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REPORT & ACCOUNTS 2010

HYPERION INSURANCE GROUP

“This year we delivered a truly excellent result despite soft market conditions.”

dAvId HOwdEN chief executive

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CONTENTS

About us 2

highlights 2

At a Glance 4

chairman’s Statement 8

chief executive’s Review 10

Board Structure 12

howden Broking Group 14

DuAL Group 20

cfc underwriting 23

financial Statements 25

Directors’ Report 26

independent Auditors’ Report 32

consolidated income Statement 33

consolidated Statement of comprehensive income 34

consolidated Statement financial Position 35

consolidated Statement of changes in equity 36

consolidated cash flow Statement 37

Notes to the Accounts 38

Balance Sheet company Only 75

company contacts 80

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• Hyperion Insurance Group acquiredHendricks & Co GmbH, the leading specialist directors’ & Officers’ and Commercial Legal Expenses broker in Germany.

• dUAL International Limited announced a long term strategic partnership with specialist insurer Hiscox to provide up to 25% of dUAL’s capacity for its global portfolio, complementing its existing capacity arrangements with Arch Insurance.

• Hyperion Insurance Group Limited was listed as one of the fastest growing companies in the UK in the Insurance Times annual Top 50 Brokers published in September 2010 and reached 6th position in the Post Magazine’s Top 25 EC3 Brokers published in 2010.

• Hyperion Insurance Group Limited announced its agreement to acquire Accette Group (‘Accette’). Accette is Asia’s largest independent insurance broker and has been trading for nearly 40 years with its headquarters in Singapore and offices in Hong Kong, Indonesia, Malaysia, Philippines and Thailand.

HIGHLIGHTS

ABOUT US

Hyperion Insurance Group Limited was founded in 1994 and is headquartered in the City of London.

It is international insurance and reinsurance distribution group with divisions in broking and underwriting. A truly dynamic international Group,it has offices in Europe, Asia, the Middle East, United States, Latin America and Australia.

Over the past ten years, the Group’s growth has been phenomenal with a compound annual growth rate of more than 30%.

Our brands: Howden (Broking UK and International global broking group), dUAL (Underwriting UK and International global underwriting group), CFC (UK specialist underwriter), Hendricks & Co GmbH (Broking in Germany) and vK Underwriters (underwriting in Latin America) are now well recognised within the countries in which they operate as well as internationally.

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33

Numbers include our acquisition of Accette whichis subject to regulatory approval.

25 countries

850 employees

50 offices

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GROUP REvENUE £72m

80

0

10

20

30

40

50

60

70

2008 2009 2010

0

2

4

6

8

10

12

14

2008 2009 2010

EBITdA £12m

MARGIN 16.7%

FEES ANd COMMISSION: BROKING £42m

0

5

10

15

20

25

30

35

40

45

2008 2009 2010

AT A GLANCE

GROSS wRITTEN PREMIUM: UNdERwRITING £182m

0

20

40

60

80

100

120

140

160

180

2008 2009 2010

BROKING CFC dUAL GROUP TOTAL GwP

0

1

2

3

4

5

6

7

8

2008 2009 2010

EARNINGS PER SHARE BefORe fAiR vALue ADJuStMeNtS ON DefeRReD cONSiDeRAtiON – BASic AND DiLuteD

8 PeNce

0

100

200

300

400

500

600

2008 2009 2010

AvERAGE NUMBER OF EMPLOYEES 555

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OUR PROdUCTShOwDeN BROkiNG GROuP

2%

14%

4%

19%

3%

18%

9%31%

PROPERTY

PROFESSIONAL INdEMNITY

dIRECTORS’ & OFFICERS’

ACCIdENT & HEALTH

OTHER

FINANCIAL INSTITUTIONS

COMBINEd

GENERAL LIABILITY

MEdMAL

DuAL GROuP

37.1%

4%3.3%

0.7%

0.9%

53.9%

cfc uNDeRwRitiNG

ESURANCE

82.83%

8.84%2.36%5.77%

0.19%

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GROUP FOOTPRINT

wHOLESALE, RETAIL & REINSURANCE BROKING

Howden Broking GroupBrazildubaiFinlandGermanyHong KongIndiaIsraelKoreaSingaporeSpainSwedenTaiwanUnited KingdomUnited States

INSURANCE UNdERwRITING

CFC UnderwritingUnited Kingdom

DUAL International LtdAustraliaGermanyHong KongIrelandItalySpainUnited Kingdom

VK UnderwritersArgentinaColombiaMexicoPuerto RicoUnited States

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KEY

BROKING

UNdERwRITING

BROKING & UNdERwRITING

REGISTER OF OvERSEAS LICENSES

NEw ACqUISITION – ACCETTE GROUP

AustriaAzerbaijanBelgiumBulgariaCyprusCzech RepublicdenmarkEcuadorEstonia GibraltarGreeceHungaryIcelandJersey

LatviaLiechtenstein LithuaniaLuxembourgMaltaNetherlandsNorwayPolandPortugalRomaniaSlovak RepublicSloveniaSwitzerland

NEw TERRITORIES

Accette Group *Hong KongIndonesia MalaysiaPhilippinesSingaporeThailand* Subject to regulatory approval

REGISTER OF OvERSEAS LICENCES – HOwdEN BROKING GROUP

“Our employees remain essential to the success of Hyperion. Their dedication, hard work, and enthusiasm have been unparalleled in 2010 and I would like to thank them all for their considerable efforts.”

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CHAIRMAN’S STATEMENT

I concluded my statement last year by saying the Group was in a strong position to achieve the growth which will place us in excellent shape for our proposed IPO in 2012.

I am delighted to be able to report that 2010 was indeed another successful year for Hyperion. The year ended 30 September 2010 delivered a truly excellent result despite soft market conditions and it is particularly encouraging to note that virtually all our operating units round the world contributed to this and that our recent acquisitions and team-lifts all outperformed their targets.

PERFORMANCE

Group revenue increased by 26% and EBITdA by 41%, which for the first time includes the contribution from our acquisition of Hendricks & Co. This is a remarkable achievement in a year where insurance markets were soft with premiums falling across many classes of business.

This is the first set of results prepared under the IFRS accounting rules; another important step we have achieved this year and which is a requirement for a Stock Exchange Listing. The prior year’s figures (the year ended 30 September 2009) have been re-stated into IFRS format and you will note some minor differences to the previously reported UK GAAP figures.

dIvIdENd

In view of these excellent results, the Board has resolved to pay a dividend of 0.97 pence per share payable on 22 december 2010 to shareholders on the register on 30 September 2010. I am pleased to report that we are able to pay this dividend after considerable re-investment in our businesses and it represents another important step towards our proposed Stock Exchange Listing.

ACqUISITIONS ANd STRATEGIC dEvELOPMENT

Subsequent to the year end, we have agreed to acquire (subject to regulatory consent) a 75% shareholding in the Accette Group, a leading independent South-East Asia insurance broker with offices in Singapore, Malaysia, Indonesia, Thailand, the Philippines and Hong Kong. This will considerably expand our footprint in Asia with its strong economic growth and expanding demand for insurance services. I am also pleased to report that david Zuellig, with his considerable knowledge and contacts in Asia, will remain as Chairman, and his family interests will continue with a 25% shareholding in the acquired business.

EMPLOYEES

Our employees remain essential to the success of Hyperion. Their dedication, hard work, and enthusiasm have been unparalleled in 2010 and I would like to thank them all for their considerable efforts.

OUTLOOK

despite soft markets, the New Year has started well with strong revenue growth both in our broking and underwriting agency businesses and the outlook for us remains good as a result of the strategic steps we took in 2010.

The ongoing support of our external shareholders is a testament to the strength of our business model. Following 3i’s investment in April 2008, the Group still has £22m of committed funds for acquisition and, in addition, we have further significant undrawn borrowing facilities. Combining this with the success of our businesses, puts the Group in a strong position to make further acquisitions and reach our proposed Stock Exchange Listing in 2012.

JOHN vAN KUFFELER chAiRMAN

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CHIEF ExECUTIvE’S REvIEw

It is interesting to reflect on just how far the Group has come in the past 10 years. Group revenue now exceeds £72m, up 26% over last year. In 2000 our total revenue was just under £5m, meaning that we have achieved a compound annual growth rate in the past decade of more than 30%.

In 2000, we had just eight offices and employed 60 people. Today, including our associated companies we have 40 offices in 21 countries employing more than 650 people. After completion of the Accette acquisition, which is subject to regulatory approval, our numbers will increase to 50 offices in 25 countries and more than 850 employees.

This year, despite a continuing soft market and recession in many of the countries where we trade, it is very encouraging to see growth without exception across all of our businesses. Particularly promising is the 40% growth achieved by Hendricks & Co GmbH, the leading German specialist directors’ & Officers’ (d&O) and Commercial Legal Expenses broker, which we acquired at the beginning of this financial year, October 2009.

More than top line growth, the Group is focussed on increasing its operating margin. It is encouraging to see our EBITdA rising by 41% to £12m representing a margin increase from 14.8% to 16.7%.

BROKING The Group’s insurance broking operations delivered a very strong performance with revenue increasing by nearly 30% to £41.8m and EBITdA by an impressive 65% to £6.4m.

In line with our strategy of developing a strong broking presence in Asia, Howden secured a reinsurance broking licence in Singapore providing us with a wholesale and reinsurance hub in the region. Subsequently, we agreed to acquire a 75% stake in the Accette Group, the largest independent insurance broker in South-East Asia, headquartered in Singapore, which combined with our existing operations gives us a strong foothold in the region with 14 offices in eight countries, and increases the number of offices around the world to 50 and the number of employees to more than 850.

UNdERwRITINGThe underwriting agencies within the Group had another outstanding year with combined Gross written Premium increasing by an impressive 28% to £182m.

The dUAL Group, including vK Underwriters (vKU), grew its revenue by 34% to £21.1m excluding profit commission (PC), and given the assumed deterioration of PC one of the significant accomplishments was the EBITdA growth (excluding PC) from £2.2m to £2.6m, thereby achieving a very satisfactory above the line return and reducing its dependency on profit sharing. EBITdA including PC increased from £3.8m to £4.3m.

In order to support its growth dUAL announced a long-term strategic partnership with specialist insurer Hiscox to provide up to 25% of dUAL’s capacity for its global portfolio, complementing its existing capacity arrangements with Arch Insurance. In addition dUAL Corporate Risks in the UK moved into property insurance with the support of Amlin UK.

vKU had a very strong year increasing its premiums by a staggering 63% to £8.6m.

CFC, a business that started at the beginning of 2000 just before another financial crisis, the dotcom bubble, had an extremely successful year with gross premium income rising by 20% to £36m and operating profit increasing by 26% to £3m. CFC’s compound annual growth rate over the past 10 years has been a impressive 67%.

THE FUTURELooking forward to this year and indeed the decade ahead, I am confident that the Group’s singular business model will allow us to continue to grow at pace. we have long been a ‘magnet for talent’ attracting the right people to drive our organic growth, as well as being the Group of choice for successful insurance businesses to merge or partner with.

Our success is attributable to our ability to provide insurance products with an exceptional level of expertise and above all service right around the globe. This is only possible because of the quality of the people, and my thanks go to them along with all our loyal clients that have enabled us to build the Group we have today.

dAvId HOwdENchief executive

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“Throughout 10 years of cyclical insurance rates and some highly volatile economic conditions, the Group’s compound annual growth is 30%. We’re all very proud of that.”


JOHN dE BLOCq vAN KUFFELER NON-executive chAiRMAN

John van Kuffeler joined Hyperion as Non-Executive Chairman in February 2009 bringing nearly 40 years’ of international financial services experience to the role. He joined Provident Financial in 1991 as Chief Executive, and was appointed

Chairman in 1997. Prior to his career at Provident Financial he was Chief Executive of Brown Shipley, the investment banking group. Both Provident Financial and Brown Shipley had significant insurance operations and John was also a Non-Executive director of the Medical defence Union, the Founder and former Chairman of dods Group, the AIM listed political publishing and media group, and former Chairman of Eidos as well as two City based investment trusts. He is also Chairman of Marlin Financial Group and an Advisory Board member of the Prince’s Trust and a former Council member of the CBI.

ERIC FAdY GROuP fiNANce DiRectOR

Eric joined Hyperion in June 2008. His last role was as Finance director for Marsh Europe, Middle East and Africa from 2003 to 2007, where he managed major projects to help the company adjust to the post Spitzer business world. Previously he

was CFO and vice President for Strategy Implementation for dun & Bradstreet Europe & Middle East from 1999 to 2002 where he contributed to the design of the company’s new business model and significantly improved their performance. Eric graduated from Rheims Business School, and began his career as an auditor with KPMG in France.


david started his career as a broker at Alexander Howden in 1980. He founded the Group in 1994 originally as a wholesale broker employing just five people. He has been the fundamental driving force behind its expansion into an international

insurance group offering wholesale, retail, reinsurance and underwriting. As Chief Executive, david’s focus is on leading the Group’s M&A activities as well as directing and implementing the Group’s strategic growth and direction.

R T vAN GIESON executive DiRectOR hYPeRiON, chAiRMAN AND ceO DuAL iNteRNAtiONAL

Bob was appointed Chairman and CEO of dUAL International in July 2009. He has over 40 years’ insurance experience and was previously President and CEO of Arch Insurance

Company Europe. Bob successfully built Arch from a start-up operation into a $500m business. He was also Chairman of Arch Europe and sat on the board of its Lloyd’s Syndicate. Prior to his time with Arch, Bob worked for CNA Financial where he was responsible for five business units with a revenue base of $1bn. Bob also had a 29 year career at the Chubb Corporation and during this time he spent many years in Canada helping to build a strong and profitable Canadian operation. Following his move to London in 1990 he was responsible for European and Far Eastern operations. He was a driving force behind Chubb’s expansion and under his leadership it was established as a significant international player.

BOARd STRUCTURE

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EMILE wOOLF NON-executive DiRectOR

Emile is a Chartered Accountant and independent insurance and litigation consultant. He is former Chairman of the Practice Insurance Requirements Committee of the Institute of Chartered Accountants in England and wales, and of its Panel of Participating

Insurers. In parallel with a long career providing Expert witness reports on the conduct of professional accountants and auditors, he is a regular columnist in ‘Accountancy’, the journal of the Institute, and is one of the profession’s most respected authors and lecturers. He was the founder of the Emile woolf Colleges, which train accountants in many countries world-wide.

dAvId wHILEMAN NON-executive DiRectOR

david is a Partner in the 3i Growth Capital business, investing up to €250m for stakeholders in market-leading businesses in the UK and across Europe. He specialises in originating and leading investments into private companies seeking to

accelerate their growth, both organically and through acquisition. Past investments include Foster & Partners, the global architects, Hayley Conference Centres and Morgan McKinley, the financial services business. david is a chartered accountant and prior to 3i worked in the insolvency division within PricewaterhouseCoopers.

LUIS MUÑOZ-ROJAS ENTRECANALES executive DiRectOR

Luis is a founding director of dUAL International. He opened the first dUAL operation in Madrid in August 1998, having previously served as director of GyC América, a reinsurance broking subsidiary of

Gil y Caravajal (now part of Aon). during that time Luis had considerable involvement in the Latin American territories. Luis began his insurance career in 1989 working with GyC & Partners, the British subsidiary of the GyC Group. Prior to this, he worked for Société Générale de France in various capacities and areas including foreign exchange.

JONATHAN NEwMAN NON-executive DiRectOR

Jonathan was appointed to the Hyperion Board in 2009. He is Group director of Finance at BP Marsh & Partners PLC, a venture capital group that specialises in investing in insurance intermediaries, and is a chartered Management

Accountant with more than 13 years’ experience in the financial services industry. He joined BP Marsh in November 1999 and is their nominee director on the boards of several investee companies.

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HOwdEN BROKING GROUP

Born in 1994 as a small London broker, Howden Broking Group (Howden) is now a global specialist broker, with 25 offices in 15 countries and more than 400 employees in wholly owned and associated companies, solving tough problems for clients across the world.

Howden comprises a series of local retail operations and a global wholesale and reinsurance practice built on a series of key global hubs. Operating both wholesale and retail arms brings balance to the group, and gives our clients access to global markets and a wealth of expertise.

Our impressive growth has stemmed from a relentless focus on the quality of our people and on our dynamic culture, in order fully to meet the needs of our clients. where we have grown through acquisition it has been by joining with teams of people who have the same drive and expertise; where we have grown organically it is because we routinely prove to our clients and to insurers that we solve the toughest problems, not just the easy ones.

THE PROPOSITION

we have demonstrated over the past 16 years that a specialist niche player that lives and dies by the classes and sectors upon which it focuses can meet challenges where larger competitors fail. This is not because we have a secret formula for success, but simply because we are a company which employs people who enjoy challenges, who are experts in their field, who work together in focused teams and, above all, who take the needs of their clients seriously and personally.

It is crucial to our continued success that we deliver the right products at the right price and in the right way. we employ professional managers to run our business so our technical experts can focus on delivering the best products for our clients.

Howden’s vision is to become a world class broking group, differentiated by its ability to achieve where others cannot.

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“It is crucial to our continued success that we deliver the right products, at the right price, in the right way.”

TIM COLES chief executive OfficeR

hOwDeN BROkiNG GROuP

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2009/10 FINANCIAL HIGHLIGHTS

The global economic situation did and continues to provide a challenging backdrop to the businesses of our clients. In spite of this, strong results from across the broking group saw us exceed our budget in 2009/10, with income of £41.8m and EBITdA of £6.4m. Our overall income growth was 29% and EBITdA growth was 47%. Excluding the acquisition of Hendricks & Co, our underlying income growth was 13% and EBITdA growth was 3%.

Our profit margin increased from 13% to 15%. In the face of difficult market conditions for all our operations, these numbers are testament to the fact that we are meeting the challenge we set ourselves – to deliver the right products at the right price and in the right way. we are positioning ourselves strongly to meet the challenge of delivering equally impressive growth consistently through the coming years.

GLOBAL wHOLESALE PRACTICE

Against the backdrop of ongoing global economic uncertainty our wholesale and reinsurance capabilities continue to grow to meet the needs of our expanding client base. Built on key hubs in Miami, Singapore and London, we are able to work with clients all over the world and provide them with access to the most appropriate markets for their risks.

The year saw several important developments which strengthen and expand the products we are able to offer.

• InMarch2010weweregrantedalicencetooperate in Singapore – an area identified as a crucial arm of our operation, allowing access to a wealth of underwriting expertise in the region

• InSeptember2010weformalisedtheacquisition of 40% of a South Korean broker, which now operates under the Howden brand

• OurNorthAmericanteamhas,injusttwoyears,established itself as one of the top five independent wholesalers in London, and continues to grow with new people and initiatives

• Ourpropertyteamhasexpandedtoincludeconstruction and risk engineering expertise

• WehavedevelopedaPersonalAccidentcapability.

Our continued push to meet client needs by diversifying our product offering and our geographical presence and capabilities is delivering strong results.

