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Syndicate
Annual Report and Accounts for the year ended
3
Contents
Directors and Administration
......................................................................................................
4
Managing agent's report
..............................................................................................................
5
Statement of Managing Agent's Responsibilities
.......................................................................
13
Independent Auditor's Report to the Member of Syndicate 4000
...............................................
14
Statement of profit or loss and other comprehensive income
...................................................
18
Balance sheet - Assets
..............................................................................................................
20
Balance sheet - Liabilities
.........................................................................................................
21
Statement of changes in member’s balances
...........................................................................
22
Statement of cash flows
...........................................................................................................
23
Notes to the financial statements
.............................................................................................
24
4
Directors and Administration
Managing Agent
Registered Office
Level 3, 8 Fenchurch Place, London, EC3M 4AJ
Registered Number
05832065
Directors
A. J. Baker
Executive
P. Billingham
Independent Non-Executive
A. J. Daws
Executive
K. Forte
Independent Non-Executive
P. C. F. Haynes
Independent Non-Executive
R. S. Vetch
Executive
Company Secretary
L. McCammond
Syndicate
Active Underwriter
M. E. Colaço-Osorio
Bankers
Barclays plc
Citibank N.A.
Royal Bank of Canada
Investment Managers
Conning Asset Management Limited
Auditor
Ernst & Young LLP
25 Churchill Place
London, E14 5EY
5
Managing agent's report
The Directors of Hamilton Managing Agency Limited (“HMA”) present the Managing Agent’s Report for
Syndicate 4000 (“the Syndicate”) for the year ended 31 December 2024.
Principal Activity
The principal activity of the Syndicate continues to be the underwriting of general insurance and
reinsurance business at Lloyd’s.
The Syndicate’s allocated capacity for the 2024 year of account was £550m (2023 year of account: £490m).
The capacity for the 2025 year of account is £635m.
Capital to support the underwriting of the Syndicate is
provided by Hamilton Corporate Member Limited (“HCM”). HCM is ultimately owned by Hamilton
Insurance Group, Ltd (collectively with its subsidiaries, “the Hamilton Group”).
Effective 1 January 2021 the 2018 year of account of the Syndicate was reinsured to close into Syndicate
3500. Effective 1 January 2022 the Syndicate accepted the reinsurance to close of the 2019 year of account
of Syndicate 3334 (a syndicate also capitalised by HCM). The results of the Syndicate therefore comprise
movements on the closed/open years of the Syndicate from 2019 onwards and Syndicate 3334’s closed
years of 2015 to 2019.
Business of the Syndicate
The Syndicate continues to be a provider of specialist insurance and reinsurance products and aims to
write a low volatility portfolio of niche Specialty, Casualty and Property classes of business. The portfolio
is built around business which has a high technical barrier to entry. The underwriting risk selection process
is supported by robust premium rating models. During the 2024 financial year gross written premium by
product area was as follows:
2024
2023
£000
£000
Specialty
292,106
250,845
Casualty
257,696
242,547
Property
68,545
52,042
Total
618,347
545,434
Speciality
This product area consists of:
•
Accident & Health which includes individual and group accidental death and disability, worldwide
excess of loss, medical expenses.
•
Marine Liability which includes both traditional marine liability and energy liability (predominantly
offshore).
This product area includes an international onshore & offshore energy book.
•
Marine Hull consist mainly of brown water (as opposed to blue water) risks domiciled in the US.
Other coverages include marine war, limited builders’ risks and mortgagees impairment cover.
•
Political Risks / Political Violence which includes cover for confiscation and contract frustration,
trade credit and war & terrorism. The account is written on a worldwide basis.
6
MANAGING AGENT’S REPORT
(continued)
Business of the Syndicate (continued)
Specialty (continued)
•
Space which provides asset cover for satellites during their launch into orbit and then the
subsequent life of the satellite once it has been placed into orbit. The range of insured missions
can include large geostationary satellites, navigation constellations and satellites in lower orbits.
•
Specie & Fine Art / High Value Cargo written via a selective number of specialist partners and also
through Hamilton’s consortium, where capacity is required.
•
Kidnap & Ransom which provides cover for corporate, family and marine piracy risks against
extortion, kidnap and ransom, illegal detention and hijack insured events. Cover provided is
generally worldwide but with a focus in the UK, Europe, US and Latin America.
•
Specialty Treaty, being a combination of war & terror, energy (both onshore and offshore but
excluding Gulf of Mexico) and marine treaty. The focus is on short-tail lines supported by detailed
analysis and catastrophe modelling.
In addition to underwriters located in the UK, underlying policies are also distributed by the Hamilton
Group owned coverholder (Hamilton Americas) based in the US.
Casualty
This product area consists of:
•
Cyber which has developed a diverse portfolio of exposure by geography and sector,
predominantly on an excess basis.
•
Environmental which offers custom risk management solutions on predominantly US business.
Cover is mainly in respect of pollution and land reclamation but there is also an element of other
Casualty coverages.
•
Mergers & Acquisitions which predominantly comprises non-US based deals in Europe and the
UK.
•
Professional Lines and Financial Institutions accounts - these are diverse portfolios, designed to
minimise economic correlation between the two accounts. The accounts comprise crime,
professional indemnity, directors’ & officers’ liability and medical malpractice products. The
Financial Institutions account targets institutional facing business rather than retail exposure.
Property
•
The Property book has global exposures, written on both a Direct and Facultative basis as well as
through a specialist Property Binders division. The underwriting strategy of the book is to minimise
catastrophe exposure. Risks written include retail risks, office blocks and government buildings.
•
Transportation covers physical damage to trucks and trailers as well as third party cargo cover for
transport companies within the US and Canada.
7
MANAGING AGENT’S REPORT (continued)
Strategic Partnerships
The HMA Strategic Partnership Team was set up to form and develop Special Purpose Arrangements and
syndicates supported by third party capital.
At present HMA manages one third party syndicate, Syndicate
1947. The capital to support the underwriting of this syndicate is provided by a third party unrelated to the
Hamilton Group.
Review of Financial Performance
The Syndicate’s key financial indicators are as follows:
2024
2023
£000
£000
Syndicate capacity
550,000
490,000
Gross written premium
618,347
545,434
Profit for the financial year
48,073
50,566
Total comprehensive income for the financial year
46,297
47,246
Net loss ratio
57.8%
51.5%
Net expense ratio
36.3%
39.7%
Combined ratio (being total of net loss ratio and net expense ratio)
94.1%
91.2%
Investments, cash and deposits
684,337
560,471
The Syndicate reports a profit for the year of £48.1m (2023: £50.6m). This comprises an underwriting profit
of £21.6m (2023: £26.4m) and other income of £26.5m (2023: £24.2m), which is mainly a return on
investment.
Year of Account Development
The history for each of the Syndicate’s underwriting years of account is set out below. This includes the
impact of closed years (excluding movements in funds in syndicate) on the underwriting year into which
they have been closed.
Year of
account
2019
2020
2021
2022
2023
2024
Three-year
funded
adj.
Profit /
(loss) to
member
£000
£000
£000
£000
£000
£000
£000
£000
2019
(25,554)
5,993
(1,680)
464
(20,777)
2020
(21,166)
17,383
(4,862)
5,028
(3,617)
2021
(7,835)
26,043
24,195
(722)
41,681
2022
(2,082)
24,023
16,851
1,795
40,587
2023
(972)
46,084
45,112
2024
(16,638)
(16,638)
Financial year
result
(25,554)
(15,173)
7,868
19,099
47,246
46,297
8
MANAGING AGENT’S REPORT (continued)
Review of Financial Performance (continued)
Gross Written Premiums
The Syndicate reports gross written premiums for the financial year of £618.3m (2023: £545.4m),
representing an increase of 13.4% on the prior year. This increase is due to additional writing capacity
obtained for the 2024 underwriting year and a strong rating and underwriting environment leading to growth
in core classes within Speciality, Casualty and Property.
Claims Incurred
The net loss ratio of 57.8% is higher than the 2023 ratio of 51.5%. The main contributory factors are
increased claims from net catastrophe losses and lower prior year reserve releases year on year. Net
catastrophe losses of £18.4m (2023: £1.4m) were 4.6% higher than the prior year catastrophe ratio. Key
events were the Baltimore Bridge collision (net £7.5m) and Hurricanes Helene and Milton (net £10.9m).
These losses mainly impact the 2024 underwriting year of account results shown in the Year of Account
development table above. Continued focus on portfolio management, pricing and terms has ensured the
attritional loss ratio remains within expectations.
Net Operating Expenses
Net operating expenses in 2024 were £132.0m (2023: £118.3m). This increase in value is to support the
business growth, however, the net expense ratio has moved favourably down to 36.3% from 39.6% in 2023.
This decrease is driven by stable brokerage rates, increased ceding commissions and effective cost
management.
Investment Return
Investment return in 2024 was a profit of £25.0m (2023: £25.3m) which remained marginally consistent
year on year. The average yield is line with benchmark performance for the year.
Assets under management also increased during the year with continued strong operating cashflow
allowing surplus assets to be invested. Fixed income portfolios are denominated in US Dollar, Sterling,
Euros and Canadian dollars.
Balance Sheet
Syndicate assets have increased by £221.4m to £1,611.3m (2023: £1,389.9m) and the total liabilities have
increased by £217.6m to £1,544.1m (2023: £1,326.5m), reflecting profitability of the syndicate and
continued business growth.
The member’s balance is a surplus of £67.3m (31 December 2023: a surplus of £63.4m). See note 25 post
balance sheet events for details of the profit distribution to the member post year-end.
Future Prospects
The stamp capacity has increased by £85.0m (or 15.5%) to £635.0m for 2025.
As the inflationary environment is expected to continue at current levels, the Syndicate is exposed to
additional insurance and market risks, which management consider within its overall risk framework.
9
MANAGING AGENT’S REPORT (continued)
Research and Development
The Syndicate has not participated in any research and development activity during the period.
Staff Matters
Recognising that attracting, retaining and engaging talent is critical to achieving Hamilton Group’s (of
which HMA is a subsidiary) strategy and long-term success, being a 'magnet for talent' is one of its core
business imperatives. A pivotable part of that goal is an ongoing focus on a positive workplace culture
where employee wellbeing, engagement and a sense of purpose are prioritised, alongside having a safe
and legally compliant workplace and environment.
Hamilton measures key aspects of culture regularly. For example, the average scores from HMA’s
engagement surveys conducted during 2024 include an 87% response rate, with 91% of respondents
feeling Hamilton is a great place to work. Positive responses were also reported on Diversity, Equity, &
Inclusivity (DE&I) questions, where 85% of respondents reported that they feel they can be themselves at
work, and 77% indicated that HMA actively encourages diversity and inclusion.
Hamilton remains dedicated to building a diverse workforce and believes in the benefits of doing so in
cultural terms across decision-making, innovation, and profitability, with the company diversity statement
encapsulating this approach: 'Open Minds Open Doors'. Hamilton believes that by welcoming and
respecting differences, the business will continue to attract, retain and engage the best talent in the
market. This approach is supported by an executive-sponsored DE&I group led by the DE&I Steering
Committee and supported by local DE&I Forums focusing on localised DE&I initiatives. The London DE&I
Forum has recently conducted an extensive survey to understand and prioritise key focus areas, with plans
underway to focus on a range of initiatives to promote DE&I.
Hamilton's DE&I commitment is shown in the most recent Lloyd's 2024 Market Policies and Practices
(MP&P) report, where HMA continues to meet the Lloyd's 1 in 3 Hiring Ambition, focused on bringing more
ethnic diversity into the Lloyd's market. The 35% Women in Leadership target was, again, surpassed at
39%. Furthermore, the 2024 Culture Survey placed Hamilton in the second quartile of the market.
Hamilton appreciates the importance of employees' physical and mental wellbeing and has support
mechanisms in place across both areas, providing employees with:
•
Specialised confidential external support via the Employee Assistance Programme
•
Access to a leading online workplace mental health platform
•
A monthly Wellness Update with information on wellness webinars and in-person events in
partnership with our workplace mental health platform and Wellbeing at Lloyd's
•
Bi-annual health assessments
•
Private medical insurance
•
A cycle-to-work scheme
•
A gym subsidy to support the ongoing physical health of employees
Hamilton's Crisis Management Team supports the safety and continuity of business operations. There
have been no significant injuries to staff in the workplace during the year or any significant actions taken
by regulatory bodies regarding staff matters.
