19th Jul 2007 07:00
Omega Insurance Holdings Limited19 July 2007 Omega Insurance Holdings Limited Impact of International Financial Reporting Standards (IFRS) Omega Insurance Holdings Limited, the international insurance and reinsurancegroup based in Bermuda, today publishes the impact of IFRS on its 2006 financialresults and its operations. From 2007 Omega Insurance Holdings Limited ("Omega") is required to prepareconsolidated financial statements in accordance with IFRS under the rules forcompanies listed on AIM, a market operated by the London Stock Exchange plc.Omega will prepare its first full year consolidated financial statements underIFRS for the year ending 31 December 2007 and will also issue interimconsolidated results to 30 June 2007 under IFRS. This announcement sets out the key changes to the income statement and thebalance sheet under IFRS. The restated consolidated financial information for2006 together with a special purpose audit report on the restatement is attachedbelow. The following is a summary of the impact of the transition from UK GAAP to IFRSon the 2006 financial results. UK GAAP IFRS Change Change US$'000 US$'000 US$'000 % Gross written premium 115,619 115,619Net earned premium 66,972 67,085 113 0.2%Profit before tax 22,035 22,589 554 2.5%Profit after tax 15,102 15,491 389 2.6%Earnings per share - basic (US$) 0.12 0.12Earnings per share - diluted (US$) 0.12 0.12Net assets 265,122 265,401 279 0.1%Net assets per share (US$) 1.80 1.80Net tangible assets 265,122 265,252 130 0.0%Net tangible assets per share (US$) 1.80 1.80 The principal adjustments arising from transition relate to accounting for thefair value of derivative financial instruments, foreign exchange accounting fornon-monetary items, and accounting for syndicate capacity. The transition toIFRS will not change the underlying operations or the actual cash flows ofOmega. A more detailed explanation of the impact of the transition to IFRS is given inthe following pages. For further information, please contact:Richard Tolliday Chief Executive Officer tel. +1 441 294 6610Penny James Group Finance Director tel. 020 7767 3000John Coles Threadneedle Communications tel. 020 7936 9604 The material adjustments arising on the restatement from UK GAAP to IFRS andtheir impact on the 2006 financial results are explained in the following tablesand accompanying notes. Summarised reconciliation of the consolidated balance sheet between UK GAAP andIFRS as at 31 December 2006 Notes UK GAAP Adjustment on IFRS restatement to IFRS US$'000 US$'000 US$'000ASSETSCash and cash equivalents 81,348 81,348Financial investments 1, 2 223,090 196 223,286Deferred acquisition 4 8,623 (53) 8,570costsReinsurance assets 4 61,654 (188) 61,466Insurance receivables 15,688 - 15,688Prepayments and accrued income 5,992 - 5,992Other debtors 16,294 - 16,294 Current income - - -tax assetsDeferred tax assets 5 860 (118) 742Property and equipment 211 - 211Intangible assets 3 - 149 149 Total assets 413,760 (14) 413,746 EQUITY Called up share capital 14,736 - 14,736Share premium account 6c 247,418 223 247,641Own shares (98) - (98) Foreign exchange reserve 1,162 - 1,162Profit and loss account 1,904 56 1,960Total equity and reserves 265,122 279 265,401LIABILITIES Insurance contracts 4 103,454 (299) 103,155Trade and other payables 4 38,514 6 38,520Current incometax liabilities 1,629 - 1,629Deferred tax liabilities 5,041 - 5,041Total liabilities 148,638 (293) 148,345 Total liabilities 413,760 (14) 413,746and equity Summarised reconciliation of the consolidated income statement between UK GAAPand IFRS for the year ended 31 December 2006 Notes US$'000Profit attributable to equity shareholders of the parentcompany reported under UK GAAP 15,102Investment valuation 1 7Derivative financial instrument 2 464Reversal of amortisation of syndicate capacity 3 29Foreign exchange movements 4 54Net tax effect 5 (165)Profit attributable to equity shareholders of the parentcompany reported under IFRS 15,491 Notes 1. Investments valuationUnder UK GAAP, the Group's listed investments were included in the 2005 balancesheet at mid-market value with all gains and losses reflected in the incomestatement. IAS 39 "Financial Instruments: Recognition and Measurement" requiresthe Group to value its investments using closing bid prices. The effect of thisadjustment is a reduction in investments of US$13,000 and a reduction in equityof US$7,000 at the date of transition. Under IFRS the Group's investments are classified as "fair value through profitand loss". Realised and unrealised gains and losses are included in the incomestatement in the period in which they arise. 2. Derivative financial instrumentsThe Group has entered into foreign exchange contracts in order to manage itsexposure to movements in currency exchange rates. In accordance with IAS 39these contracts have been valued at fair value and recognised in the balancesheet as financial investments or financial liabilities as appropriate. Theeffect of this adjustment is a reduction in equity of US$268,000 at the date oftransition and an increase in income of US$464,000 during 2006. 