30 September 2021 

Helios Underwriting plc

("Helios" or the "Company")

Interim Results for the Six Months Ended 30 June 2021

Helios Underwriting plc, the unique investment vehicle that acquires and consolidates underwriting capacity at Lloyd's, announces its unaudited results for the six months ended 30 June 2021, a half year in which Helios completed its successful fundraising and continued its strategy of driving portfolio growth and shareholder value.

Chairman's statement

Six months ended 30 June 2021

Nigel Hanbury, Chief Executive, provides the following overview:

"Whilst these interim results have yet to reflect the improvement in syndicate profitability following cumulative rate increases of an average of 51% since January 2018, Helios' strategy to generate growth and shareholder returns is firmly on track.

"We have completed or have agreed terms for the acquisition of 28 Limited Liability Vehicles with capacity of, in aggregate, £33m for 2021 underwriting year for a total outlay of £38m.  The continued improvement in current market conditions have opened up an exciting window of opportunity for Helios. The improvement in underwriting conditions over 4 years will provide a platform for better prospects for underwriting margins over the next few years, and we are confident of a strong performance in the remainder of the year."

·      Operating loss is £480,000 (30 June 2020 - a loss of £108,000)

·      The underwriting profits have recovered following the losses arising from the Covid-19 coronavirus pandemic in 2020

·      The cumulative premium rate increase achieved by underwriters since 1^st January 2018 is 51%, which together with greater discipline encouraged by the Franchise Board at Lloyd's, has improved the prospects for  profitable underwriting

·      The Net Tangible  Asset Value per share is £1.46 per share (31^st December 2020 - £1.51 per share)

·      Net Tangible Asset Value per share has been impacted by the increase in the rate of corporation tax to 25%.

The underwriting profits have recovered following the losses arising from the Covid-19 coronavirus pandemic in 2020.  Both the 2019 and 2020 underwriting years have contributed to the result as confidence in the reserves required for the Covid-19 losses have improved and as the profits from the balance of the portfolio start to be recognised. The contribution from the 2021 underwriting year is an initial loss following the winter storms in the USA and as Helios has increased its retained capacity to 54% of the portfolio, this small loss has had a greater impact on the overall result.

The positive momentum in both insurance and reinsurance pricing for many years has continued into 2021. The improvement in underwriting conditions over 4 years will provide a platform for better prospects for underwriting margins over the next few years.   .   Cumulative rate increases since 1^st January 2018 are 51%. We have been advised of further pre-emptions of approximately £6.0m of capacity (2020 - £9.5m) from our supported syndicates to take advantage of improved market conditions.

Acquisition of LLV's

Following the capital raise in April 2021, we have been active in agreeing terms for the acquisition of Limited Liability Vehicles (LLV's).  We have completed 8 acquisitions to date and have agreed terms with a further 20 LLV's where completion is subject, inter alia, to regulatory approval.  The aggregate of the capacity, consideration and total outlay for the LLV's agreed and completed transactions to date are as follows:

These acquisitions have increased the capacity retained by Helios for the 2021 underwriting year to 64% of the portfolio, an increase of 20% so far in 2021.

*Acquired post 30 June 2021

Helios has received preliminary indications of pre-emptions for 2022 year of account from the syndicates supported, which are subject to approval by Lloyd's, which together with the capacity acquired will increase the capacity portfolio for 2022 year of account to £151m - an increase of 37%.

The value of the capacity portfolio, using the 2020 weighted average prices, including the value of the capacity acquired and the value of the expected pre-emptions for 2022 (using the 2020 weighted average capacity prices) has increased to £46m - an increase of 50%

Our strategy of building a portfolio of syndicate capacity continues to rely on the flow of LLVs for sale at reasonable prices.  The discounts achieved to the Humphrey Valuations have decreased as both Vendor expectations of future value have increased and as other purchasers have realised the value of the potential future profitability of these capacity portfolios. 

The exposure on the 2021 open underwriting year as at 1st January 2021 has been reduced by 46% through quota share reinsurance.  The quota share reinsurers fund their share of the capital requirements and pay Helios a fee and a profit commission.  The reinsurance costs have increased as £7.6m of additional underwriting capital has been sourced through a reinsurance contract at a cost of £0.8m.  In addition the stop loss for the Helios retained capacity continues to be bought which has a 10% indemnity to protect the Group from a loss excess of 5% loss for the 2021 underwriting year.