Hamilton's "Magnet for Talent" business imperative promotes employee learning and development to
support HMA's talent pipeline and succession plans. Annual talent and performance reviews track
performance and potential, supported by training in software, leadership, management, essential skills,
and technical expertise. The recently launched mentoring programme has attracted strong interest, while
parental transition coaching supports talent retention, and Lloyd's and LMA training further enhance
10
MANAGING AGENT’S REPORT (continued)
Staff matters (continued)
development opportunities. Plans are also underway to introduce an early career curriculum to nurture
emerging talent and further support our established early career initiatives, such as our annual internships
and partnership with the Futures Academy for work experience.
Regular employee communication continues to be key to Hamilton's approach to employee engagement.
Current initiatives include quarterly group and local town halls where leadership teams provide employee-
focused updates on financial results and Hamilton’s strategic progress. The recent introduction of a new
email management platform offering real-time engagement data and analytics has enhanced the focus,
quality, and effectiveness of email communications.
Human Resources' key performance metrics are reviewed periodically by committees of the Board, and all
such indicators align with the expectations of the Directors.
HMA has entered into a service agreement with Hamilton UK Services Limited to provide services in
relation to its role as managing agent, including for Syndicate 4000. HMA and Hamilton UK Services Limited
are wholly owned subsidiaries of Hamilton UK Holdings Limited.
Hamilton’s Crisis Management Team supports the safety and continuity of business operations. There
have been no significant injuries to staff in the workplace during the year or any significant actions taken
by any regulatory bodies regarding staff matters.
Part of Hamilton’s ‘magnet for talent’ business imperative is to promote the ongoing learning and
development of employees, supporting HMA’s internal talent pipeline and succession plans, improving
employee knowledge and skills, and aiding retention. In this regard, HMA conducts annual talent and
performance review processes to track performance and potential, which are complemented by
comprehensive learning and development programmes covering topics such as software, leadership,
management, soft skills and occupational-specific and technical training.
HMA prioritises communication and collaboration, using an array of communication methods and tools.
HMA ensures that staff members are kept informed and their interests appropriately considered when
making decisions through regular Employee Town Halls led by senior management, where questions and
comments are addressed, and frequent online-based communication internally and externally.
Human Resources’ key performance indicators are reviewed periodically by committees of the Board, and
all such indicators are in line with the expectations of the Directors.
Environmental Matters
HMA is aligned with the strategy of the Hamilton Group, which strives to be a responsible (re)insurer in all
aspects of its operations and business practices by considering and recognising the impact to society and
communities, the environment and climate change for current and future generations and for all its
stakeholders. Cognisant of the uncertainty abundant in these areas, each are embedded in HMA’s risk
management framework.
Oversight of HMA’s approach to environmental matters is provided on a local level by HMA’s Board, with
additional governance coming from the Hamilton Group ESG Working Group. Further information on the
overall Group strategy can be found on the Hamilton Group website.
11
MANAGING AGENT’S REPORT (continued)
Business Relationships
HMA is committed to being a conscientious business and doing the right thing for its customers and
business partners. The Board recognises that relationships with stakeholders are key to the delivery of the
strategy. As such, HMA looks to conduct business with like-minded firms by undertaking the appropriate
due diligence to ensure they have good prospects for future and longevity in the market.
HMA ensures compliance with all applicable laws and has in place various internal policies, processes
and procedures covering all aspects of the business to ensure outcomes of business practice achieve
consistently high business and ethical standards. These policies, procedures and processes are reviewed
and renewed, where applicable, regularly.
Suppliers
HMA recognises that its impact on society and ability to operate in a sustainable manner extends beyond
its direct business practices to the practices of all parties in its value chain. As such, it is cognisant of the
need for appropriate methods of engaging with and monitoring suppliers. Supplier interactions are led by
the Procurement/Finance function with processes for managing supplier relationships dictated by the
Hamilton Group Procurement & Outsourcing Policy, which mandates a risk-based approach for all
supplier engagement and subsequent due diligence.
Oversight for the procurement processes, supplier selection, compliance with the Policy, and supplier
performance is provided by the Hamilton Group Vendor Management Working Group, which reports to
local boards and ultimately to the Hamilton Group Board.
Business Conduct
The Board recognises that a commitment to a high standard of business conduct is critical to the delivery
of the strategy and aspires to complete honesty and transparency in all its selling practices, product
labelling and other dealings. In addition to this, it is mindful of the fact that the insurance industry offers
unique risk to the financial system on account of its complexity and intercorrelation. Among key
documents reviewed and approved by the Board annually are the Conduct Management Framework,
Whistleblowing Policy, Financial Crime Prevention Policy, and the Code of Conduct & Ethics. The Board
further monitors conduct management at each meeting and is committed to maintaining high ethical
standards.
Regulators
HMA has transparent communication with its key regulators which is facilitated through the compliance
team. Any significant regulatory engagements are reported to the Board of HMA. The Company is aware
that legislation relating to climate and sustainability-related matters is becoming increasingly pertinent
and monitors the regulatory landscape closely.
Principal Risks and Uncertainties
The Board sets risk appetite annually as part of the Syndicate’s business planning and capacity setting
process. HMA has established a Risk Committee which meets at least quarterly to review and to monitor
performance against risk appetite using a series of key risk indicators. An Own Risk and Solvency
Assessment (“ORSA”) report is completed annually. The ORSA is used to identify the key risks to the
Syndicate and to ensure the Syndicate meets its current and future capital requirements.
The principal risks and uncertainties facing the Syndicate are set out in note 4 to the Annual Report.
12
MANAGING AGENT’S REPORT (continued)
Directors and Officers Serving During the Year
The Directors who served during the year ended 31 December 2024 and up to the date of this report (and
the current Company Secretary) are detailed on page 4.
Going Concern Basis
These financial statements are prepared on a going concern basis. Further details on this are set out in
note 1 to the Annual Report.
Annual General Meeting
The Directors do not propose to hold an annual general meeting for the Syndicate.
Auditor
Ernst & Young LLP has signified its willingness to continue in office as auditor.
Disclosure of Information to the Auditor
The Directors who held office at the date of the approval of this Managing Agent’s Report confirm that, so
far as they are individually aware, there is no relevant audit information of which the Syndicate’s auditor is
unaware and each director has taken all the steps that they ought to have taken as director to make them
aware of any relevant audit information and to establish that the Syndicate’s auditor is aware of that
information.
Board Approval
Approved by order of the Board of Hamilton Managing Agency Limited.
A. J. Daws
Chief Executive Officer
4 March 2025
13
Statement of Managing Agent's Responsibilities
The managing agent is responsible for preparing the Syndicate Annual Accounts in accordance with
applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 (the 2008
Regulations) and the Syndicate Accounts Instructions require the managing agent to prepare Syndicate
Annual Accounts at 31 December each year in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law). The Syndicate annual
accounts are required by law to give a true and fair view of the state of affairs of the Syndicate as at that
date and of its profit or loss for that year.
In preparing the Syndicate Annual Accounts, the managing agent is 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 notes to the Syndicate accounts; and
•
prepare the Syndicate accounts on the basis that the Syndicate will continue to write future business
unless it is inappropriate to presume the Syndicate will do so.
The managing agent is responsible for keeping adequate accounting records which disclose with
reasonable accuracy at any time the financial position of the Syndicate and enable it to comply with the
2008 Regulations. It is also responsible for safeguarding the assets of the Syndicate and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the corporate and financial
information included on the business’s website. Legislation in the United Kingdom governing the
preparation and dissemination of annual accounts may differ from legislation in other jurisdictions.
14
Independent Auditor's Report to the Member of
Syndicate 4000
Opinion
We have audited the syndicate annual accounts of syndicate 4000 (‘the syndicate’) for the year ended 31
December 2024 which comprise the Statement of profit or loss and other comprehensive income, the
Balance sheet, the Statement of changes in member’s balances, the Statement of cash flows and
the
related notes 1 - 27, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law including The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, United Kingdom Accounting
Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of
Ireland” and FRS 103 “Insurance Contracts” (United Kingdom Generally Accepted Accounting Practice),
and Section 1 of the Lloyd’s Syndicate Accounts Instructions V2.0 as modified by the Frequently Asked
Questions Version issued by Lloyd’s (the Syndicate Accounts Instructions).
In our opinion, the syndicate annual accounts:
•
give a true and fair view of the syndicate’s affairs as at 31 December 2024 and of its 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 Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 and the Syndicate Accounts Instructions.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)), The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the Syndicate
Accounts Instructions, and other applicable law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the syndicate annual accounts section of our
report. We are independent of the syndicate in accordance with the ethical requirements that are relevant
to our audit of the syndicate annual accounts in the UK, including the FRC’s Ethical Standard as applied to
other entities of public interest, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the syndicate annual accounts, we have concluded that the managing agent’s use of the going
concern basis of accounting in the preparation of the syndicate annual accounts is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the syndicate’s ability to
continue as a going concern for a period of 12 months from when the syndicate annual accounts are
authorised for issue.
15
INDEPENDENT AUDITOR’S REPORT TO THE MEMBER OF SYNDICATE 4000 (continued)
Our responsibilities and the responsibilities of the managing agent with respect to going concern are
described in the relevant sections of this report. However, because not all future events or conditions can
be predicted, this statement is not a guarantee as to the syndicate’s ability to continue as a going concern.
Other information
The other information comprises the information included in the annual report set out on pages 5 to 12,
other than the syndicate annual accounts and our auditor’s report thereon. The directors of the managing
agent are responsible for the other information contained within the annual report set out on page 4.
Our opinion on the syndicate annual accounts does not cover the other information and, except to the
extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the syndicate annual accounts or our knowledge obtained in the course of
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the syndicate annual accounts themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the managing agent’s report for the financial year in which the syndicate
annual accounts are prepared is consistent with the syndicate annual accounts; and
•
the managing agent’s report has been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the syndicate and its environment obtained in the course
of the audit, we have not identified material misstatements in the managing agent’s report.
We have nothing to report in respect of the following matters where The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 requires us to report to you, if in our opinion:
•
the managing agent in respect of the syndicate has not kept adequate accounting records; or
•
the syndicate annual accounts are not in agreement with the accounting records; or
•
certain disclosures of the managing agents’ emoluments specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of the managing agent
As explained more fully in the Statement of Managing Agent’s Responsibilities page 13, the managing agent
is responsible for the preparation of the syndicate annual accounts and for being satisfied that they give a
true and fair view, and for such internal control as the managing agent determines is necessary to enable
the preparation of the syndicate annual accounts that are free from material misstatement, whether due
to fraud or error.
16
INDEPENDENT AUDITOR’S REPORT TO THE MEMBER OF SYNDICATE 4000 (continued)
In preparing the syndicate annual accounts, the managing agent is responsible for assessing the
syndicate’s ability to continue in operation, disclosing, as applicable, matters related to its ability to
continue in operation and using the going concern basis of accounting unless the managing agent either
intends to cease to operate the syndicate, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of
these syndicate annual accounts.
Explanation as to what extent the audit was considered capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed
below. However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the managing agent and management.
Our approach was as follows:
•
We obtained a general understanding of the legal and regulatory frameworks that are applicable to
the syndicate and determined that the most significant are direct laws and regulations related to
elements of Lloyd’s Byelaws and Regulations, and the financial reporting framework (UK GAAP), and
requirements referred to by Lloyd’s in the Syndicate Accounts instructions. Our considerations of
other laws and regulations that may have a material effect on the syndicate annual accounts included
permissions and supervisory requirements of Lloyd’s of London, the Prudential Regulation Authority
(‘PRA’) and the Financial Conduct Authority (‘FCA’).
•
We obtained a general understanding of how the syndicate is complying with those frameworks by
making enquiries of management, internal audit, and those responsible for legal and compliance
matters of the syndicate. In assessing the effectiveness of the control environment, we also reviewed
significant correspondence between the syndicate, Lloyd’s of London and other UK regulatory bodies;
reviewed minutes of the Board and Risk Committee of the managing agent; and gained an
understanding of the managing agent’s approach to governance.
•
For direct laws and regulations, we considered the extent of compliance with those laws and
regulations as part of our procedures on the related syndicate annual accounts’ items.
•
For both direct and other laws and regulations, our procedures involved: making enquiries of the
directors of the managing agent and senior management for their awareness of any non-compliance
of laws or regulations, enquiring about the policies that have been established to prevent non-
compliance with laws and regulations by officers and employees, enquiring about the managing
agent’s methods of enforcing and monitoring compliance with such policies, and inspecting
significant correspondence with Lloyd’s, the FCA and the PRA.
