RNS Number:5277Z
Benfield Group Limited
09 March 2006
BENFIELD GROUP LIMITED
Preliminary Results for the year ended 31 December 2005
Benfield Group Limited ("Benfield" or "the Group"), the reinsurance and risk
intermediary, today announces its preliminary results for the year ended 31
December 2005.
Financial Highlights
* Group revenue increased 6.8% to #324.1m (2004: #303.5m(1) ) - at constant
rates of exchange(2) revenue increased by 8.7%.
* Group trading result(3) decreased by 26.7% to #63.3m (2004: #86.3m(1) ) -
at constant rates of exchange(2) the trading result decreased by 19.5%.
* Group trading margin(4) decreased to 19.5% (2004: 28.4%(1) ).
* Profit before tax decreased to #53.8m (2004: #57.9m(1) ).
* Profit for the financial year increased to #34.9m (2004: #31.1m(1) ).
* Basic earnings per share increased to 15.53p (2004: 13.44p(1) ).
* Diluted earnings per share increased to 14.12p (2004: 12.49p(1) ).
* 12m shares (#31.7m) have been bought back by Benfield since September
2004.
* Final dividend 7p per share (2004: 7p).
(1) 2004 comparatives have been restated to reflect the adoption of
International Financial Reporting Standards ("IFRS").
(2) Constant rates of exchange assume conversion of 2005 results at the exchange
rates achieved in 2004.
(3) Trading result comprises operating profit from continuing operations before
goodwill impairment, depreciation of tangible fixed assets and exceptional items
(see note 5).
(4) Trading margin represents trading result as a percentage of revenue.
Operational Highlights
* Reinsurance intermediary business benefiting from increased demand for
catastrophe expertise.
* Successful investment of #23.6m to capture Group growth opportunities.
* New hires in reinsurance significantly enhance capabilities.
* Strong start for Benfield Corporate Risk: on target for growth and margin
objectives.
Grahame Chilton, Chief Executive of Benfield, commented: "2005 presented some
tremendous opportunities for Benfield. As expected, our 2005 result was
affected by planned investment in our new insurance broking business, Benfield
Corporate Risk, and in further strengthening our core reinsurance business. I am
delighted with the initial performance of Benfield Corporate Risk which already
has an impressive customer roster and is on target to meet its revenue and
margin goals, while the core reinsurance business has been successful in
attracting new talent. Last year's devastating hurricane losses offered an
opportunity for us to demonstrate Benfield's ability to perform in challenging
market conditions on distribution and claims servicing as well as accessing the
capital markets to create capacity. We continue to see increased demand for our
expertise in these areas. Benfield is extremely well positioned in current
market conditions and we remain confident that our recent investments have
significantly enhanced the Group's prospects for longer term growth."
Trading Results
2005 2004 Growth
#m #m %
Revenue
International 163.9 157.8 3.9%
US 134.4 121.4 10.7%
Benfield Corporate Risk 11.4 10.6 7.5%
Corporate Investment Group 13.4 13.5 (0.7%)
Group Services 1.0 0.2 n/a
Total revenue 324.1 303.5 6.8%
Trading result
International 32.6 50.6 (35.6%)
US 50.0 49.7 0.6%
Benfield Corporate Risk (9.6) (0.1) n/a
Corporate Investment Group (0.9) (3.6) n/a
Group Services (8.8) (10.3) n/a
Total trading result 63.3 86.3 (26.7%)
Trading margin
International 19.9% 32.1%
US 37.2% 40.9%
Benfield Corporate Risk n/a n/a
Group 19.5% 28.4%
Contacts:
Grahame Chilton, Chief Executive Benfield +44 (0) 20 7578 7000
John Whiter, Chief Financial Officer Benfield +44 (0) 20 7578 7000
Analysts & Investors
Julianne Jessup Benfield +44 (0) 20 7578 7425
Rob Bailhache Financial Dynamics +44 (0) 20 7269 7200
Media
David Bogg Benfield +44 (0) 20 7522 4016
Peter Rigby/David Haggie Haggie Financial +44 (0) 20 7417 8989
Benfield is the world's leading specialist reinsurance intermediary and risk
advisory business. Its customers include most of the world's major insurance
and reinsurance companies as well as Government entities and global
corporations. Benfield employs over 1,800 people based in more than 30
locations worldwide. The company is listed on the London Stock Exchange under
the ticker symbol BFD. For further information please go to
www.benfieldgroup.com.
TRADING ENVIRONMENT
Two influences dominated the trading environment for insurance and reinsurance
brokers during 2005. These were the continued impact of the investigations into
the industry by the New York Attorney General Eliot Spitzer, first announced in
October 2004, and Hurricanes Katrina, Rita and Wilma which, in addition to their
tragic human toll, generated insured losses expected currently estimated at
US$65bn.
The impact of the New York Attorney General's investigations into the industry
in 2005 was wide-ranging. Loss of the additional fees earned by some brokers
under contingent fee agreements led to sustained pressure on margins in the
industry. Following these investigations, as Benfield did not have such fees,
there was no such impact on the Group, but Benfield benefited from a temporary
easing of upward pressure on people costs and increased opportunities to acquire
high quality people. To capture these opportunities, in June 2005 Benfield
announced a strategic investment in further strengthening its reinsurance
business, mainly through selective recruitment in areas targeted for growth.
Trading conditions in the first half of 2005 were difficult in the US as the
market absorbed the implications of the regulator's actions. In the second half,
as expected, the US Division benefited from a greater number of new business
opportunities. In other territories, such as the UK, many reinsurance buyers
re-appraised their broker relationships in the light of the greater regulatory
scrutiny and this too created new opportunities for Benfield.
A second successive year of record catastrophe losses materially affected the
January 2006 renewals. The previously downward trend in reinsurance rates
generally stabilised and there were substantial rate increases for loss affected
areas, although competition was still evident for certain non loss affected
business, particularly in Europe. Underlying demand for reinsurance was strong,
partly due to higher levels of modelled exposure driving increased regulatory
and rating agency capital requirements. However, buyers sought to manage costs
as well as to secure the most appropriate reinsurance protection. Benfield
expects that the full impact of the unprecedented losses of 2004 and 2005, like
that of previous major losses, will emerge over the next 12 to 18 months.
More than US$20bn of new capital entered the reinsurance market towards the end
of 2005, although mostly too late to have a significant impact on year end
renewals. Once again Benfield played a significant role in bringing new capacity
to the market. Benfield Advisory acted as advisor to a new Bermudian reinsurer,
Lancashire Holdings Limited, and also facilitated substantial direct capital
market involvement in underwriting through special purpose vehicles.