The Net Tangible Asset Value per share is £1.46p per share (Dec 2020 - £1.51p per share).    The tax charge includes an increased provision for deferred tax of £1.8m (3p per share) on the value of the capacity portfolio following the increase in the corporation tax to 25%.  The total deferred tax provision on the capacity value has increased to £7.0m representing 10p per share of net asset value. It is expected that there will continue to be demand for the top syndicates that make up a significant proportion of the Helios Capacity Fund at the Lloyds Capacity Auctions that take place later this year.

Helios Underwriting plc

Nigel Hanbury - Chief Executive                                     +44 (0)7787 530 404 / [email protected]

Arthur Manners - Chief Financial Officer                       +44 (0)7754 965 917

Shore Capital

Robert Finlay                                                                        +44 (0)20 7601 6100

David Coaten

Willis Re Securities (Financial Adviser)

Alastair Rodger                                                                    +44 (0)20 3124 6033

Buchanan

Helen Tarbet / Henry Wilson / George Beale                 +44 (0)7872 604 453

                                                                                                +44 (0)20 7466 5111

About Helios

Helios provides a limited liability direct investment into the Lloyd's insurance market and is quoted on the London Stock Exchange's AIM market (ticker: HUW). Helios trades within the Lloyd's insurance market writing approximately £110m of capacity for the 2021 account. The portfolio provides a good spread of business being concentrated in property insurance and reinsurance. For further information please visit www.huwplc.com.

Financial results summary

Six months ended 30 June 2021

Period to 30^th June 2021

Period to 30^th June 2020

Year to 31 December 2020

Summary Balance Sheet

The summary Group balance sheet excludes items relating to syndicate participations. See Note 15 for further information.

Summary Group Cash Flow

The summary group cash flow sheet excludes items relating to syndicate participations. See Note 15 for further information.

Net Tangible Asset per share

Interim condensed consolidated statement of comprehensive income

Six months ended 30 June 2021

The profit attributable to owners of the Parent and earnings per share set out above are in respect of continuing operations.

The notes are an integral part of these Financial Statements.

Interim condensed consolidated statement of financial position

Six months ended 30 June 2021

The Financial Statements were approved and authorised for issue by the Board of Directors on 29 September 2021, and were signed on its behalf by:

Nigel Hanbury

Chief Executive

The notes are an integral part of these Financial Statements.

Interim condensed consolidated statement of changes in equity

Six months ended 30 June 2021

Interim condensed consolidated statement of cash flows

Six months ended 30 June 2021

Cash held within the syndicates' accounts is £9,871,000 (2020: £7,345,000) of the total cash and cash equivalents held at the end of the period £62,143,000 (2020: £8,501,000). The cash held within the syndicates' accounts is not available to the Group to meet its day-to-day working capital requirements.

Cash and cash equivalents comprise cash at bank and in hand.

The notes are an integral part of these Financial Statements.

Notes to the financial statements

Six months ended 30 June 2021

1. General information

The Company is a public limited company quoted on AIM. The Company was incorporated in England, is domiciled in the UK and its registered office is 40 Gracechurch Street, London EC3V 0BT. The Company participates in insurance business as an underwriting member at Lloyd's through its subsidiary undertakings.

2. Accounting policies

Basis of preparation

The Condensed Consolidated Interim Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) and in accordance with UK adopted International Accounting Standard (IAS) 34 Interim Financial Reporting, in accordance with the requirements of the Companies Act 2006.

The Condensed Consolidated Interim Financial Statements are prepared for the six months ended 30 June 2021.

The Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2021 and 2020 are unaudited, but have been subject to review by the Group's auditors. The Condensed Consolidated Interim Financial Statements have been prepared in accordance with the accounting policies adopted for the year ended 31 December 2020, and the adoption of new and amended standards as set out further below.

The Condensed Consolidated Interim incorporate the Financial Statements of Helios Underwriting plc, the Parent Company, and its directly and indirectly held subsidiaries (see note 10).

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

Significant accounting policies

The Condensed Consolidated Interim Financial Statements have been prepared under the historical cost convention as modified by the revaluation of the financial assets at fair value through the profit and loss. The same accounting policies, presentation and methods of computation are followed in these Condensed Consolidated Interim Financial Statements as were applied in the preparation of the Group Financial Statements for the year ended 31 December 2020.

International Financial Reporting Standards

Adoption of new and revised standards

In the current year, the Group has applied new IFRSs and amendments to IFRSs issued by the IASB that are mandatory for an accounting period that begins on or after 1 January 2020.

