HYPERIONweb-resources.hyperiongrp.com/cmsmedia/1318/2012_hyperion... · Hyperion Insurance Group was founded in 1994 and is headquartered in the City of London. Beginning life as

REPORt & ACCOUNtS 2012

HYPERION INSURANCE GROUP

Highlights 8

Group Timeline 10

At a Glance 12

Group Footprint 14

Chairman’s Statement 16

Chief Executive’s Review 18

Board Structure 24

Howden Broking Group 26

DUAL Group 30

Corporate Social Responsibility Policy 34

Risk Management 38

ConSoLiDATED FinAnCiAL STATEMEnTS 42

Directors’ Report 44

independent Auditor’s Report 50

Consolidated income Statement 51

Consolidated Statement of Comprehensive income 53

Consolidated Statement Financial Position 54

Consolidated Statement of Changes in Equity 55

Consolidated Cash Flow Statement 56

notes to the Consolidated Accounts 57

CoMPAny FinAnCiAL STATEMEnTS 98

notes to the Company Financial Statements 100

CoMPAny ConTACTS 104

Cover:

olympic marathon runners pass Hyperion’s head office in London

CONtENtS

The Matthew Harding Trophy for the Lloyd’s of London Football Tournament.

2012 Champions: Howden.

At the heart of the Group’s success is the quality of our people.

The Group’s vision is to be an independent, innovative, courageous,

dynamic, great company, and that vision will continue to be delivered

by attracting the best people and empowering them to make us

insurance partners of choice for clients.

Hyperion Insurance Group was founded in 1994 and is headquartered in the City

of London. Beginning life as an insurance broker, the Group is now an international

insurance intermediary group with divisions in broking and underwriting.

In 2012 the Group turned 18, and received its second Queen’s Award for Enterprise

in International Trade.

18 YEARS

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In 2012, over 1200 employees in our operations around the world were

responsible for delivering our record growth. Their energy, innovation and

entrepreneurialism continues to drive the Group’s success.

1200EMPLOYEES

4

Hyperion Insurance Group companies serve clients around the world from

67 offices in 28 countries across Europe, the Middle East, Asia Pacific

and the Americas.

28COUNTRIES

76

• HyperionInsuranceGroupacquiredtheoperationsofAccetteInsuranceGroupinSingapore,HongKong,Malaysia,ThailandandthePhilippinesinNovember2011andinIndonesiainJuly2012.

• DUALlaunchedTamesisDUAL,specialtyexcessoflossreinsurancebusinesssupportedwithcapacityfromLloyd’sofLondon,inNovember2011.

• HyperionInsuranceGroupLimitedwaslistedintheSundayTimesBuyoutTrack100asoneof theUK’sfastestgrowingcompanies,andintheSundayTimesInternationalTrack200asoneoftheUK’scompanieswiththefastestgrowinginternationalsales.

• InApril2012HyperionInsuranceGroupwasawardeditssecondQueen’sAwardforEnterpriseinInternationalTrade.

• HyperionInsuranceGroupacquiredWindsorLimitedinJuly2012.Windsor’sLloyd’sbrokingbusinesswaslegallyintegratedintoHowdenInsuranceBrokersLimitedinOctober2012.

• DUALopenedofficesinSingaporeinMay2012,AustriainJune2012,andNewYorkinAugust2012.

• DUALwasnamedUnderwritingAgencyoftheYearattheBritishInsuranceAwardsinJuly2012.

• HowdenBrokingGroupacquiredamajority stakeinBrazilianbrokerConsetSegurosin September2012.

HIGHlIGHtS

Howden’s Madrid office welcomes clients and colleagues to thank them for their

support and partnership

67 offices 28 countries

1200 employees

98

1110

1995 19961994 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1994 2008 2010 20121996 2004

DUAL Australia, Sydney

2002

DUAL Corporate Risks, London

Davidoff Howden, Israel

Howden Risk

Partners, London

InternationalProperty Services

Team Stage 2

North American Property & Casualty

Team

Howden, Dubai

DUAL Iberica,Barcelona


Team Stage 1

VK Howden LLC,Miami

Howden Insurance

Brokers Inc., Baltimore

DUAL Australia,Perth

Howden, Singapore

Howden, Korea

Dual Corporate

Risks, Ireland

DUAL New Zealand

Accette GroupSouth-East Asia

Tamesis DUAL, London

Broking activity of Davidoff Insurance

Brokers, Israel

Broking activity ofPYV Ltd, London

Howden SpecialityUnderwriters,

Miami

1998

DUAL International

DUAL Iberica, Madrid

Howden Iberia, Madrid

Howden Pangborn (‘HP’) formed

(25% investment by BP Marsh, 75% by

David Howden andMark Pangborn)

2000

CFCUnderwriting

Howden OY,Helsinki

Howden,Iceland

DUAL Italia, Milan

Spear Gulland,London

2006

DUAL Deutschland, Cologne

DUAL Australia, Melbourne

DUAL Corporate Risks, Manchester

Howden, India

Holm & Co – later renamed

Howden Insurance Brokers AB,

Sweden

Hendricks, Germany

Howden, Taiwan

Howden, Brazil

Howden, Hong Kong

DUAL Asia, Hong Kong

VK Underwriters, Miami and Latin America

DUAL Australia, Brisbane

DUAL Singapore

DUAL New York

Accette Indonesia

Windsor Limited, UK

Conset Seguros, Brazil

DUAL Austria

1994 2008 2010 20121996 2004

DUAL Australia, Sydney

2002

DUAL Corporate Risks, London

Davidoff Howden, Israel

Howden Risk

Partners, London


Team Stage 2

North American Property & Casualty

Team

Howden, Dubai

DUAL Iberica,Barcelona


Team Stage 1

VK Howden LLC,Miami

Howden Insurance

Brokers Inc., Baltimore

DUAL Australia,Perth

Howden, Singapore

Howden, Korea

Dual Corporate

Risks, Ireland

DUAL New Zealand

Accette GroupSouth-East Asia

Tamesis DUAL, London

Broking activity of Davidoff Insurance

Brokers, Israel

Broking activity ofPYV Ltd, London

Howden SpecialityUnderwriters,

Miami

1998

DUAL International

DUAL Iberica, Madrid

Howden Iberia, Madrid

Howden Pangborn (‘HP’) formed

(25% investment by BP Marsh, 75% by

David Howden andMark Pangborn)

2000

CFCUnderwriting

Howden OY,Helsinki

Howden,Iceland

DUAL Italia, Milan

Spear Gulland,London

2006

DUAL Deutschland, Cologne

DUAL Australia, Melbourne

DUAL Corporate Risks, Manchester

Howden, India

Holm & Co – later renamed

Howden Insurance Brokers AB,

Sweden

Hendricks, Germany

Howden, Taiwan

Howden, Brazil

Howden, Hong Kong

DUAL Asia, Hong Kong

VK Underwriters, Miami and Latin America

DUAL Australia, Brisbane

DUAL Singapore

DUAL New York

Accette Indonesia

Windsor Limited, UK

Conset Seguros, Brazil

DUAL Austria

GROUP tImElINE

GROUP REvENUE

TheGroupwasbornin1994whenHowdenPangbornwasformedfollowingamanagementbuyoutfrom SteelBurrillJones.Then,itwasasmallLondonbroker,withoneofficeandjustafewpeople.Inthelast18yearstheGrouphasgrownthrough acombinationoforganicgrowthandacquisition,throughjoiningwithpeopleandteamswhosharethesamedriveandenthusiasmforourbusiness.

Today,over1,200peopleinoperationsaroundtheworldareapartoftheHyperionstory.

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EBITDABEFoRE non-RECURRinG iTEMS AnD ACqUiSiTion CoSTS

£20.6m

mARGIN: 18.6%

HYPERION At A GlANCE

AVERAGENUMBEROFEMPLOYEES 1,020

FEESANDCOMMISSION:BROKING£75.1m

EARNINGS PER SHAREFRoM ConTinUinG oPERATionS BEFoRE FAiR VALUE ADJUSTMEnTS, non-RECURRinG CoSTS AnD ACqUiSiTion CoSTS

15.0 PEnCE

GROUP REvENUE£111m

GROSSWRITTENPREMIUM:UNDERWRITING£228m

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Revenueofcontinuingoperationshasincreasedby 42%to£111m(continuingoperations)andEBITDA isup40%(excludingnon-recurringandacquisition costsanddiscontinuedoperations)to£20.6m.

OUR PROdUCtS

HOWDENBROKINGGROUPincome by Product

Property 21%

Professional indemnity 20%

Directors and officers 18%

GL, PL, EL 9%

Accident and Health 4%

Employee Benefits 4%

BBB 3%Marine 3%

Clinical Trials 2%2%

Energy

CAR/EAR 6%

Treaty, Medical Malpractice, Fi Crime, Motor Fleet, Surety, Aviation, Personal Lines1% each

dUAl GROUP GWP by Product


Financial institution Crime 5%

BBB, Property and Treaty each 2%

General Liability 1%

Accident and Health 4%

Marine 7% Professional indemnity 45%

1514

HYPERIONGROUPFOOTPRINTANd REGIONAl REvENUE IN 2012

KEY

HOWDENBROKINGGROUP

dUAl GROUP

REGIONAl REvENUE IN % 2012

WHOLESALE,RETAIL&

REINSURANCEBROKING

Howden Broking Group

BermudaBrazilCanadaDubaiFinlandGermanyHongKongIcelandIndiaIndonesiaIsraelMalaysiaMexicoPhilippinesSouthKoreaSingaporeSpainSwedenTaiwanThailandTurkeyUnitedKingdomUnitedStates

INSURANCE

UNDERWRITING

DUAL Group

ArgentinaAustraliaAustriaGermanyHongKongIrelandItalyNewZealandPuertoRicoSingaporeSpainUnitedKingdomUnitedStates

16

InSeptember2012,HowdenBrokingGroupacquiredamajoritystakeinBrazilianbrokerConsetSeguros.WithofficesinRiodeJaneiro,SaoPaoloandBeloHorizonte,andanexcellentreputationinthemarket,theacquisitionofConsetgivesHowdenafootholdinanotherimportantandgrowingglobalmarket. Afterinvestinginthecompanyasastart-upin2000,inApril2012theGroupsoldits59.5%stakeinCFCUnderwritingLimitedtoaconsortiumofprivateinvestorsandthemanagementteamforatotalof£20.8million. DUALhascementeditspositionasthelargestinternationalcoverholderatLloyd’s,andwithofficeopeningsinAustria,NewYorkandSingaporehasperformedextremelywellandiswellpositionedforfurthergrowth.

FINANCE,GOVERNANCE ANd OPERAtIONAl StRENGtHTherequirementtofinancetheacquisitionofWindsorwhilstprotectingouremployeeshareholdingssawtheGroupsecurefinancingof£90mduringoneofthelongestandworstfinancialcrisesinhistory,andisagreattestamenttothestrengthofHyperion’sbusinessmodel.EvenwiththisfinancingtheGrouphasconservativelevelsofdebt.

AcrucialpartoftheGroup’sstrategicdirectionisthestrengthoftheHyperionBoardanditsabilitytoguidetheGroupintothefuture,andIwasdelightedtowelcomeLordForsythtotheBoardinSeptember2012.Hisbackgroundandexperiencewillbeinvaluabletous.

Ongoinginvestmentinourmanagementandinfrastructuretoimprovetheagilityandeffectivenessofouroperationshasalsoseensignificantdevelopments.ThenewrolesofDeputyCEOforDUAL,CorporateandLegalDirectorforHowdenBrokingGroupandGlobalHRDirectorforHyperionarenotablestepsthathavebeenmadetoaddstrengthanddepthtoourmanagementteams. dIvIdENd2012hasbeenayearofsignificantinvestmentsinnewinitiativesandthefurtherdevelopmentofourinfrastructure,butthestronggrowthinrevenueandprofitabilityallowedustopayanincreaseddividendof3.1pencepershare(2011–2.8pence)toshare- holdersontheRegisteron30thSeptember2012.

PEOPlETheGroup’sabilitytoattractqualitypeople,businessesandteamshasresultedinanumberofimportantnewinitiatives;theacquisitionofWindsorinJuly2012andthelaunchofDUAL’sSpecialistLiabilitydivisioninNovember2012areexamplesfrombothsidesoftheGroupwhereHyperionhasbeenthepartnerofchoice.AttractingtherightpeopleisalsoattheheartofHyperion’sacquisitions,which,asaguidingprinciple,arebaseduponjoiningwithlike-mindedpeoplewherethesumofwhatwecandelivertogetherisgreaterthanthatwhichwecandeliveralone.Theabilitytoquicklyrealisesynergiesandvalueforourclients,shareholdersandemployeesistheresult,asevidenced,forexample, bytheperformanceofourbrokingoperationsinAsiaandourstart-upunderwritingoperationin NewZealand.

Theeffectivenessandefficiencywithwhichweintegratebusinessesisoneofourgreatoperationalstrengths.ParticularmentionthisyearmustgotothecentraloperationsteamsinvolvedinintegratingWindsor;theyhaveworkedextremelyhardtobringtheLloyd’sbrokingbusinessestogetherandwearealreadybeginningtoseethebenefitsfromthis.

ThenumberofemployeesintheGrouphaspassed1,000forthefirsttime,andtheevidenceoftheircontributioncontinuestopresentitselfintheexternalrecognitionthattheGrouphasreceivedthisyearforbothitsfinancialperformanceandthequalityofitsactivities.In2012,HyperionfeaturedintheSundayTimesBuyoutandInternationalTracks,placingusamongstthefastestgrowingcompaniesintheUK.Foritsstrategy,growthandcommitmenttocustomerneeds,DUALwasnamedUnderwritingAgencyoftheYearattheBritishInsuranceAwards;andfinally,forcontinuousachievement,theGroupwonitssecondQueen’sAwardforEnterpriseinInternationalTrade.

MythanksgotoeachoftheGroup’semployeesfortheirhardworkandsupportinwhathasbeenaveryspecialyearfortheGroup.

JOHNVANKUFFELERCHAiRMAn

CHAIRMAN’S StAtEmENt2012hasbeenanextremelyimportantyearintheevolutionofHyperionInsuranceGroup.Wehaveexpandedourgeographicreachwithacquisitionsandstart-upoperationsinanumberoftheworld’smajorgrowtheconomies,andthecompletionofHyperion’slargestacquisitiontodate.

Thesedevelopmentsandaverystrongperformancefromboththeunderwritingandbrokingarmshaveproduceda42%increaseinrevenueanda40%increaseinEBITDAonprioryear(excludingnon-recurringandacquisitioncostsanddiscontinuedoperations).

Akeyperformanceindicator,andunderpinningtheGroup’ssustainablelong-termgrowth,isourorganicrevenuegrowth.Thisyearourorganicrevenuegrowthforcontinuingoperationswas12%-anexcellentresultinthefaceoftheongoingchallengespresentedbytheglobaleconomy.

PERFORMANCEAt30thSeptember2012,totalrevenueofcontinuingoperationswas£111m(£78min2011),andEBITDAwas£20.6m(£14.7min2011). StrongperformancesfromouroperationsinthefastergrowingpartsoftheworldandtheabilityoftheGrouptoquicklytransformnewinitiativesandinnovationintorevenueandprofitabilityhavebeennotablecontributorstotheseresults.

ACQUISITIONSANDSTRATEGICdEvElOPmENtThecompletionoftheacquisitionofspecialistLloyd’sbrokinggroup,WindsorLimited,inJuly2012,constitutedHyperion’slargestacquisitiontodate.Windsor’s220staffhavejoinedHowdenBrokingGroup,bringingwiththemcomplementarystrengthswhichaddsignificantbreadthtothecombinedbrokingarm’scapabilities,bydeliveringmoretoboththeUKretailpropositionandtoourglobalwholesaleandreinsuranceproposition.IamalsopleasedtowelcomemanyoftheWindsordirectorsandseniormanagementasHyperionshareholders.

TheacquisitionofAccetteInsuranceGroup’soperationsinSingapore,HongKong,Thailand,MalaysiaandthePhilippinesinNovember2011,andinIndonesiainJuly2012,hasprovidedanexcellentplatformforgrowthinsomeofthefastestgrowingeconomiesinSouthEastAsia.

JoHn VAn KUFFELER Chairman, Hyperion insurance Group

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DAViD HoWDEn Chief Executive, Hyperion insurance Group

CHIEFExECUTIVE’SREVIEW

2012hasbeenalandmarkyearforHyperion.TheGrouphaspassedanumberofsignificantmilestones,notleastoftheseisthatinNovembertheGroupturned18.Thisfinancialyearhasseentwelvemonthsofachievementsanddevelopmentsfittingofour‘comingofage’.MostnotablewasouracquisitionofWindsorforanenterprisevalueof£94.7m,byfarourlargestacquisitiontodate,creatingwithHowdenaninternationalbrokinggroupofover1,000staff,operatingfrom47officesin22countries.

ThisyearsawGrouprevenuebreakingthe£100mmark.Significantly,priortotheacquisitionofWindsorwemadeamajordivestmentwiththesaleof CFCUnderwriting,nettingusaprofitofover£20mforour59.5%share,andfocusingourunderwritingactivityunderDUAL.

ItwaswithgreatprideinthepeoplewhoworkintheGroupthatIlearnedinAprilthatwewerewinnersofoursecondQueen’sAwardforInternationalTrade.WhenIlookbackatthecompanywewerein2007,whenwelastwontheQueen’sAward,itisinterestingtoseehowfarwehavecome.Atthetime,Hyperionhadjust355employeesin25officesand13countriesproducingrevenueof£34.1mandoperatingprofitofalittleunder£6m.

Thisyearwehavewontheawardforcontinuousachievementininternationaltradeoverasixyearperiod,withoverseasearningsgrowthofover250%.Ourrevenueandprofitsaretreblewhattheywerewhenwewonourfirstaward,representingaCompoundAnnualGrowthRateovertheperiodof22%.Thisrelentlessfocusonprofitablegrowthhasseen42%revenuegrowthfor2012to£111mand40%growthinEBITDAto£20.6m(excludingnon-recurringandacquisitioncostsanddiscontinuedoperations).Importantly,ourEBITDAmarginremainsstrongat18.6%forcontinuingoperations,evenwiththecostsofinitiativeslinkedtofuturegrowthengines,recruitingadditionalspecialists,andinvestingininfrastructure.Producingtheseresultsareover1,200peoplein67officesin28countriesacrossourbrokingandunderwritingoperations.

Thefoundationofourgrowthhasalwaysbeen,andwillcontinuetobeorganic.TheGroup’sorganicgrowthof12%in2012isanexcellentachievementinthecurrenteconomicclimate.NeverthelesstheacquisitionofbusinesseswhichwillthemselvesbehighgrowthaspartoftheGrouphasalwaysbeenakeyelementofourstrategy.Therearetwocriticaldriversofouracquisitionactivity:firstly,wejoinwithlike-mindedbusinessesandteamswithwhomweshareanoutlookandgoals.WeachievethisbecauseeveryonewepartnerwithhasinvariablytradedforsometimewithapartoftheGroup.Secondly,wemakeacquisitionsandenterintopartnershipswherethesumofthepartsissignificantlygreaterthantheirseparatevalues,andwherewecandelivermoretoourclientstogether.

Wecontinuetofocusonincreasingourprofitabilityasapercentageofourrevenue.CombiningWindsorwithHowdennotonlyprovidesourclientswithabroaderrangeofservicesandgreaterdepthofexpertise,butalsocreatesabrokinggroupofscalewiththeabilityforsuperioroperatingmargins.Likewise,whilstDUAL’sprimaryfocusisonunderwritingprofit,ithasdemonstrateditsabilitywithincreasedgeographicreachandproductdiversitytocreateoperationalefficienciesanddeliveranoperatingmarginofjustunder20%.

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INSURER

INSURED

Economic Value Chain

Retail Broker

UnderwritingAgency

Wholesaleand

Reinsurance Broker

39%

32%29%

vISION ANd StRAtEGYMuchhaschangedthen!Importantlythough,muchhasalsoendured.AttheheartoftheGrouphasalwaysbeenthevisionthatwewanttobeanindependent,innovative,courageous,dynamic,greatcompany,andthatwewillachievethisbyattractingthebestpeopleandempoweringthemtomakeusinsurancepartnersofchoiceforclients.Thisisourculture,whichisattheheartofourgrowth. TheGroup’svisionisimplementedthroughfourareasofstrategy–ourfocusontheoptimalperformanceofouroperatingplatformsandthequalityofourdistribution,thedepth,breadthandinnovationofourspecialistproductsandourrelativemarketpositions,beingpartnersofchoiceforclients,insurersandbrokerstheworldover,andinvestinginanddevelopingtherightpeopletodeliverthebestsolutions.

PROCESSESANDDISTRIBUTIONUnderpinningourstrategyandgrowthisouruniqueinsurancedistributionmodel.Hyperionisatrueinsuranceintermediarygroup,withdistinctbrokingandunderwritingagencyarmsoperatingindependentlyofoneanother.Themodelisimportantfortwomainreasons,bothrelevantagainstthebackdropofthecontinuingglobaleconomicdifficulties.Firstly,ourstructurerecognisesandrespondstothespectrumofclientinsuranceneedsandenablestheGrouptocaptureagreaterproportionoftheeconomicvaluechain.Secondly,thedistinctplatformsprovideanaturalhedgeinearnings,reducingvolatilityoverthemarketcycle,whichhasallowedtheGrouptogrowprofitablythroughoutour18yearsthroughhardandsoftinsurancemarketsandpeaksandtroughsofeconomiccycles.

THEBALANCEOFOURMODEL

GroupRevenue

Ourdistributionplatformhasgrownsignificantly.WhenwelastwontheQueen’sAwardDUALhadjustsevenofficesinfivecountriesandpremiumincome hadexceeded£60mforthefirsttime.TodayDUALhas19officesin13countries,andhaswritten£228minpremium(up24%onprioryear)withanEBITDAof£9.9m(up20%onprioryear).HowdenBrokingGrouphasexpandedfrom19officesin10countries,withrevenueof£27.7mto47officesin22countrieswithrevenueexceeding£75m(up58%onprioryear)andanEBITDAof£12.1m(up42%onprioryear).OurcontinuedfocusonthegeographicbalanceoftheGrouphasseenasignificantshiftsincewewonourfirstQueen’sAward,whenjustover70%ofourrevenuecamefromEurope,lessthan10%camefromAsiaPacific,andlessthan10%fromtheAmericas. In2012,activitydrivingthegeographicbalanceofourdistributionisinevidenceinabundance:

• theacquisitionoftheAccetteInsuranceGroupoperationsinSouthEastAsiahasgivenusaplatformoffourteenretailbrokingofficesinAsiaandhascreatedatruepan-regionalnetworktosupportourclients;

• theacquisitionofamajoritystakeinwellregardedBrazilianretailbrokerConsetSeguroshasgiventheBrokingGroupitsfirstretailfootholdinLatinAmerica;

• alignmentofourunderwritingoperationsintheUSandLatinAmerica,withtherebrandingofVKUnderwritersandHSUtoDUALhascreatedastrongplatformforfocusedgrowth;

• officeopeningsinNewYork,AustriaandSingaporehaveextendedtheinternationalreachofDUAL,andhaveconnectedourcapacityproviderswithnewmarketsandmorebrokerswithnewcapacity;

• theacquisitionofWindsorhasextendedtheBrokingGroup’sUKretailfootprint,broughtnewwholesalebrokingrelationshipstothegroupfrommarketssuchasLatinAmericaandAustralia,andextendedbothourwholesaleandretailbrokingplatformswiththeadditionofnewcapabilitiessuchasMarineandAviation.

The Hyperion Strategy

Products and Positions

Processes and Distribution

People andOrganisations

Partnersof choice

Ourexpansiononprioryear,particularlyinemergingmarkets,isshowninthegraphsbelow.

FeesandCommissions2011and2012(£’000s)

Ourtechnologicaldistributioncapabilitiesarealsoacontinuedfocusfordevelopment;asanexample,DUALhascontinuedtoinvestinonlineplatformsviawhichitsbrokerscantransactmid-marketbusinesseffectivelyandefficiently.Withover30%ofDUAL’sbusinessnowtransactedonline,ourinvestmentinourtechnologicaldistributionisanimportantelementforthefuture.

Comparisonofregionalrevenue

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0United

Kingdom2011Americas Europe Middle and

East AfricaAsia Pacific

2012

2006

70.3%

9.4% 10.8%

9.0%

2012

46.3%

17.5% 11.8 %

24.4%

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PROdUCtS ANd POSItIONS WhenwewonourfirstQueen’sAward78%ofourincomecamefromourtraditionalexpertiseinProfessionalIndemnityandDirectors’andOfficers’Insurance.Thisfellto60%lastyear,andforthe2012financialyeartheselinesaccountforjustover50%ofourincome.Ourtraditionallinescontinuetoshowgoodgrowth,butfurtherbalancehasbeenbroughtbytheintroductionofnewspecialistteamswhohavejoinedthebrokingarmsuchastheInternationalandNorthAmericanProperty,EnergyandMarineteamsandTamesisDUAL,launchedinNovember2011.

