investment section v1 - steamship mh and...mr c. j. madinabeitia, mr a. pohan and mr k. sheehan. mr...

The Steamship Mutual Underwriting Association (Bermuda) Limited

02 Notice of Meeting

03 Directors

04 Report of the Directors

10 Appendix I – Policy Year Statement – All Classes

12 Appendix II – Policy Year Statement – P&I Class

14 Consolidated Income and Expenditure Account

15 Consolidated Balance Sheet

16 Consolidated Cash Flow Statement

17 Notes on the Accounts

26 Report of the Independent Auditor

Contents

The Steamship Mutual UnderwritingAssociation (Bermuda) Limited

(Incorporated under the laws of Bermuda)and its subsidiary companies

01


ManagersSteamship Mutual Management (Bermuda) LimitedWashington Mall 1, P.O. Box HM 447Hamilton HM BX, BermudaTelephone: (1 441) 295 4502Telefax: (1 441) 292 8787

NNeeww aaddddrreessss wwiitthh eeffffeecctt ffrroomm 44tthh AAuugguusstt 22001144::Washington Mall II, P.O. Box HM 601Hamilton HM CX, Bermuda(Telephone and Telefax numbers remain unchanged)

Managers’ representativesSteamship P&I Management LLPAquatical House, 39 Bell Lane, London E1 7LU Telephone: (44) (0) 20 7247 5490/(44) (0) 20 7895 8490

Steamship Mutual Management (Hong Kong) Limited Room 1901-02, Jubilee Centre18 Fenwick Street, Wanchai, Hong Kong Telephone: (852) 2838 2722/(852) 2838 2873Telefax: (852) 2838 2009/(852) 2831 0826

Representative office in Brazil Avenida Rio Branco, 151/1305-1307, CentroRio de Janeiro, R.J. CEP 20040-006 Brazil Telephone: (55 21) 2221 6074/(55 21) 2221 6461 Telefax: (55 21) 2221 8747

www.steamshipmutual.com


02

Notice is hereby given that the Fortieth Annual General Meeting of the Members of the Association will be held at theFairmont Southampton Hotel, Southampton, Bermuda, on Tuesday, 28th October 2014 at 09:05 hours for the followingpurposes:

1 The Secretary to confirm that Notice of the Meeting has been given.

2 To approve the Minutes of the last Meeting of the Members.

3 To receive the Directors’ Report and Accounts for the year ended 20th February 2014.

4 To fix the number of Directors for the ensuing year.

5 To elect Directors retiring in rotation.Under the Bye-laws of the Company, one-third of the Directors are required to retire annually by rotation. The Directors retiring by rotation are Mrs A. Marques de Almeida, Mr M. Bayley, Ms I. Grimaldi, Mr H. M. Juniel, Mr C. J. Madinabeitia, Mr C. K. Ong, Mr A. Pohan and Mr A. Zacchello. Being eligible all Directors offer themselves for re-election.

6 To appoint Auditors and to authorise the Directors to agree their remuneration.

7 Confirmation of acts.

8 To transact any other ordinary business of the Company.

By Order of the Board

S. DavisSecretary

13th May 2014

N.B. A Member who is entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend, speakand vote in his or her place. The instrument appointing a proxy may be in the form enclosed and must be deposited withthe Secretary at Clarendon House, Church Street West, P.O. Box HM 666, Hamilton HM CX, Bermuda, not less than 48hours before the time specified for the holding of the Meeting.

Notice of Meeting

DirectorsH. L. F. Schoeller, Columbia Shipmanagement Ltd(Chairman)C. J. Ahrenkiel, C. J. Ahrenkiel Consulting SwitzerlandA. Marques de Almeida, ValeM. W. Bayley, Royal Caribbean InternationalC. BouchS-M. Edye, Sloman Neptun Schiffahrts AG M. Frith, Conyers, Dill & Pearman I. Grimaldi, Grimaldi Holdings SpAS. Hajara (retired 22nd October 2013) D. M. Ho, Magsaysay Maritime Corp. Hu, Jingwu, China Shipowners Mutual AssuranceAssociation (appointed 22nd October 2013)H. M. Juniel, Reederei. F. Laeisz GmbHC. J. Madinabeitia, Tradewind Tankers S.L.A. L. Marchisotto, Moran Holdings Inc. (resigned 15th May 2013)S. J. Martin, Steamship P&I Management LLPS. Mehta, Essar Global C. K. Ong, U-Ming Marine Transport Corp. R. Otoni Andrade, Log-In Logistica Intermodal SAA. Pohan, New York Waterway G. W. F. Rynsard, Steamship P&I Management LLPK. Sheehan, Norwegian Cruise LineB. K. Sheth, The Great Eastern Shipping Co. LtdB. B. Sinha, The Shipping Corporation of India Ltd(appointed 22nd October 2013)M. Sloan, Carnival Corporation & plc A. Tung, Island Navigation Corp. International LtdWang, Y-G., China Shipowners Mutual AssuranceAssociation (retired 22nd October 2013)A. Zacchello, Seaarland Shipping Management BV R. Zagari, Augustea Group

SecretaryS. Davis, Conyers, Dill & Pearman

ManagersSteamship Mutual Management (Bermuda) Ltd

Registered officeClarendon House2 Church StreetHamilton HM 11Bermuda

Administrative officeWashington Mall 1P.O. Box HM 447Hamilton HM BXBermudaTelephone: (1 441) 295 4502 Telefax: (1 441) 292 8787

NNeeww aaddddrreessss wwiitthh eeffffeecctt ffrroomm 44tthh AAuugguusstt 22001144::Washington Mall IIP.O. Box HM 601Hamilton HM CXBermuda(Telephone and Telefax numbers remain unchanged)

03

Directors


04

The Directors have pleasure in presenting their Report andthe Accounts of the Association for the year ended 20thFebruary 2014.

Principal activitiesThe principal activities of the Association were theinsurance and reinsurance of Protection and Indemnity(P&I) risks, and of Freight, Demurrage and Defence (FD&D)risks on behalf of Members. The total entered tonnage as at 20th February 2014 stood at approximately 113.7 million GT.

The Association is a member of the International Group of Protection and Indemnity Clubs (“the Group”).

DirectorsThe Directors of the Association are as shown on page 3.

