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Notes to the consolidated financial statements continued 9 Other revenues and expenses 76 Notes to the consolidated financial statements <strong>Hiscox</strong> Ltd Report and Accounts 2009 2009 2008 £000 £000 Agency related income 6,651 5,324 Profit commission 12,248 14,382 Other underwriting income, catastrophe bonds 410 – Other income 189 152 Other revenues 19,498 19,858 Managing agency expenses 33,051 19,513 Overseas underwriting agency expenses 47,943 28,787 Connect agency expenses 11,795 13,343 Investment expenses 2,690 1,899 Other Group expenses including central overheads 21,460 12,957 Other expenses 116,939 76,499 10 Employee benefit expense The aggregate remuneration and associated costs were: 2009 2008 Note £000 £000 Wages and salaries, including holiday pay and sabbatical leave charges 108,626 79,048 Social security costs 12,391 10,468 Share based payments cost of options granted to Directors and employees 25 5,260 5,269 Pension costs – defined contribution 6,510 5,794 Pension costs – net expense/(credit) arising on defined benefit schemes 31 13,300 – 146,087 100,579 The average monthly number of staff employed by the Group was 1,061 (2008: 914) comprising 368 underwriting and 693 administrative staff (2008: 335 and 579 respectively). Of the total remuneration shown above, an amount of £21,555,000 (2008: £21,053,000) was recharged to Syndicate 33. 11 Finance costs 2009 2008 Note £000 £000 Interest and expenses associated with bank borrowings 2,493 3,201 Interest and charges associated with Letters of Credit 36 2,780 1,922 Interest charges arising on finance leases 37 20 35 5,293 5,158 12 Auditors’ remuneration Fees payable to the Group’s main external auditors, KPMG, its member firms and its associates (exclusive of VAT ) include the following amounts recorded in the consolidated income statement: 2009 2008 Group £000 £000 Fees payable to the Company’s auditors for the audit of the Group’s consolidated financial statements 188 262 Fees payable to the Company’s auditors and its associates for other services: The audit of subsidiaries pursuant to legislation 638 519 Other services pursuant to legislation 90 75 All other services* 185 75 Fees in respect of the defined benefit pension scheme: 1,101 931 Audit 11 12 Total auditors’ remuneration expense 1,112 943 *Other fees relate primarily to corporate advisory and financial reporting consulting services. Non-audit services with fees greater than £50,000 must be pre-approved by the Audit Committee which is composed solely of independent Non Executive Directors.
12 Auditors’ remuneration continued The full audit fee payable for the Syndicate audit has been included above, although an element of this is borne by the third-party participants in the Syndicate. Fees payable to other external auditors in respect of the Company’s subsidiaries in the US pursuant to legislation during 2009 were £52,000 (2008: £23,000). 13 Net foreign exchange (losses)/gains The net foreign exchange (losses)/gains for the year include the following amounts: 2009 2008 £000 £000 Exchange (losses)/gains recognised in the consolidated income statement (25,554) 109,755 Exchange (losses)/gains classified as a separate component of equity (69,589) 150,582 Overall impact of foreign exchange related items on net assets (95,143) 260,337 The above excludes profit or losses on foreign exchange derivative financial instruments which are included within the investment result. Net unearned premiums and deferred acquisition costs are treated as non monetary items in accordance with IFRS. As a result, a foreign exchange mismatch arises caused by these items being earned at historical rates of exchange prevailing at the original transaction date whereby resulting claims are retranslated at the end of each period. The impact of this mismatch on the income statement is shown below. 2009 2008 £000 £000 Opening balance sheet impact of non retranslation of non monetary items 50,525 14,438 (Loss)/gain included within profit representing the non retranslation of non monetary items (53,732) 36,087 Closing balance sheet impact of non retranslation of non monetary items (3,207) 50,525 14 Foreign currency items on economic hedges and intragroup borrowings In the prior year, the Group highlighted two separate charges on the consolidated income statement to enable readers to obtain a fuller understanding of their impact and that of related amounts recognised directly in other comprehensive income. The current year comparatives are not significant and as such this presentation has not been applied to the consolidated income statement for the year ended 31 December 2009. The current year comparatives are shown below: Consolidated Consolidated other Total income comprehensive impact on statement