COMPARISONOFINCOMEBYPRODUCT

Hyperion Income 2006

Hyperion Income 2012

Withratescontinuingtochallengeinsomeareas,DUAL’srelentlessfocusonunderwritingforprofitanddeliveringlong-termprofitabilitytoitscapacityprovidershasseenmuchofitsgrowthcomefromnewproductsandnewmarkets.Alongsideitsnewoperations,continuedinnovationhasseenthelaunchofninenewproductsthisyear.

ByinvestinginnewoperationsaroundtheworldDUALhasgrownfromoneofficeinMadridin1998intotheworld’slargestglobalunderwritingagencyandisnowLloyd’slargestinternationalcoverholder,providingover£150mofpremiumtoLloyd’s.51%ofDUAL’sincomecomesfromEurope,and49%fromoutsideEurope,with36%ofthatfromAsiaPacific.ThesuccessofDUALisitsability,bycreatinganinternationaldistributionplatform,toaccessforitscapacityprovidersthelocalsmalltomid-marketbusinessthatisinherentlymoreprofitable,aswellasitsabilitytodevelopmarkets,evidencedbythefactthat40%ofDUAL’snewbusinessarefirsttimebuyers.

TheacquisitionofWindsorhasaddedanumberofadditionalareasofexpertisetotheBrokingGroup’sproductportfolio,withMarine,Aviation, PharmaceuticalandBindercapabilities,amongstothers,joiningthegroup.ThecombinedWindsorandHowdenProfessionalIndemnitydivisionisoneofthelargestspecialistteamsintheLondonmarket,placingover£140mofpremiumintotheLondonmarketandemployingover100people.

AsHyperioncelebratesits18thbirthdaysoanumberofournewinitiativescelebratetheirfirst;afteropeningtogiveourinsurersaccesstotheprofitablelocalGeneralLiabilitymarket,ourNewZealandunderwritingoperationturnedoneinMarch,havingachievedprofitabilitywithinsevenmonths. InNovember2012,TamesisDUAL,ouruniquespecialtyexcessoflossunderwritingagency,hadasuccessfulfirstyearwritingahighlyprofitablebookofover£20mpremium.

PARTNERSOFCHOICETheGroup’sabilitytocreatemeaningful,long-lastingrelationshipswithourpartners–betheyclients,employees,shareholders,capacityproviders,orbrokers–isvital.

Importantly,retentionratesremainhighinbothbrokingandunderwriting,asinvestmentinclientserviceremainscentrestage.Ourclientsarekey toourgrowth,asweexpandbothgeographicallyandinourproductcapabilitiesinlinewiththeirneeds. OurexpansioninLatinAmerica,forexample,ispartly drivenbytheinternationalrequirementsofourclients inSpain,whereourbusinessesarelisteningtotheirclientsanddevelopingtheirpropositionaccordingly.

In2006,DUALwasbackedbyArch.In2010,Hiscoxalsobecameamajorpartner,andtodayDUALhasrelationshipswith15othercapacityproviders,bringingbalance,breadthanddepthtotheunderwritingarm.Thisyear,amongstothers,Libertybecameamajorcapacityprovider,andDUAL’ssuccessfulpartnershipwithMSIGinAsiahascontinued withournewventureinSingaporegivingusaccesstothedevelopingmarketsofSouthEastAsia.

PEOPlE ANd ORGANISAtIONSWehavewelcomedmanypeopletotheGroupin2012,boththosewhohavejoinedusasaresultofacquisitionsandthosewhohavejoinedusaspartofspecialistteamsorasindividuals.

ThedevelopmentofourHRfunctionisextremelyimportant,andhastakenasignificantstepwiththerecruitmentofaGlobalHeadofHRtoleadthedeliveryofimprovedadministration,service,traininganddevelopment,andfurtherconsistencyacrossouroperations.

ThefutureoftheGroupliesnotonlyinourabilitytoattracttalentbutalsoinourabilitytodevelopit,andsoaspartofthisgoal,ourFutureLeadersProgrammewaslaunchedin2012,with21youngmanagersfromacrossourinternationaloperationsselectedtotakepartinaweek-longresidentialleadershipcourse.

Hyperionhasalwaysbeenanentrepreneurialbusinessinthetruesenseoftheword,andsoitisimportantthattodaywehaveover220employeesholdingsharesintheGroup,representingover60%ofourshareholderbase.

TheformationoftheHyperionCharityCommitteeishelpingtobringawell-deservedfocustothemanycharitableinitiativesthatHyperionemployeestakepartinandsupport.AMatchFundingschemeandtheinauguralInvestingintheCommunityAwardswerebothlaunchedin2012,andIwasparticularlypleasedtoseethevolumeandqualityofsubmissionsfortheAwards.HyperionalsosupportstheLloyd’sofLondonCommunityProgramme,andasignificantnumberofourLondon-basedstaffaregivinguptheirowntimetosupporttheinitiative.

OUTLOOKAfteranotherdifficultyearfortheglobaleconomy,withthedebtcrisisweighingheavilyonEuropeandtheeffectsofthecontinueddownturndampeningeventhehigh-growthemergingmarkets,ouroperationshaveperformedextremelywell. Thissuccessisachievedbyfocusingondoingtherightbusinesstherightway,bymakingtherightconnectionswithinsurers,brokersandclients,andbycontinuingtoinnovateandchallenge.

TheacquisitionofWindsorhasgivenHowdenBrokingGroupscale,andwithitssignificantgeographicreachanddepthandbreadthofexpertiseweareextremelywellpositionedtostandshouldertoshoulderwithourglobalcompetitorsaswecontinuetogrowthebusiness.

DUAL,namedUnderwritingAgencyoftheYearattheBritishInsuranceAwardsin2012,haslaunchedimportantnewoperationsandcontinuestodevelopnewproducts.Alongsidetherestructuringofitscapacityarrangementsandthestrengthofitsrelationshipswithitscapacityprovidersitiswellpositionedtocontinuetoprovideitsinsurerpartnerswithaccesstonewmarketsandtodeliverfurtherprofitablegrowthasaspecialtylinesunderwritingagency.

Withtheworld’sinsurancemarketsinthemiddleof afurtherwaveofconsolidation,ourrobustyetagilemodelalsopositionsuswelltowelcomemorelike-mindedindividuals,teamsandbusinessestotheGroup.

DuringdifficulttimesourbusinessesarebuildingstrongfoundationsforwhatIbelieveisabrightfuture.Therewillbechallenges,andthefocusforthecomingyearwillbetointegratethebusinesseswehaveacquiredandactivatethevaluethattheyandournewinitiativescancreate.

So,theGroupisverydifferentin2012towhatitwaswhenwewonourfirstQueen’sAward,butinsomewaysitisverysimilar:financialresultsandawardsalikearedeliveredandwonbypeople,andthisisjustthesametodayasitwasin2007.Mythanksthen, gotoourpartnersfortheircontinuedsupport, ourclientsfortheirloyalty,andtoeachofthe1,200peopleinthegroupformakingHyperionsuchafantasticplacetowork.

DAVIDHOWDENCHiEF ExECUTiVE, HyPERion inSURAnCE GRoUP


Professional indemnity 40%Financial

institutions 7%

Reinsurance 5%Property 3%

other 2%Medical Malpractice 3%


Professional indemnity 39%

Property 15%


Accident and Health (PA) 4%

other 3%

BBB 3%Employee Benefits 3%

Marine 3%

Product Liability, Employers’ Liability, Medical Malpractice, Treaty, Motor Fleet, Clinical Trials, Surety, Energy, CAR/EAR, Aviation, each1%


1. ERiC FADy, Group Finance Director, and DAViD HoWDEn, Chief Executive,collect Hyperion’s Sunday Times international Track 200 ranking

2. DAViD HoWDEn, STAnLEy Ko, Managing Director of Howden’s retail operation in Hong Kong, and members of the team

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8.7.

1.JOHNDEBLOCQVANKUFFELER non-ExECUTiVE CHAiRMAn

JohnvanKuffelerjoinedHyperionasNon-ExecutiveChairmaninFebruary2009bringingnearly40years’ofinternationalfinancialservicesexperiencetotherole.HejoinedProvidentFinancialin1991asChiefExecutive,andwasappointedChairmanin1997.PriortohiscareeratProvidentFinancialhewasChiefExecutiveofBrownShipley,theinvestmentbankinggroup.BothProvidentFinancialandBrownShipleyhadsignificantinsuranceoperationsandJohnwasalsoaNon-ExecutiveDirectoroftheMedicalDefenceUnion,theFounderandformerChairmanofDodsGroup,theAIMlistedpoliticalpublishingandmediagroup,andformerChairmanofEidosaswellastwoCitybasedinvestmenttrusts.HeisalsoChairmanofMarlinFinancialGroup,anAdvisoryBoardmemberofthePrince’sTrust,andaformerCouncilmemberoftheCBI.

2.ERICFADY GRoUP FinAnCE DiRECToR

EricjoinedHyperioninJune2008.HislastrolewasasFinanceDirectorforMarshEurope,MiddleEastandAfricafrom2003to2007,wherehemanagedmajorprojectstohelpthecompanyadjusttothepostSpitzerbusinessworld.PreviouslyhewasCFOandVicePresidentforStrategyImplementationforDun&BradstreetEurope&MiddleEastfrom1999to2002wherehecontributedtothedesignofthecompany’snewbusinessmodelandsignificantlyimprovedtheirperformance.EricgraduatedfromRheimsManagementSchool,andbeganhiscareerasanauditorwithKPMGinFrance.

3.LUISMUÑOZ-ROJASENTRECANALES ExECUTiVE DiRECToR

LuisisafoundingDirectorofDUALInternational. HeopenedthefirstDUALoperationinMadridinAugust1998,havingpreviouslyservedasDirectorofGyCAmérica,areinsurancebrokingsubsidiaryof GilyCaravajal(nowpartofAon).DuringthattimeLuishadconsiderableinvolvementintheLatinAmericanterritories.Luisbeganhisinsurancecareerin1989workingwithGyC&Partners,theBritishsubsidiaryoftheGyCGroup.

4.DAVIDHOWDEN CHiEF ExECUTiVE

DavidstartedhiscareerasabrokeratAlexanderHowdenin1980.HefoundedtheGroupin1994originallyasawholesalebrokeremployingjustfivepeople.Hehasbeenthefundamentaldrivingforcebehinditsexpansionintoaninternationalinsurancegroupofferingwholesale,retailandreinsurancebroking,andunderwriting.AsChiefExecutive,David’sfocusisonleadingtheGroup’sM&AactivitiesaswellasdirectingandimplementingtheGroup’sstrategicgrowthanddirection.

5.EMILEWOOLF non-ExECUTiVE DiRECToR

EmileisaCharteredAccountantandindependentinsuranceandlitigationconsultant.HeisformerChairmanofthePracticeInsuranceRequirementsCommitteeoftheInstituteofCharteredAccountantsinEnglandandWales,andofitsPanelofParticipatingInsurers.InparallelwithalongcareerprovidingExpertWitnessreportsontheconductofprofessionalaccountantsandauditors,heisaregularcolumnistin‘Accountancy’,thejournaloftheInstitute,andisoneoftheprofession’smostrespectedauthorsandlecturers.HewasthefounderoftheEmileWoolfColleges,whichtrainaccountantsinmanycountriesworld-wide.

6.DAVIDWHILEMAN non-ExECUTiVE DiRECToR

DavidisaPartnerinthe3iGrowthCapitalbusiness,investingupto€250mforstakeholdersinmarket-leadingbusinessesintheUKandacrossEurope.Hespecialisesinoriginatingandleadinginvestmentsintoprivatecompaniesseekingtoacceleratetheirgrowth,bothorganicallyandthroughacquisition.PastinvestmentsincludeFoster&Partners,theglobalarchitects,HayleyConferenceCentresandMorganMcKinley,thefinancialservicesbusiness.Davidisacharteredaccountantandpriorto3iworkedintheinsolvencydivisionwithinPricewaterhouseCoopers.

BOARDSTRUCTURE

7.JONATHANNEWMAN non-ExECUTiVE DiRECToR

JonathanwasappointedtotheHyperionBoardin2009.HeisGroupDirectorofFinanceatBPMarsh&PartnersPLC,aventurecapitalgroupthatspecialisesininvestingininsuranceintermediaries,andisacharteredManagementAccountantwithmorethan13years’experienceinthefinancialservicesindustry.HejoinedBPMarshinNovember1999andistheirnomineeDirectorontheboardsofseveralinvesteecompanies.

8.LORDFORSYTHOFDRUMLEAN non-ExECUTiVE DiRECToR

LordForsythwasappointedtotheHyperionBoardinSeptember2012.HeisaformerDeputyChairmanofEvercorePartnersInternationalandofJPMorganinLondon.PriortojoiningRobertFleming&Co.as aDirectorin1997hewasaCabinetMinisterandservedintheGovernmentsleadbyMargaretThatcherandJohnMajorformorethanadecade. HeisalsoaDirectorofJ&JDenholm,NBNKInvestments,theCentreforPolicyStudies,andSafor.

5.

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HowdenBrokingGroupisaninternationalbrokinggroupcomprisingretailoperationsacrossEurope,AsiaandtheAmericas,andaglobalwholesaleandreinsurancepracticebuiltaroundkeyglobalplacementandproductionhubs.

TheGrouporiginatedin1994asastart-upinsurancebrokerinLondon.Itisnowaninternationalspecialistbrokerwith47officesin22countriesandmorethan1000employees,distributingthroughretail,wholesaleandreinsurancechannels.

Revenue:£75.1m–increase58%EBITDA:£12.1m–increase42%

Numberofoffices:47Numberofcountrieswithoperations:22Numberofemployees:1,000+

Revenuedistributionchannels:retail59%, wholesale/reinsurance41%

2012wasamomentousyearforHowdenBrokingGroup;itwasayearofimportantstrategicinvestmentsinourdistributionplatform,anddeliveryofaverystrongperformancewithrevenuesup58%andEBITDA(excludingnon-recurringitemsandacquisitioncosts)increasing42%onprioryear.Howden’sretailoperationsperformedextremelywell,presentingcloseto30%EBITDAgrowthcollectively.OurWholesaleandReinsurancepracticehadatougheryearbutstilldeliveredagoodresult,withnewinitiativesperformingexceptionallywellandcontributingstronglytoouroverallgrowth.

Ourpriorityfocusonemergingmarketssawsignificantdevelopmentsinthepasttwelvemonths:

• InNovember2011wecompletedtheacquisitionoffiveoftheAccetteInsuranceGroup’soperations(Singapore,HongKong,Thailand,MalaysiaandthePhilippines)withthesixthjoiningHowdeninJuly2012(Indonesia).Thishas createdanoutstandingplatformforretaildistributionintheextremelyimportantemergingmarketsofSouthEastAsia,complementingouralreadysignificantwholesaleandreinsurancedistributionacrosstheregion.ThebusinessesrebrandedasHowdenandhaveintegratedwell,combininghighqualitylocalexpertisewiththebrokinggroup’sinternationalreach.Togetherweareabletodelivergreaterinnovation,expertiseandservicetoourclients.HowdennowhasexcellentmomentuminAsiaandveryexcitingplansforthefuture.Itisinterestingtonotethatin2012HowdenhasalmostasmanypeopleworkinginouroperationsinAsiaasworkedinthewholeofHyperionwhenwewonourfirstQueen’sAwardin2007.Almost20%ofrevenuenowcomesfromAsiaPacific.

• InSeptember2012HowdenestablisheditsfirstretailoperationinLatinAmericawiththeacquisitionofamajorityshareinConsetSegurosinthefast-growingBrazilianinsurancemarket.Consetisanextremelywell-respectedbrokerspecialisingininsurancesolutionsfortheconstructionindustry.ThebusinessisanimportantstrategicadditiontotheHowdennetwork,complementingbothourreinsurancedistributionacrossLatinAmerica,aswellastheserviceweprovidetoourSpanishretailclientsoperatingacrosstheregion.

Theproportionofbrokingincomegeneratedfromemergingmarketswillcontinuetogrowfastasaresultoftheseimportantacquisitions,futureinitiativesandthestrongorganicgrowthweanticipate.

HOWDENBROKINGGROUP

The Howden pack at the Lloyd’s of London Rugby Sevens

REVENUEBYREGION2012

43%

22% 15%

18%

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StrengtheningourpresenceintheUKhasalsobeenakeystrategicpriorityforHowden.ThiswasmostdefinitelyachievedwiththeacquisitionofWindsorLimited,inJuly2012.ThiswasHyperion’slargestacquisitiontodate,creatingoneoftheLondonmarket’slargestindependentbrokinggroupsbybringingtogetherthetwospecialistLondon-basedbrokinghouses.Crucially,WindsorbringsnewcapabilitiestoHowdeninareasinwhichwehadsoughttoexpand.Thereisnodoubtthatthebreadth,depthandreachofthecombinedentityisdeliveringastrongandbroadplatformfromwhichtoserveourclients.Alreadylegallyintegratedasonecompany,akeyobjectiveforthe2013financialyearistodelivertheexceptionalsynergiesofthecombinedbusiness.Progresstodateonthishasbeensignificant.

Theseacquisitionsareallunderpinnedbyourorganicgrowthwhichremainsourmostimportantmeasureofsuccess.Iampleasedtoreportthatforthis,revenuewasstrongat11%.Thiscomprisedgoodgrowthforthecorebusiness,complementedby newproducts,expertsandteamsthatjoinedduringtheyear.

Ourrapidgrowthrequiresthatwecontinuetodevelopandevolveourgovernanceandmanagementstructuresinordertoensurethattheseareappropriatenowand,moreimportantly,inourfuture.TheappointmentofAdrianColossoasNon-ExecutiveChairmanofHowdenBrokingGroup(effectiveMay2013)isanimportantstepinstrengtheningthegovernanceoftheGroupas weseekindependentchallengetothedevelopment ofourstrategy,directionandexecution.TheappointmentofaHowdenCorporateandLegalDirectorisanotherexampleofthis,whilstacrossHowdenweareenhancingthestrengthofourboardsandmanagementteams.

EUROPE ThegreatestexpansionforHowdenBrokingGrouptookplaceintheUKwiththeacquisitionofWindsorwhichbroughtnewcapabilitiesanddistributiontothegroup.TheadditionofMarine,Aviation,PharmaceuticalandGeneralLiabilitycapabilitiessignificantlybroadenedourwholesaleandreinsuranceplatform.OurProfessionalIndemnitydivisionexpandedgreatlywiththeunionofthetwoteams;itisnow100strong,controls£140mpremiumincomeandcomprisesagoodnumberoftheleadingexpertsintheLondonmarket.TheacquisitionalsosignificantlystrengthenedourgeneralcommercialcapabilityintheUK,anareainwhichweexpecttoexpandsubstantially.

InGermany,Hendricks&Cocontinuestodeliveroutstandingresults,cementingthebusiness’positionastheleadingbrokerforD&Oinsuranceinthemarketthroughrecognisedexpertiseandcontinualinnovation.

InspiteofextremelychallengingeconomicconditionstheexemplaryspiritofthestaffinourSpanishbusinessdrovetheoperationtodeliverexcellentgrowth.Attheheartofthissuccessisan unmitigatedfocusonourclientsandinnovation; asourSpanishclientshavesoughtnewmarkets, soHowdenIberiahasexpandeditshorizonsandcapabilitiesandisnowservingSpanish-basedclientsacrossLatinAmerica.

Astrongfocusonbusinessdevelopmentandsales inSwedenenabledouroperationtheretodeliverextremelystronggrowth.

mIddlE EAStInIsrael,ouroperationverysuccessfullyintegratedthegeneralcommercialbusinessweacquiredin2011andcontinuedtodeliverstrongresultsasitbecomesoneofthemarket’sleadingbrokers.

Likewise,ourDubaioperationsuccessfullyintegratedthegeneralcommercialteamthatjoinedin2011, andasaresultalsodeliveredhealthygrowthfromtheregion.

ASIAPACIFICTheacquisitionofthesixoperationsinSouthEastAsiahascementedastrongretailbrokingplatform inAsiaPacificalongsideourwholesalebrokingoperations.Thenewbusinesseshaveintegratedandperformedextremelywell.

InIndia,thesuccessoftheEmployeeBenefitspropositioncontinuestogrow;thebusinessoverallproduceddoubledigitrevenuegrowth.

Duringtheyear,PraveenVashishta,CEOofourIndianoperations,tooktheleadasExecutiveChairmanofallAsianretailoperations,takingresponsibilityforexpandingtheexcellentfoundationwenowhaveacrosstheregion.

Ourregionalreinsuranceandwholesalehub(basedinSingapore)alsodeliveredexcellentresults.AsiaPacificisthesecondregion(afterEurope)inwhichtheGroupnowhasacomprehensivebreadthofdistributionacrossretailandwholesale/reinsurancechannels.Intotalacrosstheregion,wenowhave 17officesandover350staff.Weexpectthistogrowsignificantlyinlinewithourstrategicprioritytodevelopemergingmarketsasasubstantialpartofouroverallbusiness.

1. David Howden welcomes new colleagues, partners and clients in Singapore2. Howden lifts the Matthew Harding Trophy as winners of the Lloyd’s of London Football Tournament3. The team race at Cowes Week4. Howden celebrate a second place finish in their class at Cowes Week, 2012

AmERICASWewelcomedadditionalspecialistsonthegroundintheUnitedStatesin2012.Wecontinuetodevelopourphysicalpresenceintheregioninordertodeliveranalignedandglobalplacementcapabilitytoourclients.

Additionally,asalreadymentioned,theacquisition ofamajoritystakeinleadingBrazilianbrokerConsetSegurosinSeptember2012isanexcitingfirststepintoretailbrokinginLatinAmerica.

PEOPlEThetenacityanddeterminationofthepeoplewithinHowdenBrokingGroupcontinuetodefineit. In2013,aswellascontinuingtodriveourinorganicandorganicgrowth,thosequalitieswillbefocusedonextendingtheformidableplatformwhichwehaveprogressedsignificantlythisyeartogether.Weareontracktodeliveroneofthemostpowerfulandrespectedbrokingplatformsintheindustryandcertainlyonethatisanextremelyattractiveplaceinwhichtowork,andtobuildbusinessesandcareers.

tIm COlESCHiEF ExECUTiVE oFFiCER, HoWDEn BRoKinG GRoUP

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tHE dUAl GROUP

TheDUALGroupisaspecialistunderwritingagencywhichprovidessolutionsformid-marketbusinessesandprofessionals.

Formedin1998whenHyperion’sfirstunderwritingagencyopenedinMadrid,itisnowthelargestglobalunderwritingagencyintheworld.

GWP:£228mRevenue:£35.4mEBITDA:£9.9mCountries:13Offices:19

HEinER EiCKHoFF, Managing Director of DUAL Deutschland, and the team on a teambuilding day

2012hasbeenanexcitingandimportantyearforDUAL.ThoughIknowtheGroupverywell,havingstartedDUALAustraliain2004,ithasbeenfantasticformetowitnesstheenergyofDUAL’sinternationaloperationsasCEOoftheGroupsinceItookoverinJanuary2012.

DUALhasalwaysbeen,andcontinuestobe,abusinessfocusedondeliveringunderwritingprofittoourcapacityproviders.Thisdoesnotmeanwehavetobealow-growthbusiness.In2012ourGWProse24.5%to£228m,butasourgrowthisalwaysbalancedbythesingle-mindedgoaltodeliverunderwritingprofitability,itisthisunderlyingthemethatcontinuestodriveouractivityandwhichhasdeliveredanEBITDAof£9.9m,up21%on2011.Wehavenotbeenimmunetotheeffectsoftheongoingfinancialcrisis,butstrongunderwritingdiscipline,decisive,timelyactionwherenecessary,andacommitmenttocloseworkingrelationshipswithourcapacityproviderpartnershasenabledustotakethenecessarystepstounderpinandsecureourbusinessforthelongterm,whilstcontinuingourinnovativeorganicgrowth.

SinceDUALopeneditsdoorsforbusinessinMadridin1998,ithasbeenabusinessthatgrowsmarkets,notmarketshare.WhenthebusinessbeganinSpain,thegrouppioneeredDirectors’andOfficers’insuranceformid-marketcompanies.Fromthere,DUALevolvedintoaleadingglobalfinanciallinesproviderbylaunchingnewinternationalofficesandutilisinginnovativedistributionchannelssuchasonlineproprietarysystemsandbancassurance.Nowinourthirdphaseofevolution,thatentrepreneurialapproachcontinuesasDUALworkstobecomealeadingglobalplayerinspecialtylines.In2012,mostofDUAL’sgrowthhasstemmedfromgeographicandproductexpansion,fromstart-upoperationsinkeyterritoriesandinnovationacrossouroperationsdeliveringnewproductsinadditiontoourcorefinanciallinesbusiness.Withninenewproductslaunchedinouroperationsin2012,andinitiativessuchasTamesis,ourspecialty,multi-classexcessoflossbusinesswecontinuetodiversifyourportfolio.OurexistingcoreFinancialLinesbusinesshasshownmodestgrowthof11.6%,notwithstandingnewoffices inNewZealand,AustriaandNewYork,withthefocusondeliveringunderwritingprofitabilitytoourcarriers.Disciplinedreviewsofourportfolioandstronganddecisiveactiontoensurethattheportfolioisstructuredtodeliverthatprofitabilityhavebeenanimportantpartoftheyear.Thisdisciplineensuresweareabletogenerateprofitforourcarriersand,inturn,strongprofitcommission.

