Annual Report 2010 - Inter Hannover

Annual Report 2010

Contents 

2 Chairman’s statement 

6 Report of the directors 

9 Statement of directors' responsibilities 

10 The Board of Directors 

13 Report of the auditors 

14 Profit and loss account for the year ended 

31st December 2010 

15 Statement of total recognised gains and losses 

for the year ended 31st December 2010 

15 Reconciliation of movements in shareholder’s funds 


16 Balance sheet as at 31st December 2010 

20 Notes to the accounts forming part of the 

financial statements 

Board of Directors 

Executive directors 

N Parr 

P Webster 

Non-Executive directors 

J Gräber (Chairman) 

T A Ablett (Independent) 

R Vogel 

R T R Woods (Independent) 

Company Secretary 

A McMahon 

Registered office 

1 Arlington Square 

Bracknell 

RG12 1WA 

United Kingdom 

Registered number 

1453123 

London office 

10 Fenchurch Street 

London 

EC3M 3BE 


Scandinavian branch office 

Hantverkargatan 25 

P.O. Box 22085 

S-104 22 Stockholm 

Sweden 

Italian branch office 

Via San Vito 7 

20123 Milan 

Italy 

Australian branch office 

The Re Centre 

Level 21, Australia Square 

264 George Street 

Sydney NSW 2000 

Australia 

Canadian branch office 

With effect from 1st May 2011: 

130 King Street, West 

Suite 2125 

Toronto 

Ontario M5X 1A4 

Canada 

Auditors 

KPMG Audit Plc 

15 Canada Square 

London 

E14 5GL 


Bankers 

Royal Bank of Scotland 

135 Bishopgate 

London 

EC2M 3UR 

United Kingdom

Inter Hannover 

core subsidiary of the Hannover Re Group 

We strive to be innovative and responsive 

With a focus on partnership and facilitation 

Yet we are sophisticated and understated 

And continue to be reliable, solid and mature

J Gräber 

Chairman 

Dear ladies and gentlemen, 

I am pleased to report a very satisfying year of business development and positive results for Inter 

Hannover in which we have exceeded our targets of achieving market share within our risk appetite by 

sector. It is very satisfying that these financial statements report a gross premium volume of circa 

£550m with a combined ratio for core business of 94.5%, net of cession outside the Group. Inter Hannover 

has from its pure net account delivered a profit before tax of £12.8m. 

With market conditions being generally quite challenging in many of the lines of business underwritten, 

the management and the teams have nevertheless worked effectively with our business partners to 

ensure an overall positive set of results, brought about through quality products efficiently distributed 

and backed by the financial strength of Hannover Re Group. In this regard I am very pleased that both 

Standard & Poor’s (AA-) and A.M. Best (A) confer equivalent Group rating for Inter Hannover. 

Our Executive Team has been focused on preparing our business model to be suitably compliant with 

Solvency II standards, which is now not so far away from its proposed implementation date. Our business 

development teams have also been engaging in discussions with potential clients for whom Solvency II 

requirements might be relieved by considering a future partnership with us. We are, of course, always 

happy to undertake such interesting research in areas of optimising capital and operating models. 

We have once again introduced some new mandates for Inter Hannover’s single risk underwriters. We 

are, for example, happy to be developing a portfolio of political violence business, generated from North 

America and underwritten by recognised experts in their field, being complementary to our specialists 

in political risks business at our Scandinavian branch in Stockholm. In addition we have begun to build 

a construction insurance portfolio from the UK and we are also proud to have developed some specialised 

products, for example in corporate group PA, illness and travel. 

I am constantly aware though that our business is principally a people business built around the expertise 

and the willingness of our staff to make a difference and to go the extra mile. The effectiveness of our 

communication is of utmost importance and this manifests itself in both the speed and quality of 

our responses to clients. 

2 CHAIRMAN’S STATEMENT 

Inter Hannover Report and Accounts 2010

Inter Hannover, for example, acts as a portal for clients to access the wider expertise of our entire Group. 

Our underwriting strength represents a combination of the skills within both Inter Hannover and 

Hannover Re, and this I see as a major benefit. Frequently I receive feedback that access to this breadth 

of knowledge and our speed in taking decisions are much appreciated qualities. 

We have further invested in building these skills within our teams, and we have welcomed a number of 

excellent quality new professionals to our staff in 2010. Our new position of Chief Operating Officer has 

been successfully introduced towards the end of the year, which will help to steer our strategy in improving 

further the standards in client service. To all who have joined in 2010 I extend my warmest welcome and 

wishes for fulfilment for your developing careers within the Group, and I also extend my thanks to all 

existing staff for sharing in the vision for Inter Hannover’s potential which we have all seen progressing 

successfully to fruition during 2010. We feel privileged to be allowed to offer you, our talented staff 

members, challenging opportunities to deploy your skills. Your empowerment means a lot to us. 

Finally, from the changes to our postal addresses in 2010 you may have noticed that we have invested 

in new and updated premises for both our City of London underwriting rooms and our technical support 

offices in Bracknell. Both offices offer the most modern of facilities and provide an environment where 

our staff can perform at their best, and be proud of their professional home. 

Moreover, we have created through their design a comfortable and efficient meeting place where we invite 

our clients to come and test our expertise. We certainly look forward to your visit. 

J Gräber 

Chairman 

22nd March 2011 

Inter Hannover Report and Accounts 2010 

CHAIRMAN’S STATEMENT 

3

4 NOTES TO THE ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS Inter Hannover Report and Accounts 2010

Partnering growth 

... we have worked effectively with our business partners to ensure an overall positive set of results. 

We bring together key elements of best practice from across the world ensuring we deliver best solutions for our clients. 


NOTES TO THE ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS 

5

International Insurance Company of Hannover Limited (Registration Number 1453123) 

Report of the directors 

The directors submit the annual report of International 

Insurance Company of Hannover Limited (“Inter Hannover”) 

together with the audited financial statements for the year 

ended 31st December 2010. 

Business review and principal activities 

The impact of the agreement on the technical result of Inter 

Hannover is disclosed in Note 1. The net cost amounted to 

£2.7m which is partially offset by profits of £2.4m arising on 

the related business during the year, prior to the reinsurance 

agreement coming into effect. 

The analysis which follows is based on the underlying result 

for the year, excluding the impact of the reinsurance 

agreement noted above. 

The Company writes all major classes of insurance business, 

with the exception of life policies, through agents and brokers 

based mainly in Europe, including the London market. It also 

operates four branches. Three are well established: a 

Scandinavian branch located in Stockholm, writing primarily 

aviation and marine business, and branches located in Italy 

(Milan) and Australia (Sydney) which write business across a 

number of classes. A fourth branch has been licensed in Canada 

which is expected to commence trading in 2011. 

During the year the rating agencies maintained their rating of 

the Company: Standard & Poor’s AA- (very strong) and A.M. 

