TIDMHSX
RNS Number : 9327X
Hiscox Ltd
25 August 2009
?
HISCOX LTD
Interim results for the six months ended 30 June 2009
Another record profit
Hamilton, Bermuda (25 August 2009) - Hiscox Ltd (LSE: HSX), the international
specialist insurer, today announces its interim results for the half year ended
30 June 2009.
+------------------------------------+-----------------+------------------+
| | H1 2009 | H1 2008 |
+------------------------------------+-----------------+------------------+
| Gross premiums written | GBP906.0m | GBP639.4m |
+------------------------------------+-----------------+------------------+
| Net premiums earned | GBP565.2m | GBP486.8m |
+------------------------------------+-----------------+------------------+
| Profit before tax | GBP141.4m | GBP109.2m |
+------------------------------------+-----------------+------------------+
| Profit before tax and FX* | GBP243.7m | GBP114.9m |
+------------------------------------+-----------------+------------------+
| Earnings per share | 33.2p | 21.7p |
+------------------------------------+-----------------+------------------+
| Interim dividend per share | 4.5p | 4.25p |
+------------------------------------+-----------------+------------------+
| Net asset value per share | 259.3p | 222.1p |
+------------------------------------+-----------------+------------------+
| Group combined ratio | 88.3% | 79.7% |
+------------------------------------+-----------------+------------------+
| Group combined ratio before | 79.5% | 81.0% |
| monetary FX | | |
+------------------------------------+-----------------+------------------+
| Return on equity | 27.5% | 21.8% |
+------------------------------------+-----------------+------------------+
Financial highlights
* Record interim pre-tax profit up by 29.5% to GBP141.4m (2008: GBP109.2m)
* Gross written premiums increased 41.7% to GBP906.0m (2008: GBP639.4m)
* Earnings per share up 53.0% to 33.2p (2008: 21.7p)
* Interim dividend increased by 5.9% to 4.5p (2008: 4.25p) in line with the
Group's progressive dividend policy
* Improved combined ratio before monetary FX of 79.5% (2008: 81.0%)
* Strong annualised return on investments of 7.0% (2008: 1.6%)
* Return on equity 27.5% (2008: 21.8%)
*excludes foreign exchange losses arising on monetary items of GBP42.8m (2008 :
GBP9.6m profit) and includes an uplift of GBP59.5m to adjust for the impact of
the non retranslation of non monetary items (2008 : GBP15.3m), as described in
note 19.
Operational highlights
* All three divisions: Hiscox Global Markets, Hiscox International and Hiscox UK
and Europe saw increases in GWP of 41%, 72% and 24%, respectively
* Management strengthened to support profitable growth across all geographies
* Experienced Hiscox USA team set for steady growth
Robert Hiscox, Chairman, Hiscox Ltd, commented:
"This is a great result considering it is after significant accounting losses
from foreign exchange differences during the period. I am writing this in
Bermuda as the island battens down the hatches with the onset of Hurricane Bill,
but our catastrophe account is well able to withstand a normal hurricane season.
Good underwriting and investing has helped to keep our long term strategy firmly
in place, which is to continue to build a first class, balanced, international
insurance business to the benefit of our customers, shareholders and staff."
ENDS
Contacts
+-----------------------------------------------+-------------------------------------+
| Hiscox | |
+-----------------------------------------------+-------------------------------------+
| Charles Dupplin, Company Secretary, Bermuda | +1 441 278 8300 |
+-----------------------------------------------+-------------------------------------+
| Kylie O'Connor, Director of Communications, | +44 (0) 20 7448 6656 |
| London | |
+-----------------------------------------------+-------------------------------------+
| | |
+-----------------------------------------------+-------------------------------------+
| Maitland | +44 (0) 20 7379 5151 |
+-----------------------------------------------+-------------------------------------+
| Suzanne Bartch | |
+-----------------------------------------------+-------------------------------------+
| Richard Farnsworth | |
+-----------------------------------------------+-------------------------------------+
Notes to editors
About Hiscox
Hiscox, headquartered in Bermuda, is a specialist insurance group listed on the
London Stock Exchange (LSE:HSX). There are three main underwriting parts of the
Group - Hiscox London Market, Hiscox UK and Europe and Hiscox International.
Hiscox London Market underwrites mainly internationally traded business in the
London Market - generally large or complex business which needs to be shared
with other insurers or needs the international licences of Lloyd's. Hiscox UK
and Hiscox Europe offer a range of specialist insurance for professionals and
business customers, as well as high net worth individuals. Hiscox International
includes operations in Bermuda, Guernsey and USA. Hiscox Insurance Company
Limited, Hiscox Underwriting Limited and Hiscox Syndicates Ltd are regulated by
the Financial Services Authority.
For further information, visit www.hiscox.com.
Chairman's statement
Another record first half year result reinforces the strength of the Hiscox
business and its resilience to the continuing international financial turmoil.
This was achieved, despite adverse currency fluctuations, by strong underwriting
results from Global Markets, Bermuda and Guernsey and by greatly improved
investment returns.
Insurance rates remain very strong in the obvious catastrophe prone areas.
However, they are weaker in non-catastrophe business as underwriters worldwide
seek diversity, and those who have reduced their catastrophe exposures seek to
replace the income. Competition is normal and disappears only occasionally for a
short while following an abnormal event - but you would think that the financial
crisis and credit crunch was such an event. Hiscox has a good business mix for
these market conditions with around half our account in the high rate areas, and
with our specialist emphasis giving us an edge in our regional businesses.
Results
Record profits before tax for the half year to 30 June 2009 of GBP141.4 million
(2008: GBP109.2 million). Gross written premiums have increased to GBP906.0
million (2008: GBP639.4 million). Net earned premium increased to GBP565.2
million (2008: GBP486.8 million). The combined ratio increased to 88.3% (2008:
79.7%) and decreased before monetary FX to 79.5% (2008: 81.0%). Earnings per
share increased to 33.2p (2008: 21.7p) and net assets per share rose to 259.3p
(2008: 222.1p).
The rise in net asset value since the year end has been achieved despite a
considerable reduction from the strengthening Pound against the US Dollar. We
are in the middle of the hurricane season and the financial markets continue to
be challenging, but this strong start to the year bodes well.
Dividend, balance sheet and capital management
In line with our policy of progressive dividend increases, the Board has
approved an increase in the interim dividend of 5.9% to 4.5p per share (2008:
4.25p per share) which will be paid on 6 October 2009 to shareholders on the
register at the close of business on 4 September 2009.
The Group is in a strong financial position with no significant changes to the
balance sheet since the 2008 year end. Following our successful share buyback
last year, we have not made any further purchases this year as the share price
rightly moved above net asset value. We remain focussed on generating a high
return on our equity and growing the net asset value per share for our
shareholders. In that regard, we did not raise equity earlier in the year as we
have sufficient capital to take advantage of the opportunities we are currently
pursuing.
Overall comment
The general insurance industry has weathered the financial storm well (with some
notable exceptions). Apart from some modest rights issues (and it is usually
better to have money put into existing players than into new ones),
exceptionally little capital has entered the industry so we are not assaulted by
the usual fresh capacity full of optimism but empty of experience. However,
despite what should be a firming market due to shortage of capital, some
existing players are competing for non-catastrophe prone business to an
unnecessary extent. We are in a hard market for any business exposed to
catastrophes and a weaker market in standard non-catastrophe lines. The strength
of our business is its balance which enables us currently to profit from the
high catastrophe rates in a large part of our account, whilst keeping our tinder
dry on the non-catastrophe business and focusing on our specialist areas in
which we have competitive advantages.
Our regional businesses have generally performed well, but Europe has suffered
from some large individual losses which have distorted figures in the short
term. The strategy remains firmly in place to grow those businesses to balance
the internationally traded large and catastrophe-exposed business. We continued
to make a big push into the USA acquiring new staff and opening new offices. The
near break-even result there is extremely encouraging considering the costs of
setting up and is a testament to their underwriting.
In our investment portfolio, David Astor, our chief investment officer, held his
nerve and his faith that our investments would weather the credit crisis has
been rewarded.
Hiscox Global Markets
This division uses the global licences, distribution network and credit rating
available through Lloyd's to serve clients throughout the world. It has
underwriting bases in London, Paris, New York and San Francisco.
+----------------------------------+----------------------------------------------------+
| Profit before tax | GBP77.3 million (2008: GBP80.4 million) |
+----------------------------------+----------------------------------------------------+
| Gross written premiums | GBP485.4 million (2008: GBP344.3 million) |
+----------------------------------+----------------------------------------------------+
| Combined ratio | 88.7% (2008: 75.7%) |
+----------------------------------+----------------------------------------------------+
| Combined ratio before monetary | 70.6% (2008: 76.0%) |
| FX | |
+----------------------------------+----------------------------------------------------+
GWP increased by 41% in Sterling and 11% at static exchange rates. This has been
driven by the strong reinsurance and energy rates, offset by caution on property
and global errors and omissions where we wanted higher prices.
A strong profit, albeit less than last year at the same time due to the effect
of foreign exchange, last year's lower 2008 rates earning through and some
losses on political risk business, mitigated by reserve releases from the
Professional Indemnity and Marine accounts on older underwriting years. The
combined ratio has also been affected by the weakening of the US Dollar since
the year end and the resulting foreign exchange loss. Stripping out foreign
exchange, the combined ratio improved from 76.0% to 70.6%.
As usual, I am writing this in the middle of the wind season, and Mother Nature
likes to be unpredictable. I read that El Nino is back which is bad for local
flooding and droughts, but reduces the likelihood of Atlantic and Gulf of Mexico
hurricanes.