GEOGRAPHICAL SPLIT – INCOME

UK NORTH AMERICA

SOUTHERN EUROPE LATIN AMERICA

NORTHERN EUROPE SOUTH AMERICA

EASTERN EUROPE INdIA

ISRAEL MIddLE EAST

AUSTRALIA & NEw ZEALANd

FAR EAST

2%

1%

14%

1%

15%

5%

24%

9%

8%

6%

7%

8%

RETAIL

Dubai In a competitive and active market in the Middle East, our growth this year was across the board. we have had particular success on Group Medical Insurance and some large property reinsurances. we expect to continue this excellent growth in the coming year, with an expansion into the High Net worth Life/Investment area via a joint venture in Hong Kong. Our partnership with the Royal Institution of Chartered Surveyors (RICS) in the Middle East has also proved successful.

FinlandFinland re-entered recession in the first quarter of 2010, the first Eurozone country to do so. However, commentators note that along with Luxembourg, Finland is the only Eurozone country to have stuck to EU fiscal rules requiring it to keep its government deficit below 3% of its GdP and its debt under 60% of GdP.

In spite of the ‘double-dip’ a successful year for our Finnish operation saw client numbers grow by almost 20%. we were especially strong in providing insurance solutions to the Private Equity sector, and we now work with the main Finnish Private Equity companies.

In addition to our traditional strength in Professional Indemnity and directors’ & Officers’ (d&O) Insurance, we also successfully diversified our product offering, including the introduction of Public Offering of Securities Insurance (arranging a POSI policy for one of the few IPOs Finland saw this year), and general liability lines.

GermanyGermany’s economy in 2010 grew at the fastest rate since reunification two decades ago. Official figures show a growth of 3.6% last year – a big turnaround from 2009 when the country was in a deep recession.

On 1 October, Hendricks & Co GmbH became a part of the Howden Group. The operation is the leading specialist d&O and Commercial Legal Expenses broker in Germany. In the first full year as part of the Group it has fulfilled its promise to deliver an impressive contribution in a difficult market.

Germany has seen some of the most serious d&O litigation battles of recent times, and Michael Hendricks and his team have continued to push the boundaries of Management Liability Insurances to meet the challenges that have emerged. we have established ourselves as the leading d&O adviser to those banks in Germany that were created to hold toxic assets, winning several large clients, and we continue to expand our presence in the IPO sector, providing coverage for one of Germany’s largest IPOs this year.

The team continues to grow as we increase our market share and develop the strength and depth of our expertise. we will maintain our strong client focus as we grow, and the operation is restructuring into account management and new business teams to provide even more timely and accurate client coverage and a more focused and successful business acquisition drive.

IndiaIndia is the second-fastest growing economy in the world behind China, and with the growth rate close to 9% last year the country has gone on record to say it is targeting double-digit growth by 2012. In this vibrant yet challenging market our Indian operations delivered growth of more than 36% in income on prior year, and an impressive EBITdA margin of 30%.

Again showing that we are offering relevant products for clients, new business accounted for 38% of income – an increase of more than 7% on prior year.

we will continue to focus on our core capabilities of Liability and Financial Lines Insurances, and are strengthening our offering in the relatively new areas of Employee Benefits and Property, where we are building our portfolio of blue-chip clients.

IsraelThe Israeli economy remains strong in spite of historical regional issues, and our operation there is another of our businesses that has proved in confident fashion that the formula for growth in a soft market is to produce strong new business figures.

19% of total income was derived from new business. Our growth in 2010 came from various sources, with the most promising success stemming from diversifying from our traditional products and expanding into new products and territories. we made significant inroads in the provision of Medical Malpractice Insurance, with some important new clients, and we aim to continue to grow our market share in this area. we are also proud to have become a leading specialist broker in the Life Science sector, providing solutions for clinical trials and product liability for the majority of these accounts. we have a broad portfolio of clients, many of whom are leading organisations in Israel which also have international operations. Like many of the businesses in the Group, the needs of our clients are leading us to begin to diversify from our traditional products to provide additional general property and casualty solutions.

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SpainSpain had a torrid 2010, but is slowly emerging from recession. There was much speculation towards the end of the year that Spain might need to ask for financial assistance from fellow European Union (EU) members, but the Spanish government has repeatedly insisted that it will not need to apply for a bail-out.

So it is doubly impressive that our Iberian operation continues to go from strength to strength. Across four locations in Spain, the team has further developed its capabilities in the areas of Professional Indemnity, Medical Malpractice, Credit and Surety, Property and CAR, and Employee Benefits. Growth has been an impressive 19% on 2009.

Of particular note is the growth of activity in the successful Credit and Surety team in line with the international expansion of many of our clients. Shifting from a national service to a global one has seen us win business in Canada, United States, Latin America, North Africa and the Middle East, further cementing the leading role Howden’s has in this sector in the Spanish market.

Over the next 12 months and beyond, the focus is, as with all of our operations, firmly on updating our products and services to ensure relevance in this challenging economic climate.

SwedenSweden’s strong public finances and fast-growing economy made it a sophisticated haven from financial turmoil in the Eurozone, backed up by a very strong currency, with the Krona rising 25% against the Euro over the past two years.

Operating in such a mature market where competition is fierce, our Swedish business is an excellent example of how being a specialist insurance broker allows us to deliver value to clients and grow in the process.

Building, in particular, on last year’s development of a niche specialty in trade credit and political risk insurance, and a new approach to our marketing, we have increased our new business in Sweden by 81%, and our EBITdA by 62%.

UK2010 in the UK saw signs of economic recovery and a new government, but the backdrop of large cuts in public spending, limited bank lending to small businesses, the threat of inflation and corporate nervousness, and another year of soft insurance markets, put to the test the our claim to be sector specialists who know insurance.

Howden Risk Partners provides bespoke Management Liability Insurance to the investment industry, and continues to demonstrate its strength in a market where rates are typically up to 25% lower than last year. The team has increased its client numbers by 20%, and an 84% quote to close ratio illustrates that we are providing the right solutions to our clients.

Our Professional Risks team, which arranges liability cover for professionals, has restructured more fully to meet client needs. Our Commercial team focuses on clients with more straightforward insurance requirements, who tend to be smaller in size, and our Corporate team focuses on clients with more complex insurance requirements, who tend to be larger in size. This new structure allows us to provide relevant service in the most effective and efficient way.

we have also developed our product offering, sector spread and partnerships with a number of high profile organisations.

Having worked with the association for nearly 15 years, we were delighted to have our relationship officially cemented when we were appointed the Preferred UK PI Broker to the Royal Institution of Chartered Surveyors. we continue to work with insurers and with surveyors to help improve understanding of the risk management issues faced, and to further add value as specialists in the sector.

we are extending our sector presence, and, with the recruitment of experts in the respective fields, have recently begun providing insurance to care homes and GP practices.

Overall, income has grown by 12% on 2008/09 and EBITdA has grown by 51%, with a margin of 20%. By concentrating on delivering value to our clients in core areas of expertise, and by growing our capabilities through high quality recruitment, we are delivering results that prove we are sector specialists who know insurance.

Our future activity will build on this strong platform for growth, and we will look to further diversify our sector specialties, and deliver additional products to our clients.

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LOOKING FORwARd

Across all territories we will continue to drive the business forward and have set ourselves ambitious goals for the next five years and beyond. Along with driving revenue growth, we will continue to focus on making the business more efficient and profitable. Having delivered an improved profit margin of 15% in 2009/10, we are working hard to improve this further.

we continue to look at new geographies such as the Far East, to support companies who are working in the logistics and construction sectors in these higher risk territories, and plan to enter the retail Financial Institutions (FI) business in the UAE.

Part of our revenue growth will be driven by strategic acquisitions. In december we announced our agreement to purchase the largest independent South-East Asian insurance broker, Accette. This will add a further dimension to our product offering and geographical reach, and is just one of a number of new initiatives we will be making over the coming months.

Our most important investment is in our people. Over the coming year, we will be rolling out new initiatives aimed at training and developing our staff, providing them with the tools to grow both professionally and personally within our business.

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“All MGAs are not created equal.”

BOB vAN GIESON chAiRMAN AND chief executive OfficeR

DuAL iNteRNAtiONAL

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THE dUAL GROUP

dUAL, the underwriting arm of Hyperion, was formed in 1998 when the Group’s first underwriting agency, dUAL Iberica, was established in Madrid. Hyperion operates its underwriting agency business through three brands, dUAL International (dUAL), CFC Underwriting (CFC) and vK Underwriters (vKU).

dUAL is the largest underwriting agency in Hyperion and consists of 17 offices in Germany, Ireland, Italy, Spain, United Kingdom, United States, Hong Kong and Australia. These offices are supported by dUAL’s headquarters based in London.

dUAL is committed to delivering first-class insurance products to the mid-market sector. Through its global network, it provides access to international expertise and consistently delivers a service tailored to its clients’ needs.

THE dUAL GROUP

Results for this financial year have been excellent. Revenue including profit commission (PC) grew by 28% and EBITdA grew by 36% against the previous year.

A number of goals were achieved:

• Our plan to function in a more decentralised way has generated many local initiatives

• Our goal to improve our return above the line prior to PC has contributed significantly to our EBITdA

• Our information technology investment is beginning to reduce staff costs

• we successfully arranged to have Hiscox provide 25% capacity for our main binder with Arch.

A significant component of a Managing General Agent (MGA) is the strength of its capacity provider. Arch and Hiscox represent high quality capacity which provides outstanding security to our broker and world-wide clients.

COMPETITION

world-wide insurance capacity continues to expand, particularly in the SME segments in which we specialise. Our goal always to achieve an underwriting profit for our capital provider continues to be challenged by falling rates. The strategy to accomplish our profitability goals are supported by service levels, expense management and IT investment.

Our historic profitability should be recognised as testament to our attention to detail and defining our role as a virtual insurance company. Our company is aligned behind the notion of a decentralised structure which better serves local markets.

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AROUNd THE wORLd

UKAt a macro-level, financial pressure within mid-market corporates and economic uncertainty has been at the front of clients’ minds. However, for us, new branches, new products, along with new capacity providers, have highlighted the year. Newline, Amlin and Liberty agreed to provide capacity in different lines of business, along with Newline providing excess capacity for our directors’ & Officers’ (d&O) products. A new branch in dublin enabled us to better service our Irish broker and clients. And our new IT system, duet, arms us with a quality and timeliness of service, unmatched in the market.

dUAL Corporate Risks (dCR) represents our largest single branch and, in spite of a very competitive London market, achieved a 30% revenue growth year on year. The historic profitability generated by this branch further emphasises the key component of our strategy that service and relationships remain critical to our success.

ItalyThe strategy we have developed over the past four years has delivered excellent results, in spite of national economic uncertainty. decisions surrounding agency appointments and white label products supported by excellent service, have helped us achieve a truly outstanding year of growth and profitability.

GermanyAmid a strong recovery in the country’s financial and support services sectors, our focus in Germany continues to surround d&O exposures. Our office, as a result of a regulatory decision, introduced a policy form to respond to the needs of individual director exposures. Our initiatives to develop a product have been rewarded with significant revenue growth in this segment. Once again the service provided by this office to its market is a critical component of our success.

SpainThe economic environment has made our task increasingly difficult. In spite of these challenges and our historical market share, our staff have responded and maximised new business opportunities, including the successful launch of our first data protection product.

Australia / AsiaAs with the economies in the region, our business in Australia has continued to flourish. Revenue growth and profit has been sustained in spite of a highly competitive rate environment. we now have four branches; Sydney, Perth, Brisbane and Melbourne. we have expanded our product offering outside our standard Professional Indemnity, d&O, Management Liability and Financial Lines, with the addition of Travel & Accident Group based in Melbourne.

we completed work on our IT system, webrater, to improve and simplify the delivery of our products electronically.

Our investment in Hong Kong and wider Asia during the previous two years is beginning to pay dividends in revenue growth. Our partner in the region, MSIG Insurance (Singapore), continues to assist us in achieving growth targets in the ever growing Asian market.

Latin America / Puerto RicoOur office in Miami, vKU, is responsible for this region. Based upon additional support from London, our business has improved significantly this year, amid relative economic calm in the region. we have a number of different binders, capacity providers and classes of business in this area, which provides diversity to our portfolio. As in other offices in dUAL, our success is based upon service and continued profitable results on behalf of our capacity providers.

All MGAs are not created equal. Our staff, our strategic execution, our service and our capacity providers have been crucial to our past success and bode well for the future.

GEOGRAPHICAL SPLIT – INCOME

1.9%24.6%

37%

25.3%

11.2%

UK

AUSTRALIA

EUROPE

NORTH/SOUTH AMERICA

OTHER

22

“It was extremely rewarding for all of our staff to be recognised by the industry when CFC was voted Underwriter of the Year at the British Insurance Awards.”

23

dAvId wALSH MANAGiNG DiRectOR,

cfc uNDeRwRitiNG

I am pleased to report that CFC has had another very successful year during which the company once again achieved significant growth in both revenue and profit. Total operating income grew by 41% to £7.5m, and operating profit before exceptional items increased by 26% to more than £3m.

Notwithstanding the fact that the past three years have brought the most challenging market conditions yet, these three years have actually been our most successful to date. Over that period, the compound annual growth rate in operating income has been 42%, at the PBT level it is an even more impressive 47%, and earnings per share has risen 56%, indicating that CFC’s growth has been achieved without the need to issue new equity and emphasising the business’s ability to develop shareholder value through organic growth.

CFC UNdERwRITING

24

OUR BUSINESS

The year has been one of considerable investment in people, premises, products, the NERd computer system and our online broker systems, but CFC’s sustained growth has enabled it to absorb these additional overheads without diluting returns and we are particularly pleased to have delivered a PBT margin of 39%. Over the past nine years we have delivered an average PBT margin of 36%.

we finalised the design and implementation of NERd. The result is an extremely efficient, one-touch, underwriting process that we control in house. we are confident that this will be a major source of competitive advantage for CFC over the coming years and enable the business to support the integration of new teams, the rapid roll-out of products, and the delivery of industry-leading service levels in a highly effective and profitable manner.

we have also continued to develop our online proposition for brokers and we now license systems to the two largest insurance brokers in the world as well as a number of smaller brokers. By providing these systems for brokers to ‘white label’ as their own, CFC aims to become the insurance brokers’ partner in transacting small programme business online and help them to compete against the growing threat of direct insurers and aggregators. we are pleased with how this project has progressed over the past year and believe that its potential is extremely exciting.

These initiatives have contributed to our goal of making the business scalable. I now believe that we have more tangible competitive advantage versus our peers than ever before and that there is genuine scope for further significant profitable growth.

EMPLOYEES

during the year, we employed a new Finance and Operations director and created a central, dedicated product development and underwriting resource led by a new Underwriting director. This team ensured that the speed of product innovation and regeneration continued to keep pace with the company’s growth and, as a result, five products were launched during the year contributing nearly 15% of CFC’s new business commission.

At the time of writing we comprise a team of 38 individuals, which is nine more than this time last year. It is a simple but very important fact that the people that were with us last year, and the year before that, and the year before that, are still with us today.

After such a busy year, it was extremely rewarding for all of our staff to be recognised by the industry when CFC was voted Underwriter of the Year at the British Insurance Awards. The timing of this award feels absolutely perfect, as we have just completed re-engineering the entire business over the past two years and we will imminently re-launch our brand, website and communications strategy and embark on a new marketing campaign.

FINANCIAL STATEMENTS

25

26

dIRECTORS’ REPORT

GROUP dIRECTORS’ REPORT FOR THE YEAR ENdEd 30 SEPTEMBER 2010

the Directors submit their report and audited financial statements for hyperion insurance Group Limited (‘the company’) together with the consolidated financial statements of the Group for the year ended 30 September 2010.

Principal activitiesthe principal activity of the company during the year was that of a holding and investment company for a group of insurance intermediaries. the Group’s trading operations comprise wholesale and retail insurance broking, reinsurance broking and underwriting agencies.

REvIEw OF BUSINESS

Financial reviewthe financial statements include a consolidated statement of comprehensive income, consolidated statement of financial position (ifRS equivalent to the balance sheet) and consolidated cash flow statement for the year ended 30 September 2010, together with comparative figures for the year ended 30 September 2009. the statement of financial position has comparative figures for the year ended 30 September 2008 as well as for the year ended 30 September 2009.

the comparative figures for the years ended 30 September 2008 and 2009 have been restated to reflect the adoption by the Group of international financial Reporting Standards (‘ifRS’) as the basis of preparation of its consolidated accounts. the impact on the figures for both 2008 and 2009 is explained in note 34. the statutory accounts of individual companies within the Group continue to be prepared in accordance with local accounting standards and in this regard the balance sheet for the Parent company, hyperion insurance Group Limited, has been prepared in accordance with uk Generally Accepted Accounting Principles (uk GAAP).

the consolidated income statement has been prepared in accordance with ifRS. the segmental analysis of the Group identifies the approach adopted by the Group in assessing its financial performance and the following comments are probably more easily interpreted by reference to note 3.

the Board is pleased to announce that the Group reported a 26% growth in operating income to £72.2m (2009: £57.2m - restated). Group eBitDA (earnings before interest, tax, Depreciation and Amortisation) excluding non-recurring items was £12.0m, up 41% (2009: £8.5m - restated). Group operating profit, before non-recurring items was £10.5m (2009: £7.2m - restated). Non-recurring items are separately identified to provide greater understanding of the Group’s underlying performance. further analysis of non-recurring items can be found in the Group’s accounting policies. Group profit before tax was £6.9m compared to a restated £3.8m in 2009.

Group operating income, excluding profit commissions, increased by 32% and Group eBitDA excluding non-recurring items grew by £5.1m. Profit commissions were down by £1.6m on 2009.

the howden broking group reported revenues of £41.8m (2009: £32.4m - restated), representing overall growth of £9.4m (29%) compared to prior year. Profit before tax was £4.7m (2009: £3.7m).

DuAL international’s reported revenue excluding profit commission (‘Pc’) increased from £15.7m to £21.1m and its eBitDA (including Pc) increased from £3.8m to £4.3m. Gross written premiums increased by 31% to £147m.

cfc underwriting reported total operating income excluding Pc of £5.9m (2009: £3.9m), and eBitDA growth was up £0.4m to £1.5m for the year with total Pc earnings increasing by 15% to £1.4m compared with 2009.

Acquisitions and growthDuring the year, the Group raised further shareholder loan note financing of €1.5m in connection with the acquisition of hendricks & co Gmbh, the leading specialist Directors’ & Officers’ and commercial legal expenses broker in Germany.

Post balance sheet eventin December 2010, the Group’s subsidiary howden Broking Group Limited, entered into an agreement to acquire 75% of the economic interest and associated shareholdings in the insurance intermediary subsidiaries and associated companies of Golden eight holdings Limited and Accette holdings (Singapore) Pte Limited (through two newly incorporated companies hBG Asia holdings Limited and hBG holdings (Singapore) Pte. Limited).

Dividendsthe profit of the Group for the year after taxation and minority interests amounted to £2.5m (2009: £1.5m - restated). No equity dividends were paid during the year (2009: £nil).

THE BOARd

the Board is responsible for maintaining effective control over the Group’s significant strategic, financial, organisational, legal and regulatory matters. it meets at least six times a year. Management supply the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary.

