30th Jul 2009 07:00
Brit Insurance Holdings PLC
PRESS RELEASE
FOR IMMEDIATE RELEASE
30 JULY 2009
HALF YEAR FINANCIAL REPORT - 30 June 2009
13.1% annualised RoE excluding the effect of foreign exchange on non-monetary items
Financial highlights
Return on equity (annualised) excluding the effect of foreign exchange on non-monetary items of 13.1% (30 June 2008: 11.0%).
Profit before tax excluding the effect of foreign exchange on non-monetary items increased by 24.1% to £64.9m (30 June 2008: £52.3m).
Result before tax after the £73.6m effect of foreign exchange on non-monetary items falls to a loss of £8.7m (30 June 2008: £49.9m profit).
Gross written premium up 30.2% to £983.0m for the 6 months to 30 June 2009 (30 June 2008: £754.8m), a 11.6% increase at constant exchange rates, driven by 5.2% average premium rate increases (30 June 2008: decrease of 2.1%) and further success in the Group's focused distribution strategy in the UK.
Underwriting contribution of £43.5m (30 June 2008: £59.4m), with combined ratio excluding the effect of foreign exchange on non-monetary items of 93.8% (30 June 2008: 88.8%). The higher combined ratio reflects a more normal claims environment after the Group's benign experience in the first six months of 2008. In addition the majority of premium earned in the first six months of 2009 relates to premium written prior to the market turn in late 2008.
Investment return of £59.2m or 1.8% (30 June 2008: £2.1m and 0.1%) with positive return in each of the Group's four asset classes.
Interim dividend maintained at 7.5p per share.
Net tangible assets per share of 235.3p (31 December 2008: 248.2p) reflects the loss after tax for the period and the 2008 final dividend of 7.5p per share.
Business development
Extending the Group's spread of reach with the establishment of a US service operation in Chicago and a representative office in Japan. Together with regional claims hubs, these new offices are part of the Group's strategy to build a local presence in major world markets.
Continued focus on portfolio management with significant growth in the Reinsurance and UK Strategic Business Units (SBUs) as a result of improved rating conditions and distribution successes. In the Global Markets SBU a 5.0% decline in premium on a constant currency basis reflects the non-renewal of business, e.g. US Medical Expenses and Extended Warranty, that did not meet the long-term required return on capital, partially offset by growth in Marine and Property.
Dane Douetil, Group CEO of Brit Insurance Holdings PLC commented:
"In the first half of 2009, we have made excellent progress towards our strategic goals across all three of our Strategic Business Units. Overall premium growth of 12% at constant exchange rates masks significant underlying active portfolio management both across and within the Global Markets, Reinsurance and UK SBUs improving the quality of our underwriting portfolio. We also made good progress on our strategic objective of getting closer to our customers, opening our first offices in the United States, in Chicago, and in Japan, in Tokyo. Our investment in the micro-end of the UK commercial market through our on-line ventures continued to deliver with year on year growth of 103%.
"Underwriting margins are improving across most of the business, although some Casualty classes, particularly US Commercial PI and UK Specialist Liability, are not seeing the price rises we believe are required in the face of low interest rates. We expect, however, the situation in these classes to improve in the next 12 months. We continue to invest in our future and the quality of our underwriting capability with eight new senior underwriters joining us during the last six months in a variety of disciplines. We are pleased with our investment performance in what were tricky conditions, but frustrated with the unintended volatility caused by IFRS's approach to certain insurance assets and liabilities, which has a significant distorting impact on our reported result in a given period."
Financial highlights and key performance indicators
|
6 months ended |
6 months ended |
Year ended |
|
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|
|
Gross written premiums (£m) |
983.0 |
754.8 |
1,394.6 |
|
Net written premiums (£m) |
792.1 |
577.7 |
1,163.3 |
|
Net earned premiums (£m)2 |
743.3 |
548.8 |
1,145.6 |
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Investment return (£m) |
59.2 |
2.1 |
7.4 |
|
Profit before tax excluding the effect of foreign exchange on non-monetary items (£m) 1 |
64.9 |
52.3 |
39.6 |
|
Profit / (loss) before tax (£m) |
(8.7) |
49.9 |
89.2 |
|
Profit / (loss) after tax (£m) |
(6.3) |
37.6 |
66.6 |
|
Net assets (£m) |
810.6 |
839.6 |
849.7 |
|
Net tangible assets (£m) |
727.7 |
759.0 |
767.6 |
|
Total invested assets (£m) |
3,231.5 |
2,784.3 |
3,233.7 |
|
Diluted earnings / (loss) per share (pence) |
(2.0) |
12.2 |
21.5 |
|
Dividend per share - proposed / paid (pence) |
7.5 |
7.5 |
15.0 |
|
Net assets per share (pence) |
262.1 |
271.3 |
274.8 |
|
Net tangible assets per share (pence) |
235.3 |
245.3 |
248.2 |
|
Return on equity excluding the effect of foreign exchange on non-monetary items (annualised) |
13.1% |
11.0% |
4.6% |
|
Return on equity (annualised) |
(1.1)% |
10.5% |
9.2% |
|
Claims ratio2 |
63.6% |
55.2% |
63.5% |
|
Expense ratio2 |
30.2% |
33.6% |
32.9% |
|
Combined ratio2 |
93.8% |
88.8% |
96.4% |
|
Investment return |
1.8% |
0.1% |
0.2% |
|
Tax rate |
27.6% |
24.6% |
25.3% |
1 Under International Financial Reporting Standards (IFRS), unearned premium and deferred acquisition costs are classified as non-monetary items and therefore translated at historic exchange rates. Corresponding monetary items are translated at closing rates. If non-monetary items were to be translated at closing rates, the 2009 half year result would increase by £73.6m (30 June 2008 result increase by £2.4m; 31 December 2008 result decrease by £49.6m).
2 Excluding the effect of foreign exchange on non-monetary items.
For further information, please contact
|
Dane Douetil, Chief Executive Officer, Brit Insurance Holdings PLC |
020 7984 8500 |
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Neil Manser, Head of Investor Relations, Brit Insurance Holdings PLC |
020 7098 6980 |
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David Haggie/Peter Rigby/Juliet Tilley, Haggie Financial |
020 7417 8989 |
Notes to Editors
Brit Insurance's operations comprise three strategic business units: Brit Global Markets, Brit Reinsurance and Brit UK. All three have access to the two regulatory vehicles through which Brit Insurance underwrites: Brit Insurance Limited which is a UK FSA regulated insurance company and Lloyd's Syndicate 2987 which is managed by Brit Syndicates Limited. Brit Insurance has UK underwriting offices in London, Reading, Birmingham, Bristol, Glasgow, Leeds, Darlington, Belfast and Manchester.
www.britinsurance.com
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CONTENTS |
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Half Year Management Report |
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Overview of the Results |
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Brit Global Markets |
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Brit Reinsurance |
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Brit UK |
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Investments |
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Risks |
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Condensed Consolidated Financial Statements |
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Condensed Consolidated Income Statement |
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Condensed Consolidated Statement of Comprehensive Income |
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Condensed Consolidated Statement of Financial Position |
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Condensed Consolidated Statement of Cash Flows |
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Condensed Consolidated Statement of Changes in Equity |
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Notes to the Financial Statements |
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Responsibility Statement |
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Independent Review Report to Brit Insurance Holdings PLC |
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Company Information |
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This document does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer or invitation or advice or recommendation to subscribe for, underwrite or otherwise acquire or dispose of any securities (including share options and debt instruments) of the Company nor any other body corporate nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever which may at any time be entered into by the recipient or any other person, nor does it constitute an invitation or inducement to engage in investment activity under Section 21 of the Financial Services and Markets Act 2000 (FSMA). This document does not constitute an invitation to effect any transaction with the Company or to make use of any services provided by the Company. Past performance cannot be relied on as a guide to future performance.
HALF YEAR MANAGEMENT REPORT
In the first half of 2009 Brit Insurance produced an annualised return on equity excluding the effect of foreign exchange on non-monetary items of 13.1% (30 June 2008: annualised excluding the effect of foreign exchange on non-monetary items of 11.0%). This is a solid result in light of continued volatility in investment markets and considering the majority of premium earned in the first half of 2009 reflects premium written prior to the market turn in late 2008. Gross written premium growth of 11.6% (at constant exchange rates) in the first half of 2009 was against the backdrop of improved underwriting conditions with average premium rate increases of 5.2% across the portfolio and continued success of the Group's focused distribution strategy in the UK.
|
Gross written premiums |
Combined ratio (excluding the effect of foreign exchange on non-monetary items) |
|||||
|
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
Movement at constant exchange rates |
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
Movement (percentage points) |
|
|
£m |
£m |
% |
% |
% |
pp |
|
|
Brit Global Markets |
469.3 |
404.5 |
(5.0) |
92.9 |
88.2 |
(4.7) |
|
Brit Reinsurance |
277.4 |
182.5 |
28.2 |
91.2 |
74.8 |
(16.4) |
|
Brit UK |
235.5 |
167.0 |
38.7 |
98.3 |
103.2 |
4.9 |
|
Other2 |
0.8 |
0.8 |
- |
- |
- |
- |
|
Total Group |
983.0 |
754.8 |
11.6 |
93.8 |
88.8 |
(5.0) |
2 Other includes the run-off of historic participations including Life Syndicate 389.
OVERVIEW OF THE RESULTS
Premiums
The Group experienced significant headline growth in gross written premium (GWP) for the six months to 30 June 2009 to £983.0m (30 June 2008: £754.8m), an increase of 30.2%. At constant exchange rates the growth was 11.6% (30 June 2008: 2.3%) and included positive movements on prior year premium estimates equivalent to 6.5% of GWP. Premium movements mainly arose from prudent estimation of new business relationships in the UK and adjustment premiums in Reinsurance.
Premium rate increases for the period were 5.2% (30 June 2008: -2.1%; 31 December 2008: -1.9%) and were broadly in line with our expectations at the start of the year. Rate increases were experienced in the majority of lines of business and were greatest in catastrophe related areas and in reinsurance where capacity remains tight. Premium rates on Marine XL (18.8%) and Property Treaty North America (11.5%) helped Reinsurance to an average premium rate increase of 8.3%. In Global Markets (4.4%) and UK (3.4%) premium rates are on the rise and are expected to continue to trend upwards over the course of 2009 and into 2010. Having said that some Casualty classes, particularly US Commercial PI and UK Specialist Liability, are not seeing the price rises required in the face of low interest rates.
|
Premium rating increases / (decreases) on renewal business |
6 months ended 30 June 2009 % |
6 months ended 30 June 2008 % |
12 months ended 31 December 2008 % |
|
Brit Global Markets |
4.4 |
(2.0) |
(2.0) |
|
Brit Reinsurance |
8.3 |
(2.4) |
(3.3) |
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Brit UK |
3.4 |
(1.9) |
(0.8) |
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Total Group |
5.2 |
(2.1) |
(1.9) |
During the period, the Group has actively managed its underwriting portfolio evidenced by the reduction in Global Markets' share of Group GWP from 54% in the first half of 2008 to 48% in the first half of 2009. At the same time Reinsurance and UK have grown as a proportion of Group GWP from 24% to 28% and 22% to 24% respectively. This portfolio shift reflects sound technical underwriting as evidenced by the previously announced withdrawal from US Medical Expenses and Extended Warranty in Global Markets; the cessation of the relationship with Augsburg Re for Aviation XL and the re-emphasis of the Financial Institutions portfolio towards Crime and non-US D&O/PI.
The Group expanded its Reinsurance account during the period on the back of an average 8.3% renewal rate increase. Particular areas of growth came from North America Property Treaty and Casualty Treaty. In the UK, in addition to an improving rating environment, the Group has successfully leveraged new relationships arising from its focus on a narrow group of brokers to derive the majority of business. Examples of significant contributors to UK growth in targeted areas include Xbridge (small business insurance) and Oak (mid and high net worth household).
Net written premium (NWP) increased 37.1% to £792.1m (30 June 2008: £577.7m) and net earned premium (NEP) excluding the effect of foreign exchange on non-monetary items increased 35.4% to £743.3m (30 June 2008: £548.8m).
