ADV.L Regulatory News (ADV)

20 Feb 2009 07:00



20 February 2009

Advent Capital (Holdings) PLC

("Advent" or the "Company")

Advent, the specialist property insurance and reinsurance Lloyd's insurer, today reports its 2008 final results. 

Financial summary 

	2008		2007 Restated
Profit (loss) before tax	(£14.4)m		£25.2m
Profit (loss) after tax	(£8.9)m		£19.2m
Net premiums earned	£157.3m		£96.0m
Net premiums earned (excluding RITC)	£123.1m		£89.9m
Combined ratio	115%		79%
Earnings (loss) per share	(22.0)p		47.2p
Return on equity	(8.5%)		21.6%
Net assets per share	233p		267p
Net tangible assets per share	216p		249p

Brian Caudle, Chairman of Advent Capital (Holdings) PLC commented:

Advent had a challenging year with the high frequency of single risk property losses and two major catastrophes. The unexpected level of losses from our offshore energy account on Hurricane Ike, cost us £19.7 million before tax and caused us to lose £8.9 million after tax for 2008. This unacceptable result was primarily caused by a significantly higher level than expected of subsea losses, representing 60% of the energy account's incurred loss, which exhausted its reinsurance protection.  We believe that decisive action is required in the energy market, and specifically to Gulf of Mexico windstorm exposures, in terms of coverage and policy wording, not simply increasing rates. Until such time that we see clear evidence that this has taken place, and not just on a short term basis, we will not expose the Company to these risks.   Our Reinsurance and Property accounts performed within our expectations and remain well within their respective reinsurance programmes.

Syndicate 780 has closed the 2006 underwriting year of account with one of its highest ever profits of £51.4 million, representing 33% of underwriting capacity and is forecasting another good profit for the 2007 underwriting year of account.

Advent Re, although affected by Hurricane Ike, had another successful year with a combined ratio of 71.6% on net earned premiums of £8.0 million and a profit of £3.7 million.

Market conditions have improved, particularly in the reinsurance market following the loss experience in 2008. This year will be challenging as we manage our US dollar catastrophe exposures within our risk appetite while meeting our underwriting profit objective.

Advent Capital Holdings
Keith Thompson		020 7743 8200
Chief Operating Officer
Trevor Ambridge Chief Financial Officer		020 7743 8200
Neil Ewing Investor Relations		020 7743 8250
Fox- Pitt, Kelton		020 7663 6000
Simon Law
Jonny Franklin-Adams
Pelham Public Relations
Damian Beeley		020 3178 2253
Polly Fergusson		020 7743 6362

  CHAIRMAN'S STATEMENT

I am very disappointed to report to our shareholders that we had an after tax loss of £8.9 million for 2008 and a negative return on shareholders' equity of 8.5%.  Net assets per share decreased by 13% to 233p at 31 December 2008.  

As our shareholders know, 2008 has been a challenging year for the insurance and reinsurance industry with a high frequency of single risk property losses and Hurricane Ike which gave us unexpected losses on the energy account. Advent is an underwriting driven company focused on underwriting profit.  Syndicate 780 has always written catastrophe exposed business and expects to incur losses when there are major catastrophes but our energy account did not perform as we would have expected with a major Gulf of Mexico windstorm. As other participants in the energy market have noted, Hurricane Ike has proved to be far more destructive to offshore energy installations than original estimates had indicated, with subsea damage representing approximately 60% of incurred energy losses to date.  We believe that decisive action is required in the energy market, and specifically to Gulf of Mexico windstorm exposures, in terms of coverage and policy wording, not simply increasing rates.  Until such time that we see clear evidence that this has taken place, and not just on a short term basis, we will not expose the Company to these risks.  Accordingly, we have taken action in our 2009 business plan to prevent recurrence of this unacceptable performance by ceasing to write any Gulf of Mexico offshore energy business which has windstorm exposure.  Management and the underwriting team at Advent are committed to ensuring that we underwrite business in accordance with our long established underwriting disciplines of taking limited and quantifiable risk with the objective of earning an underwriting profit. We are focussed on returning to underwriting profitability in 2009.

On a positive note Syndicate 780 is reporting to capital providers on the closure of the 2006 year of account one of its highest ever profits of £51.4 million equivalent to 33% of underwriting capacity and Advent Re has recorded its second successive annual profit in 2008. In addition, our underwriting income surpassed the 2008 business plan by 9% with the reinsurance account ahead of plan reflecting our focus on developing our non USA catastrophe exposed business while the Property Insurance account was below plan in the face of increasingly competitive market conditions. During the year, we had a seamless transition to our new underwriting management with the appointments of Duncan Lummis as Chief Underwriting Officer of Advent Underwriting and Darren Stockman as Active Underwriter of Syndicate 780. Excluding the Hurricane Ike energy losses, we would have had a pre tax profit of £5.3 million and a combined ratio of 104%, well within our expectations of our performance following a major catastrophe. The Reinsurance account had an underwriting profit of £2.5 million and combined ratio of 97.8% (excluding the reinsurance to close premium (RITC)) - a very satisfactory result. Advent Re performed well with a combined ratio of 71.6% on net earned premiums of £8.0 million and a profit of £3.7 million.

It was a turbulent time in financial, credit and foreign exchange markets in 2008 with many companies reporting investment losses and significant foreign exchange gains or losses resulting from volatility in exchange rates. Since the beginning of 2007, our investment portfolio has been conservatively positioned in short term government and government guaranteed investments and produced an investment return of 4.8% despite rapidly falling interest rates in the United States and United Kingdom during 2008. We also have a policy of not consciously taking foreign exchange risk. We have designated part of our US dollar debt as a hedge of our net investment in Advent Re and maintain matched foreign currency positions, within narrow parameters, on a monthly basis. Our foreign exchange gain of £3.8 million primarily resulted from the accounting convention of recording net unearned premiums at the average exchange rate for the year rather than the year end exchange rate, not from taking foreign exchange risk.

In these difficult credit market conditions, we are insulated from refinancing risk with debt which matures in 2026 and 2035 and which has no covenants other than the payment of interest and principal on maturity.

Long term financial objectives

In the 2006 Report and Accounts, I set out for the first time our corporate objectives for Advent.

When we initially established our objective of achieving a return on equity of 20% over time, we did so in recognition of the then prevailing economic environment and our expectations of underwriting performance over the insurance cycle. However, we recognise that our return on equity is primarily driven by our underwriting performance since our investment returns generally cover our debt interest costs and corporate expenses at best. Investment market conditions have changed significantly in the last several years where short term US government bonds now return less than 0.5% and short term UK government bonds yield around 1% or less, meaning that, in future, our underwriting results will have to cover a greater proportion of our expenses than in recent years. While we are confident we can achieve a 20% return on equity in years where we do not have major catastrophes, it has become clear to us that a cross cycle return on equity objective of 20% will be difficult, if not impossible, to achieve. Your Board of Directors has therefore decided to change this objective to achieving a return on equity of 15% over time with the expectation of above average returns in good underwriting years but below average returns when there are major catastrophes or during soft market conditions.

With the US dollar having strengthened by more than 25% against sterling during the second half of 2008, we will reduce our 2009 US catastrophe exposed business by approximately 35% from the original 2009 plan in dollar terms, in line with our risk appetite for 2009. Lloyd's has also requested that we review the impact of the stronger US dollar and current market conditions on our 2009 plan and the amount of additional Funds at Lloyd's (FAL) required to cover higher than expected risk. 

Due to our financial performance in 2008, we do not believe it is appropriate to pay a dividend in respect of 2008. We need to rebuild our capital strength following the 2008 loss and in order to take advantage of attractive market conditions. It is unlikely that we would recommend payment of a dividend in respect of 2009 even if we accomplish our shareholder return objectives. We believe it makes more sense to build more substantial capital and liquidity buffers to enable us to expand our business following a major catastrophe and to withstand unexpected financial or foreign currency market conditions. 

I would like to take this opportunity to comment on another major event affecting our Company in 2008. In July 2008, our major shareholder, Fairfax Financial Holdings Limited (Fairfax), made an offer to acquire all of the outstanding shares of the Company at 165p per share. While we did not believe that this offer represented fair value for the Company at a time when its net tangible assets per share were 240p per share, it did allow certain institutional shareholders to exit their positions in the Company. At the end of 2008, Fairfax now owns 66.6% of the Company's outstanding shares and it now consolidates our financial results in its financial statements. We have had a long and beneficial relationship with Fairfax since 2000 and look forward to their continuing support as we seek to build Advent into a strong and profitable underwriting company.

Outlook for 2009

While 2008 was a challenging year for Advent, the business of insurance is one of bearing risk for return. Over the past three years, the changes in our business mix were designed to reduce the volatility in the overall portfolio when there is a major catastrophe.  We believe we have accomplished this objective with our core lines of business, Non Marine Reinsurance and Property Insurance, which performed in accordance with our expectations in 2008.  These two accounts absorbed the impact of the high frequency of single risk property losses and Hurricanes Ike and Gustav while remaining well within their respective reinsurance programmes, such that we would have been profitable in 2008 in the absence of our unexpected energy loss.

Through Syndicate 780, we have traded successfully through many insurance cycles and have strong, long term client and broker relationships. Our underwriting team has an average of 14 years experience with Advent and fully subscribes to its underwriting culture and discipline with a focus on making an underwriting profit.

This allows us to better serve our clients and the appointments of Duncan Lummis and Darren Stockman have been well received and I know, with the support from our management team, they will successfully implement our underwriting plans.  We continue to maintain our specialist focus on insuring short tail property insurance and reinsurance risks with quantifiable exposures, while seeking to build our worldwide premium income.

We will continue with our plans to develop Advent Re over time into a reinsurance company of similar size and scale to Syndicate 780. Given current capital market conditions, we believe most of that development in the short term will come from internally generated capital. For 2009, we are looking to diversify Advent Re's business mix with the introduction of traditional property reinsurance and a limited amount of casualty reinsurance, most likely through participation in Syndicate 780's 2009 year of account. 

It will be a challenging year in 2009 as we manage our US dollar catastrophe exposures within our risk appetite at a time of significant volatility in the US dollar/sterling exchange rate while meeting our underwriting profit and return on equity objectives.

We have a conservative investment portfolio invested in short term government and government guaranteed securities. Our investment returns will suffer in 2009 as central banks move towards zero interest rate policies but we are not currently exposed to capital losses on other riskier classes of investments. At some point, as these difficult economic times recede, it may make sense to move some of our investments from government securities into other classes of investments, while maintaining an overall portfolio that is weighted toward conservatism.

At times when there are numerous reports of companies having difficulty refinancing their debt, it is also important to emphasise again that we are insulated from refinancing debt risk in current market conditions with our long term debt having maturities in 2026 and 2035 with no financial covenants or principal repayments prior to maturity.

Our reserves for prior years' liabilities are performing well as reflected by the release of some £6.4 million from 2007 and prior years. Our casualty business represents a small part of the overall income written and we would not anticipate many claims arising from the current credit market turmoil and deteriorating economic environment.

We write 75% of our premium in US dollars. While the weakness of the US dollar adversely affected our results in 2007, the US dollar strengthened significantly in 2008 which enhances the premiums and underwriting profits we report in sterling. Needless to say, the stronger US dollar also increases our US catastrophe exposures and any US dollar underwriting losses in sterling terms. We closely monitor our foreign currency positions on a monthly basis to minimise any mismatches and resulting foreign exchange exposure, as demonstrated by our 2008 experience. 

I look forward to 2009 with confidence knowing that our underwriting franchise has been built over many years and through all types of market conditions. We have long-lasting historical client and broker relationships.  In the last three years, well over 50% of our total client base has renewed with us year on year and, for our core treaty book business, over 63% has renewed.  We expect market conditions to improve in 2009, particularly for our reinsurance business, with our key objective being a return to underwriting profitability while successfully managing our catastrophe exposures.

By my very nature, I look to take the positives from any negative situations and despite this set back in 2008, I do see real positives for the Advent Group as we enter 2009 -

Syndicate 780 has produced one of its best ever results for the 2006 year of account.

The actions we have been taking in our core classes of business over the past three years are standing up well to the events of 2008 and we are in a position to take advantage of the improving market conditions.

The overall capital structure of the Group withstood the reported loss for the year.

The ability of the Company to promote from within to maintain continuity with little disruption.

Great positives from our investment strategy having proved to be the right one when other entities are suffering.

Strength emerging from our reserves for prior years' liabilities.

The benefits of having a strong and supportive major shareholder.

This is not to say that I or my colleagues ignore the negatives, far from it, we take action and learn from our mistakes.

Once again, I would like to thank our shareholders, clients and everyone in the Advent Group for their immense support in 2008.

Brian F Caudle

Chairman

19 February 2009

  FINANCIAL SUMMARY

	2008		2007		2006		2005		2004
	£'m		£'m		£'m		£'m		£'m
Gross premiums written	209.6		126.9		115.4		100.5		74.7
Net premiums written	168.7		106.2		88.2		62.9		63.7
Net premiums earned	157.3		96.0		81.7		65.1		69.2
Underwriting profit (loss)	(24.2)		20.0		14.1		(74.0)		(1.3)
Profit (loss) before tax	(14.4)		25.2		22.9		(74.2)		5.2
Profit (loss) after tax	(8.9)		19.2		16.0		(51.9)		3.4
Return on equity (1)	(8.5%)		21.6%		25.1%		(68.4%)		6.4%
Per share amounts (2)
Earnings	(22.0p)		47.2p		43.3p		(303p)		32p
Dividend	12.5p		-		-		27.5p		27.5p
Net assets	233p		267p		219p		160p		505p
Net tangible assets	216p		249p		199p		136p		454p
Operating ratios
Claims ratio	93%		50%		53%		191%		74%
Expense ratio	22%		29%		30%*		23%		28%
Combined ratio	115%		79%		83%*		214%		102%

(1) Return on equity is calculated on opening shareholders' funds adjusted for the weighted average 

shares issued and dividends paid during the year.

(2) Per share amounts restated for the share consolidation of 10 old ordinary shares of 5p each for 1 new ordinary share of 50p each on 23 June 2008.

  

 

REPORT OF THE DIRECTORS

The Directors present their Report together with the audited Company Accounts for the year ended 31 December 2008.

BUSINESS REVIEW

Overview of the Company

Advent Capital (Holdings) PLC (the Company) was listed on the AIM Market of the London Stock Exchange on 3 June 2005. Advent is a well-established reinsurance and insurance company which has traded for more than 30 years through Syndicate 780 at Lloyd's. Beginning in January 2007, the Company commenced underwriting through a wholly owned subsidiary, Advent Re, based in Bermuda. The Company predominantly writes property insurance and reinsurance business, with its catastrophe exposed reinsurance business increasingly balanced by its worldwide non US catastrophe exposed account and its direct insurance account.

Advent Underwriting, a wholly owned subsidiary, manages Syndicate 780 with an underwriting capacity of £135 million for the 2009 year of account, wholly supported by the Company. Advent Re, a Class 3 Bermuda reinsurer, underwrites a limited number of retrocessional contracts, a segment of the reinsurance market in which the Company has participated as a leading underwriter for over 30 years, and is seeking to diversify its business written into traditional property reinsurance and a limited amount of casualty reinsurance in 2009.

The Company primarily derives its income from Syndicate 780 and Advent Re. 

Although the Company has historically outperformed the Lloyd's market, its business is exposed to periodic catastrophe claims, such as the impact of the unprecedented number and level of natural disasters during 2004 and 2005 and from the unexpected level of Hurricane Ike losses on the offshore energy account in 2008. With effect from the 2009 underwriting year, the Company will no longer write Gulf of Mexico windstorm - exposed energy business. If there are major catastrophe events, the Company would expect to incur claims arising from such events which could lead to short term underperformance relative to general insurance markets. 

The Company seeks to maximise shareholder returns over the medium to long term, working hard to establish and maintain long standing relationships with its clients and brokers and strives to offer the highest level of service and professionalism from both its underwriting and claims handling teams.

2008 Results

For the year ended 31 December 2008, the Company incurred a loss before tax of £14.4 million compared with a profit before tax of £25.2 million in 2007 which reflected the absence of major catastrophes. Loss per share amounted to 22p for 2008 and a return on shareholders' equity of negative 8.5% compared with earnings per share of 47.2p for 2007, and reflecting the impact of the 2008 Hurricane Losses a return of equity of 21.6%.

 

The loss results from 2008 Hurricane Losses of £49.8 million of which £19.7 million resulted from Hurricane Ike offshore energy account losses, in excess of its reinsurance protection. During the fourth quarter, Syndicate 780's offshore energy loss increased as a result of information from clients reporting higher than expected losses largely due to subsea physical damage which represents approximately 60% of the Company's incurred losses to date. As other participants in the energy market have noted, Hurricane Ike has proved to be far more destructive to offshore energy installations than original estimates had indicated. A new protocol for reporting energy losses requires that loss adjusters' reports are received more quickly than for the 2005 Hurricanes Katrina and Rita. However, the acceleration in reporting by loss adjusters has resulted in a higher degree of uncertainty as to the estimated ultimate loss cost. For losses where adjusters' reports have been received, loss adjusters have generally reported a wide range of loss estimates with the lead underwriters on the policies recording at or near the top end of the loss estimate range. Advent, as a following underwriter, has included these losses in its updated loss estimate. Any further development in the offshore energy losses will be net to the Company.

The Company is extremely disappointed by the performance of its Energy account leading to this significantly higher Hurricane Ike loss estimate. Management took action in the Syndicate's 2009 revised business plan to prevent recurrence of this unacceptable performance by ceasing to write any Gulf of Mexico offshore energy business which has windstorm exposure.

The 2008 results include an improvement in prior years' reserves, net of reinsurance recoveries and reinstatement premiums, of £6.4 million, a significant increase from the net improvement in claims of £1.1 million for 2007. 

  Sources of income

		2008		2007			2006		2005		2004
		£'000		£'000		£'000			£'000		£'000
Underwriting profit (loss)		(24,164)		19,975		14,073			(73,956)		(1,275)
Investment result		15,127		13,141		12,681			6,614		4,503
Interest on debt		(4,258)		(4,558)		(3,560)			(1,153)		-
Agency income		502		483		1,054			1,915		4,563
Corporate costs		(5,366)		(4,748)		(5,436)			(3,540)		(3,047)
Profit (loss) on exchange		3,808		868		4,041			(4,065)		429
Pre tax profit (loss)		(14,351)		25,161		22,853			(74,185)		5,173

The Company primarily derives its pre tax profit or loss from underwriting activities with the Lloyd's Managing Agency income diminishing in significance as the Company has increased its share of Syndicate 780's capacity since 2005.

