Last close As at 05/08/2026
GBP2.23
— 0.00 (0.00%)
Market capitalisation
GBP156m
Research: Financials
On 22 March, Helios Underwriting reported NAV for 31 December 2023 of 185p/share. This is broadly in line with our expectations and has not affected the forecasts in our update note published on 16 January. We maintain our valuation of 280p/share, which is at a 51% premium to the 31 December 2023 NAV. Since our last publication, Helios’s share price has risen by 22% (up 33% in the last month). This strong performance is well supported by the underlying fundamentals and outlook (as highlighted in our research) and was delivered despite the conclusion of Helios’s share buyback in January. Share overhang pressure appears to have subsided, although one of Helios’s key shareholders, Hudson Structured Capital Management (HSCM), may still be a natural seller of Helios shares due to internal issues.
Helios Underwriting |
Strong share price on supportive fundamentals |
31 December 2023 |
Insurance |
4 April 2024 |
Share price performance
Business description
Next events
Analyst
Helios Underwriting is a research client of Edison Investment Research Limited |
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On 22 March, Helios Underwriting reported NAV for 31 December 2023 of 185p/share. This is broadly in line with our expectations and has not affected the forecasts in our update note published on 16 January. We maintain our valuation of 280p/share, which is at a 51% premium to the 31 December 2023 NAV. Since our last publication, Helios’s share price has risen by 22% (up 33% in the last month). This strong performance is well supported by the underlying fundamentals and outlook (as highlighted in our research) and was delivered despite the conclusion of Helios’s share buyback in January. Share overhang pressure appears to have subsided, although one of Helios’s key shareholders, Hudson Structured Capital Management (HSCM), may still be a natural seller of Helios shares due to internal issues.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
148.3 |
(5.2) |
(4.9) |
3.0 |
N/A |
1.7 |
12/23e |
213.0 |
14.9 |
14.7 |
6.0 |
12.2 |
3.3 |
12/24e |
332.1 |
25.8 |
26.2 |
12.8 |
6.9 |
7.1 |
12/25e |
441.9 |
37.0 |
37.6 |
18.4 |
4.8 |
10.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
9p/share NAV increase in Q423
Helios reported a 9p/share increase in its Q423 NAV to 185p/share at 31 December 2023, which is broadly in line with our expectation of 187p/share. This increase was supported by profitable underwriting and investment income, as well as a meaningful increase in underwriting capacity (as highlighted in our previous research). Our forecasts and our valuation of 280p/share remain unchanged.
33% share price increase over the last month
Helios’s share price has increased by 33% in the last month from 135.5p/share to 180p/share (up 22% from our previous research), despite the conclusion of its buyback programme in January. This rise is well supported by fundamentals and was delayed, in our opinion, as a result of share overhangs, initially from Odey Asset Management in 2023 and then from HSCM during the latter part of 2023 and into 2024 (a forced sell-off from c 12.5m shares to c 9.3m shares over 2023, likely predicated by the failure of one of HSCM’s key investments, Florida-based Southern Fidelity Insurance Company). Despite the recent respite, we note that HSCM could remain a natural seller of its remaining c 12% stake in Helios, which could create opportunities for new investors in the company.
Valuation: Maintained at 280p/share
Helios’s NAV update supports our forecasts and valuation of 280p/share. Our valuation is at a 51% premium to the updated 31 December 2023 NAV of 185p/share and at a 56% premium to the current share price. Our valuation is supported by our forecast return on NAV (RONAV) of 13.6% in FY24 and 16.7% in FY25.
Fundamentals are very supportive
In our 16 January 2024 note, we discussed numerous positive and supportive tailwinds for Helios. These included:
■
a 61% increase in FY24 expected underwriting capacity to £501.8m versus 30 June 2023;
■
a 62% year-on-year increase in retained capacity to £387m;
■
Helios introducing an innovative mechanism to ‘rent’ up to £55m of its £501.8m FY24 capacity to other third parties under a new ‘rental capacity’ initiative with Argenta Private Capital;
■
the execution of a material share buyback programme (2.3m shares at an average price of 143p/share during 2023); and
■
an increase in its annual base dividend from 3p to 6p to be paid in 2024, with this doubling of the base dividend potentially further supplemented by special dividends.
Since the end of 2023, Helios has concluded its share buyback programme by purchasing a further 0.8m shares at an average share price of 150p/share. In addition, on 22 March it reported NAV for 31 December 2023 of 185p/share. This is broadly in line with our expectation of 187p/share and has not affected the forecasts published in our last update note.
