Understanding Helios’s new disclosure, strategy and outlook
An investment company with unique exposure to Lloyd’s
Helios Underwriting is an AIM-listed investment company with a diversified portfolio
of Lloyd’s syndicate assets. It has a small but focused team led by Louis Tucker,
who assumed the role of CEO in October 2025. He brings over 20 years of Lloyd’s experience,
including as managing director of Arch Managing Agency. Following a period of expansion,
Helios has spent the past year consolidating its portfolio, driving expense efficiencies
and distributing cash to shareholders via growing dividends and share buybacks.
The Helios portfolio is made up of direct and indirect interests in c 50 limited liability
vehicles (LLVs), limited liability partnerships (LLPs), management agents and other
corporate partners, representing Lloyd’s underwriting capacity (capacity) of £467m. This capacity is made up of £218m in freehold capacity, where Helios has a permanent stake and participates in all currently open and future
years of account, and £249m in tenancy capacity, which the company has temporary access to and participates in. Helios cedes c £163.5m
of the capacity using quota share (QS) reinsurance and by leasing to third parties,
resulting in c £303.5m of retained capacity.
At H125, Helios had funds at Lloyd’s (FAL) of £67.9m, down from £72.2m in FY24, which forms part of its balance sheet equity
investments at fair value through profit and loss (FVTPL assets) of £156.6m. Capacity value, which also forms part of the FVTPL assets, had remained unchanged at £68.3m as no
capacity was added or acquired during H125. The company’s 30 September 2025 NAV update
pointed to a modest increase in capacity value to £69.7m, which may be further revalued
at year-end, allowing for the 2026 YOA capacity that was recently announced. The company’s
H125 earnings of £4.4m included net gains on financial assets at FVTPL (FVTPL gains)
of £4.7m and benefited from foreign exchange movements of £5.0m due to the impact
of the weaker dollar on Helios’s $75m of US debt.
There was no dividend income from subsidiaries in H125 (this is expected to become
an important feature from FY25), but the company’s cash balances increased to £49.6m
owing to a reduction in the money due from related parties. EPS of 6.2p was modest,
with underwriting profit recognition weighted to H2, resulting in an NAV of 238p per
share versus 243p per share at FY24, representing a modest annualised return on NAV
(RoNAV) of 5%, including an FY24 dividend of 10p per share. The company’s NAV at 30
September 2025 of 248p per share grew from 30 June 2025, thanks to a £0.7m increase
in its capacity value and £5.7m in profit during the quarter.
We forecast healthy profit recognition during H225 and into FY26 based on our expectation
of syndicate mid-point development. Helios releases these mid-points every quarter from Q5 to Q12, depending on the YOA.
Based on the close-out of the 2022 YOA and the expected close-out of the 2023 YOA,
we forecast strong syndicate dividend income, starting in FY25, supporting shareholder
distributions, including our dividend forecasts. On 29 September 2025, Helios proposed
a tender offer to return up to £7.3m to shareholders at 238p per share.
Change in accounting treatment and profit recognition
Helios changed its accounting framework for its financial statements from UK GAAP
to IFRS as at FY24, which means that it is now accounted for as an investment company,
where previously it was an insurance holding company. After some initial teething
issues, the new standard started to settle with the company’s H125 disclosure, and
we expect it to fully mature when the company releases its FY25 results. The new disclosure
is less detailed than that under UK GAAP, especially as the underlying syndicate investments
are no longer consolidated. While this may leave insurance specialists unsatisfied,
it may aid the understanding of generalist investors, especially those who are accustomed
to other quoted investment companies. Readers of Helios’s accounts and disclosures
will be become more dependent on the company and its syndicates’ view of ultimate
underwriting profits, profit recognition and the value placed on capacity. In the
context of this increased dependence, Helios aims to provide more regular disclosure,
including on quarterly syndicate mid-points, capacity, NAV and, by implication, earnings.
