RESOLUTION_UNDERWRITING_H - Accounts

The directors present their annual report and financial statements for the year ended 31 December 2022.

The Company is the holding company in a group which acts as insurance underwriting agents. Included in the group are two subsidiaries which are authorised and regulated by the Financial Conduct Authority. The bulk of the group’s activities are conducted through 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 loss of £878,650 (2021: loss of £97,250). The directors do not propose the payment of any dividends for the period.

The directors consider the performance of the company for the period to have been satisfactory, and they are confident that satisfactory results will be achieved in the future.

The directors consider that its business of providing services to underwriting teams which operate under delegated underwriting authorities from leading insurers provides an excellent basis for successfully developing a profitable portfolio of insurance business. During the current year the Group sought to recruit high quality underwriting teams. Falcon MGA Services Limited (FMGAS), Trinity General Agency LLC (TGA) and Trilogy Managing General Agents Limited (TMGA) continued their operations during the year. FMGAS is an Appointed Representative of Resolution Underwriting Partnership Limited (RUPL). During the year, the Appointed representative status of Trilogy Underwriting Limited (TUL) moved from TMGA to RUPL, and the 70% ownership of TUL was transferred from TMGA to Resolution Underwriting Holdings Limited. Following the year end TMGA was sold.

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 group 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 will become exposed to interest rate risk on bank deposits when interest rates recover.

The group’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 has advanced funds to trade investments which are Appointed Representatives of our Authorised Firm in order to provide start-up and working capital. The operating performance and financial targets of these debtors are closely monitored. Group companies act 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.

The past year has seen the business perform according to budget and there is confidence that the group is building a solid base from which to grow a profitable business.

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.

Impact of Covid-19 on RUHL

The operational aspects of the Resolution Group were largely unaffected by the Covid pandemic, with the exception of Falcon MGA Services Ltd (Falcon). Falcon’s business of insuring aircraft flight disruption effectively stopped as private jet usage ceased, however 2022 has seen a return to pre-pandemic business levels and it is forecast to return profits in 2022 and 2023.

The rest of the business has now also returned to normal operations although some staff continue to work from home

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 Holdings Limited (the ‘company’) for the year ended 31 December 2022 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 2022 and of its loss for the company 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 director's 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. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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 the 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 have 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 in relation to which 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 directors’ remuneration specified by law are not made; or

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

•     t

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, FRS 102, 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 for the audit of the financial statements is located on the Financial Reporting Council’s website at: 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 Holdings 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 the holding company of a group that has interests in several managing general agents (“MGA(s)”) 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’s wholly-owned subsidiaries Resolution Underwriting Partnership Limited (“RUPL”) and Trilogy Managing General Agents Limited (“TMGA”), who are regulated by the UK Financial Conduct Authority (“FCA”) and are also approved Lloyd’s coverholders. The Company also has an equity interest in a USA managing general agency based in North Carolina.

The Company acts as an incubator of these underlying businesses and, in all of them, the Company has a significant shareholding commensurate with the level of investment and working capital provided to them. The working capital is provided by means of loans which, as at 31 December 2022, totalled £3,030,878. As in the previous year allowance has been made for Falcon MGA Services to be unable to pay £471,726 of this debt. These are repayable out of trading profits of the companies. In addition short-term loans are made to entities from time to time.

The Company and its group undertakings have prepared budgets for 2023 and 2024. Based on these budgets, which have been prepared on a prudent basis, the Directors have considered the outlook for the Company and believe that it will remain profitable during 2023. Accordingly, the financial statements of the Company as at 31 December 2022 have been prepared on a going concern basis.

The directors of the Company have considered the outlook for its subsidiaries and related ARs. This they consider to be positive and the budgets prepared for the periods to 31 December 2024 indicate that these companies will be profitable. The directors have considered whether the various loans are recoverable and have concluded that the underlying strengths of the businesses are such that the loans and interest will be paid in full. As such, the directors believe that no further write downs of loans are necessary, and current progress on one where the loan was written down in the previous accounting period may lead to the previous provision becoming recoverable.

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

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.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

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.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

Taxation

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The average monthly number of persons (including directors) employed by the company during the year was 6 (2021 - 6).

As part of a group restructure during the year the shareholding of Trilogy Underwriting Limited was transferred to Resolution Underwriting Holdings Limited from another group company.

Details of the company's subsidiaries at 31 December 2022 are as follows:

On 15 June 2023 the Company sold its 100% shareholding in Trilogy Managing General Agents Ltd.

Dividends totalling £0 (2021 - £0) were paid in the year in respect of shares held by the company's directors.

As at 31 December 2022, the company owed £697,500 (2021: £687,500) to Mr C G Harman, a director and shareholder. This is repayable by the company in accordance with the loan agreement which detail the loan is repayable during 2022 and therefore is shown as due within one year. Interest is due on £697,500 (2021: £687,500) at 0.5% and £3,004 (2021: £Nil) at 11% to Mr C G Harman and totalled £5,276 (2021: £5,421) for the period. As at 31 December 2022, the Company owed interest of £5,276 (2021: £2,350) in respect of these loans.

