The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The result for the period, after taxation, amounted to a loss of £1,086,880 (2022: £878,650). The directors do not propose the payment of any dividends for the period.
The directors consider the performance of the company for the period to have been satisfactory, and they are confident that satisfactory results will be achieved in the future.
The directors consider that its business of providing services to underwriting teams which operate under delegated underwriting authorities from leading insurers provides an excellent basis for successfully developing a profitable portfolio of insurance business. Falcon MGA Services Limited (FMGAS), Trinity General Agency LLC (TGA) and Trilogy Underwriting Limited (TUL) continued their operations during the year. FMGAS and TUL are Appointed Representatives of Resolution Underwriting Partnership Limited (RUPL). During the year the Company sold its shares in Trilogy Managing General Agents Limited and Active Risk Group Limited.
The company has various financial assets and liabilities, such as trade receivables and trade payables, arising directly from its operations. These assets and operating cash arising are actively managed to avoid unnecessary currency exposure. The company has not undertaken hedging activity but may do so if such arrangements appear to be a suitable solution to minimising any currency exposures, especially for earnings in currencies other than sterling.
The company manages its own cash and borrowings to maximise interest income and minimise interest expense, whilst ensuring that sufficient liquid resources are available to meet operating needs. The group does not hold client money while insurers’ funds are held with approved banks in currencies appropriate to the settlement requirements of the business.
The company will become exposed to interest rate risk on bank deposits when interest rates recover.
The group’s principal foreign currency exposure risk potential could arise from income earned on trading operations with customers and suppliers in non sterling currency. Current and anticipated insurance business is predominantly denominated in sterling.
The company has advanced funds to trade investments which are Appointed Representatives of our Authorised Firm in order to provide start-up and working capital. The operating performance and financial targets of these debtors are closely monitored. Group companies act as an agent for insurers; while suitable vetting arrangements are operated to verify the credit worthiness of insurance brokers from whom business predominantly comes, the risk of non-payment rests largely with others. Investment of cash surpluses are made with banks which are considered by the Board to have adequate credit ratings to achieve the prudential standards applicable in our business.
The past year has seen the business perform according to budget and there is confidence that the group is building a solid base from which to grow a profitable business.
LB Group Limited (Chelmsford) were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors, and from our commercial knowledge and experience of the insurance industry;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company including Companies Act 2006, FCA compliance and taxation legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management, reviewing correspondence with the FCA and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud.
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions; and
observed and identified internal controls in place.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with laws and regulations.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Resolution Underwriting Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is 1 Vicarage Lane, Stratford, London, England, E15 4HF.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The Company is the holding company of a group that has interests in several managing general agents (“MGA(s)”) underwriting insurance on behalf of major insurance companies and Lloyd’s syndicates (“Carriers”). The business of insurance underwriting is conducted through Appointed Representatives (“AR (s)”) of the Company’s wholly-owned subsidiary Resolution Underwriting Partnership Limited (“RUPL”), which is regulated by the UK Financial Conduct Authority (“FCA”) and is also an approved Lloyd’s coverholder. The Company also has an equity interest in a USA managing general agency based in North Carolina.
The Company acts as an incubator of these underlying businesses and, in all of them, the Company has a significant shareholding commensurate with the level of investment and working capital provided to them. The working capital is provided by means of loans which, as at 31 December 2023, totalled £746,499. As in the previous year allowance has been made for Falcon MGA Services to be unable to pay £471,726 of this debt and Trinity General Agency Holdings Inc (TGAH) to be unable to pay £884,356 and a further £408,010 during 2023. These are repayable out of trading profits of the companies. In addition short-term loans are made to entities from time to time.
During the year, the Company sold its 50% shareholding in ActiveRisk Group Limited, and its 100% shareholding in Trilogy Managing General Agents Limited.
The Company and its group undertakings have prepared budgets for 2024 and 2025. Based on these budgets, which have been prepared on a prudent basis, the Directors have considered the outlook for the Company and believe that it will continue to be profitable in 2024. Accordingly, the financial statements of the Company as at 31 December 2023 have been prepared on a going concern basis.
The directors of the Company have considered the outlook for its subsidiaries and related ARs. Other than TGAH, they consider the outlook to be positive and the budgets prepared for the periods to 31 December 2025 indicate that these companies will be profitable. The directors have considered whether the various loans are recoverable and have concluded that the underlying strengths of the businesses are such that the loans and interest will be paid in full.
TGAH continues to seek replacement underwriting capacity and has made losses during 2023. As such all loans and its investment in TGAH has been fully provided for during 2023. However the Directors are confident in the long tem future of this business.
The directors are confident about the Company's prospects but recognise that the success or otherwise of it being able to meet its forecasts is inevitably uncertain.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (excluding directors) employed by the company during the year was
During the year the Company received a dividend from its subsidiary Trilogy Managing General Agents Limited.
During the year the Company sold all its shares in its subsidiary Trilogy Managing General Agents Limited and its associate Active Risk Group Limited. Both transactions are completed during the year and payment has been made without any deferred consideration.
There is uncertainty surrounding the future profitability and cash flow generation of the Company's fellow group company Trinity General Agency LLC (TGALLC), which writes motor insurance business in Texas USA. As such the Directors have decided to make a provision of £408,010 against its outstanding loans with TGALLC and £778,686 against its investment in TGALLC.
