Final Results

Beazley Group PLC 24 April 2003 24 April 2003 Beazley Group plc Preliminary results Beazley Group plc (Beazley), a leading independent Lloyd's vehicle, today announces its maiden results for the six months to 31 December 2002. Beazley was admitted to the official list on 12 November 2002. The Beazley Group acted as a Lloyd's managing agent in the period and the format of the financial statements reflects this. The group participates in the underwriting of the syndicate 2623 from 1 January 2003 so for future periods will prepare financial statements appropriate for insurance groups. In light of its importance to shareholders going forward, a review of the syndicate results and prospects is included in this report. Highlights Group â€¢ Successful flotation on London Stock Exchange on 12 November 2002, raising Â£150m â€¢ Operating profit before tax and exceptional items for the six months period - Â£0.8m â€¢ Net assets of Â£144.9m, 63p net assets per share â€¢ Capacity at Â£660m (2002: Â£403m), Beazley Group now has a 50% participation Syndicate* â€¢ Gross premiums written of Â£438m (2001: Â£355m) â€¢ Net premiums earned of Â£292m (2001: Â£179m) â€¢ Combined ratio 94% (2001: 108%) â€¢ Limited exposure to previous year losses due to limited participation â€¢ Profit for the period of Â£22m reflecting strong insurance market (2001: Â£(17)m) â€¢ 33% year-on-year renewal rate increase for 2002 *NB: These figures are for syndicates managed by the group and are for the full year, rather than six months (syndicate 623 for 2000 and 2001 and combined syndicates 623 and 2623 for 2002). Andrew Beazley, Chief Executive said: 'It is with great pleasure that I am publishing our first set of accounts as a public company. Beazley has an excellent market profile as a specialist underwriter and our syndicate results reflect this. 2002 has been an exceptional year in terms of premium growth, rate increases and underwriting results and our outlook remains positive for 2003.' Contacts Beazley Group plc Tel: 020 7667 0623 Andrew Beazley Arthur Manners Nicholas Furlonge Finsbury Tel: 020 7251 3801 Melanie Gerlis Anthony Silverman Chief Executive's statement This is my first opportunity to present you with a detailed account of our key operating activities. I would like to start first by presenting the Group's financial results and then explaining the reasons for our success. No underwriting activities for Beazley Underwriting Limited are included in the result for the six-month period as participation on syndicate 2623 only commenced on 1 January 2003. Beazley Group results The Beazley Group achieved a profit of Â£770,133 before tax and exceptional items. This is before exceptional expenses of Â£1,932,816 which relate to one-off advisor fees and debt redemption costs incurred in the lead up to the IPO, and which were charged to the profit and loss account during this period. During the same period, the proceeds from the IPO have significantly increased the net assets position of the group. The net assets per share at 31 December 2002 was 63p. The reporting period is for the six months ended 31 December 2002, as the accounting reference date was changed to 31 December. Underwriting results As can be seen in the table below, 2002 has been a strong year in terms of premium growth and underwriting results for the syndicate. Average rate increases of 33% have been achieved on renewal business compared with the prior year. In addition, we have seen a particularly low loss climate. Quota share reinsurance was purchased during 2002 for capacity management purposes, which has reduced the net premiums written. Managed syndicate results 2002 2001 2000 Â£m Â£m Â£m Gross premiums written 438 355 187 Net premiums written 289 269 129 Net premiums earned 292 179 115 Net claims incurred (174) (134) (67) Net operating expenses (102) (71) (47) Balance on technical account 22 (16) 10 Profit/(loss) for the period 22 (17) 10 Claims ratio 60% 75% 58% Expense ratio 34% 33% 39% Combined ratio 94% 108% 97% A specialist approach Through our specialist approach to underwriting, we aim to leverage our expertise in the existing lines through vertical growth and continued sound risk management. We believe that our skilled underwriting and high standards of service make us a market of choice. To facilitate and complement our approach to risk taking, we have built a robust distribution network. The sophisticated network enables us to take full advantage of the broad skill-base and licenses to