Final Results - Year Ended 31 Dec 1999, Part 2
Hiscox PLC
16 May 2000
PART 2
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PREPARATION
The financial statements of the Group have been prepared in
accordance with applicable accounting standards as at 31
December 1999 and under the historical cost accounting rules,
modified by the revaluation of investments.
The financial statements have been prepared in accordance with
the provisions set out in Section 255 of, and Schedule 9A to,
the Companies Act 1985, as amended by the Companies Act 1985
(Insurance Companies Accounts) Regulations 1993. The Group has
adopted all material recommendations of the revised Statement of
Recommended Practice 'Accounting for Insurance Business' issued
by the Association of British Insurers.
Results are determined on an annual basis, except for the
results of the underwriting participations of the Hiscox Select
subsidiaries on non-managed syndicates are accounted for on a
three-year basis. This is because of accounting practices at
Lloyd's whereby this data is not available on an annual basis
for most non-managed syndicates.
2. BASIS OF CONSOLIDATION
The consolidated financial statements include the assets,
liabilities and results of the Company and its subsidiary
undertakings up to 31 December each year. Profits or losses of
subsidiary undertakings sold or acquired during the period are
included in the consolidated results up to the date of disposal
or from the date of acquisition.
Hiscox Dedicated Corporate Member Limited underwrites as a
corporate member of Lloyd's on syndicates managed by Hiscox
Syndicates Limited (the 'managed syndicates'). Subsidiaries of
Hiscox Select Holdings Limited underwrite as corporate members
of Lloyd's on managed syndicates as well as on other non-Hiscox
managed syndicates. In view of the several liability of
underwriting members at Lloyd's for the transactions of
syndicates in which they participate, the attributable share of
the transactions, assets and liabilities of the syndicates has
been included in the financial statements.
In order to present a true and fair view, the results, assets
and liabilities of Hiscox F to J Limited have been excluded from
the consolidated financial statements on the basis that the
Hiscox Group does not have any net economic interest in the
results of Hiscox Select F to J Limited. In accordance with the
terms under which Hiscox Select Insurance Fund plc was acquired
all estimated profits less losses of the 1998, 1999 and 2000
underwriting years of Hiscox Select F to J Limited, together
with 7.5 pence per £1 of loan stock, will be paid to loan stock
holders in late 2000; if the amount is negative they will repay
the amount to Hiscox plc.
The results, assets and liabilities of Hiscox Investment
Management Limited have been excluded from the consolidated
financial statements because they are not considered to be
material to the Group.
3. ACCOUNTING POLICIES
The following principal accounting policies have been applied
consistently in dealing with items which are considered material
in relation to the Group's financial statements.
(a) Premiums
Written premiums comprise the premiums on contracts entered into
during the accounting period, irrespective of whether they
relate in whole or in part to a later accounting period.
Written premiums are disclosed gross of commission payable to
intermediaries and exclude taxes and duties levied on premiums.
Premiums written include adjustments to premiums written in
prior accounting periods and estimates for 'pipeline' premiums.
Outward reinsurance premiums are accounted for in the same
accounting period as the premiums for the related direct
insurance or inwards reinsurance business.
(b) Unearned premiums
For general business accounted for on the annual basis, the
provision for unearned premium comprises the proportion of gross
premiums written which is estimated to be earned in the
following or subsequent financial years, computed separately for
each insurance contract using the daily pro-rata method. Where
the incidence of risk varies during the period covered by the
contract, the provision is calculated taking into account the
risk profile of the contracts.
(c) Acquisition costs
Acquisition costs comprise all direct and indirect costs arising
from the acquisition of insurance contracts.
Deferred acquisition costs represent the proportion of
acquisition costs incurred which corresponds to the proportion
of gross premiums written which are unearned at the balance
sheet date.
(d) Claims
Claims incurred in respect of general business consist of claims
and claims handling expenses paid during the financial year
together with the movement in the provision for outstanding
claims and future claims handling expenses.
Outstanding claims comprise provisions for the estimated cost of
settling all claims incurred but unpaid up to the balance sheet
date whether reported or not, together with related claims
handling expenses. Anticipated reinsurance recoveries, and
estimates of salvage and subrogation recoveries, are disclosed
separately as assets.
