Final Results

RNS Number : 0021N
Helios Underwriting Plc
27 May 2022
 

 

27 May 2022

 

Helios Underwriting plc

("Helios" or the "Company")

 

Final results for the year ended 31 December 2021

Helios, the unique investment vehicle which acquires and consolidates underwriting capacity at Lloyd's, is pleased to announce its audited final results for the year ended 31 December 2021.

Highlights

· 111% increase in the capacity portfolio to £232.7m (2020: £110.3m)

· Total comprehensive income for the year of £4.9m (2020: £4.3m)

· Helios retained capacity for 2022 open underwriting year of £171.9m (2021 year of account: £58.7m)

· Net tangible asset value of £1.57 per share (2020: £1.51 per share)

· Stop loss in 2022 continues to protect the downside and provides underwriting capital support

 

Helios Group Summary Profits


2021

£'000

2020

£'000

Underwriting profits

3,401

639

Total other income

2,700

2,887

Total costs

(6,746)

(3,190)

Revaluation of syndicate capacity

8,132

5,604

Tax

(2,555)

(1,657)

Total comprehensive income

4,932

4,283

Earnings per share

 

 

Basic

(0.75p)

1.59p

Diluted

(0.74p)

1.55p

 

Nigel Hanbury, Chief Executive, commented:

"We have successfully navigated a challenging period, with reinsurance mitigating the COVID-19 losses and managing the volatility of the portfolio. This demonstrates our success in building a high quality portfolio of syndicate capacity. Our acquisition strategy has continued apace, with 28 LLV's purchased, for a total consideration of £26.5m.

"Our capacity portfolio has increased 111%, from £110m to £233m, and retained capacity increases at the outset of the underwriting year from £59m to £172m, an increase of 193%. This decision to increase the retained capacity substantially for the second year reflects the confidence in the timing of the market cycle and that it is now the right time to assume more underwriting risk for shareholders.

 

"It is pleasing to note that we have once again outperformed the Lloyd's market by an average of 4.9%.

"With the prospect of improving underwriting returns, together with the opportunity to continue to build the capacity portfolio, Helios is well placed to deliver value to shareholders in the future."

 

For further information, please contact:

 

Helios Underwriting plc

Nigel Hanbury - Chief Executive                                         +44 (0)7787 530 404 /  nigel.hanbury@huwplc.com

Arthur Manners - Chief Financial Officer                              +44 (0)7754 965 917

 

Shore Capital (Nomad and Broker)

Robert Finlay                                                                       +44 (0)20 7408 4080

David Coaten

 

Buchanan (PR)

Helen Tarbet / Henry Wilson / George Beale                         +44 (0)7872 604 453

 +44 (0)20 7466 5111

About Helios

Helios provides a limited liability direct investment into the Lloyd's insurance market and is quoted on the London Stock Exchange's AIM market (ticker: HUW). Helios trades within the Lloyd's insurance market writing approximately £233m of capacity for the 2022 account. The portfolio provides a good spread of business being concentrated in property insurance and reinsurance. For further information please visit www.huwplc.com.

Chairman's statement

 

In summary

· Total comprehensive income of £4.9m (2020: £4.3m)

· Net tangible asset value at £1.57 per share (2020: £1.51)

· A final dividend of 3p per share is being recommended (2020: 3p)

· Capital employed per share of £1.78 (2020: £1.70)

· Successful equity raise from new investors to raise £54m in April 2021

· The capacity retained by Helios increased to £172m (2020: £59m) an increase of over 193%

· 28 LLVs were acquired in 2021 for a total consideration of £27.3m (2020: 5 LLVs for £10m)

· Cumulative rate increases since 1 January 2017 in excess of 50% for the Helios portfolio

The board is pleased to announce results for the year ended 31 December 2021. The total comprehensive income for the year was £4.9m (2020: £4.3m), and the net tangible asset value of the Group has increased to £1.57 per share (2020: £1.51). Although these results show a pre-tax loss, they include the £8.1m profit on the revaluation of capacity but do not yet reflect the successful trading that has taken place over the last few years. The underwriting cycle typically can last for ten years of which three or four may be difficult. The Board believes that we are at the point of the underwriting cycle where the prospects for underwriting profitability are much improved.

It is important to understand that there is a three year lag in the recognition of underwriting profits in our accounts so at the moment we are still working through the results of difficult unprofitable years. Lloyd's has announced a return to profitability and is expecting better results in the next few years. Helios has matched the performance of Lloyd's, so we expect to mirror these substantial improvements.

Our strategy is to continue to build a 'blue chip' portfolio of underwriting capacity and during this year the Helios retained capacity fund has grown from £59m to £172m. Returning to the 'cycle clock,' it can be seen that increasing the retained capacity at this time in the cycle will bear fruit in future good years.

The majority of the fund is comprised of freehold capacity on well-established syndicates at Lloyd's. When these syndicates wish to grow their businesses, the existing owners of the capacity have pre-emptive rights to receive additional capacity pro rata to the scale of increase in the underlying business. The additional capacity is free and the value of this additional capacity increases our asset valuation but additional capital is required to meet funds at Lloyd's. This is a major benefit in holding freehold capacity.

Earlier in the cycle we reduced underwriting risk through 'Quota share reinsurance' which transfers the underwriting risk to a third party. In past years as much as 70% of the fund has been passed to reinsurers for which Helios receives a fee. We are now at the stage in the cycle where the market has become more profitable and so the underwriting risk retained by Helios has been increased and the amount ceded to reinsurers has reduced to 26% of the overall portfolio. We continue, however, to reduce risk through stop loss policies to protect against large unexpected losses. To date we have not needed to draw on these facilities.

Helios actively manages capital. We have a number of dials we can turn to increase or decrease our exposure. Fee income from risk ceded to reinsurers remains a core and attractive earnings stream that complements our underwriting returns. As the market cycle evolves, we evaluate opportunities to retain underwriting exposure or cede risk for fees. There is no doubt that over the years the nature of the underwriting risk has changed and frequency of large losses is up. In addition we have to contemplate claims, economic inflation, the ravages of climate change and for the first time, a pandemic. The Russian invasion of Ukraine will serve to stiffen resolve among carriers, to maintain pricing discipline given the unexpected nature of the potential losses.

Summary financial information


Year to 31 December

 

2021

£'000

2020

£'000

Underwriting profits

3,401

639

Other income

2,700

2,887

Total costs

(6,746)

(3,190)

Revaluation of syndicate capacity

8,132

5,604

Tax

(2,555)

(1,657)

Total comprehensive income

4,932

4,283

 

Most importantly, this hard market has not been born out of capital destruction but rather from judicious capacity deployment.

The net asset value (NAV) per share has continued to grow to 157p despite a large fundraising during the year when £54m was raised largely from new institutional investors. These funds have been used to build the capacity fund. NAV is made up of capacity valued at the annual Lloyd's auction and other assets including cash used to support underwriting.

The Helios share price generally trades at a premium to NAV which reflects future earnings and dividends. However, it is always a comfort to know that there is an asset backed safety net provided by the NAV.

As the most profitable part of the cycle will be shown in results in future years, we would expect the share price to reflect this with a higher premium.

The board recommends a 3p dividend in line with the existing policy. The payment of this dividend reflects the board's confidence in future cash flow despite the pre tax loss this year.

The opportunity

Helios represents an opportunity for investors to access an un-correlated asset class across a managed portfolio. Capital is deployed across a diversified portfolio of syndicates offering a favourable risk / return. Private capital is a significant feature of the Lloyd's market representing approx. 8.5% of market capacity for 2022 (or £3.4bn). Lloyd's has clearly stated that it values private capital but Lloyd's 2025 vision states that it must be "re-energised and provided on a more flexible and efficient basis". Helios is positioning itself to be that efficient access point and is uniquely able to drive 3rd party investment into Lloyd's.

The future strategy will exploit this opportunity to bring increased predictability to both cash flow and dividends. This is an exciting time for our company and we look forward to many years of profitable trading despite the dire economic outlook which engulfs the world at this time.

I would like to congratulate the executive team in delivering a top class portfolio of upper quartile investments in leading syndicates. In addition, your non-executive directors have played an important part in developing the future strategy.

Michael Cunningham

Non-executive Chairman

26 May 2022

 


Chief Executive's review

 

Highlights

 

· Net tangible asset value increased to £1.57 per share (2020: £1.51)

· The strategy of building a quality portfolio of syndicate capacity continues successfully as the portfolio increased from £110m to £233m - a 111% increase.

· The retained capacity increases at the outset of the underwriting year to £172m from £59m, an increase of 193%. This decision to increase the retained capacity substantially for the second year reflects the confidence in the timing of the market cycle and that it is now the correct time to assume more underwriting risk for shareholders.

· Added to the value of the capacity portfolio through pre-emptions and capacity revaluation, the main contributor to the growth in shareholder value

· Helios' portfolio underwriting results for 2019 underwriting year outperformed Lloyd's return on capacity by 5.6% and by an average of 4.9% for the last three closed underwriting years of account demonstrating the quality of the portfolio.

· Combined ratio for the overall portfolio is in line with the overall Lloyd's market combined ratio of 93.5%

· The improvement in underwriting conditions is continuing into 2022 after 17 consecutive quarters of price increases. Producing overall rate increases in excess of 50%.

· We continue to monitor events across Ukraine and Russia with respect to potential exposure within the capacity portfolio to losses in the political violence, aviation war and marine insurance classes, as well as the aviation and specialty reinsurance classes. This continues to be a complex and evolving situation and disclosures by our syndicates will be closely reviewed.

· With the prospect of improving underwriting returns, together with the opportunity to continue to build the capacity portfolio, Helios is well placed to deliver value to shareholders in the future.

 

Strategy

The building of a portfolio of participations on leading Lloyd's syndicates remains the strategic objective of the Group. During 2021 the key developments were:

· building the portfolio of capacity to £233m for 2022 by acquiring 28 LLVs in 2021, taking up freehold capacity offered for nil cost by way of pre-emptions amounting to £3.9m and building stakes on syndicates with good prospects offering tenancy capacity;

· maintaining the quality of the portfolio and getting access to the better managed syndicates at Lloyd's;

· taking advantage of the underwriting cycle and increasing the capacity retained by Helios as the prospects for improved underwriting margins remain;

· providing an income generating investment of Lloyd's underwriting capacity thereby generating returns in capital value and dividend income for shareholders; and

· providing a cost-efficient platform for participation at Lloyd's benefitting from no profit commission potentially payable to Lloyd's members' agent and taking advantage of increased scale and, therefore, cost efficiencies.

Acquisition strategy

Helios acquired 28 LLV's in 2021 having written to approximately 1,000 owners of LLVs asking them whether they would be interested in receiving an offer from Helios to buy their LLV. This project to approach the owners of LLV's directly had the advantage of:

· raising the profile of Helios as a potential purchaser of LLV's;

· allowing owners of LLV's who were potentially considering ceasing underwriting at Lloyd's to have the opportunity to realise the value of their investment quickly;

· allowing vendors a tax efficient exit if they wish to cease underwriting; and

· being an on-going exercise to offer owners of LLV's an alternative to investing at Lloyd's by taking Helios shares as part of the consideration.

As a consequence of the improved market conditions, the discounts achievable against the Humphrey valuations narrowed. In addition, the increase in the rate of corporation tax to 25% applied to the capacity value within an LLV, will reduce the accounting fair value for the acquisition.

During 2021 a further 28 LLV's were acquired.

 

Summary of acquisitions

 

Goodwill

 

Total

 consideration

£m

Capacity

£m

Humphrey

value

£m

Discount to

 Humphrey

 

Negative

Positive

2021

27.3

34.8

28.9

6%


1,219

319

2020

10.2

10.9

13.2

23%


1,260

-

2019

10.1

8.6

12.5

19%

 

1,707

-

 

The 28 (five in 2020) acquisitions in 2021 were purchased for a total consideration of £27.3m (£10m in 2020), of which £18m (£4.7m in 2020) was attributed to the value of capacity acquired. The improved prospects for underwriting profitability after four years of marginal results at Lloyd's have increased the competition for the available LLVs to the extent that some positive goodwill has been recognised. We will continue to build on the quality of the capacity portfolio as it is essential to acquire and retain the participations on the better managed syndicates.

Net tangible asset value per share

The growth in the net asset value per share remains a key management metric for determining growth in value to shareholders.

 

 

2021

£'000

2020

£'000

Net tangible assets

46,856

18,948

Fair value and capacity (WAV)

59,796

30,826

 

106,652

49,774

Shares in issue (Note 21)

67,786

33,012

Net tangible asset value per share (£) (2021)

1.57

1.51

 

The capital employed per share, being the assets used to generate earnings which exclude the deferred tax liability on capacity value, is as follows:

 

2021

£'000

Net assets

107,746

Deferred tax provision on capacity value

 13,729

Capital employed

121,475

Shares in issue (Note 21)

67,786

Capital employed per share (£)

1.79

 

The deferred tax provision on capacity value could potentially be incurred should the entire portfolio be sold. Given the strategy of the Group to grow the capacity fund, there is no intention to realise the full value of the portfolio. The capital employed by share is 22p (2020 -19p) higher than the net tangible asset value per share.

The value of capacity is subject to fluctuation and reflects the activity in the capacity auctions held in the autumn of each year.

Capacity value

The value of the portfolio of the syndicate capacity remains the major asset of the Group and an important factor in delivering overall returns to shareholders. The growth in the net asset value ("NAV"), being the value of the net tangible assets of the Group, together with the current value of the portfolio capacity, is a key management metric in determining growth in value to shareholders.

 

2021

£m

2020

£m

Freehold capacity with value

173.8

83.9

Relationship capacity

58.9

26.4

 

232.7

110.3

Value of portfolio

59.8

30.8

Value per £ of freehold capacity

34p

37p

 

The average price per £ of freehold capacity reduced to 34p per £ of capacity as further capacity on syndicates with lower prices was acquired. In addition, the relationship capacity on "nil value"/non-traded syndicates continued to grow as Helios is able to demonstrate long term commitment to providing third party capital to growing syndicates.

 

Capacity

£m

Fair value

 (WAV)

£m

At 1 January 2021

110.3

30.8

Capacity acquired with LLVs

36.2

18.2

Pre-emption capacity

3.9

1.6

Capacity purchased at auction

23.8

2.6

Tenancy capacity

58.9

-

Other capacity movements/change in value

(0.4)

6.6

At 31 December 2021

232.7

59.8

% growth

111%

94%

 

The portfolio's syndicates offered pre-emption increases in capacity totalling £3.9m (2020: £10.7m) for no cost to take advantage of the improving market conditions. This free capacity on syndicates that have values at auction increased the value of the fund by £1.6m (2020: £2.4m).

We acquired capacity on lower priced syndicates such as syndicates 510, 2689 and 2121 where capacity of £24m was acquired for £2.6m and which could increase in value in the future.

We continued to take a new "limited tenancy" participation on the Apollo syndicates for £12m, on the MCI Accrisure syndicate for £10m and increasing the participation on the Beat syndicate by £4m and the Blenheim syndicate by £10m.

The Board recognises that the average prices derived from the annual capacity auctions managed by the Corporation of Lloyd's could be subject to material change if the level of demand for syndicate capacity reduces or if the supply of capacity for sale should increase.

A sensitivity analysis of the potential change to the NAV per share from changes to the value of the capacity portfolio is set out below:

 

Capacity

value

Revised

NAV

per share

Current value

59,796

1.57

Decrease of 10%

53,807

 1.50

Increase of 10%

65,765

 1.64

 

Each 10% reduction in the capacity values at the 2022 auctions will reduce the NAV by approx. 7p per share (2020: 10p per share). The increase in capital base has reduced the impact on NAV per share from changes in capacity value. Any reduction in the value will be mitigated by any pre-emption capacity on syndicates that have a value at auction.

Underwriting result

The calendar year underwriting profit from the Helios retained capacity for 2021 has been generated from the portfolio of syndicate results from the 2019 to 2021 underwriting years as follows:

2021 was a year of uncertainty for everyone as the health impacts of the pandemic, and its economic and geopolitical effects, continued to reverberate around the world.

It was the year that the reality of climate change was felt with multiple large scale natural catastrophes, from the big freeze in Texas in February, to the floods in Europe during the summer, and wildfires across the globe. Today, there can be few people who doubt that climate change is having a demonstrable impact. Starting with the 2017 wildfires moving through a range of secondary perils and coming starkly into focus in 2021, climate change is altering the predictability of natural catastrophe risk.

Industry-wide estimates place insured losses from natural catastrophes between $105 billion and $130 billion making 2021 one of the costliest years on record. These events show the critical role the industry plays in delivering risk solutions that protect people, economies, and businesses from uncertainty. When the worst happens, it means disruption and hardship for many and we recognise the human impacts these events have.

The 2021 underwriting year result at 12 months represents an accounting loss of 3.9% (2020: loss 4.6%) on the retained capacity of £94m (2020 - £31m), a threefold increase in the retained capacity in comparison to last year. The increase in retained capacity and the share of the underwriting result for 2021 has impacted the overall result for the year. In addition, two supported syndicates had material exposure to the natural catastrophes during the year and these losses have been fully recognised in the year.