GWPBYREGION2012

56%

8% 3%

34%

3130

32 33

AttheheartofDUALaretherelationshipswebuildwithourcapacityprovidersandourbrokers.In2012wehaverelationshipswith17capacityprovidersand2,200brokersaroundtheworld,andourresults arebuiltonthestrengthofthoserelationships,oldandnew.

Followingtheappointmentofabroker,wehaverestructuredourcapacityarrangementsinordertoensurewereceiveanincreasedshareoftheunderwritingprofitsofthebusinesswecontrol,andin2012,inadditiontoourlongstandingpartnershipswithArch,HiscoxandMSIGonourFinancialLinesportfolio,wewerepleasedtowelcomeLibertyandBarbicantoaddfurtherstrengthanddepthtoourcapacity.WewerealsodelightedtoextendoursuccessfulrelationshipwithMSIGinAsiaPacificwiththelaunchofDUALinSingaporegivingusaccesstotheexcitingSouthEastAsianmarkets.OurpartnershipwithLibertyintheAmericasisalsoaveryimportantdevelopmentwhichgivesusaccesstothelargestFinancialLinesmarketintheworld.

Theimportanceofourmanyrelationshipswithbrokersandagentshasbeenadriverforourcontinuedinvestmentinthedevelopmentofouronlineproprietarysystemstoensuretheefficienttransactionofmid-marketbusiness.Thevalueofthisinvestmenttothebrokersweworkwithisevidencedbythe30%ofour100,000policieswhicharenowtransactedonline.

Inthesamevein,crucialtoDUAL’smodelandcontinuedprofitablegrowthisthestrengthofourinfrastructure,whichmustbedisciplinedandrobusttoallowouroperationstheflexibilitytogetonwithdeliveringqualityunderwritingandtodelivernewproductswithafasttimetomarket.

AspartofthisprocesswehavefurtherstrengthenedourunderwritingoversightfunctionwiththerecruitmentofaDeputyCEOwhohastheresponsibilitytocontinuetoimproveunderwritingprofitabilityacrosstheGroup.TheappointmentofaChiefActuarywillalsosupportthedeliveryofthisgoalinthe2013financialyear.

EUROPEOurEuropeanoperationshavehadastrongyearinthefaceofthesoftmarketandfinancialcrisis.Theyhavedonethisthroughacombinationofdisciplinedportfoliomanagementandinnovation,withseveralimportantnewinitiativesmakingasignificantcontribution.

InItaly,strongprofitablegrowthhasbeendrivenbycontinuedinnovationinproductsanddistribution. ApartnershipwiththeItalianPostOffice’sinsurancearmtodistributefinanciallinesproductsthroughitsbranchnetworkwasaparticularhighlightandanotherexample,followinglastyear’sground-breakingdealwithoneofthecountry’sleadingbankinggroups,ofourabilitytoprovideourcarrierswithaccesstonewmarkets.Additionally,thecreationandlaunchofanonlinePublicOfficials’LiabilityInsurancesolutionhasbeenanimportantareaofdevelopmentcontributingtoefficientgrowth.

InSpain,despiteconsiderableeconomicpressures,strongmanagementdecisionsontheportfoliohaveresultedinagoodyearfortheSpanishoperationandleavethebusinesswellpositionedtobuildonitssolidfoundation.

OuroperationinGermanyextendeditsreachbyopeningabranchinVienna,Austria,tobuildonthebusinessitalreadyhasintheregion.Thisinitiativehasbeenextremelywellreceivedbyourbrokerpartnersandisalreadybeginningtodeliverstrongresults.Newproductshavealsohelpedcontribute toanexcellentyearforDUALinGermany.

TheUKbusinesseshavealsohadanexcitingyear. ThelaunchofTamesisDUALsawtheintroductionof auniqueunderwritingagencytotheLondonmarket. Aspecialtyexcessoflossbusinesswritingamixedandflexibleportfolioofshort-tailbusiness,Tamesishasgivenusaccesstoanewareaofthemarket.TappingintothestrengthoftheDUALinfrastructurethebusinesshasbeenfast-to-market,andcelebrateditsfirstbirthdayinNovember2012.NewproductlauncheswithintheexistingLondonbusinesshavebeencomplementedbytheadditionofawell-knownspecialistGeneralLiabilityteamjustaftertheendofthefinancialyear.Thislaunchcombinesmarket-leadingexpertisewiththeglobaldistributionnetworkofDUAL,andwillbeofgreatbenefittoboththeLondonandinternationaloperationsasitbeginstowriteUKandinternationalbusiness.

ASIAPACIFICAsiaPacificcontinuestobeagrowthengine.WhenHyperionwonitsfirstQueen’sAwardin2007theregionaccountedfor15%ofourGWP;now,in2012,theregioncontributes34%.

InAustralia,theoldestofourAsiaPacificoperations,innovationcontinuesapacewithnewCyber,CrimeandStandaloneStatutoryLiabilityproductslaunchedduringtheyear.Theworkputinoverthelast18monthstoourAccidentandHealthpropositionisalsobeginningtobearfruit,withsignificantgrowthintheproductcontribution.Amajormilestonewasrecentlypassedwhenthe15,000thpolicywasboundonlinethroughourproprietarysystem,keepingusattheforefrontoftechnologicaldevelopmentsinlinewithourbrokerpartners’needs.

OurNewZealandoperationcelebrateditsfirstbirthdayinMarchafterhittingthegroundrunningin2011.ThebusinesshasgivenusaccesstotheprofitableNewZealandGeneralLiabilitymarketandhasperformedstronglyin2012.

ThesuccessofourpartnershipwithMSIGinourHongKongoperationhasseentheteamextendthepropositionthroughthelaunchofanewDUALoperationinSingapore,andthedevelopmentofbothbusinessesisnowamajorfocus.

AmERICASTherestructuringandalignmentofHyperion’sunderwritingoperationsinNorthandLatinAmericaunderasinglebrand,DUAL,wasamajordevelopment in2012.BringingtheformerVKUnderwritersandHSUbusinessestogetherhascreatedastrongfoundation,andcombinedwithourglobalpartnershipwithLibertyInternational,DUALformsanexcitingplatformfromwhichwecanentertheworld’sbiggestfinanciallinesmarket.Additionally,theopeningofanewoperationinNewYorkfurtherextendsourfootprintintheregionandgivesusapresenceinthisimportantglobalinsurancehub.

PEOPlEThefinalwordmustgotothepeoplewhohavebuiltDUAL.In2007therewere95ofus.Today190peopleareresponsiblefortheseexcellentresultsfromoperationsaroundtheworld.TheircontributionhasbeenrecognisednotonlyinDUAL’scontributiontoHyperion’sQueen’sAward,butalsowhenDUALwasnamedUnderwritingAgencyoftheYearattheBritishInsuranceAwards.

Werecruitspecialistunderwritersandspecialistoperationsexperts.Ourinfrastructureisstrongandenablesourinternationaloperationstokeepdeliveringinnovativesolutionsandgrowingmarketswhilstprovidingqualityinformationtoourcapacityproviders.Thestrengthofourpartnershipsbeginswiththestrengthofourpeople,andIamincrediblyproudofthemall.

dAmIEN COAtES CHiEF ExECUTiVE oFFiCER, DUAL inTERnATionAL

1. PAUL FERRiS, DUAL’S Chief Underwriting officer, collects the British insurance Award for Underwriting Agency of the year

2. The DUAL new Zealand team line up for the Rangitoto half marathon3. DAMiEn CoATES, CEo of DUAL international, and LUiS MUÑoZ-RoJAS,

Executive Director, Hyperion, at the top of Almanzor in Spain

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2. 3.

INtROdUCtIONCorporateSocialResponsibilityisoftheutmostimportancetoHyperion.WeunderstandthatitpositivelyaffectsourGroup,ouremployeesandthelocalcommunity.HyperionthereforestrivestofulfilallaspectsofitsCSRPolicy,aswellascontinuallyreviewingitandsettingtargetsforfutureimprovements.ThePolicyissetoutinasimplestructureundertheheadings:Environment,CommunityandCharity,Welfare,Employees,andSuppliersandCustomers.ThisapproachmakesthePolicyaccessibletoallofouremployeesandcustomers,allowingboththesuccessfulapplicationofthePolicy,aswellascriticalassessmentandfeedbackfromourcustomersandinvestors.

ENvIRONmENtHyperioniscommittedtoreducinganynegativeimpactsontheenvironmentitmayproducewhereverpossible.Asacompanyweexpectinvolvementandenvironmentalresponsibilityfromallofouremployees,andencourageourassociatesandsupplierstostrivetowardshighenvironmentalstandardsalso.

CORPORATESOCIALRESPONSIBILITYPOLICY

Ourenvironmentalcommitments:

• Recycling paper and other waste materials. –Paperandmixedrecyclingbinsareprovidedin ouroffices,andweactivelyencourage employeestoreducewasteandrecycle wheneverpossible. –Thecompanyalsorecyclesbatteriesandink andtonercartridges.

• To use environmentally responsible materials and sources. – SourcingFSCandrecycledpaperforuseinall ofourprinters.

• To increase energy efficiency. –Usingenergyefficientlightingwhereverpossible, includingmotionsensorlightsinourLondon officeswhichswitchoffautomaticallywhenthey arenotneeded. –Runninga‘SwitchOff’campaign;encouraging employeestoturnofftheircomputersand otherelectricalequipmentwhenitisnotinuse.

• To reduce our carbon footprint. –Reducingtravelwherepossiblebyusing teleconferencing. –Providingbikeshedsforouremployeesatour Londonoffices.

• To reduce wastefulness. – Encouragingduplexprintingstandardisedto reducepaperuse.

–Reducingprintingwhereverpossible: encouragingemployeesnottoprintemails.

–Donatingoldequipmentandfurnituretocharity wherepossible,orrecyclingitifnot.

– FollowingtheHeadOfficemoveto 16Eastcheapduringthe2011/12financialyear, anysurplusfurnitureatBevisMarksHousewas donatedtocharityviaClearEnvironment.

COmmUNItY ANd CHARItYHyperion’sCharityCommitteeensuresthatthecompanyhasapositiveinfluenceinthelocalcommunitieswhereitsdifferentdivisionsarebased.Thisisbasedonanawarenessofthelocalculture,whichallowsthecompanytorespectthelocalcommunityandgivebacktoitinapositiveandappropriatemanner.

Hyperionalsostrivestohaveapositivesocialinfluenceonawiderscalebyactivelyencouragingcharitablecommitmentsfromemployees,andacrossitsvariousdivisionsworldwide.Ratherthanselectacharityforthecompanytocommittoasawhole,Hyperionpreferstoencourageitsemployeestosupportcharitiesthattheyarepassionateabout,inordertomaximisetheinvolvementofallstaffandincreasethediversityofcharityandcommunityworkundertaken.

Ourcommitmentsandachievements:

• Runninga‘Give-As-You-Earn’schemeforemployees.

• Operating‘MatchFundraising’(upto£250)foremployees.

• Hyperion’s‘InvestingintheCommunityAward’.Employeescanpitchideasforcommunityprojectsthattheywouldliketorun,andthetoptwowillbeselectedandawarded£5,000eachtoputtowardstheirprojects.

• HyperionisinvolvedintheLloyd’sofLondonCommunityProgramme.

INvEStING IN tHE COmmUNItYHyperion’sInvestingintheCommunityAwardwaslaunchedinJuly2012andallsubmissionswerejudgedbytheGroupManagementTeam(“GMT”)atthebeginningofSeptember2012.SummaryofAward:Tosupportthosewhoarepassionateaboutlocalcauses,twoawardsof£5,000werecreatedtobegiventotwoprojectsthatclearlymakeapositivecontributiontotheirlocalcommunity,enhancingandimprovingthequalityoflivesofthosewholivethere.TheCharityCommitteemetduringAugust2012toreviewthesubmissionsforthisawardandmadethefollowingrecommendationswhichwereapprovedbytheGMT:

2012WINNERS:

• PHIl dAvIS, Vimba, Dewe Project – Zimbabwe AcharitywhichregeneratesrundownschoolsinZimbabwe,Africa.TheawardwillallowthecharitytoinstallasolarwaterpumpinoneoftheirschoolsnorthofHararetoensurethechildrenhaveclean,safedrinkingwater,whichinturnwillalsoallowthemtolearnhowtogrowgrainandvegetables.

• MATTBAKER, Projekt Nepal e.v – Nepal ApartnershipbetweentwoschoolsinGermanyandNepal.TheawardwillallowtheteamtocompletetheconstructionoftwonewclassroomsatJanaSudharLowerSecondarySchoolinNepal;aschoolforchildrenfromlowincomefamilies.

Submissionswerejudgedontheircontributiontothelocalcommunityandthelevelofsupportalreadyshownbythememberofstafffortheinitiative.

MATT BAKER, Associate Director, Howden (UK), visits Jana Sudhar Lower Secondary School in nepal

3534

WELFAREHyperioncomplieswiththeEqualityAct2010intheUKandwithequivalentlegislationinothercountriesinordertoprovideacommonstandardforallofitsemployees.Webelieveinequalopportunitiesforall,regardlessofrace,religion,gender,ageordisability.OurPolicyisdesignedtoensurethateveryoneisgiventhesameconsiderationwhentheyapplyforjobs,andthattheyenjoythesametraining,careerdevelopmentandprospects.

Hyperionaimstoprovideasupportiveandwelcomingworkplaceenvironment,andhasinplacetheHyperionFamilyFriendlyProposition,whichoutlinesproceduresformaternity,paternityandadoptionleaveinordertomaximiseouremployees’possibilitiesforincorporatingfamilyandwork,andalsodetailsholiday,annualleaveandleaveintheeventofemergencysituations.

Intheeventofsicknessorincapacity,Hyperionhasinplacedetailedproceduresastopaidleaveandhealthserviceprovisions,takingintospecialconsiderationthosewhomaybeaffectedbymediumtolongtermleave,andaimingtoaccommodatetoneedswhereverpossible,incompliancewiththeDisabilityDiscriminationAct.Hyperionalsoofferssupportforitsemployeesthroughtheprovisionofacounsellingservicewhereitisthoughttobeappropriate.

Wearecommittedtomaintainingthehigheststandardofintegrity,opennessandaccountabilityinouroperations.WehaveproceduresinplacetoensurecompliancewiththeBriberyAct2010,andhaveinplaceaWhistleblowingPolicywhichsetsoutspecificproceduresforemployeestoundertakeinordertoreportconcerns.HyperionalsooperatesDisciplinaryandGrievanceprocedures.

HyperionalsocomplieswiththeHealthandSafetyatWorkAct1974intheUK,andrunsriskassessmentproceduresinordertomaximisesafetyandsecurityforouremployees.ThisincludesrunningDSEassessmentsforallofouremployeesbasedinofficeenvironments.

EmPlOYEESTheBoardrecognisesthatHyperion’scontinuingsuccessdependsonitsemployeesanditsabilitytocreatepolicieswhichattract,motivateandretainemployeesofthehighestcalibre.BasedontheseprinciplesHyperionensuresthatthereisregularcommunicationwithemployeesabouttheprogressofthecompany;holdingregularmeetings,sendingoutregularnewslettersandprovidingagroupintranetforemployees.

Hyperionoperatespayandrewardpolicieswhichcommittofairandequitablestrategiesfortheremunerationofitsemployees,andindoingsotakefullaccountofmarkettrends.Payandrewardsareregularlybenchmarkedtoensurethattheyarecontinuallyimprovinginlinewithresults.Weuseatotalrewardsapproachwhichprovidesamixtureoffinancialandnon-financialrewards,andbenefitsandincentivesvaryinaccordancewithlocalcultureandpractice.

Hyperionbelievesininvestinginouremployeesinordertocontinuallyimproveourstandardsandtomaintainourcompetitiveadvantageandprofessionalism.Wethereforenotonlyofferfullsupporttoemployeeswhowishtoundergotraining,butactivelyencourageitamongstourstaff.OurFutureLeadersProgrammeisaimedatidentifyingthosewiththepotentialtobefutureleaderswithinHyperion,andtoprovidethemwithappropriatetrainingtodevelopandenhancetheirexistingskills. SUPPlIERS ANd CUStOmERSBeingcommittedtohighstandardsacrossthewholeofitsoperations,Hyperiontakescarefulconsiderationoveritssuppliers.ThereareProcurementPoliciesandTermsofBusinessAgreementsinplace,whicharereviewedinordertoensurethatoursuppliersmeettherequirementsexpected.

ThecorevaluesofHyperionInsuranceGroupcompanieshaveclientfocusattheircentre,andtheGroup’sbusinessprocessesandproceduresaredevelopedandrefinedinlinewithfeedbackinordertoensurewearealwaysdeliveringthehighestqualityservicepossible.

1. 2.

3.

1. / 2. PHiL DAViS taking part in the Marathon des Sables in support of Vimba

3. The Howden team line up for the Great City Race in London

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RISKMANAGEMENT

RisksrelatingtoHyperion’sbusinesscouldaffectitadverselybycausingfinancialresultstobemateriallydifferentoroperationaloutcomestobeoutoflinewithmanagement’sexpectations.UnderHyperion’sriskmanagementframework,risksareidentified,managedandreportedeitherlocallyoronagroupbasis.Wherenewrisksareencountered,theyareassessedagainstcriteriaapprovedbytheBoardtocoverthepotentialimpactoftheriskandthelikelihoodofitsoccurrence.Theriskwillbeconsideredforitseffectonstrategy,operations,financesorreputationandwhethertheyareexternalorinternal.

Allrisksareassignedanownerwhohasresponsibilityforensuringthattheriskismanagedandmonitoredovertime.Ownershipforcontrolactivitiesandactionsshouldalsobeassignedtoclarifyresponsibilitiesandaccountabilities.Riskmonitoringandreportingapplicationsexisttoensurerisklevelsaremaintainedwithinstatedriskappetitesandtolerancelevels,toevaluatetheriskadjustedperformanceoftheCompanyanditsbusinessunitsandtoprovidedecisionsupportinformationforvariousriskmanagementdecisions.

Thefollowingisalistofthemainrisks withcommentontheirmitigation:

FINANcIAL RIsks

THESIZEOFOURDEBTAt30thSeptember2011,wehadcurrentandnon-currentborrowingsof£25.8m.Duringtheyearto30thSeptember2012,thisamountroseto£81.0mpartlyasaresultofenteringintofurtherdebttofinancethecashportionoftheconsiderationtoacquireWindsorandtorefinanceexistingGroupdebt.WeagreedfinancialandothercovenantsinconnectionwiththefacilityenteredintoinJuly2012.Thehigherlevelofdebtandgearingthatresultswillleadtoincreasedinterestcharges,andcovenantrequirementsmayrestrictourabilitytoobtainotherfundingtofundmatterssuchasadditionalacquisitions,capitalexpendituresandgeneralrequirementsforworkingcapital.Thisinturnmayreducetheavailabilityofcashfordividendstoshareholdersandcorporatepurposes.

OURABILITYTOMAKEINTEREST ANd CAPItAl PAYmENtS Ourabilitytopayinterestandcapitalpaymentsandrefinanceourexistingdebtdependsoncashflowgeneratedfromoperations.Generationofcashflowdependsongeneralfinancial,economic,competitiveandregulatoryfactorsthatarebeyondthecontrolofHyperionmanagement.Ifcashflowisinadequatetoservicethedebtthenwemayneedtoreduceacqui- sitionactivityorcapitalexpenditure.Thismayinturnrestrictourabilitytorefinancethedebtatmaturity.

Notwithstandingthefinancialinstrumentsthatwehavetoprotectusfromcertainchangesininterestrates,anincreaseininterestratesmayaffectourfinancialresultsandreducethevalueofcashbalances.

OURHOLDINGOFFOREIGNExCHANGECURRENCY WeconductalargeproportionofourbusinessincurrenciesotherthanSterlingwhichouraccountsarereportedin.Ourresultsandcashflowsarethereforeexposedtomovementsinforeigncurrencyexchangerates.OurmainexposuresaretoUSDollar,Euro,AustralianDollarandCanadianDollar.IntheUK,partofourrevenueisinforeigncurrencies;howeverourexpensesareborneinSterling.Wemitigatetheriskbybuyingfinancialinstrumentstohelpprotectagainstexposuresthatwecanpredictwithreasonableaccuracy.Asaprofitablebusiness,however,astrongpoundagainstremainingforeigncurrencyexposuresproducesalowerprofitinourconsolidatedaccounts.

RECEIPTOFFOREIGNCURRENCYDIVIDENDSAsaholdingcompanywithUKandoverseassubsidiaries,wemaynotbeabletoreceivedividendsinsufficientamountstomeetthegroup’scashflowrequirements.UKsubsidiariesmayhaveregulatoryrequirementsforholdingofcapitaltomeetrequirementsformaintainingadequatefinancialresources.Overseassubsidiariesmayhavesimilarrequirements,orlocalfundingrequirementsthatmaypreventthemfrompayingdividends.Inthesecases,ourrequirementforfuturecashmayincrease.

OUR ACCOUNtING ASSUmPtIONS ANd EStImAtESWeprepareourfinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRS).Wearerequiredtomakeassumptionsandjudgmentalestimatesthataffectthereportedamountsofassetsandliabilitiesandthedisclosureofcontingentassetsandliabilitiesatthedateofourfinancialstatements.Wereviewtheseassumptionsandjudgmentalestimatesincludingthoserelatedtocarryingvalueofgoodwillinacquiredentities,revenuerecognition,derivativeliabilities,contingentliabilitiesandtaxation.Althoughwemakeassumptionsthatwebelievearerealistic,actualresultscoulddifferfromestimatesandthiscouldaffecttheGroup’sfinancialresults.

INsURANce RIsks

OURCOMPETITIVEPLACEINTHEMARKETTheinsurancemarketisintenselycompetitive.Wecompetewithglobalandlocalbrokersandinsurancecompaniesanddependontheprovisionofgoodservice,competitivepricingandsuperiorproductfeatures.Ourcompetitionmayhavealongertermrelationshipwiththeirclientsthanwehaveandgreaterfinancialandtechnicalresources.Theymayalsohavealargerbrandingandstrongerinternationalofficenetwork,bettercostmarginsandasuperiorrangeofservicesandofferlowerpricesforinsurancecoverage.Lowerpremiumratesmayinturnadverselyaffectouroperatingincomeandprofitmargin.Ourbusinessstrategyhelpsustomitigatethisrisk.

ECONOMICFACTORSAFFECTING OURBUSINESSAseconomicactivityincreasesandreduces,thedemandforinsurancecoveragegenerallyrisesandfalls.Thesechangesaffectbrokerageandcommissionsearnedbyus.Examplesofmeasurementofeconomicactivityarebusinesses’turnover,balancesheetvaluesandnumberofpeopleemployed.Companiesbecominginsolventandceasingtradingmayresultinlossofclients.Insolvenciesintheinsuranceindustrymayrestrictourabilitytoplacebusiness.Reducedactivitymayalsocauseareductioninclients’appetiteforbuyinginsuranceprotectionwhereitisadiscretionaryspend.Inturn,reduceddemandmaycausepricestoreducethroughcompetition,whichcanbecyclicalovertime.Althoughourbusinessstrategyhelpsustomitigatethisrisk,itislargelyoutsideourcontrol.

OURINTEGRATIONWITHACQUIREDCOmPANIES FollowingtheacquisitionsofbothAccettein2011andWindsorin2012,weundertookanintegrationplantoobtainbusinesssynergiesandcostbenefitsfromtheseacquisitions.Theanticipatedbenefitsoftheseacquisitionsdependonhowsuccessfulweareincompletingtheintegrationplaneffectively.Significantmanagementtimehasbeenspentontheintegrationofoperationstorealisethebenefitsbutavoidanydisruptiontothebusinessoftheintegratedcompanies.

TheresultoftheWindsoracquisitionisasignificantlylargerbaseintheUKwhichdemandsmoremanagementtime.Itisimportanttomaintainstaffmoraleandretentionratesatalllevelswhilstintegratingthecultures.Theassumptionsmadeaboutclientretentionandnewbusinessmayprovetobeincorrect.Thetaskofmaintainingexistingsystemsandseekingasuitablebusinesssystemforfutureuse,avoidingduplication,willabsorbfurthermanagementresource.Wealsohavetoco-ordinatetheseparatelocationsforthebusinessandoptimisespaceplanningandtechnologyusebetweentheselocations.Whilstmanagementtimeisspentinreducingtherisksofprojectfailure,theremaybeunforeseenfactorsthatcauseadditionalexpenseordelayinintegrationandsomeofthesemaybeoutsideourcontrol.

Inthelongertermwemaynotbeabletoachievetheincreaseintheprofitmarginsweseekbyincreasingoperatingincomeandcontrollingcostlevelseffectivelywhilstmeetingourclients’servicerequirements.

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41

LeGAL AND ReGULAToRy RIsks

Wemaybesubjecttolegalandregulatoryissuesthat,onceconcluded,mayaffectourfinancialresultsadversely.Wemayreceiveclaimsinrelationtoerrorsandomissions(‘E&O’)inplacingorunderwritinginsuranceordealingwithclaims.ItisnotalwayspossibletopreventerrorsandomissionsoccurringanddamagesunderE&Oclaimsmaycauseourfinancialpositiontobeadverselyaffected,aswellasdivertingmanagementtimeandcausingreputationaldamage.Wepurchaseinsurancetocovertheseclaimsandithasnotbeenmateriallydepleted.Lawsuitsmayarisefromcorporateactionsthataredisputedbythirdparties.