Underwriting Review

Gross premiums written increased by 65% to £209.6 million for 2008 from £126.9 million in 2007.  For 2008, approximately £38.6 million of gross written premiums and £34.2 million of net written and net earned premiums arose from the RITC premium received from external Names on the closure of Syndicate 780's 2005 year of account and the increase in the Company's share of capacity from 53.8% for the 2005 year of account to 80.5% for the 2006 year of account.  For 2007, the reinsurance to close premium only amounted to £6.7 million.

The growth in premiums written and earned in 2008 was affected by three main factors:

Increase in share of Syndicate 780's capacity from 83.7% on the 2007 year of account to 100% on the 2008 year of account, an effective increase of 19.5%.

With approximately 75% of the Company's business written in US dollars and the strengthening of the US dollar against sterling during the second half of 2008, US dollar premiums have been translated into sterling at an average rate of $1.85/£ for 2008, a 7.5% increase from the 2007 average rate of exchange of $2.00/£.

Additional business written in the Reinsurance account, with premiums written in excess of the 2008 Plan (at Lloyd's Premium Income Monitoring (PIM) rates of $1.99/£) of £14.2 million, partially offset by a shortfall in the Property Insurance account of £5.0 million due to more competitive market conditions.

Excluding RITC, gross premiums written increased by 42.3% to £171.0 million for 2008 from £120.2 million in 2007, with gross premiums written increasing across the portfolio with the Reinsurance account up by £34.2 million, Property Insurance account up by £7.8 million and Marine account up by £8.7 million. Net premiums written (excluding RITC) increased by 34% to £134.4 million for 2008 from £100.2 million in 2007. Net premiums earned (excluding RITC) increased by 37% to £123.1 million for 2008 from £89.9 million in 2007.  

At 31 December 2008, the Company had unearned premiums, net of deferred acquisition costs and reinsurance, of £31.3 million (2007: £22.6 million) representing potential pipeline profits after claims incurred which will be principally earned in 2009. The Property Insurance and Marine accounts represent approximately 67% of the net unearned premiums reflecting the growth in these accounts over the last two years and the slower premium earning profile of the Property Insurance account with premiums from covers and binders earned over a 24 month period.

In 2008, we experienced a high frequency of single risk property losses, Hurricanes Gustav and Ike and other attritional catastrophe losses. There was a notable increase in catastrophe claims and industry insured losses when compared with the last two underwriting years.  Insured losses from named catastrophe events totalled more than US$50 billion in 2008 (2007: US$25 billion), the second worst year ever. Hurricane Ike was the largest insured loss of 2008 with some estimates of up to US$20 billion (Source: Swiss Re) including offshore energy losses.  The Company incurred losses of £49.8 million from the 2008 Hurricanes and £10.5 million from attritional catastrophe losses (2007: £10.2 million).  Attritional catastrophe losses are part of the normal expected pattern of losses for our account particularly as we diversify our worldwide non US catastrophe exposed reinsurance account.  A higher frequency of attritional losses in any year erodes the business plan catastrophe margin.  Since 2002, attritional catastrophe losses have accounted for an average of 7% of underwriting capacity or approximately 33% of our business plan catastrophe margin.

The Company monitors the net notified loss ratio (excluding IBNR) on a year of account basis as an indicator of the developing attritional loss experience and ultimately underwriting year profits/losses. For the 2008 year of account at 31 December 2008, the net notified loss ratio was 85.5% (2007: 32.3%), primarily as a result of the 2008 Hurricane Losses.

Syndicate 780 - Net notified loss ratio at 12 months (excluding IBNR)

Year of account	1993	1994	1995	1996	1997	1998	1999	2000
% net notified	14.9%	26.0%	27.1%	28.2%	24.3%	38.4%	52.8%	33.9%
Year of account	2001	2002	2003	2004	2005	2006	2007	2008
% net notified	101.1%	15.2%	15.0%	66.6%	141.3%	17.2%	30.3%	85.5%

  Insurance Segment Review

Details of the underwriting results for each business segment are set out below.

	31 December 2008
	Non-Marine	Property	Marine	Syndicate 2	Total
	Reinsurance	Insurance
	£'000	£'000	£'000	£'000	£'000
Gross premiums written	142,136	39,473	27,435	593	209,637
Net premiums written	113,562	34,403	19,920	774	168,659
Net premiums earned	109,326	30,744	16,418	774	157,262
Net claims incurred	(90,428)	(25,089)	(29,636)	(1,256)	(146,409)
Acquisition costs	(11,209)	(8,871)	(5,401)	(89)	(25,570)
Underwriting expenses	(5,237)	(2,161)	(1,502)	(547)	(9,447)
Underwriting profit (loss)	2,452	(5,377)	(20,121)	(1,118)	(24,164)
Claims ratio	82.7%	81.6%	180.5%	162.3%	93.1%
Acquisition costs	10.3%	28.9%	32.9%	11.5%	16.3%
Underwriting expenses	4.8%	7.0%	9.1%	70.7%	6.0%
Expense ratio	15.1%	35.9%	42.0%	82.2%	22.3%
Combined ratio	97.8%	117.4%	222.5%	244.5%	115.4%
Unearned premiums net of deferred acquisition costs and reinsurance	10,329	13,808	7,188	-	31,325

  

	31 December 2007
	Non-Marine	Property	Marine	Syndicate 2	Total
	Reinsurance	Insurance
	£'000	£'000	£'000	£'000	£'000
Gross premiums written	75,966	31,723	18,691	532	126,912
Net premiums written	61,292	27,785	16,461	661	106,199
Net premiums earned	57,862	24,358	13,103	661	95,984
Net claims incurred	(28,645)	(14,499)	(6,497)	1,208	(48,433)
Acquisition costs	(8,495)	(7,431)	(2,915)	(80)	(18,921)
Underwriting expenses	(4,899)	(2,046)	(1,204)	(506)	(8,655)
Underwriting profit	15,823	382	2,487	1,283	19,975
Claims ratio	49.5%	59.5%	49.6%	(182.7%)	50.5%
Acquisition costs	14.7%	30.5%	22.2%	12.1%	19.7%
Underwriting expenses	8.5%	8.4%	9.2%	76.6%	9.0%
Expense ratio	23.2%	38.9%	31.4%	88.7%	28.7%
Combined ratio	72.7%	98.4%	81.0%	(94.0%)	79.2%
Unearned premiums net of deferred acquisition costs and reinsurance	6,669	11,108	4,829	-	22,606

Non-Marine Reinsurance

For the year ended 31 December 2008, the Non-Marine Reinsurance account had   an underwriting profit of £2.5 million and a combined ratio of 97.8% after 2008 Hurricane Losses of £19.1 million and single risk property losses, net of reinsurance recoveries and reinstatement premiums, of £14.3 million. This compares with an underwriting profit of £15.8 million and a combined ratio of 72.7% for 2007, which experienced a more benign claims environment. 

Gross premiums written (excluding the RITC) increased by 49% to £103.5 million in 2008 from £69.3 million in 2007, due to the increase in the Company's share of the 2008 year of account from 83.7% to 100%, an increase in current year income, primarily on the worldwide and US direct catastrophe sections of the account, and the stronger US dollar with a 7.5% increase in the average exchange rate from 2007.

Unearned premium, net of deferred acquisition costs and reinsurance, increased to £10.3 million at 31 December 2008 from £6.7 million in 2007. Net unearned premium at 31 December 2007 included deferred reinsurance costs relating to certain Original Loss Warranty (OLW) reinsurance contracts purchased in mid 2007.

Advent Re

For the year ended 31 December 2008, Advent Re wrote gross premiums of £7.9 million (US$14.6 million; 2007: US$12.4 million) of which £0.3 million (US$0.5 million) was included in unearned premium at 31 December 2008 on policies expiring by 31 May 2009. Advent Re incurred losses of £4.6 million (US$ 8.5 million) from Hurricane Ike resulting in an underwriting profit of £2.2 million  and a combined ratio of 71.8% for 2008 (2007: underwriting profit of £4.9 million and combined ratio of 35.8%).

During 2009, Advent Re will seek to diversify its business written to include traditional property reinsurance and a limited amount of casualty reinsurance in line with the Company's objective of ultimately having two platforms of similar size and diversity of business.

Property Insurance

For the year ended 31 December 2008, the Property Insurance account had an underwriting loss of £5.4 million and a combined ratio of 117.5%, after 2008 Hurricane Losses of £3.9 million and single risk property losses, net of reinsurance recoveries, of £4.2 million. This compares with an underwriting profit of £0.4 million and combined ratio of 98.4% for 2007.

Gross premium written income increased by 24.4% to £39.5 million for 2008 from £31.7 million in 2007, principally from the Company's increased share of Syndicate 780's capacity and the stronger US dollar, as the Company continued its strategy to develop the account to diversify its underwriting portfolio and to reduce the potential volatility of the overall portfolio. Net earned premiums increased by 26.2% to £30.7 million in 2008 from £24.4 million in 2007 with approximately 50% of gross written premiums remaining to be earned in 2009 reflecting the slower premium earning profile of this account. 

Unearned premiums, net of deferred acquisition costs and reinsurance, increased to £13.8 million at 31 December 2008 from £11.1 million in 2007, most of which will earn in 2009.

Marine

For the year ended 31 December 2008, the Marine account had an underwriting loss of £20.1 million and a combined ratio of 222.6% after 2008 Hurricane Losses of £26.8 million, of which £19.7 million resulted from Hurricane Ike offshore energy losses in excess of its reinsurance programme. This compares with an underwriting profit of £2.5 million and a combined ratio of 81.0% in 2007. 

Gross premiums written increased by 46.8% to £27.4 million for 2008 from £18.7 million in 2007 as the development of this account was a focus in 2008.

Management has taken action to prevent recurrence of this unacceptable performance by ceasing to write any Gulf of Mexico offshore energy business which has windstorm exposure.

Unearned premium, net of deferred acquisition costs and reinsurance, increased to £7.2 million at 31 December 2008 from £4.8 million at 31 December 2007.

Syndicate 2

Syndicate 2 had an underwriting loss of £1.1 million principally due to a new/unreported claim on the 1999 year of account.

On 19 February 2009, Advent Underwriting's Board of Directors approved the closure of Syndicate 2's 2002 and prior years' of account, at carried reserves, into a new syndicate which will be wholly supported by the Company.

Reinsurance Recoverable

At 31 December 2008 the reinsurance recoverable on outstanding claims increased to £55.1 million from £18.2 million at 31 December 2007 principally due to reinsurance recoveries on the 2008 hurricanes. As set out in Note 3 to the financial statements, only 2.5% of the reinsurance recoverable (excluding balances for which collateral is held) was from companies rated BBB or below and Non Rated. There was no new impaired reinsurance during 2008.

Investment Performance

	2008			2007
	Total	Company	Syndicate	Total	Company	Syndicate
	£'000	£'000	£'000	£'000	£'000	£'000
Financial investments	360,447	135,395	225,052	239,826	123,485	116,341
Cash	12,136	7,280	4,856	26,978	13,535	13,443
Total investments and cash	372,583	142,675	229,908	266,804	137,020	129,784
Investment result	15,127	6,807	8,320	13,141	7,250	5,891
Interest on debt	(4,258)	(4,258)	-	(4,558)	(4,558)	-
Net investment result	10,869	2,549	8,320	8,583	2,692	5,891

The investment result increased to £15.1 million for 2008 from £13.1 million in 2007 principally due to an increase in cash and investments of £105.8 million, offset by a lower investment return of 4.8% (2007: 5.2%). The Company's share of the syndicates' portfolio of cash and investments has increased to £229.9 million at 31 December 2008 from £129.8 million at 31 December 2007, due to the strengthening of the US dollar, the cash call on the 2005 year of account, and the increased ownership share of the 2006 YOA of 80.5%, (2005 YOA: 53.8%).

At 31 December 2008, the investment portfolio is virtually all invested in government or government guaranteed securities given the Company's concerns about taking credit risk in these turbulent financial markets. Neither the Syndicate nor the Company invested in asset backed or mortgage backed securities (ABS and MBS), equities or derivatives. Certain overseas deposits managed by Lloyd's over which the Company has no investment control, have invested in corporate bonds, MBS and ABS as referred to in Note 4 to the financial statements.

The weighted average interest rate on outstanding debt at 31 December 2008 was 5.8% down from 8.8% at 31 December 2007, reflecting the sharply lower interest rates at the end of the year. The slight decrease in the overall interest charge for 2008 reflects the effect of the lower interest rates offset by the stronger US dollar and Euro.

Other Expenses 

	2008		2007
	£'000		£'000
Staff and related costs	2,315		1,909
Profit related bonuses	-		556
Fairfax offer related costs	1,013		-
Other expenses	2,038		2,283
	5,366		4,748

The profit related pay scheme did not result in any bonuses for 2008. In 2007, the profit related pay scheme based on the annually accounted profit of Syndicate 780 resulted in a total bonus expense of £1.1 million, of which £0.6 million was included in corporate costs and the balance in underwriting expense. 

The Fairfax offer related costs are in respect of professional advice sought in responding to the 165 pence per share offer from Fairfax for all of the shares of the Company.

Capital Management

The Company's objective is to have sufficient capital to support its operations to ensure future growth and expansion while providing a satisfactory return to shareholders given the potential short term volatility of its results due to major catastrophe events.

The Company's underwriting is supported by Funds at Lloyd's (FAL) for Syndicate 780 and by Advent Re's shareholder's equity for its Bermuda operations. 

Total FAL at 31 December 2008 was as follows:

		Advent FAL £'m		Fairfax FAL £'m		Year of Account Applicable
Advent Capital Limited (ACL)		-		21.7		2001, 2002
Advent Capital (No. 3) Limited (ACL3) Cash and investments undistributed profits		96.5 10.9		- -		2006 onwards
Total		107.4		21.7

For Syndicate 780, the level of capital required is driven by the Lloyd's Individual Capital Assessment (ICA) process together with a market uplift in the individual capital requirements of members as determined by Lloyd's, as necessary to maintain its market rating, referred to as the Economic Capital Requirement (ECR) process.

The 2009 year of account has an initial ECR that is unchanged from 2008. The Company has FAL cash and investment of £96.5 million and £10.9 million of undistributed interim profits to support Syndicate 780's capacity of £135 million for 2009. Lloyd's has advised managing agents that additional FAL may be required to support the 2009 year of account to reflect the strong US dollar (up by more than 25% from the business plan exchange rate) and improving market conditions in the first quarter of 2009.

In addition to the Company's FAL of £107.4 million at 31 December 2008, Fairfax has deposited FAL of £21.7 million at 31 December 2008 (£56.6 million at 31 December 2007) to support the Company's underwriting for the 2001 to 2005 underwriting years pursuant to a Funding Agreement dated 16 November 2000. With the closure of Syndicate 780's 2005 year of account, £41.7 million of Fairfax's FAL was released on 16 July 2008. The balance of the FAL will be released once Syndicate 2 has been closed.  

In June 2008, the Company paid its share of the loss on Syndicate 780's 2005 year of account of £29.1 million (at distribution rates of exchange) which was settled from existing FAL funds (£15.2 million), profit distributions on the 2006 and 2007 years of accounts (£12.6 million) and holding company cash of £1.3 million.

The Company has provided capital to its operating subsidiaries using permanent capital and unsecured long term debt financing. The long term debt is not callable for five years from date of issue and has no financial covenants other than the quarterly payment of interest and payment of principal on maturity. In the case of the Company's US dollar and Euro denominated subordinated debt due 3 June 2035, amounting to an aggregate of £34.2 million at 31 December 2008, the Company has the ability to defer interest payable for 20 consecutive quarters without causing an event of default. The Company seeks to maintain its ratio of long term debt to total capital at less than 35% with the objective of reducing that ratio over the next five years through accumulated earnings or as the expiry of the 'No call' provisions on its debt provide it with an ability to refinance or repay its senior loan notes.

Capital Table

		2008		2007
		£'000		£'000
Long term debt - subordinated - senior		34,162 30,852		25,085 22,262
		65,014		47,347
Shareholders' equity		94,536		108,398
Debt to equity ratio		69%		44%
Debt to total capital ratio		41%		30%
Interest coverage		(2 x)		7 x

The increase in long term debt of £17.7 million results from the significant strengthening of both the US dollar and the Euro during 2008 and is the primary reason for the increase in the debt to total capital ratio from 30% in 2007 to 41% in 2008.

2009 Business Plans and Outlook

2009 Business Plan Following Hurricanes Gustav and Ike, Syndicate 780's initial business plan was reviewed taking into account expectations of improved pricing with an (overall expectation of flat pricing for the underwriting portfolio, compared to the previous expectation of an average price reduction of 10% on the underwriting portfolio), and the decision not to underwrite Energy business which had Gulf of Mexico windstorm exposure.

 

The revised 2009 Business Plan was approved by Lloyd's based upon a gross premium income of £124.8 million (at Lloyd's PIM rate of exchange). Subsequently Lloyd's advised the market that the 2009 capital requirements were subject to review based on 31 December 2008 exchange rate of US$1.44/£ and actual market conditions for 1 January 2009 renewals. The Company is currently in discussions with Lloyd's on the additional funds needed to write its 2009 business plan. As part of that process, management has considered prevailing market conditions, the need to maintain its catastrophe exposures within the 2009 risk appetite approved by the Board of Directors and the availability of additional capital to support the plan. If Lloyd's requires a significant amount of additional capital which the Company is unable to provide, this would adversely impact the level of premiums which the Company could write under its 2009 business plan.

