact on the Condensed Consolidated Interim Financial Statements at 30 June 2013.

2.   Segmental 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 2013 Unaudited	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	4,587	-	-	4,587
Net investment income	21	3	-	24
Other income	-	-	136	136
Goodwill on bargain purchase	-	-	-	-
Net insurance claims and loss adjustment expenses	(2,397)	-	-	(2,397)
Expenses incurred in insurance activities	(1,300)	-	-	(1,300)
Amortisation of syndicate capacity	-	-	(119)	(119)
Other operating expenses	(139)	-	(190)	(329)
Results of operating activities	772	3	(173)	602

6 months ended 30 June 2012 Unaudited	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
Other income	-	-	-	-
Goodwill on bargain purchase	-	-	-	-
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	(114)	-	(120)	(234)
Results of operating activities	478	63	(207)	334

12 months ended 31 December 2012 Audited	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	6,968	-	-	6,968
Net investment income	405	24	-	429
Other income	-	-	-	-
Goodwill on bargain purchase	-	-	568	568
Net insurance claims and loss adjustment expenses	(3,502)	-	-	(3,502)
Expenses incurred in insurance activities	(2,743)	-	-	(2,743)
Amortisation of syndicate capacity	-	-	(192)	(192)
Other operating expenses	(303)	-	(371)	(674)
Results of operating activities	825	24	5	854

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.

3.   Insurance liabilities and reinsurance balances

Movement in claims outstanding 

	Gross		Reinsurance		Net
	£'000		£'000		£'000
At 1 January 2013	19,814		4,323		15,491
Movement of reserves	(4)		(95)		91
Other movements	(2,323)		(570)		(1,753)
At 30 June 2013	17,487		3,658		13,829

Included within other movements are the 2010 and prior years' claims reserves reinsured into the 2011 year of account and currency exchange differences.

Movement in unearned premium

	Gross	Reinsurance	Net
	£'000	£'000	£'000
At 1 January 2013	4,624	590	4,034
Movement of reserves	1,626	689	937
Other movements	444	100	344
At 30 June 2013	6,694	1,379	5,315

4.   Net investment income

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2013	2012	2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Investment income	49	177	320
Realised gains on financial investments at fair value through income statement	129	-	3
Unrealised (losses)/gains on financial investments at fair value through income statement	(144)	20	128
Investment management expenses	(10)	(8)	(49)
Bank interest	-	15	27
Net investment income	24	204	429

5.   Income tax expense

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2013	2012	2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Income tax expense	(140)	(87)	(91)

The income tax 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 23.25% (2012: 24.50%). 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
	2013	2012	2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Profit for the period	462,000	247,000	763,000
Weighted average number of shares in issue	8,526,948	7,413,376	7,691,769
Basic and diluted earnings per share (p)	5.42p	3.33p	9.92p

7.   Dividends

No equity dividends were proposed, declared or paid in the period (2012 - £Nil).

8.   Financial assets at fair value

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

As at 30 June 2013, the Group held £17,709,000 (31 December 2012: £19,275,000) Level 1 Financial Assets and £2,108,000 (31 December 2012:  £1,703,000) Level 2 Financial Assets. The Group has no level 3 investments (31 December 2012 £Nil).

9.   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 30 June 2012		741	6,261	7,002
8,526,948 ordinary shares of 10p each and share premium at 31 December 2012		853	6,996	7,849
8,526,948 ordinary shares of 10p each and share premium at 30 June 2013		853	6,996	7,849

10. Retained earnings

	30 June	30 June	31 December
	2013	2012	2012
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Group
At 1 January 2013	1,246	483	483
Profit attributable to equity shareholders	462	247	763
At 30 June 2013	1,708	730	1,246

11. Related party transactions

Hampden Underwriting plc has provided inter-company loans to Hampden Corporate Member Limited, Nameco (No. 365) Limited, Nameco (No. 605) Limited, Nameco (No. 321) Limited, Nameco (No. 917) Limited and Nameco (No. 229) Limited ("Corporate Members"), all 100% subsidiaries of the Company.  Nameco (No. 518) Limited, a 100% subsidiary of the Company, has provided inter-company loans to 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 the Corporate Members to meet their liabilities as they fall due.  The amounts outstanding as at 30 June 2013 are set out below:

	30 June	30 June	31 December
	2013	2012	2012
	Unaudited	Unaudited	Audited
Company	£'000	£'000	£'000
Balances due from/(to) Group companies at the period end:
Hampden Corporate Member Limited	3,109	3,111	3,537
Nameco (No. 365) Limited	330	346	350
Nameco (No. 605) Limited	1,092	1,100	1,306
Nameco (No. 321) Limited	321	319	350
Nameco (No. 917) Limited	1,449	-	1,431
Nameco (No. 229) Limited	355	-	358
Nameco (No. 518) Limited	(163)	-	-
Total	6,493	4,876	7,332

The Corporate Members are 100% subsidiaries of the Company and have entered into a management agreement with Nomina plc. Jeremy 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 (2012: £2,750) per Corporate Member.

The Corporate Members are 100% subsidiaries of the Company and have entered into a member's agent agreement with Hampden Agencies Limited. Jeremy Evans, a Director of Hampden Underwriting plc and the Corporate Members, is also Director 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 underwrite 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 for 2013 are set out below:

	30 June	30 June	31 December
	2013	2012	2012
	Unaudited	Unaudited	Audited
Company	£'000	£'000	£'000
Hampden Corporate Member Limited	20	51	51
Nameco (No. 365) Limited	5	9	9
Nameco (No. 605) Limited	15	50	50
Nameco (No. 321) Limited	6	16	16
Nameco (No. 917) Limited	10	-	3
Nameco (No. 229) Limited	6	-	6
Nameco (No. 518) Limited	7	-	23
Total	69	126	158

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 £38,000.  During the period, company secretarial fees of £17,500 (2012: £17,500) were charged to Hampden Underwriting plc. Hampden Holdings Limited has a controlling interest in both Hampden Legal plc and Hampden Capital plc.