17
INDEPENDENT AUDITOR’S REPORT TO THE MEMBER OF SYNDICATE 4000 (continued)
•
The syndicate operates in the insurance industry which is a highly regulated environment. As such the
Senior Statutory Auditor considered the experience and expertise of the engagement team to ensure
that the team had the appropriate competence and capabilities, which included the use of specialists
where appropriate.
•
We assessed the susceptibility of the syndicate’s annual accounts to material misstatement,
including how fraud might occur by considering the controls that the managing agent has established
to address risks identified by the managing agent, or that otherwise seek to prevent, deter or detect
fraud. We also considered areas of significant judgement, complex transactions, performance
targets, economic or external pressures and the impact these have on the control environment.
Where this risk was considered to be higher, we performed audit procedures to address each
identified fraud risk. The risk of fraud was considered to be higher in respect of inadequate reserving
for gross and net claims incurred but not reported (‘IBNR’) and improper revenue recognition in
relation to estimated premium income. Our audit procedures include:
•
Reviewing accounting estimates for evidence of management bias. Supported by our
actuarial professionals we assessed if there were any indicators of management bias in
the valuation of gross and net IBNR reserves and the recognition of estimated premium
income;
•
Evaluating the business rationale for significant and/or unusual transactions;
•
Testing the appropriateness of journal entries recorded in the general ledger,
particularly in respect of judgemental areas including gross and net IBNR reserves and
estimated premium income.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matter
Our opinion on the syndicate annual accounts does not cover the iXBRL tagging included within these
syndicate annual accounts, and we do not express any form of assurance conclusion thereon.
Use of our report
This report is made solely to the syndicate’s members, as a body, in accordance with The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. Our audit work has been
undertaken so that we might state to the syndicate’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 syndicate and the syndicate’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Joseph Warrender (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
4 March 2025
18
Statement of profit or loss and other
comprehensive income
Technical account - General business
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Gross premiums written
5
Outwards reinsurance premiums
(227,407 )
(213,658 )
Premiums written, net of reinsurance
Changes in unearned premium
Change in the gross provision for unearned premiums
(45,120 )
(58,665 )
Change in the gross provision for unearned premiums reinsurers' share
Net change in provisions for unearned premiums
16
(27,182 )
(33,396 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the non-technical account
9
Claims paid
16
Gross amount
(195,777 )
(172,436 )
Reinsurers’ share
Net claims paid
(109,889 )
(95,823 )
Change in the provision for claims
16
Gross amount
(145,883 )
(77,444 )
Reinsurers’ share
Net change in provisions for claims
(100,264 )
(57,801 )
Claims incurred, net of reinsurance
(210,153 )
(153,624 )
Net operating expenses
6
(132,008 )
(118,319 )
Balance on the technical account – general business
19
Statement of profit or loss and other
comprehensive income: (continued)
Non-technical account - General business
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Balance on the technical account – general business
Investment income
9
Realised gains/(losses) on investments
9
(421 )
Unrealised gains on investments
9
Investment expenses and charges
9
(509 )
(389 )
Total investment return
Allocated investment return transferred to the general business technical
account
(25,025 )
(25,280 )
Gain/(loss) on foreign exchange
(1,151 )
Profit for the financial year
Other comprehensive income:
Currency translation loss
(1,776 )
(3,320 )
Total comprehensive income for the year
The accompanying notes from page 24 to 57 form an integral part of these financial statements.
20
Balance sheet - Assets
As at 31 December 2024
Note
2024
2023
(restated)*
£000
£000
Financial investments
Deposits with ceding undertakings
Investments
10
Provision for unearned premiums
Claims outstanding
Reinsurers’ share of technical provisions
16
Debtors arising out of direct insurance operations
11
Debtors arising out of reinsurance operations
12
Other debtors
13
Debtors
Cash at bank and in hand
21
Other assets
Deferred acquisition costs
14
Other prepayments and accrued income
Prepayments and accrued income
Total assets
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
21
Balance sheet - Liabilities
As at 31 December 2024
Note
2024
2023
£000
£000
Member’s balances
Total capital and reserves
Provision for unearned premiums
Claims outstanding
Technical Provisions
16
Creditors arising out of direct insurance operations
17
Creditors arising out of reinsurance operations
18
Other creditors including taxation and social security
19
Creditors
Accruals & deferred income
20
Total liabilities
Total liabilities, capital and reserves
The Syndicate financial statements on pages 18 to 57 were approved by the board of Hamilton Managing
Agency Limited on 4 March 2025 and were signed on its behalf by;
R. S. Vetch
Chief Financial Officer
22
Statement of changes in member’s balances
For the year ended 31 December 2024
2024
2023
£000
£000
Member’s balances brought forward at 1 January
Total comprehensive income for the year
Payments of profit to member’s personal reserve funds
(41,681 )
Losses collected in relation to distribution on closure of underwriting year
Other
(722 )
Member’s balances carried forward at 31 December
23
Statement of cash flows
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Cash flows from operating activities
Profit for the financial year
Adjustments:
Increase in gross technical provisions
Decrease in reinsurers’ share of gross technical provisions
(52,842 )
(6,108 )
Decrease in debtors
(29,236 )
(80,127 )
Increase in creditors
Movement in other assets/liabilities
Investment return
(25,025 )
(25,280 )
Foreign exchange movements
(1,194 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of equity and debt instruments
(493,181 )
(330,547 )
Sale of equity and debt instruments
Investment income received
Other
Net cash flows from investing activities
(142,468 )
(99,852 )
Cash flows from financing activities
(Distribution of profit)/Cash call
(41,681 )
Other
(722 )
Net cash flows from financing activities
(42,403 )
Net decrease in cash and cash equivalents
(1,146 )
(24,866 )
Cash and cash equivalents at the beginning of the year
Foreign exchange on cash and cash equivalents
(583 )
(3,635 )
Cash and cash equivalents at the end of the year
22
24
Notes to the financial statements
1.
Basis of preparation
General Information
The Syndicate’s corporate member is detailed on page 5. The Syndicate underwrites insurance and
reinsurance business in the London market at the Society of Lloyd’s on behalf of its corporate member.
The registered address of the managing agent is Level 3, 8 Fenchurch Place, London, EC3M 4AJ.
Compliance with Accounting Standards
The financial statements have been prepared in accordance with the Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, applicable Accounting Standards in the
United Kingdom and the Republic of Ireland, including Financial Reporting Standard 102 (FRS 102),
Financial Reporting Standard 103 (FRS 103) in relation to insurance contracts, and the Lloyd’s Syndicate
Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions Version 1.1 issued by
Lloyd’s.
Basis of Preparation
The financial statements have been prepared on a historical cost basis, except for certain financial
instruments which are measured at fair value.
The financial statements are presented in pounds sterling, which is the Syndicate’s presentational
currency, in order for them to be consistent with returns provided to Lloyd’s. The Syndicate’s functional
currency is US dollars, in order to better reflect the underlying business of the Syndicate. All amounts have
been rounded to the nearest thousand, unless otherwise indicated.
As permitted by FRS 103 the Syndicate continues to apply the existing accounting policies that were
applied prior to this standard for its insurance contracts.
Going Concern Basis
These financial statements are prepared on a going concern basis. Syndicates by their nature only
underwrite for single underwriting years on behalf of their supporting members. However, this is within a
context of not finalising results until after 36 months so that typically there are three underwriting years in
progress at any given time. In addition, syndicates will normally expect to continue to trade for more
underwriting years into the future.
The Syndicate has capacity for the 2025 year of account and is continuing to underwrite. The Syndicate’s
business activities, together with the factors likely to affect its future development are set out in the
Business Review contained within the Managing Agent’s Report. In addition, note 4 to the Annual Report
provides details of the financial risks the Syndicate is exposed to and how those risks are managed.
The Syndicate has considerable financial resources together with long term relationships with a number
of brokers and policyholders across different classes of business and geographical areas. As a
consequence, the Directors believe that the Syndicate is well placed to manage its business risks
successfully despite the current uncertain economic outlook.
25
NOTES TO THE FINANCIAL STATEMENTS
1.
Basis of Preparation (continued)
Going Concern Basis (continued)
The Directors have a reasonable expectation that the Syndicate has adequate resources including the
Funds at Lloyd’s of the members supporting the Syndicate (as detailed in note 27) to continue in
operational existence for the foreseeable future and for at least 12 months from the date of authorising
these accounts for issuance.
Restatement of comparative information
During 2024, Lloyd's introduced changes to the syndicate accounts process to rationalise and standardise
financial reporting across the market. As a result, certain comparative information has been restated to
ensure consistency with current year presentation and compliance with the Lloyd's Syndicate Accounts
Instructions. The changes comprise:
a)
Reclassification changes: Certain financial statement line items have been reclassified whilst the
underlying amounts remain unchanged. The principal change is:
i)
Overseas deposits of £41.9m have been reclassified from other asset balance sheet item
to financial investments, with comparative balances in notes 4 and 10 adjusted
accordingly.
ii)
Deposits with ceded undertakings of £0.6m have been reclassified from reinsurance
debtors balance sheet item to financial investments, with comparative balances in notes
4 and 10 adjusted accordingly.
b)
Aggregation changes to align with Lloyd's reporting requirements whilst maintaining FRS 102
compliance, certain items have been aggregated or disaggregated within the financial statements
and related notes. This includes the presentation of realised and unrealised gains and losses on
investments, which are now shown on a disaggregated basis in the non-technical account of the
Statement of profit or loss and other comprehensive income and in note 9.
The reclassification and aggregation changes have been applied retrospectively and had no impact on
previously reported profit, total comprehensive income, total assets, total liabilities, or total capital and
reserves.
2.
Use of judgements and estimates
In preparing these financial statements, the Directors of the managing agent have made judgements,
estimates and assumptions that affect the application of the Syndicate’s accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.
Provision for Claims Outstanding
The measurement of the provision for claims outstanding involves judgements and assumptions about the
future that have the most significant effect on the amounts recognised in the financial statements. The
provision for claims outstanding comprises the estimated cost of settling all claims incurred but unpaid at
the balance sheet date, whether reported or not. This is a judgemental and complex area due to the
subjectivity inherent in estimating the impact of claims events that have occurred but for which the
eventual outcome remains uncertain. In particular, judgement is applied when estimating the value of
amounts that should be provided for claims that have been incurred at the reporting date but have not yet
been reported (“IBNR”) to the Syndicate.
26
NOTES TO THE FINANCIAL STATEMENTS
2.
Use of judgements and estimates (continued)
The amount included in respect of IBNR is based on statistical techniques of estimation applied by the
Syndicate managing agent’s actuaries and reviewed by external consulting actuaries. These techniques
generally involve projecting from past experience the development of claims over time in view of the likely
ultimate claims to be experienced and for more recent underwriting, having regard to variations in business
accepted and the underlying terms and conditions. The provision for claims also includes amounts in
respect of internal and external claims handling costs. 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 business accepted and assessments of underwriting conditions.
Further information about the risk that the provision for claims outstanding could be materially different
from the ultimate cost of claims settlement is included in note 4.
Estimated Premium Income
For certain insurance contracts, premium is initially recognised based on an estimate. Where premium is
sourced through delegated underwriting, the premium estimate is pro-rated across the facility period. This
is calculated on a straight-line basis unless the underlying writing pattern is understood to differ materially
from this. Underwriters adjust the premium estimates as the year of account matures and after a set
period, the premiums are adjusted to match the signed premium where information has become available.
These estimates are judgemental and could result in revisions in future accounting periods. The use of
expert judgements and historical development patterns are the principle means by which the potential for
revisions is minimised.
3.
Significant accounting policies
Basis of Accounting
The underwriting results are determined on an annual basis of accounting. Under the annual basis of
accounting, the incurred cost of claims, commission and related expenses are charged against the earned
proportion of premiums, net of reinsurance. The significant accounting policies are detailed below.
A.
Premiums written
Premiums written comprise direct and inwards reinsurance premiums on contracts incepted during the
financial year. Premiums are shown gross of brokerage payable to intermediaries and exclude taxes and
duties levied on them. Estimates are made for pipeline premiums, representing amounts due to the
Syndicate not yet notified. These estimates are subsequently updated based on underwriting experience
and contract performance.
B.