The key components of the revised 2009 year of account Plan compared with the 2008 year of account Plan and forecast premium income (net of brokerage commission) are set out below at PIM rates of exchange and the average 2008 rate of exchange for the 2008 forecast:

		2008		2008		2009
(£ millions)		Plan		Forecast		Approved Plan
Exchange rate		$1.92/£		$1.85/£		$1.99/£
Reinsurance
Treaty		40.3		51.8		53.6
Assumed		12.9		18.2		17.9
Marine		2.2		2.4		2.3
Aviation		1.1		1.1		1.2
Casualty and other		3.1		4.3		5.1
		59.6		77.8		80.1

Insurance
Property		36.5		32.9		31.6
Energy		16.0		17.8		9.1
Cargo and other		0.8		0.8		1.0
Personal Accident		1.4		1.4		3.0
		54.7		52.9		44.7
		114.3		130.7		124.8
Increase (decrease)				14.3%		(4.5%)

2008 Business Plan UpdateAt Lloyd's Premium Income Monitoring (PIM) rates of exchange, total premiums, net of brokerage, for the 2008 year of account are expected to be in excess of £124 million. Premiums written for the Reinsurance account were ahead of plan by £14 million reflecting the syndicate's focus on developing its non USA catastrophe exposed business with premiums written in excess of plan of £7 million and an increase of £3 million in the US catastrophe book.Premiums written for the Property Insurance account were below plan by £5 million reflecting increasingly competitive market conditions in the insurance market. Premiums written for the Marine account are in line with plan at £18 million.

1 January 2009 renewals

The rating environment has been better than the 2009 business plan assumptions, which has led to increased premiums written of £86.8 million (at current exchange rates): £66.6 million for the Non-Marine Reinsurance account and £20.2 million for the Property Insurance account. As the year develops, we expect the rating environment to improve further.

Non-Marine Reinsurance Account

The Treaty and Assumed reinsurance sections are seeing an improved rating environment for 2009 in line with expectations. Rates for USA nationwide catastrophe accounts were up by as much as 20% depending on loss experience, regional catastrophe accounts were up by 5% - 10% and the multi regional catastrophe accounts were up by 10% - 15%. International catastrophe rates, although in line with expectations, generally achieved price increases 2.5% - 5%. Rate increases for the Assumed catastrophe account, varied with non-peak catastrophe exposed rate increases of up to 5% depending on territory with loss making accounts up by 10% - 15%. Assumed risk excess and Treaty risk accounts both saw rate increase of up to 10% depending on loss record. Treaty and Assumed Casualty reinsurance did not see the improved rating as seen for the property class but remained flat in line with expectations. Policy terms and conditions have held firm and the pricing environment has improved compared to 2008.

Property Insurance Account

The Property insurance account is showing some signs of rate increases but on a more modest scale. Certain territories have seen rate increases while others are currently renewing at flat at best. Once the treaty renewal season has been completed and insurance companies have taken on board the poor results of 2008, the increased reinsurance spend and the increased cost of capital, we would expect to see primary rate increases during 2009. With little investment return being achieved insurance companies are having to look to underwriting profit, which should result in an upward adjustment in rates. The account is performing in line with expectations but we would expect an average rate increase of 10% across the portfolio by year-end. 

Marine

Having already taken the decision to not underwrite any Energy business with Gulf of Mexico wind exposure, we continue to review other opportunities worldwide. 

In our opinion there needs to be clear evidence of major corrective action by the Energy market for Gulf of Mexico wind coverage (and not simply just a price increase) before we consider exposing our capital to such risk in the future.

The marine XOL portfolio has seen rates increase by no more than 5% at renewal.

Syndicate results update

The 2006 YOA will be closed at a profit of 33.7%, up from the previous forecast of 20% to 25% due to the stronger US dollar and net improvement in prior years' claims. 

The forecast results for Syndicate 780's years of account are set out below, including the 2008 year of account for which an initial forecast would normally be made in the second quarter of 2007. The forecast result will be affected as the remaining premium income is earned in 2009.

Year of Account	Current forecast result % of capacity	Previous forecast result % of capacity 30 September 2008	Advent syndicate participation
2006	Profit 33.7%	20% to 25%	£122.8 m
2007	Profit 13.5% to 18.5%	10 % to 15%	£126.0 m
2008	Loss (16%)	N/A	£135.0 m

Catastrophe Exposure Management

The Board of Directors has approved the 2009 risk appetite as an after tax cost of a major catastrophe event, before consideration of catastrophe margins, of 25% of opening shareholders' equity (£23.6 million). In addition, catastrophe exposures for Syndicate 780 to any one of the Lloyd's Realistic Disaster Scenarios (RDS) are maintained within the Lloyd's franchise guidelines of a gross loss of 75% of capacity and a net loss of 20% of capacity. Our objective is to allow for a margin of safety from the Lloyd's guidelines to allow for potential variations in actual catastrophe events compared with the RDS. Syndicate 780's budgeted catastrophe margin for the 2009 year of account is approximately 27% of capacity. Smaller attritional catastrophe losses will erode the catastrophe margins available to absorb the impact of a major catastrophe. From 2002 to 2008, attritional catastrophe losses absorbed, on average, 33% of the budgeted catastrophe margin.

We set out below the estimated 1 January 2009 net loss exposure as a percentage of capacity to major RDS scenarios to which we are exposed compared with Syndicate 780's 2009 business plan and its estimated net loss exposure at 1 January 2008. For 2009, Lloyd's has increased the industry loss assumptions for a number of benchmark catastrophe events within their RDS guidelines. The RDS exposures do not include the aggregate exposures (net of notified losses) on the Gulf of Mexico wind - exposed energy account of US$135 million at 1 January 2009 which will run off 32% by 1 April 2009 and 98% by 1 July 2009.

	Florida Wind	Los Angeles Quake	European Wind	Japan Quake	Gulf of Mexico	USA North East Wind
Industry loss - January 2008	$119 bn	$74 bn	$31 bn	$51 bn	$113 bn	$74 bn
Estimated net loss as % of capacity  - January 2008	13%	16%	18%	14%	20%	18%
Industry loss - January 2009	$125 bn	$78 bn	$31 bn	$51 bn	$113 bn	$78 bn
Estimated net loss as % of capacity  - January 2009 2009 plan	22% 15%	27% 16%	22% 19%	20% 13%	25% 18%	26% 18%

The Company's RDS exposures at 1 January 2009 exceed our 2009 risk appetite and the Lloyd's Franchise guidelines of a maximum net loss of 20% of capacity due to the stronger US dollar of $1.44/£ compared with the 2009 business plan assumptions of $1.99/£. As part of our review of the 2009 business plan, we will take action to reduce these net loss exposures in line with our risk appetite and the Lloyd's Franchise guidelines.

The Company's overall exposure net of reinsurance and reinstatement premiums but without consideration of catastrophe margins, to a Gulf of Mexico RDS was as follows:

		1 January 2009 £m		1 January 2008 £m
Syndicate 780  (ACH share)		33.7		26.9
Advent Re		6.1		11.4
Pre tax loss		39.8		38.3
After tax loss		30.4		30.7
Percentage of shareholders' equity, beginning of year		32.2%		28.3%

The pre tax exposure has increased slightly to £39.8 million at 1 January 2009 from £38.3 million at 1 January 2008 with the impact of the stronger US dollar accounting for Syndicate 780's increased exposure offset by the decrease in Advent Re's catastrophe exposures due to the expiry of certain contracts on 31 December 2008 which have not yet been renewed. Advent Re's loss exposures have not been tax effected as it is a non UK resident corporation.

Dividend Policy

With our financial performance in 2008, we do not believe it is appropriate to pay a dividend in respect of 2008. We need to rebuild our capital strength following the 2008 loss and in order to take advantage of attractive market conditions. It is unlikely that we would recommend payment of a dividend in respect of 2009 even if we accomplish our shareholder return objectives. We believe it makes more sense to build more substantial capital and liquidity buffers to enable us to expand our business following a major catastrophe and to withstand unexpected financial or foreign currency market conditions. 

  The Board

Executive Directors

Brian Caudle (aged 73) - Executive Chairman

Mr Caudle is the founder of Advent Underwriting Limited (Advent Underwriting) and is co-founder of the Company and Advent Capital Limited. He has over 50 years experience in the Lloyd's Market and was the Active Underwriter of Syndicate 780 from 1974 to 1999. Mr Caudle is the Executive Chairman of the Company and was the Director of Underwriting of Advent Underwriting until 13 December 2006. Mr Caudle is a Director of Advent Re Holdings Limited and Advent Re (a Bermuda Class 3 reinsurer). Mr Caudle is also a Director of other companies within the Advent Group.

Keith Thompson (aged 51) - Chief Operating Officer

Mr Thompson is co-founder of the Company and Advent Capital Limited. He has over 30 years experience in the Lloyd's Market. He began his career with the Corporation of Lloyd's in 1976. From 1983 to 1994 he held senior positions and directorships of a number of Lloyd's members agents before joining Advent Underwriting in July 1994. In 1995 he was appointed Managing Director of Advent Underwriting. Mr Thompson is also a Director of other companies within the Advent Group.

Trevor Ambridge (aged 49) - Chief Financial Officer 

Mr Ambridge joined the Board of the Company in 2002 as a non-executive director and, with effect from 1 June 2006, was appointed as the Chief Financial Officer. He remains a Vice President of Fairfax Financial Holdings Limited and was previously a partner with Coopers & Lybrand, Toronto. Mr Ambridge was President and a member of the Council of the Ontario Institute of Chartered Accountants between 1989 and 1996. Mr Ambridge was elected as a Fellow of the Ontario Institute of Chartered Accountants in 1994.

Non-Executive Directors

Brian Rowbotham (aged 77) - Non-Executive Director

Mr Rowbotham joined the Board of the Company in 1995 and is also a Non-Executive Director of Advent Underwriting, Advent Capital Limited and Advent Group Services Limited.  He was Chairman of Charterhouse Communications PLC, an AIM listed company from 1987 to 2005, and a Director of two main listed companies being Deputy Chairman of the Adscene Group PLC between 1987 and 1994, and Chairman of Allied Radio Plc from 1994 to 1996. Mr Rowbotham is a Fellow of the Institute of Chartered Accountants of England and Wales.

Eric Stobart (aged 60) - Non-Executive Director

Mr Stobart joined the Board on 6 January 2006.  He is a director of The Law Debenture Pension Trust Corporation p.l.c. and was previously Director of Public Policy and Regulation at Lloyds TSB Group PLC. He is a trustee of the Lloyds TSB Group Pension Scheme and chairman of its Investment and Funding Committee. He is also a Non-Executive Director of The Throgmorton Trust PLC, Lloyd's Superannuation Fund, Capita Managing Agencies Limited and Utilico Limited. Mr Stobart is a Fellow of the Institute of Chartered Accountants of England and Wales. His career has been spent in the City of London where he has had extensive experience of financial and investment markets. He was successively a Corporate Finance Director, Group Finance Director and Chief Executive of Hill Samuel Bank 

  Peter Stormonth Darling (aged 76) - Non-Executive Director

Mr Stormonth Darling joined the Board of the Company on 9 November 2005. He was Chairman of Mercury Asset Management Group (now BlackRock) from 1979 to 1992, and a Non-Executive Director until 1998. He is a Director of Howard de Walden Estates and other companies in the UK and Canada. 

COMPANY SECRETARY

The services of Company Secretary are provided by Littlejohn Corporate Services Limited.

Directors and their Interests in Shares

On the 24 June 2008, the Company consolidated its ordinary shares on the basis of one ordinary 50 pence share for every ten ordinary 5 pence shares. All the share disclosures shown below are on a post consolidation basis.

The Directors and their beneficial interests (including any interests of their spouses) in the share capital of the Company during the year were as follows:

		Number Held
		at 1 January 2008  and 31 December 2008
B F Caudle	Ordinary 50p shares	234,120
K D Thompson	Ordinary 50p shares	43,000
B W Rowbotham	Ordinary 50p shares	27,574
E St C Stobart	Ordinary 50p shares	3,000
P Stormonth Darling	Ordinary 50p shares	10,000

B F Caudle also has controlling interests in the share capital of Charlbury Investments Limited and Stellawell Limited which have the following interests in the share capital of the Company:

		Number Held
		1 January 2008  and 31 December 2008
Charlbury Investment Limited	Ordinary 50p shares	203,554
Stellawell Limited	Ordinary 50p shares	1,133,570

  K D Thompson also has a controlling interest in the share capital of Jacgora Investments Limited, which has the following interest in the share capital of the Company:

		Number Held
		1 January 2008  and 31 December 2008
Jacgora Investments Limited	Ordinary 50p shares	159,001

T J Ambridge has a controlling interest in the share capital of Investeast Properties Limited, which has the following interest in the share capital of the Company:

		Number Held
		1 January 2008  and 31 December 2008
Investeast Properties Limited	Ordinary 50p shares	46,000

Investor Relations

The Investor Relations Officer, Mr Ewing, manages the Company's investor relations programme. Meetings are held with major shareholders and analysts during the year including the period following reporting of interim and year end accounts, and other major transactions or events.

The Company's website (www.adventgroup.co.uk) provides a comprehensive set of investor relations software tools enabling shareholder and investors to download group data.

Substantial interests

The following interests of 3% or more of the issued ordinary share capital had been notified to the Company as at 31 December 2008:

Fairfax Financial Holdings and subsidiaries 66.58%

Mackenzie Cundill Investment Management Limited 12.71%

Avenir Corporation 4.57%

Brian F Caudle 3.86%

International Long/Short Fund LP 3.28%

Charitable Donations

During 2008 the Company made a donation of £1,250 to Lloyd's Charities Trust. No donations were made for political purposes.

  Creditor payment policy

The Company aims to pay all of its creditors promptly and in accordance with contractual and other legal obligations.

Corporate Governance Reports

The Company continued its commitment to maintaining effective corporate governance during 2008. While companies on the AIM market are not obliged to comply with the Combined Code, the Company wishes to apply best practice in relation to Corporate Governance and aims to comply with the Combined Code as much as practicable, having regard to the Company's size, complexity and stage of development. 

The Board has the authority, and is accountable to shareholders, for ensuring that the Company is appropriately managed and achieves the corporate objectives it sets. In order to fulfil its responsibilities, the Board meets on a regular basis and has a formal schedule of matters specifically reserved for its consideration and decision. The schedule of matters reserved for the Board provides that the Board's role encompasses the overall management of the Company and its subsidiaries including approval of long term strategy and objectives, oversight of operations, ensuring maintenance of a sound system of internal controls and risk management, decisions relating to any changes in the Company's capital structure or of management and approval of any significant expenditure. When directors are unable to attend a meeting, they are advised of matters to be discussed and given an opportunity to make their views known to the Chairman prior to the meeting.

During the period until 31 December 2008, the Board has at any one time comprised three Executive Directors, namely Mr Caudle, Mr Thompson, and Mr Ambridge and three Non-Executive Directors, namely, Mr Rowbotham, Mr Stormonth Darling and Mr Stobart.

The Non-Executive Directors share the responsibility for the execution of the Board's duties by taking an essentially supervisory role. Non-Executives are therefore chosen for their broad and complementary experience in relation to the Executive Directors, as well as their independence. The key elements of the role and responsibilities of the Non-Executive Directors are:

Supervision of, and advice to, the Executive Directors

Evaluation of Executive Directors' performance

Remuneration of Executive Directors

Monitoring of the effectiveness of controls

Governance and compliance

These roles and responsibilities are carried out through membership of the Group Audit, Group Investment, Remuneration and Nomination sub-committees. Membership of, and attendance at, the committees is set out below. The terms of reference for the committees, along with the schedule of matters reserved for the Board, can be found on the Company's website. 

The Company's underwriting activity is established, approved and monitored by the board of Advent Underwriting, which is authorised and regulated by the Financial Services Authority, and by the Board of Advent Re.

  Board Attendance during 2008

Director	Relevant Number of meetings	Number attended
T J Ambridge	6	6
B F Caudle	9	9
P Stormonth Darling	9	7
B W Rowbotham	9	8
E Stobart	9	8
K D Thompson	9	9
Average attendance		92%

During 2008 a number of Board meetings were held in connection with the offer by Fairfax Financial Holdings for the issue shares of the Company. Mr Ambridge, as an officer of Fairfax excluded himself from these meetings. 

Committee Membership during 2008

	Group Audit Committee	Remuneration Committee	Nominations Committee	Group Investment Committee
T J Ambridge	No	No	No	Yes
B F Caudle	No	No	No	No
P Stormonth Darling	No	Yes	Yes	Yes
B W Rowbotham	Yes	Yes	Yes	Yes
E Stobart	Yes	Yes	Yes	No
K D Thompson	No	No	No	Yes

Board Independence

Messrs Stobart and Stormonth Darling are considered independent with regards to the provisions set out in the Combined Code.

Mr Rowbotham has been a director with the Company since 1995. The Board continues to consider Mr Rowbotham as independent despite provision A.3.1. of the Combined Code regarding board service of more than nine years. The Board considers that during this period, Mr Rowbotham has maintained his objectivity and is resolutely independent in both character and judgement. There have been no circumstances or relationships that would require the Board to alter his classification as independent.

Board Evaluation

During the year the Board undertook a formal evaluation of the performance of the Board. The process involved each Director completing a self assessment questionnaire reviewing their own individual performance, the performance of the Chairman and the performance of the Board collectively. The results of this exercise were reported to the Board by the Senior Independent Director, Mr Stormonth Darling, at its meeting in on 19 February 2009.

Group Audit Committee

The Group Audit Committee consists of Mr Rowbotham (as Chairman) and Mr Stobart.  The Committee meets at least quarterly and at least once without any executive director being present.  The external auditors attend the Committee meetings quarterly, at least once with no executive directors present, to discuss the nature and scope of the audit review process before it commences as well as reviewing the auditor's reports relating to accounts and internal control systems.

The main responsibilities of the Group Audit Committee are to monitor the integrity of financial statements, to review the effectiveness of the Company's financial reporting and internal control policies, to monitor the effectiveness of the Company's internal audit function, to make recommendations to the Board in relation to the appointment of external auditors and actuaries - including reviewing terms and conditions and fee arrangements. The Committee also has regard to the requirements of the FSA, Lloyd's and the Combined Code in carrying out its duties. 

During the year, the Group Audit Committee reviewed the Company's interim and annual report and accounts, plans for and monitoring of the internal audit work undertaken, the re-appointment of external auditors and actuaries for the Company and its subsidiaries and the ongoing operation of the risk management framework for the Company and its Bermudan subsidiary companies. The Group Audit Committee also considered the terms and conditions, fees and independence of PricewaterhouseCoopers LLP and confirms the independence of the external auditors.

Attendance at each of the meetings by Committee members is set out below:

	Group Audit Committee
Relevant Director	Relevant Number of meetings	Number attended
B W Rowbotham	5	5
E Stobart	5	5
Average attendance		100%

Remuneration Committee

The Remuneration Committee consisted of Mr Rowbotham (as Chairman), Mr Stormonth Darling and Mr Stobart.  It makes recommendations to the Board on matters relating to the remuneration and terms of employment of the executive directors of the Company and on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time.