We have faced a number of challenges with historical reconciliations between the old
UK GAAP basis and the new IFRS basis, especially as it relates to the determination
of earnings and the building blocks for NAV. While the FY24 financial statements included
restatements to reconcile UK GAAP parent company statements to the new investment
company statements, the bridge to the old, consolidated statements (which formed the
basis for our NAV and RoNAV forecasts, as well as our previous valuation) has proven
to be challenging. This was particularly so as it relates to FY23 and prior years
and has been exacerbated by further changes in underwriting profit recognition from
H125. We have dealt with these challenges by considering FY24 as the new base for
forecasting and by changing our forecasting methodology and approach to align with
the new disclosure of the company.
There have been key changes to P&L and balance sheet disclosure, with the most prominent
changes being:
- all syndicate-related balance sheet items (financial assets, technical provisions,
reinsurance assets etc), including those related to FAL and capacity value (referred
to in our previous research as the weighted average value, WAV), have been rolled
into a single asset, namely ‘equity investments at FVTPL’ (FVTPL assets); and
- the detailed three-year accounts for the open YOAs, as well as consolidated P&L items
such as GWP, reinsurance, changes in provisions, syndicate investment and other income,
insurance claims, syndicate operating expenses and QS adjustment, have been included
in a single P&L item, namely ‘net gains on financial assets at FVTPL’ (FVTPL gains).
The FVTPL gain during a particular period is the difference between the FVTPL assets
at the end of the period and the FVTPL assets at the beginning of the period. As mentioned
above, these two single disclosures encompass a number of moving parts, which we have
estimated historically and forecast explicitly going forward.
| Exhibit 1: Build-up of FVTPL gains – FY24 estimated disaggregation |
 |
| Source: Helios Underwriting accounts, Edison Investment Research |
Helios disclosed FVTPL gains of £34.5m for FY24, and we were able to derive change
in FAL and capacity sales and revaluation from supplemental asset disclosure, while
a number of the other items were based on transitional and other supplemental disclosure.
There were no syndicate dividends over FY24, but when they do occur, they will represent
a negative value within the FVTPL change build-up with an equal and opposite positive
item in the P&L.
| Exhibit 2: Composition of FVTPL asset, based on FY24 estimated disaggregation |
 |
| Source: Helios Underwriting accounts, Edison Investment Research |
The FVTPL asset consists of three main parts: the FAL, the capacity value and retained
earnings. These three items are directly correlated with items in the FVTPL change:
a) change in FAL; b) capacity sales and revaluation; and c) all other items related
to retained earnings.
Key to forecasting EPS, NAV and dividends for Helios going forward is to forecast
FVTPL change and the resultant FVTPL asset. Both the FAL and the capacity value forecasts
are affected by our views on capacity growth, with the former affected by Lloyd’s
solvency requirements, reinsurance strategies in place and the pound sterling/dollar
exchange rate, while the latter is affected by the pricing observed in the Lloyd’s
capacity auctions.
Items such as fees from reinsurers, as well as other and investment income, are affected
by capacity growth as well as QS strategy, while the operating costs relate to certain
investment company activities. Stop-loss costs were a feature of the past but will
not continue. The main item driving the FVTPL gains is the underwriting results recognised,
which we unpack further below. The below sections also illustrate the development
of our forecasts from H125 based on the 30 September 2025 NAV update, which was released
by the company on 2 December 2025.
Underwriting result recognition and forecasting
Underwriting results for Lloyd’s syndicates take time to fully develop and to emerge
as earnings. A three-year accounting approach is followed for each YOA. Premiums are
largely received in the first year but earned over the first two years.
| Exhibit 3: Helios syndicate portfolio’s historical mid-point estimate development |
 |
| Source: Helios Underwriting mid-point estimates, Edison Investment Research. |
Claims are largely incurred in the first two years, but the trend is usually set by
the hurricane season and any other large claims in year one. Syndicates err on the
side of conservatism when estimating claims exposure and in raising technical provisions.
Expenses are usually quite evenly spread over the first two years. Further claims
development occurs in year three and by the end of the year, the YOA is closed out
by reinsuring any residual claims risk and determining the ultimate underwriting profit
for the YOA. There is almost always a release of claims provisions at the close-out
and this has consistently been the case for the Helios portfolio from the 2013 YOA
to the 2022 YOA. Syndicates start taking a view on the ultimate underwriting results
expected for a YOA from the fifth quarter (Q5) by producing best, worst and mid-point
estimates. These estimates are then updated every quarter thereafter until the YOA
closes out in Q12. The conservatism that syndicates employ in their accounting and
reserving approach is borne out by mid-point estimate development over time.
