Results for the year ended 31 December 2020

RNS Number : 5087Z

Randall & Quilter Inv Hldgs Ltd

24 May 2021

Randall & Quilter Investment Holdings Ltd.

24 May 2021

R e sults for the year ended 31 December 2020

Randall & Quilter Investment Holdings Ltd. (AIM-RQIH), the leading non-life global specialty insurance company focusing on the Program Management and Legacy Insurance businesses, today announces its results for the year ended 31 December 2020.

2020 Highlights

Record Pre-Tax Operating Profit driven by Strong Operating Results Across Business Segments

Accelerated Growth for the Group

§ Record Pre-Tax Operating Profit of £16.0 million, an increase of 102%, reflecting a year of accelerated growth across both business segments

§ Fee Income of £18.8 million, an increase of 89%, representing 17% of Gross Operating Income

§ Operating Earnings per share of 5.9 pence, an increase of 38%

§ Profit Before Tax of £30.2 million, a decrease of 21%, reflecting a reduction in net intangibles due to the mix of Legacy Insurance transactions

Breakthrough Year for Program Management

§ Program Management was profitable for the first time, earning Pre-Tax Operating Profit of $3.4 million, a 14.3% margin, demonstrating the operating leverage benefits of increased scale

§ 18 new programs signed, increasing total programs to 48, driving a 46% increase in Gross Written Premium to $538.9 million; on course to achieve previously announced target of at least $1.5 billion of Gross Written Premium in 2023

Record Year for Legacy Insurance

§ Legacy Insurance had a record year, executing on 19 deals and delivering a 46% increase in Pre-Tax Operating Profit to £38.1 million

§ Business continues to be written at attractive returns with Operating Return on Tangible Equity of 14.8% and a 5-year average return of 20.2%

Capital and Dividend

§ Capital remained strong with a Preliminary Group Solvency Ratio of 202% versus target of 150%

§ Final cash dividend of 0.2 pence per share for a total cash distribution for the year of 4 pence per share

§ Announcing a new progressive dividend policy with a payout ratio of 25%-50% of Pre-Tax Operating Profit, a proxy of cash earnings, reflecting current growth opportunities and a balance of reinvesting and growing dividends; intend to grow annual dividend from 4 pence per share

Franchise and Platform

§ £173 million of capital raised during the year for growth

§ Senior leadership strengthened with key hires including Executive Chairman, Group CFO, CEO of US Program Management and Chief Human Resources Officer

§ Expanded footprint and capabilities by launching US E&S Program Management business

§ Increased exposure to fee-related profits through investment in Tradesman, an MGA to whom we provide Program Management services

Post Period-End Developments

Q1 2021 Update

§ Program Management increased Gross Written Premium by 52% to $185.2 million, and Fee Income by 91% to $9.7 million, compared with Q1 2020; launched 5 new programs increasing active programs to 52 and Contracted Premium to $1.4 billion

§ Legacy Insurance completed one deal and has five more under exclusivity representing approximately £150 million of net reserves; witnessing strong level of activity for a business that is historically busier in second half of the year

§ Tradesman EBITDA increased by ~140% to ~$4.8 million, compared with Q1 2020

Summary Financial Performance (see Notes for definitions)

(£m, except where noted)	2020	2019	Y / Y Change
Group Results

Key Performance Indicators
Pre-Tax Operating Profit	£16.0	£8.0	102%
Fee Income	18.8	10.0	89%
Operating Earnings per Share ¹	5.9p	4.3p	38%
Tangible Net Asset Value Per Share¹	124.4p	125.3p	2% ²
Distribution Per Share	4.0p	3.8p (cash)	5%³
	6.1p (non-cash)
IFRS
Profit Before Tax	30.2	38.1	(21)%
Earnings Per Share ¹	11.1	20.3	(45)%
Net Asset Value Per Share ¹	142.4p	147.2p	(1)% ² -

Business Segment Metrics

Program Management ($m)
Contracted Premium	1,281.2	841.9	52%
Gross Written Premium	538.9	368.9	46%
Pre-Tax Operating Profit	3.4	(1.8)	NM
Pre-Tax Operating Profit Margin	14.3%	(15.1)%	29.3 pct. pts.

Legacy Insurance
Cash and Investments Acquired	673.7	351.0	92%
Net Reserves Acquired	499.6	276.0	81%
Pre-Tax Operating Profit	38.1	26.1	46%
Operating Return on Tangible Equity	14.8%	10.2%	4.6 pct. pts.

Commenting on the results for the year, Executive Chairman William Spiegel, said:

"2020 was a challenging year and the pandemic tested the resilience of our employees and our business model. Our team responded with agility and confidence in a dynamic market environment and this was demonstrated by our record 2020 operating results.

Since joining R&Q, I have experienced firsthand the esprit de corps that exists between our employees based across our eight global offices. All our employees contribute to the entrepreneurial and pioneering spirit that R&Q is known for and which we demonstrated once again last year. What our 2020 results demonstrate is that the difficulties of last year - not least the "work from home" phenomenon - did not hamper our ability to deliver on behalf of our clients and ultimately our shareholders.

I believe 2020 at R&Q can best be described as a year of accelerated growth. Our Legacy Insurance business reported its strongest year ever and our Program Management business, after just four years, became profitable. With both of our businesses profitable, we now have the foundation to continue accelerating our growth and delivering sustainable earnings in the years to come. We also added a complementary business to Program Management when we made a 35% investment in Tradesman Program Managers, one of our core MGA program management partners. This investment increases our exposure to fee-related profits and we anticipate exploring further opportunities to emulate this approach with other MGAs to whom we provide program management services.

Very early in 2020 it was clear to us that the pandemic would result in significant structural changes to our markets, and that this would create highly attractive and accretive opportunities for R&Q. In order to execute on these, we raised £173 million ($225 million) of new capital, which we were able to deploy effectively in both the legacy and program markets.

[1] On a fully diluted basis

2 Includes 3.8 pence cash distribution paid in 2020.

3 Excludes H2 2019 distribution paid by way of bonus shares.

We remain in the enviable position of competing in growing markets that offer us the opportunity to reinvest our capital at high rates of return, creating long term shareholder value. With significant growth opportunities in front of us, our business will continue to consume capital over the near term, particularly our Legacy Insurance business. Over time, however, we expect our Program Management business to create enough free cash flow to make us capital self-sufficient.

While we are in growth mode and remain capital consumptive, we are adopting a progressive cash dividend policy with a payout ratio of between 25% and 50% of our Pre-Tax Operating Profit, the best proxy for cash earnings. While the precise payout percentage may vary year on year, we intend to grow the total amount of the annual cash dividend from the FY 2020 level of 4 pence per share. This dividend policy will allow us the flexibility to carefully balance the allocation of our capital between reinvesting in profitable opportunities, providing an attractive and growing dividend to our shareholders and minimising the need to raise external capital.

2020 was a year like no other we have witnessed in our lifetime and it continues into 2021. Yet, despite all this turmoil, it was a very strong year for R&Q. I would like to personally thank Ken Randall and Alan Quilter, the two founders of R&Q, for having confidence in me and guiding and mentoring me over the past 17 months. I also want to thank all our stakeholders for their unwavering support during these unprecedented times: our shareholders, our customers, our regulators, our rating agencies, our board and most importantly our loyal and dedicated employees. I am so proud of what we achieved in 2020 under trying conditions. I cannot wait to see what we can accomplish over the next few years as the world returns to a more normal state."

Investor presentation

Our shareholders presentation together with an overview by William Spiegel and Thomas Solomon is available on our website at:

http://www.rqih.com/investors/shareholder-information/investor-presentations

As part of its commitment to open communication with all of its shareholder base, R&Q will also provide a live presentation and Q&A via the Investor Meet Company platform at 3pm on 24 May 2021. Registration details can be accessed via:

https://www.investormeetcompany.com/randall-quilter-investment-holdings-ltd/register-investor

Questions can be submitted pre-event via the IMC dashboard or at any time during the live presentation via the 'Ask a Question' function.

Enquiries to:

Randall & Quilter Investment Holdings Ltd

William Spiegel

Alan Quilter

Tel: +1 917-826-5877

Tel: 020 7780 5960

Numis Securities Limited (Nominated Advisor and Joint Broker)

Stuart Skinner

Tel: 020 7260 1000

Charles Farquhar

Barclays Bank PLC (Joint Broker)

Mark Astaire

Milan Solanki

Tel: 020 7260 1000

Tel: 020 7632 2322

FTI Consulting

Tom Blackwell

Tel: 020 3727 1051

Notes to financials

Pre-Tax Operating Profit is a measure of how our core businesses performed adjusted for Unearned Program Fee Revenue, intangibles created in Legacy Insurance acquisitions and net realised and unrealised investment gains on fixed income and lease-based assets.

Tangible Net Asset Value represents Net Asset Value adjusted for Unearned Program Fee Revenue, intangibles created in Legacy Insurance acquisitions, net unrealised investment gains on fixed income and lease-based assets and foreign translation currency reserves.

Gross Operating Income represents Pre-Tax Operating Profit before Fixed Operating Expenses.

Fee Income represents Program Fee Revenue and our share of earnings from minority stakes in MGAs (Associate).

Underwriting Income represents net premium earned less net claims costs, acquisitions expenses, claims management costs and premium taxes / levies.

Investment Income represents income arising on the investment portfolio excluding net realised and unrealised investment gains on fixed income and lease-based assets.

Fixed Operating Expenses include employment, legal, accommodation, information technology, Lloyd's syndicate and other fixed expenses.

Cash and Investments exclude funds withheld trusts for which we do not earn investment income.

Contracted Premium for Program Management is the Gross Premium that our existing distribution partners believe their programs will generate over a period of time. We expect a significant portion of Contracted Premium to become Gross Written Premium.

Program Fee Revenue represents the full fee revenue from insurance policies already bound including Unearned Program Fee Revenue, regardless of the length of the underlying policy period (earned). We believe Program Fee Revenue is a more appropriate measure of the revenue of the business during periods of high growth, due to a larger than normal gap between Gross Written and Gross Earned (IFRS) Premium.

Unearned Program Fee Revenue represents the portion of Program Fee Revenue that has not yet earned on an IFRS basis.

Program Fee represents Program Fee Revenue as a percentage of written premium ceded to reinsurers.

Pre-Tax Operating Profit Margin for Program Management is our profit margin on Gross Operating Income.

Average Operating Tangible Equity for Legacy Insurance is based on the Group's target solvency capital models and includes allocated debt.

Operating Return on Tangible Equity for Legacy Insurance includes allocated interest expense and has been annualised for interim reporting periods.

Chairman's Statement

2020: A Year in Review

2020 is a year that will live in the memory for a long time. The pandemic and its consequences tested our employees, customers, operations, business model and strategy, just as it did for all companies operating in the global insurance markets.

I am pleased, therefore, to report that we navigated the challenges posed by Covid-19 well, demonstrating the durability and resilience of R&Q and the quality of our people. In particular, the clarity of our model and strategy, built around two specialty businesses in fast-growing insurance sectors, meant that we were able to respond with agility and confidence in a dynamic market environment. This is demonstrated by the excellent results we have reported for 2020.

Accelerated Growth

Our results are examined in more detail in the Financial Review but, in summary, 2020 was a year of accelerated growth. Our Pre-Tax Operating Profit grew 102% to a record £16.0 million and Operating Earnings per share grew 38% to 5.9 pence.

Looking at the key performance metrics for our two core businesses highlights the excellent underlying returns and growth being generated.

· Our Legacy Insurance business recorded its strongest year ever, executing on 19 deals and delivering a Pre-Tax Operating Profit of £38.1 million, an increase of 46% compared to 2019. These results translated into a strong Operating Return on Tangible Equity of 14.8% (5-year average of 20.2%).

· Our Program Management business had a breakthrough year with an increase of 18 programs and robust growth of 89% in Fee Income and 46% in Gross Written Premium, to $24.1 million and $538.9 million, respectively. Most exciting of all is that this business, which we began just four years ago, became profitable for the first time generating a Pre-Tax Operating Profit of $3.4 million.

With both of our businesses profitable, we now have the foundation to continue accelerating our growth and delivering sustainable and growing earnings in the years to come. I think it is also important to note that in 2020 we added a complementary business to Program Management when we made a minority investment in one of our core program partners. This investment increases our exposure to fee-related profits, while locking in the associated program management business.

There are three tried and tested responses to the unexpected difficulties we witnessed in 2020: one, do nothing and hope it will all blow away; two, hunker down, preserve cash and retrench; or, three, use the changed circumstances to think and do differently, accelerate change and seize the opportunity. R&Q decided from an early stage in the pandemic to get on the front foot and embrace the third approach. We did this in a number of ways.

Very early in 2020, it was clear to us that the pandemic would result in significant structural changes to our markets, and create highly attractive and accretive opportunities for R&Q. In order to execute on these opportunities, we took the decision to raise £81 million ($100 million) of new equity in April, being one of the first listed (re)insurers in either the US or Europe to raise capital following the initial Covid-19 shock. We followed our equity raise with a £92 million ($125 million) subordinated debt issue. In total, we raised £173 million ($225 million) of capital in 2020 - an extraordinary achievement for a group of our size and testament to the confidence our investors have in our business and strategy.

We utilised this capital to accelerate the growth opportunities we identified in both the legacy and program markets by injecting it into our operating companies in Bermuda, the US and Europe and for acquisitions. Specifically, Legacy Insurance used ~£145 million to support new transactions, Program Management used ~£20 million to build out its new US platform and our UK branch and we paid a cash distribution to our shareholders of ~£8.5 million.

The growth we achieved in 2020 was quite extraordinary. In our Program Management business, we increased Gross Written Premium by 46%, Fee Income by 89% and the number of programs by 60%, to 48. Our Contracted Premium, the Gross Written Premium we expect to achieve from our MGAs when they achieve scale, ended the year at $1.3 billion, an increase of 52%. We remain on course to achieve our previously announced target of at least $1.5 billion of Gross Written Premium in 2023.

We also continued to enjoy success in Legacy Insurance, as we have consistently for 30 years. In 2020 we completed 19 legacy deals with strong global counter-parties such as Allianz, QBE and Renaissance Reinsurance. These transactions added £674 million of acquired cash and investment assets and £500 million of insurance net reserves, a growth of 92% and 81%, respectively over 2019. Our activity in 2020 shows how far the industry has come from the historic view of legacy transactions being primarily driven by challenged insurance portfolios to one of tailored and creative solutions for capital management.

Our People

What our 2020 results demonstrate is that the consequences of last year - not least the "work from home" phenomenon - did not hamper our ability to deliver on behalf of our clients and ultimately our shareholders.

Our staff, of approximately 280, coped admirably and I have the utmost confidence that they will continue to do so this year. Right from the beginning we put the welfare of our staff first and swiftly implemented best practices around protecting their physical and mental health while also ensuring they had the right support and infrastructure to continue their valuable work. We did not furlough any of our employees; indeed we continued to hire talent. Nor did we avail ourselves of any government support in the areas in which we operate.

We also moved to strengthen our senior leadership team making sure our platform had the right talent to accelerate growth. This was an important priority and we delivered on this with a number of high calibre appointments. These included Tom Solomon as our new Chief Financial Officer, Pat Rastiello, an established leader in the North American program market, as Chief Executive Officer of our US Program Management business and Michele Briggs as Chief Human Resource Officer, at a time when this function is increasingly strategically important.

Strategic Developments

Since joining R&Q, I have also experienced first-hand the esprit de corps that exists between our employees, who are based across eight global offices. All our employees contribute to the entrepreneurial and pioneering spirit that R&Q is known for and which we demonstrated once again last year. A good example was our US Legacy Insurance team, supported by colleagues in London, who worked closely with the Insurance Commissioner of Oklahoma to pioneer, and receive approval, to undertake the first insurance business transfer from a third party under the State's new legislation. An insurance business transfer allows owners of discontinued US P&C business to gain true finality by fully transferring policies to an assuming legacy insurer. The experience gained by working closely with the Oklahoma insurance commissioner's office positions R&Q well to deliver more US legacy business in the future.

We also achieved a notable "first" in our Program Management division in 2020 with the launch of our new Excess & Surplus lines insurance company. We are now the only operator in the global program market to offer program management services in the US (both admitted and non-admitted) and Europe. This allows us to create important strategic relationships with trans-Atlantic insurance distribution partners while also increasing demand from the reinsurance community to support our distribution clients.

R&Q's reputation for being nimble and entrepreneurial was demonstrated with another "first" last year, acquiring a 35% stake in one of our important Program Management clients, New York-based MGA, Tradesman Program Managers ("Tradesman") in exchange for a holding in our Bermuda reinsurer, Sandell Re. Our stake in Tradesman was increased to 40% in early 2021 in exchange for our residual holding in Sandell Re.

This arrangement was notable for two reasons. First, it was a tremendous deal economically for R&Q shareholders relative to the initial acquisition cost of Sandell Re. Second, it also created future strategic value for R&Q inherent in a much closer relationship with a growing and dynamic MGA. This transaction allows Tradesman, with the security of our partnership, to have confidence to grow their business, while for R&Q it creates an additional capital-light and recurring fee stream. In 2020, Tradesman generated earnings before interest, depreciation and amortisation of $13 million, a 61% growth over 2019. We may see opportunities to emulate this approach with other MGAs to whom we provide program management services.

Dividends

In respect of our 2020 year-end results we are pleased to propose a final cash dividend of £0.5 million or 0.2 pence per share for a total cash distribution for the year of 4 pence per share. This represents a 5% increase on the cash distribution paid for FY 2019 of 3.8 pence per share (the final 2019 distribution of 6.1 pence per share was paid in non-cash bonus shares) and reflects a payout ratio of 56% of Pre-Tax Operating Profit. The dividend will be paid on 24 June 2021. The ex-dividend date is 3 June 2021 and the record date is 4 June 2021.

We appreciate the importance to our shareholders of a consistent dividend policy. We think it is important to have a policy that allows for an appropriate balance of reinvestment in our business and dividends to shareholders, as well as one that minimises the need to raise external capital. We are in the enviable position of competing in growing markets that offer us the opportunity to reinvest our capital at high rates of return, creating long term shareholder value.

The growth in the Legacy Insurance business may require external capital in the near term until our Program Management business creates enough free cash flow to support this need. During this period, while we are in growth mode and remain capital consumptive, we will adopt a progressive cash dividend policy with a payout ratio between 25% and 50% of our Pre-Tax Operating Profit, the best proxy for cash earnings. This policy will allow us the flexibility to carefully balance the allocation of our capital between reinvesting in profitable opportunities and in providing an attractive and growing cash dividend to our shareholders. While the precise payout percentage may vary year on year, we intend to grow the annual cash dividend from the FY2020 level of 4 pence per share.

Conclusion

In summary, 2020 was a year like no-other we have witnessed in our lifetime and it continues into 2021. We have lived through lockdowns, school closings, travel restrictions, social unrest, mass vaccinations and unprecedented fiscal stimulus. Yet, despite all this turmoil, it was a year of "firsts" for R&Q. I would like to personally thank Ken Randall and Alan Quilter, the two founders of R&Q, for having confidence in me and guiding and mentoring me over the past 17 months. I also want to thank all our stakeholders for their unwavering support during these unprecedented times: our shareholders, our customers, our regulators, our rating agencies, our board and most importantly our loyal and dedicated employees. I am so proud of what we achieved in 2020 under trying conditions. I cannot wait to see what we can accomplish over the next few year as the world returns to a more normal state.

MARKET & STRATEGY

Over the past 17 months I have had many conversations with shareholders and potential investors, and I am encouraged by the consistent view that R&Q has two impressive core businesses with great potential for continued long term growth; however, it is clear from these conversations many investors still feel we can do more to make our business model less complicated and more transparent. In this section, I would like to demystify our business with the view that the more management and shareholders speak the same language, the easier it will be to achieve our collective goals.

What We Do

R&Q is a specialty insurance company focusing on two growing businesses - Legacy Insurance and Program Management. We have a clearly defined vision to be a leader in each of our high-growth markets, both of which are fundamental components of the P&C insurance ecosystem.

· Legacy Insurance: R&Q's Legacy Insurance business provides creative financial solutions to owners of discontinued insurance and reinsurance business and has been at the heart of the R&Q Group for nearly 30 years. Legacy is now an integral part of the insurance market, providing capital management solutions for global insurance companies. R&Q is one of the most well-established and reputable players within the legacy insurance industry.

R&Q prices transactions to generate a minimum of a 15% return on investment over the life of a transaction ("IRR"). R&Q applies a portfolio approach to its Legacy Insurance business to ensure diversification, and since 2009, has completed over 100 transactions across 35 regulatory jurisdictions in 18 countries. I am pleased to report that over the past five years we have delivered an average Operating Return on Tangible Equity, a proxy for IRR, of 20%, significantly above our cost of capital.

