concise annual report · 1) excludes victorian storms and melbourne hailstorm 2) includes september...

Assetinsure Pty LimitedABN 65 066 463 80331 December 2011

ConCise AnnuAl RepoRt

2011 Financial Year Results

Assetinsure’s 2011 result was a profit after

tax of $4.3m (2010: $4.9m). While this

does represent a slight drop in profit com-

pared to the prior year, we regard it as a creditable

outcome given the series of catastrophe events

that occurred during the year. The comparatively

small reduction in profit in a year that was so

heavily affected by major catastrophes is a strong

endorsement of our business model and the pro-

gress being made by the Company in improving

operational resilience and volatility management.

The 2011 result benefited from a number of

factors that reduced the impact on profits of the

catastrophe events:

• With improving product diversification, only

60% of our business has ‘natural perils’ expo-

sure.

• Assetinsure,throughcarefulmanagement,has

largely avoided accepting natural perils expo-

sure in Far North Queensland, New Zealand

and in flood exposed areas.

• TheCompany’sprudentapproachtounderwrit-

ing has helped avoid business with poor margins

even in the absence of natural peril events.

• Ourbusinessalsocontinuestoincludearein-

surance run-off and an IT services business,

activities which were not affected by the 2011

year events.

Increasing Diversity and Business Scale

The Company is reaping the benefit of the

strategies and product initiatives that have been

implemented in the last three years since the global

financial crisis.Akey elementof these strategies

has been the establishment of the ‘partnership’

businesses. Through these arrangements, Asset-

insure acts as managing general agent on behalf

of certain highly rated international reinsurers.

Astheagent,Assetinsuresourcesandunderwrites

the business and manages all claims. The reinsur-

ance partner provides both their credit rating and

capacity. The interests of both parties are fully

alignedasAssetinsurealsoinsuresaportionofthe

riskthroughitsreinsurancelines.

The partnership businesses cover:

• Surety

• GeneralAviation

• ProfessionalIndemnity

• CreditEnhancement.

These partnership arrangements have been

instrumental in liftingAssetinsure’s market pro-

file, notably in situations where broker or client

policy mandates that a credit rating is required. In

particular,theSuretyandAviationbusinesseshave

hadimpressivesuccessestablishingstrongmarket

positions in these specialist segments by delivering

genuine value to our customer base.

PROMISING PROSPECTSWe expect the current soft market conditions will improve. Through increased product and geographical diversification, Assetinsure is well positioned to benefit. p.3.

WEATHERING THE STORMAt $4.3m after tax, profit for 2011 was down 12% on the previous year, a creditable result given the highly adverse trading conditions. Financial results p.20.

E X E C U T I V E

M A N A G E M E N T

R E P O R T

MANAGEMENT

Product Diversity Increasing

Partnership Business Fuels Growth

Solvency Strong: 2.1 Times APRA Min.

Product Innovation to Continue in 2012

Peter Wedgwood, CEO Gregor Pfitzer, COO Hamish Lilly, CFO

This issue

The Magazine of Assetinsure Management

Financial Performance Resilient in Catastrophe YearStrong Endorsement of Business Model

This report documents the financial results for the 2011 financialyearforAssetinsurePtyLimited(‘Assetinsure’)along

withtheCompany’soutlookforthe2012year.

Assetinsure: Year in Review

AssetinsurePtyLimitedConciseAnnualReport | 31 December 2011 | 1

···· ····

AssetinsurePtyLimitedConciseAnnualReport | 31 December 2011 | 32 | 31 December 2011 | AssetinsurePtyLimitedConciseAnnualReport

The Company has also been developing the

business itwriteson itsownAssetinsure

paper. The main operation of this busi-

ness is providing support to underwriting agen-

ciesthatcaterfordistinctnichemarkets.Indoing

so,Assetinsureisassistingseasonedprofessionals

todeveloptheirbusinessesandmakeuseoftheir

networks and relationships. In order to deliver

sustainablesolutionstoallstakeholdersinvolved,

a highly transparent business approach is adopted,

supported by Assetinsure’s IT systems. Further

detailisprovidedundertheProductLinessection

on page 9 .

Grosswrittenpremiumfrombusinesswritten

by the Company, either directly or as inwards rein-

surance, in 2011 was $50.9m (2010: $57.0m). This

reduction in turnover resulted from Assetinsure

exiting a line of motor business that was generat-

ing over $10m of gross premium but which was

unprofitable. However, when combined with the

gross premium generated by the underwriting

agency business, the overall gross written pre-

mium generated by Assetinsure in 2011 totalled

$90.6m (2010: $83.9m). This is an 8% increase on

the previous year but an effective growth rate of

23%whentakingthemotorbusinesswithdrawal

into account.

OtherMainDevelopmentsOvertheLast12Months

Assetinsure delivers IT services to a number

of general insurers, reinsurers and underwriting

agencies by providing them with the Company’s

modern insurance administration system and

support. This provides cost effective insurance

systems solutions to the Company’s clients but

alsogeneratescostsynergiesforAssetinsure.

In 2011 the reinsurance run-off business con-

tinuedtoperformwell.Assetinsurehashonoured

all its reinsurance contracts previously underwrit-

ten to policyholders. Within the scope of the

underlying arrangements, claims continue to be

managed in a proactive manner. Recurring re-

viewsoftheentireclaimsportfolioareundertaken

ensuring reserves are adequate and opportunities

to settle claims are pursued. The overall claims de-

velopmentofthisbookhasbeenquitefavourable.

After nearly eight years in run-off, the active

claims count in the reinsurance run-off has re-

duced to about 15% of what it was at the time the

CompanywasacquiredfromGerlingGLOBALRe

in 2003. The reinsurance run-off still requires on-

going management attention given the overall size

oftheclaimsportfolio.OvertheyearsAssetinsure

has been able to transfer experienced administra-

tion and claims staff from the reinsurance run-off

into the direct insurance business reducing the

need to increase overall staffing levels.

Despite the reinsurance run-off continuing to

perform, the decrease in interest rates over the

2011 year substantially reduced the level of dis-

count applied to our outstanding claims reserves

at year end. This reduction had to be recognised

as an expense. Fortunately, the expense burden

from this economic factor was more than offset by

theprofitgeneratedfromthesaleandlease-back

enteredintoduringtheyearforour44PittStreet,

Sydney, office building. Details of these counter-

balancing effects are covered in the discussion

and analysis of the statement of comprehensive

income section of this concise financial report.

Strong Solvency Assetinsure, as a locally licensed entity, meets

therequirementssetbytheAustralianPrudential

Regulation Authority (APRA) on an ongoing

basis.

As at 31 December 2011 the Company’s sol-

vencyisstrongandstoodat2.10timestheAPRA

minimum capital requirement (2010: 2.09). On

the basis of industry data published regularly by

APRA,thisplacesAssetinsure’ssolvencyabovethe

level maintained by many of our peers.Assetin-

sure’sincreasedsolvencyratioisinstarkcontrast

to the industry trend of reducing solvency ratios

that has been a feature of the 2011 year with its

catastrophe events.

Importantly, Assetinsure has the benefit of a

very sound funding structure at operating and

holding company levels. The operating company,

AssetinsurePtyLtd,hasnodebtwhilstthehold-

ing company has only $5m of subordinated debt.

No repayments are due until late 2014. This

subordinated debt is partially allowable as a Tier 2

equityinstrumentforAPRAsolvencycalculation

purposes. Consequently, the Company can con-

tinue to expand its direct insurance business in

the coming years without the need for additional

capital input.