Exhibit 3 shows the actual mid-point estimate development for Helios syndicates for
all closed-out YOAs from 2013 to 2022 as well as the development for the open 2023
and 2024 YOAs. It is interesting to note the meaningful deterioration in ultimate
underwriting result from the 2014 YOA (15.5% of capacity) to the 2017 YOA (-4.8% of
capacity) and the subsequent recovery to 8.8% for 2022 as the underwriting cycle hardened,
with 2023 heading for a record close-out (we are forecasting 16.4%). An important
observation is that, except for 2017 and 2018, all mid-point estimates consistently
increased every quarter from Q8 and all YOAs, without exception, increased every quarter
from Q10 to Q12 (representing the close-out uplift discussed above). The average quarterly
observed mid-point increase has been 63bp and the average final year increase has
been 210bp. We have employed a 50bp per quarter mid-point increase in our forecasts.
Helios’s new accounting approach uses the syndicate mid-point estimates and the implied
ultimate underwriting result as a starting point for profit recognition. The cumulative
profit recognised in a particular period is calculated as:
the ultimate underwriting profit estimate (for each YOA) × a discounting factor × a recognition factor.
The recognition factor is aimed at spreading earnings over the three-year period,
while the discounting factor allows for the time value of money. We have made high-level
assumptions around the recognition profile, with modest recognition at the end of
year one of a YOA, gradually increasing over time until full recognition at the end
of year three for that YOA.
We calculate the underwriting profit recognised during a particular period as the
cumulative profit recognised at the end of the period minus the cumulative profit
recognised at the start of the period. The table below shows our forecasts for cumulative
underwriting profit recognised and in-period recognised underwriting profit for Helios
during our explicit forecast period. Our forecasts have been informed by the actual
H125 position, as well as our estimates for the nine months to September 2025 (9M25),
which have been based on the 30 September NAV (and specifically the Q325 profit of
£5.7m). This NAV disclosure contained unchanged retained capacity for the 2023 YOA
of £251.7m and 2024 YOA of £403.5m but delivered mid-point improvements for the 2023
YOA from 15.6% as at H125 to 16.1% and for the 2024 YOA from 8.0% as at H125 to 8.3%
(the latter being lower than our standard improvement assumption of 50bp per quarter).
| Exhibit 4: Forecast underwriting result recognition |
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| Source: Helios Underwriting accounts, Edison Investment Research. Note: *New recognition
approach from H125. **Estimate based on September 2025 NAV. |
In our forecasts, we have allowed for £332.6m of retained capacity deployed for the
2025 YOA, which is in line with the company’s disclosure. On 20 January 2026, Helios
published an update for its 2026 YOA portfolio, which included a reduction in gross
capacity from £491m to £467m. The company has indicated that the proportion of gross
capacity ceded for the 2026 YOA has increased from the c 32% for the 2025 YOA. Based
on an assumed 35% of capacity ceded for the 2026 YOA, we estimate a level of retained
capacity of £303.6m to be deployed in writing business. We allow for modest growth
in the deployed capacity to £309.6m for the 2027 YOA.
The 2025 YOA has been affected by the California wildfires earlier in the year but,
following a very benign hurricane season, indications are that experience will be
better than the 2024 YOA and could approach the very strong levels of the 2023 YOA.
We forecast a Q4 mid-point estimate of 10.0% for the 2025 YOA, which is 70bp higher
than for 2024 at the same time last year and 50bp lower than the 10.5% for the 2023
YOA two years ago. We then forecast a more modest starting mid-point forecasts for
FY26 (2026 YOA) of 8.5%, assuming a more normalised wildfire and hurricane environment,
before moderating to 7% in FY27 (2027 YOA), allowing for the impact of a softer premium
environment.