IFRS 16 Amendments, Leases COVID 19 Related Rent Concessions.  Lessees are provided with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The Group has not applied this exemption and the amendment has not had an impact on the Consolidated Financial Statements.

IFRS 3 Amendments, Business Combinations. The amendment is aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments provide further clarity on what constitutes an acquired business, and this clarification has not impacted the Group's recognition of acquired business in the year and has not had an impact on the Consolidated Financial Statements

IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark Reform.  The amendments deal specifically with interest rate hedge accounting and is the first phase of change relating to interest rate benchmark reform and the replacement of LIBOR. The Group has not been impacted by these amendments for hedge accounting.

IAS 1 and IAS 8 Amendments, Definition of Material. The amendments clarify the definition of 'material' and align the definition used in the Conceptual Framework and the standards themselves.  Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Financial Statements have been prepared in accordance with this clarification.

New standards, amendments and interpretations not yet adopted

A number of new standards and amendments adopted by the UK, as well as standards and interpretations issued by the IASB but not yet adopted by the UK, have not been applied in preparing the Consolidated Financial Statements.

The Group does not plan to adopt these standards early; instead it will apply them from their effective dates as determined by their dates of UK endorsement.  The Group continues to review the upcoming standards to determine their impact.

IFRS 9, Financial Instruments (IASB effective date 1 January 2018) has not been applied under IFRS 4 Amendment option to defer until IFRS 17 comes into effect on 1 January 2023.

IFRS 17, Insurance Contracts. (IASB effective date 1 January 2023).

IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark Reform Phase 2. (IASB effective date 1 January 2021).

Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets. (IASB effective date 1 January 2022).

IAS 1 Presentation of Financial Statements Amendments, Classification of Liabilities as Current or Non-current. (IASB effective date 1 January 2023).

IAS 8 Accounting Policies Amendments, Changes in Accounting Estimates and Errors. (IASB effective date 1 January 2023).

IFRS 9, Financial instruments (IASB effective date 1 January 2018) has not been applied under IFRS 4 Amendment option. IFRS 9 provides a reform of financial instruments accounting to supersede IAS 39 Financial Instruments: Recognition and Measurement.  Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts contained an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4.  The Group meets the eligibility criteria and has taken advantage of this temporary exemption not to apply this standard until the effective date of IFRS 17.

3. Segmental information

Nigel Hanbury is the Group's chief operating decision-maker. He has determined its operating segments based on the way the Group is managed, for the purpose of allocating resources and assessing performance.

The Group has three segments that represent the primary way in which the Group is managed, as follows:

•  syndicate participation;

•  investment management; and

•  other corporate activities.

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

No major customers exceed 10% of revenue.

Net earned premium within 2021 other corporate activities totalling £951,000 (2020: £90,000 Net insurance claims and loss adjustment expenses - 2018, 2019 and 2020 years of account) represents the 2019, 2020 and 2021 years of account net Group quota share reinsurance premium payable to Hampden Insurance Guernsey PCC Limited - Cell 6. This net quota share reinsurance premium payable is included within "reinsurance premium ceded" in the Consolidated Statement of Comprehensive Income of the period.

4. Operating profit before impairments of goodwill and capacity

Pre-acquisition relates to the element of results from the new acquisitions before they were acquired by the Group.

*     The underwriting year of account results represent the Group's share of the syndicates' results by underwriting year of account before corporate member level reinsurance and members' agents charges.

5. Insurance liabilities and reinsurance balances

Movement in claims outstanding

Movement in unearned premium 

Included within other movements are the 2018 and prior years' claims reserves reinsured into the 2019 year of account on which the Group does not participate and currency exchange differences.

Movement in claims outstanding

Movement in unearned premium 

Included within other movements are the 2017 and prior years' claims reserves reinsured into the 2018 year of account on which the Group does not participate and currency exchange differences.

Movement in claims outstanding

Movement in unearned premium 

Included within other movements are the 2018 and prior years' claims reserves reinsured into the 2019 year of account on which the Group does not participate and currency exchange differences.

6. Net investment income

7. Income tax charge

Analysis of tax charge/(credit) in the period

The income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used is 19.00% (2019: 19.00%).  Included above is £1,727,000 which relates to the increase in deferred tax rates from 1 April 2023.

8. Earnings per share

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

Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Earnings per share has been calculated in accordance with IAS 33 "Earnings per share".

The earnings per share and weighted average number of shares used in the calculation are set out below:

* Used as the denominator in calculating the basic earnings per share, and diluted earnings per share, respectively.

