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Increasing asset base to attract higher yields

Helios Underwriting 29 September 2022 Update
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Helios Underwriting

Increasing asset base to attract higher yields

H122 results update

Insurance

29 September 2022

Price

158p

Market cap

£108m

Net cash (£m) at 30 June 2022

21.1

Shares in issue

68.9m

Free float

46.4%

Code

HUW

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.0

(2.2)

(1.6)

Rel (local)

12.0

3.3

7.3

52-week high/low

195p

144p

Business description

Helios Underwriting was established in 2007 (as Hampden Underwriting) primarily to provide investors with a limited liability direct investment into the Lloyd’s insurance market. It is an AIM-quoted holding company, providing underwriting exposure across a diversified portfolio of selected Lloyd’s syndicates.

Next events

FY22 earnings release

June 2023

Analyst

Marius Strydom

+44 (0)20 3077 5700

Helios Underwriting is a research client of Edison Investment Research Limited

Helios Underwriting’s financial assets grew 21% from FY21 and could reach £235m by year-end, benefiting from the 111% increase in Lloyd’s of London (Lloyd’s) underwriting capacity (capacity) in FY21. Rising gilt yields drove short-term losses on fixed interest assets and an H122 EPS loss of 5.4p, but we forecast much higher investment returns. Ukraine claims provisions muted the results, but normalised recovery continued. The hard Lloyd’s premium rate environment bodes well for strong underwriting results in the FY23 and thereafter. We upgrade our FY23 EPS forecast by 18.5%, followed by 6.5% in FY24e and 7% in FY25e, resulting in a 6.7% increase in our valuation to 240p/share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

70.6

(1.8)

(0.8)

3.0

N/A

1.2%

12/22e

136.6

(1.0)

(1.1)

3.0

N/A

1.2%

12/23e

191.7

18.6

21.9

6.0

11.0

2.5%

12/24e

194.3

25.5

30.1

14.8

8.0

6.2%

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

One-offs muted H122 results, but not outlook

In H122, Helios’s investment return was -£3.6m as its fixed interest portfolio was repriced downwards, reducing EPS to a 5.4p loss. Conservative reserving for potential Ukraine liabilities limited an expected underwriting improvement, despite a strong showing on a normalised basis. We cut our FY22e EPS to a 1.1p loss, but there was no net asset value (NAV) impact due to an expected pre-emption revaluation and reversal of FY21 deferred tax charge (no corporate tax hike).

Rising yields are a huge positive for Helios

Over recent years, Helios and the wider UK property and casualty (P&C) industry suffered from low interest rates significantly limiting returns earned on assets. This downward pressure on margins and returns has been removed, thanks to recent interest rate and bond yield increases. The timing is ideal for Helios as it is growing financial assets strongly, amplifying these higher returns. After financial assets almost doubled to £153.8m in FY21, they increased a further 21% in H122 and we forecast them at £235m by year-end. The recent c 3.0% increase in gilt yields should deliver at least £8m pa in extra investment return for the company.

Valuation: 240p/share with capital deployment upside

Higher interest rates support a 18.5% upgrade to our FY23e EPS to 21.9p, with upgrades of 6.5% in FY24e and 7% in FY25e. Our forecast return on NAV (RONAV) of 12.9% in FY23 rises to 15.7% in FY24, or 17.6% including revaluations on uptake of syndicate pre-emption capacity. In addition, a strong outlook for medium-term premium growth, margins and returns drives our valuation of 240p/share, after increasing the discount rate to 10.5% (rising risk-free rate). Our valuation is 44% ahead of our FY22e NAV/share of 166.5p. There is further valuation upside if Helios can generate more working capital for deployment in underwriting capacity growth, boosting value drivers.

Rising interest rates & yields boost earnings & returns

Insurance companies like Helios make money in two key ways: a) underwriting risk and making a margin by delivering a combined ratio of less than 100% (an underwriting profit or margin); and b) generating investment returns on the regulatory capital they hold as well as on the assets backing their substantial insurance reserves (often referred to as the free float). Investors like Warren Buffet’s Berkshire Hathaway have traditionally been attracted to P&C insurance companies, because of this return on the free float, which helps such companies to deliver operating margins well ahead of their underwriting margins and to achieve superior NAV returns (return on free float adding to the return from underwriting margin and investment return on capital).