· Program Management: R&Q's Program Management business generates recurring fees by using its licensed and rated insurance companies to act as a conduit between capital providers (reinsurers), and independent insurance distributors or MGAs. We market our Program Management business under the Accredited brand, and each of our entities in the US and Europe are rated A- (Excellent) by A.M. Best for financial strength, making R&Q the only dedicated program partner to provide A- rated insurance capacity on both sides of the Atlantic. The insurance risk in the Program Management business is assumed by the reinsurer unless we decide to or are required to retain a portion. As at year-end 2020, R&Q retained c6% of the insurance risk on our programs and where we assume insurance risk, we generally purchase reinsurance protection.

Program Management generates a stream of stable and recurring fees by charging approximately 5% of annual gross written premium on each program assumed by reinsurers. Given our established platform and licenses, this business is highly scalable with significant potential for operating leverage and requires minimal capital to grow since it bears little of the insurance risk (after taking account the reinsurance protection from our highly rated or well collateralised reinsurance partners). Our Program Management business is only four years old and in 2020 made its first profit. We anticipate our Program Management business will generate gross written premium of at least $1.5 billion by 2023, by which time it will be at scale and we believe generating significant free cash flow. We will also continue to assess minority investments in strategic program partners, such as our investment in Tradesman, which increases our exposure to fee-related profits.

Of course, our business is not without risk. In Legacy Insurance the key concern is claims developing worse than expected. We mitigate this through portfolio diversification; some transactions will perform better, some worse, but on average we generate returns in excess of our target of a 15% IRR. The Program Management business faces a different set of issues; will reinsurers support our MGAs; will our reinsurers decline to pay claims or fail; and will our MGAs produce the expected volume. These potential issues are lessened by having a diversified portfolio of programs and reinsurers. Focusing on diversification is an important element of our strategy, and it does not simply refer to the number of transactions/programs but also the diversification by geography, risk type, customers and vintage year.

Our Profit Model

We earn Gross Operating Income (income before fixed costs) from three sources: underwriting income (69% in 2020); fee income (17% in 2020); and investment income (14% in 2020).

· Underwriting Income: Underwriting income is derived primarily from our Legacy Insurance business associated with the acquisition or reinsurance of a run-off book of (re)insurance at a discount and the settling of insurance claims for less than they were acquired. Our Program Management business generates a modest amount of underwriting income on the insurance risk it retains net of stop-loss coverage that is purchased.

· Fee Income: Fee income is derived primarily from our Program Management business associated with ~5% commission we earn on gross written premium assumed by reinsurers. We also earn distributable income on our minority stake in the earnings of MGAs (currently 40% in Tradesman). While Legacy Insurance does not currently generate fee income, we continue to explore alternative capital vehicles that would add fee income from originating and managing legacy transactions.

· Investment Income: Investment income comes primarily from our Legacy Insurance business associated with the investment of reserves and required capital. These investments comprise primarily high-grade fixed income securities. We also earn investment income on the retained premium and required capital of Program Management.

Our Growing Markets

R&Q competes in large and growing markets which enjoy both secular growth and structural protection from the P&C cycle. Our markets should witness steady growth over the years to come.

· Legacy Insurance: The legacy market continues to expand and in 2020 grew by 9% to $864 billion¹ in reserves of discontinued (re)insurance policies. However, the size of the market is not relevant, it is the size of our addressable market - meaning, will the owners of these legacy reserves transact.

Since the credit crisis of 2007-2008, there has been a significant shift in the behaviour of insurance companies which have recognised the relevance of the legacy insurance industry in helping manage capital, thereby increasing our addressable market. This has occurred for a number of reasons: the low interest rate environment has reduced the profitability of many insurance lines; the higher regulatory capital requirements, including Solvency II; the evolution of third-party managed capital; the emergence of new techniques to transfer liabilities, including insurance business transfers; and an increasingly sophisticated understanding of capital management by insurance and reinsurance companies. As a consequence, exiting discontinued businesses or business lines is now an integral method for (re)insurance companies to strategically manage their capital. We expect the dislocation from the pandemic, the anticipated hardening of premium prices and the desire for insurers to swiftly exit under-performing business lines to continue to fuel the growth in the addressable legacy market.

· Program Management: The program market is also benefiting from permanent structural change that is increasing demand for insurance fronting services. First, we are witnessing ongoing growth in the number of independent MGAs (i.e. not affiliated with an insurance company) as this form of distribution becomes the platform of choice for entrepreneurial underwriters. Second, we have seen a proliferation of reinsurance capacity searching for direct access to premiums generated by strong underwriting teams. To put this structural change in perspective, the unaffiliated MGA count grew by ~44% from 2014-2019 while reinsurance capital grew by 51% over the period 2014-2020.²

Program managers, by providing their insurance licenses, sit at the intersection of MGAs and capital providers. We estimate the US and European MGA market is now at least $100 billion in annual gross written premium (the US is estimated at $60 billion) and growing.³ Importantly, we believe the independent program managers (i.e. program managers that are not also writing live insurance) still control less than 10% of this market, which creates an enormous opportunity to grow share. We see independent MGAs increasingly choosing to align with independent program managers because of the conflict free nature of the relationship. Independent program managers, such as ourselves, have one job - to provide MGAs access to capital providers via their insurance licenses, allowing them to grow their business. We therefore expect the independent program providers to witness significant market share growth over the medium term.

1 PwC: Global Insurance Run-off Survey, February 2021

2 Conning Strategy Study Series: Managing General Agents - Managing Through the Storm, July 2020. Willis Re: Reinsurance Market Report - Results for Full-Year 2020, April 2021

3 Aon Reinsurance Solutions: estimates of US MGA market, November 2020

Our Competitive Positioning

Large, growing and profitable markets will inevitably attract competition, and we have seen more competitors in recent years. However, because R&Q operates in highly regulated markets, there are significant barriers to entry. To compete in our markets requires balance sheet strength, appropriate ratings, regulatory approvals, licenses (preferably across multiple geographies), access to capital and most importantly established operating platforms and highly specialized talent. The investments we have made in our platform - and the expertise and experience we have accumulated - makes it very difficult for others to compete with the breadth of resources we can provide our clients.

· Program Management: Since we currently manage in excess 48 programs, more than most in the industry, we have credibility with MGAs and reinsurers, which engenders more business. Furthermore, R&Q's ability to move programs between the US E&S or Admitted markets or to assist MGAs across the UK and Europe enhances our reputation as a solution provider to our clients.

· Legacy Insurance: The breadth of our platform allows us to optimise the solutions we offer our clients - we can provide rated and fully licensed solutions in the US and Europe as well as capabilities in Bermuda, Cayman, Barbados, Isle of Man as well as Lloyd's.

Much of our competition is backed by private equity, and since I come from that background, I appreciate its discipline. However, private equity backed companies typically have a high cost of capital and a short time before exit. Unlike these competitors, R&Q, as a public company with permanent capital, is able to assure its clients of its long-term commitment to the market.

Our Strategic Vision

Our long-term business vision is where we want to move R&Q over the next five years. Simply stated, our vision is to become a more capital efficient, fee oriented and data-driven company focused on our core strengths of insurance origination, underwriting and claims management. This vision recognises that to continue to be a leader in our core markets, we need to focus on four key initiatives:

· Increasing our recurring fee-based income;

· Automating our manual processes;

· Harnessing our data; and

· Engaging our employees

Fee-Based Income: While we currently generate recurring fee income from our Program Management and MGA investment, we believe the future of our Legacy Insurance business is to manage legacy insurance risk for a recurring fee on behalf of third parties who do not have direct access to this asset class. P&C insurance risks are ripe for securitising in a similar way to mortgages, credit cards and auto loans. Admittedly, progress has been slow and thus far largely focused on catastrophe reinsurance risk but it is inevitable this will occur more broadly over time. When it does, it will place greater focus and value on companies with a proven track record in originating, underwriting and managing insurance claims. This endeavour will diversify our sources of funding, reduce our capital issuances, increase our excess capital and enhance financial flexibility. Furthermore, fee income should garner a higher valuation and lower cost of capital in the public markets than underwriting and investment income.

Automation: There are many manual and repetitive tasks in the insurance businesses that should be automated by "digital workers". Automating these tasks allows "human workers" to do what humans do best - think! This emerging field of automation improves the efficiency, productivity and therefore happiness of an employee base. To put this in context, ~60%¹ of all jobs have 30% of tasks that can be automated. Applying automation to our business will us allow us to scale in a sustainable manner as we automate workflow processes such as MGA audits, contract wordings and certain aspects of diligence. We are beginning to engage with the leading players in this area.

1 McKinsey & Company "A Future that Works: Automation, Employment and Productivity - January 17, 2017".

Data: There is a growing awareness that - "Every company is a data company"; whether it is a restaurant, an airline or an insurance company, the uniqueness of a company is its "own data" and how it uses that data to better understand its markets and improve its decision making. R&Q is no different and we are starting the cultural journey of defining ourselves as a "data company competing in program management and legacy insurance". Our goal is to proactively use our own data to enhance, for example, our claims decision making and legacy acquisition pricing, by leveraging machine learning and artificial intelligence as part of our core competencies.

Engaging Our Employees: R&Q will continue to be an enterprise that is engaged and focused on the needs of its employees and we will support the spirit of entrepreneurialism that has been at the heart of R&Q for 30 years. We will continue to evolve our culture to one of increased accountability and transparency creating a strong link with our strategic vision.

Our Capital and Liquidity Framework

Given the profitable growth opportunities we have and the capital and liquidity required to achieve this growth, we have developed a capital and liquidity framework for the Group. This framework seeks to balance the attractive returns from reinvesting in our business with the provision of growing dividends to our shareholders, while maintaining appropriate financial metrics with respect to our capital, liquidity and financial leverage. We set out the four key pillars of this framework below:

· Capital: Our Legacy Insurance business is the primary consumer of capital. In general, we require capital of ~40% of net reserves to cover unforeseen events in claims and investment risks. Program Management is predominately capital light, but given the importance of credit ratings, consumes capital of ~10% of gross written premium. Our objective is to maintain not only appropriate levels of capital in our regulated subsidiaries, but to also maintain a BMA solvency ratio for the Group of at least 150%. We deem capital above 150% as excess capital.

· Liquidity: Our Legacy Insurance business consumes cash when we acquire companies or post collateral on reinsurance transactions. Furthermore, we utilise cash for strategic endeavours, to fund unallocated costs and interest expense at the parent company and of course pay shareholder dividends. Even if we have excess capital, this does not imply we have excess liquidity. Our objective is to maintain an appropriate level of liquidity, including any undrawn revolving credit lines, at the parent to cover our expected fixed charges.

· Financial Leverage: Our credit ratings are critical for both of our businesses and our capital structure needs to maintain an appropriate mix of debt and equity. We desire to maintain adjusted financial leverage of no more than 30% of capital, which gives partial equity credit to our subordinated debt.

· Dividend: Our dividend policy is the final element of our capital and liquidity framework. The payment of a dividend reduces both our capital and liquidity, but we acknowledge is very important to many of our shareholders. Our dividend policy is based on allowing for an appropriate balance of reinvestment and growing dividends, as well as one that minimises the need to raise external capital. While we are in growth mode, we believe it is in the best interests of the Group to create long term shareholder value by using our internally generated capital to invest at high rates of return (in excess of our cost of capital) to build our future and scale our business. While we remain capital consumptive, we will adopt a progressive cash dividend policy with a payout ratio of between 25% and 50% of our Pre-Tax Operating Profit, the best proxy for cash earnings. This policy will allow us the flexibility to carefully balance the allocation of our capital between reinvesting in profitable opportunities and providing an attractive and growing dividend to our shareholders. While the precise payout percentage may vary year on year, we intend to grow the annual cash dividend from the FY2020 level of 4 pence per share.

Conclusion

R&Q is in an enviable position of being a leader in two businesses that are enjoying strong secular growth. Our vision for R&Q is to become a more capital efficient, fee oriented and data-driven insurance company focused on its core strengths of originating, underwriting and claims management. The good news is that R&Q - as we demonstrated last year - is extremely well-positioned. The future R&Q is one of evolution, not revolution.

Thank you for supporting us as we move R&Q to the next stage of its development.

Chief Financial Officer Review

Financial Review

Group

We are pleased to report strong operating results demonstrating the resilience of the business model. Our Key Performance Indicators measure the economics of the business and adjust IFRS metrics to include fully written Program Fee Revenue, and exclude non-cash intangibles created from acquisitions in Legacy Insurance, net realised and unrealised investment gains on fixed income and lease-based assets, and foreign currency translation reserves. Pre-Tax Operating Profit was £16.0 million, a 102% increase compared to 2019, driven by a record year of transactions in Legacy Insurance and a debut profitable year in Program Management. Tangible Net Asset Value was £340.8 million, a 39% increase compared to year-end 2019, primarily as a result of our £81.0 million ($100 million) equity raise in H1 2020. On a fully diluted basis, our Operating Earnings Per Share was 5.9 pence, an increase of 38% compared to 2019, and our Tangible Net Asset Value Per Share was 124.4 pence, and upon including the 3.8 pence per share cash distribution paid in the year, is a 2% increase compared to year-end 2019.

One of our objectives is to grow the relative contribution of Fee Income to total Gross Operating Income. Our Fee Income was £18.8 million, an 89% increase compared to 2019 and represented 17% of Gross Operating Income before Fixed Operating Expenses, an increase of 5 percentage points compared to 2019.

Our IFRS results include the impact of intangibles created from acquisitions in Legacy Insurance as well as mark-to-market movements in our fixed income investment portfolio and foreign currency translation reserves associated with changes in interest and exchange rates, respectively, and exclude Unearned Program Fee Revenue. Profit Before Tax was £30.2 million, a 21% decrease compared to 2019 primarily due to a mix of Legacy Insurance acquisitions in 2019 that created significant non-cash intangibles. Our Net Asset Value was £390.3 million, a 35% increase compared to year-end 2019 primarily as a result of our £81 million ($100 million) equity raise in H1 2020. On a fully diluted basis, our Earnings Per Share was 11.1p, a decrease of 45% compared to 2019 and our Net Asset Value Per Share was 142.4 pence, which upon including the 3.8 pence per share cash distribution paid in 2020, was a 1% decrease compared to year-end 2019.

Program Management

Our Program Management business continued to grow rapidly in 2020. We had 48 active programs, an increase of 18 programs compared to 2019, our Contracted Premium was $1.3 billion, a 52% increase compared to 2019 and our Gross Written Premium was $538.9 million, a 46% increase compared to 2019. Our results are beginning to show the benefits of scale as we earned a positive Pre-Tax Operating Profit of $3.4 million, representing a 14.3% margin on Gross Operating Income, compared with a loss in 2019.

The primary driver of Pre-Tax Operating Profit is our Fee Income, which represents Program Fee Revenue from written premium ceded to reinsurers and our 35% minority stake in Tradesman ($13 million of earnings before interest, tax, depreciation and amortisation) effective in Q3 2020, which has subsequently increased to 40% in Q1 2021. Fee Income was $24.1 million, an 89% increase compared to 2019. The Program Fee averaged 4.5%, an increase of 0.9 percentage points compared to 2019, and we expect Fee Income to grow in line with Gross Written Premium. Underwriting Income represents our ~6% retention of Program risk. Our Underwriting Income generated a $3.0 million loss primarily due to the purchase of stop-loss coverage, costing ~$4 million to minimise claims volatility, a 14% decrease compared to the loss in 2019. We expect Underwriting Income to be profitable as we diversify our business away from programs such as motor. Our Investment Income was $2.5 million, roughly flat compared to 2019. Finally, Fixed Operating Expenses increased 49% compared to 2019 due to the expansion of our staff particularly in the US with the establishment of our Excess & Surplus platform.

Legacy Insurance

Our Legacy Insurance business continued to thrive and grow. We had a record year, concluding 19 transactions with Cash and Investments of £674 million and Net Reserves of £500 million, an increase of 92% and 81%, respectively compared to 2019. Our Pre-Tax Operating Profit was £38.1 million, a 46% increase compared to 2019. The primary driver of Pre-Tax Operating Profit is our Underwriting Income, which represents Tangible Day 1 gains on transactions originated during the year and claims management of transactions closed in prior years. Underwriting Income was £80.7 million, a 22% increase compared to 2019. Our Investment Income was £13.1m, a 36% increase compared to 2019 driven by acquired assets on transactions. Finally, our Fixed Operating Expenses grew 12% compared to 2019 primarily due to syndicate costs associated with transactions we executed in the Lloyd's market.

We remain disciplined in our focus on pricing and risk and target returns of at least 15% in our transactions. Our Operating Return on Tangible Equity, based on allocated Average Operating Tangible Equity of £212 million, was 14.8%. When evaluating the performance of our Legacy Insurance business, we also focus on Operating Return on Tangible Equity over time. We are pleased that our five-year Operating Return on Tangible Equity was 20.2%, a testament to our disciplined approach to underwriting.

Corporate and Other

Our Corporate and Other segment includes investment income on excess capital, unallocated operating expenses and finance costs. Pre-Tax Operating Profit was a loss of £(24.7) million, a 48% increase compared to 2019 primarily driven by an increase in Fixed Operating Expenses associated with senior management hires and higher Interest Expense associated with the issuance of £92 million ($125 million) of subordinated debt in H2 2020.

Cash and Investments

Our Cash and Investments, excluding funds withheld, was £1,068 million. We produced a book yield, which excludes net realised and unrealised gains on fixed income and lease-based assets, of 1.6%, a decrease of 40 bps compared to 2019 due to the impact of low interest rates experienced globally. The 2-Year US Treasury yield averaged 0.39% in 2020 compared to 2% in 2019.

We maintain a conservative, liquid investment portfolio so that we can produce consistent cash flows to meet our liability obligations, while also earning a reasonable risk-adjusted return. 92% of our investments were rated investment grade, and another 4% of our portfolio was invested in non-rated money market funds. After cash, which comprised 25% of our portfolio, our largest allocations were to corporate bonds (37%), government and municipal securities (23%) and asset-backed securities (14%). Given the steepening in the yield curve, we have maintained a short duration portfolio of 1.8 years.

During 2020, financial markets witnessed heightened volatility arising out of Covid-19 concerns. Nonetheless, our investment portfolio did not suffer any defaults and rather incurred net realised and unrealised gains of £5.2 million, and our total investment return when including these mark-to-market movements, was 2.2%.

Capital and Liquidity

As a result of our £81 million ($100 million) equity raise in H1 2020 and £92 million ($125 million) subordinated debt raise in H2 2020, we strengthened our balance sheet. We utilised the £173 million capital raise toward Legacy Insurance transactions (~£145 million), investment in our Program Management E&S business (~£20 million) and a cash distribution to our shareholders (£8.5 million). Our preliminary Group Solvency ratio is very strong at 202%, an increase of 25 percentage points compared to year-end 2019, and above our target of 150%, implying excess capital of £111 million. Our adjusted debt to capital, which provides for partial equity credit on our subordinated debt, was 28%, a decrease of 2 percentage points compared to year-end 2019, and below are target of 30%. We entered into a new bank facility in H2 2020 to enhance parent company liquidity. Our capital, liquidity and financial leverage have to be aligned as we execute against our business strategy.

Change to financial reporting currency

We have been reporting our financial results in Pound sterling since our public listing in 2007. As we have grown, our asset mix has become increasingly US dollar denominated, with 72% of our investment assets at year-end 2020 in US dollars. This creates volatility in foreign currency translation in both our income statement and statement of comprehensive income. Therefore we have determined that starting in 2021, we will report our financial results in US dollars.

