28th Jul 2008 07:00
Advent Capital (Holdings) PLC
("Advent" or the "Company")
London - 28 July 2008
Advent, the specialist Lloyd's insurer, today reports its results for the six months ended 30 June 2008.
Key highlights
Profit before tax of £1.6 million (2007: £6.7 million).
Second quarter profit before tax of £7.1 million (2007: £6.2 million) reflects the reduced frequency of single risk property losses since the first quarter.
Net improvements in prior years' claims reserves of £0.7 million.
Gross premiums written, excluding the reinsurance to close premium, increased by 25.0% to £111.7 million (2007: £89.3 million).
Competitive market conditions continue within expectations.
Financial summary
|
Six months (unaudited) |
|||||
|
2008 |
2007 |
Year 2007 |
Year 2006 |
Year 2005 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Gross premiums written |
150,238 |
96,072 |
126,912 |
115,356 |
100,550 |
|
Net premiums written |
121,854 |
76,658 |
106,199 |
88,201 |
62,949 |
|
Net premiums earned |
85,138 |
42,577 |
95,984 |
81,694 |
65,070 |
|
Underwriting profit (loss) |
894 |
4,416 |
20,912 |
21,064 |
(78,098) |
|
Profit (loss) before tax |
1,598 |
6,740 |
25,161 |
22,853 |
(74,185) |
|
Profit (loss) after tax |
1,175 |
3,457 |
19,192 |
16,011 |
(51,922) |
|
Return on equity |
1.1% |
3.9% |
21.6% |
25.1% |
(68.4%) |
|
Six months (unaudited) |
|||||
|
2008 |
2007 Restated |
Year 2007 Restated |
Year 2006 Restated |
Year 2005 Restated |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Per share amounts (1) |
|||||
|
Earnings (loss) - basic and diluted |
2.9p |
8.5p |
47.2p |
43.3p |
(303p) |
|
Dividend |
12.5p |
- |
- |
- |
27.5p |
|
Net assets
|
257p |
228p |
267p |
219p |
160p |
|
Net tangible assets |
240p |
208p |
249p |
199p |
136p |
|
Operating ratios |
|||||
|
Claims ratio
|
83% (2) |
66% |
50% |
53% |
191% |
|
Expense ratio
|
16% (2) |
11% |
28% |
21% (3) |
29% |
|
Combined ratio
|
99% (2) |
77% |
78% |
74% (3) |
220% |
|
Net notified loss ratio |
17% |
11% |
32% |
17% |
134% |
|
(by year of account) |
(1) per share amounts restated for the share consolidation of 10 old ordinary shares of 5p each for 1 new ordinary share of 50p each on 23 June 2008
(2) claims ratio of 71%, expense ratio of 27% and combined ratio of 98% excluding impact of reinsurance to close (RITC) premium
(3) expense ratio of 30% and combined ratio of 83% excluding foreign exchange profit of £7.0 million
|
Advent Capital (Holdings) PLC |
||
|
Keith Thompson |
020 7743 8200 |
|
|
Chief Operating Officer |
||
|
Trevor Ambridge Chief Financial Officer |
020 7743 8200 |
|
|
Neil Ewing Investor Relations |
020 7743 8250 |
|
|
Fox-Pitt Kelton Cochran Caronia Waller |
||
|
Simon Law |
020 7763 6023 |
|
|
Jonny Franklin-Adams |
020 7763 6029 |
|
|
Pelham Public Relations |
||
|
Polly Fergusson |
020 7743 6362 |
|
|
Damian Beeley |
020 3178 2253 |
|
Financial Review
For the six months ended 30 June 2008, the Company's profit before tax was £1.6 million compared with £6.7 million for the first half of 2007.
For the second quarter of 2008, the Company's pre-tax profit of £7.1 million reflected the reduction in frequency of significant single risk property losses from those experienced in the first quarter, up from £6.2 million in the second quarter of 2007.
Estimated aggregate single risk property losses were in excess of US$6 billion for the first half of 2008. For the first six months of 2008, the Company recorded single risk property losses, net of reinsurance recoveries and reinstatement premiums, of £9.8 million from these and other events (first quarter of 2008: £7.9 million).
The results for the first half of 2008 reflect:
Underwriting profit of £1.8 million from the 2008 year of account after single risk property losses of £5.0 million from Severstal, BHP Billiton and other insureds. In the absence of additional significant single risk property losses during the second half of 2008, the Company would expect most of these losses to be contained within business plan losses for the full year 2008.
Underwriting profit of £0.3 million from the 2007 year of account after single risk property losses of £4.8 million, principally recorded in the first quarter of 2008.
Underwriting loss of £0.7 million from the 2006 and prior years of account primarily due to reductions in ultimate premium estimates for the 2006 year of account.
Improvement in prior years' claims of £0.7 million (2007: £0.1 million).
Earnings per share of 2.9p for the first half of 2008 reflected the impact of single risk property losses principally incurred in the first quarter of 2008, compared with restated earnings per share of 8.5p in 2007.
For the six months ended 30 June 2008, the Company had an underwriting profit of £0.9 million and a combined ratio of 99.0% compared with an underwriting profit of £4.4 million and a combined ratio of 89.6% in 2007. Excluding the RITC premium from the 2005 year of account of £34.2 million (2007: £6.8 million from the 2004 year of account), the combined ratio for the first half of 2008 was 98.2% (2007: 87.9%) on net earned premium of £51.1 million. The underwriting profit for the first half of 2008 was adversely impacted by higher frequency of single risk property losses, net of reinsurance recoveries and reinstatement premiums of £9.8 million.
Underwriting Review
For the six months ended 30 June 2008, gross premiums written, excluding the RITC premium, increased by 25.0% to £111.7 million from £89.3 million in 2007, reflecting the Company's increased share of Syndicate 780's capacity to 100% in 2008 from 83.7% in 2007 (£16.7 million) and premium growth (£5.7 million). Advent Re wrote gross premiums of £7.1 million (US$14.1 million) in the first half of 2008 up from £6.3 million (US$12.4 million) in 2007.
Similarly, excluding the RITC premium, net premiums written increased by 24.3% to £87.6 million from £70.5 million in 2007, and net premiums earned increased by 39.8% to £50.9 million from £36.4 million in 2007.
