Report & Financial Statements

Transcription

1 Report & Financial Statements For the year ended 31 December 2012 Partnership Number: OC Registered Office: Beaufort House, 15 St Botolph Street, London EC3A 7EE Tel:

2 P a g e 1 Contents Members and Advisors... 2 Members Report... 3 Independent Auditor s Report to the members of Aquila Underwriting LLP... 8 Consolidated Profit and Loss Account Consolidated Balance Sheet Limited Liability Partnership Balance Sheet Notes to the financial statements... 13

3 P a g e 2 Members and Advisors Members Hawkes Bay Holdings Limited Founding Corporate Member Stephen R Fletcher Nigel K Rice Kernow Capital Corporation Tim J Hancox Gan Cheng Siong Chris Newton Cove Program Managers Ltd Paul Jansen Kevin Hastings Founding Individual Member Individual Member Resigned 31 December 2011 Corporate Member Individual Member Individual Member Individual Member Corporate Member Individual Member Individual Member Registered Office Beaufort House 15 St Botolph Street LONDON EC3A 7EE Statutory Auditor Deloitte LLP

4 P a g e 3 Members Report The members present their report and financial statements for the group for the year ended 31 December Group Structure Aquila Underwriting LLP ( the LLP or the Partnership ) is incorporated as a Limited Liability Partnership under the Limited Liability Partnerships Act These financial statements are the accounts of Aquila Underwriting LLP and reflect the results for the year to 31 December The financial statements consolidate the accounts of Aquila Underwriting LLP and its subsidiary, Sart Underwriting Limited, (the group ), drawn up to 31 December each year. Principal Activity The principal activity of the group is that of an Underwriting Agency. In this capacity the group accepts risks on behalf of Underwriters, within specific agreed terms. This activity is carried out through individual Divisions, each of which has Corporate and Individual members carrying out the business of that Division with overall management through the Management Board of the group. Partnership Agreement The LLP is governed by a Limited Liability Partnership Agreement ( the LLP Agreement ) dated 18 April The Designated Members under the LLP Agreement are Hawkes Bay Holdings Limited (HBH), the Founding Corporate Member, and Stephen Fletcher. The LLP Agreement provides for the establishment of a Management Board, the members of which are appointed by the Founding Corporate Member. At least one member of the Management Board must be an Individual Member. The directors on the Management Board are as follows: Christopher Spratt Stephen Fletcher Quintin Heaney Janice Perry Trevor Newbery Peter Haynes Non-Executive Chairman Managing Director Finance Director Compliance Director Non-executive Director Non-executive Director - appointed 1 February resigned 28 February 2013 David Harris Non-executive Director (appointed 3 December 2012)

5 P a g e 4 Members Report (continued) Members Responsibilities Statement The members are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. The Limited Liability Partnerships Regulations 2008 require the members to prepare financial statements for each financial year. Under that law the members have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. The financial statements are required by law to give a true and fair view of the state of affairs of the LLP and of the group and of the profit or loss of the group for that period. In preparing these financial statements, the members are required to: select suitable accounting policies and them apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements ; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the firm will continue in business. The members are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the LLP and enable them to ensure that the financial statements comply with the Companies Act 2006, as applicable to limited liability partnerships. They are also responsible for safeguarding the assets of the LLP and hence taking reasonable steps for the prevention and detection of fraud and other irregularities. Disclosure of information to the Auditor Each of the persons who is a member at the date of approval of this report confirms that: so far as the member is aware, there is no relevant audit information of which the group s auditor is unaware; and the member has taken all the steps that he/she ought to have taken as a member in order to make himself/herself aware of any relevant audit information and to establish that the group's auditor is aware of that information. Members Indemnities The group has made qualifying third party indemnity provisions for the benefit of its members which were made during the year and remain in force at the date of this report.