Unearned premiums
Written premiums are recognised as earned according to the risk profile of the policy. Unearned premiums
represent the proportion of premiums written that relate to unexpired claims exposure from policies in
force at the balance sheet date, calculated on the basis of established earnings patterns or time
apportionment as appropriate.
27
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
C.
Acquisition costs
Acquisition costs include direct costs such as brokerage and commission, and indirect costs such as
administrative expenses connected with the processing of proposals and the issuing of policies. The
deferred acquisition cost asset represents the proportion of acquisition costs which corresponds to the
proportion of gross premiums written that is unearned at the balance sheet date; this is then earned in
future periods in line with the associated premium income.
D.
Reinsurance
Outwards reinsurance premiums are accounted for and earned in the same accounting period as the
premiums for the related direct or inwards business being reinsured.
E.
Claims provisions and related reinsurance recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the year, whether
reported or not, including related direct and indirect claims handling costs.
The provision for claims outstanding is assessed on an individual case by case basis and is based on the
estimated ultimate cost of all claims notified but not settled by the balance sheet date, together with the
provision for related claims handling costs. The provision also includes the estimated IBNR at the balance
sheet date based on statistical methods.
These methods 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. The
amount of salvage and subrogation recoveries is separately identified and, where material, reported as an
asset.
The reinsurers’ share of provisions for claims is based on the 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. A number of statistical methods are used to assist in making these
estimates.
The two most critical assumptions as regards claims provisions are that the past is a reasonable predictor
of the likely level of claims development and the rating and other models used for current business are fair
reflections of the likely level of ultimate claims to be incurred. To the extent we do not believe this to be
true in specific areas, adjustments are made by the actuarial team.
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, the ultimate liability will vary
as a result of subsequent information and events, and this may result in significant adjustments to the
amounts provided. The methods used, and the estimates made, are reviewed regularly.
28
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
F.
Unexpired risks provision
A provision for unexpired risks is made where claims and related expenses arising after the end of the
financial period in respect of contracts concluded before that date are expected to exceed the unearned
premiums and premiums receivable under these contracts, after the deduction of any acquisition cost
deferred. The provision for unexpired risks is calculated by reference to classes of business which are
managed together, after taking into account relevant investment return. As at 31 December 2024 and 31
December 2023, the Syndicate did not have an unexpired risk provision.
G.
Foreign currencies
The Syndicate’s functional currency is US dollars. The financial statements are presented in pounds
sterling, which is the Syndicate’s reporting currency, in order for them to be consistent with returns
provided to Lloyd’s. Transactions in pounds sterling, Canadian dollars, Australian dollars and euros are
translated at the average rates of exchange for the period. Transactions denominated in other foreign
currencies are included at the rate of exchange ruling at the date the transaction is processed.
Monetary assets and liabilities (which include all assets and liabilities arising from insurance contracts
including unearned premiums and deferred acquisitions costs) denominated in foreign currencies are
translated at the rate of exchange at the balance sheet date.
Exchange differences arising on the retranslation of opening balance sheet items at the closing balance
sheet rate and the retranslation of the profit and loss account for the year are recorded in the non-technical
account. Exchange differences arising on the retranslation from functional to presentational currency are
recorded in other comprehensive income.
The rates of exchange used to translate foreign currency monetary balances at year end to pounds sterling
are in note 26.
H.
Financial assets and liabilities
In applying FRS 102, the Syndicate has chosen to apply the recognition and measurement provisions of IAS
39 Financial Instruments: Recognition and Measurement (as adopted for use in the UK) as per chapters 11
and 12 of FRS 102.
The Syndicate classifies its financial investments as financial assets at fair value through profit or loss
(“FVPL”).
FVPL assets comprise two sub-categories: financial assets held for trading and those designated as FVPL
at inception.
Investments typically bought with the intention to sell in the near future are classified as held
for trading. For investments designated as FVPL, the following criteria must be met:
•
The designation eliminates or significantly reduces the inconsistent treatment that would otherwise
arise from measuring the assets or liabilities or recognising gains or losses on a different basis; or
•
The assets and liabilities are part of a group of financial assets which are managed and their
performance evaluated on a fair value basis, in accordance with a documented risk management
or investment strategy.
29
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
H.
Financial assets and liabilities (continued)
These investments are initially recorded at fair value. Subsequent to initial recognition, these investments
are re-measured at fair value at each reporting date. Fair value adjustments and realised gains and losses
are recognised in the income statement.
i.
Classification
The accounting classification of financial assets and liabilities determines the way in which they are
measured and changes in those values are presented in the statement of profit or loss and other
comprehensive income. Financial assets and liabilities are classified on their initial recognition.
The initial classification of a financial instrument shall take into account contractual terms including those
relating to future variations.
Once the classification of a financial instrument is determined at initial recognition, re-assessment is only
required subsequently when there has been a modification of contractual terms that is relevant to an
assessment of the classification.
Financial assets and financial liabilities at fair value through profit and loss comprise financial assets and
financial liabilities held for trading and those designated as such on initial recognition. Investments in
shares and other variable yield securities, units in unit trusts, and debt and other fixed income securities
are designated as at fair value through profit or loss on initial recognition, as they are managed on a fair
value basis in accordance with the Syndicate's investment strategy. Other financial assets, principally
certain debt and other fixed-income securities are classified as available for sale.
The Syndicate does not hold any non-derivative financial assets or financial liabilities for trading purposes
although derivatives (assets or liabilities) held by the Syndicate are categorised as held for trading.
Deposits with credit institutions, debtors, and accrued interest are classified as loans and receivables.
ii.
Recognition
Financial instruments are recognised when the Syndicate becomes a party to the contractual provisions
of the instrument. Financial assets are derecognised if the Syndicate's contractual rights to the cash flows
from the financial assets expire or if the Syndicate transfers the financial asset to another party without
retaining control of substantially all risks and rewards of the asset. A financial liability is derecognised
when its contractual obligations are discharged, cancelled or expired.
Regular way purchases and sales of financial assets are recognised and derecognised, as applicable, on
the trade date, i.e., the date that the Syndicate commits itself to purchase or sell the asset.
When the Syndicate has transferred its right to receive cash flows from an asset or has entered into a pass-
through arrangement and has neither transferred nor retained substantially all the risks and rewards nor
transferred control of the asset, the asset is recognised to the extent of the Syndicate’s continuing
involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Syndicate could be required to repay. In that case, the Syndicate also recognises an
associated liability.
30
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
iii.
Measurement
A financial asset or financial liability is measured initially at fair value plus, for a financial asset or financial
liability not at fair value through profit or loss, transaction costs that are directly attributable to its
acquisition or issue. Financial assets at fair value through profit or loss are measured at fair value with fair
value changes recognised immediately in profit or loss. Net gains or net losses on financial assets
measured at fair value through profit or loss includes foreign exchange gains/losses arising on their
translation to the functional currency but excludes interest and dividend income. Financial assets
classified as available for sale are initially recognised at fair value, which typically equates to the cost, plus
transaction costs directly attributable to its acquisition. After initial measurement, these assets are
subsequently measured at fair value. Interest earned whilst holding available for sale financial assets is
reported as interest income. Impairment losses and foreign exchange gains or losses are reported in profit
or loss. Other fair value changes are recognised in other comprehensive income. Any gain or loss
recognised in Other comprehensive income (“OCI”) will be recycled to profit and loss on derecognition of
the asset.
Loans and receivables and non-derivative financial liabilities are measured at amortised cost using the
effective interest method, except Syndicate Loans to the Central Fund which are measured at fair value
through profit or loss.
iv.
Identification and measurement of impairment
At each reporting date the Syndicate assesses whether there is objective evidence that financial assets
not at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence
demonstrates that a loss event has occurred after the initial recognition of an asset, and that the loss event
has an impact on the future cash flows on the asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes observable data that comes to the attention
of the Syndicate about any significant financial difficulty of the issuer, or significant changes in the
technological, market, economic or legal environment in which the issuer operates.
Impairment losses on available for sale financial assets are recognised by reclassifying the losses
accumulated in other comprehensive income to profit or loss.
The net cumulative loss that is reclassified from other comprehensive income to profit or loss is the
difference between the acquisition cost, net of any principal repayment, and the current fair value, less
any impairment loss recognised previously in profit or loss. If, in a subsequent period, the fair value of an
impaired available for sale debt security increases and the increase can be related objectively to an event
occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss.
Otherwise, it is reversed through the statement of comprehensive income.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount, and the present value of the estimated future cash flows
discounted at the asset's original effective interest rate. Individually significant financial assets are tested
for impairment on an individual basis. The remaining financial assets are assessed collectively in groups
that share similar credit risk characteristics.
An impairment loss recognised on an amortised cost asset reduces directly the carrying amount of the
impaired asset. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the
reversal can be related objectively to an event occurring after the impairment loss was recognised. For
financial assets measured at amortised cost the reversal is recognised in profit or loss.
31
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
v.
Off-setting
Financial assets and financial liabilities are offset, and the net amount presented in the balance sheet
when, and only when, the Syndicate currently has a legal right to set off the amounts and intends either to
settle on a net basis or to realise the asset and settle the liability simultaneously.
I.
Investment return
Investment return comprises all investment income, realised investment gains and losses and movements
in unrealised gains and losses, net of investment expenses, charges and interest recognised in the income
statement. Investment return is initially recorded in the non-technical account. A transfer is made from the
non-technical account to the general business technical account. Investment return has been wholly
allocated to the technical account as all investments are held to support underwriting liabilities.
Realised gains and losses on investments carried at market value are calculated as the difference between
sale proceeds and carrying value. Unrealised gains and losses on investments represent the difference
between the valuation at the balance sheet date and their valuation at the previous balance sheet date, or
purchase price, if acquired during the year, together with the reversal of unrealised gains and losses
recognised in earlier accounting periods in respect of investment disposals in the current period.
Unrealised and realised gains and losses in financial investments are recognised based on the appropriate
classification of financial investments and are covered under the accounting policy for financial
investments.
J.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or
less from the acquisition date that are subject to an insignificant risk of changes in fair value and are used
by the Syndicate in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position. Bank
overdrafts that are repayable on demand and form an integral part of the Syndicate's cash management
are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
K.
Taxation
Under Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic rate income
tax from trading income. In addition, all UK basic rate income tax deducted from syndicate investment
income is recoverable by managing agents and consequently the distribution made to members is gross
of tax.
No provision has been made for any United States Federal Income Tax payable on underwriting results or
investment earnings. Any payments on account made by the Syndicate are included in the Statement of
Financial Position under the heading members’ balances.
No provision has been made for any overseas tax payable by members on underwriting results.
L.
Pension costs
Hamilton Managing Agency operates a defined contribution scheme. Pension contributions relating to
managing agent staff who act on behalf of the Syndicate are charged to the Syndicate as incurred and are
included within net operating expenses.
32
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
M.
Profit commission
Profit commission payable to Lloyd’s coverholders or producing brokers has been provided for on all years
of account and recognised within acquisition costs in the income statement. Profit commission accruals
are calculated based on the expected profit or loss of qualifying premium and are included within creditors
on the balance sheet. Profit commissions are calculated at the minimum value of underwriting profits
whilst there is uncertainty over the amounts due. As such this is an estimation based on the level of
information available at a point in time.
N.
Direct Insurance and Reinsurance Receivables
Direct insurance and reinsurance receivables are recognised when due and measured on initial
recognition at the fair value of the consideration received or receivable. The carrying value of these
receivables is reviewed for impairment whenever events or circumstances indicate that the carrying
amount may not be recoverable, with the impairment loss recorded in the income statement. Debtors
arising out of direct insurance and reinsurance operations are therefore stated net of specific provisions
against doubtful debts which are made on the basis of reviews conducted by management on pipeline
premium balances, which form part of the direct insurance receivables. Insurance receivables are
derecognised when the derecognition criteria for financial assets have been met.
O.
Direct Insurance and Reinsurance Payables
Direct insurance and reinsurance payables are recognised when due and measured on initial recognition
at the fair value of the consideration received less directly attributable transaction costs.
These liabilities
are derecognised when the obligation under the liability is settled, cancelled or expired.
A financial asset or, when applicable, a part of a financial asset is derecognised when:
•
The rights to the cash flows from the asset have expired; or
•
The Syndicate retains the right to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass through’
arrangement and either (a) the Syndicate has transferred substantially all the risks and rewards of
the asset; or (b) the Syndicate has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
P.