Valuation: An over-the-cycle return approach
Our base case valuation of 280p/share uses a 14.6% over-the-cycle RONAV, which is in line with our previous research. Due to the published capacity fund revaluations and uplift in 30 September 2023 NAV, we previously lifted our year-end NAV forecast from 170.5p/share to 187p/share, which is broadly in line with the 185p/share reported on 22 March 2024.
Exhibit 1: Current valuation
FY22 |
FY23e |
FY24e |
FY25e |
|
Over the cycle valuation (p) |
280 |
|
|
|
EPS (p) |
(4.9) |
14.7 |
26.2 |
37.6 |
DPS (p) |
3.0 |
6.0 |
12.8 |
18.4 |
NAV/share (p) |
151.8 |
187.1 |
217.4 |
254.0 |
Valuation-implied P/E (x) |
N/A |
19.0 |
10.7 |
7.5 |
Valuation-implied dividend yield (%) |
1.1 |
2.1 |
4.6 |
6.5 |
NAV multiple (x) |
1.82 |
1.48 |
1.28 |
1.10 |
Source: Helios Underwriting, Edison Investment Research
Our fair value for Helios is at a 56% premium to the current share price. While it is reasonably supported by expected FY23 EPS (P/E of 19x) and modestly so by dividends (2.1% dividend yield), the valuation quickly moves into very attractive territory on a forward basis, with the P/E multiple falling to 7.5x in FY25 and the dividend yield rising to 6.5%.
Financials
Our financial forecasts are unchanged from our previous research but are included below for completeness. We reiterate the impressive 77.7% increase we forecast for FY24 EPS, followed by a further 42.2% growth forecast for FY25. In both cases, this is a factor of healthy forecast underwriting performance (combined ratios below 90%), supported by growing reinsurance income and investment income. These strong forecasts drive our healthy RONAV forecasts of 13.6% in FY24 and 16.7% in FY25. The healthy outlook demonstrated in the exhibits below provides strong support for our 280p/share valuation.
Exhibit 2: Helios’s segmental forecasts and key metrics
£m |
FY21 |
FY22 |
FY23e |
FY24e |
FY25e |
Capacity (for deployment in the next year) |
232.8 |
296.6 |
449.8# |
557.8 |
624.7 |
Capacity added through acquisitions |
34.9 |
5.7 |
7.4 |
9.0 |
11.2 |
Capacity added through pre-emptions |
6.1 |
36.0 |
14.7 |
27.0 |
33.5 |
Tenancy capacity added |
58.0 |
38.9 |
124.6# |
72.0 |
22.3 |
Retained capacity |
171.2 |
238.3 |
328.3# |
379.2 |
406.0 |
Key parent company assets |
|||||
FAL (required capital) |
43.6 |
73.8 |
64.2## |
90.5 |
118.2 |
WAV (intangible assets) |
59.8 |
60.0 |
82.4 |
95.4 |
111.6 |
Free working capital |
16.2 |
10.5 |
52.3 |
36.6 |
20.4 |
Key syndicate assets |
|||||
Insurance assets |
110.3 |
152.2 |
294.3 |
444.0 |
574.0 |
Equity (members' balances at Lloyd's) |
(3.5) |
(5.1) |
6.7 |
12.3 |
19.9 |
Group NAV (syndicate plus parent equity) |
46.6 |
55.7 |
56.0 |
65.0 |
75.9 |
Syndicate level results* |
|||||
GWP |
134.6 |
250.9 |
327.6 |
477.0 |
605.9 |
Net earned premiums |
92.7 |
