Southern Rock Insurance Company LTD 2015 Accounts

Southern Rock Insurance Company Limited
Report & Financial Statements
For the year ended 31 December 2015
Company Registration No. 93137

SOUTHERN ROCK INSURANCE COMPANY LIMITED
Financial Statements
COMPANY INFORMATION
Company Registration Number: 93137
Registered Office: 3AC 3rdFloor

Leisure Island Business Centre
23 Ocean Village Promenade
Ocean Village
Gibraltar
Directors: J Banks
N Birrell
M Clayden
C Gillighan
T McGiffen
M Robinson
Secretary: STM Fidecs Management Limited
Bankers: Royal Bank of Scotland

PO Box 707
57 Line Wall
Gibraltar
Barclays Private Clients International

80-90 Main Street
Gibraltar
Solicitors: Lyons Davidson

51 Victoria Street
Bristol
BSl 6AD
Auditors: BDO Limited

Registered Auditors & Chartered Accountants
Regal House
Queensway
Gibraltar
Financial Statements
Table of Contents
Report of the Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. I

Independent Auditor's Report ....................................................................................... 6
Profit and Loss: Technical Account- General Business ........................................................ 8
Profit and Loss: Non Technical Account .......................................................................... 9
Balance Sheet: Assets ............................................................................................... 10
Balance Sheet: Liabilities ........................................................................................... 11
Notes to the Financial Statements ........................................................................... 12 to 30
Report of the Directors
The Directors present their report and the audited financial statements for the year ended 31 December 2015.
Principal Activities
The principal activity of Southern Rock Insurance Company Limited (the "Company") is the underwriting of
UK motor insurance risks. The Company is licensed by the Gibraltar Financial Services Commission ("FSC")
under the Financial Services (Insurance Companies) Act.
Business Review & Future Developments
The Directors report a profit for the year of £41.5m (2014: loss of £5.4m) and a regulatory capital position of
£53m compared to a required minimum of £16m under the Solvency I regime in force at 31' 1 December 2015.
The Company met and exceeded the required minimum margin by £3 7m at 31 ' 1 December 2015 and held
regulatory capital of 331% of the required minimum margin.
As at 1' 1 January 2016, the Company was required to comply with capital, governance and disclosure
requirements as set out in the Solvency II regime. The Directors are pleased to report that the Company both
met and exceeded its solvency capital requirement (SCR) at that date, exceeding its SCR by £10.Sm and
exceeding its minimum capital requirement (MCR) by £33.6m. The Company's SCR stood at £30.3m at 1'1
January 2016 and its MCR at £7.6m. The Company reported Own Funds of £41.2m at that date. All
other requirements of Pillar 2&3 have also been embedded in the operations of the business.
In order to comply with the enhanced capital requirements under the Solvency II regime, the Company has
taken several actions including entering into a loss portfolio transfer arrangement with Watford Re, an
associated company of Arch Re. As part of this arrangement, the Company cedes its net claims provisions for
the 2012, 2013 and 2014 underwriting years, which stand at £29.75m in aggregate, to Watford Re. The impact
of this arrangement on the Company's surplus over its SCR is c £6m.
Furthermore, during 2015 the Company entered into two arrangements with a related party company as part of
its preparations for full compliance with the Solvency II capital requirements. On 30th April 2015, the Company
entered into an agreement with Panacea Limited to sell the rights attaching to the ancillary income from the
renewal of its existing motor insurance policies for a consideration of £17.5m. On the same date, Panacea
Limited entered into an agreement to sell those same rights to ICS Risk Solutions Limited for a consideration of
£17.5m. On 30th September 2015, the Company entered into a second agreement with Panacea Ltd to sell the
rights attaching to the finance arrangement fee and overrider income on new motor insurance policies sold under
the Go Skippy and Debenhams brands until 30th December 2020 for a consideration of £60.2m. On the same
date, Panacea Limited entered into an arrangement to sell those same rights to ICS Risk Solutions Limited for a
consideration of £60.2m. These arrangements provide the Company with a fixed income stream over the next 5
years and remove any risk of volatility associated with the income. During 2015, proceeds of £9m have been
received in relation to these arrangements. A further £6.7m has been received between the year-end and the date
of signing this report.
More importantly, the underlying performance of the Company was positive in 2015 with an improvement in
the 2015 pure underwriting result following various ratings actions that were made during the second half of
2014 and 2015. Further enhancements including improved credit scoring and front end adjustments enabled the
Company to grow the book whilst maintaining its controlled approach to underwriting risk. Gross written
premiums including co-insurance increased by 22% to £129m (2014: £105m) whilst policies in force at the
year-end stood at 197,103 (2014: 163,650), an increase of 20%. Private motor policies sold under the
Debenhams brand achieved good growth in volumes, representing 30,151 of the policies in force at the year-end
compared to only 905 policies at the end of 2014. The Go Skippy brand continued to represent a significant
portion of the Company's book with 121,928 policies in force at 31' 1 December 2015, which is in line with the
Company's strategy to focus its underwriting capacity through the a limited number of brands, which will
provide the Company with continued and sustainable growth in the future.
Page 1
Business Review & Future Developments (continued)
The Company has engaged with external actuaries to estimate appropriate levels of claims reserving. Typically
the Company takes a prudent approach to reserving in the early years of development and releases provisions
once the year has settled out. As such, reserve releases have been recorded against the 2012 and 2013
underwriting years in the 2015 reporting period. The Company has based its reserves for the 2015 underwriting
year on a full year loss ratio of 82.4% (89.8% earned) in line with the external actuarial best estimate. This
demonstrates the improvement in underwriting performance compared to the 2014 underwriting year.
Following the improvements in performance during 2015, the Company made a strategic decision to retain a
greater share of the book from August 2015 onwards. From that point on, the Company retained c 50% of the
premium underwritten, an increase from 29% at the start of the year. During 2015, the Company retained an
average of c 39% of the book.
Notwithstanding that decision, the Company continued to operate a capital light business model during 2015,
transferring a significant portion of its underwriting risk to its high quality co- and re-insurance partners. The
Company co-insured 28% of its book on average in 2015; 35% of which was placed with Cardif Pinnacle until
August 2015, part of the BNP Paribas group and 10% with Alwyn, a subsidiary of Arch Re. Both BNP Paribas
and Arch Re hold A+ Standard and Poor's (S&P) ratings. The Company placed a further 20% of its business
with re-insurance partners, Partner Re, Allianz and Axis Re during 2015, leaving the Company with a net
exposure to 39% of the book on average during the year. These arrangements have been extended into 2016,
with the Company retaining 40% of the 2016 business written. Watford Re, a related Company of Arch Re, has
also joined the coinsurance panel for 2016.
The Directors believe that the Company has sufficient capital resources to manage its business risks successfully
and as such the going concern basis has been used in preparing these financial statements.
Key Performance Indicators
The Directors measure the performance of the Company based on numerous indicators, the most important of
which are:
• Profit margin;
• Return on capital employed;
• Loss ratios; and
• Expense ratios.
Research
The Company did not carry out any activities in the field of research in the current or prior periods.
Results & Dividends
The profit for the year after taxation amounted to £41.5m (2014: £5.4m loss). No dividends have been paid in
2015 (2014: £nil).
Share Capital
No share capital was issued during the year (2014: £nil).
Page2
Directors
The Directors who served during the year and to the date of signing the financial statements were as follows:
J Banks
N Birrell
M Clayden
C Gillighan
T McGiffen
M Robinson (appointed 1 January 2016)