Deposits with Ceded Undertakings
Deposits with ceding undertakings are funds held by Lloyd’s Europe on behalf of the Syndicate to settle
Part VII claims.
Q.
Operating expenses
Where expenses are incurred by the Managing Agent and Service Company for the administration of the
Syndicate, these expenses are apportioned appropriately based on type of expense. Expenses that are
incurred jointly are apportioned between the Managing Agent, Service Company and the Syndicate on
bases depending on the amount of work performed, resources used, and the volume of business
transacted.
33
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant accounting policies (continued)
R.
Reinsurers’ commission and profit participation
Reinsurers’ commissions and profit participations, which include reinsurance profit commission and
overriding commission, are treated as a contribution to expenses.
S.
RITC and Portfolio Transfer Policy
The Syndicate accepted a reinsurance to close of Syndicate 3334 effective 1 January 2022. It recorded the
assets and liabilities transferred at the fair value on the date the RITC agreement was effective. The
Syndicate had net losses on closure of its 2019 underwriting year of account. The members’ balances
including funds in syndicate were also transferred, and the closing losses for the 2019 were discharged to
Syndicate 4000 in June 2022. Thus, the RITC transaction had no impact on the Syndicate’s profit or net
assets at the time that it was first recorded.
4.
Risk and capital management
Introduction and overview
This note presents information about the nature and extent of insurance and financial risks to which the
Syndicate is exposed, the Managing Agent's objectives, policies and processes for measuring and
managing insurance and financial risks, and for managing the Syndicate's capital.
Risk management framework
The main goal of the Syndicate’s Risk Management Framework is to protect its capital providers from
adverse events that might impede the achievement of sustainable financial performance, lead to erosion
of capital, or cause missed opportunities. The Board recognises the critical importance of having efficient
and effective risk management systems in place to identify, measure, mitigate, monitor, and report on key
risks.
HMA has an established risk management function for the Syndicate with a clear remit from the Board.
This is supplemented with a clear organisational structure with documented delegated authorities and
responsibilities from the Board. Hamilton leverages the ‘three lines of defence’ model, in which the risk
management function is part of the second line of defence. The ongoing communication and collaboration
across the three lines of defence ensures that HMA identifies and manages risks effectively.
The Risk Committee and the Board approve the risk management policies, including the Risk Appetite
Framework, and meet regularly to approve any commercial, regulatory and organisational requirements of
such policies. Significant emphasis is placed on the continuous monitoring, assessment and
documentation of existing and emerging risks and controls.
A.
Insurance risk
Insurance Risk is a core aspect of the Syndicate’s business model, and it is recognised that uncertainty
associated with the frequency and severity of claims is inherent to general insurance. The Syndicate
therefore seeks a measured amount of this risk in exchange for underwriting profit, provided that the nature
of these risks are adequately assessed, evaluated and priced, based on both internal strategy, approach
and business planning processes, as well as considering the standards and expectations set by regulators
and rating agencies.
34
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
A.
Insurance Risk (continued)
The Syndicate is risk averse to subcategories of insurance risk, which, upon materialisation, may impede
or disrupt the aforementioned assessment and evaluation process, such as inadequate reserving, pricing,
catastrophe risk, reinsurance, over-concentration, inadequate claims handling or poor oversight and
governance of underwriting processes (including delegated underwriting).
HMA’s Board approves the risk appetite statement and risk tolerance limit, considering the relativity
between willingness to lose and potential forecast profitability for each year of account. The risk appetite
will therefore reflect the view of the business plan, utilising the Syndicate’s latest approved business plan
assumptions.
The principal risk the Syndicate faces under insurance contracts is that the actual claims and payments or
the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of
claims, and the development of long-term claims liabilities. The objective of the Syndicate is to ensure that
sufficient reserves are available to cover these liabilities. Management consider that this risk is heightened
in the current inflationary environment, as well as the impact of climate change on the frequency and
severity of natural catastrophes.
The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and
geographical segments. The variability of risks is also improved by careful selection and implementation
of underwriting strategy guidelines, as well as the use of reinsurance arrangements. In light of the current
inflationary environment, specific premium rates have been increased based on inflation projections, with
input from across HMA’s functions and utilising market benchmarks.
The below sets out key sub risk categories of Insurance Risk:
i.
Underwriting risk
Underwriting risk is the risk that the insurance premium will not be sufficient to cover future insurance
losses and associated expenses. This includes the risks that the premium is set too low, provides
inappropriate levels of cover, or that the actual frequency or severity of claims events will be significantly
higher than was expected during the underwriting process.
Insurance Risk is a core aspect of the
Syndicate’s business model, and it is recognised that uncertainty associated with the frequency and
severity of claims is inherent to general insurance. The Syndicate accepts a measured amount of this risk
in exchange for underwriting profit, relying on the skills and experience of our underwriters and a robust
control framework to reduce the likelihood and impact of this risk as far as is practicable and without
unreasonable expense.
HMA’s Board approves the risk appetite limit, considering the relativity between willingness to lose and
potential forecast profitability for each year of account. The risk appetite will therefore reflect the view of
forecast profitability, utilising the Syndicate’s latest business plan assumptions.
i.
Reinsurance
Reinsurance allows the Syndicate to manage capital exposure to both frequency and severity of claims.
This includes the management of any systemic issues impacting a particular area of the account, as well
as catastrophic losses across all business areas.
35
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
A.
Insurance Risk (continued)
ii.
Underwriting Committee
The Syndicate organises underwriting through product areas. The Underwriting Committee provides direct
oversight for each underwriting unit and ultimately reports to the HMA Board via the Chief Underwriting
Officer Reports. Underwriting authorities, underwriting peer reviews of all risks, independent review
procedures, and the audit and review of delegated arrangements all contribute to the strength of the
underwriting control environment. HMA records and monitors individual risk exposures to ensure they
remain within the policies and guidelines set.
iii.
Diversification
Risks usually cover twelve months’ duration, with longer duration risks of up to ten years written in selected
accounts such as Political Risks and Mergers & Acquisitions. Risks deliberately emanate from a diverse
range of sources. The variability of risks is improved by careful selection and implementation of
underwriting strategies, which are designed to ensure that risks are diversified in terms of type of risk and
level of insured benefits. This is largely achieved through diversification across industry sectors and
geographical segmentation.
iv.
Claims Management
HMA’s claims management process is designed to reduce the risk of inaccurate or incomplete case
reserves and settlements, poor service or excessive claims handling costs. This includes claim review
policies that assess all new and ongoing claims. HMA performs regular detailed reviews of claims handling
procedures and conducts investigations of possible fraudulent claims.
Exposure Management
The Syndicate monitors exposures through a combination of deterministic modelling as part of the
Realistic Disaster Scenarios Framework and stochastic modelling as part of Lloyd’s catastrophe model
reporting requirements.
Reserving Risk
HMA’s reserving policy seeks to ensure appropriate allowance for reserving risk and consistency in
reserving from year to year. Booked reserves represent the level of reserves booked at syndicate level and
provide the basis for the syndicate results and forecasts. Actuarial best estimate reserves are intended to
be true best estimates, i.e. estimates of ultimate value claims reserves. These are the basis for internal
reporting and the derivation of expected loss ratios for business planning.
The liabilities established could be significantly lower or higher than the ultimate cost of settling the claims
arising. This level of uncertainty varies between the classes of business and the nature of the risk being
underwritten and can arise from developments in case reserving for large losses and catastrophes, or from
changes in estimates of claims IBNR.
Mitigation
Reserving risk is controlled by the robust application of actuarial methodologies, stepped sign-off
procedures, quarterly tracking of projected ultimate loss ratios, reassessment of methodologies where
appropriate, regular dialogue between actuaries and practitioners, and access to historical loss data.
The use of independent external reserve assessments by professional services firms provides additional
risk mitigation.
36
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
A.
Insurance Risk (continued)
Mitigation (continued)
Management has considered the effects of the continued heightened inflation environment on claims
reserves and has made appropriate allowance in the reserving analysis and results. Specific
considerations were made around current economic circumstances, social inflation trends and the
potential impact to business portfolio mix when setting reserving assumptions. In addition, the case
reserves are being reviewed regularly to make sure they adequately allow for the latest inflation trends.
HMA is also mindful that there is a risk that climate change may adversely affect reserving requirements
and monitors its climate-related exposure closely, assessing current and future climate change risk in a
variety of ways, including stress and scenario testing, over short- and long-term time horizons.
i.
Sensitivity to insurance risk
The liabilities established could be significantly lower or higher than the ultimate cost of settling the claims
arising. This level of uncertainty varies between the classes of business and the nature of the risk being
underwritten and can arise from developments in case reserving for large losses and catastrophes, or from
changes in estimates of claims IBNR.
The following table presents the profit and loss impact of the sensitivity of the value of insurance liabilities
disclosed in the accounts to potential movements in the assumptions applied within the technical
provisions. Given the nature of the business underwritten by the Syndicate, the approach to calculating
the technical provisions for each class can vary and as a result the sensitivity performed is to apply a
beneficial and adverse risk margin to the total insurance liability. The amount disclosed in the table
represents the profit or loss impact of an increase or decrease in the insurance liability as a result of
applying the sensitivity.
The amount disclosed for the impact on claims outstanding – net of reinsurance
represents the impact on both the profit and loss for the year and member balance.
General insurance business sensitivities as at 31 December 2024
Sensitivity
5.0%
-5.0%
£000
£000
Claims outstanding – gross of reinsurance
(46,798)
46,798
Claims outstanding – net of reinsurance
(27,890)
27,890
General insurance business sensitivities as at 31 December 2023
Sensitivity
5.0%
-5.0%
£000
£000
Claims outstanding – gross of reinsurance
(39,318)
39,318
Claims outstanding – net of reinsurance
(22,118)
22,118
37
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
B.
Financial risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds from its financial
assets are sufficient to fund the obligations arising from its insurance contracts. The goal of the investment
management process is to optimise the risk-adjusted investment income and risk-adjusted total return by
investing in a diversified portfolio of securities, whilst ensuring that the assets and liabilities are managed
on a cash flow and duration matching basis.
a.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by
failing to discharge an obligation. HMA and the Syndicate has a risk averse appetite to credit risk arising
from dealings and interactions with counterparties. The key aspect of credit risk is the risk of default by a
reinsurer, insurance intermediary or debt holder. HMA also recognises that the potential increased
frequency and severity of natural catastrophes in light of climate change may adversely affect the
Syndicate in this area.
The table below provides information regarding the credit risk exposure of the Syndicate at 31 December
2024 by classifying assets according to Standard & Poor’s credit ratings (or equivalents from other
agencies) of the counterparties for assets not yet due. AAA is the highest possible rating. Assets that fall
outside the range of AAA to BBB and below are classified as speculative grade and have not been rated.
2024
AAA
AA
A
BBB
Other
Not
rated
Total
£000
£000
£000
£000
£000
£000
£000
Debt securities and other fixed income securities
115,805
247,441
219,594
38,012
3,817
-
624,669
Syndicate loans to central fund
-
-
4,918
-
-
4,918
Other investments
16,195
10,944
7,179
4,269
4,546
-
43,133
Deposits with ceding undertakings
-
-
553
-
-
-
553
Reinsurers’ share of claims outstanding
4,334
223,077
148,243
-
-
2,510
378,164
Debtors arising out of direct insurance operations
-
-
-
-
-
229,002
229,002
Debtors arising out of reinsurance operations
1,027
25,297
46,646
-
-
423
73,393
Cash at bank and in hand
-
-
11,064
-
-
-
11,064
Other debtors and accrued interest
-
-
-
-
-
17,276
17,276
Total
137,361
506,759
438,197
42,281
8,363
249,211
1,382,172
2023 (restated)*
AAA
AA
A
BBB
Other
Not
rated
Total
£000
£000
£000
£000
£000
£000
£000
Debt securities and other fixed income securities
84,803
210,438
166,093
31,195
-
-
492,529
Syndicate loans to central fund
-
-
6,358
-
-
-
6,358
Other investments
19,382
9,517
7,233
4,481
1,285
-
41,898
Deposits with ceding undertakings
-
-
587
-
-
-
587
Reinsurers’ share of claims outstanding
4,272
120,213
217,924
-
567
1,021
343,997
Debtors arising out of direct insurance operations
-
-
-
-
-
205,865
205,865
Debtors arising out of reinsurance operations
600
19,388
53,825
-
553
867
75,233
Cash at bank and in hand
-
19,099
-
-
-
19,099
Other debtors and accrued interest
-
-
-
-
-
17,332
17,332
Total
109,057
378,655
452,020
35,676
2,405
225,085
1,202,898
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
38
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
B.