In accordance with the Act of Incorporation, as amendedon 18th April 1984, and the Bye-laws, the undermentioned Directors of the Association hold office until theAnnual General Meeting to be held in Southampton,Bermuda, on 28th October 2014:

Mrs A. Marques de Almeida, Mr M. Bayley, Ms I. Grimaldi, Mr H. M. Juniel, Mr C. J. Madinabeitia, Mr C. K. Ong, Mr A. Pohan and Mr A. Zacchello.

Being eligible all Directors offer themselves for re-election.

Audit and Risk CommitteeThe Committee acts on behalf of the Board in consideringthe Association’s financial statements and its external andinternal audit activities. In so doing the Committee liaiseswith the Managers and external auditor in monitoring thequality of all reporting which contains material financialinformation, assessing the Association’s internal controlsystems, and advising the Board on the effectiveness andobjectivity of the internal and external auditors.

The Committee meets four times a year, prior to eachmeeting of the full Board and is currently comprised of the following Directors: Mr H. M. Juniel (Chairman), Mr C. J. Ahrenkiel, Mr M. W. Bayley, Mr C. Bouch, Mr C. J. Madinabeitia, Mr A. Pohan and Mr K. Sheehan.Mr H. L. F. Schoeller is invited to attend the meeting in hiscapacity as Club Chairman and two representatives of theManagers, who are also Directors of the Club, namely Mr S. J. Martin and Mr G. W. F. Rynsard, are also invitedto attend.

In discharging its responsibilities the Committee receivesregular financial and management reports from theManagers including a quarterly report from theirCompliance Director and the internal auditor. The Committee establishes the scope of the reporting,both to itself and the Board, and continually assesses the quality and adequacy of this information. The Committee monitors the effectiveness of theManagers’ activities with respect to their regulatory, audit and control responsibilities with a specific focus on any issues of enhanced strategic importance or which present a significant risk to the Association. Within the past year the Committee’s work has includedreviewing the following matters:

• the development of alternative methodologies by which to challenge, support and add transparency to the calculation of reserving volatility;

• internal audit reports on capital management, corporate governance and risk management, human resources, data quality, management strategy and business planning and management information;

• the preparations for Solvency II including a high level review of existing project documentation and cross reference to Solvency II requirements;

• the establishment of a Risk Management Operations Committee of the Managers with a direct reporting line to the Audit and Risk Committee;

• the results of a penetration test conducted by an independent service provider on the Managers’ IT facilities;

• the Own Risk and Solvency Assessment (ORSA) and level of standard increase required at the 2014 renewal to meet the Club’s financial objectives; and

• the level of administration expenses in relation to business volumes and overall operational efficiency.

Report of the Directors


05

Free reservesThe balance on the Technical Account was a surplus ofUS$ 1.4 million for the financial year.

The overall deficit for the financial year of US$ 2.1 millionreflects a net investment loss of US$ 3.5 million.

Free reserves decreased from US$ 108.2 million to US$ 106.0 million.

As at 20th February 2014, the combined free reserves ofthe Association and The Steamship Mutual Trust stood atUS$ 222.4 million. Discounting outstanding claims over aten year period at a rate of 2.5% would increasecombined free reserves to US$ 268.5 million comparedwith US$ 279.3 million last year.

UnderwritingDuring the year mutual and additional premium waslevied as follows:

• for the year 2013/14 (Class 1 – P&I) 100% mutual premium;

• for the year 2013/14 (Class 2 – FD&D) 100% mutual premium.

The 2010/11 year was closed in May 2013.

Gross premium written totalled US$ 253.0 million comparedto US$ 258.1 million last year.

The Directors have set the release call for both P&I and FD&Dat 20% of mutual premium for the 2013/14 policy year, 15%of mutual premium for the 2012/13 policy year and 5% ofmutual premium for the 2011/12 policy year.

For the year under review, the Directors ordered a generalincrease of 7.5% in P&I premium.

At the 2014 renewal the general increase was set at 10%.

TonnageThe level of owned entered tonnage grew by 3.3 millionGT during the year. The 2014 renewal resulted in no netincrease in owned entered tonnage. However taking theyear on year increase into account for both owned andchartered entries, the overall total entered tonnage rose to113.7 million GT.

The Association’s policy is to achieve diversity of vesseltypes and trades within its underwriting portfolio.Similarly, the Association seeks to keep a worldwidespread of owners. This policy of avoiding an overconcentration in any one area minimises the adverseeffects of market differences or economic difficulties inparticular trades or regions. Analysis of gross tonnage bygeographical area will be included within theManagement Highlights to be published in June 2014.

Pooling and reinsurance The Association’s reinsurance programme for the 2013/14policy year was arranged in conjunction with othermembers of the Group. The programme provided anultimate limit of US$ 3,061 million in excess of US$ 9 million, except in relation to oil pollution claims, which were subject to an overall limit of US$ 1,000 million.

PoolingFor 2014/15, the individual Club retention, before Poolingwith other members of the International Group, remains at US$ 9 million however the upper limit of the Pool willincrease by US$ 10 million to US$ 80 million each event.This year, a Club bringing a claim to the Pool will bear a10% retention within the layer of US$ 45 million to US$ 60 million and a 5% retention within the layer of US$ 60 million to US$ 80 million, with the balance beingdivided amongst all Clubs in the usual way.


06

Pooling and reinsurance – continuedHydra Insurance Company Limited (“Hydra”)With effect from 20th February 2014, the liabilities of the Association under the Group Pooling Agreement forthe top layer of the Pool (from US$ 30 million to US$ 80 million each event), for the Group’s retention of35% from US$ 80 million to US$ 100 million and of 30%of the remainder of the first US$ 500 million layer of theGeneral Excess Loss contract will continue to be reinsuredinto Hydra. Hydra is a cell captive set up by the Group in Bermuda under the Segregated Account Companies Act 2000.

Excess Loss coverThe Group’s Excess of Loss programme was renewed with a similar structure as for the expiring year. The Groupreinsured 65% of the excess of US$ 80 million up to US$ 500 million, 5% of the excess of US$ 100 million up to US$ 1,000 million and 100% excess of theremainder up to US$ 3,080 million.

The limit of the supplementary pooled cover for arestricted range of risks covered by the “Bio-Chem”exclusions in War Risk policies remains at US$ 30 million,any one event each vessel, for the 2014/15 policy year.

US oil pollutionIn consideration of the improvement in the tanker recordthere will be no surcharge for 2014/15.