trade both domestically and internationally. This has also been helped by fostering strong relationships with brokers and using cutting-edge technology. Our underwriters spend time each year travelling to meet brokers and their clients around the world. We believe this is the best way to understand their businesses, service issues and the ever-changing risks concerning them. Technology We are constantly looking for ways to improve the way we do business. For example, Beazley IQ is a unique and exclusive electronic, interactive queuing system for the box at Lloyd's, that drastically cuts broker waiting times. We are also the only syndicate to use webcams to put our trading box on public view at www.beazley.com so that brokers can easily check the availability of an underwriter. Our website also enables clients to access the latest news and product information. The Beazley Information Centre (BIC) is an innovative management information system, which we have used over the last five years. BIC is based on OLAP technology and brings data to the desktop. It lets underwriters easily access data and reports online so that they can make more timely and more informed decisions. A further example of our focus on technology is our early endorsement of the Project Blue Mountain initiative to help streamline data. The Lloyd's advantage Being a member of Lloyd's gives us many advantages and we have certainly made the most of the association through the distribution and branding. Lloyd's offers a broad product line that is attractive to clients throughout the world. As a member, we have the ability to write business in over 140 countries. We are also able to focus on what we are good at - risk taking. This has enabled us to write gross premium income of Â£438m with just 80 employees. A further benefit is that we can change the mix of business immediately according to market conditions. The flexibility within our underwriting teams allows us to respond quickly to a change in market conditions. Market opportunities We are in a strong position because we have been able to raise capital to develop new business. Even though the world has seen uncertainty since the tragic events of September 11, we have been able to take advantage of market opportunities. Our underwriting has seen significant rate increases in a period where contract terms and conditions have also tightened. Both these factors have been favourable to the operations. Operating structure Beazley Furlonge is the principal operating subsidiary that manages the underwriting operations. As a Lloyd's managing agent, Beazley Furlonge derives its operating revenue from agency fees charged to the underwriting members participating on the syndicate, and from profit commission which are based on the underwriting results of the syndicate. Agency fees currently amount to 0.6% of capacity and profit commission amount to 17.5% of the net profit of the syndicate. Beazley Underwriting participates as the sole underwriting member of syndicate 2623. This syndicate has underwritten in parallel with syndicate 623 from 1 January 2003. Under the parallel syndicate arrangement, Beazley Furlonge manages both syndicates as a single underwriting unit. All premiums, claims and any reinsurance to close of a prior year of account will be split between the syndicates pro rata to each syndicate's underwriting capacity for the relevant year of account, resulting in identical risk profiles and underwriting profitability levels. For the 2003 year, the split of business between the two syndicates is 50%/50%. The structure of our business means we are not hindered by excessive bureaucracy as we outsource many of our non-core main activities, so that we can focus on risk taking and settling claims. These outsourced functions include data input, asset management, human resources and IT maintenance. Using external suppliers has other advantages: we stand to benefit from their fresh thinking, specialist knowledge and excellent quality of service. Capacity structure The syndicate experienced little capacity growth during a disciplined period before 2000. From that date, prospects for underwriting improved and the market began to grow. Since then, the market has dislocated and grown which therefore required increases in capacity. Consequently, the underwriting capacity managed by the Beazley Group increased to Â£660m for the 2003 year of account. The different sources of capital up until the end of 2002 comprised individual names, controlled