The capacity of Syndicate 33 will be increased to GBP1 billion for 2010 (2009:
GBP750 million). In addition, we manage two smaller syndicates, Cougar Syndicate
6104 (with a capacity of GBP43 million in 2009) supported fully by third-party
capital to underwrite catastrophe business, and Syndicate 3624 (with a capacity
of GBP80 million in 2009) supported entirely by Hiscox capital to take business
from our new US expansion.
Hiscox International
This division covers Bermuda, the USA and Guernsey.
+----------------------------------+----------------------------------------------------+
| Profit before tax | GBP71.5 million (2008: GBP20.3 million) |
+----------------------------------+----------------------------------------------------+
| Gross written premiums | GBP200.6 million (2008: GBP117.0 million) |
+----------------------------------+----------------------------------------------------+
| Combined ratio | 62.6% (2008: 84.6%) |
+----------------------------------+----------------------------------------------------+
| Combined ratio before monetary | 72.3% (2008: 86.1%) |
| FX | |
+----------------------------------+----------------------------------------------------+
Bermuda: Gross written premiums increased 74% including the effect of the
strengthening dollar since June last year, or 32% at static exchange rates. The
underwriters took advantage of hardening rates when in the first half last year
they were cutting back due to weakening rates.
Guernsey: Gross written premiums increased by 61% including currency
fluctuations and 22% without, helped by the new Marine Piracy business. A
partnership between the Kidnap team in Guernsey and the London Marine team
pioneered a marine piracy policy in rapid response to the need in the Gulf of
Aden with great success.
USA: Gross written premiums grew 75% in Sterling or 33% in original currency.
The quality of Ed Donnelly and his team's underwriting has shown up already with
the release of reserves cautiously made in his first years of 2006-7, in
particular from the Miscellaneous Errors and Omissions, Allied Healthcare and
Technology and Media accounts. Work continues apace to obtain licences to
underwrite admitted business through our own insurance company, Hiscox Insurance
Company Inc., in addition to the surplus lines business we can underwrite
through Syndicate 33 and Syndicate 3624.
A substantial proportion of our business has always come from the USA but been
written in London. We are now building a significant on-shore business there
with some excellent new people and some seasoned warriors from London.
Hiscox UK and Europe
This segment covers our regional businesses throughout the UK and mainland
Europe.
+----------------------------------+----------------------------------------------------+
| Profit before tax | GBP4.5 million (2008: GBP16.3 million) |
+----------------------------------+----------------------------------------------------+
| Gross written premiums | GBP220.1 million (2008: GBP178.0 million) |
+----------------------------------+----------------------------------------------------+
| Combined ratio | 105.7% (2008: 86.3%) |
+----------------------------------+----------------------------------------------------+
| Combined ratio before monetary | 102.4% (2008: 90.4%) |
| FX | |
+----------------------------------+----------------------------------------------------+
UK: GWP increased by a strong 20%, and did well to have an improved result on
last year despite the January freeze losses in the household account.
We continue to build the brand, this year with extensive print, poster and
online advertising (but not on TV). This continues to generate good business
with growth of our direct business up around 50% at the half year. Our marketing
campaign also benefits the broker market not only from the fast increasing brand
awareness but also by reinforcing the message that we sell on service and not
price.
The UK is leading the drive in our regional businesses to cut costs as, although
the underwriting ratios are good, reducing the cost of doing business through
operating efficiency and scale can add significantly to the profit.
Europe: GWP increased by 32% year on year including currency fluctuations or 11%
without. Our European offices looked set fair at the last year end for future
profitable growth. During the period they have had a series of large, unrelated
losses which have had a bad short term effect on the figures. Whilst not
significant in terms of the whole Group, they are disappointing to the European
teams, but under the new leadership of Pierre-Olivier Desaulle, I am confident
their disciplined underwriting will have them back on profit track in no time.
Investments
Assets under management at 30 June 2009 totalled GBP2,379 million (2008:
GBP1,931 million) and the yield for the half year was 7% annualised (2008:
1.6%), giving an investment return on financial assets of GBP85.4 million (2008:
GBP16.5 million).
After the extraordinary investment challenges of 2008 and the first quarter of
2009, it is satisfactory to report a healthy return for the first half of the
year. We held on to solid investments which were marked down heavily at the
depths of the credit crisis, and they have recovered sharply.
The safest investments of cash and government securities are now offering very
poor returns, but we have to remain cautious which will reduce investment
yields. In the current environment, we prefer credit risk to interest rate risk
and have taken advantage of attractive spreads to increase our exposure to
investment grade corporate bonds. Duration remains short as the next move in
interest rates is likely to be up. Our equity portfolio is modest and has
outperformed the broader indices comfortably but we are unlikely to add to it
meaningfully while the outlook is still gloomy. Warren Buffett's analogy that
"we may have got past Pearl Harbour but we are still fighting a war" is apt and
we expect further volatility.
People
It is incredibly satisfying to have been able to fill four senior appointments
from within. Richard Watson, previously head of Global Markets in London, has
relocated to the USA to lead our expansion there, and has been replaced by the
senior reinsurance underwriter, Russell Merrett. Charles Dupplin has relocated
from London to be CEO of our Bermuda operation. Pierre-Olivier Desaulle, the
managing director of our French operation has become head of Europe.
We have been recruiting and retaining excellent people for a number of years,
and their willingness to move around the Group, both geographically and between
sectors, is a real strength. The credit crunch has enhanced the attractions of
the insurance industry and we strive to be an employer of choice.
Robert Childs has returned to the UK having set up the Bermuda and USA
operations (we owe him a big thank you) and is concentrating fully on the vital
role of Chief Underwriting Officer. With Bronek Masojada, the CEO, and Stuart
Bridges, the CFO, they make a formidable top team with 50 years experience at
Hiscox. (And if you add my experience, you get 94 years).
Outlook
This time last year we had a weakening in catastrophe business and strong
results from our regional businesses. The tide turned at the end of last year
for the catastrophe business and it has remained high, but it has ebbed
elsewhere this year against logic. I am sure when insurance company CEOs analyse
their underwriting figures they will crack a whip and insist on more discipline,
but at present the cycle is alive and well, albeit split.
One strength of our business is its diversity and its focus. We focus on areas
of business we know well, both volatile and non-volatile, and spread them into
geographical areas where we have done business for decades. The other strength,
the core strength, is the quality of our people. The combination is powerful and
I look forward to the future with confidence.
Robert Hiscox
Chairman
25 August 2009
Condensed consolidated interim income statement
for the six month period ended 30 June 2009
+--------------------------------------------+------------+-------------+-------------+------------+
| | Notes | 6 months | 6 months to | Year to |
| | | to | 30 June | 31 Dec |
| | | 30 June | 2008 | 2008 |
| | | 2009 | | |
+ +------------+-------------+-------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+--------------------------------------------+--------------------------------------------+------------+-------------+-------------+
| Income | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Gross premiums written | 7 | 906,029 | 639,360 | 1,147,364 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Outward reinsurance premiums | | (190,876) | (125,413) | (216,900) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Net premiums written | | 715,153 | 513,947 | 930,464 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Gross premiums earned | | 668,169 | 574,934 | 1,171,511 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Premiums ceded to reinsurers | | (103,004) | (88,111) | (218,491) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Net premiums earned | | 565,165 | 486,823 | 953,020 |
+--------------------------------------------+------------+-------------+-------------+------------+
| | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Investment result - financial assets | 10 | 85,433 | 16,455 | (27,632) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Investment result - derivatives | 10 | 2,476 | 821 | (52,978) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Other revenues | 11 | 8,228 | 8,381 | 19,858 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Revenue | | 661,302 | 512,480 | 892,268 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Expenses | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Claims and claim adjustment expenses, net | | (231,071) | (206,980) | (479,380) |
| of reinsurance | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Expenses for the acquisition of insurance | | (147,619) | (125,792) | (252,868) |
| contracts | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Administration expenses | | (47,566) | (38,750) | (83,198) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Other expenses | 11 | (48,409) | (37,813) | (76,499) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Foreign exchange (losses)/gains | 19 | (42,820) | 9,594 | 109,755 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Total expenses | | (517,485) | (399,741) | (782,190) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Results of operating activities | | 143,817 | 112,739 | 110,078 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Finance costs | 12 | (2,429) | (3,556) | (5,158) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Share of profit of associates after tax | | - | 38 | 260 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Profit before tax | | 141,388 | 109,221 | 105,180 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Tax expense | 13 | (19,309) | (24,869) | (34,372) |
+--------------------------------------------+------------+-------------+-------------+------------+
| Profit for the period (all attributable | | 122,079 | 84,352 | 70,808 |
| to owners of the Company) | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Earnings per share on profit attributable | | | | |
| to owners of the Company | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Basic | 15 | 33.2p | 21.7p | 18.8p |
+--------------------------------------------+------------+-------------+-------------+------------+
| Diluted | 15 | 31.8p | 20.9p | 18.1p |
+--------------------------------------------+------------+-------------+-------------+------------+
The notes to the condensed consolidated interim financial statements are an
integral part of this document.