Whilst the directors consider that the gross provision for
claims and the related reinsurance recoveries are fairly stated
on the basis of the information currently available to them, the
ultimate liability will vary as a result of subsequent
information and events and 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 methods used, and the estimates made, are reviewed
regularly.
(e) Unexpired risk
Provision is made for unexpired risks arising from general
business where the expected value of the claims and expenses
attributable to the unexpired periods of policies in force at
the balance sheet date exceeds the unearned premiums provision
in relation to such policies after the deduction of any
acquisition costs deferred. The provision for unexpired risks
is calculated separately by classes of business which are
managed together, after taking into account relevant investment
return.
(f) Equalisation provisions
An equalisation provision has been established and calculated in
accordance with the requirements of the Insurance Companies
(Reserves) Act 1995 to mitigate exceptional high loss ratios for
classes of business displaying a high degree of claims
volatility.
(g) Hiscox Select non-managed syndicate participations
These participations are accounted for on a three-year basis and
have been calculated according to the provisions of Schedule 9A
to the Companies Act 1985 as follows:
The excess of premiums written over claims and expenses paid in
respect of business commencing in an underwriting year is
carried forward as a technical provision as part of outstanding
claims. Premiums include a provision for 'pipeline' premiums.
Profits arising from underwriting are normally recognised at the
end of the second year following the end of the underwriting
year when the underwriting year is usually closed by reinsurance
into the following year of account. 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 its obligations, and other elements
of the Lloyd's chain of security were to fail, then the closed
underwriting account would have to settle outstanding claims.
The directors consider that the likelihood of such a failure of
the reinsurance to close is remote, and consequently the
reinsurance to close has been deemed to settle liabilities
outstanding at the closure of an underwriting account. When
appropriate, provision is made for losses in respect of open
underwriting years on a syndicate by syndicate basis.
Syndicate investment income is accounted for on a receivable
basis, including, where appropriate, the imputed tax credit.
Interest income is accrued up to the relevant 31 December.
Syndicate investments and cash are held on a pooled basis, the
return from which is allocated to underwriting years
proportionately to the funds contributed by the year.
Investment income and all investment gains and losses relating
to syndicate investments and cash are included in the non-
technical account, with an allocation made to the technical
account as described in section 3(k).
(h) Long term insurance business
The business is currently in run-off. Annual premiums, single
premiums and considerations for the granting of immediate and
deferred annuities are accounted for when due for payment.
Investment linked business is accounted for in the year the
policy liability is established. Provision is made for
outstanding claims when the insured event occurs or is notified.
An actuarial valuation of the long term insurance net liability
is carried out annually.
The fund for future appropriations incorporates amounts which
have yet to be allocated to either participating policyholders
or shareholders. The Company also writes unit linked and non-
participating business. Surpluses or deficiencies from the non-
profit and unit linked long term business are included in the
non-technical account in the year in which they arise. In
respect of the with-profits business, amounts are transferred
when the division of the surplus between participating
policyholders and shareholders has been determined.
(i) Investments
Investments are stated at their current value. Listed
investments comprise those quoted on the London and other
International Stock Exchanges. These investments are stated at
mid-market prices on the balance sheet date, or on the last
stock exchange trading day before the balance sheet date.
Land and buildings occupied by the Company for its own use are
stated at market value less accumulated depreciation. Full
valuations are carried out by independent professionally
qualified valuers on a regular basis. In the intervening years,
these valuations are reviewed by the directors on the basis of
independent professional advice, and any decreases in values
accounted for as value adjustments.
Investments in group undertakings and associates are stated at
cost less provision for impairment in value.
(j) Investment return
Dividends on ordinary shares and the related tax credits are
recognised as income on the date the ordinary shares are marked
ex-dividend. Other investment income and interest receivable
are included in income on an accruals basis.
Realised gains or losses represent the difference between the
net sales proceeds and purchase price. Unrealised gains and
losses on investments represent the difference between the
current value of investments at the balance sheet date and their
purchase price. The movement in unrealised investment gains/
losses includes an adjustment for previously recognised
unrealised gains/losses on investments disposed of in the
accounting period.