Underwriting
The Group combined ratio excluding the effect of foreign exchange on non-monetary items increased to 93.8% (30 June 2008: 88.8%) with an 8.4 percentage point deterioration in the claims ratio, partially offset by a 3.4 percentage point improvement in the expense ratio.
The increase in the Group claims ratio reflects both the weaker underwriting conditions prevalent in 2008 when the majority of the premium earned in the first six months of 2009 was written, and higher short-tail claims experience. In particular, the Reinsurance SBU was adversely affected by the Air France claim which is estimated at £12m net of reinstatements and added 1.6 percentage points to the Group claims ratio. In 2008 the Group ceased its relationship with Augsburg Re, which wrote Aviation XL reinsurance on behalf of the Reinsurance SBU, and this portfolio will be materially off-risk by the end of 2009.
In the UK, the claims ratio fell 4.4 percentage points as the Group's distribution platform enabled it to access lower claims ratio business, albeit with higher commission costs.
As part of the Group's standard quarterly reserving analysis, the Group released £19.0m of claims reserves from prior years (30 June 2008: £21.5m) equivalent to 2.6 percentage points of net earned premium (30 June 2008: 3.9 percentage points of net earned premium). The Group experienced reserve releases in Global Markets and the UK, partially offset by an increase in Reinsurance. The increase in Reinsurance primarily related to claims attaching to underestimated premium from previous periods. The reserve release was lower than the first half of 2008 which saw a similar claims development but lower adjustments to prior year premium estimates.
|
Net reserve movements by SBU |
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
Brit Global Markets |
18.1 |
10.0 |
22.0 |
|
Brit Reinsurance |
(11.7) |
(6.0) |
20.1 |
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Brit UK |
12.1 |
18.2 |
38.6 |
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Other |
0.5 |
(0.7) |
(1.6) |
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Total Group |
19.0 |
21.5 |
79.1 |
More specifically ultimate claim estimates for both the 2008 US hurricanes and 2007 'sub-prime' related claims remain unchanged. The specific 'sub-prime' reserve has developed in line with expectations for the tenth quarter in a row.
To aid understanding of the Group's reserving track record, the net ultimate loss ratios on an underwriting year basis are set out below. This table should be read horizontally and shows how over time the ultimate net loss ratio on each underwriting year develops from the level at which it was initially set. These figures are based on premium net of brokerage which is the basis on which the Group sets its claims reserves.
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Development of Group ultimate net loss ratio by underwriting year |
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|
After 1 year |
After 2 years |
After 3 years |
After 4 years |
After 5 years |
After 6 years |
After 7 years |
At 30 June 2009 |
|
|
2002 |
76% |
70% |
66% |
60% |
57% |
56% |
55% |
55% |
|
2003 |
74% |
72% |
64% |
59% |
55% |
53% |
52% |
|
|
2004 |
82% |
79% |
73% |
70% |
68% |
67% |
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|
2005 |
104% |
109% |
106% |
103% |
102% |
|||
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2006 |
81% |
83% |
80% |
78% |
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2007 |
89% |
92% |
93% |
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2008 |
95% |
98% |
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As this data is on an underwriting year basis, claims in the current calendar year can affect the previous underwriting year. For example the increase in the ultimate net loss ratio for 2008 is partially caused by the Air France claim which is recorded in the 2008 underwriting year.
The expense ratio of 30.2% was 3.4 percentage points lower than the first half of 2008. For Brit UK, despite a 3.0 percentage point increase in commission costs from writing lower claims ratio business, the UK expense ratio fell by 0.5 percentage points, proof of the improved operational gearing from more effective leveraging of the UK regional network.
Elsewhere the improvement arose from changes to business mix, a lower accrual for profit related compensation and exchange rate effects - the Group's non-commission costs which are generally in the UK have risen more slowly than net earned premium which benefited from approximately a 17% increase due to higher average exchange rates for US dollar, Euro and Japanese Yen in 2009.
The Group's IFRS combined ratio was 98.2% and is stated after the effect of foreign exchange on non-monetary items, which added 4.4 percentage points. See 'Foreign exchange' below for more detail.
Other underwriting related items
During the first six months of 2009, £102.1m of reinsurance was ceded to a cell of Rockhampton Insurance PCC Limited (Rockhampton), a Gibraltar based reinsurance company 100% owned by the Group. Amounts ceded included a whole account quota share (2009 year of account: 20%; 2008 year of account: 5%) and £14.4m relating to specific excess of loss reinsurance contracts underwritten alongside external reinsurers and on equivalent terms. Rockhampton will shortly be renamed 'Brit Insurance (Gibraltar) PCC Limited'.
Within 'Disposal and partial disposal of associated undertakings', the Group has recognised a £4.2m gain on its participation on Norton II. This represents the recycling of translation gains of which £4.1m were already recognised in shareholders equity at 31 December 2008.
The Group's catastrophe swap contract with Fremantle Limited, which is accounted for as a derivative, cost £2.4m in the first half of 2009.
Investment return
The Group continued to maintain a cautious investment stance during the first half of 2009 with the majority of investments in cash and short-dated high quality bonds. Investment return was £59.2m, a significant improvement over the prior year (30 June 2008: £2.1m) as investment markets reacted positively to a modest stabilisation in the macro environment. Overall non-annualised investment return for the first six months of the year was 1.8% (30 June 2008: 0.1%), with a positive contribution from each of the Group's asset classes. See Investments section later in this report for a detailed breakdown of the investment portfolio and investment return for the first six months of 2009.
Other expenses
Other non-insurance related expenses, which include Group central costs as well as one-off project costs, increased by £3.1m compared with the first half of 2008. The main increase arose from a number of projects including work on the Group's planned redomicile to the Netherlands and the proposed acquisition of Chaucer Holdings PLC.
Group headcount at 30 June 2009 was 717. Headcount has remained broadly constant since 31 December 2008 (725) and has reduced since 30 June 2008 (762).
Foreign exchange
The Group experienced significant foreign exchange related items in the first half of 2009 amounting to a pre-tax charge of £94.5m (30 June 2008: £8.3m gain).
First, the Group recognised a charge of £73.6m relating to the IFRS requirement to recognise non-monetary assets and liabilities (i.e. UPR and DAC) at historic exchange rates. At 30 June 2009, the difference between recognising non-monetary assets and liabilities at historic rather than closing exchange rates was an additional £19.6m net liability. This reflects the relative strength of Sterling at 30 June 2009 compared to the historic rate over the period. At 31 December 2008, the respective amount was an additional net asset (or lower net liability) of £54.0m as Sterling was significantly weaker at the end of the year than the historic rate during the year. The charge in the first half of 2009 of £73.6m is the movement between the differences at 31 December 2008 and 30 June 2009.
On the basis that exchange rates remain constant, the additional net liability at 30 June 2009 of £19.6m will reverse as a gain to earnings during the second half of 2009 and early 2010. Figures relating to this adjustment are disclosed separately in the segmental information in the column 'Effect of foreign exchange on non-monetary items'. The Group considers this as purely a timing difference in profit recognition and has therefore presented additional profit before tax and RoE figures excluding its effect.
Secondly, the Group recognised a charge of £20.9m (30 June 2008: £10.7m profit) reflecting the translation of net assets denominated in foreign currencies and trading activities in the normal course of business.
The total foreign exchange related charge of £94.5m is made up of £61.0m 'Net foreign exchange loss' per the face of the income statement and a reclassification of part of the foreign exchange translation on non-monetary items to premium and acquisition costs. This latter adjustment can be seen in the column 'Effect of foreign exchange on non-monetary items' in Note 4 to the Financial Statements - Segmental information.
|
Effect of foreign exchange on non-monetary items |
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
UPR/DAC valued at historic rates of exchange |
518.5 |
434.4 |
464.5 |
|
UPR/DAC valued at closing rates of exchange |
498.9 |
436.4 |
518.5 |
|
Valuation difference in closing balance sheet |
(19.6) |
2.0 |
54.0 |
|
Valuation difference in opening balance sheet |
54.0 |
4.4 |
4.4 |
|
Effect of foreign exchange on non-monetary items |
(73.6) |
(2.4) |
49.6 |
|
Foreign exchange (losses)/gains |
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
Gains/(losses) on exchange |
(20.9) |
10.7 |
39.9 |
|
Effect of FX on non-monetary items (from above) |
(73.6) |
(2.4) |
49.6 |
|
Total foreign exchange (losses)/gains |
(94.5) |
8.3 |
89.5 |
|
Of which: |
|||
|
Net FX (losses)/gains (per face of income statement) |
(61.0) |
11.8 |
124.0 |
|
Included within premium and acquisition costs (per segmental) |
(33.5) |
(3.5) |
(34.5) |
Associated undertakings
The Group's share of the result of associated undertakings was a loss of £1.0m (30 June 2008: profit of £1.0m). The loss from associates is partially offset by an additional £0.4m of profit relating to Norton II prior to the members' voluntary liquidation. Norton Re II has so far generated an IRR of approximately 10% for investors, an excellent result considering the catastrophe activity during 2008, and follows an IRR of approximately 27% for Norton in 2007.
Result before tax
The Group's profit before tax excluding the effect of foreign exchange on non-monetary items was £64.9m, a 24.1% increase over the prior period (30 June 2008: £52.3m). Including the effect of foreign exchange on non-monetary items, the result fell to a loss before tax of £8.7m (30 June 2008: £49.9m profit).
Tax
The Group's effective tax rate of 27.6% is in line with the Group's expected tax rate in the UK.
Net income, EPS and return on equity
Net income for the six months to 30 June 2009 was a loss of £6.3m compared to a profit of £37.6m in the six months to 30 June 2008. This translates into EPS of -2.0p (30 June 2008: 12.2p) and return on equity (annualised) of -1.1% (30 June 2008: 10.5%).
Excluding the effect of foreign exchange on non-monetary items, the annualised return on equity was 13.1% an improvement over the annualised return on equity excluding the effect of foreign exchange on non-monetary items of 11.0% for the first six months of 2008.
Dividend
In March 2009, the Group announced its intention of pursuing a dividend policy which seeks to grow dividends per share in line with the longer term growth prospects of the Group. For the purposes of this policy the Group decided to use the 2008 dividend per share as the base. The Board has decided to maintain the interim dividend at 7.5p per share. It is payable on 7 September 2009 to shareholders on the register on 7 August 2009. The share will go ex-dividend on 5 August.
Net asset value
Net tangible asset value (NTA) of £727.7m is 5.2% lower than at 31 December 2008. This reflects a number of factors including payment of the final dividend of £23.2m (7.5p per share), an increase in the pension fund deficit of £12.7m, and the loss after tax for the period. NTA per share at 30 June 2009 is 235.3p compared with 248.2p at 31 December 2008.
The NTA is stated after the £19.6m previously discussed additional net liability relating to holding non-monetary assets and liabilities at historic exchange rates, which will unwind over the next 12 months provided exchange rates remain constant. After tax this is equivalent to 4.5p per share.
Capital and liquidity
The Group balance sheet remains strong, and the Group's main insurance carriers, Brit Insurance Limited (BIL) and Lloyd's Syndicate 2987, benefit from strong ratings from the major rating agencies. BIL's ratings of A (Strong) with stable outlook from Fitch (downgraded from A+ (negative outlook) on 16 June 2009) and A (Excellent) with stable outlook from AM Best (affirmed on 24 June 2009) remain in the target range of mid to high 'A'. Syndicate 2987's effective rating from trading through Lloyd's is A+ (Strong) from Standard and Poor's and Fitch and A (Excellent) from AM Best.
The Group has access to a five year £150m revolving credit facility effective from 21 December 2007. At 30 June 2009, £65.0m of the facility was drawn, an amount that remains materially unchanged at 29 July 2009. Drawings from the credit facility have been used for general corporate purposes. This has increased the Group's gearing ratio to 24.0% (31 December 2008: 15.9%) and remains within the Group appetite to retain a gearing ratio below 30%.
On 6 July 2009, the Group gave notice that on 15 August 2009 it intends to call its US$15.0m floating rate notes issued in June 2004. The Group has already set aside funds for this purpose.
