Annual Report&Financial Statements 2010 - TT Club · 2018. 10. 9. · Hanjin Shipping Ltd, Seoul U Kranich 1 Hapag-Lloyd AG, Hamburg Registered Office First Floor Chevron House 11

Annual Report & Financial Statements 2010Through Transport Mutual Insurance Association Limitedfor the year ended 31 December 2010

transport insurance plus

Through Transport Mutual Insurance Association Limited

Contents


Directors and Management 2

Financial Highlights 2010 3

Chairman’s Review 4

Directors’ Report 9

Directors' Responsibilities Statement 19

Notice of Meeting 20

Independent Auditors’ Report 21

Consolidated Income and Expenditure Account 22

Balance Sheets 24

Consolidated Cash Flow Statement 26

Notes to the Financial Statements 27

TT Club Mutual Insurance Limited


Directors' Report 49

Statement of Directors' Responsibilities 55



Income and Expenditure Account 59

Balance Sheet 61


Directors and Management

ChairmanK Pontoppidan 2 3Copenhagen

DirectorsS Bradford 2 3Port of Melbourne Corporation, Melbourne

J Callahan Nautilus International Holding Corporation, Los Angeles

P S de M CottaAlianca Navegacaoe Logistica Ltde., Rio de Janeiro

M EngelstoftA P Møller-Maersk, Copenhagen

J Erlund (retired 24 June 2010)PSA International (Pte) Ltd, Singapore

T Faries Appleby, Bermuda

A Fullbrook (appointed 24 June 2010)OEC Group, New York

G Gluck M&S Shipping Group Plc, London

K Hellmann Hellmann Worldwide Logistics GmbH & Co KG,Osnabrück

B Hsieh (appointed 18 March 2010)Evergreen Group, Taipei

D JürgensenThe Bertling Group, Hamburg

Y M KimHanjin Shipping Ltd, Seoul

U Kranich 1Hapag-Lloyd AG, Hamburg

Registered OfficeFirst FloorChevron House11 Church StreetHamilton HM11Bermuda

Telephone +1 441 292 4724Telefax +1 441 292 3694

Company Registration number1750

Deputy ChairmanJ A Dorto 3Virginia International Terminals Inc, Norfolk

J KüttelErmewa, Geneva

B Louie 3OOCL Ltd, Hong Kong

Y NarayanDP World, Dubai

O RakkenesAtlantic Container Line AB, New Jersey

C SadoskiCarrix Inc, Seattle

Shi Meisi COSCO Container Lines Ltd, Shanghai

T ShimizuKawasaki Kisen Kaisha Ltd, Tokyo

G Sjöholm 1Port of Gothenburg, Gothenburg

P J Standish FCA 1Woking

CK TanPacific International Lines (Pte) Ltd, Singapore

Sir David Thomson, Bt. 2Edinburgh

J Thomson 2 (appointed 28 October 2010)Edinburgh

A Wang (resigned 18 March 2010)Evergreen Marine Corp (Taiwan) Ltd, Taipei

ManagersThomas Miller (Bermuda) Ltd

SecretaryD W R Hunter

1 Audit Committee member2 Investment Committee member3 Nominations Committee member

2 Through Transport Mutual Insurance Association Limited

Financial Highlights 2010

2010 2009

US$000s US$000s

Results for financial yearGross earned premiums 171,171 165,204

Brokerage and commission (20,226) (18,815)

Net earned premiums 150,945 146,389

Reinsurance premiums ceded (40,013) (39,489)

Investment income, gains and losses, and other income 4,037 16,450

Net claims incurred (69,762) (82,019)

Expenses, taxation and minority interest (35,076) (33,634)

Overriding commission on quota share 2,702 2,023

Surplus on ordinary activities after tax and minority interest 12,833 9,720

2010 2009

US$000s US$000s

Summary balance sheet

Total cash and investments 459,658 456,500

Other assets 121,645 121,537

Total assets 581,303 578,037

Gross unearned premiums and claims reserves (378,603) (395,470)

Other liabilities (29,457) (22,195)

Subordinated loan (29,050) (29,012)

Total surplus and reserves 144,193 131,360


Chairman’s Review

Large natural catastrophes dominated 2010 with the earthquakes in Haiti, Chile and centralChina followed by the heat wave in Russia, the flooding in Pakistan and earthquake in NewZealand. Flooding is the cause of further damage as we begin 2011 with heavy rainfall overEastern Australia and Venezuela. Further, the publication of this Review takes place in theimmediate aftermath of the earthquake and resulting tsunami in Japan. As was predicted at thestart of the year, 2010 was one of the most active hurricanes seasons on record with 19 namedtropical cyclones developing. The insurance industry escaped major losses however, largelybecause the coast of the United States was not hit by a single hurricane.

In terms of other major events, the loss of the Deepwater Horizon drilling rig in the US gulf inApril attracted much publicity. The loss however, only ranks towards the bottom of the top 20insured losses since 1970 because the insured loss will only be a fraction of the total economicloss, which is estimated to be of the order of US$35 billion.

For the Club itself, 2010 was a reasonably quiet year in terms of major losses. Naturally, theClub was involved in the major container ship incidents in the year and in particular thecollision between the MSC Chitra and the Khalijia, off Mumbai, and the grounding of theKota Kado in the Pearl River delta.

Trading Performance

The Club’s trading environment in 2010 continued to be very competitive. Overcapacity inmany insurance lines of business led to acute competition in both 2009 and 2010 and that,coupled with the economic conditions, produced the most difficult trading environment for thegeneral insurance market since the early 1980’s. Fortunately, the actions taken at the end of2008 to reduce significantly the Club’s cost base and to reshape the business profile inanticipation of the sustained very soft conditions which coupled with close management ofcosts and prudent underwriting have enabled the Club to remain competitive on the right risksand to continue to provide the level of service expected by Members and their brokers.

It is pleasing to note that in spite of the competitive environment the Club’s retention ratioacross the 2009 and 2010 years is close to 95%, and this is testament to the value delivered toMembers in the Club’s product. During that period the Club has also attracted its share of newbusiness and continues to move forwards on its aim of growing its share of the TransportOperator and Logistics market and growing in the medium sized risks bracket.

Claims trends at all levels were within expectations in 2010. Whilst some losses were sustainedfrom the Haiti, Chile and New Zealand earthquakes, the Club paid less out in respect of claimsover US$1 million in 2010 than in any recent year and no claims were made in the year on theClub’s general reinsurance arrangements. Claims below US$1 million returned to levels close totheir long term trend following what must now be considered an extraordinary drop in 2009.That drop was almost certainly the result of the sharp decrease in global trade volumes in theimmediate aftermath of the credit crunch in the second half of 2008.


In summary, the Club’s overall operating performance in 2010 has been good. A modestoperating loss on the year (which is a satisfactory result on the basis that the Club is a mutualand given market conditions) has been more than offset by continuing improvement in theclaims on years before 2010 which has enabled reserves held in respect of these years to bereleased. Whilst significant releases have been made in both 2009 and 2010 the Club remainsvery prudently reserved. The Club’s already very strong rating agency and solvency capitalposition was further strengthened in the year and the Club’s A- rating, awarded by AM Best,was once again affirmed.

The Club continues to run a very low risk Investment Policy with the focus being on avoidingreal losses. The funds are invested in cash and short dated bonds, with the currencies matched tothose of the underlying claims liabilities. With the help of the new Specialist InvestmentDirector appointed in 2010 (see below), the focus will be on identifying opportunities toimprove the investment return without adding significantly more risk into the portfolio.

Turning to non-financial matters, the annual Customer Satisfaction Survey was once againcarried out and I am pleased to say that more Members and brokers than at any time in the 8years that the survey has been running are satisfied or better with the Club’s service. The Club’sCEO, Charles Fenton, wrote to all those that took part in the survey in 2010 thanking them fortaking part and I would like to add my own thanks too, since the feedback from the Survey isvery valuable to the Club’s Directors and Managers in helping them shape service delivery andproduct development. Also in the year we published our Service Commitment which wasproduced in order to set out for the benefit of our Members and their brokers what they canexpect from the Club in the way it handles Member affairs. It is intended to adapt theCustomer Satisfaction Survey in 2011 to measure our performance against the ServiceCommitment and I would encourage any of you with feedback on the Club’s service to feedthat back in whatever way is convenient to you. The Club has a dedicated feedback e-mailaddress [email protected] and I am always pleased to receive comments from ClubMembers.

Loss Prevention

Loss Prevention is core to the Club’s product and service and I know of interest to many ofyou; I review below developments in a number of areas which have occurred during the year.

Rotterdam RulesIn the latter part of 2009, a potentially key piece of legislation – the Rotterdam Rules – wasopened for signature and ratification. At the time of preparing this review, the number ofsignatories has reached 23. Although no states have yet implemented the new regime, theUnited States is thought likely to do so at a Federal level during 2011 and this may be asignificant step towards more widespread implementation. The Club prepared and delivered aseries of seminars globally in late 2009 and early 2010 on the impact of the new rules on thevariety of interests through the international supply chain. The Club will continue to provideguidance as the implementation process develops.


Chairman’s Review (continued)

Safety Standards for CranesBuilding on its strength of relationship with like-minded organisations, the Club has beenworking with ICHCA International – the industry organisation dealing with the handling andmovement of cargo - and PEMA (the Port Equipment Manufacturers Association) to create abaseline safety standard for the specification of ship-to-shore cranes. That project has developedwell and the Club is looking to extend the scope to other types of handling equipment used inports.

Industry RegulationOne of the major challenges facing the Club and operators in the supply chain alike is theimprovement of the level of understanding of good practice and compliance with regulationamongst the shipper community. There appears to be an increasing degree of convergenceacross the industry on a number of related issues that impact the quality of the way in whichcargo is entered into the system and the Club has continued to be party to this improvement.Following its part in the successful lobbying to mandate shoreside training in relation to thecarriage of dangerous goods, which became law in the IMDG Code from 1 January 2010, theClub has sought to highlight the need for logistics operators to seek assurance from theircustomers that appropriate role-based training has been undertaken.

Container Weighing and StuffingDuring 2010 the momentum has increased towards increasing the discipline and precision ofanother core aspect of shipper information – the measurement of gross mass loaded in atransport unit. The immediate catalyst for the debate was the publication of the ‘Lashing@Sea’report by the Maritime Research Institute Netherlands (MARIN), which was the conclusionof a three year research project initiated in 2006. It is likely that proposals flowing from therecommendations in the report will be presented to the IMO in May 2011, and the Club isworking together with both Members and international shipping organisations to assess theoptions available to improve safety and ensure that the implementation is effective.

The issue of weighing containers was also a theme at the start of the year prompted by therelease of the UK’s Maritime Accident Investigation Branch ‘preliminary examination’ reporton the ‘Husky Racer’. The ship suffered a collapse of container stack whilst alongside inBremerhaven and the report revealed that the cause was seven laden units declared as emptyand stowed in the top tier thus resulting in weight mis-declaration by a factor of 5.95. InDecember the World Shipping Council urged the IMO to establish an international legalrequirement that all loaded containers be weighed prior to being stowed on board.

There is a separate initiative underway in the ILO to update the ‘IMO/ILO/UN ECEGuidelines for Packing of Cargo Transport Units (CTUs)’ which were last reviewed in 1997.This is welcome and will assist in the process of ensuring that cargo is properly loaded andsecured within CTUs.

The Club, through its risk and loss prevention team, are in pole position to represent the diverseinterests of Members in these and similar matters. It will continue to participate actively in thedebates leading to improved safety and the dissemination of good practice across the industry,



partnering with other organisations where appropriate, to achieve appropriate and pragmaticsolutions. The Club will continue to look for opportunities to make its considerable expertiseand experience available to help manage risk in the transport supply chain.

Regulatory

As is the case for all insurers falling under the remit of the United Kingdom’s Financial ServicesAuthority, the Club is in the midst of preparing for the European Union’s Europe-wideregulation, known as Solvency II. Anyone who has followed the press reports on this piece ofregulation will know the extent of the changes required to the risk management systems andreporting requirements of the Club. The Club’s preparations are going well and I am satisfiedthat we are finding the right balance in the depth of our implementation.

Directors and Officers

Two Directors retired from the Board in 2010, Arnold Wang and Jan Erlund, and I would liketo thank them both for their contributions during their time as Directors of the Club. Threenew Directors joined the Board during the year, Mr Bronson Hsieh, Mr Anthony Fullbrookand Mr John Thomson and your Board is very much looking forward to working with them.Mr Thomson has joined the Board as a Specialist Director focussing on Investment matters andwhilst he will strengthen the Board’s overall governance and oversight he will also assist theClub’s Managers in their management of investment matters.

Governance

During the year a number of steps were taken to streamline the Club’s governance structure. AnInvestment Committee was created to increase the focus on investment matters and followingits creation, the Chairman’s Committee which had the oversight of investment matters at theheart of its role, was disbanded. The Chairman’s Committee had, when it was first created, a rolein overseeing operational matters, but the Board of the Club’s UK based subsidiary hasincreasingly assumed that responsibility in recent years and the disbandment of the Chairman’sCommittee will avoid duplication in the oversight arrangements. The other change in the yearwas the adaption of the role of the Audit Committee so that its activities encompassed greaterresponsibility for risk. Accordingly, that Committee became the Audit and Risk Committee andits Terms of Reference were modified. Although this is in part preparation for the Solvency IIenvironment, it was, in any event, a sensible step to take as the management of risk became anarea of increased importance for the Boards.