Financial risk (continued)
a.
Credit risk (continued)
The HMA Ceded Reinsurance Working Group monitors all reinsurer counterparties with whom the
Syndicate conducts business and sets credit limits for the recoveries due from individual reinsurers. This
includes an analysis of the financial strength of the reinsurer, its payment performance record and
standing in the market. Thereafter, with the assistance of outside expertise, management of reinsurer
credit risk follows active and regular review of credit ratings and financial exposure to all approved
reinsurers.
Investment credit risk is managed through investment management guidelines and monitored by the HMA
Finance and Investments Committee.
The tables below show the maximum exposure to credit risk (including an analysis of financial assets
exposed to credit risk) for the components of the statement of financial position. The maximum exposure
is shown gross, before the effect of any mitigation arrangements.
vi.
Financial assets that are past due or impaired
The Syndicate has debtors arising from direct insurance and reinsurance operations that are past due but
not impaired at the reporting date.
These debtors have been individually assessed for impairment by considering information such as the
occurrence of significant changes in the counterparty's financial position, patterns of historical payment
information and disputes with counterparties.
An analysis of the carrying amounts of past due or impaired debtors is presented in the table below.
2024
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Gross
value of
impaired
assets
Impairment
allowance
Total
£000
£000
£000
£000
£000
Debt securities and other fixed income
securities
624,669
-
-
-
624,669
Syndicate loans to central fund
4,918
-
-
-
4,918
Other investments
43,133
-
-
-
43,133
Deposits with ceded undertakings
553
-
-
-
553
Reinsurers' share of claims outstanding
378,164
-
-
-
378,164
Debtors arising out of direct insurance
operations
176,441
52,561
-
-
229,002
Debtors arising out of reinsurance
operations
73,393
7,939
-
-
81,332
Other debtors and accrued interest
238,507
-
-
-
238,507
Cash at bank and in hand
11,064
-
-
-
11,064
Total
1,550,842
60,500
-
-
1,611,342
39
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
a.
Credit risk (continued)
vii.
Financial assets that are past due or impaired (continued)
2023 (restated)*
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Gross
value of
impaired
assets
Impairment
allowance
Total
£000
£000
£000
£000
£000
Debt securities and other fixed income
securities
492,529
-
-
-
492,529
Syndicate loans to central fund
6,358
-
-
-
6,358
Other investments
41,898
-
-
-
41,898
Deposits with ceded undertakings
587
-
-
587
Reinsurers' share of claims outstanding
343,997
-
-
-
343,997
Debtors arising out of direct insurance
operations
164,191
41,674
-
-
205,865
Debtors arising out of reinsurance
operations
75,233
-
-
-
75,233
Other debtors and accrued interest
204,310
-
-
-
204,310
Cash at bank and in hand
19,099
-
-
-
19,099
Total
1,348,202
41,674
-
-
1,389,876
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
The table below sets out the age analysis of financial assets that are past due but not impaired at the
balance sheet date:
Past due but not impaired
2024
0-3
months
past due
3-6
months
past due
6-12
months
past due
Greater
than 1
year past
due
Total
£000
£000
£000
£000
£000
Debtors arising out of direct insurance operations
41,208
3,528
2,406
5,419
52,561
Debtors arising out of reinsurance operations
7,939
-
-
-
7,939
Total
49,147
3,528
2,406
5,419
60,500
Past due but not impaired
2023
0-3
months
past due
3-6
months
past due
6-12
months
past due
Greater
than 1
year past
due
Total
£000
£000
£000
£000
£000
Debtors arising out of direct insurance operations
30,892
3,120
3,857
3,805
41,674
Debtors arising out of reinsurance operations
-
-
-
-
-
Total
30,892
3,120
3,857
3,805
41,674
40
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
b.
Liquidity risk
Liquidity Risk is the risk that the Syndicate, although solvent, either does not have available sufficient
financial resources to enable it to meet its obligations as they fall due or can secure such resources only
at excessive cost. In respect of catastrophic events there is also a liquidity risk associated with the timing
differences between gross cash outflows and expected reinsurance recoveries, which may be heightened
due to climate change.
viii.
Management of liquidity risk
The Syndicate is subject to calls on cash resources, mainly in respect of claims on insurance business, on
a daily basis.
HMA operates and maintains procedures designed to ensure that cash is available to settle
liabilities and other obligations when due without excessive cost to the business. The procedures set limits
for cash required to meet expected cash flows. Contingency arrangements exist to meet liquidity
requirements in extreme circumstances.
The Syndicate’s approach to managing its liquidity risk is as follows:
•
Forecasts are prepared and revised on a regular basis to predict cash outflows from insurance
contracts over the short, medium and long term;
•
The Syndicate purchases assets with durations not greater than its estimated insurance contract
outflows;
•
Assets purchased by the Syndicate are required to satisfy specified marketability requirements;
•
The Syndicate maintains cash and liquid assets to meet daily calls on its insurance contracts; and
•
The Syndicate regularly updates its contingency funding plans to ensure that adequate liquid
financial resources are in place to meet obligations as they fall due in the event of reasonably
foreseeable abnormal circumstances.
ix.
Maturity analysis of liabilities
The table below summarises the maturity profile of the Syndicate’s financial liabilities based on remaining
undiscounted contractual obligations, including interest payable, and outstanding claim liabilities based
on the estimated timing of claim payments resulting from recognised insurance liabilities. Repayments
which are subject to notice are treated as if notice were to be given immediately.
2024
No
maturity
stated
0-1 Years
1-3 Years
3-5 Years
> 5 Years
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
284,646
373,765
166,037
111,509
935,957
Creditors
84,879
57,207
104,637
-
-
246,723
Total
84,879
341,853
478,402
166,037
111,509
1,182,680
41
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
b.
Liquidity risk (continued)
ix.
Maturity analysis of liabilities (continued)
2023
No maturity
stated
0-1 Years
1-3 Years
3-5 Years
> 5 Years
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
265,454
295,162
132,190
93,555
786,361
Creditors
111,594
37,081
78,187
-
-
226,862
Total
111,594
302,535
373,349
132,190
93,555
1,013,223
C.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument or insurance contract
will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate
risk, currency risk and other price risk.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return on risk. The nature of the Syndicate exposures to
market risk and its objectives, policies and processes for managing market risk have not changed
significantly from the prior year.
i.
Management of market risks
For each of the major components of market risk the Syndicate has policies and procedures in place which
detail how each risk should be managed and monitored. The management of each of these major
components of major risk and the exposure of the Syndicate at the reporting date to each major risk are
addressed below.
ii.
Interest rate risk
Interest rate risk is the risk that the fair value and/or future cash flows of a financial instrument will
fluctuate because of changes in interest rates.
The Syndicate is exposed to interest rate risk through its investment portfolio, borrowings and cash and
cash equivalents.
The risk of changes in the fair value of these assets is managed by primarily investing in short-duration
financial investments and cash and cash equivalents. The Finance and Investment Committee monitors
the duration of these assets on a regular basis, targeting an investment portfolio duration that, in the event
of changes in interest rates, always maintains the internal capital requirements.
iii.
Currency risk
The Syndicate writes business primarily in US Dollar, Sterling, Euro, Canadian dollar and Australian dollar
and is therefore exposed to currency risk arising from fluctuations in these exchange rates.
The foreign exchange policy is to maintain assets in the currency in which the cash flows from liabilities
are to be settled in order to hedge the currency risk inherent in these contracts. The table below
summarises the carrying value of the Syndicate's assets and liabilities, at the reporting date:
42
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
iv.
Currency risk (continued)
2024
GBP
USD
EUR
CAD
AUD
Total
£000
£000
£000
£000
£000
£000
Investments
78,825
491,924
41,853
47,210
13,461
673,273
Reinsurers' share of technical provisions
58,268
418,800
18,367
5,936
6,674
508,045
Debtors
39,252
250,048
25,009
5,616
2,314
322,239
Other assets
2,434
533
3,246
-
4,851
11,064
Prepayments and accrued income
15,543
68,216
9,001
2,203
1,758
96,721
Total assets
194,322
1,229,521
97,476
60,965
29,058
1,611,342
Technical provisions
(176,999)
(919,070)
(79,515)
(52,964)
(36,292)
(1,264,840)
Creditors
(11,715)
(227,691)
(7,595)
1,054
(776)
(246,723)
Accruals and deferred income
(1,190)
(29,592)
(1,593)
(94)
(44)
(32,513)
Total liabilities
(189,904)
(1,176,353)
(88,703)
(52,004)
(37,112)
(1,544,076)
Total capital and reserves
(4,418)
(53,168)
(8,773)
(8,961)
8,054
(67,266)
2023 (restated)*
GBP
USD
EUR
CAD
AUD
Total
£000
£000
£000
£000
£000
£000
Investments
65,554
392,728
25,915
45,937
11,238
541,372
Reinsurers' share of technical provisions
89,560
337,492
13,837
6,546
7,769
455,204
Debtors
33,767
226,134
20,395
5,642
8,752
294,690
Other assets
7,047
298
9,654
-
2,100
19,099
Prepayments and accrued income
20,222
48,205
7,900
1,852
1,332
79,511
Total assets
216,150
1,004,857
77,701
59,977
31,191
1,389,876
Technical provisions
(196,427)
(733,336)
(68,216)
(41,892)
(30,457)
(1,070,328)
Creditors
(24,979)
(191,987)
(7,117)
(2,192)
(587)
(226,862)
Accruals and deferred income
(567)
(27,569)
(1,119)
(49)
(10)
(29,314)
Total liabilities
(221,973)
(952,892)
(76,452)
(44,133)
(31,054)
(1,326,504)
Total capital and reserves
5,823
(51,965)
(1,249)
(15,844)
(137)
(63,372)
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
v.
Sensitivity analysis to market risks
The analysis below is performed for reasonably possible movements in market indices on financial
instruments with all other variables held constant, showing the impact on the result before tax due to
changes in fair value of financial assets and liabilities (whose fair values are recorded in the profit and loss
account) and member’s balances.
2024
Impact on
results
2024
Impact on
member’s
balances
2023
Impact on
results
2023
Impact on
member’s
balances
£000
£000
£000
£000
Interest rate risk
Impact of 50 basis point increase on result
(7,760)
7,760
(5,803)
5,803
Impact of 50 basis point decrease on result
7,819
(7,819)
5,862
(5,862)
43
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
v.
Sensitivity analysis to market risks (continued)
A 10% increase (or decrease) in exchange rates, 5% increase (or decrease) in equity prices and a 50-basis
point increase (or decrease) in yield curves have been selected on the basis that these are considered to
be reasonably possible changes in these risk variables over the following year.
The sensitivity analysis demonstrates the effect of a change in a key variable while other assumptions
remain unchanged. However, the occurrence of a change in a single market factor may lead to changes in
other market factors as a result of correlations.
The sensitivity analyses do not take into consideration that the Syndicate's financial investments are
actively managed. Additionally, the sensitivity analysis is based on the Syndicate's financial position at the
reporting date and may vary at the time that any actual market movement occurs. As investment markets
move past pre-determined trigger points, action would be taken which would alter the Syndicate's
position.
D.
Capital management
i.
Capital framework at Lloyd's
The Society of Lloyd's (Lloyd's) is a regulated undertaking and subject to supervision by the Prudential
Regulatory Authority (PRA) under the Financial Services and Markets Act 2000, and in accordance with the
Solvency II Framework (“Solvency II”.
Within this supervisory framework, Lloyd's applies capital requirements at member level and centrally to
ensure that Lloyd's would comply with the Solvency II requirements, and beyond that to meet its own
financial strength, licence and ratings objectives.
Although, as described below, Lloyd's capital setting processes use a capital requirement set at syndicate
level as a starting point, the requirement to meet Solvency II and Lloyd's capital requirements apply at
overall and member level only respectively, not at syndicate level. Accordingly, the capital requirement in
respect of Syndicate 4000 is not disclosed in these financial statements.
ii.