Insurance Segment Review
|
30 June 2008 |
||||||
|
Non-Marine |
Property |
|||||
|
Reinsurance |
Insurance |
Marine |
Syn 2 |
Total |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Gross premiums written |
116,591 |
15,374 |
17,746 |
527 |
150,238 |
|
|
Net premiums written |
96,167 |
10,652 |
14,466 |
569 |
121,854 |
|
|
Net premiums earned |
62,722 |
13,247 |
8,600 |
569 |
85,138 |
|
|
Net claims incurred |
(53,888) |
(12,771) |
(3,490) |
(580) |
(70,729) |
|
|
Net underwriting result |
8,834 |
476 |
5,110 |
(11) |
14,409 |
|
|
Acquisition costs |
(4,088) |
(3,436) |
(1,987) |
(79) |
(9,590) |
|
|
Operating costs |
(2,518) |
(510) |
(588) |
(309) |
(3,925) |
|
|
Underwriting profit (loss) |
2,228 |
(3,470) |
2,535 |
(399) |
894 |
|
|
Claims ratio |
85.9% |
96.4% |
40.6% |
102.0% |
83.1% |
|
|
Acquisition costs |
6.5% |
25.9% |
23.1% |
13.9% |
11.3% |
|
|
Operating costs |
4.0% |
3.9% |
6.8% |
54.3% |
4.6% |
|
|
Expense ratio |
10.5% |
29.8% |
29.9% |
68.2% |
15.9% |
|
|
Combined ratio |
96.4% |
126.2% |
70.5% |
170.2% |
99.0% |
|
|
Adjusted combined ratio excluding effect of RITC premium |
92.2% |
126.2% |
70.5% |
170.2% |
98.2% |
|
|
|
30 June 2007
|
||||
|
|
Non-Marine
|
Property
|
|
|
|
|
|
Reinsurance
|
Insurance
|
Marine
|
Syn 2
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gross premiums written
|
64,538
|
16,388
|
14,953
|
193
|
96,072
|
|
Net premiums written
|
50,937
|
12,699
|
12,590
|
432
|
76,658
|
|
Net premiums earned
|
24,004
|
12,085
|
6,056
|
432
|
42,577
|
|
Net claims incurred
|
(18,132)
|
(5,279)
|
(4,546)
|
761
|
(27,196)
|
|
Net underwriting result
|
5,872
|
6,806
|
1,510
|
1,193
|
15,381
|
|
Acquisition costs
|
(2,887)
|
(3,499)
|
(1,227)
|
(29)
|
(7,642)
|
|
Operating costs
|
(2,211)
|
(562)
|
(512)
|
(38)
|
(3,323)
|
|
Underwriting result
|
774
|
2,745
|
(229)
|
1,126
|
4,416
|
|
|
|
|
|
|
|
|
Claims ratio
|
75.5%
|
43.7%
|
75.1%
|
(176.2)%
|
63.9%
|
|
Acquisition costs
|
12.0%
|
29.0%
|
20.3%
|
6.7%
|
17.9%
|
|
Operating costs
|
9.2%
|
4.7%
|
8.4%
|
8.8%
|
7.8%
|
|
Expense ratio
|
21.2%
|
33.7%
|
28.7%
|
15.5%
|
25.7%
|
|
Combined ratio
|
96.7%
|
77.4%
|
103.8%
|
(160.7)%
|
89.6%
|
|
Adjusted combined ratio excluding effect of RITC premium
|
95.7%
|
77.4%
|
103.8%
|
(160.7)%
|
87.9%
|
Non-Marine Reinsurance
For the six months ended 30 June 2008, the Non-Marine Reinsurance account had an underwriting profit of £2.2 million and combined ratio of 96.4% which includes single risk property losses, net of reinsurance recoveries and reinstatement premiums of £5.4 million, principally incurred in the first quarter. This compares with an underwriting profit of £0.8 million and combined ratio of 96.7% in 2007, which included losses from European Windstorm Kyrill, Australian storms and UK floods of £4.1 million. Excluding the RITC premium the combined ratio was 92.2% for the first half of 2008 (2007: 95.7%).
Syndicate 780
The rating environment through 1 July 2008 was in line with our expectations. Rates in all regions of the USA are under pressure with rates for regional non coastal exposures down 15% to 20% on average. Rates for coastal exposures are holding up as well as could be expected given the lack of catastrophe activity. Florida rates remain good although they are down 10% to 15% this year following significant increases in the last two years. Risk excess business is under some pressure but, with significant loss activity in 2008, any further rate reductions should be limited. Non USA catastrophe rates have held up better than expected with moderate reductions of between 3% and 5%. In general, the market has held firm on terms and conditions, particularly deductibles.
Advent Re
For the six months ended 30 June 2008, Advent Re had an underwriting profit of £0.3 million on 2007 policies which expired 31 March 2008. It wrote US$13.2 million (£6.6 million) of premiums, net of brokerage, in the first half of 2008, up from US$11.5 million (£5.8 million) in 2007, with 72% of policies expiring on 31 December 2008 and 28% of policies expiring in the first half of 2009.
The risks written consist of Original Loss Warranty (OLW) policies for 38% of premiums written and traditional Ultimate Net Loss (UNL) policies for 62% of premiums written. The attachment points for the OLW's are in line with 2007. The UNL policies are underwritten with the intention of responding to similar levels of market loss as the OLW policies, recognising that this is modelled data and the attachment points are estimates in terms of the probability and size of the market loss.
No underwriting profit has been earned from the 2008 contracts as we maintain conservative loss ratios reflecting Advent Re's exposure to catastrophe risk and the US hurricane season in particular.
Property Insurance
For the six months ended 30 June 2008, the Property Insurance account had an underwriting loss of £3.5 million and combined ratio of 126.2% which includes single risk property losses, net of reinsurance recoveries, of £4.4 million, principally incurred in the first quarter. This compares with an underwriting profit of £2.7 million and combined ratio of 77.4% in 2007.
Rates, terms and conditions are under pressure in most geographical territories, with the exception of UK and Australia, where rates have begun to increase on some property lines. Generally, the non marine property market remains increasingly competitive, but in line with expectations.
Marine
For the six months ended 30 June 2008, the Marine account had an underwriting profit of £2.5 million and a combined ratio of 70.5%, as the Energy account continued to perform in accordance with expectations. This compares with an underwriting loss of £0.2 million and combined ratio of 103.8% in 2007, principally due to the late advice of a Hurricane Rita energy claim of £2.2 million.
Rates are in line with expectations with rate decreases of 10% to 20% on Gulf of Mexico exposed business and rate decreases of 20% elsewhere. Terms and conditions are generally holding.
Syndicate 2
For the six months ended 30 June 2008, Syndicate 2 had an underwriting loss of £0.4 million compared with an underwriting profit of £1.2 million in 2007. The underwriting loss in 2008 principally resulted from a new claims advice on the 1999 year of account. The 2007 result reflected favourable development on 2001 and prior years' aviation and energy claims.
Advent Underwriting Limited is considering the closure of the 2001 and 2002 years of account and is currently consulting with all syndicate capital providers to establish whether this is achievable.
