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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| R&q Insurance Holdings Ltd | LSE:RQIH | London | Ordinary Share | BMG7371X1065 | ORD 2P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.025 | 0.83% | 3.025 | 2.80 | 3.25 | 2.98 | 2.98 | 2.98 | 1,603,547 | 16:35:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Title Insurance | 82.8M | -297M | -0.7929 | -0.04 | 11.16M |
From Apr 2019 to Apr 2024
TIDMRQIH
RNS Number : 6936P
Randall & Quilter Inv Hldgs Ltd
04 September 2017
Randall & Quilter Investment Holdings Ltd.
("R&Q" or the "Group")
Interim results for the 6 months ended 30 June 2017
The Board of Randall & Quilter (AIM:RQIH), the specialist non-life legacy insurance investor and capacity provider of US and European MGA business, announces the Group's interim results for the 6 months ended 30 June 2017.
Highlights:
-- H1 result significantly ahead of equivalent period in 2016. Pre-tax profit of GBP5.4m (H1 2016: GBP1.2m) and a tax credit of GBP0.5m, generating an EPS of 7.9p (H1 2016: 1.5p)
-- Record contribution from legacy transactions completed in the first half year of GBP19.1m (2016: GBP2.7m), of which GBP12.7m arose from premiums in excess of undiscounted reserves assumed and GBP6.4m (2016: GBP2.7m) from goodwill on bargain purchase
-- Excellent progress in deploying funds raised in the placing announced with the full year 2016 results. Additional capital has been injected into R&Q Insurance Malta and Accredited. Funds raised to pursue legacy transactions have already supported deals with others being finalised
-- Positive movements in the Group's existing run-off portfolios with net reserve releases of GBP5.0m (H1 2016: GBP6.2m), aided by commutation activity in the US and favourable development in certain captive accounts
-- An investment return of 1.4% on the Group's 'free' assets (H1 2016: 2.1%), due to favourable credit markets and rising yields on a predominantly US dollar based portfolio
-- Proposed interim distribution per share increased to 3.5p (2016 3.4p) payable on or around October 11 , 2017
-- Strong performance in the Group's principal carriers, R&Q Re Bermuda, Accredited and R&Q Insurance Malta, driven primarily by legacy loss portfolio transfer activity
-- Continued growth in the underwriting of MGA/programme business, both in the US using Accredited, and more recently, in the UK and EU, using R&Q Insurance Malta. Two new accounts have been launched from each carrier respectively during the period. Underwriting risk is primarily ceded to highly rated reinsurers.
-- Improving results from the s.1991 live syndicate participations as the account gains scale and benefits from favourable recent claims experience. Preliminary estimates of the impact on the Group's participation of the flooding and wind storm related losses from Hurricane Harvey appear to be modest net of reinsurance and annual CAT loss provisions. The syndicate purchases significant reinsurance protection which means that any potential deterioration of this estimate is not expected to have a material impact on the Group
-- Solid results from core UK insurance services offset by weaker results in the US due to continued investment in developing the US healthcare and legacy operations
-- Good progress with the disposal programme, aimed at simplifying the business through focusing on the Group's core activities of legacy and underwriting niche programme business on behalf of high quality reinsurers:
- Lloyd's managing agency sold to Coverys for $22.6m, a gain of GBP12.6m over carrying value, subject to regulatory approval; and
- Norwegian insurance manager, Triton sold during the period
-- Book value per share excluding goodwill broadly flat at 106.5p (Dec 2016: 107.4p), after a substantial final distribution of 5.1p. This was a result of profitable trading, offset by unfavourable currency movements following strengthening of the pound against the US dollar during the period
Group summary financial performance
GBP000s H1 17 H1 16 FY 2016 ------------------------------ -------- -------- -------- Group results ------------------------------ -------- -------- -------- Operating profit (Group KPI) 7,465 2,110 10,385 ------------------------------ -------- -------- -------- Profit before tax 5,435 1,229 8,478 ------------------------------ -------- -------- -------- Profit after tax 5,944 928 8,315 ------------------------------ -------- -------- -------- Earnings per share (basic) (Group KPI) 7.9p 1.5p 11.7p ------------------------------ -------- -------- -------- Balance sheet information ------------------------------ -------- -------- -------- Total gross assets 833,606 590,701 786,212 ------------------------------ -------- -------- -------- Total net insurance contract provisions 381,665 218,968 350,994 ------------------------------ -------- -------- -------- Shareholders' equity 108,817 87,170 94,368 ------------------------------ -------- -------- -------- Key statistics ------------------------------ -------- -------- -------- Investment return on free assets 1.4% 2.1% 2.7% ------------------------------ -------- -------- -------- Return on tangible equity (annualised) 15.4% 3.6% 13.5% ------------------------------ -------- -------- -------- Net tangible assets per share 88.6p 81.8p 85.1p ------------------------------ -------- -------- -------- Book value per share ex goodwill (Group KPI) 106.5p 98.1p 107.4p ------------------------------ -------- -------- -------- Distribution per share (Group KPI) 3.5p 3.4p 8.6p ------------------------------ -------- -------- --------
Ken Randall Chairman and Chief Executive Officer commented: "I am pleased to report that the Group delivered a very strong performance during the first half of the year. It is the Board's view, especially given the advanced state of a number of other legacy transactions and the growing pipeline that the results for the full year will be at least in line with expectations, absent unforeseen circumstances.
The outlook for the Group beyond the current year remains very promising. In the period, we have continued to simplify the business and announced the disposals of our Lloyd's Managing Agency business, subject to regulatory approval, as well as our insurance manager, Triton in Norway.
We have established and developed high quality and fully licensed platforms in multiple regulatory jurisdictions while retaining our entrepreneurial and innovative culture. We have widened our distribution network of brokers with the recent fundraising increasing the attractiveness of R&Q Insurance Malta and Accredited.
Our planned focus on legacy acquisitions and the use of Accredited and R&Q Insurance Malta as conduits for niche programme business to highly rated reinsurers looks increasingly well placed. There are good growth opportunities in both of these core operations and the Group's strong and growing market position is being driven by our central tenets of expertise and innovation."
Chairman's Statement
The Group delivered a strong financial performance during the first half of 2017 generating a pre-tax profit of GBP5.4m, a post-tax profit of GBP5.9m and EPS of 7.9p. This compares to GBP1.2m, GBP0.9m and 1.5p respectively in the prior year period. Distributions per share have been increased to 3.5p (H1 16: 3.4p) with a record date of September 29 and a payment date of October 11, subject to customary approvals. NTA increased by 3.5p per share despite the final 2016 distribution of 5.2p per share in the period.
As previously stated, the simplification of the Group's business model remains a priority for the Board. We have continued to rebalance our capital commitments to allow additional deployment in legacy transactions and to support our expansion in underwriting programme business, primarily on behalf of highly rated reinsurers. Agreements to dispose of certain non-core operations have already been announced and others are being actively worked on, with further progress expected before year end.
The Group's strong financial results in the period were primarily due to the excellent performance of our Insurance Investments Division and Accredited. Legacy acquisition activity was the key driver and our existing books continued to run-off favourably too. The growing scale of Syndicate 1991 together with some favourable claims movements resulted in an improved result from our 'live' syndicate participations. The service businesses were impacted by the operating losses from the developing US operations and certain one-off items in the captive management segment.
We continue to have attractive deal flow and we are well placed to take advantage of the considerable opportunities ahead. The increased opportunities we are identifying are being driven by a range of 'market' factors including the diversification of sources of underwriting capital, corporate M&A activity, solvency and rating agency capital pressures, Brexit and changes to tax laws. Rising investment yields, as seen in the US, are also supportive of our business model given our substantial and growing investment portfolio.
Strategy and business model
The overall mission and purpose of the Bermuda based Group is to offer investors profits and capital extractions from legacy non-life insurance acquisitions/reinsurances and grow commission income from its licensed carriers in the US and EU/UK writing niche and profitable programme business, largely on behalf of highly rated reinsurers.
Our main strategic objectives are to:
-- acquire or reinsure run-off insurance companies/portfolios to produce attractive cash returns; and
-- generate repeatable and growing commission income from Accredited and R&Q Insurance Malta, developing as attractive conduits for niche books of MGA business to highly rated reinsurers
The Group has developed a strong reputation and relationships in the global insurance market and benefits from a skilled and entrepreneurial workforce. We use these attributes to source and manage attractive run-off opportunities and to underwrite programme business primarily on behalf of highly rated reinsurers.