Lloyd’s capital setting process
To meet Lloyd's requirements, each Syndicate is required to calculate its Solvency Capital Requirement
(SCR) for the prospective underwriting year. This amount must be sufficient to cover a 1 in 200-year loss,
reflecting uncertainty in the ultimate run-off of underwriting liabilities (SCR ‘to ultimate'). Each Syndicate
must also calculate its SCR at the same confidence level but reflecting uncertainty over a one-year time
horizon (one year SCR) for Lloyd's to use in meeting Solvency II requirements. The SCRs of each Syndicate
are subject to review by Lloyd's and approval by the Lloyd's Capital and Planning Group.
A syndicate may be comprised of one or more underwriting members of Lloyd's. Each member is liable for
its own share of underwriting liabilities on the Syndicates on which it is participating but not other
members' shares. Accordingly, the capital requirements that Lloyd's sets for each member operates on a
similar basis. Each member's SCR shall thus be determined by the sum of the member's share of the
Syndicate SCR ‘to ultimate'.
Where a member participates on more than one syndicate, a credit for diversification is provided to reflect
the spread of risk, but consistent with determining an SCR which reflects the capital requirement to cover
a 1 in 200 loss ‘to ultimate' for that member.
44
NOTES TO THE FINANCIAL STATEMENTS
4.
Risk and capital management (continued)
D.
Capital Management (continued)
iii.
Lloyd’s capital setting process (continued)
Over and above this, Lloyd's applies a capital uplift to the member's capital requirement, known as the
Economic Capital Assessment (ECA). The purpose of this uplift, which is a Lloyd's not a Solvency II
requirement, is to meet Lloyd's financial strength, licence and ratings objectives. The capital uplift applied
for 2024 was 35% (2023: 35%) of the member's SCR ‘to ultimate'.
iv.
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd's specifically for
that member (FAL), assets held and managed within a syndicate (FIS), or as the member's share of the
members' balances on each syndicate on which it participates.
Accordingly, all of the assets less liabilities of the Syndicate, as represented in the member’s balances
reported on the balance sheet on page 20, represent resources available to meet members' and Lloyd's
capital requirements.
E.
Regulatory Risk
HMA and the Syndicate has a risk averse appetite towards all forms of non-compliance with laws and
regulations. There is particularly averse appetite towards non-compliance with laws and regulations
arising from the conduct of business, conduct towards our customers, regulatory oversight and approvals
of our business model and structure.
HMA is required to comply with the requirements of the Prudential Regulation Authority, the Financial
Conduct Authority and Lloyd’s.
Lloyd’s requirements include those imposed on the Lloyd’s market by
overseas regulators. Regulatory risk is the risk of loss owing to a breach of regulatory requirements or
failure to respond to regulatory change. HMA has a Compliance Officer, who monitors regulatory
developments and assesses the impact on HMA policy. HMA also carries out a compliance-monitoring
programme as documented in the Compliance Framework. Additional consideration has been given to
compliance with climate and sustainability-related legislation, with monitoring of the regulatory landscape
ongoing.
F.
Operational Risk
The Syndicate is potentially exposed to direct or indirect losses resulting from inadequate or failed internal
processes, systems, or people, or from external events. HMA and the Syndicate has a risk averse appetite
to operational risk.
HMA seeks to manage this risk with detailed procedure manuals and policies set out standards and
expectations for operational activities. The structured programme of testing of processes and systems by
internal audit also aims to determine adequate levels of operational continuity and resilience.
G.
Climate Change Risk
The Syndicate and HMA has a risk averse appetite towards negative financial impacts of climate change
on our strategic objectives. Negative financial impacts may arise from all three of the key subcategories of
climate risk, namely physical, transition and liability. Furthermore, operational disruptions may also arise
from the consequences of physical climate risk. HMA undertakes and embeds assessments of the
Syndicate’s exposure to climate change risk to the broad suite of risk categories. HMA does not believe
that these financial statements are subject to material uncertainty arising from climate change risk.
45
NOTES TO THE FINANCIAL STATEMENTS
5.
Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
2024
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Direct insurance
Accident and health
60,633
56,487
(31,957)
(21,841)
(2,557)
132
Motor (other classes)
857
294
(249)
(82)
(22)
(59)
Marine, aviation, and
transport
37,272
35,405
(19,290)
(10,229)
(3,960)
1,926
Fire and other damage to
property
96,757
92,799
(33,885)
(28,312)
(21,508)
9,094
Third party liability
229,538
207,866
(137,306)
(58,751)
(9,192)
2,617
Credit and suretyship
12,382
12,508
(2,315)
(4,503)
(1,872)
3,818
Miscellaneous
7,378
8,413
(8,477)
(2,040)
1,045
(1,059)
Total Direct Business
444,817
413,772
(233,479)
(125,758)
(38,066)
16,469
Reinsurance acceptances
173,530
159,455
(108,181)
(46,085)
(61)
5,128
Total Reinsurance
accepted
173,530
159,455
(108,181)
(46,085)
(61)
5,128
Total
618,347
573,227
(341,660)
(171,843)
(38,127)
21,597
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the
classification of the above segments into the Lloyd’s aggregate classes of business:
2024
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Additional analysis
Fire and damage to property of which is:
Specialities
21,236
23,265
(1,574)
(8,282)
(11,384)
2,025
Energy
(7)
(7)
78
-
3
74
Third party liability of which
is:
Energy
-
-
-
-
-
-
46
NOTES TO THE FINANCIAL STATEMENTS
5.
Analysis of underwriting result (continued)
2023
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Direct insurance
Accident and health
54,341
47,575
(18,631)
(20,349)
(7,957)
638
Motor (other classes)
11
14
(7)
-
(5)
2
Marine, aviation, and
transport
33,843
25,760
(17,032)
(6,978)
(142)
1,608
Fire and other damage to
property
81,053
70,976
(18,983)
(28,275)
(14,563)
9,155
Third party liability
221,451
199,710
(99,312)
(53,635)
(41,874)
4,889
Credit and suretyship
15,415
14,610
(8,784)
(3,913)
(1,659)
254
Miscellaneous
8,367
7,226
(5,352)
(1,332)
2,739
3,281
Total Direct Business
414,481
365,871
(168,101)
(114,482)
(63,461)
19,827
Reinsurance acceptances
130,953
120,898
(81,779)
(34,481)
1,972
6,610
Total Reinsurance accepted
130,953
120,898
(81,779)
(34,481)
1,972
6,610
Total
545,434
486,769
(249,880)
(148,963)
(61,489)
26,437
2023
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Additional analysis
Fire and damage to property of which is:
Specialities
22,835
20,453
(5,470)
(8,574)
(3,693)
2,716
Energy
(5)
(5)
131
-
(1)
125
Third party liability of which is:
Energy
-
-
-
-
-
-
The reinsurance balance is the aggregate total of all those items in the technical account which relate to
outwards reinsurance transactions including items recorded as
reinsurance commission and profit
participations. All premiums were concluded in the UK.
The gross premiums written for direct insurance by destination of risk is presented in the table below:
2024
2023
£000
£000
United Kingdom
169,212
141,279
European Union Member States
49,663
44,507
US
285,537
237,986
Rest of the world
113,935
121,662
Total gross premiums written
618,347
545,434
47
NOTES TO THE FINANCIAL STATEMENTS
6.
Net operating expenses
2024
2023
£000
£000
Acquisition costs
157,493
137,224
Change in deferred acquisition costs
(15,348)
(15,295)
Administrative expenses
19,430
18,090
Members’ standard personal expenses
10,269
8,943
Reinsurance commissions and profit participation
(39,836)
(30,643)
Net operating expenses
132,008
118,319
Total commissions for direct insurance business for the year amounted to:
2024
2023
£000
£000
Total commission for direct insurance business
108,351
95,741
Administrative expenses include:
2024
2023
£000
£000
Auditors’ remuneration:
fees payable to the Syndicate's auditor for the audit of these financial
statements
388
341
fees payable to the Syndicate's auditor and its associates in respect of other
services pursuant to legislation
241
213
7.
Key management personnel compensation
The directors of Hamilton Managing Agency Limited received the following aggregate remuneration
charged to the Syndicate and included within net operating expenses:
2024
2023
£000
£000
Directors' Emoluments
790
548
Total
790
548
This excludes a number of deferred awards which vested during the year, which would have been partially
charged to the Syndicate (in this and prior years). No other director related compensation or amounts
considered to represent key management personnel compensation was charged to the Syndicate.
The active underwriter received the following aggregate remuneration charged to the Syndicate.
2024
2023
£000
£000
Emoluments
676
714
48
NOTES TO THE FINANCIAL STATEMENTS
8.
Staff numbers and costs
All staff in the UK were employed by Hamilton UK Services Limited. The average number of employees
employed by the UK service company in the UK but working for the Syndicate during the year was as
follows:
2024
2023
Number
Number
Administration and finance
34
42
Underwriting
129
140
Claims
22
19
Compliance
34
35
Other
49
57
Total
268
293
The following amounts were recharged to the Syndicate in respect of salary costs:
2024
2023
£000
£000
Wages and salaries
21,951
21,348
Social security costs
2,767
2,826
Other pension costs
1,860
1,527
Other
221
259
Total
26,799
25,960
In addition, staff costs of £3.12m were recharged to the Syndicate from other Group locations (2023:
£3.25m).
9.
Investment return
2024
2023
£000
£000
£0
Interest and similar income
From financial instruments designated at fair value through profit or loss
Interest and similar income
20,614
13,190
Interest on cash at bank
3,744
3,849
Other income from investments
From financial instruments designated at fair value through profit or loss
Gains on the realisation of investments
1,971
474
Losses on the realisation of investments
(952)
(895)
Unrealised gains on investments
2,029
11,136
Unrealised losses on the investments
(1,872)
(2,085)
Investment management expenses
(509)
(389)
Total investment return
25,025
25,280
Transferred to the technical account from the non-technical account
25,025
25,280
49
NOTES TO THE FINANCIAL STATEMENTS
10.
Financial investments
Carrying value
Cost
2024
2023
(restated)*
2024
2023
(restated)*
£000
£000
£000
£000
Shares and other variable yield securities and units in unit
trusts
554,007
428,173
556,637
432,242
Debt securities and other fixed income securities
70,662
64,356
70,662
64,356
Syndicate
loans t
o central fund
4,918
6,358
4,918
6,358
Other investments
43,686
42,485
43,686
42,485
Total financial investments
673,273
541,372
675,903
545,441
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
The table below presents an analysis of financial investments by their measurement classification.
2024
2023
Financial assets measured at fair value through profit or loss
673,273
541,372
The Syndicate classifies its financial instruments held at fair value in its balance sheet using a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
•
Level 1
- Included in the level 1 category are financial assets that are measured by reference to
published quotes in an active market. A financial instrument is regarded as quoted in an active market
if quoted prices are readily and regularly available from an exchange, dealer, broker, industry
syndicate, pricing service or regulatory agency and those prices represent actual and regularly
occurring market transactions on an arm’s length basis.
•
Level 2
- Included in the level 2 category are financial assets measured using a valuation technique
based on assumptions that are supported by prices from observable current market transactions. For
example, assets for which pricing is obtained via pricing services but where prices have not been
determined in an active market, financial assets with fair values based on broker quotes, investments
in private equity funds with fair values obtained via fund managers and assets that are valued using the
Syndicate’s own models whereby the significant inputs into the assumptions are market observable.
•
Level 3
- Included in the level 3 category are financial assets measured using a valuation technique
(model) based on assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data. Therefore,
observable inputs reflect the Syndicate’s own assumptions about the assumptions that market
participants would use in pricing the asset. These inputs are developed based on the best information
available, which might include the Syndicate’s own data.
The table below analyses financial instruments held at fair value in the Syndicate's balance sheet at the
reporting date by its level in the fair value hierarchy.
50
NOTES TO THE FINANCIAL STATEMENTS
10.
Financial investments (continued)
2024
Level 1
Level 2
Level 3
Assets
held at
amortised
cost
Total
£000
£000
£000
£000
£000
Shares and other variable yield securities and units
in unit trusts
70,662
-
-
-
70,662
Debt securities and other fixed income securities
-
550,761
3,246
-
554,007
Syndicate loans to central fund
-
-
4,918
-
4,918
Other investments
9,496
34,190
-
-
43,686
Total financial Investments
80,158
584,951
8,164
-
673,273
2023 (restated)*
Level 1
Level 2
Level 3
Assets
held at
amortised
cost
Total
£000
£000
£000
£000
£000
Shares and other variable yield securities and units
in unit trusts
64,356
-
-
-
64,356
Debt securities and other fixed income securities
-
428,173
-
-
428,173
Syndicate loans to central fund
-
-
6,358
-
6,358
Other investments
12,407
30,078
-
-
42,485
Total financial Investments
76,763
458,251
6,358
-
541,372
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
Other assets comprise overseas deposits which are lodged as a condition of conducting underwriting
business in certain countries, and deposits with ceded undertakings representing cash held to service
business written through Lloyd’s Brussels.