During the year the share capital of Trilogy Managing General Agents Limited and Active Risk Group Limited were sold, refer to note 6 above.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Following the year-end the Company sold its interest in Falcon MGA Services Limited (FMGAS). At completion the consideration was sufficient to repay its inter company debt with FMGAS.
Also following the year-end the Company signed a Sale and Purchase Agreement to sell its investment in Trilogy Underwriting Limited. At completion all intercompany debts with other group companies had been settled and the agreement will result in an initial consideration and potentially a deferred consideration element based on future results.
Dividends totalling £0 (2022 - £0) were paid in the year in respect of shares held by the company's directors.
As at 31 December 2023, the company owed £403,125 (2022: £697,500) to Mr C G Harman, a director and shareholder. This is repayable by the company in accordance with the loan agreement which detail the loan was repayable during 2022 and therefore is shown as due within one year. Interest is due on £403,125 (2022: £697,500) at 4.5% and £Nil (2022: £3,004) at 11% to Mr C G Harman and totalled £93,324 (2022: £5,276) for the period. As at 31 December 2023, the Company owed interest of £46,288 (2022: £5,276) in respect of these loans.
As at 31 December 2023, the company owed £27,500 (2022: £40,000) to Mr N H Topche, a director and shareholder. This is repayable by the company in accordance with the loan agreement which detail the loan is repayable during 2023 and therefore is shown as due within one year. Interest is due at 11% to Mr N H Topche and totalled £5,799 (2022: £705) for the period. As at December 2023, the Company owed interest of £1,969 (2022: £705) in respect of these loans.
As at 31 December 2023, the company was owed £552,500 (2022: £552,500) by its wholly owned subsidiary Resolution Underwriting Partnership Limited, of which £552,500 (2022: £552,500) relates to subordinated loans. The interest at a base rate plus 3.5% on £308,373 of the sub-ordinated debts has been waived in 2023 and 2022 and the remaining debt of £440,000 (2022: £440,000) is non-interest bearing. As well as the amount owed by Resolution Underwriting Partnership Limited, there is an amount due to Resolution Underwriting Partnership Limited of £383,501 (2022: £315,941). In addition to these items, in 2015 upon the acquisition of Resolution Underwriting Partnership Limited, the Company acquired loan stock of £195,873 for nil cost and they continue to be held at nil value.
Mr C G Harman, Mr R C Hayes and Mr N H Topche are also directors in Resolution Underwriting Partnership Limited.
Mr C G Harman and Mr N H Topche are also directors in Trinity General Agency Holdings Inc. During the year, the Company advanced £283,150 (2022: £Nil) to Trinity General Agency Holdings Inc which is wholly owned holding company incorporated in the State of Delaware, USA. Trinity General Agency Holdings Inc owns 43% of the profit participation interests in a managing general agent Trinity General Agency LLC. As at 31 December 2023, the Company was owed £1,167,507 (2022: £884,356) from Trinity General Agency Holdings Inc in respect of these loans. Interest is due 6% from Trinity General Agency Holdings Inc and totalled £57,096 (2022: £54,887) for the period. As at 31 December 2023, the Company was owed interest of £124,860 (2022: £60,063) in respect of these loans. The Company also paid legal fees on behalf of Trinity General Agency Holdings Inc in a previous year amounting £27,211 (2022: £27,211) which remain outstanding as at 31 December 2023. In 2023, as a result of the recent trading performance of Trinity General Agency LLC and the potential restructuring of that entity £408,010 (2022: £884,356) has been impaired against the loans as disclosed in note 6.
During the year, the Company advanced £59,400 (2022: £Nil) to and received £95,000 from Falcon MGA Services Limited which is repayable as per the terms of the loan agreement and interest bearing. Interest is due at 6% from Falcon MGA Services Limited and totalled £29,186 (2022: £30,245) for the period. As at 31 December 2023, the Company was owed £456,100 (2022: £491,700) in respect of these loans and interest of £157,212 (2022: £124,666) from Falcon MGA Services Limited. Due to the uncertainty that Falcon MGA Services Limited will be able to repay these loans a bad debt provision of £471,726 was provided in 2019 against the value of the loan. This provision has been retained but no further provision made as although the trading prospects have improved there remains uncertainty of recoverability at this time.
Mr C G Harman, Mr N Topche and Mr R C Hayes are also directors in Resolution Group Services Limited. As at 31 December 2023, the Company was owed £452,783 (2022: £783,690) by Resolution Group Services Limited and included in administration expenses is a management charge of £850,000 (2022: £56,000) from Resolution Group Services Limited.
Mr C G Harman and Mr R C Hayes are also directors in Trilogy Underwriting Limited. As at 31 December 2022, the Company was owed £14,000 (2022: £276,000) from Trilogy Underwriting Limited. Interest is due 6% from Trilogy Underwriting Limited and totalled £12,990 (2022: £16,334) for the period. As at 31 December 2023, the Company was owed interest of £33,995 (2022: £17,684) in respect of these loans.
Mr C G Harman and Mr R C Hayes are also directors of Resolution Underwriting Holdings (Ireland) Ltd, a company incorporated in the Republic of Ireland. As at 31 December 2023 the Company was owed £148,907 (2022: £114,359). Other than as disclosed above, interest was not charged on any other loans.