A Wigmore (resigned 03 December 2015)
Staff
To all our team members and associates who have worked so hard throughout the year, we would like to record
our thanks for their ongoing contribution to the Company's future success.
Principal Risks and Uncertainties
Claims Review and Provisioning
The Company's reserving policy is to set provisions in line with independent actuarial best estimate. This
independent actuarial review is supplemented by a second independent review of those actuarial results. This is
more fully explained within the claims reserving note 1.4.1.
There is always inherent risk in the calculation of projecting ultimate claims. However, based upon the external
actuarial best estimate, the Board believe the loss ratio levels and associated incurred but not reported provisions
included in these financial statements to be sufficient to meet future claims settlements.
Management of Credit Risk
The Company purchases reinsurance protection from companies which are part of groups with specified
financial strength ratings of A or above according to S&P. The Company also maintains a strong credit control
function to ensure that its trade debtors are collected on a timely basis in line with FSC requirements.
Management of Insurance Risk
The Company mitigates underwriting risks through the following:
1) Purchase of reinsurance
The Company purchases excess of loss and quota share reinsurance.
2) Analytical pricing
A significant proportion of policies sold by the Company were sold directly to the customer. This allowed
the Company to obtain detailed data on which it could base its future pricing of policies. The availability of
this information is fundamental to the Company's strategy of amending rates in reaction to changes in market
conditions.
3) Effective claims management

The Company uses agreed Key Performance Indicators (KPI's) in the management of claims. Regular audits
of the claims files are completed to ensure that claims are settled promptly and fairly on behalf of customers.
Page 3
Financial Risk Management Objectives and Policies
The Company uses a number of financial instruments to raise finance for the Company's operations. The
existence of these instruments exposes the Company to financial risks which are detailed below.
Liquidity Risk I Cash Flow Risk

The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet its foreseeable
needs and to invest cash assets safely and profitably. This is measured on a monthly basis. The Company
monitors cash flow using sophisticated forecasting techniques to ensure that all liabilities are met when due.
Credit Risk
In order to manage credit risk the Directors have incorporated a range of credit control procedures to monitor
debt levels and to ensure that any debts are collected as soon as reasonably possible. Strict credit control KPI's
are reported to ensure that debts do not exceed the prescribed period.
Market Risk
Market risk is the risk of adverse financial impact as a consequence of market movements such as currency
exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of
assets held and the value of liabilities. The objective of the Company in managing its market risk is to ensure
risk is managed in line with the Company's risk appetite. The Company has established policies and procedures
in order to manage market risk and methods to measure it. There were no changes in the Company's market risk
exposure in the financial year nor to the objectives, policies and processes for managing market risk.
Employee Involvement
The Company supports the principle of equal opportunities. Its policy is that there should be no unfair
discrimination on the grounds of sex, age, religion or race. Equal employment opportunities are available to all
persons, including the disabled, having full regard to their particular skills and abilities.
The Directors believe in encouraging employees to become fully informed of the Company's activities and to be
closely involved in the business. The Company provides ongoing training to employees as necessary.
Branches
The Company did not operate any branches in either the current or prior year.
Page4
Statement of Directors Responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in accordance with Gibraltar Generally Accepted
Accounting Practice (Gibraltar Accounting Standards and applicable law). The financial statements are required
by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;

• Make judgements and estimates that are reasonable and prudent;
• State whether applicable Gibraltar accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that
the Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at
any time the financial position of the Company and enable them to ensure that the financial statements comply
with the Gibraltar Companies Act and the Gibraltar Insurance Companies (Accounts Directive) Regulations
1997. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Provision of Information to Auditors
Each of the persons who are Directors at the time when this Directors report is approved has confirmed that:
• so far as that Director is aware, there is no relevant audit information of which the Company's auditors
are unaware, and
• that Director has taken all the steps that ought to have been taken as a Director in order to be aware of
any information needed by the Company's auditors in connection with preparing their report and to
establish that the Company's auditors are aware of that information.
Auditors
The auditors are BOO Limited who are eligible for reappointment.
This report was approved by the Board and signed on its behalf.
C Gillighan T McGiffen
Director Director
Date: Date: 2...lS· o~ · l C.
Page 5
IBDO Tel: +350 20047300
Fax:+350 20047590
www.bdo.gi
Regal House
Queensway
PO Box 1200
Gibraltar
Independent auditor's report to the members of

Southern Rock Insurance Company Limited
Report on the financial statements
We have audited the accompanying financial statements ("the financial statements") of Southern
Rock Insurance Company Limited for the year ended 31 December 2015 which comprise the profit
and loss account, the balance sheet and the related notes. These financial statements have been
prepared under the accounting policies set out therein.
This report, including the opinion, has been prepared for and only for the Company's members as a
body in accordance with Section 258 of the Companies Act 2014 and for no other purpose. We do
not, in giving this opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Directors' responsibilities for the financial statements
The directors' are responsible for the preparation and true and fair presentation of these financial
statements in accordance with applicable law in Gibraltar and Gibraltar Generally Accepted
Accounting Practice. This responsibility includes: designing, implementing and maintaining internal
control relevant to the preparation and true and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors' responsibilities
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors' judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and true and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
BDO Limited, a Gibraltar limited company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BOO network of independent member firms.
BOO Limited is registered in Gibraltar with company number 52200. Directors: D. MCHard, C. Summerfield.
IBDO
Independent auditor's report to the members of

