January 17 2018

ZEAL Group reduces risk exposure by €20million over two years

New hedging structure lowers exposure and EBIT fluctuation risk; increases capital efficiency and flexibility

 

ZEAL Group today announced that with the implementation of its third collateralised hedging structure, delivered through its associated company, myLotto24, it has reduced the Group’s risk exposure by €20million over two years. By freeing up €10million of cash, it has also increased the capital efficiency of its hedging operations by 30%. Additionally, it has secured greater flexibility of cover to match its international growth.

The sophisticated hedging structure will provide cover during 2018 and 2019. It is backed by some of the world’s leading investors, and combines a number of risk management mechanisms including collateralised reinsurance and specialist jackpot insurance.

 

Lower risk exposure

Over the two years of the structure, the Group has reduced its risk exposure by €20million (€10million per year), achieved through a lower self-retention (from €35million to €25million).

Additionally, by moving to cover based on actual risk rather than modelled risks, the Group has been able to secure lower premium rates. Under the new structure, like for like costs per bet are expected to be around 20% lower.

 

Greater capital efficiency

The new structure has enabled the Group to free up €10million of cash, effectively increasing the capital efficiency of its hedging operations by 30% compared to the previous structure and giving it further financial flexibility.

 

Greater competitive advantage

The new approach also gives the Group greater competitive advantage as it grows internationally, through its ability to add new partners and official lotteries from across the world, at any time.

 

Jonas Mattsson, CFO, ZEAL Group, said: “ZEAL continues to lead the way in lottery risk management. Our new structure gives us greater flexibility as we grow internationally, increases our capital efficiency and significantly lowers our risk exposure. This is good news for shareholders and is another step in our continued focus on operational excellence.”

 

Over the last 18 years, ZEAL and its associated companies have generated stakes of more than €3 billion and paid out more than €1.3billion in winnings. myLotto24 holds the sector’s record for the largest ever single payout of €48million.

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