Charterers’ coverThe Association provides cover for P&I and other risks forcharterers, reinsured outside the Pool. Combined singlelimits up to US$ 750 million are provided for P&I andother risks.

Non-Poolable coversThe Club continues to provide cover for a range of riskswhich are ancillary to Members’ core operations, reinsuredoutside the Pool with limits up to US$ 1 billion.

The Steamship Mutual Trust At the beginning of the financial year, the Associationarranged, through its wholly-owned subsidiary, TheSteamship Mutual Underwriting Association (Reinsurance)Limited, to extend the existing reinsurance contract withThe Steamship Mutual Underwriting Association Trustees(Bermuda) Limited as Corporate Trustee of The SteamshipMutual Trust (“the Trust”), a duly authorised insurer underthe Insurance Act 1978 of Bermuda, to cover all itsretained liabilities in respect of the 2013/14 policy year, onexisting terms and conditions. The Chairman of theAssociation is an ex-officio Director of the CorporateTrustee which administers the Trust. The beneficiariesunder the Trust are the Members of the Association. Thesearrangements performed satisfactorily during the year.

ClaimsGross claims and related expenses, including Pool claims,paid during the financial year, increased by 33.8% to US$ 513.3 million in respect of all policy years, ascompared to US$ 383.5 million during the previousfinancial year. After recoveries from the Group Pool andExcess of Loss contract, claims paid for all years during thefinancial year amounted to US$ 197.6 million, a decreaseof US$ 26.9 million (12.0%) over the previous year. Claims paid by the Association, net of reinsurancerecoveries but including claims handling costs, decreasedby US$ 5.4 million to US$ 30.7 million during the year.

Gross claims arising in respect of the policy year 2013/14,including IBNR, are projected to be US$ 288.5 million, adecrease of 26.4% over 2012/13 (US$ 391.9 million).

Report of the Directorscontinued


07

During the policy year, through the Association’smembership of the International Group, the Managershave been closely involved in issues in the United Statesrelating to the new non-tank vessel response planningrequirements, the ballast water control regulations and indiscussions regarding the use of dispersants. Discussionswith the IOPC Fund regarding interim funding, claimshandling guidelines, and the winding up of the 1971Fund continue, as does the monitoring of China’sdeveloping pollution prevention regulations. Sanctionsdeveloped in the USA and the EU have continued to be an issue; particularly in relation to Iran and Syria. The problem of piracy remained of great concern,particularly off West Africa although there was a verysignificant reduction in the level of attacks off Somaliacompared with the recent years. In response to the impact of P&I liabilities arising from vessels runningaground the Managers commissioned and produced a further loss prevention DVD on this subject “Groundings – Shallow Waters, Deep Trouble” which was shortlisted and a highly commended runner-up in the 2014 Seatrade Awards’ Safety at Sea category.

The Association experienced two Pool claims during thepolicy year. Both involved collisions and subsequent wreckremoval liabilities, one in the Philippines and the other in Vietnam.

The 21st and 22nd issues of “Sea Venture” werepublished in June and November 2013 and throughoutthe year the Managers also published on the Association’swebsite various circulars, Risk Alerts articles and newsbulletins on the issues described above and other mattersof topical interest. The third annual residential trainingcourse for Members was held in London andSouthampton in June 2013.

The Managers have continued to work with VideotelMarine International in the production of onboard safetytraining programmes. New programmes on the CollisionRegulations and IALA International Buoyage System, and

Cargo Contamination on Tankers were completed.Revisions were made to existing programmes onEnvironmental Quality Management, Safe Use of ECDIS,and Vessel General Permit. Development work wasundertaken on a third programme in the Dangerous andDifficult Bulk Cargoes series, and on forthcomingprogrammes on Working with Security Guards, andCultural Awareness. Further information on theAssociation’s loss prevention activities will be included inthe Management Highlights.

Policy year statementsThe figures in Appendices I and II to this Report areprepared under the accounting policies and in the formatused within the financial statements providing a summaryand breakdown by both class of business andunderwriting year. No allowance has been made for theallocation of any future investment income.

InvestmentsThe total amount of cash and investments held by theAssociation increased by 36.7% to US$ 122.9 million.


08

RulesWith the support of advice from the Association’s lawyers,the Directors have approved Rule changes effective from20th February 2014, to clarify and in some cases broadenthe scope of existing cover, and to take account oflegislative changes.

Class 1 – Protection and IndemnityRule No. 2 – DefinitionsShip – An amendment to reflect a change to the definitionof Eligible Vessel in the Pooling Agreement, whichexcludes from pooling liabilities arising in relation tovessels constructed or adapted for the purpose of carryingout drilling operations in connection with oil or gasexploration or production.

Rule No.17 – RecoveryRule No. 25 ii (c) (ii) – Repatriation ExpensesIn order to consolidate into one rule and clarify provisionsrelating to cover for liabilities arising under the MaritimeLabour Convention (“MLC”), the MLC provisions previouslyset out in Rule 17 have been moved to Rule 25 ii (c) (ii).

Rule No. 19 – Hull Risks and Specialist Operations– v Salvage Operations

An amendment to reflect changes to the PoolingAgreement for the 2013/14 policy year, which clarify thatthe exclusion in Appendix V paragraph 24 of the PoolingAgreement in respect of liabilities, costs and expensesarising out of salvage operations, includes wreck removaloperations by the entered vessel.

Rule No. 21 – War RisksThe second part of the existing Rule 21 refers to a numberof guarantees, undertakings and certificates of financialresponsibility which the Club issues pursuant to identifiedlegislation or international conventions, notwithstandingthe exclusions in Rules 20 (Nuclear Risks) and 21 (WarRisks). The amendment to Rule 21 now permits the Clubto issue a guarantee, undertaking or certificate pursuant to new legislation or an international convention which isnot in the existing list identified in Rule 21, and whichcomes into force during the policy year. The WreckRemoval Convention may come into force during 2014requiring Clubs to issue Wreck Removal blue cards.

Rule No. 25 ii (c) (ii) – Repatriation ExpensesMLC repatriation expenses provisions are nowconsolidated into Rule 25 ii (c) (ii). A further amendmenthas been made following agreement by InternationalGroup Clubs to cover repatriation costs whereabandonment occurs after cesser of entry or termination

of P&I cover due to insolvency of a Member, for a perioduntil expiry of the policy, or three months after the date of cesser or termination upon notice, whichever shall first occur.