(k) Allocation of investment return
An allocation is made from the non-technical account to the
general business technical account of the longer term investment
return on investments supporting the general insurance technical
provisions and all the relevant shareholders' funds. The longer
term investment return is an estimate of the long term trend
investment return for Hiscox plc and its subsidiaries, together
with the Hiscox Managed Syndicates, having regard to past
performance, current trends and future expectations.
The allocation of investment return for long term business from
the technical to the non-technical account is such that the
investment return remaining in the technical account on
investments directly attributable to shareholders reflects the
longer term rate of return on these investments. For this
purpose, the investments directly attributable to shareholders
are those supporting the long term business other than assets
supporting (i) the long term business provision, (ii) the fund
for future appropriations; and (iii) the technical provision for
linked liabilities.
(l) Depreciation
Depreciation is provided to write off the cost less the
estimated residual value of tangible assets on a straight-line
basis over their estimated useful economic lives or length of
lease if less as follows:
Fixtures and fittings 10 - 15 years
Computer software and hardware 3 - 5 years
Motor vehicles 3 years
All other fixed assets 4 years
(m) Goodwill
Goodwill arising on acquisition of subsidiaries has been written
off directly to reserves in the year of acquisition up to 31
December 1997. From 1 January 1998 in accordance with FRS 10,
goodwill arising on acquisitions, being the difference between
the fair value of the purchase consideration and the fair value
of net assets acquired, is capitalised in the balance sheet and
amortised on a straight line basis over its useful economic life
which is considered to be 20 years.
(n) Other intangible assets
Other intangible assets are the cost of purchasing the Group's
participation in Lloyd's insurance syndicates. In accordance
with FRS 10, this capacity is capitalised at cost in the balance
sheet and amortised over 20 years.
(o) Rates of exchange
Assets, liabilities, revenues and costs denominated in foreign
currencies are recorded at the rates of exchange ruling at the
dates of the transactions. At the balance sheet date, monetary
assets and liabilities are translated at the year end rates of
exchange. Any exchange profits or losses arising are taken
directly to the profit and loss account.
Investments in foreign enterprises are translated using the net
investment method. All exchange profits or losses arising on
the translation of these investments are taken to reserves.
(p) Pension costs
Pension payments are charged against profits, with pension
surpluses and deficits allocated over the remaining service
periods of current employees. Differences between the amounts
charged to the profit and loss account and payments made to the
pension schemes are treated as assets or liabilities in the
balance sheet.
(q) Leases
Where the Company enters into a lease which entails taking
substantially all the risks and rewards of ownership of an
asset, the lease is treated as a 'finance lease'. The asset is
recorded in the balance sheet as a tangible fixed asset and is
depreciated over its estimated useful life or the term of the
lease, whichever is shorter. Future instalments under such
leases, net of finance charges, are included within creditors.
Rentals payable are apportioned between the finance element,
which is charged to the profit and loss account, and the capital
element which reduces the outstanding obligation for future
instalments.
All other leases are accounted for as 'operating leases' and the
rental charges are charged to the profit and loss account.
(r) Deferred taxation
Deferred taxation, calculated on the liability method, is
provided on all material timing differences to the extent that
it is probable that the liability will crystallise.
4. PRIOR PERIOD RESTATEMENT
In order to present a true and fair view of profits for the
current year an adjustment has been made to the opening reserves
for the year ended 31 December 1998. This reflects refinements
to the annual accounting model which was first introduced last
year. The impact of this adjustment to opening reserves for the
year ended 31 December 1998 is to reduce opening reserves by
£1,977,000. There is no impact on the profit for the year ended
31 December 1998.
The comparative figures for the year ended 31 December 1998 have
been re-presented to reflect the inclusion of the longer term
rate of return on all investments as part of one allocation to
the technical account. Previously the accounts for the year
ended 31 December 1998 did not allocate longer term returns on
non-technical funds. The directors believe that this
facilitates comparability with our competitors. This has no
impact on profits before tax or net assets.