	Remuneration Committee
Relevant Director	Relevant Number of meetings	Number attended
P Stormonth Darling	2	2
B W Rowbotham	2	2
E Stobart	2	2
Average attendance		100%

Nomination Committee 

The Nomination Committee consisted of Mr Stormonth Darling (as Chairman), Mr Rowbotham and Mr Stobart. It meets as required and reviews the size, structure and composition of the Board, making recommendations to the Board on all board appointments, including the selection of non-executive directors. The committee also makes recommendations on re-appointment, resignation and removal of directors. There were no new Directors appointed during the year.

  The Nominations Committee met once during 2008 to consider the re-nomination of Directors for the 2008 AGM.  Attendance at the meeting by Committee members is set out below:

	Nominations Committee
Relevant Director	Relevant Number of meetings	Number attended
P Stormonth Darling	1	1
B W Rowbotham	1	1
E Stobart	1	1
Average attendance		100 %

The Committee will consider the re-nomination of directors for the 2009 AGM on 23 April 2009. In accordance with the Company's articles of association, all Directors submit themselves for election by shareholders at the company's annual general meeting following their appointment. In addition a third of the remaining Directors will also retire by rotation and therefore all Directors are subject to re-election every three years, with the exception of Mr Rowbotham, who having served more than 9 years on the board as a Non-Executive Director, will be submitted for re-election on an annual basis. In addition to Mr Rowbotham, Mr Stobart will submit himself for re-election at this year's AGM.

Group Investment Committee

The Group Investment Committee consists of Mr Stormonth Darling (as Chairman), Mr Ambridge, Mr Rowbotham and Mr Thompson who have met regularly during 2008. The Committee makes recommendations to the Board regarding the investment policy and ensures the investment of Company funds is conducted within the policy. The Committee has delegated authority from the Board to set detailed investment parameters. Attendance at each of the meetings by Committee members is set out below:

	Group Investment Committee
Relevant Director	Relevant Number of meetings	Number attended
T J Ambridge	4	4
P Stormonth Darling	4	3
B W Rowbotham	4	4
K D Thompson	4	4
Average attendance		94%

Corporate Social Responsibility

The Company undertakes to act fairly, honestly and with integrity in its relationships with its various stakeholders including employees, shareholders, capital providers, clients and the wider community. The Code of Ethics and Standards adopted by the Company sets out the values and standards of conduct expected of its employees and the Company takes into account its responsibilities due to, and impact on, each of these stakeholders in its policies and procedures.

With respect to the environment, the Company has sought to reduce the impact of its business during 2008 by implementing various energy saving and recycling initiatives.

  Employee relations

The Company recognises that its success lies with its employees and as such aims to meet or exceed best practice in terms of employee relations. The Company has an established equal opportunities policy and, during 2008, had an average absence record of 1.2 days per employee (2007: 1.6 days). Ongoing professional development is strongly encouraged with an average of 31 hours of training undertaken per employee (not including additional study leave for examinations) during 2008 (2007: 28 hours) and around 46% of the workforce holding at least one professional qualification.

Eight employees left the Company during 2008, compared with no leavers in 2007.

Directors' Remuneration Report

All members of the Remuneration Committee are independent Non-Executive Directors and they do not have any personal financial interest in the Company other than their shareholdings in the Company disclosed in the table above.

Remuneration Policy

The objective of the policy is to ensure that all members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company. The Committee will have regard to conditions of service and remuneration levels of competitor companies to ensure that the Company is well placed to attract and retain high calibre management, but not so as to cause remuneration to rise without a corresponding improvement in performance.

The main elements to the remuneration package for executive directors and senior management are:

Basic annual salary and benefits

Annual Company performance related bonus, which has a personal performance element

Share Options

Long Term Incentive Plan

Share Incentive Plan 

Pension Arrangements

Basic Salary and benefits

The Remuneration Committee reviews executive directors and senior management salaries annually. The Committee utilises reports provided by Watson Wyatt as independent consultants, as well as other publicly available reports in order to ensure that remuneration levels are consistent with comparable companies, whilst also taking into account the Company's performance. Directors also receive benefits in kind such as private health care and permanent heath insurance.

Annual performance related bonus

The Company established a Profit Related Pay Scheme in 2005 (the "2005 PRP Scheme") under which bonuses are paid to staff based upon the annually accounted profit of Syndicate 780. This scheme was replaced during 2008 with a new scheme.

 

Payments are made under the 2005 PRP Scheme when the annual accounting profit of the Syndicate is equal to or greater than 10% of syndicate capacity on a calendar year basis. Payments are then calculated as a percentage of base salary - the percentage increasing as the profits increase as a percentage of capacity.  Directors receive a bonus of 10% of base salary should the Syndicate make a 10% profit, with the bonus increasing in increments of 4.0% of base salary per additional 1% profit made above 10%. The payments are made in two instalments, the first instalment of 60% will be made three months after the relevant year end, with the remaining 40% being paid fifteen months after the relevant year end. The PRP Scheme is not subject to any deficit clause or clawback provisions in the event the Syndicate makes a loss in any year.

The Company established a new Profit Related Pay Scheme in 2008 (the "2008 PRP Scheme".) The principles of the revised scheme are consistent with that of the 2005 PRP Scheme, however the new scheme now aligns bonus payments to achieving corporate objectives by reference to the reported return on equity of the Company rather than profit as a percentage of syndicate capacity. In addition, an element of the bonus limited to 20% of salary is derived from the achievement of personal objectives set for each individual. The remaining bonus element is only payable when the Company's return on equity exceeds 12% at which the bonus award of 10% of salary increases to a maximum of 80% on salary once a return on equity of 25% or more achieved. The maximum bonus payable under the scheme is therefore 100% of salary, whereas there was no such cap provided in the previous scheme.

Bonus payments to be made in respect of the 2008 year are set out in the table below.

Directors' Remuneration

	2008					2007
	Salary/ Fees	Bonus	Pension	Other Benefits	Total	Total
	£	£	£	£	£	£
Chairman
B F Caudle	334,750	-	-	3,116	337,866	434,289
Executive Directors
T J Ambridge*	332,583	325,000	30,348	161,905	849,836	705,418
K D Thompson	334,750	-	61,808	1,667	398,225	471,942
Non-Executive Directors
B W Rowbotham	61,650	-	-	-	61,650	58,750
E Stobart	35,900	-	-	-	35,900	33,750
P Stormonth Darling	30,900	-	-	-	30,900	28,750
Total	1,130,533	325,000	92,156	166,698	1,714,377	1,732,899

* The bonus payable is contractual as Mr Ambridge was not a member of the PRP Scheme.

Share Option Schemes

The Advent Share Option Plans are a key element of the Advent Group's retention and reward policy and are designed to align the interests of employees and shareholders in addition to incentivising staff.

The Company established two share options plan in 2005: the Advent Capital (Holdings) PLC Approved Share Option Plan ('AS2005') and the Advent Capital (Holdings) PLC Unapproved Share Option Plan ('UAS2005'), The Company established a further Unapproved Share Option Plan in 2008 ('UAS2008') which was approved by Shareholders at The Company AGM on the 9 April 2008, collectively these are referred to as the "Advent Share Option Plans".

The initial tranche of options granted under the Schemes at the time of the Company's flotation on AIM were not subject to any performance conditions and were granted at the placement price of 35 pence (now re-set to 350 pence) per ordinary 5 pence share (now per ordinary 50 pence share.)

At the Extraordinary General Meeting held on 6 January 2006, shareholders approved an amendment to the Unapproved Share Option Scheme to permit the Remuneration Committee to determine the exercise price of options to be granted pursuant to the scheme at their discretion at below market value (as defined in the scheme) only for the purposes of grant of up to 5,850,000 options at an exercise price of 20 pence (now re-set to 200 pence) per share ('UAS2006'), which was the placing price of the private placement undertaken at the same time.

On the 24 June 2008 the Company consolidated its ordinary shares on the basis of one ordinary 50 pence share for every ten ordinary 5 pence share. All the share option disclosures shown below are on a post consolidation basis.

No share options available for exercise during 2008 were exercised by directors.

On the 30 September the Company issued 740,985 options at an exercise price of 190 pence per share under option scheme UAS2008. This option scheme provides for options up to a maximum annual limit of 100% of salary and a maximum face value of 300% of salary in total. There are no performance conditions and the options will vest in three years and are subject to continuous employment. Those directors and staff who were in receipt of options granted under UAS2006 had the number of options granted under the new scheme UAS2008 adjusted downward to reflect the existence of the previous grant.

  The options held over Ordinary 50 pence shares in the company as at 31 December 2008 by executive directors serving at the year end are shown below: 

Options Held
Director	Scheme	Shares under option 1 January 2008	Shares under option 31 December 2008	Exercise price per share	Dates Options exercisable		Potential Profit (£) on 31 December 2008
T J Ambridge	UAS2008	-	177,894	190p	30/09/2011	30/09/2018	nil
Total		-	177,894				nil
B F Caudle	AS2005	8,571	8,571	350p	03/06/2008	03/06/2015	nil
	UAS2005	43,928	43,928	350p	03/06/2008	03/06/2015	nil
	UAS2006	150,000	150,000	200p	02/05/2009	02/05/2016	nil
	UAS2008	-	27,894	190p	30/09/2011	30/09/2018	nil
Total		202,499	230,393				nil
K D Thompson	AS2005	8,571	8,571	350p	03/06/2008	03/06/2015	nil
	UAS2005	58,928	58,928	350p	03/06/2008	03/06/2015	nil
	UAS2006	135,000	135,000	200p	02/05/2009	02/05/2016	nil
	UAS2008	-	42,894	190p	30/09/2011	30/09/2018	nil
Total		202,499	245,393				nil

The Remuneration Committee during 2008 reviewed the incentive schemes operated by the Company and proposed a new Long Term Incentive Plan (LTIP), Share Option and staff Share Incentive Plan (SIP) which were approved by Shareholders at the Company AGM on the 9 April 2008. The Committee obtained independent professional advice in the design of the revised incentive plans from Halliwell Consulting to ensure that they were in line with those operated by other AIM and Lloyd's market entities as well as being within the spirit of ABI Guidelines and the requirements of the Combined Code. 

On the 30 September 2008, the Company made grants under the LTIP of 1,383,313 options. The LTIP operates as a nil-cost option which will be released in three years subject to continuity of employment and performance conditions. The maximum annual individual limit of the number of shares granted may be up to 150% of salary however The Company intends to apply an annual maximum limit policy of 100% of salary. The number of shares released after three years will depend upon the average return on equity attained over three financial years with the base period for calculating ROE being 31 December 2007. Below 15% average return on equity no grants will be released, at 15% ROE 30% of grants will be released and the amounts released increase thereafter as return on equity increases, with the full release being made at an average ROE of 20%.

The SIP operates as a share save scheme. At the commencement of the scheme each employee was offered £2,000 of nil cost shares. Thereafter each employee is able to purchase £125 value of ordinary 50 pence share per month, via deduction from salary (partnership shares). The Company matches the amount of shares purchased by each employee on a 1:1 basis (matching shares). All of the shares are held in trust for three years and then released to the employee on a rolling basis to match the three year holding period for each monthly purchase.

The schemes were launched in September 2008 following closure of the Fairfax offer and the first grants were made under both schemes at this time. The LTIP options and SIP grant entitlements held over Ordinary 50 pence shares in the company as at 31 December 2008 by executive directors serving at the year end are shown below: 

Long Term Incentive Performance Options
Director	Scheme	Shares under option 31 December 2008	Dates Options exercisable		Potential Profit (£) on 31 December 2008
T J Ambridge	LTIP2008	177,894	30/09/2011	30/09/2018	nil
B F Caudle	LTIP2008	177,894	30/09/2011	30/09/2018	nil
K D Thompson	LTIP2008	177,894	30/09/2011	30/09/2018	nil

Share Incentive Plan grants
Director	SIP Free Shares	SIP Partnership Shares	SIP Matching Shares	Total SIP Shares
T J Ambridge	1,052	139	139	1,330
B F Caudle	1,052	139	139	1,330
K D Thompson	1,052	139	139	1,330

Pensions

The Company does not operate an occupational pension scheme, but instead makes contributions to employees' and directors' personal pension schemes on a non-contributory basis.

Directors also receive death in service benefit of eight times basic salary.

Service Contracts

Mr Caudle's contract was for an initial five-year period from 16 November 2000 and thereafter is terminable by either side on 12 months notice.  Mr Thompson's contract was for an initial three-year period from 22 October 1999 and thereafter is terminable by either side on 12 months notice.  Mr Ambridge's contract is for a fixed term from 1 June 2008 until 31 May 2009, thereafter the contract may be extended on terms and for a period to be agreed by both parties.

The Remuneration Committee believe that these notice periods provide an appropriate balance and adequately protect the Company, having regard to the prevailing market for recruiting suitable replacements.

Non-Executive directors

The Executive Directors review Non-Executive Director's remuneration annually to ensure that fees are in line with comparable companies. All Non-Executive Directors receive an annual fee in respect of their board and board committee duties. The Non-Executive Directors do not receive any other benefit. 

The terms and conditions of appointment of Non-Executive Directors are available for inspection upon request at the Company's registered office.

Internal Control and Risk Management

Overview

The Board of Directors is responsible for the oversight of the Company's systems of internal control, for reviewing their effectiveness at least annually and for reporting on the effectiveness of controls in the Company's Annual Report and Accounts. The Audit Committee has oversight over the internal and external auditors and actuaries. Executive Management is responsible for the implementation and satisfactory maintenance of systems of internal controls over financial reporting and for compliance with laws and regulations.

Every employee is responsible for internal control and is informed of their role through detailed job descriptions, policies and procedures manuals and communications from Executive Management and the Board of Directors.

The Company's systems of internal control consist of the five interrelated components:

Control Environment

The control environment sets the tone of the business influencing the control consciousness of its Directors and employees, sometimes referred to as the "tone at the top". It provides structure and discipline for the other four components, incorporating factors such as integrity, ethical values, management's philosophy and operating style; assignment of authority and responsibility; employee competence; organisational structure; and the attention and direction provided by the Board of Directors. 

The control environment is communicated to employees through the following key policies approved by the Board:

As a small organisation, the Company's culture is hands-on with extensive interaction between Executive Management and employees and one which takes pride in maintaining strong underwriting disciplines throughout the insurance cycle while acknowledging the potential volatility in short term results arising from catastrophe events. 

Risk Assessment

The Company's risk appetite is recommended by the Executive Management to the Board of Directors for their approval. The Board of Directors has approved the risk appetite for 2009 as an after tax loss from a major catastrophe of 25% of shareholders' equity, before consideration of catastrophe margins. In addition, catastrophe exposures for Syndicate 780 to any one of the Lloyd's RDS are maintained within the Lloyd's franchise guidelines of a gross loss of 75% of capacity and a net loss of 20% of capacity, with the objective of allowing for a margin of safety from the Lloyd's guidelines to allow for potential variations in actual catastrophe events compared with the RDS.

The Company faces a variety of risks from both internal and external sources that require identification, assessment and management. Risk management is the process that enables a business to:

Identify and understand the risks that it faces in the pursuit of its business objectives;

Assess and prioritise the risks identified and the means of mitigating them;

Where possible and commercially feasible, reduce the probability and impact of those risks;

Regularly review, monitor and report on those risks in order to take informed actions; and

Ensure that any new risks, or changes to existing risks, are captured.

As the environment in which the Company is operating is constantly changing, the risk assessment process needs to be dynamic and updated on an ongoing basis.

The key risks, as assessed by the Company, are set out below: 

Further information in respect of the key risks is included in the notes to financial statements.

Key risks are supported by risk and control maps and company policies and procedures. 

Ownership of key risks and controls is clearly defined. Assessments are undertaken upon a consistent and regular basis to ensure that risks remain relevant and up-to-date.

When any residual risk i.e. a risk after the application of existing controls, falls outside the Company's risk appetite, action plans are agreed, implemented and monitored. Risk mitigation actions have clearly defined owners and implementation timescales.

Control Activities 

Control activities are the policies and procedures that are set by the Executive Management to manage risk and support the delivery of the Company's objectives.

The Company maintains and updates policies and procedures addressing all key areas of the business.

Information and Communication

Appropriate information must be identified, captured and communicated in a form and timeframe that enables directors and employees to carry out their responsibilities. The Company has an established management information system for the production of operational, financial and compliance reports which allow the Executive Management and the Board to run and control the business.

The Company has established corporate objectives and risk appetite. The key performance data required for management and control purposes has been identified as return on shareholders' equity, combined ratio, adequacy of reserves, exposure to catastrophe losses on a gross and net basis and performance against the approved business plan. Management reports are produced monthly for the Executive Group and reported to the Board quarterly. Decision making is made at the appropriate level, within pre-agreed parameters, and communicated throughout the Company as required.

The Company maintains pro-active channels of communication with all key stakeholders including existing and prospective clients, staff, brokers, reinsurers, shareholders, capital providers and regulators. 

Monitoring

Internal control systems need to be monitored to assess the quality of the system over time. The Company achieves this through a combination of day-to-day operational monitoring conducted by management, such as the review of exception reports, together with a comprehensive risk based internal audit programme.

The audit programme is risk focussed with the majority of the activity centred upon those areas which are considered to generate the largest risks namely underwriting, reinsurance and claims, together with the target of auditing all other key areas of the Company's operations at least once every two years. The Audit Committee meets at least quarterly and there are no fundamental action points outstanding or overdue.

The Company believes it has implemented an effective system of internal control. 

Statement of Directors' Responsibilities

Company law requires the Directors to prepare Accounts for each financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing those Accounts the Directors are required to:

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for maintaining proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the Accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of disclosure of information to auditors 

Each of the persons who is a director at the date of this report confirms that:

1) So far as each of them is aware, there is no information relevant to the audit of the Company's consolidated financial statements for the year ended 31 December 2008 of which the auditors are unaware; and

2) The director has taken all steps that he ought to have taken in his duty as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Auditors

A resolution to re-appoint PricewaterhouseCoopers LLP will be proposed at the forthcoming Annual General Meeting on 23 April 2009.