The existing exclusions to recovery of expenses inconnection with crew substitution and shipwreckunemployment indemnity are extended to excluderecovery for repatriation expenses by the Member (but not relevant third parties) in the circumstances specified,for example in the ordinary course of business, such asupon the commercial sale of a ship, rather than uponinsolvency.

Rule No. 25 vi – PollutionA number of amendments harmonise the language usedacross paragraphs 25 vi a to d. The requirement in sub-paragraph d (“Costs Pursuant to Government Directions”),that Club cover shall not respond for liabilities, costs andexpenses otherwise recoverable under the Entered Vessel’shull policy, is extended to apply equally across all of thesections in which Club cover for pollution liabilities orpollution mitigation/avoidance is provided.

Rule No. 25 vii – Fixed and Floating Objects (FFO)Rule No. 25 xiii – Cargo LiabilitiesAmendments to these Rules clarify that liability to propertyother than cargo, whether or not on board an enteredship, fall to be covered under the FFO as opposed to theCargo Liabilities Rule.

Rule No. 26 – Classification and Condition SurveysRule No. 37 – Non-Payment of Premium and Other SumsA new provision at Rule 37 iii c preserves the right on thepart of the Managers to cancel back for non-payment ofpremium from inception of a policy year, in circumstanceswhere cover may already have been terminated inaccordance with the Rules from a later date, such as under Rule 26 iii b (i), based on the vessel’s condition. A corresponding amendment to Rule 26 iii b, recognisesthat the rights set out therein do not prejudice other rightswhich may be available to or exercised by the Managerselsewhere in the Rules.

Rule No. 47Given that the Club Rules already exclude the applicationof the Contracts (Rights of Third Parties) Act 1999 andsimilar legislation, with the aim of precluding third partiesfrom acquiring rights under the Rules, a consequentialamendment is made to permit payments to third parties ascontemplated in Rules 17 iii and 25 ii c (ii).

Report of the Directorscontinued


09

Steamship Mutual Underwriting Association Limited (“SMUA”)The Association entered into a reinsurance contract withSMUA under which, in return for a percentage of writtenpremium, the Association indemnified SMUA for apercentage of its net underlying liabilities in respect ofeach policy year. From 20th February 2013, the indemnitywas in respect of 90% of the first US$ 100 million ofSMUA’s net underlying liabilities and 100% of any excessover US$ 100 million. From 20th February 2014 theindemnity is in respect of 90% of SMUA’s net underlyingliabilities. All Members of SMUA are automaticallyMembers of the Association and thus beneficiaries of theTrust.

Management HighlightsThe Management Highlights will be published in June 2014.

Statement of Directors’ responsibilitiesThe Directors have prepared financial statements for eachfinancial year in accordance with European CommissionInsurance Accounts Directive (91/674/EEC) as adopted inthe United Kingdom through Section 396 of theCompanies Act 2006 and Schedule 3 of The Large andMedium-sized Companies and Groups (Accounts andReports) Regulations 2008 and United Kingdomaccounting principles applicable to insurers.

In preparing those financial statements the Directors arerequired to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Association will continue in business.

The Directors are responsible for keeping properaccounting records which disclose with reasonableaccuracy at any time the financial position of theAssociation. They are also responsible for the system ofinternal control, for safeguarding the assets of theAssociation and hence for taking reasonable steps toprevent and detect fraud and other irregularities.

H. L. F. SchoellerChairman

Pissouri, Cyprus13th May 2014


2013/14) 2012/13) 2011/12) TToottaall))US$ 000) US$ 000) US$ 000) UUSS$$ 000000))

10

Gross premium 249,149) 258,779) 289,079) 779977,,000077))Less:Group Excess Loss reinsurance premium (17,079) (22,905) (20,446) ((6600,,443300))Other reinsurance premium (15,307) (1,600) (1,381) ((1188,,228888))The Trust reinsurance premium (151,341) (175,512) (209,821) ((553366,,667744))

Net premium 65,422) 58,762) 57,431) 118811,,661155))

Gross claims paidOwn claims paid (25,450) (100,276) (535,289) ((666611,,001155))Group Pool claims (842) (17,558) (35,212) ((5533,,661122))Claims administration expenses (24,125) (19,692) (17,285) ((6611,,110022))

(50,417) (137,526) (587,786) ((777755,,772299))

Less:Group Excess Loss reinsurance recoveries –) –) 334,265) 333344,,226655))Group Pool reinsurance recoveries –) 30,533) 91,619) 112222,,115522))Other reinsurance recoveries –) –) 9,052) 99,,005522))The Trust reinsurance recoveries 26,301) 83,604) 123,287) 223333,,119922))

Net claims paid (24,116) (23,389) (29,563) ((7777,,006688))

Own claims outstanding including IBNR (238,745) (169,572) (344,640) ((775522,,995577))Group Pool claims outstanding including IBNR (23,485) (35,348) (6,504) ((6655,,333377))Future claims administration expenses (9,679) (2,773) (1,397) ((1133,,884499))Less:Group Excess Loss reinsurance recoveries –) –) 233,750) 223333,,775500))Group Pool reinsurance recoveries 58,272) 61,855) 26,631) 114466,,775588))Other reinsurance recoveries 10,932) –) –) 1100,,993322))The Trust recoveries 172,019) 127,851) 90,186) 339900,,005566))

Net provision for claims outstanding (30,686) (17,987) (1,974) ((5500,,664477))

Brokerage (7,920) (7,713) (7,351) ((2222,,998844))Underwriting administration expenses (4,046) (2,530) (1,656) ((88,,223322))Other expenses (8,606) (7,519) (6,548) ((2222,,667733))

Balance on the technical account (9,952) (376) 10,339) 1111))

Net investment income (including realised (2,956) 959) 4,219) 22,,222222))and unrealised)Non-technical account administration expenses (595) (589) (596) ((11,,778800))Other income 23) 39) 30) 9922))Taxation (4) (1) (6) ((1111))

Open policy years funds available (13,484) 32) 13,986) 553344))

Open Policy Years – All Classes

Appendix I – Policy Year StatementAll Classes


11

Available balance as at 20th February 2013 101,639)Add: Balance of 2010/11 year as at 20th February 2013 17,967)Movements during financial year:Net premium (266)Net claims paid (5,469)Expenses 38)Other income –)

Available balance as at 20th February 2014 113,909)