income equity 2009 2009 2009 Impact as at 31 December 2009 £000 £000 £000 Realised gains on foreign currency derivative contracts used to manage retranslation risk associated with the net investment in Bermuda and Guernsey insurance operations 314 – 314 Retranslation loss on managed net investment in Bermuda and Guernsey insurance operations – (5,207) (5,207) Unrealised translation (losses)/gains on intragroup borrowings (4,362) 4,362 – Total losses recognised (4,048) (845) (4,893) Consolidated Consolidated other Total income comprehensive impact on statement income equity 2008 2008 2008 Impact as at 31 December 2008 £000 £000 £000 Unrealised losses on foreign currency derivative contracts used to manage retranslation risk associated with the net investment in Bermuda and Guernsey insurance operations (42,540) – (42,540) Retranslation gain on managed net investment in Bermuda and Guernsey insurance operations – 67,591 67,591 Unrealised translation (losses)/gains on intragroup borrowings (12,580) 12,580 – Total (losses)/gains recognised (55,120) 80,171 25,051 Foreign exchange losses of £6,058,000 before tax (£4,362,000 after tax) (2008: £8,463,000 and £12,580,000 respectively) have been recorded on certain loan arrangements, denominated in US Dollars, between Group companies. In most cases, as one party to each arrangement has a functional currency other than the US Dollar, foreign exchange losses arise which are not eliminated through the income statement on consolidation. Implicit offsetting gains are reflected instead on retranslation of the counterparty company’s closing balance sheet through other comprehensive income and into the Group’s currency translation reserve within equity. In the prior year the Group entered into US Dollar currency option collar contracts which were contracted in September and October 2008 to serve as informal hedges of part of the Group’s net investment in its Bermuda and Guernsey insurance operations (note 22). Notes to the consolidated financial statements <strong>Hiscox</strong> Ltd Report and Accounts 2009 77
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Hiscox Ltd Report and Accounts 2009
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Corporate highlights Group key perf
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Chairman’s statement It is an eno
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Chief Executive’s report In 2009
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Hiscox London Market Hiscox London
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We have also worked hard to develop
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We have continued to invest in trai
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Hiscox London Market Hiscox London
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Group financial performance Group f
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The expense ratio deteriorated by 7
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High quality and well diversified p
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Risk management The risk management
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Credit Reinsurance counterparties T
Page 27 and 28: Boxplot and whisker diagram of Hisc
Page 29 and 30: in essence a non-bureaucratic organ
Page 31 and 32: Cougar Syndicate 6104 Cougar Syndic
Page 33 and 34: Hiscox Insurance Company (Bermuda)
Page 35 and 36: Independent Non Executive Directors
Page 37 and 38: ecent and relevant financial experi
Page 39 and 40: Directors’ remuneration report Th
Page 41 and 42: Executive Directors’ cash incenti
Page 43 and 44: Remuneration of Executive Directors
Page 45 and 46: Share options Number of Number of M
Page 47 and 48: Directors’ report The Directors h
Page 49 and 50: Report of the independent registere
Page 51 and 52: Consolidated balance sheet At 31 De
Page 53 and 54: Consolidated statement of cash flow
Page 55 and 56: 2 Significant accounting policies c
Page 63 and 64: 3 Management of risk continued 3.1
Page 75 and 76: 4 Operating segments continued (a)
Page 77: 5 Net asset value per share 2009 20
Page 81 and 82: 15 Intangible assets continued Othe
Page 83 and 84: 19 Reinsurance assets 2009 2008 Not
Page 85 and 86: 22 Derivative financial instruments
Page 87 and 88: 23 Fair value measurements continue
Page 89 and 90: 25 Share capital continued Share op
Page 91 and 92: 27 Insurance liabilities and reinsu
Page 93 and 94: 27 Insurance liabilities and reinsu
Page 95 and 96: 30 Deferred tax continued (b) Group
Page 97 and 98: 31 Employee retirement benefit obli
Page 99 and 100: 36 Contingencies and guarantees con
Page 101 and 102: 38 Principal subsidiary companies o
Page 103 and 104: To request a copy of the 2009 Hisco
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