Half Yearly Report

RNS Number : 0494P

Hampden Underwriting Plc

28 September 2011

 



28 September 2011

Hampden Underwriting plc

"Hampden Underwriting" or the "Company")

Interim results for the six months ended 30 June 2011

Hampden Underwriting plc, which provides investors with a limited liability direct investment into the Lloyd's insurance market, announces its unaudited results for the six months ended 30 June 2011.

Highlights

●  Premium written during the period totalled £4.6m (a decrease of 20% over the same period last year)

●  Net loss of £536,000 (compared to a loss of £58,000 over the same period last year)

●  Earnings per share of (7.23)p (compared to (0.78)p over the same period last year)

●  Net assets decreased to £7.3m

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

"Whilst it is of course disappointing to be reporting a loss of £536,000 at the half year, when viewed in the context of the insurance industry as a whole and the Lloyd's market in particular, it is certainly not surprising.  We are not immune from the fact that 2011 is expected to be the most expensive catastrophe year on record with the first six months already having suffered greater losses than the full 12 months of the previous worst year.  Notwithstanding the reported loss, the Lloyd's market, the syndicates in our portfolio and indeed the Company itself are sufficiently well capitalised and reserved not only to be able to cope with years of this nature but also to be in a position to take full advantage of the opportunities that will inevitably follow."

For further information please contact:

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

Chairman's Statement

Whilst it is of course disappointing to be reporting a loss of £536,000 at the half year, when viewed in the context of the insurance industry as a whole and the Lloyd's market in particular, it is certainly not surprising.  We are not immune from the fact that 2011 is expected to be the most expensive catastrophe year on record with the first six months already having suffered greater losses than the full 12 months of the previous worst year.  In the absence of any further major losses this year it is possible that the figure will have improved at year end but we will still be in loss territory.

Despite the fact that the losses in question took place in calendar year 2011, it is the 2010 year of account that will be most affected by them.  The 2010 year of account is currently forecast to be a mid-point loss of 2.82% of capacity.  Before that year closes we still have the 2009 year to come with a currently estimated profit of 14.25% of capacity.  Both these forecasted results outperform the Lloyd's market as a whole.

Notwithstanding the reported loss, the Lloyd's market, the syndicates in our portfolio and indeed your company itself are sufficiently well capitalised and reserved not only to be able to cope with years of this nature but also to be in a position to take full advantage of the opportunities that will inevitably follow.

In last year's Annual Report I said that we felt it prudent to delay the payment of our first dividend until there was further certainty on the impact of the large catastrophe losses on our portfolio.  I remain hopeful that if the portfolio matures in line with current expectations then this is a decision we may be in a position to revisit sooner than originally thought.

Sir Michael Oliver

Non-executive Chairman

27 September 2011

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2011

		6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
		2011	2010	2010
	Note	£'000	£'000	£'000
Gross premium written		4,571	5,723	7,887
Reinsurance premium ceded		(1,056)	(1,127)	(1,436)
Net premiums written		3,515	4,596	6,451
Change in unearned gross premium provision		(840)	(1,776)	462
Change in unearned reinsurance premium provision		423	373	(122)
		(417)	(1,403)	340
Net earned premium	2	3,098	3,193	6,791
Net investment income	4	148	201	368
Other underwriting income		-	4	4
Other income	2	17	3	116
		165	208	488
Revenue		3,263	3,401	7,279
Gross claims paid		(1,940)	(2,058)	(4,582)
Reinsurance share of gross claims paid		270	344	729
Claims paid, net of reinsurance		(1,670)	(1,714)	(3,853)
Change in provision for gross claims		(1,671)	(657)	(398)
Reinsurance share of change in provision for gross claims		543	(46)	58
Net change in provision for claims		(1,128)	(703)	(340)
Net insurance claims and loss adjustment expenses	2	(2,798)	(2,417)	(4,193)
Expenses incurred in insurance activities	2	(889)	(812)	(2,425)
Other operating expenses	2	(310)	(252)	(533)
Operating expenses		(1,199)	(1,064)	(2,958)
Operating (loss)/profit before tax	2	(734)	(80)	128
Income tax credit/(expense)	5	198	22	4
(Loss)/profit attributable to equity shareholders	9	(536)	(58)	132
Earnings per share attributable to equity shareholders
Basic and diluted	6	(7.23)p	(0.78)p	1.78p