Own claims outstanding including IBNR (278,166)Group Pool claims outstanding including IBNR (52,077)Future claims administration expenses (3,349)Less:Group Excess Loss reinsurance recoveries 17,482)Group Pool reinsurance recoveries 39,697)Other reinsurance recoveries –)The Trust recoveries 267,241)

Net provision for claims outstanding (9,172)

Closed policy years funds available 104,737)

SummaryOpen and closed years funds available 105,271)Reinsurance balance and statutory reserve 740)

Total projected funds available 106,011)

Total))US$ 000))Closed Policy Years – All Classes


2013/14) 2012/13) 2011/12) TToottaall))US$ 000) US$ 000) US$ 000) UUSS$$ 000000))

12

Gross premium 225,059) 228,591) 251,817) 770055,,446677))Less:Group Excess Loss reinsurance premium (17,079) (22,905) (20,446) ((6600,,443300))Other reinsurance premium (12,810) (1,600) (1,381) ((1155,,779911))The Trust reinsurance premium (134,717) (150,400) (178,587) ((446633,,770044))

Net premium 60,453) 53,686) 51,403) 116655,,554422))

Gross claims paidOwn claims paid (23,776) (92,536) (509,920) ((662266,,223322))Group Pool claims (842) (17,558) (35,212) ((5533,,661122))Claims administration expenses (19,602) (16,393) (14,374) ((5500,,336699))

(44,220) (126,487) (559,506) ((773300,,221133))Less:Group Excess Loss reinsurance recoveries –) –) 334,265) 333344,,226655))Group Pool reinsurance recoveries –) 30,533) 91,619) 112222,,115522))Other reinsurance recoveries –) –) 9,052) 99,,005522))The Trust reinsurance recoveries 24,626) 75,864) 97,918) 119988,,440088))

Net claims paid (19,594) (20,090) (26,652) ((6666,,333366))

Own claims outstanding including IBNR (227,477) (157,653) (331,123) ((771166,,225533))Group Pool claims outstanding including IBNR (23,485) (35,348) (6,504) ((6655,,333377))Future claims administration expenses (9,105) (2,596) (1,223) ((1122,,992244))Less:Group Excess Loss reinsurance recoveries –) –) 233,750) 223333,,775500))Group Pool reinsurance recoveries 58,272) 61,855) 26,631) 114466,,775588))Other reinsurance recoveries 10,557) –) –) 1100,,555577))The Trust recoveries 161,126) 115,932) 76,669) 335533,,772277))))Net provision for claims outstanding (30,112) (17,810) (1,800) ((4499,,772222))

Brokerage (7,149) (6,897) (6,504) ((2200,,555500))Underwriting administration expenses (3,695) (2,211) (1,426) ((77,,333322))Other expenses (7,871) (6,707) (5,813) ((2200,,339911))

Balance on the technical account (7,968) (29) 9,208) 11,,221111))

Net investment income (including realised (2,705) 859) 3,760) 11,,991144))and unrealised)Non-technical account administration expenses (543) (521) (524) ((11,,558888))Other income 23) 39) 30) 9922))Taxation (4) (1) (6) ((1111))

Open policy years funds available (11,197) 347) 12,468) 11,,661188))

Open Policy Years – P&I Class

Appendix II – Policy Year StatementP&I Class


13

Available balance as at 20th February 2013 96,124)Add: Balance of 2010/11 year as at 20th February 2013 18,083)Movements during financial year:Net premium (261)Net claims paid (5,470)Expenses 41)Other income –)))Available balance as at 20th February 2014 108,517)

Own claims outstanding including IBNR (257,579)Group Pool claims outstanding including IBNR (52,077)Future claims administration expenses (3,172)Less:Group Excess Loss reinsurance recoveries 17,482)Group Pool reinsurance recoveries 39,697)Other reinsurance recoveries –)The Trust recoveries 246,654))

Net provision for claims outstanding (8,995)

Closed policy years funds available 99,522)

Summary All Classes FD&D Others P&I)

Open and closed years funds available 105,271 (5,936) 10,067 101,140)Reinsurance balance and statutory reserve 740

Total projected funds available 106,011

Total)US$ 000)Closed Policy Years – P&I Class


22001144)) 2013)Note UUSS$$ 000000)) US$ 000)

14

Earned premium, net of reinsuranceGross premium 2 225533,,000022)) 258,092)Outward reinsurance premiumGroup Excess Loss ((2200,,334455)) (24,208)The Trust 3 ((115544,,660000)) (175,165)Other reinsurers ((1122,,000066)) –)

Earned premium, net of reinsurance 6666,,005511)) 58,719)

Claims incurred, net of reinsuranceClaims paidGross amount 4 551133,,226677)) 383,510)Reinsurers’ share:Group Pool and Excess Loss 4 ((331155,,667777)) (159,057)The Trust 4 ((116666,,886622)) (188,310)

Net claims paid 3300,,772288)) 36,143)

Change in the provision for claimsGross amount 5 ((111100,,337711)) 340,054)Reinsurers’ share:Group Pool and Excess Loss 5 113311,,775588)) (295,429)The Trust 5 22,,667733)) (43,075)Other reinsurers 5 ((1100,,993322)) –)

Change in the net provision for claims 1133,,112288)) 1,550)

Claims incurred, net of reinsurance 4433,,885566)) 37,693)

Net operating expenses 6 2200,,779999)) 17,626)

Balance on the technical account for general business 11,,339966)) 3,400)

Non-Technical AccountBalance on the general business technical account 11,,339966)) 3,400)Investment income 7 ((22,,559944)) 905)Unrealised (losses)/gains on investments 8 ((336622)) 55)Investment management expenses ((660011)) (586)Other income 9 2233)) 39)Taxation 10 ((55)) (1)

(Deficit)/surplus for the financial year ((22,,114433)) 3,812)

The results for both years are in respect of continuing operations.

There are no recognised gains or losses in either year other than the transactions reported in the above income andexpenditure account.

The accompanying notes to these accounts form an integral part of this income and expenditure account.