Our aim is to continue to develop growing and sustainable profit streams to support our business model and increase book value and cash distributions to shareholders.
Divisional overview
Insurance Investments
GBP000s H1 2017 H1 2016 ---------------------------------- -------- -------- Live income 15,082 12,483 ---------------------------------- -------- -------- Run-off Income 24,291 9,036 ---------------------------------- -------- -------- Total income 39,373 21,519 ---------------------------------- -------- -------- Result of operating activities (live and run-off) 14,576 8,890 ---------------------------------- -------- -------- Key metrics ---------------------------------- -------- -------- Net claims releases/(increases) ---------------------------------- -------- -------- * Insurance Companies 5,008 7,332 ---------------------------------- -------- -------- * Run-off Syndicates (372) (1,158) ---------------------------------- -------- -------- Goodwill on bargain purchase 6,422 2,688 ---------------------------------- -------- -------- Live Syndicates' contribution to operating profit (476) (737) ---------------------------------- -------- -------- (Decrease)/increase in fair value of insolvent insurance debt portfolio (192) 264 ---------------------------------- -------- -------- Investment return on free assets 1.4% 2.1% ---------------------------------- -------- --------
Investment return 1.4% is calculated as net investment income over average total investments excluding the syndicates, captive trusts and any reinsurance funds withheld.
Investment return is stated after fees of GBP444k and GBP200k in H1 2017 and H1 2016 respectively.
The Insurance Investments Division performed well during the first six months of trading in 2017 with an operating profit of GBP14.6m (H1 2016: GBP8.9m). There were reserve releases from a number of the owned insurance companies, especially the captive programmes assumed in the US, Bermuda and Guernsey. These were achieved through a combination of favourable settlements and interim reserve reassessments. Additional profit arose from continued commutation activity. No owned run-off book experienced net deterioration in the period. Syndicate 3330 continued to run-off favourably.
Eleven legacy transactions were completed in the first half year against just three in the same period in 2016. These included five acquisitions with goodwill on bargain purchase of GBP6.4m (H1 2016: GBP2.7m), five retrospective reinsurances (loss portfolio transfers or 'LPTs') and a UK Part VII transfer. The deals completed were diverse by geography too with acquisitions in the UK, US, Bermuda and Cayman Islands and LPTs in the US and UK. Liabilities assumed ranged from US workers' compensation, trucking liability and custom bonds to UK employers and general liability business. Of particular note is that the Group assumed over GBP72m of net insurance liabilities in the period, a clear demonstration of the larger deals we are now sourcing and completing.
R&Q Insurance Malta grew its balance sheet during the period through profitable trading and Tiers 1 and 2 capital infusions. The company continues to benefit from offering flexible and well-priced exit solutions to a growing number of interested parties in the UK and the rest of Europe looking to divest run-off books due to the increased capital charges and operational costs which they have to incur following the implementation of Solvency II.
R&Q Insurance Malta's comprehensive set of non-life EU insurance licenses, together with its underwriting, actuarial and MGA expertise is also being leveraged to underwrite quality MGA programmes in the UK and EU, primarily on behalf of well rated reinsurers. A UK motor and an Irish motor account have already been signed up and underwriting has commenced. These accounts alone are anticipated to generate up to GBP40m of annual premium with commission income accruing to R&Q Insurance Malta, as premium becomes earned. The number of further opportunities being presented to us, ranging from motor to surety and household accounts in the UK and EU is beyond our expectations, partially due to Brexit but primarily due to a lack of equivalent quality capacity in the market. A number of these opportunities are also well progressed and it is expected that there will be further updates as the year progresses. Some of the accounts may require a credit rating, the requirements and benefits of which are being actively assessed by the Group.
Meanwhile, our Bermuda based team continues to develop and expand the Group's infrastructure and exit solutions in the US and is able to offer the Group's fully licensed Admitted and 'A' rated paper for loss portfolio transfers and novations to corporates, self-insurers, Risk Retention Groups and domestic carriers alike. The benefits of this clearly contributed to the results in the first six months of the year with a significant portion of the legacy deal contribution emanating from two US based loss portfolio transfers. Meanwhile, the Group's captive buy-out offering continues to expand with new structures now being offered to the market.
We have also recently established a new insurance company in Rhode Island where new Part VII type legislation has been enacted. We are now working actively to offer a full finality solution to US insurers looking to dispose of books of business, subject to regulatory approvals.
As a result of the Group's recent track record of completing deals on both sides of the Atlantic and a significant marketing campaign, especially in the US, I am pleased to report that a number of additional transactions are expected to complete during the remainder of 2017. These transactions range from assumptions of US business from self-insured funds/groups to loss portfolio transfers and the purchase of onshore and offshore captives from US and UK domiciled sellers.
There has also been renewed interest in disposing of legacy business at Lloyd's with some well publicised potential transactions expected to conclude for the commencement of the 2018 underwriting year. The Group has deep expertise in Lloyd's legacy and is keen to increase its involvement again in this segment of the market, partnering with industry capital and infrastructure as required. The Group is thus well placed to benefit from the impact of the depressed premium rating environment in parts of the 'active' insurance market which is stimulating M&A activity and shareholder pressure to exit unprofitable lines and avoid capital loadings on legacy reserves.
The Division delivered an investment return of 1.4%, which was above our expectations and helped by markets which have remained generally favourable due to tightening credit spreads despite the rising yield environment in the US. Once again, our diversification and pro-active management delivered good returns.
Asset Class Share of Portfolio ----------------------- ------------------- ABS 9.0% ----------------------- ------------------- CLO 3.8% ----------------------- ------------------- Bonds/Treasuries 40.1% ----------------------- ------------------- Equity 3.0% ----------------------- ------------------- Funds 7.1% ----------------------- ------------------- Cash/Cash Equivalents 37.0% ----------------------- ------------------- Total 100% ----------------------- ------------------- Credit Rating Share of Portfolio --------------- ------------------- Cash 37% --------------- ------------------- AAA 17% --------------- ------------------- AA 11% --------------- ------------------- A 10% --------------- ------------------- BBB 12% --------------- ------------------- BB 2% --------------- ------------------- B 1% --------------- ------------------- Unrated 10% --------------- ------------------- Total 100% --------------- -------------------
The Group's asset allocations and credit ratings changed little during the period. The duration of the portfolios also edged upwards, which again has been a beneficial positioning but it remains short overall at between two and three years. The credit funds owned by most of the non-US subsidiaries performed well with their tactical positioning in credit and hedging through a small allocation to longer duration bonds. Our small and reduced equity portfolio also performed well. We continue with low interest rate duration and a structured credit focus. The average yield to worst is c. 2.5% gross of fees. The level of cash and invested funds has increased substantially over the last year primarily through legacy acquisition activity. To date, the third quarter of 2017 has seen continued positive investment performance.
The live syndicate participations showed improved results with significantly increased premium income and some notable improvements in the incurred and ultimate loss ratios in the 2014 and 2015 underwriting years due to favourable movements in a number of larger claims. Given higher premium volumes and improving loss ratios as the track record builds, it is anticipated that the syndicate results will continue to improve, and that the increasing maturity of the syndicate will erode the difference between the GAAP and Ultimate Year of Account results.
As previously announced, the Group believes that a focus on management and fee income rather than the deployment of significant levels of underwriting capital will generate the best returns for shareholders going forward but we anticipate reducing our participation for 2018 but maintain our support for the syndicate.
The joint venture with Phoenix Asset Management Partners Limited continues, with the distressed insurance debt portfolio performing broadly to plan. The results were modestly impacted by a delay in the anticipated receipt of a dividend on one estate and a small adjustment to the expected final pay-out. Additional opportunities continue to be presented but competition has risen with a consequent impact on returns.
Insurance Services
GBP000s H1 2017 H1 2016 ------------------------------ -------- -------- Total revenue 14,565 12,855 ------------------------------ -------- -------- * Of which intercompany 4,444 4,561 ------------------------------ -------- -------- * Of which third party 10,121 8,294 ------------------------------ -------- -------- Operating profit 141 1,189 ------------------------------ -------- -------- Operating profit margin 1.0% 9.2% ------------------------------ -------- --------
Total revenue in the Insurance Services Division was ahead year on year, primarily as a result of higher internal revenue arising from the number of new entities and run-off books added during the past 12 months. There was also an increase in revenue from the UK premium credit control operations and US healthcare.