Looking Forwards

Looking forwards, the Board is planning on the Club’s market environment in 2011 beingsimilar to 2010. We are assuming that premium rates will remain soft, although it is expectedthat as trade volumes continue to increase, premium income will increase correspondingly.Whilst it is to be expected that claims volumes will also increase as trade volumes continue togrow, this growth tends to be at inflationary levels and the Club’s planning anticipates this trend.One significant unknown is the impact of the recent natural catastrophes on the premiumrating cycle and it is possible that 2011 might see a hardening of rates as market sentimentchanges.



We will continue to prioritise working closely with the Club’s expanding Membership to assistthem in loss prevention by highlighting the exposures they incur in their operations, byefficiently managing their claims and by helping them to avoid future claims either by learningfrom their own experience or from the experience of other Club Members. 2011 will be the43rd year the Club has assisted its Members in loss prevention measures.

I would like to thank the Managers for their work throughout the year in running the day today operations of the Club. The results of the Customer Satisfaction Survey are testament to theexpertise and dedication they bring to their activities.

Finally, I would like to take this opportunity to thank all our Members, brokers, reinsurers andsuppliers for their continued support and I wish you all well in the challenging market inwhich we operate.

K Pontoppidan, Chairman24 March 2011



Directors’ Report

The Directors present herewith their Report and the consolidated financial statements ofThrough Transport Mutual Insurance Association Limited ("the Association" or “Company”).The Association and its subsidiary, TT Club Mutual Insurance Limited, trade collectively as the“TT Club”.

This report is addressed to, and written for, the Members of the Company, and the Directorswish to draw attention to a number of financial and environmental uncertainties, including butnot limited to the rate of claims and costs inflation, foreign exchange movements and economicgrowth, which mean that the actual results in the future may vary considerably from bothhistoric and projected outcomes contained within any ‘forward-looking statements’.

Principal activities

The principal activities of the TT Club during the year were the provision of insurance andreinsurance in respect of the equipment, property and liabilities of its Members in theinternational transport and logistics industry.

Business review

Strategy and values

The Group’s business is the provision of liability and asset insurances and related riskmanagement services to the international transport and logistics industry. It consists of twomutual insurance companies with separate corporate governance arrangements but operating asa single business, and is owned by its policyholder members.

Its business strategy is to provide superior insurance products and claims handling to itspolicyholder members at a competitive price, whilst maintaining excellent financial securityover the long term. Insurance is very much a cyclical business, with premium rates fluctuatingin accordance with the supply of capital in the market and with the investment returns availableto the owners of that capital.

The Group’s executive function, including that relating to investment management, isperformed by companies within the Thomas Miller Holdings Limited group of companies.

Financial performance, capital strength and solvency

The Group’s financial performance in 2010 has continued to be affected by softening premiumrates which fell by an average of 4% during the year. Gross earned premiums amounted toUS$171.2 million which was 4% higher than 2009 due to growth from new business duringthe year.

The forecast ultimate loss ratio for the 2010 policy year of 87% is the same as the 2009 year atthe same stage. Prior policy years claims have developed within expectations resulting in arelease of prior year claims reserves, excluding currency effects, of US$28.5 million (2009 :US$25.0 million). Operating expenses, including brokerage and commissions, increased by 1.8%compared to 2009.


The technical result for 2010, after allowing for the attribution of investment income on theclaims reserves, was a surplus of US$12.0 million (2009: surplus of US$4.1 million). Theunderlying investment return, excluding currency effects, was 0.9%. The non-technical accountproduced a surplus of US$1.0 million (2009: surplus of US$5.6 million), resulting in an overallnet surplus after tax of US$12.8 million (2009: surplus of US$ 9.7 million).

As a result the Group’s surplus and reserves now stand at US$144.2 million (2009: US$ 131.4million). In addition to this, the Group’s regulatory capital includes US$ 30 million insubordinated loan notes issued by the parent company in October 2006. The notes mature in2036 and are repayable at the company’s option from October 2011, subject to regulatoryapproval. They are fully admissible for regulatory (FSA) purposes until 2031 and credit rating(AM Best) purposes until 2016, after which the level of admissibility will gradually decline.

The principal KPIs by which performance is monitored by the Board are detailed below.

1. Financial strength – AM Best rating

Year Rating

2006 to 2010 A– (Excellent)


Directors’ Report (continued)

2. Solvency – capital as a percentage of FSA Enhanced Capital Requirement (ECR)

3. Capital – surplus and reserves

The Group’s financial strategy, approved by the Board, is to maintain within the businesssufficient capital to meet regulatory requirements, and to maintain an AM Best rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case. TheDirectors are satisfied that both elements of this strategy have been maintained throughout 2010.



Year

0

50

100

150

200

250

300

2006 2007 2008 2009 2010

%

Year

0

160

140

120

100

80

60

40

20

2006 2007 2008 2009 2010

US

$m

12

4(a). Operating ratios - loss ratio, expense ratio and combined ratio, including exchangemovements on claims reserves

Combined ratio

4(b). Operating ratios - loss ratio, expense ratio and combined ratio, restated to exclude the estimated effect of exchange movements on claims reserves

Combined ratio (excluding exchange movements)



Year

0

20

40

60

80

100

120

2006 2007 2008 2009 2010

%

Loss ratio

Expense ratio

Combined ratio

Year

0

20

40

60

80

100

120

2006 2007 2008 2009 2010

%

Loss ratio

Expense ratio

5(a). Investment performance – return gross of tax and including exchange movements

Investment return

5(b). Investment performance – return gross of tax and excluding exchange movements

Investment return



Year

0

5

10

15

20

25

30

2006 2007 2008 2009 2010

US

$m

Year

20

25

15

10

5

0

2006 2007 2008 2009 2010

US

$m

(excluding exchange movements)

6. Net result – income and expenditure surplus after tax

7. Customer satisfaction – index (scored out of a maximum of 10) compiled by independent research



Year

-10

15

10

5

0

-5

2006 2007 2008 2009 2010

US

$m

Year

8.0

10.0

6.0

4.0

2.0

-

2006 2007 2008 2009 2010

Corporate and social

The Directors are of the opinion that the environmental impact of the Group’s activities is low,due to the small size and the nature of its business. There are therefore currently no KPIsrelating to environmental matters. The business is however conscious of its environmentalresponsibility, and continues to invest in electronic claims handling and underwriting systemsdesigned to increase efficiency and reduce reliance on paper-based records. It is also investing inwebsite technology in order to facilitate electronic distribution of its products and informationto Members, brokers, suppliers and third parties.

As the Group’s executive function is performed by independent professional managers there areno employee matters to report.

Risks and risk management

The Board has adopted a risk management policy which is designed to protect the Group fromoccurrences that hinder sustainable achievement of our objectives and financial performanceand to ensure that the Group complies with regulatory requirements in the jurisdictions inwhich it operates.

The following key principles outline the Group’s approach to risk management:

• The Board is responsible for risk management and internal control;

• The Board is responsible for ensuring that a framework exists which sets out riskappetite, risk management and control and business conduct standards; and

• The Board is responsible for ensuring that the Managers implement and maintain asound system of internal control.

All types of risk facing the business are analysed and each one is rated according to its severity(impact on the business) and probability of occurrence, adjusted for any mitigation measuresthat have been implemented. The residual risks are prioritised, with the most highly rated itemsbeing considered as fundamental risks. Each fundamental risk is monitored and managed by amember of the executive management. All risks identified are summarised, categorised andprioritised in a Risk Log which is reviewed and approved by the Board, at least annually andmore frequently if required.

The principal risks and uncertainties faced by the business are summarised as follows:

Insurance risk

Insurance risk is the potential adverse financial impact on the Group as a result of:

• Inaccurate pricing of risk when underwritten

• Inadequate reinsurance protection

• Fluctuations in the timing, frequency and severity of claims and claimssettlements relative to expectations

• Inadequate claims reserves



Risks and risk management (continued)

Insurance risk is mitigated by means of:

• Prior approval of all quotations by a minimum of two senior underwriters

• Underwriters’ authority levels based on experience and competence

• Technical underwriting and claims file reviews by management

• Key performance indicators and key risk indicators relating to underwritingand claims functions

• Actuarial, management and Board review of claims reserves (every fourmonths)

• Management review of reinsurance adequacy and security

Financial risks

Financial risks consist of:

• Market risk

• Currency risk

• Credit risk

• Liquidity and cashflow risk.

Information on the use of financial instruments by the Association and its management offinancial risks is disclosed in Note 3 to the financial statements.

Operational risk

Operational risk arises from inadequately controlled internal processes or systems, humanerror and from external events. Operational risks include, for example, risks arising fromoutsourcing, information technology, information security, project management, humanresources, taxation, legal, fraud and compliance.

The Group’s IT systems are established and stable; any development follows standardproject methodologies. Appropriate operational policies and procedures covering allaspects of the business have been embedded through the organisation. Managementinformation supports the control framework and is subject to on-going validation andenhancement to ensure that it is appropriate to business requirements.

The Directors have assessed the mitigation and controls environment relating to each of thesetypes of insurance, financial, and operational risk and have made an assessment of the capitalrequired to meet the residual risks faced by the business. That individual capital assessment hasbeen reviewed and agreed with the FSA.



Directors & Officers

The names of the Directors of the Association who served during the year are shown on page2. All the Directors retiring at the Annual General Meeting and seeking re-election were re-elected. At the meeting of the Directors following the Annual General Meeting in June 2010,Mr K Pontoppidan was re-appointed as Chairman of the Board. Mr J Dorto was re-appointedas a Deputy Chairman. The Directors of TT Club Mutual Insurance Limited are shown at thefront of TT Club Mutual Insurance Limited annual report.

Meetings of the Directors

The Board of the Association met formally on three occasions during the year to carry out thegeneral and specific responsibilities entrusted to it by the Members under the Bye-Laws of theAssociation. The number of Directors present at these meetings was 18, 20 and 19 respectively.

Amongst the matters considered, the Directors received and discussed written reports from theManagers on the Group's financial development, with particular reference to underwritingpolicy, investment of its funds, insurance reserves and the major claims paid or outstanding.

Reports on the results of the negotiations for the renewal of Members at the start of andduring the 2010 policy year were received and the Directors reviewed the list of new entriesand of those Members whose entries had terminated.

The Annual Report and Financial Statements for the year ended 31 December 2009 wereapproved by the Board for submission to the Members of the Association at the Annual GeneralMeeting. The Directors also confirmed their intention not to levy any supplementary premiumfor the 2009 policy year.

Board Committees

The Board has delegated specific authority to a number of committees. The Board is appraisedas to the main issues discussed and all minutes of meetings of the committees are distributed tothe Board.

The Nominations Committee ensures that the Board is appropriately skilled to direct a mutualinsurance company, that the Directors are appropriately senior and representative of themembership, and that there is a proper balance of Directors taking account of the differentcategories of Member, different sizes of businesses insured and different locations of Members’businesses. The Nominations Committee met on three occasions during 2010.

The Audit and Risk Committee assists the Board in discharging its responsibilities for theintegrity of the Group’s financial statements, the assessment of the effectiveness of the systems ofinternal control and risk management, monitoring the effectiveness and objectivity of theinternal and external auditors and compliance with regulatory requirements in relevantjurisdictions. The Audit and Risk Committee met on five occasions during 2010.

The Investment Committee makes recommendations to the Board in respect of investmentpolicy and reviews in detail the performance of the Group’s investments. The InvestmentCommittee was formed in October 2010 and met once during 2010.



Charitable and political donations

During the year, the Group made a charitable donation to Chauncy Maples, a project torenovate a clinic ship on Lake Malawi, totalling US$40,000 (2009: charitable donations toUNICEF, Child Hope and Westpac Helicopter Rescue Service totalling US$9,000). Nodonations were made for political purposes.

By order of the Board.

D W R Hunter, Company Secretary 24 March 2011



Directors’ Responsibilities Statement

The Directors are responsible for preparing the financial statements in accordance withapplicable laws and regulations in Bermuda.

The Directors have elected to prepare the financial statements in accordance with UnitedKingdom Accounting Standards. The financial statements are required to give a true and fairview of the state of affairs of the Group and Parent Company and of the surplus or deficit of the Group for that year.

In preparing those financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable United Kingdom Accounting Standards have beenfollowed, subject to any material departures disclosed and explained in the financialstatements; and

• prepare the financial statements on the going concern basis unless it is inappropriateto presume that the Group and Parent Company will continue in business, inwhich case there should be supporting assumptions or qualifications as necessary.

The Directors confirm that they have complied with the above requirements in preparing thefinancial statements.

The Directors are responsible for keeping adequate accounting records which disclose withreasonable accuracy at any time the financial position of the Group and Parent Company and to enable them to ensure that the financial statements comply with applicable law and UnitedKingdom Accounting Standards. They are also responsible for safeguarding the assets of theParent Company and hence for taking reasonable steps for the prevention and detection offraud and other irregularities.




Notice of Meeting

Notice is hereby given that the forty-second Annual General Meeting of the Members of theAssociation will be held at The Grand Hotel, Stockholm on the twenty-third day of June 2011at 8.30 am for the following purposes:

To receive the Directors' Report and Financial Statements for the year ended 31December 2010 and, if they are approved, to adopt them.