Directorsthe Directors who served during the year are listed below:

J P de Blocq van kuffeler chairman D P howden chief executive L i Muñoz-Rojas entrecanales e R fady e h woolf R t van Gieson D A whileman J S Newman (appointed 11 November 2009) t S howden (resigned 25 february 2010) B P Marsh (resigned 11 November 2009)

dIRECTORS’ & OFFICERS’ LIABILITY INSURANCE

the company has purchased insurance to cover Directors’ & Officers’ liability, as permitted by section 233 of the companies Act 2006.

27

CORPORATE GOvERNANCE

hyperion is committed to maintaining high standards of corporate governance. we recognise that good governance helps the business to deliver our strategy and safeguard shareholders’ long term interests. we believe that the uk corporate Governance code provides a useful guide and we apply these principles as appropriate to a group of our size.

the Board has a schedule of matters specifically reserved for its decision.

Matters requiring Board approval include Group strategy and planning, structure and capital, financial reporting and controls, key business policies (including the remuneration policy), Board membership and other appointments.

the Board currently comprises four executive Directors and four Non-executive Directors (including the chairman) with an appropriate balance of experience and knowledge. As a result, the Board’s decision-making processes cannot be dominated by an individual or small group.

the Directors have access to independent professional advice at the company’s expense, where deemed necessary, to discharge their responsibilities as Directors. the Directors also have access to the advice and services of the company Secretary.

ACCOUNTABILITY ANd AUdIT

the Board has overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness.

the implementation and maintenance of the risk management and internal control systems are the responsibility of the executive Directors and senior management. the systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss.

Relations with shareholdersthe Board ensures that a satisfactory dialogue with major investors and employee shareholders takes place. each of the company’s major investors is represented on the Board by a Director.

Conflicts of interestthe company’s Articles of Association permit the Board to authorise potential conflicts of interest. Authorisation of any such conflicts may only be given by Directors who have no interest in the matter being considered. the Board has procedures in place to review actual and potential conflicts of interest.

Messrs howden, Muñoz-Rojas entrecanales, Newman and whileman represent the interests of the company’s four largest shareholders and their interests have been notified to the company.

Audit and remuneration committeesthe Board has delegated certain responsibilities to committees that are described below, both of which have formally constituted terms of reference. the Board does not consider that it is of sufficient size to justify the establishment of a permanent Nomination committee and all matters relating to Board appointments are therefore dealt with by the Board itself, or by a sub-committee specifically formed for that purpose.

i) Audit Committeethe Audit committee comprises three Non-executive Directors and is chaired by emile woolf. the committee meets at least four times a year. Meetings are attended, by invitation, by the company’s external auditors, the finance Director and members of his staff, compliance officers and internal audit. the Audit committee, through its chairman, formally reports to the Board on its activities.

the committee’s role is to assist the Boards of the company and its subsidiaries in fulfilling their responsibilities with regard to accounting policies, internal control, financial reporting functions, risk management, compliance and related matters.

Membershipe h woolf (chairman) J S Newman D A whileman

External auditorthe committee is responsible for overseeing the relationship with the external auditor. During the year, the committee reviewed the external auditors’ terms of engagement, assessed their independence and reviewed their audit findings.

A formal policy on auditor independence will be adopted by the committee in late December 2010. Among other things, this sets out the circumstances under which the external group auditor can provide non-audit services in a manner that does not conflict with their independence.

Internal auditthe Audit committee is required to assist the Board to fulfil its responsibilities relating to the adequacy of the resourcing and plans of the internal Audit department. to fulfil these duties, the committee:

• Reviewedandassessedtheannualinternalauditplan;

• ReviewedallreportsontheGroupfromtheinternalauditors;

• Reviewedtheco-ordinationbetweeninternalandexternalauditors;

• Reviewedandmonitoredmanagement’sresponsivenesstothefindingsandrecommendationsoftheinternalauditor;

• ReviewedareportbytheHeadofInternalAuditonRiskManagementinoverseassubsidiaries;and

• DiscussedwithInternalAudit,withoutmanagementbeingpresent, its remit and any issues arising from the internal audits carried out.

28

dIRECTORS’ REPORT (cONtiNueD)

ii) Remuneration Committeethe Remuneration committee comprises four Non-executive Directors and is chaired by John van kuffeler. the committee meets at least four times a year. Meetings are attended by the chief executive and by the Group human Resources manager. Other individuals and external advisers may be invited to attend for all or part of any meeting as and when appropriate. the Remuneration committee, through its chairman, formally reports to the Board on its activities.

the committee’s overall responsibility is to balance the various interests of shareholders, the Group and its employees, with the aim of ensuring that the Group, through its remuneration policy, is able to attract, retain and motivate management and senior staff of appropriate experience and expertise. further details on the activities of the Remuneration committee are included in the Directors’ remuneration report on page 30.

MembershipJ P de Blocq van kuffeler (chairman) e h woolf J S Newman D A whileman

BOARd ANd COMMITTEE ATTENdANCE 2010

BOARd

AUdIT COMMITTEE

REMUNERATION COMMITTEE

e R fady 6 - -

R t van Gieson 6 - -

D P howden 6 - -

J P de Blocq van kuffeler 6 - 4

L i Muñoz-Rojas entrecanales 5 - -

J S Newman (appointed 11 November 2009)

6 4 3

D A whileman 6 2 3

e h woolf 6 4 4

Former directors

t S howden (resigned 25 February 2010)

2 1 -

B P Marsh (resigned 11 November 2009)

1 - -

INTERNAL CONTROL ANd RISK MANAGEMENT

the Board is responsible for maintaining a sound system of internal control and risk management, and for reviewing its effectiveness to safeguard shareholders’ investments and Group assets. there is no absolute means of preventing material loss and/or misstatement and the Group’s internal controls reflect a balanced judgement, taking into account the direct costs of controls as well as the indirect costs of being over-bureaucratic, which provide reasonable assurance against material loss and/or misstatement.

the Group’s internal controls are tested and key business risks are evaluated on a continuing basis, using internal Audit, compliance and other relevant expertise. the Group maintains insurance cover against certain risks, including fidelity insurance.

Principal business risks and uncertaintiesthe Group is exposed to the cyclical factors that affect the insurance market, and premiums and commissions. whilst its underwriting agency operations are not directly responsible for claims, claims costs do affect the level of profit commission that the Group receives.

further, the Group’s international focus (which is one of its most important strengths) exposes its revenues to currency fluctuations, mainly Sterling/Dollar and Sterling/euro. the Group has floating-rate borrowings in Sterling/uS Dollar, Australian Dollars and Sterling/euro and is therefore also exposed to interest rate movements in those currencies. the Group has put in place appropriate hedging strategies to manage this risk.

the Group is ambitious and seeks to grow by means of acquisitions and organic growth. Such activities are inherently uncertain, particularly start-up operations where the timing and quantum of revenue build-up cannot be forecast with precision, and there is no developed book of renewals. the Group seeks to minimize such uncertainties with careful business planning, due diligence and warranties.

in all its principal operations, the Group is also exposed to regulatory risk, and also an element of political risk in certain geographic regions, such as the Middle east and Latin America.

the Group uses a number of internal performance indicators to monitor and assess its business. in particular, renewal and attrition rates are carefully reviewed.

29

Financial risk managementthe Group’s financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency or interest rate risks. its policy is to finance working capital through retained earnings and bank borrowings at prevailing market interest rates. Acquisitions are funded through the combination of retained earnings, additional equity and appropriate long-term finance.

i) Cash flow riskthe Group’s working capital comprises principally insurance debtors, creditors and cash as described in note 1(k). it is the Group’s policy not to fund any insurance transaction therefore minimising any credit exposure attaching to these insurance balances. insurance balances are denominated in various currencies, predominantly Sterling, uS Dollars and euros. to minimise the foreign exchange exposure the Group endeavours to match foreign currency assets with liabilities of similar maturities and vice versa. where this is not possible, Group companies occasionally purchase appropriate financial instruments to cover material exposures. the Group’s exposure to the price risk of financial instruments is therefore minimal.

ii) Liquidity riskin order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term debt finance.

further details regarding the liquidity risk can be found in note 25 in the financial statements.

iii) Credit riskthe Group’s principal financial assets are cash, trade and other receivables and investments. the amounts presented in the statement of financial position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience is evidence of a reduction in the recoverability of cash flows. with regards to insurance balances, the Group’s risk is limited as the Group acts as the agent on these transactions. further information on insurance balances receivable and the risk relating to these balances can be found in the statement of accounting policies in the financial statements.

the Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

the credit risk on liquid funds and derivative financial instruments is limited as the counterparties are the Group’s bankers with high credit-ratings assigned by international credit-rating agencies.

GOING CONCERN

the Group’s business activities, internal controls and risk management structure, including details of its financial instruments and hedging activities, and its exposures to credit and liquidity risks, are set out above.

the Group has adequate financial resources together with its business being geographically diverse. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

EMPLOYMENT POLICIES

the Board recognises that the continuing success of the Group depends on its employees and its ability to continue to adopt policies created to attract, motivate and retain employees of the highest calibre.

the Group is an equal opportunities employer and bases decisions on individual ability regardless of race, religion, gender, age or disability. the Group’s equal opportunities policy is designed to ensure that disabled persons are given the same consideration as others when they apply for jobs, and enjoy the same training, career development and prospects as other employees.

the Group seeks to achieve a common awareness among its employees of the financial and economic factors affecting the business by consultation and effective employee communication through a variety of media.

ENvIRONMENTAL POLICY

the Group is committed to reducing its impact on the environment.

the Group remains committed to:

• Minimisingenergy,waterandpaperuse;

• Optimisingwasterecyclingbyprovidingfacilitiesandencouragingpeopletorecycle;

• Reducingtravel,encouragingpeopletocommunicatewithouttravellingwhenpracticable;and

• Ensuringappropriateregulatorycompliance.

SUPPLIERS

the Group does not currently subscribe to any code or standard on payment practice. it is the Group’s policy, however, to settle terms of payment with those suppliers when agreeing the terms of each transaction, to ensure that those suppliers are made aware of the terms of payment, and to abide by the terms of payment.

the amount due to the Group’s trade creditors at 30 September 2010 represented 30 days’ average daily purchases of goods and services received from those creditors.

CHARITABLE dONATIONS

During the year to 30 September 2010 the Group made cash donations of £21,689 (2009: £14,000) for the benefit of charitable causes.

No political donations were made by the Group.

30

dIRECTORS’ REPORT (cONtiNueD)

dIRECTORS’ REMUNERATION REPORT

the Group’s remuneration policy is to ensure that the remuneration of employees and executive Directors enables it to recruit, retain and motivate individuals of sufficient expertise and commitment to further the success of the Group.

the Remuneration committee comprises solely of independent Non-executive Directors and has the following duties:

i) to determine and agree with the Board the framework or broad policy for the remuneration of the company’s chairman, ceO, and the executive Directors, the company Secretary and the members oftheseniorexecutivemanagementteam;

ii) in determining such policy, take into account all factors which it deems necessary. the objective of such policy shall be to ensure that members of the executive management of the company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded fortheirindividualcontributionstothesuccessoftheGroup;

iii) within the terms of the agreed policy and in consultation with the chairman and/or ceO as appropriate:

a) determine the total individual remuneration package of each executive Director and other senior executives whose contractual remuneration exceeds £150,000 per annum including bonuses, incentive payments and share options or othershareawards;

b) review and approve the appointments of all senior executives whose proposed contractual remuneration exceeds £150,000 perannum;and

c) review and approve bonus plans and any remuneration policies adopted by subsidiary companies.

dISCLOSURE OF INFORMATION TO AUdITORS

each of the persons who is a Director at the date of approval of this report confirms that:

• SofarastheDirectorsareaware,thereisnorelevantauditinformationofwhichtheGroup’sauditorsareunaware;and

• TheDirectorshavetakenallthestepsthattheyoughttohavetaken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.

this confirmation is given and should be interpreted in accordance with the provisions of section 418 of the companies Act 2006.

AUdITORS

Deloitte LLP have indicated their willingness to be reappointed for another term and appropriate arrangements have been put in place for them to be deemed reappointed as auditors in the absence of an Annual General Meeting.

Approved by the Board and signed on its behalf by:

H G PALLOT SecRetARY DeceMBeR 2010

dIRECTORS’ INTERESTS

AT 30 SEPTEMBER 2010

NO. OF ‘A’ ORdINARY SHARES

AT 30 SEPTEMBER 2010

NO. OF ‘B’ ORdINARY SHARES

At 30 SePteMBeR 2009

NO. Of ‘A’ ORDiNARY ShAReS

At 30 SePteMBeR 2009

NO. Of ‘B’ ORDiNARY ShAReS

e R fady - 518,600 - 518,600

R t van Gieson - 420,200 - 420,200

D P howden 1 6,317,200 - 6,317,200 -

J P de Blocq van kuffeler - 424,400 - 424,400

L i Muñoz-Rojas entrecanales 2 7,450,400 - 7,450,400 -

J S Newman - - - -

D A whileman - - - -

e h woolf - - - -

1 Shareholding includes shares held in family trust. 2 Shares held through investor companies in which the Director has an interest.

31

STATEMENT OF dIRECTORS’ RESPONSIBILITIES

the Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

company law requires the Directors to prepare financial statements for each financial year. under that law the Directors have elected to prepare the Group financial statements in accordance with international financial Reporting Standards (ifRSs) as adopted by the european union and the Parent company financial statements in accordance with united kingdom Generally Accepted Accounting Practice (united kingdom Accounting Standards and applicable law). under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

in preparing the Parent company financial statements, the Directors are required to:

• selectsuitableaccountingpoliciesandthenapplythemconsistently;

• makejudgmentsandaccountingestimatesthatarereasonable andprudent;

• statewhetherapplicableUKAccountingStandardshavebeenfollowed, subject to any material departures disclosed and explained inthefinancialstatements;and

• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriate to presume that the company will continue in business.

in preparing the Group financial statements, international Accounting Standard 1 requires that Directors:

• properlyselectandapplyaccountingpolicies;

• presentinformation,includingaccountingpolicies,inamanner that provides relevant, reliable, comparable and understandable information;

• provideadditionaldisclosureswhencompliancewiththespecificrequirements in ifRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on theentity’sfinancialpositionandfinancialperformance;and

• makeanassessmentoftheCompany’sabilitytocontinueasa going concern.

the Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the companies Act 2006. they are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

the Directors are responsible for the maintenance and integrity of the Group website, www.hyperiongrp.com. Legislation in the united kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

the Directors confirm that, to the best of each person’s knowledge:

• theGroupfinancialstatements,whichhavebeenpreparedinaccordance with ifRSs as adopted by the eu, give a true and fair view oftheassets,liabilities,financialpositionandprofitoftheGroup;and

• theDirectors’reportincludesafairreviewofthedevelopmentandperformance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

32

INdEPENdENT AUdITORS’ REPORT TO THE MEMBERS OF HYPERION INSURANCE GROUP LIMITEd

we have audited the Group financial statements of hyperion insurance Group Limited for the year ended 30 September 2010 which comprise the consolidated income Statement, the consolidated Statement of comprehensive income, the consolidated Statement of financial Position, the consolidated cash flow Statement, the consolidated Statement of changes in equity and the related notes 1 to 34. the financial reporting framework that has been applied in their preparation is applicable law and international financial Reporting Standards (ifRSs) as adopted by the european union.

this report is made solely to the company’s members, as a body, in accordance with chapter 3 of Part 16 of the companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ 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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group financial statements in accordance with applicable law and international Standards on Auditing (uk and ireland). those standards require us to comply with the Auditing Practices Board’s (APB’s) ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. this includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistentlyappliedandadequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebytheDirectors;andtheoverallpresentation of the financial statements.

Opinion on financial statementsin our opinion the Group financial statements:

• giveatrueandfairviewofthestateoftheGroup’saffairsasat 30September2010andofitsprofitfortheyearthenended;

• havebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion;and

• havebeenpreparedinaccordancewiththerequirementsofthecompanies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006in our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exceptionwe have nothing to report in respect of the following matters where the companies Act 2006 requires us to report to you if, in our opinion:

• certaindisclosuresofDirectors’remunerationspecifiedbylaw arenotmade;or

• wehavenotreceivedalltheinformationandexplanationswe require for our audit.

Other matterwe have reported separately on the Parent company financial statements of hyperion insurance Group Limited for the year ended 30 September 2010.

dAvId RUSH (SeNiOR StAtutORY AuDitOR) 10 DeceMBeR 2010

for and on behalf of Deloitte LLP chartered Accountants and Statutory Auditors London, united kingdom

33

CONSOLIdATEd INCOME STATEMENT FOR THE YEAR ENdEd 30 SEPTEMBER 2010

NOTE

YEAR ENd 30 SEPTEMBER

2010 £’000

YeAR eND 30 SePteMBeR

2009 £’000

fees and commissions

Other operating income

Other operating costs

Depreciation, amortisation and impairment of non-current assets

3

4

71,572

587

(60,546)

(1,499)

56,600

560

(50,499)

(1,225)

Operating profit 4 10,114 5,436

Analysed as:

Operating profit before non-recurring items

Non-recurring items 4

10,525

(411)

7,235

(1,799)

Operating profit 4 10,114 5,436

finance income

finance costs

Share of results of associates after tax and minority interests

5

5

14

147

(2,481)

-

95

(1,301)

(386)

Profit before changes in the fair value of deferred consideration 7,780 3,844

changes in the fair value of deferred consideration 5 (868) -

Profit before tax for the year 6,912 3,844

income tax expense 8 (2,522) (1,538)

Profit after tax 4,390 2,306

Profit attributable to:

Group shareholders

Minority interests

2,531

1,859

1,478

828

4,390 2,306

Earnings per share attributable to the equity holders of the Company during the year:

earnings per share – basic and diluted

Before fair value adjustments on deferred consideration – basic and diluted

9

9

6.0p

8.1p

3.5p

3.5p

Turnover and operating profit for the year arose from continuing operations.

The notes on pages 38 to 73 form an integral part of these consolidated financial statements.