By Order of the Board

Keith D Thompson

Director

CONSOLIDATED INCOME STATEMENT

Year ended 31 December 2008

	Note		2008		2007
			£'000		£'000
Income
Gross premiums earned	3		159,145		113,400
Reinsurance to close premiums	3		34,246		6,698
Reinsurance premiums ceded	3		(36,129)		(24,114)
Net premiums earned	3		157,262		95,984
Investment result	4		15,127		13,141
Other operating income			502		483
Total Income			172,891		109,608
Expenses
Claims incurred	3		(141,534)		(41,121)
Reinsurance to close claims	3		(34,246)		(6,698)
Reinsurance recoveries	3		29,371		(614)
Acquisition costs	2		(25,570)		(18,921)
Underwriting expenses	2		(9,447)		(8,655)
Profit on exchange	1		3,808		868
Corporate costs	2		(5,366)		(4,748)
Total Expenses			(182,984)		(79,889)
Operating Result			(10,093)		29,719
Interest expense			(4,258)		(4,558)
Profit (loss) before tax			(14,351)		25,161
Tax	6		5,406		(5,969)
Profit (loss) for the year attributable to ordinary shareholders			(8,945)		19,192
Earnings per ordinary share					Restated
- Basic and diluted	5		(22.0p)		47.2p
Dividends per ordinary share			12.5p		-

The notes form an integral part of these financial statements.

  CONSOLIDATED BALANCE SHEET

At 31 December 2008

	Note		2008		2007
			£'000		£'000
Assets
Cash and cash equivalents	4		12,136		26,978
Financial investments at fair value	4		360,447		239,826
Other receivables	4		4,855		4,345
Insurance and reinsurance assets
- Reinsurers' share of outstanding claims	3		55,081		18,176
- Reinsurers' share of unearned premiums	3		1,592		1,058
- Debtors arising from insurance and reinsurance operations			69,898		40,588
- Deferred acquisition costs			10,150		7,472
Deferred tax asset	6		21,071		15,665
Property and equipment			472		651
Intangible assets	7		6,843		7,210
Total assets			542,545		361,969
Shareholders' Equity
Ordinary share capital	5		20,329		20,329
Share premium account			60,662		60,662
Capital redemption reserve			21,065		21,065
Other reserves			(2,501)		(2,666)
Retained earnings (deficit)			(5,019)		9,008
Total shareholders' equity			94,536		108,398
Liabilities
Insurance and reinsurance liabilities
- Outstanding claims	3		314,444		163,764
- Unearned premiums	3		43,067		31,136
- Creditors arising out of insurance and reinsurance operations			19,881		6,442
Trade and other payables	8		5,603		4,882
Long term debt	5		65,014		47,347
Total liabilities			448,009		253,571
Total shareholders' equity and liabilities			542,545		361,969

The notes form an integral part of these financial statements.

The financial statements were approved by the Board of Directors on 19 February 2009 and signed on its behalf by:

Brian F Caudle Trevor J Ambridge

Chairman Chief Financial Officer

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2008

	Share capital	Share premium	Capital re-demption reserve	Other reserves	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance, 1 January 2007	20,329	60,662	21,065	(2,886)	(10,184)	88,986
Profit for the year	-	-	-	-	19,192	19,192
Share based payments	-	-	-	220	-	220
Balance, 31 December 2007	20,329	60,662	21,065	(2,666)	9,008	108,398

Loss for the year	-	-	-	-	(8,945)	(8,945)
Dividend	-	-	-	-	(5,082)	(5,082)
Share based payments	-	-	-	165	-	165
Balance, 31 December 2008	20,329	60,662	21,065	(2,501)	(5,019)	94,536

Share premium account is the excess of proceeds from issue of shares over the par value of the ordinary shares.

Capital redemption reserve was transferred from share capital on the reduction in par value of ordinary shares from 25p to 5p per share in June 2005.

Other reserves include the amortisation of share based payments, exchange differences on the translation of Advent Re (if applicable) and grandfathered merger reserves.

Profit for the year is the total recognised income for the year.

The notes form an integral part of these financial statements.

  CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 December 2008

	Note		2008		2007
			£'000		£'000
Cash flows from operating activities
Cash generated from operations	12		(12,871)		(117,381)
Interest paid			(4,245)		(4,563)
Income tax			-		133
Net cash used in operating activities			(17,116)		(121,811)
Cash flows from investing activities
Interest received			4,990		7,926
Purchase of property and equipment			(163)		(373)
Net cash from investing activities			4,827		7,553
Cash flows from financing activities
Dividends paid			(5,082)		-
Net increase (decrease) in cash and cash equivalents			(17,371)		(114,258)
Exchange movements on opening  cash and cash equivalents			2,529		(418)
Cash and cash equivalents at beginning of year			26,978		141,654
Cash and cash equivalents at end of year	4		12,136		26,978

The notes form an integral part of these financial statements.

  BASIS OF PRESENTATION

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, using the historic cost convention with the revaluation of financial assets and financial liabilities at fair value through the consolidated income statement.

The consolidated financial statements include the assets, liabilities and results of the Parent Company and its subsidiaries. The Company participates in insurance business as an underwriting member at Lloyd's.  The Company includes its share of the assets and liabilities arising as a result of underwriting activities in these financial statements. These assets and liabilities are held under various Lloyd's trust deeds and are shown separately in Note 9 to the Accounts. All intercompany transactions and balances are eliminated on consolidation.  

ACCOUNTING POLICIES

Use of estimates and critical judgements

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities.  Although these estimates are based on management's best knowledge of current information and events, actual results may ultimately differ from these estimates, perhaps significantly. The most significant estimate involves the valuation of outstanding claims and, in particular, the provision for claims incurred but not reported, as set out in more detail in Note 3. The significant accounting policies which the Company has adopted are set out below.

Financial investments

The Company currently holds short term government or government guaranteed securities which have been classified as "fair value through income on acquisition" due to the short term nature of the investments acquired. Purchases and sales of investments are recognised on the trade date, being the date at which a commitment to buy or sell the asset has been made. Investments are initially recognised at fair value, and are subsequently re-measured at fair value based upon quoted bid prices. Changes to the fair value are included in the income statement for the period in which they arise.

If the Company decides to purchase long term fixed income or equity securities, management expects that these securities will be classified as "available for sale" with any changes in fair value being included as a separate component of shareholders' equity as "Unrealised gain or loss on investments, net of tax" during the period in which they arise.

Foreign currency translation

The Company's functional currency is sterling. Foreign currency transactions are translated into sterling using the exchange rate at the date of the transactions. Monetary assets and liabilities in foreign currencies are translated into sterling at the closing rates of exchange at the balance sheet date. Non-monetary assets and liabilities, including unearned premiums and deferred acquisition costs, are translated into sterling at historic rates of exchange. Resulting foreign exchange gains and losses are recognised in the income statement.

Advent Re is a self-sustaining foreign subsidiary whose functional currency is the US dollar.  Assets and liabilities are translated at the period end exchange rate.  The income statement is translated at the average exchange rate for the period.  Exchange differences arising from the translation of the net investment in Advent Re, against which the Company's long term debt has been formally designated as an effective hedge, are recorded as a separate component of shareholders' equity in the "Currency Translation Account".

Cash and cash equivalents 

Cash and cash equivalents consist of cash at bank, short term bank deposits and any highly liquid short term investments with original maturity dates of three months or less.

Purchased syndicate capacity and goodwill

Purchased capacity has both definite and indefinite life components.

The cost of purchasing the Company's participation in Syndicate 780 is recorded at cost. Syndicate capacity is considered to have an indefinite life and is not subject to annual amortisation.

The additional consideration of £1.2 million payable to third party capital providers participating on the 2007 year of account is considered to be a definite life asset which has been amortised to expense over this year of account.

Goodwill, representing the excess of the cost of an acquisition over the fair value of net identifiable assets acquired at the date of acquisition, is included in these accounts on the basis of deemed cost which is the carrying value under UK GAAP at the date of transition to IFRS, less any subsequent impairment losses. 

The carrying values of purchased capacity and goodwill are reviewed annually for any impairment in value with reference to the future cash flows to be earned from Syndicate 780 for purchased capacity and from the Marine and Energy accounts for goodwill, with any impairment in value charged to the income statement in the period in which it is identified. The indefinite life purchased capacity and goodwill have been assessed as being recoverable from short term future profits which have therefore not been discounted.

Long term debt

Long term debt is initially recognised at fair value, net of transaction costs incurred. Subsequently, long term debt is stated at amortised cost using the effective interest rate method. Any difference between the amortised cost and the redemption value is recognised in the income statement over the period of the debt.

Insurance and reinsurance business 

The results for insurance and reinsurance business written are determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against net earned premium.

(i) Gross Premiums

All insurance and reinsurance contracts are accounted for as insurance under IFRS 4. Premiums written relate to business incepted during the year, together with any differences between booked premiums for prior years and those previously accrued, and include estimates of premiums due but not yet receivable or notified to the Company, less an allowance for cancellations. Gross premium is earned over the period of the contract on a 365ths basis when the incidence of risk is similar throughout the contract period. Where the incidence of risk varies through the policy period, gross premium is earned in proportion to the risk profile.

Unearned premiums represent the proportion of premiums written that relate to the unexpired terms of policies in force at the balance sheet date. 

All premiums are stated gross of acquisition costs, which represent commission and other related expenses, which are expensed over the period in which the related premiums are earned.

(ii) Reinsurance premiums ceded comprise the cost of reinsurance arrangements placed and are generally recognised over the period in which related gross written premiums are earned. "Losses occurring during" policies are charged over the period for which coverage is provided.

(iii) Claims incurred comprise claims and related expenses paid in the year and changes in the provisions for outstanding claims, including provisions for claims incurred but not reported and related expenses, together with any other adjustments to claims from previous years. Where applicable, deductions are made for salvage and other recoveries.

Provision is also made, where necessary, for any deficiencies arising when unearned premiums, net of associated acquisition costs, are insufficient to meet expected claims and expenses after taking into account future investment return on the investments supporting the unearned premiums reserve and unexpired risks provision. The expected claims are calculated based on information available at the balance sheet date. Unexpired risk surpluses and deficits are offset where business classes are managed together and a provision is made if an aggregate deficit arises.

(iv) Reinsurance recoveries represent the reinsurers' share of the claims incurred in the period, adjusted for any provisions for bad debt.

(v) Outstanding claims represent the undiscounted ultimate cost of settling all claims (including direct and indirect claims settlement costs) arising from events which have occurred up to the balance sheet date, including provision for claims incurred but not yet reported, less any amounts paid in respect of those claims. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.

Receivables

Debtors and creditors, valued at cost, include the totals of the Company's share of the syndicates' outstanding debit and credit transactions as processed by XChanging Ins-sure Services Ltd. Since there is no legal right of offset, no account has been taken of any offsets which may be applicable in calculating the net amounts due between the syndicates and their counterparty insureds, reinsurers or intermediaries as appropriate.

Property and equipment

Depreciation is provided on all property and equipment in order to write down their cost or valuation to their estimated residual value by equal instalments over their estimated useful economic lives, which are considered to be:

Furniture, fittings and equipment 3 to 5 years

Computer equipment 3 years

Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated and parent company only financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

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

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Pensions

The Company pays contributions to the individual money purchase schemes of directors and employees. Contributions are charged to the income statement as incurred.

Share based payments

The Company operates a number of share option schemes. These options are accounted using a fair value method where the cost of providing the option is based upon the fair value of the option at the date of grant. The fair value is calculated using an option pricing model, with the corresponding expense being charged to the income statement over the vesting period. The accrued liability is recognised in other reserves as a component of shareholders' equity. Upon exercise, the par value is reflected within share capital with the excess proceeds received, net of any transaction costs, over the par value reflected as part of share premium.

Long Term Incentive Plan and Share Incentive Plan

The Long Term Incentive Plans (LTIP) involve the issue of share options in the same way as the share options plans but with a performance condition based upon return on equity. The basic valuation of, and accounting policy for, the LTIP options is carried out in the same way a the share options, however, at each period end an assessment of the probability of meeting the additional performance condition is made and this probability applied to any potential charge.

The Company operates a Share Incentive Plan (SIP) whereby the Company purchases an initial tranche of shares (to the value of £2,000) and matches purchases by employees monthly (to the value of £125 per month). The cost of these shares is apportioned over the three years each purchase vests.

Early adoption of standards, and standards not yet adopted

The Company has reviewed the requirements of IFRS 8 - Operating Segments and has concluded that early adoption of this standard offers users of these financial statements a better understanding of the way in which the Company manages its business. Notwithstanding the standard's mandatory implementation date of 1 January 2009, the Company has chosen to early adopt the requirements of this standard in these financial statements.

There are no other relevant standards or interpretations of standards which have been issued but which have not yet been adopted by the Company.

Dividends

Dividends to the Company's shareholders are recognised as a liability in the period in which the dividends are approved by the Company's shareholders.

  NOTES TO THE ACCOUNTS

 

The Company's functional currency is sterling and its net assets are located in the UK. Its operations are conducted in a number of currencies, the principal ones of which are US$, £, CDN$ and Euro. The Company's policy is that it is not in the business of taking or speculating on foreign currency risk. Its objective is to match each major currency position (US$, £, CDN$ and Euro), including its share of the underlying assets and liabilities of its managed syndicates. The Company expects that syndicate losses will be called in the currency in which they occur with third party names responsible for any foreign currency mismatch relating to their share of the syndicate's net assets or liabilities.

The Company has designated US$56.3 million (2007: US$49.4 million) of its long term US dollar debt to fully hedge its investment in Advent Re of US$56.3 million at 31 December 2008 (2007: US$49.4 million).  The designated debt consists of US$26 million, due 15 January 2026, US$20 million, due 15 December 2026 and US$10.3 million due 3 June 2035.

Monthly, the Company reviews its consolidated foreign currency balance sheet, prepared in its principal currencies, including its share of the assets and liabilities of its managed syndicates. It separately assesses the continuing effectiveness of the hedge of its investment in Advent Re.  Action is taken to reduce or mitigate foreign currency mismatches through the purchase or sale of the appropriate currencies. The Company does not use derivative instruments to manage its net foreign currency position.

The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the preparation of these accounts were: 

	2008				2007
	Period		Period		Period		Period
	average		end		average		end
	rate		rate		rate		rate
US dollar	1.85		1.44		2.00		1.99
Euro	1.26		1.03		1.46		1.36
Canadian dollar	1.96		1.77		2.15		1.96

For the year ended 31 December 2008, the Company's gross premiums were written in the following currencies:

	2008				2007
	£m		%		£m		%
US dollar	156.8		74.8		95.3		75.1
£ sterling	45.6		21.7		26.2		20.6
Canadian dollar	7.2		3.5		5.4		4.3
	209.6		100.0		126.9		100.0

At 31 December 2008, the Company's asset and liability positions in its major foreign currencies were as follows:

31 December 2008	US$m		£m		CDN$m		€m
Total assets	541.3		143.3		25.1		12.1
Total liabilities	(538.4)		(54.2)		(18.2)		(19.4)
Net assets (net liabilities)	2.9		89.1		6.9		(7.3)

31 December 2007	US$m		£m		CDN$m		€m
Total assets	402.8		141.4		18.5		12.4
Total liabilities	(384.9)		(45.1)		(13.2)		(13.0)
Net assets (net liabilities)	17.9		96.3		5.3		(0.6)

For the year ended 31 December 2008, the Company had foreign exchange gains and losses which were recorded in the consolidated income statement as follows:

	2008		2007
	£'000		£'000
Underwriting activities	15,811		937
Corporate activities	(12,003)		(69)
Net profit on exchange	3,808		868

The effect on profit before tax of a 5% increase or decrease in the closing exchange rates on the foreign currency balance sheet at 31 December 2008 is approximately £0.03 million given the Company's policy of minimising foreign currency mismatches on a monthly basis.

 

	2008		2007
	£'000		£'000
Syndicate 780 - Non-Marine
Underwriting Year of Account
2008 - open	(29,564)		-
2007 - open	7,528		12,652
2006 - open	12,584		2,281
2005 - open	-		(258)
Total Syndicate 780	(9,452)		14,675
Syndicate 2 - Marine
Underwriting Year of Account
2002 - run-off	1,692		91
2001 - run-off	(2,952)		1,370
Total Syndicate 2	(1,260)		1,461
Advent Re	2,359		4,944
Company level reinsurance	-		(168)
Underwriting operations	(8,353)		20,912
Managing Agency
Agency fees	46		237
Recharges to Syndicates	456		246
	502		483
Other
Investment result	15,127		13,141
Interest expense	(4,258)		(4,558)
Corporate costs	(4,353)		(4,748)
Corporate foreign exchange loss	(12,003)		(69)
Fairfax offer related fees	(1,013)		-
Profit (loss) before tax	(14,351)		25,161

Underwriting expenses and Corporate costs included the following:

	2008		2007
	£'000		£'000
Acquisition costs	25,570		18,921
Underwriting expenses	9,447		8,656
Operating lease	150		133
Depreciation of property and equipment	342		285
Audit services
Fees payable to the Company's auditor for the audit of the Parent Company and consolidated accounts	95		70
Non-audit services
Fees payable to the Company's auditor and its Associates for other services:
The audit of the Company's subsidiaries	84		75
Fees payable to the Company's auditor for the audit of Managed syndicates	192		187
of which recharged to third party capital	(54)		(71)
Tax services	37		28
Valuation and actuarial services of which recharged to third party capital	193 (94)		184 (76)
Other services (review of interim financial statements)	90		87
	543		484

 

3. INSURANCE RISK MANAGEMENT

The Company is exposed to insurance risk through its underwriting activities. Insurance risk arises from the possibility that an insured event occurs and the uncertainty as to the timing of submission and the ultimate amount of the resulting claim.

The Company predominantly writes property insurance and reinsurance business, including catastrophe-exposed business, with additional specialised lines including energy and marine excess of loss. The Company manages its underwriting activities on a line of business basis with the three segments having the following insurance risk characteristics:

a) Non-Marine Reinsurance consists of catastrophe and individual risk cover for insurance and reinsurance contracts written predominantly on a "losses occurring during policy period" basis with generally no risks in excess of 12 months and with a large proportion of risks expiring at 31 December each year. Non-Marine Reinsurance includes casualty which is written on an excess of loss basis with the emphasis on clash business. The majority of the account is written in the United States and provides cover for general casualty classes of auto liability, medical malpractice, workers compensation and associated exposures. No business is written on an unlimited basis.

b) Property Insurance comprises mainly commercial property, personal lines and commercial automobile physical damage insurance written in the open market on both a lead and following basis, either through underwriting facilities or on an individual risk basis. Property Insurance includes the Personal Accident account which consists of a mix of personal accident, kidnap and ransom, sports disability and US medical business through binding authorities, line slips and reinsurance treaties.

c) Marine includes marine excess of loss and offshore energy portfolios with coverage provided for both individual risk and catastrophe accumulations. The marine excess of loss section is written on a worldwide basis, providing reinsurance protections of insurance accounts for hull, cargo and energy. The energy portfolio consists of short tail offshore physical damage and operator's extra expense cover written on a direct basis. Most risks are written on an excess or limited conditions basis with the objective of avoiding exposure to attritional losses.