5.SEGMENTAL INFORMATION
a) 100% level technical account
1999 1999 1999 1999
Managed Insurance European Total
Syndicates Companies Operations
£000 £000 £000 £000
Gross written 416,084 97,814 23,821 537,719
premium
Net written 258,010 89,456 12,540 360,006
premium
Net earned 261,854 83,039 5,993 350,886
premium
Net claims 136,464 43,798 93 180,355
incurred
Claims ratio 52.1% 52.7% 51.4%
(%)
Commissions 98,865 31,001 5,145 135,011
Expenses 35,737 13,605 333 49,675
Movement in (3,594) (1,966) - (5,560)
DAC
Net expenses 131,008 42,640 5,478 179,126
Expense ratio 52.2% 49.9% 51.3%
(%)
Net longer 6,586 5,792 195 12,573
term
investment
return
Technical 968 2,393 617 3,978
profit/(loss)*
Combined ratio 104.3% 102.6% 102.7%
(%)
*Before movement in equalisation provisions.
1998 1998 1998
Managed Insurance Total
Syndicates Companies
£000 £000 £000
Gross written 393,710 90,046 483,756
premium
Net written 279,733 79,670 359,403
premium
Net earned 263,916 70,192 334,108
premium
Net claims 124,111 38,868 162,979
incurred
Claims ratio 47.0% 55.4% 48.8%
(%)
Commissions 93,710 28,513 122,223
Expenses 38,838 13,366 52,204
Movement in (7,004) (3,759) (10,763)
DAC
Net expenses 125,544 38,120 163,664
Expense ratio 47.4% 52.6% 48.5%
(%)
Net longer 21,525 5,906 27,431
term
investment
return
Technical 35,786 (890) 34,896
profit/(loss)*
Combined ratio 94.4% 108.0% 97.3%
(%)
*Before movement in equalisation provisions.
b) RECONCILIATION OF 100% LEVEL TECHNICAL RESULTS TO GROUP
RESULTS - ALIGNED CAPACITY
1999 1998
£000 £000
Technical profit for 100% of 3,978 34,896
continuing operations
Notional share attributable to 3,180 6,073
Group at current level of
capacity ownership
Adjustments to reflect lower
levels of capacity in prior
years
1997 (1996) year of account (1,749) (1,964)
1998 (1997) year of account (509) (1,080)
Investment return on Group 5,800 6,296
underwriting capital
Long term business result 774 180
Technical profit for Group 7,496 9,505
share of continuing operations
- aligned capacity
c) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
1999 1999 1999 1999
Lloyd's Insurance European Total
Business Company Operations
£000 £000 £000 £000
Gross written 202,042 97,814 23,821 323,677
premium
Net earned 112,420 83,039 5,993 201,452
premium
Net longer 7,655 5,792 195 13,642
term
investment
return
Net claims (68,751) (43,798) (93) (112,642)
incurred
Acquisition (40,960) (29,035) (5,145) (75,140)
costs
Expenses (5,177) (13,605) (333) (19,115)
Long term - 774 - 774
business
result
Trading result
*
Aligned result 3,712 3,167 617 7,496
Non-aligned 1,475 - - 1,475
result
Other income (1,702) - (1,842) (3,544)
and expenses
Operating 3,485 3,167 (1,225) 5,427
profit/(loss)
Short-term (2,338) (1,572) 238 (3,672)
fluctuations
in investment
return
Equalisation - (1,643) - (1,643)
provisions
Pre tax 1,147 (48) (987) 112
profit/(loss)
1998 1998 1998 1998
Lloyd's Insurance European Total
Business Company Operations
£000 £000 £000 £000
Gross written 151,256 90,046 - 241,302
premium
Net earned 102,268 70,192 - 172,460
premium
Net longer 12,971 5,906 - 18,877
term
investment
return
Net claims (63,382) (38,868) - (102,250)
incurred
Acquisition (32,799) (24,754) - (57,553)
costs
Expenses (7,352) (13,366) - (20,718)
Long term - 180 - 180
business
result
Trading result
*
Aligned result 10,215 (710) - 9,505
Non-aligned 1,491 - - 1,491
result
Other income 2,434 - (1,235) 1,199
and expenses
Operating 14,140 (710) (1,235) 12,195
profit/(loss)
Short-term 544 1716 - 2,260
fluctuations
in investment
return
Profit on sale 2,535 - - 2,535
of capacity
Equalisation - (1,739) - (1,739)
provisions
Pre tax 17,219 (733) (1,235) 15,251
profit/(loss)
* Based on longer term investment return, before movement in
equalisation provisions and elimination of inter company
transactions.