34

CONSOLIdATEd STATEMENT OF COMPREHENSIvE INCOME FOR THE YEAR ENdEd 30 SEPTEMBER 2010

NOTEYEAR ENd

30 SEPTEMBER 2010

£’000

YeAR eND 30 SePteMBeR

2009 £’000

Profit for the year 4,390 2,306

Other comprehensive income

Gain on cash flow hedges

(Loss)/gain on foreign currency translation

23

23

366

(262)

-

82

Other comprehensive income for the year 104 82

Total comprehensive income for the period 4,494 2,388

Profits attributable to:

Group shareholders

Minority interests

2,635

1,859

1,560

828

4,494 2,388

35

NOTE

£’000

2010 £’000

£’000

2009£’000

£’000

2008 £’000

Non-current assets

Goodwill

intangible assets

Property, plant and equipment

investments in associates

Deferred tax assets

11

12

13

14

21

42,470

1,353

4,924

708

1,178

32,720

17

3,025

-

941

31,046

4

2,935

16

545

50,633 36,703 34,546

Current assets

trade and other receivables

Own cash and cash equivalents

insurance cash

Derivative financial instruments

15

16

16

20

22,408

13,337

44,727

366

21,344

14,971

42,577

-

23,845

5,272

31,825

-

80,838 78,892 60,942

Current liabilities

insurance payables

trade and other payables

corporation tax payable

Borrowings


17

17

17

19

20

(39,257)

(16,800)

(1,724)

(917)

(744)

(39,094)

(12,697)

(1,413)

(3,581)

(499)

(31,744)

(8,599)

(1,838)

(389)

(1,880)

(59,442) (57,284) (44,450)

Net current assets 21,396 21,608 16,492

Non-current liabilities

Borrowings


Deferred tax liabilities


19

18

21

20

(20,770)

(989)

(397)

(8,429)

(30,585)

(16,647)

(771)

(127)

(735)

(18,280)

(12,871)

(909)

-

-

(13,780)

Total net assets 41,444 40,031 37,258

Equity

issued share capital

Share premium

Other reserves

Retained earnings

22

23

420

34,888

(1,421)

5,396

418

34,852

1,174

2,856

407

34,330

422

1,385

Shareholders’ equity 39,283 39,300 36,544

Minority interests 2,161 731 714

Total equity 41,444 40,031 37,258

The financial statements were approved by the Board of directors and authorised for issue on 9 december 2010. They were signed on its behalf by:

d P HOwdEN E R M FAdY DiRectOR fiNANce DiRectOR

Company Number 2937398

CONSOLIdATEd STATEMENT FINANCIAL POSITION AS AT 30 SEPTEMBER 2010

36

CONSOLIdATEd STATEMENT OF CHANGES IN EqUITY AS AT 30 SEPTEMBER 2010

2010

CALLEd UP SHARE

CAPITAL £’000

SHARE PREMIUM

ACCOUNT £’000

OTHER RESERvES

£’000

RETAINEd EARNINGS

£’000

TOTAL SHAREHOLdERS

EqUITY £’000

MINORITY INTERESTS

£’000

TOTAL

EqUITY £’000

As at 1 October 2009

Profit for the year

employee share options

Dividends paid

Net foreign exchange adjustments

Net movement in shares held by eBt

Movement in cash flow hedge

Arising on acquisition and disposals

Other

418

-

-

-

-

2

-

-

-

34,852

-

-

-

-

36

-

-

-

1,174

-

96

-

(262)

-

366

(2,785)

(10)

2,856

2,531

-

-

-

-

-

-

9

39,300

2,531

96

-

(262)

38

366

(2,785)

(1)

731

1,859

-

(661)

85

-

-

299

(152)

40,031

4,390

96

(661)

(177)

38

366

(2,486)

(153)

As at 30 September 2010 420 34,888 (1,421) 5,396 39,283 2,161 41,444

2009

cALLeD uP ShARe

cAPitAL £’000

ShARe PReMiuM

AccOuNt £’000

OtheR ReSeRveS

£’000

RetAiNeD eARNiNGS

£’000

tOtAL ShARehOLDeRS

equitY £’000

MiNORitY iNteReStS

£’000

tOtAL

equitY £’000


Profit for the year


Dividends paid

issue of shares


Own shares held by eBt


Other

407

-

-

-

15

-

(4)

-

-

34,330

-

-

-

851

-

(329)

-

-

422

-

649

-

-

69

-

-

34

1,385

1,471

-

-

-

-

-

-

-

36,544

1,471

649

-

866

69

(333)

-

34

714

828

-

(546)

-

37

-

(302)

-

37,258

2,299

649

(546)

866

106

(333)

(302)

34

As at 30 September 2009 418 34,852 1,174 2,856 39,300 731 40,031

2008

cALLeD uP ShARe

cAPitAL £’000

ShARe PReMiuM

AccOuNt £’000

OtheR ReSeRveS

£’000

RetAiNeD eARNiNGS

£’000

tOtAL ShARehOLDeRS

equitY £’000

MiNORitY iNteReStS

£’000

tOtAL

equitY £’000


Profit for the year


Deferred ‘B’ ordinary shares paid up

issue of shares

Premium of redemption of ‘A’ ordinary redeemable shares

conversion of preferred shares to ordinary shares (note 22)

costs associated with issue of share capital


Dividends paid


treasury shares

212

-

-

22

115

-

58

-

-

-

-

-

9,288

-

-

1,188

21,253

-

3,281

(680)

-

-

-

-

(35)

-

95

-

-

-

-

-

362

-

-

-

716

1,184

-

-

-

(424)

-

-

-

-

-

(91)

10,181

1,184

95

1,210

21,368

(424)

3,339

(680)

362

-

-

(91)

2,931

750

-

-

-

-

-

-

33

(1,204)

(1,796)

-

13,112

1,934

95

1,210

21,368

(424)

3,339

(680)

395

(1,204)

(1,796)

(91)

As at 30 September 2008 407 34,330 422 1,385 36,544 714 37,258

37

CONSOLIdATEd CASH FLOw STATEMENTYEAR ENdEd 30 SEPTEMBER 2010

NOTE

2010 £’000

2009 £’000

Net cash inflow in own cash

Returns on investments and servicing of finance

taxation

capital expenditure and financial investment

24

24

24

9,854

(1,620)

(3,006)

(2,840)

9,964

(1,024)

(2,839)

(1,092)

Cash inflow before acquisitions and disposals 2,388 5,009

Net cash outflow from acquisitions and disposals 24 (5,302) (2,039)

Cash (outflow)/inflow before use of liquid resources and financing (2,914) 2,970

cash inflow from financing activities 24 1,499 6,519

Net (decrease)/increase in cash and cash equivalents in the year (1,415) 9,489

Own cash and bank overdrafts at beginning of year

Own cash (outflow)/inflow for the year

14,451

(1,415)

4,962

9,489

Own cash and bank overdrafts at end of year 13,036 14,451

insurance cash at beginning of year

insurance cash inflow for the year

42,577

2,150

31,825

10,752

Insurance cash at end of year 44,727 42,577

All cash flows for the year arose from continuing operations.

38

NOTES TO THE ACCOUNTS FOR THE YEAR ENdEd 30 SEPTEMBER 2010

1 ACCOUNTING POLICIESthe principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.

a) Accounting convention Statement of compliance with IFRS

the Group has prepared its consolidated financial statements under international financial Reporting Standards (ifRSs) as adopted by the european union. ifRSs comprise standards and interpretations approved by the international Accounting Standards Board (iASB) and the international financial Reporting interpretations committee (ifRic) as adopted in the european union that are in effect as at 30 September 2010, or which have been adopted early. these are the Group’s first consolidated financial statements prepared in accordance with ifRS (see note 34 for explanation of the transition to ifRS).

Overall consideration and first time adoption of IFRSthe consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments and derivative financial instruments. historical cost is generally based on the fair value of the consideration given in exchange for the assets.

the significant accounting policies that have been applied in the preparation of these consolidated financial statements are summarised below. the accounting policies have been used throughout all the periods presented in the financial statements, except where the Group has applied certain accounting policies and exemptions upon transition to ifRS. the exemptions applied by the Group and the effects of the transition to ifRS are presented in note 34.

Going concernfurther information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors’ Report. the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the notes to the accounts. in addition note 25 to the financial statements includes the Group’sfinancialriskmanagementobjectives;detailsofitsfinancialinstruments and hedging activities and its exposures to credit risk and liquidity risk.

having considered the foregoing, and after making enquiries, the Directors have a reasonable expectation that the company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Presentation of financial statements in accordance with IAS 1 (Revised 2007)the consolidated financial statements are prepared in accordance with iAS 1 ‘Presentation of financial Statements’ (Revised 2007). the Group has elected to present the ‘Statement of comprehensive income’ in two statements: the ‘income Statement’ and the ‘Statement of comprehensive income’.

in accordance with ifRS 1 ‘first-time Adoption of international financial Reporting Standards’ (Revised 2008), the Group presents three statements of financial position in its first ifRS financial statements. in future periods, the Group will present one comparative period, unless required to do otherwise as a result of a new accounting policy, changes to existing accounting policies or reclassification of items in the financial statements.

Adoption of new International Financial Reporting Standards (‘Standards’)At the date of authorisation of the consolidated financial statements, the following Standards and interpretations were in issue but not yet mandatory and have been applied in the consolidated financial statements:

ifRS 1 (Revised 2008) changes only the structure of the Standard and its paragraph references. the revised version does not change any of the technical requirements of the Standard, and therefore has no effect on first time application of ifRS.

ifRS 1 was amended in July 2010 to introduce additional optional exemptions for first-time adopters. the exemptions applied by the Group and the effects of the transition to ifRS are presented in note 34.

ifRS 3 (Revised 2008) ‘Business combinations’.

ifRS 8 ‘Operating Segments’.

iAS 27 (Revised 2008) ‘consolidation and Separate financial Statements’.

iAS 28 (Revised 2008) ‘investments in Associates’.

At the date of authorisation of the consolidated financial statements, the following Standards and interpretations were in issue but not yet mandatory and have not been applied in the consolidated financial statements:

ifRS 9 ‘financial instruments’, effective for annual periods beginning on or after 1 January 2013. this is the first part of a new Standard on classification and measurement of financial assets that will replace iAS 39 ‘financial instruments: Recognition and Measurement’.

Amendment to iAS 24 ‘Related Party Disclosures’, effective for annual periods beginning on or after 1 January 2011.

improvements to ifRSs (April 2009).

the Directors do not anticipate that the adoption of these Standards and interpretations will have a material impact on the Group’s forthcoming consolidated financial statements.

b) Basis of consolidationthe Group’s financial statements consolidate the financial statements of the company and its subsidiary undertakings for the year ended 30 September using the acquisition method. the results of acquired businesses are consolidated from the date on which effective control passes to the Group.

Subsidiaries are entities where the company has the power to control the financial and operating policies, generally accompanied by a share of more than half of the voting rights. unrealised gains and losses on transactions with subsidiaries or associates are eliminated. transactions with associates are eliminated to the extent of the Group’s interest in those entities in preparing the consolidated financial statements.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of acquisition. Losses applicable to the minority in excess of the minority’s interest in the subsidiaries’ equity are allocated against the interests of the Group.

39


c) Business combinationsthe acquisitions of subsidiaries are accounted for using the purchase method. the cost of acquisition is measured as the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange. Any costs directly attributable to the business combination are booked to the income statement. identifiable assets acquired and liabilities and contingent liabilities assumed, meeting the conditions for recognition under ifRS 3 ‘Business combinations’, are recognised at their fair value at the acquisition date, irrespective of the extent of any minority interest. the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. intangible assets are identifiable.

d) Investments in associatesAssociates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor interests in a joint venture. investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill attributable to the Group’s share in the associate is included in the amount recognised as investments in associates.

e) Operating profitOperating profit is stated before finance costs, share of results of associates and changes in the fair value of deferred consideration.

f) Foreign currenciesitems included in the financial statements of each of the Group’s entities are measured in the currency of the primary economic environment in which it operates (its functional currency). the consolidated financial statements are presented in pounds sterling, which is the Parent company’s functional and presentational currency.

the results of the foreign subsidiaries have been translated using the average of monthly average exchange rates. Assets and liabilities of overseas subsidiaries denominated in foreign currencies are translatedatexchangeratesprevailingatthebalancesheetdate;profits and losses are translated into pounds sterling at average exchange rates for the relevant accounting periods. exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. On the sale of a subsidiary, such translation differences are recognised as income or expenses in the period in which the operation is disposed of.

g) Revenue recognitionRevenue consists principally of brokerage, commissions and fees associated with the placement of insurance and reinsurance contracts, net of commissions payable to other directly involved parties. Revenues from brokerage, commissions and fees are recognised on the inception date of the risk. Any adjustments to commissions arising from premium additions or reductions are recognised as and when they are notified by third parties.

where contractual obligations exist for the performance of post placement activities, and the cost of these activities is not expected to be covered by future revenue, a relevant proportion of revenue received on placement is deferred and recognised over the period during which the activities are performed.

h) GoodwillGoodwill represents the difference between the cost of acquisitions and the Group’s interest in the fair value of the identifiable assets and liabilities of the business combinations at the dates of the acquisition. Goodwill is initially recognised at cost and is subsequently reviewed for impairment annually. Any impairment is recognised immediately in the income statement.

Goodwill arising on acquisitions before the date of transition to ifRSs has been retained at the previous uk GAAP value subject to being tested for impairment at that date. Goodwill written off to reserves under uk GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. All negative goodwill was eliminated on transition to ifRS.

the Group has determined that for the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units. cash-generating units to which goodwill has been allocated are tested for impairment annually. Recoverable amounts for cash-generating units are mainly based on value in use, which is calculated from cash flow projections from the Group’s latest internal forecasts. the key assumptions for the value in use calculations are those regarding discount rates and estimated future cash flows. if the recoverable amount of the unit is less then the carrying amount of the goodwill, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions.

i) Intangible assets Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. these costs are amortised over their estimated useful lives of up to 10 years. costs associated with maintaining computer software programmes are recognised as an expense as incurred. costs that are directly associated with the production of identifiable and unique software products controlled by the Group and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.

Customer relationships acquired in business combinationscustomer relationships such as access to distribution networks and customer lists that arise because the acquiree company has a practice of establishing insurance contracts with its customers are measured at fair value at the date of business combination. the fair value of customer relationships is determined using a discounted cash flow analysis. Best estimate assumptions for renewal rates and expenses are used in calculating the fair value. customer relationships are amortised over 10 years, the period over which benefits are expected to be derived from these relationships. customer relationships are reviewed annually for impairment.

Other intangible assetsOther intangible assets comprise brands and other acquired identifiable non-monetary assets without physical form, these include non-compete contracts and brand names that have been recognised on the acquisition of subsidiaries. Other intangible assets are carried at cost less accumulated amortisation. Amortisation on other intangible assets is calculated using the straight line method to allocate the cost over their estimated useful lives, which are normally between 5 and 10 years.

40

j) Employee benefitsthe Group operates a number of defined contribution schemes. the amount charged to the income statement in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. the Group has no legal or constructive obligation to make any further payments to the plans other than the contributions due.

k) Financial instrumentsfinancial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

financial assets and financial liabilities are measured initially at fair value plus transaction costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. financial assets and liabilities are measured subsequently as described below.

Financial assetsfor the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:

Loansandreceivables;and

financial assets at fair value through profit or loss.

the category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. the Group’s cash and cash equivalents and trade and other receivables fall into this category of financial instruments.

Financial assets at fair value through profit or lossfinancial assets at fair value through profit or loss include financial assets that are either classified as held for trading or that meet certain conditions and are designated at fair value through profit or loss upon initial recognition. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which hedge accounting requirements apply.

Assets in this category are measured at fair value with the gains and losses recognised in the income statement. the fair values of derivative financial instruments are determined by reference to expected future payments.

Financial liabilitiesthe Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value through profit or loss. All derivative financial instruments that are not designated and effective as hedging instruments are accounted for at fair value with gains and losses recognised in the income statement. All changes in an instrument’s fair value that are reported in profit or loss are separately disclosed on the face of the income statement.

Borrowings, trade and other payablesBorrowings, trade and other payables are initially measured at fair value and subsequently measured at amortised cost.

Impairment of financial assetsAll financial assets except those at fair value through profit or loss are subject to review for impairment at least at each reporting date. financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets. the Group’s financial assets are limited to loans and receivables and financial assets at fair value through profit or loss.

individual receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. impairment of trade receivables is presented within the income statement.

l) Derivative financial instrumentsthe Group only enters into derivative financial instruments in order to hedge underlying commercial exposures.

the Group designates derivatives as a hedge of a forecasted transaction or of the foreign currency risk on a firm commitment (cash flow hedge). changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective, are recognised in equity. the gain or loss relating to the ineffective portion is recognised instantly in the income statement.

when a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in the hedging reserves and is recognised in the same periods during which the hedged commitment or forecast transaction affects the income statement. when a hedged commitment or forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

m) Share-based paymentthe Group issues share awards to employees. the Group operates a number of share-based compensation schemes and applies the requirements of ifRS 2 ‘Share-based Payment’.

the cost of employees’ services received in exchange for the grant of rights under these schemes is measured at the fair value of the equity instruments granted and is charged against profits over the vesting period. for cash settled schemes the fair value is re-assessed each year and any changes are recognised in the income statement until the liability is settled.


41

n) Leasesin accordance with iAS 17 ‘Leases’, where the Group has substantially all the risks and rewards of ownership, leases are classified as finance leases. finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding.

the asset subject to the finance lease is depreciated over the shorter of its useful life and the lease term. the corresponding rental obligations, net of finance charges, are included as a liability.

All other leases are treated as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the lease term. incentives provided by the lessor are credited to the income statement on a straight-line basis over the full lease term.

o) Property, plant and equipmentProperty, plant and equipment are stated at historical cost less depreciation less any recognised impairment losses. cost includes expenditure that is directly attributable to the acquisition or construction of these items. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the costs can be measured reliably. All other costs, including repairs and maintenance costs, are charged to the income statement in the period in which they are incurred.

Depreciation is provided on all property, plant and equipment, including those held under finance lease, at rates calculated to write off the cost of fixed assets less their estimated residual value over their expected useful lives on the following bases:

Leasehold improvements – Over the outstanding lease period

furniture, fixtures and fittings – 5 years to 10 years

computer hardware – 4 years to 5 years

computer software – 3 years to 10 years

Motor vehicles – 4 years

the assets’ useful lives and residual values are reviewed and, if appropriate, adjusted at each balance sheet date.

the gain or loss arising on disposal or scrapping of an asset is recognised in the income statement.

p) Insurance intermediary assets and liabilitiesinsurance brokers act as agents in placing the insurable risks of their clients with insurers and as such, generally, are not liable as principals for the amounts arising from such transactions. Accordingly, receivables arising from insurance broking transactions are not included as assets of the Group. Other than the receivable for fees and commissions earned on the transaction which is recognised within trade receivables, no recognition of the insurance transaction occurs until the Group receives cash in respect of premiums or claims, at which time a corresponding liability is established in favour of the insurer or the client and recognised on the statement of financial position as insurance payables.

fiduciary cash arising from insurance broking transactions is included within insurance cash. the Group is entitled to retain the investment income on any cash flows arising from the insurance related transactions.

q) Dividend distributionequity dividends declared at the discretion of the company are recognised in the period in which they are declared and approved by the Board.

r) Non-recurring itemsNon-recurring items are separately identified to provide greater understanding of the Group’s underlying performance. items classifiedasnon-recurringitemsinclude:closurecostsforbusinesses;restructuringcosts;postacquisitionintegrationcosts;andothercredits and charges of non-recurring nature that require inclusion in order to provide additional insight into the underlying business performance. to assist in the analysis and understanding of the underlying trading position of the Group these items are summarised within note 4.

s) Taxationcurrent tax is the expected tax payable on the taxable income for the year, using tax rates substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.

Deferred taxation is provided on material timing differences between the incidence of income and expenditure for taxation and accounts purposes using the full provision basis. Deferred tax assets are only recognised to the extent that they are considered recoverable against future taxable profits. Deferred tax balances are not discounted. Deferred tax is determined using the tax rates that have been enacted or substantively enacted by the balance sheet date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised.

changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

the income tax expense represents the sum of current and deferred tax.

t) Own sharestreasury shares are deducted from equity. Any consideration paid or received is recognised directly in equity.

u) Group reservesthe share premium account is the difference between the nominal value of shares issued and the value of the consideration received. the use of the share premium account is governed by the companies Act 2006.