Best A (excellent). 

Financial performance 

Gross written premium (GWP) at £550m was 53% up on 

2009 driven by growth in all operating segments of the 

business. Specifically, 2010 saw significant growth in the 

agency book where premium grew by 70% to £243.3m as key 

agency agreements signed in 2009 developed through 2010. 

The single risk London Market broker channel business also 

saw strong growth as premium grew by 72.5% to £185.6m, 

the main drivers being the Company’s strategic move into UK 

solicitors PI market as well as responding to hardening rates 

in classes such as offshore energy. The marine and aviation 

business written by our Stockholm branch also performed 

well increasing premium volumes by 11% to £117.3m. 

As stated in Note 1 to the accounts, on 3rd of December 2010 

the Company entered into an agreement under which the 

risks arising from a substantial proportion of its run-off 

business were reinsured to a third party. The agreement 

provides that, subject to the successful completion of the 

requirements of Part VII of the Financial Services and 

Markets Act 2000, the liabilities will be transferred to the 

acquiring company. It is expected that this transfer will be 

completed by the third quarter of 2011. 

On the technical account, the gross technical result was 13% 

lower that in 2009 at £20.3m. This was a combination of a 

number of large losses including the Queensland floods, Pike 

River, and increases in case estimates on some of the legacy 

agency business. This was mitigated to some extent by excess 

of loss (“XL”) protections. The net technical result however 

showed growth of 594% to £19.5m (£16.8m including the RI 

contract noted in Note 1) benefiting from the XL protections 

and overrider income of £21.1m. The net loss ratio improved 

from 122% to 71% as a result. 

The slow recovery in European and US central bank base 

rates had little impact on investment yield which increased to 

3.5%. Despite this, and an increasing cost base as the 

Company continued to invest in its operational infrastructure, 

the improved underwriting result and aggregate foreign 

exchange gains resulted in a 216% increase in pre-tax 

earnings to £12.8m. 

Investment 

Inter Hannover maintains a conservative investment portfolio, 

comprising cash, short-term deposits and fixed income bonds 

with an average investment rating of AA+. The overall 

return on the portfolio has shown a small improvement over 

the previous year and has exceeded the benchmark agreed 

with the Company’s investment manager. The aggregate 

market value of the bond portfolio contained an unrealised 

(and unrecognised) profit of £5.7m at the year end, up from 

£5m in 2009. 

Foreign exchange 

The Company carries on significant business in foreign 

currencies. The impact of exchange rate movements on the 

foreign exchange positions arising from this business 

generated aggregated net gains of £2.2m in 2010 of which 

£0.2m is accounted for in the profit and loss account, and 

£2m in other recognised gains. 

6 REPORT OF THE DIRECTORS 



Staff 

Investment in high quality people to support the growth of the 

business remains a key priority. During the course of the year, 

staff numbers increased by 13% from 92 to 104, including the 

UK and branches. Staff turnover remained low at 3%. 

Dividends 

The directors recommend that no dividend is paid (2009: 

£nil). The retained profit of £9,230,000 was transferred to 

reserves (2009: £3,869,000). 

Strategy and future outlook 

Inter Hannover is continuing to evaluate a number of 

opportunities across a wide variety of classes and territories, 

particularly in UK motor, small/medium commercial, and niche 

portfolios in other classes such as UK household and travel. 

The directors expect that the markets in which they operate 

will remain competitive. They anticipate that the Company 

will increase its profitability in the long term as they grow the 

Company’s profitable business and diversify the portfolio 

across classes of business, geographic location and type of 

distribution channel (agents and brokers). 

The directors will continue to seek out new business 

relationships, primarily in Europe, as well as developing the 

Company through its global branch network. 

Principal risks and uncertainties 

The business is subjected to a broad range of risks which the 

directors seek to manage and control within acceptable limits 

through the operation of sub-committees responsible for 

individual risk areas. Risks are assessed on an annual cycle 

and the key risks to the business are currently considered to 

be as follows: 

e) operational risk – the risk of loss resulting from 

inadequate or failed internal processes, people and 

systems or from external events. 

The directors consider that adequate control procedures are 

in place to monitor the potential impact of all key risks, 

identify and implement mitigants, set and apply appetite and 

quantify required capital levels. 

Key performance indicators 

The directors monitor principal key performance indicators 

(“KPIs”) which are most commonly used for general insurance 

companies. The principal KPIs are loss and expense ratios. 

These are measures of claims incurred, net of reinsurance, 

and net operating expenses as a proportion of net earned 

premiums. For day-to-day management purposes, they are 

monitored for each agent and line of business. 

In addition, the directors monitor investment return. 

The main KPIs in relation to the business as a whole based on the 

underlying performance excluding the impact of the reinsurance 

agreement disclosed in Note 1 to the accounts, are: 

in % 2010 2009 

Net loss ratio (a) 71.2 122.0 

Net expense ratio (b) 35.3 46.9 

Investment return (c) 3.5 3.3 

a) = net losses incurred divided by net earned premium 

b) = net commissions plus net administration expenses 

divided by net earned premium 

c) = investment income net of investment costs divided 

by average investment assets 

Directors 

a) reserving risk – the risk that adequate reserves have 

not been set for past liabilities; 

The directors who served during the financial year and up to 

the date of this report were: 

b) group risk – the risk to the business from actions taken 

by the parent and other group companies; 

c) financial market risk – including credit, interest, 

foreign exchange and liquidity risks; 

d) pricing risk – the risk that insurance contracts are 

priced below the level required to cover insured 

losses. 

Executive directors 

N Parr 

P Webster 

Non-Executive directors 

J Gräber (Chairman) 

T A Ablett (appointed 11 th January 2010) 

R Vogel 

R T R Woods 


REPORT OF THE DIRECTORS 

7


Statement of disclosure of 

information to auditors 

The directors who held office at the date of approval of this 

directors’ report confirm that, so far as they are each aware, 

there is no relevant audit information of which the Company’s 

auditors are unaware; and each director has taken all the steps 

that he or she ought to have taken as a director to make himself 

or herself aware of any relevant audit information and to establish 

that the Company’s auditors are aware of that information. 

Auditors 

Pursuant to Section 487 of the Companies Act 2006, the 

auditors will be deemed to be reappointed and KPMG Audit 

Plc will therefore continue in office. 

The report was approved by the Board of Directors and 

signed on its behalf on 22nd March 2011 by: 

N Parr 

Managing Director 

8 REPORT OF THE DIRECTORS 



Statement of directors’ 

responsibilities 

Statement of directors’ responsibilities in 

respect of the directors’ report and the 

financial statements 

The directors are responsible for preparing the directors’ 

report and the financial statements in accordance with 

applicable law and regulations. 

Company law requires the directors to prepare financial 

statements for each financial year. Under that law they have 

elected to prepare the financial statements in accordance 

with UK Accounting Standards and applicable law (UK 

Generally Accepted Accounting Practice). 