PromisingProspectsfortheCurrent Year

In 2012 we expect to capture and implement

further business development opportunities

across both our partnership and own portfolio

businesses. Having witnessed highly competitive

marketconditionsinallcommerciallinesin2011,

we anticipate that more favourable trading condi-

tionswilldevelopas themarket responds to the

catastrophic peril events that have impacted on

the industry’s loss experience.

With increasing evidence of higher claims

severity and claims frequency in casualty classes

and indisputable evidence of losses resulting

from natural perils, market conditions need to

change.Asaconsequence,weexpect thecurrent

softmarketconditionswillimprove.Throughin-

creased product and geographical diversification,

Assetinsureiswellpositionedtobenefitfromthis

global trend.

Although Assetinsure did feel the impact of

the 2011 year catastrophe events, it is worth high-

lighting that despite the Company’s conservative

risk retentions it has not made a claim on its

catastrophe reinsurance programme since direct

underwriting activities commenced in 2004.

With the renewal of our reinsurance programme

beingeffectedasat1April2012,weare reaping

the benefits of this prudent approach to exposure

management.

We also expect other income to increase in

2012 as the scope and depth of the IT services

we provide to third parties expands. In addition,

we expect a contribution from Assetsecure Pty

Limited in 2012 (refer Subsidiary and Associate

Businesses section on page 11).

6,000

5,000

4,000

3,000

2,000

1,000

02009 2010 2011

AU

D M

illio

n

After Tax Profit

After Tax Profit

2009 2010 2011

2.12

2.10

2.08

2.05

2.04

2.02

2.00

1.98

Capital Coverage Ratio

Capital Coverage Ratio

100,00090,00080,00070,00060,00050,00040,00030,00020,00010,000

02009 2010 2011

AU

D M

illio

n

Gross Written Premium

Gross Written Premium

30

25

20

15

10

5

0

Industry Losses from Catastrophesin Worst Years (All in 2011 Values)

1974

TropicalCyclone Tracy

1989

NewcastleEarthquake

1999

Sydney Hail Storm

2011

Queensland floods1)

Tropical Cyclone YasiChristchurch Earthquake2)

AU

D B

illio

n

1) Excludes Victorian storms and Melbourne hailstorm2) Includes September 2010 (Darfield) and March 2011 (Lyttleton) events only; does not

include Christchurch events in June and December 2011

Year of Disaster

Source: AonBenfield Catastrophe Benchmarking Report September 2011 including updates per 30.4.2012

E X E C U T I V E M A N A G E M E N T R E P O R T···· ····E X E C U T I V E M A N A G E M E N T R E P O R T···· ····


Experienced Industry Operatives

Join AssetinsureLombard Joint

Venture Pays OffFlexible Alternatives

to Bank FinanceConstruction &

Infrastructure Bond Demand Strong

Riding the Boom Strong Prospects for Mining Rehabilitation Bonds

Lakmali PanambalanaSenior Underwriter

George TasevskiSenior Underwriter

Andrew CalvertHead of Surety

Issue 1 2012

OurProfileasaSpecialistInsurer

From inception,Assetinsure has concentrated

on organic growth and has not acquired busi-

nesses which normally involve significant invest-

mentsingoodwill.Ourprimestrategyinthespe-

cialist product classes is to differentiate ourselves

through product innovation and service.

Being a Specialist Insurer involves a number of

features:

• Assetinsureoffers a selectnumberofproduct

lines. Our focus is on companies, financial

institutions, and professionals and the protec-

tion of their professional liabilities, assets and

someoftheircreditrisks.Ourproductfocusis

sharper and the underwriting standards stricter

than would normally apply in a multi-line and

multi-state based company.

• Assetinsure employs staff with considerable

experience in their respective product areas.

These professionals can assess and underwrite

risk appropriately. Staff attrition has been

minimal.

• Assetinsure’s smaller size and lean structure

allows the Company to capture opportunities

and react quickly to market developments.

Assetinsureisnotheldbackbylargecorporate

bureaucracies and systems inflexibility. There is

also the development and establishment of in-

novativeproductswhichonlyAssetinsurehave

been able to deliver (e.g. Assetinsure’s Credit

EnhancementPolicyfortradereceivables,Em-

ployeeEntitlementsandMiningRehabilitation

Bonds provide evidence of this).

• To contain complexity costs, Assetinsure has

no overlaps when touching the market in its

chosen product areas. The underwriting agen-

cies the Company supports operate on the basis

ofproduct/marketexclusivity.Thisavoids the

channel conflicts that characterise the opera-

tions of many of our peers.

Assetinsure’ssmallersizeandleanstructureallowstheCompanytocaptureopportunitiesandreactquicklyto

marketdevelopments.Assetinsureisnotheldbackbylargecorporate bureaucracies and systems inflexibility.

E X E C U T I V E M A N A G E M E N T R E P O R T···· ····


Aviation Insurance MonthlyAIM Aviation Team

Expands: ‘Most Experienced In Australia’

Peter Lyon Head of Aviation Underwriting

Prudent Underwriting Builds Strong Portfolio

Peter FreemanNational Manager, Aviation

Aviation Academy Gets Rave Reviews

Katrina ParkerUnderwriter

Importance of claims handling recognised

Tammy McCabeUnderwriter

No Direct Quoting Appreciated, Say Brokers

Taking off in 2012

ProductLinesAssetinsure provides a number of specialist

lines that collectively set the scene for a balanced

and largely uncorrelated portfolio.

I. PartnershipBusinessesA.Surety

Surety Bonds are an effective alternative to

bank guarantees for performance obligations of

contractor clients. However, unlike a bank guar-

antee, surety bonds do not tie up client assets as

security. This makes surety an extremely useful

and flexible balance sheet management tool.

Assetinsure has achieved significant market

presence notwithstanding the fact that the Com-

pany only commenced writing surety bonds in

March2009.Ourmarketentryhasproventobe

timely as demand from the construction and in-

frastructure industries is high whilst, in contrast,

banking facilities have become more difficult to

obtain.

To achieve broad acceptance of the instru-

mentsissued,Assetinsureenteredintoanagency

agreement with Swiss Re International SE (SRI)

Australia Branch, a locally licensed member of

theSwissReGroup.SwissReGroupisoneofthe

world’s largest and longest established insurance

and reinsurance companies. Assetinsure origi-

nates, underwrites and manages the business and

Swiss Re International provides ‘the paper’ which

iscurrentlyratedAA-byStandard&Poor’s.

Assetinsure was also able to attract highly

regarded operatives to run the Surety division

so that experience and responsiveness could be

instantly delivered to our clients. In addition,

through a joint venture agreement, Assetinsure

secured additional resources from the Lombard

InsuranceGroup,thelargestsuretybondprovider

in South Africa. Through this arrangement, As-

setinsure has access to additional capacity and

specialist underwriting resources such as the

mining engineers that assist in the underwriting

ofMiningRehabilitationBonds.

B. GeneralAviation

We provide insurance solutions for a variety

of aviation risks including fixed and rotor wing,

hangar keepers’ liability, airports and aircraft

manufacturers.Our teamsarebased inBrisbane

and Sydney and have recognised experience across

all classes of aviation insurance.

AssetinsureAviationisalsotheexclusiveavia-

tion insurance underwriting agent of SRI. This

gives Assetinsure the capacity to accommodate

verylargerisksandevenmulti-yeararrangements.

Wealsotakeprideinourclaimshandlingability.

Assetinsure uses dedicated claims staff, experi-

enced loss adjusters and aircraft repairers to get

aviationclientsbackintheairasfastaspossible.