42

2 CRITICAL ACCOUNTING ESTIMATES ANd JUdGEMENTS the estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. the estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

the estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are:

a) Property, plant and equipmentAssets are carried at historical cost less depreciation calculated to write off the cost of such assets over their estimated useful lives. Management determines the estimated useful lives and related depreciation charges at acquisition. the estimated useful life is reviewed annually and the depreciation charge is revised where useful lives are subsequently found to be different to those previously estimated.

b) Impairment of assetsthe Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. the recoverable amount of an asset or a cash-generating unit is determined based on value-in use calculations prepared on the basis of management’s assumptions and estimates. this determination requires significant judgment. in making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost;andthefinancialhealthofandnear-termbusinessoutlook for the investment, including factors such as industry and sector performance, changes in regional economies and operational and financing cash flow.

c) Deferred considerationthe value of deferred consideration payable is contingent upon the results of the acquired businesses and any other specified performance criteria set out in the applicable sale and purchase agreements. Budgets and projections for acquired businesses or the relevant future periods are reviewed each year.

3 SEGMENTAL ANALYSISifRS 8 ‘Operating Segments’ requires operating segments to be determined based on the Group’s internal reporting to the chief Operating Decision Maker (‘cODM’). the cODM has been determined to be the Board of Directors, as it is this body which is primarily responsible for the allocation of resources to segments and the assessment of performance of the segments.

the cODM uses eBitDA (earnings before interest, tax, Depreciation and Amortisation), as reviewed on a monthly basis, as the key measure of the segments’ results as it reflects the segments’ underlying trading performance for the period under evaluation.

the Directors consider that the Group’s trading activities comprise two business segments (being the provision of broking and underwriting services) and that the Group operates in a market that is not bound by geographical constraints. for management purposes, the Group reports its performance between two fee structures being ‘underwriting revenue’ and ‘Broking revenue’. Revenue information analysing the aforementioned products is presented opposite:


43

3 SEGMENTAL ANALYSIS (cONtiNueD)a) Business segment analysis

Year to 30 September 2010

BROKING £’000

UNdERwRITING £’000

HEAd OFFICE ANd CONSOLIdATION

AdJUSTMENTS £’000

SUBTOTAL £’000

IFRS AdJUSTMENTS

£’000

TOTAL

£’000

fees and commission


Direct expenses

Depreciation and amortisation

41,692

115

(35,918)

(566)

29,880

472

(22,983)

(513)

-

-

(1,520)

(2,647)

71,572

587

(60,421)

(3,726)

-

-

(125)

2,227

71,572

587

(60,546)

(1,499)

Operating profit 5,323 6,856 (4,167) 8,012 2,102 10,114

finance income

finance costs

fair value adjustments

Share of results of associates

82

(730)

-

-

58

11

-

-

7

(1,741)

-

-

147

(2,460)

-

-

-

(21)

(868)

-

147

(2,481)

(868)

-

Profit before taxation 4,675 6,925 (5,901) 5,699 1,213 6,912

taxation (1,207) (1,405) 89 (2,522) - (2,522)

Profit after taxation 3,468 5,520 (5,812) 3,177 1,213 4,390

Minority interests (868) (991) - (1,859) - (1,859)

Net profit 2,600 4,529 (5,812) 1,318 1,213 2,531

EBITdA

EBITdA (excluding non-recurring items)

5,889

6,387

7,369

7,252

(1,520)

(1,491)

11,738

12,149

(125)

(125)

11,613

12,024


BROkiNG £’000

uNDeRwRitiNG £’000

heAD Office AND cONSOLiDAtiON

ADJuStMeNtS £’000

SuBtOtAL £’000

ifRS ADJuStMeNtS

£’000

tOtAL

£’000

fees and commission


Direct expenses

Depreciation and amortisation

32,320

33

(27,942)

(430)

24,280

524

(18,922)

(350)

-

3

(3,055)

(2,373)

56,600

560

(49,919)

(3,153)

-

-

(580)

1,928

56,600

560

(50,499)

(1,225)

Operating profit 3,981 5,532 (5,425) 4,088 1,348 5,436

finance income

finance costs

Share of results of associates

29

(265)

-

116

(418)

-

(55)

(757)

(386)

90

(1,440)

(386)

5

139

-

95

(1,301)

(386)

Profit before taxation 3,745 5,230 (6,623) 2,352 1,492 3,844

taxation (1,222) (1,532) 1,216 (1,538) - (1,538)

Profit after taxation 2,523 3,698 (5,407) 814 1,492 2,306

Minority interests (127) (701) - (828) - (828)

Net profit 2,396 2,997 (5,407) (14) 1,492 1,478

EBITdA

EBITdA (excluding non-recurring items)

4,411

4,411

5,882

5,882

(3,052)

(1,253)

7,241

9,040

(580)

(580)

6,661

8,460

44

3 SEGMENTAL ANALYSIS (cONtiNueD)b) Geographical segment analysis


FEES ANd COMMISSIONS

£’000

Americas

united kingdom

Northern europe

Southern europe

Middle east

Australasia

far east

Other

15,876

13,966

13,087

9,946

7,103

6,585

3,692

1,317

Total 71,572


feeS AND cOMMiSSiONS

£’000

united kingdom

Americas

Southern europe

Northern europe

Middle east

Australasia

Other

14,079

13,451

9,737

6,369

6,256

4,198

2,510

total 56,600


45

4 OPERATING PROFITOperating profit for the year is stated after charging/(crediting):

2010 £’000

2009 £’000

Depreciation of property, plant and equipment

Amortisation of intangible assets

Goodwill impairment

Audit services:

• statutory audit of the company

• statutory audit of subsidiaries

• audit-related regulatory and supplementary reporting

taxation services

Professional fees associated with other advisory services

Operating lease rentals:

• land and buildings

• equipment

exchange gains

1,287

212

-

63

287

79

305

-

1,546

186

143

979

-

246

53

272

-

136

312

1,053

154

83

Non-recurring items recognised in the income statement

2010 £’000

2009 £’000

terminating and replacing senior executives

(income)/cost attributable to restructuring investments

Professional fees and share scheme costs in respect of fundamental restructuring

-

(166)

441

705

234

269

(Income)/costs of fundamental restructuring 275 1,208

Other one-off staff incentives

Goodwill impairment

136

-

345

246

Other non-recurring administrative expenses 136 591

total non-recurring administrative expenses 411 1,799

5 FINANCE COSTS

2010 £’000

2009 £’000

interest expense

Bank and other borrowings

finance leases

Amortisation of bank and loan arrangements

fair value through profit and loss – foreign exchange contracts

(2,125)

(14)

(337)

(5)

(768)

(13)

(520)

-

(2,481) (1,301)

interest income

Bank and other borrowings

fair value through profit and loss – foreign exchange contracts

147

-

90

5

147 95

Net finance costs (2,334) (1,206)

fair value through profit and loss – deferred consideration

unwinding discount – deferred consideration

(810)

(58)

-

-

Change in the fair value of deferred consideration (868) -

46

6 STAFF COSTSthe average monthly number of employees, including Directors, employed by the Group during the year was:

2010 2009

Directors’ and senior management

insurance professionals

Administration

96

287

172

81

236

131

555 448

the average number of employees does not include staff employed by associate companies, details on associate companies can be found in note 14.

the aggregate payroll costs of the above employees, including Directors, were as follows:

2010 £’000

2009 £’000

wages and salaries

Social security costs

equity-settled share-based payments

Pension contributions

38,491

3,531

96

1,572

29,456

3,071

913

1,389

43,690 34,829

directors’ remuneration

2010 £’000

ReStAteD2009

£’000

Aggregate emoluments

Aggregate pension contributions

Severance payments

1,801

87

-

1,620

99

643

1,888 2,362

2010 £’000

ReStAteD2009

£’000

highest paid Director:

Salary and benefits

Bonus

Pension contributions

411

169

67

362

125

60

647 547

NUMBER NuMBeR

Number of Directors at 30 September 8 9

total Directors’ remuneration for 2009 was £2,362,000 compared to the £1,694,000 stated in the 2009 financial statements. the highest paid Director received £547,000, compared to £534,000.


47

7 RETIREMENT BENEFIT OBLIGATIONSthe Group operates a defined contribution pension scheme. the assets of the scheme are held separately from those of the Group in an independently administered fund. the pension cost charge represents contributions payable by the Group to the fund and amounted to £1,572,000 (2009: £1,389,000).

8 TAxATION

2010 £’000

2009 £’000

Tax expense comprises:

uk corporation tax on profits for the year

Adjustments in respect of previous years

Overseas tax

895

(21)

1,819

724

(325)

1,409

total current tax 2,693 1,808

deferred tax

Origination and reversal of timing differences

Adjustments in respect of previous years

62

(233)

148

(418)

total deferred tax (note 21) (171) (270)

Tax on profit on ordinary activities 2,522 1,538

The total charge for the year can be reconciled to the accounting profit as follows:

the tax assessed for the year is higher than the standard rate of corporation tax of 28% (2009: 28%) due to the following reasons:

2010 £’000

2009 £’000

Profit on ordinary activities before tax

Profit on ordinary activities multiplied by the standard rate of corporation tax in the uk of 28% (2009 – 28%)

Tax effects of:

expenses not deductible for taxation purposes

Preferred dividends not deductible for taxation purposes

Overseas tax in excess of uk tax

Non-taxable overseas income

unrelieved losses

Adjustments to tax charge in respect of previous years

6,912

1,935

847

25

71

(90)

(12)

(254)

3,844

1,077

1,138

-

72

(56)

50

(743)

Total tax expense recognised in income statement 2,522 1,538

the standard rate of corporation tax in the uk is 28% (2009: 28%). A full corporation tax computation is prepared at the year end. the actual charge as a percentage of the profit before tax may differ from the underlying tax rate. Differences typically arise as a result of capital allowances differing from depreciation charged, certain types of expenditure not being deductible for tax purposes, and other differences may also arise.

following the finance (No.2) Act 2010 the main rate of corporation tax will reduce for the financial year beginning 1 April 2011 from 28% to 27%. this was enacted on 27 July 2010 and the Group’s deferred tax balances have been recognised at 27%.

the tax charge for the year ended 30 September 2010 was £2,522,000 (2009: £1,538,000) which was 36% of profit before tax (2009: 40%).

48

9 EARNINGS PER SHAREBasic earnings per share is calculated by dividing the profit after tax for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated as for the basic earnings per share with a further adjustment to the weighted average number of ordinary shares to reflect the effects of all potential dilution.

the weighted average number of ordinary shares includes shares held by the employee Benefit trust (see note 22).

2010 £’000

2009 £’000

weighted average number of shares used in calculation of basic earnings per share

effect of potential dilution – share options

42,168

301

42,168

301

weighted average number of shares used in calculation of diluted earnings per share 42,469 42,469

earnings per share – basic and diluted

Before fair value adjustments on deferred consideration – basic and diluted

6.0p

8.1p

3.5p

3.5p

earnings reconciliation£’000 BASIC

2010 dILUTEd £’000 BASic

2009 DiLuteD

underlying profit

changes in the fair value of deferred consideration

3,399

(868)

8.1p

(2.1p)

8.1p

(2.1p)

1,478

-

3.5p

-

3.5p

-

Profit attributable to shareholders 2,531 6.0p 6.0p 1,478 3.5p 3.5p

10 dIvIdENdSthe Group has not declared or paid any dividends during the year ended 30 September 2010 (2009: £nil).


49

11 GOOdwILL

POSITIvEGOOdwILL

£’000

IMPAIRMENTLOSSES

£’000

TOTAL

£’000

Opening net book value as at 1 October 2009

exchange differences

Acquisitions (see note 29)

Other adjustments

36,525

(148)

9,992

(94)

(3,805)

-

-

-

32,720

(148)

9,992

(94)

Closing net book value as at 30 September 2010 46,275 (3,805) 42,470

Opening net book value as at 1 October 2008

Acquisitions

impairment during the year

Reclassification under ifRS

34,605

2,457

-

(537)

(3,559)

-

(246)

-

31,046

2,457

(246)

(537)

closing net book value as at 30 September 2009 36,525 (3,805) 32,720

for the purpose of annual impairment testing, goodwill is allocated to the following cash-generating units, which are the units expected to benefit from the synergies of the business combinations in which the goodwill arises. the Group’s policy on annual impairment testing can be found in note 2.

2010 £’000

2009 £’000

2008 £’000

united kingdom

europe

Australasia

Americas

Middle east

Other

15,775

15,212

2,612

6,141

197

2,533

15,771

5,416

2,612

5,972

197

2,752

14,861

4,818

2,522

5,973

225

2,647

Goodwill allocations at 30 September 42,470 32,720 31,046

Goodwill is not amortised under ifRS. As a result, the amortisation of goodwill recorded under uk GAAP in 2009 has been reversed in the reconciliation to ifRS. the amount of goodwill recognised upon transition to ifRS is the carrying amount under previous uk GAAP at 1 October 2008. See note 34 for transitional analysis.

50

12 INTANGIBLE ASSETS

PATENTS ANd SOFTwARE

£’000

CUSTOMER RELATIONSHIPS

£’000OTHER

£’000

TOTAL

£’000

Opening net book value 1 October 2009


Acquisitions

Amortisation charge

Disposals

17

6

600

(106)

(1)

-

-

787

(76)

-

-

-

156

(30)

-

17

6

1,543

(212)

(1)

Closing net book value as at 30 September 2010 516 711 126 1,353

costs

Accumulated amortisation

622

(106)

787

(76)

156

(30)

1,565

(212)

Closing net book value as at 30 September 2010 516 711 126 1,353

Opening net book value 1 October 2008

Reclassification

4

13

-

-

-

-

4

13

closing net book value as at 30 September 2009 17 - - 17

costs

Accumulated amortisation

17

-

-

-

-

-

17

-

closing net book value as at 30 September 2009 17 - - 17

During the year the Group acquired hendricks & co Gmbh. under ifRS 3 ‘Business combinations’ the Group is required to value intangible assets at the date of acquisition. See note 29 for further analysis of acquisitions.


51

13 PROPERTY, PLANT ANd EqUIPMENT

LEASEHOLdIMPROvEMENTS

£’000

MOTOR vEHICLES

£’000

FIxTURES, FITTINGS ANd

EqUIPMENT £’000

TOTAL

£’000

Cost

At 1 October 2009

Additions

Acquisition of subsidiary


Disposals

Reallocations and other adjustments

1,569

642

-

66

-

175

113

14

16

34

-

6

5,388

1,991

347

300

(40)

477

7,070

2,647

363

400

(40)

658

At 30 September 2010 2,452 183 8,463 11,098

depreciation

At 1 October 2009

charge for the year


elimination on disposals

Reallocations and other adjustments

1,263

312

53

-

128

47

32

21

-

1

2,735

943

154

(31)

516

4,045

1,287

228

(31)

645

At 30 September 2010 1,756 101 4,317 6,174

Net book amounts

At 30 September 2010 696 82 4,146 4,924

At 1 October 2009 306 66 2,653 3,025

LeASehOLDiMPROveMeNtS

£’000

MOtOR vehicLeS

£’000

fixtuReS, fittiNGS AND

equiPMeNt £’000

tOtAL

£’000

Cost

At 1 October 2008

Additions

Disposals

Reclassification

Reclassification to debtors

Reclassification to intangibles

1,656

19

-

-

-

(106)

85

54

-

(15)

(11)

-

4,383

1,032

(42)

15

-

-

6,124

1,105

(42)

-

(11)

(106)

At 30 September 2009 1,569 113 5,388 7,070

depreciation

At 1 October 2008

charge for the year

Disposals

Reclassification

Reclassification to intangibles

Other movement

1,009

346

-

-

(92)

-

37

23

-

(13)

-

-

2,143

610

(42)

13

-

11

3,189

979

(42)

-

(92)

11

At 30 September 2009 1,263 47 2,735 4,045

Net book amounts

At 30 September 2009 306 66 2,653 3,025

At 1 October 2008 647 48 2,240 2,935

52

14 INvESTMENTS IN ASSOCIATESOn 30 June 2010, the Group acquired a 39.9% participating interest for a purchase price of £708,000 ($1m) in howden korea Limited, an insurance broker operating in South korea.

the Group continued to hold a 26% participating interest in the ordinary share capital of howden insurance Brokers india Private Limited, an insurance broker operating in india.

A summary of the Group’s investment in howden insurance Brokers india Private Limited and howden korea Limited at 30 September 2010 is set out below:

2010 £’000

2009 £’000

2008 £’000

investment, at beginning of year

Additional investment

foreign exchange on investment

-

708

-

16

71

(7)

125

-

-

Net investment 708 80 125

Share of loss before interest and tax arising in the year

Share of interest charge

Share of tax charge

-

-

-

(80)

-

-

(98)

(11)

-

Investment, at end of year 708 - 16

for the year ended 30 September 2010, howden india contributed £115,000 profit after tax, however the Group considers its investment in howden india to be valued at £nil (2009: £nil) because of the company’s brought forward losses.

the Group’s share of howden india’s results for the year was as follows:

2010 £’000

INdIA100%

2010 £’000

INdIA26%

turnover

Profit on ordinary activities before interest and tax

interest

taxation

1,976

574

(129)

-

514

149

(34)

-

Profit on ordinary activities after tax 445 115

fixed assets

current assets

current liabilities

Long-term liabilities

98

1,502

(1,513)

-

25

391

(393)

-

Net assets 87 23

Average monthly number of employees 62


53

15 TRAdE ANd OTHER RECEIvABLES

2010 £’000

2009 £’000

2008 £’000

trade receivables

Other debtors

Prepayments

corporation tax

12,453

3,569

4,501

668

10,525

3,756

4,528

772

7,521

2,727

10,887

166

21,191 19,581 21,301

Non-current 2010 £’000

2009 £’000

2008 £’000

Other debtors

Prepayments

9

1,208

30

1,733

2,257

287

1,217 1,763 2,544

total trade and other receivables 22,408 21,344 23,845

the Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

16 CASH ANd CASH EqUIvALENTS

2010 £’000

2009 £’000

2008 £’000

cash at bank and in hand – sterling

cash at bank and in hand – other currencies

11,275

46,789

12,897

44,651

6,756

30,341

58,064 57,548 37,097

2010 £’000

2009 £’000

2008 £’000

fiduciary

Own funds

44,727

13,337

42,577

14,971

31,825

5,272

58,064 57,548 37,097

the Group holds short-term deposits that are made for varying periods, depending on the cash requirements of the Group. these deposits earn interest at market short-term deposit rates. the Group has unrestricted access to these deposits which meet the definition of a cash equivalent.

54

17 TRAdE ANd OTHER PAYABLES LESS THAN ONE YEAR

2010 £’000

2009 £’000

2008 £’000

insurance payables (39,257) (39,094) (31,744)

Other payables

Deferred consideration

Other tax and social security

Accruals and deferred income

(3,512)

(2,210)

(1,352)

(9,726)

(3,461)

-

(1,073)

(8,163)

(2,794)

-

(805)

(5,000)

(16,800) (12,697) (8,599)

Total trade and other payables (56,057) (51,791) (40,343)

the Directors consider that the carrying amount of trade and other payables approximates to their fair value.