During 2021, the 2019 underwriting year midpoint result improved to a profit of 2.7% (2020 - Loss 2.15%) outperforming the average of the Lloyd's market by 5.8%. Given that losses from COVID-19 of 7% of capacity for the Helios portfolio have predominantly fallen on the 2019 underwriting year, the overall profit is encouraging. The midpoint estimate for the 2020 underwriting year at 31 December 2021 is a profit of 1% (2020: loss - 2.15%).

The portfolio achieved a Combined Ratio of 93.9% in comparison with the combined ratio for the Lloyd's market of 93.5%. The larger share of the 2021 year of account - a loss at the 12 month stage, will have impacted the Helios portfolio combined ratio.

The initial mid-point forecast for 2021 year of 1.9% has been impacted by the series of catastrophic losses that occurred in 2021. The improved Lloyd's market mid-point forecast of 4.2% indicates the remediation work that has been undertaken by the syndicates within the lower quartiles of performance is showing in the overall market estimates.

We would expect the gap in relative performance to narrow over the next 18 months as it has done in the past. The syndicates supported by third party capital have been more conservative in their published estimates over the 36 months to the close of the year of account due to the transparency of each syndicate result.

Other income

Helios generates additional income at Group level from the following:

 

2021

£'000

2020

£'000

Fees from reinsurers

616

334

Corporate reinsurance recoveries

(372)

(282)

Gain on bargain purchases

1,219

1,260

Investment income

1,237

1,575

Total other income

2,700

2,887

 

Fees from the quota share reinsurers reflect the fee payable on the Funds at Lloyd's provided and profit commission relating to 2019 year of account has been accrued.

The intragroup reinsurance policies have been cancelled and the costs relating to the cancellation have been included.

Gain on bargain purchases has reduced as increase in deferred tax to 25% has reduced the fair value of the acquisitions.

Investment income was recognised by the syndicates and in the LLV's acquired. The Helios own funds have mostly remained in cash during this period of market dislocation.

Total costs

The costs of the Group comprise the operating expenses and the cost of the stop loss protection bought to mitigate the downside from large underwriting losses.

 

2021

£'000

2020

£'000

Pre-acquisition

1,271

92

Stop loss costs

 1,871

1,097

Operating costs

3,604

2,001

Total costs

 6,746

3,190

 

The profits that are recognised in the LLVs acquired in the year are included in the underwriting result and the pre-acquisition element is reversed out. The increase reflects the timing of completion of the acquisitions, mostly in the fourth quarter of the year and the larger number acquisitions made.

The increase in the stop loss costs reflects cover required for the larger portfolio reinsured and as £7.6m of additional underwriting capital was sourced in 2021 through a reinsurance contract at a cost of £0.8m.

The operating costs include the transaction costs from the 28 acquisitions and the additional operating costs of those LLV's. The infrastructure required to manage the larger portfolio is not expected to materially increase.

Quality of portfolio

We continue to focus ruthlessly on the best syndicates. Therefore, we strive to acquire LLVs with portfolios that comprise quality syndicates, as such we have to pay average auction prices. Participations on weaker syndicates in acquired portfolios are sold or discarded. The syndicate participations with the leading managing agents at Lloyd's account for 71% of the portfolio. Participations in syndicates managed by these managing agents represent shares in the better managed businesses at Lloyd's.



2022 capacity portfolio

 Syndicate

Managing agent

Capacity

£'000

% of

portfolio

510/557

Tokio Marine Kiln Ltd

35,760

15%

623/6107/5623

Beazley Furlonge Limited

29,991

13%

5886/7218

Blenheim

17,733

8%

33/6104

Hiscox Syndicates Limited

15,499

7%

4242

Beat (Asta)

12,637

5%

2791/6103

Managing Agency Partners Ltd

12,292

5%

609

Atrium Underwriters Limited

12,072

5%

1729

Dale Underwriting Limited

10,149

4%

2010

Lancashire

10,137

4%

1200

Argo Syndicate

10,049

4%

Subtotal

 

166,319

71%

Other

 

66,381

29%

Total

 

232,700

100%

 

The underwriting results of the Helios portfolio have on average outperformed the Lloyd's market for the last three closed underwriting years by 4.9%. This material outperformance cannot be expected to be maintained.

The combined ratio for the Helios capacity portfolio was 93.9% (2020: 103.1%) with the Lloyd's market as a whole reporting its a combined ratio of 93.5%. Over the past three years Helios' calendar year combined ratio (before corporate costs) has outperformed Lloyd's by 4.4 percentage points a year. These incremental returns demonstrate the diversity and breadth of underwriting expertise within the businesses comprising the portfolio of syndicate capacity.

Reinsurance quota share

The use of quota share reinsurance to provide access to the Lloyd's underwriting exposures for reinsurers and private capital has not been expanded in 2021. The core of the panel of reinsurers remains XL Group plc and Everest Reinsurance Bermuda Limited.

This reinsurance has successfully reduced the exposure of Helios shareholders in recent years and assists in the financing of the underwriting capital. Helios has reduced the proportion of the capacity portfolio ceded for 2022 year of account. As market conditions continue to improve the Board will consider reducing the cession percentage further thereby increasing the Group's share of the underwriting. The capital raised recently has been used to increase the Group's share of the overall portfolio in this way.

The table shows that the Helios retained capacity has more than doubled in years 2 and 3 as further LLVs are acquired, and the older years are not reinsured. Capacity on underwriting years after 18 months of development is substantially "off risk" as the underlying insurance contracts have mostly expired.

The profits from the capacity on the older years are retained 100% by Helios.

 

2019

2020

2021

2022

Helios retained capacity at outset

15.8

20.7

58.7

171.9

Retained capacity in year 1

6.4

10.1

34.8


Retained capacity in years 2 and 3

45.3

35.6

 

 

Helios retained capacity

67.4

66.4

93.5

171.9

Ceded capacity at outset

36.8

48.4

51.5

60.8

Further capacity ceded to QS

2.1

0.8

0.0

 

Total capacity ceded

38.9

49.1

51.5

60.8

Current total capacity

106.4

115.6

145.0

232.7

Helios share of total capacity

63%

57%

64%

74%

% Increase in retained capacity in the year

115%

116%

59%

 

 

Risk management

Helios continues to ensure that the portfolio is well diversified across classes of businesses and managing agents at Lloyd's.

The biggest single risk faced by insurers arises from the possibility of mispricing insurance on a large scale. The recent correction in terms and conditions and the actions of Lloyd's to force syndicates to remediate underperforming areas of their books demonstrate the mispricing that has prevailed over the past few years. The results of this remediation work by Lloyd's is starting to be reflected in the results announced by the syndicates supported.

These management teams have weathered multiple market cycles and the risk management skills employed should reduce the possibility of substantial under-reserving of previous year underwriting. There is acceptance that catastrophe exposures are generally under-priced and hence the syndicate managers have been reducing their catastrophe exposures.

We assess the downside risk in the event of a major loss through the monitoring of the aggregate net losses estimated by managing agents to the catastrophe risk scenarios ("CRS") prescribed by Lloyd's.

The individual syndicate net exposures will depend on the business underwritten during the year and the reinsurance protections purchased at syndicate level.

The aggregate exceedance probability ("AEP") assesses the potential impact on balance sheet across the portfolio from either single or multiple large losses with a probability of occurring greater than once in a 30-year period.

In addition, Helios purchases stop loss reinsurance for its 74% (2021 YOA: 53%) share of the portfolio with an indemnity of 10% of its share of the capacity and a claim can be made if the loss for the year of account at 36 months exceeds 7.5% of capacity.

The impact on the net asset value of Helios from the disclosed large loss scenarios are as follows:


Impact on net asset value

 

 

2022

2021

AEP 1 in 30 - whole world natural catastrophe

(8.8)%

(15.3)%

AEP 1 in 30 US/GOM windstorm

(5.7)%

(8.0)%

Terrorism

(5.6)%

(4.4)%

US/Canada earthquake

(5.5)%

(4.4)%

 

The assessment of the impact of the specified events is net of all applicable quota share, stop loss reinsurance contracts and corporation tax but before the likely profits to be generated from the balance of the portfolio in any year.

Capital position

The underwriting capital required by Lloyd's for the Helios portfolio comprises the funds to support the Economic Capital Requirement of the portfolio and the Solvency II adjustments is as follows:

Underwriting capital on underwriting year

2022

£m

2021

£m

Quota share reinsurance panel

26.1

27.3

Excess of loss funds at Lloyd's

20.0

8.1

Helios own funds

43.3

27.6

Total

89.4

63.0

Capacity as at 1 January

232.7

110.3

Economic capital requirement

90.9

58.2

Solvency and other adjustments

(1.5)

4.8

 

89.4

63.0

Capital Ratio

38%

57%

 

The available funds to support Helios' share of the underwriting have been supplemented by the capital raised in April 2021 and by entering into an excess of loss banking and reinsurance agreements for the Helios portfolio. These policies provide £20m (2021- £8.1m) of FAL to Helios at a cost of £900K per year. The FAL provided by using a secured bank facility and from reinsurers will only be exposed to loss if all the Helios "own FAL" is eroded. Therefore, this FAL sits on the top of the Helios capital stack has very limited exposure.

In addition to the current funds lodged at Lloyd's, Helios has available the following facilities to provide additional resources to fund the necessary capital requirements:

• a bank revolving credit bank facility of £10m; and

• the stop loss reinsurance contracts for the 2022 years of account could provide additional underwriting capital of approximately £20m.

Environmental, social and governance responsibility

Helios aims to meet its expectations of its shareholders and other stakeholders in recognising, measuring and managing the impacts of its business activities. As Helios manages a portfolio of Lloyd's syndicate capacity, it has no direct responsibility for the management of those businesses. Each managing agent has responsibility for the management of those businesses, their staff and employment policies and the environmental impact.

We support the Environmental, Social and Governance (ESG) strategy of Lloyd's who have outlined their ambition to integrate sustainability into all of Lloyd's business activities. They will take a leadership position being the insurer of the transition to make headway against the world's objective of reaching net zero by 2050. It is their intention to build a framework to help insurance businesses in the market to integrate ESG principles into their business activities and working with insurers on their net zero plans.

The Board is committed to a high standard of corporate governance and is compliant with the principles of the Quoted Companies Alliance's Corporate Governance Code (the "QCA Code"). The Directors have complied with their responsibilities under Section 172 of the Companies Act 2006 which requires them to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.

Nigel Hanbury

Chief Executive

26 May 2022

 


Summary financial information

 

The information set out below is a summary of the key items that the Board assesses in estimating the financial position of the Group. Given the Board has no active role in the management of the syndicates within the portfolio, the following approach is taken:

A)  It relies on the syndicate financial information.

B)  It calculates the amounts due to/from the quota share reinsurers in respect of their share of the profits/losses as well as fees and commissions due.

C)  An adjustment is made to exclude pre-acquisition profits on companies bought in the year.

D)  Costs relating to stop loss reinsurance and operating costs are deducted.


Year to 31 December

 

2021

£'000

2020

£'000

Underwriting profit

3,401

639

Other income:



- fees from reinsurers

616

334

- corporate reinsurance policies

(372)

(282)

- goodwill on bargain purchase

1,219

1,260

- investment income

1,237

1,575

Total other income

2,700

2,887

Costs:



- pre-acquisition

(1,271)

(92)

- stop loss costs

(1,871)

(1,097)

- operating costs

(3,604)

(2,001)

Total costs

(6,746)

(3,190)

Operating profit before impairments of goodwill and capacity

(645)

336

Tax

211

(35)

Revaluation of syndicate capacity

8,132

5,604

Income tax relating to the components of other comprehensive income

(2,766)

(1,622)

Comprehensive income

4,932

4,283

 

Year to 31 December 2021

Underwriting year

Helios

retained

 capacity at

 31 December

2021

£m

Portfolio

midpoint

forecasts

Helios

profits

£'000

2019

67.4

2.7%

4,092

2020

66.6

0.97%

2,915

2021

93.6

N/A

(3,606)

 

 

 

3,401

 

Year to 31 December 2020

Underwriting year

Helios

retained

 capacity at

 31 December

2020

£m

Portfolio

midpoint

forecasts

Helios

profits

£'000

2018

36.1

(0.3)%

1,691

2019

31.3

(2.2)%

339

2020

30.8

N/A

(1,391)

 

 

 

639

 

Summary balance sheet (excluding assets and liabilities held by syndicates)

See Note 28 for further information.

 

2021

£'000

2020

£'000

Intangible assets

60,889

31,601

Funds at Lloyd's

43,589

19,713

Other cash

16,178

4,961

Other assets

5,517

12,731

Total assets

126,173

69,006

Deferred tax

11,887

6,492

Borrowings

-

4,000

Other liabilities

3,052

2,222

Total liabilities

14,939

12,714

Total syndicate equity

(3,488)

(5,743)

Total equity

107,746

50,549

 

Cash flow

Analysis of free working capital

Year to

31 December

2021

£'000

Year to

31 December

2020

£'000

Opening balance (free cash)

4,961

3,028

Income



Cash acquired on acquisition

1,939

632

Distribution of profits (net of tax retentions)

475

120

Transfers from funds at Lloyd's

336

4,901

Other income

95

248

Proceeds from the sale of capacity

-

1,649

Proceeds from the issue of shares

53,231

11,283

Borrowings

-

2,000

Cancelled reinsurance policy refunds

6,964

-

Expenditure



Operating costs

(3,702)

(2,810)

Purchase of capacity

(2,663)

-

Acquisition of LLVs

(26,529)

(6,075)

Transfers to funds at Lloyd's

(12,270)

(9,733)

Tax

(641)

(282)

Dividends paid

(2,018)

-

Repayment of borrowings

(4,000)

-

Closing balance

16,178

4,961

 

Net tangible assets

Year to

31 December

2021

£'000

Year to

31 December

2020

£'000

Net assets less intangible assets

46,856

18,948

Fair value of capacity (WAV)

59,796

30,826

 

106,652

49,774

Shares in issue - on the market (Note 21)

67,786

33,012

Shares in issue - total of on the market and JSOP shares (Note 21)

68,886

33,512

Net tangible asset value per share £ - on the market

1.57

1.51

Net tangible asset value per share £ - on the market and JSOP shares

1.55

1.49

 

Combined ratio summary of Helios Portfolio (see Note 6)

2021

2020

2019

Net premiums earned

92,692

55,682

47,454

Net insurance claims

(54,086)

(37,881)

(28,237)

Operating expenses included in underwriting result

(32,921)

(19,503)

(17,125)

Insurance result

5,685

(1,702)

2,092

Combined ratio

93.9%

103.1%

95.6%

 

 


Consolidated statement of comprehensive income -
Year ended 31 December 2021

 

 

Note

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Gross premium written

6

106,058

68,263

Reinsurance premium ceded

6

(26,935)

(17,660)

Net premium written

6

79,123

50,603

Change in unearned gross premium provision

7

(11,201)

(2,481)

Change in unearned reinsurance premium provision

7

1,484

647

Net change in unearned premium and reinsurance provision

7

(9,717)

(1,834)

Net earned premium

5,6

69,406

48,769

Net investment income

8

568

2,006

Other underwriting income


723

420

Gain on bargain purchase

22

1,219

1,260

Other income

 

(82)

1,399

Revenue

 

71,834

53,845

Gross claims paid


(46,478)

(38,496)

Reinsurers' share of gross claims paid

 

11,328

9,967

Claims paid, net of reinsurance

 

(35,150)

(28,529)

Change in provision for gross claims

7

(15,796)

(8,255)

Reinsurers' share of change in provision for gross claims

7

6,204

2,704

Net change in provision for claims

7

(9,592)

(5,551)

Net insurance claims incurred and loss adjustment expenses

6

(44,742)

(34,080)

Expenses incurred in insurance activities


(25,407)

(17,916)

Other operating expenses

 

(2,330)

(1,522)

Total expenses

9

(27,737)

(19,438)

Operating profit before impairments of goodwill and capacity

6

(645)

336

Income tax credit/(charge)

10

211

(35)

(Loss)/profit for the year

 

(434)

301

Other comprehensive income




Revaluation of syndicate capacity


8,132

5,604

Deferred tax relating to the components of other comprehensive income

 

(2,766)

(1,622)

Other comprehensive income for the year, net of tax

 

5,366

3,982

Total comprehensive income for the year

 

4,932

4,283

(Loss)/profit for the year attributable to owners of the Parent

 

(434)

301

Total comprehensive income for the year attributable to owners of the Parent

 

4,932

4,283

(Loss)/earnings per share attributable to owners of the Parent




Basic

11

(0.75p)

1.59p

Diluted

11

(0.74p)

1.55p

 

The profit attributable to owners of the Parent, the total comprehensive income and the earnings per share set out above are in respect of continuing operations.

The notes are an integral part of these Financial Statements.