6 P a g e 5 Members Report (continued) Going Concern The group and the LLP s business activities, together with the factors likely to affect its future development, performance and position are set out in the paragraphs headed Review of the business and future developments below. These paragraphs also refer to the financial position of the group and the LLP including its cash flows, liquidity position and capital. The paragraphs headed Financial instruments refer to the group s objectives, policies and processes for financial risk management. The group is financed through subordinated loans from the Founding Corporate Member and from other corporate partners. These loans comprise the permanent capital of the group. The group is also a member of the HBH group, comprising Hawkes Bay Holdings Ltd (HBH) and its subsidiaries. The members are aware that the directors of HBH have prepared and carefully considered cash flow forecasts for the entire group for a period of five years from the reporting date of 31 December 2012 and that the directors of HBH are confident that the group has adequate resources to meet its liabilities as they fall due. These forecasts include separate analyses and forecasts for each of the regulated entities within the group. After making enquiries, the members have an expectation that the group and LLP has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the annual report and accounts. Review of the Business and Future Developments The group has been established as a unique vehicle in the underwriting agency market. Creating an FSA regulated LLP enables individual ring-fenced cells (or divisions) to be established within the partnership in a very efficient manner. The strategy of the group is to attract leading players in their own niche markets who have a proven track record of profitability, marry this to sound risk bearing markets and provide the key individuals with an ownership share in their own cell. Capital to run each cell is provided by the group s Founding Corporate Member, HBH and/or other Corporate Members who are also members in that particular cell. In this manner all members interests are aligned within each partnership cell. Cost effective central services are provided via the group allowing the key business people to concentrate on developing their core business and maximising profits in each cell. The LLP commenced trading in June 2007 through its first cell, trading as Vectura Underwriting, with a core business of marine cargo. During the current year, Vectura has continued to develop its business organically, winning new clients throughout the world. The LLP commenced a second cell, SART Underwriting (SART), in August The business of SART is located in Hong Kong, and is carried out through a Hong Kong registered company, SART Underwriting Limited, in order to comply with local regulations. SART has portfolios of marine business and also in construction, engineering and more recently PA, Casualty and Freight Forwarders.

7 P a g e 6 Members Report (continued) The third cell, Principia Underwriting, was formed in November 2009 and commenced trading early in The business comprises portfolios in Media, covering broadcast visual arts and in Technology. A fourth cell was established in the second half of 2011, trading as Cove Program Underwriters, and specialises in insurance products for the US Residential Contractors sector. Despite some initial delays, trading commenced in earnest early in The Members continue to look for other opportunities to develop further cells in the group. The group obtains financing in respect of each cell, from its Founding Corporate Member, HBH, and from other corporate members if applicable. Such funding is based on cash flow forecasts prepared in respect of each cell, which are regularly reviewed and updated where necessary. The funding is in the form of subordinated loans, which are interest bearing and are only repayable in the event of the sale or closure of the business of the cell to which the funding relates. The loans are paid to the group in instalments, to meet the needs of each cell separately as the business of that cell is developed. Financial Risk Management Treasury operations and financial instruments The HBH group of which the partnership is a member operates a centralised treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the group s activities. The group is financed through loans from Corporate members as described below, with day-to-day operating requirements financed through balances with HBH group companies. The group has various financial assets and liabilities such as receivables and payables arising directly from its operations. Liquidity risk The HBH group manages its cash and borrowing requirements centrally to ensure that each member of the HBH group has sufficient liquid resources to meet the operating needs of its businesses. Interest rate risk The group is exposed to interest rate risk on its subordinated loans. The subordinated loans are due to the corporate members of the group and interest is due at UK base rate.

8 P a g e 7 Members Report (continued) Members Interests Each of the members of the group is awarded a number of points in one or more of the individual cells. Individual Members engaged in the day to day business of a cell have a Basic Profit Share (BPS) which is a first call of the profits of that cell. All members who have points in a cell are entitled to a share of the profits of the respective cell(s) relative to their point s ownership positions. This recognises the contribution of Individual members in the day-to-day running of the cell. Profit, after accounting for profit distributed as BPS, is distributed to members determined by the share of the points they have in that cell compared to the total number of points in issue for that cell. BPS is paid irrespective of the profits of a cell. In the event that BPS exceeds the profit of a cell, the excess is divided between the individual members to whom BPS is payable and is charged to a loan account between the member and the group. All members subscribe an initial capital contribution of 1,000 when they join the partnership which is not repayable while they remain a member. No individual member has any liability to make further capital contribution over the initial capital contribution. Interest is not paid on initial capital contributions. Corporate members have committed to provide funds through subordinated loans, which are only repayable in the event of the sale or cessation of business of the particular cell in which they are a member. These loans are drawn down as necessary to meet working capital requirements. Interest is paid on subordinated loans. Results and Profit Distribution The results for the year and the state of the group s affairs are shown in the attached financial statements on pages 10 to 19. The profit for the period is distributed between the members in accordance with the LLP Agreement (2012: 1,410,000, 2011: 983,000). Auditor Deloitte LLP were appointed as first auditor to the group. The group has dispensed with the need to hold an Annual General Meeting and hence the need to reappoint auditors annually. Therefore, Deloitte LLP are deemed to continue in office. This report was approved by the Board on 25 April Q J Heaney For and on behalf of The Founding Corporate Member S R Fletcher For and on behalf of The Individual Members Beaufort House, 15 St Botolph Street, London EC3A 7EE

9 P a g e 8 Independent Auditor s Report to the members of Aquila Underwriting LLP We have audited the financial statements of Aquila Underwriting LLP (the LLP ) for the year ended 31 December 2012 which comprise the Consolidated Profit and Loss Account, the Consolidated Balance Sheet, the Limited Liability Partnership Balance Sheet and the related notes 1 to 12. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the LLP s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006, as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations Our audit work has been undertaken so that we might state to the LLP s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the LLP and the LLP s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of members and auditor As explained more fully in the Members Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and the parent company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the group s and the parent LLP s affairs as at 31 December 2012 and of the group s profit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships.