2010 £’000

2009 £’000

2008 £’000

corporation tax (1,724) (1,413) (1,838)

18 TRAdE ANd OTHER PAYABLES MORE THAN ONE YEARAmounts falling due more than one year

2010 £’000

2009 £’000

2008 £’000

Other payables (989) (771) (909)


55

19 BORROwINGS

Current

2010 £’000

2009 £’000

2008 £’000

Bank overdrafts

Loan to related parties

finance lease liabilities

(301)

(413)

(203)

(521)

(3,000)

(60)

(326)

-

(63)

(917) (3,581) (389)

Non-current

2010 £’000

2009 £’000

2008 £’000

Bank borrowings

Loans from related parties


(13,891)

(6,710)

(169)

(13,825)

(2,736)

(86)

(12,603)

(138)

(130)

(20,770) (16,647) (12,871)

the overdraft with Bank of Scotland is secured by means of a debenture over certain of the Group’s assets and bears interest of 1.5% per annum over the bank’s euro base rate.

the bank borrowings of £13,891,000 (2009: £13,825,000) are part of a £14,000,000 five year revolving credit facility with hSBc Bank plc. this facility bears interest at 2.8% over LiBOR and is secured by cross-guarantees and debentures over the company and certain of its uk subsidiary undertakings and is repayable in february 2013.

At 30 September 2010, the Group had own cash funds of £13,337,000 (2009: £14,971,000).

Shareholder loans of £3,000,000 to cover the working capital requirements of the Group, are secured by a debenture over the assets of the company and bear interest at 14% per annum, reduced to LiBOR +6% (minimum 9%) from 1 October 2010 and are repayable in five years from June 2009.

€1,500,000 of loan notes were issued in March 2010 along with the loan notes issued in June 2009 (€3,000,000) to shareholders to provide the initial funds for the hendricks & co Gmbh acquisition that took place on 1 October 2009. the notes are repayable in March 2013 and the interest rate applicable is 13% per annum.

Obligations due under finance leases are payable within two years.

the carrying amounts and the fair value of borrowings are as follows:

CARRYING AMOUNT FAIR vALUE

Current

2010 £’000

2009 £’000

2009 £’000

2010 £’000

2009 £’000

2009 £’000

Bank overdrafts

Loan from related parties


(301)

(413)

(203)

(521)

(3,000)

(60)

(326)

-

(63)

(301)

(413)

(203)

(521)

(3,000)

(60)

(326)

-

(63)

(917) (3,581) (389) (917) (3,581) (389)

Non-current

Bank overdrafts

Loans and loan notes from related parties


(13,891)

(6,710)

(169)

(13,825)

(2,736)

(86)

(12,603)

(138)

(130)

(13,891)

(6,710)

(169)

(13,825)

(2,736)

(86)

(12,603)

(138)

(130)

(20,770) (16,647) (12,871) (20,770) (16,647) (12,871)

56

20a CATEGORIES OF FINANCIAL ASSETS ANd LIABILITIESthe carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities:

30 September 2010

LOANS ANd RECEIvABLES/

OTHER FINANCIAL LIABILITIES

£’000

FAIR vALUE THROUGH PROFIT OR

LOSS £’000



corporation tax liabilities

Short term borrowings

Long term borrowings


forward foreign currency contracts *

future payments to minority interests

22,408

(17,789)

(1,724)

(917)

(20,770)

-

-

-

-

-

-

-

366

(9,173)

* forward foreign currency contracts are designated and effective hedging instruments.

Assets/(liabilities) that are measured at fair value are recognised on the statement of financial position and gains or losses are recognised in profit and loss. the fair values of derivative financial instruments are determined by reference to expected future payments.

30 September 2009

LOANS AND ReceivABLeS/

OtheR fiNANciAL LiABiLitieS

£’000

fAiR vALue thROuGh PROfit OR

LOSS £’000



corporation tax liabilities

Short term borrowings

Long term borrowings



21,344

(13,468)

(1,413)

(3,581)

(16,647)

-

-

-

-

-

-

(1,234)


57

20b dERIvATIvE FINANCIAL INSTRUMENTSthe Group uses forward exchange contracts to reduce the risk associated with sales denominated in foreign currencies for howden insurance Brokers Limited. At 30 September 2010 there were outstanding contracts with a principal value of £366,000 (2009: £5,000) for the purchase of foreign currencies in the normal course of business. the fair value of the contracts is calculated using the market to market rates prevailing at 30 September 2010. further detail including sensitivity analysis on the fair value of outstanding contracts is contained below.

the carrying amounts for the Group’s derivative financial instruments may be further analysed as follows:

Fair value of current and non-current derivative assets/(liabilities)

2010 £’000

2009 £’000

uS Dollar forward contract *

future payments to minority shareholders

366

(9,173)

-

(1,234)

Net fair value of derivatives (8,807) (1,234)

* forward foreign currency contracts are designated and effective hedging instruments.

the net loss on financial liabilities at fair value is included in other income. the net loss on financial liabilities is as follows:

2010 £’000

2009 £’000

Net loss on financial instruments at fair value through the profit and loss (868) -

20c FINANCIAL LIABILITY ON PAYMENTS TO MINORITY INTERESTSthe fair value of the Group’s financial liability on payments to minority interests at the year end was £9.4m. the future equity commitments are for the 25% minority shareholding in the acquisition of hendricks & co Gmbh (see note 29) and other minority shareholdings.

20d FINANCIAL INSTRUMENTS HELd AT FAIR vALUEthe Group is required to present certain information about financial instruments measured at fair value in the statement of financial position. in the first year of application comparative information need not be presented for the disclosures required by ifRS 7 ‘financial instruments: Disclosures’. Accordingly, the disclosure for the fair value hierarchy is only presented for the 30 September 2010 year end.

the disclosure of fair value measurements by level is assessed using the following fair value measurement hierarchy:

• quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(Level1); • inputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability(Level2);and • inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(Level3).

LEvEL 1 LEvEL 2 LEvEL 3


forward foreign currency contracts


-

-

366

-

-

(8,807)

- 366 (8,807)

58

21 dEFERREd TAxATION

2010 £’000

2009 £’000

2008 £’000

Decelerated capital allowances

Losses carried forward

Other short term timing differences

626

127

28

303

216

295

218

306

21

Net deferred tax balance 781 814 545

deferred tax asset

(i) Amount recoverable within one year:

Balance at beginning of year

Deferred tax credit in profit and loss account for period


683

172

13

545

139

(1)

403

142

-

Balance at end of year (note 16) 868 683 545

(ii) Amount recoverable in more than one year:




258

23

29

-

258

-

-

-

-

Balance at end of year (note 17) 310 258 -

deferred tax liability



Acquisition of subsidiary

(127)

(25)

(245)

-

(127)

-

-

-

-

Balance at end of year (note 19) (397) (127) -

Net deferred tax asset at end of year 781 814 545

total deferred tax credit in profit and loss account for period (note 8) 171 270 142

the recoverability of tax losses is dependent on there being sufficient future taxable profits. current forecasts support the partial recoverability of these losses in the foreseeable future. Accordingly no debtor has been recognised in respect of losses not expected to be recovered in the foreseeable future.

Factors that may affect future tax chargesthe Group has capital losses of £84,000 (2009: £84,000) available to carry forward for offset against future capital gains. the Group has non-trade losses of £4,691,000 (2009: £3,348,000) for offset against future income, subject to certain restrictions.


59

22 SHARE CAPITAL

ALLOTTEd ANd CALLEd UP

2010 NUMBER ’000 £’000

classified as equity:

‘A’ ordinary shares of £0.01 each

‘B’ ordinary shares of £0.01 each

Adjustment for employee benefit trust



38,844

3,324

(108)

(72)

388

34

(1)

(1)

41,988 420

under the companies Act 2006, companies are no longer required to have an authorised share capital. A resolution was passed by shareholders to take advantage of this deregulating measure. therefore, the company no longer has an authorised share capital and this is not presented as at 30 September 2010.

ALLOtteD AND cALLeD uP AuthORiSeD

2009 NuMBeR ’000 £’000 NuMBeR ’000 £’000




Adjustment for employee benefit trust


38,844

3,324

(127)

388

34

(4)

39,105

3,395

-

391

34

-

42,041 418 42,500 425

ALLOtteD AND cALLeD uP AuthORiSeD

2008 NuMBeR ’000 £’000 NuMBeR ’000 £’000




38,090

2,632

381

26

38,105

3,395

381

34

40,722 407 41,500 415

the ‘A’ ordinary and ‘B’ ordinary shares of £0.01 each rank pari passu in all respects except that on the sale or liquidation of the company the proceeds shall be divided between the shareholders as follows:

• the‘A’ordinaryshareholderswillreceivethefirst£2.6004pershare;and • thebalanceshallbedistributedbetweenthe‘A’ordinaryand‘B’ordinaryshareholdersequallyasthoughtheywereoneclassofshare.

the Group has established an employee Benefit trust (eBt) to hold shares to be used to meet future liabilities relating to the Group’s share-based compensation plans. under ifRS the eBt is considered to be under de facto control of the Group, and has therefore been consolidated into the Group. As at 30 September 2010, the eBt held 107,650 ‘A’ ordinary shares of £0.01 and 71,800 ‘B’ ordinary shares of £0.01, in hyperion insurance Group Limited.

Share-based compensation plansDuring the year the total cost recognised by the Group for share-based incentive schemes was £96,000 (2009: £913,000).

the company continues to operate an executive share option scheme to executive Directors and other senior employees enabling them to purchase ordinary ‘A’ £0.01 shares in the company. the price at which options are offered is based upon the estimated market value of the shares at the date of grant. Options may be exercised after 3 years, and lapse 10 years after the grant date. the charge for the year in respect of these options amounted to £nil for the year ended 30 September 2010.

in 2010 a share scheme was set up by howden Property insurance Services Limited, a principal subsidiary of the Group to incentivise a key team. the options were exercised at the grant date and were valued at inception at £96,000 using a fair value model.

All share scheme incentives are at the absolute discretion of the Remuneration committee, with no employee having the right to receive such a grant. the fair values of share based incentives are determined at their date of grant.

60

22 SHARE CAPITAL (cONtiNueD)Outstanding share optionsAt 30 September 2010 there were 300,600 unexercised options in respect of the company’s ‘A’ ordinary shares of £0.01 each, which were issued to various executives in the Group. During the year there was no movement in the number of share options issued.

An analysis of the exercise price and the dates the share options may be exercised is set out below:

date of grant

exeRciSe PRice£

exeRciSABLe fROM exPiRY DAte

heLD At eND Of YeAR NuMBeR

05 December 2001

10 february 2003

14 June 2004

14 December 2005

19 July 2007

08 December 2007

22 October 2008

21 November 2008

0.22

0.28

0.46

1.47

1.50

1.50

1.52

1.52

06/12/2004

11/02/2007

15/06/2008

15/12/2009

20/07/2009

09/12/2009

23/10/2010

22/11/2010

06/12/2011

11/02/2013

15/06/2014

15/12/2015

20/07/2016

09/12/2016

23/10/2017

22/11/2017

60,000

43,800

42,500

50,000

37,500

7,500

9,900

49,400

300,600

23 OTHER RESERvES

Consolidated 2010

SHARE OPTIONS RESERvE

£’000

TRANSLATION RESERvE

£’000

CASH FLOw HEdGING

RESERvE£’000

MINORITY OPTION RESERvE

£’000

TOTAL OTHER RESERvES

£’000



Movement in cash flow hedge



Other adjustments

765

96

-

-

-

(10)

409

-

-

-

(262)

-

-

-

366

-

-

-

-

-

-

(2,785)

-

-

1,174

96

366

(2,785)

(262)

(10)

As at 30 September 2010 851 147 366 (2,785) (1,421)

2009

ShARe OPtiONS ReSeRve

£’000

tRANSLAtiON ReSeRve

£’000

tOtAL OtheR ReSeRveS

£’000



Net exchange adjustments

Other

95

649

-

21

327

-

82

-

422

649

82

21

As at 30 September 2009 765 409 1,174

2008

ShARe OPtiONS ReSeRve

£’000

tRANSLAtiON ReSeRve

£’000

tOtAL OtheR ReSeRveS

£’000



Net exchange adjustments

treasury shares

-

95

-

-

(35)

-

362

-

(35)

95

362

-

As at 30 September 2008 95 327 422


61

24 CASH FLOw AdJUSTMENTS

2010 £’000

2009 £’000

Reconciliation of operating profit

Operating profit

Adjustments for:

Loss on disposal of property, plant and equipment

Depreciation of property, plant and equipment

Share-based payments expense

Goodwill impairment

Amortisation of intangible assets

Non-recurring items

10,525

(3)

1,287

96

-

212

(411)

7,235

-

979

649

246

-

(1,799)

11,706 7,310

Changes in working capital

Decrease in receivables

increase in payables

Movement in unrealised brokerage/commissions

1,106

1,933

(4,891)

5,676

3,385

(6,407)

(1,852) 2,654

Own cash generated from operating activities 9,854 9,964

Decrease/(increase) in insurance debtors

(Decrease)/increase in insurance creditors

Movement in unrealised brokerage/commissions

insurance cash acquired on acquisition of subsidiaries

748

(4,328)

4,891

839

(3,004)

7,349

6,407

-

Insurance cash generated from operating activities 2,150 10,752

Returns on investments and servicing of finance

2010 £’000

2009 £’000

interest received

interest paid

Preferred dividends paid

interest element of finance lease payments

Dividends paid to minorities

147

(1,273)

-

-

(494)

90

(823)

(13)

(12)

(266)

(1,620) (1,024)

Reconciliation of investing activities

2010 £’000

2009 £’000

capital expenditure and financial investment

Payments to acquire tangible and intangible fixed assets (2,840) (1,092)

(2,840) (1,092)

Acquisitions and disposals

Purchase of subsidiary undertakings

Purchase of trade businesses

Payment of deferred consideration

Purchase of minority shareholdings

Additional investment in associate

(2,160)

-

(2,434)

(708)

-

-

(650)

(934)

(362)

(93)

(5,302) (2,039)

62

24 CASH FLOw AdJUSTMENTS (cONtiNueD)

Reconciliation of financing activities

2010 £’000

2009 £’000

issue of ordinary shares

Purchase of employee benefits trust’s shares

-

(36)

13

(333)

(36) (320)

Shareholder loans received

issue of new shareholder loan notes

Drawdown of bank loans

Bank and other loan arrangement costs

Repayment of loan notes

capital element of finance leases

-

1,361

-

-

350

(176)

2,985

2,736

1,361

(181)

-

(62)

1,535 6,839

Net cash generated from financing activities 1,499 6,519

25 FINANCIAL RISK MANAGEMENT

Credit risk At 30 September 2010

NOT PAST dUE

£’0000-3 MONTHS

£’000

MORE THAN 3 MONTHS

£’000TOTAL

£’000

trade and other receivables 6,727 3,999 1,727 12,453

At 30 September 2009

NOt PASt Due

£’0000-3 MONthS

£’000

MORe thAN 3 MONthS

£’000tOtAL

£’000

trade and other receivables 4,766 2,904 2,855 10,525

the Group’s principal financial assets are bank balances and cash, trade and other receivables. the amounts presented in the statement of financial position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience is evidence of a reduction in the recoverability of cash flows.

the Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

the credit risk on liquid funds and derivative financial instruments is limited as the counterparties are the Group’s bankers with high credit ratings assigned by international credit rating agencies.

with regards to insurance balances, the Group’s risk is limited as the Group acts as the agent on these transactions. further information on insurance balances receivable and the risk relating to these balances can be found in the statement of accounting policies.


63

25 FINANCIAL RISK MANAGEMENT (cONtiNueD)Liquidity riskin order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term debt finance.

the following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. the table has been drawn up based on undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. the table includes the principal cash flows only. the contractual maturity is based on the earliest date on which the Group may be required to pay.

30 September 2010

LESS THAN 1 YEAR

1-5YEARS

5+YEARS TOTAL

finance lease liability

Bank borrowings

Other third party loans

(203)

(13,891)

(413)

(169)

-

(6,710)

-

-

-

(372)

(13,891)

(7,123)

(14,507) (6,879) - (21,386)

At 30 September 2010, the Group had own cash funds of £13,337,000 (2009: £14,971,000).

the following table details the Group’s liquidity analysis for its derivative financial instruments. the table has been drawn up based on discounted net cash flows on derivative instruments. where the amount payable or receivable is not fixed, the amount disclosed is the fair value of the instrument at the balance sheet date.

30 September 2010

LESS THAN 1 YEAR

1-5YEARS

5+YEARS TOTAL

foreign exchange forward contracts

future payments to minority shareholders

366

(744)

-

(8,429)

-

-

366

(9,173)

(378) (8,429) - (8,807)

64

25 FINANCIAL RISK MANAGEMENT (cONtiNueD)Interest rate riskthe Group’s only exposure is on the interest payable on the Group’s variable rate borrowings and interest receivable on banking deposits held in theordinarycourseofbusiness.Overdraftsandbankborrowingsbearafloatinginterestrate;asaresult,theGroupissubjecttoacertaindegreeof cash flow interest rate risk due to fluctuations in the prevailing levels of market interest rates. the Group is not subject to interest rate risk in relation to the fixed rate borrowings.

the exposure for the Group, at 30 September 2010, of financial assets and financial liabilities to interest rate risk is shown by reference to:

• floatinginterestrates(i.e.givingcashflowinterestraterisk)whentheinterestrateisduetobere-set;and • fixedinterestrates(i.e.givingfairvalueinterestraterisk)whenthefinancialinstrumentisdueforrepayment.

30 September 2010

FIxEd RATE£’000

FLOATING RATE£’000

TOTAL£’000

financial assets


insurance cash

-

-

13,337

44,727

13,337

44,727

Total financial assets - 58,064 58,064

financial liabilities


Bank borrowings and overdrafts

(2,210)

(373)

-

(21,314)

(2,210)

(21,687)

Total financial liabilities (2,583) (21,314) (23,897)

30 September 2009

fixeD RAte£’000

fLOAtiNG RAte£’000

tOtAL£’000

financial assets


insurance cash

-

-

14,971

42,577

14,971

42,577

total financial assets - 57,548 57,548

financial liabilities

Bank borrowings and overdrafts (2,882) (17,346) (20,228)

total financial liabilities (2,882) (17,346) (20,228)

interest receivable and finance costs are at rates documented in note 19.

As cash and cash equivalents are invested at short-term market rates, for fixed short-term periods and held to maturity, they are not significantly impacted in respect of fair value by movements in interest rates. the revolving credit facility is held at amortised cost, therefore movements in interest rates do not significantly impact its carrying value.


65

25 FINANCIAL RISK MANAGEMENT (cONtiNueD)Foreign currency riskcertain of the Group’s assets, liabilities, income and expenses are denominated in currencies other than Sterling (the Group’s functional currency and in which it reports its results). the currencies giving rise to this risk are primarily uS Dollar, euro and Australian Dollar. foreign exchange risk arises when recognised assets and liabilities are denominated in currency that is not the entity’s functional currency. As a result, movements in exchange rates may affect the Sterling value of those items.

the fair values of the Group’s revenue and expenses that have uS Dollar, euro and Australian Dollar foreign currency exposure are as follows:


USd $£’000

EURO£’000

AUd $£’000

Net assets

Revenue

expenses

16,986

4,356

(2,435)

(4,849)

18,526

(10,645)

1,332

5,912

(4,566)


uSD $£’000

euRO£’000

AuD $£’000

Net assets

Revenue

expenses

15,774

11,615

(475)

(5,784)

11,473

(4,946)

1,592

3,531

(2,904)

the Group’s policy is to reduce the risk associated with sales denominated in foreign currencies by using forward currency sales contracts taking into account any forecast foreign currency cash flows.