Since 2009, interest rates in developed economies and the UK in particular have been at historically low levels and declined to close to zero when the COVID-19 pandemic hit. In addition, the wider insurance market and the Lloyd’s market in particular have adopted more conservative approaches to solvency, with most participants required or choosing to hold higher levels of capital than in the decade leading up to 2009. As a result, the historical benefits of a healthy return on free float in which P&C insurers and Lloyd’s participants used to participate were significantly diluted. At the same time, these companies also faced very low investment returns on historically high levels of capital. The result was pressure on operating margins (in the case of Lloyd’s, these were only 1.3% pa ahead of the underwriting margin from 2009 to 2020), as well as on RONAV. In the case of Lloyd’s, the RONAV contribution from investment return declined from 15% pa before 2009 to 6% pa thereafter. Companies became much more dependent on underwriting results without the boost that companies with such large asset bases and their investors should naturally expect.

Over the past year, there has been a dramatic change in global and UK interest rates with Libor rising from close to zero to more than 3%, while the UK 10-year gilt yield increased from 0.9% to 4.2% (both have been very volatile). This is a huge development for the P&C industry, which is expected to have a very positive impact on margins and returns.

Large increase in asset base at exactly the right time

FY21 was a transformative year for Helios, as it resulted in an 111% increase in Lloyd’s underwriting capacity to £232.7m before reinsurance and an almost trebling in retained capacity to £171.9m. Capacity is the lifeblood of the Lloyd’s syndicates in which Helios has exposure, which gives it the right to participate in the premiums that syndicates write and the underwriting profits they generate. Lloyd’s syndicates are emerging from an extended period of weak premium rates, which lasted to 2017 and affected underwriting results into 2020, exacerbated by COVID-19. The tide has now turned with global insurance rate increases in excess of 50% since 2017 and Lloyd’s gross written premium (GWP) growing by more than 30%.

The significant increase in Helios’s capacity takes time to be reflected in an increase in its asset base. During FY21, Helios recorded an 80% increase in its financial assets from £85.3m to £153.8m, with the bulk of this increase resulting from a large capital raise of £54m and the remainder from assets in the Lloyd’s limited liability vehicles (LLVs) acquired over the period. It was only in H122 that the company’s financial assets started to benefit from the increased capacity that it started to deploy. Over the six months to 30 June 2022, financial assets rose by 21% to £186.5m as Helios benefited from the large premium income backed by its much-increased capacity. This impact is expected to accelerate during H222 as further capacity is deployed and we forecast financial assets at £235m by year-end. Even without any LLV acquisitions in FY22, Helios’s capacity will grow by at least 9.5%, thanks to the £21.7m in pre-emptions that it expects its syndicates to offer. This increase in capacity will help to fuel further healthy growth in financial assets in FY23.

The significant increase in Helios’s asset base comes at the right time for Helios to benefit from rising interest rates and bond yields. We expect Helios to benefit from a healthy boost in investment income from FY23 as it earns c 2.5% more on cash and c 3.5% more on its fixed interest portfolio.

During H122, the spike in bond yields negatively affected fixed interest portfolio values and resulted in investment income of -£3.6m. Additional losses are likely during H222 on the back of further increases in bond yields. From FY23, we forecast a meaningful improvement in investment income of £11m, rising to £15.5m by FY25 (assuming flat yields), which contributes more than a third to group income, boosting operating margin to more than 14% and supporting a RONAV of c 17.6% (including revaluations on the uptake of pre-emption capacity).

H122 results delivered in the right areas

At first glance, Helios’s H122 EPS loss of 5.39p is disappointing, coming on the back of a 0.75p loss in FY21 and resulting in a decline in NAV/share to 149p. The loss was largely driven by the negative investment income result discussed above, which is temporary and expected to improve from FY23 and drive very healthy results. Because of its fast-growing asset base, Helios is in the fortunate position of adding new investments at very attractive levels and benefiting from the higher yields that it will earn on these and its existing assets.