Operating profit was lower than in the prior year period despite the increase in revenues as a result of foreign exchange related losses on the USD credit write back balances, provisions in the captive management segment relating to the discontinued Gibraltar operation and bad debt on a start-up client which failed to launch. Costs associated with managing a large (third party) US claims pool were exacerbated due to delays arising from extended regulatory processes in generating exit solution revenue.
The operating profit margin in the core run-off service operations was above the targeted 20% but the aggregate figure continued to be impacted by the operating costs of the US healthcare and legacy broking units. US healthcare however began to generate more material revenues during the second quarter and this positive trend is expected to continue during the remainder of the year and beyond.
Run-off services
GBP000s H1 2017 H1 2016 ------------------------- -------- -------- Total income 6,598 5,725 ------------------------- -------- -------- Operating profit 1,626 1,996 ------------------------- -------- -------- Operating profit margin 24.6% 34.8% ------------------------- -------- --------
Run-off services showed a good increase in revenue in line with recent higher legacy acquisition activity. Whilst the profit margin during the period was still above target, it was lower than the prior year, primarily due to foreign exchange related losses on the US dollar denominated credit write back balances in the legacy broking unit.
Live Services
GBP000s H1 2017 H1 2016 ------------------------- -------- -------- Total income 7,967 7,130 ------------------------- -------- -------- * Of which non-US 4,808 4,590 ------------------------- -------- -------- * Of which US 3,159 2,540 ------------------------- -------- -------- Operating (loss)/profit (1,485) (807) ------------------------- -------- -------- * Of which non-US (508) 369 ------------------------- -------- -------- * Of which US (977) (1,176) ------------------------- -------- -------- Operating profit margin (18.6%) (11.3%) ------------------------- -------- --------
The H1 2017 income in live services was higher against the prior year, primarily as a result of further good progress in the premium credit control and binder management unit and the start of revenues from the US healthcare operations. The operating loss from the non-US business resulted from certain costs relating to the discontinuation of the Gibraltar captive business and a provision against revenue previously booked on a start-up client which failed to launch operations. Otherwise the captive management operations performed to plan.
The US business continued to be impacted by costs associated with expanding the healthcare operations and maintenance of the US legacy broking unit. However, the operating loss was reduced against the prior year due to revenues being generated from the healthcare operation during the second quarter and a reduction in related operating costs during the latter part of the period.
Underwriting Management
GBP000s H1 2017 H1 2016 -------------------------------------- -------- -------- Total revenue 75,652 10,412 -------------------------------------- -------- -------- Operating profit/(loss) 1,038 (1,676) -------------------------------------- -------- -------- Operating profit margin 1.2% (16.1)% -------------------------------------- -------- -------- Key metrics -------------------------------------- -------- -------- Management fee revenue 4,823 4,841 -------------------------------------- -------- -------- MGA commission revenue 831 713 -------------------------------------- -------- -------- Profit commissions - 16 -------------------------------------- -------- -------- Accredited -------------------------------------- -------- -------- * Profit/(loss) before tax 2,240 (599) -------------------------------------- -------- -------- * Return on net tangible equity 11.8% (3.9)% -------------------------------------- -------- --------
The Underwriting Management result was much improved during the period due to an excellent result from Accredited. Total revenue increased substantially due to the large premiums received in Accredited related to two significant loss portfolio transfers completed in the period.
Management fee revenue from the syndicate management operations was flat year on year with increases from active Syndicate 1991 offsetting the reduced revenue from the run-off syndicate. New business income was below expectation due to a delay on a pipeline turnkey contract. It should be noted that the syndicate management operations have been shown in the notes of the accounts as a disposal group following the recent announcement that we have reached agreement to sell subject to regulatory approval our Lloyd's managing agency to Coverys for GBP12.6m above carrying value.
MGA commission rose in line with CRS's growth. CRS is our MGA which specialises in underwriting SME commercial insurance on behalf of a panel of Lloyd's and other highly rated insurers. There were no related profit commissions in the six months.
Results in Accredited were strong, primarily owing to its legacy business activity. The use of this fully licensed onshore platform with an A- AM Best credit rating to write traditional loss portfolio transfer business as well as to provide finality solutions to risk retention groups and self-insured groups in the US is gaining traction fast. This is demonstration of the Group's use of its expanded infrastructure to leverage its sourcing of legacy transactions and its deep expertise in evaluating and managing such portfolios. In all cases, Accredited is protected from adverse development through intra-group reinsurance with our newly strengthened reinsurer in Bermuda, R&Q Re (Bermuda). This latter entity remains our core risk taking entity within the Group for new legacy business as well as our Lloyd's syndicate operations.
The period also saw the continued marketing and implementation of Accredited's live underwriting operations, which involves the writing of profitable and growing programmes, predominantly on behalf of highly rated authorised reinsurers. We are pleased to report that two new programmes were launched in the period with a number of additional and larger accounts expected to be signed up before the year end in classes ranging from surety to commercial auto, commercial property and general liability.
The bail business in Accredited continues to hold up well despite challenging political conditions and market pressures. Bad debts from agents are now tracking within expectations.
We are upbeat about the prospects for Accredited, where our focus is on generating fee income from new sources of US domestic business which will be reinsured to Lloyd's and other highly rated reinsurers and on writing legacy business requiring onshore licensed and rated paper. The expansion of new licences continues with further excellent progress being made in reaching our goal to provide Accredited with a full nationwide P&C underwriting reach. This will provide valuable new business flows and, together with the similar developing operations in R&Q Insurance Malta, an increasing commission income stream to the wider Group.
Governance
We set high standards of corporate governance, with a structure designed to establish, implement and maintain the effective controls essential to the Group's long-term success. The role of the Board is to set the Group's strategic objectives, and to oversee and review management performance, ensuring the required resources are available for meeting those objectives. The Board met regularly through the year to debate and conduct these matters.
Our people
During the past year, our staff has continued to make valuable contributions to the success of the Group and I emphasise my gratitude for this. We are identifying and recruiting high-quality individuals to supplement the existing teams charged with developing our two core business areas in the UK/EU and US.
Meanwhile, the recently announced disposals will mean that a large number of the Group's staff, especially related to the Lloyd's managing agency operations, will shortly be departing the Group. We thank them for their contribution to R&Q over the years and are confident that they will have an excellent future with Coverys.
We are also building on the strength and depth of our top management team with a particular focus on succession to help deliver the significant opportunities which lie ahead.
Outlook
The Board anticipates trading in the remainder of 2017 to be strong and believes that the full year results will at least be in line with expectations. This is due to better than forecast operating profits in the first six months and the continued high level of legacy transaction activity, especially in the US and Bermuda.
A number of the recently completed deals and those in the pipeline are structured as reinsurances with the ability for additional profits to be earned from investment income through the course of the book's run-off. Furthermore, the increased size of average reserves being assumed from these transactions provides better risk diversification and the potential to make more meaningful savings and profits, utilising our efficient and expert claims and reinsurance management.
Certain market and regulatory factors as well as the normal corporate cycle are highly supportive not just of our legacy acquisition activity but also our focus on underwriting niche MGA business through the use of R&Q Insurance Malta's and Accredited's licences, expertise and expanding balance sheets.
There is a good level of confidence in our ability to sign up a number of additional MGA accounts in both Accredited and R&Q Insurance Malta before year-end with a meaningful amount of associated annualised premium. This activity should begin to generate material commission income as premiums earn out through 2018 and beyond.
It is expected that book value will increase during the remainder of the year, save for possible unfavourable foreign exchange movements, and that we will continue with our progressive distribution policy.
Simplification of our business model continues to be a top priority. The Group has continued to focus the deployment of its capital, including that raised in the March placing and from a recently renewed and enlarged bank facility, in legacy transactions. This is where opportunities being presented to the Group are increasing as we continually evolve our product, infrastructure and distribution. A pleasing recent development is a resurgence in legacy opportunities at Lloyd's. This is in addition to the strong flow of opportunities in the US from self-insured groups and corporates with insurance liabilities in captives or retained on balance sheet through deductible programmes.
We look forward to 2017 and beyond with confidence, having delivered a strong financial performance during the first half of the year. Following the disposals already completed and those in progress, we believe our focus on our two core operations will grow profits and optimise long-term returns to shareholders.
{signed}
Chairman.