Condensed consolidated interim statement of comprehensive income
For the six month period ended 30 June 2009, after tax
+---------------------------------------------+------+------------+-------------+------------+
| | | 6 months | 6 months to | Year to |
| | | to | 30 June | 31 Dec |
| | | 30 June | 2008 | 2008 |
| | | 2009 | GBP000 | GBP000 |
| | | GBP000 | | |
+---------------------------------------------+------+------------+-------------+------------+
| Profit for the period | | 122,079 | 84,352 | 70,808 |
+---------------------------------------------+------+------------+-------------+------------+
| Other comprehensive income | | | | |
+---------------------------------------------+------+------------+-------------+------------+
| Currency translation differences (net of | | (78,075) | (1,093) | 151,179 |
| tax of GBPnil (30 June 2008: GBPnil, 31 Dec | | | | |
| 2008: GBPnil) | | | | |
+---------------------------------------------+------+------------+-------------+------------+
| Net investment hedge (net of tax GBPnil (30 | | - | (835) | (597) |
| June 2008: GBP325,000, 31 Dec | | | | |
| 2008 GBP238,000) | | | | |
+---------------------------------------------+------+------------+-------------+------------+
| Total other comprehensive (expense)/income | | (78,075) | (1,928) | 150,582 |
+---------------------------------------------+------+------------+-------------+------------+
| Total comprehensive income recognised (all | | 44,004 | 82,424 | 221,390 |
| attributable to owners of Company) | | | | |
+---------------------------------------------+------+------------+-------------+------------+
Condensed consolidated interim balance sheet
at 30 June 2009
+--------------------------------------------+------------+-------------+-------------+------------+
| | Notes | 30 June | 30 June | 31 Dec |
| | | 2009 | 2008 | 2008 |
+ +------------+-------------+-------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+--------------------------------------------+--------------------------------------------+------------+-------------+-------------+
| | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Assets | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Intangible assets | 20 | 49,775 | 41,547 | 48,557 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Property, plant and equipment | | 19,120 | 21,035 | 19,668 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Investment in associates | | 7,200 | 4,924 | 7,200 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Deferred acquisition costs | | 172,991 | 137,496 | 131,130 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Financial assets carried at fair value | 17 | 1,945,448 | 1,639,526 | 2,081,772 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Reinsurance assets | 14 | 508,012 | 315,510 | 487,720 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Loans and receivables including insurance | | 592,496 | 442,319 | 494,315 |
| receivables | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Current tax | | - | - | 26,289 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Cash and cash equivalents | | 434,099 | 291,554 | 440,622 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Total assets | | 3,729,141 | 2,893,911 | 3,737,273 |
+--------------------------------------------+------------+-------------+-------------+------------+
| | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Equity and liabilities | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Shareholders' equity | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Share capital | | 20,115 | 19,989 | 20,067 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Share premium | | 10,701 | 7,254 | 9,418 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Contributed surplus | | 320,300 | 367,693 | 352,078 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Currency translation reserve | | 29,242 | (45,193) | 107,317 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Retained earnings | | 584,493 | 467,835 | 462,146 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Total equity (all attributable to owners | | 964,851 | 817,578 | 951,026 |
| of the Company) | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| | | | | |
+--------------------------------------------+------------+-------------+-------------+------------+
| Deferred tax | | 20,134 | 34,136 | 68,649 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Insurance liabilities | 14 | 2,289,707 | 1,824,711 | 2,277,416 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Financial liabilities | 17 | 98,000 | 19 | 143,350 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Current tax | | 34,790 | 11,736 | - |
+--------------------------------------------+------------+-------------+-------------+------------+
| Trade and other payables | | 321,659 | 205,731 | 296,832 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Total liabilities | | 2,764,290 | 2,076,333 | 2,786,247 |
+--------------------------------------------+------------+-------------+-------------+------------+
| Total equity and liabilities | | 3,729,141 | 2,893,911 | 3,737,273 |
+--------------------------------------------+------------+-------------+-------------+------------+
The notes to the condensed consolidated interim financial statements are an
integral part of this document.
Condensed consolidated interim statement of changes in equity
for the six month period ended 30 June 2009
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | Share | Share | Contributed | Currency | | Total |
| | capital | premium | surplus | translation | Retained | |
| | | | | reserve | earnings | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Balance at 1 January 2009 | 20,067 | 9,418 | 352,078 | 107,317 | 462,146 | 951,026 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Total recognised comprehensive | - | | - | (78,075) | 122,079 | 44,004 |
| income/(expense) for the period (all | | - | | | | |
| attributable to owners of the Company) | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Employee share options : | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Equity settled share based payments | - | - | - | - | 2,049 | 2,049 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Proceeds from shares issued | 48 | 1,283 | - | - | - | 1,331 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Deferred tax | - | - | - | - | (1,781) | (1,781) |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Dividends paid to owners of the Company | - | - | (31,778) | - | - | (31,778) |
| (note 16) | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Balance at 30 June 2009 | 20,115 | 10,701 | 320,300 | 29,242 | 584,493 | 964,851 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
Condensed consolidated interim statement of changes in equity
for the six month period ended 30 June 2008
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | Share | Share | Contributed | Currency | | Total |
| | capital | premium | surplus | translation | Retained | |
| | | | | reserve | earnings | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Balance at 1 January 2008 | 19,898 | 4,955 | 398,834 | (43,265) | 443,882 | 824,304 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Total recognised comprehensive | - | - | - | (1,928) | 84,352 | 82,424 |
| income/(expense) for the period (all | | | | | | |
| attributable to owners of the Company) | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Employee share options : | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Equity settled share based payments | - | - | - | - | 2,778 | 2,778 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Proceeds from shares issued | 91 | 2,299 | - | - | - | 2,390 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Purchase of own shares held in treasury | - | - | - | - | (60,428) | (60,428) |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Deferred tax | - | - | - | - | (2,749) | (2,749) |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Dividends to paid to owners of the | - | - | (31,141) | - | - | (31,141) |
| Company (note 16) | | | | | | |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
| Balance at 30 June 2008 | 19,989 | 7,254 | 367,693 | (45,193) | 467,835 | 817,578 |
+-----------------------------------------+-------------+------------+-------------+--------------+-------------+------------+
The notes to the condensed consolidated interim financial statements are an
integral part of this document.
Condensed consolidated interim cash flow statement
for the six month period ended 30 June 2009
+--------------------------------------------+------------+------------+------------+------------+
| | Notes | 6 months | 6 months | Year to |
| | | to | to | 31 Dec |
| | | 30 June | 30 June | 2008 |
| | | 2009 | 2008 | |
+ +------------+------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+--------------------------------------------+--------------------------------------------+------------+------------+------------+
| Profit before tax | | 141,388 | 109,221 | 105,180 |
+--------------------------------------------+------------+------------+------------+------------+
| Adjustments for: | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Interest and equity dividend income | | (36,568) | (42,169) | (92,227) |
+--------------------------------------------+------------+------------+------------+------------+
| Interest expense | 12 | 2,429 | 3,556 | 5,158 |
+--------------------------------------------+------------+------------+------------+------------+
| Net fair value (gains)/losses on financial | | (40,821) | 33,428 | 180,085 |
| investments, derivatives and borrowings | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Depreciation | | 2,797 | 2,402 | 5,323 |
+--------------------------------------------+------------+------------+------------+------------+
| Charges in respect of share based payments | | 2,049 | 2,778 | 5,269 |
+--------------------------------------------+------------+------------+------------+------------+
| Other non-cash movements | | (1,842) | (1,229) | (766) |
+--------------------------------------------+------------+------------+------------+------------+
| Effect of exchange rate fluctuations on | | 38,154 | (4,164) | (62,086) |
| cash presented separately | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Changes in operational assets and | | | | |
| liabilities: | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Insurance and reinsurance contracts | | (88,751) | 2,745 | 281,633 |
+--------------------------------------------+------------+------------+------------+------------+
| Financial assets | | 63,266 | 74,873 | (284,069) |
+--------------------------------------------+------------+------------+------------+------------+
| Financial liabilities | | (48,430) | - | - |
+--------------------------------------------+------------+------------+------------+------------+
| Other assets and liabilities | | 753 | (28,551) | (10,474) |
+--------------------------------------------+------------+------------+------------+------------+
| Cash flows from operations | | 34,424 | 152,890 | 133,026 |
+--------------------------------------------+------------+------------+------------+------------+
| Interest received | | 33,956 | 40,441 | 89,608 |
+--------------------------------------------+------------+------------+------------+------------+
| Equity dividends received | | 2,612 | 1,727 | 2,619 |
+--------------------------------------------+------------+------------+------------+------------+
| Interest paid | | (2,240) | (4,023) | (5,327) |
+--------------------------------------------+------------+------------+------------+------------+
| Current tax paid | | (8,526) | (16,208) | (18,982) |
+--------------------------------------------+------------+------------+------------+------------+
| Net cash flows from operating activities | | 60,226 | 174,827 | 200,944 |
+--------------------------------------------+------------+------------+------------+------------+
| Cash outflow from the acquisition of | 20 | - | (1,225) | (3,137) |
| subsidiary | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Cash outflow from the sale of subsidiary | 20 | - | - | (42) |
+--------------------------------------------+------------+------------+------------+------------+
| Cash outflow from acquisition of | | - | (3,384) | (5,438) |
| associates | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Cash flows from the purchase of property, | | (4,644) | (4,009) | (4,521) |
| plant and equipment | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Cash flows from the purchase of intangible | | (2,949) | - | (3,530) |
| assets | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Net cash flows from investing activities | | (7,593) | (8,618) | (16,668) |
+--------------------------------------------+------------+------------+------------+------------+
| Proceeds from the issue of ordinary shares | | 1,331 | 2,390 | 4,632 |
+--------------------------------------------+------------+------------+------------+------------+
| Cash flow from the purchase of own shares | | - | (60,428) | (65,066) |
| including those arising on share buy-back | | | | |
| program | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Dividends paid to owners of the Company | 16 | (31,778) | (31,141) | (46,756) |
+--------------------------------------------+------------+------------+------------+------------+
| Net increase/(repayments) of borrowings | | 9,445 | (92,382) | (1,292) |
| and financial liabilities | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Net cash flows from financing activities | | (21,002) | (181,561) | (108,482) |
+--------------------------------------------+------------+------------+------------+------------+
| Net increase/(decrease) in cash and cash | | 31,631 | (15,352) | 75,794 |
| equivalents | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Cash and cash equivalents at 1 January | | 440,622 | 302,742 | 302,742 |
+--------------------------------------------+------------+------------+------------+------------+
| Net increase/(decrease) in cash and cash | | 31,631 | (15,352) | 75,794 |
| equivalents | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Effect of exchange rate fluctuations on | | (38,154) | 4,164 | 62,086 |
| cash and cash equivalents | | | | |
+--------------------------------------------+------------+------------+------------+------------+
| Cash and cash equivalents at end of period | 21 | 434,099 | 291,554 | 440,622 |
+--------------------------------------------+------------+------------+------------+------------+
The notes to the condensed consolidated interim financial statements are an
integral part of this document.