 


Consolidated statement of financial position -
At 31 December 2021

Company number 05892671

 

 

 Note

31 December

2021

£'000

31 December

2020

£'000

Assets




Intangible assets

13

60,889

31,601

Financial assets at fair value through profit or loss

15

153,844

85,277

Reinsurance assets:




- reinsurers' share of claims outstanding

7

53,433

30,781

- reinsurers' share of unearned premium

7

10,538

6,028

Other receivables, including insurance and reinsurance receivables

16

87,859

58,348

Deferred acquisition costs

17

13,615

7,726

Prepayments and accrued income


799

1,176

Cash and cash equivalents

 

24,624

8,495

Total assets

 

405,601

229,432

Liabilities




Insurance liabilities:




- claims outstanding

7

186,653

113,371

- unearned premium

7

59,611

32,356

Deferred income tax liabilities

18

11,965

6,507

Borrowings

19

-

4,000

Other payables, including insurance and reinsurance payables

20

34,927

19,356

Accruals and deferred income

 

4,699

3,293

Total liabilities

 

297,855

178,883

Equity




Equity attributable to owners of the Parent:




Share capital

21

6,931

3,393

Share premium

21

86,330

35,525

Revaluation reserve


9,348

3,982

Other reserves - treasury shares (JSOP)


(110)

(50)

Retained earnings

 

5,247

7,699

Total equity

 

107,746

50,549

Total liabilities and equity

 

405,601

229,432

 

The Financial Statements were approved and authorised for issue by the Board of Directors on 26 May 2022, and were signed on its behalf by:

Nigel Hanbury

Chief Executive

26 May 2022

 

The notes are an integral part of these Financial Statements.



 

Parent Company statement of financial position -
At 31 December 2021

Company number: 05892671

 

Note

31 December

2021

£'000

31 December

2020

£'000

Assets




Investments in subsidiaries

14

71,362

41,233

Financial assets at fair value through profit or loss

15

285

-

Other receivables

16

38,496

20,796

Cash and cash equivalents

 

14,094

4,106

Total assets

 

124,237

66,135

Liabilities




Borrowings

19

-

4,000

Other payables

20

3,864

3,892

Total liabilities

 

3,864

7,892

Equity




Equity attributable to owners of the Parent:




Share capital

21

6,931

3,393

Share premium

21

86,330

35,525

 

 

93,261

38,918

Retained earnings:




At 1 January


19,325

16,712

Profit for the year attributable to owners of the Parent


9,805

2,636

Other changes in retained earnings

 

(2,018)

(23)

At 31 December

 

27,112

19,325

Total equity

 

120,373

58,243

Total liabilities and equity

 

124,237

66,135

 

The Financial Statements were approved and authorised for issue by the Board of Directors on 26 May 2022, and were signed on its behalf by:

Nigel Hanbury

Chief Executive

26 May 2022

The notes are an integral part of these Financial Statements.



 

Consolidated statement of changes in equity -
Year ended 31 December 2021

 



Attributable to owners of the Parent


 

Note

Share

capital

£'000

 Share

premium

£'000

Revaluation

reserve

Other

reserves

(JSOP)

£'000

Retained

earnings

£'000

Total

equity

£'000

At 1 January 2020

 

1,839

18,938

-

(50)

7,421

28,148

Total comprehensive income for the year:








Profit for the year


-

-

-

-

301

301

Other comprehensive income, net of tax

 

-

-

3,982

-

-

3,982

Total comprehensive income for the year

 

-

-

3,982

-

301

4,283

Transactions with owners:








Dividends paid

12

-

-

-

-

-

-

Company buyback of ordinary shares

21, 23

-

-

-

-

(23)

(23)

Share issue, net of transaction cost

21

1,554

16,587

-

-

-

18,141

Total transactions with owners

 

1,554

16,587

-

-

(23)

18,118

At 31 December 2020

 

3,393

35,525

3,982

(50)

7,699

50,549

At 1 January 2021

 

3,393

35,525

3,982

(50)

7,699

50,549

Total comprehensive income for the year:








Loss for the year


-

-

-

-

(434)

(434)

Other comprehensive income, net of tax

 

-

-

5,366

-

-

5,366

Total comprehensive income for the year

 

-

-

5,366

-

(464)

4,932

Transactions with owners:








Dividends paid

12

-

-

-

-

(2,018)

(2,018)

Company buyback of ordinary shares

21, 23

-

-

-

-

-

-

Share issue, net of transaction cost

21

3,538

50,805

-

(60)

-

54,283

Other comprehensive income, net of tax

 

-

-

-

-

-

-

Total transactions with owners

 

3,538

50,805

-

(60)

(2,018)

52,265

At 31 December 2021

 

6,931

86,330

9,348

(60)

5,247

107,746

 

The notes are an integral part of these Financial Statements.

 



 

Parent Company statement of changes in equity -
Year ended 31 December 2021

 

 

Note

Share

capital

£'000

Share

premium

£'000

Retained

earnings

£'000

Total

equity

£'000

At 1 January 2020

 

1,839

18,938

16,712

37,489

Total comprehensive income for the year:






Profit for the year


-

-

2,636

2,636

Other comprehensive income, net of tax

 

-

-

-

-

Total comprehensive income for the year

 

-

-

2,636

2,636

Transactions with owners:






Dividends paid

12

-

-

-

-

Company buyback of ordinary shares

21, 23

-

-

(23)

(23)

Share issue, net of transaction costs

 

1,554

16,587

-

18,141

Total transactions with owners

 

1,554

16,587

(23)

18,118

At 31 December 2020

 

3,393

35,525

19,325

58,243

At 1 January 2021

 

3,393

35,525

19,325

58,243

Total comprehensive income for the year:






Profit for the year


-

-

9,805

9,805

Other comprehensive income, net of tax

 

-

-

-

-

Total comprehensive income for the year

 

-

-

9,805

9,805

Transactions with owners:






Dividends paid

12

-

-

(2,018)

(2,018)

Company buyback of ordinary shares

21, 23

-

-

-

-

Share issue, net of transaction costs

 

3,538

50,805

-

54,343

Total transactions with owners

 

3,538

50,805

(2,018)

52,325

At 31 December 2021

 

6,931

86,330

27,112

120,373

 

The notes are an integral part of these Financial Statements.

 



 

Consolidated statement of cash flows -
Year ended 31 December 2021

 

 

Note

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Cash flows from operating activities




(Loss)/profit before tax


(645)

336

Adjustments for:




- interest received

8

(17)

(156)

- investment income

8

(1,549)

(1,318)

- gain on bargain purchase

22

(1,219)

(1,260)

- profit on sale of intangible assets


(12)

(1,775)

Changes in working capital:




- change in fair value of financial assets held at fair value through profit or loss

8

1,316

(297)

- increase in financial assets at fair value through profit or loss


(31,436)

(7,768)

- decrease in other receivables


1,162

4,491

- decrease in other payables


(3,800)

(4,706)

- net increase/decrease in technical provisions

 

18,285

(650)

Cash (used in)/from operations

 

(17,915)

(13,103)

Income tax paid

 

(675)

(312)

Net cash used in operating activities

 

(18,590)

(13,415)

Cash flows from investing activities




Interest received

8

17

156

Investment income

8

1,549

1,318

Purchase of intangible assets

13

(2,984)

(186)

Proceeds from disposal of intangible assets


1,809

1,779

Acquisition of subsidiaries, net of cash acquired

 

(13,255)

(364)

Net cash from investing activities

 

(12,864)

2,703

Cash flows from financing activities




Net proceeds from issue of ordinary share capital


53,601

11,193

Payment for Company buyback of shares

24

-

(23)

Proceeds from borrowings

19

-

2,000

Repayment of borrowings

19

(4,000)

-

Dividends paid to owners of the Parent

12

(2,018)

-

Net cash from financing activities

 

47,583

13,170

Net increase in cash and cash equivalents


16,129

2,458

Cash and cash equivalents at beginning of year

 

8,495

6,037

Cash and cash equivalents at end of year

 

24,624

8,495

 

Cash held within the syndicates' accounts is £8,447,000 (2020: £3,534,000) of the total cash and cash equivalents held at the year end of £24,624,000 (2020: £8,495,000). The cash held within the syndicates' accounts is not available to the Group to meet its day-to-day working capital requirements.

Cash and cash equivalents comprise cash at bank and in hand.

The notes are an integral part of these Financial Statements.

 

 


Parent Company statement of cash flows -
Year ended 31 December 2021

 

 

Note

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Cash flows from operating activities




Profit before tax


9,222

2,490

Adjustments for:




- investment income


262

28

- dividends received


-

(3,654)

- impairment of investment in subsidiaries

14

(11,192)

37

Changes in working capital:




- change in fair value of financial assets held at fair value through profit or loss


-

-

- increase in financial assets at fair value through profit or loss


(285)

-

- increase in other receivables


66

1,433

- decrease in other payables

 

(28)

(3,618)

Net cash from operating activities

 

(1,955)

(3,284)

Cash flows from investing activities




Investment income


(263)

(28)

Dividends received


-

3,654

Acquisition of subsidiaries

14, 22

(22,523)

(2,208)

Amounts owed by subsidiaries

25

(12,854)

940

Net cash used in investing activities

 

(35,640)

(7,971)

Cash flows from financing activities




Net proceeds from the issue of ordinary share capital


53,601

11,193

Payment for Company buyback of shares

24

-

(23)

Proceeds from borrowings

19

-

2,000

Repayment of borrowings

19

(4,000)

-

Dividends paid to owners of the Parent

12

(2,018)

-

Net cash from financing activities

 

47,583

13,170

Net decrease in cash and cash equivalents


9,988

1,915

Cash and cash equivalents at beginning of year

 

4,106

2,191

Cash and cash equivalents at end of year

 

14,094

4,106

 

Cash and cash equivalents comprise cash at bank and in hand.

The notes are an integral part of these Financial Statements.

 

 


Notes to the Financial Statements - Year ended 31 December 2021

 

 

1. General information

The Company is a public limited company listed on AIM. The Company was incorporated in England and is domiciled in the UK and its registered office is 40 Gracechurch Street, London EC3V 0BT. These Financial Statements comprise the Company and its subsidiaries (together referred to as the "Group"). The Company participates in insurance business as an underwriting member at Lloyd's through its subsidiary undertakings.

2. Significant accounting policies

The principal accounting policies adopted in the preparation of the Group and Parent Company Financial Statements (the "Financial Statements") are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and interpretations issued by the IFRS Interpretations Committee ("IFRIC") as adopted by the UK international accounting standards, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

No statement of comprehensive income is presented for Helios Underwriting plc, as a Parent Company, as permitted by Section 408 of the Companies Act 2006.

The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of financial assets at fair value through profit or loss.

Use of judgements and estimates

The preparation of Financial Statements in conformity with IFRS requires the use of judgements, estimates and assumptions in the process of applying the Group's accounting policies that affect the reported amounts of assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results may ultimately differ from these estimates. Further information is disclosed in Note 3.

The Group participates in insurance business through its Lloyd's member subsidiaries. Accounting information in respect of syndicate participations is provided by the syndicate managing agents and is reported upon by the syndicate auditors.

Going concern

The Group and the Company have net assets at the end of the reporting period of £107,746,000 and £120,374,000 respectively.

The Company's subsidiaries participate as underwriting members at Lloyd's on the 2019, 2020 and 2021 years of account, as well as any prior run-off years, and they have continued this participation since the year end on the 2022 year of account. This underwriting is supported by Funds at Lloyd's totalling £48,913,000 (2020: £26,440,000), letters of credit provided through the Group's reinsurance agreements totalling £37,032,000 (2020: £39,536,000) and solvency credits issued by Lloyd's totalling £239,000 (2020: £107,000).

The Directors have a reasonable expectation that the Group and the Company have adequate resources to meet their underwriting and other operational obligations for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements. In arriving at this conclusion the Directors have taken into account the impact of COVID-19 both on the operating activities of the Group and on the Lloyd's market.

International Financial Reporting Standards

Adoption of new and revised standards

In the current year, the Group has applied new IFRSs and amendments to IFRSs issued by the IASB that are mandatory for an accounting period that begins on or after 1 January 2021.

IFRS 16 Amendments, Leases COVID 19 Related Rent Concessions: Lessees are provided with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The Group has not applied this exemption and the amendment has not had an impact on the Consolidated Financial Statements.

IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Amendments, Interest Rate Benchmark Reform Phase 2. The change relates to the modification of financial assets, financial liabilities and lease liabilities, specific hedge accounting requirements, and disclosure requirements applying IFRS 7 to accompany the amendments regarding modifications and hedge accounting. The amendment has not had a material impact on the Consolidated Financial Statements.

Amendments to IFRS 4: Insurance contracts - Deferral of IFRS 9. The amendments defer the fixed expiry date of the amendment to annual periods beginning on or after 1 January 2023.

New standards, amendments and interpretations not yet adopted

A number of new standards and amendments adopted by the UK, as well as standards and interpretations issued by the IASB but not yet adopted by the UK, have not been applied in preparing the Consolidated Financial Statements.

The Group does not plan to adopt these standards early; instead it will apply them from their effective dates as determined by their dates of UK endorsement. The Group continues to review the upcoming standards to determine their impact.

IFRS 9, Financial Instruments (IASB effective date 1 January 2018) has not been applied under IFRS 4 Amendment option to defer until IFRS 17 comes into effect on 1 January 2023.

IFRS 17 "Insurance Contracts" (IASB effective date 1 January 2023).

Amendments to IFRS 3 "Business Combinations", IAS 16 "Property, Plant and Equipment" and IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" (IASB effective date 1 January 2022).

IAS 1 Presentation of Financial Statements Amendments, Classification of Liabilities as Current or Non-current (IASB effective date 1 January 2023).

IAS 8 Accounting Policies Amendments, Changes in Accounting Estimates and Errors (IASB effective date 1 January 2023).

IFRS 9 "Financial Instruments" (IASB effective date 1 January 2018) has not been applied under the IFRS 4 amendment option. IFRS 9 provides a reform of financial instruments accounting to supersede IAS 39 "Financial Instruments: Recognition and Measurement".

Applying IFRS 9 "Financial Instruments" with IFRS 4 "Insurance Contracts" contained an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4. The Group meets the eligibility criteria and has taken advantage of this temporary exemption not to apply this standard until the effective date of IFRS 17.

Principles of consolidation, business combinations and goodwill

(a) Consolidation and investments in subsidiaries

The Group Financial Statements incorporate the Financial Statements of Helios Underwriting plc, the Parent Company, and its directly and indirectly held subsidiaries.

The Financial Statements for all of the above subsidiaries are prepared for the year ended 31 December 2021 under UK GAAP. Consolidation adjustments are made to convert the subsidiary Financial Statements prepared under UK GAAP to IFRS so as to align accounting policies and treatments.

No income statement is presented for Helios Underwriting plc as permitted by Section 408 of the Companies Act 2006. The profit after tax for the year of the Parent Company was £9,805,000 (2020: £2,636,000).

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding or partnership participation of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Intra-group transactions, balances and unrealised gains on intra-group transactions are eliminated.

In the Parent Company's Financial Statements, investments in subsidiaries are stated at cost and are reviewed for impairment annually or when events or changes in circumstances indicate the carrying value to be impaired.

(b) Business combinations and goodwill

The Group uses the acquisition method of accounting to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition costs are expensed as incurred.

The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is capitalised and recorded as goodwill. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment annually or if events or changes in circumstances indicate that the carrying value may be impaired and recognised directly in the consolidated income statement. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly as revenue in the consolidated income statement as a gain on bargain purchase. The gain on bargain purchase is recognised within the operating profit, as acquiring LLVs at a discount to their net asset fair value, as is an important part of the predominant strategy for the Group. Insurance liabilities are not discounted on acquisition, when calculating their fair value, as these liabilities will likely all crystallise within three years due to the accounting framework Lloyd's syndicates operate under. Accordingly, any discount applied to insurance liabilities will not be material.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as Nigel Hanbury.

Foreign currency translation

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The Financial Statements are presented in thousands of pounds sterling, which is the Group's functional and presentational currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

Foreign currency transactions and non-monetary assets and liabilities, including deferred acquisition costs and unearned premiums, are translated into the functional currency using annual average rates of exchange prevailing at the time of the transaction as a proxy for the transactional rates. The translation difference arising on non-monetary asset items is recognised in the consolidated income statement.

Certain supported syndicates have non-sterling functional currencies and any exchange movement that they would have been reflected in other comprehensive income. As a result of this has been included within profit before tax at consolidation level, to be consistent with the Group's policy of using sterling as the functional currency.

Monetary items are translated at period-end rates; any exchange differences arising from the change in rates of exchange are recognised in the consolidated income statement of the year.

Underwriting

Premiums

Gross premium written comprises the total premiums receivable in respect of business incepted during the year, together with any differences between booked premiums for prior years and those previously accrued, and includes estimates of premiums due but not yet receivable or notified to the syndicates on which the Group participates, less an allowance for cancellations. All premiums are shown gross of commission payable to intermediaries and exclude taxes and duties levied on them.