Condensed Consolidated Income Statement for the six months ended 30 June 2017
Hot Features
Premium
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
Continuing operations
Gross premiums written 112,989 21,103 53,377
Reinsurers' share of gross
premiums (9,254) (2,049) (3,597)
------------- ------------- --------------
Premiums written, net
of reinsurance 103,735 19,054 49,780
------------- ------------- --------------
Change in gross provision
for unearned premiums (9,276) (1,733) (6,065)
Change in provision for unearned
premiums, reinsurers' share 6,840 94 2,360
------------- ------------- --------------
Net change in provision
for unearned premiums (2,436) (1,639) (3,705)
------------- ------------- --------------
Earned premiums net of
reinsurance 101,299 17,415 46,075
------------- ------------- --------------
Investment income 6 3,782 5,935 7,976
Other income 11,472 12,534 24,843
------------- ------------- --------------
15,254 18,469 32,819
Total income 3 116,553 35,884 78,894
Gross claims paid (56,778) (26,424) (59,430)
Reinsurers' share of gross
claims paid 23,750 26,032 113,599
------------- ------------- --------------
Claims paid, net of reinsurance (33,028) (392) 54,169
------------- ------------- --------------
Movement in gross technical
provisions (23,242) (232) (2,317)
Movement in reinsurers' share
of technical provisions (17,119) 121 (63,880)
------------- ------------- --------------
Net change in provision
for claims (40,361) (111) (66,197)
------------- ------------- --------------
Net insurance claims incurred (73,389) (503) (12,028)
------------- ------------- --------------
Operating expenses (41,414) (35,625) (71,897)
Result of operating activities
before goodwill on bargain
purchase and impairment
of intangible assets 3 1,750 (244) (5,031)
Goodwill on bargain purchase 6,422 2,688 16,281
Amortisation and impairment
of intangible assets (732) (364) (943)
Result of operating activities 7,440 2,080 10,307
Finance costs (1,788) (877) (1,889)
Share of loss of associate (242) (4) (18)
Profit from continuing
operations before income
taxes 5,410 1,199 8,400
Income tax credit/(charge) 7 510 (301) (145)
------------- ------------- --------------
Profit for the period
from continuing operations 3 5,920 898 8,255
Profit for the period
from discontinued operations 4 25 30 60
============= ============= ==============
Profit for the period 5,945 928 8,315
============= ============= ==============
Attributable to equity
holders of the parent:-
Attributable to ordinary
shareholders 6,026 1,067 8,414
Non-controlling interests (81) (139) (99)
------------- ------------- --------------
5,945 928 8,315
============= ============= ==============
Earnings per ordinary
share from continuing
and discontinued operations:-
Basic 9 7.9p 1.5p 11.7p
Diluted 9 7.9p 1.5p 11.7p
============= ============= ==============
Earnings per ordinary
share from continuing
operations:-
Basic 9 7.9p 1.5p 11.7p
Diluted 9 7.9p 1.5p 11.7p
============= ============= ==============
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2017
Six Six Year ended
months months 31 December
ended ended 2016
30 June 30 June
2017 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Other comprehensive income:-
Items that will not be
reclassified to profit
or loss:
Pension scheme actuarial
losses (116) (2,317) (4,168)
Deferred tax on pension
scheme actuarial losses 20 417 709
------------ ------------ -------------
(96) (1,900) (3,459)
Items that may be subsequently
reclassified to profit or loss:-
Exchange (losses)/gains
on consolidation (4,308) 4,853 8,742
Other comprehensive income (4,404) 2,953 5,283
Profit for the period 5,945 928 8,315
Total comprehensive income
for the period 1,541 3,881 13,598
============ ============ =============
Attributable to:-
Equity holders of the parent 1,643 4,001 13,649
Non-controlling interests (102) (120) (51)
------------ ------------ -------------
Total comprehensive income
for the period 1,541 3,881 13,598
============ ============ =============
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2017
Share Share Share Retained Total Non-controlling Total
capital option premium profit interest
costs
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Six months
ended 30
June 2017
(unaudited)
At beginning
of period 1,441 64 5,563 87,300 94,368 6 94,374
Total comprehensive
income for
the period
Profit/(loss)
for the period - - - 6,026 6,026 (81) 5,945
------------- --------- ---------- ---------- --------- ----------------- ------------
Other comprehensive
income
Exchange
gains on
consolidation - - - (4,287) (4,287) (21) (4,308)
Pension scheme
actuarial
losses - - - (116) (116) - (116)
Deferred
tax on pension
scheme actuarial
losses - - - 20 20 - 20
------------- --------- ---------- ---------- ---------
Total other
comprehensive
income for
the period - - - (4,383) (4,383) (21) (4,404)
------------- --------- ---------- ---------- --------- ----------------- ------------
Total comprehensive
income for
the period - - - 1,643 1,643 (102) 1,541
Transactions
with owners
Issue of
shares 307 - 17,044 - 17,351 - 17,351
Issue of
X shares 4,545 - (4,545) - - - -
Cancellation
of X shares (4,545) - - - (4,545) - (4,545)
At end of
period 1,748 64 18,062 88,943 108,817 (96) 108,721
============= ========= ========== ========== ========= ================= ============
Condensed Consolidated Statement of Changes in
Equity for the six months ended 30 June 2016
Share Share Share Retained Total Non-controlling Total
capital option premium profit interest
costs
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Six months
ended 30
June 2016
(unaudited)
At beginning
of period 1,437 64 11,369 73,651 86,521 57 86,578
Total
comprehensive
income for
the period
Profit/(loss)
for the period - - - 1,067 1,067 (139) 928
-------- ------- -------- --------- -------- ---------------- --------
Other
comprehensive
income
Exchange
gains on
consolidation - - - 4,834 4,834 19 4,853
Pension scheme
actuarial
losses - - - (2,317) (2,317) - (2,317)
Deferred
tax on pension
scheme actuarial
losses - - - 417 417 - 417
-------- ------- -------- --------- --------
Total other
comprehensive
income for
the period - - - 2,934 2,934 19 2,953
-------- ------- -------- --------- -------- ---------------- --------
Total
comprehensive
income for
the period - - - 4,001 4,001 (120) 3,881
Transactions
with owners
Issue of
shares 4 - 247 - 251 - 251
Issue of
V shares 3,603 - (3,603) - - - -
Cancellation
of V shares (3,603) - - - (3,603) - (3,603)
At end of
period 1,441 64 8,013 77,652 87,170 (63) 87,107
======== ======= ======== ========= ======== ================ ========
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Changes in Equity for the year ended 31 December 2016
Share Share Share Retained Total Non-controlling Total
capital option premium profit interest
costs
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Year ended
31 December
2015 (audited)
At beginning
of year 1,437 64 11,369 73,651 86,521 57 86,578
Total
comprehensive
income for
the year
Profit/(loss)
for the year - - - 8,414 8,414 (99) 8,315
---------- ------- -------- ---------- ------------- ---------------- --------
Other
comprehensive
income
Exchange
gains on
consolidation - - - 8,694 8,694 48 8,742
Pension scheme
actuarial
gains - - - (4,168) (4,168) - (4,168)
Deferred
tax on pension
scheme actuarial
gains - -- - 709 709 - 709
---------- ------- -------- ---------- ------------- ---------------- --------
Total other
comprehensive
income for
the year - - - 5,235 5,235 48 5,283
---------- ------- -------- ---------- ------------- ---------------- --------
Total
comprehensive
income for
the year - - - 13,649 13,649 (51) 13,598
Transactions
with owners
Issue of
shares 4 - 247 - 251 - 251
Issue of
V&W shares 6,053 - (6,053) - - - -
Cancellation
of V&W shares (6,053) - - - (6,053) - (6,053)
At end of
year 1,441 64 5,563 87,300 94,368 6 94,374
========== ======= ======== ========== ============= ================ ========
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Financial Position as at 30 June 2017
Company number 47341
30 June 30 June 31 December
Note 2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Assets
Intangible assets 31,406 28,220 32,966
Investment in associates - 9 -
Property, plant and equipment 3,596 1,093 3,396
Investment properties 422 2,339 407
Financial instruments 281,748 188,470 251,322
Reinsurers' share of insurance
liabilities 8 201,054 195,598 202,732
Current tax assets 2,802 5,112 6,344
Deferred tax assets 5,908 5,882 3,014
Insurance and other receivables 146,010 111,267 143,875
Cash and cash equivalents 160,160 52,211 141,656
Assets held for sale 4 500 500 500
------------ ------------ ------------
Total assets 833,606 590,701 786,212
============ ============ ============
Liabilities
Insurance contract provisions 8 582,719 414,566 553,726
Financial liabilities 70,167 37,936 67,285
Deferred tax liabilities 1,764 2,517 2,893
Insurance and other payables 10 54,324 33,564 50,410
Current tax liabilities 5,779 7,171 7,656
Pension scheme obligations 10,132 7,840 9,868