Business development
The changing macro environment of the last two years has brought a number of challenges for the global re/insurance industry. Volatile investment markets, a generally softening insurance cycle up to the fourth quarter of 2008, and significant risk and catastrophe claims in 2008 have all contributed to remove a significant amount of excess capacity from the industry. In addition the weakness of Sterling against the Euro, US dollar and Japanese Yen during 2008 put further pressure on capital positions for businesses operating within Lloyd's.
Against this backdrop the Group's balance sheet has remained stable and it has made good progress in developing the business in line with its strategic objectives. Major business development highlights include:
Portfolio management: The Group continues to actively manage its underwriting portfolio both across and within the SBU structure. Reinsurance and UK have seen strong constant currency growth during 2009 in light of the improved rating environment whereas Global Markets has continued to optimise its portfolio with the exit from US Medical Expenses and Extended Warranty and the re-emphasis of the Financial Institutions division towards Crime and non-US D&O/PI. These adjustments position the Group's underwriting portfolio to take advantage of areas of improved rating conditions but also reduce exposure to classes of business where the Group believes claims are yet to emerge.
Leveraging the UK network: Since 2003 the Group has been actively building out a UK regional infrastructure and developing relationships with a limited number of key brokers in the UK market. This strategy continues to bear fruit with a 41% increase in gross written premium for Brit UK, an improvement in the combined ratio and 27% of premium now coming from regional relationships. Furthermore micro-commercial business which is traded electronically now represents close to 10% of Brit UK's gross written premium.
Increasing risk appetite in selected areas: Following the improved outlook for profitability from catastrophe related lines of business the Group decided to increase its risk appetite towards the upper end of its risk tolerance. At 30 June 2009, the Group's largest modelled RDS on a pre-tax basis had increased to 18% of NTA from 16% as at 30 June 2008. Additionally the improving outlook for the Group's non-catastrophe business further supports its decision to increase catastrophe risk appetite.
Extending spread of reach: The Group made good progress on the strategic objective of getting closer to its customers. On 1 May 2009 Brit Insurance Services (USA) Inc (BISI) began trading and initially will focus on Public Entity and Religious Package business but over time will expand its product offering. In addition, in early August the Group's representative office in Japan will begin operations. The office will at first focus on the reinsurance market, but in due course will assist in the potential expansion into the primary market. Together with the claims hubs already established in the US (Atlanta) and planned in the Netherlands and Singapore, these new regional offices are part of the Group's strategy to build a local presence in major world markets.
Employer of choice: The Group continues to attract talent across the breadth of the organisation. During 2009 Global Markets has recruited five senior underwriters including a new Short-tail Portfolio Director. Outside of underwriting, the Group has strengthened its central operations with a Director of Treasury and Investments, Head of Investor Relations and recently announced new Chief Operating Officer.
Corporate activity: The Group regularly assesses acquisition opportunities as a means to supplement the organic implementation of its strategy. Prior to the deterioration in capital market conditions in mid-2008 the Group's main focus had been on attracting either underwriting teams or renewal rights deals. Over the last year, however, a number of businesses have become available primarily due to capital strain at either operating or parent company level. The Group has assessed a number of these opportunities and, as disclosed on 22 June 2009, made a proposal to the Board of Chaucer Holdings PLC in relation to a possible offer. The Board considered that the terms of the all share proposal were attractive to both sets of shareholders but was not willing to increase the proposed terms at the expense of the Group's existing shareholders. The proposed offer was withdrawn on 22 June 2009.
Planned redomicile: As part of the Group's development of an efficient operating structure it announced in March 2009 that it planned, subject to receiving all relevant approvals, to redomicile to the Netherlands. This process continues and a more detailed announcement will be made in due course.
Outlook
Premium rate movements in the first half of 2009 suggest that potentially the insurance industry has reached the bottom of the underwriting cycle after one of the shortest ever market downturns. Premium rate increases, however, are not uniform and given pre-existing variation in technical pricing between different lines of business, the Group's focus on portfolio management and risk selection remains paramount.
The mid-year reinsurance renewal season saw a continuation of positive premium rate movements across the Group's Reinsurance portfolio. For example, renewal rates for North America Property Catastrophe reinsurance rose in the region of 15%. Furthermore, in the UK the focus on a limited number of broker relationships continues to generate business opportunities as evidenced by the new relationship with Thistle Underwriters, a recently established Managing General Underwriter (MGU) owned by Jardine Lloyd Thompson, which went live in June 2009.
Following significant growth in Global Markets in previous years, 2008 and early 2009 saw the SBU consolidate its position. During this period approximately £100m of premium which could not sustain the required long-term rate of return was not renewed. Meanwhile, the SBU has grown its Marine and Property accounts on the back of improved underwriting conditions and has seen particular opportunities in Marine Hull, Energy, Lender Placed Property and Open Market Property.
Improvements in underwriting conditions have yet to have a significant impact on the reported combined ratios of the Group, as the majority of premium earned in the first half of 2009 reflects business written prior to the market turn in late 2008. For example, less than 20% of the premium earned in the first half of 2009 relates to the 2009 underwriting year. However, as the underwriting results begin to reflect premium written in the 2009 underwriting year, the Group anticipates that, subject to normal large claim experience, this should have a beneficial impact on underlying underwriting performance.
Turning to investments, the portfolio remains conservatively positioned allowing the Group to expand gradually its exposure to riskier assets as opportunities arise. With the portfolio's yield reflecting today's low interest rates the risk-free income available in the near future will be quite modest. It is therefore prudent to expect that reasonable investment returns will in future require an exposure to greater volatility.
Over the last 18 months the Group has taken action to improve the quality of its underwriting capability. Active management of the underwriting portfolio together with a number of senior hires puts the Group in position to take advantage of the improved rating conditions. Going forward, the Group will continue to develop quality distribution capacity at the same time as focusing on improving its return on capital over the insurance cycle.
BRIT GLOBAL MARKETS
|
6 months ended |
6 months ended |
Year ended |
||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||
|
£m |
£m |
£m |
||
|
Gross written premium |
||||
|
Accident & Health |
49.3 |
80.6 |
144.2 |
|
|
Aerospace |
17.7 |
13.8 |
20.3 |
|
|
Finance & Professional |
153.3 |
145.1 |
308.3 |
|
|
Marine |
138.6 |
99.5 |
183.5 |
|
|
Property |
110.4 |
65.5 |
125.0 |
|
|
Total |
469.3 |
404.5 |
781.3 |
|
|
Net earned premium |
421.8 |
323.0 |
665.9 |
|
|
Net reserve movement from prior years |
18.1 |
10.0 |
22.0 |
|
|
Underwriting profit |
28.7 |
36.7 |
20.7 |
|
|
Operating profit |
32.0 |
54.1 |
57.6 |
|
|
Combined ratio |
92.9% |
88.2% |
96.4% |
|
|
Premium rating increases/(decreases) on renewal business |
6 months ended |
6 months ended |
|
30 June 2009 |
30 June 2008 |
|
|
% |
% |
|
|
Accident & Health |
1.4 |
2.0 |
|
Aerospace |
(6.2) |
(2.7) |
|
Finance & Professional |
2.6 |
(0.7) |
|
Marine |
8.4 |
(2.0) |
|
Property |
3.4 |
(8.5) |
|
Total |
4.4 |
(2.0) |
|
The rate movements should be read with caution. They are based on underwriters' estimates of rate changes, including adjustments to terms and conditions. They relate to renewal business only, since this represents the business for which the Group has the best year-on-year data. |
||
Review
Gross written premium increased by 16.0% to £469.3m (30 June 2008: £404.5m), which on constant exchange rates represented a 5.0% decrease. This resulted from realignment of the portfolio to reduce the level of Medical Expenses, Extended Warranty, FI and US casualty business offset by improved rates and new business opportunities in Marine and Property.
In 2009 rate improvements across the majority of Global Markets divisions have been recorded. Of particular note rates have increased by 20% across the FI classes, 17% in Downstream Energy, 15% in Upstream Energy, 10% in Marine Liability, 7% in Marine Hull and 17% for Open Market Property.
The underwriting result decreased to £28.7m with a combined ratio of 92.9% (30 June 2008: £36.7m and 88.2%) as a result of an increase in the claims ratio to 60.3% compared with 51.4% in the first six months of 2008. The prior period benefited from an especially benign claims environment whilst the claims ratio in the first six months of 2009 showed an improvement on the 2008 full year claims ratio of 61.2%.
Business Development
The SBU has reaffirmed its strategy to focus on active portfolio management, distribution and operational performance. To this end the following has been achieved so far in 2009:
The promotion of Stephen Moss to Portfolio Director for long tail and the recruitment of John King to Portfolio Director for short tail have established a team that is now fully positioned to manage execution of the SBU's strategy and invest in future evolution, whilst enforcing and maintaining underwriting discipline.
The underwriting team has been further strengthened with the recruitment of four new underwriters in Personal Accident, Marine Hull, US Package and International Property.
The wholly owned Chicago based MGA, Brit Insurance Services USA Inc (BISI), began writing business on 1 May 2009. BISI provides the opportunity to strengthen local US relationships and deliver improved service to our preferred target market.
The SBU continues to support and strengthen relationships with key intermediaries and coverholders in order to improve our spread of reach and operational effectiveness.
The SBU is in the process of building a delegated underwriting centre of excellence, in order to create a market leading platform for the management, administration and control of the SBU's delegated underwriting business.
Operationally significant gains are being achieved in support systems including technical pricing tools, electronic peer review and underwriter dashboard resulting in improved management information, increased efficiency and ultimately better decision making.
Outlook
Following the extreme financial conditions of 2008 and the tough underwriting stance taken by Brit Global Markets the platform has been created to capitalise upon the opportunities now presenting themselves, including improved rates and terms and wider distribution and geographical opportunities.
BRIT REINSURANCE
|
6 months ended |
6 months ended |
Year ended |
||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||
|
£m |
£m |
£m |
||
|
Gross written premium |
||||
|
Property Treaty North America |
92.4 |
56.1 |
81.5 |
|
|
Property Treaty International |
49.7 |
44.7 |
55.3 |
|
|
Casualty Treaty |
101.2 |
61.1 |
82.6 |
|
|
Marine XL |
15.8 |
12.1 |
17.8 |
|
|
Aviation XL |
8.8 |
5.3 |
16.3 |
|
|
Other |
9.5 |
3.2 |
7.2 |
|
|
Total |
277.4 |
182.5 |
260.7 |
|
|
Net earned premium |
153.5 |
107.0 |
209.9 |
|
|
Net reserve movement from prior years |
(11.7) |
(6.0) |
20.1 |
|
|
Underwriting profit |
12.4 |
25.7 |
13.9 |
|
|
Operating profit |
13.8 |
33.4 |
30.8 |
|
|
Combined ratio |
91.2% |
74.8% |
91.7% |
|
|
Premium rating increases/(decreases) on renewal business |
6 months ended |
6 months ended |
|
30 June 2009 |
30 June 2008 |
|
|
% |
% |
|
|
Property Treaty |
9.1 |
(4.7) |
|
Casualty Treaty |
7.7 |
(0.9) |
|
Marine XL |
18.8 |
(5.4) |
|
Aviation XL |
n.a. |
5.2 |
|
Total |
8.3 |
(2.4) |
|
The rate movements should be read with caution. They are based on underwriters' estimates of rate changes, including adjustments to terms and conditions. They relate to renewal business only, since this represents the business for which the Group has the best year-on-year data. |
||
Review
Gross written premiums increased by 52.0% to £277.4m (30 June 2008: £182.5m) a 28.2% increase at constant exchange rates. The growth in the year includes net movements on prior year premiums of £29.0m as a consequence of conservative original actuarial ultimates and projected reinstatement premiums from recent claims activity.
Rates have increased across all classes of business written within the SBU reflecting the pricing improvements seen in the reinsurance segment following the 2008 hurricanes. Focus remains on bottom line profitability as opposed to top line growth.