With more than 60% of reinsurance broking revenues derived from property
catastrophe business, market leading expertise in the analysis and modelling of
catastrophe risk and transactional capability in both traditional insurance and
reinsurance and capital market vehicles, Benfield is extremely well positioned
to meet reinsurance customer needs in current market conditions. The investment
in Benfield Corporate Risk has proved timely given the severe impact of
Hurricanes Katrina, Rita and Wilma on the energy market, and the increasing
demand from insurance buyers in the energy and related sectors for the
specialist modelling and risk analysis which Benfield can offer.
FINANCIAL REVIEW
Revenue
Revenue for the year ended 31 December 2005 was #324.1m (2004: #303.5m), an
increase of 6.8%. After adjusting for the effect of movements in currency
exchange rates, revenue increased by 8.7%.
International Division
The International Division revenue increased by 3.9% to #163.9m for the year
ended 31 December 2005 from #157.8m for the year ended 31 December 2004. At
constant rates of exchange, revenue increased by 6.9%
The Facultative Solutions team was a significant contributor to the growth in
the Division with revenue more than double that achieved in 2004. Now with over
100 staff operating as a single team across offices in the UK, US, Australia,
Singapore, South Africa, Europe and Bermuda, this revenue growth fully supports
the investment that was made in this area in 2004 and 2005.
As anticipated, the declining trend in Global Specialty revenue reversed in
2005, assisted by more favourable market conditions following the hurricanes in
the second half of the year. This area, which now includes the new Casualty
team recruited in 2005, showed revenue growth of 0.7% at constant rates of
exchange.
Changes in buying patterns in relation to structured reinsurance and other
alternative risk transfer products have had a negative impact on revenue earned
from such transactions.
US Division
The US Division revenue increased by 10.7% to #134.4m for the year ended 31
December 2005 from #121.4m for the year ended 31 December 2004. At constant
rates of exchange, revenue increased by 11.3%.
The US Division comprises the core US broking operations together with Benfield
Advisory, the specialist insurance corporate finance and investment advisory
business. Commission and fees earned by the broking business declined by 4.0%
from #110.5m for the year ended 31 December 2004 to #106.1m for the year ended
31 December 2005. Commission and fees earned by Benfield Advisory increased
significantly from #8.7m for 2004 to #24.7m for 2005.
Trading conditions for US brokers were difficult in the first half of 2005 and
Benfield's US revenue was adversely impacted by the market disruption resulting
from the various regulatory investigations of the insurance industry. However,
new business development recovered strongly in the second half and the broking
operation experienced a high demand for its property solutions expertise
following Hurricanes Katrina, Rita and Wilma. These loss events also had a
significant impact on reinsurance pricing in the US market, particularly for
loss-affected customers who saw rates increase substantially at year end
renewals.
Benfield Advisory had a very successful year advising on the raising of nearly
US$2bn of capital in the insurance sector during 2005. The most significant
transaction, which closed in December, raised approximately US$1.1bn for
Lancashire Holdings Limited, a new Bermudian insurer which listed on the
Alternative Investment Market in the UK. This transaction made a substantial
contribution to Benfield Advisory's revenue for 2005, including #8.0m which
represents the fair value of warrants received as part of the consideration. The
Group has recognised a further #5.2m of unrealised gains on the value of these
warrants up to the end of the year.
Benfield Corporate Risk
Revenue in the Benfield Corporate Risk Division increased by 7.5% from #10.6m
for the year ended 31 December 2004 to #11.4m for the year ended 31 December
2005. This increase mainly reflects the successful start of the new marine,
energy and power operation in the latter part of 2005 which contributed #2.5m of
revenue, ahead of the business plan. Revenue from the corporate insurance
business previously included in the International and US divisions reduced in
2005 mainly due to fewer satellite launches during the year.
Corporate Investment Group
The Corporate Investment Group manages the Group's portfolio of investments in
non-core businesses. These include Orbit (an employee benefits business) and
Paragon (a run-off services company), which are consolidated into the results of
the Group. Revenue overall decreased from #13.5m in 2004 to #13.4m for 2005.
However, 2004 included small amounts of revenue from former subsidiaries which
were disposed of during 2004.
Trading result and margin
As anticipated, the Group trading result decreased from #86.3m in 2004 to #63.3m
in 2005, and the overall trading margin reduced from 28.4% to 19.5%. The 6.8%
increase in operating revenue described above was offset by a 20.1% increase in
general and administrative expenses. These cost increases, summarised below,
impacted each of the three operating divisions, reducing trading margins.
2005 2004 Growth
#m #m %
General and administrative expenses (i)
Staff costs 185.7 150.7 23.2%
Premises 18.1 16.0 13.1%
Travel and entertaining 18.0 14.8 21.6%
Other 39.0 35.6 9.6%
Total 260.8 217.1 20.1%
(i) Excluding exceptional items
In June 2005 we announced an investment in recruiting for both the existing
reinsurance business and the new marine, energy and power team. A major part of
the staff cost increase (#23.6m) reflects this investment. The remainder of the
staff cost increase was principally the result of the full year cost of hires
made in the previous year together with appropriate incentive arrangements.
Increases in travel and entertaining costs were a direct consequence of the
hiring programme in 2004 and 2005. Additional premises cost supported, in
particular, the Benfield Corporate Risk initiative and the development of
Facultative Solutions.
As a result of revenue and cost factors referred to above, the International
Division trading result for the year ended 31 December 2005 decreased to #32.6m
from #50.6m for the year ended 31 December 2004, a decrease of 35.6%. The
trading margin declined from 32.0% to 19.9%.
The US Division trading result increased by 0.6% to #50.0m for the year ended 31
December 2005 from #49.7m for the year ended 31 December 2004, whilst the
trading margin decreased from 40.9% to 37.2%.
The trading result for the Benfield Corporate Risk Division was a loss of #9.6m
for the year ended 31 December 2005, compared with a loss of #0.1m for the year
ended 31 December 2004. This principally represents the #8.6m cost of investment
made in the development of the marine, energy and power corporate insurance
business.
The trading result for the Corporate Investment Group shows an improvement for
the year ended 31 December 2005 with a loss of #0.9m compared with a loss of
#3.6m for the year ended 31 December 2004. This is mainly due to the disposals
of non-core businesses in 2004. Profits and losses arising from investment
disposals are included in exceptional items.
Exceptional items
In the year ended 31 December 2005, the Group's operating profit benefited from
a net exceptional gain of #0.3m (2004: loss #14.7m). This comprised gains of
#7.2m from the sale of the Group's available-for-sale financial assets offset by
exceptional operating expenses of #6.9m. The expenses include a provision for
the costs of the anticipated early termination of the lease on a vacant property
of #3.2m, the remaining charge for pre-IPO share awards granted to employees of
#3.0m and a charge of #0.7m relating to a loss on disposal of a non-core
subsidiary operation.