Underwriting performance (excluding investment income) was mediocre, relative to expectation, with a combined ratio of 94.5% compared with 93.5% in H122 and 93.9% in FY21. This was caused by a weak performance for the 2022 year of account (YOA) and a lower-than-expected 2021 YOA recovery, while 2020 was strong. The 2021 YOA was affected by conservatism around the potential Ukraine liability (most notably related to aviation), resulting in a loss ratio of 57.5% versus an expected recovery to 55% or lower. While further Ukraine losses cannot be ruled out (and we have lifted our FY22 loss ratio forecast to 59%), we take comfort in the track record of Helios’s syndicates to reserve very conservatively in year one and for excess reserves to be released over time as there is more clarity on ultimate liability. Much of the Ukraine liability remains a matter for the courts and it may take time before there is clarity for Lloyd’s as a whole.

The underwriting loss for the 2022 YOA was largely driven by the impact of aggressive GWP growth and a lower-than-usual level of earned premiums in the six months. This is forecast to normalise as earned premiums grow strongly in the second half and are better able to cover the higher expense base and strong claims reserving requirements. We have modestly increased our forecast return on capacity (RoC) for the 2020 and 2021 YOA, with higher investment income moderating the Ukraine reserving impact. The outlook for the underwriting result and RoCs for the 2023 YOA and thereafter remains very optimistic. We have upgraded our 2023 YOA RoC forecast from 12.8% to 13.4%.

Other than the two near-term and temporary blots on Helios’s results, the H122 performance provides very strong support for our investment outlook. The highlights are as follows:

132.5% growth in GWP, supported by the significant capacity increase in FY21.

£21.7m in expected pre-emptions, which will drive a 9.5% increase in capacity and could add £12m to the weighted average value of capacity (WAV) and lift NAV by a similar amount – we have allowed for a £7.6m uplift in our FY22 forecasts.

free working capital of £13m, moderating slightly to £11.2m by year-end as a weaker sterling affects capital requirements. This level is sufficient, with cash flow generation, to drive capacity growth of c 9% pa over the next four years.

21% increase in financial assets from FY21 to £186.5m.

£222.5m in financial assets and cash exposed to higher interest and yields – forecast to grow to £255m by year-end.

a very healthy 2021 YOA result – forecast to deliver an RoC of 9.0% by FY23.

Acquisition upside remains attractive

We explored Helios’s track record of delivering growth through acquisition in our initiation report published on 24 February 2022 and expanded on it in our FY21 results commentary of 31 May 2022. The H122 results provided an up-to-date view of working capital management and utilisation to fund capacity growth. Working capital at 30 June 2022 was £13m, which is a healthy position and is expected to remain around this level at the end of the year. We do not forecast any LLV acquisitions over the remainder of the year. We forecast Helios to be well positioned to ramp up LLV acquisitions from organic working capital generation, including an increased contribution from investment income, in FY23, driving capacity growth by 8–10% to FY25.

However, as stated in our initiation report and highlighted by Helios in its FY21 results, the potential for tapping into the c £3bn capacity represented by LLVs is meaningful. Helios’s organic working capital generation will not be sufficient to fund an aggressive acquisitive strategy in this attractive space, which will only be possible if the company is able to raise further capital and, on the back of this, increase its gearing and use of excess of loss agreements.

Our sensitivity calculations show that raising capital at levels above its NAV will be very value enhancing for Helios. Current share price is approaching a 7% premium to the H122 NAV of 149p/share.

Financials

Exhibit 1: Helios’s segmental forecasts and key metrics

£m

FY20

FY21

H122

FY22e

FY23e

FY24e

FY25e

Capacity (for deployment in the next year)

110.4

232.8

254.4

254.5

274.4

300.4

324.7

Capacity added through acquisitions

10.9

34.9

0.0

0.0

15.3

21.9

21.0

Key parent company assets

 

 

 

 

 

 

 

FAL (required capital)

19.7

43.6

58.8

62.5

56.1

52.2

56.6

WAV (intangible assets)

30.8

59.8

59.8

68.5

77.5

89.5

100.5

Free working capital

5.0

16.2

13.0

11.2

12.9

14.3

13.7

Key syndicate assets

 

 

 

 

 

 

 

Insurance assets

65.6

110.3

127.6

172.9

230.9

266.6

311.8

Equity (members' balances at Lloyd's)

(5.7)

(3.5)

(6.9)

(5.0)

9.0

22.4

27.4

Group NAV (syndicate plus parent equity)