Syndicate 780 - Net notified loss ratio at 6 months (excluding IBNR)
|
Year of account |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
|
% net notified |
6.3% |
17.0% |
4.2% |
8.8% |
7.2% |
17.7% |
15.2% |
8.4% |
|
Year of account |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
|
% net notified |
12.2% |
2.0% |
4.6% |
8.9% |
12.6% |
4.6% |
10.5% |
17.1% |
The 2008 net notified loss ratio of 17.1% reflects the single risk property losses incurred in the first quarter. The 2007 net notified loss ratio included incurred losses on Kyrill but did not include the Australian storms and UK floods.
Catastrophe Exposure
At 30 June 2008, the Company's consolidated exposure to any one of the major Lloyd's Realistic Disaster Scenarios (RDS), from Syndicate 780 and Advent Re, is summarised below:
|
Industry |
30 June 2008 |
30 June 2008 |
1 January 2008 |
1 January 2008 |
|
|
Loss |
Gross loss |
Net loss |
Gross loss |
Net loss |
|
|
Catastrophe Event |
US$bn |
£m |
£m |
£m |
£m |
|
Gulf of Mexico Windstorm |
113 |
91.7 |
41.6 |
83.7 |
38.3 |
|
USA North East Windstorm |
74 |
76.7 |
36.7 |
72.6 |
35.2 |
|
Los Angeles Earthquake |
74 |
70.1 |
36.7 |
69.1 |
32.6 |
|
European Windstorm |
31 |
68.6 |
34.1 |
66.1 |
34.6 |
|
Japan Earthquake |
51 |
47.0 |
30.2 |
32.4 |
26.6 |
The Gulf of Mexico catastrophe event, before consideration of Syndicate 780 and Advent Re's catastrophe margins, would result in an estimated after tax loss of £34.2 million or 32.7% of shareholders' equity (1 January 2008: £30.7 million and 28.3% respectively).
Expenses
For the six months ended 30 June 2008, the operating expense ratio (excluding acquisition costs and profit/loss on exchange) as a percentage of net earned premiums, excluding RITC, was 8.1%, compared with 9.9% in 2007, reflecting savings on reduced Lloyd's central charges and the on increase net premiums earned.
Investment Return
For the six months ended 30 June 2008, the investment return decreased to £5.1 million (2007: £6.1 million), reflecting the sharply lower interest rates in the United States and slightly lower interest rates in the United Kingdom, offset by an increase in the Company's cash and investments of £51.0 million since 30 June 2007.
The Syndicate's US dollar investment portfolio duration has been maintained short, at approximately 0.7 years. It is wholly invested in government or government guaranteed securities, with an overall return on US bonds of 1.4% for the first half of 2008 (annualised return of 2.8%). Neither the syndicates nor the Company invest in asset backed or mortgage backed securities (ABS and MBS), equities or derivatives. Certain overseas deposits managed by Lloyd's (over which the Company has no investment control) have invested in corporate bonds and ABS as referred to in note 5 to the financial statements.
Advent Re's funds (included in corporate balances below) continued to be invested mainly in short term US treasury bills held in trust accounts as collateral for cedents' policy limits. The investment return for the first half of 2008 was £0.3 million (annualised return of 2.2%) reflecting sharply lower US interest rates.
Our investment mix as at 30 June 2008 is shown below.
|
30 June 2008 |
31 December 2007 |
||||
|
Syndicate |
Corporate |
Total |
Total |
||
|
Investment mix |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Government debt securities |
152,500 |
110,089 |
262,589 |
219,654 |
|
|
Cash and cash equivalents |
15,693 |
18,067 |
33,760 |
26,978 |
|
|
Overseas deposits and money market funds |
8,171 |
- |
8,171 |
20,172 |
|
|
Total |
176,364 |
128,156 |
304,520 |
266,804 |
The increase in cash and investments from £266.8 million at 31 December 2007 to £304.5 million at 30 June 2008 reflects the increase in the Company's share of Syndicate 780's 2005 year of account assets reinsured into the 2006 year of account and the collection of Syndicate 780's outstanding losses on the closure of the 2005 year of account from third party names.
Capital Management
|
30 June 2008 |
31 December 2007 |
|||||
|
£'000 |
£'000 |
|||||
|
Long term debt - subordinated - senior |
25,766 22,270 |
25,085 22,262 |
||||
|
48,036 |
47,347 |
|||||
|
Shareholders' equity |
104,554 |
108,398 |
||||
|
Debt to equity ratio |
46% |
44% |
||||
|
Debt to total capital ratio |
31% |
30% |
||||
|
Interest coverage |
2 x |
7 x |
The Company continues to maintain its debt to total capital ratio below 35% in accordance with its stated policy.
2008 Business Plan
The first half is the key underwriting period for Syndicate 780 with premiums written of £104.4 million. At business plan exchange rates of US$1.92, premiums written of £106.3 million are ahead of plan premiums of £101.8 million at this stage. Premiums written for the Reinsurance account were ahead of plan by £10.9 million reflecting the syndicate's focus on developing its non USA catastrophe exposed business with premiums written in excess of plan by £6.4 million and an increase of £3.0 million in the US catastrophe book. This resulted in increases in peak catastrophe zone exposures in the Gulf of Mexico and Japan to 19.9% and 16.7% of capacity at 1 July 2008 compared with plan of 18.9% and 12.5% respectively. Premiums written by the Property Insurance division are below plan by £6.4 million reflecting increasingly competitive market conditions in the insurance market. Premiums written for the Marine account are in line with plan at £16.4 million.
The premiums underwritten of £104.4 million consist of £84.0 million recognised as premiums written in these interim statements and £20.5 million which is in respect of "premiums written but unincepted" business, principally relating to Property Insurance binders, where the premiums will be recognised in the second half of 2008.
We have submitted the 2009 preliminary business plan of Syndicate 780 which remains focused on the existing lines of business and recognises, in the absence of any major catastrophes, the continued pressures of the pricing environment and therefore reduced profit potential. The 2009 plan has forecast gross premium income of £117 million (at exchange rates of US$1.99 and Cdn$2.04). Further review will take place prior to finalising our 2009 premium forecasts in October taking into account prevailing market conditions.
Outlook
As expected, market conditions are increasingly competitive in our principal lines of business, affecting rates and premium signings, particularly in the Property Insurance and Energy accounts. Our 2008 business plans for Syndicate 780 and Advent Re reflected our expectation of softer market conditions albeit we believe that underwriting profitability remains at attractive levels. We have made good progress in the development of our worldwide, non USA exposed reinsurance book. Terms and conditions are holding, particularly in the Reinsurance account.
