Helios built capacity in 2021 on tenancy, paid more on LLV purchases

Helios Underwriting, a market-listed consolidator of Lloyd’s capacity, more than doubled its capacity to £233 million for the 2022 account, nearly a third of which came through increasingly high-value acquisitions.

“Our acquisition strategy has continued apace,” management said in its 2021 full-year statement regarding 28 completed acquisitions of limited liability vehicles (LLVs).  “Returning to the ‘cycle clock,’ it can be seen that increasing the retained capacity at this time in the cycle will bear fruit in future good years.”

Of the £122.4 million run up in capacity in 2021, £36.2 million came from LLV acquisitions, including what management called “low-cost” purchase of £24 million for £2.6 million with upside valuation hopes.

But Helios may have paid its highest to-date average valuations on LLVs acquired in 2021, despite talk of select “low-cost” buys. Helios paid at a 6% discount to valuations crafted by Humphrey & Co, versus discounts closer to 20% over the prior two years, data indicated.

Another £24 million came from auction purchases. But the bulk of £58.9 million otherwise came on tenancy capacity from syndicates in which Helios has a stake. Retained capacity fund has grown from £59m to £172m.

With capacity central in asset totals, net asset value (NAV) per share continued to grow to 157p despite £54 million in fundraising during the year from new institutional investors, management said.

Underwriting profits (on retained capacity for 2021 generated from 2019-21 underwritings years) rose 5.3 times from the prior year measure, but was showing a 3.9% loss for the 2021 underwriting year, what management called "a year of uncertainty for everyone." The views to 2019 and 2020 swung to a profit.

As the market has hardened to rate adequacy, Helio has cut its prior reliance on quota share reinsurance from a one-time 70% to as little as 26% of the overall portfolio, management said.

The portfolio achieved a combined ratio of 93.9%, within eyeshot of the measure for the larger Lloyd's market at 93.5%, but with the hit from much of 2021 still to hit the figures, management warned.

“We would expect the gap in relative performance to narrow over the next 18 months as it has done in the past,” management said of accounting outlook, citing increased conservatism from syndicates supported by third party capital.

Helios Underwriting is making its business as a listed investment company acquiring and growing a portfolio made up of Lloyd’s – Limited Liability Vehicles of former Lloyd’s Names.

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