The directors are responsible for keeping adequate accounting 

records that are sufficient to show and explain the company’s 

transactions and disclose with reasonable accuracy at any 

time the financial position of the company and enable them 

to ensure that its financial statements comply with the 

Companies Act 2006. They have general responsibility for 

taking such steps as are reasonably open to them to safeguard 

the assets of the company and to prevent and detect fraud and 

other irregularities. 

The directors are responsible for the maintenance and 

integrity of the corporate and financial information included 

on the company's website. Legislation in the UK governing 

the preparation and dissemination of financial statements 

may differ from legislation in other jurisdictions. 

The statement was approved by the Board of Directors on 

22nd March 2011 and was signed on its behalf by: 

Under company law the directors must not approve the 

financial statements unless they are satisfied that they give a 

true and fair view of the state of affairs of the company and 

of the profit or loss of the company for that period. 

In preparing these financial statements, the directors are 

required to: 

• select suitable accounting policies and then 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; and 

• prepare the financial statements on the going concern basis 

unless it is inappropriate to presume that the company will 

continue in business. 

J Gräber 

Chairman 

N Parr 



STATEMENT OF DIRECTORS´ RESPONSIBILITIES 

9

The Board of Directors 

Nick Parr 


Spearheads the strategic growth of the Inter Hannover 

business, leading its executive team in achieving its goals 

and targets. Over 35 years experience in the insurance 

and reinsurance industries, and committed to developing 

team-based working and partnership models with our clients. 

Roland Vogel 

Non-Executive Director 

As Hannover Re Group CFO and member of its Executive 

Board there is a close oversight of the Inter Hannover financial 

standards and provision of Group expertise to optimise the 

quality of our results. 

Jürgen Gräber 

Non-Executive Director (Chairman) 

Senior Non-Executive Director and member of the Hannover 

Re Group Executive Board closely connected with the 

daily business development objectives, providing expert 

underwriting guidance and support to the Inter Hannover 

executive management in its interface with the Group. 

Tony Chapman 

Chief Operating Officer 

Leads the development of operational support for Inter 

Hannover, ensuring the business and the attendant risks are 

efficiently processed and properly controlled. Over 30 years 

operational insurance experience and a Chartered Accountant 

by profession. Joining the Board during 2011. 

10 

THE BOARD OF DIRECTORS 


Paul Webster 

Chief Financial Officer 

An experienced financial interface to our clients, specialising 

in bespoke solutions and consultancy which recognises the 

increasing importance of the leading role of finance in optimal 

client relationships, and the close management of capital and 

financial resources to the success of Inter Hannover. 

Tim Ablett 

Independent Non-Executive Director 

An experienced insurance entrepreneur, building successful 

ventures at CEO level. Such experience is an invaluable 

sounding board for guiding business opportunities within 

the Inter Hannover board and executive groups, and for 

challenging strategic thinking and risk awareness. Chairs the 

Inter Hannover Risk Committee. 

Robert Woods 

Independent Non-Executive Director 

A wealth of financial experience serves as a solid foundation 

to chairing the Inter Hannover Audit Committee and providing 

the support and challenge to the executive team essential to 

optimising our systems and controls. 

Richard Winter 

Chief Actuary 

Provides a robust assessment of the insurance liabilities of the 

company and responsible for ensuring risks are identified, 

and either mitigated or accepted in an informed and controlled 

way. Nearly 25 years experience in the insurance industry. 

Joining the Board during 2011. 

Inter Hannover Report and Accounts 2010 THE BOARD OF DIRECTORS 11

LONDON 

The new Inter Hannover offices provide efficient meeting places where our clients can visit and test our expertise 

BRACKNELL 

12 Inter Hannover Report and Accounts 2010


Report of the auditors 

Opinion on financial statements 

In our opinion the financial statements: 

Report of the auditors, KPMG Audit Plc, 

to the members of International Insurance 

Company of Hannover Limited 

We have audited the financial statements of International 

Insurance Company of Hannover Limited for the year ended 

31st December 2010 set out on pages 14 to 39. The financial 

reporting framework that has been applied in their preparation 

is applicable law and UK Accounting Standards (UK Generally 

Accepted Accounting Practice). 

This report is made solely to the Company's members, as a 

body, in accordance with Chapter 3 of part 16 of the 

Companies Act 2006, having regard to the statutory 

requirement for insurance companies to maintain equalisation 

provisions. The nature of equalisation provisions, the 

amounts set aside at 31st December 2010 and the effect of the 

movement in those provisions during the year on shareholders’ 

funds, the balance on the general business technical account 

and profit before tax, are disclosed in Note 21. 

Our audit work has been undertaken so that we might state 

to the Company’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 the law, we do not accept 

or assume responsibility to anyone other than the Company 

and the Company’s members, as a body, for our audit work, 

for this report, or for the opinion we have formed. 

Respective responsibilities of 

directors and auditors 

As explained more fully in Directors' Responsibilities set out 

on page 9, the directors are responsible for preparation of the 

financial statements and for being satisfied that they give a 

true and fair view. 

• give a true and fair view of the state of the Company’s 

affairs as at 31st December 2010 and of its profit for the 

year then ended; 

• have been properly prepared in accordance with UK 

Generally Accepted Accounting Practice; and 

• have been prepared in accordance with the requirements 

of the Companies Act 2006. 

Opinion on other matter prescribed 

by the Companies Act 2006 

In our opinion the information given in Directors’ Report for 

the financial year for which the financial statements are 

prepared is consistent with the financial statements. 

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 requires us to report to you 

if, in our opinion: 

• adequate accounting records have not been kept, or returns 

adequate for our audit have not been received from branches 

not visited by us; or 

• the financial statements are not in agreement with the 

accounting records and returns; or 

• certain disclosures of directors’ remuneration specified by 

law are not made; or 

• we have not received all the information and explanations 

we require for our audit. 

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 (APB’s) Ethical Standards for Auditors. 

Scope of the audit of the financial 

statements 

A description of the scope of an audit of financial statements 

is provided on the APB’s web-site at: 

www.frc.org.uk/apb/scope/UKNP. 