C.ProfessionalIndemnity

With Professional Indemnity (PI) Insurance,

we protect professionals against claims that can

jeopardise their business. Assetinsure’s service

proposition centres around easy access to under-

writersprovidingfeedbackonriskandcoverage,

speed of policy documentation and responsiveness

onclaimsmatters.Thisalsoprovidesbrokerswith

a more efficient service option for their clients. In

a number of cases, the Company can claim that it

hasbeenabletoprovideaPIInsurancesolution

where the client has been previously unable to

obtainone.ActingasagentforInterHannover,a

memberof theHannoverReGroup,Assetinsure

offersindisputablesecurity(currentlyratedAA-).

Additionally,Assetinsureinsuresprivatehospitals

and clinics (not individual doctors) on the basis of

a modern policy wording on its own paper.

D.CreditEnhancement

This cover provides credit protection for

lenders who advance funds or lines of credit to

medium to large sized enterprises. In most cases,

the policies are supported by tangible collateral.

Credit enhancement is also the essential insurance

component in the finance programme distributed

by Assetsecure Pty Limited. More detail on As-

setsecure and their finance programme is provided

intheAssetsecurePtyLimitedsectiononpage11.

Assetinsureunderwritesandmanagesthebusiness.

As with Professional Indemnity, Inter Hannover

provides the paper (rated AA- by Standard &

Poor’s).



AGENCY BUSI

NESS

A SpEcIAlISt FocUS:Risks In Rural AreasSME (Package) BusinessSME SpecialtyEnthusiast MotorStrataHeavy Motor

Sharp product focus | Responsive distribution platforms

Nicola DressSenior Underwriter

Adam VinesNational Claims Controller

Sue Vidler-WiechmanNational Manager, Claims

Issue 1 / 2012

II.AssetinsureDirectBusinessA.Property

Assetinsure insures theproperty risksofAus-

traliancompanies.Ourcurrentportfoliocoversa

varietyof corporate risks includingmanufactur-

ing, retail centres, hotels, warehousing and office

blocks. Our value proposition to brokers is that

we enhance the placement process by providing

direct access to experienced decision makers.

Assetinsure writes 60% of its property portfolio

either 100%, or in a lead capacity. This emphasises

the market acceptance gained by the Company

since commencing business in 2004.

B. insure that

This is a facility for Farm, SME Package and

HomeOwnersbusinessthroughanetworkofover

100 intermediariesacrossmainlyruralAustralia.

Insurance products are made available to the net-

workofintermediariesthroughtheelectronicun-

derwritingsystem‘TITEN’.Ifaparticularriskfits

definedrules, thebrokercan issue the insurance

documentsfromhisoffice.Assetinsurehandlesall

claims with individual claims officers assigned to

the insure that business.

C. SME(Package)Business

Custodian Underwriting Agency (CUA) fo-

cusesonSME(Package)Business,makinguseof

extensive business experience and well established

brokerrelationships.Activitiesarefocusedregion-

ally on metropolitan NSW. In addition, corporate

business alsoflows fromCUA through toAsset-

insure’s own property underwriting division as

weprovideourbrokerswithAssetinsurecapacity

across their entire client spectrum.

D.SMESpecialty

Specialist Underwriting Agency (SUA) has

developed two products that cater for special re-

quirementsintheSMEmarket.BusinessIncome

ProtectionWeekly(BIPW)facilitatesthetake-up

and enhances the value of business interruption

protectionforthisclientgroup.Marketinterestin

this offering is increasing due to the effectiveness

of the product in addressing the needs of clients

in loss situations. Excess Crime policies will be

inincreasingdemandasthemarkethardensand

automatic limits are curtailed.

E. HeavyMotor

SpecialistUnderwritingAgency (SUA)under-

writesMotor(Truck)Fleetbusinessmainlyonthe

basis of aggregate deductibles. This business assists

indiversifyingourportfolio.Asaminimumfleet

size is imposed, the premium income per account

is material and therefore meets our general criteria

for corporate business.

F. Private(Enthusiast)Motor

Enthusiast Underwriting Pty Ltd (Enthusiast)

was created to support motoring clubs and mo-

tor enthusiasts. The focus of the agency is on

individuals with high regard and passion for their

motor vehicles. The agency covers all states with a

team of experienced motor underwriters based in

Queensland,VictoriaandWesternAustralia.

G.StrataInsurance

Complete Strata Insurance Underwriting Pty

Ltd (CSI) is an underwriting agency established

to offer a genuine alternative in terms of strata

insurance inAustralia. CSI offers a full range of

strata policies and insurance services. CSI target

customers that recognise the benefits of long term

sustainableriskmanagementsolutions.

The number of specialist lines set the scene for a balanced and largely uncorrelated

portfolio. In all these specialist classes the business is sourced through distribution

channels specific to each class.



Bank liquidity tightens for corporate AustraliaTraditional bank debt less available

5th pillar in AustraliaThe working capital answer for unrated companies

AssetWatchReceivables finance withoutonerous reporting obligations

Rated Fixed Income – New Asset class3 year, Floating Rate Notes, well-priced, underpinned by trade receivables

Gareth WilsonSenior Underwriter

Duncan AlexanderExecutive Director, Risk Management,Assetsecure

Martin McconnellHead of Financial Risk

terry HartanExecutive Director, Origination, Assetsecure

ASSETSECUREThe Big News in Alternative Funding Solutions

SubsidiaryAndAssociateBusinesses

Along with the traditional insurance busi-

ness,Assetinsurehasinvestedintwodis-

tinct businesses with potential to provide

substantial value in the future.

AssetsecurePtyLtd

In the current harsh borrowing environment,

particularly for growing mid-sized Australian

based companies that do not have credit ratings,

alternative funding sources are much needed.

Assetsecure is a specialist company providing

trade receivable funding to qualifying mid-tier

corporates. The Assetsecure funding for trade

receivables is more effective (higher proceeds)

and less intrusive (debtor management retained

byclients)comparedtothetraditionalbankalter-

natives in the market. In delivering this form of

finance, the Company brings together a combina-

tionofthirdpartyfunding(warehousebankingor

capital markets), asset management (verification

of trade receivables) and insurances (trade credit

and credit enhancement).

Until the global financial crisis, Assetsecure’s

funding sources were restricted to warehouse

funding facilities provided by financial institu-

tions. In order to increase the funding availability

forfuturereceivablepoolsforclients,Assetsecure

has developed a Floating Rate Note (FRN)

programme which is targeted at investors in the

Australian capital markets. The programme will

offer investors a 3 year FRN instrument with a

AA-creditrating

Assetsecure provides facilities ranging from

$10m to $100m to medium to large corporations.

Given the obvious value proposition offered, we

expect theAssetsecurebusiness togrowstrongly

in the future. This growth will provide substantial

benefittoAssetinsurethroughgrowingpremium

and management fee income streams.

It should be highlighted that Assetsecure

operates on the asset management IT platform

‘AssetWatch’.ThisallowsAssetsecuretoapplystate

of the art asset management and cash control

through its access to daily client transaction data

and daily reconciliation on each debtor pool. This

sophisticated software was developed in-house

byAssetinsure’s systems development team. It is

auniquetoolthatallowstheAssetsecureteamto

proactively manage client exposures and reduce

the‘reporting lagrisk’ that iseverpresent in the

financing of trade receivables.

CumulusWinesPtyLimited

Assetinsure’s 49% minority shareholding sits

proudly alongside the majority shareholder, being

theBerardoGroupfromPortugal.TheBerardos,

whoarePortugal’slargestwineproducer,alsoown

a number of vineyards and wine operations in

Canada and Spain.

Cumulus Wines is the largest wine producer

in the Orange region. Complementing its exist-

ing 508 hectare Cumulus Estate vineyard and

its 10,000 tonne winery, the Company further

expanded its operations in 2010 by acquiring a

new bottling plant.