Consolidated Income Statement

For the year ended 31 December 2020

			2020		2019
	Note	£000	£000	£000	£000
					restated
Gross written premiums		772,051		450,187
Written premiums ceded to reinsurers		(405,170)		(285,033)
Net written premiums			366,881		165,154
Change in provision for unearned premiums, gross		(75,556)		(94,315)
Change in provision for unearned premiums, reinsurers' share		71,843		103,687
Net change in provision for unearned premiums			(3,713)		9,372
Earned premium, net of reinsurance			363,168		174,526
Program fee revenue (earned)	6	14,438		7,241
Gross investment income	7	22,243		21,993
Other income	8	5,729		6,780
			42,410		36,014
Total income			405,578		210,540

Gross claims paid		(210,764)		(183,438)
Proceeds from commutations and reinsurers' share of gross claims paid		130,804		111,033
Claims paid, net of reinsurance		(79,960)		(72,405)

Movement in gross technical provisions		(347,870)		(125,978)
Movement in reinsurers' share of technical provisions after adjusting for commutations		118,056		55,227
Net change in provisions for claims		(229,814)		(70,751)

Net claims provision increase			(309,774)		(143,156)
Operating expenses	9		(111,580)		(85,892)
Result of operating activities before goodwill on bargain purchase			(15,776)		(18,508)
Goodwill on bargain purchase	29		65,469		69,307
Amortisation and impairment of intangible assets	15		(11,047)		(3,162)
Share of profit of associates			1,314		-
Result of operating activities			39,960		47,637
Finance costs	10		(9,776)		(9,537)
Profit before income taxes	11		30,184		38,100
Income tax charge	12		(798)		(1,280)
Profit for the year			29,386		36,820

Attributable to:-
Shareholders of the parent			29,447		37,298
Non-controlling interests			(61)		(478)
			29,386		36,820

The accounting policies and accompanying notes are an integral part of the Consolidated Financial Statements.

		2020	2019

Earnings per share
Basic	13	13.6p	20.3p
Diluted	13	11.1p	20.3p

Consolidated Statement of Comprehensive Income For the year ended 31 December 2020
	2020 £000	2019 £000
Other Comprehensive Income:
Items that will not be reclassified to profit or loss:
Pension scheme actuarial losses	(583)	(1,698)
Deferred tax on pension scheme actuarial losses	258	51
	(325)	(1,647)
Items that may be subsequently reclassified to profit or loss:
Exchange losses on consolidation	(10,284)	(8,147)
Other comprehensive income	(10,609)	(9,794)

Profit for the year	29,386	36,820
Total comprehensive income for the year	18,777	27,026

Attributable to:
Shareholders of the parent	18,828	27,526
Non-controlling interests	(51)	(500)
Total comprehensive income for the year	18,777	27,026

The accounting policies and accompanying notes are an integral part of the Consolidated Financial Statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020


	Notes	Share capital	Share premium	Treasury shares	Convertible debt	Foreign currency translation reserve	Retained earnings	Total	Non-controlling interests	Total
		£000	£000	£000	£000	£000	£000	£000	£000	£000
Year ended 31 December 2020
At beginning of year		3,918	134,905	-	-	1,148	148,361	288,332	443	288,775

Profit for the year		-	-	-	-	-	29,447	29,447	(61)	29,386

Other comprehensive income
Exchange losses on consolidation		-	-	-	-	(10,294)	-	(10,294)	10	(10,284)
Pension scheme actuarial losses		-	-	-	-	-	(583)	(583)	-	(583)
Deferred tax on pension scheme actuarial losses		-	-	-	-	-	258	258	-	258
Total other comprehensive income for the year		-	-	-	-	(10,294)	(325)	(10,619)	10	(10,609)
Total comprehensive income for the year		-	-	-	-	(10,294)	29,122	18,828	(51)	18,777

Transactions with owners
Share based payments		-	11,345	-	-	-	-	11,345	-	11,345
Issue of shares	25	570	15,637	-	-	-	-	16,207	-	16,207
Issue of convertible debt		-	-	-	64,273	-	-	64,273	-	64,273
Purchase of shares		-	-	(150)	-	-	-	(150)	-	(150)
Issue of AD shares		8,523	(8,523)	-	-	-	-	-	-	-
Cancellation of AD shares	14	(8,523)	-	-	-	-	-	(8,523)	-	(8,523)
Non-controlling interest in subsidiary disposed		-	-	-	-	-	-	-	(769)	(769)
At end of year		4,488	153,364	(150)	64,273	(9,146)	177,483	390,312	(377)	389,935

	Notes	Share capital	Share premium	Foreign currency translation reserve	Retained earnings	Total	Non-controlling interests	Total
		£000	£000	£000	£000	£000	£000	£000
Year ended 31 December 2019 (restated)
At beginning of year		2,520	51,135	9,273	112,710	175,638	349	175,987

Profit for the year		-	-	-	37,298	37,298	(478)	36,820

Other comprehensive income
Exchange losses on consolidation		-	-	(8,125)	-	(8,125)	(22)	(8,147)
Pension scheme actuarial losses		-	-	-	(1,698)	(1,698)	-	(1,698)
Deferred tax on pension scheme actuarial losses		-	-	-	51	51	-	51
Total other comprehensive income for the year		-	-	(8,125)	(1,647)	(9,772)	(22)	(9,794)
Total comprehensive income for the year		-	-	(8,125)	35,651	27,526	(500)	27,026

Transactions with owners
Share based payments		2	138	-	-	140	-	140
Issue of shares	25	1,396	102,047	-	-	103,443	-	103,443
Issue of AB & AC shares		18,415	(18,415)	-	-	-	-	-
Cancellation of AB & AC shares	14	(18,415)	-	-	-	(18,415)	-	(18,415)
Non-controlling interest in subsidiary acquired		-	-	-	-	-	594	594
At end of year		3,918	134,905	1,148	148,361	288,332	443	288,775

The accounting policies and accompanying notes are an integral part of the Consolidated Financial Statements.

Consolidated Statement of Financial Position

As at 31 December 2020

Company Number 47341	Note	2020 £000	2019 £000
Assets				restated
Intangible assets	15	60,577		46,082
Investments in associates	18	33,387		-
Property, plant and equipment	16	1,533		969
Right of use assets	17	4,141		3,191
Investment properties	18a	1,350		1,480
Financial instruments
- Investments (fair value through profit and loss)	18b	863,142		559,963
- Deposits with ceding undertakings	4b	132,947		19,504
Reinsurers' share of insurance liabilities	23	869,888		471,412
Deferred tax assets	24	4,227		4,008
Current tax assets	24	-		1,988
Insurance and other receivables	19	508,122		419,535
Cash and cash equivalents	20	267,829		252,741

Total assets		2,747,143		1,780,873

Liabilities
Insurance contract provisions	23	1,770,402		1,072,208
Financial liabilities
- Amounts owed to credit institutions	22	243,350		142,693
- Lease liabilities	22	4,979		3,210
- Deposits received from reinsurers		2,105		1,068
Deferred tax liabilities	24	13,259		9,465
Insurance and other payables	21	313,871		255,823
Current tax liabilities	24	1,918		294
Pension scheme obligations	27	7,324		7,337

Total liabilities		2,357,208		1,492,098

Equity
Share capital	25	4,488		3,918
Share premium	25	153,364		134,905
Convertible debt	25	64,273		-
Treasury share reserve		(150)		-
Foreign currency translation reserve		(9,146)		1,148
Retained earnings		177,483		148,361
Attributable to equity holders of the parent		390,312		288,332
Non-controlling interests in subsidiary undertakings	30	(377)		443
Total equity		389,935		288,775

Total liabilities and equity		2,747,143		1,780,873

The Consolidated Financial Statements were approved by the Board of Directors on 21 May 2021 and were signed on its behalf by:

W L Spiegel A K Quilter

The accounting policies and accompanying notes are an integral part of the Consolidated Financial Statements.

Consolidated Cash Flow Statement

For the year ended 31 December 2020

Cash flows from operating activities	Note	2020 £000	2019 £000 restated
Profit for the year		29,386	36,820
Tax included in consolidated income statement		798	1,280
Finance costs	10	9,776	9,537
Depreciation and impairment	16 & 17	2,337	2,242
Share based payments	25	11,345	138
Share of profits of associates		(1,314)	-
Profit on divestment		(532)	-
Goodwill on bargain purchase	29	(65,469)	(69,307)
Amortisation and impairment of intangible assets	15	11,047	3,162
Fair value gain on financial assets		(4,361)	(6,602)
Loss on revaluation of investment property	18	130	40
Loss on disposal of property, plant and equipment		4	89
Contributions to pension plan		(795)	(1,400)
Loss on net assets of pension schemes		199	173
Increase in receivables		(83,511)	(145,830)
(Increase)/decrease in deposits with ceding undertakings		(114,614)	1,294
Increase in payables		17,953	72,220
Increase in net insurance technical provisions		233,527	61,379
Income taxes paid		-	(2,330)
Net cash from/(used in) operating activities		45,906	(37,095)

Cash flows from investing activities
Purchase of property, plant and equipment	16	(1,039)	(958)
Proceeds from sale of property, plant and equipment	16	9	-
Purchase of intangible assets	15	(16)	(143)
Proceeds from sale of intangible assets		-	1,952
Proceeds from sale of financial assets		78,106	68,997
Purchase of financial assets		(284,058)	(94,364)
Proceeds from disposal of investment properties	18	-	361
Acquisition of subsidiary undertakings (offset by cash acquired)		22,801	(1,615)
Divestment (offset by cash disposed of)		(4,009)	-
Payments to acquire minority interest		-	(221)
Net cash used in investing activities		(188,206)	(25,991)

Cash flows from financing activities
Repayment of borrowings		(44,138)	(34,966)
Proceeds from new borrowing arrangements		145,101	41,751
Interest and other finance costs paid	10	(9,776)	(9,537)
Cancellation of shares	14	(8,523)	(18,415)
Receipts from issue of shares		16,207	103,445
Receipts from issue of convertible debt		64,273	-
Purchase of treasury shares		(150)	-
Net cash from financing activities		162,994	82,278

Net increase in cash and cash equivalents		20,694	19,192
Cash and cash equivalents at beginning of year		252,741	236,923
Exchange losses on cash and cash equivalents		(5,606)	(3,374)
Cash and cash equivalents at end of year	20	267,829	252,741

Share of Syndicates' cash restricted funds		26,852	15,320
Other funds		240,977	237,421
Cash and cash equivalents at end of year		267,829	252,741

The accounting policies and accompanying notes are an integral part of the Consolidated Financial Statements.

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

1. Corporate information

Randall & Quilter Investment Holdings Ltd. (the "Company") is a company incorporated in Bermuda and listed on AIM, a sub-market of the London Stock Exchange. The Company and its subsidiaries (together forming the "Group") carry on business worldwide as owners and managers of insurance companies, live and in run-off, as providers of program capacity, as underwriting managers for active insurers and as participators in Lloyd's Syndicates in the non-life insurance market. The Consolidated Financial Statements were approved by the Board of Directors on 21 May 2021.

2. Accounting policies

The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

a. Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), endorsed by the European Union, International Financial Reporting Interpretations Committee interpretations and with the Bermuda Companies Act 1981 (as amended).

The Consolidated Financial Statements have been prepared under the historical cost convention, except that financial assets (including investment property), financial liabilities (including derivative instruments) and purchased reinsurance receivables are recorded at fair value through profit and loss. All amounts are stated in sterling and thousands, unless otherwise stated.

The preparation of the Consolidated Financial Statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the year (Note 3). Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised in the year when the revision is made.

These Consolidated Financial Statements have been restated for a prior year adjustment relating to the finalisation of the fair value review of the 2019 acquisition of Sandell Re, which was reported as provisional, and has been adjusted in accordance with IFRS3. The impact of this is a reduction in the 2019 profit after tax of £2,025k.

New and amended Standards adopted by the Group

In the current year, the Group has applied new IFRSs and amendments to IFRSs issued by the IASB that are mandatory for an accounting period that begins on or after 1 January 2020.

IFRS 16 Amendments, Leases COVID 19 Related Rent Concessions. Lessees are provided with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The Group has not applied this exemption and the amendment has not had an impact on the Consolidated Financial Statements.

IFRS 3 Amendments, Business Combinations. The amendment is aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments provide further clarity on what constitutes an acquired business, and this clarification has not impacted the Group's recognition of acquired business in the year and has not had an impact on the Consolidated Financial Statements.

IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark Reform. The amendments deal specifically with interest rate hedge accounting and is the first phase of change relating to interest rate benchmark reform and the replacement of LIBOR. The Group has not been impacted by these amendments for hedge accounting but is undergoing review of internal and external contracts where LIBOR has been the interest rate reference point, ready for phase 2 which is effective 1 January 2021.

IAS 1 and IAS 8 Amendments, Definition of Material. The amendments clarify the definition of 'material' and align the definition used in the Conceptual Framework and the standards themselves. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Financial Statements have been prepared in accordance of this clarification.

New and amended Standards not yet adopted by the Group

A number of new standards and amendments adopted by the EU, as well as standards and interpretations issued by the IASB but not yet adopted by the EU, have not been applied in preparing the Consolidated Financial Statements.

The Group does not plan to adopt these standards early; instead it will apply them from their effective dates as determined by their dates of EU endorsement. The Group continues to review the upcoming standards to determine their impact.

IFRS 9, Financial Instruments (IASB effective date 1 January 2018) has not been applied under IFRS 4 Amendment option to defer until IFRS 17 comes into effect on 1 January 2023.

IFRS 17, Insurance Contracts. (IASB effective date 1 January 2023).

IFRS 9, IAS 39 and IFRS 7 Amendments, Interest Rate Benchmark Reform Phase 2. (IASB effective date 1 January 2021).

Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets. (IASB effective date 1 January 2022).

IAS 1 Presentation of Financial Statements Amendments, Classification of Liabilities as Current or Non-current. (IASB effective date 1 January 2023).

IAS 8 Accounting Policies Amendments, Changes in Accounting Estimates and Errors. (IASB effective date 1 January 2023).

Of the upcoming accounting standards and amendments, IFRS 9 and IFRS 17 will result in major changes to accounting for insurance and investment transactions and on the Company's annual reported results, whilst having no effects on the fundamental economics of the insurance industry. Impact analysis in respect of these standards continues to be monitored and project plans are being implemented to deliver the changes to systems and accounting practices required to meet the effective date of 1 January 2023. A brief overview of these standards and the progress in implementation is provided below:

IFRS 9, Financial instruments (IASB effective date 1 January 2018) has not been applied under IFRS 4 Amendment option. IFRS 9 provides a reform of accounting for financial instruments to supersede IAS 39 Financial Instruments: Recognition and Measurement. Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts contained an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4. The Group meets the eligibility criteria and has taken advantage of this temporary exemption not to apply this standard until the effective date of IFRS 17. Workstreams within the IFRS 17 Project are being developed to cater for the requirements of IFRS 9, ready for implementation on 1 January 2023.

IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Under IFRS 9, financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost unless the entity applies the fair value option. All other financial assets, including equity investments are measured at their fair values at the end of subsequent accounting periods. Under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or increase an accounting mismatch in profit or loss. Changes in the fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss.

IFRS 17 Insurance Contracts, published in May 2017, addresses recognition, measurement, presentation and disclosure for insurance contracts. The measurement approach is based on the following building blocks: (i) a current, unbiased probability-weighted estimate of future cash flows expected to arise as the insurer fulfils its contracts; (ii) the effect of the time value of money; (iii) a risk adjustment that measures the effects of uncertainty about the amount and timing of future cash flows; and (iv) a contractual service margin which represents the unearned profit in a contract (that is recognised in net earnings as the insurer fulfils its performance obligations under the contracts). Estimates are required to be re-measured each reporting period. In addition, a simplified measurement approach is permitted for short-duration contracts in which the coverage period is approximately one year or less. The standard is effective for annual periods beginning on or after 1 January 2023. This new standard introduces significant changes to the statutory reporting of insurance entities that prepare financial statements according to IFRS, changing the presentation and measurement of insurance contracts, including the effect of technical reserves and reinsurance on the value of insurance contracts. The effect of changes required to the Group's accounting policies as a result of implementing the new standard is currently being considered but these changes can be expected to, among other things, alter the timing of IFRS profit recognition, costs and distributable reserves and impact the Group's reported results of operations and financial position.

During 2019, the Group engaged with external consultants to carry out an operational gap analysis and implementation plan. In 2020 a financial impact assessment was carried out and a sub-ledger selection process finalised. The Group has a roadmap in place to mobilise an implementation program in 2021 which will include the provision of technical training on the main interpretations of the standard to all directors and relevant internal stakeholders, as well as the development of the sub-ledger system in conjunction with an external service provider and consultancy firm.

b. Selection of accounting policies

Judgement, estimates and assumptions are made by the Directors in selecting each Group accounting policy. The accounting policies are selected by the Directors to present Consolidated Financial Statements that they consider provide the most relevant information. In the case of certain accounting policies, there are different accounting treatments that could be adopted, each of which would be in compliance with IFRS and would have a significant influence upon the basis on which the Consolidated Financial Statements are presented.

In respect of financial instruments, the Group accounting policy is to designate all financial assets as fair value through profit or loss, including purchased reinsurance receivables.

c. Consolidation

The Consolidated Financial Statements incorporate the Financial Statements of the Company, and entities controlled by the Company (its subsidiaries), for the years ended 31 December 2020 and 2019. Control exists when the Group is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial results of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes non-controlling interests to have a deficit balance.

The Group uses the acquisition method of accounting to account for business combinations. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of acquisition directly attributable to the acquisition. Acquisition-related costs are charged to the Consolidated Income Statement in the year in which they are incurred.

Certain Group subsidiaries underwrite as corporate members of Lloyd's on Syndicates managed by Coverys Managing Agency Limited, Capita Managing Agency Limited and Vibe Syndicate Management Limited. In view of the several and direct liability of underwriting members at Lloyd's for the transactions of Syndicates in which they participate, only attributable shares of transactions, assets and liabilities of those Syndicates are included in the Consolidated Financial Statements. The Group continues to conclude that it remains appropriate to consolidate only its share of the result of these Syndicates. The Group is the sole provider of capacity on Syndicate 1110 and Syndicate 5678, and these Consolidated Financial Statements include 100% of the economic interest in these Syndicates. For Syndicate 1991, the Group provides 0.4% of the capacity on the 2018, 2019 and 2020 years of account. For Syndicate 3330, the Group provides 10% of the capacity on the 2018 year of account. These Consolidated Financial Statements include the Group's relevant share of the result for those years and attributable assets and liabilities.

Associates are those entities in which the Group has power to exert influence but which it does not control. Investments in associates are accounted for using the equity method of accounting. Under this method the investments are initially measured at cost. Thereafter the Group's share of post-acquisition profits or losses are recognised in the Consolidated Income Statement and adjusted against the cost of the investment included in the Consolidated Statement of Financial Position.

When the Group's share of losses equals or exceeds the carrying amount of the investment in the associate, the carrying amount is reduced to nil and recognition for the losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

Equity accounting is discontinued when the Group no longer has significant influence over the investment.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, amounts reported by subsidiaries have been adjusted to conform to the Group's accounting policies. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income and within equity in the Consolidated Statement of Financial Position, separately from the equity attributable to the shareholders of the parent.

Insurance broking cash, receivables and payables held by subsidiary companies which act as intermediaries, other than any receivable for fees, commissions and interest earned on a transaction, are not included in the Group's Consolidated Statement of Financial Position as the subsidiaries act as agents for the client in placing the insurable risks of their clients with insurers and as such are not liable as principals for amounts arising from such transactions.

d. Going concern

The Consolidated Financial Statements have been prepared on a going concern basis. At the date of signing these Consolidated Financial Statements, the Group's financial position and forecasts for 2021 and 2022 demonstrate that it has adequate cash resources to meet its liabilities as they fall due. The Group has continued to make advances with its strategy, including the continuation of legacy deals and ongoing development of the Program management business.

Given these factors, the Directors have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future. For the purposes of these Consolidated Financial Statements, this is considered to be a minimum of 12 months from the signing date.

The Group's operations have not been materially impacted by the COVID-19 pandemic and it has continued to operate effectively during the period.

e. Foreign currency translation

Functional and presentational currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The Consolidated Financial Statements are presented in sterling, which is the Group's presentational currency.

Transactions and balances

Transactions in foreign currencies are recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the end of the reporting period; the resulting exchange gain or loss is recognised in the Consolidated Income Statement. Non-monetary items recorded at historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction and are not subsequently restated.

Group translation

The assets and liabilities of overseas subsidiaries, including associated goodwill, held in functional currencies other than the Group's presentational currency are translated at the exchange rate as at the period end date. Income and expenses are translated at average rates for the period. All resulting exchange differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve in the Consolidated Statement of Financial Position.

On the disposal of foreign operations, cumulative exchange differences previously recognised in other comprehensive income are recognised in the Consolidated Income Statement as part of the gain or loss on disposal.

f. Premiums

Gross premiums written represent premiums on business commencing in the financial year together with adjustments to premiums written in previous accounting periods and estimates for premiums from contracts entered into during the course of the year. Gross premiums written are stated before deduction of brokerage and commission but net of taxes and duties levied on premiums.

Unearned premiums

A provision for unearned premiums represents that part of the gross premiums written that is estimated will be earned in the following financial periods. It is calculated on a time apportionment basis having regard, where appropriate, to the incidence of risk. For After the Event (ATE) policies written by the Group, premiums remain unearned until the point at which the claims exposures relating to these policies become crystallised.