6. INVESTMENT RETURN
a) Actual investment return
1999 1998
£000 £000
Investment return on funds at
Lloyd's and other corporate funds
Investment income 4,529 5,482
Unrealised gains/(losses) on (1,755) 2,751
investments
Realised gains/(losses) on (63) 378
investments
2,711 8,611
Investment return on syndicate
funds
Investment income 3,893 3,431
Realised gains/(losses) on (468) 664
investments
3,425 4,095
Investment return on insurance
company funds*
Investment income 5,737 7,635
Unrealised gains/(losses) on 5 811
investments
Realised gains/(losses) on (1,255) 157
investments
4,487 8,603
Investment management expenses (653) (172)
Total investment return 9,970 21,137
Allocation to the technical (13,642) (18,877)
account based on the longer term
rate
Short-term fluctuations in (3,672) 2,260
investment return retained in the
non-technical account
* Excluding investment return on the long term business.
b) Actual investment return
The longer term return is based on a combination of historical
experience and current expectations for each category of
investments. The longer term return is calculated by applying
the following yields to the weighted average of each category of
assets.
1999 1998
% %
Shares and units in unit 7.0 8.0
trusts
Debt securities and other 6.0 7.5
fixed interest securities
Deposits with credit 6.0 7.5
institutions
c) Comparison of longer term investment return with actual
returns
Funds at Lloyd's Share of
and other syndicates
Corporate
Assets
£000 % £000 %
Actual investment
return
Shares and units 2,320 13.8 (20) (0.9)
in unit trusts
Debt and other (958) (2.1) 2,202 4.2
fixed income
securities
Deposits with 327 6.0 327 8.6
credit
institutions
Other 681 4.3 871 9.5
2,370 3,380
Longer term
investment return
Shares and units 1,175 7.0 162 7.0
in unit trusts
Debt and other 2,793 6.0 3,166 6.0
fixed income
securities
Deposits with 326 6.0 228 6.0
credit
institutions
Other - - - -
4,294 3,556
Short term (1,924) (176)
fluctuations
1999
Insurance Total
Company*
£000 % £000
Actual investment
return
Shares and units 1,602 23.5 3,902
in unit trusts
Debt and other 2,259 2.6 3,503
fixed income
securities
Deposits with 211 7.1 865
credit
institutions
Other 148 8.9 1,700
4,220 9,970
Longer term
investment return
Shares and units 478 7.0 1,815
in unit trusts
Debt and other 5,137 6.0 11,096
fixed income
securities
Deposits with 177 6.0 731
credit
institutions
Other - - -
5,792 13,642
Short-term (1,572) (3,672)
fluctuations
* Excluding investment return on long term business.
7. Earnings per share
1999 1999 1999
Average
Number of
Earnings Shares EPS
£000 000 p
Basic, based on operating 3,751 143,869 2.6
profit after tax
Basic, based on profit on 84 143,869 0.1
ordinary activities after
tax
Diluted, based on profit 84 146,267 0.1
on ordinary activities
after tax
1998 1998 1998
Average
Number of
Earnings Shares EPS
£000 000 p
Basic, based on operating 7,617 141,854 5.4
profit after tax
Basic, based on profit on 9,725 141,854 6.9
ordinary activities after
tax
Diluted, based on profit 9,725 144,104 6.8
on ordinary activities
after tax
The reconciliation of basic earnings per share to basic earnings
per share based on operating profit after tax is as follows:
1999 1998
EPS EPS
p p
Basic 0.1 6.9
Short term movements in 1.7 (1.1)
investments
Exceptional item: sale of non- - (1.2)
managed Lloyd's Capacity
Change in claims equalisation 0.8 0.8
provisions
Basic based on operating 2.6 5.4
profit after tax
Earnings per share has also been
calculated based on the operating profit before exceptional
items and after taxation as the directors believe this earnings
per share figure provides a better indication of operating
performance. Diluted earnings per share has been calculated
taking into account the options under employee share schemes.