TheOrange region,definedby itshigheleva-

tion, continental climate and rich volcanic soils,

allows Cumulus Wines to produce elegant cool

climate wines.

Thehardwork inrebuildingawinecompany

over the last eight years in the most difficult of

environments (weather volatility, wine glut and

strong Australian dollar) is paying off with a

number of tangible achievements:

• Few, if any, Australian wine companies have

developed prominent brands in such a short

timeframe with ROLLING and CLIMBING

now sold in 23 countries.

• Both the ROLLING Cabernet Merlot and the

ROLLING Sauvignon Blanc Semillon are the

number 1 top selling brands in Australia (in

their respective varietal category) for wines

sold in the $15–$20 price range.

• WineawardsfortheCumulusbrandshavenow

reachedthe500mark.

• CumulusShiraz2008ratedatSyrahduMonde

in the World’s top ten Syrah/Shiraz 2011.

We recommend a visit to the Cumulus Wines website

www.cumuluswines.com.au.



Directors’ ReportThe directors present their report together with

the financial report of Assetinsure Pty Limited

(‘the Company’) for the year ended 31 December

2011 and the auditor’s report thereon.

Directors

The names of the directors of the Company in

office during the year and until the date of signing,

and their dates of appointment, are as follows:

Mr John Fahey – Chairman

(appointed 1 September 2003)

Mr Brian Cairns

(appointed 1 January 2007)

Mr Gregor Pfitzer

(appointed3August2004)

Mr Henricus Sprangers


Mr Beverley Walters


Mr Peter Wedgwood


Mr Volker Weisbrodt

(appointed1April2002)

Mr Christopher Old–Alternate

(appointed 7 December 2010)

Principalactivities

The principal activities of the Company dur-

ing the course of the financial year were of an

insurance underwriter, underwriting agent and

reinsurance company in run-off. There were no

significant changes in the nature of the activities

of the Company during the year.

Review and results of operations

The profit of the Company after income tax

amounted to $4,349,000 (2010: $4,946,000). The

principal reason for the reduction in profit from

the previous year was the increase in claims cost

flowing from the unprecedented level of storm

activity that occurred during 2011.

Direct insurance

Grosswrittenpremiumfrombusinesswritten

by the Company, either directly or as inwards

reinsurance, in 2011 was $50,914,000 (2010:

$57,044,000). However, when combined with the

gross premium generated by the underwriting

agency business, the overall gross written pre-

mium generated by the Company in 2011 totalled

$90,639,000 (2010: $83,902,000), an 8% increase

on the previous year.

As in the previous year, the main area of

growth in 2011 was in the business underwritten

by the Company as underwriting agent. Under

these arrangements the Company underwrites

insurance as agent for several highly rated third

party insurers. In doing so, the Company provides

underwriting expertise for which it receives fee

and expense recovery income and also takes

a share of the insurance risk and premium by

providing reinsurance. The underwriting agency

arrangements were successfully established in

2009 initially writing surety, credit enhancement

and professional indemnity business. In 2010 this

was extended to include general aviation.

In 2011 the underwriting agency business

generated $46,916,000 of gross written premium

for the insurers it represents (2010: $32,647,000).

The Company’s inwards reinsurance share of this

premium only, and not the full gross premium

amount, is able to be reported as gross written

premium revenue in the financial statements. In-

wards reinsurance premium income from agency

business increased to $6,998,000 in 2011 from

$5,750,000 in the previous year. The growth in

the underwriting agency and other business was

not sufficient to offset the reduction in Company

gross premium reported resulting from the deci-

sion to cease writing prestige motor business at

the end of 2010.

Agencyfee,costrecoveryandotherservicefee

income increased by 42% to $9,466,000 in 2011

(2010: $6,676,000). This reflects the substantial

growth achieved in the underwriting agency

activity during the year along with continued ex-

pansion of the Company’s IT services business. IT

Services fee income is generated from providing

the Company’s modern insurance administration

systems and support to third party users.

BoardofAssetinsure

Assetinsure has an experienced board of

directors. The board is well balanced

with only two of the seven directors being

executiveDirectors.Meetingsareheldbimonthly.

For efficiency and regulatory compliance purpos-

es,theboardhasestablishedcommitteesforAudit

and Compliance, Investments and Remuneration.

Current members of the board are:

John Fahey AC,Chairman,formerPremierof

NSW and Federal Minister for Finance andAd-

ministration. Before entering politics, John prac-

tised law as a solicitor. John serves on a number

ofboards,isPresidentoftheWorldAnti-Doping

AgencyandChairmanoftheAustralianGovern-

ment Reconstruction Inspectorate.

Brian Cairns, Non-Executive Director, has

more than 40 years of experience in general insur-

anceandreinsuranceincludingrolesasManaging

DirectorofGerlingGlobalReinsurance,ScorRe,

andGeneralManagerofAustralianInternational

InsuranceLtd.BrianhasaBachelorofCommerce

degree and is a fellow of the Chartered Insurance

Institute.

Gregor PfitzerisAssetinsure’sChiefOperating

Officerandhasmorethan20yearsexperiencein

generalinsurance.PriortojoiningAssetinsurein

July2003,GregorwasDeputyManagingDirector

ofGerlingAustraliaInsurance.Gregorholdsade-

gree in economics from the University of Cologne.

Henricus Sprangers, Non-Executive Director,

has more than 25 years experience in general

insurance,includingeightyearsasManagingDi-

rector of Lumley General Insurance. Hans has a

masters degree in economics.

Bev Walters,Non-ExecutiveDirector,hasmore

than30yearsexperience inbankingandfinance

and servesonanumber ofboardsofAustralian

companies.BevhasaBachelorofScience (Min-

ingGeology),aBachelorofCommerce(Business

Administration)degreeandanMBA.

Peter WedgwoodisAssetinsure’sChiefExecu-

tiveOfficer.PeterisaCharteredAccountantwith

over 25 years in the insurance industry, particular-

lyinthebusinessofunderwritingfinancialrisks.

Volker Weisbrodt, Non-Executive Director,

is the Chief Executive Officer at GLOBAL (Ger-

many).Volkerhasmorethan25yearsexperience

in the general, credit and life insurance industries.

He holds a degree in business administration and

economics from the University of Cologne.

Christopher Old, (Alternate) Non-Executive

Director, is the Managing Director of the

GLOBALGroupofAustraliaPtyLimitedandisan

AlternateDirectorforVolkerWeisbrodt.Chrishas

more than 30 years experience in the insurance

industry. He holds a Bachelor of Business and is a

fellowoftheAustralianSocietyofCertifiedPrac-

tisingAccountantsandtheCharteredInstituteof

Secretaries.

········ D I R E C T O R S ’ R E P O R T········ B O A R D O F A S S E T I N S U R E


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Cyclones to Floods Not Enough To Deter Capacity

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inside

All the News for Today’s Professional Risk Manager

Ewen McKayNational Manager, Professional Risks

Neil DempseyNational Manager, Property

Review and results of operations

(continued)

Reinsurance run-off

For the reinsurance business, premium adjust-

ments received in 2011 on reinsurance treaties

incepting prior to the reinsurance business being

placed in run-off on 1 November 2002, produced

gross written premium of $193,000 (2010:

$39,000).

The Company has reserved, in accordance with

independent actuarial advice, for outstanding

claims incurred and unpaid at year end. During

the year there was less claims activity in the rein-

surancerun-offthanexpected.Overalltheclaims

development that did occur was favourable and

consequently the Appointed Actuary’s year end

InsuranceLiabilityValuationreleased$3,660,000

from IBNR/IBNER to profits (2010: $3,255,000

release).

The reinsurance run-off underwriting result

was, however, adversely affected by the substantial

decline in the discount rates applied to discount

outstanding claims liabilities to present value.