The Board of Directors sets the Company's overall risk appetite for insurance and catastrophe risk with specific parameters for risk set out in the approved annual business plan. Management of insurance risk on an operational basis is the responsibility of the Chief Underwriting Officers of Advent Underwriting and Advent Re.

Catastrophe Exposure

Lloyd's defines its own set of Realistic Disaster Scenarios (RDS) events for which all syndicates must report their exposures. The Company's pre tax exposure, before and after reinsurance, to its major RDS scenarios at 1 January 2009, including Advent Re, are set out below:

	Industry Loss	1 January 2009  Gross loss	1 January 2009  Net loss	1 January 2008  Gross loss	1 January 2008  Net loss
Catastrophe event	US$Bn	£M	£M	£M	£M
Gulf of Mexico Windstorm	113	90.0	39.8	83.7	38.3
USA North East Windstorm	78	87.9	40.6	72.6	35.2
Los Angeles Earthquake	78	73.6	42.7	69.1	32.6
European Windstorm	31	60.7	31.3	66.1	34.6
Japan Earthquake	51	49.2	27.1	32.4	26.6

The Gulf of Mexico catastrophe event, before consideration of Syndicate 780's catastrophe margins, would result in an estimated after tax loss of £30.4 million or 32.2% of shareholders' equity (2007: £30.7 million 28.3% respectively). 

The Company maintains strong underwriting disciplines to mitigate its exposure to catastrophe losses using an underwriting team with significant expertise in the business lines they write and with a well diversified portfolio of clients with whom the Company has long-established relationships. In 2008, approximately 80% of gross premiums written came from the Company's existing clients (2007: 79%).

The Company's approach to underwriting is governed by key principles which run throughout the underwriting units and are continuously monitored by management. Strict underwriting guidelines are adopted in terms of class of business, line size and in terms of policy periods, which are preferably limited to 12 months. The Company's policy is that it does not write excess of loss reinsurance contracts on an unlimited basis. Any risk which falls outside agreed guidelines must be approved by the Chief Underwriting Officer before the risk is underwritten and is reported to Executive Management. The Chief Underwriting Officers report at least monthly to Executive Management on underwriting results against the approved business plan.

With the exception of the Property Insurance account, the Company retains control of the business written rather than delegating the authority to accept risk to third parties. For the Property Insurance account, delegation of authority to third parties is only made where the Company is completely satisfied as to coverholders' competence and suitability based on personal contacts and visits, previous experience and regular audits. Binding authorities are principally used in the Property Insurance account and accounted for £26.5 million of gross premiums written for the year ended 31 December 2008 (2007: £20.0 million), of which 44% (2007: 46%) was in respect of clients which have been with the Company for five or more years.

The Company manages its insurance and reinsurance business without over reliance on reinsurance protection purchased.  The Company uses reinsurance, principally purchased on an excess of loss basis, to reduce the impact of probable maximum losses following major catastrophe events to levels within the Company's risk appetite for exposure to such catastrophe losses. The reinsurance programme is determined predominantly using the RDS as a guide to the amount of cover required and considers a number of other factors including reinsurance security, availability of reinsurers and retrocessional reinsurers, pricing, terms and conditions and commercial relationships.

Specific protections are purchased to cover the major classes written and the programme is designed to provide significant vertical cover for major losses.  The Company records all of its exposures and, in the case of Syndicate 780, uses RDS analysis and industry accepted third party catastrophe modelling software to monitor and analyse its peak exposures and estimated losses, based on key concentrations of risk. 

The Company's reinsurance costs as a percentage of gross written premiums for the last four years is set out below:

Ceded premiums
		2008		2007		2006		2005
		£m		£m		£m		£m
Gross Premiums Written (GPW)		209.6		126.9		115.4		100.5
Ceded Reinsurance Premiums		(40.9)		(20.7)		(27.2)		(37.6)
Net Premiums Written		168.7		106.2		88.2		62.9
Ceded Reinsurance Premiums as % of GPW		19.5%		16.3%		23.6%		37.4%

Ceded premiums for 2008 include reinstatement premiums of £(0.1) million, a reinsurance to close premium of £4.3 million, and ceded reinsurance premiums of £8.8 million in relation to Hurricanes Ike and Gustav. Excluding these premiums, the ceded premiums as a percentage of gross premiums written was 13.5%. Ceded premiums for 2005 included reinstatement premiums of £27.8 million, ceded reinstatement premiums of £14.1 million and a reinsurance to close premium of £10.3 million in respect of Syndicate 506. Excluding these premiums, the ceded premiums as a percentage of gross premiums written was 18.2%.

The security of the Company's proposed and existing reinsurers is reviewed and approved by the Advent Underwriting Limited Board. The objective is to ensure that the outward placement of reinsurance is placed with reinsurers of an acceptable level of security. The core list of approved reinsurers currently consists of 7 Lloyd's syndicates and 13 reinsurance companies all of which are rated A- or higher, or where policy limits are fully collateralised.

Reinsurers are selected depending on their rating by either AM Best or Standard & Poors. No reinsurer is selected with a rating below A except in specific circumstances and with the prior approval of the Advent Underwriting Board or where the policy limits are fully collateralised. For the 2009 reinsurance programme, the Company's reinsurance exposure is provided by reinsurers rated as follows:

		Exposure
		£'000
Reinsurers
A++		2,700
A+		53,125
A (companies)		69,500
A (Lloyd's syndicates)		7,400
A -		8,725
Not rated - fully collaterised limits		15,000
Total exposure		156,450

The Company reviews amounts due from reinsurers on paid losses, amounts recoverable from reinsurers on outstanding losses and amounts in dispute to determine if a provision for bad debts is required. The Company's policy is to provide for reinsurer bad debts in situations where it does not expect to collect the full amount outstanding due to the financial position of the reinsurer or due to disputes over coverage.

  REINSURANCE RECOVERABLE

At 31 December 2008, the Company's reinsurance recoverable on outstanding claims amounted to £55.1 million with reinsurers with the following risk ratings by AM Best (or equivalent S&P rating in the absence of an AM Best rating):

Risk Rating
		£'000		%
A+		21,373		38.8
Lloyd's		8,619		15.7
A		12,531		22.8
A-		4,818		8.7
Trust fund backed		6,337		11.5
BBB or below and Non Rated		1,403		2.5
Total		55,081		100.0

DEBTORS ARISING FROM INSURANCE AND REINSURANCE OPERATIONS 

The table below sets out the analysis of the debtors arising from insurance and reinsurance operations, at cost and fair value.

	2008		2007
	£'000		£'000
Insurance and reinsurance premiums due	15,798		9,183
Reinsurance premium refund accruals	592		701
Pipeline premium - Syndicate 780	38,684		20,614
Pipeline premium - Syndicate 2	6,454		5,237
Additional premium - Advent Re	347		-
Reinsurance recoveries on paid claims	8,023		4,853
	69,898		40,588

Pipeline premium represents amounts receivable in respect of reinstatement premiums on claims, together with the balance of premiums incepted on binder business for which notification from the broker has not yet been received. The estimate of the likely settlement date for pipeline premium due on reinstatement premiums due is intrinsically related to the estimate of the likely settlement dates for the major losses. For Syndicate 2, as almost all of the pipeline premium relates to the World Trade Center losses, this amount will probably be collected after more than one year. For Syndicate 780, almost all of this balance would be expected to be recovered within one year.

The reinsurance recoveries accruals on paid claims is further analysed below:

		Syndicate 780		Syndicate 2				Total
		£'000		£'000			£'000
Fully performing		2,919		124			3,043
Past due		2		657			659
Impaired		5,668		8,609			14,277
Provision for uncollectible reinsurance		(4,189)		(5,767)			(9,956)
Net		4,400		3,623			8,023

Of the £659,000 detailed as past due, £269,000 is considered to be overdue by up to 3 months, £1,000 by a further 3 months and the balance of £389,000 is overdue by over 6 months. The provision for uncollectible reinsurance is assessed using a combination of factors including payment performance, market notifications and liquidator advices.

Of the remaining debtor balances, it is expected that substantially all of the insurance and reinsurance premiums due, the reinsurance premium refund accruals and 90% of the deferred acquisition costs will be received or expensed within one year. Other than reinsurance recoveries as noted above all of these debtors are fully performing.

UNDERWRITING YEAR OF ACCOUNT RESULTS

The underwriting results of Advent Re are included in the Non-Marine Reinsurance segment from 1 January 2007, the date it commenced writing business. Acquisition costs consisting of direct brokerage commissions, are allocated to each segment on a direct basis while operating costs, including underwriting costs, are allocated based on gross premiums written. The Company does not prepare a segmented balance sheet by line of business and accordingly, has presented key insurance account balances only.

INSURANCE SEGMENT RESULTS

	Non-Marine
	Re-insurance		Property Insurance		Marine		Synd 2		Group		Total
	£'000		£'000		£'000		£'000		£'000		£'000
2008
Gross premiums written	142,136		39,473		27,435		593				209,637
Net premiums written	113,562		34,403		19,920		774				168,659
Net premiums earned	109,326		30,744		16,418		774				157,262
Net claims incurred	(90,428)		(25,089)		(29,636)		(1,256)				(146,409)
Acquisition costs	(11,209)		(8,871)		(5,401)		(89)				(25,570)
Underwriting expenses	(5,237)		(2,161)		(1,502)		(547)				(9,447)
Underwriting profit	2,452		(5,377)		(20,121)		(1,118)				(24,164)
Combined ratio	97.8%		117.4%		222.5%		244.5%		115.4%
Balance sheet accounts
Reinsurers' share of outstanding claims	22,836		438		22,218		9,589				55,081
Reinsurers' share of unearned premiums	598		817		177		-				1,592
Deferred acquisition costs	2,030		5,462		2,658		-				10,150
Other assets	-		-		-				475,722		475,722
Total assets	25,464		6,717		25,053		9,589		475,722		542,545
Outstanding claims	(119,089)		(48,256)		(92,244)		(54,855)				(314,444)
Unearned premiums	(12,958)		(20,087)		(10,022)		-				(43,067)
Other liabilities	-		-		-		-		(90,498)		(90,498)
Total liabilities	(132,047)		(68,343)		(102,266)		(54,855)		(90,498)		(448,009)

	Non-Marine
	Re-insurance		Property Insurance		Marine		Synd 2		Group		Total
	£'000		£'000		£'000		£'000		£'000		£'000
2007
Gross premiums written	75,966		31,723		18,691		532				126,912
Net premiums written	61,292		27,785		16,461		661				106,199
Net premiums earned	57,862		24,358		13,103		661				95,984
Net claims incurred	(28,645)		(14,499)		(6,497)		1,208				(48,433)
Acquisition costs	(8,495)		(7,431)		(2,915)		(80)				(18,921)
Underwriting expenses	(4,899)		(2,046)		(1,204)		(506)				(8,655)
Underwriting profit (loss)	15,823		382		2,487		1,283				19,975
Combined ratio	72.7%		98.4%		81.0%		(94.0%)				79.2%
Balance sheet accounts
Reinsurers' share of outstanding claims	7,545		1,109		785		8,737				18,176
Reinsurers' share of unearned premiums	437		551		70		-				1,058
Deferred acquisition costs	1,458		4,501		1,513		-				7,472
Other assets	-		-		-		-		335,263		335,263
Total assets	9,440		6,161		2,368		8,737		335,263		361,969
Outstanding claims	(71,904)		(20,583)		(26,344)		(44,933)				(163,764)
Unearned premiums	(8,564)		(16,160)		(6,412)		-				(31,136)
Other liabilities	-		-		-		-		(58,671)		(58,671)
Total liabilities	(80,468)		(36,743)		(32,756)		(44,933)		(58,671)		(253,571)

In 2008, gross and net premiums of £7.9 million (2007: £6.2 million) were written by Advent Re in Bermuda, with the remainder written in the United Kingdom through Syndicate 780 and Syndicate 2.

The net assets of Advent Re are located in Bermuda and amount to £39.1 million (US$56.3 million) at 31 December 2008 (2007: £24.7 million, US$49.4 million). All other assets are located in the United Kingdom.

OUTSTANDING CLAIMS

The establishment of claims reserves represents the area of greatest uncertainty in preparing insurance company accounts.  Reserves for future anticipated claims are made based on information available at the time of preparation of the accounts. Any "best estimate" of ultimate claims needs to be viewed as a point value within a likely range of outcomes.  The nature of each insurer's business, and the reinsurance arrangements in place, influence how wide that likely range of outcomes will be.

The estimation of claims incurred but not reported (IBNR) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available.  Claims IBNR may often not be apparent to the insured until many years after the event giving rise to the claims has happened.  Classes of business where the IBNR proportion of the total reserve is high, such as casualty, will typically display greater variations between initial estimates and final outcomes because of the greater degree of difficulty of estimating these reserves. Classes where claims are typically reported relatively quickly after the claim event tend to display lower levels of volatility.  In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience.

Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:

- changes in the Company's underwriting and claims processes which might accelerate or slow down the development and/or recording of paid or incurred claims compared with the statistics from previous periods

- changes in the legal environment

- the effects of inflation

- changes in mix of business

- the impact of large losses

- movements in industry benchmarks

A component of these estimation techniques is usually the estimation of the cost of notified but not paid claims.  In estimating the cost of these claims the Company has regard to the claim circumstance as reported, any information available from cedants and information on the cost of settling claims with similar characteristics in previous periods.

Large claims impacting each relevant business class are generally assessed separately, being measured on a case-by-case basis or projected separately in order to allow for the possible distortive effect of the development and incidence of these large claims.

For major natural catastrophe events, the original loss estimate for all 'on risk' exposures is analysed using computer simulation to ascertain those accounts likely to be impacted. From the initial output, modelled loss estimates, per account, are generated. An underwriting review of the account, by cedant, is then conducted to validate the individual loss estimates and, where applicable, amend the model driven estimates with underwriter input relevant to the particular features of the loss and its anticipated impact on an account. Where accounts cannot be analysed, using catastrophe-modelling software, benchmark analysis is conducted, again on an account-by-account basis, to generate loss estimates. As more specific client information becomes available the ultimate loss estimates are updated from the initial forecast to reflect the client specific data.

Where possible, the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections resulting from the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.

Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions and having due regard to collectability.

Actual claims experience will always differ from projected estimates. Such differences in relation to risks previously earned are recognised in the income statement in the accounting period during which the difference is identified.

The Company's claims reserves are calculated by the Company's Chief Actuary and underwriters with input from the claims manager. These reserves are reviewed and approved quarterly by the Reserve Group, Executive Management and the Board. Annually, the reserves of the Syndicates and Advent Re are reviewed by external actuaries who issue valuation opinions on the adequacy of reserves.

The movement in the Company's claims reserves for the year ended 31 December 2008 is set out below:

	Provision for unearned premiums		Claims outstanding		Total
	£'000		£'000		£'000
Gross
At 1 January 2008	31,136		163,764		194,900
Exchange adjustments	-		71,466		71,466
Movements in provisions
- Current year	11,931		145,753		157,684
- Prior year	-		34,342		34,342
- Paid claims	-		(100,881)		(100,881)
At 31 December 2008	43,067		314,444		357,511
Reinsurers' share
At 1 January 2008	1,058		18,175		19,233
Exchange adjustments	-		13,608		13,608
Movements in provisions
- Current year	534		28,865		29,399
- Prior year	-		4,823		4,823
- Paid recoveries	-		(10,390)		(10,390)
At 31 December 2008	1,592		55,081		56,673
Gross
At 1 January 2007	24,322		193,101		217,423
Exchange adjustments	-		(1,814)		(1,814)
Movements in provisions
- Current year	6,814		50,523		57,337
- Prior year	-		(2,691)		(2,691)
- Paid claims	-		(75,355)		(75,355)
At 31 December 2007	31,136		163,764		194,900
Reinsurers' share
At 1 January 2007	4,457		33,317		37,774
Exchange adjustments	-		(512)		(512)
Movements in provisions
- Current year	(3,399)		1,646		(1,753)
- Prior year	-		(2,263)		(2,263)
- Paid recoveries	-		(14,012)		(14,012)
At 31 December 2007	1,058		18,176		19,234
Net
At 31 December 2008	41,475		259,363		300,838
At 31 December 2007	30,078		145,588		175,166

For the year ended 31 December 2008, improvement in prior years' development on claims, net of reinstatement premiums and reinsurance recoveries, amounted to £6.4 million (2007: improvement of £1.1 million).

  The claims balance is further analysed between notified outstanding claims and IBNR outstanding below:

	2008				2007
	Gross		Net		Gross		Net
	£'000		£'000		£'000		£'000
Notified outstanding claims	216,914		177,750		116,654		101,901
IBNR	97,530		81,613		47,110		43,687
Outstanding claims	314,444		259,363		163,764		145,588
Percentage of IBNR to notified outstanding claims	45%		46%		40%		43%

The breakdown of the gross and net claims reserves by category of claims is set out below.

	2008				2007
	Gross		Net		Gross		Net
	£'000		£'000		£'000		£'000
Large catastrophe provisions	135,686		90,397		33,970		27,735
All other short tail provisions	86,735		86,531		60,221		57,017
Long-tail casualty provisions	37,168		37,168		24,640		24,640
Syndicate 2 provisions	54,855		45,267		44,933		36,196
Total	314,444		259,363		163,764		145,588

Large catastrophe provisions include the 2004, 2005 and 2008 hurricanes. All other short tail provisions represent property-related coverages where the majority of claims are expected to be reported within two years of the occurrence of the claim. Long tail provisions consist of Syndicate 780's casualty and Personal Accident accounts. Syndicate 2 has been in run-off since the 2002 year of account. Its claims provisions principally consist of its marine and aviation and excess of loss reinsurance accounts, with outstanding gross and net World Trade Center (WTC) losses of £28.0 million and £24.8 million respectively (2007: £27.4 million and £23.4 million respectively) with the increase resulting from the stronger US dollars net of claims paid.