Combined ratio 91.2% (30 June 2008: 74.8%) reflects the impact of several major claim events in the year thus far, namely the Air France claim (£12m net of reinstatements) and the Australian Floods/Wildfires which hit the Property Treaty International account. In 2008 the Group ceased its relationship with Augsburg Re, which wrote Aviation XL reinsurance on behalf of the Reinsurance SBU, and will be materially off-risk by the end of 2009.
Operating profit fell by £19.6m to £13.8m (30 June 2008: £33.4m).
Retention ratio for the period was 90.9% (31 December 2008: 82.8%).
Business Development
The Reinsurance SBU continues to manage its portfolio of accounts responsibly. Increased pricing levels seen on catastrophe-exposed portfolios have led to the Group increasing its sterling risk appetite for natural perils scenarios. The teams remain alert to new opportunities - this has led to new business written in the year to date accounting for 11.6% of the total income.
The underwriting skill displayed by the SBU was recently recognised with the Casualty Treaty team being awarded 'Reinsurance Company of the Year Underwriting Casualty' by Reactions Magazine.
In June the SBU successfully established a representative office in Japan, the first element of the SBU's strategy roll-out, as it looks to develop its market presence within the global reinsurance segment. This initiative will make the Group a more meaningful player in this specific arena and allow it to continue its responsible growth in international revenues.
In addition, the team recently concluded its first catastrophe swap contract, swapping US$50m of US wind exposure for US$50m of Japanese wind exposure, demonstrating its proactive approach to aggregate management.
Outlook
The economic environment is expected to remain difficult and investment income cannot be relied upon to contribute in any meaningful way to profits in the short term. Underwriting profit as ever remains the primary focus. Classes exposed to recession-driven claims continue to be closely monitored, with elements of the Casualty Treaty account being particularly carefully underwritten. The global focus on underwriting profit will assist in maintaining the current positive rating environment within the Reinsurance segment for the balance of 2009 and into 2010.
BRIT UK
|
6 months ended |
6 months ended |
Year ended |
||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||
|
£m |
£m |
£m |
||
|
Gross written premium |
||||
|
Employers'/Public Liability |
60.8 |
54.0 |
103.5 |
|
|
Professional Indemnity/D&O |
21.2 |
8.0 |
34.0 |
|
|
Motor |
60.8 |
43.4 |
87.3 |
|
|
Property & Commercial/Packages |
92.7 |
61.6 |
125.8 |
|
|
Total |
235.5 |
167.0 |
350.6 |
|
|
Net earned premium |
160.4 |
116.0 |
259.9 |
|
|
Net reserve movement from prior years |
12.1 |
18.2 |
38.6 |
|
|
Underwriting profit/(loss) |
2.5 |
(3.9) |
1.5 |
|
|
Operating profit |
4.3 |
12.3 |
35.7 |
|
|
Combined ratio |
98.3% |
103.2% |
99.3% |
|
|
Premium rating increases/(decreases) on renewal business |
6 months ended |
6 months ended |
|
30 June 2009 |
30 June 2008 |
|
|
% |
% |
|
|
Employers'/Public Liability |
(0.7) |
(4.1) |
|
Professional Indemnity/D&O |
1.7 |
(6.7) |
|
Motor |
9.0 |
3.9 |
|
Property & Commercial/Packages |
2.4 |
(2.0) |
|
Total |
3.4 |
(1.9) |
|
The rate movements should be read with caution. They are based on underwriters' estimates of rate changes, including adjustments to terms and conditions. They relate to renewal business only, since this represents the business for which the Group has the best year-on-year data. |
||
Review
Gross written premium up 41.0% to £235.5m (30 June 2008: £167.0m) a 38.7% increase at constant exchange rates. Growth includes favourable development of premiums written in previous years arising from prudent estimation of premium volumes on new binding authorities. Adjusted for these movements the growth rate is 22%.
Adjusted growth reflects an increase in business written through regional offices and in small commercial and niche personal lines business resulting from new relationships entered into during the last 12 months. Premiums written through regional offices now represent 27% of Brit UK (30 June 2008: 22%).
Rates have increased across all UK classes except Employers/Public Liability which is still showing a small reduction. The growth in the Employers/Public Liability account in 2009 relates largely to the micro end of the market written through electronic trading whilst at the same time the Specialist Liability account written in London has reduced exposure.
Combined ratio of 98.3% (30 June 2008: 103.2%) driven by an improvement in both the claims and expense ratios.
Net reserve movement from prior years remains positive at £12.1m in the first 6 months of 2009.
Business Development
The UK has continued to execute its strategy and build upon the significant progress that was made during 2008. The book continues to both grow and diversify, notably with increased momentum in our regional network which is now well established. In micro-commercial business which is traded electronically, our revenues have grown to £22.5m from £11.1m at 30 June 2008, representing close to 10% of our overall gross premium written.
Continued good progress has been recognised at the British Insurance Awards where Brit UK won 'Underwriter of the Year' for Brit Lite. Brit UK was also a finalist in two further categories - 'Customer Care' and 'Young Achiever of the Year'.
The UK SBU continues to see attractive new business opportunities as evidenced by a new relationship with Thistle Underwriters, a recently established MGU owned by Jardine Lloyd Thompson, which went live in June 2009.
UK headcount has reduced to 152 (30 June 2008: 163) with GWP per head for the six months to 30 June increasing by £0.5m to £1.5m.
Outlook
The investment in people, product development and infrastructure in recent years is undoubtedly paying off as the business continues to develop and see an improvement in operating ratio. Market conditions are gradually improving and this trend is expected to continue.
The UK SBU is now a well established player in the UK market, differentiated through strong service delivery, quality of people and skills in execution. Despite economic challenges the business remains optimistic about the outlook.
INVESTMENTS
Market conditions
Market conditions remained volatile in the early months of 2009, as equities reached new lows in March and credit spreads widened further, particularly for financial issuers. Conditions improved steadily from late March through to the end of June for both equities and corporate credit. The new issue market re-opened for many corporate issuers and confidence in the health of the banking system strengthened. Towards the end of the half year government bond yields began to rise, particularly in the US, as the market began to discount an economic recovery. Yields at the five year maturity rose a full percentage point during the six months to close at 2.55%.
Financial performance
The investment portfolio provided a total return of £59.2m in the first half of 2009, equivalent to a non-annualised return of 1.8%. The figure is calculated by converting the returns of each underlying currency to sterling at the average exchange rate.
|
Pre-tax return |
6 months ended |
6 months ended |
Year ended |
|||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||
|
£m |
% |
£m |
% |
£m |
% |
|
|
Equity securities |
0.7 |
1.6 |
(11.9) |
(6.0) |
(36.7) |
(24.0) |
|
Debt securities |
46.1 |
2.2 |
13.6 |
0.7 |
89.4 |
4.6 |
|
Specialised investment funds |
2.6 |
2.2 |
(11.0) |
(3.9) |
(69.9) |
(38.8) |
|
Cash and cash equivalents |
9.8 |
1.1 |
11.4 |
2.5 |
24.6 |
4.6 |
|
|
59.2 |
1.8 |
2.1 |
0.1 |
7.4 |
0.2 |
Equity securities
The equity portfolio registered a modest gain of 1.6% in the first six months of the year. Equities accounted for 3.1% of the investment portfolio on 30 June 2009, down from 3.6% at the end of the last year. The change is driven primarily by the sale of the Group's remaining shares in Ebix Inc, which realised a small gain. The remainder of the portfolio produced a small loss.
Debt securities
The fixed income portfolio has witnessed a good performance to date in 2009, owing to the tightening in corporate credit spreads and the short duration of the portfolio. Corporate bonds produced about half of the portfolio's £46.1m total return, with all of the return coming in the last three months. The Group has reduced the size of its corporate holdings in recent months through the sale of some financial sector holdings. Corporate bonds totalled £653.5m on 30 June 2009, down from £851.6m at the year end. In addition, the proportion of holdings in the financial sector was reduced slightly. Proceeds from the sale of corporates have been applied to government bond and cash holdings.
Specialised investment funds
The Group's holdings in specialised investment funds provided a gain of £2.6m during the first six months of 2009. The Emerging market and Funds of funds sectors performed well, but private equity and some credit funds have continued to perform poorly. Excessive leverage is the most common factor in underperforming funds at present.
Asset allocation
|
At 30 June 2009 |
At 30 June 2008 |
At 31 December 2008 |
||||
|
£m |
% |
£m |
% |
£m |
% |
|
|
Equity securities |
100.3 |
3.1 |
167.2 |
6.0 |
117.4 |
3.6 |
|
Debt securities |
1,959.3 |
60.6 |
1,855.0 |
66.6 |
2,162.5 |
66.9 |
|
Specialised investment funds |
90.5 |
2.8 |
206.1 |
7.4 |
113.1 |
3.5 |
|
Cash and cash equivalents |
1,081.4 |
33.5 |
556.0 |
20.0 |
840.7 |
26.0 |
|
3,231.5 |
100.0 |
2,784.3 |
100.0 |
3,233.7 |
100.0 |
|
Breakdown of debt securities at 30 June 2009
|
£m |
Government |
P-1 |
AAA |
AA |
A |
BBB and lower |
Total |
|
Government issue* |
887.0 |
- |
- |
- |
- |
- |
887.0 |
|
Corporate bonds |
- |
- |
86.3 |
279.5 |
272.7 |
15.0 |
653.5 |
|
CDs and CPs |
- |
418.8 |
- |
- |
- |
- |
418.8 |
|
887.0 |
418.8 |
86.3 |
279.5 |
272.7 |
15.0 |
1,959.3 |
* All Government issue bonds are from either the US, Canada or from countries within the EU.
Breakdown of debt securities at 31 December 2008
|
£m |
Government |
P-1 |
AAA |
AA |
A |
BBB and lower |
Total |
|
Government issue |
753.9 |
- |
- |
- |
- |
- |
753.9 |
|
Corporate bonds |
- |
- |
168.4 |
369.5 |
311.9 |
1.8 |
851.6 |
|
CDs and CPs |
- |
557.0 |
- |
- |
- |
- |
557.0 |
|
753.9 |
557.0 |
168.4 |
369.5 |
311.9 |
1.8 |
2,162.5 |
Outlook
Although the recent period of rapidly declining global growth may be behind us, important structural challenges remain. The unusual combination of high leverage across the financial and household sectors in several of the world's leading economies is likely to require a reduction that may involve multiple economic cycles. The Group's investment portfolio is conservatively positioned, allowing it to expand gradually its exposure to riskier assets as opportunities arise. With the portfolio's yield reflecting today's low interest rates the risk-free income available in the near future will be quite modest.
risks
Principal risks
The Group identifies and manages risk under categories consistent with the Financial Services Authority (FSA) risk classification: group, market, insurance, credit, liquidity and operational. The principal risks facing the business were discussed on page 52 of the Group's 2008 Annual Report, with further details on risk management, including sensitivity analysis, given in Note 4 on page 99 of the same report.