We are now entering the US windstorm season with experts predicting greater than normal levels of hurricane activity. During the last two years, we have experienced attritional catastrophe activity but no major catastrophe events. There are no guarantees that these relatively benign catastrophe conditions will continue. We are involved in writing insurance and reinsurance business which is exposed to catastrophes such that, if there are any major catastrophe events in the second half of 2008, you can expect us to be involved.
I am very pleased to announce that the Board of Directors of Advent Underwriting has approved the appointments of Duncan Lummis, as Chief Underwriting Officer of Advent Underwriting and Darren Stockman, as Active Underwriter of Syndicate 780. They have both been appointed to that company's Board of Directors. Duncan and Darren both have 20 years experience with the Company and I am confident that they have the abilities to manage and develop our underwriting business in the future.
Advent is well positioned in these competitive and challenging markets. Our underwriting business has lived through many challenges over the past 33 years and our experienced management and underwriting team is well prepared to operate in what is clearly a highly competitive pricing environment. We continue to maintain our focus on underwriting profitability while remaining alert to the changing business environment that our Lloyd's and Bermuda operations may have to contend with.
Brian F Caudle
Chairman
25 July 2008
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2008
|
Note |
Six months |
Year |
|||||
|
2008 |
2007 |
2007 |
|||||
|
(unaudited) |
(unaudited) |
(audited) |
|||||
|
£'000 |
£'000 |
£'000 |
|||||
|
Income |
|||||||
|
Gross premiums earned |
58,317 |
44,990 |
113,400 |
||||
|
Reinsurance to close premium |
34,246 |
6,765 |
6,698 |
||||
|
Reinsurance premium ceded |
(7,425) |
(9,178) |
(24,114) |
||||
|
Net premiums earned |
4 |
85,138 |
42,577 |
95,984 |
|||
|
Investment income |
5 |
5,062 |
6,053 |
13,141 |
|||
|
Other operating income |
237 |
309 |
483 |
||||
|
Total Income |
90,437 |
48,939 |
109,608 |
||||
|
Expenses |
|||||||
|
Claims incurred |
4 |
(39,180) |
(20,041) |
(41,121) |
|||
|
Reinsurance to close claims |
4 |
(34,246) |
(6,765) |
(6,698) |
|||
|
Reinsurance recoveries |
4 |
2,697 |
(390) |
(614) |
|||
|
Acquisition costs |
(9,590) |
(7,642) |
(18,921) |
||||
|
Underwriting expenses |
(4,126) |
(3,607) |
(8,655) |
||||
|
Profit (loss) on exchange |
(32) |
316 |
868 |
||||
|
Corporate costs |
(2,359) |
(1,836) |
(4,748) |
||||
|
Total Expenses |
(86,836) |
(39,965) |
(79,889) |
||||
|
Operating Result |
3,601 |
8,974 |
29,719 |
||||
|
Interest on debt |
(2,003) |
(2,234) |
(4,558) |
||||
|
Profit before tax |
1,598 |
6,740 |
25,161 |
||||
|
Tax |
7 |
(423) |
(3,283) |
(5,969) |
|||
|
Profit for the period attributable to ordinary shareholders |
1,175 |
3,457 |
19,192 |
||||
|
Earnings per ordinary share (restated) |
|||||||
|
- Basic and diluted |
6 |
2.9p |
8.5p |
47.2p |
|||
CONSOLIDATED BALANCE SHEET
At 30 June 2008
|
Note |
30 June |
31 December |
|||||
|
2008 |
2007 |
2007 |
|||||
|
(unaudited) |
(unaudited) |
(audited) |
|||||
|
Restated |
|||||||
|
£'000 |
£'000 |
£'000 |
|||||
|
Assets |
|||||||
|
Cash and cash equivalents |
5 |
33,760 |
137,537 |
26,978 |
|||
|
Financial investments at fair value |
5 |
270,760 |
115,941 |
239,826 |
|||
|
Other receivables |
5,640 |
10,043 |
4,345 |
||||
|
Insurance and reinsurance assets |
|||||||
|
- Reinsurers' share of outstanding claims |
4 |
18,877 |
21,335 |
18,176 |
|||
|
- Reinsurers' share of unearned premiums |
4 |
17,701 |
14,692 |
1,058 |
|||
|
- Debtors arising from insurance and reinsurance operations |
98,480 |
79,915 |
48,060 |
||||
|
Deferred tax asset |
15,242 |
18,371 |
15,665 |
||||
|
Property and equipment |
524 |
704 |
651 |
||||
|
Intangible assets |
8 |
6,938 |
7,835 |
7,210 |
|||
|
Total assets |
467,922 |
406,373 |
361,969 |
||||
|
Equity |
|||||||
|
Share capital |
6 |
20,329 |
20,329 |
20,329 |
|||
|
Share premium account |
60,662 |
60,662 |
60,662 |
||||
|
Capital redemption reserve |
21,065 |
21,065 |
21,065 |
||||
|
Other reserves |
(2,603) |
(2,773) |
(2,666) |
||||
|
Retained earnings (deficit) |
5,101 |
(6,727) |
9,008 |
||||
|
Total shareholders' equity |
104,554 |
92,556 |
108,398 |
||||
|
Liabilities |
|||||||
|
Insurance and reinsurance liabilities |
|||||||
|
- Outstanding claims |
4 |
203,768 |
171,226 |
163,764 |
|||
|
- Unearned premiums |
4 |
84,496 |
68,639 |
31,136 |
|||
|
- Creditors arising out of insurance and reinsurance operations |
19,418 |
17,560 |
6,442 |
||||
|
Trade and other payables |
7,650 |
10,188 |
4,882 |
||||
|
Long term debt |
6 |
48,036 |
46,204 |
47,347 |
|||
|
Total liabilities |
363,368 |
313,817 |
253,571 |
||||
|
Total liabilities and shareholders' equity |
467,922 |
406,373 |
361,969 |
||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2008
|
Share capital |
Share premium |
Capital re-demption reserve |
Other reserves |
Retained earnings |
30 June 2008 (unaudited) Total |
30 June 2007 (unaudited) Total |
31 Dec 2007 (audited) Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 January |
20,329 |
60,662 |
21,065 |
(2,666) |
9,008 |
108,398 |
88,986 |
88,986 |
|
Profit for the period |
- |
- |
- |
- |
1,175 |
1,175 |
3,457 |
19,192 |
|
Dividends Share based payments |
- - |
- - |
- - |
- 63 |
(5,082) - |
(5,082) 63 |
- 113 |
- 220 |
|
Balance at end of period |
20,329 |
60,662 |
21,065 |
(2,603) |
5,101 |
104,554 |
92,556 |
108,398 |
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2008
|
Note |
Six months |
Year |
|||||
|
2008 |
2007 |
2007 |
|||||
|
(unaudited) |
(unaudited) |
(audited) |
|||||
|
Restated |
|||||||
|
£'000 |
£'000 |
£'000 |
|||||
|
Cash flows from operating activities |
9 |
6,572 |
(4,208) |
(117,799) |
|||
|
Interest paid |
(2,048) |
(2,252) |
(4,563) |
||||
|
Income tax |
- |
- |
133 |
||||
|
4,524 |
(6,460) |
(122,229) |
|||||
|
Cash flows from investing activities |
|||||||
|
Interest received |
2,302 |
2,633 |
7,926 |
||||
|
Purchase of property and equipment |
(44) |
(290) |
(373) |
||||
|
2,258 |
2,343 |
7,553 |
|||||
|
Net increase (decrease) in cash and cash equivalents |
6,782 |
(4,117) |
(114,676) |
||||
|
Cash and cash equivalents at 1 January |
26,978 |
141,654 |
141,654 |
||||
|
Cash and cash equivalents at end of period |
5 |
33,760 |
137,537 |
26,978 |
|||
NOTES TO THE INTERIM FINANCIAL STATEMENTS
These interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended 31 December 2007 as set out on pages 41 to 79 of the 2007 Report and Accounts.
These interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting. The policies utilised are also consistent with those set out on pages 46 to 49 of the Company's consolidated financial statements for the year ended 31 December 2007.
Cash and cash equivalents at 30 June 2007 have been restated consistent with their presentation in the 2007 Report and Accounts to include in financial investments certain syndicate overnight sweep cash accounts where the custodian and manager had invested aggregate underlying deposits in longer term investments.
Status of the interim financial statements
The interim financial statements have been reviewed by the Company's auditors PricewaterhouseCoopers LLP. These interim financial statements do not constitute accounts as defined in section 240 of the Companies Act 1985 ("the Act").
The results for the year ended 31 December 2007 are based on the Company's statutory accounts which received an unqualified audit opinion from the Company's auditors, and did not contain a statement under section 237(2) or (3) of the Act. The Company's Report and Accounts for the year ended 31 December 2007 have been filed with the Registrar of Companies.
2. FOREIGN EXCHANGE RISK MANAGEMENT
The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the preparation of these financial statements were:
|
30 June 2008 |
30 June 2007 |
31 December 2007 |
|||||||||
|
Period |
Period |
Period |
Period |
Period |
Period |
||||||
|
average |
end |
average |
end |
average |
end |
||||||
|
rate |
rate |
rate |
rate |
rate |
rate |
||||||
|
US dollar |
1.98 |
1.99 |
1.97 |
2.01 |
2.00 |
1.99 |
|||||
|
Euro |
1.29 |
1.26 |
1.48 |
1.49 |
1.46 |
1.36 |
|||||
|
Canadian dollar |
1.99 |
2.02 |
2.24 |
2.13 |
2.15 |
1.96 |
|||||
The Company had foreign exchange gains and losses which were recorded in the consolidated income statement as follows:
|
Six months 2008 |
Six months 2007 |
Year 2007 |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Underwriting activities |
201 |
284 |
937 |
||
|
Corporate activities |
(233) |
32 |
(69) |
||
|
Net gain (loss) |
(32) |
316 |
868 |
At 30 June 2008, the Company's asset and liability positions in its major foreign currencies were as follows:
|
30 June 2008 (unaudited) |
||||
|
US$m |
£m |
CDN$m |
€m |
|
|
Total assets |
553.5 |
167.8 |
25.0 |
12.0 |
|
Total liabilities |
(550.1) |
(66.8) |
(19.6) |
(12.8) |
|
Net assets (net liabilities) |
3.4 |
101.0 |
5.4 |
(0.8) |
|
31 December 2007 (audited) |
||||
|
US$m |
£m |
CDN$m |
€m |
|
|
Total assets |
402.8 |
141.4 |
18.5 |
12.4 |
|
Total liabilities |
(384.9) |
(45.1) |
(13.2) |
(13.0) |
|
Net assets (net liabilities) |
17.9 |
96.3 |
5.3 |
(0.6) |
3. OPERATING RESULTS
|
Six months |
Six months |
Year |
|||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Underwriting profit |
|||||
|
Syndicate 780 - Non-Marine |
|||||
|
Underwriting Year of Account |
|||||
|
2008 - open |
1,769 |
- |
- |
||
|
2007 - open |
267 |
(401) |
12,652 |
||
|
2006 - open |
(717) |
3,396 |
2,281 |
||
|
2005 and prior closed |
- |
661 |
(258) |
||
|
Total Syndicate 780 |
1,319 |
3,656 |
14,675 |
||
|
Syndicate 2 - Marine |
|||||
|
Underwriting Year of Account |
|||||
|
2002 - run-off |
13 |
(180) |
91 |
||
|
2001 - run-off |
(412) |
1,306 |
1,370 |
||
|
Total Syndicate 2 |
(399) |
1,126 |
1,461 |
||
|
Advent Re |
(26) |
(366) |
4,944 |
||
|
Company level reinsurance |
- |
- |
(168) |
||
|
Underwriting profit |
894 |
4,416 |
20,912 |
||
|
Managing Agency |
|||||
|
Agency fees |
23 |
178 |
237 |
||
|
Recharges to Syndicates |
214 |
131 |
246 |
||
|
237 |
309 |
483 |
|||
|
Other |
|||||
|
Investment result |
5,062 |
6,053 |
13,141 |
||
|
Interest expense |
(2,003) |
(2,234) |
(4,558) |
||
|
Corporate costs |
(2,359) |
(1,836) |
(4,748) |
||
|
Corporate foreign exchange (loss) |
(233) |
32 |
(69) |
||
|
Profit before tax |
1,598 |
6,740 |
25,161 |
4. INSURANCE RISK MANAGEMENT
Insurance segment results
The underwriting results of Advent Re are included in the Non-Marine Reinsurance segment. Acquisition costs consisting of direct brokerage commissions, are allocated to each segment on a direct basis while operating costs, including underwriting costs, are allocated based on gross premiums written.
For catastrophe exposed business, including multiple peril coverage, the Company recognises premiums as earned based on the underlying exposure to catastrophe. As a result, a greater proportion of premium income on catastrophe exposed business is earned in the second half of the year when the company is exposed to greater risk of hurricane related losses.