Weaccruefortheseexposurestotheextentthatlossesareprobableandcanbereasonablyestimated.TheseaccrualsareadjustedovertimeaccordingtodevelopmentsanddetailsoflegalissuesarecontainedinthenotestotheConsolidatedFinancialStatements.

Ourbusinessissubjecttoahighdegreeofregulationfromgovernmentsortheiragenciesandthismaylimitourgrowthorharmourfinancialresults.Thecostofcomplianceincreaseswiththequantityandtypesofinsuranceproductsthatweplaceforclientsorunderwrite.Alsoasweexpand,wearerequiredtoobtainlicencesincountriesinwhichwetradeandcountriesthathavemorestrictregulatoryregimesneedtohavemoreresourcededicatedtocompliancematters.Inconnectionwithunderwriting,wemayhavetocomplywithregulationsaffectingtheinsurersforwhichweactascoverholders.

Innovationsinregulatingourindustrythatcouldhaveanimpactonourfinancialresultsincludeadditionalregulations,suchastheFSA’sproposedchangesinclientmoneyruleswhichwillrequiremorefinancestaffresourcetoimplementandfurtherexpansionofdirectsellingofinsurancebyinsurancecompanies.

oUR oPeRATIoNs

Werelyonhighlytrainedandexperiencedstafftoundertakebrokingandunderwritingbusiness.Thebusinessismanagedbydirectorswhohavemanyyearsofexperienceandexpertise.Lossofpersonnelcouldhaveadisruptiveimpactonourabilitytomanageourbusinesseffectivelyandtofulfilourstrategyandplans.Weareinahighlycompetitivemarketfortalentandneedtoretainstaffoncerecruited.Anylossofkeystaffcouldthereforeadverselyaffectouroperatingresultsandprofitability.Theadequacyofemploymentcontracts,effectivenessofourappraisalandtrainingprogrammeandcompletenessofsuccessionplansarereviewedregularly.

Ourinformationtechnologysystemsareakeypartofourbusinessandanydisruptionofsystemsorthesupportinginfrastructureandnetworkscouldadverselyaffectouroperations,incomeandfinancialresults.Inparticular,wearecarefulthatanychangesinthesystemsforrecordinginsurancetransactionsareplannedandtestedthoroughlytoaddresstheriskofoverrunsoftimeorcost.Wealsotakespecificmeasurestoensurethatsecurityofpersonaldataismaintained.

Asnotedaboveourglobaloperationsaresubjecttoeconomic,financial,regulatory,legalandmarketrisksasnotedabove.OverseasofficesmayexperiencetheserisksmoreseverelythantheUK,forinstancebylackingthestafftobuildthebusinessinacompetitivemarket.Subsidiariesmaybesubjecttopoorereconomicconditionsleadingtoaworsecreditcontrolenvironment,inflationoflocalcostsorlocalcurrencyfluctuations.Also,overseasregulatoryandtaxationprovisionscouldresultinrestrictionstoourtrading,additionaltaxburdenandlimitationsontheamountofdividendsthatcanbepaidtotheparentcompany.

Aswellasnaturalandman-madedisasterscausingvolatilityinfinancialmarketsanddisruptingtheinsurancemarketsinwhichwetrade,theymayaffectouroperationsdespitelocalbusinesscontinuity anddisasterrecoveryplanning,causingfurtherfinancialloss.

Wedependonouroperationstoensureclientsatisfactionandifweareunabletooperate,thelossofclientsatisfactioncouldresultinharmtoourbusinessandfinancialresults.Inparticular,akeypartofoperationsisthehandlingofclientmoneyandensuringthatitistreatedproperlyandinaccordancewithregulations.

Inacquiringordisposingofbusinesses,weneedtoidentifysuitableopportunitiesforacquisitionandnegotiatefavourabletermsandcompletetransactions.Werelyonourduediligenceprocesstounderstandthenatureofallliabilities,bothrealandcontingentthatthetargetcompanyissubjectto.However,toenableeffectiveintegrationwithacquiredcompanies,weneedtorealisethefullbusinessbenefitsasnotedabove,orotherwisethefullfinancialbenefitwillnotoccur.Inturn,thisreliesonsatisfactorygrowthandprofitableoperationsofthecompaniesweacquire.

Wemayalsorelyonthirdpartiestoprovideoutsourcedservices.Thisincludespaymentserviceswithbanks,payroll,archivingandLondonInsuranceMarketprocessing,andfailureofthesethirdpartiesdespiteourduediligencepriortoemployingthemcouldresultinfinanciallossorregulatorypenaltiesanddamageourbusinessanditsreputation.

40

Steering the Howden boat at Cowes Week GARETH ABBoTT, Account Executive,

Howden insurance Brokers (UK)

FINANCIALSTATEMENTS

42 43

44 45

Directors’ rePort

GrouP Directors’ rePort for the year enDeD 30 sePtember 2012

The Directors submit their report and audited financial statements for Hyperion Insurance Group Limited (“the Company”) together with the consolidated financial statements of the Group for the year ended 30 September 2012.

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

review of business

Financial reviewThe Group’s financial statements include a consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position and consolidated cash flow statement for the year ended 30 September 2012, together with comparative figures for the year ended 30 September 2011.

The Group has adopted International Financial Reporting Standards (“IFRS”) as the basis of preparation of its consolidated accounts. The statutory accounts of individual companies within the Group continue to be prepared in accordance with local accounting standards and in this regard the balance sheet for the parent company, Hyperion Insurance Group Limited, has been prepared in accordance with UK Generally Accepted Accounting Principles (“UK GAAP”).

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

Discontinued OperationsDuring the year the Group sold to a consortium of new investors its 59.5% interest in CFC Underwriting Limited (“CFC”), which it had held since the establishment of CFC in 2000. The CFC sale was concluded, following FSA consent, on 19 June 2012. The Group disposed its entire 59.5% interest in CFC for cash consideration of £20.8m. For the year ended 30 September 2012, a profit of £1.5m was recorded for the discontinued operation, compared to a net profit of £2.4m in the previous financial year. The profit on disposal of CFC was £17.1m.

Continuing OperationsThe Board is pleased to announce that the Group reported a 42% growth in fees and commissions to £108.9m (2011: £76.9m). Group EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) excluding acquisition costs and non-recurring items was £20.6m, up 40% (2011: £14.7m). Group operating profit, before acquisition costs and non-recurring items was £17.5m (2011: £13.1m). Acquisition costs and non-recurring items are separately identified to provide greater understanding of the Group’s underlying performance. Further analysis of these items can be found in the Group’s accounting policies. Group profit before tax was £7.0m compared to £8.2m in 2011.

Howden Broking Group reported revenues of £74.8m (2011: £47.3m), representing overall growth of £27.5m (58%) compared to prior year. EBITDA was £12.1m (2011: £8.4m).

DUAL International reported revenue increased by £4.6m to £34.2m and its EBITDA increased from £8.2m to £9.9m. Gross written premiums increased by 24% to £227.8m. This includes exceptional costs of £1.7m incurred in the write-off of a business critical system as there has been a significant change in the extent and manner in which the system is

expected to be used in the future, such that previously capitalised costs are not expected to provide further benefit.

Acquisitions and growthOn 3 November 2011 Howden Broking Group Limited completed, following regulatory approvals, the acquisition of a 75% interest in the Accette Insurance Group, Asia’s largest independent insurance broker, through a newly-incorporated company called HBG Asia Holdings Limited.

During the year the Group also completed its largest acquisition to date with the agreed takeover of Windsor Limited and its subsidiaries, a specialist insurance broking group providing insurance broking services to companies in the UK and overseas, which was concluded following FSA consent on 3 July 2012.

On 28 September 2012 Howden Broking Group Limited acquired 51% of the shares in Conset Seguros, a Brazilian retail insurance broker specialising in the construction industry.

DividendsThe profit of the Group for the year after taxation and minority interests amounted to £18.4m (2011: £5.3m). Equity dividends were paid during the year amounting to £1.2 million (2011: £409,000).

the boarD

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

DirectorsThe Directors who served during the year are listed below:

J P de Blocq van Kuffeler Chairman D P Howden Chief Executive E R M Fady L I Muñoz-Rojas Entrecanales J S Newman D A Whileman E H Woolf R T Van Gieson (resigned 27 April 2012) Lord Forsyth (appointed 20 September 2012)

Directors’ inDemnities

The Company has made qualifying third party indemnity provisions for the benefit of its Directors which were made during the year and remain in force at the date of this report.

corPorate Governance

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

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

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

The Board currently comprises three Executive Directors and five Non-Executive Directors (including the Chairman) with an appropriate balance of experience and knowledge. As a result, the Board‘s decision-making processes cannot be dominated by an individual or small group.

Mr. Whileman and Mr. Newman represent on the Company’s Board the shareholding interests of, respectively, 3i Group plc (including its managed funds) and BP Marsh & Company Limited. The Board believes that the presence of Mr. Whileman and Mr. Newman on the Board is appropriate and in the interests of shareholders generally and does not detract from their independence on any relevant issue. Mr. de Blocq van Kuffeler (the Chairman of the Board), Mr. Woolf (the senior independent non-executive Director), and Lord Forsyth are independent of any of the Company’s major shareholders. While Mr. Woolf has been a Director of the Company since 1999, the Board believes that his presence on the Board and as Chairman of the Audit Committee continues to be appropriate and in the interests of shareholders generally, having regard to his particular expertise and relevant experience in relation to his role.

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

accountability anD auDit

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

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

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

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

Messrs Howden, Muñoz-Rojas Entrecanales, Newman and Whileman represent the interests of the Company’s four largest shareholders and their interests have been notified to the Company.

Committees of the BoardThe Board has delegated certain responsibilities to Committees that are described below, all of which have formally constituted terms of reference.

i) Audit CommitteeThe Audit Committee comprises three Non-Executive Directors and is chaired by Emile Woolf. The Committee meets at least four times a year. Meetings are attended, by invitation, by the Company’s external auditor, the Finance Director and members of his staff, compliance officers and Internal Audit. The Audit Committee, through its Chairman, formally reports to the Board on its activities.

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

MembershipE H Woolf (Chairman) J S Newman D A Whileman

External auditorThe Committee is responsible for overseeing the relationship with the external auditor. During the year, the Committee reviewed the external auditor’s terms of engagement, assessed his independence and reviewed his audit findings.

The formal policy on auditor independence was adopted by the Committee in December 2010. Among other things, this sets out the circumstances under which the external group auditor can provide non-audit services in a manner that does not conflict with his independence.

Internal auditThe Audit Committee is required to assist the Board to fulfil its responsibilities relating to the adequacy of the resourcing and plans of the Internal Audit department. To fulfil these duties, the Committee:

• reviewedandassessedtheannualinternalauditplan;

• reviewedallreportsontheGroupfromtheinternalauditors;

• reviewedtheco-ordinationbetweeninternalandexternal auditors;

• reviewedandmonitoredmanagement’sresponsivenesstothefindingsandrecommendationsoftheinternalauditor;

• reviewedareportbytheHeadofInternalAuditonRiskManagementinoverseassubsidiaries;and

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

46 47

Directors’ rePort (CONTINUED)

ii) Remuneration Committee

The Remuneration Committee comprises four Non-Executive Directors and is chaired by John van Kuffeler. The Committee normally meets four times a year. Meetings are attended by the Chief Executive and by the Group Human Resources manager. Other individuals and external advisers may be invited to attend for all or part of any meeting as and when appropriate. The Remuneration Committee, through its Chairman, formally reports to the Board on its activities.

The Committee’s overall responsibility is to balance the various interests of shareholders, the Group and its employees, with the aim of ensuring that the Group, through its remuneration policy, is able to attract, retain and motivate management and senior staff of appropriate experience and expertise. Further details on the activities of the Remuneration Committee are included in the Directors’ remuneration report on page 8.

MembershipJ P de Blocq van Kuffeler (Chairman) E H Woolf J S Newman D A Whileman

iii) Nomination Committee

The Nomination Committee comprises of four non-executive Directors and the Chief Executive Officer, and is chaired by John van Kuffeler. The Committee normally meets twice a year. The Committee’s overall responsibility is to review regularly and to evaluate the balance of skills, experience, independence and knowledge on the Board and, in light of this evaluation, prepare a description of the role and capabilities required for a particular appointment, making recommendations to the Board with regard to any changes.

MembershipJ P de Blocq van Kuffeler (Chairman) E H Woolf J S Newman D A Whileman D P Howden

boarD anD committee attenDance 2012

boarD auDit committee remuneration committee

nominationcommittee

E R M Fady 6 - - -

D P Howden 6 - 4 2

J P de Blocq van Kuffeler 7 - 4 2

L I Muñoz-Rojas Entrecanales 5 - - -

J S Newman 7 4 4 2

D A Whileman 6 3 3 1

E H Woolf 7 4 4 2

Lord Forsyth 1 - - -

R T Van Gieson 3 - - -

internal control anD risk manaGement

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

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

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

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

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

In all its principal operations, the Group is also exposed to regulatory risk, and also an element of political risk in certain geographic regions.

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

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

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

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

Further details regarding the liquidity risk can be found in note 28 in the financial statements.

The Company agreed on 3 July 2012, in connection with the 6,876,900 ‘A’ ordinary shares of £0.01 each which were then issued to shareholders of Windsor Limited as part of the consideration paid for the Windsor Group acquisition (“the Windsor consideration shares”), that if no IPO or sale of the Company occurs before 27 September 2017, the holders of the Windsor consideration shares will have the right to convert their shares into loan notes which would be repayable in 2022. This agreement constitutes a put option for the holders of the shares (“the liquidity put option”).

Further details of the accounting treatment of the liquidity put option can be found in note 21 in the financial statements.

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

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The credit risk on liquid funds and derivative financial instruments is limited as the counterparties are the Group’s bankers with high credit-ratings assigned by international credit-rating agencies.

GoinG concern

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

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

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

emPloyment Policies

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

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

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

environmental Policy

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

The Group remains committed to:

• minimisingenergy,waterandpaperuse;

• optimisingwasterecyclingbyprovidingfacilitiesandencouraging peopletorecycle;

• reducingtravel,encouragingpeopletocommunicatewithout travellingwhenpracticable;and

• ensuringappropriateregulatorycompliance.

suPPliers

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

The amount due to the Group’s trade creditors at 30 September 2012 represented 30 days’ average daily purchases of goods and services received from those creditors.

charitable Donations

During the year to 30 September 2012 the Group made cash donations of £23,885 (2011: £36,518) for the benefit of charitable causes.

Political donations of £24,000 were made by a Windsor Group company to the Conservative Party during the year. No political donations were made by Group companies in 2011.

48 49

1 Shareholding includes shares held in SIPP. 2 Shareholding includes shares held in family trust and in SIPP. 3 Shares held through investor companies in which the Director has an interest. 4 Shares held in wife’s name.

Directors’ rePort (CONTINUED)

Directors’ remuneration rePort

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

The Remuneration Committee comprises solely of independent Non-Executive Directors and has the following duties:

(i) To determine and agree with the Board the framework or broad policy for the remuneration of the Company’s Chairman, CEO, and the Executive Directors, the Company Secretary and the members oftheseniorexecutivemanagementteam;

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

(iii) Within the terms of the agreed policy and in consultation with the Chairman and/or CEO as appropriate:-

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

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

(c) review and approve Bonus Plans and any remuneration policies adopted by subsidiary companies.

statement of Directors’ resPonsibilities

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve a Company’s financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the parent company financial statements, the Directors are required to:

• selectsuitableaccountingpoliciesandthenapplythemconsistently;

• makejudgmentsandaccountingestimatesthatarereasonable andprudent;

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

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

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

• properlyselectandapplyaccountingpolicies;

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

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

• makeanassessmentoftheCompany’sabilitytocontinueasa going concern.

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

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

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

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

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

Directors’ interests

at 30 sePtember 2012

no. of ‘a’ orDinary shares


no. of ‘b’ orDinary shares

AT 30 SEPTEMBER 2011

NO. OF ‘A’ ORDINARY SHARES


NO. OF ‘B’ ORDINARY SHARES

E R M Fady 1 - 668,600 - 518,600

D P Howden 2 6,264,400 - 6,317,200 -

J P de Blocq van Kuffeler 1 - 424,400 - 424,400

L I Muñoz-Rojas Entrecanales 3 8,643,900 - 7,450,400 -

J S Newman - - - -

D A Whileman - - - -

E H Woolf - - - -

Lord Forsyth - 20,000 - -


no. of ‘c’ orDinary shares


NO. OF ‘C’ ORDINARY SHARES

E R M Fady 4 70,000 -

D P Howden 105,600 -

J P de Blocq van Kuffeler - -

L I Muñoz-Rojas Entrecanales - -

J S Newman - -

D A Whileman - -

E H Woolf - -

Lord Forsyth - -

Disclosure of information to the auDitor

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

• sofarastheDirectorsareaware,thereisnorelevantauditinformationofwhichtheGroup’sauditorisunaware;and

• theDirectorshavetakenallthestepsthattheyoughttohavetaken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.

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

auDitor

Deloitte LLP have indicated their willingness to be reappointed for another term and appropriate arrangements have been put in place for them to be reappointed as auditor at the Annual General Meeting.

Approved by the Board and signed on its behalf by:

h G Pallot SECRETARY 11 DECEMBER 2012

50 51

inDePenDent auDitor’s rePort to the members of hyPerion insurance GrouP limiteD

We have audited the Group financial statements of Hyperion Insurance Group Limited for the year ended 30 September 2012 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, and the related notes 1 to 37. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistentlyappliedandadequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebytheDirectors;andtheoverallpresentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• giveatrueandfairviewofthestateoftheGroup’saffairsasat30September2012andofitsprofitfortheyearthenended;

• havebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion;and

• havebeenpreparedinaccordancewiththerequirementsoftheCompanies Act 2006.

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

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

• certaindisclosuresofDirectors’remunerationspecifiedbylaware notmade;or

• wehavenotreceivedalltheinformationandexplanationswerequirefor our audit.

Other matterWe have reported separately on the parent company financial statements of Hyperion Insurance Group Limited for the year ended 30 September 2012.

DaviD rush (SENIOR STATUTORY AUDITOR) 11 DECEMBER 2012

for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom

consoliDateD income statement for the year enDeD 30 sePtember 2012

continuing operations note

year enD 30 sePtember

2012 £’000

YEAR END 30 SEPTEMBER

2011 £’000

Fees and commissions

Other operating income

Other operating costs

Depreciation and amortisation

3

3 3

4

108,919

1,650

(94,999)

(3,062)

76,919

1,323

(65,187)

(1,636)

operating profit 4 12,508 11,419

analysed as:

operating profit before non-recurring items

Acquisition costs

Non-recurring items

4

4

17,531

(1,743)

(3,280)

13,078

(490)

(1,169)

operating profit 4 12,508 11,419

Finance income

Finance costs

5

5

115

(4,168)

156

(2,514)

Profit before changes in the fair value of deferred consideration 8,455 9,061

Changes in the fair value of deferred consideration 5 (1,503) (911)

Profit before tax for the year 6,952 8,150

Income tax expense 8 (3,887) (3,001)

Profit after tax from continuing operations 3,065 5,149

Discontinued operations

Profit after tax from discontinued operations

Profit on sale of investments and impairment of non-financial assets

37

37

1,580

15,927

2,390

-

total discontinued operations 17,507 2,390

Profit after tax 20,572 7,539

Profit attributable to

Group shareholders

Minority interests

18,427

2,145

5,275

2,264

20,572 7,539

Turnover and operating profit for the year arose from continuing operations, discontinued operations have been separately disclosed. The notes on pages 57 to 97 form an integral part of these consolidated financial statements.

52 53

consoliDateD income statement (CONTINUED)for the year enDeD 30 sePtember 2012

earnings per share attributable to the equity holders of the company during the year: note

2012 £’000

2011 £’000

from continuing operations

Earnings per share - basic

Before fair value adjustments on deferred consideration - basic

Before fair value adjustments on deferred consideration and non-recurring costs

Before fair value adjustments on deferred consideration and non-recurring costs and acquisition costs

9

2.1p

5.5p

11.0p

15.0p

9.1p

11.3p

13.3p

14.5p

from discontinued operations


Before FV adjustments on deferred consideration - basic

Before FV adjustments on deferred consideration and profit on disposal - basic

9

39.5p

39.5p

3.6p

3.4p

3.4p

3.4p

from continuing and discontinued operations


Before fair value adjustments on deferred consideration - basic


9

41.6p

45.0p

18.5p

12.5p

14.7p

17.9p

consoliDateD statement of comPrehensive incomefor the year enDeD 30 sePtember 2012

note

2012 £’000

2011 £’000

Profit for the year 20,572 7,539

Other comprehensive income

Gain on cash flow hedges

(Loss)/gain on foreign currency translation

26

26

444

(290)

-

81

other comprehensive income for the year 154 81

total comprehensive income for the period 20,726 7,620

Profits attributable to

Group shareholders

Minority interests

18,581

2,145

5,356

2,264

20,726 7,620

Comprehensive income for the year arose from continuing operations only.

54 55

note

£’000

2012 £’000

£’000

2011£’000

non-current assets

Goodwill

Intangible assets

Property, plant and equipment

Investments held at cost

Deferred tax assets

11

12

13

14

24

116,098

25,450

9,292

1,073

2,185

46,156

4,260

5,294

775

1,318

154,098 57,803

current assets

Trade and other receivables

Own cash and cash equivalents

Insurance cash

Derivative financial instruments

16

17

17

23

40,011

23,175

113,488

816

30,484

16,616

60,787

-

177,490 107,887

current liabilities

Insurance payables

Trade and other payables

Corporation tax payable

Borrowings


Provisions for liabilities and charges

18

18

18

20

23

22

(106,888)

(29,705)

(4,124)

(3,656)

(3,576)

(677)

(55,793)

(17,985)

(3,728)

(4,056)

(2,147)

(1,183)

(148,626) (84,892)

net current assets 28,864 22,995

non-current liabilities

Borrowings


Deferred tax liabilities


Liquidity put option

20

19

24

23

21

(77,439)

(3,150)

(6,258)

(10,057)

(48,118)

(145,022)

(21,803)

(2,187)

(406)

(9,226)

-

(33,622)

total net assets 37,940 47,176

equity

Issued share capital

Share premium

Other reserves


Retained earnings

25

26

21

508

60,146

(5,069)

(48,118)

27,489

422

35,140

(2,418)

-

10,262

shareholders’ equity 34,956 43,406

minority interests 2,984 3,770

total equity 37,940 47,176

the financial statements were approved by the board of Directors and authorised for issue on 11 December 2012. they were signed on its behalf by:

D P howDen e r m faDy DIRECTOR FINANCE DIRECTOR

company number 2937398

consoliDateD statement financial Positionas at 30 sePtember 2012

consoliDateD statement of chanGes in equity as at 30 sePtember 2012

2012

calleD uP share

caPital £’000

share Premium

account £’000

liquiDity Put

oPtion reserve

£’000

other reserves

£’000

retaineD earninGs

£’000

total share-

holDersequity

£’000

minority interests

£’000

total

equity £’000

as at 1 october 2011

Profit for the year

Employee share options

Dividends paid

Net foreign exchange adjustments

Issue of shares

Net movement in shares held by Employee Benefit Trust

Movement in cash flow hedge

Arising on acquisition and disposals

422

-

-

-

-

83

3

-

-

35,140

-

-

-

-

24,795

211

-

-

-

-

-

-

-

-

-

-

(48,118)

(2,418)

-

-

-

(276)

-

-

444

(2,819)

10,262

18,427

-

(1,200)

-

-

-

-

-

43,406

18,427

-

(1,200)

(276)

24,878

214

444

(50,937)

3,770

2,145

-

(700)

196

-

-

-

(2,427)

47,176

20,572

-

(1,900)

(80)

24,878

214

444

(53,364)

as at 30 september 2012 508 60,146 (48,118) (5,069) 27,489 34,956 2,984 37,940

2011

CALLED UP SHARE

CAPITAL £’000

SHARE PREMIUM

ACCOUNT £’000

LIqUIDITY PUT

OPTION RESERVE

£’000

OTHER RESERVES

£’000

RETAINED EARNINGS

£’000

TOTAL SHARE-

HOLDERSEqUITY

£’000

MINORITY INTERESTS

£’000

TOTAL

EqUITY £’000


Profit for the year

Employee share options

Dividends paid


Issue of shares




420

-

-

-

-

-

2

-

-

34,888

-

-

-

-

-

252

-

-

-

-

-

-

-

-

-

-

-

(1,421)

-

-

-

81

-

580

(366)

(1,292)

5,396

5,275

-

(409)

-

-

-

-

-

39,283

5,275

-

(409)

81

-

834

(366)

(1,292)

2,161

2,264

-

(655)

-

-

-

-

-

41,444

7,539

-

(1,064)

81

-

834

(366)

(1,292)

as at 30 september 2011 422 35,140 - (2,418) 10,262 43,406 3,770 47,176

56 57


note2012

£’0002011

£’000

Net cash inflow in own cash

Returns on investments and servicing of finance

Taxation

Capital expenditure and financial investment

27

27

27

20,297

(7,625)

(5,335)

(2,761)

11,864

(2,511)

(1,877)

(1,735)

cash inflow before acquisitions and disposals 4,576 5,741

Net cash outflow from acquisitions and disposals 27 (31,865) (7,901)

cash outflow before use of liquid resources and financing (27,289) (2,160)

Cash inflow from financing activities 27 38,559 2,481

net increase in cash and cash equivalents in the period 11,270 321

Own cash and bank overdrafts at beginning of period

Own cash inflow for the period

11,627

11,270

11,306

321

own cash and bank overdrafts at end of period from continuing operations 22,897 11,627

Own cash and bank overdrafts at the end of period from discontinued operations - 1,850

own cash and cash equivalents at the end of the period 22,897 13,477

Insurance cash at beginning of period

Net insurance cash inflow for the period

57,643

55,845

39,866

17,777

insurance cash at end of period from continuing operations 113,488 57,643

Insurance cash at beginning of period from discontinued operations - 3,144

insurance cash at end of period 113,488 60,787

cash flows for the year arose from continued and discontinued operations. refer to note 37 for detail of the cash flows of the discontinued operations.

consoli DateD cash flow statement year enDeD 30 sePtember 2012

notes to the accounts for the year enDeD 30 sePtember 2012

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

a) Accounting convention Statement of compliance with IFRS

The Group has prepared its consolidated financial statements under International Financial Reporting Standards (IFRSs) as adopted by the European Union. IFRSs comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) as adopted in the European Union that are in effect as at 30 September 2012, or which have been adopted early.

