Trading update also announces £150m share buyback and £300m debt facility
Benfield Group Limited today released a trading update, and announced a share buyback and new debt facility designed to enhance the capital structure of the Group.
The Company proposes to apply up to £150 million to fund a share buyback programme over the next two years, subject to market conditions.
It has also arranged a new debt facility for up to £300 million with Bank of Scotland plc, Barclays Capital (the investment banking division of Barclays Bank plc) and Lloyds TSB Corporate Markets to fund the buyback programme and meet the prospective capital requirements of the Group.
Grahame Chilton, Chief Executive of Benfield, said: "I am delighted that we are able to announce another significant share buyback programme supported by a new debt facility which will enhance the capital structure of the Group. The trading environment remains challenging and the weak dollar will have a further adverse impact on reported results in the second half of 2007. Nevertheless the broking operations continue to generate growth on a constant currency basis and we see increasing demand for our specialist expertise in capital markets and structured solutions."
The release read as follows:
“Following a comprehensive review of the Group's capital requirements, the
Benfield Board ("the Board") concluded that it would be appropriate to increase the leverage in the business. Accordingly, the Company today announced the successful negotiation of a new debt facility for up to £300 million and the launch of a new share buyback programme which the Board believes will enhance the efficiency of the Group's balance sheet and lead to increased earnings per share.
“Following the successful conclusion of the previous share buyback programme announced on 14 June 2006, the Company today announces that, subject to market conditions, it intends to use up to £150 million to carry out a new share buyback programme over the next two years. The Board's resolution approving the share buyback programme authorises the Company to implement the programme by way of market purchases, tender offers, accelerated purchase programmes or privately negotiated transactions.
“The Board has resolved to make repurchases under the share buyback programme only if it considers them to be in the best interests of the Company and its shareholders as a whole and expects the repurchases to result in an increase in earnings per share.
New Debt Facility
“The Company has arranged a new debt facility of up to £300 million with Bank of Scotland plc, Barclays Capital (the investment banking division of Barclays Bank plc) and Lloyds TSB Corporate Markets which will be used to repay the Group's existing debt. This new facility will be drawn down as required to fund the share buyback programme and provide capital for general corporate purposes.
Trading Update
“As stated in the Interim Results announcement of 6 September 2007, the results for the first half of 2007 were significantly affected by the weakness of the US dollar and by softening of the reinsurance market. As also noted at the time of the interim announcement, the Board's expectation that reported trading profit for the full year would be at a similar level to that achieved in 2006 was subject to deterioration in exchange rates or in market conditions. The adverse impact of these two factors, particularly the further weakening of the dollar, has continued in the second half of the year. Consequently, the Board now estimates that reported trading profit for 2007 will be marginally lower than previously indicated, subject to expectations on business streams in the final quarter of 2007 being met. However the Group's broking operations continue to generate growth on a constant currency basis, driven by significant new business wins and a sustained increase in demand for property catastrophe reinsurance cover in peak exposure zones.
“The outlook for 2008 is again likely to be affected by the weak dollar. Reinsurance capacity is ample in most markets and in the absence of significant global reinsurance losses Benfield anticipates further softening of rates over the next twelve months. While lower reinsurance pricing typically stimulates increased buying of reinsurance overall, it is too early in the cycle for this to occur and the current trend for insurers to retain more risk is expected to continue into 2008.”