Southern Rock Insurance Company Limited (continued)
Opinion
In our opinion, the financial statements:
• give a true and fair view, in accordance with Gibraltar Generally Accepted Accounting
Practice, of the state of the Company's affairs as at 31 December 2015 and of the
Company's profit for the year then ended; and
• have been properly prepared in accordance with the Companies Act 2014 and the Insurance
Companies (Accounts Directive) Regulations 1997.
Emphasisof matter
We draw attention to note five to the financial statements which describes the conditions required
for the realisation of this long term receivable from a related party. The receivable is recorded at
its fair value based on the present value of the expected future cash flows over the following five
years. The Board of Directors has reviewed the recoverability of the balance and assessedthe
circumstances under which the receivable may be considered impaired and subsequently concluded
that no impairment is required. Our opinion is not qualified in respect of this matter.
Opinion on other matter prescribed by the Companies Act
In our opinion the information given in the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2014
requires us to report to you if, in our opinion:
• the Company has not kept proper accounting records; or
• if information specified by law regarding directors' remuneration and other transactions is

not disclosed; or
• we have not received all the information and explanations we require for our audit.
Christian Sum rfield (Statutory Auditor)

for and on beh f of
BDO Limited
Regal House
Queensway
Gibraltar
29 April 2016
SOUTHERN ROCK INSURANCE COMP ANY LIMITED
Profit and Loss Account
Profit and Loss: Technical Account - General Business
NOTES 2015 2015 2014 2014

£'000 £'000 £'000 £'000
Gross written premiums 2 92,358 53,026

Outward reinsurance premiums 2 (51,942} (30,330)
Net written premiums 40,416 22,696
Change in the provision for unearned premiums:

- Gross 2 (25,807) 8,943
- Reinsurers' share 2 14,436 (5,187)
(11,371) 3,756
Earned premiums, net of reinsurance 2 29,045 26,452
Other technical income 5 26,097 30,233
Gross claims paid 3 (62,027) (66,514)

Reinsurers' share of claims paid 3 26,874 24,104
Net claims paid (35,153) (42,410)
Change in the provision for claims:

- Gross 3 (5,089) (5,210)
- Reinsurers' share 3 (1,841} 5,271
(6,930) 61
Claims incurred, net of reinsurance (42,083) (42,349)
Net operating expenses 4 (41,032) (23,823)
Balance on the Technical Account: General Business (27,973} (9,487}
The notes on pages 12 to 30 are an integral part of these financial statements.
Page 8
Profit and Loss Account
Profit and Loss: Non-Technical Account
NOTES 2015 2015 2014 2014

£'000 £'000 £'000 £'000
Balance on the Technical Account: General Business (27,973) (9,487)
Investment income:
Income from land and buildings 25
Income from other financial investments 298 343
Realised gains on investments 572 106
Unrealised gains on investments 765 (766)
1,635 (292)
Other income 5 73,163 6,503
Other charges 6 (5,299) (2,133)
Profit/(loss) on ordinary activities before tax 41,526 (5,409)
Tax on profit/(loss) on ordinary activities 7
Profit/(loss) for the financial year 17 41,526 (5,409)
The Company has had no discontinued activities in the year. Accordingly, the above results for the Company
relate solely to continuing activities and include all recognised gains and losses in arriving at the loss for the
year. This loss is stated on an historical cost basis as modified by the revaluation of investments.
Page 9
Balance Sheet
As at 31 December 2015
Balance Sheet: Assets
NOTES 2015 2015 2014 2014

£'000 £'000 £'000 £'000
Investments:
Land and buildings 8 820 820
Investment in subsidiaries 9 10,256 12,488
Other financial investments 10 15,000 17,071
26,076 30,379
Debtors due within 1 year:

Debtors arising out of direct insurance operations 11 49,869 43,209
Debtors arising out of reinsurance operations 3,691 4,042
Other debtors 12 21,657 844
75,217 48,095
Debtors due after 1 year:

Other debtors 12 43,392
43,392
Other assets:
Tangible assets 13 54 143
Cash at bank and in hand 5,798 3,476
5,852 3,619
Prepayments and accrued income:

Deferred acquisition costs 26,369 25,229
Accrued interest 22 35
Other prepayments and accrued income 14 17,288 16,108
43,679 41,372
Total assets 194,216 123,465
Page 10
Balance Sheet
As at 31 December 2015
Balance Sheet: Liabilities
NOTES 2015 2015 2014 2014

£'000 £'000 £'000 £'000
Capital and reserves:

Called up share capital 16, 17 25,502 25,502
Share premium account 17 9,051 9,051
Revaluation reserve 17 (38) 2,194
Profit and loss account 17 33,302 (8,225)
67,817 28,522
Technical provisions:
Provision for unearned premiums:
- Gross 2 52,888 27,081
- Reinsurers' share 2 {29,176} (14,740)
23,712 12,341
Claims outstanding:
- Gross 3 104,726 99,637
- Reinsurers' share 3 {49,791} (51,632)
54,935 48,005
Creditors:
Creditors arising out of direct insurance 946 5,404
Creditors arising out of reinsurance operations 33,701 21,511
Other creditors including taxation and social security 15 3,579 665
38,226 27,580
Accruals and deferred income 9,526 7,017
Total liabilities and shareholders' equity 194,216 123,465
The financial statements were approved by the Board of Directors and were authorised for issue on its behalf by:
~-
C Gillighan T McGiffen
Director Director
Date: 2-~ · C\ · '-b Date: )_J ·0 lt · \ C:,
Page 11
Notes to the Financial Statements
1. Principle accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered
material in relation to the Company's financial statements:
1.1 Basis of accounting

The financial statements have been prepared under the historical cost convention, modified to include certain
items at fair value, and in accordance with Financial Reporting Standards 102 & 103 (FRS 102 & 103) issued by
the Financial Reporting Council and in accordance with Gibraltar Accounting Standards (Gibraltar Generally
Accepted Accounting Practice). These financial statements present information about the Company as a
standalone entity and not about the group. The Company has taken advantage of the exemptions conferred by
FRS 102 and section five of the Insurance Companies (Accounts Directive) Regulations 1997 not to produce
consolidated financial statements because it is a majority owned subsidiary of Southern Rock Holdings Limited.
These financial statements represent the results of the Company only and do not contain consolidated
information as a parent of a group. The Company is consolidated into the Group Accounts of its parent
company, Southern Rock Holdings Limited, incorporated in Gibraltar.
1.2 Going concern basis

The financial position of the Company, its cash flows, liquidity position and borrowing facilities are monitored
on a monthly basis and the techniques used to monitor these are noted in the Directors' report. In addition the
insurance risk is monitored as noted in the critical accounting estimation policy note below. The Company has
sufficient financial resources together with sufficient renewing income from customers across different income
streams from its motor book to meet its operating requirements.
The Company is required to maintain a minimum level of solvency margin in accordance with the Insurance
Companies (Solvency Margins and Guarantee Funds) Regulations 2004. As at 31 December 2015 the Company
held regulatory capital of331% of the required minimum margin (2014: 104%). The Company held regulatory
capital under the Solvency II regime at 1st January 2016 of £4lm compared to its SCR of £30.3m. Therefore, the
Directors believe that the Company continues to have adequate resources to manage its business risks
successfully. After making enquiries, the Directors have a reasonable expectation that the Company has
adequate resources to continue operating for the foreseeable future and continues to demonstrate a positive cash
flow position to fund claims and other liabilities as they fall due.
1.3 Cash flow statement