The reinsurance to close (RITC) premium and claims are included in the Non Marine Reinsurance segment and are valued at the RITC transaction date of 1 January 2008. Subsequent movements in premiums and claims from the RITC are reflected in the segments to which they relate in claims incurred and reinsurance recoveries on the income statement.
|
Non-Marine |
Property |
||||||||
|
Re-insurance |
Insurance |
Marine |
Syndicate 2 |
Total |
|||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Six months 2008 (unaudited) |
|||||||||
|
Gross premiums written |
116,591 |
15,374 |
17,746 |
527 |
150,238 |
||||
|
Net premiums written |
96,167 |
10,652 |
14,466 |
569 |
121,854 |
||||
|
Net premiums earned |
62,722 |
13,247 |
8,600 |
569 |
85,138 |
||||
|
Net claims incurred |
(53,888) |
(12,771) |
(3,490) |
(580) |
(70,729) |
||||
|
Acquisition costs |
(4,088) |
(3,436) |
(1,987) |
(79) |
(9,590) |
||||
|
Operating expenses |
(2,739) |
(539) |
(622) |
(226) |
(4,126) |
||||
|
Profit (loss) on exchange |
221 |
29 |
34 |
(83) |
201 |
||||
|
Underwriting profit (loss) |
2,228 |
(3,470) |
2,535 |
(399) |
894 |
||||
|
Combined ratio |
96.4% |
126.2% |
70.5% |
170.2% |
99.0% |
|
Non-Marine |
Property |
||||||||
|
Re-insurance |
Insurance |
Marine |
Syndicate 2 |
Total |
|||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Six months 2007 (unaudited) |
|||||||||
|
Gross premiums written |
64,538 |
16,388 |
14,953 |
193 |
96,072 |
||||
|
Net premiums written |
50,937 |
12,699 |
12,590 |
432 |
76,658 |
||||
|
Net premiums earned |
24,004 |
12,085 |
6,056 |
432 |
42,577 |
||||
|
Net claims incurred |
(18,132) |
(5,279) |
(4,546) |
761 |
(27,196) |
||||
|
Acquisition costs |
(2,887) |
(3,499) |
(1,227) |
(29) |
(7,642) |
||||
|
Operating expenses |
(2,322) |
(590) |
(538) |
(157) |
(3,607) |
||||
|
Profit on exchange |
111 |
28 |
26 |
119 |
284 |
||||
|
Underwriting profit (loss) |
774 |
2,745 |
(229) |
1,126 |
4,416 |
||||
|
Combined ratio |
96.7% |
77.4% |
103.8% |
(160.7)% |
89.6% |
|
Non-Marine |
Property |
||||||||
|
Re-insurance |
Insurance |
Marine |
Syndicate 2 |
Total |
|||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Year 2007 (audited) |
|||||||||
|
Gross premiums written |
75,966 |
31,723 |
18,691 |
532 |
126,912 |
||||
|
Net premiums written |
61,292 |
27,785 |
16,461 |
661 |
106,199 |
||||
|
Net premiums earned |
57,862 |
24,358 |
13,103 |
661 |
95,984 |
||||
|
Net claims incurred |
(28,645) |
(14,499) |
(6,497) |
1,208 |
(48,433) |
||||
|
Acquisition costs |
(8,495) |
(7,431) |
(2,915) |
(80) |
(18,921) |
||||
|
Underwriting expenses |
(4,899) |
(2,046) |
(1,204) |
(506) |
(8,655) |
||||
|
Profit on exchange |
456 |
191 |
112 |
178 |
937 |
||||
|
Underwriting profit |
16,279 |
573 |
2,599 |
1,461 |
20,912 |
||||
|
Combined ratio |
71.9% |
97.6% |
80.2% |
(120.9%) |
78.2% |
Provision for claims
|
(a) Net incurred claims |
Six months |
Six months |
Year |
||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Claims incurred |
|||||
|
- Gross paid claims |
37,616 |
45,399 |
75,354 |
||
|
- Change in provision for claims |
1,564 |
(25,358) |
(34,233) |
||
|
39,180 |
20,041 |
41,121 |
|||
|
Reinsurance Recoveries |
|||||
|
- Received |
(6,328) |
(11,031) |
(14,013) |
||
|
- Change in provision |
3,631 |
11,421 |
14,627 |
||
|
(2,697) |
390 |
614 |
|||
|
Reinsurance to close claims (net) |
34,246 |
6,765 |
6,698 |
||
|
Net incurred claims |
70,729 |
27,196 |
48,433 |
||
|
(b) Outstanding claims and unearned premiums |
Unearned |
Claims |
Total |
||
|
Premiums |
outstanding |
||||
|
£'000 |
£'000 |
£'000 |
|||
|
Gross |
|||||
|
At 1 January 2008 (audited) |
31,136 |
163,764 |
194,900 |
||
|
Exchange adjustments |
(119) |
(119) |
|||
|
Movement in provisions |
|||||
|
- current year |
53,360 |
39,265 |
92,625 |
||
|
- reinsurance to close claims |
38,561 |
38,561 |
|||
|
- prior year |
(87) |
(87) |
|||
|
- paid claims |
(37,616) |
(37,616) |
|||
|
At 30 June 2008 (unaudited) |
84,496 |
203,768 |
288,264 |
||
|
Reinsurance amount |
|||||
|
At 1 January 2008 (audited) |
1,058 |
18,176 |
19,234 |
||
|
Exchange adjustments |
17 |
17 |
|||
|
Movement in provisions |
|||||
|
- current year |
16,643 |
2,134 |
18,777 |
||
|
- reinsurance to close claims recoveries |
4,315 |
4,315 |
|||
|
- prior year |
563 |
563 |
|||
|
- paid recoveries |
(6,328) |
(6,328) |
|||
|
At 30 June 2008 (unaudited) |
17,701 |
18,877 |
36,578 |
||
|
Net |
|||||
|
At 30 June 2008 (unaudited) |
66,795 |
184,891 |
251,686 |
||
|
At 31 December 2007 (audited) |
30,078 |
145,588 |
175,666 |
||
|
At 30 June 2007 (unaudited) |
53,947 |
149,891 |
203,838 |
For the six months ended 30 June 2008, improvement in prior years' claims, net of reinsurance recoveries and reinstatement premiums, amounted to £0.7 million (2007: improvement of £0.1 million).