To elect Directors.

To appoint auditors and to authorise the Directors to fix their remuneration.

To transact any other business of an Ordinary General Meeting.




Independent Auditors’ Report

To the Members of Through Transport Mutual Insurance Association LimitedWe have audited the Group and parent company financial statements (the ‘‘financialstatements’’) of Through Transport Mutual Insurance Association Limited for the year ended 31December 2010 which comprise the Consolidated Income and Expenditure Account, theConsolidated and Parent company Balance Sheets, the Consolidated Cash Flow Statement, andthe related notes. The financial reporting framework that has been applied in their preparationis applicable law in Bermuda and United Kingdom Accounting Standards as issued by the UKAccounting Standards Board.

Respective responsibilities of directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance withapplicable law in Bermuda and International Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the UK Auditing Practices Board’s Ethical Standards forAuditors.

This report, including the opinion, has been prepared for and only for the company’s membersas a body in accordance with Section 90 of The Companies Act 1981 (Bermuda) and for noother purpose. We do not, in giving the opinion, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financialstatements sufficient to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the group’s and parent company’scircumstances and have been consistently applied and adequately disclosed; the reasonablenessof significant accounting estimates made by the directors; and the overall presentation of thefinancial statements.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the group’s and the parent company’s affairsas at 31 December 2010 and of the group’s surplus and cash flows for the year thenended;

• have been properly prepared in accordance with United Kingdom AccountingStandards; and

• have been prepared in accordance with the requirements of the Companies Act1981 (Bermuda).

PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsLondon, United Kingdom

24 March 2011


Consolidated Income and Expenditure Accountfor the year ended 31 December 2010

All activities derive from continuing operations.


Technical Account

Note 2010 2009

US$000s US$000s US$000s US$000s

Gross written premiums 13 167,444 175,784Reinsurance premiums ceded (38,783) (46,406)

Premiums written, net of reinsurance 128,661 129,378

Change in provision for unearned premiumsGross 3,727 (10,580)Reinsurers' share (1,230) 6,917

2,497 (3,663)

Earned premiums, net of reinsurance 131,158 125,715

Allocated investment return transferred from the non-technical account 2(j) 467 9,388

Commission income 1,498 1,395Other technical income 49 47

Claims paidGross 4 (107,275) (130,566)Reinsurers' share 5 19,477 52,549

(87,798) (78,017)

Change in the provision for claimsGross 13,140 21,674Reinsurers' share 4,896 (25,676)

18,036 (4,002)

Claims incurred, net of reinsurance (69,762) (82,019)

Net operating expenses 6 (51,362) (50,460)

Balance on the technical account 12,048 4,066

Consolidated Income and Expenditure Account for the year ended 31 December 2010 (continued)


There is no material difference between the surplus on ordinary activities before taxation andthe retained surplus for the year stated above and their historic cost equivalents.

Note 11 details the movements on the Reserve Fund during the year. There are no recognisedgains or losses other than those shown in the Consolidated Income and Expenditure Account.Accordingly, no statement of total recognised gains and losses has been prepared.

The notes on pages 27 to 46 form an integral part of these financial statements.


Non-technical Account

Note 2010 2009

US$000s US$000s


Investment income 6,926 2,149

Unrealised gains on investments – 3,042

Investment expenses and charges (190) (244)

Unrealised losses on investments (3,018) –

Interest payable on subordinated loan (1,047) (1,207)

Exchange (losses)/gains (1,170) 11,268

Total investment return 7 1,501 15,008

Allocated investment return transferred to the technical account 2(j) & 7 (467) (9,388)

Surplus on ordinary activities before tax 13,082 9,686

Tax on ordinary activities 8 (249) 34

Surplus on ordinary activities after tax 12,833 9,720

Minority interests – –

Surplus for the financial year 11 12,833 9,720

Balance Sheetsas at 31 December 2010


Note 2010 2009 2010 2009

US$000s US$000s US$000s US$000s

Assets

InvestmentsShares in subsidiary undertakings 9 – – 11 11

Other financial investments 10 417,253 426,916 353,555 358,352

Reinsurers' share of technical provisionsProvision for unearned premiums 7,322 8,552 87 –

Claims outstanding 67,090 62,194 9,236 3,643

74,412 70,746 9,323 3,643

DebtorsArising out of direct insurance operations

- policyholders 27,011 25,132 350 18

Arising from reinsurance ceded 11,649 14,512 43,084 45,371

Corporation tax debtor 114 137 – –

Other debtors 1,707 1,708 116 140

40,481 41,489 43,550 45,529

Cash at bank and in hand 42,405 29,584 5,477 3,959

Prepayments and accrued incomePrepayments 147 178 111 85

Accrued interest 575 1,374 564 1,347

Deferred acquisition costs 6,030 7,750 146 57

6,752 9,302 821 1,489

Total assets 581,303 578,037 412,737 412,983

Parent CompanyConsolidated

Balance Sheetsas at 31 December 2010 (continued)

The financial statements on pages 22 to 46 were approved by the Board of Directors on 24March 2011 and were signed on its behalf by:

K Pontoppidan, DirectorJ A Dorto, Director

Company Number 1750



Note 2010 2009 2010 2009

US$000s US$000s US$000s US$000s

Liabilities and reservesReservesStatutory reserve 240 240 240 240

Surplus and reserves 11 143,953 131,120 87,343 78,052

144,193 131,360 87,583 78,292

Subordinated liabilities 12 29,050 29,012 29,050 29,012

Technical provisionsProvision for unearned premiums – gross 51,687 55,414 34,797 35,293

Claims outstanding – gross 326,916 340,056 245,626 256,589

378,603 395,470 280,423 291,882

CreditorsArising out of direct insurance operations 173 751 17 –

Arising from reinsurance ceded 6,699 5,817 875 –

Provision for taxation – – 96 89

Amount due to Group undertakings – – – 3,532

Accrued expenses and sundry creditors 22,621 15,663 14,693 10,176

29,493 22,231 15,681 13,797

Equity minority interest (36) (36) – _

Total liabilities and reserves 581,303 578,037 412,737 412,983

Parent CompanyConsolidated


Consolidated Cash Flow Statementfor the year ended 31 December 2010

Note 2010 2009

US$000s US$000s

Operating activitiesPremiums received from Members 146,480 160,001

Reinsurance premiums paid (37,901) (42,417)

Claims paid (105,391) (133,045)

Reinsurance receipts in respect of claims 22,340 57,177

Investment income 7,535 2,012

Management fee paid (24,934) (20,650)

Expenses paid (4,736) (8,382)

Other operating cash movements 1,577 1,480

Overriding commissions on quota share reinsurance 3,609 (2,116)

Net cash inflow from operating activities 14 8,579 14,064

Interest payable on subordinated loan (1,009) (1,150)

Taxation paid (224) (78)

(1,233) (1,228)

Financing activities:Net cash inflow from financing activities 7,346 12,836

Cash flows were invested as follows:Increase in cash holdings 15 12,821 11,379

Net portfolio investments 16

Net purchase of UCITS (5,818) (12,487)

Purchase of bonds and other fixed interest securities 436,835 330,415

Sale of bonds and other fixed interest securities (436,492) (316,471)

(5,475) 1,457

Net investment of cash flows 7,346 12,836

Notes to the Financial Statements31 December 2010

Note 1: Constitution and ownershipThe Association is incorporated in Bermuda under the Through Transport Mutual InsuranceAssociation Limited Consolidation and Amendment Act 1993 as an exempted company. Theliability of mutual Members is limited to the supplementary premiums set by the Directors and,in the event of its liquidation, any net assets of the Association (including the Statutory Reserveof US$240,000) are to be distributed equitably to those mutual Members insured for openpolicy years. There is no ultimate parent company or controlling party.

Note 2: Accounting policies

(a) Basis of preparationThese Group financial statements which consolidate the accounts of the Association and itssubsidiary undertakings have been prepared under the Bermuda Companies Act 1981, andalso under the provisions of Schedule 3 to the UK Companies Act 2006. The Associationand its subsidiary undertaking have applied uniform accounting policies and onconsolidation all intra group transactions, profits and losses have been eliminated. Theaccounts have been prepared in accordance with applicable accounting standards in theUnited Kingdom and the Statement of Recommended Practice on Accounting forInsurance Business issued in December 2005 (as amended in December 2006) by theAssociation of British Insurers. The accounts of all group companies are made up to 31December. The Association has not prepared a Parent company income and expenditureaccount under the exemption in Section 408 of the UK Companies Act 2006.

The accounts have been prepared under the provisions of The Large and Medium-sizedCompanies and Groups (Accounts and Reports) Regulations 2008 relating to insurancegroups.

(b)PremiumsPremiums written relate to business incepted during the year, together with any differencesbetween booked premiums for prior years and those previously accrued, and includeestimates of provisions for anticipated adjustment premiums, less an allowance forcancellations.

Premiums are stated before the deduction of commissions and brokerage but net of taxesand duties levied.

(c) Unearned premiumsPremiums written during the financial year are earned as revenue on a daily pro-rata basisover the period of cover provided, in line with the incidence of risk. Amounts relating toperiods after the year end are treated as unearned and included within liabilities on theBalance Sheets.


(d)Commission incomeCommission income is earned on the Group's general reinsurance programme and oninsurance arranged by the Group on behalf of Members and others. Overriding commissionon quota share premiums is shown as a reduction of net operating expenses.

(e) ClaimsProvision is made for all claims incurred during the year, whether paid, estimated orunreported, claims management costs and adjustments to claims provisions brought forwardfrom previous years. In addition, claims includes claims management costs and an allowancefor estimated costs expected to be incurred in the future in the management of claims.

Estimated claims stated in currencies other than the functional currency are converted atyear end rates of exchange and any exchange difference is included within claims incurredin the Income and Expenditure account.

The provision for claims outstanding includes both estimates for known outstanding claimsand for claims incurred but not reported (IBNR). The estimates for known outstandingclaims are based on the best estimate and judgement of the likely final cost of eachindividual claim based on current information. The estimation of claims IBNR is generallysubject to a greater degree of uncertainty than the estimation of cost of settling claimsalready notified to the Company, where more information is generally available.

The best estimate of unreported claims on each policy year and the eventual outcome mayvary from the original assessment. As a result of this inherent uncertainty, sophisticatedestimation techniques are required to determine an appropriate provision. The estimate ismade using a range of standard actuarial projection techniques, such as the Chain Ladderand Bornheutter-Ferguson methods. Such methods extrapolate the development of claimsfor each policy year, based on the claims patterns of earlier years and the expected loss ratios.The main assumption underlying these techniques is that past claims developmentexperience can be used to project ultimate claims costs. Judgement is used to assess theextent to which past trends may not apply in future and alternative approaches are appliedas appropriate.

An estimate for Members and general reinsurance in relation to the provision forunreported claims has been made by reference to the relationship between gross and netclaims on current and prior policy years and having due regard to recoverability.

(f) Reinsurance recoveriesThe liabilities of the Group are reinsured above certain levels and for certain specific risks.The figure credited to the Income and Expenditure Account for reinsurance recoveriesincludes receipts and amounts due to be recovered on claims already paid together withchanges in the amount of recoveries to be made on outstanding claims. An assessment is alsomade of the recoverability of reinsurance recoveries having regard to market data on thefinancial strength of each of the reinsurance companies.


Notes to the Financial Statements 31 December 2010 (continued)

(g)Acquisition costsBrokerage and commission payments and other direct costs incurred in relation to securingnew contracts and rewriting existing contracts are deferred to the extent that they areattributable to premiums unearned at the balance sheet date and are shown as assets in theBalance Sheets. Amounts deferred are amortised over the life of the associated insurancecontract.

(h)Financial assetsFinancial assets are classified between the following categories: financial assets at fair valuethrough profit or loss, loans and receivables and available-for-sale financial assets. Theclassification depends on the purpose for which the assets were acquired and is determinedat initial recognition and this is re-evaluated at every reporting date.

Fair value through profit and lossAssets, including all of the investments of the Group, which are classified as fair valuethrough the profit and loss account are designated as such by management to minimise anymeasurement or recognition inconsistency with the associated liabilities.

Investments are included in the Balance Sheet at market value translated at year end rates ofexchange. The market value of listed investments is based on current bid prices as at thebalance sheet date.

The costs of investments denominated in currencies other than US dollars are translatedinto US dollars on the date of purchase. Any subsequent changes in value, whether arisingfrom market value or exchange rate movements, are charged or credited to the Income andExpenditure Account and are then accumulated within the Investment RevaluationReserve until realised. The movement in unrealised investment gains and losses includes thereversal of previously recognised unrealised gains and losses on investments disposed of inthe current period.

Net gains or losses arising from changes in fair value of financial assets at fair value throughprofit or loss are presented in the Income and Expenditure Account within ‘Unrealisedgains/(losses) on investments’ in the period in which they arise.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. Receivables arising from insurancecontracts are also classified in this category and are reviewed for impairment as part of theimpairment review of loans and receivables. A bad debt provision is created against anybalances that may be impaired.



(h)Financial assets (continued)

Available for saleAvailable-for-sale financial assets are non-derivative financial assets that are either designatedin this category or not classified in any of the other categories. No available for sale assetsare held.

Derivative financial instruments Derivative financial instruments include open foreign currency contracts. They are classifiedas held for trading. They are initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at their fair value.Changes in fair value are charged or credited to the Income and Expenditure Account. Fairvalues are obtained from quoted market prices in active markets. All derivatives are carriedas assets when the fair value is positive and as liabilities when the fair value is negative.