Total liabilities 724,885 503,594 691,838
------------ ------------ ------------
Equity
Share capital 1,748 1,441 1,441
Other reserves 18,126 8,077 5,627
Retained earnings 88,943 77,652 87,300
------------ ------------ ------------
Attributable to equity
holders of the parent 108,817 87,170 94,368
Non-controlling interests
in subsidiary undertakings (96) (63) 6
------------ ------------ ------------
Total equity 108,721 87,107 94,374
------------ ------------ ------------
Total liabilities and
equity 833,606 590,701 786,212
============ ============ ============
The Condensed Consolidated Financial Statements were approved by the Board of Directors on 1 September 2017 and were signed on its behalf by:
K E Randall T A Booth
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
Condensed Consolidated Cash
Flow Statement for the six Six Six Year
months ended 30 June 2017 months months ended
ended ended 31 December
30 June 30 June 2016
2017 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
Cash flows from operating
activities
Profit before income taxes 5,435 1,229 8,478
Finance costs 1,788 877 1,889
Depreciation 183 325 617
Share based payments 60 251 251
Share of losses of associates 242 4 18
Loss/(profit) on disposal
of subsidiary 2 (625) (625)
Goodwill on bargain purchase (6,422) (2,688) (16,281)
Amortisation of intangible
assets 732 364 943
Fair value gain on financial
assets (1,958) (4,015) (3,848)
Loss on revaluation of investment
property - 25 65
Loss on net assets of pension
schemes 168 543 1,012
Decrease in receivables 2,597 10,107 6,315
Increase in deposits with
ceding undertakings (1,325) (267) (469)
Decrease/(increase) in payables 1,804 (2,358) 11,999
Increase in net insurance
technical provisions 42,797 1,750 69,902
------------ ------------ ---------------
46,103 5,522 80,266
Sale of financial assets 5,319 9,721 19,177
Purchase of financial assets (55,179) (28,516) (85,312)
------------ ------------ ---------------
Cash (used in)/generated
from operations (3,757) (13,273) 14,131
Income taxes paid - - (234)
Income taxes repaid - - 225
------------ ------------ ---------------
Net cash from/(used in)
operating activities (3,757) (13,273) 14,122
------------ ------------ --------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (419) (449) (3,085)
Proceeds from sale of property,
plant and equipment - - 61
Purchase of investment properties - (1,487) -
Proceeds from sale of investment
properties - - 359
Purchase of intangible assets (188) (49) (288)
Acquisition of subsidiary
undertaking (offset by cash
acquired) 10,355 2,889 39,341
Proceeds from sale of subsidiary
undertaking (offset by cash
disposed of) 988 625 625
Net cash from investing
activities 10,736 1,529 37,013
------------ ------------ ---------------
Net cash to financing activities
Repayment of borrowings (10,808) (4,126) (5,999)
New borrowing arrangements 15,100 747 30,677
Interest and other finance
costs paid (1,788) (877) (1,889)
Cancellation of shares (4,545) (3,603) (6,053)
Issue of shares 17,291 - -
Net cash from/(used in)
financing activities 15,250 (7,859) 16,736
------------ ------------ ---------------
Net increase/(decrease)
in cash and cash equivalents 22,229 (19,603) 67,871
Cash and cash equivalents
at beginning of period 141,656 69,325 69,325
Foreign exchange movement
on cash and cash equivalents (3,725) 2,489 4,460
Cash and cash equivalents
at end of period 160,160 52,211 141,656
============ ============ ===============
Share of Syndicates' cash
restricted funds 8,586 4,915 7,119
Other funds 151,574 47,296 134,537
------------ ------------ ---------------
Cash and cash equivalents
at end of period 160,160 52,211 141,656
============ ============ ===============
The accompanying notes form an integral part of these Condensed Consolidated Financial Statements.
1. Basis of preparation
The Condensed Consolidated Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
The Condensed Consolidated Financial Statements for the 2017 and 2016 half years are unaudited, but have been subject to review by the Group's auditors.
2. Significant accounting policies
The accounting policies adopted in the preparation of the Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Group's Consolidated Financial Statements for the year ended 31 December 2016 other than as detailed below. There have been no amendments to accounting policies.
New standards effective from 1 January 2017:-
-- IAS 7 Amendment: Disclosure initiative. (EU effective date: 1 January 2017); and
-- IAS 12 Amendment: Recognition of deferred tax assets for unrealised losses. (EU effective date: 1 January 2017); and
-- IFRS 2014-2016 annual improvement cycle, IFRS 12 Disclosure of Interests in Other Entities. (EU effective date: 1 January 2017)
These amendments will not result in any material impact on the interim financial statements of the group and there have been no amendments to the Group's accounting policies as a result of the new standards listed above.
3. Segmental information
The Group's segments represent the level at which financial information is reported to the Board, being the chief operating decision maker as defined in IFRS 8. The reportable segments have been identified as follows:-
-- Insurance Investments, which acquires legacy portfolios and insurance debt and provides capital support to the Group's managed Lloyd's Syndicates
-- Insurance Services, which provides insurance related services (including captive management) to both internal and external clients in the insurance market
-- Underwriting Management, which provides underwriting of MGA/programme business, management to Lloyd's syndicates and operates other underwriting entities including bail bond business
-- Other corporate activities, which primarily includes the holding company and other minor subsidiaries which fall outside of the segments above
Segment result for the six months ended 30 June 2017 (unaudited)
Continuing operations
Insurance Investments Insurance Underwriting Other Consolidation
Live Run-off Total Services Management Corporate adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Earned premium,
net of reinsurance 15,033 17,857 32,890 - 68,409 - - 101,299
Net investment
income 49 6,393 6,442 520 597 1,839 (5,616) 3,782
External
income - (330) (330) 9,954 1,725 123 - 11,472
Internal
income - 371 371 4,091 120 3,507 (8,089) -
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Total income 15,082 24,291 39,373 14,565 70,851 5,469 (13,705) 116,553
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Claims paid,
net of reinsurance (4,300) (26,825) (31,125) - (1,903) - - (33,028)
Net change
in provision
for claims (4,300) 23,219 18,919 - (59,280) - - (40,361)
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Net insurance
claims increased (8,600) (3,606) (12,206) - (61,183) - - (73,389)
Operating
expenses (6,958) (11,606) (18,564) (14,254) (8,553) (8,132) 8,089 (41,414)
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Result of
operating
activities
before goodwill
on bargain
purchase (476) 9,079 8,603 311 1,115 (2,663) (5,616) 1,750
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Goodwill
on bargain
purchase - 6,422 6,422 - - - - 6,422
Amortisation
and impairment
of intangible
assets - (449) (449) (170) (102) (11) - (732)
Result of
operating
activities (476) 15,052 14,576 141 1,013 (2,674) (5,616) 7,440
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Finance costs - (2,821) (2,821) (712) (107) (3,764) 5,616 (1,788)
Share of
loss of associate - - - - (242) - - (242)
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(loss)
on ordinary
activities
before income
taxes (476) 12,231 11,755 (571) 664 (6,438) - 5,410
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Income tax
credit/(charge) - (1,085) (1,085) (29) 1,470 154 - 510
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(loss)
for the period (476) 11,146 10,670 (600) 2,134 (6,284) - 5,920
-------- --------- --------- ---------- ------------- ---------- -------------- ---------
Non-controlling
interests - 11 11 70 - - - 81
Attributable
to shareholders
of parent (476) 11,157 10,681 (530) 2,134 (6,284) - 6,001
======== ========= ========= ========== ============= ========== ============== =========
Segment assets 43,315 823,912 867,227 73,029 101,966 260,383 (469,499) 833,106
======== ========= ========= ========== ============= ========== ============== =========
Segment liabilities 48,000 604,172 652,172 68,395 88,048 385,769 (469,499) 724,885
======== ========= ========= ========== ============= ========== ============== =========
Segment result for the six months ended 30 June 2016 (unaudited)
Continuing operations
Insurance Investments Insurance Underwriting Other Consolidation
Live Run-off Total Services Management Corporate adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Earned premium,
net of reinsurance 12,462 1,393 13,855 - 3,560 - - 17,415
Net investment
income 21 7,204 7,225 306 474 1,728 (3,798) 5,935
External
income - 140 140 9,587 1,992 815 - 12,534
Internal
income - 299 299 2,962 54 2,977 (6,292) -