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

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

Condensed Consolidated Statement of Financial Position

At 30 June 2011

		30 June	30 June	31 December
		2011	2010	2010
	Note	£'000	£'000	£'000
Assets
Intangible assets		1,123	1,101	1,274
Financial investments		13,162	13,025	13,841
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	3	2,974	2,383	2,592
- Reinsurers' share of unearned premiums	3	884	935	425
Other receivables, including insurance receivables		7,095	7,982	6,039
Prepayments and accrued income		1,026	1,086	901
Deferred income tax assets		12	-	12
Cash and cash equivalents		4,566	3,408	3,320
Total assets		30,842	29,920	28,404
Liabilities
Insurance liabilities
- Claims outstanding	3	14,068	11,988	13,104
- Unearned premiums	3	4,411	5,557	3,377
Other payables, including insurance payables		3,814	3,513	2,819
Accruals and deferred income		727	603	577
Current income tax liabilities		29	108	-
Deferred income tax liabilities		457	469	655
Total liabilities		23,506	22,238	20,532
Shareholders' equity
Share capital	8	741	741	741
Share premium	8	6,261	6,261	6,261
Retained earnings	9	334	680	870
Total shareholders' equity		7,336	7,682	7,872
Total liabilities and shareholders' equity		30,842	29,920	28,404

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

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2011

	6 months ended 30 June	6 months ended  30 June	12 months ended 31 December
Cash flow from operating activities	2011	2010	2010
	£'000	£'000	£'000
Results of operating activities	(734)	(80)	128
Interest received	(8)	(9)	(31)
Investment income	(118)	(159)	(315)
Dividend received	-	-	-
Income tax paid	(1)	(1)	68
Recognition of negative goodwill	-	-	(116)
Amortisation of intangible assets	141	118	246
Profit on sale of intangible assets	-	-	-
Change in fair value of investments recognised in the income statement	30	-	(21)
Changes in working capital:
Increase in other receivables	(1,181)	(3,285)	(1,157)
Increase in other payables	1,145	1,675	955
Net increase in technical provisions	1,157	5,454	4,691
Net cash inflow from operating activities	432	3,713	4,448
Cash flows from investing activities
Interest received	8	9	31
Investment income	118	159	315
Dividend received	-	-	-
Purchase of intangible assets	9	-	(26)
Proceeds from disposal of intangible assets	-	-	-
Purchase of financial investments	679	(2,584)	(3,400)
Acquisition of subsidiary, net of cash acquired	-	-	(159)
Net cash used in investing activities	814	(2,416)	(3,239)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital	-	-	-
Net cash used in financing activities	-	-	-
Net increase/(decrease) in cash and cash equivalents	1,246	1,297	1,209
Cash and cash equivalents at beginning of period	3,320	2,111	2,111
Cash, cash equivalents and bank overdrafts at end of period	4,566	3,408	3,320

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

Condensed Statement of Changes in Shareholders' Equity

Six months ended 30 June 2011

	Ordinary share capital	Share Premium	Retained Earnings	Total
	£'000	£'000	£'000	£'000
At 1 January 2010	741	6,261	738	7,740
Profit for the year attributable to equity shareholders	-	-	132	132
At 31 December 2010	741	6,261	870	7,872
At 1 January 2011	741	6,261	870	7,872
Loss for the period attributable to equity shareholders	-	-	(536)	(536)
At 30 June 2011	741	6,261	334	7,336

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

Notes to the Interim Financial Statements

Six months ended 30 June 2011

1.  Accounting policies

Basis of preparation

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

The Interim Financial Statements are prepared for the six months ended 30 June 2011.

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

The Interim Financial Statements are unaudited, but have been subject to review by the Group's auditors. The Interim Financial Statements have been prepared in accordance with the accounting policies adopted for the period ended 31 December 2010.

The comparative figures are based upon the Group Financial Statements for the period ended 31 December 2010, and have been reported on by the Group's auditors and were delivered to the Registrar of Companies on 17 June 2011.

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

Significant accounting policies

The Interim Financial Statements have been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in these Interim Financial Statements as were applied in the preparation of the Group Financial Statements for the period ended 31 December 2010.

2.  Segmental information

Primary segment information

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

●  Syndicate participation;

●  Investment management;

●  Other corporate activities.

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

6 months ended 30 June 2010	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	3,193	-	-	3,193
Net investment income	140	61	-	201
Other underwriting income	4	-	-	4
Other income	-	-	3	3
Net insurance claims and loss adjustment expenses	(2,417)	-	-	(2,417)
Expenses incurred in insurance activities	(812)	-	-	(812)
Amortisation of syndicate capacity	-	-	(76)	(76)
Other operating expenses	-	-	(176)	(176)
Results of operating activities	108	61	(249)	(80)