3. Syndicate capacityUnder UK GAAP, the purchased syndicate capacity was amortised over an estimateduseful life of 5 years. In accordance with IAS 38 Intangible Assets, the useful life of the Group'srecognised intangible asset has been reviewed on adoption of IFRS. Followingthis review it has been concluded that syndicate capacity has an indefiniteuseful life and so will no longer be amortised but will be subject to an atleast annual impairment test. Syndicate capacity of US$120,000 previouslyamortised has been reinstated on adoption of IFRS, as has the US$29,000amortised during 2006. 4. Foreign exchangeUnder UK GAAP, unearned premium reserve, reinsurers' share of the unearnedpremium reserve and deferred acquisition costs that were recorded in separatecurrency ledgers were translated into the Group's functional currency using thebalance sheet rate of exchange. IAS 21 "The effects of changes in foreign exchange rates" requires thatnon-monetary assets and liabilities are translated into the Group's functionalcurrency of US$ at the rate applicable on initial recognition and are notretranslated. An element of the underwriting is supported by a financing agreement whereby thefinance charge is directly related to the underwriting result. The foreignexchange underwriting adjustment is therefore partially offset by an adjustmentin the servicing of finance expense. The effect of these adjustments before tax is a reduction in equity of US$2,000at the date of transition and an increase in income of US$54,000 for the yearended 31 December 2006. 5. TaxationCurrent income tax was provided in the UK GAAP financial statements for amountsexpected to be paid (or recovered) using the tax rates and laws that had beenenacted or substantially enacted at the balance sheet date. The current taxnumbers for the transition and 2006 balance sheet conversions from UK GAAP toIFRS are unchanged. Under UK GAAP, provision is made for deferred tax assets and liabilities, usingthe liability method, that arise as a result of timing differences between therecognition of gains and losses in the financial statements and theirrecognition in the tax computation. Deferred tax assets and liabilities are recognised at the balance sheet datewhere transactions have occurred at the date that will result in an obligationto pay more, or a right to pay less or to receive more, tax. Under IAS 12 "Income taxes", deferred tax is provided, using the liabilitymethod, for all relevant temporary differences, being the difference between thecarrying amount of an asset or liability in the balance sheet and its value fortax purposes. Deferred tax assets are recognised for unused tax losses and otherdeductible temporary differences to the extent that it is probable that futuretaxable profits will be utilised against unused tax losses and credits. IAS 12explicitly states that deferred tax assets and liabilities shall not bediscounted. The net effect of the adjustment to the deferred tax asset is to increase equityby US$47,000 at the date of transition and a decrease in income of US$165,000for the year ended 31 December 2006. This reflects the tax effect of theadjustments relating to investment valuation, syndicate capacity, recognition ofderivative financial instruments, and foreign exchange. Omega has nocircumstances that result in a different calculation of deferred tax resultingfrom application of the "temporary difference" approach in the IFRS comparedwith the "timing difference" approach in UK GAAP. 6. Other informationa) Functional currencyThe functional currency used in the financial statements is US dollars, beingthe currency of the primary economic environment of the companies within theGroup. The functional currency under UK GAAP changed to US dollars with effectfrom 1 January 2006 being both the date from which the Group retained a moresubstantial volume of the underwriting risk and the IFRS transition date. Aspermitted under IFRS 1 the foreign currency reserve is set at nil on transition. b) Insurance ContractsIFRS 4 "Insurance contracts" identifies circumstances in which contractscurrently classified as insurance may no longer qualify as such under IFRS.Omega is satisfied that there are no contracts treated as insurance contractsunder UK GAAP that require reclassification under IFRS 4. c) Share premium account adjustmentAs a result of the group reorganisation on 9 November 2006 reserves generatedbefore that date are transferred via a merger reserve to the share premiumaccount. IFRS adjustments and the relevant share of the foreign exchangeadjustment generated prior to 9 November 2006 have been transferred to the sharepremium reserve in the same way. Transition StatementsThe following information is available on the Omega website www.omegauw.com • Detailed reconciliation of the consolidated balance sheet as at 1 January 2006 from UK GAAP to IFRS • Detailed reconciliation of the consolidated balance sheet as at 31 December 2006 from UK GAAP to IFRS • Detailed reconciliation of the consolidated income statement for the year ended 31 December 2006 from UK GAAP to IFRS • Consolidated statement of changes in equity for the year ended 31 December 2006 • Consolidated cash flow statement for the year ended 31 December 2006 • Accounting policies • Special Purpose Audit Report to the Company by Ernst & Young LLP This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Orascom Inv