1999 1998
000 000
Basic weighted 143,869 141,854
average number of
shares
Employee share 1,988 2,250
options
SAYE share options 410 -
Total 146,267 144,104
8. Investments
Funds at Share of Insurance 1999
Lloyd's Syndi- Company Total
and other cates
Corporate
Assets
Market Market Market Market
Value Value Value Value
£000 £000 £000 £000
Shares and 19,404 2,468 18,263 40,135
units in unit
trusts
Debt and other 46,796 41,042 93,876 181,714
fixed income
securities
Deposits with 4,038 3,278 867 8,183
credit
institutions
Other 259 1,669 35 1,963
70,497 48,457 113,041 231,995
Assets held to (3,016) (3,016)
cover linked
liabilities
110,025 228,979
Funds at Share of Insurance 1998
Lloyd's Syndi- Company Total
and other cates
Corporate
Assets
Market Market Market Market
Value Value Value Value
£000 £000 £000 £000
Shares and 14,427 2,166 5,358 21,951
units in unit
trusts
Debt and other 40,553 64,459 92,500 197,512
fixed income
securities
Deposits with - 4,328 4,974 9,302
credit
institutions
Other - 2,245 74 2,319
54,980 73,198 102,906 231,084
Assets held to (2,516) (2,516)
cover linked
liabilities
100,390 228,568
9. Reconciliation of Movement in Shareholders' funds
Share Share Capital
Capital Premium Redemption
Reserve Reserve
£000 £000 £000
At 1 January 7,184 68,011 33,244
1999
Prior period - - -
restatement
(note 4)
Exercise of 39 1,031 -
share options
Revaluation of - - -
fixed assets
Exchange - - -
differences
Retained loss - - -
for the year
At 31 December 7,223 69,042 33,244
1999
Merger Profit Total
Reserve and Loss Share-
Account holders'
Funds
£000 £000 £000
At 1 January 4,723 22,731 135,893
1999
Prior period - (1,977) (1,977)
restatement
(note 4)
Exercise of - - 1,070
share options
Revaluation of - (413) (413)
fixed assets
Exchange - (91) (91)
differences
Retained loss - (4,897) (4,897)
for the year
At 31 December 4,723 15,353 129,585
1999
Notes to the Cash Flow Statement (unaudited)
a) Reconciliation of operating profit to net cash inflow from
operating activities
1999 1998
£000 £000
Operating profit before 5,427 12,195
taxation after interest
Amortisation and depreciation 2,899 1,594
of tangible and intangible
fixed assets
Increase in general insurance 36,610 14,897
technical provision - net of
reinsurance
(Decrease)/increase in amounts (7,622) 2,107
owed to agents
Decrease/(increase) in amounts 3,958 (11,249)
owed by agents
Decrease/(increase) in other 1,481 (5,792)
debtors
(Decrease)/increase in other (23,870) 14,604
creditors
Cash received from Lloyd's 12,021 17,531
business (note d)
Realised and unrealised 3,068 (3,323)
investment losses/(gains)
Short term fluctuations in (3,672) 2,260
investment return
Interest expense 933 844
Other non-cash transactions (2,502) (18,990)
Net cash inflow from operating 28,731 26,678
activities
b) Movement in opening and closing portfolio investments net
of financing
1999 1998
£000 £000
Net cash (outflow)/inflow for (16,752) 15,472
the period
Portfolio investments 27,123 (7,970)
Decrease/(increase) in loans 8,462 (8,237)
Movement arising from cash 18,833 (735)
flows
Movement in long-term and (23,056) (685)
Lloyd's business
Acquired with subsidiaries - 71,465
Changes in market value and (3,169) 4,920
exchange rate effects
Other changes - (100)
Total movement in portfolio (7,392) 74,865
investments net of financing
Total portfolio investments 261,648 186,783
net of financing at 1 January
Total portfolio investments 254,256 261,648
net of financing at 31
December
c)Cash flows of the long-term business
1999 1998
£000 £000
Premiums received 468 532
Claims paid (1,031) (1,270)
Net portfolio investments 1,017 1,120
Other net cash flows (329) (397)
Taxation (233) -
Net cash flow before retention (108) (15)
and transfer to general fund
Transfer to general fund - -
Cash retained in long-term (108) (15)
business
d) Cash flows of the Lloyd's business
1999 1998
£000 £000
Premiums received 132,377 104,474
Claims paid (89,253) (50,188)