Unearned premiums

Gross premium written is earned according to the risk profile of the policy. Unearned premiums represent the proportion of gross premium written in the year that relates to unexpired terms of policies in force at the end of the reporting period calculated on a time apportionment basis having regard, where appropriate, to the incidence of risk. The specific basis adopted by each syndicate is determined by the relevant managing agent.

Deferred acquisition costs

Acquisition costs, which represent commission and other related expenses, are deferred over the period in which the related premiums are earned.

Reinsurance premiums

Reinsurance premium costs are allocated by the managing agent of each syndicate to reflect the protection arranged in respect of the business written and earned.

Reinsurance premium costs in respect of reinsurance purchased directly by the Group are charged or credited based on the annual accounting result for each year of account protected by the reinsurance.

Claims incurred and reinsurers' share

Claims incurred comprise claims and settlement expenses (both internal and external) occurring in the year and changes in the provisions for outstanding claims, including provisions for claims incurred but not reported ("IBNR") and settlement expenses, together with any other adjustments to claims from previous years. Where applicable, deductions are made for salvage and other recoveries.

The provision for claims outstanding comprises amounts set aside for claims notified and IBNR. The amount included in respect of IBNR is based on statistical techniques of estimation applied by each syndicate's in-house reserving team and reviewed, in certain cases, by external consulting actuaries. These techniques generally involve projecting from past experience the development of claims over time to form a view of the likely ultimate claims to be experienced for more recent underwriting, having regard to variations in the business accepted and the underlying terms and conditions. The provision for claims also includes amounts in respect of internal and external claims handling costs. For the most recent years, where a high degree of volatility arises from projections, estimates may be based in part on output from the rating and other models of the business accepted, and assessments of underwriting conditions.

The reinsurers' share of provisions for claims is based on calculated amounts of outstanding claims and projections for IBNR, net of estimated irrecoverable amounts, having regard to each syndicate's reinsurance programme in place for the class of business, the claims experience for the year and the current security rating of the reinsurance companies involved. Each syndicate uses a number of statistical techniques to assist in making these estimates.

Accordingly, the two most critical assumptions made by each syndicate's managing agent as regards claims provisions are that the past is a reasonable predictor of the likely level of claims development and that the rating and other models used, including pricing models for recent business, are reasonable indicators of the likely level of ultimate claims to be incurred.

The level of uncertainty with regard to the estimations within these provisions generally decreases with time since the underlying contracts were exposed to new risks. In addition, the nature of short-tail risks, such as property where claims are typically notified and settled within a short period of time, will normally have less uncertainty after a few years than long-tail risks, such as some liability businesses where it may be several years before claims are fully advised and settled. In addition to these factors if there are disputes regarding coverage under policies or changes in the relevant law regarding a claim this may increase the uncertainty in the estimation of the outcomes.

The assessment of these provisions is usually the most subjective aspect of an insurer's accounts and may result in greater uncertainty within an insurer's accounts than within those of many other businesses. The provisions for gross claims and related reinsurance recoveries have been assessed on the basis of the information currently available to the directors of each syndicate's managing agent. However, ultimate liability will vary as a result of subsequent information and events and this may result in significant adjustments to the amounts provided. Adjustments to the amounts of claims provisions established in prior years are reflected in the Financial Statements for the period in which the adjustments are made. The provisions are not discounted for the investment earnings that may be expected to arise in the future on the funds retained to meet the future liabilities. The methods used, and the estimates made, are reviewed regularly.

Quota share reinsurance

Under the Group's quota share reinsurance agreements, 70% of the 2020 Underwriting year, an average of 47% of the 2021 underwriting year and an average of 26% of the 2022 underwriting year of insurance exposure is ceded to the reinsurers. Amounts payable to the reinsurers are included within "reinsurance premium ceded" in the consolidated income statement of the year and amounts receivable from the reinsurers are included within "reinsurers' share of gross claims paid" in the consolidated income statement of the year.

Unexpired risks provision

Provision for unexpired risks is made where the costs of outstanding claims, related expenses and deferred acquisition costs are expected to exceed the unearned premium provision carried forward at the end of the reporting period. The provision for unexpired risks is calculated separately by reference to classes of business that are managed together, after taking into account relevant investment return. The provision is made on a syndicate-by-syndicate basis by the relevant managing agent.

Closed years of account

At the end of the third year, the underwriting account is normally closed by reinsurance into the following year of account. The amount of the reinsurance to close premium payable is determined by the managing agent, generally by estimating the cost of claims notified but not settled at 31 December, together with the estimated cost of claims incurred but not reported ("IBNR") at that date and an estimate of future claims handling costs. Any subsequent variation in the ultimate liabilities of the closed year of account is borne by the underwriting year into which it is reinsured.

The payment of a reinsurance to close premium does not eliminate the liability of the closed year for outstanding claims. If the reinsuring syndicate was unable to meet any obligations, and the other elements of Lloyd's chain of security were to fail, then the closed underwriting account would have to settle any outstanding claims.

The Directors consider that the likelihood of such a failure of the reinsurance to close is extremely remote and consequently the reinsurance to close has been deemed to settle the liabilities outstanding at the closure of an underwriting account. The Group will include its share of the reinsurance to close premiums payable as technical provisions at the end of the current period and no further provision is made for any potential variation in the ultimate liability of that year of account.

Run-off years of account

Where an underwriting year of account is not closed at the end of the third year (a "run-off" year of account) a provision is made for the estimated cost of all known and unknown outstanding liabilities of that year. The provision is determined initially by the managing agent on a similar basis to the reinsurance to close. However, any subsequent variation in the ultimate liabilities for that year remains with the corporate member participating therein. As a result, any run-off year will continue to report movements in its results after the third year until such time as it secures a reinsurance to close.

Net operating expenses (including acquisition costs)

Net operating expenses include acquisition costs, profit and loss on exchange and other amounts incurred by the syndicates on which the Group participates.

Acquisition costs, comprising commission and other costs related to the acquisition of new insurance contracts, are deferred to the extent that they are attributable to premiums unearned at the end of the reporting period.

Investment income

Interest receivable from cash and short-term deposits and interest payable are accrued to the end of the period.

Dividend income from financial assets at fair value through profit or loss is recognised in the income statement when the Group's right to receive payments is established.

Syndicate investments and cash are held on a pooled basis, the return from which is allocated by the relevant managing agent to years of account proportionate to the funds contributed by the year of account.

Other operating expenses

All expenses are accounted for on an accruals basis.

Intangible assets: syndicate capacity

With effect from 31 December 2020, the Group changed this policy so that syndicate capacity is revalued on a regular basis to its fair value which the directors believe to be the average weighted value achieved in the Lloyd's auction process. The increase in value of syndicate capacity between its fair value and its cost less impairment is taken to the revaluation reserve through the statement of comprehensive income net of any tax effect, as required by IAS 38.

Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group does not make use of the held-to-maturity and available-for-sale classifications.

(i) Financial assets at fair value through profit or loss

All financial assets at fair value through profit or loss are categorised as designated at fair value through profit or loss upon initial recognition because they are managed and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. Information about these financial assets is provided internally on a fair value basis to the Group's key management.

The Group's investment strategy is to invest and evaluate their performance with reference to their fair values. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets, except for maturities greater than 12 months after the reporting period. The latter ones are classified as non-current assets.

The Group's loans and receivables comprise "other receivables, including insurance and reinsurance receivables" and "cash and cash equivalents".

The Parent Company's loans and receivables comprise "other receivables" and "cash and cash equivalents".

(b) Recognition, derecognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date, being the date on which the Group commits to the purchase or sale of the asset. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or is transferred and the Group has transferred substantially all its risks and rewards of ownership.

Financial assets at fair value through profit or loss are initially recognised at fair value and transaction costs incurred expensed in the income statement.

Loans and receivables are initially recognised at fair value plus transaction costs and are subsequently carried at amortised cost less any impairment losses.

Fair value estimation

The fair value of financial assets at fair value through profit or loss which are traded in active markets is based on quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regular occurring market transactions on an arm's length basis. The quoted market price used for financial assets at fair value through profit or loss held by the Group is the current bid price.

The fair value of financial assets at fair value through profit or loss that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates.

Unrealised gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the income statement within "net investment income".

The fair values of short-term deposits are assumed to approximate to their book values. The fair values of the Group's debt securities have been based on quoted market prices for these instruments.

(c) Impairment

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Asset carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument's fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Cash and cash equivalents

For the purposes of the statements of cash flows, cash and cash equivalents comprise cash and short-term deposits at bank.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services, and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Borrowing costs

Borrowing costs are recognised in the income statement in the period in which they are incurred.

Joint Share Ownership Plan ("JSOP")

On 16 August 2021, the Company issued and allotted 600,000 new ordinary shares of £0.10 each ("ordinary shares"). The new ordinary shares have been issued at a subscription price of 155p per ordinary share, being the closing price of an ordinary share on 16 August 2021, pursuant to the Helios Underwriting plc employees' Joint Share Ownership Plan (the "Plan").

The new ordinary shares have been issued into the respective joint beneficial ownership of (i) each of the participating Executive Directors as shown in Note 23 and (ii) the Trustee of JTC Employee Solutions Limited (the "Trust") and are subject to the terms of joint ownership agreements ("JOAs") respectively entered into between the Director, the Company and the Trustee. The nominal value of the new ordinary shares has been paid by the Trust out of funds advanced to it by the Company with the additional consideration of 145p left outstanding until such time as new ordinary shares are sold. The Company has waived its lien on the shares such that there are no restrictions on their transfer.

The terms of the JOAs provide, inter alia, that if jointly owned shares become vested and are sold, the proceeds of sale will be divided between the joint owners so that the participating Director receives an amount equal to the amount initially provided by the participating Director plus any growth in the market value of the jointly owned Ordinary Shares above a target share price of 174.8p (so that the participating Director will only ever receive value if the share sale price exceeds this).

The vesting of the award will be subject to performance conditions relating to growth in Net Tangible Asset Value per share measured over the three calendar years from the Net Tangible Asset per share disclosed as at 31 December 2021 of 151p.

The percentage of Jointly Owned Shares that vest shall be dependent on the average growth in Net Tangible Asset Value per share during the three financial years ending 31 December 2023. The vesting percentage shall be determined on the Average Growth in Net Tangible Asset Value per share. If the Average Growth in Net Tangible Asset Value does not exceed 5%, then no awards vest, and if the Average Growth in Net Tangible Asset Value exceeds 20% or above, then 100% of the awards vest.

The Plan was established and approved by resolution of the Remuneration Committee of the Company on 13 December 2017 and provides for the acquisition by employees, including Executive Directors, of beneficial interests as joint owners (with the Trust) of ordinary shares in the Company upon the terms of a JOA. The terms of the JOA provide that if the jointly owned shares become vested and are sold, the proceeds of sale will be divided between the joint owners on the terms set out above.

Current and deferred tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case tax is also recognised in other comprehensive income or directly in equity, respectively.

Current tax

The current income tax charge is calculated on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management establishes provisions when appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.

However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Other payables

These present liabilities for services provided to the Group prior to end of the financial year which are unpaid. These are classified as current liabilities, unless payment is not due within 12 months after the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Share capital and share premium

Ordinary shares are classified as equity.

The difference between the fair value of the consideration received and the nominal value of the share capital issued is taken to the share premium account. Incremental costs directly attributable to the issue of shares or options are shown in equity as a deduction, net of tax, from proceeds.

Where the Company buys back its own ordinary shares on the market, and these are held in treasury, the purchase is made out of distributable profits and hence shown as a deduction from the Company's retained earnings.

Dividend distribution policy

Dividend distribution to the Company's shareholders is recognised in the Group's and the Parent Company's Financial Statements in the period in which the dividends are approved by the Company's shareholders.

3. Key accounting judgements and estimation uncertainties

In applying the Company's accounting policies, the Directors are required to make judgements, estimates and assumptions in determining the carrying amounts of assets and liabilities. These judgements, estimates and assumptions are based on the best and most reliable evidence available at the time when the decisions are made, and are based on historical experience and other factors that are considered to be applicable. Due to the inherent subjectivity involved in making such judgements, estimates and assumptions, the actual results and outcomes may differ. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

The measurement of the provision for claims outstanding is the most significant judgement involving estimation uncertainty regarding amounts recognised in these Financial Statements in relation to underwriting by the syndicates and this is disclosed further in Notes 4 and 7.

The management and control of each syndicate is carried out by the managing agent of that syndicate, and the Group looks to the managing agent to implement appropriate policies, procedures and internal controls to manage each syndicate.

The key accounting judgements and sources of estimation uncertainty set out below therefore relate to those made in respect of the Group only, and do not include estimates and judgements made in respect of the syndicates.

4. Risk management

The majority of the risks to the Group's future cash flows arise from each subsidiary's participation in the results of Lloyd's syndicates. As detailed below, these risks are mostly managed by the managing agents of the syndicates. The Group's role in managing these risks, in conjunction with its subsidiaries and members' agent, is limited to a selection of syndicate participations, monitoring the performance of the syndicates and the purchase of appropriate member level reinsurance.

Risk background

The syndicates' activities expose them to a variety of financial and non-financial risks. The managing agent is responsible for managing the syndicate's exposure to these risks and, where possible, introducing controls and procedures that mitigate the effects of the exposure to risk. For the purposes of setting capital requirements for the 2019 and subsequent years of account, each managing agent will have prepared a Lloyd's Capital Return ("LCR") for the syndicate to agree capital requirements with Lloyd's based on an agreed assessment of the risks impacting the syndicate's business and the measures in place to manage and mitigate those risks from a quantitative and qualitative perspective. The risks described below are typically reflected in the LCR and typically the majority of the total assessed value of the risks concerned is attributable to insurance risk.

The insurance risks faced by a syndicate include the occurrence of catastrophic events, downward pressure on pricing of risks, reductions in business volumes and the risk of inadequate reserving. Reinsurance risk arises from the risk that a reinsurer fails to meet its share of a claim. The management of the syndicate's funds is exposed to investment risk, liquidity risk, credit risk, currency risk and interest rate risk (as detailed below), leading to financial loss. The syndicate is also exposed to regulatory and operational risks including its ability to continue to trade. However, supervision by Lloyd's and the Prudential Regulation Authority provides additional controls over the syndicate's management of risks.

The Group manages the risks faced by the syndicates on which its subsidiaries participate by monitoring the performance of the syndicates it supports. This commences in advance of committing to support a syndicate for the following year, with a review of the business plan prepared for each syndicate by its managing agent. In addition, quarterly reports and annual accounts, together with any other information made available by the managing agent, are monitored and if necessary enquired into. If the Group considers that the risks being run by the syndicate are excessive, it will seek confirmation from the managing agent that adequate management of the risk is in place and, if considered appropriate, will withdraw support from the next year of account. The Group also manages its exposure to insurance risk by purchasing appropriate member level reinsurance.

(a) Syndicate risks

(i) Liquidity risk

The syndicates are exposed to daily calls on their available cash resources, principally from claims arising from its insurance business. Liquidity risk arises where cash may not be available to pay obligations when due, or to ensure compliance with the syndicate's obligations under the various trust deeds to which it is party.

The syndicates aim to manage their liquidity position so that they can fund claims arising from significant catastrophic events, as modelled in their Lloyd's realistic disaster scenarios ("RDS").