The change in this economic factor resulted in

a $2,399,000 reduction in discount applied to

reinsurance run-off outstanding claims liabilities

at year end (2010: $84,000 discount increase).

Overall the reinsurance run-off produced a net

$476,000 positive contribution to underwriting

profits in 2011.As expected, this was a substan-

tial decrease from the $2,008,000 contribution

achieved in 2010 given the declining size of the

reinsurance run-off and the adverse impact of the

reduction in discount.

In the period since the Company was acquired by

AssetinsureHoldingsPtyLimited,thereinsurance

run-off outstanding claims liabilities have been

reduced by $162,697,000 (2010: $157,766,000) to

$35,873,000 (2010: $40,804,000).

Investment activities

The Company’s investment activities gener-

ated $6,634,000 of investment revenue during

the year (2010: $6,426,000). The majority of the

Company’s investment assets in 2011 comprised

cash and bonds. Capital gains on the Company’s

bond investments improved in 2011 in response

to declining interest rates. In line with the Com-

pany’s policy of matching assets backing insur-

ance liabilities, this partially offset the adverse

profit impact of the reduction in discount applied

to outstanding claims liabilities. Investments were

assessed for impairment at year end and no im-

pairment adjustments were found to be necessary.

Building sale

During the year the Company entered into a

saleandlease-backofitsofficebuildinglocatedat

44PittStreet,Sydney.Asthebuildingisoccupied

by the Company, in accordance with Australian

AccountingStandards,priortoitssaletheproper-

ty was held at cost less accumulated depreciation.

Revenue in 2011 includes $3,998,000 representing

the realised gain generated from the sale of the

property. In addition to the realised gain, the

purchaser provided a $1,500,000 lease incentive in

consideration for the Company entering into an

eight year head lease for the property. The lease

incentive will be amortised over the period of the

lease.

Dividends

During the year a $4,000,000 dividend was

declared and paid in respect of the previous

financialyear(2010:$1,000,000).On3April2012

a $1,000,000 dividend was proposed by the direc-

tors. The dividend has not been provided for and

has no tax consequences. The financial effect of

the dividend has not been brought to account in

the financial statements for the year ended 31 De-

cember 2011 and will be recognised in subsequent

financial reports.

State of affairs

In the opinion of the directors, there were no

significant changes in the state of affairs of the

Company during the financial year, other than

those disclosed above.

········ D I R E C T O R S ’ R E P O R T


Eventssubsequenttoreportingdate

In the interval between the end of the financial

year and the date of this report, other than the

proposed dividend and events described in note

5, no item, transaction or event of a material and

unusualnaturehasoccurredwhichislikely,inthe

opinion of the directors of the Company, to affect

significantly the operations of the Company, the

results of those operations, or the state of affairs of

the Company in future financial years.

Likelydevelopments

The Company expects to be able to meet its

financial obligations resulting from all insurance

liabilities. The Company will also proceed to fur-

ther develop its direct insurance business.

Indemnification

The Company has agreed to indemnify the fol-

lowing present and past directors and officers of

theCompany,MrPBWedgwood,MrGMPfitzer,

Mr B H Walters and Mr J M Hewitt to the full

extent permitted by the law, against any liability

that may arise from their position as directors of

AssetsecurePtyLimitedandCumulusWinesPty

Limited except where the liability arises due to

dishonest or grossly negligent conduct.

Insurance premiums

Since the end of the previous financial year the

ultimateholdingcompany,AssetinsureHoldings

PtyLimited,paidinsurancepremiumsinrespect

of a directors’ and officers’ liability and legal

expenses insurance contracts, insuring past and

present directors and officers, including executive

officers of the Company and directors and ex-

ecutive officers and secretaries of its controlled

entities. The directors have not included details of

the nature of the liabilities covered or the amount

of the premium paid in respect of the directors’

and officers’ liability and legal expenses insurance

contracts, as such disclosure is prohibited under

the terms of the contract.

Environmentalregulation

The Company’s operations are not significantly

impacted by any environmental regulations under

either Commonwealth or State legislation. The

Company is not aware of any breach of these

environmental regulations.

Directors’ benefits

During or since the financial period no director

of the Company has received or become entitled

to receive a benefit, other than a benefit included

in the aggregate amount of emoluments received

or due and receivable by the directors, by reason

of a contract entered into by the Company or a

body corporate that was related to the Company

when the contract was made or when the director

received, or became entitled to receive, the benefit

with:

• adirector;or

• afirmofwhichadirectorisamember;or

• anentityinwhichadirectorhasasubstantial

financial interest.

Leadauditor’sindependencedeclaration

TheLeadauditor’sindependencedeclarationis

set out on page 19 and forms part of the Directors’

report for the financial year ended 31 December

2011.

Rounding off

TheCompanyisofakindreferredtoinASIC

ClassOrder98/100dated10July1998andinac-

cordance with that Class Order, amounts in the

financial statements and directors’ report have

been rounded off to the nearest thousand dollars,

unless otherwise stated.

Signed in accordance with a resolution of the

directors:

____________________________

PBWedgwood

Director

DatedatSydneythis3rddayofApril2012.

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········ D I R E C T O R S ’ R E P O R T


Leadauditor’sindependencedeclaration under section 307CoftheCorporationsAct2001

To:thedirectorsofAssetinsurePtyLtd

Ideclarethat,tothebestofmyknowledgeand

belief, in relation to the audit for the financial year

ended 31 December 2011 there have been:

• nocontraventionsoftheauditorindependence

requirementsassetoutintheCorporationsAct

2001inrelationtotheaudit;and

• no contraventions of any applicable code of

professional conduct in relation to the audit.

KPMG

IanMoyser

Partner

Sydney

3April2012

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········ A U D I T O R ’ S I N D E P E N D E N C E D E C l A R A T I O N


Concise financial report for the financial year ended 31 December 2011

ThisconcisefinancialreporthasbeenderivedfromthefullfinancialreportofAssetinsurePtyLimited

andhasbeenpreparedinaccordancewiththeAustralianaccountingstandards.Theconcisefinancialreport

cannot be expected to provide as full an understanding of the financial performance, financial position and

financing and investing activities of the Company as the full financial report. Further information can be

obtainedfromthefinancialreportofAssetinsurePtyLimited.

Statement of comprehensive income for the year ended 31 December 2011

Note2011

$’0002010

$’000

Revenue 2 98,053 86,043

Expenses 92,768 79,116

Profit before income tax 5,285 6,927

Income tax expense 936 1,981

Profit for the period 4,349 4,946

Other comprehensive income for the period net of income tax - -

Total comprehensive income for the period net of tax attributable to members of Assetinsure Pty Limited 4,349 4,946

Discussion and analysis of the statement of comprehensive income

At$4.3maftertax,theprofitfor2011wasdown

12% on the previous year. This was a creditable

result given the highly adverse trading conditions

that prevailed during the year.

2011 was challenging both for Assetinsure

and the insurance industry in Australia gener-

ally. The year started with catastrophic floods in

Queensland followed by cyclones, then storms

and floods in Victoria and finally a major hail

storm on Christmas day in Melbourne. In all,

an unprecedented seven recognised catastrophe

eventsoccurredinAustraliaduringtheyear.

While the Company’s conservative underwrit-

ing approach, diversified product offering and

prudent use of reinsurance help to reduce the

impact of events such as these, Assetinsure did

incur $10.1m in additional gross claims from the

2011 catastrophes ($2.5m net after reinsurance).

Assetinsure provides flood cover only in limited

circumstances. This approach and the relatively

small, geographically dispersed nature of the

Company’s property risk portfolios substantially

reduced the losses from these severe natural events.