Chris Moulder (Senior Statutory Auditor) 

for and on behalf of KPMG Audit Plc, Statutory Auditor 

Chartered Accountants 

15 Canada Square 

London E14 5GL 

Dated: 24th March 2011 


REPORT OF THE AUDITORS 

13

Profit & loss account 


Technical account - general business 

Earned premiums, net of reinsurance 

Gross premiums written 3 549,700 358,902 

Outward reinsurance premiums 1 (615,720) (351,121) 

(66,020) 7,781 

Notes 

2010 

£000 

2009 

£000 

Change in the gross provision for unearned premiums 21 (108,711) (56,479) 

Change in the provision for unearned premiums, reinsurers’ share 21 100,521 65,747 

(8,190) 9,268 

1 (74,210) 17,049 

Claims incurred, net of reinsurance 

Claims paid – Gross amount 21 (163,079) (181,051) 

– Reinsurers’ share 1 and 21 163,702 131,835 

623 (49,216) 

Change in the provision for claims – Gross amount 21 (169,442) (40,547) 

– Reinsurers’ share 1 and 21 258,617 68,958 

89,175 28,411 

1 89,798 (20,805) 

Net operating expenses 1 and 7 1,213 6,570 

Sub-total (balance on the technical account for general business) 16,801 2,814 

14 PROFIT AND LOSS ACCOUNT 


Profit & loss account 


Non-technical Account 

Balance on the general business technical account 1 16,801 2,814 

Notes 


£000 

2009 

£000 

Investment income 5 10,698 9,245 

Unrealised losses on investments 5 (2,856) (6,381) 

Investment expenses and charges 6 (397) (255) 

Foreign exchange gains 2,594 9,811 

Other charges (14,026) (11,184) 

Profit on ordinary activities before tax 1 and 8 12,814 4,050 

Tax on profit on ordinary activities 1 and 11 (3,584) (181) 

Retained profit for the financial year after tax 9,230 3,869 

All profits are derived from continuing activities. 

Statement of total recognised gains and losses 


Profit on ordinary activities after tax 19 9,230 3,869 

Exchange movements arising on consolidation of overseas branches 19 2,071 68 

Total recognised gain arising in the year 11,301 3,937 

Notes 


£000 

2009 

£000 

Reconciliation of movements in shareholder’s funds 


Shareholder’s funds at beginning of year 108,148 104,211 

Total recognised gains in the year 11,301 3,937 

Shareholder’s funds at end of year 119,449 108,148 

The notes on pages 20 to 39 form part of these financial statements. 


£000 

2009 

£000 


PROFIT AND LOSS ACCOUNT 

15

Balance sheet 

Assets 

Investments 

Investment in group undertakings 12 2 387 

Other financial investments 1 and 13 289,568 281,667 

Notes 


£000 

2009 

£000 

289,570 282,054 

Reinsurers’ share of technical provisions 

Provision for unearned premiums 21 281,604 177,777 

Claims outstanding 1 and 21 860,469 589,575 

1,142,073 767,352 

Debtors 

Debtors arising out of direct insurance operations 1 and 14 258,171 235,941 

Debtors arising out of reinsurance operations 15 5,205 2,346 

Other debtors 16 4,186 5,968 

267,562 244,255 

Other assets 

Tangible assets 17 3,242 2,892 

Cash at bank and in hand 18,817 6,134 

22,059 9,026 

Prepayments and accrued income 

Accrued interest and rent 3,294 3,660 

Deferred acquisition costs 21 57,740 31,401 

Other prepayments and accrued income 532 368 

61,566 35,429 

Total assets 1,782,830 1,338,116 

16 BALANCE SHEET 


as at 31st December 2010 

Liabilities 

Capital and reserves 

Called up share capital 18 65,000 65,000 

Profit and loss account 1 and 19 54,449 43,148 

Shareholder’s funds attributable to equity interests 119,449 108,148 

Notes 


£000 

2009 

£000 

Subordinated liabilities 20 51,000 31,000 

Technical provisions 

Provision for unearned premiums 21 302,161 190,065 

Claims outstanding 21 910,237 730,136 

1,212,398 920,201 

Creditors 

Creditors arising out of direct insurance operations 22 328,302 236,135 

Other creditors including taxation and social security 1 and 23 10,746 9,596 

339,048 245,731 

Accruals and deferred income 1 and 24 60,935 33,036 

Total liabilities 1,782,830 1,338,116 

The notes on pages 20 to 39 form part of these financial statements. 

These financial statements were approved by the Board of Directors on 22nd March 2011 and were signed on its behalf by: 

J Gräber 

Chairman 

N Parr 



BALANCE SHEET 

17

Launching ideas 

... brought about through quality products effectively distributed. 

18 Inter Hannover Report and Accounts 2009


19

Notes to the accounts 

forming part of the financial statements 

1. Basis of preparation 

The financial statements have been prepared in accordance with the provisions of Section 255 of, and 

Part 1 of Schedule 3 to, the Companies Act 2006. The financial statements have also been prepared in 

accordance with applicable accounting standards and under the historical cost accounting rules, and 

comply with the revised Statement of Recommended Practice on Accounting for Insurance Business 

issued by the Association of British Insurers (“The ABI SORP”) in December 2005 (as amended in 

December 2006). 

The Company is exempt by virtue of s400 of the Companies Act 2006 from the requirement to prepare 

group accounts. These financial statements present information about the Company as an individual 

undertaking and not about its group. Under FRS 1, the Company is exempt from the requirement to 

prepare a cash flow statement on the grounds that it is a wholly owned subsidiary undertaking of 

Haftpflichtverband der Deutschen Industrie V.a.G. whose financial statements are publicly available. 

The Company's business activities, together with the factors likely to affect its future development, 

performance and position are set out in the Business Review on pages 6 to 7 which include the Company's 

risks and uncertainties. The Company has considerable financial resources together with very prudent 

investment guidelines and high quality of assets, sound underwriting procedures, controls and risk 

mitigating processes (including, but not limited to, reinsurance). As a consequence, the directors believe 

that the group is well placed to manage its business risks successfully despite the current uncertain 

economic outlook. The directors are confident that the Company 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. 

On 3rd December 2010 the Company entered into an agreement under which the risks arising from a 

substantial proportion of its run-off business were reinsured to a third party. The agreement provides 

that, subject to the successful completion of the requirements of Part VII of the Financial Services and 

Markets Act 2000, the liabilities will be fully transferred to the acquiring company. It is expected that 

the transfer will be completed by the third quarter of 2011. 

The reinsurance premium paid, and the impact of the agreement on the Profit & Loss account for the 

year and Balance sheet as at 31st December 2010 are as follows: 

Profit and loss account 

Reported 

Amount 

£000 

Impact of 

Reinsurance 

Agreement 

£000 

Amount excl. 

Reinsurance 

Agreement 

£000 

Outward reinsurance premiums (615,720) (98,410) (517,310) 

Earned premiums, net of reinsurance (74,210) (98,410) 24,200 

Claims paid – reinsurers’ share 163,702 42,718 120,984 

Change in provision for claims – reinsurers’ share 258,617 64,320 194,297 

Claims incurred, net of reinsurance 89,798 107,038 (17,240) 

Net operating expenses 1,213 (11,371) 12,584 

Balance on the technical account 16,801 (2,743) 19,544 

Profit on ordinary activities before tax 12,814 (2,743) 15,557 

Tax on profit on ordinary activities (3,584) 768 (4,352) 

Retained profit for the financial year after tax 9,230 (1,975) 11,205 


Balance sheet 

Reported 

Amount 

£000 

Impact of 

Reinsurance 

Agreement 

£000 

Amount excl. 