Although there are usually no stated maturities for claims outstanding, syndicates have provided their expected maturity of future claims settlements as follows:

2021

No stated

maturity

£'000

0-1 year

£'000

1-3 years

£'000

3-5 years

£'000

>5 years

£'000

 

Total

£'000

Claims outstanding

3

64,445

66,161

27,329

28,715

186,653

 

2020

No stated

maturity

£'000

0-1 year

£'000

1-3 years

£'000

3-5 years

£'000

>5 years

£'000

Total

£'000

Claims outstanding

72

40,003

38,451

18,340

16,505

113,371

 

(ii) Credit risk

Credit ratings to syndicate assets (Note 28) emerging directly from insurance activities which are neither past due nor impaired are as follows:

2021

AAA

£'000

AA

£'000

A

£'000

BBB or lower

£'000

Not rated

£'000

Total

£'000

Financial investments

22,984

30,330

33,663

16,070

6,588

109,635

Deposits with ceding undertakings

3

-

597

-

20

620

Reinsurers' share of claims outstanding

1,085

16,276

31,285

707

4,033

53,386

Reinsurance debtors

46

773

1,882

212

379

3,292

Cash at bank and in hand

675

117

7,597

19

39

8,447

 

24,793

47,496

75,024

17,008

11,059

175,380

 

2020

AAA

£'000

AA

£'000

A

£'000

BBB or lower

£'000

Not rated

£'000

Total

£'000

Financial investments

10,098

20,099

22,142

8,378

4,840

65,557

Deposits with ceding undertakings

-

-

-

-

7

7

Reinsurers' share of claims outstanding

1,204

8,240

18,217

531

2,538

30,730

Reinsurance debtors

12

450

1,277

169

408

2,316

Cash at bank and in hand

12

96

3,346

41

39

3,534

 

11,326

28,885

44,982

9,119

7,832

102,144

 

Syndicate assets (Note 28) emerging directly from insurance activities, with reference to their due date or impaired, are as follows:


Past due but not impaired

2021

Neither

past due

nor impaired

£'000

Less than

6 months

£'000

Between

6 months

and 1 year

£'000

Greater

than 1 year

£'000

Impaired

£'000

Total

£'000

Financial investments

109,633

-

-

-

-

109,635

Deposits with ceding undertakings

620

-

-

-

-

620

Reinsurers' share of claims outstanding

53,386

-

-

-

(13)

53,373

Reinsurance debtors

3,292

2,691

66

111

-

6,160

Cash at bank and in hand

8,447

-

-

-

-

8,447

Insurance and other debtors

88,144

2,833

835

672

(13)

92,471

 

263,524

5,524

901

783

(26)

270,706

 


Past due but not impaired

2020

Neither

past due

nor impaired

£'000

Less than

6 months

£'000

Between

6 months

and 1 year

£'000

Greater

than 1 year

£'000

Impaired

£'000

Total

£'000

Financial investments

65,557

-

-

-

-

65,557

Deposits with ceding undertakings

7

-

-

-

-

7

Reinsurers' share of claims outstanding

30,730

-

-

-

(10)

30,720

Reinsurance debtors

2,316

1,153

57

21

-

3,547

Cash at bank and in hand

3,534

-

-

-

-

3,534

Insurance and other debtors

49,373

1,453

458

300

(10)

51,574

 

151,517

2,606

515

321

(20)

154,939

 

(iii) Interest rate equity price risk

Interest rate risk and equity price risk are the risks that the fair value of future cash flows of financial instruments will fluctuate because of changes in market interest rates and market prices, respectively.

(iv) Currency risk

The syndicates' main exposure to foreign currency risk arises from insurance business originating overseas, primarily denominated in US dollars. Transactions denominated in US dollars form a significant part of the syndicates' operations. This risk is, in part, mitigated by the syndicates maintaining financial assets denominated in US dollars against its major exposures in that currency.

The table below provides details of syndicate assets and liabilities (Note 28) by currency:

2021

GBP

£'000

converted

USD

£'000

converted

EUR

£'000

converted

CAD

£'000

converted

Other

£'000

converted

Total

£'000

converted

Total assets

45,145

191,697

9,537

24,446

8,605

279,430

Total liabilities

(52,934)

(194,965)

(12,655)

(18,028)

(4,335)

(282,918)

(Deficiency)/surplus of assets

(7,789)

(3,268)

(3,118)

6,418

4,270

(3,488)

 

2020

GBP

£'000

converted

USD

£'000

converted

EUR

£'000

converted

CAD

£'000

converted

Other

£'000

converted

Total

£'000

converted

Total assets

29,186

106,692

6,092

13,633

4,823

160,426

Total liabilities

(38,021)

(109,050)

(6,177)

(10,180)

(2,741)

(166,169)

(Deficiency)/surplus of assets

(8,835)

(2,358)

(85)

3,453

2,082

(5,743)

 

The impact of a 5% change in exchange rates between GBP and other currencies would be £209,000 on shareholders' funds (2020: £153,000).

(v) Reinsurance risk

Reinsurance risk to the Group arises where reinsurance contracts put in place to reduce gross insurance risk do not perform as anticipated, result in coverage disputes or prove inadequate in terms of the vertical or horizontal limits purchased. Failure of a reinsurer to pay a valid claim is considered a credit risk, which is detailed separately below.

The Group currently has reinsurance programmes on the 2019, 2020 and 2021 years of account.

The Group has strategic collateralised quota share arrangements in place in respect of its underwriting business with XL Re Limited, Bermudan reinsurer Everest Reinsurance Bermuda Limited (part of global NYSE-quoted insurer Everest Re Group Limited), Guernsey reinsurer Polygon Insurance Co Limited and other private shareholders through HIPCC Limited.

 

(b) Group risks - corporate level

(i) Investment, credit, liquidity and currency risks

The other significant risks faced by the Group are with regard to the investment of funds within its own custody. The elements of these risks are investment risk, liquidity risk, credit risk, interest rate risk and currency risk. To mitigate this, the surplus Group funds are deposited with highly rated banks and fund managers. The main liquidity risk would arise if a syndicate had inadequate liquid resources for a large claim and sought funds from the Group to meet the claim. In order to minimise investment risk, credit risk and liquidity risk, the Group's funds are invested in readily realisable short-term deposits. The Group's maximum exposure to credit risk at 31 December 2021 is £65.3m (2020: £37.4m), being the aggregate of the Group's insurance receivables, prepayments and accrued income, financial assets at fair value, and cash and cash equivalents, excluding any amounts held in the syndicates. The syndicates can distribute their results in sterling, US dollars or a combination of the two. The Group is exposed to movements in the US dollar between the balance sheet date and the distribution of the underwriting profits and losses, which is usually in the May following the closure of a year of account. The Group does not use derivative instruments to manage risk and, as such, no hedge accounting is applied.

As a result of the specific nature and structure of the Group's collateralised quota share reinsurance arrangements through Cell 6 (Guernsey based protected cell managed by HIPCC), the Group's Funds at Lloyd's calculation benefits from an aggregate £37.0m (2020: £39.5m) letter of credit ("LOC") acceptable to Lloyd's, on behalf of XL Re Limited, Everest Reinsurance Bermuda Limited, Polygon Insurance Co Limited (the reinsurers) and other private shareholders. The LOC is pledged in aggregate to the relevant syndicates through Lloyd's and thus Helios Underwriting plc is not specifically exposed to counterparty credit risk in this matter. Should the bank's LOC become unacceptable to Lloyd's for any reason, the reinsurer is responsible under the terms of the contract for making alternative arrangements. The contract is annually renewable and the Group has a contingency plan in place in the event of non-renewal under both normal and adverse market conditions.

(ii) Market risk

The Group is exposed to market and liquidity risk in respect of its holdings of syndicate participations. Lloyd's syndicate participations are traded in the Lloyd's auctions held in September and October each year. The Group is exposed to changes in market prices and a lack of liquidity in the trading of a particular syndicate's capacity could result in the Group making a loss compared to the carrying value when the Group disposes of particular syndicate participations.

(iii) Regulatory risks

The Company's subsidiaries are subject to continuing approval by Lloyd's to be a member of a Lloyd's syndicate. The risk of this approval being removed is mitigated by monitoring and fully complying with all requirements in relation to membership of Lloyd's. The capital requirements to support the proposed amount of syndicate capacity for future years are subject to the requirements of Lloyd's. A variety of factors are taken into account by Lloyd's in setting these requirements including market conditions and syndicate performance and, although the process is intended to be fair and reasonable, the requirements can fluctuate from one year to the next, which may constrain the volume of underwriting a subsidiary of the Company is able to support.

The Company is subject to the AIM Rules. Compliance with the AIM Rules is monitored by the Board.

Operational risks

As there are relatively few transactions actually undertaken by the Group, there are only limited systems and operational requirements of the Group and therefore operational risks are not considered to be significant. Close involvement of all Directors in the Group's key decision making and the fact that the majority of the Group's operations are conducted by syndicates provide control over any remaining operational risks.

Capital management objectives, policies and approach

The Group has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:

• to maintain the required level of stability of the Group, thereby providing a degree of security to shareholders;

• to allocate capital efficiently and support the development of the business by ensuring that returns on capital employed meet the requirements of the shareholders; and

• to maintain the financial strength to support increases in the Group's underwriting through acquisition of capacity in the Lloyd's auctions or through the acquisition of new subsidiaries.

The Group's capital management policy is to hold a sufficient level of capital to allow the Group to take advantage of market conditions, particularly when insurance rates are improving, and to meet the Funds at Lloyd's ("FAL") requirements that support the corporate member subsidiaries' current and future levels of underwriting.

Approach to capital management

The capital structure of the Group consists entirely of equity attributable to equity holders of the Company, comprising issued share capital, share premium and retained earnings as disclosed in the statements of changes in equity.

At 31 December 2021, the corporate member subsidiaries had an agreed Economic Capital Assessment ("ECA") requirement of £90.9m (2020: £58.2m) to support their underwriting on the 2022 year of account (2021 year of account). The funds to support this requirement are held in short-term investment funds and deposits or provided by the quota share reinsurance capital providers by way of an LOC. The FAL requirements are formally assessed and funded twice yearly and must be met by the corporate member subsidiaries to continue underwriting. At 31 December 2021, the agreed ECA requirements for the Group were 38% (2020: 53%) of the capacity for the following year of account.

5. Segmental information

Nigel Hanbury is the Group's chief operating decision-maker. He has determined its operating segments based on the way the Group is managed, for the purpose of allocating resources and assessing performance.

The Group has three segments that represent the primary way in which the Group is managed, as follows:

• syndicate participation;

• investment management; and

• other corporate activities.

Year ended 31 December 2021

Syndicate

participation

£'000

Investment

management

£'000

Other

corporate

activities

£'000

Total

£'000

Net earned premium

69,406

-

-

69,406

Net investment income

185

383

-

568

Other income

119

-

522

641

Net insurance claims and loss adjustment expenses

(42,423)

-

(2,319)

(44,742)

Expenses incurred in insurance activities

(24,491)

-

(916)

(25,407)

Other operating expenses

(267)

-

(2,063)

(2,330)

Gain on bargain purchase (Note 22)

-

-

1,219

1,219

Impairment of goodwill

-

-

-

-

Impairment of syndicate capacity (see Note 13)

-

-

-

-

Loss before tax

2,529

383

(3,557)

(645)

 

Year ended 31 December 2020

Syndicate

participation

£'000

Investment

management

£'000

Other

corporate

activities

£'000

Total

£'000

Net earned premium

48,769

-

-

48,769

Net investment income

2,126

(120)

-

2,006

Other income

101

-

1,718

1,819

Net insurance claims and loss adjustment expenses

(33,990)

-

(90)

(34,080)

Expenses incurred in insurance activities

(17,573)

-

(343)

(17,916)

Other operating expenses

203

-

(1,725)

(1,522)

Gain on bargain purchase (Note 22)

-

-

1,260

1,260

Impairment of goodwill

-

-

-

-

Impairment of syndicate capacity (see Note 13)

-

-

-

-

Profit before tax

(364)

(120)

820

336

 

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.

Net insurance claims and loss adjustment expenses within 2021 other corporate activities totalling £2,319,000 (2020: £90,000 - 2018, 2019 and 2020 years of account) presents the 2019, 2020 and 2021 years of account net Group quota share reinsurance premium recoverable from HIPCC Limited (Note 25). This net quota share reinsurance premium recoverable is included within "net insurance claims incurred and loss adjustments expenses" in the consolidated income statement of the year.

6. Operating loss/profit before impairments of goodwill and capacity


Underwriting year of account*





Year ended 31 December 2021

2019

and prior

£'000

2020

£'000

2021

£'000

Sub-total

£'000

Pre-

acquisition **

£'000

Corporate

reinsurance

£'000

Other

corporate

£'000

Total

£'000

Gross premium written

721

11,712

122,179

134,612

(28,554)

-

-

106,058

Reinsurance ceded

(713)

(2,569)

(28,909)

(32,191)

7,126

-

(1,871)

(26,935)

Net premium written

8

9,143

93,270

102,421

(21,427)

-

(1,871)

79,123

Net earned premium

3,426

40,573

48,693

92,692

(21,415)

-

(1,871)

69,406

Other income

206

(166)

(3)

37

(681)

616

2,456

2,428

Net insurance claims incurred and loss adjustment expenses

5,113

(22,945)

(36,256)

(54,088)

12,037

(2,319)

(372)

(44,742)

Operating expenses

(2,261)

(12,406)

(18,254)

(32,921)

8,788

-

(3,604)

(27,737)

Operating (loss)/profit before impairments of goodwill and capacity

6,484

5,056

(5,820)

5,720

(1,271)

(1,703)

(3,391)

(645)

Quota share adjustment

(2,392)

(2,141)

2,214

(2,319)

-

2,319

-

-

Operating (loss)/profit before impairments of goodwill and capacity, after quota share adjustment

4,092

2,915

(3,606)

3,401

(1,271)

616

(3,391)

(645)

 

*  The underwriting year of account results represent the Group's share of the syndicates' results by underwriting year of account before corporate member level reinsurance and members' agent's charges.

**  Pre-acquisition relates to the element of results from the new acquisitions before they were acquired by the Group.


Underwriting year of account*





Year ended 31 December 2020

2019

and prior

£'000

2020

£'000

2021

£'000

Sub-total

£'000

Pre-

acquisition **

£'000

Corporate

reinsurance

£'000

Other

corporate

£'000

Total

£'000

Gross premium written

348

6,105

69,693

76,146

(7,883)

-

-

68,263

Reinsurance ceded

202

(1,410)

(16,817)

(18,025)

1,462

-

(1,097)

(17,660)

Net premium written

550

4,695

52,876

58,121

(6,421)

-

(1,097)

50,603

Net earned premium

3,116

24,807

27,759

55,682

(5,816)

-

(1,097)

48,769

Other income

1,242

585

604

2,431

(515)

334

2,835

5,085

Net insurance claims incurred and loss adjustment expenses

579

(17,074)

(21,386)

(37,881)

4,174

(90)

(283)

(34,080)

Operating expenses

(1,473)

(7,373)

(10,657)

(19,503)

2,065

-

(2,000)

(19,438)

Operating (loss)/profit before impairments of goodwill and capacity

3,464

945

(3,680)

729

(92)

244

(545)

336

Quota share adjustment

(1,773)

(606)

2,289

(90)

-

90

-

-

Operating (loss)/profit before impairments of goodwill and capacity, after quota share adjustment

1,691

339

(1,391)

639

(92)

334

(545)

336

 

*  The underwriting year of account results represent the Group's share of the syndicates' results by underwriting year of account before corporate member level reinsurance and members' agent's charges.

**  Pre-acquisition relates to the element of results from the new acquisitions before they were acquired by the Group.

 

7. Insurance liabilities and reinsurance balances

Movement in claims outstanding

 

Gross

£'000

Reinsurance

£'000

Net

£'000

At 1 January 2020

95,616

25,760

69,856

Increase in reserves arising from acquisition of subsidiary undertakings

17,737

3,592

14,145

Movement of reserves

8,255

2,704

5,551

Other movements

(8,237)

(1,275)

(6,962)

At 31 December 2020

113,371

30,781

82,590

At 1 January 2021

113,371

30,781

82,590

Increase in reserves arising from acquisition of subsidiary undertakings

57,941

15,405

42,537

Movement of reserves

15,796

6,204

9,592

Other movements

(455)

1,043

(1,499)

At 31 December 2021

186,653

53,433

133,220

 

Included within other movements are the 2017 and prior years' claims reserves reinsured into the 2018 year of account on which the Group does not participate and currency exchange differences.

Movement in unearned premium

 

Gross

£'000

Reinsurance

£'000

Net

£'000

At 1 January 2020

26,522

5,023

21,499

Increase in reserves arising from acquisition of subsidiary undertakings

4,679

613

4,066

Movement of reserves

2,481

647

1,834

Other movements

(1,326)

(255)

(1,071)

At 31 December 2020

32,356

6,028

26,328

At 1 January 2021

32,356

6,028

26,328

Increase in reserves arising from acquisition of subsidiary undertakings

15,649

3,095

12,553

Movement of reserves

11,201

1,484

9,717

Other movements

405

(69)

475

At 31 December 2021

59,611

10,538

49,073

 

Assumptions, changes in assumptions and sensitivity

As described in Note 4, the majority of the risks to the Group's future cash flows arise from its subsidiaries' participation in the results of Lloyd's syndicates and are mostly managed by the managing agents of the syndicates. The Group's role in managing these risks, in conjunction with the Group's members' agent, is limited to a selection of syndicate participations and monitoring the performance of the syndicates and their managing agents.

The amounts carried by the Group arising from insurance contracts are calculated by the managing agents of the syndicates, derived from accounting information provided by the managing agents and reported upon by the syndicate auditors.

The key assumptions underlying the amounts carried by the Group arising from insurance contracts are:

• the claims reserves calculated by the managing agents are accurate; and

• the potential deterioration of run-off year results has been fully provided for by the managing agents.

There have been no changes in assumptions in 2021.

The amounts carried by the Group arising from insurance contracts are sensitive to various factors as follows:

• a 10% increase/decrease in the managing agents' calculation of gross claims reserves will decrease/increase the Group's pre-tax profits by £18,665,000 (2020: £11,337,000);

• a 10% increase/decrease in the managing agents' calculation of net claims reserves will decrease/increase the Group's pre-tax profits by £13,322,000 (2020: £8,259,000); and

• a 10% increase/decrease in the run-off year net claims reserves will decrease/increase the Group's pre-tax profits by £43,000 (2020: £4,000).

The 10% movement has been selected to give an indication of the possible variations in the assumptions used.