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Total income 12,483 9,036 21,519 12,855 6,080 5,520 (10,090) 35,884
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Claims paid,
net of reinsurance (2,474) 2,091 (383) - (9) - - (392)
Net change
in provision
for claims (4,206) 4,083 (123) - 12 - - (111)
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Net insurance
claims
(increased)/released (6,680) 6,174 (506) - 3 - - (503)
Operating
expenses (6,540) (8,076) (14,616) (11,595) (7,691) (8,015) 6,292 (35,625)
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Result of
operating
activities
before goodwill
on bargain
purchase (737) 7,134 6,397 1,260 (1,608) (2,495) (3,798) (244)
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Goodwill
on bargain
purchase - 2,688 2,688 - - - - 2,688
Amortisation
and impairment
of intangible
assets - (195) (195) (71) (98) - - (364)
Result of
operating
activities (737) 9,627 8,890 1,189 (1,706) (2,495) (3,798) 2,080
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Finance costs - (1,140) (1,140) (443) (118) (2,974) 3,798 (877)
Share of
loss of associate - - - - (4) - - (4)
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(loss)
on ordinary
activities
before income
taxes (737) 8,487 7,750 746 (1,828) (5,469) - 1,199
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Income tax
(charge)/credit - (1,044) (1,044) 206 278 259 - (301)
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(loss)
for the period (737) 7,443 6,706 952 (1,550) (5,210) - 898
-------- -------- --------- ---------- ------------- ---------- -------------- ---------
Non-controlling
interests - (253) (253) 392 - - - 139
Attributable
to shareholders
of parent (737) 7,190 6,453 1,344 (1,550) (5,210) - 1,037
======== ======== ========= ========== ============= ========== ============== =========
Segment assets 27,663 599,473 627,136 92,077 45,749 166,569 (341,330) 590,201
======== ======== ========= ========== ============= ========== ============== =========
Segment liabilities 33,309 464,527 497,836 85,179 27,353 234,556 (341,330) 503,594
======== ======== ========= ========== ============= ========== ============== =========
Segment result for the year ended 31 December 2016 (audited)
Continuing operations
Insurance Investments Insurance Underwriting Other Consolidation
Live Run-off Total Services Management Corporate adjustments Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Earned premium,
net of reinsurance 28,458 10,325 38,783 - 7,292 - - 46,075
Net investment
income 23 10,232 10,255 1,037 694 4,042 (8,052) 7,976
External
income - 456 456 19,977 4,142 268 - 24,843
Internal
income - 1,777 1,777 8,528 335 6,903 (17,543) -
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Total income 28,481 22,790 51,271 29,542 12,463 11,213 (25,595) 78,894
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Claims paid,
net of reinsurance (6,095) 49,484 43,389 - 10,780 - - 54,169
Net change
in provision
for claims (10,739) (44,787) (55,526) - (10,671) - - (66,197)
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Net insurance
claims
(increased)/released (16,834) 4,697 (12,137) - 109 - - (12,028)
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Operating
expenses (13,735) (17,599) (31,334) (27,357) (14,412) (16,337) 17,543 (71,897)
Result of
operating
activities
before goodwill
on bargain
purchase (2,088) 9,888 7,800 2,185 (1,840) (5,124) (8,052) (5,031)
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Goodwill
on bargain
purchase - 16,281 16,281 - - - - 16,281
Amortisation
and impairment
of intangible
assets - (566) (566) (164) (193) (20) - (943)
Result of
operating
activities (2,088) 25,603 23,515 2,021 (2,033) (5,144) (8,052) 10,307
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Finance costs - (2,085) (2,085) (1,294) (284) (6,278) 8,052 (1,889)
Share of
loss of associate - - - - (18) - - (18)
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(Loss)
on ordinary
activities
before income
taxes (2,088) 23,518 21,430 727 (2,335) (11,422) - 8,400
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Income tax
(charge)/credit - (1,904) (1,904) 730 549 480 - (145)
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Profit/(Loss)
for the year (2,088) 21,614 19,526 1,457 (1,786) (10,942) - 8,255
--------- --------- --------- ---------- ------------- ---------- -------------- ---------
Non-controlling
interests - (350) (350) 449 - - - 99
Attributable
to shareholders
of parent (2,088) 21,264 19,176 1,906 (1,786) (10,942) - 8,354
========= ========= ========= ========== ============= ========== ============== =========
Segment assets 37,351 811,784 849,135 96,887 45,520 196,522 (402,352) 785,712
========= ========= ========= ========== ============= ========== ============== =========
Segment liabilities 44,349 623,878 668,227 91,292 36,579 298,092 (402,352) 691,838
========= ========= ========= ========== ============= ========== ============== =========
Internal income includes fees payable by the insurance companies to the Insurance Services Division in the period, which are contractually committed on an arm's length basis. External income contains no clients which generate more than 10% of the total external income.
Geographical analysis
Continuing operations
As at 30 June 2017
North
UK America Europe Total
GBP000 GBP000 GBP000 GBP000
Gross assets 349,796 709,843 242,966 1,302,605
Intercompany eliminations (219,712) (191,647) (58,140) (469,499)
Segment assets 130,084 518,196 184,826 833,106
========== ========== ========= ==========
Gross liabilities 325,180 685,334 183,870 1,194,384
Intercompany eliminations (213,547) (249,730) (6,222) (469,499)
Segment liabilities 111,633 435,604 177,648 724,885
========== ========== ========= ==========
Segmental income 21,052 85,058 10,443 116,553
========== ========== ========= ==========
As at 30 June 2016
North
UK America Europe Total
GBP000 GBP000 GBP000 GBP000
Gross assets 282,919 511,473 137,139 931,531
Intercompany eliminations (197,776) (91,475) (52,079) (341,330)
Segment assets 85,143 419,998 85,060 590,201
========== ========== ========= ==========
Gross liabilities 264,660 498,030 82,234 844,924
Intercompany eliminations (194,380) (144,740) (2,210) (341,330)
Segment liabilities 70,280 353,290 80,024 503,594
========== ========== ========= ==========
Segmental income 20,714 11,789 3,381 35,884
========== ========== ========= ==========
As at 31 December
2016
North
UK America Europe Total
GBP000 GBP000 GBP000 GBP000
Gross assets 312,188 640,129 235,747 1,188,064
Intercompany eliminations (206,717) (134,274) (61,361) (402,352)
Segment assets 105,471 505,855 174,386 785,712
========== ========== ========= ==========
Gross liabilities 293,504 620,388 180,298 1,094,190
Intercompany eliminations (200,497) (191,832) (10,023) (402,352)
Segment liabilities 93,007 428,556 170,275 691,838
========== ========== ========= ==========
Segmental income 43,039 19,451 16,404 78,894
========== ========== ========= ==========
4 Discontinued operations and disposal group
On 23 June 2017 the Group announced that it had reached agreement to sell the entire share capital of its Lloyd's managing agency, R&Q Managing Agency Ltd ('RQMA') to Coverys, a leading provider of medical professional liability insurance based in Boston, Massachusetts. RQMA manages the operations of Syndicates 1991 and 3330. The R&Q Group will continue its participations in Syndicate 1991 and 3330. Subsequent to the sale, the R&Q Group will provide certain support services to Coverys.
The sale remains subject to regulatory change of control approval by Lloyd's and the PRA, anticipated to be received in late 2017 and the sale of the business is expected to be completed before 31 December 2017.
The assets and liabilities related to the sale of RQMA represent a disposal group and are presented as held for sale following shareholder approval of the decision to dispose of this operation. RQMA is presented within these financial statements as a discontinued operation at 30 June 2017 and for previous period comparatives, as it represents a major line of business within the R&Q Group.
Profit for the period from RQMA discontinued operations
Six Six
months months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Other Income 4,801 4,332 8,904
Operating expenses (4,776) (4,302) (8,826)
--------- --------- -------------
Profit from discontinued
operations before tax 25 30 78
Income tax charge - - (18)
Profit for the period from
discontinued operations 25 30 60
========= ========= =============
The cashflows broadly equate to profits over time.
The agreement for the sale of RQMA includes a closing mechanism such that Coverys will acquire the company with net assets of GBP500k.
The carrying value of goodwill held against the Underwriting Management CGU, of which RQMA forms a part, is GBP871k. This will be reviewed for impairment at completion of the disposal of RQMA.
5. Fair Value
The following table shows the fair values of financial assets using a valuation hierarchy; the fair value hierarchy has the following levels:-
Level 1 - Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date.