Full details of the exceptional items for the year ended 31 December 2005 and 31
December 2004 are set out in note 5.
Finance income
Finance income increased from #0.4m to #7.2m in the year ended 31 December 2005,
due to the unrealised gain on the holding of Lancashire warrants of #5.2m and
the receipt of a special dividend from Montpelier Re totalling #1.9m.
Profit for the year
Profit before taxation decreased to #53.8m in the year ended 31 December 2005
from #57.9m in the year ended 31 December 2004.
The Group taxation charge decreased to #18.9m in the year ended 31 December 2005
from #26.8m in 2004, representing an effective tax rate of 35.1% (2004: 46.3%).
The rate is higher than the UK statutory tax rate of 30%, primarily due to
non-deductible expenditure and the effect of higher tax rates in overseas
territories, in particular, in the US. The 2004 tax rate was further impacted
by tax adjustments arising in respect of exceptional items. Full details of the
tax charge are set out in note 6.
The profit for the financial year, after taxation, increased by 12.2% from
#31.1m in 2004 to #34.9m in 2005.
Earnings per share
Basic earnings per share increased to 15.5p for the year ended 31 December 2005
from 13.4p per share in the year ended 31 December 2004. This reflects the
increase in profit after taxation and a reduction in the number of outstanding
shares following the share buy-back programme. Diluted earnings per share
increased to 14.1p for the year ended 31 December 2005 from 12.5p for the year
ended 31 December 2004. In the year ended 31 December 2005, the Group had
223.6m common shares in issue on average for the purpose of the calculation of
fully diluted earnings per share (2004: 230.1m).
Dividends
The Board has proposed a final dividend of 7.0p per common share (2004: 7.0p)
which together with the interim dividend of 3.5p per common share (2004: 3.5p
plus special dividend of 10.0p) makes a total dividend for the year of 10.5p per
common share (2004: 20.5p).
Foreign exchange
The Group's principal foreign currency exposure is to US dollars, arising from
the results of the US Division, and from revenues earned by the International
Division. Approximately 42% of the International Division's revenues were US
dollar denominated in 2005 (2004: 43%). These are principally earned in the UK.
The Group results are sensitive to the impact of movements in the US dollar/
pounds sterling exchange rate, with a 1 cent movement approximately equating to
a #0.6m movement in trading result, prior to the impact of any foreign exchange
hedging activity.
In the UK, the Group enters into foreign currency contracts (including
derivative options) to manage the impact of currency risk on trading results.
The Group's policy is to hedge a minimum of 50% of the forecast exposure prior
to each financial year for each of its principal UK trading currencies and at
least 25% of forecast exposure for the following financial year, dependent upon
prevailing market conditions.
The Group does not actively hedge the results of the overseas subsidiaries.
Group borrowings provide an economic hedge against the principal overseas assets
of the Group, which are denominated in US dollars.
Liquidity and Capital Resources
Net cash rose to #11.0m as at 31 December 2005, compared to #6.6m at the end of
the prior year. Net cash comprises available corporate funds of #65.0m less
borrowings of #54.0m. Additionally, the Group has access for general corporate
purposes to an undrawn committed revolving facility of #50.0m, available until
June 2006.
During the year the Group repaid #27.5m of borrowings, representing term loan
repayments. The Group continued the share buy-back programme announced in 2004,
with #9.3m of shares repurchased in the year. Combined with common share
dividends of #23.4m, less proceeds from share issuance of #1.6m, the Group
returned #31.1m of cash to common shareholders during the year, compared to
#67.4m in the prior year.
The Group expects to finance operations, capital expenditure and acquisitions
from operating cashflow and the revolving facility where required. The Group's
cashflow statement is set out on page 14.
Adoption of International Financial Reporting Standards ("IFRS")
The Group has adopted IFRS in these financial statements. A reconciliation of
the results and net assets under UK GAAP, as previously reported, to IFRS is
included on pages 15 to 18. The adoption of IFRS resulted in a number of
adjustments to the previously reported results and net assets. The main changes
were in relation to share based payments, financial instruments and dividends.
OUTLOOK
Marketplace
While it is still too early to assess the full impact of Hurricane Katrina, the
reinsurance market trends seen at January 2006 renewals have continued. Despite
the new capital which entered the market in late 2005, there has been a
continued tightening in property catastrophe capacity, particularly for US
exposures. As expected, a number of factors are imposing constraints on
capacity. These include the recalibration of catastrophe models, a shrinking
risk appetite for peak exposures, the restructuring of coverage on a more
restrictive basis and the increased cost of underwriting capital. We expect
these influences to maintain upward pressure on reinsurance pricing during 2006
and 2007.
Demand for the specialist risk analysis, modelling and transactional skills
which Benfield offers is strong in both the reinsurance and corporate insurance
sectors. Our investment in further strengthening our reinsurance capabilities
and in acquiring specialist expertise in the marine, energy and power sectors
will stand Benfield in good stead to meet this demand.
The market disruption started by the regulatory upheavals of late 2004 is not
yet over. We believe it will continue to offer Benfield opportunities for
profitable expansion, but as other brokers also follow this path, competition in
the market for high quality people could place costs under pressure in the
medium term.
Revenues
As we have previously reported, revenue growth in the reinsurance intermediary
business is expected to be above 10% for 2006. Benfield Corporate Risk remains
on target to meet revenue expectations and we anticipate overall revenue growth
to exceed 20% in 2006. Revenue in 2005 benefited from the exceptionally strong
contribution from Benfield Advisory. This revenue stream is largely transaction
related and therefore unpredictable, which may affect the overall revenue growth
rate achieved by the Group.
Investment, costs and margins
As previously stated, we are prepared to accept short-term impact on margin to
enhance growth prospects while maintaining target margins over the longer term.
The investment programme for our existing reinsurance intermediary business
announced in June 2005 is now substantially complete but in the current market
conditions there remain further opportunities to enhance the capabilities of our
core businesses. While maintaining our focus on controlling underlying costs, we
expect to invest in further selected opportunities in 2006, although not on the
same scale as in 2005. Consequently we anticipate expense growth of more than
10% in 2006, reflecting the remaining investment in Benfield Corporate Risk and
the full year impact of the hires made in 2005.
Business Strategy and Outlook
The benefits of our strategy of investing for profitable growth can be seen in
the strong performance of the Facultative Solutions team during 2005 following
two years of targeted investment in building a strong global capability. In a
market environment which continues to offer exceptional opportunities for
further development, we expect that the Group's more recent investments will
also deliver earnings enhancing results over time. As previously disclosed,
Benfield's 2006 trading result is expected to amount to at least the level
achieved in 2004. A key aspect of our strategy remains creating and maintaining
a business with industry leading margins. We anticipate that trading margins
will improve progressively until 2008, when we expect the benefits of the
current investment programme to have been realised in full.