Impact of the credit crunch
In addition to these principal risks, it is expected that the broader impacts of the fall out from the credit crunch and the ensuing global economic dislocations on the insurance market as a whole and Brit Insurance in particular might include:
Reduced returns on investment portfolios, increased credit spreads, defaults on asset backed securities and investment market volatility;
Increased claims against market intermediaries, professional advisors and directors;
Increased risk of fraudulent claims activity; and
Reduction in insurance purchasing where some element of discretion exists.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
for the 6 months ended 30 June 2009
|
Note |
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
|
Revenue |
|
|
|
|
|
Gross premiums written |
4 |
983.0 |
754.8 |
1,394.6 |
|
Less premiums ceded to reinsurers |
4 |
(190.9) |
(177.1) |
(231.3) |
|
Premiums written, net of reinsurance |
792.1 |
577.7 |
1,163.3 |
|
|
Gross amount of change in provision for unearned premiums |
(160.1) |
(101.0) |
(77.2) |
|
|
Reinsurers' share of change in provision for unearned premiums |
68.9 |
67.8 |
15.7 |
|
|
Net change in provision for unearned premiums |
(91.2) |
(33.2) |
(61.5) |
|
|
Earned premiums, net of reinsurance |
700.9 |
544.5 |
1,101.8 |
|
|
Investment return |
5 |
59.2 |
2.1 |
7.4 |
|
Return on derivative contracts |
(1.3) |
(8.5) |
(19.1) |
|
|
Disposal and partial disposal of associated undertakings |
6 |
4.2 |
4.5 |
4.5 |
|
Net foreign exchange gains |
7 |
- |
11.8 |
124.0 |
|
Other income |
0.3 |
0.9 |
1.1 |
|
|
Total revenue |
763.3 |
555.3 |
1,219.7 |
|
Expenses |
||||
|
Claims incurred: |
||||
|
Claims paid: |
||||
|
Gross amount |
(363.3) |
(311.5) |
(694.3) |
|
|
Reinsurers' share |
51.9 |
44.9 |
90.0 |
|
|
Claims paid, net of reinsurance |
(311.4) |
(266.6) |
(604.3) |
|
|
Change in the provision for claims: |
||||
|
Gross amount |
(164.3) |
(47.1) |
(191.8) |
|
|
Reinsurers' share |
2.5 |
10.9 |
68.5 |
|
|
Net change in the provision for claims |
(161.8) |
(36.2) |
(123.3) |
|
|
Claims incurred, net of reinsurance |
(473.2) |
(302.8) |
(727.6) |
|
|
Acquisition costs |
(183.2) |
(153.4) |
(306.1) |
|
|
Other operating expenses |
(48.4) |
(43.7) |
(90.4) |
|
|
Net foreign exchange losses |
7 |
(61.0) |
- |
- |
|
Total expenses excluding finance costs |
(765.8) |
(499.9) |
(1,124.1) |
|
|
Operating (loss)/profit |
(2.5) |
55.4 |
95.6 |
|
|
Finance costs |
(5.2) |
(6.5) |
(13.1) |
|
|
Finance income |
- |
- |
7.2 |
|
|
Share of (loss)/profit after tax of associated undertakings |
(1.0) |
1.0 |
(0.5) |
|
|
(Loss)/profit on ordinary activities before tax |
(8.7) |
49.9 |
89.2 |
|
|
Tax credit/(expense) |
8 |
2.4 |
(12.3) |
(22.6) |
|
(Loss)/profit attributable to owners of the parent |
(6.3) |
37.6 |
66.6 |
|
|
Basic earnings per share (pence per share) |
9 |
(2.0p) |
12.2p |
21.5p |
|
Diluted earnings per share (pence per share) |
9 |
(2.0p) |
12.2p |
21.5p |
Condensed Consolidated Statement of Comprehensive Income
for the 6 months ended 30 June 2009
|
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
||
|
|
||||
|
(Loss)/profit for the period |
(6.3) |
37.6 |
66.6 |
|
|
Other comprehensive income net of tax |
||||
|
Actuarial losses on defined benefit pension scheme |
(12.7) |
(7.8) |
(10.1) |
|
|
Tax relating to components of other comprehensive income |
3.6 |
2.2 |
2.9 |
|
|
Foreign exchange translation differences arising on the revaluation of foreign operations |
0.1 |
- |
4.1 |
|
|
Reversal of foreign exchange translation differences resulting from the disposal and partial disposal of foreign operations |
(4.2) |
1.3 |
1.3 |
|
|
Effect of associates' capital movements |
- |
0.6 |
0.6 |
|
|
Other comprehensive income for the period net of tax |
(13.2) |
(3.7) |
(1.2) |
|
|
Total comprehensive income for the period attributable to owners of the parent |
(19.5) |
33.9 |
65.4 |
Condensed Consolidated Statement of Financial Position
as at 30 June 2009
|
Note |
30 June 2009 £m |
30 June 2008 £m |
31 December 2008 £m |
|
|
Assets |
||||
|
Property, plant and equipment |
6.8 |
8.9 |
8.0 |
|
|
Intangible assets |
82.9 |
80.6 |
82.1 |
|
|
Deferred acquisition costs |
189.3 |
153.9 |
152.1 |
|
|
Investments in associated undertakings |
14.4 |
24.0 |
29.1 |
|
|
Current taxation |
- |
- |
1.9 |
|
|
Reinsurance contracts |
10 |
581.0 |
460.6 |
549.6 |
|
Financial investments |
11 |
2,150.1 |
2,228.3 |
2,393.0 |
|
Derivative contracts |
1.0 |
1.1 |
1.4 |
|
|
Insurance and other receivables |
642.7 |
552.2 |
518.4 |
|
|
Cash and cash equivalents |
1,081.4 |
556.0 |
840.7 |
|
|
Total assets |
4,749.6 |
4,065.6 |
4,576.3 |
Liabilities and Equity
|
Liabilities |
||||
|
Insurance contracts |
10 |
3,447.4 |
2,785.8 |
3,344.7 |
|
Employee benefits |
14.2 |
12.8 |
1.4 |
|
|
Borrowings |
12 |
206.8 |
174.4 |
143.1 |
|
Current taxation |
8.2 |
13.1 |
- |
|
|
Deferred taxation |
6.5 |
20.4 |
29.5 |
|
|
Provisions |
0.3 |
0.4 |
0.4 |
|
|
Derivative contracts |
1.4 |
0.6 |
5.4 |
|
|
Insurance and other payables |
254.2 |
218.5 |
202.1 |
|
|
Total liabilities |
3,939.0 |
3,226.0 |
3,726.6 |
|
Equity |
||||
|
Called up share capital |
247.3 |
247.3 |
247.3 |
|
|
Share premium account |
- |
138.0 |
- |
|
|
Capital redemption reserve |
- |
0.6 |
- |
|
|
Translation reserve |
- |
- |
4.1 |
|
|
Own shares |
(64.1) |
(64.0) |
(64.2) |
|
|
Retained earnings |
627.4 |
517.7 |
662.5 |
|
|
Total equity attributable to owners of the parent |
810.6 |
839.6 |
849.7 |
|
|
Total liabilities and equity |
4,749.6 |
4,065.6 |
4,576.3 |
Condensed Consolidated Statement of Cash Flows
for the 6 months ended 30 June 2009
|
Note |
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
|
Cash generated from operations |
||||
|
Cash flows provided by operating activities |
13 |
194.9 |
(187.6) |
36.5 |
|
Tax paid |
(6.9) |
(10.3) |
(25.8) |
|
|
Interest paid |
(0.6) |
(1.3) |
(11.8) |
|
|
Interest received |
64.0 |
54.3 |
109.3 |
|
|
Dividends received |
0.7 |
1.4 |
4.0 |
|
|
Net cash inflows/(outflows) from operating activities |
252.1 |
(143.5) |
112.2 |
|
|
|
||||
|
Cash flows from investing activities |
||||
|
Purchase of property, plant and equipment |
(0.3) |
(0.7) |
(2.1) |
|
|
Purchase of intangible assets |
(3.0) |
(1.9) |
(5.5) |
|
|
Net proceeds from disposal of property, plant and equipment |
- |
- |
0.2 |
|
|
Net proceeds from disposals and partial disposals of associated undertakings |
15.4 |
22.1 |
22.1 |
|
|
Movements in associated undertaking loan and preference share balances |
(1.6) |
- |
(0.8) |
|
|
Investment in associated undertakings |
- |
(11.5) |
(13.2) |
|
|
Net cash inflows from investing activities |
10.5 |
8.0 |
0.7 |
|
Cash flows from financing activities |
||||
|
Equity dividends paid |
(23.2) |
(44.9) |
(68.2) |
|
|
Draw down on revolving credit facility |
65.0 |
- |
- |
|
|
Repurchase of Lower Tier Two subordinated debt |
- |
- |
(8.4) |
|
|
Repurchase of 8.5% unsecured subordinated loan stock |
- |
- |
(19.7) |
|
|
Acquisition of own shares for employee incentive schemes |
(0.1) |
(0.1) |
(0.5) |
|
|
Repurchase of treasury shares |
- |
(1.1) |
(1.1) |
|
|
Net cash inflows/(outflows) from financing activities |
41.7 |
(46.1) |
(97.9) |
|
|
Net increase/(decrease) in cash and cash equivalents |
304.3 |
(181.6) |
15.0 |
|
|
Cash and cash equivalents at beginning of the period |
840.7 |
735.3 |
735.3 |
|
|
Effect of exchange rate fluctuations on cash and cash equivalents |
(63.6) |
2.3 |
90.4 |
|
|
Cash and cash equivalents at the end of the period |
1,081.4 |
556.0 |
840.7 |
Condensed Consolidated Statement of Changes in Equity
for the 6 months ended 30 June 2009
|
Note |
Called up share capital £m |
Share premium account £m |
Capital redemption reserve £m |
Translation reserve £m |
Own shares £m |
Retained earnings £m |
Total equity attributable to shareholders £m |
|
|
Balance at 1 January 2009 |
247.3 |
- |
- |
4.1 |
(64.2) |
662.5 |
849.7 |
|
|
Total comprehensive income for the period |
- |
- |
- |
(4.1) |
- |
(15.4) |
(19.5) |
|
|
Acquisition of own shares for share schemes |
- |
- |
- |
- |
(0.1) |
- |
(0.1) |
|
|
Vesting of own shares |
- |
- |
- |
- |
0.2 |
(0.2) |
- |
|
|
Equity dividends |
14 |
- |
- |
- |
- |
- |
(23.2) |
(23.2) |
|
Share-based payments |
- |
- |
- |
- |
- |
3.7 |
3.7 |
|
|
Balance at 30 June 2009 |
247.3 |
- |
- |
- |
(64.1) |
627.4 |
810.6 |
|
Condensed Consolidated Statement of Changes in Equity
for the 6 months ended 30 June 2008
|
Note |
Called up share capital £m |
Share premium account £m |
Capital redemption reserve £m |
Translation reserve £m |
Own shares £m |
Retained earnings £m |
Total equity attributable to shareholders £m |
|
|
Balance at 1 January 2008 |
247.3 |
138.0 |
0.6 |
(1.3) |
(63.1) |
527.4 |
848.9 |
|
|
Total comprehensive income for the period |
- |
- |
- |
1.3 |
- |
32.6 |
33.9 |
|
|
Acquisition of own shares for share schemes |
- |
- |
- |
- |
(0.1) |
- |
(0.1) |
|
|
Vesting of own shares |
- |
- |
- |
- |
0.3 |
(0.3) |
- |
|
|
Purchase of treasury shares |
- |
- |
- |
- |
(1.1) |
- |
(1.1) |
|
|
Equity dividends |
14 |
- |
- |
- |
- |
- |
(44.9) |
(44.9) |
|
Share-based payments |
- |
- |
- |
- |
- |
2.9 |
2.9 |
|
|
Balance at 30 June 2008 |
247.3 |
138.0 |
0.6 |
- |
(64.0) |
517.7 |
839.6 |
|
Condensed Consolidated Statement of Changes in Equity
for the 12 months ended 31 December 2008
|
Note |
Called up share capital £m |
Share premium account £m |
Capital redemption reserve £m |
Translation reserve £m |
Own shares £m |
Retained earnings £m |
Total equity attributable to shareholders £m |
|
|
Balance at 1 January 2008 |
247.3 |
138.0 |
0.6 |
(1.3) |
(63.1) |
527.4 |
848.9 |
|
|
Total comprehensive income for the period |
- |
- |
- |
5.4 |
- |
60.0 |
65.4 |
|
|
Acquisition of own shares for share schemes |
- |
- |
- |
- |
(0.5) |
- |
(0.5) |
|
|
Vesting of own shares |
- |
- |
- |
- |
0.5 |
(0.5) |
- |
|
|
Purchase of treasury shares |
- |
- |
- |
- |
(1.1) |
- |
(1.1) |
|
|
Equity dividends |
14 |
- |
- |
- |
- |
- |
(68.2) |
(68.2) |
|
Share-based payments |
- |
- |
- |
- |
- |
5.2 |
5.2 |
|
|
Capital reduction |
- |
(138.0) |
(0.6) |
- |
- |
138.6 |
- |
|
|
Balance at 31 December 2008 |
247.3 |
- |
- |
4.1 |
(64.2) |
662.5 |
849.7 |
|
Notes to the Financial Statements
1 Accounting policies
The interim condensed consolidated financial statements for the six months ended 30 June 2009 have not been audited, nor have the interim condensed financial statements for the equivalent period in 2008.