9. Dividends paid or proposed

It was proposed and agreed at the AGM on 29 June 2021 that a dividend of 3p will be payable in 2021 (2020: nil).

10. Investments in subsidiaries

Helios UTG Partner Limited, a subsidiary of the Company, owns 100% of Nomina No 035 LLP, Nomina No 342 LLP, Nomina No 372 LLP, Salviscount LLP, Inversanda LLP, Fyshe Underwriting LLP, Nomina No 505 LLP and Nomina No 321 LLP. The cost of acquisition of these LLPs is accounted for in Helios UTG Partner Limited, their immediate Parent Company.

RBC CEES Trustee Limited is a newly incorporated entity in year 2017 to satisfy the requirements of the Joint Share Ownership Plan.

11. Share capital and share premium

 (i) Number of shares

(ii)  The partly paid ordinary shares are not entitled to dividend distribution rights during the year.

12. Related party transactions

A number of subsidiary companies have entered into quota share reinsurance contracts for the 2019, 2020 and 2021 years of account with protected cell companies of Hampden Insurance PCC (Guernsey) Limited. The quota share percentages for the above years was 70% on the 2019 and 2020 years of account, and an average of 46% on the 2021 year of account.

Nigel Hanbury, a Director of Helios Underwriting plc and its subsidiary companies, is also a director and majority shareholder in Hampden Insurance Guernsey PCC Limited. Hampden Capital plc, a substantial shareholder in Helios Underwriting plc, is also a substantial shareholder in Hampden Insurance Guernsey PCC Limited - Cell 6.  Under quota share agreements between Cell 6 and certain Helios subsidiaries, the Group accrued a net reinsurance premium recovery of £4,232,000 (2020: £4,741,000) during the period.

In addition, HIPCC provide stop loss, portfolio stop loss and HASP reinforce policies for the company.

HIPCC Limited acts as an intermediary for the reinsurance products purchased by Helios. An arrangement has been put in place so that 51% of the profits generated by HIPCC (being Nigel Hanbury's share) in respect of the business relating to Helios will be repaid to Helios for the business transacted for the 2021 and subsequent underwriting years.

13. Ultimate controlling party

The Directors consider that the Group has no ultimate controlling party.

14. Syndicate participations

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

15. Group-owned net assets

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

16. Event after the financial reporting period

On 16th August 2021, the company issued and allotted 600,000 new ordinary shares of £0.10 each in the Company ("Ordinary Shares").  The new Ordinary Shares have been issued at a subscription price of 155.0p per Ordinary Share, being the closing price of an Ordinary Share on 13th August 2021, pursuant to The Helios Underwriting plc Employees' Joint Share Ownership Plan (the "Plan").

The new Ordinary Shares have been issued into the respective joint beneficial ownership of (i) each of the participating executive Directors listed below and (ii) the trustee of the Trust upon and subject to the terms of joint ownership agreements ("JOAs") respectively entered into between the Director, the Company and the Trustee.  The nominal value of the new Ordinary Shares has been paid by the Trust out of funds advanced to it by the Company (with the participating executives contributing to those funds) with the additional consideration of 145p per Ordinary Share left outstanding until such time as new Ordinary Shares are sold. The Company has waived its lien on the Shares such that there are no restrictions on their transfer.

The terms of the JOAs provide, inter alia, that if jointly owned shares become vested and are sold, the proceeds of sale will be divided between the joint owners so that the participating Director receives an amount equal to the amount initially provided by the participating Director plus any growth in the market value of the jointly owned Ordinary Shares above a target share price of 174.8p (so that the participating Director will only ever receive value if the share sale price exceeds this).

The vesting of the award will be subject to performance conditions relating to growth in Net Tangible Asset Value per share measured over the three calendar years from the Net Tangible Asset per share disclosed as at 31 December 2021 of 151p.

Note:

The Plan was established and approved by resolution of the Remuneration Committee of the Company on 13 December 2017 and provides for the acquisition by employees, including executive directors, of beneficial interests as joint owners (with the Trust) of Ordinary Shares in the Company upon the terms of a JOA. The terms of the JOA provide that if the jointly owned shares become vested and are sold, the proceeds of sale will be divided between the joint owners on the terms set out above.

The beneficial interests of the executives as follows:

Acquisitions of LLV's since the period end

Since the Financial reporting period, the company has acquired the following entities either directly, or indirectly:

The Interim Report will be made available in electronic format on the Company's website, www.huwplc.com