 

Analysis of gross and net claims development

The tables below provide information about historical gross and net claims development:

Claims development - gross

£m

 

 

 

 

 

 

 

 

 

 

 

Underwriting pure year*

After

one year

After

two

years

After

three

years

After

four

years

After

five

years

After

six

years

After

seven

years

After

eight

years

After

nine

years

After

ten

years

Profit

on RITC

received

2012

28

41

40

39

38

38

37

37

36

36

5

2013

24

40

39

38

37

36

36

35

35


3

2014

22

38

38

37

37

36

36

36



5

2015

21

39

39

38

38

37

37




6

2016

24

47

48

47

46

46





3

2017

48

70

72

71

71






3

2018

41

68

72

69







4

2019

37

70

69









2020

40

72










2021

52

 

 

 

 

 

 

 

 

 

 

 

Claims development - net

£m

 

 

 

 

 

 

 

 

 

 

 

Underwriting pure year*

 

After

one year

After

two

years

After

three

years

After

four

years

After

five

years

After

six

years

After

seven

years

After

eight

years

After

nine

years

After

ten

years

Profit

on RITC

received

2012

24

35

34

33

32

32

32

31

31

31

5

2013

21

35

34

33

32

32

31

31

31


4

2014

19

33

33

32

31

31

31

31



4

2015

18

33

34

33

32

32

32




4

2016

20

38

39

38

37

37





4

2017

34

52

54

53

52






3

2018

31

51

54

52







4

2019

28

53

53









2020

29

53










2021

37

 

 

 

 

 

 

 

 

 

 

 

*  Including the new acquisitions during 2020.

 

At the end of the three years syndicates are normally reinsured to close. Participations on subsequent years on syndicates may therefore change. The above table shows nine years of development and how the reinsurance to close received performed.

8. Net investment income

 

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Investment income

1,549

1,318

Realised losses on financial assets at fair value through profit or loss

392

288

Unrealised losses on financial assets at fair value through profit or loss

(1,316)

297

Investment management expenses

(74)

(53)

Bank interest

17

156

Net investment income

568

2,006

 

9. Operating expenses (excluding goodwill and capacity impairment)

 

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Expenses incurred in insurance activities:



Acquisition costs

20,299

13,215

Change in deferred acquisition costs

(2,358)

(387)

Administrative expenses

7,467

5,039

Other

-

49

 

25,408

17,916

Other operating expenses:



- exchange differences

32

106

- Directors' remuneration

582

398

- acquisition costs in connection with the new subsidiaries acquired in the year

319

72

- professional fees

1,106

439

- administration and other expenses

187

395

Auditors' remuneration:



- audit of the Parent Company and Group Financial Statements

54

47

- audit of subsidiary company Financial Statements

49

43

- underprovision of prior year audit fee

-

2

- audit related assurance services

-

20

 

2,329

1,522

Operating expenses

27,737

19,438

 

The Group has three employees other than the Directors of the Company.

Details of the Directors' remuneration are disclosed below:

Directors' remuneration

Year ended

31 December

2021

£

Year ended

31 December

2020

£

Arthur Manners

212,000

128,333

Edward William Fitzalan-Howard

26,000

18,000

Jeremy Evans (resigned 6 February 2021)

2,000

15,000

Michael Cunningham

34,000

20,000

Andrew Christie

28,000

15,000

Nigel Hanbury

246,000

201,667

Martin Reith (appointed 21 April 2021)

17,000

-

Tom Libassi (appointed 21 April 2021)

17,000

-

Total

582,000

398,000

 

The Chief Executive, Nigel Hanbury, and the Finance Director, Arthur Manners, had a bonus incentive scheme during 2021 in addition to their basic remuneration. The above figures for Nigel Hanbury and Arthur Manners include an accrual for the year of £139,000 and £119,000 respectively (2020: £116,500 for Nigel Hanbury and £58,500 Arthur Manners) in respect of this scheme.

No other Directors derive other benefits, pension contributions or incentives from the Group. During 2017, a Joint Share Ownership Plan was implemented as an incentive scheme for the Chief Executive, Nigel Hanbury, and the Finance Director, Arthur Manners (see Note 23).

10. Income tax charge

(a) Analysis of tax (credit)/expense in the year

 

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Current tax:



- current year

340

(297)

- prior year

(35)

161

- foreign tax paid

61

45

Total current tax

366

(91)

Deferred tax:



- current year

(577)

203

- prior year

-

(77)

Total deferred tax

(577)

126

Income tax (credit)/expense

(211)

35

 

(b) Factors affecting the tax credit for the year

Tax for the year is the same as (2020: the same as) the standard rate of corporation tax in the UK of 19% (2020: 19%).

The differences are explained below:

 

Year ended

31 December

2021

£'000

Year ended

31 December

2020

£'000

Profit before tax

(645)

336

Tax calculated as profit before tax multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%)

(123)

64

Tax effects of:



- prior year adjustments

(35)

84

- rate change and other adjustments

(299)

(189)

- permanent disallowances

184

68

- foreign taxes

61

45

- other

-

(37)

Tax (credit/expense) for the year

(211)

35

 

The results of the Group's participation on the 2019, 2020 and 2021 years of account and the calendar year movement on 2018 and prior run-offs will not be assessed for tax until the years ended 2022, 2023 and 2024 respectively, being the year after the calendar year result of each run-off year or the normal date of closure of each year of account. Full provision is made as part of the deferred tax provisions for underwriting profits/(losses) not yet subject to corporation tax.

The UK Government announced on 3 March 2021 its intention to increase the UK rate of corporation tax to 25% from 19% from 1st April 2023. This was legislated on 10 June 2021. If a deferred tax balance, this has been calculated with reference to the substantively enacted rates as required under FA5 102.

11. Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the Company after tax by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Earnings per share has been calculated in accordance with IAS 33 "Earnings per Share".

The earnings per share and weighted average number of shares used in the calculation are set out below:

 

Year ended

31 December

2021

Year ended

31 December

2020

Profit for the year after tax attributable to ordinary equity holders of the Parent

£(434,000)

£301,000

Basic - weighted average number of ordinary shares*

58,058,164

18,921,902

Adjustments for calculating the diluted earnings per share:



Treasury shares (JSOP scheme), Note 21

1,100,000

500,000

Diluted - weighted average number of ordinary shares*

58,783,369

19,412,902

Basic (loss)/earnings per share

(0.75)p

1.59p

Diluted (loss)/earnings per share

(0.74)p

1.55p

 

*  Used as the denominator in calculating the basic earnings per share, and diluted earnings per share, respectively.

 

12. Dividends paid or proposed

A dividend of £2,018,000 was paid during the year (2020: £nil).

A final dividend of 3p is being proposed in respect of the financial year ended 31 December 2021. The dates relevant to the payment of the dividend, if approved at the Company's Annual General Meeting, are as follows :

Event

Date

Ex-dividend date

23rd June 2022

Record date

24th June 2022

Payment date

18th July 2022

 

13. Intangible assets

 

Goodwill

£'000

Syndicate

capacity

£'000

Total

£'000

Cost




At 1 January 2020

775

20,565

21,340

Additions

-

186

186

Disposals

-

(520)

(520)

Acquired with subsidiary undertakings

-

4,991

4,991

Revaluation

-

5,604

5,604

At 31 December 2020

775

30,826

31,601

At 1 January 2021

775

30,826

31,601

Additions

319

2,664

2,983

Disposals

-

-

-

Acquired with subsidiary undertakings

-

18,173

18,173

Revaluation

-

8,132

8,132

At 31 December 2021

1,094

59,795

60,889

 

Note 22 sets out the details of the entities acquired by the Group during the year, the fair value adjustments and the goodwill arising.

14. Investments in subsidiaries

 

31 December

2021

£'000

31 December

2020

£'000

Total

71,362

41,233

 

During 2021 a reverse impairment charge of £11,192,000 was recognised on the cost of investments in subsidiaries and included in the Parent income statement.

At 31 December 2021, the Company owned 100% of the following companies and limited liability partnerships, either directly or indirectly. All subsidiaries are incorporated in England and Wales and their registered office address is at 40 Gracechurch Street, London EC3V 0BT, apart from RBC CEES Trustee Limited, which is incorporated in Jersey and its registered office address is Gaspé House, 66-72 Esplanade, Jersey JE2 3QT.

Company or partnership

Direct/indirect

interest

2021

ownership

2020

ownership

Principal activity

Nameco (No. 917) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Devon Underwriting Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Nameco (No. 346) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Pooks Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Charmac Underwriting Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

RBC CEES Trustee Limited(ii)

Direct

100%

100%

Joint Share Ownership Plan

Nottus (No 51) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Chapman Underwriting Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Llewellyn House Underwriting Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Advantage DCP Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Romsey Underwriting Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Helios UTG Partner Limited(i)

Direct

100%

100%

Corporate partner

Salviscount LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Inversanda LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Fyshe Underwriting LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Nomina No 505 LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Nomina No 321 LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Nameco (No. 409) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Nameco (No. 1113) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Catbang 926 Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Whittle Martin Underwriting

Direct

100%

100%

Lloyd's of London corporate vehicle

Nameco (No 408) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Nomina No 084 LLP

Indirect

100%

100%

Lloyd's of London corporate vehicle

Nameco (No 510) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Nameco (No 544) Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

N J Hanbury Limited

Direct

100%

100%

Lloyd's of London corporate vehicle

Nameco (No 1011) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 1111) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nomina No 533 LLP

Indirect

100%

-

Corporate partner

North Breache Underwriting Limited

Direct

100%

-

Lloyd's of London corporate vehicle

G T C Underwriting Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Hillnameco Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 2012) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 1095) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

New Filcom Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Kemah Lime Street Capital

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 1130) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nomina No 070 LLP

Indirect

100%

-

Corporate partner

Nameco (No 389) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nomina No 469 LLP

Indirect

100%

-

Corporate partner

Nomina No 536 LLP

Indirect

100%

-

Corporate partner

Nameco (No 301) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 1232) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Shaw Lodge Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Queensberry Underwriting

Direct

100%

-

Lloyd's of London corporate vehicle

Nomina No 472 LLP

Indirect

100%

-

Corporate partner

Nomina No 110 LLP

Indirect

100%

-

Corporate partner

Chanterelle Underwriting Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Kunduz LLP

Indirect

100%

-

Corporate partner

Exalt Underwriting Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nameco (No 1110) Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Clifton 2011 Limited

Direct

100%

-

Lloyd's of London corporate vehicle

Nomina No 378 LLP

Indirect

100%

-

Corporate partner

Gould Scottish Limited Partnership

Indirect

100%

-

Corporate partner

 

For details of all new acquisitions made during the year 2021 refer to Note 22(a).

(i)  Helios UTG Partner Limited, a subsidiary of the Company, owns 100% of Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP, Nomina No 505 LLP, Nomina No 321 LLP Nomina No 084 LLP, Nomina No 533 LLP, Nomina No 070 LLP, Nomina No 469 LLP, Nomina No 536 LLP, Nomina No 472 LLP, Nomina No 110 LLP, Kunduz LLP. Nomina No 348 LLP and Gould Scottish Limited Partnership. The cost of acquisition of these LLPs is accounted for in Helios UTG Partner Limited, their immediate parent company.

  During the year, the Company sold its shares in Bernul Limited, Nameco (No 229) Limited, Nameco (No 76) Limited, Updown Underwriting Limited, Nameco (No 518) Limited, Hampden Corporate Member Limited, Halperin Limited, Nameco (No 311) Limited, Nameco (No 402) Limited and Nameco (No 507) Limited for £nil gain or loss.

 (ii)  RBC CEES Trustee Limited was an incorporated entity in year 2017 to satisfy the requirements of the Joint Share Ownership Plan (see Note 23).

 

15. Financial assets at fair value through profit or loss

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

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices (unadjusted) at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data inputs, either directly or indirectly (other than quoted prices included within Level 1) and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. This is the case for unlisted equity securities.

The Group held the following financial assets carried at fair value on the statement of financial position:

Group

Total

2021

£'000

Level 1

£'000

Level 2

£'000

Level 3

£'000

Shares and other variable yield securities and units in unit trusts

15,288

3,339

9,960

1,989

Debt securities and other fixed income securities

93,548

33,244

60,263

41

Participation in investment pools

511

161

330

20

Loans and deposits with credit institutions

245

64

-

181

Derivatives

43

36

7

-

Other investments

905

905

-

-

Funds at Lloyd's

43,304

43,304

-

-

Total - fair value

153,844

81,053

70,560

2,231

 

Group

Total

2020

£'000

Level 1

£'000

Level 2

£'000

Level 3

£'000

Shares and other variable yield securities and units in unit trusts

11,104

2,878

7,140

1,086

Debt securities and other fixed income securities

53,950

19,569

34,381

-

Participation in investment pools

219

43

134

42

Loans and deposits with credit institutions

198

87

105

6

Derivatives

115

77

38

-

Other investments

7

7

-

-

Funds at Lloyd's

19,684

19,684

-

-

Total - fair value

85,277

42,345

41,798

1,134

 

 

Funds at Lloyd's represent assets deposited with the Corporation of Lloyd's to support the Group's underwriting activities as described in the accounting policies. The Group entered into a Lloyd's Deposit Trust Deed which gives Lloyd's the right to apply these monies in settlement of any claims arising from the participation on the syndicates. These monies can only be released from the provision of this Deed with Lloyd's express permission and only in circumstances where the amounts are either replaced by an equivalent asset, or after the expiration of the Group's liabilities in respect of its underwriting.

In addition to funds held by Lloyd's shown above, letters of credit totalling £1,481,000 (2020: £6,971,000) are also held as part of the Group's Funds at Lloyd's.

The Directors consider any credit risk or liquidity risk not to be material.

Company

Financial assets at fair value through profit or loss are shown below:

 

31 December

2021

£'000

31 December

2020

£'000

Holdings in collective investment schemes - Level 1

285

-

Total - market value

285

-

 

16. Other receivables

Group

31 December

2021

£'000

31 December

2020

£'000

Arising out of direct insurance operations

32,566

15,280

Arising out of reinsurance operations

37,128

27,306

Other debtors

18,165

15,762

Total

87,859

58,348

 

The Group has no analysis of other receivables held directly by the syndicates on the Group's behalf (see Note 27). None of the Group's other receivables are past their due date and all are classified as fully performing.

Included within the above receivables are amounts totalling £Nil (2020: £7,001,000) which are not expected to be wholly recovered within one year.

Company

31 December

2021

£'000

31 December

2020

£'000

Receivables from subsidiaries (Note 25)

37,290

20,473

Other debtors

1,206

323

Prepayments

-

-

Total

38,496

20,796

 

Included within receivables are amounts totalling £100,000 (2020: £100,000), which are not expected to be recoverable within one year.

17. Deferred acquisition costs

 

31 December

2021

£'000

31 December

2020

£'000

At 1 January

7,726

6,641

Increase arising from acquisition of subsidiary undertakings (Note 22)

3,966

1,018

Movement in deferred acquisition costs

2,358

387

Other movements

(435)

(320)

At 31 December

13,615

7,726

 

18. Deferred tax

Group

Deferred tax is calculated in full on temporary differences using a tax rate of 25% on deferred tax assets and deferred tax liabilities (2020: 19% on deferred tax assets and deferred tax liabilities). The movement on the deferred tax liability account is shown below:

Deferred tax liabilities

Valuation of

capacity

£'000

Timing

differences on

underwriting

results

£'000

Total

£'000

At 1 January 2020

4,132

(840)

3,292

On acquisition of subsidiary undertakings

1,427

1,662

3,089

Revaluation of capacity

292

1,330

1,622

Prior period adjustment

(77)

-

(77)

Credit for the year

77

126

203

At 31 December 2020

5,891

616

6,507

At 1 January 2021

5,891

616

6,507

On acquisition of subsidiary undertakings

4,683

(1,414)

3,269

Revaluation of capacity

2,766

-

2,766

Prior period adjustment

(489)

-

(489)

Credit for the year

489

(577)

(88)

At 31 December 2021

13,340

(1,375)

11,965

 

Company

The Company had no deferred tax assets or liabilities (2020: £nil), as disclosed in Note 10.

19. Borrowings

Group and Company

31 December

2021

£'000

31 December

2020

£'000

Secured - at amortised cost



Bank revolving credit facility

-

4,000

 

-

4,000

Current

-

4,000

Non-current

-

-

 

-

4,000

 

Bank loan

(a) Revolving credit/loan facility

A sterling revolving loan facility ("RLF") was agreed with Barclays Bank Plc during the year ended 31 December 2019 to the value of £4m, of which £2m was available for general corporate purposes and acquisitions and the remaining £2m was available for use only in a large loss scenario, secured against all of the assets of Helios Underwriting plc.

On 19 December 2019, £2,000,000 was drawn down on the RLF. The maturity of the RLF was three months from the initial date of the drawdown, being 19 March 2020. On 19 March 2020, the RLF was extended by three months to 19 June 2020. On 29 July 2020, a further £2,000,000 was drawn down on the RLF. The RLF incurs interest at the following rates:

• drawn amounts: 3% per annum over LIBOR; and

• undrawn amount: 1% fixed per annum.

