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Growth in capacity through acquisitions

The strategy of building a portfolio of underwriting capacity at Lloyd’s has continued through the purchase of further corporate members. There remains a steady flow of vehicles for sale as existing owners wish to cease underwriting due to a change of circumstances. This acquisition strategy has increased the portfolio from £13m at the start of the 2013 underwriting year to £36.3m currently. Since 1 January 2015 over £14m of capacity has been acquired. We remain selective on the purchases and have encountered increasing competition from other potential purchasers. There remains a risk to the implementation of our strategy if suitable vehicles are not available at attractive prices.

Quality of portfolio

We continue to focus ruthlessly on the quality syndicates. So participations on weaker syndicates in acquired portfolios are sold to maintain the overall quality. The six largest syndicate participations account for 77% of the portfolio. These syndicates are managed by the leading managing agents at Lloyd’s and represent shares in the better managed businesses at Lloyd’s.

The underwriting results of the Helios portfolio have consistently outperformed the Lloyd’s market average. Helios’ average return on capacity over the last four years is 11% and is on average 3% higher than the average of the Lloyd’s market.

These incremental returns demonstrate the diversity and the breadth of underwriting expertise within the businesses comprising the portfolio of syndicate capacity

Highlights

  • 77% of the portfolio managed by leading managing agents at Lloyd’s
  • Adjusted net tangible asset value is 196p per share (2015 - 201p per share)
  • Total dividend for the year to 31st December 2016 of 5.5p per share (2015 - 5.0p per share)

Adjusted net assetvalue per share (pence)

Chart:Dividends

Dividend for the year (pence per share)

Chart:Dividends
Underwriting Year
2014 2015 2016 2017
Capacity at 1st January – £m 35.5 32.2 33.7 32.6
Acquired during the year – £m 2.1 3.4 3.5 3.7
Capacity at 28th September – £m 37.6 35.6 37.2 36.3
Helios Retained Capacity – £m 22.3 19.1 14.0 11.0
Increase in retained from Quota Share Commutation – £m 3.3
Adjusted Retained Capacity – £m 22.3 19.1 17.3 11.0
Proportion of Capacity Retained 59% 54% 47% 30%

Helios portfolio (@ September 2017)

Top six holdings by Managing Agent

Syndicate Managing agent 2017 Helios portfolio capacity £’000 2017 Helios portfolio % of total Largest class
510 / 557 Tokio Marine Kiln Syndicates Ltd 6,624 18 Composite / Non Marine XL
623 / 6107 Beazley Furlonge Ltd 5,960 16 Composite / Reinsurance
2791 / 6103 Managing Agency Partners Ltd 4,607 13 Composite / Reinsurance
33 / 6104 Hiscox Syndicates Ltd 4,687 13 Composite / Reinsurance
609 Atrium Underwriters Ltd 3,578 10 Composite
6117 Ariel Re / Asta Managing Agency 2,629 7 Reinsurance
Subtotal 28,086 77
Other 8,241 23
Total 2017 Helios portfolio 36,327 100.0

Source: 2017 syndicate capacities sourced from Lloyd’s / Hampden Agencies Ltd.

Inheritance Tax

Helios Underwriting Plc has been advised that its ordinary shares are eligible for Business Relief (formerly known as Business Property Relief) for Inheritance Tax purposes.

The exemption is applicable for shareholdings in unquoted trading companies. For these purposes, AIM listed shares are considered to be unquoted.

This is not intended to be tax advice. Individual investors should seek their own personal tax advice prior to making decisions to trade in Helios Underwriting Plc’s share capital.