The Company is a majority owned subsidiary of Southern Rock Holdings Limited and is included in the
consolidated financial statements of Southern Rock Holdings Limited, which are publically available (see note
23). Consequently the Company has taken advantage of the exemption from preparing a cash flow statement
under the terms ofFRS 102 sections 1.9 and 1.12.
1.4 Critical accounting estimates and judgements in applying accounting policies

The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities. These
estimates and judgements are continually evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. There are two
critical accounting estimates which include a significant level of uncertainty; (i) the ultimate liability arising
from claims made under insurance. See also note 3 for further information on claims reserves; and (ii) the
technique and assumptions used in measuring the fair value of the outstanding balance due from Panacea Ltd
related to the assignment ofrights contracts entered into during 2015. Note 5 includes more information on this
balance and the techniques used.
1.4.1 The ultimate liability arising from claims made under insurance
Claims incurred includes all losses occurring during the year, whether reported or not, related handling costs and
reasonable deductions for recoveries in respect of salvage, subrogation rights and other recoveries.
Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a
projection of the ultimate cost of settling claims that have occurred prior to the balance sheet date and remain
unsettled at the balance sheet date. The key area where these techniques are used relates to the ultimate cost of
Page 12
1.4.1 The ultimate liability arising from claims made under insurance (continued)
reported claims. A secondary area relates to the emergence of claims that occurred prior to the balance sheet
date, but had not been reported at that date. The estimates of the ultimate cost of reported claims are based on
the setting of claim provisions on a case-by-case basis, for all but the simplest of claims. The sum of these
provisions are compared with projected ultimate costs using a variety of different projection techniques
(including incurred and paid chain ladder and an average cost of claim approach) to allow an actuarial
assessment of their potential outcome. They include allowance for unreported claims. The most significant
sensitivity in the use of the projection techniques arises from any future step change in claims costs, which
would cause future claim cost inflation to deviate from historic trends. This is most likely to arise from a change
in the regulatory or judicial regime that leads to an increase in awards or legal costs for bodily injury claims that
is significantly above or below the historical trend.
The Company's independent actuarial advisors project best estimate claims reserves using a variety of
recognised actuarial techniques. The Company's reserving policy is to record claims reserves at the independent
actuarial best estimate (see note 3).
1.4.2 Valuation of the long term receivable due from Panacea Ltd
The directors use their judgement in selecting an appropriate valuation technique to measure the long term
receivable from Panacea Ltd (note 12). The Company uses valuation techniques which include "market
observable inputs" where available, derived from similar assets in similar and active markets, from recent
transaction prices for comparable items or from other observable market data. The fair value of the receivable
has been estimated using a discounted cash flow analysis based on assumptions supported, where possible, by
observable market prices or rates.
1.5 Processing costs

These are included in claims paid and are deferred over the weighted average settlement period of a claim,
which is over a period of 48 months (see note 3).
1.6 Premiums
General business written premiums comprise the premiums on contracts entered into during the year which
incept during the current financial year together with premiums sold on policies which incept after the year end.
Premiums are disclosed gross of commission payable to intermediaries and exclude taxes and levies based on
premiums.
1.7 Unearned premium reserve

For general business accounted for on the annual basis, the provision for unearned premiums comprises the
proportion of gross premiums written which is estimated to be earned in the following or subsequent financial
years, computed separately for each insurance contract using the daily pro rata method, adjusted if necessary to
reflect any variation in the incidence of risk during the year covered by the contract.
1.8 Acquisition costs

Acquisition costs comprise brokerage and service company acquisition costs, including marketing, incurred on
insurance contracts written during the financial year.
Acquisition costs are spread over a period equivalent to that over which the premiums on the underlying
business are earned.
1.9 Reinsurance
The Company cedes insurance risk in the normal course of business for all of its products. Reinsurance assets
represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a
manner consistent with the outstanding claims provision or settled claims associated with the reinsurer's policies
and are in accordance with the related reinsurance contract. Gains or losses on buying reinsurance are
recognised in the income statement immediately at the date of purchase and are not amortised.
Page 13
1.9 Reinsurance (continued)

Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Reinsurance
liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner
consistent with the related reinsurance contract.
Premiums and claims are presented on a gross basis for ceded reinsurance. Reinsurance assets or liabilities are
derecognised when the contractual rights are extinguished or expire or when the contract is transferred to
another party.
1.10 Other technical income

Other technical income consists of insurance related income earned in relation to insurance products. Other
technical income is recognised when earned.
1.11 MIB levy

The Motor Insurer's Bureau annual levy ("MIB levy") is accrued on a monthly basis at a fixed percentage of
gross written premiums.
1.12 Investments in group undertakings

Investments in group undertakings are recorded in the Company's balance sheet at the Company's share of the
net asset value in the group undertaking less any necessary provision for impairment in value.
1.13 Other financial investments

Other financial investments comprise deposits with credit institutions which are stated at cost; debt securities,
other fixed income securities and other loans which are stated at amortised cost; and equities which are stated at
market value in the accounting records.
1.14 Land and buildings

Investments in land and buildings are stated at the lower of cost and open market value.
1.15 Investment income

Investment income includes income from land and buildings, which relates to the investment property.
Income from other financial investments relates to investment income from fixed income securities and
dividend income from equity investments. Investment income is recognised in the period it is earned.
Dividends are recognised in the period they are received.
Umealised gains/losses on investments represent the difference between the current value of investments at the
balance sheet date and their purchase price or the carrying value at the start of the year. The movement in
umealised investment gains/losses includes an adjustment for previously recognised umealised gains/losses on
investments disposed of in the accounting period. Realised gains or losses represent the difference between net
sales proceeds and purchase price.
Investment return (including realised and the movement in umealised investment gains and losses) on
investments attributable to the general business and associated shareholder's funds is reported in the non-
technical account.
1.16 Tangible assets

Tangible assets are stated at cost less depreciation.
1.16.1 Depreciation
Depreciation is calculated at the following annual rates so as to write off the cost of tangible assets over their
anticipated useful lives using the straight line method:-
• Computer equipment and software: 3 years

• Fixtures & fittings, tools and equipment: 4 years
Page 14
1.17 Current taxation

Current taxation is provided for on the basis of tax rates and tax law that have been enacted or substantially
enacted at the year-end date.
1.18 Deferred taxation