With our expertise in property catastrophe reinsurance and specialist modelling
and analytical capabilities, Benfield is well placed to benefit from current
market trends, and the Group remains confident that carefully targeted expansion
will significantly enhance the medium term outlook for the Group.
BENFIELD GROUP LIMITED
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2005 (audited)
Notes 2005 2004
#'000 #'000
Commission and fees 3 314,614 295,524
Interest income 9,455 7,944
Total revenue 324,069 303,468
Other operating income 7,186 2,196
Operating expenses 4 (267,636) (234,016)
Depreciation, amortisation and impairment charges (10,294) (7,643)
Operating profit 53,325 64,005
Analysed as:
Trading result 63,289 86,339
Depreciation, amortisation and impairment charges (10,294) (7,643)
Exceptional items 5 330 (14,691)
Operating profit 53,325 64,005
Finance income 7,192 412
Finance costs (5,447) (4,648)
Share of losses of associated undertakings after taxation (1,225) (1,840)
Profit before taxation 53,845 57,929
Taxation 6 (18,975) (26,869)
Profit for the financial year 34,870 31,060
Attributable to:
Equity holders of the Company 34,714 30,930
Minority interest 156 130
34,870 31,060
Earnings per 1p common share
Basic 7 15.53p 13.44p
Diluted 7 14.12p 12.49p
Dividends per 1p common share
Interim paid 8 3.5p 3.5p
Special paid 8 - 10.0p
Final proposed 8 7.0p 7.0p
10.5p 20.5p
BENFIELD GROUP LIMITED
CONSOLIDATED BALANCE SHEET
As at 31 December 2005 (audited)
ASSETS Notes 2005 2004
#'000 #'000
Non-current assets
Goodwill 161,851 151,943
Intangible assets 11,938 6,318
Property, plant and equipment 10,670 9,368
Investment in associated undertakings 32 32
Financial assets 41,515 19,663
Deferred tax assets 14,991 6,062
240,997 193,386
Current assets
Trade and other receivables 9 65,064 37,283
Financial assets 745 18,839
Current tax recoverable 189 3,146
Cash and cash equivalents 64,995 84,668
130,993 143,936
Fiduciary financial assets 17,339 15,615
Fiduciary cash and cash equivalents 184,496 141,590
332,828 301,141
LIABILITIES
Current liabilities
Trade and other payables 10 72,428 47,556
Insurance broking creditors 201,835 157,205
Financial liabilities 16,098 25,565
Current tax liabilities 35,548 31,735
Provisions 11 4,513 1,462
330,422 263,523
Net current assets 2,406 37,618
Non-current liabilities
Trade and other payables 10 921 2,877
Financial liabilities 39,622 53,121
Provisions 11 2,590 1,646
43,133 57,644
Net assets 200,270 173,360
SHAREHOLDERS' EQUITY
Share capital 2,345 2,355
Share premium 138,181 136,585
Treasury shares (10,252)
(10,284)
Fair value and other reserves 103,787 94,730
Retained earnings (34,332) (50,375)
Total shareholders' equity 12 199,729 173,011
Minority interest in equity 541 349
Total equity 200,270 173,360
BENFIELD GROUP LIMITED
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES
For the year ended 31 December 2005 (audited)
2005 2004
#'000 #'000
Currency translation adjustments 12,874 (4,883)
Actuarial loss in defined benefit scheme (199) (55)
Deferred tax on actuarial loss 78 21
Fair value losses on revaluation of available-for-sale financial assets (4,362) (493)
Deferred tax on available-for-sale financial assets 1,309 95
Fair value losses on cash flow hedges (915) -
Deferred tax on cash flow hedges 274 -
Net income/(expenses) recognised directly in equity 9,059 (5,315)
Profit for the financial year 34,870 31,060
Total recognised income for the financial year 43,929 25,745
Attributable to:
Equity holders of the Company 43,737 25,618
Minority interest 192 127
43,929 25,745
BENFIELD GROUP LIMITED
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2005 (audited)
2005 2004
Corporate Fiduciary Total Corporate Fiduciary Total
#'000 #'000 #'000 #'000 #'000 #'000
Cash flows from operating activities
Cash generated from operations (note 13) 57,150 33,088 90,238 63,527 (35,065) 28,462
Interest received 9,455 - 9,455 7,944 - 7,944
Taxation paid (19,623) - (19,623) (21,717) - (21,717)
Net cash generated/(used) by operating 46,982 33,088 80,070 49,754 (35,065) 14,689
activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash (3,184) - (3,184) (194) - (194)
acquired
Proceeds from disposal of subsidiaries, - - - (911) - (911)
net of cash
Purchases of intangible assets (9,529) - (9,529) (6,049) - (6,049)
Proceeds from sale of intangibles - - - - - -
Purchases of property, plant and (3,393) - (3,393) (3,778) - (3,778)
equipment
Proceeds from sale of property, plant 113 - 113 384 - 384
and equipment
Increase in investments in associates (1,575) - (1,575) (1,375) - (1,375)
Proceeds from disposal of associates 350 - 350 500 - 500
Purchases of available-for-sale (8,099) (1,724) (9,823) (16,379) - (16,379)
financial assets
Proceeds from sale of available-for-sale 18,049 - 18,049 25,547 21,731 47,278
financial assets
Dividends received 2,018 - 2,018 412 - 412
Net cash (used in)/generated from (5,250) (1,724) (6,974) (1,843) 21,731 19,888
investing activities
Cash flows from financing activities
Net proceeds from issue of common shares 1,611 - 1,611 464 - 464
Proceeds from sale of own shares - - - 1,784 - 1,784
Repurchase of common shares (9,284) - (9,284) (22,453) - (22,453)
Repayments of borrowings (27,500) - (27,500) (10,701) - (10,701)
Finance costs (5,619) - (5,619) (4,166) - (4,166)
Dividends paid to Company's shareholders (23,407) - (23,407) (44,978) - (44,978)
Net cash used in financing activities (64,199) - (64,199) (80,050) - (80,050)
Net (decrease)/ increase in cash and (22,467) 31,364 8,897 (32,139) (13,334) (45,473)
cash equivalents
Cash and cash equivalents at 1 January 84,668 141,590 226,258 117,038 163,546 280,584
Exchange gains/(losses) on cash and bank 2,794 11,542 14,336 (231) (8,622) (8,853)
overdrafts
Cash and cash equivalents at 31 December 64,995 184,496 249,491 84,668 141,590 226,258
BENFIELD GROUP LIMITED
NOTES TO THE PRELIMINARY RESULTS
As at 31 December 2005
1. BASIS OF PREPARATION
The Company is obliged to prepare its financial statements in accordance with
the Bermuda Companies Act 1981, which permits a company to prepare its financial
statements under International Financial Reporting Standards ("IFRS").