Reinsurance premium costs are allocated to financial periods to reflect the protection arranged in respect of the business written and earned.

Acquisition costs

Acquisition costs, which represent commission and other related direct underwriting expenses, are deferred over the period in which the related premiums are earned. Acquisition costs recognised during the period are recorded in operating expenses in the Consolidated Income Statement.

g. Claims

These include the cost of claims and related expenses paid in the year, together with changes in the provisions for outstanding claims, including provisions for claims incurred but not reported and related expenses, together with any other adjustments to claims from previous years. Where applicable, deductions are made for salvage and other recoveries. These are shown as net claims provisions (increased)/released in the Consolidated Income Statement.

h. Insurance contract provisions and reinsurers' share of insurance liabilities

Provisions are made in the insurance company subsidiaries and in the Lloyd's Syndicates on which the Group participates for the full estimated costs of claims notified but not settled, including claims handling costs, on the basis of the best information available, taking account of inflation and latest trends in court awards. The Directors of the subsidiaries, with the assistance of run-off managers, independent actuaries and internal actuaries, have established such provisions on the basis of their own investigations and their best estimates of insurance payables, in accordance with accounting standards. Legal advice is taken where appropriate. Deductions are made for salvage and other recoveries as appropriate.

The provisions for claims incurred but not reported ("IBNR") have been based on a number of factors including previous experience in claims and settlement patterns, the nature and amount of business written, inflation and the latest available information as regards specific and general industry experience and trends.

A reinsurance asset (reinsurers' share of technical provisions) is recognised to reflect the amount estimated to be recoverable under the reinsurance contracts in respect of the outstanding claims reported and IBNR. The amount recoverable from reinsurers is initially valued on the same basis as the underlying claims provision. The amount recoverable is reduced when there is an event arising after the initial recognition that provides objective evidence that the Group may not receive all amounts due under the contract.

Neither the outstanding claims nor the provisions for IBNR has been discounted.

The uncertainties which are inherent in the process of estimating are such that, in the normal course of events, unforeseen or unexpected future developments may cause the ultimate cost of settling the outstanding liabilities to differ materially from that estimated. Any differences between provisions and subsequent settlements are recorded in the Consolidated Income Statement in the year which they arise.

Having regard to the significant uncertainty inherent in the business of insurance as explained in Note 3, and in light of the information available, in the opinion of the Directors the provisions for outstanding claims and IBNR in the Consolidated Financial Statements are fairly stated.

Provision for future claims handling costs

Provision for future run-off costs relating to the Group's run-off businesses is made to the extent that the estimate of such costs exceeds the estimated future investment income expected to be earned by those businesses.

Estimates are made for the anticipated costs of running off the business of those insurance subsidiaries and the Group's participation in Syndicates which have insurance businesses in run-off. Where insurance company subsidiaries have businesses in run-off and underwrite new business, management estimates the run-off costs and the future investment income relating to the run-off business. Syndicates are treated as being in run-off for the Consolidated Financial Statements where they have ceased writing new business and, in the opinion of management, there is no current probable reinsurer available to close the relevant syndicate year of account.

Changes in the estimates of such costs and future investment income are reflected in the year in which the estimates are made.

When assessing the amount of any provision to be made, the future investment income and claims handling and all other costs of all the insurance company subsidiaries' and syndicates' businesses in run-off are considered in aggregate.

The uncertainty inherent in the process of estimating the period of run-off and the pay-out pattern over that period, the anticipated run-off administration costs to be incurred over that period and the level of investment income to be received is such that in the normal course of events unforeseen or unexpected future developments may cause the ultimate costs of settling the outstanding liabilities to differ from that previously estimated.

Unexpired risks provision

Provisions for unexpired risks are made where the costs of outstanding claims, related expense and deferred acquisition costs are expected to exceed the unearned premium provision carried forward at the end of the reporting period. The provision for unexpired risks is calculated separately by reference to classes of business which are managed together, after taking into account relevant investment return.

i. Provisions

Provisions, other than insurance provisions, 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 the obligation, and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

j. Structured settlements

Certain of the US insurance company subsidiaries have entered into structured settlements whereby their liability has been settled by the purchase of annuities from third party life insurance companies in favour of the claimants. The subsidiary retains the credit risk in the unlikely event that the life insurance company defaults on its obligations to pay the annuity amounts. Provided that the life insurance company continues to meet the annuity obligations, no further liability will fall on the insurance company subsidiary. The amounts payable to claimants are recognised in liabilities. The amount payable to claimants by the third party life insurance companies are also shown in liabilities as reducing the Group's liability to nil.

In the opinion of the Directors, this treatment reflects the substance of the transaction on the basis that any remaining liability of Group companies under structured settlements will only arise upon the failure of the relevant third party life insurance companies and will be reduced by any available reinsurance cover.

Should the Directors become aware of a claim arising from a policy holder that a third party life insurance company responsible for the payment of an annuity under a structured settlement may not be in a position to meet its annuity obligations in full, appropriate provision will be made for any such failure.

Disclosure of the position in relation to structured settlements is shown in Note 21.

k. Segmental reporting

The Group's business segments are based on the Group's management and internal reporting structures and represent the level at which financial information is reported to the Board, being the chief operating decision maker as defined in IFRS 8.

l. Financial instruments

Financial instruments are recognised in the Consolidated Statement of Financial Position at such time that the Group becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognised when the contractual rights to receive cash flows from the financial assets expire, or where the financial assets have been transferred, together with substantially all the risks and rewards of ownership. Financial liabilities are derecognised if the Group's obligations specified in the contract expire, are discharged or cancelled.

Financial assets

i) Acquisition

On acquisition of a financial asset, the Group is required under IFRS to classify the asset into one of the following categories: 'financial assets at fair value through profit and loss', 'loans and receivables held to maturity' and 'available for sale'. The Group does not currently hold assets classified as 'held to maturity' and 'available for sale'.

ii) Financial assets at fair value through profit and loss

All financial assets, other than cash, loans and receivables, are currently designated as fair value through profit and loss upon initial recognition because they are managed and their performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value basis to the Group's key management. The Group's investment strategy is to invest and evaluate their performance with reference to their fair values.

iii) Fair value measurement

When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument.

If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available) and reference to the current fair value of other instruments that are substantially the same or discounted cash flow analyses.

Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price. Where the Group has positions with offsetting risks, mid-market prices are used to measure the offsetting risk positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes a third party market participant would take them into account in pricing a transaction.

Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are recognised when incurred in other operating expenses in the Consolidated Income Statement. Financial assets at fair value through profit and loss are measured at fair value, and changes therein are recognised in the Consolidated Income Statement. Net changes in the fair value of financial assets at fair value through profit and loss exclude interest and dividend income, as these items are accounted for separately as set out in the investment income section below.

iv) Insurance receivables and payables

Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders. Insurance receivables are classified as 'loans and receivables' as they are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. Insurance receivables are measured at amortised cost less any provision for impairment. Insurance payables are stated at amortised cost. Insurance receivables and payables are not discounted.

v) Investment income

Investment income consists of dividends, interest, realised and unrealised gains and losses and exchange gains and losses on financial assets at fair value through profit and loss. The realised gains or losses on disposal of an investment are the difference between the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between the carrying amount at the reporting date, and the carrying amount at the previous period end or the purchase value during the period.

Financial liabilities

Borrowings

Borrowings are initially recorded at fair value less transaction costs incurred. Subsequently borrowings are stated at amortised cost and interest is recognised in the Consolidated Income Statement over the period of the borrowings.

Senior and subordinated debt

Randall & Quilter Investment Holdings Ltd. and Group subsidiaries have issued senior and subordinated debt. At Group level this is treated as a financial liability and interest charges are recognised in the Consolidated Income Statement.

Derivative financial instruments

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges.

m . Property, plant and equipment

All assets included within property, plant and equipment ("PPE") are carried at historical cost less depreciation and assessed for impairment. Depreciation is calculated to write down the cost less estimated residual value of motor vehicles, office equipment, IT equipment, freehold property and leasehold improvements by the straight-line method over their expected useful lives.

The principal rates per annum used for this purpose are:

	%
Motor vehicles	25
Office equipment	8 - 50

IT equipment	20 - 25
Freehold property	2
Leasehold improvements	Term of lease

The gain or loss arising on the disposal of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Consolidated Income Statement .

n. Leases

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to refurbish the underlying asset, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of Property, plant and equipment. In addition, the right-of-use asset is reviewed for impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases as an expense to the Consolidated Income Statement on a straight-line basis over the lease term.

Right-of-use assets are disclosed under note 17.

o. Goodwill

The Group uses the acquisition method in accounting for acquisitions. The difference between the cost of acquisition and the fair value of the Group's share of the identifiable net assets acquired is capitalised and recorded as goodwill. If the cost of an acquisition is less than the fair value of the net assets of the subsidiary acquired the difference is recognised directly in the Consolidated Income Statement as goodwill on bargain purchase.

Goodwill acquired in a business combination is initially measured at cost, being the excess of the fair value of the consideration paid for the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment at the cash generating unit level, as shown in Note 15, on a biannual basis or if events or changes in circumstances indicate that the carrying amount may be impaired.

p. Other intangible assets

Intangible assets, other than goodwill, that are acquired separately are stated at cost less accumulated amortisation and impairment.

Intangible assets acquired in a business combination, and recognised separately from goodwill, are recognised initially at fair value at the acquisition date. This includes intangibles assets calculated by measuring the difference between the discounted and undiscounted fair value of net technical provisions acquired.

Amortisation is charged to operating expenses in the Consolidated Income Statement as follows:

Purchased IT software	3 - 5 years, on a straight-line basis
On acquisition of insurance companies in run-off	Estimated pattern of run-off
On acquisitions - other	Useful life, which may be indefinite

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the Consolidated Income Statement to reduce the carrying amount to the recoverable amount.

US insurance authorisation licences

US state insurance authorisation licences acquired in business combinations are recognised initially at their fair value. The asset is not amortised, as the Directors consider that economic benefits will accrue to the Group over an indefinite period due to the long-term stability of the US insurance market. The licences are tested annually for impairment. This assumption is reviewed annually to determine whether the asset continues to have an indefinite life. Costs of acquiring new licences are recognised in the year of acquisition.

Rights to customer contractual relationships

Costs directly attributable to securing the intangible rights to customer contractual relationships are recognised as an intangible asset where they can be identified separately and measured reliably, and it is probable that they will be recovered by directly related future profits. These costs are amortised on a straight-line basis over the useful economic life which is deemed to be 15 years and are carried at cost less accumulated amortisation and impairment losses.

q. Employee Benefits

The Group makes contributions to defined contribution schemes and a defined benefit scheme.

The pension cost in respect of the defined contribution schemes represents the amounts payable by the Group for the year. The funds of the schemes are administered by trustees and are separate from the Group. The Group's liability is limited to the amount of the contributions.

The defined benefit scheme is funded by contributions from a subsidiary company and its assets are held in a separate Trustee administered fund. Pension scheme assets are measured at market value, and liabilities are measured using the projected unit method and discounted at the current rate of return on high quality corporate bonds of equivalent term and currency to the liability.

Current service cost, net interest income or cost and any curtailments/settlements are charged to the Consolidated Income Statement . The present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets is recognised and disclosed separately as a net pension liability in the Consolidated Statement of Financial Position. Surpluses are only recognised up to the aggregate of any cumulative unrecognised net actuarial gains and past service costs, and the present value of any economic benefits available in the form of any refunds or reductions in future contributions.

Subject to the restrictions relating to the recognition of a pension surplus, all actuarial gains and losses are recognised in full in other comprehensive income in the period in which they occur.

r. Cash and cash equivalents

For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less from the date of acquisition, and bank overdrafts which are repayable on demand.

s. Finance costs

Finance costs comprise interest payable and are recognised in the Consolidated Income Statement in line with the effective interest rate on liabilities.

t. Operating expenses

Operating expenses are accounted for in the Consolidated Income Statement in the period to which they relate .

Pre-contract costs

Directly attributable pre-contract costs are recognised as an asset when it is virtually certain that a contract will be obtained and the contract is expected to result in future net cash inflows in excess of any amounts recognised as an asset.

Pre-contract costs are charged to the Consolidated Income Statement over the shorter of the life of the contract or five years.

Onerous contracts

Onerous contract provisions are provided for in circumstances where the Group has a present legal or constructive obligation as a result of past events to provide services, the costs of which exceed future income. The costs of providing the services are projected based on management's assessment of the contract.

Arrangement fees

Arrangement fees in relation to loan facilities are deducted from the relevant financial liability and amortised over the period of the facility.

u. Other income

Other income is stated excluding any applicable value added tax and includes the following items:

Management fees

Management fees are from non-Group customers and are recognised when the right to such fees is established through a contract and to the extent that the services concerned have been performed. Billing follows the supply of service and the consideration is unconditional because only the passage of time is required before the payment is due.

Purchased reinsurance receivables

The Group accounts for these financial assets at fair value through profit and loss. Fair value is defined as the price at which an orderly transaction would take place between market participants at the reporting date and is therefore an estimate which requires the use of judgement.

Insurance commissions from Managing General Agencies

Insurance commissions comprise brokerage and profit commission arising from the placement of insurance contracts. Brokerage is recognised at the inception date of the policy, or the date of contractual entitlement, if later. Alterations in brokerage arising from premium adjustments are taken into account as and when such adjustments are notified. To the extent that the Group is contractually obliged to provide services after this date, a suitable proportion of income is deferred and recognised over the life of the relevant contracts to ensure that revenue appropriately reflects the cost of fulfilling those obligations. Profit commission is recognised when the right to such profit commission is established through a contract but only to the extent that a reliable estimate of the amount due can be made. Such estimates are made on a prudent basis that reflects the level of uncertainty involved.

v. Share based payments

The Group issues equity settled payments to certain of its employees.

The cost of equity settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense on a straight-line basis over the vesting period. The fair value is measured using the binomial option pricing method, taking into account the terms and conditions on which the awards were granted.

w. Current and deferred income tax

Tax on the profit or loss for the year comprises current and deferred tax.

Tax is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised in the Consolidated Statement of Comprehensive Income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income.

Deferred tax liabilities are provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination and which, at the time of the transaction, affects neither accounting, nor taxable profit or loss, it is not provided for.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which these temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax assets and liabilities are determined using tax rates that have been enacted or substantively enacted by the period end date and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.

x. Share capital

Ordinary shares and Preference A and B shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

y. Distributions

Distributions payable to the Company's shareholders are recognised as a liability in the Consolidated Financial Statements in the period in which the distributions are declared and approved.

3. Estimation techniques, uncertainties and contingencies

Estimates and judgements are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant uncertainty in technical provisions

Significant uncertainty exists as to the accuracy of the insurance contract provisions and the reinsurers' share of insurance liabilities established in the insurance company subsidiaries and the Lloyd's Syndicates on which the Group participates as shown in the Consolidated Statement of Financial Position. The ultimate costs of claims and the amounts ultimately recovered from reinsurers could vary materially from the amounts established at the year end.

In the event that further information were to become available to the Directors of an insurance company subsidiary which gave rise to material additional liabilities, the going concern basis might no longer be appropriate for that company and adjustments would have to be made to reduce the value of its assets to their realisable amount, and to provide for any further liabilities which might arise in that subsidiary. The Group bears no financial responsibility for any liabilities or obligations of any insurance company subsidiary in run-off, except as disclosed. Should any insurance company subsidiary cease to be able to continue as a going concern in the light of further information becoming available, any loss to the Group would thus be restricted to the book value of their investment in and amounts due from that subsidiary and any guarantee liability that may arise.

Claims provisions

The Consolidated Financial Statements include provisions for all outstanding claims and IBNR, for related reinsurance recoveries and for all costs expected to be incurred to run-off its liabilities.

The insurance contract provisions including IBNR are based upon actuarial and other studies of the ultimate cost of liabilities including exposure based and statistical estimation techniques. There are significant uncertainties inherent in the estimation of each insurance company subsidiary's and Lloyd's Syndicate's insurance liabilities and reinsurance recoveries. There are many assumptions and estimation techniques that may be applied in assessing the amount of those provisions which individually could have a material impact on the amounts of liabilities, related reinsurance assets and reported shareholders' equity funds. Actual experience will often vary from these assumptions, and any consequential adjustments to amounts previously reported will be reflected in the results of the year in which they are identified. Potential adjustments arising in the future could, if adverse in the aggregate, exceed the amount of shareholders' equity funds of an insurance company subsidiary.

Independent external actuaries are contracted to provide a Statement of Actuarial Opinion for the Lloyd's Syndicates that the Group participates on. This statement confirms that, in the opinion of the actuary, the booked reserves are greater than or equal to their view of best estimate.

In the case of the Group's larger insurance companies, independent external actuaries provide a view of best estimate reserves and confirm that the held reserves are within their range of acceptable estimates.

The business written by the insurance company subsidiaries consists in part of long-tail liabilities, including asbestos, pollution, health hazard and other US liability insurance. The claims for this type of business are typically not settled until many years after policies have been written. Furthermore, much of the business written by these companies is reinsurance and retrocession of other insurance companies' business, which lengthens the settlement period.

Significant delays occur in the notification and settlement of certain claims and a substantial measure of experience and judgement is involved in making the assumptions necessary for assessing outstanding liabilities, the ultimate cost of which cannot be known with certainty at the period end date. The gross insurance contract provisions and related reinsurers' share of insurance liabilities are estimated on the basis of information currently available. Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions and having due regard to collectability.

The insurance contract provisions include significant amounts in respect of notified and potential IBNR claims for long-tail liabilities. The settlement of most of these claims is not expected to occur for many years, and there is significant uncertainty as to the timing of such settlements and the amounts at which they will be settled.

While many claims are clearly covered under policy wordings and are paid quickly, many other claims are subject to significant disputes, for example over the terms of a policy and the amount of the claim. The provisions for disputed claims are based on the view of the Directors of each insurance company subsidiary as to the expected outcomes of such disputes. Claim types impacted by such disputes include asbestos, pollution and certain health hazards and retrocessional reinsurance claims.

Uncertainty is further increased because of the potential for unforeseen changes in the legal, judicial, technological or social environments, which may increase or decrease the cost, frequency or reporting of claims, and because of the potential for new sources or types of claim to emerge.

Asbestos, pollution and health hazard claims

The estimation of the provisions for the ultimate cost of claims for asbestos, pollution, health hazard and other US liability insurance is subject to a range of uncertainties that is generally greater than those encountered for other classes of insurance business. As a result it is not possible to determine the future development of asbestos, pollution, health hazard and other US liability insurance with the same degree of reliability as with other types of claims. Consequently, traditional techniques for estimating claims provisions cannot wholly be relied upon. The Group employs further techniques which utilise, where practical, the exposure to these losses by contract to determine the claims provisions.

Insurance claims handling expenses

The provision for the cost of handling and settling outstanding claims to extinction and all other costs of managing the run-off is based on an analysis of the expected costs to be incurred in run-off activities, incorporating expected savings from the reduction of transaction volumes over time.

The period of the run-off may be between 5 and 50 years depending upon the nature of the liabilities within each insurance company subsidiary. Ultimately, the period of run-off is dependent on the timing and settlement of claims and the collection of reinsurance recoveries; consequently similar uncertainties apply to the assessment of the provision for such costs.

Reinsurance recoveries

Reinsurance recoveries are included in respect of claims outstanding (including IBNR claims) and claims paid after making provision for irrecoverable amounts.

The reinsurance recoveries on IBNR claims are estimated based on the recovery rate experienced on notified and paid claims for each class of business.

The insurance company subsidiaries are exposed to disputes on contracts with their reinsurers and the possibility of default by reinsurers. In establishing the provision for non-recovery of reinsurance balances, the Directors of each insurance company subsidiary consider the financial strength of each reinsurer, its ability to settle their liabilities as they fall due, the history of past settlements with the reinsurer, and the Group's own reserving standards and have regard to legal advice regarding the merits of any dispute.

Recognition and de-recognition of assets and liabilities in run-off

In the course of the Group's business of managing the run-off of insurers and brokers, accounting records are initially recognised in the form provided by previous management. As part of managing run-off the Group carries out extensive enquiries to clarify the assets and liabilities of the run-off and to obtain all available and relevant information. Those enquiries may lead the Group to identify and record additional assets and liabilities relating to that run-off, or to conclude that previously recognised assets and liabilities should be increased or no longer exist and should be de-recognised. Where decisions to de-recognise liabilities are supported by an absence of relevant information there may remain a remote possibility that a third party may subsequently provide evidence of its entitlement to such de-recognised liabilities which may lead to a transfer of economic benefit to settle such entitlement. The right of a third party to such a settlement will be recognised in the accounting period in which the position is clarified.