The interim condensed consolidated financial statements for the six months ended 30 June 2009 have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2008.
The interim condensed financial statements have been prepared in accordance with accounting policies that are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008 except for the adoption of IFRS 8 'Operating segments', Amendment to IFRS 2 'Share based payment: Vesting Conditions and Cancellations', Improving Disclosures and Financial Instruments (Amendment to IFRS 7), Amendments to IFRS 1 'First-time Adoption of IFRS' and IAS 27 'Consolidated and Separate Financial Statements', IAS 32 'Financial Instruments: Presentation' and IAS 1 'Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation' and IFRIC 16 'Hedges of a Net Investment in a Foreign Operation'. The adoption of these standards has had no effect on the interim condensed consolidated financial statements for the six months ended 30 June 2009 except for the adoption of IFRS 8. The effects of IFRS 8 are explained in Note 4. The accounting policies that have been adopted are those that the Directors anticipate will be complied with in the Group's annual financial statements for the year ended 31 December 2009.
The Group prepares annual financial statements in accordance with International Financial Reporting Standards adopted for use by the EU. The statutory accounts for the year ended 31 December 2008 have been reported on by the Group's auditors, Ernst & Young LLP, and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The comparative figures provided for the 12 months ended 31 December 2008 are based on the Group's statutory accounts.
The interim condensed financial statements do not constitute statutory accounts of the Group within the meaning of Section 240 of the Companies Act 1985 or Section 435 of the Companies Act 2006.
Basis of preparation
The Group's condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of cash flows and condensed consolidated statement of changes in equity have been prepared in accordance with IFRS. IFRS comprises standards issued by the IASB and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the EU.
In accordance with IFRS 4, 'Insurance Contracts', the Group continues to comply with the recommendations of the Statement of Recommended Practice on Accounting for Insurance Businesses issued by the Association of British Insurers in December 2005 (as revised in December 2006). However the Group has the option to change its accounting policies for insurance contracts only if, as a result its financial statements present information that is more relevant and no less reliable, or more reliable and no less relevant.
After making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis for preparing financial statements.
Basis of consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries and the Group's participation in Lloyd's syndicates' assets, liabilities, revenues and expenses. Subsidiaries are those entities in which the Group directly or indirectly has the power to govern the operating and financial policies in order to gain economic benefits. Also consolidated as if they were subsidiaries are special purpose entities including the Group's employee benefit trusts, its open ended investment company (OEIC) and its protected cell. The financial statements of subsidiaries are prepared for the same reporting year as the parent company. Consolidation adjustments are made to convert subsidiary accounts prepared under UK GAAP into IFRS so as to remove any dissimilar accounting policies that may exist. Subsidiaries are consolidated from the date control is transferred to the Group and cease to be consolidated from the date control is transferred. All significant inter-company balances, profits and transactions are eliminated. Shares held by third parties in the Group's OEIC are treated as a liability to the Group.
Associated undertakings are those entities over which the Group has the power to exercise significant influence but not control. The Group's investment in associated undertakings is accounted for under the equity method of accounting whereby associated undertakings are carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associate, less any impairment in value. The Group's investment in associated undertakings also includes goodwill identified on acquisition less any accumulated impairment loss. The income statement reflects the Group's share of the post-acquisition results of operations of the associated undertaking. The financial statements of associated undertakings are prepared for the same reporting year as the parent company.
2 Risks and uncertainties
The principal risks and uncertainties affecting the business activities of the Group remain those detailed in Note 4 to the Group's annual financial statements for the year ended 31 December 2008.
3 Seasonality of operations
The Group underwrites a wide range of risks, some of which are subject to potential seasonal variation. The most material of these is the Group's exposure to US Windstorms which are largely concentrated into the second half of a calendar year.
4 Segmental information
The Group has adopted International Financial Reporting Standard 8 'Operating Segments' (IFRS 8) in the current period. IFRS 8 requires that segments represent the level at which financial information is reported to the Executive Management Committee, being the chief operating decision maker as defined in IFRS 8. Following the adoption of IFRS 8, quota share reinsurance ceded by the insurance entities (Brit Insurance Limited and Syndicate 2987) to Rockhampton cell is no longer reflected in the Brit Global Markets, Brit Reinsurance and Brit UK strategic business unit (SBU) reportable segments. Consequently, the Rockhampton cell segment consists solely of Excess of Loss reinsurance ceded from the SBUs and based on quantitative thresholds this segment has been included within 'Other underwriting'. In addition, on the adoption of IFRS 8, foreign exchange differences on non-monetary items are no longer reflected in the SBU reportable segments but are instead separately disclosed. This provides a fairer representation of the claims ratios and financial performance of the SBUs which would otherwise be distorted by the mismatch arising from IFRSs whereby unearned premium, reinsurers share of unearned premium and deferred acquisition costs are treated as non-monetary items and claims reserves are treated as monetary items. Non-monetary items are carried at historic exchange rates, while monetary items are translated at closing rates.
The reportable segments have been identified as follows:
Brit Global Markets SBU which underwrites Brit's international and US business other than reinsurance.
Brit Reinsurance SBU which underwrites reinsurance.
Brit UK SBU which underwrites UK general commercial insurance.
'Other underwriting' which is made up of Syndicate 389 (Life - final year of account 2003), historic participations on external managed syndicates in run off (final year of account 2000) and Excess of Loss reinsurance ceded from the SBUs to Rockhampton cell.
'Other corporate' which is made up of residual income and expenditure not allocated to other segments.
The Group investment return is managed centrally and an allocation is made to each of the Strategic Business Units based on the average base interest rate for the period being applied to the insurance funds of each Unit. The annualised average base interest rate was 0.5% for the 6 months ended 30 June 2009 (30 June 2008: 3.9%) (31 December 2008: 3.9%).
Information regarding the Group's reportable segments is presented below. Comparative information has been restated to reflect the adoption of IFRS 8.
6 months ended 30 June 2009
|
|
Brit Global
Markets
£m
|
Brit
Reinsurance
£m
|
Brit UK
£m
|
Other
underwriting
£m
|
Intra Group
£m
|
Total underwriting excluding the effect of foreign exchange on non-monetary items
£m
|
Effect of foreign exchange on non-monetary items
£m
|
Total
underwriting after the effect of foreign exchange on non-monetary items
£m
|
Other
corporate
£m
|
Total
£m
|
|
Gross premiums written
|
469.3
|
277.4
|
235.5
|
15.2
|
(14.4)
|
983.0
|
-
|
983.0
|
-
|
983.0
|
|
Less premiums ceded to reinsurers
|
(94.8)
|
(55.5)
|
(54.3)
|
(0.7)
|
14.4
|
(190.9)
|
-
|
(190.9)
|
-
|
(190.9)
|
|
Premiums written, net of reinsurance
|
374.5
|
221.9
|
181.2
|
14.5
|
-
|
792.1
|
-
|
792.1
|
-
|
792.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross earned premiums
|
486.7
|
184.3
|
196.2
|
8.3
|
(7.2)
|
868.3
|
(45.4)
|
822.9
|
-
|
822.9
|
|
Reinsurers’ share
|
(64.9)
|
(30.8)
|
(35.8)
|
(0.7)
|
7.2
|
(125.0)
|
3.0
|
(122.0)
|
-
|
(122.0)
|
|
Earned premiums, net of reinsurance
|
421.8
|
153.5
|
160.4
|
7.6
|
-
|
743.3
|
(42.4)
|
700.9
|
-
|
700.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return
|
3.3
|
1.4
|
1.8
|
-
|
-
|
6.5
|
-
|
6.5
|
52.7
|
59.2
|
|
Return on derivative contracts
|
(1.1)
|
(1.1)
|
(0.2)
|
-
|
-
|
(2.4)
|
-
|
(2.4)
|
1.1
|
(1.3)
|
|
Disposal and partial disposal of associated undertaking
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4.2
|
4.2
|
|
Other income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
0.3
|
0.3
|
|
Total revenue
|
424.0
|
153.8
|
162.0
|
7.6
|
-
|
747.4
|
(42.4)
|
705.0
|
58.3
|
763.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross claims incurred
|
(282.4)
|
(121.0)
|
(123.9)
|
(8.9)
|
8.6
|
(527.6)
|
-
|
(527.6)
|
-
|
(527.6)
|
|
Reinsurers’ share
|
28.1
|
14.9
|
18.7
|
1.3
|
(8.6)
|
54.4
|
-
|
54.4
|
-
|
54.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims incurred, net of reinsurance
|
(254.3)
|
(106.1)
|
(105.2)
|
(7.6)
|
-
|
(473.2)
|
-
|
(473.2)
|
-
|
(473.2)
|
|
Acquisition costs – commission
|
(110.0)
|
(26.4)
|
(32.0)
|
0.6
|
-
|
(167.8)
|
8.9
|
(158.9)
|
-
|
(158.9)
|
|
Acquisition costs – other
|
(14.0)
|
(2.1)
|
(7.5)
|
(0.7)
|
-
|
(24.3)
|
-
|
(24.3)
|
-
|
(24.3)
|
|
Other insurance related expenses
|
(13.7)
|
(5.4)
|
(13.0)
|
-
|
-
|
(32.1)
|
-
|
(32.1)
|
-
|
(32.1)
|
|
Other expenses
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(16.3)
|
(16.3)
|
|
Net foreign exchange losses
|
-
|
-
|
-
|
-
|
-
|
-
|
(40.1)
|
(40.1)
|
(20.9)
|
(61.0)
|
|
Total expenses excluding finance costs
|
(392.0)
|
(140.0)
|
(157.7)
|
(7.7)
|
-
|
(697.4)
|
(31.2)
|
(728.6)
|
(37.2)
|
(765.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss)
|
32.0
|
13.8
|
4.3
|
(0.1)
|
-
|
50.0
|
(73.6)
|
(23.6)
|
21.1
|
(2.5)
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
(5.2)
|
|