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

The significant accounting policies that have been applied in the preparation of these consolidated financial statements are summarised below. The accounting policies have been used throughout all the periods presented in the financial statements.

Going ConcernFurther information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors’ Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the notes to the accounts. In addition note 28 to the financial statements includes the Group’s financialriskmanagementobjectives;detailsofitsfinancialinstrumentsandhedgingactivities;anditsexposurestocredit risk and liquidity risk.

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

Presentation of financial statements in accordance with IAS 1 (Revised 2007)The consolidated financial statements are prepared in accordance with IAS 1 ‘Presentation of Financial Statements’ (Revised 2007).

The Group has elected to present the ‘Statement of Comprehensive Income’ in two statements: the ‘Income Statement’ and the ‘Statement of Comprehensive Income’.

The consolidated cash flow statement has been prepared showing separately corporate funds, being the Group’s own cash balances, and insurance funds, being funds held on behalf of clients and insurers in non-statutory trust accounts.

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

IFRS 9 ‘Financial instruments’, effective for annual periods beginningonorafter1January2015;

IFRS 10 ‘Consolidated financial statements’, effective for annualperiodsbeginningonorafter1January2013;

IFRS 11 ‘Joint arrangements’, effective for annual periods beginningonorafter1January2013;

IFRS 12 ‘Disclosures of interests in other entities’, effective forannualperiodsbeginningonorafter1January2013;

IFRS 13 ‘Fair value measurement’, effective for annual periodsbeginningonorafter1January2013;

IAS 19 ‘Employee Benefits’, effective for annual periodsbeginningonorafter1January2013;

IAS 27 ‘Separate financial statements’ (2011), effective for annualperiodsbeginningonorafter1January2013;and

IAS 28 ‘Investments in associates and joint ventures’ (2011), effective for annual periods beginning on or after 1 January 2013.

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

IAS 32 ‘Financial Instruments: Presentation’, effective for annual periods beginning on or after 1 January 2014.

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

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

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

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

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

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition

58 59

where they qualify as measurement period adjustments. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs.

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

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

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

The results of the foreign subsidiaries have been translated using the average of monthly average exchange rates. Assets and liabilities of overseas subsidiaries denominated in foreign currencies are translatedatexchangeratesprevailingatthebalancesheetdate;profits and losses are translated into pounds sterling at average exchange rates for the relevant accounting periods. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. On the sale of a subsidiary, such translation differences are recognised as income or expenses in the period in which the operation is disposed of. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

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

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

Profit commission is recognised when the amount can be estimated, with a reasonable degree of certainty, and is equivalent to the minimum value expected to be received.

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

h) Discontinued operations and non-current assets held for saleNon-current assets (and disposal groups) classified as held for sale, and discontinued operations, are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held for sale, and (a) represents a separate major line of business or geographical area of operations;and(b)isapartofasinglecoordinatedplantodisposeofaseparatemajorlineofbusinessorgeographicalareaofoperations;or (c) is a subsidiary acquired exclusively with a view to resale.

Any gain or loss from disposal of a business, together with the results of these operations until the date of disposal, is reported separately as discontinued operations. The financial information of discontinued operations is excluded from the respective captions in the consolidated financial statements and related notes for all years presented.

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

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

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

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

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

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

Other intangible assetsOther intangible assets comprise brands and other acquired identifiablenon-monetaryassetswithoutphysicalform;theseincludenon-compete contracts and brand names that have been recognised on the acquisition of subsidiaries. Other intangible assets are carried at cost less accumulated amortisation. Amortisation on other intangible assets is calculated using the straight-line method to allocate the cost over their estimated useful lives, which is normally estimated to be between 5 and 10 years.

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

Defined benefit schemeThe Group has a legacy defined benefit pension scheme which is closed to new members and which has one deferred member. Full actuarial valuations of the scheme are carried out at least every three years. A qualified independent actuary updated these valuations as at 30 September 2012. For the purposes of these annual updates, scheme assets are included at market value and scheme liabilities are measured on an actuarial basis using the projected unit method. The defined benefit surplus or deficit is included in the Group’s statement of financial position. A surplus is included only to the extent that it is recoverable through reduced contributions in the future or through refunds from the scheme. The current service cost, any past service costs and the expected return on the scheme’s assets, net of the impact of the unwinding of the discount on scheme liabilities, are included in the income statement. Actuarial gains and losses, including differences between the expected and actual return on scheme assets, are recognised through the statement of comprehensive income.

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

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

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

Loansandreceivables;and

Financial assets at fair value through profit or loss.

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

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

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

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

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

Trade and other payablesTrade payables are initially measured at fair value and subsequently measured at amortised cost.

BorrowingsBorrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Borrowings are initially measured at fair value, net of transaction costs incurred. They are subsequently measured at amortised cost using the effective interest rate method.

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


60 61

Individual receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Impairment of trade receivables is presented within ‘other operating costs’.

m) Derivative financial instrumentsThe Group only enters into derivative financial instruments in order to hedge underlying commercial exposures. The Group designates certain derivatives as either hedges of fair value of recognised assets or liabilities or a firm commitment (fair value hedge), or hedges of highly probable forecast transactions (cash flow hedges).

The Group currently has cash flow hedges only, relating to interest rate and foreign exchange risk management. At the inception of the transaction the relationship between hedging instruments and hedged items, as well as the Group’s risk management objective and strategy for undertaking various hedge transactions are documented.

Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flow hedged items, are also documented.

The effective portion of the changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in a hedge reserve in equity. The gain or loss relation to the ineffective portion is recognised immediately in the Consolidated Statement of Comprehensive Income. Amounts accumulated in the hedge reserve in equity are transferred to the Consolidated Statement of Comprehensive Income in the periods when the hedged item will affect profit and loss.

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

n) Share-based paymentThe Group issues share awards to employees. The Group operates a number of share-based compensation schemes and applies the requirements of IFRS 2 ‘Share-based Payment’.

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

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

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

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

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

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

Leasehold improvements – Over the outstanding lease period

Furniture, fixtures and fittings – 5 years to 10 years

Computer hardware – 4 years to 5 years

Computer software – 3 years to 10 years

Motor vehicles – 4 years

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

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

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

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

r) Dividend distributionEquity dividends declared at the discretion of the Company are recognised in the period in which they are declared and approved by the Board.

s) Non-recurring ItemsNon-recurring items are separately identified to provide greater understanding of the Group’s underlying performance. Items classifiedasnon-recurringitemsinclude:closurecostsforbusinesses;restructuringcosts;acquisitioncosts,postacquisitionintegrationcosts;writeoffs;andothercreditsandchargesofnon-recurringnature that require separate identification in order to provide additional insight into the underlying business performance. To assist in the analysis and understanding of the underlying trading position of the Group these items are summarised within note 4.


t) Acquisition costsAcquisition related costs are costs the acquirer incurs to effect a business combination. These include legal fees, finder’s fees, valuation costs and other professional or consulting fees, which are expensed in the period they are incurred.

Other acquisition costs incurred which are directly attributable to obtaining finance in order to fund the acquisition are not expensed but included within the debt balance. The costs are then amortised (according to the effective interest rate method) through the Income Statement over the period of the debt.

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

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

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

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

v) Own sharesTreasury shares are deducted from equity. No gain or loss is recognised on the purchase, sale, issue or cancellation of the treasury shares. Any consideration paid or received is recognised directly in equity.

w) Group reservesThe share premium account is the difference between the nominal value of shares issued and the value of the consideration received. The use of the share premium account is governed by the Companies Act 2006.

x) ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

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

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

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

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

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

62 63

a) Business segment analysis The divisional analysis has been provided for continuing operations only.

Year to 30 September 2012

broking £’000

underwriting £’000

head office and conSolidation

adjuStmentS £’000

total continuing operationS

£’000



Direct expenses


74,753

378

(64,910)

(1,604)

34,166

1,272

(27,573)

(721)

-

-

(2,516)

(737)

108,919

1,650

(94,999)

(3,062)

operating profit 8,617 7,144 (3,253) 12,508

Finance income

Finance costs

Fair value adjustments

(64)

(1,721)

(1,503)

(133)

(2)

-

312

(2,445)

-

115

(4,168)

(1,503)

profit before taxation 5,329 7,009 (5,386) 6,952

Taxation (2,146) (2,420) 679 (3,887)

profit after taxation 3,183 4,589 (4,707) 3,065

Minority interests (1,881) (264) - (2,145)

net profit 1,302 4,325 (4,707) 920

ebitda (excluding non-recurring and acquisition items)

12,122 9,902 (1,431) 20,593

non-recurring costs (1,030) (2,035) (215) (3,280)

See note 4 for a further analysis of non-recurring costs.

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

The CODM uses Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”), as reviewed on a monthly basis, as the key measure of the segments’ results as it reflects the segments’ underlying trading performance for the period under evaluation.

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

3 Segmental analYSiS (COnTInUED)

Year to 30 September 2011

BROkInG £’000

UnDERwRITInG £’000

hEAD OFFICE AnD COnSOlIDATIOn

ADjUSTMEnTS £’000

TOTAl COnTInUInG OpERATIOnS

£’000



Direct expenses


47,324

101

(40,259)

(605)

29,595

1,222

(22,753)

(606)

-

-

(2,175)

(425)

76,919

1,323

(65,187)

(1,636)

operating profit 6,561 7,458 (2,600) 11,419

Finance income

Finance costs

Fair value adjustments

99

(868)

(911)

(223)

(1)

-

280

(1,645)

-

156

(2,514)

(911)

profit before taxation 4,881 7,234 (3,965) 8,150

Taxation (1,417) (2,309) 725 (3,001)

profit after taxation 3,464 4,925 (3,240) 5,149

Minority interests (1,219) (1,045) - (2,264)

net profit 2,245 3,880 (3,240) 2,885

ebitda (excluding non-recurring and acquisition items)

8,528 8,239 (2,054) 14,713

non-recurring costs (874) (174) (121) (1,169)

See note 4 for a further analysis of non-recurring costs.

b) Geographical segment analysis The geographical analysis has been provided for continuing operations only.

fees and commissions

2012£’000

2011

£’000

United kingdom

Americas

northern Europe

Far East

Australasia

Southern Europe

Middle East

Eastern Europe

Africa

19,396

18,850

16,983

14,467

14,389

12,764

10,453

1,220

397

13,605

13,143

15,019

3,444

10,465

11,432

8,088

1,459

264

total 108,919 76,919

noteS to the accountS for the Year ended 30 September 2012

64 65

4 oPeratinG ProfitOperating profit for the year is stated after charging/(crediting):

2012£’000

2011£’000

Depreciation of property, plant and equipment

Amortisation of intangible assets

Professional Fees in relation to the Group’s auditors

Audit services:

• statutory audit of the Company

• statutory audit of subsidiaries

• audit-related regulatory and supplementary reporting

All other services

• Taxation services

• Professional fees associated with other advisory services

Operating lease rentals:

• land and buildings

• equipment

Exchange gain

1,867

1,195

87

469

44

272

750

3,855

221

(633)

1,266

370

70

319

21

197

124

1,610

143

(37)

non-recurring items recognised in the income statement

2012 £’000

2011 £’000

Terminating and replacing senior executives

Post Acquisition Integration costs

1,504

290

517

-

costs of fundamental restructuring 1,794 517

Write-off costs

Provision for litigation (see note 22)

Other

1,671

(285)

100

-

652

-

other non-recurring administrative expenses 1,486 652

total non-recurring administrative expenses 3,280 1,169

Exceptional costs incurred in the year include the write-off of a business critical system as there has been a significant change in the extent and manner in which the system is expected to be used in the future, such that previously capitalised costs are not expected to provide further benefit. As a result management has written down the net present value of existing software at 30 September 2012 amounting to the write down of £1.4m of software costs and £0.2m cancellation fees.

2012

£’000

2011

£’000

acquisition costs 1,743 490

Acquisition costs in the period are in relation to the acquisition of HBG Asia Holdings Limited and controlled entitles (the ‘Accette Group’), Windsor Limited and controlled entities, Conset Administração e Corretagem De Seguros Ltda, a book of business specialising in Energy products and a book of business from Professional Risk Solutions LLC (see note 33). Management have separately presented these acquisition costs on the income statement to facilitate an understanding of the Group’s underlying performance.

4 oPeratinG Profit (CONTINUED)

acquisition costs

£’000

Accette Group

Windsor Limited and controlled entities

Energy book of business

PRS

Conset Administração e Corretagem De Seguros Ltda

245

1,243

168

8

79

1,743

*Of the total transaction costs incurred in relation to the purchase of the Accette Group, £403,000 were expensed as incurred in the prior year. The remaining £245,000 has therefore been expensed through the current year’s Income Statement.

5 finance costs

2012 £’000

2011 £’000

Interest expense

HSBC revolving credit facility and overdraft - repaid 3 July 2012

HSBC and Lloyds senior facility

Finance leases

Other loan Interest

Amortisation of bank and loan arrangement fees

Shareholder loan interest

Shareholder loan note interest

(465)

(869)

(4)

(603)

(864)

(915)

(448)

(585)

-

(8)

(217)

(366)

(888)

(450)

(4,168) (2,514)

Interest income

Bank interest 115 168

net finance costs from continuing operations (4,053) (2,346)

Net finance costs from discontinuing operations

net finance costs from operations

15

(4,038)

(5)

(2,351)

Fair value through profit and loss - deferred consideration (note 23b) (1,503) (911)

change in the fair value of deferred consideration (1,503) (911)

6 staff costsThe average monthly number of employees, including Directors, employed by the Group during the year from continued operations was:

2012 number

2011 NUMBER

Directors and senior management

Insurance professionals

Administration

123

586

311

99

330

197

1,020 626

The average number of employees for 2011 does not include staff employed by associate companies, details on associate companies can be found in note 15. In 2012 there were no associate companies.


66 67

6 staff costs (CONTINUED)The aggregate payroll costs of the above employees, including Directors, were as follows:

2012 £’000

2011 £’000

Wages and salaries

Social security costs

Pension contributions

47,237

5,272

2,802

40,562

3,935

1,947

55,311 46,444

Directors’ remuneration

2012 £’000

RESTATED2011

£’000

Aggregate emoluments

Aggregate pension contributions

1,628

54

1,453

88

1,682 1,541

2012 £’000

RESTATED2011

£’000

Highest paid Director:

Salary and benefits

Pension contributions

618

18

392

67

636 459

number NUMBER

Number of Directors at 30 September 8 8

During the year, a Director received £256,000 in total by way of compensation for loss of office. Prior year numbers were also restated to reflect the final payments made to Directors of the Company in respect of the year end 30 September 2011.

7 retirement benefit obliGationsThe Group operates a number of defined contribution pension schemes as well as a defined benefit scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £2,802,000 (2011: £1,947,000). Contributions outstanding at the end of the year amounted to £311,000 (2011: £127,000). See note 31 for details on the defined benefit scheme.

8 taxation2012

£’0002011

£’000

tax expense comprises:

UK corporation tax on profits for the year

Adjustments in respect of previous years

Overseas tax

483

16

3,834

312

(48)

2,786

Total current tax 4,333 3,050

Deferred tax

Origination and reversal of timing differences

Impact of change in UK tax rate

Adjustments in respect of previous years

(489)

47

(4)

(2)

62

(109)

Total deferred tax (note 24) (446) (49)

tax on profit on ordinary activities 3,887 3,001

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

The tax assessed for the year is higher than the standard rate of corporation tax of 25% (2011: 27%) due to the following reasons:

2012 £’000

2011 £’000

Profit on ordinary activities before tax

Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 25% (2011: 27%)

tax effects of:

Expenses not deductible for taxation purposes

Overseas tax in excess of UK tax

Unrelieved losses

Adjustments to UK tax charge in respect of previous years

Adjustments to overseas tax charge in respect of previous years

Impact of change in UK tax rate

6,952

1,738

1,652

642

(196)

12

(8)

47

8,150

2,201

648

184

210

(157)

(147)

62

total tax expense recognised in income statement 3,887 3,001

The blended rate of corporation tax in the UK is 25% (2011: 27%).

Following the enactment of the Finance Act 2011, the main rate of corporation tax has reduced for the financial year beginning 1 April 2012 from 26% to 24%, this was enacted on 19 July 2011. The Finance Act 2012 was enacted on 17 July 2012 which reduces the corporation tax rate to 23% from 1 April 2013 and the Group’s UK deferred tax balances have been recognised at this rate. The tax charge for the year ended 30 September 2012 for continuing operations was £3,887,000 (2011: £3,001,000) which was 56% of profit before tax (2011: 37%).


68 69

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

Diluted earnings per share is calculated as for the basic earnings per share with a further adjustment to the weighted average number of ordinary shares to reflect the effects of all potential dilution and any increase in share capital during the year. The diluted earnings per share is not presented in the financial statements because the impact of the dilution is immaterial, the impact on the earnings per share is 0.02p.

The weighted average number of ordinary shares includes shares held by the Employee Benefit Trust (see note 25).

2012 £’000

2011 £’000

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

Effect of potential dilution – share options

44,326

301

42,168

301

Weighted average number of shares used in calculation of diluted earnings per share 44,627 42,469

The earnings per share is derived from the figures as follows

2012 continuinGoPerations

DiscontinueD oPerations total

Profit after tax

Minority interest

3,065

(2,145)

17,507

-

20,572

(2,145)

Profit after tax and minority interests 920 17,507 18,427

Fair value adjustments 1,503 - 1,503

before fair value “fv” adjustments on deferred consideration 2,423 17,507 19,930

Profit on Disposal - (15,927) (15,927)

before fv adjustments on deferred consideration and profit on disposal - basic 2,423 1,580 4,003

Non-recurring costs 3,280 - 3,280

Tax effect on non-recurring costs (820) - (820)

before fv adjustments on deferred consideration and non-recurring costs 4,883 1,580 6,463

Acquisitions costs 1,743 - 1,743

before fv adjustments on deferred consideration and non-recurring costs and acquisition costs

6,626 1,580 8,206

2011 CONTINUINGOPERATIONS

DISCONTINUED OPERATIONS TOTAL

Profit after tax

Minority interest

5,149

(1,312)

2,390

(952)

7,539

(2,264)

Profit after tax and minority interests 3,837 1,438 5,275

Fair value adjustments 911 - 911

before fair value “fv” adjustments on deferred consideration 4,748 1,438 6,186

Profit on Disposal - - -

before fv adjustments on deferred consideration and profit on disposal - basic 4,748 1,438 6,186

Non-recurring costs 1,169 - 1,169

Tax effect on non-recurring costs (292) - (292)

before fv adjustments on deferred consideration and non-recurring costs 5,625 1,438 7,063

Acquisitions costs 490 - 490

before fv adjustments on deferred consideration and non-recurring costs and acquisition costs

6,115 1,438 7,553

9 earninGs Per share (CONTINUED)

2012 £’000

2011£’000


Earnings per share - basic 920 2.1p 3,837 9.1p

Before fair value "FV" adjustments on deferred consideration - basic 2,423 5.5p 4,748 11.3p

Before FV adjustments on deferred consideration and non-recurring costs 4,883 11.0p 5,625 13.3p

Before FV adjustments on deferred consideration and non-recurring costs and acquisition costs

6,626 15.0p 6,115 14.5p

from discontinued operations

Earnings per share - basic 17,507 39.5p 1,438 3.4p


1,580 3.6p 1,438 3.4p

from continuing and discontinued operations

Earnings per share - basic 18,427 41.6p 5,275 12.5p

Before FV adjustments on deferred consideration - basic 19,930 45.0p 6,186 14.7p

Before FV adjustments on deferred consideration, non-recurring costs, acquisition costs and profit on disposal - basic

8,206 18.5p 7,553 17.9p

The adjustment for non-recurring costs include a tax saving at the current rate of 25%.

10 DiviDenDsThe Group has paid interim dividends in the year of £1,200,000 (2011: £409,000). The Group has not declared any further dividends during the year ended 30 September 2012 (2011: nil)


70 71

11 GooDwillPositive

GooDwill £’000

imPairmentlosses

£’000

total

£’000

opening net book value as at 1 october 2011

Exchange differences

Acquisitions

Disposals and impairments

49,961

-

71,153

(16)

(3,805)

-

-

(1,195)

46,156

-

71,153

(1,211)

closing net book value as at 30 september 2012 121,098 (5,000) 116,098

opening net book value as at 1 october 2010


Acquisitions

Other adjustments

46,275

-

3,686

-

(3,805)

-

-

-

42,470

-

3,686

-

Closing net book value as at 30 September 2011 49,961 (3,805) 46,156

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

brokinG2012

£’000

unDerwritinG2012

£’000

total2012

£’000

United Kingdom

Europe

Australasia

Americas

Middle East

Far East

Other

71,421

12,750

-

7,056

198

3,120

4,220

12,259

2,462

2,612

-

-

-

-

83,680

15,212

2,612

7,056

198

3,120

4,220

Goodwill allocations at 30 september 2012 98,765 17,333 116,098

brokinG2011

£’000

unDerwritinG2011

£’000

total2011

£’000

United Kingdom

Europe

Australasia

Americas

Middle East

Far East

Other

5,498

12,750

-

6,141

197

-

4,220

12,276

2,462

2,612

-

-

-

-

17,774

15,212

2,612

6,141

197

-

4,220

Goodwill allocations at 30 september 2011 28,806 17,350 46,156

The recoverable amounts of the CGUs are determined from value in use calculations. The primary driver for the calculations is the valuation of each CGU at the end of a three year forecast, at which stage projected profitability is considered to equate to normalized future cash flows. The valuation is based on a multiple of projected revenue and profit discounted to net present value. These calculations use projections based on financial forecasts approved by management covering a three year period. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates, and valuation multiples. Management estimates discount rates using current market assessments of the time value of money and the Group’s cost of capital. The growth rates within the financial forecasts are determined based on management’s knowledge of the business and expectations for market development. Valuation multiples applied reflect management’s internal model for the valuation of insurance intermediaries.

12 intanGible assets

Patents anD software

£’000

customer relationshiPs

£’000other

£’000

total

£’000

opening net book value 1 october 2011


Additions

Acquisition of subsidiary

Amortisation charge

Disposals

1,454

(19)

366

286

(234)

(55)

2,206

-

19,724

-

(649)

-

600

-

2,083

-

(312)

-

4,260

(19)

22,173

286

(1,195)

(55)

closing net book value as at 30 september 2012 1,798 21,281 2,371 25,450

Costs

Accumulated amortisation

2,270

(472)

22,211

(930)

2,759

(388)

27,240

(1,790)

closing net book value as at 30 september 2012 1,798 21,281 2,371 25,450

Opening net book value 1 October 2010

Acquisitions

Amortisation charge

Reclassifications

516

650

(131)

419

711

1,700

(205)

-

126

521

(47)

-

1,353

2,871

(383)

419

Closing net book value as at 30 September 2011 1,454 2,206 600 4,260

Costs

Accumulated amortisation

1,692

(238)

2,487

(281)

677

(77)

4,856

(596)

Closing net book value as at 30 September 2011 1,454 2,206 600 4,260

During the year the Group acquired the following entities and books of business. Under IFRS 3 ‘Business combinations’ the Group is required to value intangible assets at the date of acquisition. See note 33 for further analysis of acquisitions.

