MSL Legal Expenses Ltd - Limited company accounts 16.3

REGISTERED NUMBER: 02210857 (England and Wales)

STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

FOR

MSL LEGAL EXPENSES LTD

Page

Company Information

1

Strategic Report

2

to

4

Report of the Directors

5

to

6

Report of the Independent Auditors

7

to

8

Statement of Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Notes to the Financial Statements

12

to

20

DIRECTORS:

N D Garner

A S Hughes

S M Baldwin

SECRETARY:

S A Garner

REGISTERED OFFICE:

No. 1 Lakeside

Cheadle Royal Business Park

Cheadle

Cheshire

SK8 3GW

REGISTERED NUMBER:

02210857 (England and Wales)

AUDITORS:

Allens Accountants Limited

Statutory Auditor and

Chartered Accountants

123 Wellington Road South

Stockport

Cheshire

SK1 3TH

The directors present their strategic report for the year ended 31 December 2016.

REVIEW OF BUSINESS

The company income has increased by 11% in 2016 mainly due to growth and a change in the mix of business.

The company balance sheet reserves increased in 2016 and following a full review of the legal expenses insurance

business the directors will continue to monitor and amend the reserves accordingly. The directors consider the current

level of reserves on the balance sheet to be adequate.

Staffing levels within the company are continually reviewed to ensure maximum efficiency whilst maintaining high

levels of customer service and the average staff numbers increased to 66 (2015: 61).

The company continues to focus on key areas of income generation and cost control throughout the 2017 financial year

and plan to achieve growth in profits.

Finally, we would like to thank our customers and employees for their ongoing support of the business and their

contribution towards our success.

PRINCIPAL RISKS AND UNCERTAINTIES

Reserving risk

The company adopts a vigilant approach to reserving, ensuring that any assumptions are sufficiently robust to meet its

liabilities. The reserving policy is designed to reduce volatility, with any material changes to reserving policy being

subject to board approval.

Credit risk

The risks considered are that a bank defaults on amounts held for or due to the company. The company's exposure to

credit risk has been assessed in the context of the credit worthiness of the relevant counterparties and is controlled and

managed accordingly.

Liquidity risk

Liquidity is not a significant risk to the company; however due to organic growth the cash flow forecasts show a

requirement for additional funding during 2017, which will be arranged externally.

Future risk

In February 2017 the Ministry of Justice published its response to the 'Reforming the soft tissue injury ('whiplash')

claims process' consultation. The response provides further detail on the package of measures which are designed to

disincentivise minor, exaggerated and fraudulent road traffic accident (RTA) related whiplash claims by:

1. The introduction of a tariff of fixed compensation for pain, suffering and loss of amenity for claims with an injury

duration of between 0 and 24 months;

2. Providing the judiciary with the facility to both decrease the amount awarded under the tariff in cases where there may

be contributory negligence or to increase the award (with increases capped at no more than 20%) in exceptional

circumstances;

3. Introducing a ban on both the offering, payment and requesting of offers to settle claims without medical evidence;

4. Increasing the small claims limit for RTA related personal injury claims to £5,000; and

5. Increasing the small claims limit for all other types of personal injury claim to £2,000.

Items 1 to 3 above will be introduced through provisions in the Prisons and Courts Bill which is currently going through

the parliamentary process. Items 4 and 5 will be introduced through secondary legislative procedures, and it is the

government's intention to implement these reforms as a package once the Prisons and Courts Bill has completed its

Parliamentary passage.

The government expected the reforms to be implemented in full on 1 October 2018 but now that the Prison and Courts

Bill is on hold it is likely that any such changes will be delayed.

The changes will have a significant and material effect in relation to the company's RTA business. The company has

been aware of and recognised, for some considerable time, this emerging risk and consequently, in line with its strategic

direction, the reliance on RTA business had reduced significantly and will continue to do so in 2017.

The effect of the changes in relation to non RTA business is not considered to be significant.

The company fully anticipates that as a consequence of any changes that it will be able to produce new products and

models within parameters to ensure that access to justice for customers is protected.