Notes to the condensed consolidated interim financial statements
1. Reporting entity
Hiscox Ltd (the "Company") is a public limited company registered and domiciled
in Bermuda. The condensed consolidated interim financial statements for the
Company as at, and for the six months ended, 30 June 2009 comprise the Company
and its subsidiaries (together referred to as the "Group") and the Group's
interest in associates. The Chairman's statement accompanying these condensed
consolidated interim financial statements forms the Interim Management Report
for the half year ended 30 June 2009.
The Directors of Hiscox Ltd are listed in the Group's 2008 Report and Accounts.
A list of current Directors is maintained and available for inspection at the
registered office of the company located at 4th Floor, Wessex House, 45 Reid
Street, Hamilton, Bermuda HM 12. There have been no changes in the composition
of the Board of Directors during the period under review.
2. Basis of preparation
These condensed consolidated interim financial statements have been prepared in
accordance with the Listing Rules issued by the Financial Services Authority.
The information presented herein does not include all of the disclosures
typically required for full consolidated financial statements. Consequently
these financial statements should be read in conjunction with the full
consolidated financial statements of the Group as at, and for the year ended, 31
December 2008 which are available from the Company's registered office or at
www.hiscox.com. Except where otherwise indicated, all amounts are presented in
Pounds Sterling, rounded to the nearest thousand.
The Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. For this reason the condensed consolidated interim financial statements
have been prepared on a going concern basis and are prepared on the historical
cost basis except that pension scheme assets included in the measurement of the
employee retirement benefit obligation, and certain financial instruments
including derivative instruments are measured at fair value.
The independent auditors have reported on the Group's full consolidated
financial statements as at, and for the year ended, 31 December 2008. The report
of the independent auditors was not qualified. The amounts presented for the 30
June 2009 and 30 June 2008 period are unaudited.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 25 August 2009.
3. Accounting policies and methods of computation
The accounting policies applied in these condensed consolidated interim
financial statements are consistent with those applied by the Group in its
consolidated financial statements as at, and for the year ended, 31 December
2008. The consolidated financial statements as at, and for the year ended, 31
December 2008 were compliant with International Financial Reporting Standards as
adopted by the European Union and in accordance with the provisions of the
Bermuda Companies Act 1981. The interim report is compliant with IAS 34
Interim Financial Reporting as adopted by the European Union.
There were no new accounting standards required to be adopted by the Group
during the period which were not already adopted as at 31 December 2008. The
accounting policies applied in these condensed consolidated interim financial
statements are consistent with those that the Group expects to apply for the
year ending 31 December 2009.
4. Financial, Insurance and other risk management
The Group's financial, insurance and other risk management objectives and
policies are consistent with that disclosed in note 3 of the full consolidated
financial statements as at, and for the year ended, 31 December 2008. The
principal risks and uncertainties are unchanged and may be summarised as
insurance risk, equity price risk, interest rate risk, liquidity risk, credit
risk, currency risk, capital risk and operational risk.
Since the onset of global concerns regarding sub prime and credit issues during
Autumn 2007, the Group has been mindful of the ongoing dislocation in specific
asset classes and their resultant impact on investment markets and the solvency
of counterparties more generally. The Group continues to monitor all aspects of
its financial risk appetite and the resultant exposure taken with caution, and
has consequently suffered insignificant defaults on investments held during the
period under review. As detailed in note 17, the Group's investment allocation
is broadly comparable to that at 31 December 2008 as outlined in the Group
Report and Accounts. The Group also continues to be mindful of the processes
required for establishing the reliability of fair values obtained for some
classes of financial assets affected by ongoing periods of diminished liquidity.
In order to assist users, the Group has disclosed the measurement attributes
of its investment portfolio in a fair value hierarchy in note 18 in accordance
with the Amendments to IFRS 7, Financial Instruments Disclosures which has not
yet been endorsed by the European Union.
The Group remains susceptible to changes in rates of foreign exchange, in
particular between Pound Sterling and the US Dollar.
Profitable trading and strong treasury management has ensured that the Group's
balance sheet remains well capitalised and its operations are financed to
accommodate foreseen liquidity demands together with a high level of capital
sufficient to meet future catastrophe obligations even if difficult investment
market conditions were to prevail for a period of time.
5. Seasonality and weather
Historically the Group's most material exposure to catastrophe losses on certain
lines of business such as reinsurance inwards and marine and major property risk
have been greater during the second half of the calendar year, broadly in line
with the most active period of the North Atlantic hurricane season. In contrast
a majority of gross premium income written in these lines of business occurs
during the first half of the calendar year. The Group actively participates in
many regions and if any catastrophic events do occur, it is likely that the
Group will share some of the market's losses. Consequently, the potential for
significantly greater volatility in expected returns remains during the second
half of the year. Details of the Group's recent exposures to these classes of
business are disclosed in note 3 of the Group's 2008 Report and Accounts.
6. Related party transactions
Transactions with related parties during the period are consistent in nature and
scope with those disclosed in note 38 of the Group's 2008 Report and Accounts.
7. Operating Segments
The Group's operating segments consist of four segments which recognise the
differences between products and services, customer groupings and geographical
areas. Financial information is used in this format by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. There have been no changes in reportable segments during the
period under review.
The Group's four operating segments are identified as follows:
- Global Markets comprises the results of Syndicate 33, excluding Syndicate
33's fine art, UK regional events coverage, non-US household business and
underwriting result of Hiscox Inc. It includes the results of the larger retail
TMT business written by Hiscox Insurance Company Limited.
- UK and Europe comprises the results of Hiscox Insurance Company Limited, the
results of Syndicate 33's fine art, UK regional events coverage and non-US
household business, together with the income and expenses arising from the
Group's retail agency activities in the UK and in continental Europe. It
excludes the results of the larger retail TMT business written by Hiscox
Insurance Company Limited.
- International comprises the results of Hiscox Insurance Company (Guernsey)
Limited, Hiscox Inc., Hiscox Insurance Company (Bermuda) Limited and the ALTOHA
sub-group.
- Corporate Centre comprises the investment return and administrative costs
associated with the Group management activities. Corporate Centre also
includes the majority of foreign currency items on economic hedges. Corporate
Centre forms a reportable segment due to its investment activities which earn
significant external revenues.
Information regarding the Group's operating segments is presented below. All
amounts reported below represent transactions with external parties only, with
all intra-segment amounts eliminated. Performance is measured based on each
reportable segment's profit before tax.
+-------------------------+--+--+----+--+---+-----------+---------------+-------------+-------------+
| | | | | | 6 Months ended 30 June 2009 |
+-------------------------+--+--+----+--+-----------------------------------------------------------+
| | Global | UK and | International | Corporate | Total |
| | Markets | Europe | GBP000 | Centre | GBP000 |
| | GBP000 | GBP000 | | GBP000 | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Gross premiums written | 485,376 | 220,069 | 200,584 | - | 906,029 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Net premiums written | 353,518 | 204,153 | 157,482 | - | 715,153 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Net premiums earned | 266,701 | 174,237 | 124,227 | - | 565,165 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Investment result - | 46,239 | 11,431 | 25,629 | 2,134 | 85,433 |
| financial assets | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Investment result - | - | 2,213 | - | 263 | 2,476 |
| derivatives | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Other revenues | 5,763 | 1,303 | 1,162 | - | 8,228 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Revenue | 318,703 | 189,184 | 151,018 | 2,397 | 661,302 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Claims and claim | (86,210) | (97,413) | (47,448) | - | (231,071) |
| adjustment expenses, | | | | | |
| net of reinsurance | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Expenses for the | (77,813) | (40,763) | (29,043) | - | (147,619) |
| acquisition of | | | | | |
| insurance contracts | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Administration expenses | (14,516) | (24,685) | (8,365) | - | (47,566) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Other expenses | (14,313) | (15,941) | (6,912) | (11,243) | (48,409) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Foreign exchange | (48,350) | (5,910) | 12,465 | (1,025) | (42,820) |
| (losses)/gains | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total expenses | (241,202) | (184,712) | (79,303) | (12,268) | (517,485) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Results of operating | 77,501 | 4,472 | 71,715 | (9,871) | 143,817 |
| activities | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Finance costs | (234) | (12) | (199) | (1,984) | (2,429) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Share of profit of | - | - | - | - | - |
| associates after tax | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Profit before tax | 77,267 | 4,460 | 71,516 | (11,855) | 141,388 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| 100% ratio analysis | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Claims ratio (%) | 32.0 | 55.9 | 37.8 | - | 39.5 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Expense ratio (%) | 38.6 | 46.5 | 34.5 | - | 40.0 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Combined ratio | 70.6 | 102.4 | 72.3 | - | 79.5 |
| excluding foreign | | | | | |
| exchange impact (%) | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Foreign exchange impact | 18.1 | 3.3 | (9.7) | - | 8.8 |
| (%) | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Combined ratio (%) | 88.7 | 105.7 | 62.6 | - | 88.3 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total assets before | 2,308,525 | 730,477 | 1,248,299 | 844,322 | 5,131,623 |
| intragroup items and | | | | | |
| eliminations | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Intragroup items and | | | | | (1,402,482) |
| eliminations | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total assets | | | | | 3,729,141 |