The Company’s net retention is only $2.5m for

catastrophe losses. Despite this, none of the events

of 2011 generated sufficient net losses to trigger a

claim by the Company on its catastrophe reinsur-

ance programme.

Notwithstanding the challenging environment,

Assetinsure continued to grow and develop its

direct insurance and underwriting agency busi-

nesses during the year. The main area of growth

was in the business the Company underwrites as

underwriting agent for other highly rated insur-

ers. Gross premium generated for these insurers

by Assetinsure in 2011 increased to $46.9m, up

44%onthepreviousyear(2010:$32.6M).

Otherkeyfeaturesofthe2011resultwere:

• the combined total of gross premium under-

written by the Company in the direct insurance

business and underwritten for other insurers in

the underwriting agency business increased by

8% to $90.6m (2010: $83.9m) .

• premiumrevenue,which includesonlyAsset-

insure’s net reinsurance share of the premium

written as underwriting agent, was down 11%.

This was due to the termination of the prestige

motor underwriting agency arrangement with

MBPrestigeattheendof2010.Thepremium

growth achieved by the other business lines

during the year was not sufficient to fully offset

the premium loss from this.

• total revenue increased by 14%. This was

assisted by a 30% increase in revenue from re-

insurance recoveries following the catastrophe

events discussed above and a one-off gain on

the sale of the Company’s Sydney office build-

ing.

• duringtheyearAssetinsureenteredintoasale

and lease-back of its Sydney headquarters.As

an owner occupied building, Australian Ac-

counting Standards had required the Company

to hold the property in the books at cost less

depreciation rather than as an investment asset

atmarketvalue.Inmid-2011thepropertywas

soldandleasedbackrealisinga$4.0mprofiton

sale.

• consistentwiththecontinuedstronggrowthin

the Company’s underwriting agency activities,

commission and fee income increased by 42%

to $9.5m (2010: $6.7m).

• inadditiontothecostofthecatastropheevents,

direct insurance underwriting results were

also adversely affected by two large individual

claims, one in the Surety and the other in the

Healthcare Professional Indemnity portfolios.

3 1 D E C E M B E R 2 0 1 1···· ············ C O N C I S E F I N A N C I A l R E P O R T


These claims reduced 2011 pre-tax profits by

$2.2m.

• Claimsdevelopmentinthereinsurancerun-off

continued to be benign with reserve releases

generating $2.9m in underwriting profit before

accounting for changes in the allowance for

discount.

• The steep fall in risk-free discount rates that

resulted from market uncertainty regarding

the world economy reduced the amount of

discount applied to the outstanding claims

liabilities in the reinsurance run-off at 31 De-

cember 2011 by $2.4m (2010: $0.1m increase

in discount).

• Incomefrominvestmentsincreasedby3%.In

response to falling interest rates, capital gains

on the Company’s bond investments increased

321% in 2011. However, the increase in income

was only slightly more than the amount needed

to offset the decline in interest earned for the

year.

• Management and other overhead expenses

increased by 21% due to the staff increases

needed to support the growing underwriting

agency business, the inclusion of office rent

followingthesaleandlease-backoftheCom-

pany’s Sydney offices and the increasing cost of

aSurety jointarrangementwiththeLombard

InsuranceGroupofSouthAfrica.Theincrease

in Surety joint venture cost reflects the increas-

ing profitability of this activity. The increase

in overhead expenses was fully offset by the

increase in commission and fee income earned

during the year.

• On 1 January 2011 Assetinsure became sub-

ject to the application of Division 230 of the

Income Tax Assessment Act 1997 relating to

thetaxationoffinancialarrangements(TOFA).

The Assetinsure Group elected to adopt the

fair value and reliance on financial reports

application methods and also to bring existing

financialarrangementsintoTOFA.Theresult-

ing adjustments to some deferred tax balances

reduced the income tax expense in 2011.

Statement of changes in equity for the year ended 31 December 2011

NoteIssuedcapital

$’000

Retainedearnings /

(losses)$’000

Total$’000

Balance at 1 January 2010 50,000 (3,654) 46,346

Dividends paid - (1,000) (1,000)

Total transaction with owners - (1,000) (1,000)

Profit for the year - 4,946 4,946

Other comprehensive income - - -

Total comprehensive income for the year - 4,946 4,946

Balance at 31 December 2010 50,000 292 50,292

Balance at 1 January 2011 50,000 292 50,292

Dividends paid 3 - (4,000) (4,000)

Total transactions with owners - (4,000) (4,000)

Profit for the year - 4,349 4,349

Other comprehensive income - - -

Total comprehensive income for the year - 4,349 4,349

Balance at 31 December 2011 50,000 641 50,641

Discussion and analysis of the statement of comprehensive income (continued)



Discussion and analysis of the statement of financial position

During 2011 the impact of natural perils, increases in reinsurance costs and volatile invest-mentmarketsputdownwardpressureonindustrysolvency. In this very turbulent environment Assetinsure was able not only to maintain itsrobust solvency position but slightly improve it. At31December2011theAPRACapitalCoverageRatiowas2.10timesMinimumCapitalRequired(MCR) after allowing for the proposed 2011dividend payment (refer note 3). This was up from2.09timesMCRattheendof2010.

During the year reinsurance run-off claims continued to be settled in an orderly manner reducing the capital required to support this business. Strong growth in the business lines writ-ten by the Company as underwriting agent and reinsurer is also enhancing capital efficiency. For this business, capital is only required to support theportionoftheriskreinsuredbytheCompanyrather than the full amount as is the case for the direct insurance lines.

The Company continues to be a well capitalised insurerintheAustralianmarket.TheAssetinsureboard considers maintaining a sizeable regula-tory capital buffer above the minimum capital requirement is necessary to provide flexibility and maintainmarketconfidenceinthebusiness.

During 2011 APRA has continued with itsreview of capital standards for life and general insurers. APRA has stated that the objective ofthe review is not to increase industry capital levels generally but to introduce more risk sensitiv-ity into the determination of the required capital amount(thenewequivalentofthecurrentMCR).Assetinsureiswellplacedtodealwithanyrequiredcapital changes resulting from the implementa-tionoftheAPRAreview.

Trade and other receivables outstanding at year end increased by 20%. Consistent with the decrease in written premium in 2011, the trade receivables component decreased slightly. An increase in sundry debtors resulting from achange in classification of a collateral deposit and the additional working capital funding that wasprovided to subsidiary companyAssetsecure PtyLtd during the year resulted in a net increase inreceivables overall.

Reinsurance and other recoveries receivable at year end were 20% higher than in 2010.As dis-

cussed in the analysis of the income statement, the increase in direct insurance claims activity in 2011 is the reason. The allocation of reinsurance recov-eries between current and non-current reflects the allocation of the underlying claims liabilities as determinedbytheAppointedActuaryduringtheinsurance liability valuation.

Investments at 31 December 2011 were 9% higher than at the end of 2010. This is primarily due to the reinvestment of the $12.5m proceeds from the sale of the Company’s Sydney office building into cash and bonds. The building sale is also the reason for the $8.1m net decrease in property, plant and equipment at year end.

At year end 84% of investment funds wereinvested in cash deposits and highly rated govern-ment and corporate bonds. The majority of these investments are liquid, so even large fluctuations in claim settlement funding requirements can be comfortably accommodated.

Deferred acquisition costs increased by 13% in 2011. During the year the proportion of direct insurance premium sourced from third party underwriting agencies continued to increase. Acquisition costs for premium written throughunderwriting agencies is higher than for business underwritten in-house due to the agency commis-sion incurred.