156.6 |
216.6 |
335.4 |
448.9 |
Claims |
(54.1) |
(96.8) |
(119.1) |
(185.8) |
(249.8) |
Expenses |
(32.9) |
(54.2) |
(75.8) |
(115.8) |
(151.6) |
Underwriting result |
5.7 |
5.6 |
21.7 |
33.8 |
47.5 |
Investment income on financial assets |
0.0 |
(3.5) |
8.9 |
13.4 |
17.9 |
Quota share reinsurance |
(2.3) |
(2.0) |
(8.3) |
(9.7) |
(14.9) |
Underwriting Operating result |
3.4 |
0.1 |
22.4 |
37.5 |
50.5 |
Parent level results |
|||||
Reinsurance income** |
0.2 |
0.6 |
1.2 |
2.5 |
3.4 |
Investment income on FAL |
1.2 |
0.6 |
1.8 |
5.1 |
5.7 |
Stop loss costs |
(1.9) |
(1.3) |
(4.2) |
(7.4) |
(10.3) |
Operating costs*** |
(3.6) |
(5.2) |
(5.9) |
(10.6) |
(10.8) |
Pre-acquisition impact |
(0.1) |
(0.0) |
(0.5) |
(1.3) |
(1.6) |
Combined pre-tax profit |
(0.6) |
(5.2) |
14.9 |
25.8 |
37.0 |
Tax |
0.2 |
1.9 |
(3.7) |
(6.5) |
(9.2) |
Profit after tax |
(0.4) |
(3.3) |
11.2 |
19.4 |
27.7 |
WAV revaluation after tax |
5.4 |
2.0 |
13.9 |
7.1 |
8.8 |
Total comprehensive income |
4.9 |
(1.3) |
25.0 |
26.4 |
36.5 |
NAV/share (p) |
157.0 |
151.8 |
187.1 |
217.4 |
254.0 |
WAV/share (p) |
88.2 |
78.7 |
111.4 |
129.3 |
151.2 |
EPS (p) |
(0.8) |
(4.9) |
14.7 |
26.2 |
37.6 |
DPS (p) |
3.0 |
3.0 |
6.0 |
12.8 |
18.4 |
Capacity growth |
110.9% |
27.4% |
51.7% |
24.0% |
12.0% |
EPS growth |
(147.3%) |
546.7% |
(403.0%) |
77.7% |
43.3% |
RONAV/share |
(0.5%) |
(3.1%) |
9.4% |
13.6% |
16.7% |
RONAV/share plus WAV revaluations |
5.5% |
(1.2%) |
25.0% |
19.2% |
22.6% |
Group insurance ratios**** |
|||||
Claims ratio |
64.5% |
63.7% |
58.4% |
58.5% |
59.1% |
Expense ratio |
43.3% |
40.9% |
42.1% |
42.2% |
40.2% |
Combined ratio |
107.8% |
104.6% |
100.5% |
100.7% |
99.3% |
Underwriting portfolio insurance ratios***** |
|||||
Claims ratio |
58.4% |
61.8% |
55.0% |
55.4% |
55.6% |
Expense ratio |
35.5% |
34.6% |
35.0% |
34.5% |
33.8% |
Combined ratio |
93.9% |
96.4% |
90.0% |
89.9% |
89.4% |
RoC (closed YOA) |
3.3% |
3.6% |
6.3% |
14.3% |
16.0% |
Year 3 (accounting year) |
6.1% |
3.9% |
5.8% |
9.2% |
7.5% |
Year 2 (previous year) |
1.3% |
4.4% |
4.6% |
9.1% |
8.8% |
Year 1 (underwriting year) |
(4.2%) |
(4.6%) |
(4.0%) |
(4.0%) |
(0.3%) |
Source: Helios Underwriting accounts, Edison Investment Research. Notes: *Syndicate results before pre-acquisition/other parent items and after QS. **QS and ‘rental capacity’ fees and profit commission. ***Including finance costs. ****Using consolidated premiums (after pre-acquisition impact) and including parent items. *****Using syndicate excluding pre-acquisitions and parent impacts. Syndicate revenue higher than consolidated revenue, but so are claims and expenses (pre-acquisition impact). #Assumes £52m of tenancy capacity only active in H124 (reduced contribution to FY24 UW results and capital requirements). ##Allows for FAL deferral and elevated syndicate solvency credits.