+-------------------------+--+--+----+--+---+-----------+---------------+-------------+-------------+
+--------------------------+--+--+----+--+----+-----------+---------------+-------------+-------------+
| | | | | | 6 Months ended 30 June 2008 |
+--------------------------+--+--+----+--+------------------------------------------------------------+
| | Global | UK and | International | Corporate | Total |
| | Markets | Europe | GBP000 | Centre | GBP000 |
| | GBP000 | GBP000 | | GBP000 | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Gross premiums written | 344,341 | 178,038 | 116,981 | - | 639,360 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Net premiums written | 249,252 | 163,772 | 100,923 | - | 513,947 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Net premiums earned | 259,491 | 143,189 | 84,143 | - | 486,823 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Investment result - | 13,792 | (3,414) | 6,556 | (479) | 16,455 |
| financial assets | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Investment result - | - | 514 | - | 307 | 821 |
| derivatives | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Other revenues | 6,379 | 1,092 | 906 | 4 | 8,381 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Revenue | 279,662 | 141,381 | 91,605 | (168) | 512,480 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Claims and claim | (107,779) | (57,964) | (41,237) | - | (206,980) |
| adjustment expenses, net | | | | | |
| of reinsurance | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Expenses for the | (69,439) | (36,337) | (20,016) | - | (125,792) |
| acquisition of insurance | | | | | |
| contracts | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Administration expenses | (11,143) | (21,582) | (6,025) | - | (38,750) |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Other expenses | (11,687) | (15,019) | (5,278) | (5,829) | (37,813) |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Foreign exchange | 739 | 5,835 | 1,354 | 1,666 | 9,594 |
| gains/(losses) | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Total expenses | (199,309) | (125,067) | (71,202) | (4,163) | (399,741) |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Results of operating | 80,353 | 16,314 | 20,403 | (4,331) | 112,739 |
| activities | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Finance costs | - | - | (93) | (3,463) | (3,556) |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Share of profit of | - | - | - | 38 | 38 |
| associates after tax | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Profit before tax | 80,353 | 16,314 | 20,310 | (7,756) | 109,221 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| 100% ratio analysis | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Claims ratio (%) | 41.5 | 39.9 | 50.0 | - | 42.3 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Expense ratio (%) | 34.5 | 50.5 | 36.1 | - | 38.7 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Combined ratio excluding | 76.0 | 90.4 | 86.1 | - | 81.0 |
| foreign exchange impact | | | | | |
| (%) | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Foreign exchange impact | (0.3) | (4.1) | (1.5) | - | (1.3) |
| (%) | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Combined ratio (%) | 75.7 | 86.3 | 84.6 | - | 79.7 |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Total assets before | 1,971,336 | 681,025 | 780,381 | 803,028 | 4,235,770 |
| intragroup items and | | | | | |
| eliminations | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Intragroup items and | | | | | (1,341,859) |
| eliminations | | | | | |
+--------------------------+------------------+-----------+---------------+-------------+-------------+
| Total assets | | | | | 2,893,911 |
+--------------------------+--+--+----+--+----+-----------+---------------+-------------+-------------+
+-------------------------+--+--+----+--+---+-----------+---------------+-------------+-------------+
| | | | | | Year ended 31 December 2008 |
| | | | | | |
+-------------------------+--+--+----+--+-----------------------------------------------------------+
| | Global | UK and | International | Corporate | Total |
| | Markets | Europe | GBP000 | Centre | GBP000 |
| | GBP000 | GBP000 | | GBP000 | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Gross premiums written | 586,458 | 354,899 | 206,007 | - | 1,147,364 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Net premiums written | 425,056 | 328,744 | 176,664 | - | 930,464 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Net premiums earned | 477,814 | 302,418 | 172,788 | - | 953,020 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Investment result - | (5,785) | (11,935) | (8,114) | (1,798) | (27,632) |
| financial assets | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Investment result - | - | (10,483) | - | (42,495) | (52,978) |
| derivatives | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Other revenues | 15,606 | 2,929 | 1,323 | - | 19,858 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Revenue | 487,635 | 282,929 | 165,997 | (44,293) | 892,268 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Claims and claim | (275,679) | (129,889) | (73,812) | - | (479,380) |
| adjustment expenses, | | | | | |
| net of reinsurance | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Expenses for the | (137,379) | (74,625) | (40,864) | - | (252,868) |
| acquisition of | | | | | |
| insurance contracts | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Administration expenses | (23,157) | (46,228) | (13,813) | - | (83,198) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Other expenses | (19,149) | (33,042) | (14,112) | (10,196) | (76,499) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Foreign exchange | 108,536 | 32,507 | (22,291) | (8,997) | 109,755 |
| gains/(losses) | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total expenses | (346,828) | (251,277) | (164,892) | (19,193) | (782,190) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Results of operating | 140,807 | 31,652 | 1,105 | (63,486) | 110,078 |
| activities | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Finance costs | (273) | (35) | (186) | (4,664) | (5,158) |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Share of profit of | - | - | - | 260 | 260 |
| associates after tax | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Profit before tax | 140,534 | 31,617 | 919 | (67,890) | 105,180 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| 100% ratio analysis | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Claims ratio (%) | 57.8 | 41.9 | 43.0 | - | 51.1 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Expense ratio (%) | 36.7 | 50.3 | 38.8 | - | 40.8 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Combined ratio | 94.5 | 92.2 | 81.8 | - | 91.9 |
| excluding foreign | | | | | |
| exchange impact (%) | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Foreign exchange impact | (26.0) | (10.7) | 12.4 | - | (15.8) |
| (%) | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Combined ratio (%) | 68.5 | 81.5 | 94.2 | - | 76.1 |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total assets before | 2,208,887 | 716,495 | 1,148,668 | 870,296 | 4,944,346 |
| intragroup items and | | | | | |
| eliminations | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Intragroup items and | | | | | (1,207,073) |
| eliminations | | | | | |
+-------------------------+-----------------+-----------+---------------+-------------+-------------+
| Total assets | | | | | 3,737,273 |
+-------------------------+--+--+----+--+---+-----------+---------------+-------------+-------------+
8. Net asset value per share
+------------------------------+-----------+----------+----------+----------+---------+--------+
| | 30 June 2009 | | 31 Dec 2008 |
| | | | |
| | | 30 June 2008 | |
+------------------------------+----------------------+---------------------+------------------+
| | Net asset | NAV | Net | NAV | Net | NAV |
| | value | per | asset | per | asset | per |
| | (total | share | value | share | value | share |
| | equity) | pence | (total | pence | (total | pence |
| | GBP000 | | equity) | | equity) | |
| | | | GBP000 | | GBP000 | |
+------------------------------+-----------+----------+----------+----------+---------+--------+
| | | | | | | |
+------------------------------+-----------+----------+----------+----------+---------+--------+
| Net asset value | 964,851 | 259.3 | 817,578 | 222.1 | 951,026 | 258.1 |
+------------------------------+-----------+----------+----------+----------+---------+--------+
| Net tangible asset value | 915,076 | 246.0 | 776,031 | 210.8 | 902,469 | 244.9 |
+------------------------------+-----------+----------+----------+----------+---------+--------+
The net asset value per share is based on 372,035,093 shares (30 June 2008:
368,139,361; 31 December 2008: 368,477,595), being the adjusted number of shares
in issue at each reference date. Net tangible assets comprise total shareholders
equity excluding intangible assets.
9. Return on equity
+----------------------------------------------------+----------+-----------+------------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+----------+-----------+------------+
| | | | |
+----------------------------------------------------+----------+-----------+------------+
| Profit for the period | 122,079 | 84,352 | 70,808 |
+----------------------------------------------------+----------+-----------+------------+
| Opening shareholders' equity | 951,026 | 824,304 | 824,304 |
+----------------------------------------------------+----------+-----------+------------+
| Adjusted for the time weighted impact of: | | | |
+----------------------------------------------------+----------+-----------+------------+
| - Distribution and other movements in capital | (4,565) | (11,222) | (55,700) |
+----------------------------------------------------+----------+-----------+------------+
| Adjusted opening shareholders' equity | 946,461 | 813,082 | 768,604 |
+----------------------------------------------------+----------+-----------+------------+
| Annualised return on equity (%) | 27.5 | 21.8 | 9.2 |
+----------------------------------------------------+----------+-----------+------------+
10. Investment result
i) Analysis of investment result
+----------------------------------------------------+----------+-----------+------------+
| The total result for the Group before taxation | 6 months | 6 months | Year to |
| comprises: | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+----------+-----------+------------+
| | | | |
+----------------------------------------------------+----------+-----------+------------+
| Investment income including interest receivable | 38,947 | 46,497 | 94,678 |
+----------------------------------------------------+----------+-----------+------------+
| Net realised gains on financial investments at | 8,141 | 4,207 | 4,743 |
| fair value through profit or loss | | | |
+----------------------------------------------------+----------+-----------+------------+
| Net fair value gains/(losses) on financial | 38,345 | (34,249) | (127,053) |
| investments at fair value through profit or loss | | | |
+----------------------------------------------------+----------+-----------+------------+
| Investment result - financial assets | 85,433 | 16,455 | (27,632) |
+----------------------------------------------------+----------+-----------+------------+
| Fair value gains/(losses) on derivative | 2,476 | 821 | (52,978) |
| instruments | | | |
+----------------------------------------------------+----------+-----------+------------+
| Total result | 87,909 | 17,276 | (80,610) |
+----------------------------------------------------+----------+-----------+------------+
Investment expenses are presented within other expenses (note 11). Included
within fair value gains/(losses) on derivative instruments above, are derivative
gains/(losses) on foreign exchange contracts as detailed in note 19.