While there is a risk that underwriting performance could deteriorate more sharply
than our 2027 YOA forecast, especially if there are large unexpected claims and a
severe hurricane experience, we believe that the record 83% increase in Lloyd’s GWP
since 2020 positions the market very well to weather such events. We are cautiously
optimistic that the Lloyd’s underwriting down-cycle will be much shallower than the
2016 to 2020 cycle, with combined ratios potentially remaining below 100%.
From our forecast mid-point starting levels, we allow for a 50bp per quarter improvement
or 2% per year over a reporting year.
FVTPL asset, FVTPL change and subsidiary dividend
FVTPL change and dividends from subsidiaries are the main drivers of Helios’s total
P&L income, while total expenses mainly relate to the PLC cost structure. As mentioned
earlier, FVTPL change is directly related to FVTPL assets, with the latter being the
principal component of the company’s NAV. We have estimated the building blocks for
FVTPL asset and FVTPL change historically and have forecast these based on our understanding
of the Helios business, and this is presented in Exhibit 5.
Our forecasts for FY25 have allowed for the 30 September 2025 NAV update, taking into
account changes in freehold capacity and the capacity value included in the update,
as well as the increase in NAV as a result of profits during the quarter. Our FY26
forecasts allow for the announced 5% reduction in the 2026 YOA capacity to £467m (and
our estimate for retained capacity of £303.5m).
Over the remainder of our forecast period, we have not allowed for any meaningful
growth in Helios’s syndicate capacity as the company focuses on consolidating its
portfolio and returning cash to its shareholders. We have allowed for modest growth
in capacity from pre-emptions, amounting to 2.0% of starting capacity from FY26, following on from the 2.7% increase
in FY25 (from the NAV update). We have also not forecast any meaningful changes in
FAL, allowing for Lloyd’s solvency requirements to remain largely unchanged in the
medium term and for Helios to maintain its reinsurance strategy as far as both QS
and excess of loss reinsurance goes. The largely flat forecast FAL in FY25 is the
combination of a rise, due to the disclosed increase in freehold capacity, offset
by the impact of the weaker dollar during H125 (with much of the FAL being dollar
denominated).
We have taken a conservative view on capacity revaluation for FY25 and have largely
limited it to the disclosed revaluations included in the 30 September 2025 NAV update
(£1.2m). Thereafter, we have not allowed for any further capacity revaluations. While
a downward turn in the underwriting cycle could negatively affect capacity pricing
over time, the increased contribution to Lloyd’s GWP growth in H125 from new syndicates
could signal increased demand for capacity, at least in the medium term. Capacity
pricing at auction is a key development to monitor going forward as it could affect
NAV and RoNAV via the contribution from capacity value.
We have also not made any material assumptions around Helios’s participation in the
auctions or any further LLV acquisitions, assuming that it may be content to extract
value from the capacity that it currently has access to. Helios still has a very high
level of tenancy capacity and while this capacity carries a capital requirement (included
in FAL), it is not accounted for in its capacity value. In the recent YOA capacity
announcement, Helios reduced its tenancy capacity exposure from £320.4m to £254m (out
of £467m of gross capacity), which has increased its relative exposure to freehold
capacity from 35% for the 2025 YOA to 46% for the 2026 YOA. Helios may opt to further
increase this exposure to freehold capacity over time, which could have a positive
impact on capacity value. If such an increase in exposure to freehold capacity occurs
via LLV acquisitions (its recent YOA capacity announcement included the purchase of
two LLVs at £4.85m), it could increase its participation in strong pipeline profits
(eg from the 2024, 2025 and 2026 YOA). The potential increase in freehold capacity
going forward offers optionality to our forecasts and valuation.
| Exhibit 5: FVTPL asset and change forecast |
 |
| Source: Helios Underwriting accounts, Edison Investment Research. Note: *Historical
numbers estimated based on limited disclosure. **Estimated based on 30 September 2025
NAV disclosure. |
The main driver of the FVTPL change is the underwriting result recognised, which is
not disclosed by the company, but we have estimated it based on our mid-point assumptions
above. The largest contributor to this result on an annual basis is typically from
the YOA in its second year, due to the large assumed acceleration in recognition,
but the close-out year of account is also forecast to become increasingly important.