Cash and cash equivalentsCash and cash equivalents include cash in hand, UCITS and deposits held at call with banks.The UCITS are Undertakings for Collective Investments of Transferable Securities, and areused as an alternative to short term cash deposits. They are classified as cash equivalents asthey are short term, highly liquid investments that can be readily converted to cash.

(i) Impairment of financial assetsAt each balance sheet date, an assessment is made as to whether there is objective evidencethat a financial asset is impaired. A financial asset or group of financial assets is impairedonly if there is objective evidence of impairment as a result of one or more events that haveoccurred after the initial recognition of the asset and it is expected that the event will havean impact on estimated future cash flows of the financial asset or group of financial assets.The Group must be able to reliably estimate the impact on future cash flows.

If the carrying value of an asset is greater than its recoverable amount, the carrying value isreduced through a charge to the Income and Expenditure account in the period ofimpairment.

(j) Investment returnInvestment income comprises dividend income from equities, income on fixed interestsecurities, interest on deposits and cash and realised and unrealised gains and losses oninvestments.

Dividends are recognised as income on the date the relevant securities are marked ex-dividend. Other investment income is recognised on an accruals basis.



(j) Investment return (continued)The movement in unrealised gains and losses on investments represents the differencebetween the fair value at the balance sheet date and their purchase price (if purchased in thefinancial year) or the fair value at the last balance sheet date, together with a reversal ofpreviously recognised unrealised gains and losses on investments disposed of in the currentperiod.

The Group allocates a proportion of its investment return to the technical account based onthe average ratio of outstanding claims to funds available to meet outstanding claims. Thistransfer is made so that the balance on the technical account is based on a longer-term rateof investment return and is not subject to distortion from short-term fluctuations ininvestment return (SORP para. 294).

(k) Foreign currenciesRevenue transactions are translated into US dollars at the rate applicable for the month inwhich the transaction took place. Monetary assets and liabilities have been translated at theclosing US dollar exchange rate. The resulting differences, apart from those relating toestimated future claims or investments, are shown separately in the Income and ExpenditureAccount.

Exchange gains or losses arising on non-US dollar cash holdings are treated as realised andare included in the Income and Expenditure Account.

(l) Policy year accountingWhen considering the results of individual policy years for the purposes of membershipaccounting, premiums, reinsurance premiums payable, claims and reinsurance recoveries areallocated to the policy years to which they relate based on the period of cover of eachinsurance policy. The fixed portion of the management fee is charged to the current policyyear while any performance related management fee is allocated to the Reserve Fund.General administration expenses are charged against the current policy year.

Investment income and exchange gains or losses are allocated proportionately to the averagebalance on each open policy year and the Reserve Fund.

UK taxation, which is based on investment income, is allocated proportionately betweenthe open policy years and the Reserve Fund. Other taxation is allocated entirely to thepolicy years to which it relates

(m)Closure of policy years On formal closure of a policy year, a sum equivalent to the anticipated future investmentincome on the balance on that year is transferred from the Reserve Fund to the credit ofthe closing year. Thereafter, any income derived from such funds is credited to the ReserveFund, thereby offsetting the amount originally debited.



(m)Closure of policy years (continued)For closed policy years, the Group retains a balance sufficient to meet the estimated netoutstanding claims and claims incurred but not reported on that year. Future adjustments tothese amounts as well as differences between the estimates and the ultimate payments willbe met by transfers to or from the Reserve Fund.

(n) Unexpired risk reserveFull provision is made for unexpired risks when it is anticipated that unearned premiums,net of associated acquisition costs, will be insufficient to meet the expected claims andexpenses of business as at the year end after taking account future investment income.

Unexpired risk surpluses and deficits are offset where business classes are managed togetherand provision is made if a deficit arises.

(o)Deferred taxationDeferred taxation is provided in full on timing differences that result in an obligation at thebalance sheet date to pay more tax, or a right to pay less tax, at a future date. The rates usedin these calculations are those which are expected to apply when the timing differencescrystallise, based on current tax rates and law. Timing differences arise from the inclusion ofitems of income and expenditure in taxation computations in periods different from thosein which they are included in the financial statements. Deferred tax assets are recognised tothe extent that it is regarded as more likely than not that they will be recovered. Deferredtax balances are not discounted.

(p) Subordinated liabilitiesIn accordance with Financial Reporting Standard 26 Financial Instruments: Recognitionand Measurement, the subordinated loan liability is recognised at amortised cost with thetransaction costs directly attributable to the issue being amortised through the Income andExpenditure account over the expected duration of the liability.

Note 3: Management of Financial Risk

Financial Risk Management ObjectivesThe Group is exposed to financial risk primarily through its financial investments, reinsuranceassets and liabilities to policyholders. In particular, the key financial risk is that the proceedsfrom financial investments are not sufficient to fund the obligations arising from insurancepolicies as they fall due. The most important components of this financial risk are market risk orinvestment risk (comprised of interest rate risk, equity price risk and currency risk) togetherwith credit risk and liquidity risk.

The Group manages these risks using a risk governance structure incorporating the Managers’Risk Review Committee and the Audit and Risk Committee. Further details are set out in theDirectors’ Report on page 9.



Financial Risk Management Objectives (continued)The Boards are responsible, advised by the Chief Executive working with the InvestmentCommittee, for setting investment policy and the appropriate level of market or investment risk.This is set with reference to the overall risks faced by the Group which are analysed as part ofthe Individual Capital Assessment (“ICA”) process.

The processes used to manage risks within the Group are unchanged from the previous periodand are set out in the Directors’ Report.

(a) Market risk

(i) Interest rate riskInterest rate risk arises primarily from investments in fixed interest securities. In addition, tothe extent that claims inflation is correlated to interest rates, liabilities to policyholders areexposed to interest rate risk.

The Group’s investment policy is set to ensure that the duration of the investment portfoliois appropriately matched to the duration of the policyholder liabilities. Interest rate risk isthen monitored by comparing the mean duration of the investment portfolio and that ofthe policyholder liabilities. The mean duration is an indicator of the sensitivity of the assetsand liabilities to changes in current interest rates.

The sensitivity analysis for interest rate risk illustrates how changes in the fair value or futurecash flows of a financial instrument will fluctuate because of changes in market interest ratesat the reporting date. An increase of 100 basis points in interest rates at the year end date,with all other factors unchanged would result in a US$2.04 million fall in market value ofthe Group’s investments (2009: US$3.95 million fall). A decrease in 100 basis points ininterest rates would result in a US$2.04 million increase in the market value of the Group’sinvestments (2009: US$3.95 million increase).

(b) Currency risk

The Group is exposed to currency risk in respect of liabilities under policies of insurancedenominated in currencies other than US dollar. The most significant currencies to whichthe Group is exposed to are pounds sterling and the Euro. From time to time the Groupuses forward currency contracts or options to protect against adverse exchange movements.

The following table shows the Group’s assets by currency. The Group seeks to mitigate suchcurrency risk by matching the estimated foreign currency denominated liabilities withfinancial investments denominated in the same currency.



At 31 December 2010, if the US dollar weakened/strengthened by 5% against the pound,with all other factors unchanged, the surplus for the year would have increased/decreasedby US$0.58 million (2009: US$0.22 million). At 31 December 2010, if the US dollarweakened/strengthened by 5% against the Euro, with all other factors unchanged, thesurplus for the year would have increased/decreased by US$1.1 million (2009: US$1.37million).

(c) Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due.The main areas where the Group is exposed to credit risk are:• Reinsurers’ shares of insurance liabilities;• Amounts due from reinsurers in respect of claims already paid;• Amounts due from policyholders;• Amounts due from insurance intermediaries;• Amounts due from bond issuers;• Cash at banks and deposits with credit institutions; and• Counterparty risk with respect to derivative transactions.



As at 31 December 2009:

USD STG EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 192,536 18,606 55,561 – 266,703

Assets arising from reinsurance contracts held 78,952 (270) 5,053 1,523 85,258

Assets arising from insurance contracts 16,281 2,649 2,595 3,607 25,132

Other debtors 254 (306) 58 1,702 1,708

Cash and cash equivalents 141,377 12,451 19,813 15,644 189,285

Other 3,418 (497) (9,550) 16,580 9,951

Total 432,818 32,633 73,530 39,056 578,037

As at 31 December 2010:

USD STG EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 206,866 11,561 44,220 – 262,647

Assets arising from reinsurance contracts held 80,034 (316) 4,040 2,303 86,061


Other debtors 828 114 – 765 1,707


Other 12,896 (1,270) (17,133) 13,096 7,589

Total 455,899 27,762 60,886 36,756 581,303



(c) Credit risk (continued)Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’sliability as primary insurer. If a reinsurer fails to pay a claim, the Group remains liable for thepayment to the policyholder.

Credit risk on reinsurance balances is mitigated by assessing the creditworthiness of areinsurer before it is used and strict criteria are applied (including the financial strength ofthe reinsurer) before a reinsurer is approved. Counterparty limits based on credit ratings arealso in place in relation to amounts due from bond issuers and cash and bank deposits.

The following tables provide information regarding aggregated credit risk exposure, forfinancial assets with external credit ratings, as at 31 December 2010. The credit rating bandsare provided by independent ratings agencies:

2010 AAA AA A BBB or Total

US$000s US$000s US$000s US$000s US$000s

Debt securities 248,303 13,296 1,048 – 262,647

Assets arising from reinsurance contracts held – 37,686 45,231 3,144 86,061

Debtors arising out of direct insurance – – – 27,011 27,011

Other debtors – – – 1,707 1,707

Cash and cash equivalents 153,883 324 42,081 – 196,288

Other – – – 7,589 7,589

Total 402,186 51,306 88,360 39,451 581,303

2009

Debt securities 251,883 11,591 3,229 – 266,703

Assets arising from reinsurance contracts held – 29,376 53,707 2,175 85,258


Other debtors – – – 1,708 1,708

Cash and cash equivalents 189,285 – – – 189,285

Other – – – 9,951 9,951

Total 441,168 40,967 56,936 38,966 578,037

less ornot rated



(c) Credit risk (continued)

The Group’s policy is to make a full provision against all reinsurance debts with an age inexcess of two years and a fifty percent provision for reinsurance debts between one and twoyears old. The Group also provides against all amounts due from policyholders and insuranceintermediaries that are more than nine months overdue.

After assessing all other financial assets at the end of the period, no objective evidence wasfound to suggest that any were impaired (2009: no impairments).

(d) Liquidity and cashflow risk

Liquidity and cashflow risk is the risk that cash may not be available to pay obligations asthey fall due at a reasonable cost. The Group maintains holdings in short term deposits toensure there are sufficient funds available to cover anticipated liabilities and unexpected levelsof demand. As at 31 December 2010, the Group’s short term deposits (including cash andUCITs) amounted to US$196.3 million (2009: US$189.3 million).

The tables below provide a maturity analysis of the Group’s financial assets:

2010 Past due but not impairedFinancial Carrying

Neither past assets that value in thedue nor 0-3 3-6 6 months- have been balanceimpaired months months 1 year > 1 year impaired sheet

US$000s US$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 262,647 – – – – – 262,647

Reinsurance debtors 83,357 1,949 750 (33) 38 – 86,061

Insurance debtors 23,987 3,024 – – – – 27,011

Other debtors 1,014 348 181 153 11 – 1,707

Cash and cash equivalents 196,288 – – – – – 196,288

Other 7,589 – – – – – 7,589

Total 574,882 5,321 931 120 49 – 581,303

2009

Debt securities 266,703 – – – – – 266,703

Reinsurance debtors 70,746 13,922 – – 590 – 85,258


Other debtors – 914 140 21 633 – 1,708


Other 9,951 – – – – – 9,951

Total 559,313 17,340 140 21 1,223 – 578,037



(d) Liquidity and cashflow risk (continued)

The tables below show a maturity analysis of the Group’s derivative contracts:

The tables below provide a maturity analysis of the Group’s financial assets and liabilities:

2010 0-3 3-6 6 monthsmonths months –1 year > 1year TotalUS$000s US$000s US$000s US$000s US$000s

Forward currency contracts 723 – – – 723

Total 723 – – – 723

2009

Forward currency contracts 512 – – – 512

Total 512 – – – 512

2010 < 6 months Between 6 Between Betweenor on months & 1 and 2 2 and 5

demand 1 year years years > 5 years TotalUS$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 94,658 15,124 72,146 74,016 6,703 262,647

Insurance debtors 24,010 3,001 – – – 27,011

Other debtors 1,707 – – – – 1,707

Cash and cash equivalents 196,288 – – – – 196,288

Subordinated loan – – – – (29,050) (29,050)

Creditors (29,494) – – – – (29,494)

Total 287,169 18,125 72,146 74,016 (22,347) 429,109

2009

Debt securities 69,004 39,807 42,321 111,873 3,698 266,703


Other debtors 1,708 – – – – 1,708


Subordinated loan – – – – (29,012) (29,012)

Creditors (18,908) 10 – – – (18,898)

Total 262,610 43,428 42,321 111,873 (25,314) 434,918



(e) Capital management

The Group maintains an efficient capital structure from a combination of policyholders’funds (surplus and reserves) and long term borrowings (subordinated debt), consistent withthe Group’s risk profile. The Group’s strategy is to maintain sufficient capital to meetregulatory requirements and to maintain an AM Best financial strength rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case.