• HBGAsiaHoldingsLimitedandcontrolledentities(‘AccetteGroup’). • WindsorLimitedandcontrolledentities • ProfessionalRiskSolutionsLLCbookofbusiness • Energybookofbusiness • ConsetAdministraçãoeCorretagemDeSegurosLtda


72 73

13 ProPerty, Plant anD equiPment

leaseholDimProvements

£’000

motor vehicles

£’000

fixtures, fittinGs anD

equiPment £’000

total £’000

cost

At 1 October 2011

Additions



Disposals and write downs

Reallocations to intangible assets and other adjustments

2,870

2,554

1,036

307

(1,285)

-

191

58

114

181

(34)

(1)

9,718

2,904

5,325

579

(3,722)

-

12,779

5,516

6,475

1,067

(5,041)

(1)

At 30 September 2012 5,482 509 14,804 20,795

Depreciation

At 1 October 2011

Charge for the year


Eliminated on disposals and write downs

Reallocations to intangible assets and other adjustments

1,970

355

167

(1,243)

94

87

71

55

(5)

64

5,428

1,522

763

(1,962)

4,137

7,485

1,948

985

(3,210)

4,295

At 30 September 2012 1,343 272 9,888 11,503

At 30 September 2012 4,139 237 4,916 9,292

At 1 October 2011 900 104 4,290 5,294

As at 30 September 2012 the net book value of tangible fixed assets held under finance leases was £1,109,000 (2011: £411,000).

LEASEHOLDIMPROVEMENTS

£’000

MOTOR VEHICLES

£’000

FIXTURES, FITTINGS AND

EqUIPMENT £’000

TOTAL

£’000

cost

At 1 October 2010

Additions



Disposals

Reallocations and other adjustments

2,452

412

-

9

(3)

-

183

56

-

(3)

(45)

-

8,463

1,512

158

48

(31)

(432)

11,098

1,980

158

54

(79)

(432)

At 30 September 2011 2,870 191 9,718 12,779

Depreciation

At 1 October 2010

Charge for the year


Eliminated on disposals

Reallocations and other adjustments

1,756

198

9

(1)

8

101

35

(4)

(45)

-

4,317

1,125

18

(24)

(8)

6,174

1,358

23

(70)

-

At 30 September 2011 1,970 87 5,428 7,485

net book amounts

At 30 September 2011 900 104 4,290 5,294

14 investments helD at cost

2012 £’000

2011£’000

Investment, at beginning of year

Reclassification from investments in associates

Acquisitions during the year

775

-

298

-

775

-

net investment 1,073 775

During the year Howden Broking Group Limited acquired 9.99% of GRC Howden Reasurans Brokerigi Anonim Sirketi (“GRC”), an insurance broker in Turkey for £298,000. The Group continues to hold its investment in Howden Korea Limited.

Management at Hyperion Insurance Group Limited and Howden Broking Group Limited do not have board representation and are unable to exert any significant influence on the financial and operating policies of Howden Korea and GRC.

The results of Howden Korea for the year were as follows:

howDen korea£’000

Turnover

Profit on ordinary activities before interest and tax

Interest income

Taxation

1,607

440

67

(131)

Profit on ordinary activities after tax 376

Fixed assets

Current assets

Current liabilities

Long-term liabilities

314

1,738

(112)

(286)

net assets 1,654

15 investments in associatesDuring the year the Group established that its participating investment in Howden Insurance Brokers India Private Limited constituted control in accordance with IAS 27 and therefore the investment should be consolidated in line with IAS 27 “consolidated financial statements”.

Previously, Howden India had been accounted for as an associate entity as local management had control of the early operational stages and given Indian law only allows a maximum of 26% direct foreign ownership, Hyperion did not believe at the time of acquiring shares that it was feasible to consolidate the Indian entity.

Management recognises that there is a clear differentiation between accounting control and legal control. Management believe that there is now sufficient evidence which constitutes a clear example of ‘substance over form’, the key factor being the CEO of Howden India and 20% shareholder of Howden India now being employed by Hyperion Insurance Group Limited as the CEO of the Howden Asia Group which includes the recent acquisition of the Accette Group.

The Group therefore believes accounting control exists and as such Howden India’s financial results have been consolidated into the Group financial statements for the year ended 30 September 2012.


74 75

16 traDe anD other receivables

2012 £’000

2011 £’000

Insurance receivables

Other debtors

Prepayments

Corporation tax

25,789

5,643

6,193

2,324

16,830

6,022

6,108

1,099

39,949 30,059

non-current 2012 £’000

2011 £’000

Other debtors 62 425

total trade and other receivables 40,011 30,484

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

17 cash anD cash equivalents

2012 £’000

2011£’000

Cash at bank and in hand – sterling

Cash at bank and in hand – other currencies

36,253

100,410

10,870

66,533

136,663 77,403

2012 £’000

2011£’000

Fiduciary

Own funds

113,488

23,175

60,787

16,616

136,663 77,403

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

Fiduciary balances comprise client and insurer monies and fees and commissions earned but undrawn at the balance sheet date. These are held in insurance trust fund bank accounts for the benefit of clients and insurers.

A portion of the Group’s cash balance is not available for use due to legal restrictions and controls that operate in the UK. At 30 September 2012, the Group’s restricted cash balance is £1,200,000.

18 traDe anD other Payables less than one year

2012 £’000

2011£’000

Insurance payables (106,888) (55,793)

Other payables

Deferred consideration

Other tax and social security

Accruals and deferred income

(6,140)

(3,163)

(2,092)

(18,310)

(3,980)

(447)

(1,392)

(12,166)

(29,705) (17,985)

total trade and other payables (136,593) (73,778)

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

2012 £’000

2011 £’000

Corporation tax payable (4,124) (3,728)

19 traDe anD other Payables Due after more than one yearAmounts falling due after more than one year

2012 £’000

2011 £’000

Other payables (3,150) (2,187)


76 77

20 borrowinGs

current

2012 £’000

2011 £’000

Bank overdrafts

Loan from related parties

Bank borrowings

Finance lease liabilities

(278)

(198)

(2,737)

(443)

(3,139)

(570)

-

(347)

(3,656) (4,056)

non-current

2012 £’000

2011 £’000

Bank borrowings

Loans from related parties


(65,259)

(11,565)

(615)

(15,371)

(6,353)

(79)

(77,439) (21,803)

During the year the Group repaid in full its existing HSBC facilities, being a £17m revolving credit facility and a £3m uncommitted overdraft, as part of the refinancing for the Windsor acquisition (see note 33).

bank borrowings

As part of the Windsor acquisition (see note 33), the Group entered into syndicated facilities with HSBC and Lloyds Banking Group on 3 July 2012 to borrow £70m over five years. The facilities are split into a £30m Amortising facility (Facility A) payable over the course of the five years, and a £40m Bullet facility payable at the end of the five year term (Facility B). The total syndicated facility amounts to £90m, with undrawn additional facility of 1) an acquisition facility of £10m and 2) a revolving credit facility of £10m.

The facilities bear interest which is calculated based on LIBOR plus margin. The margin is different for each facility and reduces as the adjusted leverage reduces for the Group. Facility A bears interest of as high as 3.25% or as low as 2% over LIBOR, while Facility B bears interest of as high as 3.75% or as low as 2.50% over LIBOR. The Group has entered into interest rate swaps to hedge the risk of an adverse interest rate movement on the 6 month LIBOR rate (refer to Note 23). The facilities are secured by cross-guarantees and debentures over the Company and over a number of the Company’s subsidiaries.

loans from related parties

Shareholder loans of £3,000,000, are secured by a debenture over the assets of the Company and bear interest at LIBOR +6% (minimum 9%). During the year the Group extended the repayment terms of the loan payable to BP Marsh & Company Limited out to September 2017, the balance as at 30 September 2012 was £1,937,000.

The repayment of the shareholder loan notes (2012: €4,500,000, 2011: €4,500,000) was renegotiated and the loan notes are now repayable in September 2017 which has been extended from March 2013. The interest rate applicable is 13% per annum.

As part of the Windsor acquisition (see note 33), the Company issued Loan Notes of £5,125,000 during the year, these are redeemable should Hyperion either be sold or in the event of an initial public offering. If neither of these events occur, the final redemption date is 3 October 2017. Throughout the loan term, interest is payable at a rate of 9% per annum.

finance leases

Obligations due under finance leases are payable within two and five years.

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

carryinG amount fair value

current

2012 £’000

2011£’000

2012 £’000

2011£’000

Bank overdrafts

Loan from related parties

Bank borrowings


(278)

(198)

(2,737)

(444)

(3,139)

(570)

-

(347)

(278)

(198)

(2,737)

(444)

(3,139)

(570)

-

(347)

(3,657) (4,056) (3,657) (4,056)

20 borrowinGs (CONTINUED)


non-current

2012 £’000

2011 £’000

2012 £’000

2011 £’000

Bank borrowings

Loans and loan notes from related parties


(65,260)

(11,564)

(615)

(15,371)

(6,353)

(79)

(65,260)

(11,564)

(615)

(15,371)

(6,353)

(79)

(77,439) (21,803) (77,439) (21,803)

21 liquiDity Put oPtion

2012 £’000

2011 £’000

Liquidity put option (48,118) -

On 3 July 2012, 6,876,900 ‘A’ ordinary shares of £0.01 each (“the Windsor consideration shares”) were issued to shareholders of Windsor Limited as part of the consideration paid for the Windsor Group acquisition. Under the terms of the acquisition, the Company agreed that if no IPO or sale of the company occurs before 27 September 2017, the holders of the Windsor consideration shares will have the right to convert their shares into loan notes which would be repayable in 2022. This constitutes a put option for the holders of the shares (“the liquidity put option”).

The liquidity put option has a cap on the value of loan notes which can be issued of £50m. The Group has recognised the maximum redemption amount of £50m which has been discounted to present value.

Management does not believe the liquidity put option will crystallise in 5 years’ time, as it is expected that there will be other exit strategies available to the holders. In the event of an IPO or sale of the Company before September 2017, the put option would be cancelled and the liability written back to equity against the liquidity put option reserve. In the unlikely event that the put option is exercised, loan notes will be issued to the holders of the put option in exchange for their 6,876,900 ‘A’ ordinary shares, which currently represent together 13.5% of the current issued share capital. The shares obtained by the Company through this exchange would be cancelled, with a transfer from share premium and share capital to a capital redemption reserve. The net impact of this transaction on the income statement and on the statement of financial position is anticipated to be nil.

The carrying amount and the fair value of liquidity put option is as follows:


Non-current

2012 £’000

2011 £’000

2012 £’000

2011 £’000

Liquidity put option (50,000) - (48,118) -

22 Provisions

e&oProvisions

£’000

litiGationProvisions

£’000total

£’000

At 1 October 2011

Arising from acquisitions and disposals

Settled in the year

(Income)/Expense to the income statement

531

347

-

(201)

652

-

(367)

(285)

1,183

347

(367)

(486)

At 30 September 2012 677 - 677

A provision of € 700,000 was made in the Group’s financial statements for the year ended 30 September 2011 in relation to litigation in the Spanish Courts against Howden Iberia S.A. This provision has now been released, following the decision of the Intermediate Court in Spain to reduce the amount of the first instance judgment on appeal from €1,763,000 to € 352,000, and to order the claimants to repay to Howden Iberia the amount of the first instance judgment which had been paid over to them, less the amount of € 352,000. Both parties have now appealed the judgment of the Intermediate Court to the Supreme Court. Management continue to believe that Howden Iberia has a strong case in relation to the allegation of unfair competition practice on the part of Howden Iberia, S.A. which is the subject of the litigation, and that consequently no further provision is necessary.


78 79

23a cateGories of financial assets anD liabilitiesThe carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities:

30 september 2012

loans anD receivables/

other financial liabilities

£’000

fair value throuGh Profit or

loss £’000



Corporation tax liabilities

Short-term borrowings

Long-term borrowings


Forward foreign currency contracts *

Interest rate swaps

Future payments to minority interests due in less than one year

Future payments to minority interests due in more than one year


40,011

(32,855)

(4,124)

(3,655)

(77,439)

-

-

-

-

-

-

-

-

-

-

816

(373)

(3,203)

(10,057)

(48,118)

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

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

30 september 2011

LOANS AND RECEIVABLES/

OTHER FINANCIAL LIABILITIES

£’000

FAIR VALUE THROUGH PROFIT OR

LOSS £’000



Corporation tax liabilities

Short-term borrowings

Long-term borrowings


Future payments to minority interests due in less than one year

Future payments to minority interests due in more than one year

30,484

(20,172)

(3,728)

(4,056)

(21,803)

-

-

-

-

-

-

-

(2,147)

(9,226)

23b Derivative financial instrumentsThe Group uses forward exchange contracts to reduce the risk associated with sales denominated in foreign currencies for Howden Insurance Brokers Limited and Dual International Underwriting Limited. At 30 September 2012 there were outstanding contracts with a fair value of £816,000 (2011: £nil) in favour of the Group for the purchase of foreign currencies in the normal course of business.

During the year the Group also entered into interest rate swap transactions to hedge the risk associated with the variable interest payable on its long-term bank borrowings. At 30 September 2012 there were outstanding contracts with a fair value of £373,000 in favour of HSBC and Lloyds Banking Group, all of which are to receive floating/pay-fixed interest rate swaps. These arrangements effectively hedge 80% of Facility A for three years effective 31 December 2012, and 100% of Facility B for five years, effective 31 December 2012.

The fair value of the above contracts are calculated using the mark to market rates prevailing at the end of the financial year. Further detail including sensitivity analysis on the fair value of outstanding contracts is contained below.

23b Derivative financial instruments (CONTINUED)The carrying amounts for the Group’s derivative financial instruments may be further analysed as follows:

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

2012 £’000

2011 £’000

Foreign exchange forward contracts *

Interest rate swaps*

Future payments to minority shareholders

816

(373)

(13,260)

-

-

(11,373)

net fair value of derivatives (12,817) (11,373)

* These contracts are designated and are effective hedging instruments.

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

2012 £’000

2011 £’000

Net loss on financial instruments at fair value through the profit and loss (1) (911)

23c financial liability on Payments to minority interestsThe fair value of the Group’s financial liability on payments to minority interests at the year end was £13,260,000 (2011: £11,373,000).

The future equity commitments include the earn-out due on recent acquisitions, and the future liability on put and call options. The option liability is carried at fair value and revalued each year with movements going through the income statement. The liability as at 30 September 2012 is as follows:

2012 £’000

2011 £’000

Hendricks Earnout

Conset Earnout

Conset put/call

Accette put/call

Hendricks put/call

PYV

HGMI

7,580

1,288

1,024

1,147

2,221

-

-

7,062

-

-

-

2,221

954

1,136

total payments to minority interests 13,260 11,373

23d financial instruments helD at fair valueThe Group is required to present certain information about financial instruments measured at fair value in the statement of financial position.

The disclosure of fair value measurements by level is assessed using the following fair value measurement hierarchy • quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(Level1); • inputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability(Level2);and • inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(Level3).

30 september 2012 level 1 level 2 level 3


Forward foreign currency contracts

Interest rate swaps

Future payments to minority interests

-

-

-

-

-

-

816

(373)

(13,260)

- - (12,817)


80 81

23d financial instruments helD at fair value (CONTINUED)

30 September 2011 LEVEL 1 LEVEL 2 LEVEL 3


Forward foreign currency contracts

Future payments to minority interests

-

-

- -

-

(11,373)

- - (11,373)

24 DeferreD taxation

2012 £’000

2011 £’000

Decelerated capital allowances

Losses carried forward

Other short term timing differences

445

103

(4,621)

173

111

653

net deferred tax balance (4,073) 937

Deferred tax asset

Balance at beginning of year

Deferred tax credit in profit and loss account for period

Reclassification from current tax


1,345

841

-

(1)

1,178

58

79

28

balance at end of year 2,185 1,343

Deferred tax liability




(406)

(395)

(5,457)

(397)

(9)

-

balance at end of year (6,258) (406)

net deferred tax (liability)/asset at end of year (4,073) 937

Total deferred tax credit in profit and loss account for period (note 8) 446 49

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

Factors that may affect future tax chargesThe Group has capital losses of £84,000 (2011: £84,000) available to carry forward for offset against future capital gains. The Group has unrecognised non-trade losses of £3,931,000 (2011: £4,966,000) for offset against future income, subject to certain restrictions.

The 2011 deferred taxation note does not include discontinued operations. Deferred tax in 2011 for discontinued operations was as follows:

2011 £’000

Decelerated capital allowances

Other short-term timing differences

(32)

5

net deferred tax balance (27)




1

(28)

balance at end of year (27)

25 share caPitalUnder the companies Act 2006, companies are no longer required to hava an authorised share capital. A resolution was passed by shareholders to take advantage of this deregulating measure. Therefore, the company no longer has an authorised share capital and this is not presented as at 30 September 2012.

allotteD anD calleD uP

2012 number ’000 £’000

Classified as equity:

‘A’ ordinary shares of £0.01 each

‘A’ ordinary shares of £0.01 each (with option to convert)

‘B’ ordinary shares of £0.01 each

‘C’ ordinary shares of £0.01 each

Adjustment for employee benefit trusts



39,051

6,877

3,395

1,478

(114)

(3)

391

69

34

15

(1)

-

50,684 508

ALLOTTED AND CALLED UP

2011 NUMBER ’000 £’000

Classified as equity:

‘A’ ordinary shares of £0,01 each


‘C’ ordinary shares of £0.01 each

Adjustment for employee benefit trust


38,844

3,324

227

(34)

388

34

1

(1)

42,361 422

The ‘A’ ordinary, ‘B’ ordinary and ‘C’ ordinary shares of £0.01 each rank pari passu in all respects except that on the sale or liquidation of the Company the proceeds shall be divided between the shareholders as follows: • firstly,theholdersofthe‘A’ordinaryshareholdersandthe‘A’ordinaryshareswillreceivethefirst£2.6004pershare; • secondly,theholdersofthe‘A’ordinarysharesandthe‘B’ordinarysharesthesumof£0.4296pershare[£3.03-£2.6004]; • thirdly,thebalanceoverandabove£3.03shallbedistributedbetweentheholdersofthe‘A’ordinary,‘B’ordinaryand‘C’ ordinaryfirstissue(C1) sharesequallyasthoughtheywereoneclassofshare;and • fourthly,thebalanceoverandabove£3.60shallbedistributedbetweentheholdersofthe‘A’ordinary,‘B’ordinary,‘C’ordinaryfirstissue(C1) and ‘C’ ordinary second issue (C2) shares equally as though they were one class of share.

During the year ended 30 September 2012, the Company issued new shares in relation to employee share incentive arrangements for the Howden North American Property & Casualty (“NAP&C”) and Howden Property (“HPIS”) broking teams, as part of the consideration payable following the exercise by Howden Broking Group Limited of call options on shares representing the minority interests in NAP&C and HPIS. A total of 110,100 ‘A’ ordinary shares were issued as part of the NAP&C transaction and a total of 96,900 ‘A’ ordinary shares were issued as part of the HPIS transaction.

On 3 July 2012, 6,876,900 ‘A’ ordinary shares (with option to convert) at £0.01 each were issued to shareholders of Windsor Limited as part of the consideration paid for the Windsor Group acquisition. See note 21 for further details on the option to convert.

In September 2008, the Group established the Hyperion Insurance Group Employee Benefit Trust 2008 (Hyperion EBT) to hold shares to be used to meet future liabilities relating to the Group’s share-based compensation plans. Under IFRS the EBT is considered to be under de facto control of the Group, and has therefore been consolidated into the Group. As at 30 September 2012, the Hyperion EBT held 68,650 (2011: 32,850) ‘A’ ordinary shares of £0.01 and 25,200 (2011: 600) ‘B’ ordinary shares of £0.01 in the Company.

Upon acquisition of the Windsor group of companies, the Group also obtained control of the Windsor Employee Benefit Trust (Windsor EBT), which has a similar function to that of the Hyperion EBT. As at 30 September 2012, the Windsor EBT held 45,300 (2011: nil) ‘A’ ordinary shares of £0.01 in the Company.

Share-based compensation plans

During the year ‘C’ ordinary shares were issued for share-based incentive schemes, the total cost recognised by the Group was £nil (2011: £nil).

The Company continues to operate an executive share option scheme for executive Directors and other senior employees under which the options originally granted over Ordinary shares of £1 each in the Company prior to the reorganisation of the Company’s share capital on 31 March 2008 were converted into options over ‘A’ ordinary shares of £0.01 each in the Company. This scheme is no longer an HMRC approved scheme, having lost its HMRC approval status on the reorganisation of the Company’s share capital in 2008. The price at which options were granted under the scheme was based upon the estimated market value of the shares at the date of grant of the options in each case. Options were granted on the basis that they would


82 83

25 share caPital (CONTINUED)be exercisable between 3 years and 10 years after the date of grant, following which they would lapse. During the year, however, the Remuneration Committee agreed on behalf of the Company to extend the final expiry date of certain options which would otherwise have lapsed to 6 December 2014. The charge for the year in respect of these options amounted to £nil for the year ended 30 September 2012. All share scheme incentives are at the absolute discretion of the Remuneration Committee, with no employee having the right to receive such a grant. The fair values of share-based incentives are determined at their date of grant.

Outstanding share optionsAt 30 September 2012 there were 300,600 unexercised options in respect of the Company’s ‘A’ ordinary shares of £0.01 each, which were issued to various executives in the Group. During the year there was no movement in the number of share options issued.

Date of grant

HELD AT END OF YEAR NUMBER

05 December 2001

10 February 2003

14 June 2004

14 December 2005

19 July 2005

08 December 2006

22 October 2007

21 November 2007

16,300

25,000

47,500

25,000

75,000

15,000

9,900

86,900

300,600

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

Date of grant

EXERCISE PRICE£

EXERCISABLE FROM EXPIRY DATE

HELD AT END OF YEAR NUMBER

05 December 2001

10 February 2003

14 June 2004

14 December 2005

19 July 2005

08 December 2006

22 October 2007

21 November 2007

0.22

0.28

0.46

1.47

1.50

1.50

1.52

1.52

06/12/2004

11/02/2006

15/06/2007

15/12/2008

20/07/2009

09/12/2009

23/10/2010

22/11/2010

06/12/2011*

11/02/2013*

15/06/2014*

15/12/2015

20/07/2016

09/12/2016

23/10/2017

22/11/2017

16,300

25,000

47,500

25,000

75,000

15,000

9,900

86,900

300,600

* The final exercise dates of these options have been extended by the Company to 6 December 2014 in each case. 26 other reserves

consolidated 2012

share oPtions reserve

£’000

ebt reserve

£’000

translationreserve

£’000

cash flow heDGinG

reserve£’000

minority oPtion reserve

£’000

total other

reserves£’000

As at 1 October 2011




851

11

-

-

580

-

-

227

228

(290)

-

-

-

-

444

-

(4,077)

-

-

(3,043)

(2,418)

(279)

444

(2,816)

as at 30 september 2012 862 807 (62) 444 (7,120) (5,069)

26 other reserves (CONTINUED)

Consolidated 2011

SHARE OPTIONS RESERVE

£’000

EBT RESERVE

£’000

TRANSLATION RESERVE

£’000

CASH FLOW HEDGING

RESERVE£’000

MINORITY OPTION RESERVE

£’000

TOTAL OTHER

RESERVES£’000

As at 1 October 2010





Other adjustments

851

-

-

-

-

-

-

-

580

-

-

-

147

81

-

-

-

-

366

-

-

(366)

-

-

(2,785)

-

-

-

(1,292)

-

(1,421)

81

580

(366)

(1,292)

-

As at 30 September 2011 851 580 228 - (4,077) (2,418)

The reserve for minority options includes the initial fair value of put option liabilities granted to minority shareholders. Subsequent changes in the fair value of the put option liability are recognised in the income statement.

27 cash flow aDjustments

2012 £’000

2011 £’000

reconciliation of operating profit

Operating profit

Adjustments for:

(Loss)/gain on disposal of property, plant and equipment

Depreciation of property, plant and equipment

Impairment

Amortisation of intangible assets

Exchange gain/(loss)

12,508

(114)

1,867

1,481

1,195

(341)

11,419

2

1,403

-

239

184

16,596 13,247

changes in working capital

Decrease/(increase) in receivables

(Decrease)/increase in payables

Movement in unrealised brokerage/commissions

5,474

(2,599)

828

(3,226)

4,977

(3,134)

3,703 (1,383)

own cash generated from operating activities 20,297 11,864

(Increase) in insurance debtors

Increase in insurance creditors

Movement in unrealised brokerage/commissions

Insurance cash acquired on acquisition of subsidiaries

(876)

13,759

(829)

43,791

(4,776)

19,419

3,134

-

insurance cash generated from operating activities 55,845 17,777


84 85

27 cash flow aDjustments (CONTINUED)

returns on investments and servicing of finance

2012£’000

2011 £’000

Interest received

Finance costs paid

Equity dividend paid

Interest element of finance lease payments

Dividends paid to minorities

150

(6,012)

(1,200)

-

(563)

86

(1,537)

(408)

-

(652)

(7,625) (2,511)

reconciliation of investing activities

2012 £’000

2011 £’000

Capital expenditure and financial investment

Payments to acquire tangible and intangible fixed assets (2,761) (1,735)

(2,761) (1,735)

Acquisitions and disposals

Purchase of subsidiary undertakings

Acquisition costs

Payment of deferred consideration

Cash acquired on acquisition of subsidiaries

Cash received on disposal of subsidiary

(52,284)

(1,743)

(4,450)

5,802

20,810

(4,207)

(460)

(3,234)

-

-

(31,865) (7,901)

reconciliation of financing activities

2012 £’000

2011 £’000

Purchase of employee benefit trust’s shares - 276

- 276

Drawdown of bank loans

Drawdown/(repayment) of shareholder loans

Capital element of finance leases

34,053

4,918

(412)

2,906

(519)

(182)

38,559 2,205

net cash generated from financing activities 38,559 2,481

The cash flows for the Group are presented for continuing operations only. They exclude the impact of net assets acquired through the acquisition of subsidiaries and net assets disposed of through the disposal of subsidiaries during the year.