Foreign currency sensitivitythe following tables details the sensitivity of the Group’s equity to a 10% increase and decrease in Sterling against uS Dollar, euro and Australian Dollar.


USd $£’000

EURO£’000

AUd $£’000

Net assets

Revenue

expenses

1,699

436

(243)

(485)

1,853

(1,065)

133

591

(457)


uSD $£’000

euRO£’000

AuD $£’000

Net assets

Revenue

expenses

1,577

1,162

(48)

(578)

1,147

(495)

159

353

(290)

66

26 CONTINGENT LIABILITIESAt 30 September 2010 the Group had contingent liabilities in respect of guarantees and indemnities entered into as part of the ordinary course of the Group’s business. No material losses are likely to arise from such contingent liabilities and therefore no provision has been recorded.

the Group is involved from time to time in the ordinary course of its business in certain claims and legal proceedings related to the Group’s operations, including employment-related matters. in the opinion of management, liabilities, if any, arising from these claims and proceedings will not have a material adverse effect on the Group’s consolidated financial position or the results of its operations.

the Group analyses its litigation exposure based on available information, including external legal consultation, where appropriate, to assess its potential liability. the Group has accordingly made no provision in the financial statements.

27 OPERATING LEASE COMMITMENTSAt 30 September 2010 the Group had commitments under non-cancellable operating leases as set out below:

LANd ANd BUILdINGS OTHER

2010£’000

2009£’000

2010£’000

2009£’000

No later than one year

Later than one year and not later than five years

674

1,619

555

2,333

351

521

69

117

2,293 2,888 872 186


67

28 RELATEd PARTIES TRANSACTIONSthe Group considers parties to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

As at the balance sheet date, the only amounts due from related parties were shareholder loans and loan notes.

the Group had the following transactions with related parties during the year:

Amount received/(expensed) in the year

2010 £’000

2009 £’000

fees payable to Davidoff insurance Brokers Limited

it and other expenses paid to femi Premium Limited

feeds paid to B P Marsh & company Limited

interest paid/payable to B P Marsh & company Limited

interest paid/payable to Murofo investments SL

interest paid/payable to inversiones Muroca SL

interest paid/payable to 3i Group plc and associated undertakings

fees paid/payable to 3i Group plc and associated undertakings

-

-

(151)

(433)

(52)

(24)

(318)

(98)

(22)

(42)

(210)

(111)

(17)

(8)

-

(50)

(1,076) (460)

Amounts receivable/(payable) at the end of the year

2010 £’000

2009 £’000

B P Marsh & company Limited fees payable

3i Group plc and associated undertakings

(15)

(15)

(18)

(24)

Amounts included within other short term debtors and creditors (30) (42)

Loan from B P Marsh & company Limited

Loan from Murofo investments SL

Loan from inversiones Muroca SL

(338)

(51)

(24)

(2,460)

(369)

(171)

Amounts included in loans from related parties < 1 year (note 19) (413) (3,000)

Loan from B P Marsh & company Limited

Loan from Murofo investments SL

Loan from inversiones Muroca SL

(2,122)

(318)

(147)

-

-

-

Amounts included in loans from related parties > 1 year (note 19) (2,587) -

Loan notes from 3i Group plc

Loan notes from B P Marsh & company Limited

Loan notes from Marsh christian trust

(2,629)

(853)

(640)

(1,779)

(547)

(410)

Amounts included in loans from related parties > 1 year (note 19) (4,122) (2,736)

3i Group plc and associated undertakings (‘3i’) had a 27.4% interest in the company at the end of the year.

B P Marsh & company Limited (‘B P Marsh’), a wholly owned subsidiary of B P Marsh & Partners Plc, owned 19.5% of the company’s issued shares at the end of the year.

each of 3i and B P Marsh are entitled under the terms of the company’s investment & Shareholders’ Agreement dated 31 March 2008 to appoint Directors to the Board of the company. currently Mr. D A whileman and Mr. J S Newman serve on the company’s Board as, respectively, the appointees of 3i and B P Marsh.

68

29 BUSINESS COMBINATIONSHendricks & Co GmbHhowden Broking Group Limited acquired 75% of hendricks & co Gmbh on 1 October 2009. the acquired business contributed revenue of £3.8m and a net profit of £1.1m to the Group since its acquisition.

Purchase consideration £’000

fair value of total consideration

Less fair value of net assets acquired

Less deferred tax arising on acquisition

11,651

(961)

245

consideration in excess of net assets acquired 10,935

intangible assets

Goodwill

943

9,992

10,935

the total assets and the liabilities at the date of acquisition were as follows:

£’000



cash and cash equivalents


372

5,332

839

(5,235)

1,308

the key business focus when acquiring hendricks & co Gmbh was to secure the skills and expertise of lawyers who have led the Directors’ & Officers’ wording in the German market through a constant focus on product innovation, and hence the ability to generate future new profits.

North America Property and CasualtyOn 26 November 2008, howden Broking Group acquired the trade from a London Broker that specialises in Property & casualty wholesale.

the acquired business contributed revenue of £3.9m (2009: £3.2m) and a net profit of £1.1m (2009: £0.6m) to the Group since its acquisition.

£’000

total purchase consideration

Less fair value of net assets acquired

450

-

Goodwill 450

Goodwill of £450,000 arising on the acquisition reflects the benefits expected to accrue from access to the services of the team members.

30 ULTIMATE CONTROLLING PARTIESAs at 30 September 2010 the company had no ultimate controlling parties, nor at 30 September 2009.

31 CAPITAL COMMITMENTSthe Group has capital commitments in relation to the acquisition of hendricks and the acquisition of other minority shareholdings, further information is in note 20c. the Group had no other capital commitments as at 30 September 2010 and 30 September 2009.


69

32 POST BALANCE SHEET EvENTSthe Group’s subsidiary howden Broking Group Limited has entered into an agreement to acquire (subject to regulatory consent) the economic interest and associated shareholdings in the insurance broking/agency businesses of Golden eight holdings Limited and Accette holdings (Singapore) Pte Limited, through newly-incorporated local companies hBG holdings Limited and hBG holdings (Singapore) Pte Limited. this planned acquisition is an important step in the Group’s strategy of establishing a network of insurance broking offices in the Asia Pacific region.

33 PRINCIPAL SUBSIdIARY ANd ASSOCIATEd COMPANIESthe following were the principal subsidiary and associate entities at 30 September 2010. unless otherwise shown, the capital of each company is wholly-owned, is in ordinary shares and the principal country of operation is the country of incorporation/registration.

NAME OF COMPANY % OwNEd NATURE OF BUSINESS

DuAL international Limited *

cfc underwriting Limited *

DuAL iberica Riesgos Professionales S.A.

DuAL italia SpA

DcR (holdings) Limited

DuAL corporate Risks Limited

DuAL corporate Risks (Pi) Limited

DuAL Australia Pty Limited

DuAL Deutschland Gmbh

DuAL international underwriters Limited

DuAL Overseas investments Limited

vk underwriters LLc

vk underwriters inc

vk howden LLc

howden North American Property & casualty Limited

howden Broking Group Limited *

howden insurance Brokers Limited

howden Property insurance Services Limited

Global Services 1999 Limited

howden insurance Brokers (2002) Limited

howden international

General insurance Agency (2009) Limited

howden insurance Brokers AB

howden insurance Brokers inc

howden insurance Brokers LLc

howden iberia S.A.

hendricks & co Gmbh

howden insurance Brokers Oy

howden Asia (hong kong) Limited

howden Asia Pte. Limited

howden corretora de Resseguros Ltda

howden korea company Limited

hiG Services Limited *

J k Buckenham Limited *

Avant Garantías SL *

england

england

Spain

italy

england

england

england

Australia

Germany

england

england

uSA

Puerto Rico

uSA

england

england

england

england

england

israel

israel

Sweden

uSA

Dubai

Spain

Germany

finland

hong kong

Singapore

Brazil

korea

england

england

Spain

100

59.5

100

90

100

100

100

100

90

100

100

100

100

100

51

100

100

56.4

100

100

100

95

100

35

99

75

92.6

100

100

100

39.9

100

100

100

intermediate holding company and insurance underwriting

insurance underwriting agency












insurance broking and underwriting agency

insurance broking


insurance broking

insurance broking


insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

insurance broking

Management services

Reinsurance broking

Motor extended warranties and motor management services

* held directly by hyperion insurance Group Limited

70

34 FIRST-TIME AdOPTION OF IFRSthese are the Group’s first consolidated financial statements prepared in accordance with ifRS. the transition date is 1 October 2008.

the Group’s ifRS accounting policies presented in note 1 have been applied in preparing the consolidated financial statements for the year ended 30 September 2010, the comparative information and the opening statement of financial position at the date of transition.

the Group has applied ifRS 1 (Revised 2008) in preparing these first ifRS consolidated financial statements. the effects of the transitions to ifRS on equity, total comprehensive income and reported cash flows are presented in this section.

First-time adoption exemptions applied upon transition, ifRS 1 permits certain exemptions from full retrospective application. the Group has applied the mandatory exceptions and certain optional exemptions. the exemptions adopted by the Group are set out below.

Mandatory exemptions adoptedfinancial assets and liabilities that had been de-recognised before 1 January 2005 under uk GAAP have not been recognised under ifRS.

the Group has only applied hedge accounting in the opening statement of financial position where all the requirements in iAS 39 ‘financial instruments: Recognition and Measurement’ were met at the date of transition.

the Group has used estimates under ifRS that are consistent with those applied under uk GAAP (with adjustment for accounting policy differences) unless there is objective evidence those estimates were in error.

Optional exemptions applied by the Groupthe Group has elected not to apply ifRS 3 (Revised 2008) retrospectively to business combinations that occurred before the 1 October 2008 transition date.

the Group has deemed the cumulative translation differences for foreign operations at the date of transition to be zero. Adjustments to give effect to this are recorded against opening equity. After the date of transition, translation differences arising on translation of foreign operations are recognised in other comprehensive income and included in a separate ‘translation reserve’ within equity.


71

34 FIRST-TIME AdOPTION OF IFRS (cONtiNueD)Reconciliation of the statement of financial positionequity at the date of transition and at 30 September 2009 can be reconciled to the amounts reported under uk GAAP as follows:

01 OctOBeR 2008 30 SePteMBeR 2009

uk GAAP £’000

effect Of tRANSitiON

£’000 ifRS

£’000

uk GAAP £’000


£’000 ifRS

£’000

Non-current assets

Goodwill

intangible assets


investments in associates

Deferred tax assets

a, b, c, g 30,608

4

2,935

16

545

438

-

-

-

-

31,046

4

2,935

16

545

30,873

17

3,025

-

941

1,847

-

-

-

-

32,720

17

3,025

-

941

34,108 438 34,546 34,856 1,847 36,703

Current assets



insurance cash

f, c 93,924

5,272

31,825

(70,079)

-

-

23,845

5,272

31,825

130,999

14,971

42,577

(109,655)

-

-

21,344

14,971

42,577

131,021 (70,079) 60,942 188,547 (109,655) 78,892

Current liabilities

Borrowings

insurance payables


corporation tax payable


f

g

e, g, h

(389)

(101,823)

(10,046)

(1,838)

-

-

70,079

1,447

-

(1,880)

(389)

(31,744)

(8,599)

(1,838)

(1,880)

(3,581)

(148,426)

(13,191)

(1,413)

-

-

109,332

494

-

(499)

(3,581)

(39,094)

(12,697)

(1,413)

(499)

(114,096) 69,646 (44,450) (166,611) 109,327 (57,284)

Net current assets 16,925 (433) 16,492 21,936 (328) 21,608

Non-current liabilities

Borrowings

Other payables

Deferred tax liabilities


d

g

g

(12,871)

(909)

-

-

-

-

-

-

(12,871)

(909)

-

-

(16,787)

(1,337)

(127)

-

140

566

-

(735)

(16,647)

(771)

(127)

(735)

(13,780) - (13,780) (18,251) (29) (18,280)

Total net assets 37,253 5 37,258 38,541 1,490 40,031

Equity

issued share capital

Share premium

Other reserves

Retained earnings a, b, c, d, e

407

34,330

422

1,380

-

-

-

5

407

34,330

422

1,385

418

34,852

1,174

1,366

-

-

-

1,490

418

34,852

1,174

2,856

Shareholders’ equity 36,539 5 36,544 37,810 1,490 39,300

Minority interests 714 - 714 731 - 731

Total equity 37,253 5 37,258 38,541 1,490 40,031

72

34 FIRST-TIME AdOPTION OF IFRS (cONtiNueD)Reconciliation of total comprehensive incometotal comprehensive income for the reporting period ended 30 September 2009 can be reconciled to the amounts reported under uk GAAP as follows:

uk GAAP £’000


£’000 ifRS

£’000

Revenue

fees and commissions


Other operating costs

Depreciation, amortisation and impairment of non-financial assets

c

a, b

56,600

560

(49,919)

(3,153)

-

-

(580)

1,928

56,600

560

(50,499)

(1,225)

Operating profit 4,088 1,348 5,436

Analysed as:

Operating profit before non-recurring items

Non-recurring items

5,887

(1,799)

1,348

-

7,235

(1,799)

Operating profit 4,088 1,348 5,436

finance income

finance costs

Share of results of associates after tax and minority interests

d

90

(1,440)

(386)

5

139

-

95

(1,301)

(386)

Profit before changes in the fair value of deferred consideration 2,352 1,492 3,844

changes in the fair value of deferred consideration e - - -

Profit before tax for the year 2,352 1,492 3,844

income tax expense (1,538) - (1,538)

Profit after tax 814 1,492 2,306

Total comprehensive income for the period 814 1,492 2,306

Profits attributable to

Group shareholders

Minority interests

(14)

828

1,492

-

1,478

828

814 1,492 2,306


73

Notes to the reconciliationsa) under ifRSs, goodwill is not amortised but is measured at cost

less impairment. the effect of the change is an increase in goodwill as at 30 September 2009 of £1,931,000 and an increase in profit before tax of £1.931,000. the change does not affect equity at 1 October 2008.

b) under ifRSs, negative goodwill is recognised in the income statement immediately. An adjustment of £5,000, that had previously been recognised under uk GAAP has been written off to the income statement at the transition date. the effect of this change in 30 September 2009 is a decrease in profit before tax of £2,000 and the corresponding adjustment was made to goodwill.

c) under previous GAAP, legal fees directly attributable to the acquisition of a subsidiary or minority interest are capitalised within goodwill. under ifRSs, legal expenses do not qualify for recognition as an asset, neither at 1 October 2008 nor at 30 September 2009. the effect of this change is a decrease in goodwill as at 30 September 2009 of £257,000, a decrease in other debtors of £323,000 and a decrease in profit before tax for 30 September 2009 of £580,000.

d) under ifRSs, financial liabilities, other then derivatives, are measured at amortised cost. under previous GAAP, financial liabilities were measured at normal value and any difference between the amount initially recognised and the maturity amount of the liability was recognised in profit and loss. the effect of the change is an increase in equity at 30 September 2009 of £140,000 and an increase in profit before tax of £140,000. there was no impact to equity at 30 September 2008.

e) Derivative financial instruments are initially recognised at fair value and subsequently measured at fair value with any changes going through the profit and loss. the effect of this change was an increase in equity at 30 September 2009 of £5,000 and an increase in profit before tax of £5,000. changes in the fair value of derivative financial instruments classified as hedging instruments and meeting the criteria for hedging future cash flows are recognised in other comprehensive income. under previous GAAP, derivatives hedging future cash flows were not recognised.

f) under ifRSs, receivables arising from insurance broking transactions are not included as an asset of the Group. Other than the receivable for fees and commissions earned on the transaction, no recognition of the insurance transaction occurs until the Group receives cash in respect of premiums or claims, at which time a corresponding liability is established in favour of the insurer or the client. the effect of this change is a decrease in payables and receivables as at 30 September 2008 of £70.1m and as at 30 September 2009 of £109.3m.

g) under previous GAAP, any deferred consideration liability that is contingent upon the results of the acquired business was measured on an annual basis and classified on the balance sheet as a liability at deemed cost with any movement going to goodwill. under ifRSs, deferred consideration is recognised as a derivative liability measured at fair value through the profit and loss. Any movement in the liability is recognised in the income statement. if a reliable estimate of the contingent adjustment can be made and its payment is probable, contingency payments for a past business combination can be revalued at the date of transition. the effect of these changes is an increase in goodwill at 1 October 2008 of £433,000, an increase in the derivative liability of £433,000 and the reclassification of other payables amounting to £1,447,000 (short term) to derivative liabilities. the effect of these changes is an increase in goodwill at 30 September 2009 of £294,000, an increase in the derivative liability of £294,000 and the reclassification of other payables amounting to £566,000 (long term) and £200,000 (short term) to derivative liabilities.

h) under uk GAAP certain incentives received in relation to operating leases had been spread over the term of the lease. the benefit was allocated on a straight line basis over the shorter of the lease term and a period ending on a date from which it is expected the prevailing market rental will be payable. ifRS requires the lessor to recognise the benefit over the full lease term. As a result, the rental expense recognised under previous GAAP has been reduced by £17,000 in 2010. there was not material impact to the statement of financial position and income statement at 30 September 2009 and 1 October 2008.

Statement of cash flowsifRSs permit a choice as to how cash flows are classified, provided that the classification is consistently applied from period to period. Management has decided that cash flows from the Group’s own ordinary activities should not be reclassified. however management has separately identified the cash flows from insurance activities. there are no adjustments to the cash balances recognised in the cash flow statement. the components of cash and cash equivalents under uk GAAP are similar to those presented under ifRS.

Other presentational informationunder uk GAAP the Group did not report total comprehensive income. exchange differences on translation of foreign operations and gains and losses on cash flow hedges were recognised directly in equity under uk GAAP. Other items recognised in other comprehensive income under ifRS did not arise under uk GAAP.

certain presentations are different between uk GAAP and ifRS, there is no impact on reported profit or total equity.

Some assets and liabilities have been reclassified into another line item under ifRS at the date of transition

Some line items are described differently under ifRS compared to uk GAAP. these lines are as follows:

Property, plant and equipment (tangible fixed assets)

trade payables (trade creditors)

trade receivables (trade debtors)

34 FIRST-TIME AdOPTION OF IFRS (cONtiNueD)

74

we have audited the Parent company financial statements of hyperion insurance Group Limited for the year ended 30 September 2010 which comprise the Parent company Balance Sheet and the related notes 1 to 12. the financial reporting framework that has been applied in their preparation is applicable law and united kingdom Accounting Standards (united kingdom Generally Accepted Accounting Practice).

this report is made solely to the company’s members, as a body, in accordance with chapter 3 of Part 16 of the companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ 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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Parent company financial statements in accordance with applicable law and international Standards on Auditing (uk and ireland). those standards require us to comply with the Auditing Practices Board’s (APB’s) ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. this includes an assessment of: whether the accounting policies are appropriate to the Parent company’s circumstances and have beenconsistentlyappliedandadequatelydisclosed;thereasonableness ofsignificantaccountingestimatesmadebytheDirectors;andtheoverallpresentation of the financial statements.