The Group’s principal regulator is the Financial Services Authority (FSA) in the UnitedKingdom. Under the FSA’s ICA regime the Group is obliged to assess and maintain theamount of capital required to meet the risks that it faces based on a 99.5% confidence levelof solvency over one year or a longer timeframe with an equivalent probability. Throughoutthe period the Group complied with the FSA’s capital requirements and the requirements inother countries where it has regulated operations.

As at 31 December 2010 the Group’s total regulatory capital available amounted toUS$173.24 million (2009: US$160.37 million) made up surplus and reserves of US$144.19million (2009: US$131.36) and subordinated debt of US$29.05 million (2009: US$29.01million).

As at 31 December 2010 the Group held deposits and letters of credit totalling US$72.6million to meet overseas regulatory requirements (2009: US$54.6 million). This includesletters of credit amounting to US$35 million (2009: $35.0 million) in relation to Hong Kongand a trust fund deposit of US$37.6 million (2009: US$19.6 million) in relation to the US.

(f) Fair value estimations

From 1 January 2009, the group adopted the amendment to Financial Reporting Standard29. This requires, for financial instruments held at fair value in the balance sheet, disclosureof fair value measurements by level of the following fair value hierarchy

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for theassets or liability, either directly (that is, prices) or indirectly (that is, derived fromprices)

Level 3 – Inputs for the assets or liability that are not based on observable market data (that is,unobservable inputs)

All of the Group’s financial assets and liabilities that are measured at fair value at both 31December 2010 and 31 December 2009 fall into the Level 2 category.

The fair value of financial instruments traded in active markets is based on quoted bid pricesas at the balance sheet date. All valuations are taken from external price feeds based uponmarket prices or broker quotes.



Note 4: Claims paidClaims paid include claims handling charges paid to the Managers totalling US$8.82 million(2009: US$8.40 million).

Net claims payments and the provision for claims outstanding at the end of the year in respect of 2009 and prior policy years were US$31.6 million lower than the provision for claimsoutstanding at the beginning of the year (2009: US$17.2 million).

When the impact of fluctuations in foreign currency exchanges rates is excluded from themovement in claims outstanding, the reduction in provisions for claims outstanding exceeds netclaims paid in respect of 2009 and prior policy years by US$28.4 million (2009: US$25.2million).

Note 5: Reinsurers' share of claims paid 2010 2009

US$000s US$000s

Members' reinsurance 5,953 4,164

General reinsurance 4,788 33,801

Traditional quota share reinsurance 8,778 14,560

Change in provision for potential irrecoverable reinsurance (42) 24

19,477 52,549



Note 6: Net operating expenses

2010 2009

US$000s US$000sAcquisition costsBrokerage and commission 18,506 21,766

Management fee in respect of underwriting 11,440 12,596

General expenses in respect of underwriting 1,500 326

Change in deferred acquisition costs 1,720 (2,951)

33,166 31,737

Management fee in respect of management and investment costs andperformance related management fee 17,627 16,996

General expenses 1,652 1,748

Directors' fees 689 779

Directors' travelling costs 469 554

Auditors' remunerationParent company audit 203 207

Subsidiary company audit 165 169

Non-audit services– Other services pursuant to legislation, including the audit of the regulatory returns 30 47

– Tax services 60 237

– Other services not covered above 3 9

20,898 20,746

Total operating expenses before overriding commission 54,064 52,483

Overriding commission on quota share reinsurance (2,702) (2,023)

51,362 50,460

The Directors’ fees for the highest paid director during 2010 amounted to US$133,000 (2009:US$137,000).

The parent company’s surplus for the financial year was US$9.3 million (2009: surplus of US$6.6million).



Note 7: Investment return

2010 2009

US$000s US$000s

Investment incomeIncome from financial assets held at fair value through profit or loss 4,841 6,105

Net gains/(losses) on the realisation of investments 2,085 (3,956)

6,926 2,149

Exchange (losses)/gains (1,170) 11,268

5,756 13,417

Investment expenses and chargesInterest payable on subordinated loan (1,047) (1,207)

Other investment management expenses (190) (244)

Net unrealised (losses)/gains on investments (3,018) 3,042

Total investment return 1,501 15,008

Investment return is analysed between:

Allocated investment return transferred to the technical business account 467 9,388

Net investment return included in the non-technical account 1,034 5,620


Note 8: Tax on ordinary activities

2010 2009

US$000s US$000s

(i) Analysis of tax charge on ordinary activitiesForeign tax for the current period 245 95

Adjustments in respect of prior periods 4 (129)

249 (34)



Note 8: Tax on ordinary activities (continued)

2010 2009

US$000s US$000s

(ii) Factors affecting Tax Charge for the current period

The tax assessed for the period is higher (2009: lower) than that resulting from applying the standard rate of corporation tax in Bermuda: 0% (2009: 0%) – the differences are explained below:


Tax at 0% thereon – –

Effects of:Tax levied outside Bermuda:United Kingdom 58 65

United States 300 15

Singapore (73) 15

Australia – –

Italy – –

Adjustments in respect of prior periods (36) (129)

Current tax charge for period 249 (34)

The taxation charge comprises a charge for UK taxation based at a rate of 28% based on 10% of the group's investment return excluding that taxed within an overseas branch. The overseas tax charges relate to overseas income taxed at the prevailing rate in the respective jurisdictions.

A potential deferred tax asset of $2.0m in respect of certain unutilised tax losses has not beenrecognised as there is insufficient evidence that it will be recoverable. This asset would berecovered should sufficient taxable profits be generated in future which would be eligible forrelief against the unutilised tax losses.



Note 9: Shares in subsidiary undertakings and interests in joint ventures

Proportion of Country of Class of Principal shares held

Name incorporation shares held activity and voting rights

TT Club Mutual Insurance Limited United Kingdom N/A General insurance 75% ofand reinsurance Members' votes

TT (Bermuda) Services Limited Bermuda Ordinary Holding company 90%(incorporated 30 January 1998)

Note 10: Other financial investmentsThe Group’s financial investments are summarised below by measurement category in the tablebelow:

2010 2009 2010 2009Consolidated US$000s US$000s US$000s US$000s

Held at fair value through profit and loss:

– debt securities 262,647 266,703 262,954 262,832

– derivative financial instruments 723 512 – –

– UCITS 153,883 159,701 153,883 159,701

Financial assets held at fair value through profit and loss 417,253 426,916 416,837 422,533

2010 2009 2010 2009Parent Company US$000s US$000s US$000s US$000s

Held at fair value through profit and loss:

– debt and other fixed interest securities 257,539 257,008 257,651 253,176

– forward currency contracts 723 512 – –

– UCITS 95,293 100,832 95,293 100,832

Financial assets held at fair value through profit and loss 353,555 358,352 352,944 354,008

Carrying Value Purchase Price


Note 10: Other financial investments (continued)

The UCITS are Undertakings for Collective Investments of Transferable Securities, and are usedas an alternative to short term cash deposits. They are classified as cash equivalents as they areshort term, highly liquid investments that can be readily converted to cash.

The financial assets with a maturity of less than one year total US$109.8 million (2009:US$108.8 million) with the remainder recoverable after more then one year.

As described in note 2(h), the investments of US$417.3 million (2009: US$426.9 million) arevalued in the financial statements at market value.

Note 11: Surplus and reserves

Open InvestmentReserve policy Capital revaluation Total Total

fund years reserve reserve 2010 2009US$000s US$000s US$000s US$000s US$000s US$000s

Transfer to closed policy year balance of future investment income, plus policy year deficit on closure, 2007 (2006) 13,433 – – – 13,433 13,834

Investment income and exchange gains less losses, expenses and taxation 3,551 – – – 3,551 1,260

Transfer from closed policy years (11,243) – – – (11,243) (7,929)

2.5% Members' contribution to Reserve Fund 4,237 – – – 4,237 3,909

Net movements on open policy years – 5,873 – – 5,873 (4,396)

Unrealised gains arising during the year – – – (3,018) (3,018) 3,042

Net transfer to reserves 9,978 5,873 – (3,018) 12,833 9,720

Balance at beginning of year 140,801 (29,090) 12,980 6,429 131,120 121,400

Balance at end of year 150,779 (23,217) 12,980 3,411 143,953 131,120

The parent company surplus for the year ended 31 December 2010 was US$9.3 million (2009:US$6.6 million).



Note 12: Subordinated loanOn 10 October 2006, the Association issued US$30 million of subordinated loan notes. Interestis payable on the loan notes at a rate of 2.95% plus three month US dollar LIBOR. The loannotes have a maturity date of 9 October 2036 and are repayable, in whole or in part, after fiveyears at the Association’s option, subject only to regulatory approval.

The Group has an obligation to deliver cash or, for interest settled under the alternativesettlement mechanism, equivalent financial assets at maturity in 2036 or earlier as permitted bythe terms of the loan notes and to pay interest up until the loan notes are repaid. Hence, despitequalifying as regulatory capital, the loan notes have been included in subordinated liabilities.

The fair value and amortised cost of the subordinated loan is US$29.05 million (2009: US$29.01million).

Note 13: Segmental information

2010 2009

US$000s US$000s

Gross premiums written– Members located in UK 10,430 10,226

– Members located in other EU states 33,250 41,442

– Members located outside EU 123,764 124,116

167,444 175,784

The Group writes only marine, aviation and transport business.

The geographical analysis of surplus on ordinary activities before tax and net assets has not beendisclosed as this, in the view of the Directors, would be prejudicial to the interest of theMembers.

Note 14: Reconciliation of surplus to net cash inflow from operating activities

2010 2009

US$000s US$000s

Surplus before taxation 13,082 9,686

Unrealised investment gains 3,018 (3,042)

Exchange losses/(gains) 1,170 (11,278)

Interest payable on subordinated loan 1,009 1,150

Servicing of finance 38 57

Decrease in debtors 3,534 2,526

Increase in creditors 7,261 7,297

(Decrease)/Increase in net technical provisions (20,533) 7,666

Net cash inflow from operating activities 8,579 14,062



Note 15: Movement in cash, portfolio investments and financing

Changes to1 January market value 31 December

2010 Cash flow & currencies 2010US$000s US$000s US$000s US$000s

Cash at bank 29,584 12,821 – 42,405

UCITS 159,701 (5,818) – 153,883

Bond and other fixed interest securities 266,703 343 (4,399) 262,647

Forward currency contract 512 – 211 723

456,500 7,346 (4,188) 459,658

Note 16: Movement in opening and closing portfolios net of financing

2010 2009

US$000s US$000s

Net cash inflow 12,821 11,379

Portfolio investments (5,475) 1,457

Movements arising from cash flows 7,346 12,836

Changes in market values and exchange rates (4,188) 14,317

Total movement in portfolio investments net of financing 3,158 27,153

Portfolio investments net of financing as at 1 January 456,500 429,347

Portfolio investments net of financing as at 31 December 459,658 456,500

Note 17: Guarantees and commitments

Investments to the value of US$42.23 million (2009: US$42.21 million) have been charged ascollateral in respect of letters of credit as security for holders of insurance policies in Canadaand for regulatory purposes in Singapore and Hong Kong. The Association has issued aguarantee, not to exceed US$2.5 million, to TT Club Mutual Insurance Limited to enable it tocomply with the solvency margin requirements of the Financial Services and Markets Act 2000.The amount withdrawn as 31 December 2010 amounted to nil (2009: nil).

Note 18: Related party transactions

All material related party transactions are disclosed separately within the financial statements.



Annual Report & Financial Statements 2010TT Club Mutual Insurance Limitedfor the year ended 31 December 2010

Contents



Directors' Report 49

Statement of Directors' Responsibilities 55



Income and Expenditure Account 59

Balance Sheet 61



Directors and Management

ChairmanK Pontoppidan 1 3Copenhagen

DirectorsD Davies Shenfield

C FentonThrough Transport Mutual Services (UK) Ltd,London

Registered Office90 Fenchurch StreetLondonEC3M 4ST

Telephone +44 (0) 20 7204 2626Telefax +44 (0) 20 7204 2727

Company Registration number2657093

Deputy ChairmanG Sjöholm 2Port of Gothenburg, Gothenburg

J KüttelErmewa, Geneva

Managers & SecretaryThrough Transport Mutual Services (UK) Ltd

1 Nominations Committee member2 Audit Committee member3 Investment Committee member

48 TT Club Mutual Insurance Limited

Directors’ Report

The Directors present herewith their Report and the financial statements of TT Club MutualInsurance limited ("the Association" or “Company”).

This report is addressed to, and written for, the Members of the company, and the Directorswish to draw attention to a number of financial and environmental uncertainties, including butnot limited to the rate of claims inflation, costs inflation, foreign exchange movements andeconomic growth, which mean that the actual results in the future may vary considerably fromboth historic and projected outcomes contained within any ‘forward-looking statements’.

Principal activities

The principal activities of the Association during the year were the provision of insurance andreinsurance in respect of the equipment, property and liabilities of its Members in theinternational transport and logistics industry.

The Association operates in the UK and through branches in Singapore, Hong Kong andAustralia.

Business review

Strategy and values

The Association’s business is the provision of liability and asset insurances and related riskmanagement services to the international transport and logistics industry. The Association is amutual company, limited by guarantee. It is a subsidiary of Through Transport Mutual InsuranceAssociation Limited (“TT Bermuda”), a mutual insurance company based in Bermuda. Thetwo companies have separate corporate governance arrangements but operate as a singlebusiness.