18.9

46.6

40.9

44.4

50.1

56.5

61.1

Syndicate level results*

GWP

76.1

134.6

124.1

248.1

284.4

289.3

312.5

Net earned premiums

55.7

92.7

60.0

148.5

202.5

205.9

222.4

Claims

(37.9)

(54.1)

(35.0)

(87.7)

(111.3)

(108.1)

(116.1)

Expenses

(19.5)

(32.9)

(21.7)

(46.0)

(68.4)

(70.2)

(75.8)

Underwriting result

(1.7)

5.7

3.3

14.8

22.8

27.6

30.5

Investment income on financial assets

2.4

0.0

(3.6)

(7.9)

9.0

11.3

13.0

Quota share reinsurance

(0.1)

(2.3)

(0.4)

(2.9)

(8.6)

(9.0)

(10.2)

Underwriting Operating result

0.6

3.4

(0.7)

4.0

23.2

29.9

33.3

Parent level results

 

 

 

 

 

 

 

Reinsurance income**

0.1

0.2

0.7

0.8

1.7

2.4

2.9

Investment income on FAL

1.6

1.2

0.1

0.6

1.7

2.1

2.6

Stop loss costs

(1.1)

(1.9)

(1.2)

(2.5)

(2.7)

(3.0)

(3.2)

Operating costs

(2.0)

(3.6)

(2.4)

(4.0)

(3.3)

(3.4)

(3.5)

Other***

1.2

(0.1)

0.0

(0.0)

(1.0)

(1.2)

(1.1)

Combined pre-tax profit

0.3

(0.6)

(3.4)

(1.0)

19.6

26.9

31.0

Tax

(0.0)

0.2

(0.5)

0.3

(4.7)

(6.4)

(7.4)

Profit after tax

0.3

(0.4)

(3.9)

(0.8)

14.9

20.5

23.6

WAV revaluation after tax

4.0

5.4

(0.3)

8.2

1.8

1.9

2.1

Total comprehensive income

4.3

4.9

(3.9)

7.4

16.7

22.5

25.7

NAV/share (p)

150.8

157.0

148.6

166.5

188.2

215.3

238.4

WAV/share (p)

93.4

88.2

88.2

101.0

114.3

132.0

148.2

EPS (p)

1.6

(0.8)

(5.4)

(1.1)

21.9

30.1

34.6

DPS (p)

3.0

3.0

0.0

3.0

6.0

14.8

17.0

Capacity growth

59.8%

110.9%

67.9%

9.3%

7.8%

9.5%

8.1%

EPS growth

(93.8%)

N/A

N/A

N/A

N/A

37.3%

14.9%

RONAV/share

1.0%

(0.5%)

(7.1%)

(0.7%)

12.9%

15.7%

15.8%

RONAV/share plus WAV revaluations

(4.9%)

5.5%

N/A

6.9%

14.8%

17.6%

17.6%

Group insurance ratios****

 

 

 

 

 

 

 

Claims ratio

69.9%

64.5%

59.5%

61.2%

58.1%

55.2%

54.8%

Expense ratio

43.0%

43.3%

41.2%

36.9%

39.0%

39.5%

39.4%

Combined ratio

112.9%

107.8%

100.7%

98.1%

97.1%

94.8%

94.3%

Underwriting portfolio insurance ratios*****

 

 

 

 

 

 

 

Claims ratio

68.0%

58.4%

58.4%

59.0%

55.0%

52.5%

52.2%

Expense ratio

35.0%

35.5%

36.1%

31.0%

33.8%

34.1%

34.1%

Combined ratio

103.1%

93.9%

94.5%

90.0%

88.8%

86.6%

86.3%

RoC (closed YOA)

(0.2%)

3.3%

N/A

1.4%

9.0%

12.4%

13.4%

Year 3 (accounting year)

4.7%

6.1%

N/A

1.6%

7.2%

6.2%

5.9%

Year 2 (previous year)

4.2%

1.3%

N/A

4.4%

5.8%

7.6%

6.9%

Year 1 (underwriting year)

(9.0%)

(4.2%)

N/A

(4.6%)

(4.0%)

(1.4%)

0.5%

Source: Helios, Edison Investment Research. Note: *Syndicate results before pre-acquisition and other parent items and after quota share reinsurance. **Quota share fees & profit commission. ***Goodwill on bargain purchase and pre-acquisition impact. ****Using consolidated premiums (after pre-acquisitions impact) and including parent items. *****Using syndicate excluding pre-acquisitions and parent impacts. Syndicate revenue is higher than consolidated revenue, but so are claims and expenses (pre acquisition impact).