Technical Account

Consolidated Income and Expenditure Accountfor the year ended 20th February 2014


InvestmentsLand and buildings 11 1100,,999977 10,997Other financial investments 12 110000,,777766 69,352

Reinsurers’ share of technical provisionsClaims outstanding 5 11,,110055,,991166 1,229,415

DebtorsDebtors arising out of direct insurance operations 1100,,774455 10,186Debtors arising out of reinsurance operations 13 4455,,993388 72,434Other debtors 14 44,,111144 5,642

Other assetsCash at bank and in hand 1111,,008888 9,499

Prepayments and accrued incomeDeferred acquisition costs 2255 80Other prepayments and accrued income 226633 1,078

Total assets 11,,228899,,886622 1,408,683

LiabilitiesCapital and reservesFree reserves 15 110066,,001111 108,154

Technical provisionsProvision for unearned premium 226600 550Claims outstanding 5 11,,116655,,773355 1,276,106

Provisions for other risks and chargesProvision for taxation 10 55 1

CreditorsCreditors arising out of direct insurance operations 11,,661144 3,519Creditors arising out of reinsurance operations 16 1133,,229955 18,240Other creditors 22,,994422 2,113

Total liabilities 11,,228899,,886622 1,408,683

The accompanying notes to these accounts form an integral part of this balance sheet.

These financial statements were approved by the Board of Directors on 13th May 2014.

H. L. F. Schoeller H. M. Juniel Managers:Chairman Director Steamship Mutual Management (Bermuda) Limited

15

22001144 2013Note UUSS$$ 000000 US$ 000

Consolidated Balance Sheetas at 20th February 2014

Assets


22001144)) 2013)UUSS$$ 000000)) US$ 000)

16

Operating (deficit)/surplus before taxation after interest ((22,,113388)) 3,813)

Increase in general insurance technical provisions 1122,,883388)) 1,515)Unrealised losses/(gains)on investments 336622)) (55)Decrease/(increase) in debtors 2288,,333355)) (39,255)(Decrease)/increase in creditors ((66,,002211)) (10,712)

3355,,551144)) (27,083)

Net cash inflow/(outflow) from operating activities 3333,,337766)) (23,270)

Cash flow statementNet cash inflow/(outflow) from operating activities 3333,,337766)) (23,270)Taxation paid ((11)) (3)

3333,,337755)) (23,273)

Cash flows were invested as follows:Increase in cash holdings 11,,558899)) 1,378)Net portfolio investmentPurchase of bonds and loans 33,,556677)) –)Purchase/(sale) of money market instruments 2222,,662277)) (18,998)Increase/(decrease) in cash on short term deposit 55,,559922)) (5,653)

) 3311,,778866)) (24,651)

Net investment of cash flows 3333,,337755)) (23,273)

Movement in opening and closing portfolio investments net of financingNet cash inflow for the period 11,,558899)) 1,378)Portfolio investments 3311,,778866)) (24,651)

Movement arising from cash flows 3333,,337755)) (23,273)Changes in market values and exchange rate effects ((336622)) 55)

Total movement in portfolio investments net of financing 3333,,001133)) (23,218)

Portfolio investments net of financing at 20th February 2013 7788,,885511)) 102,069)

Portfolio investments net of financing at 20th February 2014 111111,,886644)) 78,851)

(Deficit)/surplus on ordinary activities before tax

Consolidated Cash Flow Statementfor the year ended 20th February 2014


17

1. Accounting policies(a) Accounting conventionThe consolidated accounts have been prepared in accordance with the European Commission Insurance AccountsDirective (91/674/EEC) as adopted in the United Kingdom through Section 396 of the Companies Act 2006 and Schedule3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and generallyaccepted United Kingdom accounting principles applicable to insurers. The Association has adopted all materialrecommendations of the Statement of Recommended Practice on Accounting for Insurance Business issued in December2005 and amended in December 2006 by the Association of British Insurers (“ABI SORP”).

After making enquiries, the Directors have a reasonable expectation that the Association has adequate resources tocontinue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concernbasis in preparing the accounts.

(b) Basis of consolidationThe Group accounts consolidate the accounts of The Steamship Mutual Underwriting Association (Bermuda) Limited andits subsidiary undertakings The Steamship Mutual Underwriting Association (Reinsurance) Limited, Steamship MutualProperty Holdings Limited and its share of Hydra Insurance Company Limited at 20th February 2014.

(c) Calls and premiums writtenCalls and premiums, less returns, comprise the total premiums receivable for the whole period of cover provided bycontracts incepting during the financial year. All premiums are shown gross of commission payable to intermediaries.

(d) Unearned premiumsThe proportion of the premiums written relating to periods of cover after the year end is carried forward as a provision forunearned premiums.

(e) Deferred acquisition costsAcquisition costs, comprising commission and other costs related to the acquisition of new business are deferred to theextent that they are attributable to premiums unearned at the balance sheet date.

(f) Claims and related expensesClaims and related expenses are charged to the income and expenditure account when they have been settled. Aprovision is made on a claim by claim basis for the estimated cost of claims notified but not settled by the balance sheetdate. A provision for claims incurred but not reported is established on a statistical basis having regard to past experienceas to the number and magnitude of claims reported after previous balance sheet dates.

(g) Reinsurance premiums and recoveriesPayments made to and recoveries from other Associations under the Group Pooling arrangements are recognised in theincome and expenditure account when debited or credited. Other reinsurance premiums are recognised on an accrualsbasis.

(h) Land and buildingsLand and buildings are revalued every three years and are held at the revalued amount. Any losses or reversal of lossesarising upon revaluation are recognised in the income and expenditure account.

(i) Other financial investmentsQuoted investments have been valued at their bid value as at the balance sheet date. Unquoted investments are held atcost less any provision for impairment in value. Unrealised gains and losses on the movement in the market value ofinvestments, compared to their cost are included in the non-technical account.

Notes on the Accounts


18

1. Accounting policies continued(j) DebtorsReceivables arising from insurance and reinsurance operations are reviewed for impairment throughout the financial yearand as at the balance sheet date.

(k) Foreign currenciesMonetary assets and liabilities, other than unquoted investments, are converted to US dollars at the rate of exchangeruling at the balance sheet date. Unquoted investments are included at their original dollar cost.

Income and expenditure items are translated to US dollars at the rate of exchange ruling at the relevant month end. All exchange differences are included in the income and expenditure account. Land and buildings have been translated at the historic rate of exchange prevailing on the date of revaluation.

The rates of exchange ruling on the balance sheet date and used for the purpose of preparing the accounts were as follows:

(l) Allocation to policy years and classesMutual premium, additional premium, fixed premium, reinsurance premium payable, claims and reinsurance recoveriesare allocated to the policy years and classes to which they relate. Administration expenses, investment income andexchange gains or losses are allocated to the current policy year in line with total premium income.