As at 31 December 2022, the company owed £40,000 (2021: £Nil) to Mr N H Topche, a director and shareholder. This is repayable by the company in accordance with the loan agreement which detail the loan is repayable during 2023 and therefore is shown as due within one year. Interest is due at 11% to Mr N H Topche and totalled £705 (2021: £1,030) for the period. As at December 2022, the Company owed interest of £705 (2020: £Nil) in respect of these loans.

A loan from Mr I M Winchester, a director and shareholder, was repaid during 2021. Interest is at 11% to Mr I M Winchester and totalled £Nil (2021: £3,363). As at December 2022, the Company owed interest of £Nil (2021: £Nil) in respect of these loans.

As at 31 December 2022, the company was owed £552,500 (2021:£563,294) by its wholly owned subsidiary Resolution Underwriting Partnership Limited, of which £552,500 (2021: £552,500) relates to subordinated loans. The interest at a base rate plus 3.5% on £308,373 of the sub-ordinated debts has been waived in 2022 and 2021 and the remaining debt of £440,000 (2021: £440,000) is non-interest bearing. As well as the amount owed by Resolution Underwriting Partnership Limited, there is an amount due to Resolution Underwriting Partnership Limited of £315,941 (2021: £nil). In addition to these items, in 2015 upon the acquisition of Resolution Underwriting Partnership Limited, the Company acquired loan stock of £195,873 for nil cost and they continue to be held at nil value.

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

During the year, the Company advanced £Nil (2021: £Nil) to Trinity General Agency Holdings Inc which is wholly owned holding company incorporated in the State of Delaware, USA. Trinity General Agency Holdings Inc owns 43% of the profit participation interests in a managing general agent Trinity General Agency LLC. As at 31 December 2022, the Company was owed £884,356 (2021: £884,356) from Trinity General Agency Holdings Inc in respect of these loans. Interest is due 6% from Trinity General Agency Holdings Inc and totalled £54,887 (2021: £46,027) for the period. As at 31 December 2022, the Company was owed interest of £60,063 (2021: £128,869) in respect of these loans. The Company also paid legal fees on behalf of Trinity General Agency Holdings Inc in a previous year amounting £27,211 (2021: £27,211) which remain outstanding as at 31 December 2022. As a result of the recent trading performance of Trinity General Agency LLC and the potential restructuring of that entity the £884,356 loan has been fully impaired as disclosed in note 5 (2021: nil impairment).

During the year, the Company advanced £Nil (2021: £28,900) to Falcon MGA Services Limited which is repayable as per the terms of the loan agreement and interest bearing. Interest is due at 6% from Falcon MGA Services Limited and totalled £30,245 (2021: £29,700) for the period. As at 31 December 2022, the Company was owed £491,700 (2021: £510,850) in respect of these loans and interest of £124,666 (2021: £91,946) from Falcon MGA Services Limited. Due to the uncertainty that Falcon MGA Services Limited will be able to repay these loans a bad debt provision of £471,726 was provided in 2019 against the value of the loan. This provision has been retained but no further provision made as although the trading prospects have improved there remains uncertainty of recoverability at this time.

Mr C G Harman and Mr R C Hayes are also directors in Resolution Group Services Limited. As at 31 December 2022, the Company was owed £783,690 (2021: £326,120) by Resolution Group Services Limited and included in administration expenses is a management charge of £56,000 (2021: £48,000) from Resolution Group Services Limited.

Mr C G Harman and Mr R C Hayes are also directors in Trilogy Managing General Agents Limited. As at 31 December 2022, the Company was owed £230 (2020: £39,000 owed to) by Trilogy Managing General Agents Limited.

Mr C G Harman and Mr R C Hayes are also directors in Trilogy Underwriting Limited. As at 31 December 2022, the Company was owed £276,000 (2021: £148,000) from Trilogy Underwriting Limited. Interest is due 6% from Trilogy Underwriting Limited and totalled £16,334 (2021: £1,350) for the period. As at 31 December 2022, the Company was owed interest of £17,684 (2021: £1,350) in respect of these loans.

Mr C G Harman and Mr R C Hayes are also directors in ActiveRisk Group Limited. As at 31 December 2022 the Company was owed £283,363 (2021: £330,365) by ActiveRisk Group Limited. interest is due at 2.5% from ActiveRisk Group Limited as totalled £8,087 (2021: £5,365) in respect of these loans.

Mr R C Hayes was also a director of Resolution Underwriting Holdings (Ireland) Ltd, a company incorporated in the Republic of Ireland. As at 31 December 2022 the Company was owed £114,359 (2021: £40,299).Other than as disclosed above, interest was not charged on any other loans.