Defined benefit pension scheme

The pension assets and post retirement liabilities are calculated in accordance with IAS 19. The assets, liabilities and Consolidated Income Statement charge or credit, calculated in accordance with IAS 19, are sensitive to the assumptions made, including inflation, interest rate, investment return and mortality. IAS 19 compares, at a given date, the current market value of a pension fund's assets with its long term liabilities, which are calculated using a discount rate in line with yields on high quality bonds of suitable duration and currency. As such, the financial position of a pension fund on this basis is highly sensitive to changes in bond rates and equity markets.

Litigation, mediation and arbitration

The Group in common with the insurance industry in general, is subject to litigation, mediation and arbitration, and regulatory, governmental and other sectorial inquiries in the normal course of its business. The Directors do not believe that, in the aggregate, current litigation, governmental or sectorial inquiries and pending or threatened litigation or dispute is likely to have a material impact on the Group's financial position. However, if the outcome of any individual dispute differs substantially from expectation, there could be a material impact on the Group's profit or loss, financial position or cash flows in the year in which that impact is recognised.

Changes in foreign exchange rates

The Group's Consolidated Financial Statements are prepared in sterling. Therefore, fluctuations in exchange rates used to translate other currencies, particularly the Euro and US dollar, into sterling will impact the reported Consolidated Statement of Financial Position, results of operations and cash flows from year to year. These fluctuations in exchange rates will also impact the sterling value of the Group's investments and the return on its investments. Income and expenses are translated into sterling at average exchange rates. Monetary assets and liabilities are translated at the closing exchange rates at the period end date.

Assessment of impairment of intangible assets

Goodwill and US insurance authorisation licences are deemed to have an indefinite life as they are expected to have a value in use that does not erode or become obsolete over the course of time. Consequently, they are not amortised but tested for impairment on a biannual basis or if events or changes in circumstances indicate that the carrying amount may be impaired.

The impairment tests involve evaluating the recoverable amount of the Group's cash generating units and comparing them to the relevant carrying amounts. The recoverable amount of each cash generating unit is determined based on cash flow projections. These cash flow projections are based on the financial budgets approved by management covering a five year period. Management also consider the current net asset value and earnings of each cash generating unit for impairment.

Provisions

Estimates are based on reports provided by recognised specialists as well as the Group's own internal review. Liabilities may not be settled for many years and significant judgement is involved in making an assessment of these liabilities, the period over which they will be settled and where appropriate the discount rate to be applied to assess the present value of the amounts to be settled.

4. Management of insurance and financial risks

The Group's activities expose it to a variety of insurance and financial risks. The Board is responsible for managing the Group's exposure to these risks and, where possible, for introducing controls and procedures that mitigate the effects of the exposure to risk.

The Group has a Risk Committee which is a formal Committee of the Board. The Committee has responsibility for maintaining the effectiveness of the Group's Risk Management Framework, systems of internal control, risk policies and procedures and adherence to risk appetite.

The following describes the Group's exposure to the more significant risks and the steps management have taken to mitigate their impact from a quantitative and qualitative perspective.

a. Investment risks (including market risk and interest rate risk)

The Group has established a dedicated Investment Committee which has taken over responsibility from the former Group Capital and Investment Committee for setting and recommending to the Board a strategy for the management of the Group's investment assets owned or managed by companies within the Group within an acceptable level of risk as set out in the Group's Risk Management Framework. The investment of the Group's financial assets, except certain deposits with ceding undertakings, is managed by external investment managers, appointed by the Investment Committee. The Investment Committee is responsible for setting the policy to be followed by the investment managers. The investment strategy strives to mitigate the impact of interest rate fluctuation and credit risks and to provide appropriate liquidity, in addition to monitoring and managing foreign exchange exposures.

The Investment Committee is also responsible for keeping under review the investment control procedures, monitoring and amending (where appropriate) the investment policies and oversight and reviewing the making of loans and guarantees between Group companies.

The main objective of the investment policy is to maximise return whilst maintaining and protecting the principal value of funds under management.

The investment allocation (including surplus cash) at 31 December 2020 and 2019 is shown below:

	2020 £000	2019 £000

Government and government agencies	229,753	188,030
Corporate bonds	573,383	345,296
Equities	5,502	10,991
Cash based investment funds	54,504	15,646
Cash and cash equivalents	267,829	252,741
	1,130,971	812,704

	%	%
Government and government agencies	20.3	23.1
Corporate bonds	50.7	42.5
Equities	0.5	1.4
Cash based investment funds	4.8	1.9
Cash and cash equivalents	23.7	31.1
	100.0	100.0

Corporate bonds include asset backed mortgage obligations totalling £30,356k (2019: £10,914k).

Based on invested assets at external managers of £863,142k as at 31 December 2020 (2019: £559,963k), a 1 percentage increase/decrease in market values would result in an increase/decrease in the profit before income taxes for the year to 31 December 2020 of £8,631k (2019: £5,600k).

(i) Pricing risk

The following table shows the fair values of financial assets using a valuation hierarchy; the fair value hierarchy has the following levels:

Level 1 - Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date.

Level 2 - Valuations based on quoted prices in markets that are not active or based on pricing models for which significant inputs can be corroborated by observable market data.

Level 3 - Valuations based on inputs that are unobservable or for which there is limited activity against which to measure fair value.

2020	Level 1 £000	Level 2 £000	Level 3 £000	Total £000

Government and government agencies	229,401	352	-	229,753
Corporate bonds	547,035	26,348	-	573,383
Equities	5,282	220	-	5,502
Cash based investment funds	-	54,504	-	54,504
Purchased reinsurance receivables (Note 19)	-	-	4,652	4,652
Total financial assets measured at fair value	781,718	81,424	4,652	867,794

2019	Level 1 £000	Level 2 £000	Level 3 £000	Total £000

Government and government agencies	180,970	7,060	-	188,030
Corporate bonds	342,538	2,758	-	345,296
Equities	10,991	-	-	10,991
Cash based investment funds	-	15,646	-	15,646
Purchased reinsurance receivables (Note 19)	-	-	5,969	5,969
Total financial assets measured at fair value	534,499	25,464	5,969	565,932

The following table shows the movement on Level 3 assets measured at fair value:

	2020	2019
	£000	£000

Opening balance	5,969	3,393
Total net gains/(losses) recognised in the Consolidated Income Statement	351	(93)
Acquisitions	-	3,528
Disposals	(1,506)	(692)
Exchange adjustments	(162)	(167)
Closing balance	4,652	5,969

Level 3 investments (purchased reinsurance receivables) have been valued using detailed models outlining the anticipated timing and amounts of future receipts. The net gains recognised in the Consolidated Income Statement in other income for the year amounted to £351k (2019: losses £93k). The Group purchased no further reinsurance receivables in 2020 (2019: £3,528k). Short term delays in the anticipated receipt of these investments will not have a material impact on their valuation.

There were no transfers between Level 1 and Level 2 investments during the year under review.

The following shows the maturity dates and interest rate ranges of the Group's debt securities:

(ii) Liquidity risk

As at 31 December 2020

Maturity date or contractual re-pricing date

Total

Less than one year

After one

year but

less than

two years

After two years but

less than

three years

After three years but

less than

five years

More than five years

£000

Debt securities

857,640

166,940

152,052

123,273

119,974

295,401

Interest rate ranges (coupon-rates)

Less than one year

After one

year but

less than

two years

After two years but

less than

three years

After three years but

less than

five years

More than five years

Debt securities

0.13-10.00

0.13-8.25

0.10-7.88

0.14-9.75

0.37-9.00

As at 31 December 2019

Maturity date or contractual re-pricing date

Total

Less than one year

After one

year but

less than

two years

After two years but

less than

three years

After three years but

less than

five years

More than five years

£000

Debt securities

548,971

88,991

91,961

82,285

75,953

209,781

Interest rate ranges (coupon-rates)

Less than one year

After one

year but

less than

two years

After two years but

less than

three years

After three years but

less than

five years

More than five years

Debt securities

0.38-8.75

2.38

1.38-2.50

1.50-5.51

3.15-6.88

Liquidity risk is managed by the Investment Committee who monitor the cash position of each entity and for the Group as a whole on a regular basis to ensure that sufficient funds are available to meet liabilities as they fall due. Liquidity risk is also monitored by the Group's financial planning and treasury function's established cash flow and liquidity management processes.

(iii) Interest rate risk

Fixed income investments represent a significant proportion of the Group's assets and the Investment Committee continually monitors investment strategy to minimise the risk of a fall in the portfolio's market value.

The fair value of the Group's investment portfolio of debt and fixed income securities is normally inversely correlated to movements in market interest rates. If market interest rates rise, the fair value of the Group's debt and fixed income investments would tend to fall and vice versa.

Debt and fixed income assets are predominantly invested in high-quality corporate, government and asset-backed bonds. The investments typically have relatively short durations and terms to maturity.

The Group is exposed to interest rate risk within the Group's financial liabilities. This exposure lies predominately with amounts owed to credit institutions and debentures secured over the assets of the Company and its subsidiaries.

b. Credit risk

Credit risk arises where counterparties fail to meet their financial obligations as they fall due. The most significant area where it arises for the Group is where reinsurers fail to meet their obligations in full as they fall due. In addition, the Group is exposed to the risk of disputes on individual claims presented to its reinsurers or in relation to the contracts entered into with its reinsurers.

The ratings used in the below analysis are based upon the published rating of Standard & Poor's or other recognised ratings agency.

As at 31 December 2020
	A rated	B rated	Less than B		Other *		Exposures of less than £200k		Total
	£000	£000		£000		£000		£000		£000
Deposits with ceding undertakings	96,010	6,716		-		29,771		450		132,947

Reinsurers' share of insurance liabilities	628,203	43,946		-		194,792		2,947		869,888

Receivables arising out of reinsurance contracts	140,890	9,856		-		43,687		661		195,094

As at 31 December 2019
	A rated	B rated	Less than B		Other *		Exposures of less than £200k		Total
	£000	£000		£000		£000		£000		£000
Deposits with ceding undertakings	10,811	183		-		2,539		5,971		19,504

Reinsurers' share of insurance liabilities	374,482	5,705		-		35,038		56,187		471,412

Receivables arising out of reinsurance contracts	141,715	1,805		-		18,112		50,602		212,234

* Other includes reinsurers who currently have no credit rating.

The reinsurers' share of insurance liabilities is based upon a best estimate given the profile of the insurance provisions outstanding and the related IBNR. Receivables arising out of reinsurance contracts are included in insurance and other receivables in the Consolidated Statement of Financial Position.

The average credit period of receivables arising out of reinsurance contracts is as follows:


As at 31 December 2020	0-6 months%	6-12 months%	12-24 months%	> 24 months %
Percentage of receivables	50.7	8.8	11.0	29.5

As at 31 December 2019	0-6 months%	6-12 months%	12-24 months%	> 24 months%
Percentage of receivables	47.4	8.5	12.2	31.9

Part of the Group's business consists of acquiring debts or companies with debts, which are normally past due. Any further analysis of these debts is not meaningful. The Directors monitor these debts closely and make appropriate provision for impairment.

		Financial assets past due but not impaired
As at 31 December 2020	Neither past due nor impaired £'000	Past due 1-90 days £'000	Past due more than 90 days £'000	Assets that have been impaired £'000	Carrying value in the balance sheet '000
Deposits with ceding undertakings	132,793	-	-	154	132,947
Reinsurers' share of insurance liabilities	789,231			80,657	869,888
Receivables arising out of reinsurance contracts	88,689	238	211	105,956	195,094

		Financial assets past due but not impaired
As at 31 December 2019	Neither past due nor impaired £'000	Past due 1-90 days £'000	Past due more than 90 days £'000	Assets that have been impaired £'000	Carrying value in the balance sheet '000
Deposits with ceding undertakings	19,150	-	-	354	19,504
Reinsurers' share of insurance liabilities	431,785			39,627	471,412
Receivables arising out of reinsurance contracts	120,666	235	208	91,125	212,234

The Directors believe the amounts past due but not impaired are recoverable in full.

Credit risk is managed by committees established by the Group, Capita Managing Agency Limited ("Capita"), Vibe Syndicate Management Limited ("Vibe") and Coverys Managing Agency Limited ("Coverys").

The Group Board has a Group Reinsurance Asset Committee, chaired by a Non-Executive Director, which meets quarterly. Its function is to monitor and report on the Group's Syndicate and non-Syndicate reinsurance assets and, where necessary, recommend courses of action to the Group to protect the asset.

Capita, Vibe and Coverys are the Lloyd's Managing Agents which manage the Syndicates on which the Group participates. Capita, Vibe and Coverys have established Syndicate Management Committees in relation to each managed syndicate and the Group has representation on each of these committees with the exception of the S1991 Committee on which the Group now only has a nominal participation. The committees are responsible for establishing minimum security levels for all reinsurance purchases by the managed Syndicates by reference to appropriate rating agencies for agreeing maximum concentration levels for individual reinsurers and intermediaries, and for dealing with any other issue relating to reinsurance assets.

There are also a number of Key Risk Indicators pertaining to reinsurance security and concentration which have been developed under the auspices of the Group Risk Committee and the Capita, Vibe and Coverys Risk and Capital Committees, which monitor adherence to predefined risk appetite and tolerance levels.

c. Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group's principal transactions are carried out in sterling and its exposure to foreign exchange risk arises primarily with respect to US dollar and Euros. This is the same as in the previous year.

The Group's main objective in managing currency risk is to mitigate exposure to fluctuations in foreign exchange rates. There have been no material changes in trading currencies during the year under review. The Group manages this risk by way of matching assets and liabilities by individual entity. Asset and liability matching is monitored by the Group's financial planning and treasury functions' established cash flow and liquidity management processes.

The Group's financial assets are primarily denominated in the same currencies as its insurance and investment contract liabilities. This mitigates the foreign currency exchange rate risk for the overseas operations. Thus, the main foreign exchange risk arises from assets and liabilities denominated in currencies other than those in which insurance and investment contract liabilities are expected to be settled. The currency risk is effectively managed by the Group through derivative financial instruments. Forward currency contracts are used to eliminate the currency exposure on individual foreign transactions. The Group will not enter into these forward contracts until a firm commitment is in place.

The table below summarises the Group's principal assets and liabilities by major currencies:

31 December 2020	Sterling £000	US dollar £000	Euro £000	Total £000

Intangible assets	26,666	33,780	131	60,577
Reinsurers' share of insurance liabilities	527,336	323,498	19,054	869,888
Financial instruments	205,889	806,189	18,748	1,030,826
Insurance receivables	216,900	116,908	953	334,761
Cash and cash equivalents	133,048	133,719	1,062	267,829
Insurance liabilities and insurance payables	(1,054,791)	(874,817)	(39,302)	(1,968,910)
Deferred tax and pension scheme obligations	(3,036)	(17,439)	(108)	(20,583)
Trade and other (payables)/receivables	(66,163)	(110,775)	(7,138)	(184,076)
Total	(14,151)	411,063	(6,600)	390,312

31 December 2019	Sterling £000	US dollar £000	Euro £000	Total £000

Intangible assets	1,426	44,501	155	46,082
Reinsurers' share of insurance liabilities	234,180	215,358	21,874	471,412
Financial instruments	17,298	545,972	17,676	580,946
Insurance receivables	178,512	143,159	942	322,613
Cash and cash equivalents	99,092	151,796	1,853	252,741
Insurance liabilities and insurance payables	(495,642)	(720,133)	(42,299)	(1,258,074)
Deferred tax and pension scheme obligations	768	(17,450)	(120)	(16,802)
Trade and other (payables)/receivables	(29,208)	(75,047)	(6,331)	(110,586)
Total	6,426	288,156	(6,250)	288,332

The analysis that follows is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax and equity due to changes in the fair value of currency sensitive monetary assets and liabilities including insurance contract claim liabilities. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear.

		31 December 2020		31 December 2019
Currency	Changes in variables	Impact on profit	Impact on equity*	Impact on profit	Impact on equity*
		£000	£000	£000		£000

Euro weakening	10%	1,480	(149)	101		105
US dollar weakening	10%	6,781	(37,225)	4,209		(28,965)
Euro strengthening	10%	(1,811)	181	(122)		(127)
US dollar strengthening	10%	(8,289)	45,497	(5,144)		35,402

* Impact on equity reflects adjustments for tax, where applicable.

d. Capital management

The Group's objectives with respect to capital sufficiency are to maintain capital at a level that provides a suitable margin over that deemed by the Group's regulators and supervisors as providing an acceptable level of policyholder protection, whilst remaining economically viable. The Group is regulated in Bermuda by the Bermuda Monetary Authority ('BMA'). The BMA assesses the capital and solvency adequacy of the Group and requires that sufficient capital is in place to meet the Bermuda Solvency Capital Requirement ('BSCR'). The BSCR generates a risk-based capital measure by applying capital factors to capital and solvency return elements, including investments and other assets, premiums and reserves, operational risk, and insurer-specific catastrophe exposure measures, in order to establish an overall measure of capital and surplus for statutory solvency purposes.

The Group maintains a capital level that provides an adequate margin over the Group's solvency capital requirements whilst maintaining local capital which meets or exceeds the relevant local minima including, where appropriate, those relating to maintenance of external ratings. This is monitored by way of a capital sufficiency assessment by the Group Risk Committee.

e. Insurance risk

(i) Program management business

The Group underwrites live business through a network of Managing General Agents (which is largely reinsured). This program underwriting business, is underwritten in the US by Accredited Surety and Casualty Inc. and Accredited Speciality Insurance Company, and in Europe by Accredited Insurance (Europe) Limited, the Companies being AM Best A- credit rated risk carriers.

The Group guideline is for program underwriting business reinsurers to meet a minimum of the AM Best A credit rating, in order to mitigate risk and provide a high quality reinsurance security.

(ii) Syndicate participations

The Group participates on Syndicates shown below:

Syndicate	Year of account	Syndicate Capacity £000	Group participation 000	Open / closed

2689	2021	70,700	50	Open

1991	2020	110,000	43	Open
1991	2019	126,750	50	Open
1991	2018	126,750	50	Closed
1110	2020	3,000	3,000	Open
1110	2019	3,000	3,000	Open
1110*	2017	280,000	280,000	Open

5678	2019	122,800	122,800	Open
5678	2018	114,100	114,100	Open

3330	2018	3,000	300	Closed

* Syndicate 1110 2017 year of account benefits from reinsurance arrangements in place with New York Marine and General Insurance Company, which protects the Group from any adverse net claims development.

Syndicates 1110, 1991, 5678 and 3330 are classified by Lloyd's as run-off Syndicates and their capacity shown above is reflective of this status. Syndicate 1110 is now the Group's platform for legacy transactions at Lloyd's. The capacity of run-off Syndicates does not represent the level of risk these are able to take on, this is a nominal level set by Lloyd's, they are able to receive portfolios of risk greater than this nominal capacity.

(iii) Underwriting risk

Underwriting risk is the primary source of risk in the Group's live underwriting operations and is reflected in the scope and depth of the risk appetite and monitoring frameworks implemented in those entities. Individual operating entities are responsible for establishing a framework for the acceptance and monitoring of underwriting risk including appropriate consideration of potential individual and aggregate occurrence exposures, adequacy of reinsurance coverage and potential geographical and demographic concentrations of risk exposure.

In the event that potential risk concentrations are identified across operating entities, appropriate monitoring is developed to manage the overall Group exposure.

(iv) Reserving risk

Reserving risk represents a significant risk to the Group in terms of both driving required capital levels and the threat to volatility of earnings.

Reserving risk is managed through the application of an appropriate reserving approach to both live and run-off portfolios and the performance of extensive due diligence on new run-off portfolios and acquisitions prior to acceptance. Reserving exercises undertaken by the in-house actuarial team are supplemented with both scheduled and ad hoc reviews conducted by external actuaries.

Reserving risk is also mitigated through the use of reinsurance on live underwriting portfolios and through assuming the inuring reinsurance treaties in place in respect of acquired run-off acquisitions/portfolios.

Claims development information is disclosed below in order to illustrate the effect of the uncertainty in the estimation of future claims settlements by the Group. The tables compare the ultimate claims estimates with the payments made to date. Details are presented on an aggregate basis and show the movements on a gross and net basis, and separately identify the effect of the various acquisitions made by the Group since 1 January 2017.