Net portfolio investments 3,507 5,865
Other net cash flows (57,558) (43,290)
Taxation - -
Net cash flow before retention (10,927) 16,861
and transfer to the Group
Transfer to the Group (12,021) (17,531)
Cash retained in the Lloyd's (22,948) (670)
business
e) Analysis of cash flows for headings netted in the cash flow
statement
1999 1998
£000 £000
Servicing of finance
Interest paid (1,638) (844)
Interest paid element of (197) (55)
finance leases
(1,835) (899)
Capital expenditure
Payments to acquire tangible (1,837) (8,099)
fixed assets
Receipts from sales of 1,326 597
tangible fixed assets
Receipts from sales of land 1,339 -
and buildings
Payments to acquire intangible (613) (12,848)
fixed assets
Receipts from sales of 49 6,785
intangible fixed assets
264 (13,565)
Acquisitions
Acquisition of subsidiaries - (10,129)
Acquisition expenses - (1,381)
Net cash acquired with - 6,836
subsidiaries
- (4,674)
Financing
Proceeds from share issues 1,070 436
New bank loan - 8,400
Repayment of bank loan (8,213) -
Capital element of finance (581) 378
leases
(7,724) 9,214
Portfolio investment
Purchase of shares and units 13,194 15,380
in unit trusts
Sale of shares and units in (571) (22,480)
unit trusts
Purchase of debt securities 104,559 163,405
and fixed income securities
Sale of debt securities and (90,046) (120,600)
fixed income securities
(Decrease) in deposits with (271) (43,616)
credit institutions
Increase in other investments 258 (59)
27,123 (7,970)
f) Movement in cash, portfolio investments and financing
At 1 Jan Cash flow Changes
1999 in other
business
£000 £000 £000
Cash at bank and in 43,868 (16,752) 486
hand
Ordinary shares 21,951 12,623 243
Debt securities 197,512 14,513 (22,122)
Deposits with credit 9,302 (271) (1,050)
institutions
Loans secured by 74 - (39)
mortgages
Other investments 2,244 258 (574)
Assets held to cover (2,516) - -
linked liabilities
Loans due within one (2,309) 1,913 -
year
Loans due after one (6,300) 6,300 -
year
Finance leases (2,178) 249 -
Total 261,648 18,833 (23,056)
Changes to At 31 Dec
market 1999
value and
currencies
£000 £000
Cash at bank and in - 27,602
hand
Ordinary shares 5,318 40,135
Debt securities (8,189) 181,714
Deposits with credit 202 8,183
institutions
Loans secured by - 35
mortgages
Other investments - 1,928
Assets held to cover (500) (3,016)
linked liabilities
Loans due within one - (396)
year
Loans due after one - -
year
Finance leases - (1,929)
Total (3,169) 254,256
g) Scope of cash flow
The consolidated cash flow statement excludes cash flows
relating to both underwriting on Lloyd's syndicates and on long
term business in respect of policyholders.
NOTES:
1. An interim dividend of 1.2p (net) per ordinary share was paid
on 30 November 1999. The Directors recommend a final dividend of
2.3p (net) per ordinary share payable on 19 July 2000 to
shareholders on the register on 26 May 2000.
2. The financial information set out in this statement does not
constitute the company's statutory accounts for the years ended
31 December 1998 or 1999. The financial information for 1998 is
derived from the statutory accounts for 1998 which have been
delivered to the registrar of companies. The auditors have
reported on the 1998 accounts; their report was unqualified and
did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. The statutory accounts for 1999 will be
finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be
delivered to the registrar of companies following the company's
annual general meeting.
3. The audited Annual Report and Accounts for 1999 will be
posted to shareholders no later than Wednesday 14 June 2000 and
will be delivered to the Registrar of Companies following the
Annual General Meeting on Thursday 13 July 2000. Copies of the
Report may be obtained by writing to the Company Secretary,
Hiscox plc, 1 Great St Helen's, London EC3A 6HX.
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