Helios Underwriting, the Lloyd’s of London investment and underwriting vehicle, has released its results for the first six months of 2019, showing a recovery in underwriting profits due to higher premium rate increases and lower loss activity.
Overall profit after tax was recorded at £648,000 for H1 2019, an increase of more than three and half times the £182,000 reported for the same period in 2018.
Results this year were boosted by an underwriting profit of £1.61 billion, compared with just £741 million last year.
Helios explained that the increase in underwriting profits from its syndicate participations reflected muted loss activity in the first half of the year and higher premium rates.
Investment returns at the syndicate level also benefitted from the fall in bond yields and a benign equity market, the company added.
The rate increases achieved by underwriters over the last 18 months, together with the more stringent underwriting discipline being enforced by the Franchise Board at Lloyd’s, should continue to improve profitability going forward, Helios believes.
Additionally, the company noted that a 61% increase in the retained capacity on 2017 and 2018 underwriting years contributed further to an increase in profitability.
Over the last 12 months Helios has also taken advantage an increase in retained capacity by acquiring a further 8 limited liability vehicles (LLV’s), increasing its Capacity Fund to £55m.
The additional capacity acquired on the ‘older’ underwriting years has increased the capacity retained by Helios by over 60%.
This increase in the retained capacity has made a significant contribution to the underwriting profits recognised on these older years, and, although both 2017 and 2018 underwriting years are forecast to be loss making, both these years will contribute to profits in this calendar year.
Helios completed two acquisitions in 2019 with a capacity of £3.0 million, and there are now 25 Limited LLV’s for sale (compared to 15 in September 2018), and there have been 45 LLV’s offered for sale so far in 2019 (35 in 2018), of which 25 remain unsold (15 in 2018).
The company continues to reduce its exposure by 70% on the open underwriting year 2018 through quota share reinsurance, while stop loss reinsurance is bought for the remaining 30% to limit the group’s exposure in the event of large underwriting losses.
As the size of Helios’ capacity fund increases more reinsurance will likely be ceded, which in turn should increase the flow of fees and profit commission, it explained.