Share of loss after tax of associated undertakings
|
|
|
|
|
|
|
|
|
|
(1.0)
|
|
Loss on ordinary activities before tax
|
|
|
|
|
|
|
|
|
|
(8.7)
|
|
Tax credit
|
|
|
|
|
|
|
|
|
|
2.4
|
|
Loss attributable to owners of the parent
|
|
|
|
|
|
|
|
|
|
(6.3)
|
|
Claims ratio
|
60.3%
|
69.1%
|
65.6%
|
|
|
63.6%
|
|
67.5%
|
|
|
|
Expense ratio
|
32.6%
|
22.1%
|
32.7%
|
|
|
30.2%
|
|
30.7%
|
|
|
|
Combined ratio
|
92.9%
|
91.2%
|
98.3%
|
|
|
93.8%
|
|
98.2%
|
|
|
6 months ended 30 June 2008
|
|
Brit Global
Markets
£m
|
Brit
Reinsurance
£m
|
Brit UK
£m
|
Other
underwriting
£m
|
Intra Group
£m
|
Total underwriting excluding the effect of foreign exchange on non-monetary items
£m
|
Effect of foreign exchange on non-monetary items
£m
|
Total
underwriting after the effect of foreign exchange on non-monetary items
£m
|
Other
corporate
£m
|
Total
£m
|
|
Gross premiums written
|
404.5
|
182.5
|
167.0
|
12.2
|
(11.4)
|
754.8
|
-
|
754.8
|
-
|
754.8
|
|
Less premiums ceded to reinsurers
|
(104.2)
|
(37.8)
|
(46.2)
|
(0.3)
|
11.4
|
(177.1)
|
-
|
(177.1)
|
-
|
(177.1)
|
|
Premiums written, net of reinsurance
|
300.3
|
144.7
|
120.8
|
11.9
|
-
|
577.7
|
-
|
577.7
|
-
|
577.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross earned premiums
|
389.6
|
126.6
|
141.1
|
3.1
|
(2.3)
|
658.1
|
(4.3)
|
653.8
|
-
|
653.8
|
|
Reinsurers’ share
|
(66.6)
|
(19.6)
|
(25.1)
|
(0.3)
|
2.3
|
(109.3)
|
-
|
(109.3)
|
-
|
(109.3)
|
|
Earned premiums, net of reinsurance
|
323.0
|
107.0
|
116.0
|
2.8
|
-
|
548.8
|
(4.3)
|
544.5
|
-
|
544.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return
|
17.4
|
7.7
|
16.2
|
0.8
|
-
|
42.1
|
-
|
42.1
|
(40.0)
|
2.1
|
|
Return on derivative contracts
|
(1.3)
|
(1.3)
|
(0.2)
|
-
|
-
|
(2.8)
|
-
|
(2.8)
|
(5.7)
|
(8.5)
|
|
Disposal and partial disposal of associated undertaking
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4.5
|
4.5
|
|
Net foreign exchange gains
|
-
|
-
|
-
|
-
|
-
|
-
|
1.1
|
1.1
|
10.7
|
11.8
|
|
Other income
|
-
|
-
|
-
|
0.9
|
-
|
0.9
|
-
|
0.9
|
-
|
0.9
|
|
Total revenue
|
339.1
|
113.4
|
132.0
|
4.5
|
-
|
589.0
|
(3.2)
|
585.8
|
(30.5)
|
555.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross claims incurred
|
(209.0)
|
(55.8)
|
(93.3)
|
(2.1)
|
1.6
|
(358.6)
|
-
|
(358.6)
|
-
|
(358.6)
|
|
Reinsurers’ share
|
42.8
|
2.5
|
12.1
|
-
|
(1.6)
|
55.8
|
-
|
55.8
|
-
|
55.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims incurred, net of reinsurance
|
(166.2)
|
(53.3)
|
(81.2)
|
(2.1)
|
-
|
(302.8)
|
-
|
(302.8)
|
-
|
(302.8)
|
|
Acquisition costs – commission
|
(93.3)
|
(18.6)
|
(19.5)
|
-
|
-
|
(131.4)
|
0.8
|
(130.6)
|
-
|
(130.6)
|
|
Acquisition costs – other
|
(11.9)
|
(3.2)
|
(7.0)
|
(0.7)
|
-
|
(22.8)
|
-
|
(22.8)
|
-
|
(22.8)
|
|
Other insurance related expenses
|
(13.6)
|
(4.9)
|
(12.0)
|
-
|
-
|
(30.5)
|
-
|
(30.5)
|
-
|
(30.5)
|
|
Other expenses
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(13.2)
|
(13.2)
|
|
Total expenses excluding finance costs
|
(285.0)
|
(80.0)
|
(119.7)
|
(2.8)
|
-
|
(487.5)
|
0.8
|
(486.7)
|
(13.2)
|
(499.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss)
|
54.1
|
33.4
|
12.3
|
1.7
|
-
|
101.5
|
(2.4)
|
99.1
|
(43.7)
|
55.4
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
(6.5)
|
|
Share of profit of associated undertakings
|
|
|
|
|
|
|
|
|
|
1.0
|
|
Profit on ordinary activities before tax
|
|
|
|
|
|
|
|
|
|
49.9
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
(12.3)
|
|
Profit attributable to owners of the parent
|
|
|
|
|
|
|
|
|
|
37.6
|
|
Claims ratio
|
51.4%
|
49.8%
|
70.0%
|
|
|
55.2%
|
|
55.6%
|
|
|
|
Expense ratio
|
36.8%
|
25.0%
|
33.2%
|
|
|
33.6%
|
|
33.8%
|
|
|
|
Combined ratio
|
88.2%
|
74.8%
|
103.2%
|
|
|
88.8%
|
|
89.4%
|
|
|
12 months ended 31 December 2008
|
|
Brit Global
Markets
£m
|
Brit
Reinsurance
£m
|
Brit UK
£m
|
Other
underwriting
£m
|
Intra Group
£m
|
Total underwriting excluding the effect of foreign exchange on non-monetary items
£m
|
Effect of foreign exchange on non-monetary items
£m
|
Total
underwriting after the effect of foreign exchange on non-monetary items
£m
|
Other
corporate
£m
|
Total
£m
|
|
Gross premiums written
|
781.3
|
260.7
|
350.6
|
14.9
|
(12.9)
|
1,394.6
|
-
|
1,394.6
|
-
|
1,394.6
|
|
Less premiums ceded to reinsurers
|
(123.1)
|
(52.6)
|
(68.0)
|
(0.5)
|
12.9
|
(231.3)
|
-
|
(231.3)
|
-
|
(231.3)
|
|
Premiums written, net of reinsurance
|
658.2
|
208.1
|
282.6
|
14.4
|
-
|
1,163.3
|
-
|
1,163.3
|
-
|
1,163.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross earned premiums
|
789.7
|
259.2
|
313.6
|
10.4
|
(8.3)
|
1,364.6
|
(47.2)
|
1,317.4
|
-
|
1,317.4
|
|
Reinsurers’ share
|
(123.8)
|
(49.3)
|
(53.7)
|
(0.5)
|
8.3
|
(219.0)
|
3.4
|
(215.6)
|
-
|
(215.6)
|
|
Earned premiums, net of reinsurance
|
665.9
|
209.9
|
259.9
|
9.9
|
-
|
1,145.6
|
(43.8)
|
1,101.8
|
-
|
1,101.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return
|
36.9
|
16.9
|
34.2
|
1.7
|
-
|
89.7
|
-
|
89.7
|
(82.3)
|
7.4
|
|
Return on derivative contracts
|
(3.5)
|
(3.5)
|
(0.4)
|
-
|
-
|
(7.4)
|
-
|
(7.4)
|
(11.7)
|
(19.1)
|
|
Disposal and partial disposal of associated undertaking
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4.5
|
4.5
|
|
Net foreign exchange gains
|
-
|
-
|
-
|
-
|
-
|
-
|
84.1
|
84.1
|
39.9
|
124.0
|
|
Other income
|
-
|
-
|
-
|
1.0
|
-
|
1.0
|
-
|
1.0
|
0.1
|
1.1
|
|
Total revenue
|
699.3
|
223.3
|
293.7
|
12.6
|
-
|
1,228.9
|
40.3
|
1,269.2
|
(49.5)
|
1,219.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross claims incurred
|
(529.1)
|
(144.2)
|
(211.7)
|
(10.6)
|
9.5
|
(886.1)
|
-
|
(886.1)
|
-
|
(886.1)
|
|
Reinsurers’ share
|
121.9
|
7.1
|
39.1
|
(0.1)
|
(9.5)
|
158.5
|
-
|
158.5
|
-
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims incurred, net of reinsurance
|
(407.2)
|
(137.1)
|
(172.6)
|
(10.7)
|
-
|
(727.6)
|
-
|
(727.6)
|
-
|
(727.6)
|
|
Acquisition costs – commission
|
(183.5)
|
(36.6)
|
(44.8)
|
(0.3)
|
-
|
(265.2)
|
9.3
|
(255.9)
|
-
|
(255.9)
|
|
Acquisition costs – other
|
(24.5)
|
(9.2)
|
(15.1)
|
(1.4)
|
-
|
(50.2)
|
-
|
(50.2)
|
-
|
(50.2)
|
|
Other insurance related expenses
|
(26.5)
|
(9.6)
|
(25.5)
|
-
|
-
|
(61.6)
|
-
|
(61.6)
|
-
|
(61.6)
|
|
Other expenses
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(28.8)
|
(28.8)
|
|
Total expenses excluding finance costs
|
(641.7)
|
(192.5)
|
(258.0)
|
(12.4)
|
-
|
(1,104.6)
|
9.3
|
(1,095.3)
|
(28.8)
|
(1,124.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss)
|
57.6
|
30.8
|
35.7
|
0.2
|
-
|
124.3
|
49.6
|
173.9
|
(78.3)
|
95.6
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
(13.1)
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
7.2
|
|
Share of loss of associated undertakings
|
|
|
|
|
|
|
|
|
|
(0.5)
|
|
Profit/(loss) on ordinary activities before tax
|
|
|
|
|
|
|
|
|
|
89.2
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
(22.6)
|
|
Profit /(loss) attributable to owners of the parent
|
|
|
|
|
|
|
|
|
|
66.6
|
|
Claims ratio
|
61.2%
|
65.3%
|
66.4%
|
108.1%
|
|
63.5%
|
|
66.0%
|
|
|
|
Expense ratio
|
35.2%
|
26.4%
|
32.9%
|
17.2%
|
|
32.9%
|
|
33.4%
|
|
|
|
Combined ratio
|
96.4%
|
91.7%
|
99.3%
|
125.3%
|
|
96.4%
|
|
99.4%
|
|
|
5 Investment return
|
|
6 months ended 30 June 2009 |
|||
|
|
Investment income £m |
Net realised gains/(losses) £m |
Net unrealised gains/(losses) £m |
Total investment return £m |
|
Equity securities |
0.6 |
10.2 |
(10.1) |
0.7 |
|
Debt securities |
42.1 |
9.6 |
(5.6) |
46.1 |
|
Specialised investment funds |
0.7 |
(9.1) |
11.0 |
2.6 |
|
Cash and cash equivalents |
9.8 |
- |
- |
9.8 |
|
|
53.2 |
10.7 |
(4.7) |
59.2 |
|
|
6 months ended 30 June 2008 |
|||
|
|
Investment income £m |
Net realised gains/(losses) £m |
Net unrealised gains/(losses) £m |
Total investment return £m |
|
Equity securities |
0.8 |
5.5 |
(18.2) |
(11.9) |
|
Debt securities |
44.4 |
(1.9) |
(28.9) |
13.6 |
|
Specialised investment funds |
1.4 |
4.2 |
(16.6) |
(11.0) |
|
Cash and cash equivalents |
11.4 |
- |
- |
11.4 |
|
|
58.0 |
7.8 |
(63.7) |
2.1 |
|
|
12 months ended 31 December 2008 |
|||
|
|
Investment income £m |
Net realised gains/(losses) £m |
Net unrealised gains/(losses) £m |
Total investment return £m |
|
Equity securities |
1.6 |
6.3 |
(44.6) |
(36.7) |
|
Debt securities |
100.0 |
(12.3) |
1.7 |
89.4 |
|
Specialised investment funds |
2.4 |
(3.9) |
(68.4) |
(69.9) |
|
Cash and cash equivalents |
24.6 |
- |
- |
24.6 |
|
|
128.6 |
(9.9) |
(111.3) |
7.4 |
6 Associated undertakings
On 26 March 2009, Norton II Holdings Limited was placed in members' voluntary liquidation in order to return capital to investors.
Assets disposed of and related sales proceeds were as follows:
|
Norton II Holdings Limited £m |
|
|
Proceeds |
15.4 |
|
Carrying value of Group holding in associated undertakings |
(15.4) |
|
Reversal of translation reserve |
4.2 |
|
Profit on disposal |
4.2 |
7 Net foreign exchange gains/(losses)
The Group recognised foreign exchange losses of £61.0m (30 June 2008: gain of £11.8m) (31 December 2008: gain of £124.0m) in the income statement in the period.
Foreign exchange gains and losses result from the translation of the balance sheet to closing exchange rates and the income statement to average exchange rates. However, as an exception to this, International Accounting Standard 21 'The Effects of Changes in Foreign Exchange Rates' requires that net unearned premiums and deferred acquisition costs (UPR/DAC), being non-monetary items, remain at historic exchange rates. This creates a foreign exchange mismatch, the financial effects of which are shown in the table below.
|
6 months ended |
6 months ended |
12 months ended |
|
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|
|
£m |
£m |
£m |
|
|
|
|
|
|
|
(Losses)/gains on foreign exchange arising from: |
|||
|
Translation of the balance sheet and income statement |
(20.9) |
10.7 |
39.9 |
|
Maintaining UPR/DAC items in the balance sheet at historic rates |
(73.6) |
(2.4) |
49.6 |
|
Maintaining UPR/DAC items in the income statement at historic rates |
33.5 |
3.5 |
34.5 |
|
Total foreign exchange (losses)/gains |
(61.0) |
11.8 |
124.0 |
Principal exchange rates applied are set out in the table below.
|
6 months ended 30 June 2009 |
6 months ended 30 June 2008 |
12 months ended 31 December 2008 |
|||||
|
Average |
Closing |
Average |
Closing |
Average |
Closing |
||
|
|
|
|
|
|
|
|
|
|
US dollar |
1.50 |
1.65 |
1.98 |
1.99 |
1.85 |
1.44 |
|
|
Canadian dollar |
1.80 |
1.91 |
1.99 |
2.02 |
1.96 |
1.77 |
|
|
Euro |
1.12 |
1.17 |
1.29 |
1.26 |
1.26 |
1.03 |
|
In accordance with International Accounting Standard 1 'Presentation of Financial statements', exchange gains and losses are presented on a net basis.