The Association has entered into a 90% quota share reinsurance contract with TT Bermuda.The reinsurance contract also includes a stop loss element to protect the Association from anexcess accumulation of claims within its 10% retention.

The Association’s business strategy is to provide superior insurance products and claimshandling to its policyholder Members at a competitive price, whilst maintaining excellentfinancial security over the long term. Insurance is a very much cyclical business, with premiumrates fluctuating in accordance with the supply of capital in the market and with the investmentreturns available to the owners of that capital.

The Association’s executive function, including that relating to investment management, isperformed by companies within the Thomas Miller Holdings Limited group of companies.


Financial performance, capital strength and solvency

The Association’s underwriting performance in 2010 continued to be affected by marketpressure on premium rates in 2010. The technical result for 2010, after allowing for theattribution of investment income on the claims reserves, was a surplus of US$2.75 million(2009: surplus of US$1.05 million). The non-technical account produced a surplus of US$0.79million (2009: surplus of US$1.89 million), resulting in an overall surplus after tax of US$3.54million (2009: surplus of US$2.94 million).

As a result the Association’s surplus and reserves increased to US$56.62 million (2009:US$53.08 million).

The principal KPIs by which performance is monitored by the Board are set out in the chartsbelow. The position is shown as at the end of 2010 and 2009.

AM Best rating

2010 2009

AM Best rating A- (Excellent) A- (Excellent)

Surplus and reserves US$56.6m US$53.1m

Technical result (before attribution of investment return) US$2.3m US$0.2m

Investment return (incl. exchange gains and losses) US$1.5m US$2.8m

Net result US$3.5m US$2.9m

Customer satisfaction index – on a scale of 1 to 10 (compiled by independent research) 8.3 8.0

The Association’s financial strategy, approved by the Board, is to maintain within the businesssufficient capital to meet regulatory requirements, and to maintain an AM Best rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case. TheDirectors are satisfied that both elements of this strategy have been maintained throughout2010.



Corporate and social

The Directors are of the opinion that the environmental impact of the Association’s activities islow, due to the small size and the nature of its business. There are therefore currently no KPIsrelating to environmental matters. The business is however conscious of its environmentalresponsibility, and continues to invest in electronic claims handling and underwriting systemsdesigned to increase efficiency and reduce reliance on paper-based records. It is also investing inwebsite technology in order to facilitate electronic distribution of its products and informationto Members, brokers, suppliers and third parties.

As the Association has outsourced all of its management activities to independent professionalmanagers there are no employee matters to report.

Risks and risk management

The Board has adopted the Group risk management policy which is designed to protect theAssociation from occurrences that hinder sustainable achievement of our objectives andfinancial performance and to ensure that the Association complies with regulatory requirementsin the jurisdictions in which it operates.

The following key principles outline the Association’s approach to risk management:

• The Board is responsible for risk management and internal control;

• The Board is responsible for ensuring that a framework exists which sets out riskappetite, risk management and control and business conduct standards; and

• The Board is responsible for ensuring that the Managers implement and maintain asound system of internal control.

All types of risk facing the business are analysed and each one is rated according to its severity(impact on the business) and probability of occurrence, adjusted for any mitigation measuresthat have been implemented. The residual risks are prioritised with the most highly rated itemsbeing considered as fundamental risks. Each fundamental risk is monitored and managed by amember of the executive management. All risks identified are summarised, categorised andprioritised in a Risk Log which is reviewed and approved by the Board, at least annually andmore frequently if required.

The principal risks and uncertainties faced by the business are summarised as follows:

Insurance risk

Insurance risk is the potential adverse financial impact on the Association as a result of:

• Inaccurate pricing of risk when underwritten;

• Inadequate reinsurance protection;

• Fluctuations in the timing, frequency and severity of claims and claims settlementsrelative to expectations; and

• Inadequate claims reserves.



Insurance risk is mitigated by means of:

• Prior approval of all quotations by a minimum of two senior underwriters

• Underwriters’ authority levels based on experience and competence

• Technical underwriting and claims file reviews by management

• Key performance indicators and key risk indicators relating to underwriting andclaims functions

• Actuarial, management and Board review of claims reserves (every four months)

• Management review of reinsurance adequacy and security

Financial risks

Financial risks consist of:

• Market risk

• Currency risk

• Credit risk

• Liquidity and cash flow risk

Information on the use of financial instruments by the Association and its management offinancial risks is disclosed in Note 3 to the financial statements.

Operational risk

Operational risk arises from inadequately controlled internal processes or systems, human errorand from external events. Operational risks include, for example, risks arising from outsourcinginformation technology, information security, project management, human resources, taxation,legal, fraud and compliance.

The Association’s IT systems are established and stable; any development follows standardproject methodologies. Appropriate operational policies and procedures covering all aspects ofthe business have been embedded through the organisation. Management information supportsthe control framework and is subject to on-going validation and enhancement to ensure that itis appropriate to business requirements.

The Directors have assessed the mitigation and control environment relating to each of thesetypes of risk and have made an assessment of the capital required to meet the residual risksfaced by the business. That assessment has been reviewed and agreed with the Club’s regulatoryauthority.



Directors & Officers

The names of the Directors of the Association who served during the year are shown on page48. All the Directors retiring at the Annual General Meeting and seeking re-election were re-elected. At the meeting of the Directors following the Annual General Meeting in June 2010,Mr K Pontoppidan was appointed Chairman of the Board and Mrs G Sjoholm was appointedas Deputy Chairman.

Meetings of the Directors

The Board of the Association met formally on ten occasions during 2010, with its main focusbeing to direct the operations of underwriting, sales, the external reinsurance programme,service, claims management, information technology and general administration. The Board alsomonitored performance against budget.

Board Committees

The Board has delegated specific authority to a number of committees. The Board is appraisedas to the main issues discussed and all minutes of meetings of the committees are distributed tothe Board.

The Nominations Committee aims to ensure that the Board is appropriately skilled to direct amutual insurance company, and has sufficient policyholder representation. The NominationsCommittee met on three occasions during 2010.

The Investment Committee makes recommendations to the Board in respect of investmentpolicy and reviews in detail the performance of the Association’s investments. The InvestmentCommittee was formed in October 2010 and met once during 2010.

The Audit and Risk Committee assists the Board in discharging its responsibilities for theintegrity of the financial statements, the assessment of the effectiveness of the systems of internalcontrol and risk management, monitoring the effectiveness and objectivity of the internal andexternal auditors and compliance with regulatory requirements in relevant jurisdictions. TheAudit Committee met on five occasions during 2010.

Charitable and political donations

During the year the Association did not make any charitable donations (2009: US$nil). Nodonations were made for political purposes.

Statement of disclosure of information to auditors

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

1) So far as each of them is aware, there is no information relevant to the audit of theAssociation’s financial statements for the year ended 31 December 2010 of which theauditors are unaware; and

2) The Director has taken all steps that he/she ought to have taken in his/her duty as aDirector in order to make him/herself aware of any relevant audit information and toestablish that the Association’s auditors are aware of that information.



Independent Auditors

PricewaterhouseCoopers LLP have indicated their willingness to continue in office and aresolution that they be re-appointed will be proposed at the annual general meeting.

By order of the Board

Through Transport Mutual Services (UK) Limited, Secretary24 March 2011



Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual report and the financial statements inaccordance with applicable laws and regulations. United Kingdom company law requires theDirectors to prepare financial statements for each financial year which give a true and fair viewof the state of affairs of the Association and of the surplus or deficit of the Association for thatperiod. In preparing those financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently, with theexception of changes arising on the adoption of new accounting standards in theyear;

• Make judgments and estimates that are reasonable and prudent;

• Prepare the financial statements on the going concern basis unless it isinappropriate to presume that the Association will continue in business; and

• State whether applicable accounting standards have been followed, subject to anymaterial departures disclosed and explained in the financial statements.

The Directors confirm they have complied with the above requirements in preparing thefinancial statements.

The Directors are responsible for keeping proper accounting records which disclose withreasonable accuracy at any time the financial position of the Association and to enable them toensure that the financial statements comply with the Companies Act 1985. They are alsoresponsible for safeguarding the assets of the Association and hence for taking reasonable stepsfor the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the company’s website.Legislation in the United Kingdom governing the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.




Notice of Meeting

Notice is hereby given that the nineteenth Annual General Meeting of the Members of TTClub Mutual Insurance Limited will be held at The Grand Hotel, Stockholm on the twenty-third day of June 2011 at 8.40am for the following purposes:

To receive the Directors' report and financial statements for the year ended 31 December 2010and, if they are approved, to adopt them.

To elect Directors.

To appoint auditors and to authorise the Directors to fix their remuneration.

To transact any other business of an Ordinary General Meeting.




Independent Auditors’ Report

To the Members of TT Club Mutual Insurance Limited

We have audited the financial statements of TT Club Mutual Insurance Limited for the yearended 31 December 2010 which comprise the Income and Expenditure Account, the BalanceSheet and the related notes. The financial reporting framework that has been applied in theirpreparation is applicable law and United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice).

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give atrue and fair view. Our responsibility is to audit the financial statements in accordance withapplicable law and International Standards on Auditing (UK and Ireland). Those standardsrequire us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s membersas a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no otherpurpose. We do not, in giving these opinions, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financialstatements sufficient to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the company’s circumstances and have beenconsistently applied and adequately disclosed; the reasonableness of significant accountingestimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements In our opinion the financial statements:

• give a true and fair view of the state of the company’s affairs as at 31 December2010 and of its surplus for the year then ended;

• have been properly prepared in accordance with United Kingdom GenerallyAccepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act2006.


Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the financial year forwhich the financial statements are prepared is consistent with the 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 2006requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audithave not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records andreturns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Tom RobbFor and on behalf of PricewaterhouseCoopers LLPStatutory AuditorLondon

24 March 2011

TT Club Mutual Insurance Limited58

Independent Auditors’ Report (continued)

Income and Expenditure Account for the year ended 31 December 2010



Technical Account

Note 2010 2009

US$000s US$000s US$000s US$000s

Gross written premiums 13 164,607 174,857

Reinsurance premiums ceded (135,664) (139,091)

Premiums written, net of reinsurance 28,943 35,766

Change in provision for unearned premiumsGross 4,495 (10,372)

Reinsurers' share (2,621) 3,056

1,874 (7,316)

Earned premiums, net of reinsurance 30,817 28,450

Allocated investment return transferredfrom the non-technical account 2(h) 442 898

Commission income 2(d) 16,679 19,594

Other technical income 49 47

Claims paidGross 4 (102,414) (114,433)

Reinsurers' share 5 94,103 107,217

(8,311) (7,216)

Change in the provision for claimsGross 13,801 (4,856)

Reinsurers' share (12,321) 3,063

1,480 (1,793)

Claims incurred, net of reinsurance (6,831) (9,009)

Net operating expenses 6 (38,403) (38,928)


Income and Expenditure Account for the year ended 31 December 2010 (continued)


Note 10 details the movements on the Reserve Fund during the year. There are no recognisedgains or losses other than the surplus for the current and previous financial year. Accordingly nostatement of total recognised gains and losses has been prepared.


60

Non-technical Account

Note 2010 2009

US$000s US$000s


Investment income 946 807

Investment expenses and charges 6 (46)

Unrealised losses on investments (234) (90)

Exchange gains 750 2,144

7 1,468 2,815

Allocated investment return transferred to the technical account 2(h) (442) (898)


Tax on ordinary activities 8 (237) (31)

Surplus on ordinary activities after tax 10 3,542 2,938


Balance Sheetas at 31 December 2010


Note 2010 2009

US$000s US$000s

Assets

Other financial investments 9 63,698 68,564

Reinsurers' share of technical provisionsProvision for unearned premiums 41,021 43,641

Claims outstanding 268,776 281,097

309,797 324,738

DebtorsArising out of direct insurance operations

– policyholders 26,661 25,114

Arising from reinsurance ceded 11,481 4,193

Amounts due from Parent company – 3,819

Corporation tax debtors 209 226

Other debtors 1,607 1,319

39,958 34,671

Cash at bank 36,928 25,625

Prepayments and accrued incomePrepayments 37 93

Accrued interest 11 28

Deferred acquisition costs 5,884 7,693

5,932 7,814

Total assets 456,313 461,412

Balance Sheetas at 31 December 2010 (continued)

These financial statements on pages 59 to 79 were approved by the Board of Directors on 24March 2011 and were signed on its behalf by:

K Pontoppidan, DirectorG Sjoholm, Director

Company Number 2657093



Note 2010 2009

US$000s US$000s

Liabilities and reservesSurplus and reserves 10 56,623 53,080

Technical provisionsProvision for unearned premiums – gross 50,675 55,170

Claims outstanding – gross 292,212 306,013

342,887 361,183

CreditorsArising out of direct insurance operations 157 751

Arising from reinsurance ceded 12 42,153 40,869

Amounts due to parent company 6,319 –

Provision for taxation – –

Accrued expenses and sundry creditors 8,174 5,529

56,803 47,149

Total liabilities and reserves 456,313 461,412

Note 1: Constitution

The Association was incorporated as a mutual company limited by guarantee in the UnitedKingdom under the Companies Act 1985 on 24 October 1991. The liability of Assureds islimited to the supplementary premiums set by the Directors. Under the Association'sMemorandum of Association, individual Members' liabilities are limited, in the event of theAssociation being wound up, to a maximum of £5 and, under the Association's Articles, in theevent of its liquidation, any net assets of the Association are to be distributed equitably amongstthe Members.