The own cash acquired on acquisition of subsidiaries is instead separately shown within net cash outflow from acquisitions and disposals, and the insurance cash acquired on acquisition of subsidiaries is instead shown separately within insurance cash generated from operating activities. Management considers that this approach provides a clearer view of the underlying cash flow movements.

Cash flows for discontinued operations are separately presented in note 37.

28 financial risk manaGement

credit risk at 30 september 2012

not Past Due

£’0000-3 months

£’000

more than 3 months

£’000total

£’000

Trade and other receivables 14,042 7,140 4,607 25,789

At 30 September 2011

NOT PAST DUE

£’0000-3 MONTHS

£’000

MORE THAN 3 MONTHS

£’000TOTAL

£’000

Trade and other receivables 10,506 4,702 1,622 16,830

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

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

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

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

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

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

30 september 2012

less than 1 year

1-5years

5+years total

Finance lease liability

Bank borrowings

Other third party loans

(444)

(2,737)

(198)

(615)

(65,260)

(11,564)

-

-

-

(1,059)

(67,997)

(11,762)

(3,379) (77,439) - (80,818)

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

30 september 2012

less than 1 year

1-5years

5+years total

Foreign exchange forward contracts

Interest rate swaps

Future payments to minority shareholders

816

(373)

(3,203)

-

-

(10,057)

-

-

-

816

(373)

(13,260)

(2,760) (10,057) - (12,817)


86 87

28 financial risk manaGement (CONTINUED)Interest rate riskThe Group’s only exposure is on the interest payable on the Company’s variable rate borrowings and interest receivable on banking deposits held in the ordinarycourseofbusiness.Overdraftsandbankborrowingsbearafloatinginterestrate;asaresult,theGroupissubjecttoacertaindegreeofcashflow interest rate risk due to fluctuations in the prevailing levels of market interest rates. The Group is not subject to interest rate risk in relation to the fixed rate borrowings.

During the year the Group entered into interest rate swap transactions to exchange variable and fixed interest payment obligations to protect long-term borrowings from the risk of increasing interest rates. The Group uses swap contracts to maintain a designated proportion of fixed to floating debt.

At 30 September 2012 there were outstanding contracts with a principal value of £373,000 in favour of the HSBC and Lloyds Banking Group, all of which are to receive floating/pay-fixed interest rate swaps. These arrangements hedge 80% of Facility A for three years effective 31 December 2012, and 100% of Facility B for five years, effective 31 December 2012. The net interest payments or receipt settlements of the swap contracts occur semi-annually. The net settlement amounts are brought into account as an adjustment to interest expense.

The net effective variable interest rate borrowings (i.e. unhedged debt) expose the Group to interest rate risk which will impact future cash flows and interest charges.

The exposure for the Group, at 30 September 2012, of financial assets and financial liabilities to interest rate risk is shown by reference to:

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

at 30 september 2012

fixeD rate£’000

floatinG rate£’000

total£’000

Financial assets


Insurance cash

-

-

23,175

113,488

23,175

113,488

total financial assets - 136,663 136,663

Financial liabilities

Bank borrowings and overdrafts

Loans and loan notes from related parties

Finance leases

Unhedged bank borrowings

Derivative financial liabilities*

-

-

(1,059)

-

(373)

(59,538)

(14,301)

-

(6,000)

-

(59,538)

(14,301)

(1,059)

(6,000)

(373)

total financial liabilities (1,432) (79,839) (81,271)

*Interest rate swaps are measured at fair value with gains and losses taken to the cash flow hedge reserve until such time as the profit or loss associated with the hedged risk is recognised in the Consolidated Statement of Comprehensive Income. Given the matching of the hedge settlements with the payment of interest expense on the hedged borrowings, the balance in the reserve attributable to interest rate swaps is generally minimal.


FIXED RATE£’000

FLOATING RATE£’000

TOTAL£’000

Financial assets


Insurance cash

-

-

16,616

60,787

16,616

60,787

Total financial assets - 77,403 77,403


Bank borrowings and overdrafts


(426)

(447)

(25,432)

-

(25,858)

(447)

Total financial liabilities (873) (25,432) (26,305)

Finance costs are at rates documented in note 20.

• InterestreceivedoncashandcashequivalentsismanagedtoachieveamarginoverLIBORoritsforeigncurrencyequivalent(2011:nochange).

As cash and cash equivalents are invested at short-term market rates, for fixed short-term periods and held to maturity, they are not significantly impacted by movements in interest rates.

28 financial risk manaGement (CONTINUED)Foreign currency riskCertain of the Group’s assets, liabilities, income and expenses are denominated in currencies other than Sterling (the Group’s functional currency and in which it reports its results). The currencies giving rise to this risk are primarily US Dollar, Euro and Australian Dollar. Foreign exchange risk arises when recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. As a result, movements in exchange rates may affect the Sterling value of those items.

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


usD $£’000

euro£’000

auD $£’000

Net assets

Revenue

Expenses

28,772

18,336

(5,443)

11,595

24,055

(8,135)

674

10,776

(7,016)


USD $£’000

EURO£’000

AUD $£’000

Net assets

Revenue

Expenses

24,513

32,577

(2,389)

5,546

30,757

(15,681)

2,735

8,688

(6,066)

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

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


usD $£’000

euro£’000

auD $£’000

Net assets

Revenue

Expenses

2,877

1,834

(544)

1,160

2,406

(813)

67

1,078

(702)


USD $£’000

EURO£’000

AUD $£’000

Net assets

Revenue

Expenses

2,451

3,258

(239)

555

3,076

(1,568)

274

869

(607)

29 continGent liabilitiesAt 30 September 2012 the Group had contingent liabilities in respect of guarantees and indemnities entered into as part of the ordinary course of the Group’s business. No material losses are likely to arise from such contingent liabilities and therefore no provision has been recorded.

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

The Group analyses its litigation exposure based on available information, including external legal consultation, where appropriate, to assess its potential liability. Aside from the amounts disclosed in note 22, the Group has accordingly made no provision in the financial statements.


88 89

30 oPeratinG lease commitmentsAt 30 September 2012 the Group had commitments under non-cancellable operating leases as set out below:

lanD anD builDinGs other

2012£’000

2011£’000

2012£’000

2011£’000

No later than one year

Later than one year and not later than five years

2,765

8,644

495

897

292

535

59

238

11,409 1,392 827 297

During the year the Group entered into a new operating lease agreement upon the relocation of the head office to Eastcheap in London. The lease commenced on 31 January 2012 for a period of 11 years. The agreement includes an incentive in the form of a 30 month rent free period. Upon acquisition of the Windsor Group in 2012, the Group also acquired several operating leases in relation to various Windsor offices, including Fenchurch Street in London. This lease commenced on 1 June 2010 and has a 15 year term, with a rent free period which ended on 30 November 2011. These lease incentives have been considered when determining the rental expense amount for each lease charged to the Income Statement.

31 DefineD benefit schemeThe Group operates a defined benefit pension scheme, the Windsor Retirement Benefits Scheme No 2. The assets of the scheme are held in a separate trustee administered fund independent of the Group’s finances.

Actuarial gains and losses are recognised in full in the period in which they occur. As permitted by IAS19, actuarial gain and losses are recognised outside profit or loss as other comprehensive income. The figure recognised in the statement of financial position represents the fair value of the scheme assets reduced by the present value of the defined benefit obligation.

An actuarial valuation was performed as at 30 September 2012 by an independent qualified actuary in accordance with IAS19. As required by IAS19, the value of the defined benefit obligation has been measured using the projected unit credit method and both the assets and liabilities include the value of those pensions in payment which are secured with insured annuities.

The expected rate of return on assets for the nine months to 30 September 2012 was 4.8% pa (year to 31 December 2011: 5.6% pa). This rate is derived by taking the weighted average of the long term expected rate of return on each of the asset classes that the scheme was invested in at 30 September 2012.

No contributions have been paid by the Group in the period to 30 September 2012 and none are expected in 2013. There are no longer any active members in the scheme.

The following table sets out the key IAS19 assumptions used for the scheme.

assumptions

2012£’000

Price inflation

Discount rate

Pension increases in payment (LPI)

2.7% pa

4.3% pa

2.7% pa

On the basis of the assumptions used for life expectancy, a male person age 65 at the accounting date would be expected to live a further 22.5 years (2011: December - 22.4 years). A male person who attains age 65 in 20 years’ time is expected to live a further 24.4 years (2011: December - 24.3 years).

31 DefineD benefit scheme (CONTINUED)The amount included in the statement of financial position arising from the Group’s obligations in respect of the scheme is as follows:

2012 £’000

Fair value of scheme assets

Present value of scheme liabilities

2,697

(2,628)

Surplus 69

Amount not recognised due to asset limit (69)

Balance sheet asset / (liability) -

The amounts recognised in profit and loss are as follows:

2012 £’000

Employer’s part of current service cost

Interest cost

Expected return on scheme assets

5

87

(92)

Total expense/(credit) included in profit and loss -

The current allocation of the scheme’s assets is as follows:

2012 £’000

Equities

Bonds

Insured pensioner policies/other

14%

15%

71%

100%

None of the assets of the scheme are directly invested in the Group’s own financial instruments or in any property occupied by the Group.

Changes in the present value of the defined benefit obligation are as follows:

9 months to30 seP 12

£’000

Opening defined benefit obligation

Employer’s part of current service cost

Interest cost

Actuarial loss

Benefits paid

2,532

5

87

111

(106)

Closing defined benefit obligation 2,629

Changes in the fair value of the Scheme assets are as follows:

9 months to30 seP 12

£’000

Opening fair value of the Scheme assets

Expected return on Scheme assets

Actuarial loss

Contributions by the employer

Contributions by Scheme members

Benefits paid

2,627

92

84

-

-

(106)

Closing fair value of Scheme assets 2,697

The changes in the present value of the defined benefit obligations have been taken from the movement since the previous valuation.


90 91

31 DefineD benefit scheme (CONTINUED)The actual return on the Scheme’s assets over the nine months to 30 September 2012 was a gain of £176,000 (year to 31 December 2011: a gain of £324,000).

The amount recognised outside profit and loss in other comprehensive income for the nine months to 30 September 2012 is £nil (year to 31 December 2011: a loss of £5,000), including the effect of the asset limit.

The cumulative amount recognised outside profit and loss at 30 September 2012, excluding the effect of the asset limit, is a loss of £208,000 (31 December 2011: a loss of £181,000).

Amounts to be shown for the current and previous four periods:

2012£’000

2011£’000

2010£’000

2009£’000

2008£’000

Fair value of scheme assets

Present value of defined benefit obligation

2,697

(2,628)

2,627

(2,532)

2,444

(2,306)

2,419

(2,288)

2,177

(1,903)

Surplus 69 95 138 131 274

2012£’000

2011£’000

2010£’000

2009£’000

2008£’000

Experience adjustments on scheme assets

Amount of gain / (loss)

Percentage of scheme assets

Experience adjustments on Scheme liabilities

Amount of loss

Percentage of the present value of the scheme liabilities

84

3%

(40)

-2%

191

7%

(61)

-2%

34

1%

-

0%

222

9%

-

0%

(118)

-5%

(4)

0%

32 relateD Parties transactions The Group considers parties to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

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

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

2012 £’000

2011 £’000

amount expensed in the year

Fees paid to B P Marsh & Company Limited

Interest paid/payable to B P Marsh & Company Limited

Interest paid/payable to Murofo Investments SL

Interest paid/payable to Inversiones Muroca SL

Interest paid/payable to 3i Group plc. and associated undertakings

Fees paid/payable to 3i Group plc. and associated undertakings

(53)

(245)

(18)

(12)

(356)

(53)

(51)

(324)

(32)

(15)

(355)

(51)

(737) (828)

amounts payable at the end of the year

B P Marsh & Company Limited fees payable

3i Group plc. and associated undertakings

(12)

(53)

(15)

(15)

Amounts included within other short-term debtors and creditors (65) (30)

32 relateD Parties transactions (CONTINUED)2012

£’0002011

£’000

Loan from B P Marsh & Company Limited

Loan from Murofo Investments SL

Loan from Inversiones Muroca SL

-

(125)

(32)

(461)

(69)

(32)

amounts included in loans from related parties < 1 year (note 20) (157) (562)

Loan from B P Marsh & Company Limited

Loan from Murofo Investments SL

Loan from Inversiones Muroca SL

(1,937)

(125)

(83)

(1,661)

(78)

(286)

amounts included in loans from related parties > 1 year (note 20) (2,145) (2,025)

Loan notes from 3i Group plc (inc rolled interest)

Loan notes from B P Marsh & Company Limited

Loan notes from Marsh Christian Trust

Loan notes from other shareholders

(2,723)

(957)

(718)

(5,125)

(2,807)

(902)

(676)

-

amounts included in loans from related parties > 1 year (note 20) (9,523) (4,385)

3i Group plc and associated undertakings (“3i”) had a 22.8% interest in the Company at the end of the year.

B P Marsh & Company Limited (“B P Marsh”), a wholly owned subsidiary of B P Marsh & Partners plc, owned 13.84% of the Company’s issued shares at the end of the year.

Each of 3i and B P Marsh are entitled under the terms of the Company’s Shareholders’ Agreement dated 3 July 2012 to appoint Directors to the Board of the Company. Currently Mr. D A Whileman and Mr. J S Newman serve on the Company’s Board as, respectively, the appointees of 3i and B P Marsh.

As part of the Windsor acquisition (see note 33). The Company issued Loan Notes of £5,125,000 during the year, interest is payable at a rate of 9% per annum.

33 business combinations

HBG Asia Holdings Limited and controlled entitiesTThe Group completed, following regulatory approvals, the acquisition of 75% of the Accette group from Golden Eight Holdings Limited, through a newly-incorporated company called HBG Asia Holdings Limited. The acquisition of Accette Insurance Group’s operations in Singapore, Hong Kong, Malaysia and the Philippines was completed on 3 November 2011, and in Indonesia on 10 July 2012. The acquisition of Accette gives the Group an opportunity to further expand its international distribution network with a financially sound, well-known and profitable Asian retail insurance brokerage operation, in accordance with the Group’s strategy to develop the Asian retail platform and derive revenue from developing and fast-growing areas.

While the Group does not legally own 100% of the Accette group of companies, its results are fully consolidated into the Group’s accounts. The acquisition contributed revenue of £7,152,000 and an EBITDA of £970,000 to the Group since its acquisition.

Purchase consideration £’000

Purchase considerationUpfront cash paidFair value of deferred considerationPut option (fair value at acquisition)

2,386 2,173 1,022

total purchase consideration 5,581

Non current assetsNet insurance balancesCommission receivablesPrepayments, deposits and other receivablesCash and cash equivalentsCommission payablesOther payables and accrued liabilitiesNon current liabilities

net assets acquired

648 231

1,053 764

1,169 (193)

(1,417)(229)

2,026

Consideration in excess of net assets acquired 3,555

Intangible assetsGoodwill

396 3,159

3,555

The goodwill of £3,159,000 arising from the acquisition of Accette reflects the benefits expected to accrue from combining the activities of Accette and Howden Broking Group. None of the goodwill recognised is expected to be deductible for income tax purposes.

There is a put and call option on the remaining 25% of HBG Asia Holdings Limited. The option is exercisable by Howden Broking Group Limited between 3 November 2014 and 3 November 2016.


92 93

33 business combinations (CONTINUED)

Windsor Limited and controlled entitiesOn 3 July 2012 the Group completed, following regulatory approvals, the acquisition of 100% of the ordinary share capital of Windsor Limited and controlled entities (“the Windsor Group”) with effective control taking place on 27 June 2012. The Windsor Group is a specialist insurance broking group providing insurance and reinsurance broking services to businesses in the United Kingdom and overseas. Following the acquisition it is expected that the Group’s revenue will substantially increase through a fully-coordinated integration plan with synergetic benefits arising through Windsor’s in-depth portfolio and cross selling.

The strategic rationale for this business combination is to:

• delivergeographicexpansionanddiversificationwithinthecompetitiveLondonmarket; • provideastrongplatformforfuturegrowth,withsignificantorganicgrowthexpectedtocontinue;and • increasetheabilitytocompeteagainstlargerinternationalcompetitors

As part of this transaction, the Group entered into syndicated facilities with HSBC and Lloyds Banking Group on 3 July 2012 to borrow £70m over five years. The facilities are split into a £30m Amortising facility (Facility A) payable over the course of the five years, and a £40m Bullet facility payable at the end of the five year term (Facility B). This funding provided was used as part of the consideration paid for the purchase, which also included loan notes and issued equity instruments, as detailed below. The total syndicated facility amounts to £90m, with undrawn additional facility of 1) an acquisition facility of £10m and 2) a revolving credit facility of £10m.

Since acquisition, revenue of £10,023,000 and EBITDA of £2,631,000 contributed by Windsor is included in the consolidated income statement. Had Windsor been consolidated from 1 October 2011, the consolidated income statement would have included additional revenue of £29,029,000 and profit before tax of £5,596,000.


Purchase consideration

Upfront cash paid

Loan notes issued (Fair value)

Equity instruments (6,876,900 ordinary shares of Hyperion)

43,432

4,111

24,757

total purchase consideration 72,300

Recognised amounts of identifiable assets acquired and liabilities assumed


Identifiable intangible assets

Investment in associate


Cash and cash equivalents



Corporation taxation

Deferred taxation

Net insurance balances

1,679

21,806

64

1,931

3,219

(20,760)

(5,143)

(889)

(5,639)

10,480

6,748

Goodwill 65,552

The goodwill of £65,552,000 arising from the acquisition of Windsor consists largely of business synergies which will drive the future growth in addition to the economies of scale expected from combining the activities of Windsor and Howden Insurance Brokers Limited. None of the goodwill recognised is expected to be deductible for income tax purposes.

33 business combinations (CONTINUED)

Professional Risk Solutions LLC book of businessHowden Insurance Brokers Inc acquired a book of business from Professional Risk Solutions LLC (“PRS”) on 20 October 2011. PRS is a specialist wholesaler based in New Jersey. Howden Insurance Brokers Inc acquired the book of business for £428,000 ($684,000).

The acquisition contributed revenue of £274,000 and £nil EBITDA to the Group since its acquisition.


Upfront cash paid

Fair value of deferred consideration

299

129

428

Goodwill 428

428

The purchase of the PRS book of business did not include any assets or liabilities other than the goodwill noted above. Goodwill of £428,000 arising on the acquisition reflects the benefits expected to accrue from access to the services of the team members.

Energy book of businessHyperion purchased a book of Energy business from Glencairn Limited on 19 October 2011 for £156,000 ($250,000).

The acquired book of business contributed revenue of £1,361,000 and an EBITDA of £(25,000) to the Group since its acquisition.


Upfront cash paid 156

156

Goodwill 156

156

The purchase of the Energy book of business did not include any assets or liabilities other than the goodwill noted above. Goodwill of £156,000 arising on the acquisition reflects the benefits expected to accrue from access to the services of the team members.

Conset Administração e Corretagem De Seguros Ltda On 28 September 2012, Hyperion acquired 51% of Conset Administração e Corretagem De Seguros Ltda (‘Conset’), a Brazilian based independent retail and wholesale broker that specialises in the construction industry, a key growth sector in the territory. The acquisition is in line with the Group’s strategy to increase its geographical presence, particularly in the emerging market of Latin America. Subsequently a put and call option was agreed upon for a further 24% of the share capital.

The acquired book of business did not contribute any revenue or EBITDA due to the acquisition occurring on the final day of the financial year.


Upfront cash paid

Fair value of deferred consideration

810

1,289

2,099

Net assets acquired

Goodwill

375

1,724

2,099

As at the 30 September 2012, the process of reviewing the fair values of assets acquired had not been completed and consequently the fair values stated above are provisional and intangible items acquired on acquisition have not been recognised.

None of the goodwill recognised is expected to be deductible for income tax purposes.

34 ultimate controllinG PartiesAs at 30 September 2012 the Company had no ultimate controlling party, nor at 30 September 2011.


94 95

35 caPital commitmentsThe Group has capital commitments in relation to the acquisition of minority shareholdings, further information is in note 23c. Hyperion Insurance Group Limited also had capital commitments in relation to the leasehold improvements of the new lease the company has entered into post year end. The Group had no other capital commitments as at 30 September 2012 and 30 September 2011.

36 PrinciPal subsiDiary anD associateD comPaniesThe following were the principal subsidiary and associate entities at 30 September 2012. Unless otherwise shown, the capital of each company is wholly-owned, is in ordinary shares and the principal country of operation is the country of incorporation.

name of comPany % owneD

nature of business

Howden North American Property & Casualty Limited

Howden Insurance Brokers Limited

Howden Property Insurance Services Limited

Howden Energy Limited

Howden Broking Group Limited*

Global Services 1999 Limited

Howden Insurance Brokers AB

Howden Iberia SA

Howden Asia Pte. Limited

Howden Insurance Brokers (2002) Limited

Howden International Underwriters General Insurance Agency (2009) Limited

Howden General and Marine Insurance Brokers (2011) Limited

Howden Insurance Brokers India Private Limited**

Howden Asia (Hong Kong) Limited

Hendricks & Co GmbH

Howden Insurance Brokers Oy

Howden Insurance Brokers LLC**

Howden Corretora de Resseguros Ltda

Howden Insurance Brokers (Bermuda) Limited

Howden Insurance Brokers Inc.

Howden Insurance LLC

HBG Asia Holdings Limited

Howden Insurance Brokers (HK) Limited**

Universal Healthcare Management Limited**

Accette Insurance Management Limited**

Howden Insurance & Reinsurance Brokers (Phil.), Inc.

Ultramar Reinsurance Brokers, Inc.

Accette Life and Accident Insurance Brokers, Inc.

HBG Holdings (Singapore) Pte Limited

Howden Insurance Brokers (S.) Pte. Limited

PT Howden Insurance Brokers Indonesia

Howden Insurance Brokers (Thailand) Limited**

Three Wise Boys Ltd**

HIG Risk Management Services Sdn. Bhd.

Howden Risk Management Consultants Sdn. Bhd.

Kinabalu Ultramar Agency Sdn. Bhd.

Conset Administração e Corretagem De Seguros Ltda

United Kingdom (U.K)

U.K.

U.K.

U.K.

U.K.

U.K.

Sweden

Spain

Singapore

Israel

Israel

Israel

India

Hong Kong

Germany

Finland

Dubai

Brazil

Bermuda

USA

USA

Hong Kong

Hong Kong

Hong Kong

Hong Kong

Philippines

Philippines

Philippines

Singapore

Singapore

Indonesia

Thailand

Thailand

Malaysia

Malaysia

Malaysia

Brazil

83.6

100

74.2

100

100

100

95

74

100

100

100

100

26

100

75

92.6

35

100

100

100

100

75

48.8

48.8

48.8

74.9

74.9

74.9

75

75

80

36.8

36.75

75

75

75

51

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Intermediate holding company and insurance broking


Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Intermediate holding company

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking


Insurance broking

Insurance broking

Insurance broking


Insurance broking

Insurance broking

Insurance broking

Insurance broking

* Held directly by Hyperion Insurance Group Limited ** Although legal ownership is less than 50%, financial results are 100% consolidated for the purposes of these financial statements, as the Group has effective control over these entities

36 PrinciPal subsiDiary anD associateD comPanies (CONTINUED)

name of comPany % owneD

nature of business

Windsor Limited

Condor Professional Indemnity Limited

Ostrakon Capital (2) Limited

BGH Risk Solutions Limited

Clinical Trials Insurance Services Limited

Ostrakon Securities Limited

Minmar (934) Limited

Windsor Partners Limited

Windsor Partners LLP

Canadian Resources Insurance Services Inc.

Spa Underwriting Services Select Limited

Anthony K Falcon Limited

Borough Run-Off Services Limited

Football League & P.F.A Administration Limited

Lander Eberli Shorter (Aviation) Limited

Risk Assessment Through Evaluation Limited

Windsor Insurance Brokers Limited

Windsor Insurance Brokers (UK) Limited

Windsor Professional Indemnity Limited

Windsor Properties Limited

Windsor Services Limited

Windsor Trustees Limited

Howden Specialty Underwriters, LLC

DUAL International Underwriting Limited

DUAL Corporate Risks Limited

DCR (FI) Limited

DUAL Speciality Risks Limited

Tamesis DUAL Limited

VK Underwriters LLC

DUAL Ibérica Riesgos Profesionales S.A.

VK Underwriters Inc.

DUAL New Zealand Limited

DUAL Italia S.p.A

DUAL Deutschland GmbH

DUAL Australia Pty Limited

DUAL Underwriting Agency (Singapore) Pte. Limited

DUAL Underwriting Agency (Hong Kong) Limited

DUAL International Limited*

DCR Holdings Limited

DUAL Overseas Investments Limited

HIG Services Inc.

HIG Services Limited*

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

Canada

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

U.K.

USA

U.K.

U.K.

U.K.

U.K.

U.K.