corporate members and third party corporate members. The Beazley Group had a limited participation up to 31 December 2002 in syndicate 623. In view of the current underwriting opportunities, the Beazley Group now has participation of Â£330m in 2003. The capital for that additional capacity was provided through the proceeds from the share issue in November 2002. The group has available a letter of credit facility to enable it to increase its Funds at Lloyd's (FAL) by up to Â£30m. Based on our existing risk based capital ratio of 40%, this facility allows syndicate 2623 to write up to Â£405m of capacity in future years of account. Investments Of the net proceeds from the share issue of Â£138m, Â£132m has been used as FAL for syndicate 2623, with the balance being used to fund working capital of the new syndicate. FAL is invested in short dated government bonds and commercial paper with an average duration of six months. The overall investment strategy is to maximise investment returns while stressing diversification of risk, preservation of capital and market liquidity with reference to the overall underwriting profitability of the group. The group has used a conservative approach to its investments in the past. Dividend policy The directors do not recommend the payment of a dividend. As stated in the company's prospectus dated 7 November 2002, it is anticipated that the company will commence paying dividends with effect from the interim results for the six months to 30 June 2003, which are expected to be announced in September 2003. Specialist Underwriting: Divisional Review Property Group The Property Group has the expertise and experience to provide consistent management of both price and capacity, and clients have access to the decision makers at all stages of the underwriting process. The team emphasises service as a means to product enhancement and achieves this through high underwriting skill levels accompanied by in-house technical support. This is provided by a specialist claims and policy wordings team and underwriting administration. At Beazley, we believe that by understanding our customers' businesses, we can find solutions to their needs. During 2002, the Lloyd's market was a market of choice for US brokers. This enabled us to increase the volume of risks underwritten and premium per risk. The claims ratio has improved due to the low frequency of losses in 2002 and from the effect from the improvement in the terms and conditions, while the 2001 result was impacted by an involvement in WTC. Current market conditions continue to be favourable. Rate increases are still being achieved although competition is increasing from international markets, particularly in the US. For 2003 the Property Group will expand in the UK following the recruitment of a dedicated underwriting team. Underwriting results 12 months ending 12 months ending 31 December 2002 31 December 2001 --------------------------------------------------------------------------- Gross premiums written (Â£m) 145 123 Net premiums written (Â£m) 115 108 Net premiums earned (Â£m) 114 66 --------------------------------------------------------------------------- Claims ratio 41% 72% --------------------------------------------------------------------------- Rate increase achieved 27% 20% Percentage of business led* 51% 51% *based on gross premium written Specialty Lines Specialty Lines has focused on writing specialty-risk insurance in selected markets and is an established lead underwriter in many of its areas of expertise. A significant proportion of this business is written in the US excess and surplus lines market and is predominately structured on a claims-made, rather than losses occurring, basis. The aim is to provide very high service levels - having the necessary skills and experience to write the business, produce the policy and settle the claims. Rate increases achieved accelerated throughout 2002 as the number of competitors reduced. As part of the overall syndicate capacity management, quota share reinsurance was purchased on this account which reduced the net premium written in 2002. It is not anticipated that we purchase similar levels of quota share reinsurance in 2003. The account maintains its conservative reserving strategy in line with recent years. During 2003, we will continue to recruit additional specialist underwriters to build existing lines of business. We expect the rating environment to continue to improve. Underwriting results 12 months ending 12 months ending 