Brexit Risk

Following the Brexit referendum on 23rd June 2016, the government on 29th March 2017 triggered Article 50 signalling

that the UK will leave the EU by 29th March 2019 at the earliest. How the UK will implement the change and what will

remain the same, is uncertain. The company is monitoring developments on how the exit of the UK evolves and the

likely areas of impact are:

1. Employment mobility

2. Other countries leaving the UK

3. Legislation and Regulation

In respect of the future risks and uncertainties the company will continue to pursue its strategic aims, develop

appropriate products and models for the future and will maintain a watching brief and monitor the passage of the Prison

and Courts Bill (if the Bill is revived following the election of a new government) through parliament, with a view to

developing those new products and alternative models at the appropriate time. The company will also be undertaking a

review of its Brexit risks and put in place any mitigating plans as appropriate.

FINANCIAL KEY PERFORMANCE INDICATORS

The company turnover increased for the year by 11% to £5.95m (2015: £5.37m).

The profit for the year, after taxation but before dividends, amounted to £0.2m (2015: £0.1m).

The shareholders' funds of the company were £1.2m at 31st December 2016 (2015: £1m).

FUTURE DEVELOPMENTS & GOING CONCERN

The financial statements for the company are prepared on a going concern basis in accordance with UK Generally

Accepted Accounting Standards.

The directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future. The directors have reached this conclusion giving due consideration to the projected

future performance of the company and any potential risk that might impact the company's ability to meet its required

solvency levels. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

ON BEHALF OF THE BOARD:

N D Garner - Director

19 April 2017

The directors present their report with the financial statements of the company for the year ended 31 December 2016.

PRINCIPAL ACTIVITY

The principal activity of the company is the underwriting of legal expenses insurance and associated claims handling

including first notification of loss, personal injury, medical reporting, rehabilitation, credit hire, credit repair and

uninsured loss recovery.

DIVIDENDS

No dividends were distributed for the year ended 31 December 2016.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2016 to the date of this

report.

N D Garner

A S Hughes

Other changes in directors holding office are as follows:

S M Baldwin - appointed 5 November 2016

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not

approve 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 judgements and accounting estimates that are reasonable and prudent;

-	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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the

company's auditors are aware of that information.

AUDITORS

The auditors, Allens Accountants Limited, will be proposed for re-appointment at the forthcoming Annual General

Meeting.

ON BEHALF OF THE BOARD:

N D Garner - Director

19 April 2017

We have audited the financial statements of MSL Legal Expenses Ltd for the year ended 31 December 2016 on pages

nine to twenty. The financial reporting framework that has been applied in their preparation is applicable law and United

Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial

Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.

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 a Report of the Auditors and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's

members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

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

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give

reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.

This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and

have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by

the directors; and the overall presentation of the financial statements. In addition, we read all the financial and

non-financial information in the Strategic Report and the Report of the Directors to identify material inconsistencies with

the audited financial statements and to identify any information that is apparently materially incorrect based on, or

materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of

any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2016 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.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for

which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

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 directors' remuneration specified by law are not made; or

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

Paul Wright (Senior Statutory Auditor)

for and on behalf of Allens Accountants Limited

Statutory Auditor and

Chartered Accountants

123 Wellington Road South

Stockport

Cheshire

SK1 3TH

19 April 2017

TURNOVER

3

5,949,294

5,371,615

Administrative expenses

5,639,118

5,254,099

OPERATING PROFIT

5

310,176

117,516

Interest receivable and similar income

-

1,071

310,176

118,587

Interest payable and similar expenses

6

94,066

38,800

PROFIT BEFORE TAXATION

216,110

79,787

Tax on profit

7

30,392

(8,999

)