Exhibit 3: Financial summary
2022 |
2023e |
2024e |
2025e |
|
Accounts: IFRS, year-end 31 December, £’000s |
||||
PROFIT & LOSS |
||||
Revenue* |
148,345 |
212,958 |
332,089 |
441,885 |
Net insurance claims and loss adjustment expenses |
(149,667) |
(193,975) |
(298,865) |
(397,328) |
Gross Profit |
(1,322) |
18,984 |
33,223 |
44,557 |
EBITDA |
(5,169) |
14,872 |
25,816 |
36,996 |
Operating profit (before amort. and excepts.) |
(5,169) |
14,872 |
25,816 |
36,996 |
Intangible Amortisation |
0 |
0 |
0 |
0 |
Exceptionals |
0 |
0 |
0 |
0 |
Other |
(3,847) |
(4,111) |
(7,407) |
(7,561) |
Operating Profit |
(5,169) |
14,872 |
25,816 |
36,996 |
Net Interest |
0 |
0 |
0 |
0 |
Profit Before Tax (norm) |
(5,169) |
14,872 |
25,816 |
36,996 |
Profit Before Tax (FRS 3) |
(5,169) |
14,872 |
25,816 |
36,996 |
Tax |
1,852 |
(3,718) |
(6,454) |
(9,249) |
Profit After Tax (norm) |
(3,317) |
11,154 |
19,362 |
27,747 |
Profit After Tax (FRS 3) |
(3,317) |
11,154 |
19,362 |
27,747 |
Average Number of Shares Outstanding (m) |
72.0 |
75.1 |
73.9 |
73.8 |
EPS - normalised (p) |
(4.9) |
14.7 |
26.2 |
37.6 |
EPS - normalised fully diluted (p) |
(4.9) |
14.5 |
25.7 |
36.7 |
EPS - (IFRS) (p) |
(4.9) |
14.5 |
25.7 |
36.7 |
Dividend per share (p) |
3.0 |
6.0 |
12.8 |
18.4 |
Gross Margin (%) |
(0.9%) |
8.9% |
10.0% |
10.1% |
EBITDA Margin (%) |
(3.5%) |
7.0% |
7.8% |
8.4% |
Operating Margin (before GW and except.) (%) |
(3.5%) |
7.0% |
7.8% |
8.4% |
BALANCE SHEET |
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Fixed Assets |
567,249 |
767,015 |
1,115,996 |
1,445,049 |
Intangible Assets |
61,434 |
83,852 |
96,900 |
113,079 |
Tangible Assets |
279,803 |
324,684 |
484,597 |
639,777 |
Investments |
226,012 |
358,479 |
534,498 |
692,193 |
Current Assets |
25,300 |
77,910 |
71,300 |
59,714 |
Stocks |
0 |
0 |
0 |
0 |
Debtors |
0 |
0 |
0 |
0 |
Cash |
25,300 |
77,910 |
71,300 |
59,714 |
Other |
0 |
0 |
0 |
0 |
Current Liabilities |
22,488 |
8,237 |
9,060 |
9,967 |
Creditors |
7,488 |
8,237 |
9,060 |
9,967 |
Short term borrowings |
15,000 |
0 |
0 |
0 |
Long Term Liabilities |
452,883 |
696,793 |
1,016,330 |
1,305,834 |
Long term borrowings |
0 |
60,000 |
60,000 |
60,000 |
Other long-term liabilities |
452,883 |
636,793 |
956,330 |
1,245,834 |
Net Assets |
117,178 |
139,896 |
161,905 |
188,963 |
CASH FLOW |
||||
Operating Cash Flow |
(24,798) |
13,088 |
11,661 |
16,289 |
Net Interest |
(2,870) |
(6,119) |
(12,202) |
(16,870) |
Tax |
(166) |
(3,718) |
(6,454) |
(9,249) |
Capex |
(696) |
(392) |
0 |
0 |
Acquisitions/disposals |
3,459 |
7,038 |
4,823 |
7,721 |
Financing |
27,781 |
45,000 |
0 |
0 |
Dividends |
(2,034) |
(2,287) |
(4,439) |
(9,476) |
Net Cash Flow |
676 |
52,610 |
(6,611) |
(11,586) |
Opening net debt/(cash) |
24,624 |
10,300 |
17,910 |
11,300 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
Change in borrowings |
(15,000) |
(45,000) |
0 |
0 |
Closing net debt/(cash) |
10,300 |
17,910 |
11,300 |
(286) |
Source: Helios Underwriting accounts, Edison Investment Research. Note: *Shown after pre-acquisition impact and parent reinsurance result, investment income, costs and other items (see Exhibit 2 for a segmental view of syndicate result and parent result).
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Research: Healthcare
Basilea has announced the FDA approval of its second lead asset, Zevtera (ceftobiprole), for the treatment of severe bacterial infections (three indications), marking a major commercial win. The US is the most commercially lucrative market for Zevtera, accounting for 85–90% of its total market potential. Zevtera is already approved in several countries (including in Europe) and the FDA nod is based on three Phase III studies (including the ERADICATE and TARGET studies with R&D partly funded by the BARDA). Note that the drug holds the Qualified Infectious Disease Product (QIDP) designation, which will provide up to 10-years of market exclusivity following approval. As we await more details on the US commercial partner (expected by mid-2024), we upgrade our US probability of success (PoS) to 100%, bumping our valuation to CHF1,008.6m or CHF84.0/share (from CHF80.7/share).