31 December 2002 31 December 2001 --------------------------------------------------------------------------- Gross premiums written (Â£m) 166 152 Net premiums written (Â£m) 79 111 Net premiums earned (Â£m) 93 77 --------------------------------------------------------------------------- Claims ratio 80% 72% --------------------------------------------------------------------------- Rate increase achieved 38% 13% Percentage of business led* 77% 68% *based on gross premium written Reinsurance Our Reinsurance underwriters employ the most up-to-date software programmes and analytical tools to assist risk assessment and help utilise available capacity more effectively. At Beazley, we believe that by understanding our customers' businesses, we can find solutions to their needs. The growth in the Reinsurance account comes from taking larger participations on core accounts in addition to rate increases. The 2001 result was affected by the WTC loss. The underlying impact of the WTC loss for the syndicate was Â£20m. The estimates for the ultimate gross and net WTC loss have not been changed. During 2003, the rating depends upon the client's loss record and exposure but, on average, rate levels are expected to be maintained in 2003. Underwriting results 12 months ending 12 months ending 31 December 2002 31 December 2001 ---------------- ---------------- ---------------- Gross premiums written (Â£m) 67 42 Net premiums written (Â£m) 49 18 Net premiums earned (Â£m) 46 18 ---------------- ---------------- ---------------- Claims ratio 68% 105% ---------------- ---------------- ---------------- Rate increase achieved 44% 14% Percentage of business led* 20% 21% *based on gross premium written Marine The Marine team is an acknowledged leader of traditionally difficult areas such as Greek trampship operators, demolition and towage business and the insurance of older vessels. The Marine account has shown positive premium growth this year and was not materially affected by the significant marine losses of late 2002. We expect significant growth in the energy account following the recruitment of a specialist underwriter, an area that has seen dramatic rate rises over the last eighteen months. Although rate rises in the portfolio were lower than other markets, further rises of a similar level are expected during 2003. There continue to be good prospects for underwriting returns in the short and medium term. Underwriting results 12 months ending 12 months ending 31 December 2002 31 December 2001 ---------------- ---------------- ---------------- Gross premiums written (Â£m) 60 38 Net premiums written (Â£m) 46 31 Net premiums earned (Â£m) 39 17 ---------------- ---------------- ---------------- Claims ratio 55% 63% ---------------- ---------------- ---------------- Rate increase achieved 16% 11% Percentage of business led* 51% 57% *based on gross premium written Outlook Our strategy is to capitalise on the current market conditions to position ourselves with a high quality portfolio in a financially efficient environment. We will achieve this by continuing to focus on risk taking and access. We believe this will result in good long-term returns for our shareholders. We strongly feel that prospects for the foreseeable future are good. Rates continue to increase in certain areas. This rating environment offers the potential for healthy underwriting returns. Recent trading conditions have been very favourable for premium rates during a period where there has been a particularly low loss climate. We believe there is a significant opportunity to grow the business within our existing areas of expertise. In addition, as the market dislocation continues, there will be opportunities to attract underwriting talent in specific areas that are complementary to the existing portfolio. PROFIT & LOSS ACCOUNT 6 months Year ended ended 31 December 30 June 2002 2002 Note Â£ Â£ Turnover 2 2,199,484 2,968,568 Administrative expenses: - ordinary items 5 (2,713,414) (1,071,397) - exceptional items 5 (1,189,816) (710,800) --------- --------- (3,903,230) (1,782,197) --------- --------- Operating profit/(loss) (1,703,746) 1,186,371 Share of operating income in associate undertakings 471,668 137,561 Profit on sale of investments 3 516,458 - --------- --------- (715,620) 1,323,932 Interest and dividends receivable 724,504 23,862 Interest payable and similar charges: - ordinary items 4 (428,567) (487,259) - exceptional items 4 (743,000) - - --------- --------- (1,171,567) (487,259) --------- --------- Profit/(loss) on