The analysis of claims development in the Group's run-off insurance entities is as follows:

Gross	Group	Entities	Entities	Entities	Entities
	entities at	acquired by	acquired by	acquired by	acquired by
	1 January	the Group	the Group	the Group	the Group
	2017	during 2017	during 2018	during 2019	during 2020
	£000	£000	£000	£000	£000
Gross claims at:
1 January/acquisition	553,726	270,945	16,842	293,422	730,511
First year movement	(82,104)	(43,749)	(1,091)	(30,261)	(32,635)
Second year movement	(59,235)	(63,559)	(7,293)	(92,233)
Third year movement	(47,365)	(27,341)	(1,729)
Fourth year movement	(83,600)	(25,800)

Gross provision at 31 December 2020	281,422	110,496	6,729	170,927	697,876

Gross claims at:
1 January/acquisition	553,726	270,945	16,842	293,422	730,511
Exchange adjustments	(772)	(21,477)	(6,132)	(19,728)	(22,771)
Payments	(303,077)	(164,109)	(4,095)	(110,455)	(3,487)
Gross provision at 31 December 2020	(281,422)	(110,496)	(6,729)	(170,928)	(697,876)
(Deficit)/surplus to date	(31,545)	(25,137)	(114)	(7,689)	6,377

Net	Group	Entities	Entities	Entities	Entities
	entities at	acquired by	acquired by	acquired by	acquired by
	1 January	the Group	the Group	the Group	the Group
	2017	during 2017	during 2018	during 2019	during 2020
	£000	£000	£000	£000	£000
Net claims at :
1 January/acquisition	350,994	198,513	16,120	275,466	499,559
First year movement	(35,259)	(45,734)	(1,653)	(25,098)	(31,868)
Second year movement	(20,026)	(69,592)	(6,980)	(95,588)
Third year movement	(18,790)	(27,516)	(1,382)
Fourth year movement	(64,366)	(18,046)

Net provision at 31 December 2020	212,553	37,625	6,104	154,781	468,190

Net claims at:
1 January/acquisition	350,994	198,513	16,120	275,466	499,559
Exchange adjustments	6,013	(26,802)	(6,617)	(23,250)	(13,855)
Payments	(176,541)	(113,043)	(4,022)	(108,226)	(3,487)
Net position at 31 December 2020	(212,553)	(37,625)	(6,104)	(154,781)	(468,190)
Surplus/(deficit) to date	(32,088)	21,042	(623)	(10,790)	14,026

The above figures include the Group's participation on Lloyd's Syndicates treated as being in run-off.

Foreign exchange movements shown above are offset by comparable foreign exchange movements in cash and investments held to meet insurance liabilities.

Additional information regarding movements in claims reserves are disclosed in note 23.

5. Segmental information

The Group's segments represent the level at which financial information is reported to the Board, being the chief operating decision maker as defined in IFRS 8. For these financials the reporting segments have been realigned to reflect the Group's core operating businesses. The reportable segments have been identified as follows:-

• Program Management - the Group delegates underwriting authority to MGAs to provide program capacity through its licensed platforms in the US and Europe

• Legacy Insurance - acquires legacy portfolios and insurance debt and provides capital support to the Group's managed Lloyd's Syndicates

• Corporate / Other - primarily includes the holding company and other non- core subsidiaries which fall outside of the segments above

Segmental results for the year ended 31 December 2020

	Note	Program Management	Legacy Insurance	Corporate / Other	Total
		£000	£000	£000	£000
Underwriting income	(i)	(2,365)	80,650	-	78,285
Fee income	(ii)	18,808	-	-	18,808
Investment income	(iii)	1,983	13,092	1,093	16,168
Gross Operating Income	(iv)	18,426	93,742	1,093	113,261

Fixed operating expenses	(v)	(15,795)	(55,621)	(16,409)	(87,825)
Interest expense		-	-	(9,392)	(9,392)
Pre-Tax Operating Profit	(vi)	2,631	38,121	(24,708)	16,044

Unearned program fee revenue	(vii)	(3,111)	-	-	(3,111)
Net intangibles	(viii)	-	15,479	-	15,479
Net unrealised and realised gains/(losses)		(296)	5,568	-	5,272
Non-core and exceptional items		-	-	(3,500)	(3,500)
Profit Before Tax		(776)	59,168	(28,208)	30,184

Segment assets		669,950	1,939,764	137,428	2,747,143

Segment liabilities		629,050	1,489,050	239,107	2,357,208

Segmental results for the year ended 31 December 2019

	Note	Program Management	Legacy Insurance	Corporate / Other	Total
		£000	£000	£000	£000
Underwriting income	(i)	(2,766)	66,300	-	63,534
Fee income	(ii)	9,976	-	-	9,976
Investment income	(iii)	1,975	9,600	821	12,396
Gross Operating Income	(iv)	9,185	75,900	821	85,906

Fixed operating expenses	(v)	(10,568)	(49,820)	(8,624)	(69,012)
Interest expense		-	-	(8,937)	(8,937)
Pre-Tax Operating Profit	(vi)	(1,383)	26,080	(16,740)	7,957

Unearned program fee revenue	(vii)	(2,766)	-	-	(2,766)
Net intangibles	(viii)	-	28,754	-	28,754
Net unrealised and realised gains/(losses)		2,272	7,283	-	9,555
Non-core and exceptional items		-	-	(5,400)	(5,400)
Profit Before Tax		(1,877)	62,117	(22,140)	38,100

Segment assets		441,444	1,215,626	123,803	1,780,873

Segment liabilities		429,144	908,299	154,655	1,492,098

Notes:

(i) Underwriting Income represents Legacy Insurance tangible day one gains and reserve development / savings, net of claims costs and brokerage commissions. Underwriting income also includes Program Management retained earned premiums, net of claims costs, acquisition costs, claims handling expenses and premium taxes / levies.

(ii) Fee Income represents Program Fee Revenue (ix) and earnings from minority stakes in MGAs.

(iii) Investment Income represents income arising on the investment portfolio excluding net realised and unrealised investment gains on fixed income and leased-based assets.

(iv) Gross Operating Income represents Pre-Tax Operating Profit before fixed operating expenses (v).

(v) Fixed operating expenses includes employment, legal, accommodation, information technology, Lloyd's Syndicate and other fixed expenses of ongoing operations, excluding non-core and exceptional items.

(vi) Pre-Tax Operating Profit is a measure of how the Group core businesses performed adjusted for unearned program fee revenue, intangibles created in Legacy acquisitions and net realised and unrealised investment gains on fixed income and lease-based assets.

(vii) Unearned program fee revenue represents the portion of program fee revenue (ix) which has not yet been earned on an IFRS basis.

(viii) Net intangibles is the aggregate movement of intangible assets arising on acquisitions in the year less the amortisation costs of existing intangible assets in the year.

(ix) Program fee revenue represents the fee revenue from insurance policies already bound (written), regardless of the length of the underlying policy period (earned). The Board believe Program fee revenue is a more appropriate measure of the revenue of the business during periods of high growth, due to a larger than normal gap between gross written and gross earned premium.

No income from any one client included within the fee income generated more than 10% of the total external income.

Geographical analysis

As at 31 December 2020
	UK		North America		Europe		Total
		£000		£000		£000		£000

Gross assets		959,793		1,426,541		638,954		3,025,288
Intercompany eliminations		(85,746)		(145,282)		(47,117)		(278,145)
Segment assets		874,047		1,281,259		591,837		2,747,143

Gross liabilities		798,450		1,279,899		557,004		2,635,353
Intercompany eliminations		(114,520)		(157,308)		(6,317)		(278,145)
Segment liabilities		683,930		1,122,591		550,687		2,357,208

Revenue from external customers		124,791		227,263		53,524		405,578

As at 31 December 2019
	UK		North America		Europe		Total
		£000		£000		£000		£000

Gross assets		460,617		1,153,071		478,722		2,092,410
Intercompany eliminations		(128,640)		(132,124)		(50,773)		(311,537)
Segment assets		331,977		1,020,947		427,949		1,780,873

Gross liabilities		293,176		1,099,281		411,178		1,803,635
Intercompany eliminations		(55,826)		(250,150)		(5,561)		(311,537)
Segment liabilities		237,350		849,131		405,617		1,492,098

Revenue from external customers		84,860		105,955		19,725		210,540

6. Program fee revenue

Program fees are reinsurance overriding commissions earned on quota share treaties which reinsure the Program business underwritten by Accredited Insurance (Europe) Limited in Europe, and Accredited Surety & Casualty Company Inc. in the USA. Program fee revenue for Program Management represents the fee revenue from insurance policies already bound (written), regardless of the length of the underlying policy period (earned).

	2020 £000	2019 £000

Program fee revenue	17,467	9,976
Unearned Program fee revenue	(3,111)	(2,766)
Program fee revenue (earned)	14,356	7,210

7. Gross investment income

	2020 £000	2019 £000

Investment income	17,882	15,391
Realised net (losses)/gains on financial assets	(3,536)	4,581
Unrealised gains on financial assets	7,897	2,021
	22,243	21,993

8. Other income

	2020 £000	2019 £000
Income from contracts with customers
Management fees	3,355	4,082
Income from other sources
Insurance commissions	2,000	2,923
Interest expense on pension scheme deficit	(140)	(173)
Rental income from investment properties	163	41
Purchased reinsurance receivables	351	(93)
	5,729	6,780

Income from contracts with customers is derived from the supply of insurance and administration related management services to third parties. The Group derives this income from the transfer of services over time.

9. Operating expenses

	2020 £000	2019 £000
Expenses of insurance company subsidiaries	41,306	22,895
Expenses of Syndicate participations	5,774	9,344
Employee benefits	46,456	40,856
Other operating expenses	18,044	12,797
	111,580	85,892

The expenses of insurance company subsidiaries represent external expenses borne by subsidiaries of the Group; intragroup charges are removed on consolidation.

Operating expenses have increased as a result of the organic and acquisitive growth of the Group's Program Management and Legacy Insurance segments in 2019 and 2020.

Auditor remuneration

	2020 £000	2019 £000
Fees payable to the Group's auditors for the audit of the parent company and its Consolidated Financial Statements	168	153
Fees payable for the audit of the Group's subsidiaries by:
- Group auditors	654	504
- Other auditors	891	815
Other services under legislative requirements	150	131
Total	1,863	1,603

The above include the Group's share of the audit fee payable for Syndicate 1110 and 3330 audits.

10. Finance costs

	2020 £000	2019 £000

Bank loan and overdraft interest	2,515	4,455
Interest on lease liabilities	128	147
Subordinated debt interest	7,133	4,935
	9,776	9,537

11. Profit before income taxes

Profit before income taxes is stated after charging:

	2020 £000	2019 £000

Employee benefits (Note 26)	46,456	40,856
Legacy acquisition costs (including aborted transactions)	3,504	3,169
Depreciation and impairment of fixed assets and right-of-use assets (Note 16 &17)	2,337	2,242
Short term and low value lease rental expenditure	93	57
Amortisation of pre contract costs	809	425
Amortisation and impairment of intangibles (Note 15)	11,047	3,162

12. Income tax charge

a. Analysis of charge in the year

	2020 £000	2019 £000
Current tax
Current year	-	-
Adjustments in respect of prior periods	(1,545)	3,870
Foreign tax	4,598	(6,176)
	3,053	(2,306)

Deferred tax
Current year	(3,759)	4,389
Adjustments in respect of prior periods	1,504	1,672
Foreign tax	-	(2,475)
Income tax charge for the year	798	1,280

b. Factors affecting tax charge for the year

The tax assessed differs from the standard rate of corporation tax in the United Kingdom of 19%. The differences are explained below:

	2020 £000	2019 £000

Profit before income taxes	30,184	38,100

Profit on ordinary activities at the standard rate of corporation tax in the UK of 19.00% (2019: 19.00%)	5,735	7,239

Income not taxable for tax purposes	(20,916)	(14,565)
Expenses not deductible for tax purposes	2,494	1,740
Deferred tax not recognised on capital allowances	(31)	43
Differences in taxation treatment	(28)	4,478
Unrelieved tax losses carried forward	15,565	6,631
Utilisation of brought forward losses	(150)	(72)
Deferred tax not recognised on foreign tax pool	-	303
Foreign tax	4,598	(8,651)
Tax rate differential	(6,428)	(1,408)
Adjustments in respect of previous years	(41)	5,542
Income tax charge for the year	798	1,280

c. Factors that may affect future tax charges

In addition to the recognised deferred tax asset, the Group has other trading losses of approximately £210,214k (2019: £118,263k) in various Group companies available to be carried forward against future trading profits of those companies. The recovery of these losses is uncertain and no deferred tax asset has been provided in respect of these losses. Should it become possible to offset these losses against taxable profits in future years, the Group tax charge in those years will be reduced accordingly.

The Group has available capital losses of £27,514k (2019: £27,514k).

In the Finance Bill 2021, it was announced that the main rate of UK corporation tax would increase to 25% from April 2023.

The Group's 2020 results are taxed at 19%.

13. Earnings and net assets per share

a. Basic earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

	2020 £000	2019 £000

Profit for the year attributable to ordinary shareholders	29,447	37,298

	No. 000's	No. 000's
Shares in issue throughout the year	200,827	125,984
Weighted average number of ordinary shares issued in year	15,199	57,469

Weighted average number of ordinary shares	216,026	183,453

Basic earnings per ordinary share	13.6p	20.3p

b. Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares for conversion of all potentially dilutive ordinary shares. The Group's earnings per share is diluted by the effects of outstanding share options.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

	2020 £000	2019 £000

Profit for the year attributable to ordinary shareholders	29,447	37,298

	No. 000's	No. 000's
Weighted average number of ordinary shares in issue in the year	216,026	183,453
Dilution effect of convertible shares	49,772	-
	265,798	183,453

Diluted earnings per ordinary share	11.1p	20.3p

c. Net asset value per share

	2020 £000	2019 £000

Net assets attributable to equity shareholders as at 31 December	390,312	288,332

	No. 000's	No. 000's

Ordinary shares in issue as at 31 December	224,395	195,918
Less: shares held in treasury	(112)	-
	224,283	195,918

Net asset value per ordinary share	174.0p	147.2p

d. Diluted net asset value per share

	2020 £000	2019 £000

Net assets attributable to equity shareholders as at 31 December	390,312	288,332

	No. 000's	No. 000's

Ordinary shares in issue as at 31 December	224,395	195,918
Less: shares held in treasury	(112)	-
Dilution effect of convertible shares	49,772	-
	274,055	195,918

Diluted net asset value per ordinary share	142.4p	147.2p

14. Distributions

The amounts recognised as distributions to equity holders in the year are:

	2020 £000	2019 £000


Bonus share award (2019: distribution on cancellation of AB shares)	-	10,971
Distribution on cancellation of AD (2019: AC) shares	8,523	7,444

Total distributions to shareholders	8,523	18,415

2019 final distribution was completed by a bonus share award of 1 for every 22 shares held.

15. Intangible assets

	US state licences & customer contracts		Arising on acquisition	Goodwill		Other		Total
		£000	£000		£000		£000		£000
Cost
As at 1 January 2019		6,677	16,218		18,907		542		42,344
Exchange adjustments		(291)	(897)		(578)		(1)		(1,767)
Acquisition of subsidiaries		2,654	28,683		-		-		31,337
Additions		-	-		819		143		962
Disposals		(2,703)	-		-		(23)		(2,726)

As at 31 December 2019		6,337	44,004		19,148		661		70,150

Exchange adjustments		(81)	(1,065)		(682)		(2)		(1,830)
Acquisition of subsidiaries		-	26,526		-		-		26,526
Additions		-	-		-		16		16
Disposals		(2,573)	(4,780)		-		-		(7,353)
As at 31 December 2020		3,683	64,685		18,466		675		87,509

Amortisation/Impairment
As at 1 January 2019		727	3,655		17,637		351		22,370
Exchange adjustments		(6)	(153)		(530)		(1)		(690)
Charge for the year		30	2,579		474		79		3,162
Disposals		(751)	-				(23)		(774)
As at 31 December 2019		-	6,081		17,581		406		24,068

Exchange adjustments		(1)	(165)		(662)		(2)		(830)
Charge for the year		2,574	7,681		714		78		11,047
Disposals		(2,573)	(4,780)		-		-		(7,353)
As at 31 December 2020		-	8,817		17,633		482		26,932

Carrying amount
As at 31 December 2020		3,683	55,868		833		193		60,577

As at 31 December 2019		6,337	37,923		1,567		255		46,082

Goodwill acquired through business combinations has been allocated to the Legacy cash generating unit, which is also an operating and reportable segment, for impairment testing.

Intangible assets arising on acquisition are calculated by measuring the difference between the discounted and undiscounted fair value of net technical provisions acquired. These intangible assets are amortised over the estimated pattern of run-off of the net technical provisions.

The recoverable amount of this cash generating unit is determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management.

Key assumptions used in value in use calculations

The calculation of value in use for the units is most sensitive to the following assumptions:-

· Discount rates, which represent the current market assessment of the risks specific to each cash generating unit, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The pre-tax discount rate applied to the cash flow projections is 10.0% (2019: 10.0%). The discount rate calculation is based on the specific circumstances of the Group and its operating segments and derived from its weighted average cost of capital ("WACC") with uplift for expected increases in interest rates. The WACC takes into account both debt and equity. The cost of equity is derived from the expected investment return.

· Growth rate used to extrapolate cash flows beyond the budget period is based on published industry standards. Cash flows beyond the four-year period are extrapolated using a 10% growth rate (2019: 10.0%).

The Directors believe that no foreseeable change in any of the above key assumptions would require an impairment of the carrying amount of goodwill.

16. Property, plant and equipment

	Computer equipment	Motor vehicles		Office equipment		Leasehold improvements
	£000		£000		£000		£000	£000
Cost
As at 1 January 2019	1,566		41		1,314		778	3,699
Exchange adjustments	(42)		(1)		(12)		(48)	(103)
Additions	218		18		261		461	958
Disposals	(563)		(40)		(491)		(10)	(1,104)
As at 31 December 2019	1,179		18		1,072		1.181	3,450

Exchange adjustments	(40)		-		(11)		(70)	(121)
Additions	89		-		778		172	1,039
Disposals	(184)		-		(238)		(77)	(499)
As at 31 December 2020	1,044		18		1,601		1,206	3,869

Depreciation
As at 1 January 2019	1,386		41		1,100		595	3,122
Exchange adjustments	(39)		-		(11)		(42)	(92)
Charge for the year	274		2		104		86	466
Disposals	(560)		(40)		(406)		(9)	(1,015)
As at 31 December 2019	1,061		3		787		630	2,481

Exchange adjustments	(37)		-		(2)		(53)	(92)
Charge for the year	145		4		176		108	433
Disposals	(180)		-		(231)		(75)	(486)
As at 31 December 2020	989		7		730		610	2,336

Carrying amount
As at 31 December 2020	55		11		871		596	1,533

As at 31 December 2019	118		15		285		551	969

As at 31 December 2020, the Group had no significant capital commitments (2019: none). The depreciation charge for the year is included in operating expenses.

17. Right-of-use assets

	Property		Office equipment		Total
		£000		£000		£000

Position recognised at 1 January 2019 under IFRS 16		5,048		13		5,061
Depreciation charge for the year		(1,771)		(5)		(1,776)
Exchange adjustment		(94)		-		(94)
As at 31 December 2019		3,183		8		3,191

Depreciation charge for the year		(1,839)		(65)		(1,904)
Additions in the year		2,729		187		2,916
Exchange adjustment		(62)		-		(62)
As at 31 December 2020		4,011		130		4,141

The cost of leases with a rental period of less than 12 months or with a contract value of less than £4,000 was £93k for the year (2019: £57k) and is reflected within expenses in the Consolidated Income Statement.

18. Investment properties and financial assets

		2020 £000	2019 £000
a.	Investment properties
	As at 1 January	1,480	1,881
	Decrease in fair value during the year	(130)	(40)
	Disposal	-	(361)
	As at 31 December	1,350	1,480

The investment properties are measured at fair value derived from the valuation work performed at the balance sheet date by independent property valuers.