22001144 2013

Euro € 00..772277 0.749UK sterling £ 00..559988 0.648

22001144 2013)2. Gross premium UUSS$$ 000000 US$ 000)

Mutual and fixed premiums written 225522,,117744 256,368)Deferred premium and releases 553366 1,730)Additional premium 22 (41)Movement in unearned premiums 229900 35)

225533,,000022 258,092)

Gross premium by destinationEurope 5522,,667722 75,510)North America 7788,,556655 68,338)Far East 6699,,775599 65,873)Africa and Middle East 88,,773388 8,335)Latin America 2277,,776677 25,947)Indian Sub-Continent 1155,,550011 14,089)

225533,,000022 258,092)

Gross premium relates predominantly to one class of business: Protection and Indemnity.

Notes on the Accountscontinued


19

3. Reinsurance contracts(a) Under contracts dated 11th March 1983, the Association, through its subsidiary company, The Steamship Mutual

Underwriting Association (Reinsurance) Limited (note 18), reinsured with The Steamship Mutual Underwriting Association Trustees (Bermuda) Limited all of its Protection and Indemnity risks and Freight, Demurrage and Defence risks for the period up to 20th February 1983 and subsequently further contracts for each of the policy years ended, respectively, 20th February 1984 through to 20th February 2014.

(b) The Association indemnified SMUA in respect of 90% of the first US$ 50 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 50 million for the 2012/13 policy year, in respect of 90% of the first US$ 100 million of SMUA’s net underlying liabilities and 100% of any such liabilities which exceed US$ 100 million for the 2013/14 policy year.

4. Claims paid – gross amount22001144 2013

UUSS$$ 000000 US$ 000

Claims and related expenses 445533,,222288 319,323Group Pool claims 3355,,882211 44,540Claims administration expenses 2244,,221188 19,647

) 551133,,226677 383,510

Less reinsurers’ shareGroup Pool 6655,,556666 62,351Group Excess Loss 225500,,111111 96,706The Trust 116666,,886622 188,310

) 448822,,553399 347,367

Net claims paid 3300,,772288 36,143


20

22001144)) 2013)UUSS$$ 000000)) US$ 000)

Gross outstanding claimsProvision brought forward ((11,,227766,,110066)) (936,052)Provision carried forward 11,,116655,,773355)) 1,276,106)

((111100,,337711)) 340,054)

Group Pool and Excess Loss reinsurers’ share of outstanding claimsProvision brought forward 556699,,444455)) 274,016)Provision carried forward ((443377,,668877)) (569,445)

113311,,775588)) (295,429)

The Trust’s share of outstanding claimsProvision brought forward 665599,,997700)) 616,895)Provision carried forward ((665577,,229977)) (659,970)

22,,667733)) (43,075)

Other reinsurers’ share of outstanding claimsProvision brought forward ––)))) –)Provision carried forward ((1100,,993322)) –)

((1100,,993322)) –)

Change in net provision for claims 1133,,112288)) 1,550)

The estimates for known outstanding claims are based on the best estimates and judgement of the Managers of the finalcost of individual cases based on current information. The individual estimates are reviewed regularly and include thisAssociation’s share of other Associations’ Pool claims. Provision is also made for claims incurred but not reported by thebalance sheet date using detailed statistical analysis having regard to past experience as to the number and magnitude ofclaims reported after previous balance sheet dates.


5. Change in net provision for claims


21

22001144 2013)UUSS$$ 000000 US$ 000)

Acquisition costsBrokerage 88,,006688 7,615)Underwriting administration expenses 44,,110000 2,503)

1122,,116688 10,118)

Administrative expensesOther administration expenses 88,,009999 6,946)Directors’ remuneration 338811 428)Auditor’s remuneration – audit fees 115511 134)

88,,663311 7,508)

2200,,779999 17,626)

Transactions with related partiesSteamship Mutual Management (Bermuda) Limited (“SMM(B)”) provides management and administrative services to theAssociation. Under the terms of its management contract SMM(B) receives as remuneration for its services, a fee which isbased in part on premiums payable by Members in each accounting year together with reimbursement of its office andadministration expenses and those of its worldwide representatives.

For the financial year to 20th February 2014 these fees and expenses amounted to US$ 28.9 million (2013: US$ 26.7 million). US$ 4.0 million was prepaid at the year end (2013: US$ 3.3 million). Since 21st February 2000the Association has provided SMM(B) with an unsecured, indefinite long term loan amounting to US$ 2.0 million. This loan was increased to US$ 5.3 million during the financial year for which full provision has been made. There were no other related parties transactions requiring disclosure under FRS 8.

22001144)) 2013)7. Investment income UUSS$$ 000000)) US$ 000)

Dividends and interest 9988)) 105)

Realised gains/(losses)Investments 332244)) –))))Exchange ((33,,001166)) 800))

((22,,669922)) –))))

((22,,559944)) 905))

Realised exchange losses arose on forward currency contracts taken out to offset the Association's claims exposure tomovements in the Brazilian Real exchange rate.

6. Net operating expenses


22

22001144)) 2013)UUSS$$ 000000)) US$ 000)

Investments (347) 53)Exchange (15) 2)

(362) 55)

22001144)) 2013)9. Other income UUSS$$ 000000)) US$ 000)

Bail commission 2233)) 39)

2233)) 39)

10. TaxationThe charge for the year consists of an estimated liability for the accounting year to 20th February 2014 of US$ 4,953 (2013: US$ 794) based upon negotiations with the United Kingdom HM Revenue & Customs and assessed on the investment income of the Association and SMUA for the year.

At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda. Accordingly no provision forsuch taxes has been recorded by the Association. In the event that such taxes are levied, the Association has received anundertaking from the Bermuda government exempting it from all such taxes until 31st March 2035.

11. Land and buildingsThe freehold property consists of office premises in London E1. It is occupied under licence, free of rent, by the LondonRepresentatives of SMM(B). The property was valued by CB Richard Ellis Limited at £6,950,000 (US$ 10,996,835)reflecting the market value at 20th February 2012. This resulted in a revaluation surplus of US$ 4,086,964 since the lastvaluation at 20th February 2009. The original costs incurred when the property was purchased in 1987 amounted to US$ 16,952,226.