The net outstanding claims are further analysed between notified outstanding claims and incurred but not reported claims (IBNR) below:
|
30 June |
30 June |
31 December |
|||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Notified outstanding claims |
120,227 |
101,665 |
101,901 |
||
|
Claims incurred but not reported |
64,664 |
48,226 |
43,687 |
||
|
Claims outstanding |
184,891 |
149,891 |
145,588 |
The breakdown of the gross and net outstanding claims by category of claims is set out below.
|
30 June 2008 (unaudited) |
30 June 2007 (unaudited) |
31 December 2007 (audited) |
|||||||||
|
Gross |
Net |
Gross |
Net |
Gross |
Net |
||||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
Large catastrophe provisions |
35,704 |
26,821 |
46,149 |
37,143 |
33,970 |
27,735 |
|||||
|
All other short tail provisions |
88,589 |
86,080 |
52,251 |
49,273 |
60,221 |
57,017 |
|||||
|
Long-tail provisions (casualty) |
36,342 |
36,342 |
25,478 |
25,478 |
24,640 |
24,640 |
|||||
|
Syndicate 2 provisions |
43,133 |
35,648 |
47,348 |
37,997 |
44,933 |
36,196 |
|||||
|
Total |
203,768 |
184,891 |
171,226 |
149,891 |
163,764 |
145,588 |
|||||
Reinsurance recoverable
At 30 June 2008, the Company's reinsurance recoverable on outstanding claims amounted to £18.9 million, an increase of £0.7 million since 31 December 2007, with reinsurers with the following risk ratings by AM Best (or equivalent S&P rating in the absence of an AM Best rating):
|
Risk Rating |
Reinsurance recoverable |
|||
|
£'000 |
% |
|||
|
A+ |
8,515 |
45.1 |
||
|
Lloyd's |
2,808 |
14.9 |
||
|
A |
4,423 |
23.4 |
||
|
A- |
478 |
2.5 |
||
|
Trust fund backed |
1,549 |
8.2 |
||
|
BBB or below and Non rated |
1,104 |
5.9 |
||
|
Total |
18,877 |
100.0 |
||
Included in debtors arising from insurance and reinsurance operations are the following reinsurer balances.
|
Syndicate 780 |
Syndicate 2 |
Total |
||||||
|
£'000 |
£'000 |
£'000 |
||||||
|
Fully performing |
558 |
526 |
1,084 |
|||||
|
Past due |
3 |
967 |
970 |
|||||
|
Impaired |
4,408 |
7,122 |
11,530 |
|||||
|
Provision for uncollectible reinsurance |
(3,249) |
(4,088) |
(7,337) |
|||||
|
Net |
1,720 |
4,527 |
6,247 |
|||||
5. FINANCIAL RISK MANAGEMENT
|
NET INVESTMENT INCOME |
Six months |
Six months |
Year |
||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Investment Income |
|||||
|
Interest |
5,651 |
5,942 |
12,515 |
||
|
Gain on sale of investments |
218 |
191 |
325 |
||
|
Unrealised gains on investments |
42 |
67 |
772 |
||
|
5,911 |
6,200 |
13,612 |
|||
|
Investment expenses and charges |
|||||
|
Investment management expenses |
(115) |
(47) |
(114) |
||
|
Loss on sale of investments |
(216) |
(48) |
(350) |
||
|
Unrealised losses on investments |
(518) |
(52) |
(7) |
||
|
(849) |
(147) |
(471) |
|||
|
Net investment income |
5,062 |
6,053 |
13,141 |
||
|
FINANCIAL INVESTMENTS |
30 June 2008 |
30 June 2007 |
31 Dec 2007 |
||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Carrying Value |
|||||
|
Debt securities and other fixed income securities |
|||||
|
- Government and government guaranteed |
262,589 |
67,184 |
219,654 |
||
|
- Holdings in collective investment schemes |
3,373 |
45,351 |
16,118 |
||
|
- Syndicate overseas deposits |
4,798 |
3,406 |
4,054 |
||
|
270,760 |
115,941 |
239,826 |
|||
|
Purchase Price |
|||||
|
Debt securities and other fixed income securities |
|||||
|
- Government and government guaranteed |
262,581 |
67,151 |
218,821 |
||
|
- Holdings in collective investment schemes |
3,373 |
45,351 |
16,118 |
||
|
- Syndicates' overseas deposits |
4,798 |
3,406 |
4,054 |
||
|
270,752 |
115,908 |
238,993 |
|||
All debt securities and other fixed income securities are listed on recognised stock exchanges. All financial investments are classified as fair value through income including short term fixed maturity securities.
At 30 June 2008, Syndicate investments of £49.5 million (31 December 2007: £44.8 million) were held in US Situs and other regulatory deposits available for the payment of claims in those jurisdictions and which are not available for the payment of other claims and obligations.
At 30 June 2008, Advent Re had pledged cash and investments of £19.5 million (31 December 2007: £23.0 million) as security for policy limits of contracts written.
|
CASH AND CASH EQUIVALENTS |
30 June |
30 June |
31 December |
||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Corporate cash at bank |
7,075 |
14,200 |
10,760 |
||
|
Corporate funds held by Lloyd's |
342 |
94,366 |
628 |
||
|
Advent Re cash at bank |
10,650 |
24,560 |
2,147 |
||
|
Syndicates' cash at bank |
9,551 |
1,951 |
5,448 |
||
|
Syndicates' deposits with credit institutions |
6,142 |
2,460 |
7,995 |
||
|
Total cash and cash equivalents |
33,760 |
137,537 |
26,978 |
||
Cash at bank was held with Royal Bank of Scotland and Barclays Bank, both of which are rated AA by Standard & Poor's.
The syndicates' overseas deposits (Joint Asset Trust Funds (JATF)) are managed by Lloyd's. The Company does not have the authority to ensure that its investment policies are complied with. Lloyd's has advised the Company that it has invested the JATF in:
|
Company's share £'000 |
|||
|
US Government securities |
3,417 |
||
|
Corporate bonds rated AAA AA A BBB NR |
278 548 313 3 109 |
||
|
Asset backed securities (ABS) |
99 |
||
|
Mortgage backed securities (MBS) |
19 |
||
|
Cash |
12 |
||
|
4,798 |
|||
Other than the above investments, over which the Company does not exercise investment authority, the Company only invests in short term government and government guaranteed securities. It does not invest in derivatives, MBS, ABS, equities or corporate bonds given current market conditions.