Reinsurance 

Agreement 

£000 

Other financial investments 289,568 (77,227) 366,795 

Reinsurers’ share of technical provision – claims outstanding 860,469 64,955 795,514 

Debtors arising out of direct insurance operations 258,171 11,446 246,725 

Profit and loss account 54,449 (1,975) 56,424 

Other creditors including taxation and social security 10,746 (768) 11,514 

Accruals and deferred income 60,935 1,917 59,018 

2. Accounting policies 

The following accounting policies have been applied consistently in dealing with items which are 

considered material to the Company’s financial statements. 

Basis of accounting for underwriting activities 

All lines of business are accounted for on the annual basis of accounting. 

Premiums 

Written premiums comprise the premiums on contracts entered into during the year, whether they relate 

in whole or in part to an earlier or later accounting period. Premiums are disclosed gross of commission 

and exclude taxes and levies based on premiums. Premiums written include adjustments to premiums 

written in prior accounting periods and estimates for ‘pipeline’ premiums. 

Proportional reinsurance premiums are accounted for in the same accounting period as the premiums 

for the related direct insurance or inwards reinsurance business. The cost of excess of loss reinsurances, 

purchased on an accident year basis, is borne in the financial year. For other excess of loss reinsurances 

the cost is matched with the premium earned. 

Unearned premiums 

The provision for unearned premiums represents that part of premiums written which is estimated to 

be earned in the following or subsequent financial years, computed separately for each insurance 

contract using the daily pro-rata method except for some schemes where the monthly pro-rata method 

is applied to premium bordereaux. 

Acquisition costs 

Acquisition costs comprise all direct and indirect costs, arising from the conclusion of insurance 

contracts during the financial year. Deferred acquisition costs represent the proportion of acquisition 

costs incurred which corresponds to the unearned premium provision. 

Overrider commission is taken to the profit and loss account when the related reinsurance premium 

is booked. 



21

Claims incurred 

Claims incurred consist of claims and external claims handling expenses paid during the financial year 

and the movement in provisions for outstanding claims, including an allowance for the cost of claims 

incurred by the balance sheet date but not reported until after the year end. 

Claims outstanding 

Outstanding claims comprise provisions for the estimated cost of settling all claims incurred but not 

paid at the balance sheet date whether reported or not, together with related external claims handling 

expenses. The provision included in respect of claims incurred but not reported (IBNR) is based on 

statistical techniques of estimation applied by external and in-house actuaries. These techniques 

generally involve projecting from past experience the development of claims over time to form a view of 

the likely ultimate claims to be experienced for more recent underwriting, having regard to variations 

in the business accepted and the underlying terms and conditions. For the most recent years, where a 

high degree of volatility arises from projections, estimates may be based in part on output from rating 

and other models of the business accepted and assessments of underwriting conditions. Accordingly 

the two most critical assumptions as regards estimating claims provisions are that the past is a reasonable 

predictor of claims development and that the rating and other models used for current business are fair 

reflections of the likely level of ultimate claims to be incurred. 

The reinsurers’ share of provisions for claims is based on calculated amounts of outstanding claims and 

projections for IBNR, net of estimated irrecoverable amounts, having regard to the reinsurance 

programme in place for the class of business, the claims experience for the year and the current security 

rating of the reinsurance companies involved. 

Anticipated reinsurance recoveries and estimates of salvage and subrogation recoveries are shown in 

the balance sheet as assets. 

The directors consider that the provisions for gross claims and related reinsurance recoveries are fairly 

stated on the basis of the information currently available to them. However, ultimate liability will vary 

as a result of subsequent information and events and this may result in significant adjustments to the 

amounts provided. Adjustments to the amounts of claims provisions established in prior years are 

reflected in the financial statements for the period in which the adjustments are made. The methods 

used, and the estimates made, are reviewed regularly. 

Equalisation provisions 

Equalisation provisions are established in accordance with the requirements of the Insurance Companies 

(Reserves) Regulations 1996, to mitigate exceptionally high loss ratios if and when incurred. 

Unexpired risks 

Provision is made for unexpired risks where the claims and administrative expenses likely to arise after 

the end of the financial year in respect of contracts entered into before that date are expected to exceed 

the unearned premiums and premiums receivable under these contracts. Provision for unexpired risks 

is calculated separately by classes, which are managed together, after taking into account relevant 

investment return. 

Allocation of investment return 

Investment income, realised gains and losses, expenses and charges are reported in the non-technical account. 


Investment income, expenses and charges 

Investment income is accounted for on an accruals basis. Realised gains and losses represent the 

difference between net sales proceeds and the amortised cost of acquisition. Unrealised gains and losses 

on investments represent the difference between the amortised cost of investments at the balance sheet 

date and their original cost. Both realised and unrealised gains and losses include currency gains and 

losses. The movement in unrealised investment gains and losses recognised in the profit and loss account 

includes an adjustment for previously unrealised gains and losses on investments disposed of in the 

accounting period. 

Differences between the cost and amount receivable on maturity of redeemable fixed interest securities 

are charged and released to the profit and loss account in equal instalments over the period remaining 

until redemption. 

Investments 

Financial investments other than redeemable fixed interest securities are stated at the market value ruling 

at the balance sheet date using the bid price, whilst deposits with credit institutions are stated at cost. 

Redeemable fixed interest securities are stated at amortised cost. 

Depreciation 

Depreciation is calculated to write off the cost of tangible fixed assets to their estimated residual value, 

on a straight line basis over the estimated useful life as follows: 

Computer equipment (including related software) 

Motor vehicles 

Furniture, fixtures and fittings 

– 3 to 5 years 

– 5 years 

– 5 years 

Foreign currencies 

Transactions in foreign currencies are translated into sterling using average rates of exchange ruling 

during the year. Assets and liabilities denominated in foreign currencies are translated into sterling 

using the rate of exchange ruling at the balance sheet date. Foreign currency insurance funds at the 

beginning of the year have been revalued at closing exchange rates. Gains or losses on translation of 

insurance funds are included in the non-technical account. 

The branch profit and loss accounts are translated into sterling using average exchange rates for the 

year. Assets and liabilities of branches are translated into sterling using the rate of exchange ruling at 

the balance sheet date. The impact of these currency translations is recorded as a component of 

shareholder’s funds within the statement of total recognised gains and losses. 

Taxation 

The charge for taxation is based on the profit for the year and takes into account taxation deferred, which arises 

because of timing differences between the treatment of certain items for taxation and accounting purposes. 

Deferred tax assets and liabilities are recognised in accordance with the provisions of FRS 19. Except 

as set out in FRS 19, deferred tax is recognised on all material timing differences that have originated 

but not reversed by the balance sheet date. Deferred tax assets are recognised to the extent that it is 

considered more likely than not that they will be recovered. 