The Corporate Members have entered into a quota share reinsurance arrangement with Hampden Insurance PCC (Guernsey) Limited - Cell 6.  Under this the agreement, the Corporate members have 50% quota share reinsurance.  The Corporate Members in return charge Hampden Insurance PCC (Guernsey) Limited - Cell 6 a profit commission fee based on the group's aggregate underwriting profits.  A Fund fee of 1.5% of the security provided by the reinsurer (less expenses) is also charged by the Corporate Members to Hampden Insurance PCC (Guernsey) Limited - Cell 6.

12. 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 Year of account
Syndicate or MAPA Number	Managing or Members' Agent			2011		2012		2013
33	Hiscox Syndicates Limited			464,465		385,769		385,769
218	Equity Syndicates Management Limited			363,431		229,285		329,285
386	QBE Underwriting Limited			76,108		86,117		86,117
510	RJ Kiln & Co. Limited			528,155		457,911		457,911
557	RJ Kiln & Co. Limited			327,725		523,590		102,868
570	Atrium Underwriters Limited			181,671		-		-
609	Atrium Underwriters Limited			215,723		397,394		397,394
623	Beazley Furlonge Limited			452,631		324,688		340,269
727	S.A. Meacock & Company Limited			69,592		69,592		69,592
807	R.J. Kiln & Co Limited			120,587		-		-
958	Canopius Managing Agency Limited			260,508		335,508		263,615
1176	Chaucer Syndicates Limited			-		101,818		201,818
1200	Argo Managing Agency Limited			217,465		197,466		28,551
2010	Cathedral Underwriting Limited			162,690		162,690		162,690
2121	Argenta Syndicate Management Limited			156,969		156,969		11,691
2791	Managing Agency Partners Limited			828,338		653,338		653,338
6103	Managing Agency Partners Limited			110,000		310,000		363,956
6104	Hiscox Syndicates Limited			115,000		315,000		345,000
6105	Ark Syndicate Management Limited			99,847		99,847		55,439
6106	Amlin Underwriting Limited			140,000		190,000		175,000
6107	Beazley Furlonge Limited			25,000		75,000		10,000
6110	Pembroke Managing Agency Limited			-		314,379		724,541
6111	Catlin Underwriting Agencies Limited			-		292,654		424,537
7200	Members' Agents Pooling Arrangement			295,221		303,635		303,613
7201	Members' Agents Pooling Arrangement			1,532,011		1,556,771		1,556,744
7202	Members' Agents Pooling Arrangement			542,140		552,653		552,629
7203	Members' Agents Pooling Arrangement			59,711		60,610		60,582
7211	Members' Agents Pooling Arrangement			4,627,855		4,751,602		4,751,588
7217	Members' Agents Pooling Arrangement			67,621		67,621		67,620
Total				12,040,464		12,971,907		12,882,157

13. 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 2013			30 June 2012			31 December 2012
	Group	Syndicate	Total	Group	Syndicate	Total	Group	Syndicate	Total
	Unaudited			Unaudited			Audited
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Assets
Intangible assets	1,571	-	1,571	909	-	909	1,797	-	1,797
Deferred income tax assets	-	-	-	-	-	-	-	-	-
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	-	3,658	3,658	-	2,702	2,702	-	4,323	4,323
- Reinsurers' share of unearned premiums	-	1,379	1,379	-	992	992	-	590	590
Other receivables, including insurance receivables	386	8,899	9,285	703	5,895	6,598	490	8,853	9,343
Prepayments and accrued income	34	1,543	1,577	27	1,018	1,045	62	1,154	1,216
Financial assets at fair value	7,881	11,936	19,817	5,562	8,529	14,091	7,354	13,624	20,978
Cash and cash equivalents	296	1,974	2,270	2,080	1,446	3,526	697	747	1,444
Total assets	10,168	29,389	39,557	9,281	20,582	29,863	10,400	29,291	39,691
Liabilities
Insurance liabilities
- Claims outstanding	-	17,487	17,487	-	12,853	12,853	-	19,814	19,814
- Unearned premiums	-	6,694	6,694	-	4,603	4,603	-	4,624	4,624
Deferred income tax liabilities	978	-	978	417	-	417	938	-	938
Other payables, including insurance payables	233	3,875	4,108	737	3,077	3,814	246	4,343	4,589
Accruals and deferred income	487	246	733	346	98	444	581	50	631
Current income tax liabilities	-	-	-	-	-	-	-	-	-
Total liabilities	1,698	28,302	30,000	1,500	20,631	22,131	1,765	28,831	30,596
Shareholders' equity
Share capital	853	-	853	741	-	741	853	-	853
Share premium	6,996	-	6,996	6,261	-	6,261	6,996	-	6,996
Retained earnings	621	1,087	1,708	779	(49)	730	786	460	1,246
Total shareholders' equity	8,470	1,087	9,557	7,781	(49)	7,732	8,635	460	9,095
Total liabilities and shareholders' equity	10,168	29,389	39,557	9,281	20,582	29,863	10,400	29,291	39,691

14. Announcement

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

 

END

 

 

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