Rental income from the investment properties for the year was £163k (2019: £163k) and is included in Other Income within the Consolidated Income Statement.

b. Financial investment assets at fair value through profit or loss (designated at initial recognition)

	2020 £000	2019 £000

Equities	5,502	10,991
Debt and fixed interest securities	803,136	533,326
Cash based investment funds	54,504	15,646
	863,142	559,963

Included in the above amounts are £38,388k (2019: £18,660k) pledged as part of the Funds at Lloyd's in support of the Group's underwriting activities. Lloyd's has the right to apply these monies in the event the corporate member fails to meet its obligations. These monies are not available to meet the Group's own working capital requirements and can only be released with Lloyd's permission. Also included in the above amounts are £98,131k (2019: £90,100k) of funds withheld as collateral for certain of the Group's reinsurance contracts.

c. Shares in subsidiary and associate undertakings

The Company had interests in the following subsidiaries and associates at 31 December 2020:

							% of ordinary shares held via:
	Country of incorporation/ registration			The Company	Subsidiary and associate undertakings			Overall effective % of share capital held
Name of subsidiaries/associate
Distinguished Re Ltd		Barbados	-			100			100
Berda Developments Limited*		Bermuda	-			100			100
R&Q Bermuda (SAC) Limited*		Bermuda	-			100			100
R&Q Quest (SAC) Limited +		Bermuda	-			100			100
R&Q Quest Insurance Limited +		Bermuda	-			100			100
R&Q Re (Bermuda) Limited		Bermuda	-			100			100
RQLM Limited		Bermuda	100			-			100
Sandell Holdings Ltd.		Bermuda	-			100			100
Tradesman Program Managers, LLC		USA	-			35			35
Sandell Re Ltd. ^		Bermuda	-			100			100
Mondi Reinsurance Ltd*		Bermuda	-			100			100
R&Q Quest Management Services (Cayman) Limited		Cayman Island	-			100			100
Marillac Insurance Company, Ltd		Cayman Island	-			100			100
R&Q Re (Cayman) Ltd.		Cayman Island	-			100			100
R&Q Alpha Insurance Company SE -		Malta	-			100			100
R&Q Beta Insurance Company SE -		Malta	-			100			100
R&Q Capital No. 1 Limited		England and Wales	-			100			100
R&Q Capital No. 6 Limited		England and Wales	-			100			100
R&Q Capital No. 7 Limited		England and Wales	-			100			100
R&Q Capital No. 8 Limited @		England and Wales	-			100			100
R&Q Central Services Limited		England and Wales	-			100			100
R&Q Commercial Risk Services Limited /		England and Wales	-			100			100
R&Q Delta Company Limited		England and Wales	-			100			100
R&Q Eta Company Limited		England and Wales	-			100			100
R&Q Gamma Company Limited		England and Wales	-			100			100
Inceptum Insurance Company Limited		England and Wales	-			100			100
R&Q Insurance Services Limited		England and Wales	-			100			100
R&Q MGA Limited		England and Wales	-			100			100
R&Q Munro MA Limited		England and Wales	-			100			100
R&Q Munro Services Company Limited		England and Wales	-			100			100
R&Q Oast Limited		England and Wales	-			100			100
R&Q Overseas Holdings Limited		England and Wales	-			100			100
R&Q Reinsurance Company (UK) Limited		England and Wales	-			100			100
R&Quiem Financial Services Limited		England and Wales	-			100			100
Randall & Quilter Captive Holdings Limited		England and Wales	-			100			100
Randall & Quilter II Holdings Limited		England and Wales	-			100			100
Randall & Quilter IS Holdings Limited		England and Wales	-			100			100
Randall & Quilter Underwriting Management Holdings Limited		England and Wales	-			100			100
RQIH Limited		England and Wales	100			-			100
The World Marine & General Insurance Company PLC		England and Wales	-			100			100
La Licorne Compagnie de Reassurances SA		France	-			100			100
Capstan Insurance Company Limited		Guernsey	-			100			100
R&Q Ireland Claims Services Limited #		Ireland	-			100			100
R&Q Ireland Company Limited by Guarantee #		Ireland	-			100			100
Hickson Insurance Limited		Isle of Man	-			100			100
Pender Mutual Insurance Company Limited		Isle of Man	-			100			100
R&Q Insurance Management (IOM) Limited		Isle of Man	-			100			100
Accredited Insurance (Europe) Limited {		Malta	-			100			100
R&Q Epsilon Insurance Company SE [		Malta	-			100			100
R&Q Insurance (Europe) Limited		Malta	-			100			100
R&Q Malta Holdings Limited		Malta	-			100			100
Accredited Bond Agencies Inc.		USA	-			100			100
Accredited Group Agency Inc.		USA	-			100			100
Accredited Holding Corporation		USA	-			100			100
Accredited Surety and Casualty Company, Inc.		USA	-			100			100
Accredited Speciality Insurance Company		USA	-			100			100
CMAL LLC }		USA	-			-			-
Excess and Treaty Management Corporation		USA	-			100			100
GLOBAL Reinsurance Corporation of America		USA	-			100			100
GLOBAL U.S. Holdings Incorporated		USA	-			100			100
Grafton US Holdings Inc.~		USA	-			100			100
ICDC Ltd		USA	-			100			100
National Legacy Insurance Company		USA	-			100			100
R&Q Healthcare Interests LLC		USA	-			100			100
R&Q Quest PCC, LLC		USA	-			100			100
R&Q Reinsurance Company		USA	-			100			100
R&Q RI Insurance Company		USA	-			100			100
R&Q Services Holding Inc		USA	-			100			100
R&Q Solutions LLC		USA	-			100			100
Randall & Quilter America Holdings Inc		USA	-			100			100
Randall & Quilter Healthcare Holdings Inc.		USA	-			100			100
Randall & Quilter PS Holdings Inc		USA	-			100			100
Risk Transfer Underwriting Inc.		USA	-			100			80
RSI Solutions International Inc		USA	-			100			100
Transport Insurance Company		USA	-			100			100

# has a November year end due to Irish Law Society connection.

* Merged into R&Q Re (Bermuda) Ltd. on 31 December 2020

+ Sold to Quest Bermuda Holdings Limited on 28 January 2021

^ Sold to Tradesman Program Managers LLC

~ Randall & Quilter America Holdings Inc increased its shareholding in Grafton US Holdings Inc. to 100% by acquiring the remaining 20% issued share capital on 31 July 2020.

- Merged into Accredited Insurance (Europe) Limited on 30 March 2021

/ Sold to Stride Limited on 23 April 2021

{ Has a UK and an Italian Branch

} Membership interest held by R&Q Capital No.1 Limited

[ Redomiciled to Malta on 16 March 2020

@Renamed on 6 May 2021. The Company was previously named Vibe Corporate Member Limited

19. Insurance and other receivables

	2020 £000	2019 £000

Receivables arising from direct insurance operations	139,667	110,379
Receivables arising from reinsurance operations	195,094	212,234
Insurance receivables	334,761	322,613

Trade receivables/ Receivables arising from contracts with customers	2,298	4,097
Other receivables	96,587	49,933
Purchased reinsurance receivables	4,652	5,969
Prepayments and accrued income	69,824	36,923
	173,361	96,922
Total	508,122	419,535

The purchased reinsurance receivables balance is expected to be received after 12 months (2019: before 12 months £1,513k: after 12 months £4,456k).

Included in receivables arising from contracts with customers are amounts due from customers in relation to the supply of management services which are now unconditionally due. There are no amounts due from contracts with customers which are subject to further performance or conditions before settlement.

Since 2015 the Group has entered into retroactive reinsurance contracts as an integral component of its strategy to actively seek commutations of the original ceded Reinsurance Program in respect of R&Q Re US. To date, the Group has received cash proceeds in excess of $190,000k from the R&Q Re commutations strategy. The Group retains oversight and custody of the premiums and investment thereof.

Included in receivables arising from reinsurance operations is £63,932k (2019: £57,075k) in respect of amounts due under certain structured reinsurance contracts which are expected to be received after 12 months. The increase arises due to the effect of the commutations strategy, realised investment gains and USA interest rate rises which have enhanced the amounts recoverable under the policies. The movement of £11,049k (2019: £14,100k) has been included in the £130,804k (2019: £111,033k) shown as proceeds from commutations and reinsurers' share of claims paid in the Consolidated Income Statement.

The Group retains the right to recover any surplus assets ("experience accounts") remaining when the reinsurance reaches its natural expiry or is terminated by the Group. The estimated value of the experience accounts is reported within receivables arising from reinsurance operations. The valuation of the experience account is sensitive to movements in investment returns; any subsequent movement will be charged or credited to the Consolidated Income Statement in the year in which it arises. An increase or reduction in returns of 0.25% would result in a movement of 0.4% in total Group assets.

The carrying amounts disclosed above reasonably approximate their fair values at the period end date.

Prepayments and accrued income includes gross deferred acquisition costs which have increased in accordance with the growth of Program Management.

20. Cash and cash equivalents

	2020 £000	2019 £000

Cash at bank and in hand	267,829	252,741

Included in cash and cash equivalents is £553k (2019: £574k) being funds held in escrow accounts in respect of guarantees provided to the Institute of London Underwriters. The decrease is due to exchange movements.

In the normal course of business, insurance company subsidiaries will have deposited funds in respect of certain contracts which can only be released with the approval of the appropriate regulatory authority.

The carrying amounts disclosed above reasonably approximate their fair values at the period end date.

21. Insurance and other payables

	2020 £000	2019 £000

Structured liabilities	380,484	400,910
Structured settlements	(380,484)	(400,910)
	-	-

Payables arising from reinsurance operations	163,565	118,528
Payables arising from direct insurance operations	32,838	66,271
Insurance payables	196,403	184,799

Trade payables	1,378	2,259
Other taxation and social security	10,678	1,633
Other payables	59,752	40,052
Accruals and deferred income	45,660	27,080
	117,468	71,024
Total	313,871	255,823

The carrying amounts disclosed above reasonably approximate their fair values at the period end date.

Structured Settlements

No new structured settlement arrangements have been entered into during the year. The movement in these structured liabilities during the period is primarily due to exchange movements. Some group subsidiaries have paid for annuities from third party life insurance companies for the benefit of certain claimants. The subsidiary company retains the credit risk in the unlikely event that the life insurance company defaults on its obligations to pay the annuity amounts. In the event that any of these life insurance companies were unable to meet their obligations to these annuitants, any remaining liability may fall upon the respective insurance company subsidiaries. The Directors believe that, having regard to the quality of the security of the life insurance companies together with the reinsurance available to the relevant Group insurance companies, the possibility of a material liability arising in this way is very unlikely. The life companies will settle the liability directly with the claimants and no cash will flow through the Group. These annuities have been shown as reducing the insurance companies' liabilities to reflect the substance of the transactions and to ensure that the disclosure of the balances does not detract from the users' ability to understand the Group's future cash flows.

22. Financial liabilities

	2020 £000	2019 £000

Amounts owed to credit institutions	243,350	142,693
Lease liabilities	4,979	3,210
	248,329	145,903

Amounts due to credit institutions are payable as follows:
	2020 £000	2019 £000

Less than one year	51,000	37,651
Between one to five years	31,022	15,500
Over five years	161,328	89,542
	243,350	142,693

As outlined in Note 31, £63,000k (2019: £55,141k) owed to credit institutions is secured by debentures over the assets of the Company and several of its subsidiaries.

The Group has issued the following debt:

Issuer	Principal	Rate	Maturity
Randall & Quilter Investment Holdings Ltd.	$70,000k	6.35% above USD LIBOR	2028
Randall & Quilter Investment Holdings Ltd.	$125,000k	6.75% above USD LIBOR	2033
Accredited Insurance (Europe) Limited	€20,000k	6.7% above EURIBOR	2025
Accredited Insurance (Europe) Limited	€5,000k	6.7% above EURIBOR	2027
R&Q Re (Bermuda) Limited	$20,000k	7.75% above USD LIBOR	2023

The Group's subsidiary, Accredited Holding Corporation provides a full and unconditional guarantee for the payment of principal, interest and any other amounts due in respect of the $70,000k Notes issued by Randall & Quilter Investments Holding Ltd.

Lease liabilities maturity analysis - contractual undiscounted cash flows

	2020 £000	2019 £000

Less than one year	1,375	1,069
Between one to five years	3,801	2,058
Over five years	142	356
Total undiscounted lease liabilities at 31 December	5,318	3,483

Reconciliation of liabilities arising from financing activities

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from the financing activities are those for which cash flows were, or future cash flows will be, classified in the Group Consolidated Cash Flows Statement as cash flows from financing activities.

	2020 £000	2019 £000
Balance at 1 January	142,693	140,243
Financing cash flows (1)	100,963	6,785
Non-cash exchange adjustment	(306)	(4,335)
Balance at 31 December	243,350	142,693

1) Represents the net cash flows from the repayment of borrowings and the proceeds from new borrowing arrangements.

23. Insurance contract provisions and reinsurance balances

		2020			2019
	Program Management	Legacy Insurance	Total	Program Management	Legacy Insurance	Total
	£000	£000	£000	£000	£000	£000
Gross
Insurance contract provisions at 1 January	299,273	772,935	1,072,208	107,304	591,774	699,078
Claims paid	(102,754)	(108,010)	(210,764)	(52,996)	(130,442)	(183,438)
Increases/(Decreases) in provisions arising from the (disposal)/acquisition of subsidiary undertakings and Syndicate participations	-	331,885	331,885	-	174,551	174,551
Increases in provisions arising from acquisition of reinsurance portfolios	-	286,750	286,750	-	132,234	132,234
Increase in claims provisions	239,116	32,768	271,884	144,051	33,131	177,182
Increase/(decrease) in unearned premium reserve	77,986	(2,430)	75,556	107,608	(13,293)	94,315
Net exchange differences	(10,669)	(46,448)	(57,117)	(6,694)	(15,020)	(21,714)
As at 31 December	502,952	1,267,450	1,770,402	299,273	772,935	1,072,208

Reinsurance
Reinsurers' share of insurance contract provisions at 1 January	288,922	182,490	471,412	101,946	198,411	300,357
Proceeds from commutations and reinsurers' share of gross claims paid	(95,425)	(35,379)	(130,804)	(50,165)	(60,868)	(111,033)
Increases/(Decreases) in provisions arising from the (disposal)/acquisition of subsidiary undertakings and Syndicate participations	-	220,458	220,458	-	18,644	18,644
Increases in provisions arising from acquisition of reinsurance portfolios	-	1,092	1,092	-	-	-
Increase in claims provisions	226,408	21,360	247,768	137,775	28,485	166,260
Increase/(decrease) in unearned premium reserve	71,842	1	71,843	104,255	(568)	103,687
Net exchange differences	(10,055)	(1,826)	(11,881)	(4,889)	(1,614)	(6,503)
As at 31 December	481,692	388,196	869,888	288,922	182,490	471,412

Net
Net insurance contract provisions at 1 January	10,351	590,445	600,796	5,358	393,363	398,721
Net claims paid	(7,329)	(72,631)	(79,960)	(2,831)	(69,574)	(72,405)
Increases/(Decreases) in provisions arising from the (disposal)/acquisition of
subsidiary undertakings and Syndicate participations	-	111,427	111,427	-	155,907	155,907
Increases in provisions arising from acquisition of reinsurance portfolios	-	285,658	285,658	-	132,234	132,234
Increase/(decrease) in claims provisions	12,708	11,408	24,116	6,276	4,646	10,922
Increase/(decrease) in unearned premium reserve	6,144	(2,431)	3,713	3,353	(12,725)	(9,372)
Net exchange differences	(614)	(44,622)	(45,236)	(1,805)	(13,406)	(15,211)
As at 31 December	21,260	879,254	900,514	10,351	590,445	600,796

		2020			2019
	Program Management	Legacy Insurance	Total	Program Management	Legacy Insurance	Total
	£000	£000	£000	£000	£000	£000
Gross
Claims reserves	257,847	1,267,085	1,524,932	128,286	745,425	873,711
Unearned premiums reserves	245,105	365	245,470	170,987	27,510	198,497
As at 31 December	502,952	1,267,450	1,770,402	299,273	772,935	1,072,208

Reinsurance
Claims reserves	247,903	388,196	636,099	123,404	182,256	305,660
Unearned premiums reserves	233,789	-	233,789	165,518	234	165,752
As at 31 December	481,692	388,196	869,888	288,922	182,490	471,412

Net
Claims reserves	9,944	878,889	888,833	4,882	563,169	568,051
Unearned premiums reserves	11,316	365	11,681	5,469	27,276	32,745
As at 31 December	21,260	879,254	900,514	10,351	590,445	600,796

The carrying amounts disclosed above reasonably approximate their fair values at the period end date.

Assumptions, changes in assumptions and sensitivity

The assumptions used in the estimation of provisions relating to insurance contracts are intended to result in provisions which are sufficient to settle the net liabilities from insurance contracts. The amounts presented above include estimates of future reinsurance recoveries expected to arise on the settlement of the gross insurance liabilities, including £63,932k (2019: £57,075k) in respect of the structured reinsurance contract collateralised by the funds withheld disclosed in Note 18 (b).

Provision is made at the period end date for the estimated ultimate cost of settling all claims incurred in respect of events and developments up to that date, whether reported or not.

As detailed in Note 3, significant uncertainty exists as to the likely outcome of any individual claim and the ultimate costs of completing the run-off of the Group's insurance operations.

The provisions carried by the Group for its insurance liabilities are calculated using a variety of actuarial techniques. The provisions are calculated and reviewed by the Group's internal actuarial team; in addition the Group periodically commissions independent reviews by external actuaries. The use of external actuaries provides management with additional comfort that the Group's internally produced statistics and trends are consistent with observable market information and other published data. Provisions for outstanding claims and IBNR are initially estimated at a gross level and a separate calculation is carried out to estimate the size of reinsurance recoveries. Insurance companies and Syndicates within the Group are covered by a variety of treaty, excess of loss and stop loss reinsurance programs.

As detailed in Note 2 (h), when preparing these Consolidated Financial Statements, provision is made for all costs of running off the business of the insurance company subsidiaries to the extent that these costs exceed the estimated future investment return expected to be earned by those subsidiaries. Provision is also made for all costs of running off the underwriting years for those Syndicates treated as being in run-off on which the Group participates. The quantum of the costs of running off the business and the future investment income has been determined through the preparation of cash flow forecasts over the anticipated period of the run-off, using internally prepared budgets and forecasts of expenditure, investment income and actuarially assessed settlement patterns for the gross provisions. The gross costs of running off the business are estimated to be fully covered by the estimated future investment income.

Other than as described above, insurance liabilities are not discounted.

The provisions disclosed in the Consolidated Financial Statements are sensitive to a variety of factors including:

• Settlement and commutation activity of third party lead reinsurers

• Development in the status of settlement and commutation negotiations being entered into by the Group

• The financial strength of the Group's reinsurers and the risk that these entities could, in time, become insolvent or could otherwise default on payments

• Future cost inflation of legal and other advisors who assist the Group with the settlement of claims

• Changes in statute and legal precedent which could particularly impact provisions for asbestos, pollution and other latent exposures

• Arbitration awards and other legal precedents which could particularly impact upon the presentation of both inwards and outwards claims on the Group's exposure to major catastrophe losses

A 1 percent reduction in the net technical provisions would increase net assets by £9,005k (2019: £6,008k).

24. Current and deferred tax

Current tax	2020		2019
		£000		£000

Current tax assets		-		1,988
Current tax liabilities		(1,918)		(294)
Net current tax assets/(liabilities)		(1,918)		1,694

Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using tax rates of 19% for the UK (2019: 17%) and 21% for the US (2019: 21%).

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered.

The movements in deferred tax assets and liabilities during the year are shown below. The movement in deferred tax is recorded in the income tax charge in the Consolidated Income Statement.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances on a net basis.


	Deferred tax assets	Deferred tax liabilities	Total
	£000	£000	£000

As at 1 January 2019	3,205	(3,449)	(244)
Movement in year	803	(6,016)	(5,213)
As at 31 December 2019	4,008	(9,465)	(5,457)
Movement in year	219	(3,794)	(3,575)
As at 31 December 2020	4,227	(13,259)	(9,032)

The movement on the deferred tax account is shown below:

Accelerated capital allowances		Trading losses		Pension scheme deficit		Other temporary differences		Total
	£000		£000		£000		£000		£000

As at 1 January 2019	(39)		10,031		1,167		(11,403)		(244)
Movement in year	1		5,129		80		(10,423)		(5,213)
As at 31 December 2019	(38)		15,160		1,247		(21,826)		(5,457)
Movement in year	-		(1,781)		144		(1,938)		(3,575)
As at 31 December 2020	(38)		13,379		1,391		(23,765)		(9,032)

Movements in the provisions for deferred taxation are disclosed in the Consolidated Financial Statements as follows:

	Exchange adjustment		Deferred tax in Consolidated Income Statement		Deferred tax in Consolidated Statement of Comprehensive Income		Total
		£000		£000		£000	£000

Movement in 2019		(1,678)		(3,586)		51	(5,213)
Movement in 2020		(6,088)		2,255		258	(3,575)

The analysis of the deferred tax assets relating to tax losses is as follows:

	2020		2019
		£000	£000
Deferred tax assets - relating to trading losses
Deferred tax assets to be recovered after more than 12 months		5,767	11,038
Deferred tax assets to be recovered within 12 months		7,612	4,122

Deferred tax assets		13,379	15,160

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.