ordinary activities before taxation 5 (1,162,683) 860,535 Taxation on ordinary activities 6 (91,633) (616,673) Taxation on 6 179,905 213,240 exceptional items --------- --------- Profit/(loss) on ordinary activities after taxation (1,074,411) 457,102 Dividends received - - --------- --------- Retained profit/(loss) for the Period (1,074,411) 457,102 --------- --------- Earnings per share - basic 7 (1.7p) N/A - diluted 7 (1.7p) N/A The group's and company's turnover and expenses all relate to the continuing operations. There were no recognised gains or losses during the period other than those passing through the profit and loss account. BALANCE SHEET AS AT 31 DECEMBER 2002 31 December 2002 30 June 2002 ---------------- -------------- Note Â£ Â£ Fixed assets: Intangible assets 8 6,268,071 6,440,107 Investments 132,418,235 19,923 --------- -------- Investments in associated undertakings 5,241,573 4,911,405 --------- -------- 143,927,879 11,371,435 --------- -------- Current assets: Debtors 3,577,629 1,794,264 Investments - 83,807 Cash at bank 4,990,202 780,668 --------- -------- 8,567,831 2,658,739 Creditors: Amounts falling due within one year (7,557,622) (7,061,599) --------- -------- Net current assets / (liabilities) 1,010,209 (4,402,860) Creditors: Amounts falling due after one year - (4,057,000) --------- -------- Provisions for liabilities and charges (30,244) (276,387) --------- -------- Total net assets 144,907,844 2,635,188 --------- -------- Capital and reserves: Called up share capital 9 11,473,973 504,172 Share Premium 10 132,377,266 - Merger Reserve 10 1,675,328 1,675,328 Profit and loss account 10 (618,723) 455,688 --------- -------- 144,907,844 2,635,188 --------- -------- Net tangible assets value per share 60p N/A Net assets value per share 63p N/A The financial statements were approved by the board of directors on 23 April 2003. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months ended Year to 31 December 2002 30 June 2002 Â£ Â£ Profit/(loss) on ordinary activities after taxation (1,074,411) 457,102 Prior year adjustment - (410,027) ------------- ------------ Shareholders' consolidated gains and losses recognised during the period (1,074,411) 47,075 ------------- ------------ Reconciliation of movement in shareholders'funds Shareholders' funds at beginning of period (as reported) 2,635,188 2,476,613 Prior year adjustment - (410,027) ------------- ------------ Shareholders' funds at beginning of period (as restated) 2,635,188 2,066,586 Profit/(loss) for the financial year (1,074,411) 457,102 Issue of shares net of issue costs 143,347,067 111,500 ------------- ------------ Shareholders' funds at period end 144,907,844 2,635,188 ------------- ------------ CONSOLIDATED CASH FLOW STATEMENT 6 months to Year to 31 December 2002 30 June 2002 Note Â£ Â£ Net cash flow from operating activities 11 (1,603,981) 1,415,475 Return on investments and servicing of finance Interest received 694,504 23,862 Interest paid (1,171,567) (487,259) Taxation Corporation tax paid (1,176) (144,803) Capital expenditure and financial investments Sale of current asset investments - 6,212 Fixed asset investments 32,398,313) - ------------- ----------- (134,480,533) 813,487 Financing (Decrease) in debt (4,657,000) (818,001) Issue of ordinary share capital 143,347,067 111,500 ------------- ----------- Increase in cash 4,209,534 106,986 ------------- ----------- Reconciliation of net cash flow to movement in net funds/(debt) Increase in cash during the period 4,209,534 106,986 Decrease in debt 4,657,000 818,001 ------------- ----------- 8,866,534 924,987 Opening net (debt) (3,876,332) (4,801,319) ------------- ----------- Closing net funds 4,990,202 (3,876,332) ------------- ----------- NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies Basis of preparation The preliminary financial statements, which do not comprise full accounts, have been prepared on the basis of the accounting policies set out in the accounts for the group for the year ended 30 June 2002 which were reproduced in the prospectus dated 6 November 2002. The preliminary financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom. The financial information contained in these preliminary financial statements does not constitute statutory accounts of the group within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 30 June 2002 have been delivered to the Registrar of Companies and statutory accounts for the six months ended 31 December 2002 will be delivered in due