8. Unrealised (losses)/gains on investments


23

22001144 2013UUSS$$ 000000 US$ 000

Market valueBonds and loans 1100,,990011 7,681Equities 113333 148Money market instruments 5511,,111144 28,487Deposits with credit institutions 3388,,662288 33,036)

110000,,777766 69,352

CostBonds and loans 1111,,003333 7,466Equities 448855 485Money market instruments 5511,,111144 28,487Deposits with credit institutions 3388,,662288 33,036

110011,,226600 69,474

Unquoted investments of US$ 132,964 (2013: US$ 148,398) are carried in the accounts at their original euro cost less aprovision for a permanent diminution in value.

22001144 201313. Debtors arising out of reinsurance operations UUSS$$ 000000 US$ 000

Group Clubs and Excess Loss reinsurers 1100,,336644 21,683The Trust 3355,,225544 48,957SMUA 332200 –Other reinsurance debtors –– 1,794

4455,,993388 72,434

22001144 201314. Other debtors UUSS$$ 000000 US$ 000

Balances with agents 5599 327Other debtors 44,,005555 5,315

44,,111144 5,642

12. Other financial investments


24

22001144)) 2013)UUSS$$ 000000)) US$ 000)

Statutory reserve 224400)) 240)Accumulated fund brought forward 110077,,991144)) 104,102)(Deficit)/surplus for year ((22,,114433)) 3,812)

110066,,001111)) 108,154)

The balance carried forward, of US$ 106,011,031 together with any additional premium to be ordered by the Board ofDirectors and recoveries under the reinsurance contracts, will be available to meet liabilities not yet passed or ascertained.The Members of the Association are liable for their rateable proportion of any deficiency arising from an excess ofliabilities over premium. The Directors and Managers are of the opinion that the Association has adequate assets andcontractual arrangements to meet known and anticipated liabilities.

22001144)) 2013)16. Creditors arising out of reinsurance operations UUSS$$ 000000)) US$ 000)

Group Clubs and Excess Loss reinsurers 77,,003399)) 4,373)Other reinsurers 66,,225566)) –)SMUA ––)) 13,867)

))) 1133,,229955)) 18,240)

17. Contingent liabilitiesThe Association provides guarantees to third parties on behalf of Members. For guarantees issued in respect of coveredclaims, provision is made within the claims outstanding technical provision. For uncovered claims, guarantees are issuedwhen appropriate counter security is obtained. As at 20th February 2014 the total value of guarantees issued in respectof uncovered claims was US$ 10.29 million (2013: US$ 9.20 million).


15. Free reserves


25

18. Wholly-owned subsidiary companiesThe Steamship Mutual Underwriting Association (Reinsurance) Limited is a wholly-owned subsidiary company which inturn holds 100% of the share capital of Steamship Mutual Property Holdings Limited.

19. Hydra Insurance Company Limited (“Hydra”)Hydra is a reinsurance captive created by the Members of the Group. Each Member has its own cell which is legally separate from the liabilities of the other cells. Under the provisions of FRS 5 this cell has been classified as a quasi-subsidiary and has been consolidated.

20. SecurityDuring the course of the year to 20th February 1997, the Directors authorised the setting up of a trust to secure thepayment of recoveries to US resident Members of the Association in accordance with the standard terms of the US National Association of Insurance Commissioners. As at the balance sheet date assets with a total value of US$ 5.4 million (2013: US$ 5.4 million) had been allocated to the trust. With effect from 8th July 2013 The Bank of New York Mellon replaced Wells Fargo Bank, NA as trustee in a new Trust Agreement between various members of theGroup and the US Federal Maritime Commission in connection with the provision of evidence of financial responsibilityunder Sections 2 and 3 of US Public Law 89–777. As at the balance sheet date the funds deposited had a total value of US$ 1.8 million (2013: US$ 1.4 million).


26

To the Members of The Steamship MutualUnderwriting Association (Bermuda) LimitedWe have audited the financial statements of The Steamship Mutual Underwriting Association(Bermuda) Limited for the year ended 20th February 2014,which comprise the consolidated income and expenditureaccount, the consolidated balance sheet, the consolidatedcash flow statement and the related notes 1 to 20. These financial statements have been prepared under the accounting policies set out therein. These financialstatements have been prepared for the purpose ofMember and policy holder information.

This report is made solely to the Company’s Members inaccordance with Section 90 of the Bermuda CompaniesAct 1981. Our audit work has been undertaken so that we might state to the Company’s Members those matterswe are required to state to them in an independentauditor’s report and for no other purpose. To the fullestextent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and theCompany’s Members as a body, for our audit work, forthis report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs described in the statement of Directors’ responsibilities,the Company’s Directors are responsible for thepreparation of the financial statements in accordance withthe European Commission Insurance Accounts Directive(91/674/EEC) as adopted in the United Kingdom throughSection 396 of the Companies Act 2006 and Schedule 3 of The Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 and generallyaccepted United Kingdom accounting principles applicableto insurers.

Our responsibility is to audit the financial statements inaccordance with International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financialstatements give a true and fair view and are properlyprepared in accordance with the relevant financialreporting framework and whether the financial statements have been properly prepared in accordancewith the Bermuda Companies Act 1981. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financialstatements.

Report of the Independent Auditor


27

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amountsand disclosures in the financial statements sufficient togive reasonable assurance that the financial statementsare free from material mis-statement, whether caused byfraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’scircumstances and have been consistently applied andadequately disclosed; the reasonableness of significantaccounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financialinformation in the annual report to identify materialinconsistencies with the audited financial statements and to identify any information that is apparentlymaterially incorrect based on, or materially inconsistentwith, the knowledge acquired by us in the course ofperforming the audit. If we become aware of anyapparent material mis-statements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the Company’saffairs as at 20th February 2014 and of its deficit for the year then ended;

• have been properly prepared in accordance with the European Commission Insurance Accounts Directive (91/674/EEC) as adopted in the United Kingdom through S396 of the Companies Act 2006 and Schedule 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and generally accepted United Kingdom accounting principles applied to insurers; and

• have been properly prepared in accordance with the Bermuda Companies Act 1981.

Opinion on other matterIn our opinion the information given in the Directors’Report is consistent with the financial statements.

Deloitte LLPChartered Accountants and Registered Auditor

London13th May 2014


investment section v1 - steamship mh and...mr c. j. madinabeitia, mr a. pohan and mr k. sheehan. mr...

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