Deferred reinsurance expense outstanding was 18% lower at year end compared to 2010. For busi-nesswrittenbyAssetinsureasunderwritingagent,the inwards reinsurance line is calibrated to the Company’sriskappetiteineachclassofbusiness.Generally,nofurtherreinsuranceisrequired.Thegrowth in this area in 2011 reduced the outwards reinsurance expense during the year and also the amount deferred at year end.

Trade and other payables increased by 28% in 2011. Two main factors caused the increase: the growth in fourth quarter Surety premium collected on behalf of Swiss Re International and paid quarterly; and an increase in the amountpayable to the holding company mainly due to further income tax related transfers.

Outstanding claims liabilities at year endwere9%higherthanin2010.Asdiscussedintheanalysis of the income statement, the increase in incurred claims during 2011 and reduction in discount at year end are the reason for this change.

Statement of financial position as at 31 December 2011

2011$’000

2010$’000

Current assetsCash and cash equivalents 8,302 5,707Trade and other receivables 22,344 20,450Reinsurance and other recoveries receivable 8,014 11,612Deferred acquisition costs 4,218 3,722Investments 35,268 39,905Current tax assets - 270Deferred reinsurance expense 12,661 15,529Total current assets 90,807 97,195

Non-current assetsTrade and other receivables 3,310 1,000Reinsurance and other recoveries receivable 20,338 12,047Investments 62,410 49,825Property, plant and equipment 795 8,934Intangible assets 3,309 2,717Deferred tax assets 308 -Total non-current assets 90,470 74,523

Total assets 181,277 171,718

Current liabilitiesTrade and other payables 23,510 18,355Current tax liabilities 100 122Outstanding claims liabilities 23,176 25,959Unearned premium liabilities 28,614 30,888Total current liabilities 75,400 75,324

Non-current liabilitiesOutstanding claims liabilities 55,236 45,885Deferred tax liabilities - 217Total non-current liabilities 55,236 46,102

Total liabilities 130,636 121,426

Net assets 50,641 50,292

EquityIssued capital 50,000 50,000Retained earnings 641 292

Total equity 50,641 50,292



Statement of cash flows for the year ended 31 December 2011

2011$’000

2010$’000

Cash flows from operating activities

Cash receipts from customers 55,231 58,940

Reinsurance and retrocession premiums paid (27,527) (32,462)

Claims paid (34,938) (43,521)

Reinsurance and retrocession claim recoveries 19,718 26,223

Interest received 5,044 4,373

Rent received 431 423

Income tax paid (1,461) (1,356)

Goods and services tax paid (2,908) (1,558)

Other underwriting expenses paid (8,344) (8,324)

Other operating income received 9,467 6,671

Payments to suppliers and employees (12,310) (10,389)

Net cash provided by / (used in) operating activities 2,403 (980)

Cash flows from investing activities

Proceeds of property, plant and equipment 12,325 -

Proceeds from sale of investments 70,423 55,611

Purchase of investments (82,287) (50,062)

Purchase of intangible assets (928) (757)

Purchase of property, plant and equipment (341) (343)

Net cash (used in) / provided by investing activities (808) 4,449

Cash flows from financing activities

Dividends paid (4,000) (1,000)

Net cash (used in) financing activities (4,000) (1,000)

Net (decrease) / increase in cash held (2,405) 2,469

Cash at the beginning of the financial year 13,434 10,965

Cash at the end of the financial year 11,029 13,434

Discussion and analysis of the statement of cash flows for the year ended 31 December 2011

In 2011 positive net cash was provided from

operating activities for the first time since the

CompanywasacquiredfromtheGLOBALGroup

in 2003. This highlights the steadily reducing cash

flow needs of the reinsurance run-off. The Com-

pany continues to proactively manage and settle

the remaining portfolio of run-off claims and

the cash flows associated with this activity have

declined appreciably in the last two years. In 2010,

$5.9m of reinsurance claim settlements were paid.

This reduced to $3.2m in 2011.

Direct insurance is now the major driver of

cash flows in the business.

Cash receipts from customers declined in

2011 as the proportion of premium written as

underwritingagentincreased.ThemajorityofAs-

setinsure’s reinsurance programmes are propor-

tional covers and so reinsurance and retrocession

payments also decreased broadly in line with the

decrease in direct gross premium written.

Claim payments decreased by 20% and rein-

surance recoveries decreased by 25% in 2011. The

difference in these percentages is mainly due to the

reduction in reinsurance run-off claims paid. The

retrocession covering the run-off is on an excess of

loss basis and the claim settlements made in 2011

did not include any retrocession recovery.

Notwithstanding the Company’s focus on

promptly settling all valid claims arising out of the

catastrophe events in 2011, less cash was required

to settle claims than in 2010. This was because two

large fire claims incurred during 2010 along with

another large fire-related claim from the previous

year were paid in 2010. These settlements and

their related reinsurance recoveries were larger

than any settlements made in 2011.

Commission and fee income is paid promptly

and so the 42% increase in cash received mirrors

the growth in the underwriting agency business.

Payments made to suppliers and employees

increased by 19% in 2011. This is broadly in line

with the increase in management expenses in

theyear.Allemployeesand themajorityof sup-

pliers are paid by the parent company with the

cost passed on to the Company through parent

company charges. The timing of settlement of

these charges determines how closely changes in

expenses are reflected in the cash flows.

In 2011 the dividend payment was funded from

operating cash flows and short term cash deposits

and so it was not necessary to source cash from

the Company’s investment portfolios for this.

Assetinsure’scontinuinginvestmentinits‘Graile’

computer system and a computer hardware up-

grade undertaken resulted in a net cash outflow

from investing activities.



Notes to the concise financial report for the year ended 31 December 2011

2011$’000

2010$’000

2 Revenue (continued)(c) Total revenue from all activities

Insurance activities 77,955 72,943Other activities 20,098 13,100

86,043 98,0533 Dividends

Dividends proposed and paid in the current year 4,000 1,000

TheCompanyispartofaconsolidatedgroupfor incometax.Theultimateparententity,Assetinsure

HoldingsPtyLimited,istheheadcompanyinthegroup.Dividendspaidwithinthetaxconsolidatedgroup

are not taxable when received by the recipient. The entitlement to all franking credits generated by the

Company during the year rests with the head company.

After thebalancesheetdatea2centspershare($1,000,000)dividendwasproposedby thedirectors.

Theproposeddividendpaymentdateis5April2012.Thedividendhasnotbeenprovidedforandhasno

tax consequences. The financial effect of the dividend has not been brought to account in the financial

statements for the year ended 31 December 2011 and will be recognised in subsequent financial reports

4 Segment reporting

TheCompanyoperatesinasinglesegment,thegeneralinsurancesegmentinAustralia.

5 Events subsequent to balance date

On3April2012thedirectorsproposedadividendof$1,000,000(2011:$4,000,000).

InMarch2012associatecompanyCumulusWinesPtyLimitedrefinanceditsCommonwealthBankdebt

facilitieswiththeNationalAustraliaBank.Insupportofthenew3yeardebtfacilityagreement,eachof

CumulusWinesPtyLimited’stwoshareholdersconverted$1.0moftheirloanbalancesintoadditionalor-

dinary shares and the Company subordinated the $4.68m balance of the loans outstanding to the National

AustraliaBank’sfacilityoncommercialterms.The$4.68msubordinatedloanissecuredbyasecondranking

chargeovertheassetsofCumulusWinesPtyLimited.

There are no other material events occurring after balance date that the Company is aware of as at the

date of this report.

Notes to the concise financial report for the year ended 31 December 2011

1 Basis of preparation of concise financial report

TheconcisefinancialreporthasbeenpreparedinaccordancewiththeCorporationsAct2001,Accounting

StandardAASB1039:ConciseFinancialReports.Thefinancialstatementsandspecificdisclosuresrequired

byAASB 1039 have been derived from the Company’s full financial report for the financial year. Other

information included in the concise financial report is consistent with the Company’s full financial report.