Accordingly, the consolidated financial information has been prepared in
accordance with Bermuda law, under the historic cost convention as modified by
the revaluation of available-for-sale investments and derivative financial
instruments, and in accordance with IFRS and IFRIC interpretations endorsed by
the European Union.
The Company's consolidated financial statements were prepared in accordance with
UK Generally Accepted Accounting Principles ("UK GAAP") until 31 December 2004.
Consequently certain accounting, valuation and presentational methods
previously applied under UK GAAP have been amended to comply with IFRS. The
comparative figures in respect of 2004 are restated to reflect these
adjustments.
Reconciliations and descriptions of the effect of the transition from UK GAAP to
IFRS on the Group's results are provided below.
Full details of the Group's principal accounting policies, as revised to comply
with IFRS, were included in the Interim Report issued in September 2005.
2. TRANSITION TO IFRS
Basis of transition to IFRS
The Group adopted IFRS on 1 January 2005. Accordingly, the Group's financial
statements for the year ended 31 December 2005 will be the first annual
financial statements to comply with IFRS. The Group has prepared its opening
IFRS balance sheet as at 1 January 2004, being the effective date of transition
to IFRS.
Transitional provisions for the first time adoption of IFRS are set out in IFRS
1, "First-time adoption of International Financial Reporting Standards". IFRS 1
allows companies adopting IFRS for the first time to apply certain exemptions
from the full retrospective application of IFRS. The relevant exemptions
available to the Group and its options selected are as follows:
a) Business combinations exemption
Business combinations that took place prior to the 1 January 2004 transition
date have not been restated and are included in the results at their book value
as at that date.
b) Cumulative translation differences
IAS 21, "The effects of changes in foreign exchange rates", requires translation
differences to be recorded in a separate exchange reserve rather than as part of
retained earnings as required by UK GAAP. IFRS 1 allows an exemption from
calculating the cumulative translation differences on the historical
retranslation of net assets of foreign subsidiaries. The Group has elected to
take advantage of this exemption and has set the foreign currency translation
reserve to zero as at the date of transition to IFRS.
c) Financial instruments
A first time adopter of IFRS is permitted to apply IAS 32, "Financial
Instruments: Disclosure and Presentation", and IAS 39, "Financial Instruments:
Recognition and Measurement", prospectively from 1 January 2005. However, the
Group has elected not to take this exemption, but has instead applied the
standards retrospectively to all periods presented so as to present the result
of each period on a consistent basis.
d) Employee benefits exemption
The Group has elected to recognise all cumulative actuarial gains and losses as
at 1 January 2004. The Group has also chosen the option available for subsequent
actuarial gains and losses to be recognised immediately in the Statement of
Recognised Income and Expenses.
e) Share-based payment transaction exemption
The Group has adopted IFRS 2, "Share-based payments", for all employee share
awards granted since 7 November 2002. As permitted under IFRS 2, no adjustment
is made for awards granted prior to that date.
Restatement summary
1 January 2004 31 December 2004
Group Equity Net Income Equity
#'000 #'000 #'000
As previously presented under UK GAAP 197,561 54,744 183,280
Reversal of proposed ordinary dividends payable 13,819 - 15,691
Revision of charge for share-based payments - (9,268) -
Recognition of provision for post-employment benefits on a (279) 59 (246)
projected unit credit method basis
Reversal of goodwill amortisation - 8,670 8,418
Reclassification of non-equity financial instruments (39,370) (2,526) (39,496)
Recognition of derivative financial instruments at fair value 22,111 (20,549) 1,562
Restatement of financial assets to fair value 4,206 - 3,829
Deferred tax adjustments (70) (70) 322
As reported under IFRS 197,978 31,060 173,360
Recognition of dividends (IAS 10)
Under UK GAAP, proposed dividends in respect of an accounting period are
recognised as a liability at the balance sheet date. Under IAS 10, "Events after
the balance sheet date", dividends proposed are only recognised as a liability
when the shareholders have approved their distribution, or for the interim
dividend, when paid.
The final dividend proposed at 31 December 2003 has been reversed in the opening
balance sheet and recognised in the year ended 31 December 2004. Similarly, the
final dividend proposed at 31 December 2004 has been reversed and recognised in
the subsequent period.
Share-based payments (IFRS 2)
Under UK GAAP, the cost of awards to employees in the form of shares or rights
to shares was charged over the period to which the employee's performance
related. The charge was based on the intrinsic value, being the fair value of
the shares at the date of grant, reduced by any consideration payable by the
employee. IFRS 2, "Share based payments", requires the cost to be measured by
the fair value of the equity instrument awarded at the date of grant, and is
recognised over the vesting period of the award.
Application of IFRS 2 results in an additional pre-tax charge in the income
statement of #9,731,000 and a deferred tax credit of #463,000 for the year ended
31 December 2004. There is no impact on Group equity.
These charges include an adjustment for awards made under the 2002 Incentive
Plan to certain key employees in respect of services provided prior to the
Company's Initial Public Offering. In accordance with UK GAAP the charge for
these awards was recognised in full at the date of grant, as they relate to
prior services and have no performance criteria, resulting in an exceptional
item operating expense of #22,432,000. Under IFRS, the fair value of these
awards is being spread over the 12 to 36 month vesting period from the date of
grant resulting in a pre-tax charge of #8,542,000 for the year ended 31 December
2004. These charges are classified as exceptional as they are considered
material and in relation to a non-recurring event.
Employee benefits (IAS 19)
The Group has operated only one defined benefit arrangement since the transition
date and this scheme was closed to further accrual of benefits in December 2001.
Under UK GAAP the Group followed the transitional rules of FRS 17, "Retirement
benefits", whereby only disclosure of the net defined benefit scheme pension
deficit was required, along with disclosure of the changes in the net deficit
that would be taken through the income statement. IAS 19, "Employee Benefits",
requires any surplus or deficit to be recognised on the balance sheet with
changes in the net surplus/deficit being charged to the income statement.
On transition the deficit disclosed under FRS17 has been recognised in the
balance sheet resulting in a reduction in net assets of #279,000.
Goodwill amortisation (IFRS 3)
Under UK GAAP, goodwill was capitalised and amortised over its estimated useful
economic life. Under IFRS 3, "Business combinations", goodwill is no longer
amortised but instead tested for impairment on an annual basis. In accordance
with the transition exemption noted above, goodwill has been frozen at its
carrying value as at 1 January 2004 and the amortisation previously charged
under UK GAAP since that date has been reversed.