6. CAPITAL MANAGEMENT
|
SHARE CAPITAL |
Authorised |
Allotted, Called-Up and Fully Paid |
|||||||||
|
30 June |
30 June |
31 December |
30 June |
30 June |
31 December |
||||||
|
2008 |
2007 |
2007 |
2008 |
2007 |
2007 |
||||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
Ordinary shares of 5p each (£000) |
- |
50,000 |
50,000 |
- |
20,329 |
20,329 |
|||||
|
Ordinary shares of 50p each (£000) |
50,000 |
- |
- |
20,329 |
- |
- |
|||||
|
Number of shares ('000s) |
100,000 |
1,000,000 |
1,000,000 |
40,657 |
406,570 |
406,570 |
|||||
On 23 June 2008, the Company's ordinary shares of 5p each were consolidated on a ratio of 1 new ordinary share of 50p each for 10 old ordinary shares of 5p each approved by shareholders at the Annual General Meeting. Outstanding shares, as options and per share amounts have been retroactively restated to present the comparative information on a consistent basis.
|
EARNINGS PER ORDINARY SHARE |
Six Months |
Six months |
Year |
||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
Restated |
Restated |
||||
|
Profit after tax for the period (£'000) |
1,175 |
3,457 |
19,192 |
||
|
Weighted average number of shares in issue ('000s) |
40,657 |
40,657 |
40,657 |
||
|
Basic and diluted earnings per share |
2.9p |
8.5p |
47.2p |
|
Outstanding debt |
Issue date |
Due date |
Callable (by the Company) after |
Interest rate |
Interest rate (30 June 2008) |
30 June 2008 £'000 |
30 June 2007 £'000 |
31 December 2007 £'000 |
|
Subordinated Notes |
||||||||
|
US$34 million |
3/6/2005 |
3/6/2035 |
3/6/2010 |
3 month LIBOR + 3.90% |
6.68% |
16,557 |
16,388 |
16,546 |
|
€12 million |
3/6/2005 |
3/6/2035 |
3/6/2010 |
3 month EURIBOR + 3.85% |
8.80% |
9,209 |
7,785 |
8,539 |
|
25,766 |
24,173 |
25,085 |
||||||
|
Senior Notes |
||||||||
|
US$26 million |
16/1/2006 |
15/1/2026 |
16/1/2011 |
3 month LIBOR + 4.50% |
7.28% |
12,545 |
12,409 |
12,540 |
|
US$20 million |
15/12/2006 |
15/12/2026 |
15/12/2011 |
3 month LIBOR + 4.15% |
6.93% |
9,725 |
9,622 |
9,722 |
|
22,270 |
22,031 |
22,262 |
||||||
|
Total Loan Notes at amortised cost and fair value |
48,036 |
46,204 |
47,347 |
|||||
|
Weighted average interest rate, period end |
7.30% |
9.27% |
8.80% |
|||||
The Subordinated Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).
The Senior Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and subordinated loan notes, and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).
The Subordinated Notes and Senior Notes are listed on the Channel Islands Stock Exchange.
LONG TERM INCENTIVE PLANS
During the first six months of 2008, 45,000 options were cancelled under the 2005 grants at 350p per share and 50,000 options were cancelled under the 2006 grant at 200p per share.
FUNDS AT LLOYD'S (FAL)
The Funds held by Lloyd's represent monies deposited with the Corporation of Lloyd's (Lloyd's) to support the Company's underwriting activities. These Funds are subject to a Lloyd's deposit trust deed which gives Lloyd's the right to apply these monies in settlement of any claims arising from the Company's underwriting at Lloyd's.
In addition to the Company's FAL of £91.2 million at 30 June 2008, a major shareholder, Fairfax Financial Holdings Limited (Fairfax), had deposited FAL of £56.1 million at 30 June 2008 (£56.6 million at 31 December 2007) to support the Company's underwriting for the 2001 to 2005 underwriting years pursuant to a Funding Agreement dated 16 November 2000. With the closure of Syndicate 780's 2005 year of account, £41.7 million of Fairfax's FAL was released on 16 July 2008 leaving £14.4 million to support Syndicate 2's open years of account. Any underwriting profits arising from the business supported by the Fairfax FAL are receivable by the Company which is also responsible for the payment of any losses arising.
The FAL and the overseas deposits are not available for use by the Company for ordinary cash flow purposes.
During June, the Company paid its share of the loss on the 2005 year of account of Syndicate 780 of £29.1 million (at distribution rates of exchange) which was settled from existing FAL funds (£15.2 million), profit distributions on the 2006 and 2007 years of accounts (£12.6 million) and holding company cash of £1.3 million.
7. INCOME TAXES
|
30 June |
30 June |
31 December |
|||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Analysis of charge in period |
|||||
|
UK corporation tax on profit for the period |
- |
- |
- |
||
|
Adjustment in respect of prior periods |
- |
- |
(20) |
||
|
Foreign tax |
- |
- |
- |
||
|
Deferred tax |
423 |
3,283 |
5,989 |
||
|
Total taxation |
423 |
3,283 |
5,969 |
8. INTANGIBLE FIXED ASSETS
|
Goodwill on Acquisition |
Purchased Capacity - finite life |
Purchased Capacity - indefinite life |
Total |
||||
|
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
Fair Value |
|||||||
|
At 30 June 2008 (unaudited) |
4,148 |
95 |
2,695 |
6,938 |
|||
|
At 31 December 2007 (audited) |
4,148 |
367 |
2,695 |
7,210 |
|||
|
At 30 June 2007 (unaudited) |
4,148 |
992 |
2,695 |
7,835 |
The consideration paid to third party capital providers of £1.2 million on 30 June 2008 is a finite life asset and accordingly, is amortised to expenses as the gross premium income is earned on the 2007 year of account to which the payment relates.
9. RECONCILIATION OF PROFIT BEFORE TAX TO NET CASH
INFLOW (OUTFLOW) FROM OPERATING ACTIVITIES
|
Six Months |
Six months |
Year |
|||
|
2008 |
2007 |
2007 |
|||
|
(unaudited) |
(unaudited) |
(audited) |
|||
|
£'000 |
£'000 |
£'000 |
|||
|
Profit before tax |
1,598 |
6,740 |
25,161 |
||
|
Movement in: |
|||||
|
- insurance and reinsurance receivables |
(67,764) |
(32,847) |
15,801 |
||
|
- other receivables |
(921) |
65 |
3,738 |
||
|
- insurance and reinsurance payables |
106,340 |
33,204 |
(22,879) |
||
|
- trade and other payables |
2,804 |
4,417 |
(1,014) |
||
|
Interest expense |
2,003 |
2,234 |
4,558 |
||
|
Investment result |
(2,667) |
(3,221) |
(6,489) |
||
|
Unrealised investment gains (losses) |
172 |
15 |
765 |
||
|
Net (purchase) sale of investments |
(31,106) |
(14,225) |
(138,861) |
||
|
Depreciation |
170 |
148 |
284 |
||
|
Amortisation of debt issue costs |
12 |
11 |
22 |
||
|
Amortisation of capacity |
272 |
227 |
852 |
||
|
Amortisation of share option costs |
63 |
113 |
220 |
||
|
Foreign exchange movements on financing Dividend payable |
678 (5,082) |
(1,089) - |
43 - |
||
|
6,572 |
(4,208) |
(117,799) |
Related Shares:
ADV.L