The following table shows the adverse or favourable development of claims, on a gross and net basis, determined on an accident year basis, from the amounts originally estimated at the end of the preceding year. The claims have been grossed up to include 100% of Syndicates 2, 780 and Advent Re claims rather than the claims that reflect the Advent's percentage ownership of each syndicate's capacity during the respective accident years. Claims in currencies other than sterling have been reconverted at 31 December 2008 exchange rates for all accident years.

  Ultimate gross claims

Accident year		2001 and prior £'m		2002 £'m		2003 £'m		2004 £'m		2005 £'m		2006 £'m		2007 £'m		2008 £'m	Total  £'m
At the end of accident year		1,396		174		105		196		461		45		65		181
One year later		1,476		138		86		252		512		44		66
Two years later		1,493		132		75		254		520		46
Three years later		1,483		132		77		252		519
Four years later		1,484		127		75		250
Five years later		1,489		125		74
Six years later		1,482		124
Seven years later		1,482
Estimate of cumulative claims		1,482		124		74		250		519		46		66		181	2,742
Cumulative  paid claims																	(2,331)
Less third party participations on syndicates																	(100)
Gross claims liability *																	311
Favourable (unfavourable) development		(86)		50		31		(54)		(58)		(1)		(1)			(119)

* Gross Claims reserves per balance sheet of £314 million includes additional claims handling and offset adjustments of £3 million.

Ultimate net claims

Accident year		2001 and prior £'m		2002 £'m		2003 £'m		2004 £'m		2005 £'m		2006 £'m		2007 £'m		2008 £'m	Total  £'m
At the end of accident year		853		147		104		146		280		45		64		143
One year later		935		122		84		180		304		44		65
Two years later		953		120		73		186		314		46
Three years later		955		120		74		185		314
Four years later		963		115		72		184
Five years later		967		114		71
Six years later		964		113
Seven years later		963
Estimate of cumulative claims		963		113		71		184		314		46		65		143	1,899
Cumulative  paid claims																	(1,555)
Less third party participations on syndicates																	(86)
Net claims liability *																	258
Favourable (unfavourable) development		(110)		34		33		(38)		(34)		(1)		(1)			(117)

* Net Claims reserves per balance sheet of £259 million include additional claims handling, bad debt and offset adjustments of £2 million.

  The gross and net adverse development, on an accident year basis, is primarily related to WTC for 2001 and prior and to the 2004 and 2005 hurricanes for those respective accident years.

Reserve Sensitivity

The potential uncertainty in outstanding claims has been estimated based on the volatility seen in historical development patterns. This indicates that there is about a 50% chance that the final outcome will lie within +/- £20 million of the estimated reserve. This analysis assumes that the historical volatility, excluding major losses, is representative of future uncertainty in outstanding claims. A significant part of the outstanding claims relate to major losses, such as the terrorist attacks in the United States on 11 September 2001. The basis on which these claims will be settled is still uncertain, and may be influenced by future legal proceedings, which adds to the uncertainty in these reserve estimates.

The projected payout of the ultimate gross and net claims reserves at 31 December 2008 is as follows:

Payment within	1 year	2 years	3 years	4 years	5 years	More than 5 years
	£'m	£'m	£'m	£'m	£'m	£'m
Gross	128.1	58.9	32.6	20.6	14.0	60.2
Net	98.9	47.9	27.9	18.2	12.8	53.7

The payout patterns have been estimated based on the historical payment patterns. Future payment patterns are uncertain, particularly for claims related to the terrorist attacks in the United States on 11 September 2001.

Unearned premiums are expected to be earned 90% in 2009 and the balance in 2010.

 

 

4. FINANCIAL RISK MANAGEMENT

The Company is exposed to financial risk through its financial assets and liabilities. The key financial risk is that proceeds from financial assets are not sufficient to fund the obligations arising from policies as they fall due. The most important components of financial risk are interest rate risk, credit risk and liquidity risk.

Interest rate risk arises primarily from investments in fixed rate securities. In addition, to the extent that claims inflation is correlated to interest rates, liabilities to policyholders are exposed to interest rate risk. The Company is also exposed to interest rate risk through its floating rate unsecured subordinated and senior loan notes which are linked to US LIBOR in the case of the US dollar dominated debt and EURIBOR in the case of the Euro denominated debt.

The Company mitigates interest rate risk by maintaining its investment portfolio and Funds at Lloyd's (FAL) in short-dated fixed income securities, cash and cash equivalents. The interest rates on these short term investments tend to fluctuate with movements in central bank lending rates.

At 31 December 2008, all of the Company's cash and short term investments had maturities of 90 days or less.

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Company is exposed to credit risk are:

amounts due from reinsurers on paid and outstanding losses

amounts due from policyholders and intermediaries

The Company places limits on its exposure to any single counterparty for investments and reinsurers and to geographical and industry segments.

The Company's current investment strategy is to invest in short term government or government guaranteed treasury bills and bonds with operating cash placed on deposit with highly rated banks for very short maturities of 30 days or less. The Company does not invest in derivatives, asset or mortgage backed securities or securities of government agencies which do not benefit from a full government guarantee except for the syndicates' overseas deposits managed by Lloyd's. 

Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Company monitors its liquidity needs through monthly cash flow forecasts at syndicate and parent company level. Given its exposure to large catastrophe events, the Company currently maintains its financial investments in short term investments and cash equivalents to provide the necessary liquidity to fund claims payments as they come due.

In addition, the Company has a US$50 million bank facility at syndicate level, maturing 30 April 2009 and secured by eligible premiums receivable and amounts due from reinsurers, which can be used to fund gross loss payments or US situs fund deposits until such time as amounts due from reinsurers are collected. 

Given the short term nature of the Company's cash and investments, it is not exposed to significant interest rate risk since maturing short term investments are repriced at market interest rates on an ongoing basis. The impact of each 100 basis point increase or decrease in interest rates on the value of the investments is approximately £2.8 million before tax at 31 December 2008.

INVESTMENT RESULT

	2008		2007
	£'000		£'000
Investment Income
Interest	12,362		12,515
Gain on sale of investments	1,848		325
Unrealised gains on investments	2,556		772
	16,766		13,612
Investment expenses and charges
Investment management expenses	(236)		(114)
Loss on sale of investments	(1,220)		(350)
Unrealised losses on investments	(183)		(7)
	(1,639)		(471)
Investment result	15,127		13,141

FINANCIAL INVESTMENTS

	2008		2007
	£'000		£'000
Carrying value
Debt securities and other fixed income securities
- government and government guaranteed	349,850		219,654
Holdings in collective investment schemes	3,402		16,118
Syndicates' overseas deposits	7,195		4,054
	360,447		239,826
Cost
Debt securities and other fixed income securities
- government and government guaranteed	345,796		218,821
Holdings in collective investment schemes	3,402		16,118
Syndicates' overseas deposits	7,195		4,054
	356,393		238,993

All debt securities and other fixed income securities are listed on recognised stock exchanges.

At 31 December 2008, syndicate investments of £80.9 million (2007: £44.8 million) were held in US situs and other regulatory deposits available for the payment of claims in those jurisdictions and which are not available for the payment of other claims and obligations.

At 31 December 2008, Advent Re had pledged cash and investments of £39.5 million (US$56.9 million) (2007: £23.0 million. US$45.8 million) as security for policy limits of contracts written.

The syndicates' overseas deposits (Joint Asset Trust Funds (JATF)) are managed by Lloyd's. The Company does not have the authority to ensure that its investment policies are complied with. Lloyd's has advised the Company that it has invested the JATF in:

	2008 £'000		2007 £'000
Government securities	5,028		2,509
Mortgage backed securities (MBS)	18		23
Callable bonds	283		173
Corporate bonds rated AAA	964		295
AA	573		577
A	324		343
BBB	-		1
Asset backed securities (ABS)	-		128
Cash	5		5
	7,195		4,054

Other than the above investments over which the Company does not exercise investment authority, the Company only invests in short term government and government guaranteed securities. During the year, it did not invest in derivatives, MBS, ABS, equities or corporate bonds given the prevailing market conditions.

CASH AND CASH EQUIVALENTS

	2008		2007
	£'000		£'000
Corporate cash at bank	1,834		10,760
Syndicates' cash at bank	4,484		5,448
Advent Re cash at bank	5,247		2,147
Deposits with credit institutions	372		7,995
Corporate funds held by Lloyd's	199		628
	12,136		26,978

At 31 December 2008, the cash at bank was held with Royal Bank of Scotland and Barclays Bank, which are rated A+ and AA- respectively by Standard & Poor's.

OTHER RECEIVABLES 

	2008		2007
	£'000		£'000
Other receivables at cost and fair value comprise
- prepayments	672		221
- accrued income	1,350		1,549
- other debtors	2,053		958
- Syndicate third party names	780		1,617
	4,855		4,345

All balances are due within 12 months.

At 31 December 2008, no single entity accounted for 5% or more of the aggregate amount of other debtors.

  

 

The Company's objective is to have sufficient capital to support its operations to ensure future growth and expansion while providing a satisfactory return to shareholders given the potential short volatility of its results due to major catastrophe events.

The Company has provided capital to its operating subsidiaries using permanent capital and unsecured long term debt financing. The long term debt issues are not callable for five years from date of issue and have no financial covenants other than the quarterly payment of interest and payment of principal on maturity. In the case of the Company's US dollar and Euro denominated subordinated debt due 3 June 2035, amounting to an aggregate of £34.2 million at 31 December 2008, the Company has the ability to defer interest payable on the subordinated notes for 20 consecutive quarters without causing an event of default. The Company seeks to maintain its ratio of long term debt to total capital at less than 35% with the objective of reducing that ratio over the next five years through accumulated earnings or as the expiry of the "no call" provisions on its debt provide it with an ability to refinance or repay its senior loan notes.

For the Company's operations at Lloyd's, the capital required to support a corporate member's underwriting on a syndicate is determined by Lloyd's. The Lloyd's capital framework for setting member capital requirements is based on syndicates' individual capital assessments and taking into account the overall economic capital requirements of the market/franchise after allowing for the benefits provided by the Lloyd's rating and the Central Fund support. The 2009 business plan of Syndicate 780 has been approved by Lloyd's. Lloyd's advised the Company that its initial 2009 Economic Capital Requirement (ECR) was unchanged from 2008. Subsequently Lloyd's advised managing agents that 2009 capital requirements would be subject to review based on the year end exchange rate of US$1.44/£ compared with the exchange rate of US$1.99/£ used in the 2009 business plan and actual market conditions compared with business plan assumptions. The syndicate has the ability to pay out interim profits on its current years of account to its members which provides more immediate available capital to support ongoing underwriting activities for future years of account.

The Company deposits Funds held by Lloyd's (FAL) with the Corporation of Lloyd's (Lloyd's) to support the Company's underwriting activities. The Company is party to a Lloyd's deposit trust deed which gives Lloyd's the right to apply these monies in settlement of any claims arising from the Company's underwriting at Lloyd's. At 31 December 2008, the Company's FAL amounted to £97.5 million, which was held in support of ongoing underwriting activities for the 2009 year of account. The Company also has undistributed profit from its 2006 and 2007 years of account of £10.9 million to support the 2009 year of account.

In addition to the Company's FAL, a major shareholder, Fairfax Financial Holdings Limited (Fairfax), has deposited FAL of £21.4 million at 31 December 2008 to support the Company's underwriting for the 2001 to 2002 underwriting years pursuant to a Funding Agreement dated 16 November 2000. On 19 February 2009, Advent Underwriting Limited approved the closure of Syndicate 2 into a syndicate wholly supported by the Company. The above FAL of £21.4 million will be released by Lloyd's to Fairfax now that Syndicate 2 has closed. 

During 2008, Lloyd's released £42.1 million (2007: £9.8 million) of Fairfax FAL concurrent with the closure of Syndicate 780's 2005 year of account (2007: 2004 year of account).

The FAL and the overseas deposits are not available for use by the Company for ordinary cash flow purposes.

  

SHARE CAPITAL

	Authorised						Allotted, Called Up and Fully Paid
	2008		2007			2008			2007
	£'000		£'000			£'000			£'000
Ordinary shares of 5p each	-		50,000			-			20,329
Ordinary shares of 50p each	50,000		-			20,329			-
Number of shares ('000s)	100,000		1,000,000			40,657			406,570

On 23 June 2008, the Company's ordinary shares of 5p each were consolidated on a ratio of 1 new ordinary share of 50p each for 10 old ordinary shares of 5p each approved by shareholders at the Annual General Meeting. Outstanding shares, as options and per share amounts have been retroactively restated to present the comparative information on a consistent basis

Share Option Schemes

The Company has established three share option plans: an Unapproved Plan which was adopted by the Board of Directors on 20 April 2005; an Approved Plan which was adopted by the Board of Directors on 29 March 2005; and an Unapproved Share Option Plan which was adopted by the Board of Directors on 9 April 2008 (collectively referred to as the "Advent Share Option Plans"). The Advent Share Option Plans have been set up to enable employees and Directors of the Company to be granted options to acquire Ordinary Shares of the Company ("Options").

Pursuant to a Placing Agreement dated 3 June 2005, the Company granted to Numis Securities Limited an option to subscribe for up to 2,196,087 Ordinary Shares at 350p per share, exercisable at any time, in whole or in part, up to 3 June 2010.

On 3 June 2005, options over an aggregate of 4,629,000 Ordinary Shares were awarded to directors and employees, pursuant to the Advent Share Option Plans. These awards have been granted at the placing price of 350p per share and are not subject to performance conditions.  The Approved Scheme options have an exercise period between three and ten years from the date of grant of 3 June 2005, whereas the Unapproved Scheme options have an exercise period between one and ten years following the date of grant.

On 28 April 2006, options over an aggregate of 5,850,000 shares, exercisable at 200p (which was the Placing Price of the private placement undertaken at the same date that shareholder approval was granted for issue of the options following publication of the Company's 2005 Report and Accounts) were granted to directors and employees. The options are not exercisable before 28 April 2009 and expire 28 April 2016.

During 2008, 67,500 options were cancelled under the 2005 grants at 350p per share and 75,000 options were cancelled under the 2006 grant at 200p per share.

On 30 September 2008, the Company issued 740,985 options to purchase ordinary shares of 50p each at an exercise price of 190p per share. The options vest on 30 September 2011 and are exercisable until 30 September 2018.

On 30 September 2008, the Company made grants under its Long Term Incentive Plan of 1,383,303 nil cost options to buy ordinary shares of 50p each. The shares vest as to 30% of the initial grant if the Company's average return on equity exceeds 15% for the three year period from 2008 to 2010 rising to 100% if the average return on equity during the three year period reaches 20% or over.

On 29 September 2008, the Company implemented a Share Incentive Plan (SIP) with the issue of free shares of £2,000 per eligible employee and the matching of employee contributions on a one for one basis to a maximum of £1,500 per employee per year. At 31 December 2008, the Company has paid £91,070 for 48,162 free and partnership shares under the SIP.

  

Grant	Numis		2005 Approved		2005 Unapproved		2006 Unapproved		2008 Unapproved		2008 LTIP
Outstanding at  1 January 2007	2,196,087		1,957,568		2,126,432		5,600,000		-		-
Outstanding at  31 December 2007	2,196,087		1,957,568		2,126,432		5,600,000		-		-
Exercisable  at 31 December 2007	2,196,087		-		2,126,432		-		-		-
Forfeited in year  (prior to share consolidation)	-		(85,714)		(364,286)		(250,200)		-		-
Restatement adjustment  for share consolidation	(1,976,479)		(1,684,707)		(1,586,004)		(4,840,000)		-		-
Granted in year	-		-		-		-		740,985		1,383,385
Forfeited in year  (post share consolidation)	-		(10,571)		(13,928)		(25,000)		-		-
Outstanding at  31 December 2008	219,608		176,566		162,214		485,000		740,985		1,383,385
Exercisable at  31 December 2008	219,608		176,566		162,214		485,000		-		-

In accordance with IFRS 2, a charge has been made to the consolidated income statement for the share options in issue. The charge is broken down between the various option grants as follows:

Description	Exercise price	Normal exercise period	Charge for the year 2007	Reserve at 31 December 2007	Charge for the year 2008	Reserve at 31 December 2008
			£'000	£'000	£'000	£'000
2005 grant	350 pence	Jun 2008 - Jun 2015	8	20	2	22
2005 grant	350 pence	Jun 2006 - Jun 2015	-	27	-	27
Numis options	350 pence	Jun 2005 - Jun 2010	-	30	-	30
2006 grant	200 pence	May 2009 - May 2016	212	338	132	470
2008 grant	190 pence	Oct 2011 - Oct 2018	-	-	32	32
			220	415	166	581

A "Black Scholes" option pricing model has been used to calculate the fair value of the options with the following key assumptions used for the options granted in each year:

	2008		2006		2005
Weighted average share price	190p		326p		35p
Weighted average exercise price	190p		279p		35p
Expected volatility	18.9%		13.1%		13.1%
Expected life	7.5  years		4.5 - 8.0 years		4.5 - 7.0 years
Risk free rate of return	5%		4.6% - 4.7%		4.7%
Expected dividend yield	0%		0.0% - 8.0%		8.0%

The volatility of the Company's share price is measured by reference to the standard deviation of the daily share price and the risk free rate of return is consistent with government bond yields. Due to the small pool of recipients, no assumption is made for staff turnover in the calculations. Adjustments are made for leavers during the vesting period of the option.

   EARNINGS PER ORDINARY SHARE

Earnings per share is based on the profit attributable to shareholders and the weighted average number of shares in issue during the year.

	2008		2007
			Restated
	£'000		£'000
Profit (loss) for the year	(8,945)		19,192
Weighted average number of shares in issue ('000s)	40,657		406,571
Basic earnings (loss) per share	(22.0p)		47.2p
Dilutive shares	-		401
Adjusted average number of share in issue	40,657		40,692
Diluted earnings (loss) per share	(22.0p)		47.2p

LONG TERM DEBT

Outstanding debt	Issue date	Due date	Callable (by the Company) after	Interest rate	Interest rate (31 December 2008)	2008 £'000	2007 £'000
Subordinated Notes
US$34 million	3/6/2005	3/6/2035	3/6/2010	3 month LIBOR + 3.90%	5.33%	22,894	16,546
€12 million	3/6/2005	3/6/2035	3/6/2010	3 month EURIBOR + 3.85%	6.74%	11,268	8,539
						34,162	25,085
Senior Notes
US$26 million	16/1/2006	15/1/2026	16/1/2011	3 month LIBOR + 4.50%	5.93%	17,400	12,540
US$20 million	15/12/2006	15/12/2026	15/12/2011	3 month LIBOR + 4.15%	5.58%	13,452	9,722
						30,852	22,262
Total Loan Notes at amortised cost and fair value						65,014	47,347
Weighted average interest rate, 31 December						5.78%	9.19%

The increase in the long term debt results from the strengthening of the US dollar and euro against sterling during 2008.

