TIDMGAH
RNS Number : 3149Z
Gable Holdings Inc
25 May 2016
25 May 2016
Gable Holdings Inc.
Trading update
Potential related party transaction
and
Strategic review
Further to its trading update of 31 March 2016, the Board of
Gable Holdings Inc. ("Gable" or the "Company") announces:
- Following receipt of new information, a GBP6 million provision
against an ATE insurance policy receivable which will significantly
impact the Company's results for the year ended 31 December 2015
(previously indicated as being a pre-tax loss of between GBP7
million and GBP8 million);
- An in principle agreement with Hogarth Underwriting Agencies
Limited (a company wholly-owned by William Dewsall, Chief Executive
of Gable) to provide GBP10 million of capital which will form part
of Gable's regulatory capital;
- Gable continues to enjoy high levels of policy renewals and
strong organic growth. A tight control over financial controls has
led to enhanced cash collections and cash and short term investment
balances currently exceed GBP70 million having stood at over GBP60
million as at 31 December 2015; and
- A full strategic review of the Company's business and
structure in the context of the transitional provisions of Solvency
II, which is likely to result in a fundamental restructuring of
Gable
ATE insurance policy provision
In relation to the Company's results for the year ended 31
December 2015, which are shortly to be announced, the Board of
Gable has recently received information relating to a specific ATE
insurance policy under which Gable was entitled to receive a
proportion of the damages awarded to the plaintiff estimated at
GBP7.9 million. In the light of this information, the Board has
concluded, with the support of its auditor, that it is prudent to
provide for GBP6 million of the receivable balance.
Recognition of the share of damages was made in 2012 following
the successful award of damages in favour of the plaintiff (and
therefore by extension Gable). The amount recognised was calculated
at a significant discount to Gable's contractual share of the
estimated total damages. Without the plaintiff referring the matter
to Gable for consent as required under the terms of the ATE policy,
the plaintiff and defendant reached an out of court settlement and
Gable has recently discovered that this settlement is for a
significantly lower value than that awarded on an interim basis by
the US courts. Whilst Gable intends to dispute the legality of this
out of court settlement, which may therefore result in Gable
recouping some of the provision by securing its own damages award
for breach of contract, Gable will make the GBP6 million provision
against this receivable in its accounts for the year ended 31
December 2015. This will increase the anticipated loss before tax
of the Company for the year ended 31 December 2015, which was
previously indicated as being in the range of GBP7 million to GBP8
million.
This does not have an impact on the Company's strong
underwriting performance for the year ended 31 December 2015 or the
Company's cash and liquid investment balances at the period
end.
Related party transaction with Hogarth Underwriting Agencies
Limited ("HUAL")
The Company further announces that it has reached an in
principle agreement with HUAL to provide GBP10 million of capital
to Gable's regulated subsidiary Gable Insurance AG ("GIAG") which
will form part of GIAG's regulatory capital and which shall exist
until the earlier of 31 December 2016 or the conclusion of the
strategic reorganisation described below.
HUAL is wholly owned by William Dewsall, Chief Executive of
Gable, and acts as an insurance intermediary for the Group's UK
construction account and routinely collects premiums and settles
claims under a delegated authority from Gable. Accordingly,
pursuant to Rule 13 of the AIM Rules for Companies such a guarantee
will, once entered into, constitute a related party
transaction.
Therefore, the independent directors of Gable are consulting
with its nominated adviser Zeus Capital Limited to ensure that the
terms of the transaction are fair and reasonable insofar as its
shareholders are concerned. A further announcement will be made in
due course.
Strategic review
The transitional provisions of Solvency II provide insurers with
a two year transitional period ending 31 December 2017 in order to
comply with Solvency II's new rules, including enhanced capital
requirements. Gable has undertaken an extensive review of the
implications on capital requirements under the Solvency II regime
in conjunction with its actuarial advisors, Grant Thornton.
The new capital requirements are determined through a risk based
analysis of expected future gross written premiums. As Gable writes
small niche lines of business its Solvency II capital calculation
does not receive material benefits from diversification of risk and
this together with the rapid growth profile of the business leads
to a capital requirement which is a multiple of that under Solvency
I. Gable's own capital base is also risk weighted under Solvency II
with certain material balances such as deferred acquisition costs
(amounting to some GBP13 million) being disallowed under the new
rules.
Having completed this assessment, the Board has concluded that
raising sufficient additional capital for full Solvency II
compliance is not possible for the existing business, its growth
profile and structure as Solvency II appears to be incompatible
with small niche European insurance business models.
Accordingly, the Board of Gable announces that it has commenced
a full strategic review of the Company's business and operations.
The Company has entered into discussions with a number of different
parties, and is also maintaining a regular dialogue with its
regulator the FMA in Liechtenstein, as regards the range of
potential options open to the Company. At this stage, no firm
conclusions have been reached, but the exercise is expected to lead
to a fundamental restructuring of the Gable business. The Board has
not restricted its considerations in any way and has not ruled out
the potential sale of the Company as a whole or the disposal of a
substantial proportion of the Company's trade and assets. Whilst
the Board of Gable is encouraged by the range of available options
and level of third party interest being shown in these, as well as
the support of the FMA, there can be no certainty at this stage as
to the outcome of these discussions and a further announcement will
be made in due course, as appropriate.
Enquiries:
Gable Holdings Inc. Tel: +44(0) 20 7337 7460
William Dewsall, Chief
Executive
Michael Hirschfield, Group
Finance Director
John Bick, Investor Relations
Zeus Capital Limited Tel: +44(0) 20 3829 5000
Nicholas How, Corporate
Finance
Adam Pollock, Corporate
Broking
Haggie Partners LLP Tel : +44(0) 20 7562 4444
Peter Rigby
About Gable Holdings Inc.
Gable is a European non-life insurance company underwriting a
comprehensive range of specialist policies for the commercial
sectors in the UK, Denmark, France, Germany, Italy, Norway, Spain
and Sweden. Gable benefits from a low-cost online underwriting
platform and the Company has continued to successfully grow its
business geographically whilst simultaneously exploiting a range of
niche insurance segments which exist across the EU, which is
delivered through the EU passporting mechanism. Gable Holdings Inc
is quoted on the London Stock
Exchange's AIM market. For further information please visit www.gableholdings.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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