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Notes to the consolidated financial statements continued 31 Employee retirement benefit obligations continued The amounts recognised in the Group’s income statement are as follows: 94 Notes to the consolidated financial statements <strong>Hiscox</strong> Ltd Report and Accounts 2009 2009 2008 Note £000 £000 Current service cost 300 200 Interest cost 5,720 6,135 Expected return on scheme assets (7,899) (7,720) Past service costs 11,800 – Net actuarial gain recognised – (433) Effect of deemed irrecoverability of surplus 3,379 1,818 Total included in staff costs 10 13,300 – The actual return on scheme assets was a gain of £4,221,000 (2008: loss of £10,387,000). The movement in liability recognised in the Group’s balance sheet is as follows: 2009 2008 Note £000 £000 At beginning of year – – Total expense charged in the income statement of the Group 10 13,300 – Past service costs recognised in other creditors (11,800) – Contributions paid (1,500) – At end of year – – A reconciliation of the fair value of scheme assets is as follows: 2009 2008 £000 £000 Opening fair value of scheme assets 115,166 127,576 Expected return on scheme assets 7,899 7,720 Difference between expected and actual return on scheme assets (3,678) (18,107) Contributions by the employer 1,500 – Settlements with scheme members – – Benefits paid (2,496) (2,023) Closing fair value of scheme assets 118,391 115,166 A reconciliation of the present value of scheme obligations of the scheme is as follows: 2009 2008 £000 £000 Opening present value of scheme obligations 101,615 106,793 Current service cost 300 200 Interest cost 5,720 6,135 Actuarial losses/(gains) 23,737 (9,490) Past service costs 11,800 – Benefits paid from scheme (2,496) (2,023) Settlements with scheme members – – Closing present value of scheme obligations 140,676 101,615 A summary of the scheme’s recent experience is shown below: 2009 2008 2007 2006 2005 £000 £000 £000 £000 £000 Experience gains/(losses) on scheme obligations – – 2,783 (3,310) (1,223) Experience (losses)/gains on scheme assets (3,678) (18,107) 75 6,480 10,764
31 Employee retirement benefit obligations continued Additional memorandum information at the end of the current and previous four accounting periods is presented below: 2009 2008 2007 2006 2005 £000 £000 £000 £000 £000 Present value of scheme obligations 140,676 101,615 106,793 137,461 137,533 Fair value of scheme assets (118,391) (115,166) (127,576) (133,660) (101,409) Present value of unfunded obligations/(surplus scheme assets) 22,285 (13,551) (20,783) 3,801 36,124 Gross liability recognised on balance sheet – – – 3,801 16,677 Assumptions regarding future mortality experience are set based on professional advice, published statistics and actual experience. The average life expectancy in years of a pensioner retiring at age 60 on the balance sheet date is as follows: 2009 2008 years years Male 24.5 24.5 Female 27.6 27.6 The average life expectancy in years of a pensioner retiring at 60, 15 years after the balance sheet date is as follows: 2009 2008 years years Male 25.6 25.6 Female 28.6 28.6 Other principal actuarial assumptions are as follows: 2009 2008 % % Discount rate 5.70 6.70 Expected return on scheme assets 6.50 6.90 Inflation assumption 3.90 3.00 Pension increases 3.90 3.00 The triennial valuation carried out as at 31 December 2008, resulted in a deficit position of £5.1 million and excludes the impact of the equalisation of scheme obligations. The equalisation of scheme obligations has been included in the valuation as at 31 December 2009 and an amount of £11.8 million has been recognised as past service costs. The Group has agreed to fund the £5.1 million deficit paying equal instalments over four years and to pay the full amount relating to the equalisation of obligations in 2010. During the year the Group made the first instalment of £1.5 million to the defined benefit scheme (2008: £nil). 61% of any scheme surplus or deficit calculated is recharged or refunded to Syndicate 33. The expected return on scheme assets is based on historical data and management’s expectations of long-term future returns. While management believe that the actuarial assumptions are appropriate, any significant changes to those could affect the balance sheet and income statement. Whilst an additional one year of life expectancy for all scheme members might be expected to reduce the present value of unfunded obligations at 31 December 2009 by approximately £4 million, the Group considers that the most sensitive and judgemental assumptions are the discount rate and inflation. The Group has estimated the sensitivity of the net obligation recognised in the consolidated balance sheet to isolated changes in these assumptions at 31 December 2009 as follows: Present value (Increase) of unfunded Present value /decrease obligations of unfunded in obligation before change obligations recognised on in assumption after change balance sheet £000 £000 £000 Effect of a change in discount rate Use of discount rate of 5.45% (22,285) (30,165) – Effect of an increase in inflation Use of inflation assumption of 4.15% (22,285) (24,454) – 32 Earnings per share Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the year, excluding ordinary shares held by the Group and held in treasury as own shares. Basic 2009 2008 Profit for the year attributable to the owners of the Company (£000) 280,497 70,808 Weighted average number of ordinary shares (thousands) 372,848 377,506 Basic earnings per share (pence per share) 75.2p 18.8p Notes to the consolidated financial statements <strong>Hiscox</strong> Ltd Report and Accounts 2009 95
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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
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Boxplot and whisker diagram of Hisc
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in essence a non-bureaucratic organ
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Cougar Syndicate 6104 Cougar Syndic
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Hiscox Insurance Company (Bermuda)
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Independent Non Executive Directors
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ecent and relevant financial experi
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Directors’ remuneration report Th
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Executive Directors’ cash incenti
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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 and 78: 5 Net asset value per share 2009 20
Page 79 and 80: 12 Auditors’ remuneration continu
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: 30 Deferred tax continued (b) Group
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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