26 July 2013
Hampden Underwriting PLC
("Hampden Underwriting" or the "Company")
Reinsurance releases capital for reinvestment in new opportunities
Hampden Underwriting, which provides investors with a limited liability direct investment into the Lloyd's insurance market, is pleased to announce the significant release of capital achieved by way of an annually renewable reinsurance arrangement.
Overview of the transaction
§ Collateralised quota share reinsurance agreement commencing with 2013 year of account
§ 50% of the Company's 2013 insurance exposure ceded to reinsurer
§ Release of £4.1m (approximately 50%) of the Company's £8.2m of Funds at Lloyd's) for reinvestment in new opportunities
§ Ratcheted, performance-based profit commission payable to the Company of between 10% and 20% of the profits arising on business ceded in each period
§ Minimum term of one year renewable annually thereafter
Commenting upon this transaction Sir Michael Oliver, the Company's Chairman, said:
"This transaction presents Hampden Underwriting with a welcome source of capital with which to fund near-term opportunities the Company wishes to pursue and does so on attractive commercial terms. The Board regularly considers the relative merits of alternative sources of capital and is confident that this is an appropriate funding option at this time."
Commenting upon this transaction Nigel Hanbury, the Company's Chief Executive, said:
"Current market conditions continue to present the Company with attractive investment opportunities which require funding. We are delighted to have been able to successfully conclude this transaction which provides the Company with a modest war chest with which we can continue to progress acquisition opportunities. The reinsurance terms provide a profit commission in good underwriting years and a reduced risk exposure in disappointing underwriting years in a spectrum that is both equitable and commercially attractive. Its annually renewable feature provides Hampden Underwriting with certainty for 2013 as well as the appropriate opportunity to review the arrangement from time to time."
For further information please contact:
Hampden Underwriting |
Nigel Hanbury |
[email protected] |
Smith & Williamson Corporate Finance |
David Jones |
020 7131 4000 |
Additional information on the reinsurance arrangements
The Company has entered a reinsurance agreement with Hampden Insurance PCC (Guernsey) Limited - Cell 6 ("Cell 6"), a newly-formed special purpose vehicle. On a back-to-back basis, Cell 6 has reinsured the reinsurance risk with Bermudan reinsurer, XL Re Ltd ("XL"), part of global NYSE-quoted insurer XL Group plc.
The key terms of the arrangements are as follows:
- XL will take on via Cell 6 the risks and rewards of 50% of the Company's existing 2013 underwriting activities (although the activities themselves and the underwriting capacity will remain the Company's);
- XL will provide a letter of credit to Lloyd's in an amount of £4.1m (approximately 50% of the Company's existing funds at Lloyd's ("FAL"), enabling an equivalent amount to be released from FAL to the Company;
- XL will pay a profit commission of between 10% and 20% of profits from the business ceded to the Company (via Cell 6) depending on the results of the relevant insurance years of account;
- XL will pay a fee to Cell 6 of 1.5% per year of account of the value of the letter of credit provided to Lloyd's and Cell 6 will pay this on to the Company, less the Company's share of Cell 6's management fees, costs and expenses which is estimated to be approximately £12,500 per annum; and
- the reinsurance arrangements apply to the Company's 2013 year of account and are renewable annually thereafter.
Cell 6 is ultimately 51% owned by Nigel Hanbury (a director and 14.8% shareholder in the Company) and 49% by Hampden Capital plc (a 11.9% shareholder in the Company). Nigel Hanbury and a number of Lloyd's underwriting entities ultimately owned by him and his family have entered reinsurance agreements with Cell 6 on a pari passu basis. The terms of the transaction have been approved by the independent members of the Company's board of directors.
About Hampden Underwriting plc
Hampden Underwriting plc has been incorporated primarily to provide a limited liability direct investment into the Lloyd's insurance market. Hampden Underwriting plc is quoted on the London Stock Exchange's AIM market (ticker: HUW). For further information please visit www.hampdenplc.com.