23

Powering success 

... backed by the financial strength of Hannover Re Group. 


Continued commitment to the partnership ethos underpins Inter Hannover’s vision. 



25

3. Segmental reporting 

Analysis of gross premiums written by region 

2010 In the UK 

£000 

In other EU states 

£000 

In other countries 

£000 

Accident and health 16,024 2,525 786 19,335 

Fire and other damage to property 57,288 2,929 4,098 64,315 

Third party liability 160,616 7,444 6,041 174,101 

Marine, aviation and transport 86,797 116,067 1,261 204,125 

Motor 40,366 17,036 6,622 64,024 

Miscellaneous 16,609 6,812 379 23,800 

Total 377,700 152,813 19,187 549,700 

Total 

£000 

Analysis by business segment 

2010 Gross 

premiums 

earned 

£000 

Gross 

claims 

incurred 

£000 

Gross 

operating 

expenses 

£000 

Gross 

technical 

result 

£000 

Reinsurance 

balance 

£000 

Net 

technical 

result 

£000 

Net 

insurance 

funds 

£000 

Accident and health 13,118 (6,417) (4,617) 2,084 (812) 1,272 5,225 

Fire and other damage to property 54,121 (16,930) (12,285) 24,906 (21,514) 3,392 10,511 

Third party liability 112,008 (102,018) (20,719) (10,729) 17,580 6,851 24,076 

Marine, aviation and transport 195,748 (144,429) (32,142) 19,177 (10,620) 8,557 4,481 

Motor 46,435 (50,466) (10,603) (14,634) 13,486 (1,148) 12,842 

Miscellaneous 19,559 (12,261) (7,803) (505) (1,618) (2,123) 8,544 

Total 440,989 (332,521) (88,169) 20,299 (3,498) 16,801 65,679 

Analysis by geographical location 

2010 UK 

£000 

Foreign branches 

£000 

Gross written premium 404,756 144,944 549,700 

Profit before tax 8,634 4,180 12,814 

Net assets 92,370 27,079 119,449 

Total 

£000 


Analysis of gross premiums written by region 

2009 In the UK 

£000 

In other EU states 

£000 

In other countries 

£000 

Accident and health 6,394 1,705 502 8,601 

Fire and other damage to property 30,217 4,591 369 35,177 

Third party liability 85,986 3,843 6,039 95,868 

Marine, aviation and transport 72,149 99,706 595 172,450 

Motor 9,421 21,254 – 30,675 

Miscellaneous 10,232 5,866 33 16,131 

Total 214,399 136,965 7,538 358,902 

Total 

£000 

Analysis by business segment 

2009 Gross 

premiums 

earned 

£000 

Gross 

claims 

incurred 

£000 

Gross 

operating 

expenses 

£000 

Gross 

technical 

result 

£000 

Reinsurance 

balance 

£000 

Net 

technical 

result 

£000 

Net 

insurance 

funds 

£000 

Accident and health 8,612 (3,732) (3,149) 1,731 (1,464) 267 5,308 

Fire and other damage to property 32,885 (13,403) (5,646) 13,836 (1,992) 11,844 13,724 

Third party liability 66,370 (85,431) (9,578) (28,639) 27,822 (817) 48,617 

Marine, aviation and transport 167,449 (99,490) (23,324) 44,635 (54,122) (9,487) 34,610 

Motor 15,025 (7,623) (3,691) 3,711 2,534 6,245 43,087 

Miscellaneous 12,082 (11,919) (12,053) (11,890) 6,652 (5,238) 4,945 

Total 302,423 (221,598) (57,441) 23,384 (20,570) 2,814 150,291 

Analysis by geographical location 

2009 UK 

£000 

Foreign branches 

£000 

Gross written premium 237,512 121,390 358,902 

Profit before tax 342 3,708 4,050 

Net assets 84,169 23,979 108,148 

Total 

£000 



27

4. Prior years’ net claims provisions 

Over (under) provisions for claims at the beginning of the year compared to payments and provisions at 

the end of the year in respect of prior years’ claims are shown in the table below. 


£000 

Accident and health 984 1,380 

Fire and other damage to property 2,340 10,748 

2009 

£000 

Third party liability 2,836 (2,989) 

Marine, aviation and transport (2,225) (10,345) 

Motor (931) 2,528 

Miscellaneous (1,972) (461) 

1,032 861 

The figures for 2010 are stated after adjusting for the reinsurance assets acquired as a result of the 

agreement described in Note 1 above. 

5. Investment income 


£000 

Income from other investments 9,329 9,614 

2009 

£000 

Gains/(losses) on the realisation of investments 1,369 (369) 

10,698 9,245 

Movement in unrealised losses on investments (2,856) (6,381) 

Total investment return 7,842 2,864 

Realised and unrealised gains and losses include foreign exchange losses of £2,416,000 (2009: losses 

£6,601,000). 

6. Investment expenses and charges 


£000 

2009 

£000 

Investment management expenses, including interest 397 255 


7. Net operating expenses 

2010 Gross 

£000 

Reinsurance 

£000 

Acquisition costs 111,024 (91,571) 19,453 

Net 

£000 

Deferred acquisition costs carried forward (57,740) 53,094 (4,646) 

Deferred acquisition costs brought forward 31,401 (28,843) 2,558 

Change in deferred acquisition costs (26,339) 24,251 (2,088) 

Incurred acquisition costs 84,685 (67,320) 17,365 

Administration costs 3,484 (934) 2,550 

Total operating expenses 88,169 (68,254) 19,915 

Overrider commission - (21,128) (21,128) 

88,169 (89,382) (1,213) 

Acquisition costs include costs of £2,743,000 relating to the reinsurance contract referred to in Note 1 above. 

2009 Gross 

£000 

Reinsurance 

£000 

Acquisition costs 68,278 (65,191) 3,087 

Net 

£000 

Deferred acquisition costs carried forward (31,401) 28,843 (2,558) 

Deferred acquisition costs brought forward 18,743 (13,236) 5,507 

Change in deferred acquisition costs (12,658) 15,607 2,949 

Incurred acquisition costs 55,620 (49,584) 6,036 

Administration costs 1,821 135 1,956 

Total operating expenses 57,441 (49,449) 7,992 

Overrider commission – (14,562) (14,562) 

57,441 (64,011) (6,570) 

8. Profit on ordinary activities before tax 

Profit on ordinary activities before tax is stated after charging 


£000 

Depreciation 1,497 1,296 

Operating lease rentals – land and buildings 507 421 

2009 

£000 

Auditors’ remuneration: 

Audit of statutory accounts 377 281 

Audit of regulatory returns 71 107 

Other services 155 191 

Provision for impairment of investment in associated undertaking 526 - 



29

9. Directors’ emoluments 

During the year four directors (2009: five) received total remuneration of £618,529 (2009: £505,000) for 

their qualifying services as directors of the Company and in connection with the management of the 

Company’s affairs. No other directors received remuneration in respect of their services to the Company. 