AssetinsurePtyLimited(the‘Company’)isacompanydomiciledinAustralia.

The reporthasbeenpreparedon thebasisofhistorical costsand,exceptwhere stated,doesnot take

into account changing money values or fair values of non-current assets. These accounting policies have

been consistently applied and are consistent with those applied in the previous year. The report has been

presentedinAustraliandollars.

AfulldescriptionoftheaccountingpoliciesadoptedbytheCompanymaybefoundintheCompany’s

full financial report.

2011$’000

2010$’000

2 Revenue(a) Revenue from insurance activities

DirectGross written premiums 43,724 51,255Movement in unearned premium 3,838 434Premium revenue – direct 47,562 51,689Inwards reinsuranceGross written premiums 7,190 5,789Movement in unearned premium (1,564) (3,517)Premium revenue – inwards reinsurance 5,626 2,272Total premium revenue 53,188 53,961Reinsurance and other recoveries revenue 24,767 18,982Total insurance revenue 77,955 72,943

(b) Revenue from other activitiesFrom operating activities:Services revenue Services – other corporations 9,466 6,639 Services – related corporations - 35Investment revenue Interest – other corporations 5,011 5,720 Rent – other corporations 375 367 Rent – wholly owned group 56 56 Realised gain on sale of investments 802 154 Change in fair market value of investments 390 129From non-operating activities:Gain on disposal of property, plant and equipment 3,998 -Total revenue from other activities 20,098 13,100



Independentauditor’sreporttothemembersofAssetinsurePtyLimited

WehaveauditedtheaccompanyingconcisefinancialreportofAssetinsurePtyLimited(theCompany)

which comprises the statement of financial position as at 31 December 2011, the statement of compre-

hensive income, statement of changes in equity and statement of cash flows for the year then ended and

relatednotes1to5,derivedfromtheauditedfinancialreportofAssetinsurePtyLimitedfortheyearended

31 December 2011 and the discussion and analysis. The concise financial report does not contain all the

disclosures required by Australian Accounting Standards and accordingly, reading the concise financial

report is not a substitute for reading the audited financial report.

Directors’ responsibility for the concise financial report

The directors of the Company are responsible for the preparation and presentation of the concise finan-

cialreportinaccordancewithAustralianAccountingStandardAASB1039Concise Financial Reports and the

Corporations Act 2001 and for such internal control as the directors determine are necessary to enable the

preparation of the concise financial report.

Auditor’s responsibility

Ourresponsibility is toexpressanopinionontheconcisefinancial reportbasedonourauditproce-

dures which were conducted in accordance withAuditing Standard ASA 810 Engagements to Report on

Summary Financial Standards. We have conducted an independent audit in accordance withAustralian

AuditingStandards,ofthefinancialreportofAssetinsurePtyLimitedfortheyearended31December2011.

Weexpressedanunmodifiedauditopiniononthefinancialreportinourreportdated3April2012.The

AustralianAuditingStandardsrequirethatwecomplywithrelevantethicalrequirementsrelatingtoaudit

engagements and plan and perform the audit to obtain reasonable assurance whether the financial report

for the year is free of material misstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosures

in the concise financial report. The procedures selected depend on the auditor’s judgement, including the

risk of material misstatement of the concise financial report, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the

concise financial report in order to design procedures, that are appropriate in the circumstances, but not for

thepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Ourprocedures

included testing that the information in the concise financial report is derived from, and is consistent with,

the financial report for the year, and examination on a test basis, of evidence supporting the amounts,

discussion and analysis, and other disclosures which were not directly derived from the financial report

fortheyear.Theseprocedureshavebeenundertakentoformanopinionwhether,inallmaterialrespects,

theconcisefinancialreportcomplieswithAustralianAccountingStandardAASB1039Concise Financial

ReportsandwhetherthediscussionandanalysiscomplieswiththerequirementslaiddowninAustralian

AccountingStandardAASB1039Concise Financial Reports.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

(continued next page)

Directors’ declarationIn theopinionof thedirectorsofAssetinsure

Pty Limited, the accompanying concise financial

report of the Company for the year ended 31

December 2011, set out on pages 20 to 29:

(a) has been derived from or is consistent with

thefullfinancialreportforthefinancialyear;

and

(b) complieswiththeAccountingStandardAASB

1039: Concise Financial Reports. There are

reasonable grounds to believe that the Com-

pany will be able to pay its debts as and when

they become due and payable.

Signed in accordance with a resolution of the

directors:

____________________________

PBWedgwood

Director

DatedatSydneythis3rddayofApril2011.

KPMG,anAustralianpartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternationalCooperative(‘KPMGInternational’),aSwissentity.Independentauditor’sreporttothemembersofAssetinsurePtyLimited

········ D I R E C T O R S ’ D E C l A R A T I O N ········ I N D E P E N D E N T A U D I T O R ’ S R E P O R T

3 1 D E C E M B E R 2 0 1 1···· ····

32 | 31 December 2011 | AssetinsurePtyLimitedConciseAnnualReport

In the News

AssetinsureHosts SecondAviationAcademy

In February Assetinsure and Swiss Re Inter-

nationalhosted thesecondAviation‘Academy’,a

two-daybrokerconferenceinOrange.

Thirty-eight delegates from all over Australia

and New Zealand were flown to Orange for a

program that included accident trends and loss

prevention, business opportunities for aviation

operators, legal developments and insurance

policy and service issues.

In addition to presentations by Assetinsure’s

specialists, instructive papers were delivered by

StevePadgettoftheAeromilGroup,DeanStanton

from the Australian Transport Safety Bureau,

Aviation lawyers Ben Martin and Keira Nelson

fromNortonWhite,andKeraMcDonaldandPaul

O’RyanfromSwissReInternational.

AtaneveningbarbecueattheCumulusEstate

vineyard, guests were treated to an amazing

aerobatic display from Assetinsure-sponsored

pilot Paul Andronicou, the Australian Aerobatic

Champion.

Those delegates inspired by Paul’s aerobatic

displaycouldthentaketotheskiesinatwo-seater

aerobatic plane for a memorable joy flight. The

two day programme concluded with a visit to the

impressive Cumulus winery.

The feedback provided was again very fa-

vourable and the unequivocal suggestion from

participants is: ‘We want more of Assetinsure’s

Academies’.

Independent auditor’s report (continued)

Independence

In conducting our audit, we have complied

with the independence requirements of the Cor-

porations Act 2001.

Auditor’s opinion

In our opinion, the concise financial report, in-

cludingthediscussionandanalysis,ofAssetinsure

PtyLimitedfortheyearended31December2011

complies with Australian Accounting Standard

AASB1039Concise Financial Reports.

KPMG

IanMoyser

Partner

Sydney

3April2012

AustralianAerobaticChampionPaulAndronicou

········ S E C O N D A V I A T I O N A C A D E M Y········ I N D E P E N D E N T A U D I T O R ’ S R E P O R T

Assetinsure Pty Ltd

ABN 65 066 463 803

www.assetinsure.com.au

Sydney

44 Pitt Street

Sydney NSW 2000

Australia

T (02) 9251 8055

F (02) 9251 8061

Melbourne

330 Collins Street

Melbourne Vic 3000

Australia

T (03) 8602 6300

F (03) 9606 0035

Brisbane

324 Queen Street

Brisbane Qld 4000

Australia

T (07) 3051 5005

F (07) 3051 5099

concise annual report · 1) excludes victorian storms and melbourne hailstorm 2) includes september...

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