The amortisation of goodwill arising under UK GAAP totalling #8,418,000 for the
year ended 31 December 2004 has therefore been reversed on transition to IFRS.
Financial instruments (IAS 32 & IAS 39)
The Group has elected to adopt IAS 32, "Financial Instruments: Disclosure and
Presentation", and IAS 39, "Financial Instruments: Recognition and Measurement"
retrospectively from the date of transition.
Non-equity financial instruments
Under IAS 32, preference shares that are not redeemable or that are redeemable
solely at the option of the issuer, are classified as equity. Where the terms of
issuance require the issuer to redeem preference shares for a fixed or
determinable amount at a fixed or determinable future date, or where the holder
has the option of redemption, these shares are classified as liabilities and the
dividends paid on these shares classified as a finance cost.
On transition #39,370,000 has been reclassified as a financial liability and
deducted from shareholders' funds in relation to the Company's Cumulative
Redeemable Convertible Preference Shares ("CRCPs"). Within the income statement,
CRCP dividends totalling #2,526,000 for the year to 31 December 2004 have been
reclassified from dividends to finance costs.
Derivative and hedge accounting
IAS 39 requires all derivative financial instruments to be recorded at fair
market value with changes taken to the income statement. There was no such
requirement under UK GAAP and consequently derivative financial instruments were
accounted for as cash flows arising from these instruments occured.
If certain criteria are met, financial instruments may be designated as part of
a cash flow hedge relationship. As a result of this treatment, changes in the
fair value of the financial instrument can be deferred to equity until the
hedged transaction occurs. There were no designated hedge relationships during
the periods presented in this note.
The fair value of derivative instruments on the date of transition including the
associated deferred tax was #22,111,000 representing an increase in equity at
that date. Included within that balance was #19,678,000 in respect of Montpelier
Re Holdings Limited warrants which were sold in February 2004. Under UK GAAP,
the increase in fair value of the warrants was recognised in full at the time of
disposal resulting in an exceptional gain of #29,105,000. The application of IAS
39 results in the recognition of part of the increase in fair value in prior
periods. Consequently, for the year ended 31 December 2004 this gain was reduced
by #28,111,000.
Valuation of financial assets
Under UK GAAP, fixed asset investments are stated at cost less provisions for
impairment. Current asset investments are stated at lower of cost and Directors
estimated valuation or market value, if listed. IAS 39 requires all financial
instruments to be accounted for at either fair value or amortised cost depending
on their classification.
All investments of the Group during the periods presented have been classified
as 'Available-for-sale' and as such are measured at fair value, when this can be
determined, with changes in that value being recognised in equity. This has
resulted in an increase in equity of #4,206,000 and #3,829,000 at 1 January 2004
and 31 December 2004 respectively. Available for sale financial assets continue
to be stated at cost less any provision for impairment when fair value can not
be determined.
Reclassification of software costs (IAS 36)
Under UK GAAP, software was classified as tangible fixed assets. Under IAS 36, "
Fixed assets other than acquired goodwill and investments", where software is
not an integral part of related hardware, computer software costs should be
capitalised as intangible assets.
Accordingly, computer software and capitalised software development costs have
been reclassified from property, plant and equipment to intangible assets. The
net book value of these assets was #6,176,000 and #6,318,000 at 1 January 2004
and 31 December 2004 respectively. Within the income statement, depreciation on
these assets during the year ended 31 December 2004 totalling #3,711,000 has
been reclassified as amortisation. There is no impact on net income or net
assets as a result of this reclassification.
De-recognition of insurance broking debtors (IAS 32 & IAS 39)
Reinsurance brokers normally act as agents in placing the risks of insurance
companies with reinsurers and as such, generally are not liable as principals
for amounts arising from such transactions. Notwithstanding such legal
relationships, receivables, payables and fiduciary cash arising from insurance
broking transactions were previously included within the assets and liabilities
of the Group.
Under IFRS, a financial asset should not be recognised when an obligation to
transfer the cash flows arising from the asset is assumed and substantially all
risks and rewards are transferred. There is an obligation on the group to
transfer cash flows arising from insurance broking debtors in respect of
premiums and claims. Furthermore, the risk and rewards in respect of these
assets does not lie with the Group, which has no obligation to pay these amounts
until the cash is received. Consequently, other than amounts due as commissions
and fees, insurance broking debtors are no longer recognised in the balance
sheet.
Reinsurance intermediaries are entitled to retain the investment income on
fiduciary cash and investments arising from insurance broking transactions.
Consequently, these amounts are included under a separate heading within assets
on the balance sheet with the corresponding payable included as a liability.
On transition, #3,742,087,000 of insurance debtors has been de-recognised along
with the corresponding balance represented by insurance creditors. There is no
impact on net income or net assets as a result of this de-recognition.
Changes to cash flow statement (IAS 7)
The adoption of IFRS does not affect the Group's underlying cash flows. However
the presentation of the cash flow statement differs from that required under UK
GAAP. IFRS requires the cash flows of the Group to be analysed between operating
activities, investing activities and financing activities.
Following the de-recognition of insurance broking debtors, the Group has decided
to disclose separately fiduciary cash and financial assets from its own ("
Corporate") assets on the balance sheet. In addition, a columnar presentation
has been adopted for the cash flow statement in order that the impact of
movements in insurance broking balances on cash flows can be fully appreciated.
3. SEGMENTAL REPORTING
Primary reporting format - Business segments
Based on the risks and returns, the Directors consider that the Group had only
one business segment during the year ended 31 December 2005, which provides
reinsurance and insurance intermediary, risk advisory and related services.
Therefore the disclosures for the primary segment are given in the full
financial statements.
Operating division analysis
The Group manages its core intermediary business on the basis of three operating
divisions, International, US and Benfield Corporate Risk. The International
Division incorporates business emanating from customers located outside of the
US together with revenues from certain specialty lines which operate on a global
basis. The US Division encompasses the Group's business emanating from customers
located in mainland US, excluding revenues from those global specialty lines,
and also includes the Group's corporate finance and investment advisory
businesses. Benfield Corporate Risk is a new division for 2005 and incorporates
business emanating from corporate insurance customers globally. This division
also includes business formerly part of the International and US divisions that
also provide intermediary services to corporate insurance customers. The
non-operating areas of the business include the Corporate Investments Group ("
CIG") which manages the Group's portfolio of investments, and the Group Services
Division which controls expenses incurred in connection with the provision of
head office and group related activities. The analysis of revenue and trading
result by operating division is presented below by way of additional
information.