Driven by negative investment income in H122, which is expected to continue in H222 as well as the Ukraine impact on the 2022 YOA underwriting result, we have cut our EPS forecast from 7.2p to a loss of 1.1p , but increased our forecast NAV/share from 165.4p to 166.5p, with a pre-emption revaluation and a reversal of the deferred tax charge in FY21 (with the decision to raise corporate tax rate having been scrapped), providing other comprehensive income offsets to the impact of lower EPS.

We have lifted our FY23 EPS by 18.5% to 21.9p, driven by higher forecast investment income on the back of higher interest rates and yields. FY24 and FY25 EPS have been lifted by 6.5% and 7% respectively on the expectation of higher investment income. We forecast RoC for the 2021 YOA of 9.0%, rising to 12.4% for 2022 YOA and 13.4% for 2023. We forecast RONAV of 12.9% in FY23, rising to 15.8% by FY25. Including revaluations on the uptake of pre-emption capacity, the returns are 14.8% in FY23, rising to 17.6% in FY25.

For the purposes of our valuation, we look at an average RONAV from FY23 to FY25 and exclude revaluations. This results in an average 14.6% return, which we use in our RONAV versus P/NAV valuation.

Valuation: An over-the-cycle return approach

Our base case valuation of 240p/share uses a 14.6% over-the-cycle RONAV, derived as the average return forecast from FY23 to FY25. This is a 7% increase on our previous valuation of 225p/share, supported by a much more optimistic outlook for investment income, which is expected to boost operating margins and RONAV.

We have increased our cost of equity to 10.5% based on a risk-free rate of 4.0% (up from 1.9%), a risk premium of 6.5% and a beta of 1x.

Exhibit 2: Current valuation

FY20

FY21

FY22e

FY23e

FY24e

FY25e

Over the cycle valuation (p)

240

 

 

 

 

 

EPS (p)

1.6

(0.8)

(1.1)

21.9

30.1

34.6

DPS (p)

3.0

3.0

3.0

6.0

14.8

17.0

NAV/share (p)

150.8

157.0

166.5

188.2

215.3

238.4

Valuation-implied P/E (x)

150.9

(319.1)

(212.7)

11.0

8.0

6.9

Valuation-implied dividend yield (%)

1.2%

1.2%

1.2%

2.5%

6.2%

7.1%

NAV multiple (x)

1.57

1.51

1.44

1.28

1.12

1.01

Source: Helios, Edison Investment Research

Our fair value for Helios is at a 1.44x multiple of its FY22 forecast NAV of 166.5p/share and at a 50% premium to the current share price. The valuation is not well supported by expected FY22 EPS or dividends but, once the improved underwriting conditions start to emerge from FY23, the forward earnings multiple implied by our valuation is attractive at 11.0x and declines rapidly to 6.9x in FY25. Similarly, the dividend yield becomes more attractive from FY23.

Exhibit 3: Peer group P/NAV and dividend yield comparison

Source: Refinitiv, Helios, Edison Investment Research. Note: Priced at 28 May 2022. Helios’s NAV includes WAV at fair value, while NAV of peers does not.

While our valuation for Helios indicates a relative value on an implied forward earnings and NAV multiple basis, the company far undershoots the peer group on dividend yield. This is because Helios chooses to retain most of its earnings to fund capacity growth.

Exhibit 4: Financial summary

2020

2021

2022e

2023e

2024e

2025e

Accounts: IFRS, year-end: December, £’000s

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue*

52,594

70,615

136,563

191,656

194,296

212,365

Net insurance claims and loss adjustment expenses

(51,996)

(70,149)

(134,815)

(170,725)

(166,445)

(180,289)

Gross Profit

598

466

1,748

20,930

27,851

32,075

EBITDA

(924)

(1,864)

(1 027)

18,613

25,476

29,641

Operating profit (before amort. and excepts.)