ii) Annualised investment yields
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| | 6 months to | 6 months to | Year to |
| | 30 June 2009 | 30 June 2008 | 31 Dec 2008 |
+----------------------------------------------+-----------------+-------------------+-------------------+
| | Return | Yield | Return | Yield | Return | Yield |
| | GBP000 | % | GBP000 | % | | % |
| | | | | | GBP000 | |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| | | | | | | |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| Debt and fixed income securities | 77,611 | 8.3 | 20,407 | 2.8 | (4,027) | (0.3) |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| Equities and shares in unit trusts | 6,141 | 10.6 | (12,686) | (16.8) | (38,267) | (28.4) |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| Deposits with credit institutions/cash and | 1,681 | 0.7 | 8,734 | 4.2 | 14,662 | 3.7 |
| cash equivalents | | | | | | |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
| | 85,433 | 7.0 | 16,455 | 1.6 | (27,632) | (1.3) |
+----------------------------------------------+---------+-------+----------+--------+----------+--------+
11. Other revenues and expenses
+------------------------------------------------------+-----------+-----------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Agency related income | 3,166 | 2,601 | 5,324 |
+------------------------------------------------------+-----------+-----------+-----------+
| Profit commission | 5,049 | 5,780 | 14,382 |
+------------------------------------------------------+-----------+-----------+-----------+
| Other income | 13 | - | 152 |
+------------------------------------------------------+-----------+-----------+-----------+
| Other revenues | 8,228 | 8,381 | 19,858 |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Managing agency expenses | 12,366 | 13,316 | 19,513 |
+------------------------------------------------------+-----------+-----------+-----------+
| Overseas underwriting agency expenses | 14,566 | 9,965 | 28,787 |
+------------------------------------------------------+-----------+-----------+-----------+
| Connect agency expenses | 5,599 | 7,994 | 13,343 |
+------------------------------------------------------+-----------+-----------+-----------+
| Investment expenses | 1,193 | 798 | 1,899 |
+------------------------------------------------------+-----------+-----------+-----------+
| Other Group expenses including central overheads | 14,685 | 5,740 | 12,957 |
+------------------------------------------------------+-----------+-----------+-----------+
| Other expenses | 48,409 | 37,813 | 76,499 |
+------------------------------------------------------+-----------+-----------+-----------+
12. Finance costs
+------------------------------------------------------+-----------+-----------+-----------+
| | 6 months | | Year to |
| | to | 6 months | 31 Dec |
| | 30 June | to | 2008 |
| | 2009 | 30 June | GBP000 |
| | GBP000 | 2008 | |
| | | GBP000 | |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Interest and expenses associated with bank | 1,118 | 2,701 | 3,201 |
| borrowings | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Interest and charges associated with Letters of | 1,299 | 837 | 1,922 |
| Credit | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Interest charges arising on finance leases | 12 | 18 | 35 |
+------------------------------------------------------+-----------+-----------+-----------+
| | 2,429 | 3,556 | 5,158 |
+------------------------------------------------------+-----------+-----------+-----------+
As at 30 June 2009, the total amount drawn by way of Letter of Credit to support
the Funds at Lloyd's requirement was GBP180.0 million (June and December 2008:
GBP137.5 million).
13. Tax expense
The Group's subsidiaries are subject to enacted tax laws in the jurisdictions in
which they are incorporated and domiciled.
The amounts charged in the condensed consolidated income statement comprise the
following:
+-----------------------------------------------------+-----------+-----------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Current tax expense/(credit) | 69,606 | 3,233 | (32,341) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Deferred tax (credit)/expense | (50,297) | 21,636 | 66,713 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Tax expense | 19,309 | 24,869 | 34,372 |
+-----------------------------------------------------+-----------+-----------+-----------+
The Group records its income tax expense based on the expected effective rate
for the full year.
Included in deferred tax assets, is GBP7,700,000 (June 2008: GBP5,319,000;
December 2008: GBP5,996,000) relating to losses arising in overseas companies
which the Group considers will be utilised in part against future trading
profits of the overseas entities.
14. Insurance liabilities and reinsurance assets
+-----------------------------------------------------+-----------+-----------+-----------+
| | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2008 |
+-----------------------------------------------------+-----------+-----------+-----------+
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Gross | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Claims outstanding | 1,556,483 | 1,262,454 | 1,767,728 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Unearned premiums | 733,224 | 562,257 | 509,688 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total insurance liabilities, gross | 2,289,707 | 1,824,711 | 2,277,416 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Recoverable from reinsurers | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Claims outstanding | 358,314 | 220,095 | 426,303 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Unearned premiums | 149,698 | 95,415 | 61,417 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total reinsurers' share of insurance liabilities | 508,012 | 315,510 | 487,720 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Net | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Claims outstanding | 1,198,169 | 1,042,359 | 1,341,425 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Unearned premiums | 583,526 | 466,842 | 448,271 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total insurance liabilities, net | 1,781,695 | 1,509,201 | 1,789,696 |
+-----------------------------------------------------+-----------+-----------+-----------+
Net claims and claim adjustment expenses include releases of GBP73m (30 June
2008: GBP66m) of reserves established in prior reporting periods.
The development of net claims reserves by accident years are detailed below.
Insurance claims and claims expenses reserves - net at 100%
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Accident | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Total |
| year | | | | | | | | | | |
| ending 31 | | | | | | | | | | |
| December | | | | | | | | | | |
| ** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Estimate | | | | | | | | | | |
| of | | | | | | | | | | |
| ultimate | | | | | | | | | | |
| claims | | | | | | | | | | |
| costs as | | | | | | | | | | |
| adjusted | | | | | | | | | | |
| for | | | | | | | | | | |
| foreign | | | | | | | | | | |
| exchange*: | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| at end | 325,343 | 268,903 | 351,921 | 563,608 | 662,365 | 516,453 | 675,586 | 749,100 | 322,185 | 4,435,464 |
| of | | | | | | | | | | |
| accident | | | | | | | | | | |
| year** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| one period | 365,897 | 293,359 | 370,854 | 615,097 | 759,884 | 508,598 | 613,513 | 715,691 | - | 4,242,893 |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| two | 435,706 | 302,940 | 338,517 | 590,924 | 750,555 | 491,846 | 599,047 | - | - | 3,509,535 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| three | 473,480 | 281,061 | 349,427 | 553,755 | 726,367 | 471,831 | - | - | - | 2,855,921 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| four | 462,343 | 274,600 | 340,483 | 554,639 | 726,730 | - | - | - | - | 2,358,795 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| five | 448,093 | 260,984 | 335,541 | 542,262 | - | - | - | - | - | 1,586,880 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| six | 442,656 | 255,025 | 334,677 | - | - | - | - | - | - | 1,032,358 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| seven | 445,063 | 259,227 | - | - | - | - | - | - | - | 704,290 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| eight | 440,951 | - | - | - | - | - | - | - | - | 440,951 |
| periods | | | | | | | | | | |
| later** | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Current | 440,951 | 259,227 | 334,677 | 542,262 | 726,730 | 471,831 | 599,047 | 715,691 | 322,185 | 4,412,601 |
| estimate | | | | | | | | | | |
| of | | | | | | | | | | |
| cumulative | | | | | | | | | | |
| claims | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Cumulative | (364,743) | (200,004) | (268,121) | (444,006) | (595,565) | (362,998) | (337,165) | (313,283) | (41,541) | (2,927,426) |
| payments | | | | | | | | | | |
| to date | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Liability | 76,208 | 59,223 | 66,556 | 98,256 | 131,165 | 108,833 | 261,882 | 402,408 | 280,644 | 1,485,175 |
| recognised | | | | | | | | | | |
| at 100% | | | | | | | | | | |
| level | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Liability | | | | | | | | | | 45,842 |
| recognised | | | | | | | | | | |
| in respect | | | | | | | | | | |
| of prior | | | | | | | | | | |
| accident | | | | | | | | | | |
| years at | | | | | | | | | | |
| 100% level | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Total net | | | | | | | | | | 1,531,017 |
| liability | | | | | | | | | | |
| to | | | | | | | | | | |
| external | | | | | | | | | | |
| parties at | | | | | | | | | | |
| 100% level | | | | | | | | | | |
+------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
Reconciliation of 100% disclosures above to Group's share - net
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Accident | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Total |
| year | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Current | 440,951 | 259,227 | 334,677 | 542,262 | 726,730 | 471,831 | 599,047 | 715,691 | 322,185 | 4,412,601 |
| estimate | | | | | | | | | | |
| of | | | | | | | | | | |
| cumulative | | | | | | | | | | |
| claims | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Less: | (102,419) | (50,606) | (73,078) | (124,851) | (173,494) | (98,188) | (114,446) | (138,232) | (52,904) | (928,218) |
| attributable | | | | | | | | | | |
| to external | | | | | | | | | | |
| Names | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Group | 338,532 | 208,621 | 261,599 | 417,411 | 553,236 | 373,643 | 484,601 | 577,459 | 269,281 | 3,484,383 |
| share of | | | | | | | | | | |
| current | | | | | | | | | | |
| ultimate | | | | | | | | | | |
| claims | | | | | | | | | | |
| estimate | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Cumulative | (364,743) | (200,004) | (268,121) | (444,006) | (595,565) | (362,998) | (337,165) | (313,283) | (41,541) | (2,927,426) |
| payments | | | | | | | | | | |
| to date | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Less: | 81,758 | 35,098 | 55,737 | 102,887 | 142,343 | 74,694 | 59,581 | 48,979 | 4,782 | 605,859 |
| attributable | | | | | | | | | | |
| to external | | | | | | | | | | |
| Names | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Group | (282,985) | (164,906) | (212,384) | (341,119) | (453,222) | (288,304) | (277,584) | (264,304) | (36,759) | (2,321,567) |
| share of | | | | | | | | | | |
| cumulative | | | | | | | | | | |
| payments | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Liability | 55,547 | 43,715 | 49,215 | 76,292 | 100,014 | 85,339 | 207,017 | 313,155 | 232,522 | 1,162,816 |
| for 2001 | | | | | | | | | | |
| to 2009 | | | | | | | | | | |
| accident | | | | | | | | | | |
| years | | | | | | | | | | |
| recognised | | | | | | | | | | |
| on Group's | | | | | | | | | | |
| balance | | | | | | | | | | |
| sheet | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Liability | | | | | | | | | | 35,353 |
| for | | | | | | | | | | |
| accident | | | | | | | | | | |
| years | | | | | | | | | | |
| before | | | | | | | | | | |
| 2001 | | | | | | | | | | |
| recognised | | | | | | | | | | |
| on Group's | | | | | | | | | | |
| balance | | | | | | | | | | |
| sheet | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
| Total net | | | | | | | | | | 1,198,169 |
| liability | | | | | | | | | | |
| to | | | | | | | | | | |
| external | | | | | | | | | | |
| parties | | | | | | | | | | |
| included | | | | | | | | | | |
| in the | | | | | | | | | | |
| balance | | | | | | | | | | |
| sheet| | | | | | | | | | | |
+--------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+----------+-------------+
* The foreign exchange adjustment arises from the retranslation of the estimates
at each date using the exchange rate ruling at 30 June 2009.