USA

Spain

Puerto Rico

New Zealand

Italy

Germany

Australia

Singapore

Hong Kong

U.K.

U.K.

U.K.

USA

U.K.

100

100

100

100

55

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

99

100

75

100

100

87.5

100

65

100

100

100

75

90

90

100

100

100

100

100

100

100

100


Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking

Insurance broking and underwriting agency

Insurance underwriting agency














Intermediate holding company and insurance underwriting agency



Management services

Management services

* Held directly by Hyperion Insurance Group Limited


96 97

37 DiscontinueD oPerations

CFC Underwriting LimitedOn 19 June 2012, the Company sold its 59.5% investment in the ordinary share capital of CFC Underwriting Limited for cash consideration of £20,810,000.

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

2012 £’000

2011 £’000




Depreciation, amortisation and impairment of non-financial assets

6,542

8

(4,527)

(85)

8,492

33

(5,267)

(99)

Operating profit 1,938 3,159

Finance income

Finance costs

15

-

6

-

Profit before tax 1,953 3,165

Attributable tax expense (448) (812)

Profit after tax 1,505 2,353

Profit on disposal of discontinued operations

Income tax expense

17,123

-

-

-

Net profit attributable to discontinued operations 18,628 2,353

During the year, CFC Underwriting contributed £387,000 (2011: £2,578,000) to the Group’s net operating cashflows, paid £156,000 (2011: £184,000) in respect of investing activities, and paid £nil (2011: £965,000) in respect of financing activities.

A profit of £17,123,000 arose on the disposal of CFC Underwriting Limited, being the proceeds of disposal less the carrying amount of the subsidiary’s net assets and attributable goodwill.

2012 £’000


Other non-current assets

501

38

Total non current assets 539


Own cash

Insurance cash

Insurance receivables

Intercompany receivables

2,886

1,615

4,697

6,745

1,013

Total assets sold 16,957


Tax liabilities

Insurance payables

(1,202)

(409)

(9,959)

Total Liabilities associated with assets sold (11,570)

net assets as at 19 june 2012 5,927

HIB Inc - DivisionDuring the year management began the process of finding a buyer of a book of business within the entity of Howden Insurance Brokers Inc. Management have concluded it is unlikely any material value will be raised from the sale and therefore the goodwill has been impaired.

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

2012 £’000

2011 £’000




Depreciation, amortisation and impairment of non-financial assets

593

1

(496)

(6)

543

-

(489)

(5)

Operating profit 92 49

Finance income

Finance costs

-

-

-

-

Profit before tax 92 49

Attributable tax expense (17) (12)

Profit after tax 75 37

Loss on impairment of discontinued operations (1,196) -

(Loss) / profit attributable to discontinued operations (1,121) 37

Management believes the cashflows of this division are not material to the Group and has therefore not separately identified the cashflow movements of this division.

A loss of £1,196,000 arose on the impairment of the goodwill recognised for the particular division within HIB Inc.

98 99

We have audited the parent company financial statements of Hyperion Insurance Group Limited for the year ended 30 September 2012 which comprise the Parent Company Balance Sheet and the related notes 1 to 12. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorAs explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have beenconsistentlyappliedandadequatelydisclosed;thereasonableness ofsignificantaccountingestimatesmadebytheDirectors;andtheoverallpresentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the parent company financial statements:

• giveatrueandfairviewofthestateoftheparentcompany’saffairsas at 30 September 2012

• havebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccountingPractice;and

• havebeenpreparedinaccordancewiththerequirementsoftheCompanies Act 2006.

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

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

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

• theparentcompanyfinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns;or

• certaindisclosuresofDirectors’remunerationspecifiedbylaware notmade;or

• wehavenotreceivedalltheinformationandexplanationswerequirefor our audit.

Other matterWe have reported separately on the group financial statements of Hyperion Insurance Group Limited for the year ended 30 September 2012.

DaviD rush (SENIOR STATUTORY AUDITOR) 11 DECEMBER 2012

for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom

inDePenDent auDitor’s rePort to the members of hyPerion insurance GrouP limiteD

balance sheetas at 30 sePtember 2012

note

2012 £’000

2011 £’000

fixed assets

Investments in subsidiary undertakings 4 21,860 21,892

current assets

Debtors due within one year

Debtors due after more than one year

Cash at bank and in hand

5

5

60,872

78,006

406

41,267

375

3

139,284 41,645

creditors

Amounts falling due within one year

net current assets

6 (7,059)

132,225

(9,468)

32,177

total assets less current liabilities 154,085 54,069

creditors

Amounts falling due after more than one year 7 (74,131) (16,626)

net assets 79,954 37,443

capital and reserves

Called up share capital

Share premium account

Other reserves

Profit and loss account

9

10

10

10

508

60,612

364

18,470

422

35,181

364

1,476

shareholders’ funds 79,954 37,443

the financial statements were approved by the board of Directors and authorised for issue on 11 December 2012. they were signed on its behalf by:

D P howDen e r m faDy DIRECTOR FINANCE DIRECTOR

company number 2937398

the notes on pages 100 to 103 form an integral part of these financial statements.

100 101

notes to the accountsfor the year enDeD 30 sePtember 2012

1 accountinG PoliciesThe principal accounting policies adopted in the preparation of these financial statements are set out below. These were applied to items considered material to the financial statements in both the current and prior year.

a) Basis of preparationThe Board has decided that the continued use of UK GAAP at the Company level is a more appropriate method of accounting rather than the application of IFRS.

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

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

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

d) Dividends receivableDividends received are recognised in the period in which they are declared and approved by the company paying the dividend.

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

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

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

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

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

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

2 Profit anD loss accountAs permitted by section 408 of the Companies Act 2006, the Company has not included its own profit and loss account in these financial statements. The Company’s profit after tax for the year was £18.2m (2011: £0.6m) this is dealt with in the financial statements of the Group.

3 DiviDenDsThe Company has paid an interim dividend in the year of £1,200,000, the Company has not declared any further dividends during the year ended 30 September 2012 (2011: £409,000).


4 investments

cost

2012 £’000

2011 £’000

At beginning of year

Additions

Disposals

21,892

73,314

(73,346)

21,892

-

-

At end of year 21,860 21,892

The following were the principal subsidiary entities at 30 September 2012. Unless otherwise shown, the capital of each company is wholly-owned, is in ordinary shares and the principal country of operation is the country of incorporation/registration.

name of comPany % owneD nature of business

DUAL International Limited

Howden Broking Group Limited

HIG Services Limited

J K Buckenham Limited

Avant Garantías SL

United Kingdom (UK)

UK

UK

UK

Spain

100

100

100

100

100



Management services

Reinsurance broking

Motor extended warranties and motor management services

On 19 June 2012, the Company sold its 59.5% investment in the ordinary share capital of CFC Underwriting Limited for cash consideration of £20,810,000.

Hyperion Insurance Group Limited (‘Hyperion’) acquired a group of companies (“Windsor”) on 26th June 2012. On 31 July 2012 the investment in Windsor was sold to Howden Broking Group Limited for consideration of £73,314,000.

Further details of the transaction are given in the Group’s financial statements in note 37.

5 Debtors Due within one year

2012 £’000

2011 £’000

Other debtors

Group relief debtor

Prepayments and accrued income

Amounts due from Group undertakings

Dividends receivable from Group undertakings

Loans due from Group undertakings

161

1,198

1,159

29,793

4,429

24,132

-

687

711

25,629

8,689

5,551

60,872 41,267

Amounts falling due after one year

2012 £’000

2011 £’000

Prepayments and accrued income

Amounts due from Group undertakings

3,454

74,552

375

-

78,006 375

102 103

6 creDitors – amounts fallinG Due within one year

2012 £’000

2011 £’000

Bank overdrafts, secured

Bank loans

Shareholder loans

Amounts owed to Group undertakings

Interest payable

Corporation tax payable

Other creditors

-

(3,000)

(296)

(1,013)

(869)

(517)

(1,364)

(2,498)

-

(563)

(6,073)

-

-

(334)

(7,059) (9,468)

7 creDitors – amounts fallinG Due after more than one year

2012 £’000

2011 £’000

Shareholder loans, secured

Shareholder loan notes

Bank loans

(2,006)

(5,125)

(67,000)

(2,025)

-

(14,601)

(74,131) (16,626)

During the year the Group repaid their existing HSBC facilities, being a £17m revolving credit facility and a £3m uncommitted overdraft, as part of the refinancing for the Windsor acquisition.

As part of this transaction, the Group entered into syndicated facilities with HSBC and Lloyds Banking Group on 3 July 2012 to borrow £70m over five years. The facilities are split into a £30m Amortising facility (Facility A) payable over the course of the five years, and a £40m Bullet facility payable at the end of the five year term (Facility B).

The facilities bear interest which are calculated based on LIBOR plus margin. The margin is different for each facility and reduces as the adjusted leverage reduces for the Group. Facility A bears interest of as high as 3.25% or as low as 2% over LIBOR, while Facility B bears interest of as high as 3.75% or as low as 2.50% over LIBOR. Hyperion have entered into interest rate swaps to hedge the risk of an adverse interest rate movement (refer to note 23).

The facilities are secured by cross-guarantees and debentures over the Company.

8 DeferreD tax

2012 £’000

2011 £’000

Losses carried forward



Other timing differences

Balance at end of year

-

-

(200)

(200)

-

-

-

-

net deferred tax liability at end of year (200) -

total deferred tax debit in profit and loss account for period (200) -


9 share caPitalDetails of the Company’s share capital are given in the Group financial statements on note 25.

10 reconciliation of movements in shareholDers’ funDs

calleD uP share

caPital£’000

share Premium

account£’000

other reserves

£’000

Profit anD loss

account£’000

total shareholDer

funDs£’000


Shares issued

Dividends paid

Profit for the year

422

86

-

-

35,181

25,431

-

-

364

-

-

-

1,476

-

(1,200)

18,194

37,443

25,517

(1,200)

18,194

as at 30 september 2012 508 60,612 364 18,470 79,954

calleD uP share

caPital£’000

share Premium

account£’000

other reserves

£’000

Profit anD loss

account£’000

total shareholDer

funDs£’000


Dividends paid

Profit for the year

422

-

-

35,181

-

-

364

-

-

1,238

(409)

647

37,205

(409)

647

as at 30 september 2011 422 35,181 364 1,476 37,443

11 caPital commitmentsThe Company had no capital commitments as at 30 September 2012, nor at 30 September 2011.

12 Post balance sheet eventsThere are no post balance sheet events for the period ended 30 September 2012.

104 105

comPany contacts correct at january 2013

HEAD OFFICEhyPerion insurance GrouP

16 eastcheaplondon ec3m 1bDunited kingdom

tel: +44 (0)20 7398 4888fax: +44 (0)20 7645 9398email: [email protected]: www.hyperiongrp.com

BROKING OFFICEShowDen brokinG GrouP limiteD


tel: +44 (0)20 7623 3806fax: +44 (0)20 7623 3807email: [email protected]: www.howdengroup.com

AMERICAS

canaDian resources insurance solutions inc238 elm street, suite 102Greater sudburyontario, P3c 1v3canada

tel: +1 705 222 2747web: www.crisinsure.com

conset aDministraÇÃo e corretaGem De seGuros ltDa (rio De janeiro)

av. Pres. vargas.583 – centrorio de janeirorj 20071-004brazil

tel: +55 21 2176 8200email: [email protected]: www.conset.com.br

conset aDministraÇÃo e corretaGem De seGuros ltDa (belo horiZonte)

rua santa catarina1627 – lourdesbelo horizonte - mG 30170-081brazil


conset aDministraÇÃo e corretaGem De seGuros ltDa (sÃo Paulo)rua Pedro de toledo130 vila marianasão Paulo 04039-000brazil


howDen corretora De resseGuros ltDa

(rio De janeiro)

avenida luís carlos Prestes, 180, sala 351rio de janeiro 22775-055brazil

tel: +55 21 2112 4628email: [email protected]: www.howdengroup.com

flaG - financial lines aDvisory GrouP (a member of the howDen brokinG GrouP network)

av. Paseo de las Palmas no. 2070col. lomas de chapultepecmiguel hidalgoc.P. 11000méxico, D.f.

web: www.howdenflag.com

howDen insurance brokers (bermuDa) limiteD

4th floor Phase ii, washington mall22 church streethamilton hm11bermuda

howDen insurance brokers inc (baltimore)

37 walker avenuesuite 200baltimore mD 21208united states of america

tel: +1 410 486 2400fax: +1 410 486 2998email: [email protected]: www.howdenbrokers.com

howDen insurance brokers inc (new jersey)

103 carnegie centresuite 300Princetonnew jersey 08540united states of america

tel: +1 786 353 1123email: [email protected]: www.howdenbrokers.com

howDen insurance, llc (miami - latam)

sabadell financial center1111 brickell avenue, suite 2725miami, fl 33131united states of america

tel: +1 (786) 497 7042fax: +1 (305) 675 0939email: [email protected]: www.howdengroup.com

EUROPE

clinical trials insurance services limiteD

4 lloyd’s avenuelondon ec3n 3eDunited kingdom

tel: +44 (0) 20 7133 1243fax: +44 (0) 20 7133 1500email: [email protected]

Grc howDen reasurans brokerliGi anonim sirketi (istanbul)

Dereboyu street uphill towersa block, floor 28, office 15434746, bati atasehiristanbulturkey

tel: +90 216 688 2300fax: +90 216 688 2386email: [email protected]

henDricks & co Gmbh (DusselDorf)

arnheimer straße 14240489 DüsseldorfGermany

tel: +49 (0)211 940830fax: +49 (0)211 9408383email: [email protected]: www.hendricks.eu.com

henDricks & co Gmbh (hamburG)

jungfernstieg 120095 hamburgGermany

tel: +49 (0)40 767 94760fax: +49 (0)40 767 94769email: [email protected]: www.hendricks.eu.com

henDricks & co Gmbh (munich)

maximilianstraße 2280539 münchenGermany

tel: +49 (0)89 1799 770fax: +49 (0)89 1799 7717email: [email protected]: www.hendricks.eu.com

howDen iberia s.a. (barcelona)

c/aragón 264, 1°-3ª08007 barcelonaspain

tel: +34 (0)93 488 0937fax: +34 (0) 93 488 0763email: [email protected]: www.howdeniberia.com

howDen iberia s.a. (maDriD)

montalbán 7, Planta 728014 madridspain

tel: +34 (0) 91 429 9699fax: +34 (0) 91 369 2182email: [email protected]: www.howdeniberia.com

howDen iberia s.a. (seville)

c/Progreso n39 – local41013 sevillaspain

tel: +34 (0) 95 429 6122fax: +34 (0) 95 462 3824email: [email protected]: www.howdeniberia.com

howDen iberia s.a. (valencia)

c/Don juan de austria, 4-5° puerta 15946002 valenciaspain

tel: +34 (0) 96 351 83 05fax: +34 (0) 96 351 83 10email: [email protected]: www.howdeniberia.com

howDen insurance brokers ab (stockholm)

nybrogatan 27s-114 39 stockholmsweden

tel: +46 8 545 670 20fax: +46 8 667 29 10email: [email protected]: www.howden.se

104 105

106 107

howDen insurance brokers limiteD

(lonDon)


tel: +44 (0) 20 7623 3806fax: +44 (0) 20 7623 3807email: [email protected]: www.howdengroup.com

howDen insurance brokers limiteD (lonDon)

71 fenchurch streetlondon ec3m 4bsunited kingdom

tel: +44 (0)20 7133 1300fax: +44 (0)20 7133 1500email: [email protected]: www.howdengroup.com


(leeDs)

brookfield courtselby roadleeds, ls25 1nb

tel: 0845 371 1433email: [email protected]: www.howdengroup.com


(wakefielD)

first floor8 navigation courtcalder Parkwakefield wf2 7bjunited kingdom

tel: +44 (0)1924 241900fax: +44 (0)1924 241940email: [email protected]: www.howdengroup.com


(shrewsbury)

talbot housemarket streetshrewsburyshropshire sy1 1lGunited kingdom

tel: +44 (0)1743 260600fax: +44(0)1743 355237email: [email protected]: www.howdengroup.com


(Guernsey)

Dewhurst houseweighbridgest Peter PortGuernsey Gy1 4eD

tel: +44 (0)1481 725536fax: +44 (0)1481 727756email: [email protected]: www.howdengroup.com

howDen insurance brokers limiteD (hamburG)

moenckebergstrasse 1320095 hamburgGermany

tel: +49 40 325 085600fax: +49 40 325 085656email: [email protected]: www.howdengroup.com

howDen insurance brokers oy

(helsinki)

erottajankatu 5helsinki, fi-00130finland

tel: +358 (9) 2513 7500fax: +358 (9) 6220 0130email: [email protected]: www.howdengroup.com

sPa unDerwritinG services select limiteD

Dowding housecoach & horses Passagelower Pantilestunbridge wellskent, tn2 5uaunited kingdom

tel: +44 (0) 1892 709621web: www.spa-underwriting.co.uk

winDsor

(a traDinG name of howDen insurance brokers limiteD)

71 fenchurch streetlondon ec3m 4bsunited kingdom

tel: +44 (0) 20 7133 1200fax: +44(0) 20 7133 1500email: [email protected]: www.windsor.co.uk

MIDDLE EAST

howDen insurance brokers (2002) limiteD (tel aviv)

adgar tower35 efal streetPetach tikva, 49511israel

tel: +972 3 627 0700fax: +972 3 760 2618email: [email protected]: www.howden.co.il

howDen insurance brokers llc(Dubai)

P.o. box 49195office no. 305 & 502al nasr Plaza buildingnear oud metha metro stationoud methaDubai, u.a.e.

tel: +971(4)357 3835fax: +971(4)357 3892email: [email protected]: www.howdendubai.com

ASIA PACIFIC

accette insurance brokers (h.k.) limiteD (macau branch)

estrada do repousono 131a, r/c, em,macau

web: www.howdengroup.com

howDen asia (honG konG) limiteD

(honG konG)

room 1001-3, 10/f harcourt house39 Gloucester roadwanchaihong kong

howDen asia Pte. ltD.

(sinGaPore)

3 Phillip street, royal Group building#12-01singapore 048693

tel: +65 6302 9699fax: +65 6557 0564email: [email protected]: www.howdengroup.com

howDen insurance anD reinsurance brokers (Phil.) inc.

(makati city)

23rd floorPhilippine axa life centre1286 sen. Gil Puyat avenue corner tindalo st.makati cityPhilippines

tel: +632 845 2327email: [email protected]: www.howdengroup.com

howDen insurance brokers (hk) limiteD

(honG konG)

room 1001-3, 10/f harcourt house39 Gloucester roadwanchaihong kong


howDen insurance brokers inDia Private limiteD (banGalore)

red cross bhavanunit s – 3, 2nd flooresteem arcade, 26, race course roadbangalore 560 001india

tel: +91 080 6583 2972email: [email protected]: www.howdenindia.com

howDen insurance brokers inDia Private limiteD (chennai)

2b raghupriya apt3 krishnama roadnungambakkamchennai 600 034india


howDen insurance brokers inDia Private limiteD (hyDerabaD)

6-3-550, 4th floor, lb bhavanopp. medinova Diagnostic servicessomajigudahyderabad 500 082india


107106

108 109

howDen insurance brokers inDia Private limiteD (mumbai)

6th floor, Peninsula chambersPeninsular corporate ParkGanpatrao kadam marglower Parelmumbai 400 013india

tel: +91 22 6655 8888fax: +91 22 6654 8833email: [email protected]: www.howdenindia.com

howDen insurance brokers inDia Private limiteD (new Delhi)

a-261, first floor,Defence colonynew Delhi 110 024india


howDen insurance brokers inDia Private limiteD (Pune)

office no 10. 4th floorkarnik heritage f.c. roadshivajinagar, Pune - 411004india

tel: +91 (0)20 4120 1552-55web: www.howdenindia.com

howDen insurance brokers limiteD (taiwan branch)

floor 11, room 209no. 51 hengyang roadjhongjheng Districttaipei city 100taiwan r.o.c.

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

howDen insurance brokers (thailanD) limiteD (banGkok)

10th floor, Ploenchit center2 sukhumvit roadkwaeng klongtoeybangkokthailand, 10110


howDen insurance brokers (s.) Pte limiteD (sinGaPore)

3 anson road#26-01 springleaf towersingapore, 079909


howDen korea comPany limiteD

(seoul)

8th floor, seorin building88 seorin-Dong chongro-kuseoul 110-790korea


howDen risk manaGement consultants sDn. bhD. (selanGor)unit c-25-03, 3 two squareno. 2, jalan 19/146300 Petaling jayaselangor Darul ehsanmalaysia


P t howDen insurance brokers inDonesia (jakarta)

mayapada tower 8th floorjl. jend. sudirman kav.28, jakarta 12920indonesia

tel: +62 21 2939 4900fax: +62 21 2939 4999email: [email protected]: www.howdengroup.com

108

UNDERWRITING OFFICESDual international limiteD

4th floor140 leadenhall streetlondon ec3v 4qtunited kingdom

tel: +44 (0)20 7337 9888fax: +44 (0)20 7398 4801email: [email protected]: www.dualinternational.com

AMERICAS

Dual new york (a branch of howDen sPecialty unDerwriters llc)80 broad street5th floornew york, ny 10004united states of america


howDen sPecialty unDerwriters llc (miami)

6915 red road, suite 226coral Gables,miami, fl 33143united states of america

t: +1 786 275 3233f: +1 786 513 2678email: [email protected]

vk unDerwriters llc (buenos aires)

basavilbaso 1350, 7 suite 707buenos airesc1006argentina

tel: +54 11 5258 7178email: [email protected]

vk unDerwriters llc (miami)

6915 red road, suite 226coral Gables,miami, fl 33143united states of america

t: +1 786 275 3233f: +1 786 513 2678email: [email protected]

vk unDerwriters inc (san juan)

caparra office center22 avenue Gonzalez Giusti, suite 222Guayuabo, Pr 00968Puerto rico

tel: +1 787 708 6376email: [email protected]

EUROPE

Dual austria (vienna)

(a branch of Dual DeutschlanD Gmbh)

firmiangasse 7/21130 wienaustria

tel.: +43 (0) 1 8760 334email: [email protected]: www.dualaustria.com

Dual corPorate risks limiteD (lonDon)

4th floor140 leadenhall streetlondon ec3v 4qtunited kingdom

tel: +44 (0)20 7337 9888fax: +44 (0)20 7337 9889email: [email protected]: www.dualcorporaterisks.com

Dual corPorate risks limiteD (manchester)

barnett house53 fountain streetmanchester m2 2anunited kingdom

tel: +44 (0)161 233 7150fax: +44 (0)161 233 7160email: [email protected]: www.dualcorporaterisks.com

Dual DeutschlanD Gmbh (coloGne)

schanzenstr. 36 / Gebäude 19751063 kölnGermany

tel: +49 (0)221 16 80 26-0fax: +49 (0)221 16 80 26-66email: [email protected]: www.dualdeutschland.com

109

110

Dual iberica riesGos Profesionales s.a.u.

(maDriD)

c/alfonso xii, 32, 128014 madridspain

tel: +34 91 369 1258fax: +34 91 429 5925email: [email protected]: www.dualiberica.com

Dual irelanD (Dublin) (a branch of Dual corPorate risks limiteD)33 fitzwilliam squareDublin 2ireland

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

Dual italia s.P.a (milan)via santa maria fulcorina, 2020123 milanoitaly

tel: +39 02 72 08 05 97fax: +39 02 72 08 05 92email: [email protected]: www.dualitalia.com

ASIA PACIFIC

Dual australia Pty ltD (brisbane)

level 8, suite 4320 adelaide streetbrisbane qlD 4000australia

tel: +61 (0) 73218 2728fax: +61 (0)2 9248 6301web: www.dualaustralia.com.au

Dual australia Pty ltD (melbourne)

level 13520 collins streetmelbourne vic 3000australia

tel: +61 (0)3 8611 3500fax: +61 (0)2 9248 6301email: [email protected]: www.dualaustralia.com.au

Dual australia Pty ltD (Perth)

unit 68, 177 oxford streetleederville wa 6007australia


Dual australia Pty ltD (syDney)

level 4332 kent streetsydney nsw 2000australia


Dual new ZealanD limiteD

level 20191 queen streetauckland 1010new Zealand

tel: +64 (0)9 973 0190fax: +64 (0) 9 973 0191email: [email protected]: www.dualnewzealand.co.nz

Dual unDerwritinG aGency (honG konG) limiteD

9/f, cityplaza one1111 king’s road, taikoo shinghong kong

tel. +852 2894 0756fax. +852 2886 2680email: [email protected]: www.dualasia.com

Dual unDerwritinG aGency

(sinGaPore) Pte limiteD

c/- 4 shenton way#21-01 sGx centre 2singapore, 068807

tel: +65 9781 4078 email: [email protected]: www.dualasia.com

110

HYPERION INSURANCE GROUP

16EastcheapLondonEC3M1BDTel:+44(0)2073984888Fax:+44(0)2076459398Email:[email protected]:www.hyperiongrp.com

Documents

HYPERIONweb-resources.hyperiongrp.com/cmsmedia/1318/2012_hyperion... · Hyperion Insurance Group was founded in 1994 and is headquartered in the City of London. Beginning life as