course. The auditors have reported on the accounts, their report was not qualified and did not contain a statement under Section 237(2)or (3) of the Companies Act 1985. Basis of consolidation The group financial statements consolidate those of the company and its subsidiaries following acquisition accounting principles. The investment in the associate is accounted for on the equity basis. Investments Investments in group undertakings and associates are stated at cost less permanent diminution in value. The investment in APUA is shown at the lower of cost and the directors' valuation. Other fixed asset investments are shown at cost. Turnover Turnover represents agency salaries and profit commission derived from underwriting Names at Lloyd's. Agency salaries represent net retained salaries and have been accounted for on an accruals basis. Profit commission is accounted for on an accruals basis. Results from associated companies The Group's interest in the results of the underwriting activities of an associated company, which is a corporate member of Syndicate 623 is accounted for on an annual basis. Operating leases Rentals payable under operating leases are charged on a straight line basis over the term of the lease. Deferred taxation Except where otherwise required by accounting standards, full provision without discounting is made for all timing differences which have arisen but not reversed at the balance sheet date. Pension costs The expected cost of providing pensions is recognised in accordance with Statement of Standard Accounting Practice 24 on a systematic and rational basis over the period from which the benefit from the employee's service is derived. Contributions are assessed in accordance with advice of a qualified actuary, using the projected unit method of funding. Goodwill Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions is capitalised. Positive goodwill is amortised to nil by equal annual instalments over the directors' estimate of its useful life, 20 years. On the subsequent disposal or termination of a business, the profit or loss on disposal or termination is calculated after charging the unamortised amount of any related goodwill. In the company's financial statements, investments in subsidiary undertakings, associates and joint ventures are stated at cost less amounts written off. 2. Turnover 6 months Year ended ended 31 December 2002 30 June 2002 ------------------ ------------------ Group Group Â£ Â£ Profit commission 759,484 1,354,239 Agency fees 1,440,000 1,614,329 ------------ ------------ 2,199,484 2,968,568 ------------ ------------ Turnover and profit before taxation arise in the United Kingdom, from business underwritten at Lloyd's on behalf of Names resident in the United Kingdom and overseas. 3. Profit on sale of investments Profit arises from a subsidiary's disposal of its entire holding of 819,672 shares of 5p each in Beazley Group plc. The shares were sold at a price of 73p each for a gross receipt of Â£598,361 on a holding with an original cost of Â£81,903, resulting in a profit of Â£516,458 (year to 30 June 2002: Â£Nil). 4. Interest payable and similar charges 6 months Year ended ended 31 December 2002 30 June 2002 ------------------ -------------- Group Group Â£ Â£ Bank loans 332,046 101,843 9.5% convertible loan notes 96,521 385,416 --------------- ------------ 428,567 487,259 Redemption premium on 9.5% convertible loan notes 743,000 - --------------- ------------ 1,171,567 487,259 --------------- ------------ 5. Profit on ordinary activities before taxation 6 months Year ended ended 31 December 2002 30 June 2002 ---------------- -------------- Group Group Profit on ordinary activities before Â£ Â£ taxation is stated after charging and crediting the following: Depreciation - tangible fixed assets - 36,481 Amortisation of goodwill 172,036 344,072 Auditors' remuneration - audit 88,151 33,091 - other 36,300 19,750 Staff costs 4,768,414 6,093,625 Short term incentive payments 1,509,848 61,037 Rental payments under operating leases - buildings 130,154 124,936 - motor vehicles 63,156 143,483 -------------- ------------- 6,768,059 6,856,475 Other costs 1,933,151 1,127,261 Recharged to managed syndicate (5,987,796) (6,912,339) -------------- ------------- Administrative expenses 2,713,414 1,071,397 Exceptional items: professional fees in respect of capital raising 1,189,816 710,800 Exceptional items: redemption premium 9.5% convertible loan notes 743,000 - Interest payable - bank loans 332,046 101,843 - other loans 96,521 385,416 -------------- ------------- 5,074,797 2,269,456 -------------- ------------- In addition to the amounts shown above as auditor's remuneration for non audit services, Â£763,962 (year to 30 June 2002: Â£258,000) was paid to KPMG Audit Plc in respect of services provided in connection with capital raising. Â£149,357 (year to 30 June 2002: Â£258,000) of this is included in the exceptional item, the remaining Â£614,605 (year to 30 June 2002: Â£nil) has been charged against the share premium created as part of the capital raised. 