Opinion on financial statementsin our opinion the Parent company financial statements:

• giveatrueandfairviewofthestateoftheParentCompany’saffairs asat30September2010;

• havebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccountingPractice;and

• havebeenpreparedinaccordancewiththerequirementsofthecompanies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006in our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the Parent company financial statements.

Matters on which we are required to report by exceptionwe have nothing to report in respect of the following matters where the companies Act 2006 requires us to report to you if, in our opinion:

• adequateaccountingrecordshavenotbeenkeptbytheParentcompany, or returns adequate for our audit have not been received frombranchesnotvisitedbyus;or

• theParentCompanyfinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns;or

• certaindisclosuresofDirectors’remunerationspecifiedbylaware notmade;or

• wehavenotreceivedalltheinformationandexplanationswerequirefor our audit.

Other matterwe have reported separately on the group financial statements of hyperion insurance Group Limited for the year ended 30 September 2010.

dAvId RUSH (SeNiOR StAtutORY AuDitOR) 10 DeceMBeR 2010

for and on behalf of Deloitte LLP chartered Accountants and Statutory Auditors London, united kingdom

INdEPENdENT AUdITORS’ REPORT TO THE MEMBERS OF HYPERION INSURANCE GROUP LIMITEd

75

BALANCE SHEETAS AT 30 SEPTEMBER 2010

NOTE

2010 £’000

2009 £’000

Fixed assets

investments in subsidiary undertakings 4 21,892 21,892

Current assets

Debtors due within one year

Debtors due after more than one year

cash at bank and in hand

5

5

33,287

1,061

182

38,481

1,733

-

34,530 40,214

Creditors

Amounts falling due within one year

Net current assets

6 (2,626)

31,904

(15,340)

24,874

Total assets less current liabilities 53,796 46,766

Creditors

Amounts falling due after more than one year 7 (16,591) (13,965)

Net assets 37,205 32,801

Capital and reserves

called up share capital

Share premium account

Other reserves

Profit and loss account

9

10

10

10

422

35,181

364

1,238

422

35,181

355

(3,157)

Shareholders’ funds 37,205 32,801

The financial statements were approved by the Board of directors and authorised for issue on 9 december 2010. They were signed on its behalf by:

d P HOwdEN E R M FAdY DiRectOR fiNANce DiRectOR

Company Number 2937398

The notes on pages 76 to 79 form an integral part of these financial statements.

76

NOTES TO THE ACCOUNTSFOR THE YEAR ENdEd 30 SEPTEMBER 2010

1 ACCOUNTING POLICIESthe principal accounting policies adopted in the preparation of these financial statements are set out below.

a) Basis of preparationthe Board has decided that the continued use of uk GAAP at the entity level is a more appropriate method of accounting rather than the application of ifRS.

the financial statements have been prepared under the historical cost convention and in accordance with applicable uk accounting standards. the Directors have made the appropriate enquiries, and have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these accounts.

b) Foreign currenciestransactions denominated in foreign currencies are translated to sterling at the exchange rates ruling at the date of the transaction. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into sterling at the rates ruling at the balance sheet date. exchange differences arising are dealt with through the profit and loss account.

c) Dividend distributionequity dividends declared at the discretion of the company are recognised in the period in which they are declared and approved by shareholders.

d) Trade and other payablestrade payables are initially measured at fair value, and are subsequently measured at amortised cost.

e) Investmentsinvestments in subsidiary undertakings are carried at cost less any provision for impairment.

f) Finance costsfinance charges are accounted for on an accruals basis in the profit and loss account and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Professional and other fees incurred directly in raising long-term debt finance are capitalised and amortised over the period of the instrument.

g) Taxationcorporation tax on the profit or loss for the year comprises current and deferred tax.

current tax is the expected tax payable on the taxable income for the year, using tax rates substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.

Deferred taxation is provided on material timing differences between the incidence of income and expenditure for taxation and accounts purposes using the full provision basis. Deferred tax assets are only recognised to the extent that they are considered recoverable against future taxable profits. Deferred tax balances are not discounted. Deferred tax is determined using the tax rates that have been enacted or substantively enacted by the balance sheet date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised.

changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

2 PROFIT ANd LOSS ACCOUNTAs permitted by section 408 of the companies Act 2006, the company has not included its own profit and loss account in these financial statements. the company loss after tax for the year was £1.4m which is dealt with in the financial statements of the Group.

3 dIvIdENdSthe company has not declared or paid any dividends during the year ended 30 September 2010 (2009: £nil).

77

4 INvESTMENTS

Cost

2010 £’000

2009 £’000

At beginning of year

Provision

Additions

Reclassification to investment in associates

21,892

-

-

-

23,042

(2,004)

872

(18)

At end of year 21,892 21,892

the following were the principal subsidiary entities at 30 September 2010. unless otherwise shown, the capital of each company is wholly-owned, is in ordinary shares and the principal country of operation is the country of incorporation/registration.

NAME OF COMPANY % OwNEd NATURE OF BUSINESS

DuAL international Limited

cfc underwriting Limited

howden Broking Group Limited

hiG Services Limited

J k Buckenham Limited

Avant Garantías SL

england

england

england

england

england

Spain

100

59.5

100

100

100

100




Management services

Reinsurance broking

Motor extended warranties and motor management services

5 dEBTORS dUE wITHIN ONE YEAR

2010 £’000

2009 £’000

Other debtors

Group relief debtor

Prepayments and accrued income

Amounts due from Group undertakings

Dividends receivable from Group undertakings

Loans due from Group undertakings

64

658

689

24,716

7,160

-

11

943

692

25,492

726

10,617

33,287 38,481


2010 £’000

2009 £’000

Prepayments and accrued income 1,061 1,733

78

6 CREdITORS – AMOUNTS FALLING dUE wITHIN ONE YEAR


2010 £’000

2009 £’000

Bank overdrafts, secured

Shareholder loans, secured

Amounts owed to Group undertakings

Other creditors

Accruals and deferred income

-

413

2,211

2

-

14

3,000

11,731

278

317

2,626 15,340

7 CREdITORS – AMOUNTS FALLING dUE AFTER MORE THAN ONE YEAR

Amounts falling due after more than one year

2010 £’000

2009 £’000

Shareholder loans, secured

Bank loans

2,587

14,004

-

13,965

At end of year 16,591 13,965

the bank loans of £14,004,000 (2009: £13,965,000) are part of a £14,000,000 five year revolving credit facility with hSBc Bank plc. this facility bears interest at 2.8% over LiBOR and is secured by cross-guarantees and debentures over the company and certain of its uk subsidiary undertakings and is repayable within five years. Details of the company’s shareholder loan notes are given in the Group’s financial statements on note 19.

NOTES TO THE ACCOUNTSFOR THE YEAR ENdEd 30 SEPTEMBER 2010

79

8 dEFERREd TAx

2010 £’000

2009 £’000

Losses carried forward

deferred tax asset



Balance at end of year

-

16

(16)

-

16

67

(51)

16

Net deferred tax asset at end of year - 16

Total deferred tax credit in profit and loss account for period - (51)

9 SHARE CAPITALDetails of the company’s share capital are given in the Group financial statements on note 22.

10 RECONCILIATION OF MOvEMENTS IN SHAREHOLdERS’ FUNdS

CALLEd UP SHARE

CAPITAL£’000

SHARE PREMIUM

ACCOUNT£’000

OTHER RESERvES

£’000

PROFIT ANd LOSS

ACCOUNT£’000

TOTAL SHAREHOLdER

FUNdS£’000


Profit for the year


422

-

-

35,181

-

-

355

-

9

(3,157)

4,395

-

32,801

4,395

9

As at 30 September 2010 422 35,181 364 1,238 37,205

11 CAPITAL COMMITMENTSthe Group had no capital commitments as at 30 September 2010, nor at 30 September 2009.

12 POST BALANCE SHEET EvENTSthere are no post balance sheet events for the period ended 30 September 2010.

COMPANY CONTACTS

HEAD OFFICEHYPERION INSURANCE GROUP LIMITEd

Bevis Marks House24 Bevis MarksLondon EC3A 7JBUnited Kingdom

Tel: +44 (0)20 7398 4888Fax: +44 (0)20 7645 9398Email: [email protected]: www.hyperiongrp.com

BROKING OFFICESHOwdEN BROKING GROUP LIMITEd

Bevis Marks House24 Bevis MarksLondonEC3A 7JBUnited Kingdom

Tel: +44 (0)20 7623 3806Fax: +44 (0)20 7623 3807Email: [email protected]: www.howdengroup.com

HOwdEN INSURANCE BROKERS LIMITEd (LONdON)



HOwdEN INSURANCE BROKERS LIMITEd (LEEdS)

Brookfield Court Selby RoadLeedsLS25 1NBUnited Kingdom


HOwdEN INSURANCE BROKERS OY

Kalevankatu 20, 2nd floorFI-00100 HelsinkiFinland

Tel: + 358 (9) 2513 7500Fax: + 358 (9) 6220 0130Email: [email protected]: www.howdengroup.com

HOwdEN INSURANCE BROKERS AB

Nybrogatan 27S-114 39 StockholmSweden

Tel: +46 (8) 545 670 20Fax: +46 (8) 667 29 10Email: [email protected]: www.howden.se

HOwdEN INSURANCE BROKERS (2002) LIMITEd

2 Habarzel StreetRamat HaChayalTel-Aviv 69710Israel

Tel: +972 3 627 0700Fax: +972 3 760 2618Email: [email protected]: www.howden.co.il

HOwdEN IBERIA S.A. (MAdRId)

C/Casado del Alisal, 1028014 MadridSpain

Tel: +34 (0)91 429 9699Fax: +34 (0)91 369 2182Email: [email protected]: www.howdeniberia.com

HOwdEN IBERIA S.A. (BARCELONA)

C/Aragón, 264, 1º- 3ª08007 BarcelonaSpain

Tel: + 34 (0)93 488 0937Fax: + 34 (0)93 488 0763Email: [email protected]: www.howdeniberia.com

80

81

HOwdEN IBERIA S.A. (vALENCIA)

C/don Juan de Austria, 4 - 5º puerta 15946002 valenciaSpain


HOwdEN IBERIA S.A. (SEvILLE)

Avda. de la Palmera 28, 2 Planta41013 SevillaSpain


HOwdEN INSURANCE BROKERS INdIA PRIvATE LIMITEd (MUMBAI)

The Bombay dyeing Administrative OfficeGround FloorPandurang Budhkar Marg, worliMumbai 400 025India

Tel: +91 (0)22 6655 8888/00Fax: +91 (0)22 6654 8833Email: [email protected]: www.howdenindia.in

HOwdEN INSURANCE BROKERS INdIA PRIvATE LIMITEd (NEw dELHI)

A – 261, First Floordefence ColonyNew delhi 110 024India

Tel: +91 (0)11 4655 8010Fax: +91 (0)11 4655 8020Email: [email protected]: www.howdenindia.in

HOwdEN INSURANCE BROKERS INdIA PRIvATE LIMITEd (CHENNAI)

2B, Raghupriya Apartment3 Krishnama RoadNungambakkam, Chennai 600 034India

Tel: +91 (0)44 4213 2894/96 Email: [email protected]: www.howdenindia.in

HOwdEN INSURANCE BROKERS INdIA PRIvATE LIMITEd (BANGALORE)

No S-4 BPMP Khata No 1221203rd Floor Monarch ChambersInfantry RoadBangalore 560 001India

Tel: +91 (0)80 658 32972Email: [email protected]: www.howdenindia.in

HOwdEN INSURANCE BROKERS INdIA PRIvATE LIMITEd (HYdERABAd)

6-3-550, 4th Floor, LB BhavanOpp. Medinova diagnostic ServicesSomajiguda, Hyderabad 500 082India

Tel: +91 (0)40 3048 4004Fax: +91 (0)40 2339 2464Email: [email protected]: www.howdenindia.in

HOwdEN INSURANCE BROKERS LLC

Office No 301,304,305Al Nasr Plaza BuildingNear Al Nasr ClubOud Methadubai

Tel: +971 (4) 357 3835Fax: +971 (4) 357 3892Email: [email protected]: www.howdengroup.com

HOwdEN ASIA (HONG KONG) LIMITEd

Unit 3328 33/FChina Merchants Tower168 Connaught RoadCentralHong Kong

Tel: +852 98361061Email: [email protected]: www.howdengroup.com

HOwdEN ASIA PTE LTd

#12-01Commerce Point3 Phillip StreetSingapore 048693

Tel: +65 94233386Email: [email protected]: www.howdengroup.com

82

HOwdEN KOREA COMPANY LIMITEd

8th Floor, Seorin Building88 Seorin-dong, Chongro-KuSeoul, Korea 110-790

Tel: +82 2 318 4500 (Rep.)Fax: +82 2 319 1030Email: [email protected]: www.howdengroup.com

HOwdEN INSURANCE BROKERS INC (BALTIMORE)

37 walker AvenueSuite 200Baltimore Md 21208United States

Tel: +1 (410) 486 2400Fax: +1 (410) 486 2998Email: [email protected]: www.howdenbrokers.com

HOwdEN INSURANCE BROKERS LIMITEd (TAIwAN BRANCH)

Floor 11, Room 209No.51 Hengyang RoadJhongjheng districtTaipeiTaiwan

Tel: +886 2 2313 1188Email: [email protected]: www.howdengroup.com

HOwdEN CORRETORA dE RESSEGUROS LTdA

Avenida Luís Carlos Prestes, 180Sala 3o. AndarRio de Janeiro 22775-055Brazil

Tel: +55 (21) 2112 4628Email: [email protected]: www.howdengroup.com

vK HOwdEN, LLC TRAdING AS HOwdEN INSURANCE (MIAMI – LATAM)

801 Brickell Ave. Suite 900Miami, Fl 33131United States

Tel: +1 (786) 275 3266Fax: +1 (786) 228 0521Email: [email protected]: www.howdengroup.com

HENdRICKS & CO GmbH(düSSELdORF)

Arnheimer Straße 14240489 düsseldorfGermany

Tel: +49 211 940 830Fax: +49 211 940 8383Email: [email protected]: www.hendricks.eu.com

HENdRICKS & CO GmbH(HAMBURG)

Jungfernstieg 120095 HamburgGermany

Tel: +49 40 767 94760Fax: +49 40 767 94769Email: [email protected]: www.hendricks.eu.com

HENdRICKS & CO GmbH(MüNCHEN)

Maximilianstraße 2280539 MünchenGermany

Tel: +49 89 1799790Fax: +49 89 179977Email: [email protected]: www.hendricks.eu.com

UNDERWRITING OFFICESdUAL INTERNATIONAL LIMITEd


Tel: +44 (0)20 7337 9888Fax: +44 (0)20 7398 4801Email: [email protected]: www.dualinternational.com

dUAL AUSTRALIA PTY LTd (SYdNEY)

Level 4332 Kent StreetSydneyNSw 2000Australia

Tel: +61 (0)2 9248 6300Fax: +61 (0)2 9248 6301Email: [email protected]: www.dualaustralia.com.au

dUAL AUSTRALIA PTY LTd (MELBOURNE)

Level 8454 Collins StreetMelbournevIC 3000Australia


dUAL AUSTRALIA PTY LTd (PERTH)

177 Oxford StreetLeedervillewA 6007Australia


dUAL AUSTRALIA PTY LTd (BRISBANE)

Level 7127 Creek StreetBrisbane qLd 4000Australia

Tel: +61 (0)7 3218 2728web: www.dualaustralia.com.au

dUAL ASIA HONG KONG

9/F, Cityplaza One 1111 King’s Road, Taikoo ShingHong Kong

Tel. +852 2894 0756 Fax. +852 2886 2680 Email: [email protected]: www.dualasia.com

dUAL dEUTSCHLANd GmbH

Schanzenstr. 39 d2151063 KölnGermany

Tel: +49 (0)221 16 80 260Fax: +49 (0)221 16 80 2666Email: [email protected]: www.dualdeutschland.com

dUAL ITALIA S.p.A

via Santa Maria Fulcorina, 2020123 MilanoItaly

Tel: +39 02 72 08 05 97Fax: +39 02 72 08 05 92Email: [email protected]: www.dualitalia.com

dUAL IBERICA RIESGOS PROFESIONALES S.A.U.

C/Alfonso xII, 32, 128014 MadridSpain

Tel: +34 91 369 1258Fax: +34 91 429 5925Email: [email protected]: www.dualiberica.com

dUAL IBERICA RIESGOS PROFESIONALES S.A.U.

Balmes Business CentreC/Balmes, 188, 7°, 1ª08006 BarcelonaSpain

Tel: +34 93 505 6405Fax: +34 93 396 0696Email: [email protected]: www.dualiberica.com

83

dUAL CORPORATE RISKS LIMITEd (LONdON)

4th Floor140 Leadenhall StreetLondonEC3v 4qTUnited Kingdom

Tel: +44 (0)20 7337 9888Fax: +44 (0)20 7337 9889Email: [email protected]: www.dualcorporaterisks.com

dUAL CORPORATE RISKS LIMITEd (MANCHESTER)

Barnett House53 Fountain StreetManchester M2 2ANUnited Kingdom

Tel: +44 (0)161 233 7150Fax: +44 (0)161 233 7160Email: [email protected]: www.dualcorporaterisks.com

dUAL IRELANd (a branch of dUAL Corporate Risks Limited)

33 Fitzwilliam Squaredublin 2Ireland

Tel: +353 (0) 1 699 4640Email: [email protected]: www.dualireland.ie

CFC UNdERwRITING LIMITEd

2nd Floor85 Gracechurch StreetLondonEC3v 0AAUnited Kingdom

Tel: +44 (0)20 7220 8500Fax: +44 (0)20 7220 8501Email: [email protected]: www.cfcunderwriting.com

vK UNdERwRITERS LLC (MIAMI)

80 Sw 8th StreetFloor 20Miami FL 33130United States

Tel: +1 (786) 275 3233Fax: +1 (786) 228 0521Email: [email protected]: www.vk-uw.com

vK UNdERwRITERS LLC (BUENOS AIRES)

Basavilbaso 1350, 7 suite “707”Buenos Aires (C1006)Argentina

Tel: +54 11 5258 7178web: www.vk-uw.com

vK UNdERwRITERS INC (SAN JUAN)

Atrium Office Center530 Avenue de las ConstitucionSan JuanPR 00901 - 2304Puerto Rico

Tel: +1 787 708 6376web: www.vk-uw.com

vK UNdERwRITERS LLC (MExICO)

Avenida Presidente Masaryk III – Piso 1Colonia PolancoMexico dF, 11560Mexico

Tel: +52 (55) 1168 9737Fax: +52 (55) 3300 5999web: www.vk-uw.com

84

HYPERION INSURANCE GROUP

Bevis Marks House24 Bevis MarksLondon EC3A 7JBTel: +44 (0)20 7398 4888Fax: +44 (0)20 7645 9398Email: [email protected]: www.hyperiongrp.com

hyperion - microsoft · pdf file2 • hyperion insurance group acquired hendricks & co...

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