Level 2 - Valuations based on quoted prices in markets that are not active or based on pricing models for which significant inputs can be corroborated by observable market data.
Level 3 - Valuations based on inputs that are unobservable or for which there is limited activity against which to measure fair value.
Level Level Level Total
June 2017 1 2 3 GBP000
GBP000 GBP000 GBP000
Government and government
agencies - 40,439 - 40,439
Corporate bonds - 189,672 - 189,672
Equities 12,961 - 66 13,027
Cash based investment
funds 30,815 892 - 31,707
Purchased reinsurance
receivables - - 5,126 5,126
-------------- -------- -------- --------
Total financial assets
measured at fair value 43,776 231,003 5,192 279,971
============== ======== ======== ========
Level Level Level Total
June 2016 1 2 3 GBP000
GBP000 GBP000 GBP000
Government and government
agencies 931 2,744 - 3,675
Corporate bonds 116,647 2,540 1,110 120,297
Equities 9,845 - 3,232 13,077
Cash based investment
funds 46,047 - - 46,047
Purchased reinsurance
receivables - - 5,683 5,683
-------------- -------- -------- --------
Total financial assets
measured at fair value 173,470 5,284 10,025 188,779
============== ======== ======== ========
Level Level Level Total
December 2016 1 2 3 GBP000
GBP000 GBP000 GBP000
Government and government
agencies 4,241 24,289 - 28,530
Corporate bonds 382 164,661 - 165,043
Equities 9,313 - 69 9,382
Cash based investment
funds 42,789 - - 42,789
Purchased reinsurance
receivables - - 5,585 5,585
-------- -------- -------- --------
Total financial assets
measured at fair value 56,725 188,950 5,654 251,329
======== ======== ======== ========
The following table shows the movement on Level 3 assets measured at fair value:-
June June December
2017 2016 2016
GBP000 GBP000 GBP000
Opening balance 5,654 9,624 9,624
Total net (losses)/gains recognised
in the Consolidated Income Statement (192) 264 522
Purchases - - 354
Disposals - (1,307) (6,193)
Exchange adjustments (270) 1,444 1,347
Closing balance 5,192 10,025 5,654
======= ======== =============
Level 3 investments (purchased reinsurance receivables) have been valued using detailed models outlining the anticipated timing and amounts of future receipts. The net losses recognised in the Consolidated Income Statement in other income for the period amounted to GBP192k (2016: gains GBP264k). During the period the Group purchased no further reinsurance receivables (2016: GBP Nil). Short term delays in the anticipated receipt of these investments will not have a material impact on their valuation.
Level 3 investments (equities) relate to equity investments included on an acquisition, the valuation is calculated based on the fair value of the underlying assets and liabilities.
Level 3 investments (corporate bonds) relate to mortgages and are held at their principal balance.
There were no transfers between Level 1 and Level 2 investments during the period under review.
6. Investment income
Continuing operations
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
Interest income 1,824 1,920 4,127
Realised (losses)/gains
on investments (362) 73 3,191
Unrealised gains on
investments 2,320 3,942 658
3,782 5,935 7,976
=========== =========== =============
7. Income tax
Continuing operations
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
Tax (credit)/charge (510) 301 145
=========== =========== =============
8. Insurance contract provisions and reinsurance balances
Six Six Year
months months ended
ended ended 31 December
30 30 June 2016
June 2016
2017
Gross GBP000 GBP000 GBP000
Insurance contract provisions
at 1 January 553,726 376,802 376,802
Claims paid (56,778) (26,424) (59,430)
Increase in provisions arising
from acquisition of subsidiary
undertakings and syndicate
participations 15,641 7,853 107,121
Increase in claims provisions 80,020 26,656 61,747
Increase in unearned premium
reserve 9,276 1,733 6,065
Net exchange differences (19,166) 27,946 61,421
--------- --------- -------------
As at period end 582,719 414,566 553,726
========= ========= =============
Six months Six Year
Reinsurance ended months ended
30 June ended 31 December
2017 30 2016
June
2016
GBP000 GBP000 GBP000
Reinsurers' share of insurance
contract provisions at 1
January 202,732 177,211 177,211
Proceeds from commutations
and reinsurers' share of
gross claims paid (23,750) (26,032) (113,599)
Increase in provisions arising
from acquisition of subsidiary
undertakings and syndicate
participations 11,238 - 64,581
Increase in claims provisions 6,631 26,153 49,719
Increase in unearned premium
reserve 6,840 94 2,360
Net exchange differences (2,637) 18,172 22,460
----------- ----------- ---------------
As at period end 201,054 195,598 202,732
=========== =========== ===============
Net Six months Six Year
ended months ended
30 June ended 31 December
2017 30 2016
June
2016
GBP000 GBP000 GBP000
Net claims outstanding at
1 January 350,994 199,591 199,591
Net (claims paid)/commutation
proceeds (33,028) (392) 54,169
Increase in provisions arising
from acquisition of subsidiary
undertakings and syndicate
participations 4,403 7,853 42,540
Increase in claims provisions 73,389 503 12,028
Increase in unearned premium
reserve 2,436 1,639 3,705
Net exchange differences (16,529) 9,774 38,961
----------- ----------- -------------
As at period end 381,665 218,968 350,994
=========== =========== =============
The assumptions used in the estimation of claims provisions relating to insurance contracts are intended to result in provisions which are sufficient to settle the net liabilities from insurance contracts.
Provision is made at the balance sheet date for the estimated ultimate cost of settling all claims incurred in respect of events and developments up to that date, whether reported or not. The source of data used as inputs for the assumptions is primarily internal.
Significant uncertainty exists as to the likely outcome of any particular claim and the ultimate costs of completing the run off of the Group's owned insurance operations.
The Group owns a number of insurance companies in run-off. Significant uncertainty arises in the quantification of technical provisions for all insurance entities under the Group's control due to the long tail nature of the business underwritten by those entities. The business written by the insurance company subsidiaries consists in part of long tail liabilities, including asbestos, pollution, health hazard and other US liability insurance. The claims for this type of business are typically not settled until several years after policies have been written. Furthermore, much of the business written by these companies is reinsurance and retrocession of other insurance companies, which lengthens the settlement period.
The provisions carried by the Group's owned insurance companies are calculated using a variety of actuarial techniques. The provisions are calculated and reviewed by the Group's internal actuarial team; in addition the Group periodically commissions independent external actuarial reviews. The use of external advisers provides management with additional comfort that the Group's internally produced statistics and trends are consistent with observable market information and other published data.
When preparing these Condensed Consolidated Financial Statements, full provision is made in the aggregate for all costs of running off the business of the insurance entities to the extent that the provision exceeds the estimated future investment return expected to be earned by those entities deemed to be in run-off. The quantum of the costs of running off the business and the future investment income has been determined through the preparation of cash flow forecasts over the anticipated period of the run offs. The gross costs of running off the business are estimated to be fully covered by investment income.
Provisions for outstanding claims and IBNR are initially estimated at a gross level and a separate calculation is carried out to estimate the size of reinsurance recoveries. Insurance companies within the Group are covered by a variety of treaty, excess of loss and stop loss reinsurance programmes.
9. Earnings per share
Six Six
months months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
No. No.
000's 000's No. 000's
Weighted average number of
Ordinary shares 76,053 71,864 72,004
Effect of dilutive share
options 94 115 95
--------- --------- -------------
Weighted average number of
Ordinary shares for the purposes
of diluted earnings per share 76,147 71,979 72,099
========= ========= =============
GBP000 GBP000 GBP000
Earnings per share for profit
from continuing operations
Profit for the period attributable
to Ordinary shareholders 5,945 1,067 8,414
========= ========= =============
Basic earnings per share 7.9p 1.5p 11.7p
Diluted earnings per share 7.9p 1.5p 11.7p
GBP000 GBP000 GBP000
Earnings per share for profit
from discontinued operations
Profit for the period attributable
to Ordinary shareholders 25 30 95
========= ========= =============
Basic earnings per share - - -
Diluted earnings per share - - -
Potentially issuable securities that would result in a loss per share if issued are not considered to have a dilution effect.
