Group strategy Our Group strategy remains unchanged. Our goal is to build a profitable specialty insurer, focused on specific product lines and geographic markets. With this specialist focus, we ensure that we can meet and exceed clients’ needs and expectations. We continue to focus on markets where our flexibility and agility gives us a distinct advantage over larger competitors whose scale works against them. Within this strategy our long-term focus has been to build our smaller ticket retail business – in the UK, Europe, and globally through Syndicate 33 – to balance the more volatile bigger ticket business we write solely through Syndicate 33 at Lloyd’s.
our renewed focus on smaller business risks has achieved growth both in London and in the UK Regions. We are also developing our capacity in this area in Europe and I expect it to become a strong contributor to the business in the years ahead.
Shareholder communications Ongoing communication with private and institutional investors is a top priority for the Board.
Remuneration policy The Remuneration Committee recommends to the Board a framework of executive remuneration and its cost.
All options granted under the Approved and Unapproved Share Options Schemes as well as the Performance Share Plan since 22 June 2004 are to be granted in accordance with the revised terms and conditions as follows: (i) There will be no facility for the re-testing of performance conditions; (ii) The targets for these grants under both the Option Schemes and Performance Share Plan are as follows: (a) the participants will receive 100% of their share grants if the Group’s Return on
The Company will be seeking formal shareholder approval at the Annual General Meeting for the amendment of the Unapproved Scheme through an ordinary resolution, number 11.
None of the contracts include any provision for compensation payments on early termination.
The directors have pleasure in submitting their annual report and financial statements for the year ended 31 December 2004.
Payment of creditors It is the policy of the Group to agree terms of payment for its business transactions with its suppliers and ensure that the supplier is aware of the terms of payment.
The standards are themselves evolving and undergoing improvements with amendments to existing standards being issued by the International Accounting Standards Board on a regular basis. Accordingly, the standards to be applied may change prior to publication of the Group’s first IFRS results and so the consolidated accounts under IFRS have yet be finalised. However, it is possible to conclude from the work performed by the Group’s working party that the material changes arising from the standards will include: – Recognition of the defined benefit pension scheme deficit (IAS 19 ‘Employee Benefits’); – Recognition of the estimated fair value cost of share option schemes (IFRS 2 ‘Sharebased payments’); – Annual impairment testing of goodwill and syndicate capacity rather than charging amortisation through the profit and loss account (IAS 38 ‘Intangible Assets’); – Removal of the annual movement on the equalisation provision through the profit and loss account (IFRS 4 ‘Insurance Contracts’); and
In addition to the ordinary business, the following items of special business will be considered at the meeting.
Resolution 11, which will be proposed as an ordinary resolution, seeks to amend the rules of the Hiscox Unapproved Share Option Scheme to allow for the grant of options to French employees that will qualify for favourable tax treatment in France. Full details of the amendment are set out in the Directors’ Remuneration Report.
Equalisation reserves Our evaluation of the presentation of information in the financial statements has had regard to the statutory requirement for insurance companies to maintain equalisation reserves. The nature of equalisation reserves, the amounts set aside at 31 December 2004, and the effect of the movement in those reserves during the year on the general business technical result and profit before tax, are disclosed in note 7.
Dividends – Interim paid (4,419) (3,830) Dividends – Final payable (10,281) (8,414)
Consolidated Cash Flow Statement For the year ended 31 December 2004
As permitted by Section 230 of the Companies Act 1985, no profit and loss account of the parent company is presented. The profit after taxation for the Company for the year was and the retained loss for the financial year for the Company was £713,000 (2003: loss of £1,955,000).
The Group operates an Inland Revenue approved SAYE employee share option scheme and has taken advantage of the exemption given in UITF Abstract 17 ‘Employer share schemes’ from recognising a charge in the profit and loss account for the discount on the options.
Accelerated capital allowances 899 722 Short term timing differences (25,277) (14,823) Underwriting losses – (1,398) Capital gains (883) (4)
Notes to the Accounts continued 25 Directors’ emoluments and share option schemes continued Hiscox plc Subsidiary 2004 2003
Past service costs – – Net return (1,526) (1,433) Actuarial gain/(loss) 412 (5,688)
The value of services provided to the syndicate in the year was as follows: Services provided by Hiscox Syndicates Limited to the undertakings below: Balances due to the Hiscox Group at the balance sheet dates were as follows: Due (to)/from respective related parties as at 31 December: BE Masojada is a non-executive director of Ins-sure Holdings Limited and its subsidiaries, appointed in October 2002. These companies operate in a joint venture between Lloyd’s, the International Underwriting Association (IUA) and Xchanging. These companies provide policy issuance, premium collection, claims settlement and clearing services to the Lloyd’s and London insurance company markets. Hiscox Underwriting Group Services Limited receives a fee of £20,000 p.a. in relation to this directorship. The balance due at 31 December 2004 was £5,000 (2003: £19,858).
Acquisitions and disposals Payments to acquire investment in associated undertaking (200) (50) Net cash proceeds on disposal of a business 675 – Movement in net cash and investments on disposal of a business (1,566) –
(11) That the amendment to the Rules of the Hiscox Unapproved Share Option Scheme by the addition of a new Schedule 2 in relation to the issue of options in France in the form produced to the Meeting and initialled by the Chairman for the purposes of identification be and is hereby approved and that the directors be authorised to do all acts and things which they may consider necessary or expedient to carry the amendment into effect.