Note 2: Accounting policies

The financial statements are prepared in accordance with applicable United Kingdom Law andaccounting standards. The significant accounting policies adopted are described below.

(a) Basis of presentation

These financial statements have been prepared under the provisions of Schedule 3 of theCompanies Act 2006. The accounts have been prepared in accordance with applicableaccounting standards and the Statement of Recommended Practice on Accounting forInsurance Business issued in December 2005 (as amended in December 2006) by theAssociation of British Insurers. The accounts have been prepared under the provisions ofThe Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations2008 relating to insurance companies. Under Financial Reporting Standard 1: Cash Flowstatements, no cash flow has been presented in these Financial Statements as the Associationis deemed to be a wholly owned subsidiary of Through Transport Mutual InsuranceAssociation Limited and the cash flows of the Association are included within theconsolidated accounts of that entity

During the financial year, the Association adopted the amendment to Financial ReportingStandard 29 which requires additional disclosure relating to the valuation of investment heldat fair value. The amendment is limited to additional disclosure and there is therefore noimpact on brought forward reserves or surplus in the year.

(b)Premiums

Premiums written relate to business incepted during the year, together with any differencesbetween booked premiums for prior years and those previously accrued, and includeestimates of provisions for anticipated adjustment premiums, less an allowance forcancellations. Premiums are stated before the deduction of commissions and brokerage butnet of taxes and duties levied.

(c) Unearned premiums

Premiums written during the financial year are earned as revenue on a daily pro-rata basisover the period of cover provided, in line with the incidence of risk. Amounts relating toperiods after the year end are treated as unearned and included within liabilities on theBalance Sheet.


Notes to the Financial Statements 31 December 2010

(d)Commission income

Commission income is earned on the Association's quota share reinsurance with the parentcompany, the Association's general reinsurance programme and on insurance arranged bythe Association on behalf of Members and others. Commission income also includesoverriding commission on quota share reinsurance premiums.

(e) Claims

Provisions made for all claims incurred during the year, whether paid, estimated orunreported, claims management costs and adjustments to claims provisions brought forwardfrom previous years. In addition, claims includes claims management costs and an allowancefor estimated costs expected to be incurred in the future in the management of claims.Estimated claims stated in currencies other than the functional currency are converted atyear end rates of exchange and any exchange difference is included within claims incurredin the Income and Expenditure account.

The provision for claims outstanding includes both estimates for known outstanding claimsand for claims incurred but not reported (IBNR). The estimates for known outstandingclaims are based on the best estimate and judgement of the likely final cost of eachindividual claim based on current information. The estimation of IBNR is generally subjectto a greater degree of uncertainty than the estimation of the cost of settling claims alreadynotified to the Association, where more information is generally available.

The best estimate of unreported claims on each policy year and the eventual outcome mayvary from the original assessment. As a result of this inherent uncertainty, sophisticatedestimation techniques are required to determine an appropriate provision. The estimate ismade using a range of standard actuarial projection techniques, such as the Chain Ladderand Bornheutter-Ferguson methods. Such methods extrapolate the development of claimsfor each policy year, based on the claims patterns of earlier years and the expected loss ratios.The main assumption underlying these techniques is that past claims developmentexperience can be used to project ultimate claims costs. Judgement is used to assess theextent to which past trends may not apply in future and alternative approaches are appliedas appropriate.

An estimate for Members and general reinsurance in relation to the provision forunreported claims has been made by reference to the relationship between gross and netclaims on prior policy years and having due regard to recoverability.

(f) Reinsurance recoveries

The liabilities of the Association are reinsured above certain levels and for certain specificrisks. In addition, the Association has a quota share reinsurance agreement with the parentcompany covering all risks insured by the Association.



(f) Reinsurance recoveries (continued)

The figure credited to the Income and Expenditure Account for reinsurance recoveriesincludes receipts and amounts due to be recovered on claims already paid together withchanges in the amount of recoveries to be made on outstanding claims. An assessment is alsomade of the recoverability of reinsurance recoveries having regard to market data on thefinancial strength of each of the reinsurance companies.

(g) Acquisition costs

Brokerage and commission payments and other direct costs incurred in relation to securingnew contracts and rewriting existing contracts are deferred to the extent that they areattributable to premiums unearned at the balance sheet date and are shown as assets in theBalance Sheet.

(h) Financial assets

Financial assets are classified between the following categories: financial assets at fair valuethrough profit or loss, loans and receivables and available-for-sale financial assets. Theclassification depends on the purpose for which the assets were acquired and is determined atinitial recognition and this is re-evaluated at every reporting date.

Fair value through profit and lossAssets, including all of the investments of the Association, which are classified as fair valuethrough the profit and loss account are designated as such by management to minimise anymeasurement or recognition inconsistency with the associated liabilities.

Investments are included in the Balance Sheet at market value translated at year end rates ofexchange. The market value of listed investments is based on current bid prices as at thebalance sheet date.

The cost of investments denominated in currencies other than the US dollar, are convertedinto US dollars on the date of purchase. Any subsequent changes in value, whether arisingfrom market value or exchange rate movements, are charged or credited to the Income andExpenditure Account and are then accumulated within the Investment RevaluationReserve until realised. The movement in unrealised investment gains and losses includes thereversal of previously recognised unrealised gains and losses on investments disposed of inthe current period.

Net gains or losses arising from changes in fair value of financial assets at fair value throughprofit or loss are presented in the Income and Expenditure Account within ‘Unrealisedgains/(losses) on investments’ in the period in which they arise.



(h) Financial assets (continued)

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. Receivables arising from insurancecontracts are also classified in this category and are reviewed for impairment as part of theimpairment review of loans and receivables. A bad debt provision is created against anybalances that may be impaired.

Available for saleAvailable-for-sale financial assets are non-derivative financial assets that are either designatedin this category or not classified in any of the other categories. No available for sale assetsare held.

Derivative financial instruments Derivative financial instruments include open foreign currency contracts. They are classifiedas held for trading. They are initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at their fair value.Changes in fair value are charged or credited to the Income and Expenditure Account. Fairvalues are obtained from quoted market prices in active markets. All derivatives are carriedas assets when the fair value is positive and as liabilities when the fair value is negative.

Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks andUCITS.

The UCITS are Undertakings for Collective Investments of Transferable Securities, and areused as an alternative to short term cash deposits. They are classified as cash equivalents asthey are short term, highly liquid investments that can be readily converted to cash.

(i) Impairment of financial assets

At each balance sheet date an assessment is made whether there is objective evidence that a financial asset is impaired. A financial asset is impaired only if there is evidence of one ormore events that have occurred giving rise to a reduction in estimated future cash flows.The Association must be able to reliably estimate the impact on future cash flows.

If the carrying value of an asset is greater than its recoverable amount, the carrying value is reduced through a charge to the Income and Expenditure account in the period ofimpairment.



(j) Investment return

Investment income comprises income on fixed interest securities, interest on deposits andcash and realised and unrealised gains and losses on investments. Other investment incomeis recognised on an accruals basis.

The movement in unrealised gains and losses on investments represents the differencebetween the fair value at the balance sheet date and their purchase price (if purchased in thefinancial year) or the fair value at the last balance sheet date, together with a reversal ofpreviously recognised unrealised gains and losses on investments disposed of in the currentperiod.

The Association allocates a proportion of its investment return to the technical accountbased on the average ratio of outstanding claims to funds available to meet outstandingclaims. This transfer is made so that the balance on the technical account is based on alonger-term rate of investment return and is not subject to distortion from short-termfluctuations in investment return (SORP para. 294).

(k) Foreign currencies

Revenue transactions are translated into US dollars at the rate applicable for the month inwhich the transaction took place. Assets and liabilities have been translated at the closingUS dollar exchange rate. The resulting differences, apart from those relating to estimatedfuture claims or investments, are shown separately in the Income and Expenditure Account.

Exchange gains or losses arising on non-US dollar cash holdings are treated as realised andare included in the Income and Expenditure Account.

(l) Policy year accounting

When considering the results of individual policy years, premiums, reinsurance premiumspayable, claims and reinsurance recoveries are allocated to the policy years to which theyrelate based on the period of cover of each insurance policy. The management fee andgeneral administration expenses are charged against the current policy year.

Investment income and exchange gains or losses are allocated proportionately to the averagebalance on each open policy year and the Reserve Fund. UK taxation, which is based oninvestment income, is allocated proportionately between the open policy years and theReserve Fund. Other taxation is allocated entirely to the policy years to which it relates.

(m)Closure of policy years

On formal closure of a policy year, a sum equivalent to the anticipated future investmentincome on the balance on that year is transferred from the Reserve Fund to the credit ofthe closing year. Thereafter, any income derived from such funds is credited to the ReserveFund, thereby offsetting the amount originally debited.



(m)Closure of policy years (continued)

For closed policy years, the Association retains a balance sufficient to meet the estimated netoutstanding claims and claims incurred but not reported on that year. Future adjustments tothese amounts as well as differences between the estimates and the ultimate payments willbe met by transfers to or from the Reserve Fund.

(n)Unexpired risk reserve

Full provision is made for unexpired risks when it is anticipated that unearned premiums,net of associated acquisition costs, will be insufficient to meet the expected claims andexpenses of business as at the year end after taking account future investment income.Unexpired risk surpluses and deficits are offset where business classes are managed togetherand provision is made if a deficit arises.

(o)Deferred Taxation

Deferred taxation is provided in full on timing differences that result in an obligation at thebalance sheet date to pay more tax, or a right to pay less tax, at a future date, at ratesexpected to apply when they crystallise based on current tax rates and law. Timingdifferences arise from the inclusion of items of income and expenditure in taxationcomputations in periods different from those in which they are included in the financialstatements.

Deferred tax assets are recognised to the extent that it is regarded as more likely than notthat they will be recovered. Deferred tax balances are not discounted.

Note 3: Management of Financial Risk

Financial Risk Management Objectives

The Association is exposed to financial risk through its financial investments, reinsurance assetsand liabilities to policyholders. In particular, the key financial risk is that the proceeds fromfinancial investments are not sufficient to fund the obligations arising from policies as they falldue. The most important components of this financial risk are market risk or investment risk(comprised of interest rate risk, equity price risk and currency risk) together with credit riskand liquidity risk.

The Association manages these risks using a risk governance structure incorporating theManagers’ Risk Review Committee and the Audit and Risk Committee. Further details canbe found in the Directors’ report on page 49.



Financial Risk Management Objectives (continued)

The Board is responsible, advised by the Chief Executive working with the InvestmentCommittee, for setting investment policy and the appropriate level of market or investment risk.This is set with reference to the overall risks faced by the Association which are analysed as partof the ICA process.

The processes used to manage risks within the Association are unchanged from the previousperiod.

(a) Market risk

(i) Interest rate risk

Interest rate risk arises primarily from investments in fixed interest securities. In addition, tothe extent that claims inflation is correlated to interest rates, liabilities to policyholders areexposed to interest rate risk.

The Association’s investment policy is set to ensure that the duration of the investmentportfolio is appropriately matched to the duration of the policyholder liabilities. Interestrate risk is then monitored by comparing the mean duration of the investment portfolio andthat of the policyholder liabilities. The mean duration is an indicator of the sensitivity ofthe assets and liabilities to changes in current interest rates.

(b) Currency risk

The Association is exposed to currency risk in respect of liabilities under policies ofinsurance denominated in currencies other than US dollar. The most significant currenciesto which the Association is exposed to are pounds sterling and the Euro.

The following table shows the Association’s assets by currency. The Association seeks tomitigate the risk by matching the estimated foreign currency denominated liabilities withfinancial investments denominated in the same currency.



(b) Currency risk (continued)

At 31st December 2010, if the US dollar weakened/strengthened by 5% against the pound,with all other factors unchanged, the surplus for the year would have increased/decreasedby US$0.45 million (2009: US$0.7 million). If the US dollar weakened/strengthened by5% against the euro, with all other factors unchanged, the surplus for the year would haveincreased/decreased by US$1.42 million (2009: US$1.3 million).

(c) Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due.The main areas where the Association is exposed to credit risk are:• Reinsurers’ shares of insurance liabilities;• Amounts due from reinsurers in respect of claims already paid;• Amounts due from policyholders; • Amounts due from insurance intermediaries;• Amounts due from bond issuers;• Cash at banks and deposits with credit institutions; and• Counterparty risk with respect to derivative transactions.



2010 USD STG EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 5,108 – – – 5,108

Assets arising from reinsurancecontracts held 315,830 (284) 4,041 1,691 321,278


Other debtors 1,008 – – 599 1,607


Other 1,139 2,265 107 2,630 6,141

Total 413,092 6,991 10,718 25,512 456,313

2009 USD STG EUR Other TotalUS$000s US$000s US$000s US$000s US$000s


Assets arising from reinsurancecontracts held 323,306 (186) 5,052 759 328,931


Other debtors 1,500 26 58 (265) 1,319


Other 7,405 2,191 14 2,249 11,859

Total 418,711 6,504 14,204 21,993 461,412



(c) Credit risk (continued)

Reinsurance is used to manage insurance risk. This does not, however, discharge theAssociation’s liability as primary insurer. If a reinsurer fails to pay a claim, the Associationremains liable for the payment to the policyholder.