The Directors have prepared forecasts which indicate that, excluding the deferred tax asset on the pension scheme deficit, the deferred tax assets will substantially reverse over the next six years.

The above deferred tax assets arise mainly from temporary differences and losses arising on the Group's US insurance companies. Under local tax regulations these losses and other temporary differences are available to offset against the US subsidiaries' future taxable profits in the Group's US Insurance Services Division as well as any future taxable results that may arise in the US insurance companies.

The Group's total deferred tax asset includes £13,379k (2019: £15,160k) in respect of trading losses carried forward. The tax losses have arisen in individual legal entities and will be used as future taxable profits arise in those legal entities. Substantially all of the unused tax losses for which a deferred tax asset has been recognised arises in the US subgroup.

25. Share capital

	Number of shares	Ordinary shares	Share premium	Treasury share reserve	Total
		£000	£000	£000	£000
At 1 January 2019	125,984,280	2,520	51,135	-	53,655
Issue of ordinary shares	69,858,915	1,396	102,047	-	103,443
Share based payments	74,373	2	138	-	140
Issue of AB-AC shares	391,835,136	18,415	(18,415)	-	-
Redemption/Cancellation of AB-AC shares	(391,835,136)	(18,415)	-	-	(18,415)
At 31 December 2019	195,917,568	3,918	134,905	-	138,823

Issue of ordinary shares	21,578,813	570	15,637	-	16,207
Share based payments	6,898,903	-	11,345	-	11,345
Treasury	(111,525)	-	-	(150)	(150)
Issue of AD shares	222,563,380	8,523	(8,523)	-	-
Redemption/Cancellation of AD shares	(222,563,380)	(8,523)	-	-	(8,523)
At 31 December 2020	224,283,759	4,488	153,364	(150)	157,702

During the year, the Group issued 11,902,318 ordinary shares at £1.35 per share.

During the year, a Group subsidiary issued 47,609,270 $0.01 convertible preference shares for cash consideration of $80,000k. These preference shares converted into ordinary share capital of the Company upon certain regulatory conditions being met on 21 January 2021. The convertible preference shares are entirely accounted for within equity in accordance with IAS 32 as the conversion to ordinary share capital is at a fixed amount.

In the year, the Group commenced a share repurchase programme and purchased 111,525 of its ordinary shares for total consideration of £150k. These ordinary shares are held in treasury.

	2020 £	2019 £
Allotted, called up and fully paid
224,283,759 ordinary shares of 2p each (2019: 195,917,568 ordinary shares of 2p each)	4,487,904	3,918,350
1 Preference A Share of £1	1	1
1 Preference B Share of £1	1	1
	4,487,906	3,918,352

Included in Equity	2020 £	2019 £
224,283,759 ordinary shares of 2p each (2019: 195,917,568 ordinary shares of 2p each)	4,487,904	3,918,350
1 Preference A Share of £1	1	1
1 Preference B Share of £1	1	1
	4,487,906	3,918,352

Cumulative Redeemable Preference Shares

Preference A and B Shares have rights, inter alia, to receive distributions in priority to ordinary shares of distributable profits of the Company derived from certain subsidiaries:

• Preference A Share: one half of all distributions arising from the Company's investment in R&Q Reinsurance Company up to a maximum of $5,000k.

• Preference B Share: one half of all distributions arising from the Company's investment in R&Q Reinsurance Company (UK) Limited up to a maximum of $10,000k.

The Preference A and Preference B Shares have been classified as equity on the basis that redemption dates are not prescribed in the Memorandum and Articles of Association and as such there is no contractual obligation to deliver cash. No distributions have been made since acquisition by either R&Q Reinsurance Company or R&Q Reinsurance Company (UK) Limited.

Shares issued

During the year the Group issued AD shares (with an aggregate value of £8,523k) (2019: AB and AC shares (with an aggregate value of £18,415k) which were all cancelled.

26. Employees and Directors

Employee benefit expense for the Group during the year

	2020 £000	2019 £000

Wages and salaries	38,297	35,987
Social security costs	3,657	3,767
Pension costs	1,303	1,102
Share based payment charge	3,199	-
	46,456	40,856

Pension costs are recognised in operating expenses in the Consolidated Income Statement and include £1,303k (2019: £1,102k) in respect of payments to defined contribution schemes.

Average number of employees	2020 Number	2019 Number

Program Legacy Other	71 169 40	55 167 37
	280	259

Remuneration of the Directors and key management

	2020 £000	2019 £000

Aggregate Director emoluments	9,565	5,368
Aggregate key management emoluments	3,318	2,061
Share based payments - Directors	3,019	-
Share based payments - Key management	65	169
Key management pension contributions	-	10
	15,967	7,608
Highest paid Director
Aggregate emoluments	5,234	2,477

Key management refers to employees who are Directors of subsidiaries within the Group but not members of the Group's Board of Directors.

Directors' emoluments

Name	Salary	Bonus paid	Bonus accrued	Share award cost	Total	Total
	£000	£000	£000	£000	£000	$000

K E Randall (resigned 31 March 2021)	769	1000	2,538	-	4,307	5,600
A K Quilter	525	600	927	-	2,052
W L Spiegel (appointed 10 January 2020)	1,124	166	1,153	2,791	5,234	6,805
T S Solomon (appointed 2 November 2020)	147	23	769	228	1,167	1,517
A H F Campbell	101	-	-	-	101	-
P A Barnes	88	-	-	-	88	115
J P Fox	87	-	-	-	87	-
E M Flanagan (appointed 1 June 2020)	49	-	-	-	49	-
Dr R Sellek (resigned 14 January 2020)	498	-	-	-	498	648

W L Spiegel, T S Solomon, K E Randall, Dr R Sellek and P A Barnes have been remunerated in US dollars.

Bonus payments relating to the reporting year are paid in the following 3 years being 50%, 25% and 25% annually, and reflect the performance of the Group and the individuals. The costs in the 2020 financial year represent the amounts paid in 2020 and provision for costs relating to the 2018, 2019 and 2020 reporting years performance, which will be paid in 2020, 2021 and 2022. The provisions are established on a likelihood of the performance and service period criteria being met. Where contractual arrangements supersede the above policy the contractual arrangements are included.

During the year share awards were granted to W L Spiegel and T S Solomon, the shares are held in Escrow and have a three year vesting period. The costs of issue are charged over the vesting period.

27. Pension scheme obligations

The Group operates one defined benefit scheme in the UK. The defined benefit scheme's assets are held in separate trustee administered funds. The pension cost was assessed by an independent qualified actuary. In the valuation, the actuary used the projected unit method as the scheme is closed to new employees. A full actuarial valuation of the scheme is carried out every three years.

On 2 December 2003, the scheme was closed to future accrual although the scheme continues to remain in full force and effect for members at that date.

a. Employee benefit obligations - amount disclosed in the Consolidated Statement of Financial Position

	2020 £000	2019 £000

Fair value of plan assets	27,811	26,003
Present value of funded obligations	(35,135)	(33,340)
Net defined benefit liability	(7,324)	(7,337)
Related deferred tax asset	1,392	1,247
Net position in the Consolidated Statement of Financial Position	(5,932)	(6,090)

All actuarial losses are recognised in full in the Consolidated Statement of Comprehensive Income in the period in which they occur.

b. Movement in the net defined benefit obligation and fair value of plan assets over the year

	Present value of obligation	Fair value of plan assets	Deficit of funded plan
	£000	£000	£000
As at 31 December 2019	(33,340)	26,003	(7,337)
Interest (expense)/income	(647)	507	(140)
	(33,987)	26,510	(7,477)
Remeasurements:-
Return on plan assets, excluding amounts included in interest expense	-	2,573	2,573
Loss from changes in financial assumptions	(3,115)	-	(3,115)
Loss from changes in demographic assumptions	(127)	-	(127)
Gain from new valuation data	-	-	-
Experience gain	86	-	86
Loss on curtailments	(23)	-	(23)
Past service cost	(36)	-	(36)
	(37,202)	29,083	(8,119)

Employer's contributions	-	795	795
Benefit payments from the plan	2,067	(2,067)	-
As at 31 December 2020	(35,135)	27,811	(7,324)

	Present value of obligation	Fair value of plan assets	Deficit of funded plan
	£000	£000	£000
As at 31 December 2018	(30,437)	23,571	(6,866)
Interest (expense)/income	(838)	665	(173)
	(31,275)	24,236	(7,039)
Remeasurements:-
Return on plan assets, excluding amounts included in interest expense	-	1,390	1,390
Gain from changes in financial assumptions	(3,642)	-	(3,642)
Gain from changes in demographic assumptions	554	-	554
Gain from new valuation data	-	-	-
Experience loss	-	-	-
Loss on curtailments	-	-	-
Liabilities extinguished on settlements	-	-	-
	(34,363)	25,626	(8,737)

Employer's contributions	-	1,400	1,400
Benefit payments from the plan	1,023	(1,023)	-
As at 31 December 2019	(33,340)	26,003	(7,337)

c. Significant actuarial assumptions

i) Financial assumptions

	2020	2019
Discount rate	1.35%	2.0%
RPI inflation assumption	3.0%	3.2%
CPI inflation assumption	2.7%	2.4%
Pension revaluation in deferment: - CPI, maximum 5%	2.7%	2.4%
Pension increases in payment: - RPI, maximum 5%	3.0%	3.2%

ii) Demographic assumptions

Assumed life expectancy in years, on retirement at 60

	2020	2019
Retiring today
- Males	26.2	26.0
- Females	28.7	28.1
Retiring in 20 years
- Males	27.4	27.6
- Females	30.0	29.7

d. Sensitivity to assumptions

The results of the IAS 19 valuation at 31 December 2020 are sensitive to the assumptions adopted.

The sensitivities regarding the principal assumptions used to measure the Scheme liabilities are set out below:

Assumption	Change in assumption	Change in liabilities
Discount rate	Decrease by 0.5%	Increase by 8.0%
Rate of inflation	Increase by 0.5%	Increase by 1.4%
Life expectancy	Increase by 1 year	Increase by 3.9%

The above sensitivity analyses are based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to significant actuarial assumptions has been estimated, based on the average age and the normal retirement age of members and the duration of the Scheme.

e. The major categories of plan assets are as follows

		As at 2020				As at 2019
			£000			£000
	Level 1	Level 2	Total	Level 1	Level 2	Total
Cash and cash equivalents	-	368	368	-	921	921
Investment funds:
- equities	-	17,527	17,527	-	16,350	16,350
- bonds	-	2,805	2,805	-	2,950	2,950
- property	-	-	-	-	-	-
- Liability driven	-	7,111	7,111	-	5,782	5,782
	-	27,811	27,811	-	26,003	26,003

Definitions of Level 1 and Level 2 investments can be found in note 4(a)(i).

f. Contributions and present value of defined benefit obligation

Funding levels are monitored on an annual basis. £795k contributions have been made directly into the scheme during 2020 (2019: £1,400k). A recovery plan has been agreed with the Trustees to reduce the plan deficit starting from 1 January 2020. £795k will be contributed to the plan assets each year for 6 years, ending in 2025.

28. Related party transactions

Transactions with subsidiaries

Transactions between the Group's wholly owned subsidiary undertakings, which are related parties, have been eliminated on consolidation and accordingly not disclosed.

Transactions with Directors

The following Directors and connected parties were entitled to the following distributions during the year:-

	2020	2019
	£000	£000
K E Randall and family	499	1,222
A K Quilter and family	119	328
W L Spiegel	64	-
T S Solomon	46	-
M G Smith	-	5

Transactions with associate

On 10 September 2020 the Group invested in Tradesman Program Managers, LLC which is treated as an investment in associate. The Group receives income through its Program operations as detailed below.

	2020
	£000
Written premium	103,677
Commissions	25,303
Funds due at year end	512

The summarised financial information of the amounts presented in the financial statements of the associate for the full year of the associate is as follows:

	2020
	£000

Assets	14,464
Liabilities	14,025
Net assets	439

Revenue for the year	14,457
Profit for the year	10,097

29. Business combinations

Business combinations

The Group made 12 business combinations during 2020, all of which involve legacy transactions and have been accounted for using the acquisition method of accounting.

Legacy entities and businesses

The following table shows the fair value of assets and liabilities (and consideration where paid) included in the Consolidated Financial Statements at the date of acquisition of the legacy businesses:

	Intangible assets	Other receivables	Cash & Investments	Other payables	Technical provisions	Tax & deferred tax	Net assets acquired	Consideration	Gross Deal Contribution
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

Vigneron	103	-	1,479	-	(1,041)	-	541	-	541
Anglo French	1,304	-	5,670	-	(5,670)	-	1,304	-	1,304
ICIICL	103	-	9,705	-	(2,342)	-	7,466	5,213	2,253
Citadel	4	3	1,042	(64)	(33)	(2)	950	740	210
Premier Temps	40	-	615	-	(402)	-	253	-	253
TAEP	512	-	3,465	-	(2,998)	(125)	854	-	854
Nations Builders	444	390	8,264	(984)	(5,291)	-	2,823	1,382	1,441
Vibe	17,924	80,784	168,314	(23,893)	(174,746)	(3,405)	64,978	20,500	44,478
Marillac	1,630	928	19,115	(381)	(13,873)	-	7,419	1,721	5,698
Mondi Re	780	-	15,419	-	(5,427)	-	10,772	8,277	2,495
Inceptum	3,658	973	20,364	(221)	(7,654)	(695)	16,425	12,100	4,325
WMG	24	41	12,908	(52)	(94)	(5)	12,822	11,205	1,617

	26,526	83,119	266,360	(25,595)	(219,571)	(4,232)	126,607	61,138	65,469

Gross deal contribution represents the net asset value acquired in excess of any consideration paid, gross of any transaction expenses or commissions.

In all instances, goodwill on bargain purchase was recorded on the transactions. Goodwill on bargain purchase arises when the consideration is less than the fair value of the net assets acquired. It is calculated after the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition. The long-tail nature of the liabilities causes significant problems for former owners such as tying up capital and a lack of specialist staff. As a specialist service provider and manager, the Group is more efficient at managing such entities and former owners are prepared to sell at a discount on the fair value of the net assets.

In order to disclose the impact on the Group as though the legacy entities had been owned the whole year, assumptions would have to be made about the Group's ability to manage efficiently the run-off of the legacy liabilities prior to the acquisition. As a result, and in accordance with IAS 8, the Directors believe it is not practicable to disclose revenue and profit before tax as if the entities had been owned for the whole year.

Where significant uncertainties arise in the quantification of the liabilities, the Directors have estimated the fair value based on the currently available information and on assumptions which they believe to be reasonable.

The Group completed the following business combinations during 2020:

Vigneron

On 22 January 2020, ICDC Ltd completed the acquisition of the entire issued ordinary shares of Vigneron Insurance Company Inc ("Vigneron"), a Montana, USA domiciled captive insurance company. Vigneron provided workers' compensation, auto and general liability coverage to its affiliates from 2004 to 2018.

Anglo French

Effective 5 March 2020, the Group completed the Part VII transfer of policies underwritten by Anglo French Insurance Company Limited on or prior to 31 December 1969 to R&Q Gamma Company Limited. External costs incurred were £400k.

ICIICL

On 9 April 2020, RQIIH completed the acquisition of the entire issued share capital of ICI Insurance Company Limited ("ICIICL"), a Cayman domiciled captive insurance company. ICIICL's remaining liabilities relate to general liability and workers' compensation claims arising from policies written from 1974 to 2009. External costs incurred were £32k.

Citadel

On 16 June 2020, ICDC Ltd completed the acquisition of the entire issued ordinary shares of Citadel Assurance Company ("Citadel"), a Vermont, USA domiciled captive insurance company. Citadel provided workers' compensation, auto and general liability coverage from 2002 to 2015. External costs incurred were £12k. The Company subsequently merged into ICDC Ltd on 15 October 2020.

Premier Temps

On 1 September 2020, the Group completed the novation of policies from three Bermuda segregated cells, collectively known as Premier Temps, to a 100% owned segregated cell within R&Q Quest (SAC) limited. The policies provided for workers' compensation coverage for 2006-2008.

TAEP

On 30 September 2020, the Group completed the novation of policies from The Texas Alliance of Energy Works Compensation Self-Insured Group Trust ("TAEP") to Accredited Surety & Casualty Company, Inc ("ASC"). The policies provided workers' compensation coverage from 2005 to 2011.

Nations Builders

On 31 July 2020, ICDC Ltd completed the acquisition of NationsBuilders Insurance Company ("Nations Builders"), a Washington D.C. domiciled captive insurance company. Nations Builders provided commercial auto liability, general liability and workers' compensation coverage from 2006 to 2019.

Vibe

On 23 December 2020, the Group completed the acquisition of Vibe Corporate Member Limited ("Vibe"). Vibe is the sole member of Syndicate 5678, which ceased underwriting at the end of 2019 and was placed into run-off. Syndicate 5678 was established in 2007 to underwrite legacy business and completed 22 Reinsurance to close contracts ("RITCs") which cover years 1993 to 2003. The Group has also agreed, subject to regulatory approval, to acquire Vibe Services Management Limited and Vibe Syndicate Management Limited. External costs incurred were £235k. The Company was subsequently renamed R&Q Capital No. 8 Limited on 6 May 2021.

Marillac

On 23 December 2020, the Group completed the acquisition of Marillac Insurance Company, Ltd ("Marillac"), a Cayman domiciled captive insurance company. Marillac provided workers' compensation and professional and general liability coverage to its parent from 2002 to 2020. External costs incurred were £45k.

Mondi Re

On 29 December 2020, the Group completed the acquisition of Mondi Reinsurance, Ltd ("Mondi"), a Bermuda domiciled captive insurance company. Mondi provided freight forwarder's liability and commercial general liability covered from 2004 to 2019. Subsequent to the acquisition, on 31 December 2020, Mondi was merged into R&Q Re (Bermuda) Ltd with R&Q Re (Bermuda) Ltd being the surviving entity.

Inceptum

On 31 December 2020, the Group completed the acquisition of Inceptum Insurance Company Limited ("Inceptum"), an insurance company domiciled in England & Wales. Inceptum provided UK motor coverage from 1996 to 2009 when it was placed into run-off. External costs incurred were £78k.

WMG

On 31 December 2020, the Group completed the acquisition of The World Marine & General Insurance Plc ("WMG"), an insurance company domiciled in England & Wales, from BHP Group Limited. From 1987 to 2001 WMG operated as a captive insurer and wrote a mix of property and casualty business on both a direct and reinsurance basis. WMG also has some historical exposures from 1973 to 1982 and a pre-1973 book which is fully indemnified.

30. Non-controlling interests

The following table shows the Group's non-controlling interests and movements in the year:-

	2020	2019
	£000	£000
Non-controlling interests
Equity shares in subsidiaries	3	3
Share of retained earnings	(380)	380
Share of other reserves	-	60
	(377)	443
Movements in the year
Balance at 1 January	443	349

Profit for the year attributable to non-controlling interests	(61)	(478)
Exchange adjustments	10	(22)
Comprehensive profit attributable to non-controlling interests	(51)	(500)

Changes in non-controlling interest in subsidiaries	(769)	594
Balance at 31 December	(377)	443

31. Guarantees and indemnities in ordinary course of business

The Group has entered into a guarantee agreement and a debenture arrangement with its bankers, along with several of its subsidiaries, in respect of the Group term loan facilities. The total liability to the bank at 31 December 2020 was £63,000k (2019: £55,141k).

The Group also gives various other guarantees in the ordinary course of business.

32. Foreign exchange rates

The Group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into sterling, being the Group's presentational currency:-

		2020		2019
	Average		Year end	Average	Year end
US dollar	1.28		1.36	1.28	1.31
Euro	1.13		1.11	1.14	1.17

33. Events after the reporting date

As disclosed in note 25, 47,609,270 $0.01 convertible preference shares issued by a Group subsidiary converted into ordinary share capital of the Company on 21 January 2021.

On 31 March 2021, K E Randall retired from his role as Executive Chairman with W L Spiegel succeeding him in the role. Mr Randall also stepped down as a Director of the Company on the same date.

On 23 April 2021 R&Q Commercial Risk Services Limited was sold to Stride Limited.

On 13 May 2021, Randall & Quilter II Holdings Limited completed the acquisition of Electric Insurance Ireland Designated Activity Company, an insurance undertaking incorporated in Ireland.

34. Ultimate controlling party

The Directors consider that the Group has no ultimate controlling party.

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