Total arrangement fees of £15,000 were paid to Barclays Bank Plc during 2020 for the creation of the RLF.

On 23 April 2021, a total of £4,000,000 was repaid to Barclays in full settlement of the RLF draw down.

On 21 December 2021, a new sterling revolving loan facility ("RLF") was agreed with Barclays Bank Plc to the value of £15m. The interest is 4.2% per annum. On 21 March 2022 the full £15m was drawn down (see note 29).

Reconciliation of movements of liabilities to cash flows arising from financing activities:

Group

Liabilities

 

Equity


 

Other

loans and

borrowings

£'000

 

Share capital/

premium

£'000

Other

reserves

£'000

Retained

earnings

£'000

Total

£'000

Balance at 1 January 2020

2,000

 

20,777

(50)

7,421

30,148

Changes from financing cash flows







Proceeds from issue of share capital (Note 21)

-


18,141

-

-

18,141

Proceeds from loans and borrowings

2,000


-

-

-

2,000

Payments for Company buyback of ordinary shares (Note 24)

-


-

-

(23)

(23)

Repayment of borrowings

-


-

-

-

-

Dividend paid

-

 

-

-

-

-

Total changes from financing cash flows

2,000

 

18,141

-

(23)

20,118

Effect of changes in foreign exchange rates

-

 

-

-

-

-

Changes in fair value

-

 

-

-

-

-

Other changes:







Liability related

-


-

-

-

-

Other expense

-


-

-

-

-

Interest expense

-


-

-

-

-

Interest paid

-

 

-

-

-

-

Total liability related other changes

-

 

-

-

-

-

Total equity related other changes*

-

 

-

-

4,283

4,283

Balance at 31 December 2020

4,000

 

38,918

(50)

11,681

54,549

 

*  The equity related other changes relate to the consolidated profit for the year 2020.

 

Group

Liabilities

 

Equity


 

Other

loans and

borrowings

£'000

 

Share capital/

premium

£'000

Other

reserves

£'000

Retained

earnings

£'000

Total

£'000

Balance at 1 January 2021

4,000

 

38,918

(50)

11,681

54,549

Changes from financing cash flows







Proceeds from issue of share capital (Note 21)

-


-

-

-

-

Proceeds from loans and borrowings

-


54,343

(60)

-

54,283

Payments for Company buyback of ordinary shares (Note 24)

-


-

-

-

-

Repayment of borrowings

(4,000)


-

-

-

(4,000)

Dividend paid

-

 

-

-

(2,018)

(2,018)

Total changes from financing cash flows

(4,000)

 

54,343

(60)

(2,018)

(48,265)

Effect of changes in foreign exchange rates

-

 

-

-

-

-

Changes in fair value

-

 

-

-

-

-

Other changes:







Liability related

-


-

-

-

-

Other expense

-


-

-

-

-

Interest expense

-


-

-

-

-

Interest paid

-

 

-

-

-

-

Total liability related other changes

-

 

-

-

-

-

Total equity related other changes*

-

 

-

-

4,932

4,932

Balance at 31 December 2021

-

 

93,261

(110)

14,595

107,746

 

*  The equity related other changes relate to the consolidated profit for the year 2021.

 

Company

Liabilities

 

Equity


 

Other

loans and

borrowings

£'000

 

Share capital/

premium

£'000

Other

reserves

£'000

Retained

earnings

£'000

Total

£'000

Balance at 1 January 2020

2,000

 

20,777

-

16,712

39,489

Changes from financing cash flows







Proceeds from issue of share capital (Note 21)

-


18,141

-

-

18,141

Proceeds from loans and borrowings

2,000


-

-

-

2,000

Payments for Company buyback of ordinary shares (Note 24)

-


-

-

(23)

(23)

Repayment of borrowings

-


-

-

-

-

Dividend paid

-

 

-

-

-

-

Total changes from financing cash flows

2,000

 

18,141

-

(23)

20,118

Effect of changes in foreign exchange rates

-

 

-

-

-

-

Changes in fair value

-

 

-

-

-

-

Other changes:

-


-

-

-

-

Liability related

-


-

-

-

-

Other expense

-


-

-

-

-

Interest expense

-


-

-

-

-

Interest paid

-

 

-

-

-

-

Total liability related other changes

-

 

-

-

2,636

2,636

Total equity related other changes*

-

 

-

-

-

-

Balance at 31 December 2020

4,000

 

38,918

-

19,325

62,243

 

*  The equity related other changes relate to the Company's profit for the year 2020.

 

Company

Liabilities

 

Equity


 

Other

loans and

borrowings

£'000

 

Share capital/

premium

£'000

Other

reserves

£'000

Retained

earnings

£'000

Total

£'000

Balance at 1 January 2021

4,000

 

38,918

-

19,325

62,243

Changes from financing cash flows







Proceeds from issue of share capital (Note 21)

-


54,343

-

-

54,343

Proceeds from loans and borrowings

-


-

-

-

-

Payments for Company buyback of ordinary shares (Note 24)

-


-

-

-

-

Repayment of borrowings

(4,000)


-

-

-

(4,000)

Dividend paid

-

 

-

-

(2,018)

(2,018)

Total changes from financing cash flows

(4,000)

 

54,343

-

(2,018)

48,325

Effect of changes in foreign exchange rates

-

 

-

-

-

-

Changes in fair value

-

 

-

-

-

-

Other changes:

-


-

-

-

-

Liability related

-


-

-

-

-

Other expense

-


-

-

-

-

Interest expense

-


-

-

-

-

Interest paid

-

 

-

-

-

-

Total liability related other changes

-

 

-

-

-

-

Total equity related other changes*

-

 

-

-

9,805

9,805

Balance at 31 December 2021

-

 

93,261

-

27,112

120,373

 

*  The equity related other changes relate to the Company's profit for the year 2021.

 

20. Other payables

Group

31 December

2021

£'000

31 December

2020

£'000

Arising out of direct insurance operations

2,606

2,752

Arising out of reinsurance operations

23,957

12,348

Corporation tax payable

185

288

Other creditors

8,179

3,968

 

34,927

19,356

 

The Group has no analysis of other payables held directly by the syndicates on the Group's behalf (see Note 27).

Company

31 December

2021

£'000

31 December

2020

£'000

Payable to subsidiaries

2,959

3,328

Accruals and deferred income

904

564

 

3,863

3,892

 

All payables above are due within one year.

 

21. Share capital and share premium

 

Number of

shares (i)

Ordinary share

capital

£'000

Partly

paid ordinary

share capital

£'000

Share

premium

£'000

Total

£'000

Ordinary shares of 10p each and share premium
at 31 December 2020

33,931,345

3,343

50

35,525

38,918

Ordinary shares of 10p each and share premium
at 31 December 2021

69,305,381

6,821

110

86,330

93,261

 

During the year, the Company issued a further 35,374,036 shares.

 

(i) Number of shares

 

2021

2020

Allotted, called up and fully paid ordinary shares:



- on the market

67,786,212

33,012,176

- Company buyback of ordinary shares held in treasury (Note 24)

419,169

419,169


68,205,381

33,431,345

Uncalled and partly paid ordinary shares under the JSOP scheme (ii) (Note 23)

1,100,000

500,000

 

69,305,381

33,931,345

 

(ii) The partly paid ordinary shares are not entitled to dividend distribution rights during the year.

 

22. Acquisition of Limited Liability Vehicles

Acquisitions of Limited Liability Vehicles are accounted for using the acquisition method of accounting.

Where the comparison of the consideration paid to the fair value of net assets acquired gives rise to a negative goodwill this is recognised in the revenue in the consolidated income statement as a gain on bargain purchase (negative goodwill). The below table shows the summary of the gain on bargain purchase and the impairment of goodwill as follows:

(a) 2021 acquisitions

In 2021 the Company acquired twenty eight Limited Liability vehicle, all of which are incorporate in England and Wales and are corporate members of Lloyd's.

 

Nameco (No 1011) Limited

Nameco (No 1111) Limited

Nomina

No 533 LLP

North Breach UW Limited

GTC UW Limited

Hill

Nameco

Limited

Nameco (No 2012) Limited

Nameco (No 1095) Limited

New Filcom Limited

Kemah Lime Street Capital

Total

2021 acquisition date

21 Sept

21 Sept

21 Sept

21 Sept

22 Sept

22 Sept

23 Sept

24 Sept

29 Sept

30 Sept

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Intangible assets

-

2

199

5

68

10

-

251

-

1

536

Uplift to fair value

602

213

225

1,814

532

467

490

1,167

227

226

5,963

 

602

215

424

1,819

600

477

490

1,418

227

227

6,499

Financial investments

1,014

390

683

3,499

1,224

966

1,349

1,957

1,349

508

12,939

Deferred income tax asset

-

-

-

-

-

-

-

-

-

-

-

Reinsurers' share of insurance liabilities:












- reinsurers' share of outstanding claims

425

251

292

1,431

504

478

639

974

658

339

5,991

- reinsurers' share of unearned premium

72

46

58

274

103

96

112

187

156

63

1,167

Other receivables, including insurance receivables

1,152

425

354

5,933

847

728

771

3,095

677

304

14,286

Deferred acquisition costs

101

55

74

380

145

126

137

252

160

67

1,497

Prepayments and accrued income

9

4

4

37

9

9

8

17

7

9

113

Cash and cash equivalents

191

69

89

455

539

259

258

388

637

428

3,313

Insurance liabilities:












- claims outstanding

(1,705)

(791)

(1,105)

(6,502)

(1,904)

(1,686)

(2,251)

(3,307)

(2,004)

(996)

(22,251)

- unearned premiums

(417)

(219)

(283)

(1,643)

(554)

(493)

(528)

(991)

(587)

(264)

(5,979)

Deferred income tax liabilities

(151)

(53)

(57)

(516)

(170)

(117)

(123)

(335)

(57)

(57)

(1,636)

Other payables, including insurance payables

(297)

(397)

(160)

(1,071)

(562)

(658)

(430)

(1,486)

(448)

(472)

(5,981)

Accruals and deferred income

(43)

(23)

(29)

(118)

(43)

(43)

(49)

(71)

(85)

(39)

(543)

Total fair value acquired

953

(28)

344

3,978

738

142

383

2,098

690

117

9,415

Consideration

891

-

280

3,857

696

100

360

2,024

651

145

9,004

Positive goodwill on acquisition

-

28

-

-

-

-

-

-

-

28

56

Negative goodwill on acquisition

(62)

-

(64)

(121)

(42)

(42)

(23)

(74)

(39)

-

(467)

 

Capacity acquired












2019 underwriting year

1,027

481

562

4,235

1,262

1,091

1,457

2,019

1,108

649

13,891

2020 underwriting year

968

495

609

3,890

1,225

1,139

1,181

2,185

1,183

504

13,380

2021 underwriting year

949

556

682

3,935

820

1,006

618

2,914

364

502

12,347

 

Had the Limited Liability Vehicles been consolidated from 1 January 2020, the consolidated statement of comprehensive income would show net earned premium of £90,820,000 and a profit after tax of £819,000.

Costs incurred in connection with the twenty eight acquisitions totalling £447,000 (2020: £114,000) have been recognised in the consolidated income statement.

 

 

Brought forward

Nameco (No 1130) Limited

Nomina No 070 LLP

Nameco (No 389) Limited

Nomina No 469 LLP

Nomina No 536 LLP

Queens-

berry UW

Nameco (No 301) Limited

Nameco (No 1232) Limited

Shaw Lodge Limited

Total

2021 acquisition date

 

30 Sept

30 Sept

05 Oct

06 Oct

06 Oct

09 Oct

13 Oct

13 Oct

15 Oct

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Intangible assets

536

-

456

4

159

430

29

15

1

-

1,630

Uplift to fair value

5,963

311

100

1,017

149

405

1,048

771

381

23

10,168

 

6,499

311

556

1,021

308

835

1,077

786

382

23

11,798

Financial investments

12,939

661

957

1,780

639

1,573

1,690

1,394

679

495

22,807

Deferred income tax asset

-

-

-

-

-

-

-

-

-

-

-

Reinsurers' share of insurance liabilities:












- reinsurers' share of outstanding claims

5,991

370

409

847

343

873

876

655

358

134

10,858

- reinsurers' share of unearned premium

1,167

76

75

169

63

141

200

120

66

45

2,122

Other receivables, including insurance receivables

14,286

1,075

780

2,266

323

896

1,145

1,503

640

180

23,094

Deferred acquisition costs

1,497

96

109

205

71

168

232

145

78

51

2,653

Prepayments and accrued income

113

7

9

13

4

14

11

10

6

1

188

Cash and cash equivalents

3,313

189

181

271

93

298

279

164

102

131

5,021

Insurance liabilities:












- claims outstanding

(22,251)

(1,286)

(1,561)

(2,984)

(1,081)

(2,958)

(2,935)

(2,330)

(1,138)

(418)

(38,942)

- unearned premiums

(5,979)

(364)

(470)

(824)

(288)

(651)

(903)

(580)

(315)

(164)

(10,538)

Deferred income tax liabilities

(1,636)

(78)

(56)

(319)

(37)

(101)

(262)

(241)

(118)

(6)

(2,854)

Other payables, including insurance payables

(5,979)

(950)

(262)

(500)

(163)

(446)

(674)

(757)

(531)

(158)

(10,422)

Accruals and deferred income

(543)

(34)

(40)

(70)

(31)

(59)

(79)

(55)

(34)

(30)

(975)

Total fair value acquired

9,415

73

687

1,875

244

585

657

814

175

284

14,809

Consideration

9,004

31

645

1,829

223

543

674

818

195

209

14,171

Positive goodwill on acquisition

56

-

-

-

-

-

17

4

20

-

97

Negative goodwill on acquisition

(467)

(42)

(42)

(46)

(21)

(42)

-

-

-

(75)

(735)

 

Capacity acquired












2019 underwriting year

13,891

784

990

1,637

620

1,922

1,860

1,343

699

267

24,014

2020 underwriting year

13,380

835

1,048

1,795

648

1,412

2,054

1,261

713

296

23,411

2021 underwriting year

12,347

653

1,044

2,005

494

1,512

2,211

1,364

683

355

22,668

 

 

 

 

 

Brought forward

Nomina No 472 LLP

Nomina No 110 LLP

Chant-
erelle UW

Kunduz LLP

Exalt UW Limited

Nameco (No 1110) Limited

Clifton 2011 Limited

Nomina No 348 LLP

Gould Scottish Limited

Total

2021 acquisition date

 

19 Nov

23 Nov

26 Nov

15 Dec

20 Dec

21 Dec

22 Dec

24 Dec

31 Dec

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Intangible assets

1,630

169

436

-

171

21

-

22

744

358

3,551

Uplift to fair value

10,168

100

100

1,473

150

418

1,530

684

-

-

14,623

 

11,798

269

536

1,473

321

439

1,530

706

744

358

18,174

Financial investments

22,807

478

1,156

4,471

740

893

2,733

1,087

1,462

-

35,827

Deferred income tax asset

-

-

-

-

-

-

-

-

-

-

-

Reinsurers' share of insurance liabilities:












- reinsurers' share of outstanding claims

10,858

268

526

638

351

505

918

727

613

-

15,404

- reinsurers' share of unearned premium

2,122

48

99

231

56

96

188

154

104

-

3,098

Other receivables, including insurance receivables

23,094

245

677

2,598

365

585

2,499

741

1,023

116

31,943

Deferred acquisition costs

2,652

57

123

318

82

146

281

166

140

-

3,965

Prepayments and accrued income

188

3

10

31

4

9

16

8

9

-

278

Cash and cash equivalents

5,021

81

270

1,406

110

573

831

687

221

6

9,206

Insurance liabilities:












- claims outstanding

(38,942)

(839)

(1,850)

(5,175)

(1,173)

(1,765)

(3,798)

(2,132)

(2,269)

-

(57,943)

- unearned premiums

(10,538)

(220)

(487)

(1,285)

(299)

(544)

(1,037)

(671)

(569)

-

(15,650)

Deferred income tax liabilities

(2,854)

(25)

(44)

(368)

(38)

(105)

(388)

(171)

(74)

-

(4,067)

Other payables, including insurance payables

(10,422)

(116)

(334)

(1,440)

(184)

(419)

(622)

(1,076)

(318)

(1)

(14,932)

Accruals and deferred income

(975)

(25)

(47)

(91)

(45)

(65)

(77)

(79)

(44)

(16)

(1,464)

Total fair value acquired

14,809

224

635

2,807

290

348

3,074

147

1,042

463

23,839

Consideration

14,171

190

560

2,662

220

410

3,083

298

910

435

22,939

Positive goodwill on acquisition

97

-

-

-

-

62

9

151

-

-

319

Negative goodwill on acquisition

(735)

(34)

(75)

(145)

(70)

-

-

-

(132)

(28)

(1,219)

 

Capacity acquired












2019 underwriting year

24,014

470

1,126

3,212

714

1,207

2,057

1,378

1,238

672

36,086

2020 underwriting year

23,411

495

1,099

3,081

655

1,207

2,398

1,492

1,256

711

35,736

2021 underwriting year

22,668

475

773

3,108

640

1,186

2,300

1,558

1,308

766

34,784

 

(b) 2020 acquisitions

 

Nameco

 (No 408) Limited

Nameco

(No 510) Limited

Nameco

(No 544) Limited

Nomina

No 084 LLP

N J Hanbury Limited

Total

2020 acquisition date

28 Jan

27 Nov

27 Nov

27 Nov

27 Nov

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Intangible assets

-

-

1

1,371

10

1,382

Uplift to fair value

477

662

680

-

1,791

3,610

 

477

662

681

1,371

1,801

4,992

Financial investments

1,172

2,067

2,437

1,855

2,957

10,488

Deferred income tax asset

-

-

-

-

-


Reinsurers' share of insurance liabilities:







- reinsurers' share of outstanding claims

504

818

1,282

510

478

3,592

- reinsurers' share of unearned premium

92

179

221

83

38

613

Other receivables, including insurance receivables

1,417

1,769

3,902

2,435

6,305

15,828

Deferred acquisition costs

137

278

304

129

170

1,018

Prepayments and accrued income

10

15

25

15

31

96

Cash and cash equivalents

390

232

606

256

359

1,843

Insurance liabilities:







- claims outstanding

(2,035)

(3,541)

(5,351)

(2,602)

(4,208)

(17,737)

- unearned premiums

(532)

(1,145)

(1,343)

(679)

(983)

(4,682)

Deferred income tax liabilities

(91)

(126)

(174)

(239)

(967)

(1,597)

Other payables, including insurance payables

(325)

(449)

(780)

(486)

(682)

(2,722)

Accruals and deferred income

(42)

(61)

(80)

(67)

(71)

(321)

Total fair value acquired

1,174

698

1,729

2,581

5,228

11,410

Consideration

1,007

628

1,602

2,207

4,706

10,150

Positive goodwill on acquisition

-

-

-

-

-

-

Negative goodwill on acquisition

(167)

(70)

(127)

(374)

(522)

(1,260)

 

Capacity acquired







2019 underwriting year

1,304

1,024

1,691

2,206

3,583

9,808

2020 underwriting year

1,143

982

1,683

1,936

3,443

9,187

2021 underwriting year

1,086

1,088

1,412

3,308

3,982

10,876

 

 

23. Joint Share Ownership Plan ("JSOP")

500,000 shares have been vested as at 31 December 2021.