Deferred taxation is recognised in respect of all significant timing differences that have originated but not
reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in
future or a right to pay less tax in the future have accrued at the balance sheet date. Timing differences are
differences between the Company's taxable profits and results as stated in the financial statements that arise
from the inclusion of gains and losses in a tax assessment period different from those in which they are
recognised in the financial statements. Deferred tax is recognised in respect of the retained earnings of overseas
subsidiaries and associates only to the extent that, at the balance sheet date, dividends have been accrued as
receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary or
associate. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which
timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially
enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
1.19 Foreign currencies

Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the
balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the
transaction. All differences are taken to the profit and loss account.
1.20 Impairment of assets

Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet
date. Ifthere is objective evidence of impairment, an impairment loss is recognised in profit or loss as described
below.
Non-financial assets
An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after
initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount ofan
asset is the higher of its fair value less costs to sell and its value in use. The recoverable amount of goodwill is
derived from measurement of the present value of the future cash flows of the cash-generating units ("CGU") of
which the goodwill is a part. Any impairment loss in respect of a CGU is allocated first to the goodwill attached
to that CGU, and then to other assets within that CGU on a pro-rata basis.
Where indicators exist for a decrease in impairment loss, the prior impairment loss is tested to determine
reversal. An impairment loss is reversed on an individual impaired asset to the extent that the revised
recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment
been recognised. Where a reversal of impairment occurs in respect of a CGU, the reversal is applied first to the
assets (other than goodwill) of the CGU on a pro-rata basis and then to any goodwill allocated to that CGU.
1.21 Financial Instruments
Financial assets
For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original
effective interest rate. For financial assets carried at cost less impairment, the impairment loss is the difference
between the asset's carrying amount and the best estimate of the amount that would be received for the asset ifit
were to be sold at the reporting date.
Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event
occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An
impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable
value does not lead to a revised carrying amount higher than the carrying value had no impairment been
recognised.
Page 15
Financial assets (continued)

The Company's investments comprise of debt and equity investments, cash and cash equivalents, loans and
receivables and investment in subsidiaries.
Recognition
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument. 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.
Initial measurement
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except
for those financial assets classified as at fair value through profit or loss, which are initially measured at fair
value (which is normally the transaction price excluding transaction costs), unless the arrangement constitutes a
financing transaction. If an arrangement constitutes a finance transaction, the financial asset or financial liability
is measured at the present value of the future payments discounted at a market rate of interest for a similar debt
instrument.
Subsequent measurement
Non-current debt instruments which meet the following conditions are subsequently measured at amortised cost
using the effective interest method:
a) Returns to the holder are (i) a fixed amount; or (ii) a fixed rate ofretum over the life of the instrument; or (iii)
a variable return that, throughout the life of the instrument, is equal to a single referenced quoted or observable
interest rate; or (iv) some combination of such fixed rate and variable rates, providing that both rates are
positive.
b) There is no contractual provision that could, by its terms, result in the holder losing the principal amount or
any interest attributable to the current period or prior periods.
c) Contractual provisions that permit the issuer to prepay a debt instrument or permit the holder to put it back to
the issuer before maturity are not contingent on future events, other than to protect the holder against the credit
deterioration of the issuer or a change in control of the issuer, or to protect the holder or issuer against changes
in relevant taxation or law.
d) There are no conditional returns or repayment provisions except for the variable rate return described in (a)
and prepayment provisions described in (c ).
Debt instruments that are classified as payable or receivable within one financial year and which meet the above
conditions are measured at the undiscounted amount of the cash or other consideration expected to be paid or
received, i.e. net of impairment.
Other debt instruments not meeting these conditions are measured at fair value through profit or loss.
Commitments to make and receive loans which meet the conditions mentioned above are measured at cost
(which may be nil) less impairment.
Investments in non-convertible preference shares and non-puttable ordinary shares or preference shares shall be
measured at fair value with changes in fair value recognised in profit or loss, if the shares are publicly traded or
their fair value can otherwise be measured reliably; and all other such investments shall be measured at cost less
impairment.
Realised and unrealised gains and losses arising from changes in the fair value of investments are presented in
the non-technical profit and loss account in the period in which they arise. Dividend and interest income is
recognised when earned. Investment management and other related expenses are recognised when incurred.
Page 16
Derecognition of financial assets and liabilities

Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the
financial asset expire or are settled, b) the Company transfers to another party substantially all of the risks and
rewards of ownership of the financial asset, or c) the Company, despite having retained some significant risks
and rewards of ownership, has transferred control of the asset to another party and the other party has the
practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability
unilaterally and without needing to impose additional restrictions on the transfer.
Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled
or expires.
Fair value measurement

The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices
are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as
there has not been a significant change in economic circumstances or a significant lapse of time since the
transaction took place. If the market is not active and recent transactions ofan identical asset on their own are
not a good estimate of fair value, the company estimates the fair value by using a valuation technique.
Impairment of financial instruments measured at amortised cost or cost

For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original
effective interest rate, i.e. using the effective interest method.
For financial assets carried at cost less impairment, the impairment loss is the difference between the asset's
carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at
the reporting date.
Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event
occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An
impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable
value does not lead to a revised carrying amount higher than the carrying value had no impairment been
recognised. The amount of the reversal is recognised in profit and loss immediately.
Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of
changes in value.
Page 17
2. Earned premiums, net of reinsurance

2015
Gross Reinsurance Net

£'000 £'000 £'000
Premiums receivable 92,358 (51,942) 40,416
Unearned premiums carried forward (52,888) 29,176 (23,712)

Unearned premiums brought forward 27,081 (14,740) 12,341
(25,807) 14,436 (11,371)
Premiums earned 66,551 (37,506) 29,045
2014

£'000 £'000 £'000
Premiums receivable 53,026 (30,330) 22,696
Unearned premiums carried forward (27,081) 14,740 (12,341)

Unearned premiums brought forward 36,024 (19,927) 16,097
8,943 (5,187) 3,756
Premiums earned 61,969 (35,517) 26,452
Gross written premiums before co-insurance for the year ended 31 December 2015 amounted to £128.7m (2014:
£105.6m).
Page 18
3. Claims incurred, net of reinsurance
2015

£'000 £'000 £'000
Claims paid (54,721) 26,874 (27,847)

Claims handling costs (7,306) (7,306)
(62,027) 26,874 (35,153)
Outstanding claims carried forward (104,726) 49,791 (54,935)

Outstanding claims brought forward 99,637 (51,632) 48,005
(5,089) (1,841) (6,930)
Claims incurred (67,116) 25,033 (42,083)
2014

£'000 £'000 £'000
Claims paid (59,890) 24,104 (35,786)

Claims handling costs (6,624) (6,624)
(66,514) 24,104 (42,410)
Outstanding claims carried forward (99,637) 51,632 (48,005)