Contributions were made to a defined contribution scheme on behalf of two directors (2009: two) in the 

sum of £75,667 (2009: £34,000). 

These costs were paid by Hannover Services (UK) Limited and recharged to the Company. The total 

amount of the recharge is shown in Note 10 below. Two directors of the Company were also directors of 

Hannover Services (UK) Limited during the financial year. 

Highest paid director 2010 

£000 

Aggregate emoluments 276 185 

2009 

£000 

10. Staff numbers and costs 

Staff numbers and costs for employees in the Scandinavian and Australian branches 

Average number of employees 2010 2009 

Business acquisition 18 18 

Claims handling 5 6 

Administration 17 18 

40 42 

Full time equivalent number of employees 2010 2009 

Business acquisition 18 18 

Claims handling 5 6 

Administration 15 13 

38 37 

Aggregate payroll costs 2010 

£000 

Wages and salaries 2,622 2,201 

Social security 723 647 

Other pension costs 970 545 

2009 

£000 

4,315 3,393 

The Company employs no staff in the UK, Italian or Canadian branches. A charge for staff costs for the 

day-to-day administration and operations, has been included in the profit and loss account for the year 

in the sum of £6,887,000 (2009: £4,492,000) for UK staff. These costs were paid by Hannover Services 

(UK) Limited and recharged to the Company. This charge reflects services provided for an average 66 

(2009: 49) employees during the year. Full disclosure of staff numbers and costs has been made in the 

accounts of Hannover Services (UK) Limited. There were no staff costs incurred in the Italian and 

Canadian branches. 


11. Tax on profit on ordinary activities 

Analysis of charge in the period 


£000 

2009 

£000 

Current tax 

UK corporation tax (2,411) (1,197) 

Adjustments in respect of prior periods - 49 

Double tax relief 1,184 1,197 

(1,227) 49 

Overseas taxation (1,184) (1,243) 

Adjustments in respect of prior periods 2 (25) 

Tax charge on profit on ordinary current activities (2,409) (1,219) 

Deferred tax 

Origination and reversal of timing differences (1,230) 28 

Adjustments in respect of prior periods 55 1,010 

Total deferred tax credit/(charge) (1,175) 1,038 

Tax charge on profit on ordinary activities (3,584) (181) 

Factors affecting tax charge for the period 

The standard rate of current tax applied for the year is 28% (2009: 28%). The tax assessed for the period 

is lower (2009: higher) than that resulting from applying the standard rate of current tax in the UK and 

the differences are explained below. 

Tax reconciliation 2010 

£000 

Profit on ordinary activities before tax 12,814 4,050 

2009 

£000 

Profit on ordinary activities multiplied by the standard rate of 

current tax of 28% (2009: 28%) 3,588 1,134 

Effects of: 

Expenses not deductible for tax purposes 230 52 

Prior year corporation tax adjustments (2) 25 

Timing differences: 

Capital allowances net of depreciation 29 (92) 

Accruals and provisions (46) – 

Tax losses carried forward (1,390) 74 

Unrelieved foreign tax charge - 26 

Current tax charge on ordinary activities for the period 2,409 1,219 

The effective tax rate on total profit was 18.77% (2009: 30.09%). 



31

Deferred tax asset 2010 

£000 

2009 

£000 

Asset brought forward (1,819) (781) 

Deferred tax charge/(credit) for the year 1,175 (1,038) 

Asset at end of year (644) (1,819) 

The full potential deferred tax asset at 31st December 2010 was £644,000 (2009: £2,016,000), which 

included an unrecognised amount of £nil (2009: £197,000). The prior year unrecognised amount arose 

from the retranslation of timing differences into sterling. 

Finance Act 2010 provides for a reduction in the main rate of UK corporation tax from 28% to 27% 

effective from 1st April 2011. The impact of the rate reduction is reflected in the closing deferred tax 

asset. The Government has also indicated that it intends to enact future reductions in the main tax rate 

of 1% each year down to 24% by 1st April 2014. 

12. Investment in group undertakings 


£000 

Investment in group undertakings at cost 2 2 

Investment in associated undertaking at cost 526 385 

Less: provision for impairment (526) - 

2009 

£000 

2 387 

The Company became the 100% shareholder of International Mining Industry Underwriters Limited 

(IMIU Ltd) in 2003, when the shares of the other members were redeemed. IMIU Ltd is an insurance 

agency incorporated in England and Wales. 

During the year the Company made further capital contributions of SEK 1,544,000 to its associated 

undertaking Hannover Care AB, an insurance agency incorporated in Sweden. At 31st December 2010 

the directors were of the opinion that the investment no longer had long term value and accordingly full 

provision has been made against the cost. 

During the year the Company acquired 100% of the issued share capital of Inter Hannover (No.1) 

Limited (formerly Apollo Underwriting No. 6 Limited), a company incorporated in England and Wales. 


13. Other financial investments 

Carrying value 


£000 

2009 

£000 

Historical cost 


£000 

2009 

£000 

Available for sale 

Debt securities and other fixed income securities 

at amortised cost - listed 180,941 199,287 178,683 189,984 

Deposits with credit institutions 80,498 54,170 80,498 54,170 

261,439 253,457 259,181 244,154 

Held to maturity 

Debt securities and other fixed income securities 

at amortised cost - listed 28,129 28,210 28,575 28,575 

289,568 281,667 287,756 272,729 

Debt securities and other fixed income securities, which are shown at amortised cost, are analysed below: 


£000 

Cost 207,258 218,559 

Cumulative amortisation 1,812 8,938 

Carrying value – amortised cost 209,070 227,497 

2009 

£000 

Market value 214,761 232,525 

The redemption value of investments held at the end of the year was £2,218,305 less (2009: £876,000 

more) than the amortised cost. 

Market valuations are provided for debt and other fixed income securities by the Company’s investment 

manager, AmpegaGerling Asset Management GmbH. At 31st December 2010 the portfolio comprised 

only highly-rated debt securities in which liquid markets have continued to be maintained and included 

no derivatives or other complex instruments. Management monitor market values on a daily basis in 

accordance with the Company’s risk management procedures. The directors are therefore confident that 

the market values shown above are a reasonable reflection of achievable prices at the balance sheet date. 