On 16 August 2021 a further 600,000 shares were issued.

Effect of the transactions

The beneficial interests of the Executives following the transaction will be as follows:


2021

 

2020

Director

Interests

in jointly

owned ordinary

shares issued

under JSOP

Other

interests in

 ordinary

shares

Total

shareholding

 

Interests

in jointly

owned ordinary

shares issued

under JSOP

Other

interests in

 ordinary

shares

Total

shareholding

Arthur Manners

477,500

709,868

1,187,368


200,000

162,292

909,868

Nigel Hanbury

622,500

8,927,294

9,549,794

 

300,000

4,027,640

9,227,294

 

The new ordinary shares will rank pari passu with the Company's existing issued ordinary shares. The Company's issued share capital following Admission will comprise 68,205,381 ordinary shares with voting rights and no restrictions on transfer and this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Disclosure Guidance and Transparency Rules.

The JSOP is to be accounted for as if it were a premium priced option, and therefore Black Scholes mathematics have been applied to determine the fair value. As the performance condition will eventually be trued up, a calculation of the fair value based on an algebraic Black Scholes calculation of the value of the "as if" option discounted for the risk of forfeiture or non-vesting is reasonable. The discount factors are for the risk that an employee leaves and forfeits the award or the failure to meet the performance condition with the result the JSOP awards do not vest in full or at all.

The basic Black Scholes calculation for the new awards is based on the following six basic assumptions:

(a)  market value of a share at the date of grant (155p);

(b)  expected premium or threshold price of a share (174.8p);

(c)  expected life of the JSOP award (3 years);

(d)  risk-free rate of capital (1%);

(e)  expected dividend yield (1.9%); and

(f)  expected future volatility of a Helios share (20%).

The gives a total fair value is to be charged as an expense and spread over three years, being the years 2022 to 2024.

24. Treasury shares: purchase of own shares

The Company bought back some of its own ordinary shares on the market and these are held in treasury. No shares were bought back during 2021.

The retained earnings have been reduced by £527,000, being the consideration paid on the market for these shares, as shown in the consolidated and Parent Company statements of changes in equity.

The Company cannot exercise any rights over these bought back and held in treasury shares, and has no voting rights. No dividend or other distribution of the Company's assets can be paid to the Company in respect of the treasury shares that it holds.

As at 31 December 2021, the 419,169 own shares bought back represent 0.61% of the total allotted, called up and fully paid ordinary shares of the Company of 69,305,381 (Note 21).

25. Related party transactions

Helios Underwriting plc has inter-company loans with its subsidiaries which are repayable on three months' notice provided it does not jeopardise each company's ability to meet its liabilities as they fall due. All inter-company loans are therefore classed as falling due within one year. The amounts from/(to) subsidiaries exceeding £750,00 as at 31 December are set out below:

Company

31 December

2021

£'000

31 December

2020

£'000

Nameco (No. 917) Limited

9,338

6,589

Helios UTG Partner Limited

7,930

3,784

Chapman Underwriting Limited

2,554

-

Romsey Underwriting Limited

6,412

5,082

Advantage DCP Limited

(1,623)

(1,555)

Catbang 926 Limited

1,546

766

Hillnameco Limited

879

-

Clifton 2011 Limited

845

-

Subsidiaries below £750,000

6,450

2,479

Net amount

34,331

17,145




Receivable from subsidiaries

37,290

20,473

Payable from subsidiaries

(2,959)

(3,328)

 

34,331

17,145

 

Helios Underwriting plc and its subsidiaries have entered into a management agreement with Nomina plc. Jeremy Evans, who resigned as a Director of the Company on 6 February 2021, is 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 £150,000 (2020: £145,000).

The Limited Liability Vehicles have entered into a members' agent agreement with Hampden Agencies Limited. Jeremy Evans, who resigned as a Director of Helios Underwriting plc on 7 February 2021, is a director of the Company's subsidiary companies and is also a director of Hampden Capital plc, which controls Hampden Agencies Limited. Under the agreement the Limited Liability Vehicles will pay Hampden Agencies Limited a fee based on a fixed amount, which will vary depending upon the number of syndicates the Limited Liability Vehicles underwrite on a bespoke basis, and a variable amount depending on the level of underwriting through the members' agent pooling arrangements. In addition, the Limited Liability Vehicles 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 2021 are £478,000 (2020: £193,000). Following acquisition into the Group, no profit commission is payable on future underwriting years.

The Group entered into quota share reinsurance contracts for the 2019, 2020, 2021 and 2022 years of account with HIPCC Limited. The Limited Liability Vehicles' underwriting year of account quota share participations are set out below:

Company or partnership

2019

2020

2021

2022

Nameco (No. 917) Limited

70%

70%

59%

44%

Nameco (No. 346) Limited

70%

70%

60%

65%

Chapman Underwriting Limited

70%

70%

68%

11%

Advantage DCP Limited

70%

70%

54%

-

Romsey Underwriting Limited

70%

70%

48%

37%

Nomina No 321 LLP

70%

70%

35%

-

Nameco (No. 409) Limited

70%

70%

44%

-

Nameco (No. 1113) Limited

70%

70%

46%

-

Catbang 926 Limited

-

70%

60%

21%

Whittle Martin Underwriting

-

70%

48%

-

Nameco (No. 408) Limited

-

-

53%

-

 

Nigel Hanbury, a Director of Helios Underwriting plc and its subsidiary companies, is also a director and majority shareholder in HIPCC Limited. Hampden Capital, a substantial shareholder in Helios Underwriting plc, is also a substantial shareholder in HIPCC Limited - Cell 6. Under the agreement, the Group accrued a net reinsurance premium recovery of £2,703,000 (2020: £4,741,000) during the year.

In addition, HIPCC provides stop loss, portfolio stop loss and HASP reinforce policies for the Company.

HIPCC Limited acts as an intermediary for the reinsurance products purchased by Helios. An arrangement has been put in place so that 51% of the profits generated by HIPCC in respect of the business relating to Helios will be repaid to Helios for the business transacted for the 2020 and subsequent underwriting years. The consideration paid to Nigel Hanbury of £100,000 reflects the HIPCC income that he is expected to forgo.

Nigel Hanbury was the majority shareholder of Upperton Holdings Limited, which in turn was the sole shareholder of N J Hanbury Limited, which was acquired by the Company on 27 November 2020 in exchange for 3,066,752 shares in the Company, a total consideration of £3,680,000 (see Note 22).

Nigel Hanbury was 40% owner of Nomina No 084 LLP, which was acquired by the Helios UTG Partner Limited (a subsidiary of the Company) on 27 November 2020 in exchange for 1,025,786 shares in the Company, a total consideration of £2,036,000 (see note 22).

Arthur Manners was the sole shareholder of Nameco (No 510) Limited, which was acquired by the Company on 27 November 2020 in exchange for 547,576 shares in the company, a total consideration of £657,000 (see note 22).

During 2021, the following Directors received dividends, in line with their shareholdings held:

Director

Shareholding

at date

dividend

declared

29 June 2021

Dividend

received

19 July 2021

£

Nigel Hanbury (either personally or has an interest in)

9,227,294

276,818

Andrew Christie

34,317

1,029

Arthur Manners

909,868

27,296

Edward Fitzalan-Howard (appointed 1 January 2018)

382,864

11,485

Michael Cunningham

86,848

2,605

Tom Libassi (appointed 20 April 2021)

13,000,000

390,000

Martin Reith (appointed 20 April 2021)

130,161

3,904

 

26. Ultimate controlling party

The Directors consider that the Group has no ultimate controlling party.

 

27. Syndicate participations

The syndicates in which the Company's subsidiaries participate as corporate members of Lloyd's are as follows:



Allocated capacity per year of account

Syndicate
number

Managing or members' agent

2022

£

2021

£

2020 *

£

2019 *

£

33

Hiscox Syndicates Limited

13,830,779

13,830,793

14,193,201

11,926,480

218

IQUW Syndicate Management Limited

7,070,046

7,070,053

6,558,839

6,968,088

318

Cincinnati Global Underwriting Agency Limited

992,637

992,635

404,687

1,185,937

386

QBE Underwriting Limited

2,543,190

2,312,008

2,249,975

2,256,356

510

Tokio Marine Kiln Syndicates Limited

32,301,169

22,594,020

19,595,324

17,893,591

557

Tokio Marine Kiln Syndicates Limited

3,458,576

3,458,576

3,236,695

2,348,475

609

Atrium Underwriters Limited

12,071,789

11,612,849

10,545,464

9,333,876

623

Beazley Furlonge Limited

21,576,129

18,913,248

16,129,766

14,170,533

727

S A Meacock & Company Limited

2,059,162

1,999,191

3,053,284

3,151,336

1176

Chaucer Syndicates Limited

2,784,204

2,784,212

2,813,031

2,844,303

1200

Argo Managing Agency Limited

10,050,000

-

160,714

280,675

1729

Asta Managing Agency Limited

10,148,838

131,123

295,476

440,727

1902

Asta Managing Agency Limited

10,000,002

-

-

-

1969

Apollo Syndicate Management Limited

5,610,170

400,001

-

-

1971

Apollo Syndicate Management Limited

6,467,147

-

-

-

1991

Coverys Managing Agency Limited

-

-

53,345

123,345

2010

Lancashire Syndicates Limited

10,137,041

9,547,814

4,188,754

4,209,871

2014

Pembroke Managing Agency Limited

-

-

-

649,038

2121

Argenta Syndicate Management Limited

10,019,394

5,472,177

2,473,682

1,836,835

2288

Astra Managing Agency Limited

-

-

8,139

-

2525

Asta Managing Agency Limited

1,281,801

1,193,027

1,149,189

954,916

2689

Asta Managing Agency Limited

10,025,276

438,655

518,866

1,011,739

2791

Managing Agency Partners Limited

9,217,847

9,217,851

10,303,120

10,457,746

2988

Brit Syndicates Limited

-

-

-

639,126

4242

Asta Managing Agency Limited

12,561,664

8,483,065

423,592

841,866

4444

Canopius Managing Agents Limited

-

162,189

281,110

291,535

5623

Beazley Furlonge Limited

6,894,032

4,769,792

2,883,293

50,002

5886

Asta Managing Agency Limited

22,520,345

12,054,953

7,277,465

1,570,433

6103

Managing Agency Partners Limited

3,073,952

2,704,446

2,076,669

1,944,856

6104

Hiscox Syndicates Limited

1,702,213

1,695,393

1,738,097

1,985,770

6107

Beazley Furlonge Limited

1,562,047

1,548,102

1,562,779

1,771,471

6117

Argo Managing Agency Limited

2,741,022

1,715,599

1,556,376

5,068,808

6123

Asta Managing Agency Limited

-

-

-

152,550

6133

Apollo Syndicate Management Limited

-

-

14,400

12,000

Total

 

232,700,472

145,101,772

115,745,332

106,372,284

 

Including the new acquisitions in 2021.

 

28. Group-owned net assets

The Group statement of financial position includes the following assets and liabilities held by the syndicates on which the Group participates. These assets are subject to trust deeds for the benefit of the relevant syndicates' insurance creditors. The table below shows the split of the statement of financial position between Group and syndicate assets and liabilities:


31 December 2021

 

31 December 2020

 

Group

£'000

Syndicate

£'000

Total

£'000

 

Group

£'000

Syndicate

£'000

Total

£'000

Assets








Intangible assets

60,889

-

60,889


31,601

-

31,601

Financial assets at fair value through profit or loss

43,589

110,255

153,844


19,713

65,564

85,277

Deferred income tax asset

-

-

-


-

-

-

Reinsurance assets:








- reinsurers' share of claims outstanding

60

53,373

53,433


61

30,720

30,781

- reinsurers' share of unearned premium

-

10,538

10,538


-

6,028

6,028

Other receivables, including insurance and reinsurance receivables

5,457

82,402

87,859


12,008

46,340

58,348

Deferred acquisition costs

-

13,615

13,615


-

7,726

7,726

Prepayments and accrued income

-

799

799


662

514

1,176

Cash and cash equivalents

16,178

8,446

24,624

 

4,961

3,534

8,495

Total assets

126,173

279,428

405,601

 

69,006

160,426

229,432

Liabilities








Insurance liabilities:








- claims outstanding

-

186,653

186,653


-

113,371

113,371

- unearned premium

-

59,611

59,611


-

32,356

32,356

Deferred income tax liabilities

11,887

78

11,965


6,492

15

6,507

Borrowings

-

-

-


4,000

-

4,000

Other payables, including insurance and reinsurance payables

445

34,482

34,927


364

18,992

19,356

Accruals and deferred income

2,607

2,092

4,699

 

1,858

1,435

3,293

Total liabilities

14,939

282,916

279,855

 

12,714

166,169

178,883

Equity attributable to owners of the Parent








Share capital

6,931

-

6,931


3,393

-

3,393

Share premium

86,330

-

86,330


35,525

-

35,525

Other reserves

(110)

-

(110)


(50)

-

(50)

Retained earnings

18,083

(3,488)

14,595

 

17,424

(5,743)

11,681

Total equity

111,234

(3,488)

107,746

 

56,292

(5,743)

50,549

Total liabilities and equity

126,173

279,428

405,601

 

69,006

160,426

229,432

 

 

Below is an analysis of the free working capital available to the Group:

Group

31 December

2021

£'000

31 December

2020

£'000

Funds at Lloyd's supplied by:



Reinsurers

37,032

39,536

Other third party

5,609

6,971

Group owned

43,304

19,469

Total funds at Lloyd's supplied (excluding solvency credits)

85,945

65,976

Group funds available:



Financial assets

43,589

19,713

Cash

16,178

4,961

Total funds

59,767

24,674

Less Group funds at Lloyd's

(43,304)

(19,469)

Free working capital

16,463

5,205

 

29. Events after the financial reporting period

Dividend

In respect of the year ended 31 December 2021 a final dividend of 3p per fully paid ordinary share (note 21) amounting to a total dividend of £2,034,000, is to be proposed at the Annual General Meeting on 29 June 2022. These Financial Statements do not reflect this dividend payable.

Bank loan

On 21 March 2022 the Company drew down on a £15,000,000 loan facility from Barclays Bank Plc for 15 month term expected to be renewed annually at a rate of interest of 3.5% over base rate

30. Finan cial Statements

The financial information set out in this announcement does not constitute statutory accounts but has been extracted from the Group's Financial Statements which have not yet been delivered to the Registrar. The Group's annual report will be posted to shareholders shortly and further copies will be available from the Company's registered office: 40 Gracechurch Street, London EC3V 0BT and on the Company's website www.huwplc.com.

 

 

 

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