Helios confirms 26% uplift in underwriting capacity for 2018

Helios Underwriting announced on Wednesday that its capacity for the 2018 year of account would commence at £41m - an increase of 26% over opening capacity for 2017 year of account.

The AIM-traded firm said the quality of the portfolio had also been improved, with Helios taking up all the pre-emption offers on capacity with value at the auctions, and as premium rates were expected to rise following the recent losses, the underwriting margins were likely to improve.

Following the Lloyd's Capacity Auctions, the weighted average prices of the capacity traded in 2017 reduced as a greater volume of capacity was traded over the three auctions and as the implications of the recent hurricane losses was felt, the Helios board explained.

While its capacity was improving 26% year-on-year, the value was down 13% to £13m as at 1 January 2018, and the price per pound sterling of capacity was off 30% at 0.32p.

Capacity value per share was 13% lower year-on-year at 0.89p, compared to 1.02p at the start of the 2017 year of account.

Helios said it would continue to quota share reinsure 70% of the 2018 underwriting year exposures.

“The results for the year to 31 December … have been impacted by the 2017 catastrophe losses,” the board explained in its statement.

It said it expected an operating loss before tax of approximately £0.5m, compared to a profit of £1.3m in 2016, after reinsurance recoveries but before any charge for the impairment of capacity and deferred tax adjustments.

The adjusted net asset value as at 31 December was forecast to be approximately 168p, down from 196p at the end of 2016.

Helios said the reduction in the weighted average price per pound sterling of capacity of 30% from the Lloyds Auctions was the driver to that fall in ANAV.

“Following the catastrophic losses of Hurricanes Harvey, Irma and Maria, along with bushfires in California and other events, there is evidence of a hardening market for 2018 and beyond.

“We will continue to seek to acquire further LLV's, particularly as valuation expectations for LLVs will now take into account lower auction values and a less profitable pipeline of underwriting results.”

Helios said its reinsurers had indicated “continued support”, for which its board was “most grateful”.

“They have been the beneficiaries of the quality portfolio which makes up the Helios Capacity Fund.

“In profitable years the outperformance against Lloyd's as a whole has been significant,” the board noted.

“We are confident that a satisfactory degree of outperformance will be maintained when the results for 2017 begin to be announced.”

Helios said its “quality portfolio”, together with the reinsurance protections it had put in place, left it in a “strong position” to benefit from the changing circumstances.