PROFIT FOR THE FINANCIAL YEAR

185,718

88,786

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

185,718

88,786

FIXED ASSETS

Tangible assets

9

57,021

42,717

CURRENT ASSETS

Debtors

10

5,145,377

4,326,292

Cash at bank

294,681

371,935

5,440,058

4,698,227

CREDITORS

Amounts falling due within one year

11

3,481,532

3,162,792

NET CURRENT ASSETS

1,958,526

1,535,435

TOTAL ASSETS LESS CURRENT LIABILITIES

2,015,547

1,578,152

PROVISIONS FOR LIABILITIES

15

855,124

603,447

NET ASSETS

1,160,423

974,705

CAPITAL AND RESERVES

Called up share capital

16

50,000

50,000

Retained earnings

17

1,110,423

924,705

SHAREHOLDERS' FUNDS

1,160,423

974,705

The financial statements were approved by the Board of Directors on 19 April 2017 and were signed on its behalf by:

N D Garner - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2015

50,000

1,035,919

1,085,919

Changes in equity

Dividends

-

(200,000

)

(200,000

)

Total comprehensive income

-

88,786

88,786

Balance at 31 December 2015

50,000

924,705

974,705

Changes in equity

Total comprehensive income

-

185,718

185,718

Balance at 31 December 2016

50,000

1,110,423

1,160,423

1.	STATUTORY INFORMATION

MSL Legal Expenses Ltd is a private company, limited by shares , registered in England and Wales. The

company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Going concern

The directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future and will continue to have the support of the group. The directors have

reached this conclusion giving due consideration to the projected future performance of the company and any

potential risk that might impact the company's ability to meet its required solvency levels. For this reason, they

continue to adopt the going concern basis in preparing the financial statements.

Financial reporting standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements,

as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv);

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);

•

the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c).

Consolidated accounts for the ultimate parent of the group, Drive Further Limited, can be obtained from the

company's registered office.

Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements, estimates and

assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts

reported for revenues and expenses for the year. However, the nature of estimation means that actual outcomes

could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimate is revised if revision only affects that period, or in the period

of the revision and future periods if the revision affects both current and future periods.

The following judgements have had the most significant effect on amounts recognised in the financial statements.

Bad and doubtful debts

A key area involving management judgement and estimate is in determining the provision for bad and doubtful

debts for both medical and rehabilitation debts due

Legal expenses claims reserve

Management judgement and estimate are significant in determining both the level of claims likely to be received

on the legal expense insurance products sold, together with ultimate costs to be paid per claim.

Turnover

Turnover is measured at the fair value of the consideration receivable and represents the total amount receivable

by the company for services provided in the normal course of business, excluding value added tax and trade

discounts.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures & fittings

-

33% on cost, 20% on cost and 10% on reducing balance

Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment

losses.

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets

have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any

affected asset is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the

carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised

immediately in profit or loss.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate

of its recoverable amount, but not in excess of the amount that would have been determined had no impairment

loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in

profit or loss.

Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured

initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective

interest rate method, less any impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits deposits with banks and other

short term highly liquid investments with original maturities of three months or less and bank overdrafts. In the

statement of financial position, bank overdrafts are shown within borrowings or current liabilities.

Financial instruments

The company only enters into basic financial instrument transactions that result in the recognition of financial

assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third

parties, together with loans to and from related parties.

Debt instruments (other than those wholly repayable or receivable in one year), including loans and other

accounts receivable and payable, are initially measured at present value of future cash flows and subsequently at

amortised cost using the effective interest method. Debt instruments that are payable or receivable in one year,

typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of

cash or other consideration, expected to be paid or received. However, if the arrangements of a short-term

instrument constitute a financing transactions, like the payment of a trade debt deferred beyond normal business

terms or financed at a rate of interest that is not a market rate or in case of an out-right short-term loan not at

market rate, the financial asset or liability is measured, initially at the present value of the future cash flow

discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for

objective evidence of impairment. If objective evidence if impairment is found, an impairment loss is recognised

in the Statement of Income.

For financial assets measured at amortised cost, the impairment loss is measured as the difference between an

asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective

interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is

the current effective interest rate determined under the contract.

For financial assets measured at cost less impairment, the impairment loss is measured as the difference between

an asset's carrying amount and best estimate, which is an approximation of the amount that the company would

receive for the asset if it were to be sold at the balance sheet date.

Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an

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.

Creditors

Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are

measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using

the effective interest method.

