Lloyd's insurer to place 2.8 million shares
Heritage Underwriting Agency plc (“Heritage” or “HUA”), the specialist London based Lloyd’s insurer, today announced the firm placing of 2.8 million Placing Shares at a price of 110p per share to raise £3 million (£2.9 million after expenses) together with an update of the trading outlook.
Placing
• Heritage has been able to increase its owned capacity from £139 million in 2007 to £175 million for 2008 (from 44% to 54% of aggregate managed capacity).
• Whilst Heritage has been able to fund most of the required capital out of retained profits the placing will provide the balance of the capital required.
• The latest capacity has become available at nil cost.
• The new capital should achieve the required return on equity, even in a softening US property insurance market.
• The Placing Shares will rank for the final dividend for 2007 which is expected to be 5.5p per share payable in May 2008.
Trading
• 2007 can be anticipated to be a further excellent year for underwriting with minimal catastrophe losses this year and no material exposure to the sub-prime issues.
• Heritage’s unearned premium reserves written at highly attractive rates are £46.9 million at 30 September 2007, underpinning HUA’s 2007 profits.
• Syndicate forecasts (as at 30 September 2007) for prior years remain unchanged. The annual claims reserving exercise currently being undertaken, is likely to result in an improvement of the 2006 year of account forecast for the worldwide property unit (Syndicate 1200).
Outlook for 2008
• Expansion in international (non-US) treaty, personal accident and non-US general liability business has significantly reduced the impact of planned reductions in direct and facultative US property.
Commenting on the placing and current trading, Richard Pexton Chief Executive said:
“We are delighted to be able to obtain an additional £36 million of capacity for HUA which will be capitalised through a combination of retained earnings and the Placing.”
“2007 continues to develop well and due to attractive pricing in our core areas we expect a high utilisation of capital.”
“We were delighted that the merger of syndicates 1200 (worldwide property) and 3245 (non US liability) was approved by Lloyd’s which will assist us to maximise the profitability. We are now more able to respond rapidly to changing market conditions by allocating capital to those classes which give us the most attractive margins.”
“In 2008 we plan to have a managed capacity of £325 million, a 3% increase on 2007. Growth in premiums is coming from the more recent classes added to our portfolio in 2006 and 2007 such as International Treaty, Personal Accident and Non dollar general liability, in line with our strategy of diversification and growth in non correlated classes. In areas where we see increased competition and rate reductions we will reduce exposure and we will not sacrifice profit for volume. Capital management remains a cornerstone of our strategy.”