6 months Year ended ended 31 December 2002 30 June 2002 ---------------- --------------- Group Group Reconciliation of operating profit/(loss) Â£ Â£ before tax to operating profit/(loss) before tax and exceptional items: Operating profit/(loss) before tax as presented in the profit and loss account (1,162,683) 860,535 Add back exceptional items 1,932,816 710,800 ------------- ------------ 770,133 1,571,335 ------------- ------------ 6. Taxation 6 months Year ended ended 31 December 2002 30 June 2002 ------------------ ------------- Group Group Â£ Â£ UK corporation tax on: Profit on ordinary activities at 30% - 136,142 Prior period adjustments 14,320 (5,381) ------------ ------------- 14,320 130,761 Deferred tax Timing differences in respect of capital allowances 2,050 (4,065) Timing differences in respect of profit recognition (246,143) 227,737 Share of associate tax 141,501 49,000 ------------ ------------- (88,272) 403,433 ------------ ------------ Factors affecting the tax charge for the current period The corporation tax liability is higher than the standard rate of corporation tax in the UK due to the differences explained below: 6 months Year ended ended 31 December 2002 30 June 2002 ---------------- -------------- Â£ Â£ Profit on ordinary activities before tax (1,162,683) 860,535 ------------ ----------- Current tax at 30% (year to 30 June 2002 30%) (348,805) 258,160 Effect of; Expenses not deductible for tax 194,602 55,562 Capital allowances for the period lower than depreciation (2,050) (4,065) Amortisation 51,611 103,222 Timing differences in respect of profit recognition 104,642 (276,737) ------------ ----------- Tax on profit on ordinary activities - 136,142 ----------- ----------- 7. Earnings per share The calculation of basic earnings per share is based on earnings of Â£ (1,074,411), being the loss for the six month period and on 63,092,885 shares, being the weighted average number of shares in issue during the period. The earnings and number of shares used for the purposes of calculating diluted earnings per share are identical to those used for basic earnings per share. This is because the exercise of share options would have the effect of reducing the loss per share and is therefore not diluting under the terms of FRS 14. 8. Intangible fixed assets Group 31 December 2002 30 June 2002 ------- ------------------ -------------- Goodwill Goodwill ---------- ---------- Â£ Â£ Cost: Opening balance 6,881,450 6,881,450 Additions - - --------------- ------------- At period end 6,881,450 6,881,450 --------------- ------------- Amortisation: Opening balance 441,343 97,271 Charge for period / year 172,036 344,072 --------------- ------------- At period end 613,379 441,343 --------------- ------------- Net book amount: Opening balance 6,440,107 6,784,179 Closing balance 6,268,071 6,440,107 --------------- ------------ 9. Share capital Allotted Allotted Authorised and called-up Authorised and called-up ------------ --------------- ------------ --------------- 31 Dec 2002 31 Dec 2002 30 June 2002 30 June 2002 Â£ Â£ Â£ Â£ Equity Interests: 500,000 'B' shares of 50p each - - 250,000 - 1,015,358/ 1,008,344 'D' shares of 50p each - - 507,679 504,172 300,000,000/ 229,479,452 ordinary shares of 5p each 15,000,000 11,473,973 - - Non Equity Interests: 6,600 'A' shares of 50p each - - 3,300 - 3,400 'C' shares of 50p each - - 1,700 - ---------- ---------- ---------- ---------- 15,000,000 11,473,973 762,679 504,172 ---------- ---------- ---------- ---------- On 12 November 2002 the existing authorised share capital in Beazley Group plc was redesignated as 1,525,358 ordinary shares and a ten for one split performed to revalue the shares at 5p each. The authorised share capital was increased to 300,000,000 shares of 5p each and a bonus issue amounting to 13.8013925 new shares for each original 'D' share held resulted in the issued number of shares rising to 24,000,000. 