RESOLUTION_UNDERWRITING_P - Accounts

The directors present their annual report and financial statements for the year ended 31 December 2020.

The group acts as insurance underwriting agents and Resolution Underwriting Partnership Limited is one of the main operating companies. The company is authorised and regulated by the Financial Conduct Authority and is an approved Lloyd’s coverholder. The bulk of the company’s activities are conducted through its Appointed Representatives.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The result for the period, after taxation, amounted to a profit of £37,563. The directors do not propose any dividend for the period.

The company has various financial assets and liabilities, such as trade receivables and trade payables, arising directly from its operations. These assets and operating cash arising are actively managed to avoid unnecessary currency exposure. The company has not undertaken hedging activity but may do so if such arrangements appear to be a suitable solution to minimising any currency exposures, especially for earnings in currencies other than sterling.

The company manages its own cash and borrowings to maximise interest income and minimise interest expense, whilst ensuring that sufficient liquid resources are available to meet operating needs. The company does not hold client money while insurers’ funds are held with approved banks in currencies appropriate to the settlement requirements of the business.

The company could become exposed to interest rate risk on bank deposits if interest rates recover.

The company’s principal foreign currency exposure risk potential could arise from income earned on trading operations with customers and suppliers in non sterling currency. Current and anticipated insurance business is predominantly denominated in sterling.

The company acts as an agent for insurers; while suitable vetting arrangements are operated to verify the credit worthiness of insurance brokers from whom business predominantly comes, the risk of non-payment rests largely with others. Investment of cash surpluses are made with banks which are considered by the Board to have adequate credit ratings to achieve the prudential standards applicable in our business.

Subsequent to the year end the Group sold its interest in Accelerate Underwriting Limited ("AUL") to reduce its Appointed Representatives to one, Falcon MGA Services Limited ("FMGAS"). FMGAS did not achieve its budgets in 2020 and reported a loss in the year. It is anticipated that it will become profitable and return a positive cashflow during 2021.

PKF Littlejohn LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102).

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgments and accounting estimates that are reasonable and prudent; and

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

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

We have audited the financial statements of Resolution Underwriting Partnership Limited (the 'company') for the year ended 31 December 2020 which comprise the profit and loss account, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its profit for the year then ended;

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

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the directors' report has been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

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

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

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

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

•     the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and take advantage of the small companies exemption from the requirement to prepare a strategic report.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

• We obtained an understanding of the company and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, and application of cumulative audit knowledge and experience of the sector.

• We determined the principal laws and regulations relevant to the company in this regard to be those arising from FCA Rules, FRS102, Companies Act 2006 and relevant tax compliance regulations in the UK.

• We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the company with those laws and regulations. These procedures included, but were not limited to making enquiries of management, review of minutes and review of regulatory correspondence.

• We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that included the potential for management bias in relation to the impairment of debtors and we addressed this by challenging the assumptions and judgements made by management when auditing their assessment of the recoverability of debtors.

• As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

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

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

Resolution Underwriting Partnership Limited is a private company limited by shares incorporated in England and Wales. The registered office is Number One, Vicarage Lane, Stratford, London, England, E15 4HF.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The Company is a managing general agent (“MGA”) underwriting insurance on behalf of major insurance companies and Lloyd’s syndicates (“Carriers”). The business of insurance underwriting is conducted through Appointed Representatives (“AR(s)”) of the Company, for which it acts as the regulated entity. Currently the Company has two ARs, being Accelerate Underwriting Limited (“AUL”) and Falcon MGA Services Limited (FMGAS”). The Company is a wholly owned subsidiary of Resolution Underwriting Holdings Limited (“RUHL”).

As at 31 December 2020 the Company has advanced loans of £700,000 to AUL.

The directors have considered the outlook for the Company, which they consider to be positive and the budgets prepared for the period to 31 December 2022 have been prepared on a prudent basis and indicate that no further funding will be required from RUPL.

As a regulated entity, the Company is required to report its regulatory capital surplus or deficit to the UK Financial Conduct Authority (“FCA”) quarterly to confirm the solvency position of the Company. The Company has a capital surplus at the year-end and this position is monitored regularly through the review of monthly management accounts and the assessment of future profit and loss, and cash flow forecasts.

Covid-19 has continued to result in major disruptions throughout the United Kingdom and the whole world, generally affecting both people and the business world. The situation continues to evolve and the restrictions on movement initially led to a slowdown in trade which will have lead to lower incomes across many sectors of business. This will include the purchase of insurance although, aside from the business written by FMGAS, none of the ARs write classes of insurance that are unusually vulnerable to Covid.

The Company assessed the effects of Covid-19 on its own business as follows:

•    The effect on its staff and their continuing ability to work safely and efficiently

•    The effect on its customers and insurance Carriers

•    The potential reduction of the Company’s cost base

•    Re-forecast budgets and cashflows

Currently the employees of each AR have mostly been working from home. They all have full access to the various software systems and lines of communication and are working effectively and efficiently and continuing to provide swift service to their client base. They have contacted their major customers to assess the impact of the virus on their own businesses and have also contacted the insurance Carriers. Somewhat surprisingly, the most important impact of Covid so far has been significantly to increase the numbers of enquiries for insurance and the number of quotes being requested on new business. This has much to do with the continuing levels of service that the ARs have offered and the fact that many insurance companies have been struggling to offer any sort of decent levels of service.

The ARs have prepared budgets for 2021 and 2022. Based on these budgets, which have been prepared on a prudent basis, the Directors have considered the outlook for the Company and believe that the Company will be profitable during 2021 and 2022. Accordingly, the financial statements of the Company as at 31 December 2020 have been prepared on a going concern basis. Additionally, the Company has received confirmation from its parent company RUHL that it will continue to support the Company’s operations for the foreseeable future.