Interest bearing borrowings

Interest bearing borrowing are recognised initially at fair value less attributable transaction costs. Subsequent to

initial recognition, interest bearing borrowings are stated at amortised cost with any difference between the

amount initially recognised and redemption value being recognised in the statement of comprehensive income

over the period of the borrowings, together with any interest and fees payable, using the effective interest

method.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive

Income, except to the extent that it relates to items recognised in other comprehensive income or directly in

equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the

lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to profit or loss in the period to which they relate.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

31/12/16

31/12/15

£

£

Principal operating activities

3,929,232

3,664,569

Group related activities

2,020,062

1,707,046

5,949,294

5,371,615

4.	EMPLOYEES AND DIRECTORS

31/12/16

31/12/15

£

£

Wages, salaries and social security costs

1,784,387

1,672,970

Other pension costs

94,629

90,653

1,879,016

1,763,623

The average monthly number of employees during the year was as follows:

31/12/16

31/12/15

Office and administration

50

47

Sales and marketing

16

14

66

61

31/12/16

31/12/15

£

£

Directors' remuneration

24,052

20,281

Directors' pension contributions to money purchase schemes

26,715

33,285

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

1

1

5.	OPERATING PROFIT

The operating profit is stated after charging:

31/12/16

31/12/15

£

£

Hire of plant and machinery

4,028

3,828

Depreciation - owned assets

8,583

7,507

Auditors' remuneration

13,783

13,783

Auditors' remuneration for non audit work

2,717

1,417

Other operating leases

244,868

204,118

6.

INTEREST PAYABLE AND SIMILAR EXPENSES

31/12/16

31/12/15

£

£

Bank interest

3,540

-

Loan fees and interest

90,526

38,800

94,066

38,800

7.

TAXATION

Analysis of the tax charge/(credit)

The tax charge/(credit) on the profit for the year was as follows:

31/12/16

31/12/15

£

£

Current tax:

UK corporation tax

42,309

16,638

Adjustment in respect of prior years

(16,638

)

(30,280

)

Total current tax

25,671

(13,642

)

Deferred tax

4,721

4,643

Tax on profit

30,392

(8,999

)

Reconciliation of total tax charge/(credit) included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is

explained below:

31/12/16

31/12/15

£

£

Profit before tax

216,110

79,787

Profit multiplied by the standard rate of corporation tax in the UK of 20% (2015 - 20%)

43,222

15,957

Effects of:

Expenses not deductible for tax purposes

3,808

5,299

Adjustments to tax charge in respect of previous periods

(16,638

)

(30,280

)

Change in corporation tax rate

-

205

Marginal relief

-

(180

)

Total tax charge/(credit)

30,392

(8,999

)

Factors that may affect future tax charges

Following Budget 2017 announcements, there will be a reduction in the rate of corporation tax for future years,

resulting in the following rates applying:

19% from 1 April 2017

17% from 1 April 2020

8.

DIVIDENDS

31/12/16

31/12/15

£

£

Interim

-

200,000

9.	TANGIBLE FIXED ASSETS

Fixtures

& fittings

£

COST

At 1 January 2016

243,806

Additions

22,887

Disposals

(142,642

)

At 31 December 2016

124,051

DEPRECIATION

At 1 January 2016

201,089

Charge for year

8,583

Eliminated on disposal

(142,642

)

At 31 December 2016

67,030

NET BOOK VALUE

At 31 December 2016

57,021

At 31 December 2015

42,717

10.

DEBTORS

31/12/16

31/12/15

£

£

Amounts falling due within one year:

Trade debtors

1,758,749

1,503,159

Amounts owed by group undertakings

2,829,434

2,591,137

Other debtors

10,100

5,900

Deferred tax asset

Accelerated capital allowances

-

1,790

Prepayments and accrued income

247,094

224,306

4,845,377

4,326,292

Amounts falling due after more than one year:

Amounts owed by group undertakings

300,000

-

Aggregate amounts

5,145,377

4,326,292

Movements on provisions for doubtful debts resulted in a charge of £182,650 (2015: charge of £92,360) to the

statement of income.