205,479,452 ordinary shares of 5p each were issued at the IPO at 73p per share for a total consideration of Â£150,000,000, resulting in a total number of shares in issue of 229,479,452. The ordinary shares of 5p each have the right to receive notice of and to attend and vote at General Meetings. They are entitled to the reserves, both in relation to income distribution and to the distribution of capital. 10. Reserves Group Share Profit & Total Merger premium loss reserves reserve account account Â£ Â£ Â£ Â£ Balance brought forward 2,131,016 1,675,328 - 455,688 Retained profit/(loss) for the period (1,074,411) - - (1,074,411) Share premium on issue of shares 139,030,199 - 139,030,199 - Capitalised listing costs (6,652,933) - 6,652,933) - --------- --------- --------- --------- At 31 December 2002 133,433,871 1,675,328 132,377,266 (618,723) --------- --------- --------- --------- Company Share Profit & Total Merger premium loss reserves reserve account account Â£ Â£ Â£ Â£ Balance brought forward 144,137 - - 144,137 Retained profit/(loss) for the year (1,201,411) - - (1,201,411) Share premium on issue of shares 139,030,199 - 139,030,199 - Capitalised listing costs (6,652,933) - (6,652,933) - --------- --------- --------- --------- At 31 December 2002 131,319,992 - 132,377,266 (1,057,274) --------- --------- --------- --------- 11. Reconciliation of operating profit to net cash inflow from operating activities 6 months Year ended ended 31 December 2002 30 June 2002 ------------ ------------ Â£ Â£ Operating profit/(loss) (1,703,746) 1,186,371 Amortisation of goodwill 172,036 344,072 Depreciation charge - 36,481 Decrease/(increase) in debtors (1,155,150) (1,190,324) (Decrease)/increase in creditors 1,082,879 1,038,875 ------------ ------------ (1,603,981) 1,415,475 ------------ ------------ 12. Analysis of net funds/(debt) At 1 July Cash flow At 31 December 2002 2002 Â£ Â£ Â£ Cash at bank and in hand 780,668 4,209,534 4,990,202 Bank overdraft - - - --------- --------- --------- 780,668 4,209,534 4,990,202 --------- --------- --------- Debt due within one year (600,000) 600,000 - Debt due after one year (4,057,000) 4,057,000 - --------- --------- --------- (4,657,000) 4,657,000 - --------- --------- --------- Total (3,876,332) 8,866,534 4,990,202 --------- --------- --------- 13. Pension commitments The valuation of the schemes was calculated by the actuary on the Financial Reporting Standard 17 'Retirement benefits', basis as at 31 December 2002 and 30 June 2002. The major assumptions used in these valuations were: 31 December 2002 30 June 2002 ------------------------------------------------------------------------------- Rate of increase in salaries 4.0% 4.5% Rate of increase in pensions 2.0% 2.5% Discount rate applied to scheme liabilities 5.5% 6.0% Inflation assumption 2.0% 2.5% ------------------------------------------------------------------------------- The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. Scheme assets The fair value of the scheme's assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme's liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Long term Value at rate of 31 Long term Value at return 31 December rate of 30 June December 2002 return 30 2002 2002 Â£000 June 2002 Â£000 ------------------------------------------------------------------------------- Equities 6.5% 2,572 7.3% 3,133 Bonds 4.5% 705 5.3% 563 Cash 2.5% 552 0.0% -------- ------- Fair value of assets 3,829 3,696 Present value of scheme's liabilities (6,240) (5,309) -------- ------- Gross pension liability (2,411) (1,613) Deferred tax asset arising on pension 484 liability -------- ------- Net pension liability (2,411) (1,129) -------- ------- ------------------------------------------------------------------------------ Although a proportion of the pension costs are rechargeable to the managed syndicate, the amount of this net pension liability would have a consequential effect on the Group's reserves. Movement in deficit during the year Value at 31 December Value at 30 2002 June 2002 Â£000 Â£000 ------------------------------------------------------- ---------- Deficit in the scheme at beginning of year (1,613) (621) Current service cost (287) (710) Contributions paid 544 565 Past service cost - - Other finance income/cost (21) 19 Actuarial gain/loss (1,034) (866) ---------- ---------- Deficit in the scheme at end of year (2,411) (1,613) ---------- ---------- This information is provided by RNS The company news service from the London Stock Exchange

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