10. Insurance and other payables
Six Six
months months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Structured liabilities 415,669 399,104 436,927
Structured settlements (415,669) (399,104) (436,927)
---------- ---------- -------------
- - -
Other creditors 54,324 33,564 50,410
54,324 33,564 50,410
========== ========== =============
Structured Settlements
No new structured settlement arrangements have been entered into during the period. The movement in these structured liabilities during the period is primarily due to exchange movements. The Group has paid for annuities from third party life insurance companies for the benefit of certain claimants. In the event that any of these life insurance companies were unable to meet their obligations to these annuitants, it is possible that any remaining liability may fall upon the respective insurance company subsidiaries. The subsidiary company may retain the credit risk in the unlikely event that the life insurance company defaults on its obligations to pay the annuity amounts. The Directors believe that, having regard to the quality of the security of the life insurance companies together with the reinsurance available to the relevant Group insurance companies, the possibility of a material liability arising in this way is very unlikely. The life companies will settle the liability directly with the claimants and no cash will flow through the Group. These annuities have been shown as reducing the insurance companies' liabilities to reflect the substance of the transactions and to ensure that the disclosure of the balances does not detract from the users' ability to understand the Group's future cash flows.
Segregated Cells
R&Q Quest (SAC) Limited ("Quest") is a segregated cell company in which assets and liabilities are held separately in segregated cells. The assets and liabilities of the segregated cells not owned by the Group and the profits and losses of each cell not owned by the Group are not available for use by Quest, nor the Group, and as such these balances are not included in the Condensed Consolidated Statement of Financial Position. The amounts held on behalf of the segregated cells as at 30 June 2017 amounted to GBP33,078k (31 December 2016: GBP27,432k).
RQLM Limited ("RQLM") is a segregated cell company in which assets and liabilities are held separately in segregated cells. The assets and liabilities of the segregated cells and the profits and losses of each are not available for use by the Group and as such only the assets and the liabilities of the Groups share of cells are included in the Consolidated Statement of Financial Position. The amounts held on behalf of the third parties as at 30 June 2017 amount to GBP6,847k (31 December 2016: GBP7,561k).
Insurance broking fiduciary funds
The Group holds insurance broking fiduciary funds, which are used to pay premiums to underwriters and settle claims to policyholders. As these are not available for use by the Group, they are not included in the Condensed Consolidated Statement of Financial Position. The amounts held as at 30 June 2017 amounted to GBP11,202k (31 December 2016: GBP12,988k).
11. Borrowings
The Company has entered into a guarantee agreement and debenture arrangement with its bankers, along with various of its subsidiaries in respect of the Group's overdraft and term loan facilities. The total liability to the bank at 30 June 2017 is GBP35,525k (31 December 2016: GBP31,874k).
12. Issued share capital
Issued share capital as at 30 June 2017 amounted to GBP1,747,925 (31 December 2016: GBP1,441,359).
On 28 March the Group issued 15,278,291 ordinary shares at 117p raising approximately GBP17.9m
13. Contingencies and commitments
Prior to its acquisition by the Group during 2014, a subsidiary undertook projects to advise members of defined benefit pension schemes where the members received incentivised transfer offers from their employer. Following the conclusion of an internal review, work continued on finalising the quantum of loss that clients of the subsidiary may have suffered and the amount of compensation that they might be entitled to, calculated actuarially, by reference to Financial Ombudsman Service guidelines. In 2016, the Financial Conduct Authority requested affected firms to suspend the payment of compensation amounts until further notice pending the outcome of a review of industry redress methodology. This suspension is still in force with the outcome expected to be communicated before the end of 2017. Notwithstanding the suspension, having regard to the review work undertaken, the potential impact of an adverse outcome on the small number of cases remaining to be resolved and the warranties, indemnities and insurance protections in place, the Directors have concluded no additional provision is required.
14. Goodwill
When testing for impairment of goodwill, the recoverable amount of each relevant cash generating unit is determined based on cash flow projections. These cash flow projections are based on the financial forecasts approved by management covering a five year period. Management also consider the current net asset value and earnings of each cash generating unit.
No changes to the underlying assumptions have been made in the interim review.
15. Acquisitions and divestment
The Group made five acquisitions during the first six months of 2017, all of which involve legacy transactions and have been accounted for using the acquisition method of accounting.
Legacy entities and businesses
The following table shows the fair value of assets and liabilities included in the Consolidated Financial Statements at the date of acquisition of the legacy businesses:
In all instances, goodwill on bargain purchase was recorded on the transactions. Goodwill on bargain purchase is calculated after the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition. It arises because the long-tail nature of the liabilities causes significant problems for former owners such as tying up capital and a lack of specialist staff. As a specialist service provider and manager, the Group is more efficient at managing such entities and former owners are prepared to sell at a discount on the fair value of the net assets.
In order to disclose the impact on the Group as though the legacy entities had been owned the whole year, assumptions would have to be made about the Group's ability to manage efficiently the run-off of the legacy liabilities prior to the acquisition. As a result, and in accordance with IAS 8, the Directors believe it is not practicable to disclose revenue and profit before tax as if the entities had been owned for the whole year.
Where significant uncertainties arise in the quantification of the liabilities, the Directors have estimated the fair value based on the currently available information and on assumptions which they believe to be reasonable.
The Group acquired the following legacy entities and businesses during 2017:
-- On 16 March 2017, the Group completed the purchase of the entire issued share capital of ICDC Ltd, a company incorporated in Vermont USA. It reinsured workers' compensation, commercial general liability, auto liability and auto physical damage and property risks in respect of a large US engine manufacturer.
-- On 30 March 2017, the Group completed the purchase of the entire issue capital of Linco Limited. The Company is domiciled in Bermuda and provided reinsurance coverage for worker's compensation, general and automotive liability to linen supply companies.
-- On 20 June 2017, the Group contracted to purchase the entire share capital of a US based Captive domiciled in Colorado. Full completion awaits merger approval. This entity provided multi-peril coverage to welding supply distributors from 1977 to 1988. Only product liability claims remain open due to welding supply companies being named in asbestos litigation (where typically only defence costs are incurred).
-- On 30 June 2017, the Group contracted to purchase and the entire share capital of Octagon Insurance Group, a captive domiciled in the Cayman Islands and completed 31 August. Octagon wrote forced placed mortgage insurance for a US based bank from 1999 to 2017. As at the date of acquisition there were no outstanding insurance liabilities.
-- On 30 June 2017, the Group completed the purchase of AstraZeneca Insurance Company Limited, a company incorporated in England and Wales. The Company's technical reserves relate primarily to UK Employers Liability claims in respect of policies written from 1994 to 2004
Divestment
On 30 June 2017 the Group completed the sale of the entire share capital of R&Q Triton AS to Gabler AS.
On 23 June 2017 the Group announced that it had reached agreement to sell the entire share capital of its Lloyd's managing agency, R&Q Managing Agency Ltd ('RQMA') to Coverys, a leading provider of medical professional liability insurance based in Boston, Massachusetts. The sale remains subject to regulatory change of control approval by Lloyd's and the PRA, anticipated to be received in late 2017. The sale of the business is expected to be completed before 31 December 2017.
16. Related party transactions
The following Officers and connected parties received distributions during the period as follows:-
Six months Six months Year ended
ended ended 31 December
30 June 2017 30 June 2016 2016
GBP000 GBP000 GBP000
K E Randall and
family 974 921 1,540
A K Quilter and
family 253 212 364
T A Booth 62 46 96
M G Smith 2 1 2
During the period the Group recharged expenses totalling GBP4,593k to Lloyd's Syndicates 1991 and 3330 which are managed by the Group (2016: GBP4,632k).
17. Foreign exchange rates
The Group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into Sterling, being the Group's presentational currency:
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Average
US dollar 1.27 1.43 1.36
Euro 1.17 1.29 1.23
--------- --------- -------------
Spot
US dollar 1.30 1.34 1.23
Euro 1.14 1.21 1.18
--------- --------- -------------
Independent Review Report to Randall & Quilter Investment Holdings Ltd. for the six months ended 30 June 2017
Introduction
We have been engaged by the Company to review the condensed set of Financial Statements in the interim financial report for the six months ended 30 June 2017 which comprise the condensed consolidated income statement, condensed consolidated statement of financial position, condensed consolidated cash flow statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements.
Directors' Responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union, and the AIM Rules for Companies.
The annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union and the requirements of the AIM Rules for Companies.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies. We do not, in producing this report, accept or assume responsibility for any other purpose to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We also read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Financial Statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the interim financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.
PKF Littlejohn LLP 1 Westferry Circus
Chartered Accountants Canary Wharf
Registered Auditor London
E14 4HD
01 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EZLBBDKFZBBZ
(END) Dow Jones Newswires
September 04, 2017 02:00 ET (06:00 GMT)
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