2005 2004
Revenue Trading Revenue Trading
result result
#'000 #'000
#'000 #'000
International 163,913 32,592 157,823 50,582
US 134,445 50,030 121,381 49,714
Benfield Corporate Risk 11,377 (9,598) 10,559 (55)
Corporate Investment Group 13,426 (885) 13,468 (3,630)
Group Services 908 (8,850) 237 (10,272)
324,069 63,289 303,468 86,339
4. OPERATING EXPENSES
2005 2004
#'000 #'000
Staff costs 188,616 162,419
Premises 21,287 15,970
Travel and entertaining 17,974 14,832
Other 39,759 40,795
267,636 234,016
Included within operating expenses are certain exceptional items as described in
note 5.
5. EXCEPTIONAL ITEMS
2005 2004
#'000 #'000
Other operating income
Gain on sale of available-for-sale financial assets 7,186 2,170
Operating expenses
Vacant property provision (3,200) -
Awards granted to employees (2,964) (8,630)
Loss on disposal of subsidiary operations (692) (3,252)
Bonus paid to employees - (3,017)
Professional fees - (1,962)
(6,856) (16,861)
Exceptional items (net) 330 (14,691)
Income or expenditure in relation to a non-recurring event is credited or
charged to operating profit and is classified under the appropriate heading in
the income statement. Such items are disclosed separately as "exceptional" when
they are considered material, in order that the effects of these items on
operating profit can be fully appreciated.
Gain on sale of available-for-sale financial assets
The gain in 2005 relates predominantly to the disposal of investments in
Montpelier Re Holdings Limited ("Montpelier Re") and Wildcard Systems Inc. ("
Wildcard"). In June 2005, the Group disposed of its entire shareholding in
Wildcard resulting in a gain of #2,322,000. In July 2005, the Group disposed of
its entire holding of Montpelier Re shares which resulted in a gain of
#4,537,000.
In January 2004 the Group sold its entire holding of shares in BRiT Insurance
Holdings PLC resulting in a gain of #387,000. In February 2004 the Group sold
its entire holding of Montpelier Re warrants which resulted in a gain of
#29,105,000 of which, under IFRS, #28,111,000 has been recognised in prior
periods by way of movements in fair value taken through the income statement. In
March 2004 the Group sold 200,000 ordinary shares in Equity Partnership Limited
and 10,618,850 shares in Uni Alliance Insurance Holdings Limited resulting in a
gain of #1,062,000.
Vacant property provision
The charge relates to an anticipated one-off cost to the Group of the early
termination of a lease on a vacant property.
Awards granted to employees
In March 2003 share based awards were made under the 2002 Incentive Plan to
certain key employees of the Group in respect of services provided prior to the
Company's Initial Public Offering. No previous awards had been made under the
2002 Incentive Plan and the plan ceased to be available for the issue of new
awards with effect from June 2003. In accordance with IFRS, the cost of these
awards is being spread over the 12 to 36 month vesting period from the date of
grant.
On the acquisition of EW Blanch Holdings, Inc. the Group provided share based
awards to certain key employees for which the cost was spread over a 17 to 29
month vesting period from the date of the award, resulting in a charge of
#212,000 for the year ended 31 December 2004.
Loss on disposal of subsidiary operations
In 2005 Catixl SAS, a wholly owned subsidiary of the Group, ceased to trade.
Consequently, the carrying value of the Group's interest in Catixl SAS has been
written down to the expected recoverable amount, resulting in a loss of
#692,000.
In April 2004 the Group disposed of its interest in Wildnet Group Limited, a
wholly owned subsidiary, resulting in a loss of #1,141,000. In November 2004,
the Group disposed of its investment in Benfield Premium Finance Limited
resulting in a loss of #2,113,000.
Bonus paid to employees
In connection with the gain on disposal of the Group's holding of warrants in
Montpelier Re Holdings Limited in 2004, a one-off bonus was paid to all
employees.
Professional fees
During 2004 the Group incurred one-off professional fees in respect of certain
corporate transactions.
6. TAXATION
Major components of tax expense
2005 2004
#'000 #'000
Current tax:
UK corporate tax on income for the period (16,338) (17,379)
Foreign tax on income for the period (9,465) (16,730)
Adjustments in respect of previous periods 1,380 (840)
(24,423) (34,949)
Deferred tax:
Relating to the origination and reversal of temporary differences 5,448 8,080
Total tax expense (18,975) (26,869)
Tax on items charged to equity
2005 2004
#'000 #'000
Deferred tax credit on actuarial loss 78 21
Deferred tax credit on exchange movements to hedging reserve 274 -
Deferred tax credit on available-for-sale investments 1,309 95
Deferred tax credit on share awards 1,700 -
3,361 116
Taxation for the period 2005 and 2004 is higher than the standard rate of
corporation tax in the UK of 30%. The differences are explained below:
2005 2004
#'000 #'000
Profit on ordinary activities before tax 53,845 57,929
Profit on ordinary activities multiplied by the standard rate of corporation tax in (16,154) (17,379)
the UK of 30%
Effect of:
Expenses not deductible for tax purposes (includes goodwill impairment and (4,198) (2,913)
preference dividend)
Adjustments in respect of foreign tax rates (1,311) (3,081)
Adjustments in respect of share awards 719 (2,157)
Adjustments to tax in respect of prior periods 1,425 (840)
Utilisation of unrecognised losses 927 1,011
Loss on disposal of subsidiary operations not deductible for tax purposes - (1,110)
Other (383) (400)
(18,975) (26,869)
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to
common shareholders by the weighted average number of common shares in issue
during the year, excluding those held in the employee share trusts which are
treated as cancelled.
For diluted earnings per share, the weighted average number of common shares in
issue, excluding those held in the employee share trusts, is adjusted to assume
conversion of all dilutive potential common shares. The Company has the
following three classes of shares which were potentially dilutive:
(i) cumulative redeemable convertible preference shares;
(ii) those share awards granted to employees where the exercise
price is less than the estimated fair value of the Company's common shares
during the relevant year; and
(iii) deferred share units.
Supplementary basic and diluted earnings per share have been calculated to
exclude the effect of goodwill impairment and exceptional items. The adjusted
numbers have been provided in order that the effects of these charges on
reported earnings can be fully appreciated.