The directors are confident about the Company's prospects but, notwithstanding the prudent forecasts, they recognise that the success or otherwise of it being able to meet its forecasts is inevitably uncertain.

The Company generates revenue principally from commissions, profit commissions and fees associated with underwriting and administering insurance contracts.

Brokerage, commission and fees not due until after the year end are recognised on the inception of the insurance contracts concerned, which is when the underwriting services have been substantially completed. Adjustments to commission and fees are recognised when they can be ascertained with reasonable certainty, which is normally when the amounts concerned are advised or confirmed by the relevant third parties.

Profit commissions are receivable based upon the underwriting performance of certain schemes. They are recognised when the Company can be certain that the commission will be paid and the amount can be reasonably accurately ascertained.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred taxation is provided on the liability method to take account of timing differences between the treatment of certain items for accounts purposes and their treatment for tax purposes. Tax deferred or accelerated is accounted for in respect of all material timing differences.

Insurance assets and liabilities

In accordance with the Statement of Accounting Principles, the company recognises insurance debtors and fiduciary cash balances only to the extent that the company has a material economic interest in those balances. Accordingly, where insurance debtors and fiduciary cash are not recognised in the company's balance sheet, insurance creditors relating to those insurance debtors and fiduciary cash are also not included in the company's balance sheet. The net amount that will be receivable by the company from the fiduciary accounts, representing only that element of the insurance debtors and fiduciary cash that is commissions, fees or interest due to the company, is shown under debtors.

Taxation

The average monthly number of persons (including directors) employed by the company during the year was:

The company owns 10,000 shares at a par value of £0.000001 in Holdsure Limited, representing 100% of the share capital.

Loans due within one year includes bank loans of £785 (2019: £Nil) from the government business bounce back loan scheme.

As at 31 December 2020, subordinated loans of £748,373 (2019: £748,373) were due to the parent company, Resolution Underwriting Holdings Limited.

These amounts can only be repaid dependent upon the regulatory solvency position of the company. Of this, £440,000 (£2019: £440,000) could be payable within one year if the company's solvency position permitted.

Loans due after one year includes bank loans of £49,215 (2019: £Nil) from the government business bounce back loan scheme.

Mr C G Harman and Mr R C Hayes are also directors in Accelerate Underwriting Limited, an Appointed Representative of the company and an associate of the parent company, Resolution Underwriting Holdings Limited. During the year, the Company was due to retain commissions of £239,821 (2019: £228,261) and share commissions of £1,758,689 (2019: £1,673,922) with Accelerate Underwriting Limited under this agreement. As at 31 December 2020, the Company owed £197,845 (2019: £48,393) to Accelerate Underwriting Limited in respect of this agreement.

As at 31 December 2020, the Company was owed £700,000 (2019: £700,000) from Accelerate Underwriting Limited in respect of these loans, which £700,000 (2019: £700,000) is due in accordance with the loan agreement. These loans are interest bearing at 6% and totalled £42,000 (2019: £42,000) for the year. As at 31 December 2020, the Company was owed interest of £nil (2019: £31,500) in respect of these loans.

The Company incurred charges of £nil (2019: £8,000) in respect of the rent of desk space during the year from Accelerate Underwriting Limited. As at 31 December 2020, the Company owed £NIL (2019: £5,334) to Accelerate Underwriting Limited in respect of these charges.

Mr C G Harman and Mr R C Hayes are also directors in Falcon MGA Services Limited, an Appointed Representative of the company and an associate of the parent company, Resolution Underwriting Holdings Limited. During the year, the Company incurred commission of £12,375 (2019: £16,319) relating to this agreement. As at 31 December 2020, the Company owed £830 (2019: £9,943) to Falcon MGA Services Limited in respect of this agreement.

As at 31 December 2020, the Company was owed £nil (2019: £7,611) from Falcon MGA Services Limited

Mr C G Harman and Mr R C Hayes are also directors in Resolution Group Services Limited, a fellow subsidiary of the parent company, Resolution Underwriting Holdings Limited. As at 31 December 2020, the Company was owed £318,669 (2019: £nil) by Resolution Underwriting Group Services Limited.

The company is wholly owned and controlled by Resolution Underwriting Holdings Limited, a company incorporated and domiciled in England. The address of the registered office is 1 Vicarage Lane, London E15 4HF.

As at 31 December 2020, the company owed £935,587 (2019: £779,439 ) to Resolution Underwriting Holdings Limited. Of this, £187,214 (2019: £31,066 ) in due in under one year with no interest or repayment terms and £748,373 (2019: £748,373) relates to subordinated loans to the company.

Mr C G Harman, Mr R C Hayes and Mr N H Topche are also directors in Resolution Underwriting Holdings Limited.

The interest at a base rate plus 3.5% on £308,373 of the subordinated debt has been waived in 2020 and 2019 and the remaining debt of £440,000 (2019: £440,000) is non-interest bearing.

In February 2021 RUHL sold its interest in Accelerate Underwriting Limited (AUL) to a third party and as a result the terms of the loans made by RUHL and RUPL were amended. Following this the loans due from AUL to RUPL became payable as follows: £260,000 in February 2021, £220,000 in February 2022 and £220,000 in February 2023. In addition, there were changes to the future contractual conditions under which AUL acts as an Appointed Representative of RUPL. There has been no change to the balances disclosed with RUPL as at 31 December 2020 as a result of these changes.