Outstanding claims brought forward 94,427 (46,361) 48,066
(5,210) 5,271 61
Claims incurred (71,724) 29,375 (42,349)
The Company appointed Lane Clark & Peacock LLP (LCP) to provide an actuarial valuation of the claims
reserve as at 31 December 2015, having also used LCP in the prior year. The actuarial valuation provided the
Company with a range of outcomes and their opinion of the best estimate reserve. The Company's Underwriting
and Reserving Committee accepted LCP's best estimate and at 31 December 2015 the Company is holding a net
outstanding claims reserve position of £54.9m (2014: £48.0m).
The Directors are therefore confident that the claims reserves in the financial statements are a prudent reflection
of the future potential liability of the Company.
4. Net operating expenses

2015 2014
£'000 £'000
Acquisition costs 49,829 43,425

Change in deferred acquisition costs (1,140) (12,368)
Administrative expenses 2,138 1,924
Reinsurance commissions and profit participation (9,795) (9,158)
41,032 23,823
Page 19
5. Other technical income and other income

2015 2014
£'000 £'000
Other technical income:
Income from ancillary products 26,097 30,233
26,097 30,233
2015 2014
£'000 £'000
Other income:
Other 73,163 6,503
73,163 6,503
Other income in 2015 included the profit on sale of the ancillary rights attaching to the ancillary income from the
renewal of its existing motor insurance policies to Panacea Ltd, a subsidiary company, for a consideration of
£17.5m. On the same date, Panacea Ltd entered into an agreement to sell those same rights to ICS Risk Solutions
Limited for a consideration of £17.5m. Other income in 2015 also included the profit on sale of the rights
attaching to the finance arrangement fee and overrider income on new motor insurance policies sold under the
Go Skippy and Debenhams brands until 30th December 2020 to Panacea Ltd for a consideration of £60.2m. On
the same date, Panacea Ltd entered into an arrangement to sell those same rights to ICS Risk Solutions Limited
for a consideration of £60.2m. Between entering into these deals and the date of signing these financial
statements, the Company has received cash consideration of £9.8m and £5.9m respectively. The remaining
consideration outstanding on the rights to the renewals income of £7.7m is due monthly at £700,000 per month
and will be fully paid up by March 2017. The remaining consideration outstanding on the rights to the finance
and overrider income of £54.3m is due monthly at £970,000 per month and will be fully paid up by December
2020.
The receivable balances have been recorded at their fair value as at 31st December 2015 of £17.3m and £54.8m
respectively (note 12 and note 19). The difference between the fair value and the nominal consideration due will
be unwound as interest over the term of each deal.
The Directors have given due consideration to the recoverability of the balances due from Panacea and
concluded that no impairment is necessary at the balance sheet date in accordance with relevant financial
reporting standards. In assessing the recoverability of the balances, the Directors have assessed the current
performance and net asset position of ICS Risk Solutions, the ultimate counterparty in these transactions. The
Directors have considered the performance of ICS since each deal was signed and are satisfied that sufficient
profits and cash funds are available to pay down the balances due in line with the contractual obligations. All
payments have been received on time and in accordance with the contractual obligations since the deals were
signed. The Directors have also considered the circumstances which might reasonably be expected to lead to a
default and the impact this would have on the recoverability of the outstanding balances. Such circumstances are
considered to be remote but would include the Company ceasing to write business under the GoSkippy and
Debenhams brands. The Directors have no plans to follow such a strategy, however are comfortable that should
such an action take place then ICS would have sufficient resources available to it so that it could meet its
obligations. Therefore the recoverability of the debtor is not reliant on the Company continuing to write
business.
Other income also includes £921,000 related to settlement of a litigation that was concluded during 2015.
Other income in 2014 included a write back of a related party creditor balance as part of a wider simplification
of related party balances.
Page 20
6. Other charges
2015 2014
£'000 £'000
Other charges include:
Depreciation 95 131
Staff costs (see below) 718 653
Statutory audit fees 80 75
2015 2014
£'000 £'000
Staff costs:
Wages and salaries 670 621
Social security costs 33 28
Other staff costs 15 4
718 653
The Company employed 19 staff each month on average (2014: 17), of these 14 were employed in underwriting
(2014: 15), 2 in compliance (2014: 2), and 3 in Ml/pricing.
The aggregate of Directors' emoluments in 2015 amounted to £0.7m (2014: £0.7m), including consultancy costs.
Page 21
7. Taxation
2015 2014
£'000 £'000
Gibraltar
Corporation tax at 10% (2014: 10%)
Total current tax
The tax for the period is nil (2014: nil) compared with the standard effective rate of corporation tax in Gibraltar
for the year ended 31 December 2015 of 10% (2014: 10%). The differences are explained below:
2015 2014
£'000 £'000
(Loss )/profit on ordinary activities before tax 41,526 (5,409)
(Loss)/profit on ordinary activities multiplied by the

standard rate of corporation of 10% (2014: 10%) 4,153 (541)
Effects of:
- Expenses not deductible for tax purposes 27 4
- Depreciation in excess of capital allowances 6 4
- Unrealised loss/(gain) on investments (76)
- Realised loss/(gain) on investments (58)
- Non trading interest and dividend income (30)
- Unrelieved tax losses and other deductions 3,177 504
- Capital gain arising from sale of rights to ancillary (7,199)
income
- Non-taxable investment income 29
Total current tax
Factors affecting current and future tax charges
During the year, there were no factors that affected current and future tax charges.
8. Land and buildings

2015 2014
£'000 £'000
As at 1 January 820 1,063

Additions
Increase in market value 20
Disposals (263)
As at 31 December 820 820
Page 22
8. Land and buildings (continued)
The property is a long leasehold apartment in Gibraltar with an open market valuation in October 2014 of
£820,000.
9. Investment in subsidiaries
2015 2014
£'000 £'000
As at 1 January 12,488 10,294

Revaluation (2,232) 2,194
Disposals
As at 31 December 10,256 12,488
The Company's investment in subsidiaries consists of:

2015 2014
£'000 £'000
Panacea Limited 10,256 12,488

Southern Rock Intellectual Property Limited
10,256 12,488
Panacea Limited
The Company owns 100% of the issued ordinary and preference share capital of Panacea Limited, a company
registered in Gibraltar, whose net assets at 31 December 2015 were £10.3m* (2014: £12.5m*) and retained loss
for the year was £2.2m* (2014: profit of £2.lm*).
Southern Rock Intellectual Property Limited

The Company owns 100% of the issued ordinary and preference share capital in Southern Rock Intellectual
Property Limited, a company registered in Gibraltar, whose net assets at 31 December 2015 were £nil* (2014:
£nil) and retained profit for the year was £nil* (2014: £nil).
* Per unaudited management accounts for the year ended 31 December 2015 and 31 December 2014
10. Other financial investments