10 P a g e 9 Independent Auditor s Report (continued) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 as applied to limited liability partnerships requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent LLP, or returns adequate for our audit have not been received from branches not visited by us; or the parent LLP financial statements are not in agreement with the accounting records and returns; or we have not received all the information and explanations we require for our audit. Andrew Downes (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 25 April 2013

11 P a g e 10 Consolidated Profit and Loss Account For the year ended 31 December 2012 Notes Turnover 2 3,105 1,500 Administrative expenses (1,610) (418) Operating profit 3 1,495 1,082 Interest receivable - - Interest payable and similar charges 5 (87) (98) Net interest (87) (98) Profit on ordinary activities before taxation 1, Tax charge on profit on ordinary activities 6 (9) (1) Profit for the year before members profit share 1, Members profit share charged as expense 4 (1,400) (983) Result for the year debited to members loan accounts (1) - There are no recognised gains or losses in the year other than those reported in the consolidated profit and loss account and therefore a Statement of Total Recognised Gains and Losses has not been presented. The group s turnover and expenses all relate to continuing operations. The accompanying notes form an integral part of the financial statements.

12 Consolidated Balance Sheet As at 31 December 2012 P a g e 11 Notes Fixed assets Investments Current assets Debtors 8 5,412 3,697 Cash at bank and in hand 9 3,343 2,837 8,755 6,534 Creditors: amounts falling due within one year 10 (6,428) (4,801) Net current assets 2,327 1,733 Net assets 2,327 1,733 Total members interests Loans due to members 11 2,319 1,724 Members other interests members capital ,327 1,733 The accompanying notes form an integral part of the financial statements. The financial statements on pages 10 to 19 were approved by the Board on 25 April Q J Heaney For and on behalf of The Founding Corporate Member S R Fletcher For and on behalf of The Individual Members

13 Limited Liability Partnership Balance Sheet As at 31 December 2012 P a g e 12 Partnership number: OC Notes Fixed assets Investments Current assets Debtors 8 4,586 3,368 Cash at bank and in hand 9 1,861 1,690 6,447 5,058 Creditors: amounts falling due within one year 10 (4,128) (3,334) Net current assets 2,319 1,724 Net assets 2,328 1,733 Total members interests Loans due to members 11 2,320 1,724 Members other interests members capital ,328 1,733 The accompanying notes form an integral part of the financial statements. The financial statements on pages 10 to 19 were approved by the Board on 25 April Q J Heaney For and on behalf of The Founding Corporate Member S R Fletcher For and on behalf of The Individual Members

14 P a g e 13 Notes to the financial statements For the year ended 31 December 2012 The principal accounting policies, which have been applied consistently throughout the current and prior years, are set out below. 1. Accounting policies (a) Accounting basis The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards and the requirements of the Statement of Recommended Practice Accounting by Limited Liability Partnerships (issued March 2010). The financial statements have also been prepared on the going concern basis in view of the continued support from its Founding Corporate Member Hawkes Bay Holdings Limited (HBH). The financial position of the LLP is further described in the Members Report. The members are aware that the directors of HBH have prepared and carefully considered cash flow forecasts for the HBH Group comprising HBH and all its subsidiary companies for a period of five years from the reporting date of 31 December 2012 and are confident that the HBH Group has adequate resources to meet its liabilities as they fall due. (b) Basis of consolidation The LLP has elected to prepare group financial statements to reflect the results of its subsidiary, SART Underwriting Limited. The group financial statements consolidate the financial statements of the LLP and its subsidiary undertaking drawn up to 31 December each year. Acquisitions are accounted for under the acquisition method. (c) (d) Turnover Turnover represents profit commissions and net commission receivable on continuing activities. Net commission is credited to the profit and loss account on the later of the date of inception of a risk or, if the completion of placement occurs subsequent to inception, the debit note date. Adjustments relating to additional or return premiums are accounted for as and when they arise. Net commission is credited on an accruals basis. Profit commissions are credited to the profit and loss account on the earlier of the final calculation being provided or the funds being received. Other operating income Other operating income comprises fees received from subsidiaries of the Founding Corporate Member.