33

14. Debtors arising out of direct insurance operations 


£000 

Amounts owed by intermediaries 190,339 193,996 

Amounts due from group undertakings 67,832 41,945 

2009 

£000 

258,171 235,941 

15. Debtors arising out of reinsurance operations 


£000 

Amounts owed by intermediaries 5,205 2,346 

2009 

£000 

16. Other debtors 


£000 

Amounts due from group undertakings 2,269 807 

Deferred tax 644 1,819 

Corporation tax 442 899 

Other debtors 831 2,443 

2009 

£000 

4,186 5,968 

17. Tangible fixed assets 

Computer 

hardware 

£000 

Computer 

software 

£000 

Motor 

vehicles 

£000 

Furniture, 

fixtures and 

fittings 

£000 

Cost 

At beginning of year 252 7,364 94 60 7,770 

Additions 108 509 - 1,220 1,837 

Disposals - - (28) - (28) 

Foreign exchange rate movements - - 2 (8) (6) 

At end of year 360 7,873 68 1,272 9,573 

Total 

£000 

Depreciation 


Charged in year 60 1,291 18 153 1,522 

Disposals - - (25) - (25) 

Foreign exchange rate movements (1) (46) 3 - (44) 

At end of year 229 5,892 37 173 6,331 

Net book value 

At end of year 131 1,981 31 1,099 3,242 



18. Called-up share capital 


£000 

2009 

£000 

Authorised: 

65,000,000 (2009: 65,000,000) ordinary shares of £1 each 65,000 65,000 

Allotted, called up and fully paid: 

65,000,000 (2009: 65,000,000) ordinary shares of £1 each 65,000 65,000 

19. Reserves 


£000 

2009 

£000 

Profit and loss account 

At beginning of year 43,148 39,211 

Retained profit for the year 9,230 3,869 

Other recognised gains for the year 2,071 68 

At end of year 54,449 43,148 

20. Subordinated liabilities 


£000 

2009 

£000 

Subordinated loans from Hannover Re: 

Earliest 

Latest 

repayment date repayment date 

5.23% 29 th July 2010 29 th July 2035 8,000 8,000 

5.48% 9 th December 2010 9 th December 2035 11,300 11,300 

5.33% 16 th February 2011 16 th February 2036 6,700 6,700 

6.95% 22 nd June 2012 22 nd June 2037 5,000 5,000 

6.42% 1 st October 2015 1 st October 2040 5,000 - 

6.40% 15 th November 2015 15 th November 2040 15,000 - 

51,000 31,000 

All six loans are unsecured and subject to five-yearly interest rate reviews. 



35

21. Technical provisions and deferred acquisition costs 

Provision for 

unearned 

premiums 

£000 

Claims 

outstanding 

Gross amount 

At beginning of year 190,065 730,136 920,201 

Movement in provision 108,711 169,442 278,153 

Foreign exchange rate movements 3,385 10,659 14,044 

At end of year 302,161 910,237 1,212,398 

£000 

Total 

£000 

Reinsurance amount 


Movement in provision 100,521 258,617 359,138 

Foreign exchange rate movements 3,306 12,277 15,583 

At end of year 281,604 860,469 1,142,073 

Net technical provisions 

At end of year 20,557 49,768 70,325 


There is no unexpired risk reserve included in claims outstanding at the end of the year (2009: £nil). 


£000 

Net technical provisions at end of year 70,325 152,849 

2009 

£000 

Deferred acquisition costs: 

Gross (57,740) (31,401) 

Reinsurance commission 53,094 28,843 

(4,646) (2,558) 

Net insurance funds 65,679 150,291 

Equalisation provisions are established in accordance with the requirements of the Insurance Companies 

(Reserves) Regulations 1996. These provisions are in addition to the provisions which are required to meet 

the anticipated ultimate cost of settlement of outstanding claims at the balance sheet date. They are required 

by schedule 3 to the Companies Act 2006 to be included within technical provisions in the balance sheet 

notwithstanding that they do not represent liabilities at the balance sheet date. 

There is no equalisation provision at the end of the year and therefore there is no effect on shareholder’s 

funds (2009: £nil). 


22. Creditors arising out of direct insurance operations 


£000 

Amounts due to group undertakings 255,432 126,333 

Other 72,870 109,802 

2009 

£000 

328,302 236,135 

23. Other creditors including taxation and social security 


£000 

Amounts due to group undertakings 1,859 791 

Social security and other taxes 3,162 1,395 

Other 5,725 7,410 

2009 

£000 

10,746 9,596 

24. Accruals and deferred income 


£000 

Deferred reinsurance commission 53,094 28,843 

Other accruals and deferred income 7,841 4,193 

2009 

£000 

60,935 33,036 



37

25. Contingencies and related obligations 

In accordance with FRS 12, ‘Provisions, contingent liabilities and contingent assets’, appropriate 

provision has been made in the financial statements where the Company has an obligation arising from 

events or activities where an estimate of the obligation can be made, but not for contingent liabilities. 

Contingent liabilities 

In common with the insurance industry in general, the Company is subject to litigation, mediation and 

arbitration in the normal course of its business. The directors do not believe that any current mediation, 

arbitration pending or threatened litigation or dispute will have a material adverse effect on the Company’s 

financial position, although there can be no assurance that any losses resulting from any pending 

mediation, arbitration and threatened litigation or dispute will not materially affect the Company’s 

financial position or cash flows for any period. 

As security for the Company’s technical liabilities the Company’s parent has arranged for financial institutions 

to furnish sureties on behalf of the Company in the form of letters of credit. The total amount of the letters 

of credit as at the balance sheet date was US$50,623,132 (2009: US$53,504,735). Included within this 

amount is £409,544 (2009: £397,044) recognised in the balance sheet in respect of a rental liability. 

Capital commitments 

The Company has no future capital commitments at the balance sheet date (2009: £nil). 

Operating leases 

The Company is guarantor for operating lease agreements entered into by Hannover Services (UK) 

Limited for land and buildings. The annual commitments under those operating leases are as follows: 


£000 

2009 

£000 

Expiry date: 

Within one year 37 22 

Within two to five years - 185 

After five years 105 – 

142 207 


26. Related party transactions 

As the Company is a wholly owned subsidiary of Hannover Rückversicherung AG it has taken advantage 

of the exemption under FRS 8 ‘Related Party Transactions’ not to disclose transactions with other entities 

within the Hannover Re Group. 

27. Parent company 

The Company is a subsidiary undertaking of HDI Haftpflichtverband der Deutschen Industrie V.a.G., 

which is incorporated in Germany. 

The largest group in which the results of the Company are consolidated is that headed by HDI 

Haftpflichtverband der Deutschen Industrie V.a.G., which is incorporated in Germany. 

The smallest group in which they are consolidated is that headed by Hannover Rückversicherung AG, 

which is also incorporated in Germany. 

The consolidated accounts of these groups are available to the public and may be obtained from: 

The Company Secretary 

International Insurance Company of Hannover Limited 

1 Arlington Square, Bracknell, RG12 1WA, United Kingdom 



39

Published by: 


1 Arlington Square 

Bracknell 

RG12 1WA 


Tel +44 (0)1344 397600 

Fax +44 (0)1344 397601 

Registered in England No: 1453123 

www.inter-hannover.com 


is authorised and regulated by the Financial Services Authority

A member of the Hannover Re Group

Annual Report 2010 - Inter Hannover

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