The Subordinated Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).

The Senior Notes rank on a winding-up of the Company in priority to distributions on all classes of share capital and subordinated loan notes, and rank pari passu with each other but are subordinated in right of payment to the claims of all unsubordinated creditors of the Company (including, where applicable, all policyholders of the Syndicate).

The Subordinated Notes and Senior Notes are listed on the Channel Islands Stock Exchange.

  6. INCOME TAXES 

	2008		2007
	£'000		£'000
Charge in period
Current tax:
UK corporation tax on profit for the year	-		-
Adjustments in respect of previous year	-		(20)
Foreign tax	-		-
Total current tax	-		(20)
Deferred Tax:
Origination and reversal of timing differences	(5,406)		5,989
Tax on profit on ordinary activities	(5,406)		5,969
Factors affecting tax charge for the year
Profit (loss) on ordinary activities before tax	(14,351)		25,161
Tax charge at standard rate of UK corporation tax of 28.5% (2007: 30%)	(4,090)		7,548
Effects of:
Zero rate of tax applied to Advent Re's profits	(1,736)		(1,793)
Effect of change in tax rate - deferred tax brought forward	-		1,423
Effect of change in tax rate - current year change	-		(503)
Adjustments from tax return as filed	-		(893)
Other differences	420		187
	(5,406)		5,969

 

Factors that may affect future tax charges

Deferred tax is provided on the annually accounted result of each year of account. A deferred tax asset of £21.1 million (2007: £15.6 million) has been recognised on annually accounted results.

The Company is subject to US tax on its share of syndicate deemed US underwriting profits. This tax is recoverable to the extent that UK tax arises on taxable syndicate profits for the appropriate years of account. The Company's expects to suffer US tax on its share of syndicate deemed US underwriting profits. Provision has been made for the Company's liability to US tax. Some US tax suffered will be irrecoverable due to the difference between UK and US tax rates and the difference between the timing of US and UK syndicate profits for tax purposes. No US tax has been written off during the year (2007: £nil).

The Company's tax provision for the year ended 31 December 2008 has been calculated on the basis that Advent Re is a non-UK resident corporation for UK tax purposes. As a result, there is no tax provision on Advent Re's profits in these accounts. A deferred tax liability has not been provided on the undistributed profit of £12.0 million as the parent company does not intend to distribute these profits in the foreseeable future. The UK government has announced its intention to implement legislation permitting the tax free payment of dividends from foreign affiliates effective 1 April 2009. Subject to seeing the detailed tax provisions, management expects that this contingent tax liability will be removed with enactment of the proposed legislation.

DEFERRED TAX

	2008		2007
	£'000		£'000
Deferred tax asset in respect of technical provisions disclaimed:			-
Deferred tax asset (liability) in respect of underwriting results to be declared:
Underwriting Year of Account
2001	560		(718)
2002	(552)		(115)
2005	-		17,060
2006	(11,802)		(7,232)
2007	(6,178)		(3,418)
2008	8,899		-
Deferred tax liability in respect of:
Losses carried forward to future periods	29,966		9,737
Capital allowances disclaimed	340		244
Other timing differences	(162)		107
	21,071)		15,665
Deferred tax asset at 1 January 2008	15,665		21,654
Deferred tax charge in the income statement	5,406		(5,989)
Deferred tax asset at 31 December 2008	21,071		15,665

As required by IAS 12 Income Taxes, the Directors have recognised a deferred tax asset in respect of underwriting losses as they regard it as probable that there will be suitable future profits based upon future business plans and historical underwriting profitability available to utilise these losses. The recoverability of the deferred tax asset is reviewed annually and its carrying value adjusted as appropriate. 

 

7. INTANGIBLE ASSETS

	Goodwill		Purchased		Purchased
	on Acquisition		Capacity - finite life		Capacity - indefinite life		Total
	£'000		£'000		£'000		£'000
At 1 January 2007	4,148		1,219		2,695		8,062
Amortisation of consideration paid in 2008 (see below	-		(852)				(852)
At 31 December 2007	4,148		367		2,695		7,210

At 1 January 2008	4,148		367		2,695		7,210
Amortisation of consideration paid in 2008			(367)				(367)
At 31 December 2008	4,148		-		2,695		6,843

The consideration of £1.2 million that was paid to third party capital providers on 30 June 2008 is a finite life asset and was amortised to corporate costs over the 2007 year of account to which it relates.

 

8. TRADE AND OTHER PAYABLES 

	2008		2007
	£'000		£'000
Trade and other payables at cost and fair value
- Accruals	986		3,184
- Deferred income	84		1,379
- Payable to third party capital providers	4,304		-
- Other	229		319
	5,603		4,882
Categorised as due
- within 12 months	5,594		4,843
- after more than 12 months	9		39
	5,603		4,882

Other payables include amounts due to suppliers of goods or services to the Company. These balances will be paid in accordance with the Company's creditor payment policy.

9. ASSETS AND LIABILITIES HELD BY SYNDICATE 

The consolidated balance sheet includes the following assets and liabilities held by the syndicates on which the Company participates. These assets are subject to Lloyd's trust deeds for the benefit of policyholders.

	2008		2007
	£'000		£'000
Assets
Cash and cash equivalents	4,856		33,616
Financial investments	225,052		96,169
Other receivables	2,229		2,147
Insurance and reinsurance assets
- Reinsurers' share of outstanding claims	55,081		18,176
- Reinsurers' share of unearned premiums	1,592		1,058
- Debtors arising from insurance and reinsurance operations	69,551		48,060
	358,361		199,226
Liabilities
Insurance and reinsurance liabilities
- Outstanding claims	308,541		163,764
- Unearned premiums	42,804		30,823
- Creditors arising out of insurance and reinsurance operations	19,881		6,442
Trade and other payables	265		613
	371,491		201,642

 

10. COMMITMENTS

(a) Capital commitments

There were no capital commitments or authorised but un-contracted commitments at the end of the financial year.

(b) Funds at Lloyd's

As detailed further in Note 5, the Company has committed funds to support its underwriting business at Lloyd's in the form of investments managed by Credit Agricole Asset Management, a fund manager. These assets are not available to meet day to day cash flow requirements of the Company.

  (c) Operating leases

The Company leases certain land and buildings on short-term operating leases, the future minimum lease payments under non-cancellable operating leases are as follows:

	2008		2007
	£'000		£'000
No later than one year	103		290
Later than one year and no later than 5 years	-		103

The company is in the process of negotiating a one year extension to its current premises leases.

 

11. RELATED PARTIES

Accommodation costs, at an arm lengths price of £25,000 (2007: £20,870) for the Wickford office were paid to Charlbury Investments Limited in accordance with the terms of the lease. B.F. Caudle is a director of Charlbury Investments Limited.

Syndicate 780 accepted inwards reinsurance business from and placed outwards reinsurance business with, companies that are deemed to be related parties of the Company by virtue of the shareholding of Fairfax and certain of its subsidiaries. The Company's share of premiums ceded to Syndicate 780 from related parties under quota share arrangements was £686,078 (2007: ceded to Syndicate 780 £111,709). The Company's share of reinsurance recoveries from related parties under quota share arrangements was £2,001,275 (2007: £678,440). All transactions with these parties were conducted at arms length and at normal commercial terms.

As disclosed in Note 5, Fairfax has deposited Funds at Lloyd's to support the Company's underwriting.

Advent Capital (Holdings) PLC carries out transactions with its subsidiaries on a regular basis through intercompany accounts to minimize the need for cash to be held in those subsidiaries. These transactions fall into the following categories:

	2008		2007
	£'000		£'000
(Payment)/receipt of underwriting (loss)/profit distributions	(2,528)		10,740
Net funding of FAL requirements	-		(5,954)
Payments for goods and services	(1,118)		(869)
Receipts for services provided	3,774		70
Receipt of FAL investment income	2,159		7,906
Dividends from subsidiaries	(3,090)		-
Capital restructuring	72,024		-

The table below sets out the intercompany receivables and payables due from or to each subsidiary entity at the balance sheet date.

	2008		2007
	£'000		£'000
Advent Underwriting Limited	(1,494)		(577)
Advent Group Services Limited	373		247
Advent (Strategic Investments) Limited	-		3,290
Advent Capital Limited	(4)		89,173
Advent Capital (No 2) Limited	(259)		(1,745)
Advent Capital (No 3) Limited	93,584		71,318
Advent Re Limited	38		37

 

12. RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS 

	2008		2007
	£'000		£'000
Profit (loss) before tax	(14,351)		25,161
Movement in:
- insurance and reinsurance receivables	(69,429)		15,801
- other receivables	(699)		3,738
- insurance and reinsurance payables	176,050		(22,879)
- trade and other payables	700		(1,014)
Interest expense	4,258		4,558
Investment result	(4,792)		(6,489)
Unrealised investment gains (losses)	2,374		765
Net (purchase) sale of investments	(122,995)		(138,861)
Depreciation	342		284
Amortisation of debt issue costs	26		22
Amortisation of capacity	369		852
Amortisation of share option costs	165		220
Exchange movements on opening  cash and cash equivalents	(2,529)		418
Foreign exchange movements on financing	17,640		43
	(12,871)		(117,381)

Advent Group Services Limited, a wholly owned subsidiary, purchases goods and services on behalf of the Company, its subsidiaries and Managed Syndicates.

 

13. STAFF COSTS (including Directors)

	2008		2007
	£'000		£'000
Wages and salaries	5,816		5,891
Social security costs	583		615
Other pension costs	644		557
	7,043		7,063
Recharged to third party capital	(515)		(1,075)
	6,528		5,988

Other pension costs are in respect of money purchase schemes and personal pension arrangements. Outstanding contributions at 31 December 2008 were £43,102 (2007: £38,988).

The average number of persons, including executive directors, employed by the Company during the year was: 

	2008		2007
Management	4		4
Finance and actuarial	8		8
Underwriting	19		16
Claims and Reinsurance	6		6
Compliance	3		3
IT	5		5
Administration	4		4
	49		46

 

14. DIRECTORS' EMOLUMENTS

	2008		2007
	£'000		£'000
Aggregate emoluments	1,494		1,555
Fees	128		121
Contribution to money purchase pension schemes	92		57
	1,714		1,733
Recharged to third party capital	(43)		(56)
	1,671		1,677
Number of Directors with accrued benefits under money purchase scheme	2		2
Highest paid Director
Emoluments (including benefits in kind)	820		695
Contribution to money purchase pension schemes	30		10
	850		705
Recharged to third party capital	-		-
	850		705

Refer to the Directors' Remuneration Report on pages 32 to 36 for further information on the remuneration of key executives and directors.  

PARENT COMPANY ONLY BALANCE SHEET

At 31 December 2008

	Note		2008		2007
			£'000		£'000
Assets
Cash and cash equivalents	15		688		9,719
Other receivables
- Due from subsidiaries			93,996		164,092
- Deferred tax			613		571
- Other			2,591		1,739
Investments in subsidiaries	17		118,814		33,560
Total assets			216,702		209,681
Shareholders' Equity
Ordinary share capital	5		20,329		20,329
Share premium account			60,662		60,662
Capital redemption reserve			21,065		21,065
Other reserves			580		415
Retained earnings			46,726		56,706
Total shareholders' equity			149,362		159,177
Liabilities
Trade and other payables	16		570		836
Due to subsidiaries			1,756		2,321
Long term debt	5		65,014		47,347
Total liabilities			67,340		50,504
Total shareholders' equity and liabilities			216,702		209,681

The notes form an integral part of these financial statements.

The parent company only financial statements were approved by the Board on 19 February 2009 and signed on its behalf by:

Brian F Caudle Trevor J Ambridge

Chairman  Chief Financial Officer

  PARENT COMPANY ONLY STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2008

	Share capital	Share premium	Capital redemption reserve	Other reserves	Retained earnings	31 December 2007 Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance, at 1 January 2007	20,329	60,662	21,065	195	61,631	163,882
Loss for the year	-	-	-	-	(4,925)	(4,925)
Share based payments	-	-	-	220	-	220
Balance, at 31 December 2007	20,329	60,662	21,065	415	56,706	159,177

Loss for the year	-	-	-	-	(4,898)	(4,898)
Dividend paid	-	-	-	-	(5,082)	(5,082)
Share based payments	-	-	-	165	-	165
Balance, at 31 December 2008	20,329	60,662	21,065	580	46,726	149,362

The loss for the year is the total recognised loss for the year.

The notes form an integral part of these financial statements.  PARENT COMPANY ONLY CASH FLOW STATEMENT

Year ended 31 December 2008

	Note		2008		2007
			£'000		£'000
Cash flows from operating activities
Cash generated from operations	19		(1,387)		9,029
Interest paid			(4,245)		(4,563)
Net cash used in operating activities			(5,632)		4,461
Cash flows from investing activities
Interest received			292		618
Cash flows from investing activities			292		618
Dividend paid			(5,082)		-
Net increase (decrease) in cash and cash equivalents			(10,422)		5,084
Exchange movement on opening cash and equivalents			1,391		(5)
Cash and cash equivalents at beginning of year			9,719		4,640
Cash and cash equivalents at end of year	15		688		9,719

The notes form an integral part of these financial statements.  Accounting policies

Basis of presentation

Advent Capital (Holdings) PLC is the ultimate parent company for the Advent Group. The Parent Company is domiciled in the United Kingdom.

These Parent Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, using the historic cost convention with the revaluation of financial assets and financial liabilities at fair value through the consolidated income statement. As permitted under section 230 of the Companies Act 1985, no separate income statement has been prepared.

The accounting policies used in the preparation of the consolidated financial statements have been consistently applied in the preparation of these separate Parent Company financial statements. In addition, the following policies have also been used.

Investment in Subsidiaries

Investments in the Parent Company's subsidiaries are initially stated at cost and are subsequently reviewed for impairment as circumstances indicate that the carrying value exceeds the realisable value.

Dividend income

Dividend income from investments in subsidiaries is recognised when the right to receive payment has been established.

 

15. CASH AND CASH EQUIVALENTS

	2008		2007
	£'000		£'000
Cash at bank	688		9,719

 

16. TRADE AND OTHER PAYABLES 

	2008		2007
	£'000		£'000
Parent Company
Interest payable	297		285
Accruals	273		551
Total at cost and fair value	570		836

 

17. INVESTMENT IN SUBSIDIARIES

	Subsidiary Undertakings
	£'000
Cost
At 1 January 2008	33,560
Transfer of investments from Advent (Strategic Investments) Limited	10,617
Liquidation of Advent (Strategic Investments) Limited	(14,428)
Capitalisation of loan from Advent Capital No3 Limited	82,156
Revaluation of investment in Advent Re	6,909
As at 31 December 2008	118,814

  The net investment balance consists of 100% of the following companies: 

Company	Shareholding	Nature of Business	Country of  Registration
Advent Underwriting Limited	100%	Lloyd's Managing Agent	England & Wales
Advent Group Services Limited	100%	Service Company	England & Wales
Advent Capital Limited	100%	Lloyd's Corporate Member	England & Wales
Advent Capital (No. 2) Limited	100%	Lloyd's Corporate Member	England & Wales
Advent Capital (No. 3) Limited	100%	Lloyd's Corporate Member	England & Wales

On 21 December 2006, the Parent Company incorporated a Bermudan Class 3 reinsurer, Advent Re, whose shares are owned by Advent Re Holdings Limited (Advent Re Holdco), an intermediary holding company. Advent Re Holdco is wholly owned by Advent Capital (Holdings) PLC. Advent Re and Advent Re Holdco are both registered in Bermuda.

Advent (Strategic Investments) Limited was placed in Members Voluntary Liquidation on 31 October 2008.

Amounts due to and from subsidiaries are non-interest bearing, have no fixed repayment terms and are recorded at cost which approximates fair value.

The Company has provided a letter of support to its subsidiary, Advent Capital Limited.

 

18. PROFIT ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY

As permitted by section 230 of the Companies Act 1985, the Parent Company's income statement has not been included in the Company's Accounts.

The Parent Company's loss for the year ended 31 December 2008 was £4,898,000 (2007: loss £4,925,000).

 

19. RECONCILIATION OF LOSS BEFORE TAX TO CASH GENERATED FROM OPERATIONS

	2008		2007
	£'000		£'000
Loss before tax	(5,515)		(6,933)
Movement in:
- other receivables	(15,436)		17,223
- trade and other payables	(842)		(5,521)
Debt interest	4,258		4,558
Investment income	(292)		(588)
Amortisation of debt issue costs	26		22
Amortisation of share option costs	165		220
Exchange movement on opening cash and equivalents	(1,391)		5
Foreign exchange movements on financing	17,640		43
	(1,387)		9,029

 

20. ULTIMATE PARENT COMPANY

The Company is a subsidiary of Fairfax Financial Holdings Limited, a company registered in Canada.

  COMPANY SECRETARY AND ADVISORS

COMPANY SECRETARY

Littlejohn Corporate Services Limited

1 Westferry Circus

Canary Wharf

London E14 4HD 

REGISTERED OFFICE OF THE COMPANY

10th Floor

1 Minster Court

Mincing Lane 

London EC3R 7AA

REGISTERED NUMBER OF THE COMPANY 03033609

NOMINATED ADVISER AND BROKER

Fox-Pitt, Kelton

Cochran Caronia Waller

25 Copthall Avenue

London EC2R 7BP

AUDITORS

PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

Hay's Galleria

1 Hay's Lane

London SE1 2RD

SOLICITORS

Norton Rose LLP

3 More London Riverside

London SE1 2AQ

PRINCIPAL BANKERS

The Royal Bank of Scotland

5-10 Great Tower Street

London EC3P 3HX

REGISTRARS

Capita IRG Plc

Northern House 

Woodsome Park

Fenay Bridge

Huddersfield HD8 0LA

 

ENDFR SFSFUUSUSESE