15 P a g e 14 Notes to the financial statements (continued) For the year ended 31 December Accounting policies (continued) e) Foreign currencies Profit and loss account transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Assets and liabilities in overseas currencies have been translated into sterling at the rates of exchange ruling at the balance sheet date. Gains and losses on translation are included in the profit and loss account. (f) (g) Interest payable and interest receivable Interest receivable and interest payable are recognised on an accruals basis. Taxation The taxation payable on profits of the Limited Liability Partnership is the personal liability of the partners and is not dealt with in these financial statements. A retention from profit distributions is made to fund the taxation payments on behalf of partners. The tax expense represents the sum of the current and deferred tax relating to the corporate subsidiaries. The current tax expense is based on taxable profits of these companies. Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax relating to the corporate subsidiary is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the subsidiary s taxable profits and their results as included in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on a basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. (h) Underwriting agent assets and liabilities Recognition of the insurance transaction occurs when the LLP raises transactions in respect of premiums or claims, at which time a corresponding asset or liability is established in favour of the insurer or the client. (i) Investments Investments held as fixed assets, including investments in subsidiary undertakings, are stated at cost less provision for impairment.

16 P a g e 15 Notes to the financial statements (continued) For the year ended 31 December Accounting policies (continued) (j) Compliance with Statement of Recommended Practice The LLP has adoptedd all material recommendations of the Statement of Recommended Practice ( SORP ) on Accounting by Limited Liability Partnerships published in March 2010 by the Consultative Committee of Accountancy Bodies ( CCAB ). (k) Exemption from preparing a cash flow statement The LLP has taken advantage of the exemption under FRS 1 (Revised) not to prepare a cash flow statement, on the grounds that it is a wholly controlled subsidiary of a group which prepares a consolidated cash flow statement and whose accounts are publicly available. No profit and loss account for the LLP has been presented as permitted by Section 408 of the Companies Act Turnover United Kingdom Rest of Europe North America Asia Other 1, , ,105 1,500 ====== ==== ========= The whole of the turnover relates to insurance mediation activities. Millions United Kingdom Rest of Europe North America Asia Other

17 P a g e 16 Notes to the financial statements (continued) For the year ended 31 December Auditor s remuneration The remuneration of the auditor in respect of the audit of the group is paid by Tyser Group Services Limited, a subsidiary of Hawkes Bay Holdings Limited, the Founding Corporate Member and is included in the accounts of that company. The amount recharged to the business is as follows: Audit fee Members profit share Highest paid Total profit share 1, Average number of members Interest payable Corporate members subordinated loans 1 2 Individual members balances - 1 Excess funding from Founding Corporate Member

18 P a g e 17 Notes to the financial statements (continued) For the year ended 31 December Taxation a) Analysis of charge in year UK tax: Corporation tax charge at 24.5 % (2011: 26.5%) on the taxable profit for the year - - Foreign tax 9 1 Adjustment in respect of prior years b) Factors affecting tax charge for year Profit on ordinary activities before tax 1, Less share of members profits before tax (1,399) (983) Group result on ordinary activities before tax 9 1 c) Balance sheet deferred tax Balance brought and carried forward in respect of: Other timing differences - -

19 P a g e 18 Notes to the financial statements (continued) For the year ended 31 December Investments Group LLP Investment in subsidiary undertaking The LLP owns the whole of the issued share capital of SART Underwriting Limited a company incorporated in Hong Kong, to carry out its business as an Underwriting Agent in Hong Kong. The results of SART Underwriting Limited are incorporated in the overall results of these accounts. 8. Debtors: Amounts falling due within one year Group LLP Insurance debtors 2,217 1,787 1,563 1,076 Other debtors Prepayments and accrued income Due from subsidiary of Founding Corporate Member 97 1, ,431 Due from Individual members in respect of BPS in excess of available profit 2, , ,412 3,697 4,586 3, Cash at bank and in hand Included in cash at bank and in hand for the group is 2,765,000 (2011: 1,250,000) held as deposits on behalf of underwriters against claims payments, and 549,000 (2011: 1,583,000) held on behalf of underwriters.

20 P a g e 19 Notes to the financial statements (continued) For the year ended 31 December Creditors: Amounts falling due within one year Group LLP Insurance creditors 5,045 4,145 3,162 2,663 Accruals and deferred income Due to subsidiary of Founding Corporate Member Due to Individual members Other creditors ,428 4,801 4,128 3, Loans due to members Subordinated loans made or committed by Corporate members 2,319 1,724 The subordinated loans have been made to the LLP by the Corporate members and are only repayable in the event of the sale of cessation of business of any particular cell. Interest is payable on the loans at a rate equal to the Bank of England base rate from time to time plus 2%. 12. Members capital accounts Capital contributed by members 8 9