** With the exception of the most recent development data for each accident
year, which only relates to the 6 months ending 30 June 2009, the term period
refers to one full calendar year.
| This represents the claims element of the Group's insurance liabilities.
15. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the period, excluding ordinary shares purchased by the Group and
held in treasury as own shares.
+-----------------------------------------------------+-----------+-----------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Profit attributable to the Company's equity holders | 122,079 | 84,352 | 70,808 |
| (GBP000) | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Weighted average number of ordinary shares | 368,209 | 389,488 | 377,506 |
| (thousands) | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Basic earnings per share (pence per share) | 33.2p | 21.7p | 18.8p |
+-----------------------------------------------------+-----------+-----------+-----------+
Diluted
Diluted earnings per share is calculated by adjusting the assumed conversion of
all dilutive potential ordinary shares. The Company has one category of dilutive
potential ordinary shares, share options and awards. For the share options, a
calculation is made to determine the number of shares that could have been
acquired at fair value (determined as the average annual market share price of
the Company's shares) based on the monetary value of the subscription rights
attached to outstanding share options. The number of shares calculated as above
is compared with the number of shares that would have been issued assuming the
exercise of the share options.
+-----------------------------------------------------+-----------+-----------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 |
| | 30 June | 30 June | Dec 2008 |
| | 2009 | 2008 | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Profit attributable to the Company's equity holders | 122,079 | 84,352 | 70,808 |
| (GBP000) | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Weighted average number of ordinary shares in issue | 368,209 | 389,488 | 377,506 |
| (thousands) | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Adjustment for share options (thousands) | 15,139 | 13,193 | 13,351 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Weighted average number of ordinary shares for | 383,348 | 402,681 | 390,857 |
| diluted earnings per share | | | |
| (thousands) | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Diluted earnings per share (pence per share) | 31.8p | 20.9p | 18.1p |
+-----------------------------------------------------+-----------+-----------+-----------+
Diluted earnings per share has been calculated after taking account of
outstanding options under both employee share schemes and also SAYE schemes.
16. Dividends paid to owners of the Company
+-----------------------------------------------------+-----------+-----------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+-----------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Final dividend for the year ended: | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| - 31 December 2008 of 8.5p (net) per share | 31,778 | - | - |
+-----------------------------------------------------+-----------+-----------+-----------+
| - 31 December 2007 of 8.0p (net) per share | - | 31,141 | 31,141 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Interim dividend for the year ended: | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| - 31 December 2008 of 4.25p (net) per share | - | - | 15,615 |
+-----------------------------------------------------+-----------+-----------+-----------+
| | 31,778 | 31,141 | 46,756 |
+-----------------------------------------------------+-----------+-----------+-----------+
An interim dividend of 4.5p (net) per ordinary share has been declared payable
on 6 October 2009 to shareholders registered on 4 September 2009 in respect of
the six months to 30 June 2009 (30 June 2008: 4.25p (net) per ordinary share).
The dividend was approved by the Board on 25 August 2009 and accordingly has not
been included as a distribution or liability in this interim consolidated
financial information in accordance with IAS 10 Events after the Balance Sheet
Date.
17. Financial assets and liabilities
i) Analysis of financial assets carried at fair value
+-----------------------------------------------------+-----------+-----------+-----------+
| | 30 June | 30 June | 31 |
| | 2009 | 2008 | Dec 2008 |
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Debt and fixed income securities | 1,815,855 | 1,456,712 | 1,928,599 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Equities and shares in unit trusts | 120,748 | 131,442 | 124,864 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Deposits with credit institutions | 8,745 | 50,840 | 28,269 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total investments | 1,945,348 | 1,638,994 | 2,081,732 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Derivative instruments | 100 | 532 | 40 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total financial assets carried at fair value | 1,945,448 | 1,639,526 | 2,081,772 |
+-----------------------------------------------------+-----------+-----------+-----------+
ii) Analysis of financial liabilities carried at fair value
+-----------------------------------------------------+-----------+-----------+-----------+
| | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2008 |
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Borrowing from credit institutions | 98,000 | - | 90,278 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Derivative instruments | - | 19 | 53,072 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Total financial liabilities | 98,000 | 19 | 143,350 |
+-----------------------------------------------------+-----------+-----------+-----------+
iii) Investment and cash allocation
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| | 30 June 2009 | 30 June 2008 | 31 Dec 2008 |
+------------------------------------------+------------------+------------------+------------------+
| | GBP000 | % | GBP000 | % | GBP000 | % |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| | | | | | | |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| Debt and fixed income securities | 1,815,855 | 76.3 | 1,456,712 | 75.5 | 1,928,599 | 76.4 |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| Equities and shares in unit trusts | 120,748 | 5.1 | 131,442 | 6.8 | 124,864 | 5.0 |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| Deposits with credit institutions/cash | 442,844 | 18.6 | 342,394 | 17.7 | 468,891 | 18.6 |
| and cash equivalents | | | | | | |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
| Total | 2,379,447 | | 1,930,548 | | 2,522,354 | |
+------------------------------------------+-----------+------+-----------+------+-----------+------+
iv) Investment and cash allocation by currency
+-----------------------------------------------------+-----------+-----------+-----------+
| | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2008 |
| | % | % | % |
+-----------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-----------------------------------------------------+-----------+-----------+-----------+
| Sterling | 23.6 | 27.0 | 19.7 |
+-----------------------------------------------------+-----------+-----------+-----------+
| US Dollars | 66.1 | 59.7 | 65.8 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Euro and other currencies | 10.3 | 13.3 | 14.5 |
+-----------------------------------------------------+-----------+-----------+-----------+
18. Fair value measurements
The tables below summarise the fair value hierarchy for the Group in accordance
with Improving Disclosures about Financial Instruments - Amendments to IFRS
7 Financial Instruments: Disclosures.
The levels of the fair value hierarchy are defined as follows:
- Level 1 - fair values measured using quoted prices (unadjusted) in active
markets for identical instruments,
- Level 2 - fair values measured using directly or indirectly observable inputs
or other similar valuation techniques for which all significant inputs are based
on observable market data,
- Level 3 - fair values measured using valuation techniques for which
significant inputs are not based on market observable data.
The Group measures the fair value of its financial assets based on prices
provided by investment managers who obtain market data from independent pricing
services. The pricing services used by the investment manager obtain actual
transaction prices for securities that have quoted prices in active markets. For
those securities which are not actively traded, the pricing services use common
market valuation pricing models. Observable inputs used in common market
valuation pricing models include, but are not limited to, broker quotes, credit
ratings, interest rates and yield curves, prepayment speeds, default rates and
other such inputs which are available from market sources.
Investments in mutual funds comprise a portfolio of stock investments in trading
entities which are invested in various quoted investments. The fair value of
shares in unit trusts are based on the net asset value of the fund as reported
by independent pricing sources or the fund manager.
+-----------------------------------------+------------+-----------+-----------+-----------+
| As at 30 June 2009 | Level 1 | Level 2 | Level 3 | Total |
| | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| | | | | |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Debt and fixed income securities | 562,915 | 1,252,940 | - | 1,815,855 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Equities and shares in unit trusts | 210 | 118,516 | 2,022 | 120,748 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Deposits with credit institutions | 8,745 | - | - | 8,745 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Derivative instruments | - | - | 100 | 100 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Total | 571,870 | 1,371,456 | 2,122 | 1,945,448 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| | | | | |
+-----------------------------------------+------------+-----------+-----------+-----------+
| As at 30 June 2008 | Level 1 | Level 2 | Level 3 | Total |
| | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Debt and fixed income securities | 407,879 | 1,048,833 | - | 1,456,712 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Equities and shares in unit trusts | 2,251 | 129,191 | - | 131,442 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Deposits with credit institutions | 50,840 | - | - | 50,840 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Derivative instruments | - | - | 532 | 532 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Total | 460,970 | 1,178,024 | 532 | 1,639,526 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| | | | | |
+-----------------------------------------+------------+-----------+-----------+-----------+
| As at 31 December 2008 | Level 1 | Level 2 | Level 3 | Total |
| | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Debt and fixed income securities | 605,222 | 1,323,377 | - | 1,928,599 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Equities and shares in unit trusts | 2,043 | 122,282 | 539 | 124,864 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Deposits with credit institutions | 22,392 | - | 5,877 | 28,269 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Derivative instruments | - | - | 40 | 40 |
+-----------------------------------------+------------+-----------+-----------+-----------+
| Total | 629,657 | 1,445,659 | 6,456 | 2,081,772 |
+-----------------------------------------+------------+-----------+-----------+-----------+
Included within Level 1 of the hierarchy are Government bonds and Treasury bills
which are measured based on quoted market prices.