2015 2014
£'000 £'000
Shares and other variable yield securities 7,038 8,404

Debt securities and other fixed income securities 7,960 8,610
Other loans 2 57
15,000 17,071
The cost offmancial investments held on 31 December 2015 was £13.7m (2014: £19.3m). Other loans consist of
loans to external entities. On 31 December 2015, the Company held listed investments with a total market value
of £6.2m (2014: £6.5m).
Page 23
11. Debtors arising out of direct insurance operations
2015 2014
£'000 £'000
Amounts owed by group undertakings (note 19) 35,821 29,186

Amounts owed by third parties 14,048 14,023
49,869 43,209
All the debtor balances above fall due for payment within one year.
12. Other debtors

2015 2014
£'000 £'000
Debtors due within 1 year:
Amounts owed by group undertakings (note 19) 1,051 598
Amounts owed by related parties (note 19 and note 5) 20,453 113
Other debtors 153 133
21,657 844
2015 2014
£'000 £'000
Debtors due after 1 year:
Amounts owed by related parties (note 19 and note 5) 43,392
43,392
13. Tangible assets

Computer Computer Fixtures
equipment software & fittings Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2015 121 531 50 702
Additions 6 6
Disposals
At 31 December 2015 121 537 50 708
Depreciation
At 1 January 2015 107 422 30 559
Charge for year (2) 91 6 95
Disposed assets
At 31 December 2015 105 513 36 654
Net book value at 31 December 2015 16 24 14 54
Page 24
13. Tangible assets (continued)

Computer Computer Fixtures
equipment software & fittings Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2014 106 399 39 544
Additions 15 132 11 158
Disposals
At 31 December 2014 121 531 50 702
Depreciation
At 1 January 2014 83 320 25 428
Charge for year 24 102 5 131
Disposed assets
At 31 December 2014 107 422 30 559
Net book value at 31 December 2014 14 109 20 143
14. Other prepayments and accrued income

2015 2014
£'000 £'000
Deferred processing costs and levies 17,288 16,108

17,288 16,108
15. Other creditors including taxation and social security

2015 2014
£'000 £'000
Insurance premium tax payable 3,602 688

Amounts owed to group undertakings (note 19)
Corporation tax (24) (23)
Other creditors 1
3,579 665
All the creditor balances above fall due for payment within one year and are unsecured.
16. Called up share capital

2015 2014
£'000 £'000
Allotted, called up and fully paid:
Class A Ordinary shares of £1 each 20,845 20,845
Class D Preference shares of£ 1 each 4,657 4,657
25,502 25,502
All preference shares are non-voting, non-cumulative, participating, redeemable and convertible.
Page 25
17. Reconciliation of share capital and other reserves
Share Profit
Revaluation Share premium & loss
reserve capital account account Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2014 25,502 9,051 (2,816) 31,737

Issue of share capital 2,194 2,194
Profit for the year (5,409) (5,409)
Balance at 31 December 2014 2,194 25,502 9,051 (8,225) 28,522
Balance at 1 January 2015 2,194 25,502 9,051 (8,225) 28,522

Revaluation of investment in subsidiaries (2,232) (2,232)
Loss for the year 41,527 41,527
Balance at 31 December 2015 {38} 25,502 9,051 33,302 67,817
The share capital reserve includes the called up share capital as laid out in note 16. The share premium reserve
includes the associated premium on that share capital.
The revaluation reserve includes movements in the net asset value of Panacea Ltd and Southern Rock
Intellectual Property Ltd, the Company's two subsidiaries.
The profit and loss account includes the cumulative profits earned by the Company, which have not been
distributed.
18. Segmental information

2015
Third Party Other
Motor Motor Total
£'000 £'000 £'000
Gross written premium 44,721 47,637 92,358
Gross earned premium 35,861 30,690 66,551

Gross claims incurred (33,182) (26,628) (59,810)
Gross operating expenses {24,611} {26,216} {50,827}
Reinsurance balance {1,463} {1,558} {3,020}
2014
Third Party Other
Motor Motor Total
£'000 £'000 £'000
Gross written premium 31,844 21,182 53,026
Gross earned premium 41,010 20,959 61,969

Gross claims incurred (41,257) (23,843) (65,100)
Gross operating expenses (19,806) (13,175) (32,981)
Reinsurance balance 544 362 906
The Company writes direct motor insurance in the United Kingdom. All contracts are concluded in Gibraltar.
Page 26
19. Related party transactions
Transactions during the year with related parties were as follows:
Transactions with group undertakings 2015 2015 2014 2014

Income Expense Income Expense
£'000 £'000 £'000 £'000
E Development 2 Limited 900 900

Rock Services Limited 19,408 21,704
20,308 22,604
Transactions with entities sharing key management 2015 2015 2014 2014
Income Expense Income Expense
£'000 £'000 £'000 £'000
Eldon Insurance Services Limited 25,729 24,611

ICS Risk Solutions Limited 4,496 3,437
STM Group plc 97
30,225 28,145
Balances at the end of the year with related parties were as follows:
Year end balances arising from 2015 2015 2015 2014

transactions with group undertakings Receivable Payable Net Net
£'000 £'000 £'000 £'000
Balances arising from direct insurance operations:
E Development 2 Limited 35,821 35,821 29,186
35,821 35,821 29,186
Other balances:
E Group (Australia) Insurance Services Pty Limited 201 201 200
Rock Services Limited 850 850 398
1,051 1,051 598
Year end balances arising from 2015 2015 2015 2014