They are reported within revenue where they result in a net gain and within expenses where they result in a net loss.
8 Tax credit/(expense)
The major components of the tax credit/(expense) in the interim condensed consolidated income statement are:
|
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
|
Current tax: |
|||
|
For the period |
(17.1) |
(11.3) |
(12.0) |
|
Adjustments in respect of prior years |
0.1 |
0.2 |
0.4 |
|
Total current tax |
(17.0) |
(11.1) |
(11.6) |
|
Deferred tax: |
|||
|
Origination and reversal of temporary differences |
19.4 |
(1.4) |
(13.9) |
|
Adjustments in respect of prior years |
- |
0.2 |
2.9 |
|
Total deferred tax |
19.4 |
(1.2) |
(11.0) |
|
|
|||
|
Total tax credited/(charged) to income statement |
2.4 |
(12.3) |
(22.6) |
9 Earnings and net assets per share
Basic and diluted earnings per share are as follows:
|
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
|
|
(Loss)/profit on ordinary activities after tax |
(6.3) |
37.6 |
66.6 |
|
6 months ended 30 June 2009 Number |
6 months ended 30 June 2008 Number |
12 months ended 31 December 2008 Number |
|
|
Basic weighted average number of shares |
309,272,101 |
309,562,590 |
309,415,097 |
|
Employee share options |
- |
19,116 |
- |
|
Diluted weighted average number of shares |
309,272,101 |
309,581,706 |
309,415,097 |
|
Basic earnings per share (pence per share) |
(2.0) |
12.2 |
21.5 |
|
Diluted earnings per share (pence per share) |
(2.0) |
12.2 |
21.5 |
Net assets and net tangible assets per share are as follows:
|
30 June 2009 £m |
30 June 2008 £m |
31 December 2008 £m |
|
|
Net assets |
810.6 |
839.6 |
849.7 |
|
Intangible assets |
(82.9) |
(80.6) |
(82.1) |
|
Net tangible assets |
727.7 |
759.0 |
767.6 |
|
30 June 2009 Number |
30 June 2008 Number |
31 December 2008 Number |
|
|
Number of shares in issue at end of period |
329,784,443 |
329,784,443 |
329,784,443 |
|
Own shares |
(20,500,835) |
(20,363,043) |
(20,523,934) |
|
Number of shares in issue less own shares |
309,283,608 |
309,421,400 |
309,260,509 |
|
Net assets per share (pence per share) |
262.1 |
271.3 |
274.8 |
|
Net tangible assets per share (pence per share) |
235.3 |
245.3 |
248.2 |
10 Insurance and reinsurance contracts
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||
|
|
|
£m |
£m |
£m |
|
Gross |
||||
|
Insurance contracts |
||||
|
Claims reported and loss adjustment expenses |
1,401.2 |
1,115.0 |
1,439.2 |
|
|
Claims incurred but not reported |
1,199.1 |
960.0 |
1,218.5 |
|
|
2,600.3 |
2,075.0 |
2,657.7 |
||
|
Unearned premiums |
847.1 |
710.8 |
687.0 |
|
|
Total insurance contracts |
3,447.4 |
2,785.8 |
3,344.7 |
|
|
Recoverable from reinsurers |
||||
|
Reinsurance contracts |
||||
|
Claims reported and loss adjustment expenses |
287.2 |
197.0 |
274.9 |
|
|
Claims incurred but not reported |
168.2 |
153.3 |
219.8 |
|
|
Impairment provision |
(13.7) |
(12.2) |
(15.5) |
|
|
441.7 |
338.1 |
479.2 |
||
|
Unearned premiums |
139.3 |
122.5 |
70.4 |
|
|
Total reinsurance contracts |
581.0 |
460.6 |
549.6 |
|
|
Net |
||||
|
Claims reported and loss adjustment expenses |
1,114.0 |
918.0 |
1,164.3 |
|
|
Claims incurred but not reported |
1,030.9 |
806.7 |
998.7 |
|
|
Impairment provision |
13.7 |
12.2 |
15.5 |
|
|
2,158.6 |
1,736.9 |
2,178.5 |
||
|
Unearned premiums |
707.8 |
588.3 |
616.6 |
|
|
Net insurance and reinsurance contracts |
2,866.4 |
2,325.2 |
2,795.1 |
|
Net releases from prior year claims reserves have been made of £19.0m (30 June 2008: £21.5m) (31 December 2008: £79.1m).
The split of the release by SBU has been disclosed in the Half Year Management Report.
11 Financial investments
|
30 June 2009 £m |
30 June 2008 £m |
31 December 2008 £m |
|
|
Equity securities : |
|||
|
Listed |
99.1 |
166.2 |
116.0 |
|
Unlisted |
1.2 |
1.0 |
1.4 |
|
100.3 |
167.2 |
117.4 |
|
|
Debt securities : |
|||
|
Listed |
1,477.6 |
1,602.3 |
1,537.5 |
|
Unlisted |
2.9 |
2.8 |
2.9 |
|
Certificates of deposit |
478.8 |
249.9 |
622.1 |
|
|
1,959.3 |
1,855.0 |
2,162.5 |
|
Specialised investment funds |
90.5 |
206.1 |
113.1 |
|
|
2,150.1 |
2,228.3 |
2,393.0 |
All financial investments have been designated as held at fair value through the profit or loss.
12 Borrowings
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||
|
£m |
£m |
£m |
||
|
Revolving credit facility |
65.0 |
- |
- |
|
|
8.5% unsecured subordinated loan stock |
- |
19.6 |
- |
|
|
US dollar floating rate unsecured subordinated loan notes |
9.1 |
7.5 |
10.4 |
|
|
Lower Tier Two subordinated debt |
132.7 |
147.3 |
132.7 |
|
|
|
|
206.8 |
174.4 |
143.1 |
During the period, the Group made draw downs amounting to £65.0m on its five year revolving credit facility.
On 6 July 2009, the Group gave notice that on 15 August 2009 it intends to call the US dollar floating rate unsecured subordinated loan notes.
13 Cash flows provided by operating activities
|
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
||
|
Profit on ordinary activities before tax |
(8.7) |
49.9 |
89.2 |
|
|
Adjustments for non-cash movements: |
||||
|
Realised and unrealised (gains)/losses on investments |
(6.0) |
55.9 |
121.2 |
|
|
Realised and unrealised losses on derivatives |
1.3 |
8.5 |
19.1 |
|
|
Loss on sale of property, plant and equipment |
- |
0.1 |
0.8 |
|
|
Amortisation of software |
2.2 |
1.8 |
3.9 |
|
|
Depreciation of property, plant and equipment |
1.5 |
1.7 |
3.1 |
|
|
Foreign exchange (gains)/losses on financing items |
(1.3) |
- |
2.9 |
|
|
Foreign exchange losses/(gains) on cash and cash equivalents |
63.6 |
(2.3) |
(90.4) |
|
|
Share of loss/(profit) after tax of associated undertakings |
1.0 |
(1.0) |
0.5 |
|
|
Charges in respect of employee share schemes |
3.7 |
2.9 |
5.2 |
|
|
Cash contributions in excess of charges in respect of defined benefit pension scheme |
0.1 |
(0.1) |
(13.8) |
|
|
Interest income |
(52.5) |
(56.6) |
(124.6) |
|
|
Dividend income |
(0.7) |
(1.4) |
(4.0) |
|
|
Finance costs on borrowing |
0.6 |
1.5 |
13.1 |
|
|
Finance income |
- |
- |
(7.2) |
|
|
Profit on partial disposal of associated undertaking |
(4.2) |
(4.5) |
(4.5) |
|
|
Changes in working capital: |
||||
|
Deferred acquisition costs |
(37.2) |
(21.7) |
(19.9) |
|
|
Insurance and other receivables excluding accrued income |
(135.8) |
(82.4) |
(35.6) |
|
|
Insurance and reinsurance contracts |
71.3 |
83.0 |
552.9 |
|
|
Financial investments |
248.9 |
(285.1) |
(515.7) |
|
|
Derivative contracts |
(4.9) |
(9.1) |
(14.6) |
|
|
Insurance and other payables |
52.1 |
71.3 |
54.9 |
|
|
Provisions |
(0.1) |
- |
- |
|
|
Cash flows provided by operating activities |
194.9 |
(187.6) |
36.5 |
|
14 Equity dividends
|
6 months ended 30 June 2009 £m |
6 months ended 30 June 2008 £m |
12 months ended 31 December 2008 £m |
||
|
Final 2007 |
- |
23.2 |
23.3 |
|
|
Special 2007 |
- |
21.7 |
21.7 |
|
|
Interim 2008 |
- |
- |
23.2 |
|
|
Final 2008 |
23.2 |
- |
||
|
|
23.2 |
44.9 |
68.2 |
The Company had distributable reserves of £221.9m at 30 June 2009 (30 June 2008: £107.4m) (31 December 2008: £255.7m)
The Directors recommend an interim dividend of 7.5p per ordinary share for the period ended 30 June 2009. These dividends will be paid on 7 September 2009 to shareholders on the register on 7 August 2009. Based on the number of shares in issue as at 29 July 2009, but excluding treasury shares and those owned by the Group's Employee Share Participation Trust which has waived its entitlement to dividends, this would amount to £23.2m
15 Related party transactions
Transactions with related parties during the period are consistent in nature and scope with those disclosed in Note 39 to the Group's annual financial statements for the year ended 31 December 2008.
Responsibility Statement
We confirm that to the best of our knowledge:
a) The condensed consolidated financial statements have been prepared in accordance with IAS 34 (Interim Financial Reporting);
b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c) The interim management report includes a fair review of the information required by DTR 4.2.8R
(disclosure of related party transactions and changes therein).
By order of the Board
Dane Douetil CBE Matthew Scales
Chief Executive Officer Finance Director
29 July 2009 29 July 2009
INDEPENDENT REVIEW REPORT TO BRIT INSURANCE HOLDINGS PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows, the condensed consolidated statement of changes in equity and related Notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with ISRE (UK and Ireland) 2410. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority
Ernst & Young LLP
London
29 July 2009
Company Information
|
The Board: Robert John Orr Barton (John) Chairman Kenneth Culley CBE Non-Executive Director Dane Jonathan Douetil CBE Chief Executive Officer Peter Frank Hazell Non-Executive Director Joseph Patrick MacHale Non-Executive Director Matthew Scales Finance Director Drs Cornelis Antonius Carolus Maria Schrauwers (Cees) Senior Independent Director Michael Gordon Smith Non-Executive Director |
Useful details: Company Secretary Peter John Goddard Investor Relations Neil Manser T: 020 7098 6980 Media Queries Brit Insurance T: 020 7098 6626 Haggie Financial T: 020 7417 8989 Registered Office Registered in England number 3121594 at 55 Bishopsgate, London EC2N 3AS T: 020 7984 8500 W: www.britinsurance.com Registrars Equiniti Limited Aspect House Spencer Road Lancing, West Sussex BN99 6DA T: 0871 384 2630* W: www.shareview.co.uk *Calls to this number are charged at 8p per minute from a BT landline. Other telephony providers' charges may vary. Corporate Brokers JP Morgan Cazenove Limited 20 Moorgate London EC2R 6DA Numis Securities Limited 10 Paternoster Square London EC4M 7LT Auditor Ernst & Young LLP 1 More London Place London SE1 2AF |
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