12 months ended 31 December 2010	Syndicate participation	Investment management	Other corporate activities	Total
	£'000	£'000	£'000	£'000
Net earned premium	6,791	-	-	6,791
Net investment income	365	3	-	368
Other underwriting income	4	-	-	4
Other income	-	-	116	116
Net insurance claims and loss adjustment expenses	(4,193)	-	-	(4,193)
Expenses incurred in insurance activities	(2,425)	-	-	(2,425)
Amortisation of syndicate capacity	-	-	(158)	(158)
Other operating expenses	(156)	-	(219)	(375)
Results of operating activities	386	3	(261)	128

Secondary segment information

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

3.  Insurance liabilities and reinsurance balances

         Movement in claims outstanding 

	Gross	Reinsurance	Net
	£'000	£'000	£'000
At 1 January 2011	13,104	2,592	10,512
Movement of reserves	1,671	543	1,128
Net exchange differences and changes in syndicate participation	(707)	(161)	(546)
At 30 June 2011	14,068	2,974	11,094

Movement in unearned premium

	Gross	Reinsurance	Net
	£'000	£'000	£'000
At 1 January 2011	3,377	425	2,952
Movement in premiums earned in the year	840	423	417
Net exchange difference and changes in syndicate participation	194	36	158
At 30 June 2011	4,411	884	3,527

4.  Net investment income

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2011	2010	2010
	£'000	£'000	£'000
Investment income at fair value through income statement	118	159	315
Realised gains on financial investments at fair value through income statement	-	-	137
Unrealised gains/(losses) on financial investments at fair value through income statement	22	33	21
Investment management expenses	-	-	(136)
Bank interest	8	9	31
Net investment income	148	201	368

5.  Income tax expense

	6 months ended 30 June	6 months ended 30 June	12 months ended 31 December
	2011	2010	2010
	£'000	£'000	£'000
Income tax credit/(expense)	198	22	(4)

The income tax credit/(expense) is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 27% (2010: 28%). Material disallowed items have been adjusted for in the income tax calculation.

6.  Earnings per share

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

The Group has no dilutive potential ordinary shares.

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

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

	6 months ended 30 June	6 months ended 30 June	12 months  ended 31 December
	2011	2010	2010
	£'000	£'000	£'000
(Loss)/profit for the period	(536,000)	(58,000)	132,000
Weighted average number of shares in issue	7,413,376	7,413,376	7,413,376
Basic and diluted earnings per share (p)	(7.23)p	(0.78)p	1.78p

7.  Dividends

No equity dividends were proposed, declared or paid in the period (2010 - £Nil).

8.  Share capital and share premium

Allotted, called up and fully paid		Ordinary Share  Capital  £'000			Share Premium £'000	Total £'000
7,413,376 ordinary shares of 10p each and share premium at 1 January 2011				741	6,261	7,002
7,413,376 ordinary shares of 10p each and share premium at 30 June 2011				741	6,261	7,002

9.  Retained earnings

	30 June	30 June	31 December
	2011	2010	2010
	£'000	£'000	£'000
Group
At 1 January 2011	870	738	738
(Loss)/profit attributable to equity shareholders	(536)	(58)	132
At 30 June 2011	334	680	870

10.  Related party transactions

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

	30 June	30 June	31 December
	2011	2010	2010
Company	£'000	£'000	£'000
Balances due from Group companies at the period end:
Hampden Corporate Member Limited	3,715	3,693	3,704
Nameco (No. 365) Limited	134	133	134
Nameco (No. 605) Limited	1,024	960	1,021
Nameco (No. 321) Limited	12	-	12
Total	4,885	4,786	4,871

Hampden Corporate Member Limited, Nameco (No.365) Limited, Nameco (No.605) Limited and Nameco (No.321) Limited ("Corporate Members") are 100% subsidiaries of the Company and have entered into a management agreement with Nomina plc. Jeremy Richard Holt Evans, a Director of Hampden Underwriting plc and the Corporate Members is also a Director of Nomina plc. Under the agreement, Nomina plc provides management and administration, financial tax and accounting services to the Group for an annual fee of £2,625 (2009: £2,625) per Corporate Member.

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

	30 June	30 June	31 December
	2011	2010	2010
Company	£'000	£'000	£'000
Hampden Corporate Member Limited	44	17	17
Nameco (No. 365) Limited	8	9	9
Nameco (No. 605) Limited	21	43	43
Nameco (No. 321) Limited	10	19	19
Total	83	88	88

Hampden Underwriting plc has entered into a company secretarial agreement with Hampden Legal plc. Under the agreement, Hampden Legal plc provides company secretarial services to the Group for an annual fee of £42,000.  During the period, company secretarial fees of £17,500 (2010: £35,000) were charged to Hampden Underwriting plc. Hampden Holdings Limited has a controlling interest in both Hampden Legal plc and Hampden Capital plc.