transactions with entities sharing key management Receivable Payable Net Net
£'000 £'000 £'000 £'000
Balances arising from direct insurance operations:
Brightside Group plc 929
NewLaw Legal Limited 322
1,251
Other balances:
Eldon Insurance Services Limited - less than one year 833 833 113
Panacea Limited - less than one year 19,620 19,620
Panacea Limited - greater than one year 43,392 43,392
63,845 63,845 113
Page 27
20. Capital management
Gibraltar insurance company law specifies the minimum amount and type of capital that must be held by the
Company to meet its insurance liabilities. The minimum required capital must be maintained at all times
throughout the period.
The Company must hold assets in excess of the minimum regulatory capital known as the 'required minimum
margin', which is calculated based on applying fixed percentages to the premiums written and earned for the
period, and claims incurred for the 3 years up to and including the current period under consideration.
As at 31 December 2015, the Company was meeting and exceeding the required minimum margin by £37m
(2014: £0.7m) and held regulatory capital of33 l % of the required minimum margin (2014: 104%).
21. Financial risk management
The Company's activities expose it to a variety of financial risks including price risk, credit risk and liquidity
risk.
(a) Price risk
The Company is exposed to price risk because of investments held by the Company and classified on the
balance sheet as at fair value. To manage its price risk, the Company diversifies its portfolio and its investment
committee monitors the portfolio regularly. Diversification of the portfolio is done in accordance with the limits
set by the Company.
(b) Credit risk
Credit risk arises from cash and cash equivalents including deposits with banks, as well as credit exposures to
reinsurers and retail customers. Reinsurance protection is only purchased from companies which are part of
groups with specified financial strength ratings of A or above and the ratings are monitored regularly. The
Company also maintains a strong credit control function to ensure that its trade debtors are collected on a timely
basis.
(c) Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash to meet its foreseeable needs and to
invest cash assets safely and profitably. This is measured on a monthly basis. The Company monitors cash flow
using sophisticated forecasting techniques to ensure that all liabilities are met when due. Such forecasting takes
into consideration the Company's financing plans, compliance with internal balance sheet targets and external
regulatory requirements.
(d) Market Risk
Market risk is the risk of adverse financial impact as a consequence of market movements such as currency
exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of
assets held and the value of liabilities. The objective of the Company in managing its market risk is to ensure
risk is managed in line with the Company's risk appetite. The Company has established policies and procedures
in order to manage market risk and methods to measure it. There were no changes in the Company's market risk
exposure in the financial year nor to the objectives, policies and processes for managing market risk.
Page 28
22. Insurance risk management
The Company accepts insurance risk through its insurance contracts where it assumes the risk of loss from
persons or organisations that are directly subject to the underlying loss. The Company is exposed to the
uncertainty surrounding the timing, frequency and severity of claims under these contracts.
The Company manages its risk through underwriting and reinsurance strategy within an overall risk
management framework. Pricing is based on assumptions which have regard to trends and past experience, and
exposures are managed by having documented underwriting limits and criteria. Reinsurance is purchased to
mitigate the effect of potential loss to the Company from individual large or catastrophic events and also to
provide access to specialist risks and to assist in managing capital. Reinsurance policies are written with
approved reinsurers on either a quota share or excess of loss treaty basis.
The Company mainly writes motor insurance business in the United Kingdom, and therefore a concentration of
risk exists. This risk is mitigated by the variability of the Company's types of policyholders.
The Company's loss ratios are subject to a number of variables and sensitivities which may have an impact on
profit before tax and equity reserves. However, the historic loss ratios did not significantly move year on year,
which indicates that the Company has a minimal exposure to changes in relevant assumptions.
The following tables lay out the gross claims incurred on a gross and net basis for each underwriting year.
(i) Southern Rock Insurance Gross Claims Incurred-net of co-insurance, XOL and quota share
reinsurance
UWYear Dec-15 Dec-13 Dec-12 Dec-11

2011 70,846,202 66,828,907 63,173,244 31,157,679
2012 17,137,346
(ii) Southern Rock Insurance Gross Claims Incurred - gross of co-insurance and quota share
reinsurance, net ofXOL
Dec-13 Dec-12 Dec-11

80,847,881 76,436,819 37,282,622
93,722,508 45,656,396
37,179,008
23. Ultimate controlling party
The Company's immediate parent company is Southern Rock Holdings Limited, a company registered in
Gibraltar. The Company's ultimate parent company is Rock Holdings Limited, a company registered in the Isle
of Man. The ultimate controlling party of Rock Holdings Limited is Arron Fraser Andrew Banks as major
shareholder of that company.
Group consolidated accounts are prepared at the level of Southern Rock Holdings Limited and are publicly
available from 2nd Floor, Lysander House, Cribbs Causeway, Bristol BSIO 7TQ, United Kingdom.
Page 29
24. Post balance sheet event
During the first quarter of 2016, the Company entered into a loss portfolio transfer arrangement with Watford
Re, an associated company of Arch Re. As part of this arrangement, the Company cedes its net claims
provisions for the 2012, 2013 and 2014 underwriting years, which stand at £29.75m in aggregate, to Watford
Re. The impact of this arrangement on the Company's surplus over its SCR is c £6m.
25. Transition to Gibraltar Financial Reporting Standards 102 and 103
This is the first financial year that the Company has presented its financial statements under Gibraltar Financial
Reporting Standards 102 and 103 (GFRS 102 and 103), which are now the applicable Gibraltar Generally
Accepted Accounting Practice. The last financial statements under previous standards were for the financial year
ended 31 December 2014 and the date of transition to GFRS102 and 103 was therefore 1 January 2014. This
transition did not result in material changes in the accounting policies of the Company, and therefore no
adjustments have been made to equity reserves.
Page 30

Southern Rock Insurance Company LTD 2015 Accounts

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Southern Rock Insurance Company Limited

Report & Financial Statements

For the year ended 31 December 2015

Company Registration No. 93137

For the year ended 31 December 2015

Company Registration Number: 93137

Registered Office: 3AC 3rdFloor

Secretary: STM Fidecs Management Limited

Bankers: Royal Bank of Scotland

Barclays Private Clients International

Solicitors: Lyons Davidson

Auditors: BDO Limited

For the year ended 31 December 2015

Report of the Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. I

Report of the Directors

For the year ended 31 December 2015

Business Review & Future Developments

Report of the Directors

For the year ended 31 December 2015

Business Review & Future Developments (continued)

Key Performance Indicators

Results & Dividends

No share capital was issued during the year (2014: £nil).

Report of the Directors

For the year ended 31 December 2015

M Robinson (appointed 1 January 2016)

Principal Risks and Uncertainties

Claims Review and Provisioning

Management of Credit Risk

Management of Insurance Risk

The Company mitigates underwriting risks through the following:

3) Effective claims management

Report of the Directors

For the year ended 31 December 2015

Financial Risk Management Objectives and Policies

Liquidity Risk I Cash Flow Risk

Report of the Directors

For the year ended 31 December 2015

Statement of Directors Responsibilities

• Select suitable accounting policies and then apply them consistently;

Provision of Information to Auditors

Independent auditor's report to the members of

Report on the financial statements

Directors' responsibilities for the financial statements

Independent auditor's report to the members of

In our opinion, the financial statements:

Opinion on other matter prescribed by the Companies Act

Matters on which we are required to report by exception

• the Company has not kept proper accounting records; or

• if information specified by law regarding directors' remuneration and other transactions is

Christian Sum rfield (Statutory Auditor)

Profit and Loss Account

For the year ended 31 December 2015

Profit and Loss: Technical Account - General Business

NOTES 2015 2015 2014 2014

Gross written premiums 2 92,358 53,026

Change in the provision for unearned premiums:

Other technical income 5 26,097 30,233

Gross claims paid 3 (62,027) (66,514)

Change in the provision for claims:

Net operating expenses 4 (41,032) (23,823)

Balance on the Technical Account: General Business (27,973} (9,487}

The notes on pages 12 to 30 are an integral part of these financial statements.