Credit risk on reinsurance balances is mitigated by assessing the creditworthiness of a reinsurerbefore it is used and strict criteria are applied (including the financial strength of the reinsurer)before a reinsurer is approved. Counterparty limits based on credit ratings are also in place inrelation to amounts due from bond issuers and cash and bank deposits.

The Association’s policy is to make a full provision against all reinsurance debts with an agein excess of two years and a fifty percent provision for reinsurance debts between one andtwo years old. The Association also provides against all amounts due from policyholders andinsurance intermediaries that are more than nine months overdue.

After assessing all other financial assets at the end of the period, no objective evidence wasfound to suggest that any were impaired (2009: no impairments).

2010 AAA AA A BBB+ or Total

US$000s US$000s US$000s US$000s US$000s


Assets arising from reinsurancecontracts held – 34,770 283,322 3,186 321,278


Other debtors – – – 1,607 1,607

Cash and cash equivalents 58,590 74 36,854 – 95,518

Other – – – 6,141 6,141

Total assets bearing credit risk 63,698 34,844 320,176 37,595 456,313

2009


Assets arising from reinsurancecontracts held – 23,244 303,519 2,168 328,931


Other debtors – – – 1,319 1,319

Cash and cash equivalents 84,494 – – – 84,494

Other – – – 11,859 11,859

Total assets bearing credit risk 94,189 23,244 303,519 40,459 461,412

less ornot rated



(d) Liquidity and cash flow risk

Liquidity and cash flow risk is the risk that cash may not be available at a reasonable cost topay obligations as they fall due. The Association maintains holdings in short term deposits toensure there are sufficient funds available to cover anticipated liabilities and unexpectedlevels of demand. As at 31 December 2010 the Association’s short term deposits (includingcash and UCITs) amounted to US$95.5 million (2009: US$83.3 million)

The tables below provide a maturity analysis of the Association’s financial assets:

2010 Past due but not impairedFinancial Carrying

Neither past assets that value in thedue nor 0-3 3-6 6 months- have been balanceimpaired months months 1 year > 1 year impaired sheet

US$000s US$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 5,108 – – – – – 5,108

Reinsurance debtors 318,607 1,891 749 2 29 – 321,278


Other debtors 925 348 181 153 – – 1,607


Other 6,141 – – – – – 6,141

Total 448,452 6,747 930 155 29 – 456,313

2009

Debt securities 9,695 – – – – – 9,695

Reinsurance debtors 324,738 3,933 45 70 145 – 328,931


Other debtors – (210) (402) 895 1,036 – 1,319


Other 11,859 – – – – – 11,859

Total 453,179 6,444 (357) 965 1,181 – 461,412

(d) Liquidity and cash flow risk (continued)

The table below provides a maturity analysis of the Association’s financial assets andliabilities:

(e) Capital management

The Association maintains capital, comprising of policyholders’ funds (surplus and reserves),consistent with the Association’s risk profile. As at 31 December 2010, the total regulatorycapital available amounted to US$56.6 million (2009: US$53.1 million), which exceededthe UK Financial Services Authority requirements.

As at 31 December 2010, the Association held deposits and letters of credit totalling ofUS$62.7 million to meet overseas regulatory requirements (2009: US$44.9 million). Thisincluded a letters of credit amounting to US$35.2 million (2009: US$35.3 million) inrelation to Hong Kong and a trust fund deposit of US$27.5 million (2009: US$9.6 million)in relation to the US.

The Association’s strategy is to maintain sufficient capital to meet regulatory requirementsand to maintain an AM Best rating of A- (Excellent) over the insurance market cycle, with asubstantial margin in each case.



2010 < 6 months Between 6 Between Betweenor on months & 1 and 2 2 and 5

demand 1 year years years > 5 years TotalUS$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 5,108 – – – – 5,108


Other debtors 1,607 – – – – 1,607


Creditors (56,803) – – – – (56,803)

Total 69,138 2,953 – – – 72,091

2009

Debt securities – 4,388 5,307 – – 9,695


Other debtors 1,319 – – – – 1,319


Creditors (52,489) (202) (65) – – (52,756)

Total 54,862 7,762 5,242 – – 67,866



(f) Fair value estimations

From 1 January 2009, the company adopted the amendment to FRS 29. This requires, forfinancial instruments held at fair value in the balance sheet, disclosure of fair valuemeasurements by level of the following fair value hierarchy

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable forthe assets or liability, either directly (that is, prices) or indirectly (that is, derivedfrom prices)

Level 3 – Inputs for the assets or liability that are not based on observable market data (thatis, unobservable inputs)

All of the assets and liabilities that are measured at fair value at both 31 December 2010 and31 December 2009 fall into the Level 2 category.

The fair value of financial instruments traded in active markets is based on quoted bid pricesas at the balance sheet date. All valuations are taken from external price feeds based uponmarket prices or broker quotes.

Note 4: Claims paid

Claims paid include claims handling charges paid to the Managers totalling US$7.9 million(2009: US$7.6 million).

Net claims payments and the provision for claims outstanding at the end of the year in respectof 2009 and prior policy years were US$3.05 million lower than the provision for claimsoutstanding at the beginning of the year.

Note 5: Reinsurers' share of claims paid 2010 2009

US$000s US$000s

Members' reinsurance 5,716 4,161

General reinsurance 5,715 25,505

Quota share reinsurance 7,892 11,118

Quota share with parent company 74,799 66,409

Change in provision for potential unrecoverable reinsurance (19) 24

94,103 107,217



Note 6: Net operating expenses

2010 2009

US$000s US$000sAcquisition costsBrokerage and commission 18,150 21,628

Management fee in respect of underwriting 10,626 11,318

General expenses in respect of underwriting 1,394 292

Change in deferred acquisition costs 1,809 (2,900)

31,979 30,338

Administration expensesManagement fee in respect of management and investment 7,483 7,236

General expenses 1,118 2,743

Directors' fees 216 337

Directors' travelling costs 43 66

Auditors' remuneration:– Audit fee 165 169

Non-audit services– Other services pursuant to legislation,

including the audit of the regulatory returns 15 9

– Tax services 60 23

– Other services not covered above 3 9

9,103 10,592

Total operating expenses before overriding commission 41,082 40,930

Overriding commission on quota share reinsurance (2,679) (2,002)

38,403 38,928

The Directors of the Association and its parent company, TT Bermuda, agree a management feecovering the management of the Association as a whole.



Note 7: Investment return

2010 2009

US$000s US$000s

Investment incomeIncome from financial assets held at fair value through profit or loss 1,000 800

Net (losses)/gains on the realisation of investments (54) 7

946 807

Exchange losses 750 2,144

Other investment management expenses 6 (46)

Net unrealised gains on investments (234) (90)


Investment return is analysed between:

Allocated investment return transferred to the technical business account 442 898

Net investment return included in the non-technical account 1,026 1,917


Note 8: Tax on ordinary activities

2010 2009

US$000s US$000s

(i) Analysis of tax charge on ordinary activitiesUnited Kingdom corporation tax at 28% (2009: 28%)– Under / (over) provision in previous periods (9) 4

– charge in current period 4 4

Foreign tax – overprovision in previous periods 18 8

– charge in current period 224 15

Reduction in deferred tax – –

237 31



Note 8: Tax on ordinary activities (continued)

2010 2009

US$000s US$000s

(ii) Factors affecting tax charge for the current periodThe tax assessed for the period is higher than that resulting from applying the standard rate of corporation tax in the UK: 28% (2008: 28%) – the differences are explained below:


Tax at 28% hereon 1,058 823

Effects of:Inland Revenue agreement – 10% of investment profits (1,066) (815)

Foreign tax 245 23

237 31

A potential deferred tax asset of $2.0m in respect of certain unutilised tax losses has not beenrecognised as there is insufficient evidence that it will be recoverable. This asset would berecovered should sufficient taxable profits be generated in future which would be eligible forrelief against the unutilised tax losses.

Note 9: Financial investments

The Association’s financial investments are summarised below by measurement category in thetable below;

2010 2009 2010 2009Consolidated US$000s US$000s US$000s US$000s

Held at fair value through profit or loss:

– debt securities 5,108 9,695 5,303 9,695

– UCITS 58,590 58,869 58,590 58,869

63,698 68,564 63,893 68,564




Note 10: Surplus and reserves

Open InvestmentReserve policy revaluation Total Total

fund years reserve 2010 2009US$000s US$000s US$000s US$000s US$000s

Net transfer to closed policy year balance of deficit less future investment income on closure, 2007 (2006) (6,022) – – (6,022) (2,553)

Investment income and exchange gains less losses, expenses and taxation 194 – – 194 (3,172)

Transfer to closed policy years 1,020 – – 1,020 3,681

2.5% Members' contribution to Reserve Fund 4,185 – – 4,185 3,889

Net movements on open policy years – 4,400 – 4,400 1,183

Unrealised gains arising during the year – – (234) (234) (90)

Net transfer to reserves (623) 4,400 (234) 3,543 2,938

Balance at beginning of year 70,691 (17,518) (93) 53,080 50,142

Balance at end of year 70,068 (13,118) (327) 56,623 53,080

Of the surplus and reserves, US$3.7 million (2009: US$3.9 million) is shown in the accounts ofTT Club Mutual Insurance Limited’s Singapore branch.

Note 11: Guarantee from parent company

TT Bermuda has issued a guarantee, not to exceed US$ 2.5 million, to the Association to enableit to comply with the solvency margin requirements of the Financial Services and Markets Act2000. The amount withdrawn as 31 December 2010 amounted to nil (2009: nil).

Note 12: Creditors arising from reinsurance ceded

2010 2009

US$000s US$000s

Reinsurance premiums ceded 8,368 5,820

Accrual for future reinsurance premiums ceded 33,785 35,049

42,153 40,869

79

Note 13: Segmental information

2010 2009

US$000s US$000s

Gross premiums written

- Members located in UK 10,437 10,233

- Members located in other EU states 33,273 41,469

- Members located outside EU 120,897 123,155

164,607 174,857

The Association writes only marine, aviation and transport business.

The geographical analysis of surplus on ordinary activities before tax and net assets has not beendisclosed as this, in the view of the Directors, would be prejudicial to the interest of theMembers.

Note 14: Related party transactionss

Reinsurers’ share of the provision for unearned premiums includes US$33.8 million (2009:US$35.0 million) in relation to the quota share with the parent company. Reinsurers’ share ofthe provision for outstanding claims includes US$210.9 million (2009: US$222.5 million) inrelation to the quota share with the parent company.

All other material related party transactions are disclosed separately within the financialstatements.

Note 15: Ultimate parent company

The Association’s immediate and ultimate parent company and controlling party is ThroughTransport Mutual Insurance Association Limited, a company incorporated in Bermuda.




The TT Club underwriting centres

LondonThrough Transport Mutual Services (UK) Ltd90 Fenchurch StreetLondon EC3M 4STUnited Kingdom

T +44 (0)20 7204 2626F +44 (0)20 7549 4242E [email protected]

Hong KongThomas Miller (Hong Kong) LtdSuite 1201-1204 Sino Plaza255 - 257 Gloucester RoadCauseway BayHong Kong

T +852 2832 9301F +852 2574 5025 & 2574 5062E [email protected]

New JerseyThomas Miller (Americas) IncHarborside Financial CenterPlaza Five, Suite 2710Jersey CityNew Jersey 07311United States of America

T +1 201 557 7300F +1 201 946 0167E [email protected]

The TT Club Network

AntwerpT +32 3 206 9250F +32 3 206 9259

AucklandT +64 9 303 1900F +64 9 308 9204

BarcelonaT +34 93 23 09310F +34 93 23 09311

Buenos AiresT +54 11 4311 3407/09F +54 11 4314 1485

DubaiT +971 488 10167F +971 488 10955

DurbanT +27 31 368 5050F +27 31 332 4455

GenoaT +39 010 83 33301 F +39 010 83 17006

HamburgT +49 40 36 98 180 F +49 40 36 98 1819

For further information contact the TT Club at one of its underwriting centres or at any point in the network.

www.ttclub.com

SingaporeThomas Miller (South East Asia) Pte Ltd61 Robinson Road#10-02 Robinson CentreSingapore 068893

T +65 6323 6577F +65 6323 6277E [email protected]

SydneyThomas Miller (Australasia) Pty LtdSuite 1001, Level 10117 York StreetSydney NSW 2000Australia

Postal AddressPO Box Q697QVB Post OfficeNSW 1230Australia

T +61 2 8262 5800F +61 2 8262 5858E [email protected]

MoscowT +7 495 935 8620F +7 495 981 1529

San FranciscoT +1 415 956 6537F +1 415 956 0685

SeoulT +82 2776 4319F +82 2771 7150

ShanghaiT +86 21 6321 7001F +86 21 6321 0206

TaipeiT +866 2 2736 2986F +866 2 2736 2976

TokyoT +81 3 5442 5001F +81 3 5442 5002

WellingtonT +64 4 473 5742F +64 4 473 5745

Documents

Annual Report&Financial Statements 2010 - TT Club · 2018. 10. 9. · Hanjin Shipping Ltd, Seoul U Kranich 1 Hapag-Lloyd AG, Hamburg Registered Office First Floor Chevron House 11