(924)

(1,864)

(1 027)

18,613

25,476

29,641

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

1,260

1,219

0

974

1,401

1,342

Other

(1,522)

(2,330)

(2,775)

(2,317)

(2,375)

(2,434)

Operating Profit

336

(645)

(1,027)

19,587

26,877

30,983

Net Interest

Profit Before Tax (norm)

(924)

(1,864)

(1,027)

18,613

25,476

29,641

Profit Before Tax (FRS 3)

336

(645)

(1,027)

19,587

26,877

30,983

Tax

(35)

211

257

(4,653)

(6,369)

(7,410)

Profit After Tax (norm)

(959)

(1,653)

(770)

13,960

19,107

22,231

Profit After Tax (FRS 3)

301

(434)

(770)

14,934

20,508

23,572

Average Number of Shares Outstanding (m)

25.3

50.4

67.8

67.8

67.8

67.8

EPS - normalised (p)

1.6

(0.8)

(1.1)

21.9

30.1

34.6

EPS - normalised fully diluted (p)

1.6

(0.7)

(1.1)

21.5

29.6

34.0

EPS - (IFRS) (p)

1.6

(0.7)

(1.1)

21.5

29.6

34.0

Dividend per share (p)

3.0

3.0

3.0

6.0

14.8

17.0

Gross Margin (%)

1.1%

0.7%

1.3%

10.9%

14.3%

15.1%

EBITDA Margin (%)

(1.8%)

(2.6%)

(0.8%)

9.7%

13.1%

14.0%

Operating Margin (before GW and except.) (%)

(1.8%)

(2.6%)

(0.8%)

9.7%

13.1%

14.0%

BALANCE SHEET

Fixed Assets

220,937

380,720

573,025

655,618

695,020

774,495

Intangible Assets

31,601

60,890

68,485

77,507

89,477

100,487

Tangible Assets

104,059

165,986

269,090

291,103

286,756

305,635

Investments

85,277

153,844

235,450

287,009

318,787

368,373

Current Assets

8,495

24,624

19,023

23,599

26,752

28,416

Stocks

0

0

0

0

0

0

Debtors

0

0

0

0

0

0

Cash

8,495

24,624

19,023

23,599

26,752

28,416

Other

0

0

0

0

0

0

Current Liabilities

7,293

4,699

20,169

20,686

21,254

21,880

Creditors

3,293

4,699

5,169

5,686

6,254

6,880

Short term borrowings

4,000

0

15,000

15,000

15,000

15,000

Long Term Liabilities

171,590

293,156

459,009

530,957

554,559

619,401

Long term borrowings

0

0

0

0

0

0

Other long-term liabilities

171,590

293,156

459,009

530,957

554,559

619,401

Net Assets

50,549

107,489

112,871

127,574

145,958

161,630

CASH FLOW

Operating Cash Flow

(11,629)

(16,350)

(18,824)

23,741

31,330

35,313

Net Interest

(1,474)

(1,566)

4,584

(5,911)

(7,825)

(9,113)

Tax

(312)

(675)

257

(4,653)

(6,369)

(7,410)

Capex

(186)

(2,983)

0

835

1,402

2,129

Acquisitions/disposals

2,889

(9,880)

(4,584)

(7,402)

(11,318)

(9,225)

Financing

13,170

49,601

15,000

0

0

0

Dividends

0

(2,018)

(2,034)

(2,034)

(4,067)

(10,029)

Net Cash Flow

2,458

16,129

(5 601)

4,576

3,153

1 664

Opening net debt/(cash)

4,037

4,495

24,624

4,023

8,599

11,752

HP finance leases initiated

0

0

0

0

0

0

Change in borrowings

(2,000)

4,000

(15,000)

0

0

0

Closing net debt/(cash)

4,495

24,624

4,023

8,599

11,752

13,416

Source: Helios, Edison Investment Research. Note: *Shown after pre-acquisition impact and parent reinsurance result, investment income, costs and other items (see Exhibit 1 for a segmental view of Syndicate result and Parent result).


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This report has been commissioned by Helios Underwriting and prepared and issued by Edison, in consideration of a fee payable by Helios Underwriting. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Helios Underwriting and prepared and issued by Edison, in consideration of a fee payable by Helios Underwriting. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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