The Group has entered into a reinsurance arrangement with an insurance company owned by Hampden Capital plc.  The total premium paid during the period was £640 (2010: £920). The reinsurance arrangement was at market rates.  Hampden Capital plc is the holding company of Nomina plc.

11.  Syndicate participations

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

					Allocated capacity Period of account
Syndicate or MAPA Number	Managing or Members' Agent					2009		2010		2011
33	Hiscox Syndicates Limited					103,551		138,067		124,261
218	Equity Syndicates Management Limited					111,446		220,092		220,092
386	QBE Underwriting Limited					25,113		26,968		26,968
510	RJ Kiln & Co. Limited					117,860		172,115		172,115
557	RJ Kiln & Co. Limited					185,000		205,000		102,868
570	Atrium Underwriters Limited					49,241		56,931		56,931
609	Atrium Underwriters Limited					41,718		57,431		57,431
623	Beazley Furlonge Limited					126,912		190,841		190,841
727	S.A. Meacock & Company Limited					40,000		43,348		43,348
807	R.J. Kiln & Co Limited					33,748		39,225		39,225
958	Omega Underwriting Agency Limited					105,500		118,428		118,428
1200	Heritage Managing Agency Limited					110,592		118,915		118,915
2121	Argenta Syndicate Management Limited					404,441		100,000		114,286
2791	Managing Agency Partners Limited					115,128		309,577		309,577
4040	HCC Underwriting Agency Limited					40,000		-		-
6103	Managing Agency Partners Limited					302,831		235,000		100,000
6104	Hiscox Syndicates Limited					200,000		225,000		100,000
6105	Ark Syndicate Management Limited					-		-		87,549
6106	Amlin Underwriting Limited					104,334		175,000		125,000
6107	Beazley Furlonge Limited					-		15,000		15,000
7200	Members' Agents Pooling Arrangement					194,522		245,501		237,453
7201	Members' Agents Pooling Arrangement					1,028,768		1,278,668		1,240,909
7202	Members' Agents Pooling Arrangement					373,037		458,211		435,303
7203	Members' Agents Pooling Arrangement					35,660		44,288		42,859
7208	Members' Agents Pooling Arrangement					4,416,391		5,086,898		4,627,855
7217	Members' Agents Pooling Arrangement					59,320		70,235		53,477
Total						8,325,113		9,630,739		8,760,691

12.  Group owned net assets

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

	30 June 2011			30 June 2010			31 December 2010
	Group	Syndicate	Total	Group	Syndicate	Total	Group	Syndicate	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Assets
Intangible assets	1,123	-	1,123	1,101	-	1,101	1,274		1,274
Financial investments	3,674	9,488	13,162	4,130	8,895	13,025	3,473	10,368	13,841
Reinsurance share of insurance liabilities
- Reinsurers' share of outstanding claims	-	2,974	2,974	-	2,383	2,383	-	2,592	2,592
- Reinsurers' share of unearned premiums	-	884	884	-	935	935	-	425	425
Other receivables, including insurance receivables	321	6,774	7,095	77	7,905	7,982	17	6,022	6,039
Prepayments and accrued income	31	995	1,026	40	1,046	1,086	45	856	901
Deferred income tax assets	12	-	12	-	-	-	12	-	12
Cash and cash equivalents	3,072	1,494	4,566	2,347	1,061	3,408	2,892	428	3,320
Total assets	8,233	22,609	30,842	7,695	22,225	29,920	7,713	20,691	28,404
Liabilities
Insurance liabilities
- Claims outstanding	-	14,068	14,068	-	11,988	11,988	-	13,104	13,104
- Unearned premiums	-	4,411	4,411	-	5,557	5,557	-	3,377	3,377
Other payables, including insurance payables	74	3,542	3,616	118	3,395	3,513	67	2,752	2,819
Accruals and deferred income	633	94	727	507	96	603	781	(204)	577
Current income tax liabilities	29	-	29	108	-	108	-	-	-
Deferred income tax liabilities	655	-	655	469	-	469	655	-	655
Total liabilities	1,391	22,115	23,506	1,202	21,036	22,238	1,503	19,029	20,532
Shareholders' equity
Share capital	741	-	741	741	-	741	741	-	741
Share premium	6,261	-	6,261	6,261	-	6,261	6,261	-	6,261
Retained earnings	(160)	494	334	(509)	1,189	680	(792)	1,662	870
Total shareholders' equity	6,842	494	7,336	6,493	1,189	7,682	6,210	1,662	7,872
Total liabilities and shareholders' equity	8,233	22,609	30,842	7,695	22,225	29,920	7,713	20,691	28,404

13.  Announcement

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

 

END

 

 

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