2005 2004
Earnings Weighted Pence per Earnings Weighted Pence per
average number share average number share
#'000 of shares #'000 of shares
Unadjusted earnings per share
Basic earnings per share
Earnings attributable to common 34,714 223,571,360 15.53 30,930 230,110,574 13.44
shareholders
Effect of dilutive securities:
Share options 18,643,954 (1.20) 13,997,050 (0.77)
Deferred share units 3,588,877 (0.21) 3,580,671 (0.18)
Diluted earnings per share 34,714 245,804,191 14.12 30,930 247,688,295 12.49
Adjusted earnings per share
Basic earnings per share 34,714 223,571,360 15.53 30,930 230,110,574 13.44
Goodwill impairment 3,061 1.37 - -
Exceptional items (330) (0.15) 14,691 6.38
Tax on exceptional items and impairment (466) (0.21) (815) (0.35)
Basic earnings per share excluding 36,979 223,571,360 16.54 44,806 230,110,574 19.47
goodwill impairment and exceptional
items
Diluted earnings per share 34,714 245,804,191 14.12 30,930 247,688,295 12.49
Goodwill impairment 3,061 1.25 - -
Exceptional items (330) (0.14) 14,691 5.93
Tax on exceptional items and impairment (466) (0.19) (815) (0.33)
Effect of dilutive securities:
Cumulative redeemable convertible - - - 2,526 16,000,000 (0.14)
preference shares
Diluted earnings per share excluding 36,979 245,804,191 15.04 47,332 263,688,295 17.95
goodwill impairment and exceptional
items
Potentially dilutive securities totalling 16,000,000 common shares of 1p each in
respect of cumulative redeemable convertible preference shares have not been
included in the determination of unadjusted and adjusted earnings per share in
2005, and in the determination of unadjusted earnings per share in 2004, as
their inclusion would be anti-dilutive.
8. DIVIDENDS
2005 2004
#'000 #'000
Final paid in respect of 2004 - 7.0p (2003: 6.0p) per common share of 1p 15,691 13,819
Interim paid in respect of 2005 - 3.5p (2004: 3.5p) per common share of 1p 7,716 8,107
Special dividend paid in respect of 2004 - 10.0p per common share of 1p - 23,163
23,407 45,089
Dividends amounting to #262,000 (2004: #496,000) in respect of the Company's
common shares held by employee share trusts have been deducted in arriving at
the aggregate of dividends paid.
A final dividend in respect of 2005 of 7.0p per share (2004: 7.0p) is proposed
by the Directors. If approved the final dividend will be paid on 3 May 2006 to
shareholders who were registered at the close of business on 31 March 2006.
9. TRADE AND OTHER RECEIVABLES
2005 2004
#'000 #'000
Trade debtors 52,681 29,530
Less provision for bad debts (8,789) (10,811)
Trade debtors - net 43,892 18,719
Amounts due from subsidiary undertakings - -
Amounts due from associated undertakings 331 -
Other debtors 7,182 4,083
Prepayments and accrued income 13,659 14,481
65,064 37,283
10. TRADE AND OTHER PAYABLES
2005 2004
#'000 #'000
Current liabilities
Trade creditors 9,539 5,914
Amounts due to subsidiary undertakings - -
Amounts due to associated undertakings - 168
Social security payable 4,661 3,515
Retirement benefit obligations 523 365
Other creditors and accruals 57,705 37,594
72,428 47,556
Non-current liabilities
Other creditors and accruals 921 2,877
73,349 50,433
11. PROVISIONS
Litigation Property Other Total
and disputes related
#'000 #'000
#'000 #'000
At 1 January 2005 1,088 1,020 1,000 3,108
Exchange adjustments 49 65 - 114
Charged to income statement 623 3,407 - 4,030
Transfer from fixed assets - 1,200 - 1,200
Utilised in year (747) (602) - (1,349)
At 31 December 2005 1,013 5,090 1,000 7,103
Provisions have been analysed between current and non-current as follows:
2005 2004
#'000 #'000
Current 4,513 1,462
Non-current 2,590 1,646
7,103 3,108
12. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Group Share Share premium Treasury Fair value Retained Total
capital shares and other earnings
#'000 reserves #'000
#'000 #'000 #'000
#'000
At 1 January 2004 2,422 132,638 (10,904) 99,922 (26,322) 197,756
Total recognised (expense)/income for - - - (5,278) 30,896 25,618
the period
Dividend - - - - (45,089) (45,089)
Provision for share awards - - - - 14,788 14,788
Shares issued to employees 19 3,947 42 - (3,401) 607
Repurchase and cancellation of own (86) - - 86 (22,453) (22,453)
shares
Proceeds on disposal of own shares - - 578 - 1,206 1,784
At 31 December 2004 2,355 136,585 (10,284) 94,730 (50,375) 173,011
Total recognised income for the period - - - 9,023 34,714 43,737
Dividend - - - - (23,407) (23,407)
Provision for share awards - - - - 13,975 13,975
Shares issued to employees 24 1,596 32 - 45 1,697
Repurchase and cancellation of own (34) - - 34 (9,284) (9,284)
shares
At 31 December 2005 2,345 138,181 (10,252) 103,787 (34,332) 199,729
Cumulative goodwill relating to acquisitions made prior to 1 January 1998, which
has been eliminated against reserves, amounted to #110,725,000 as at 31 December
2005 and 2004.
13. CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of operating profit to net cash inflow from operating activities:
2005 2004
#'000 #'000
Continuing operations
Profit for the financial year 34,870 31,060
Adjusted for:
Taxation 18,975 26,869
Depreciation, amortisation and impairment charges 10,294 7,643
Fair value (gain)/loss through income statement (5,222) 1,154
Loss on disposal of subsidiary operations 692 3,252
(Gain)/loss on sale of available-for-sale financial assets (7,186) 847
Gain on disposal of property, plant and equipment - (26)
Cost of shares gifted during the year 86 143
Cost of share options issued 13,975 15,273
Interest income (9,455) (7,944)
Investment income (7,192) (412)
Finance costs 5,447 4,648
Share of losses of associated undertakings 1,225 1,840
(Increase)/decrease in trade and other receivables (27,932) (7,239)
Increase/(decrease) in payables 22,916 (6,117)
Increase/(decrease) in provisions 2,681 (7,123)
Exchange translation differences 2,976 (341)
Corporate cash generated from operations 57,150 63,527
Increase/(decrease) in insurance broking creditors 44,630 (43,687)
Exchange translation differences (11,542) 8,622
Cash generated from operations 90,238 28,462
14. SHAREHOLDER INFORMATION
The financial information contained in this preliminary announcement does not
constitute statutory accounts within the meaning of s240 of the UK Companies Act
1985. Statutory accounts will be posted to shareholders no later than 24 March
2006.
The auditors have reported on the statutory accounts. Their report was
unqualified and did not contain a statement under s237(2) or s237(3) of the UK
Companies Act 1985.
The shareholders entered in the Register of Members on 31 March 2006 will be
entitled to the proposed final dividend of 7.0p per common share which will,
subject to approval at the Annual General Meeting to be held on 25 April 2006,
be payable on 3 May 2006.
Copies of the preliminary press release (and statutory accounts when available)
may be obtained from the Company Secretariat, Benfield Group Limited, 55
Bishopsgate, London, EC2N 3BD
This information is provided by RNS
The company news service from the London Stock Exchange
END
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