During FY25, we forecast a proportionally lower contribution from the very strong
2023 YOA due to: a) a large proportion already recognised in FY24 (based on a more
aggressive previous recognition profile); b) conservatism around the mid-point development
(this YOA could surprise on the upside); and c) the lower level of retained capacity
of £251.7m, versus £403.5m committed to the 2023 YOA and £332.6m to 2025. The net
effect is for a 6% increase in FY25, which accelerates sharply (+29.5%) in FY26 due
to higher capacity commitments, especially for the 2024 YOA, which is forecast to
close out strongly in the year, combined with a healthy outlook for the 2025 YOA.
Thereafter, we allow for the recently announced reduction in capacity and a softer
underwriting cycle manifesting in lower initial mid-point estimates and ultimate close-outs.
The other P&L items have not been disclosed in H125 and while not directly comparable
to FY24 due to a different recognition profile, have been calibrated after discussion
with management and we have made forecasts using our assumptions and understanding
of the business. Specifically, we have forecast a cessation of stop-loss reinsurance
as flagged by management, we allow for modest improvements in reinsurance fee income
on the back of modest capacity growth and slight decreases in other and investment
income as interest rates moderate in sub-inflationary growth in syndicate operating
costs (all from FY26 onwards). The 30 September 2025 NAV update did not include any
details on FVTPL asset or FVTPL change, but it did disclose profit for the quarter
of £5.7m, which (together with the updated capacity value) has been used to produce
the 9M25 column in the exhibit above. We have assumed no dividends from subsidiaries
during the quarter.
Tax has been forecast at the UK corporate tax rate of 25%, but from FY25 onwards,
we have offset total PLC expenses as Helios and the syndicates are expected to form
a tax group and there will be no tax paid or tax relief obtained at PLC level (both
FVTPL change and dividend from subsidiaries are tax-exempt at PLC level).
Helios has not reported any dividend income from syndicates since adopting the new
accounting standard but has seen a reduction in money due from related parties drive
an increase in cash and cash equivalents. This mechanism will change from FY25 with
syndicate profits (from closed YOAs) resulting in dividends from subsidiaries being
declared and explicitly disclosed in the P&L. These positive dividends in the P&L
will have an equal and opposite impact on the FVTPL change and the FVTPL asset. The
level of dividends will be driven by the close-out of YOAs as it is only once a close-out
occurs and the final underwriting result is fixed that cash will flow from the syndicates
to the holding company (Helios). We have therefore based our syndicate profit and
subsidiary dividend forecasts on our forecasts of the close-outs and have set the
amount to 90% of the ultimate close-out result. Based on our estimate of the 2022
YOA close-out in FY24, we forecast dividends of £19.9m in FY25, rising to £37.6m in
FY26 based on a strong forecast close-out for 2023 and then further to £39.2m in FY27.
As a result of these dividend flows, we expect the ‘retained earnings’ within the
FVTPL asset to reduce over our forecast period, resulting in a declining asset after
a peak in FY25, but with a commensurate build-up in holding company cash and cash
equivalents available for shareholder dividends and distributions.
Large cash deployment in the coming years
As a result of the large forecast syndicate dividends from FY25, supported by YOA
close-outs and underwriting result recognition from open years during our forecast
period, we project a very healthy build-up in Helios’s cash balances over the coming
years. In the light of the company’s updated strategy, which has been implemented
over the past year and is expected to be continued by the new CEO, we do not expect
this surplus cash to be deployed in the accumulation of capacity, as it was over the
period from FY19 to FY23 when gross capacity rose from £69.1m to £512.0m. As discussed
above, we see only modest growth from the current gross level of £467.0m (retained
capacity of c £303.5m). Instead of investing for growth, we expect that Helios will
deploy its surplus cash in debt repayment and shareholder distributions.
However, as flagged, it is possible that Helios could increase its exposure to freehold
capacity over time (either via LLV acquisitions or auctions) and this would require
the deployment of cash. As can be seen below, our cash and cash equivalents forecasts
are sufficiently high (especially for FY25) to allow Helios the freedom to do this,
without limiting its ability to repay debt, carry out buybacks or pay special dividends.
Below is an extract from our cash flow statement forecast, highlighting our expectations
for cash deployment.