Level 2 of the hierarchy contains US Government Agencies, Corporate Securities,
Asset Backed Securities and Mortgage Backed Securities. The fair value of these
assets are based on prices derived from models with observable market inputs as
discussed above. Also included within Level 2 are units held in traditional long
funds and long and short special funds.
Level 3 contains investments in a limited partnership and investment in a mutual
fund which at 31 December 2008 had limited observable transactions on which to
measure fair value. Redemptions from the fund were suspended throughout 2008 and
the fund was deemed illiquid. In 2009 the fund was redeemed in full.
Derivative instruments included within Level 3 represent event linked future
contracts which are transacted on the Chicago Climate Futures Exchange. Pricing
models based on unobservable inputs are used by the exchange to determine the
fair value of the contracts.
In certain cases, the inputs used to measure the fair value of a financial
instrument may fall into different levels within the fair value hierarchy. In
this instance, the fair value of the instrument in its entirety is classified
based on the lowest level of input that is significant to the fair value
measurement.
During the period, there were no significant transfers made between Level 1 and
Level 2 of the fair value hierarchy.
The following table shows the reconciliation of opening and closing balances for
financial instruments classified under Level 3 of the fair value hierarchy for
the six months to 30 June 2009:
+-----------------------------------------+------------+--------------+-------------+-----------+
| | Equities | Deposits | Derivative | Total |
| | and shares | with | instruments | GBP000 |
| | in unit | credit | GBP000 | |
| | trusts | institutions | | |
| | GBP000 | GBP000 | | |
+-----------------------------------------+------------+--------------+-------------+-----------+
| | | | | |
+-----------------------------------------+------------+--------------+-------------+-----------+
| Balance at 1 January | 539 | 5,877 | 40 | 6,456 |
+-----------------------------------------+------------+--------------+-------------+-----------+
| Net gains recognised in the income | 58 | - | 60 | 118 |
| statement* | | | | |
+-----------------------------------------+------------+--------------+-------------+-----------+
| Net purchases, sales, issues and | 1,425 | (5,877) | - | (4,452) |
| settlements | | | | |
+-----------------------------------------+------------+--------------+-------------+-----------+
| Transfers to other levels | - | - | - | - |
+-----------------------------------------+------------+--------------+-------------+-----------+
| Closing balance | 2,022 | - | 100 | 2,122 |
+-----------------------------------------+------------+--------------+-------------+-----------+
* Net gains are included within the investment result in the income statement.
19. Impact of foreign exchange related items
The net foreign exchange gains/(losses) for the year include the following
amounts:
+------------------------------------------------------+-----------+-----------+----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+------------------------------------------------------+-----------+-----------+----------+
| | | | |
+------------------------------------------------------+-----------+-----------+----------+
| Exchange (losses)/gains recognised in the | (42,820) | 9,594 | 109,755 |
| consolidated income statement | | | |
+------------------------------------------------------+-----------+-----------+----------+
| Exchange (losses)/gains classified as a separate | (78,075) | (1,928) | 150,582 |
| component of equity | | | |
+------------------------------------------------------+-----------+-----------+----------+
| Overall impact of foreign exchange related items on | (120,895) | 7,666 | 260,337 |
| net assets | | | |
+------------------------------------------------------+-----------+-----------+----------+
The above excludes profit or losses on foreign exchange derivative contracts
which are included within the investment result.
Net unearned premiums and deferred acquisition costs are treated as non monetary
items in accordance with IFRS. As a result, a foreign exchange mismatch
arises caused by these items being translated at historical rates of
exchange prevailing at the original transaction date and not being retranslated
at the end of each period. The impact of this mismatch on the income statement
is shown below.
+------------------------------------------------------+------------+-------------+-----------+
| | 6 months | 6 months | Year to |
| | to | to | 31 Dec |
| | 30 June | 30 June | 2008 |
| | 2009 | 2008 | GBP000 |
| | GBP000 | GBP000 | |
+------------------------------------------------------+------------+-------------+-----------+
| Opening balance sheet impact of non monetary items | 50,525 | 14,438 | 14,438 |
+------------------------------------------------------+------------+-------------+-----------+
| Closing balance sheet impact of non monetary items | (8,943) | (849) | 50,525 |
+------------------------------------------------------+------------+-------------+-----------+
| Impact of non retranslation of non monetary items on | (59,468) | (15,287) | 36,087 |
| the income statement | | | |
+------------------------------------------------------+------------+-------------+-----------+
The following is an analysis of the foreign exchange gains and losses recognised
in the consolidated income statement:-
+------------------------------------------------------------------------+--------------+---------------+------------+
| 6 months to 30 June 2009 |
+--------------------------------------------------------------------------------------------------------------------+
| | Economic | Other | Total |
| | hedges and | | |
| | intragroup | | |
| | borrowings | | |
+------------------------------------------------------------------------+--------------+---------------+------------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------------------------------------------+--------------+---------------+------------+
| Foreign exchange losses on intragroup borrowings | (7,689) | - | (7,689) |
+------------------------------------------------------------------------+--------------+---------------+------------+
| Other foreign exchange losses | - | (35,131) | (35,131) |
+------------------------------------------------------------------------+--------------+---------------+------------+
| Foreign exchange losses arising on retranslation of monetary items | (7,689) | (35,131) | (42,820) |
+------------------------------------------------------------------------+--------------+---------------+------------+
| Derivative gains on foreign exchange contracts included within | 263 | 2,175 | 2,438 |
| investment return | | | |
+------------------------------------------------------------------------+--------------+---------------+------------+
| Total foreign exchange losses recognised in the consolidated income | (7,426) | (32,956) | (40,382) |
| statement | | | |
+------------------------------------------------------------------------+--------------+---------------+------------+
+------------------------------------------------------+------------+-----------+---------+
| 6 months to 30 June 2008 |
+-----------------------------------------------------------------------------------------+
| | Economic | Other | Total |
| | hedges | | |
| | and | | |
| | intragroup | | |
| | borrowings | | |
+------------------------------------------------------+------------+-----------+---------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------------------------+------------+-----------+---------+
| Foreign exchange losses on intragroup borrowings | - | - | -- |
+------------------------------------------------------+------------+-----------+---------+
| Other foreign exchange gains | - | 9,594 | 9,594 |
+------------------------------------------------------+------------+-----------+---------+
| Foreign exchange gains arising on retranslation of | - | 9,594 | 9,594 |
| monetary items | | | |
+------------------------------------------------------+------------+-----------+---------+
| Derivative gains on foreign exchange contracts | 514 | - | 514 |
| included within investment return | | | |
+------------------------------------------------------+------------+-----------+---------+
| Total foreign exchange gains recognised in the | 514 | 9,594 | 10,108 |
| consolidated income statement | | | |
+------------------------------------------------------+------------+-----------+---------+
+------------------------------------------------------+------------+-----------+----------+
| | | Year to 31 December |
| | | 2008 |
+------------------------------------------------------+------------+----------------------+
| | Economic | Other | Total |
| | hedges | | |
| | and | | |
| | intragroup | | |
| | borrowings | | |
+------------------------------------------------------+------------+-----------+----------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------------------------+------------+-----------+----------+
| Foreign exchange losses on intragroup borrowings | (8,463) | - | (8,463) |
+------------------------------------------------------+------------+-----------+----------+
| Other foreign exchange gains | - | 118,218 | 118,218 |
+------------------------------------------------------+------------+-----------+----------+
| Foreign exchange gains arising on retranslation of | (8,463) | 118,218 | 109,755 |
| monetary items | | | |
+------------------------------------------------------+------------+-----------+----------+
| Derivative losses on foreign exchange contracts | (42,540) | (10,123) | (52,663) |
| included within investment return | | | |
+------------------------------------------------------+------------+-----------+----------+
| Total foreign exchange (losses)/gains recognised in | (51,003) | 108,095 | 57,092 |
| the consolidated income statement | | | |
+------------------------------------------------------+------------+-----------+----------+
20. Business combinations
On 30 September 2008, the Group acquired 100% of issued share capital of
Amershill Limited. Cash consideration of GBP2,000,000 was paid and goodwill of
GBP1,909,000 was recognised. The fair value of the identifiable net asset
acquired was GBP91,000.
On 16 August 2007 the Group acquired 100% of the share capital of ALTOHA Inc. in
the USA. The total consideration was GBP29,052,000 which included contingent
consideration of GBP7,530,000. No goodwill arose on acquisition.Intangible
assets of GBP5,083,000 were initially recognised in respect of the US State
authorisation licenses held by ALTOHA Inc.'s consolidated operations. During
2008, further cash consideration of GBP1,225,000 was paid in finalisation of
their ultimate purchase value.
21. Condensed consolidated interim cash flow statement
The purchase, maturity and disposal of financial assets is part of the Group's
insurance activities and is therefore classified as an operating cash flow. The
purchase, settlement and disposal of derivative contracts is also classified as
an operating cash flow.
Included within cash and cash equivalents held by the Group are balances
totalling GBP85,321,000 (30 June 2008: GBP69,388,000; 31 December 2008:
GBP47,094,000) not available for use by the Group outside of the Lloyd's
Syndicates within which they are held.
Directors' responsibility statement
The Directors confirm, to the best of our knowledge, that the Chairman's
statement and condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 as adopted by the European Union and the
Interim Statement includes a fair review of the information required by sections
4.2.7R and 4.2.8R of the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority, being:
1) an indication of important events during the first six months of the current
financial year and their impact on the condensed, consolidated interim financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the year; and
2) related party transactions that have taken place in the first six months of
the current year and that have materially affected the consolidated financial
position or performance of Hiscox Ltd during that period, and any changes in the
related party transactions described in the last annual report that could have
such a material effect.
The individuals responsible for authorising the responsibility statement on
behalf of the Board are the Chairman, RRS Hiscox and the Group Finance Director,
SJ Bridges. The statements were approved for issue on 25 August 2009.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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