The level 3 assets are loans provided by the Syndicate to the Lloyd’s Central Fund and are carried at fair
value using information provided by Lloyd’s. These instruments are not tradeable, and their valuation
includes significant unobservable inputs.
Information on the methods and assumptions used to determine fair values for each major category of
financial instrument measured at fair value is provided below.
Debt securities are generally valued using prices provided by external pricing vendors. Pricing vendors will
often determine prices by consolidating prices of recent trades for identical or similar securities obtained
from a panel of market makers into a composite price.
The pricing service may make adjustments for the elapsed time from a trade date to the valuation date to
take into account available market information. Lacking recently reported trades, pricing vendors will use
modelling techniques to determine a security price.
Some government and supranational securities are listed on recognised exchanges and are generally
classified as level 1 in the fair value hierarchy.
51
NOTES TO THE FINANCIAL STATEMENTS
10.
Financial investments (continued)
Those that are not listed on a recognised exchange are generally based on composite prices of recent
trades in the same instrument and are generally classified as level 2 in the fair value hierarchy.
Corporate bonds, including asset backed securities, that are not listed on a recognised exchange or are
traded in an established over-the-counter market are also mainly valued using composite prices. Where
prices are based on multiple quotes and those quotes are based on actual recent transactions in the same
instrument the securities are classified as level 2, otherwise they are classified as level 3 in the fair value
hierarchy.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using valuation
techniques based on observable market data. All of the investments categorised as Level 3 are fair valued
based on the inputs to the valuation technique used.
11.
Debtors arising out of direct insurance operations
2024
2023
£000
£000
Due within one year
199,864
175,471
Due after one year
29,138
30,394
Total
229,002
205,865
12.
Debtors arising out of reinsurance operations
2024
2023
(restated)*
£000
£000
Due within one year
72,813
67,555
Due after one year
8,519
7,678
Total
81,332
75,233
* The 2023 comparatives have been restated. Refer to Note 1 – Basis of preparation for further details.
13.
Other debtors
2024
2023
£000
£000
Consortia fees receivable
4,688
4,349
Undistributed profits
4,597
5,259
Overseas taxes
2,609
3,050
Sundry
11
934
Total
11,905
13,592
52
NOTES TO THE FINANCIAL STATEMENTS
14.
Deferred acquisition costs
The table below shows changes in deferred acquisition costs assets from the beginning of the period to the
end of the period.
2024
2023
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£000
£000
£000
£000
£000
£000
Balance at 1 January
75,771
(22,685)
53,086
62,877
(18,032)
44,845
Incurred deferred acquisition
costs
157,493
(43,370)
114,123
137,224
(36,224)
101,000
Amortised deferred acquisition
costs
(142,145)
39,836
(102,309)
(121,929)
30,643
(91,286)
Foreign exchange movements
231
(266)
(35)
(2,401)
928
(1,473)
Other
-
-
-
-
-
-
Total
91,350
(26,485)
64,865
75,771
(22,685)
53,086
15.
Claims development
The following tables illustrate the development of the estimates of earned ultimate cumulative claims
incurred, including claims notified and IBNR, for each successive underwriting year, illustrating how amounts
estimated have changed from the first estimates made. The table illustrates the most recent seven
underwriting years. This includes the full history for Syndicate S3334’s 2018 & 2019 underwriting years of
accounts.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts reported
for the end of the underwriting year to one year later as a large proportion of premiums are earned in the year
of account's second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all cases.
Gross claims development:
Pure underwriting
year
2018
2019
2020
2021
2022
2023
2024
Total at 31
December
2024
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of gross
claims at the end of
the underwriting year
one year later
47,707
126,170
112,460
102,518
108,078
133,400
194,208
two years later
105,939
242,983
244,633
242,275
240,955
278,678
three years later
112,548
283,906
248,281
224,868
276,740
four years later
129,168
296,688
243,681
221,275
five years later
142,188
293,277
244,080
six years later
148,891
281,045
seven years later
145,359
Estimate of gross
claims reserve
145,359
281,045
244,080
221,275
276,740
278,678
194,208
1,641,385
Provision in respect of
prior years
31,766
Less: gross claims
paid
(122,770)
(225,868)
(157,051)
(100,570)
(81,196)
(41,686)
(8,053)
(737,194)
Gross claims reserve
22,589
55,177
87,029
120,705
195,544
236,992
186,155
935,957
53
NOTES TO THE FINANCIAL STATEMENTS
15.
Claims development (continued)
Net Claims Development
Pure underwriting
year
2018
2019
2020
2021
2022
2023
2024
Total at 31
December
2023
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of gross
claims at the end of
the underwriting
year
one year later
37,553
98,733
71,187
65,255
62,474
82,107
108,976
two years later
79,408
193,851
144,837
131,619
142,692
170,605
three years later
52,688
203,107
147,459
131,237
161,606
four years later
47,639
202,368
141,913
129,570
five years later
72,885
192,588
142,757
six years later
77,615
187,010
seven years later
77,388
Estimate of net
claims reserve
77,388
187,010
142,757
129,570
161,606
170,605
108,976
977,912
Provision in respect
of prior years
10,294
Less: net claims
paid
(64,755)
(150,371)
(80,784)
(46,101)
(54,852)
(27,199)
(6,351)
(430,413)
Net claims reserve
12,633
36,639
61,973
83,469
106,754
143,406
102,625
557,793
16.
Technical provisions
The table below shows changes in the insurance contract liabilities and assets from the beginning of the
period to the end of the period.
Loss Reserves
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Balance at 1 January
786,361
(343,997)
442,364
738,807
(358,660)
380,147
Claims paid during the year
(195,777)
85,888
(109,889)
(172,436)
76,613
(95,823)
Expected cost of current year claims
344,997
(132,953)
212,044
272,675
(107,111)
165,564
Change in estimates of prior year
provisions
(3,337)
1,446
(1,891)
(22,795)
10,855
(11,940)
Foreign exchange movements
3,713
519
4,232
(29,890)
19,038
(10,852)
Other
-
10,933
10,933
-
15,268
15,268
Closing balance
935,957
(378,164)
557,793
786,361
(343,997)
442,364
Other relates to the settlement of intra-group quota share arrangements.
54
NOTES TO THE FINANCIAL STATEMENTS
16.
Technical provisions (continued)
Unearned Premiums
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Balance at 1 January
283,967
(111,207)
172,760
235,637
(90,436)
145,201
Premiums written during the
year
618,347
(227,407)
390,940
545,434
(213,658)
331,776
Premiums earned during the
year
(573,227)
209,469
(363,758)
(486,768)
188,389
(298,379)
Foreign exchange movements
(204)
(736)
(940)
(10,336)
4,498
(5,838)
Other
-
-
-
-
-
-
Closing balance
328,883
(129,881)
199,002
283,967
(111,207)
172,760
Refer to Note 4 for the sensitivity analysis performed over the value of insurance liabilities, disclosed in the
accounts, to potential movements in the assumptions applied within the technical provisions.
17.
Creditors arising out of direct insurance operations
2024
2023
£000
£000
Due within one year
25,460
15,304
Due after one year
-
257
Total
25,460
15,561
18.
Creditors arising out of reinsurance operations
2024
2023
£000
£000
Due within one year
96,785
108,126
Due after one year
109,586
89,163
Total
206,371
197,289
19.
Other creditors
2024
2023
£000
£000
Other related party balances (non-syndicates)
9,521
5,935
Other liabilities
5,371
8,077
Total
14,892
14,012
Other liabilities above is comprised of:
2024
2023
£000
£000
Funds withheld balances
5,026
7,978
Sundry
345
99
Total
5,371
8,077
55
NOTES TO THE FINANCIAL STATEMENTS
20.
Accruals & deferred income
2024
2023
£000
£000
Reinsurance ceded commissions
26,485
22,685
Other accruals & deferred income
6,028
6,629
Total accruals and deferred income
32,513
29,314
21.
Cash and cash equivalents
2024
2023
£000
£000
Cash at bank and in hand
11,064
19,099
Short term debt instruments presented within other financial investments
70,662
64,356
Total cash and cash equivalents
81,726
83,455
Only deposits with credit institutions with maturities of three months or less that are used by the Syndicate
in the management of its short-term commitments are included in cash and cash equivalents.
Of the total cash and cash equivalents, the following amount was held in regulated bank accounts in
overseas jurisdictions:
2024
2023
£000
£000
Cash and cash equivalents held in regulated accounts
50,001
56,123
22.
Analysis of net debt
At 1 January
2024
Cash flows
Fair value and
exchange
movements
At 31
December
2024
£000
£000
£000
£000
Cash and cash equivalents
19,099
(7,452)
(583)
11,064
Other
64,356
6,306
-
70,662
Total
83,455
(1,146)
(583)
81,726
At 1 January
2023
Cash flows
Fair value and
exchange
movements
At 31
December
2023
£000
£000
£000
£000
Cash and cash equivalents
57,785
(35,051)
(3,635)
19,099
Other
54,171
10,185
-
64,356
Total
111,956
(24,866)
(3,635)
83,455
56
NOTES TO THE FINANCIAL STATEMENTS
23.
Related parties
Managing Agent
The Syndicate is managed by Hamilton Managing Agency Limited (“HMA”). The immediate parent company
of HMA is Hamilton UK Holdings Limited.
Syndicate 1947
The Syndicate manages Space consortia whose partners include Syndicate 1947, which is also managed by
HMA. The management fees charged to Syndicate 1947 during the year were £0.2m (2023: £0.3m), with no
balances outstanding at year end (2023: nil).
Ada Re, Ltd
In 2020, the Hamilton Group established Ada Capital Management Limited, an insurance agent incorporated
and regulated in Bermuda, which is authorised to underwrite on behalf of Ada Re, Ltd. Ada Re, Ltd is a special
purpose insurer funded by third party investors and formed to provide fully collateralised reinsurance and
retrocession to both the Hamilton Group and third party cedents. Business ceded to Ada Re by the Syndicate
was as follows for the years ended 31 December 2024 and 2023:
2024
2023
£000
£000
Outward reinsurance premiums, net of acquisition costs
125
191
Reinsurers’ share of claims incurred
50
81
Syndicate 6125
The Syndicate ceded business by way of variable rate quota share arrangements to Syndicate 6125, which
was also managed by HMA until its closure on 31 December 2022. The creditor balance relating to this
arrangement at 31 December 2022 was £13.3m, and the debtor balance £17.2m. These balances were
settled as part of the final loss distribution process of Syndicate 6125 in June 2023.
Capital
Capital to support the underwriting of the Syndicate is provided by HCM.
24.
Off-balance sheet items
The Syndicate has not been a party to any arrangements which are not reflected in its Statement of Financial
Position, where material risks and benefits arise to the Syndicate.
25.
Post balance sheet events
The 2022 year of account closed with a profit of £40.6m. In line with the closed year process in the Lloyd’s
market this profit will be settled to the corporate member in April 2025. The profit will be settled in US Dollars,
being the currency of the capital provided by the corporate member, the amount being $51.0m.
57
NOTES TO THE FINANCIAL STATEMENTS
26.
Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions:
2024
2023
Start of
period rate
End of period
rate
Average rate
Start of
period rate
End of period
rate
Average rate
GBP
EUR
USD
CAD
AUD
27.
Funds at Lloyd's
Every member is required to hold capital at Lloyd's which is held in trust and known as Funds at Lloyd's
(‘FAL'). These funds are intended primarily to cover circumstances where Syndicate assets prove insufficient
to meet participating members' underwriting liabilities. The level of FAL that Lloyd's requires a member to
maintain is determined by Lloyd's based on Prudential Regulatory Authority requirements and resource
criteria. The determination of FAL has regard to a number of factors including the nature and amount of risk
to be underwritten by the member and the assessment of the reserving risk in respect of business that has
been underwritten. Since FAL is not under the management of the Managing Agent, no amount has been
shown in these Financial Statements by way of such capital resources. However, the Managing Agent is able
to make a call on the Member's FAL to meet liquidity requirements or to settle losses.