QBE Syndicate 2999 Annual Report and Accounts 2009
QBE Syndicate 2999 Annual Report and Accounts 2009 QBE Syndicate 2999 Annual Report and Accounts 2009
Notes to the financial statements continued For the year ended 31 December 2009 8 Investment income, expenses and charges Income from investments 34 QBE Syndicate 2999 Annual report 2009 2009 2008 £000 £000 Income from investments 24,542 46,590 Gains on the realisation of investments 6,285 3,810 Investment expenses and charges 30,827 50,400 2009 2008 £000 £000 Investment management expenses 1,428 1,317 9 Other financial investments a) Designated at fair value through profit and loss Cost Fair value 2009 2008 2009 2008 £000 £000 £000 £000 Shares and other variable yield securities and units in unit trusts 89,876 66,075 89,876 66,075 Debt securities and other fixed income securities 1,126,818 1,286,232 1,128,312 1,283,884 Participation in investment pools 60,968 57,078 60,968 57,078 Deposits with credit institutions 8,507 7,346 8,507 7,346 Derivatives – – 426 – None of the above investments are quoted on recognised stock exchanges. 1,286,169 1,416,731 1,288,089 1,414,383 b) Derivative financial instruments 2009 2008 Fair value Foreign currency derivatives £000 £000 Other investments 426 – Other creditors (6,969) (30,891) Foreign currency derivatives The syndicate uses forward foreign exchange derivatives in order to hedge its exposure to foreign currencies. These are valued using the underlying foreign exchange rates at the year end. Contractual amounts for foreign currency exchange derivatives outstanding at the balance sheet date include foreign exchange contracts to transact the net equivalent of £6,543,000 (2008 £30,891,000). The forward foreign exchange derivatives outstanding at year end expired by 5 February 2010 (2008 5 February 2009). During the year an unrealised loss of £6,542,000 (2008 £30,891,000) relating to such contracts was recognised. This is included in the net foreign exchange loss of £1,403,000 (2008 gain £99,591,000) in the profit and loss technical account.
9 Other financial investments continued c) Valuation hierarchy The table below shows the financial instruments carried at fair value by valuation method. Level 1 Level 2 Level 3 Total 2009 2009 2009 2009 £000 £000 £000 £000 Overseas deposits – 86,635 – 86,635 Debt securities and other fixed income securities – 1,128,311 – 1,128,311 Derivatives – 427 – 427 – 1,128,738 – 1,128,738 Notes: Level 1 Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed equity shares, certain exchange-traded derivatives, G10 government securities and certain US agency securities. Level 2 Valued using techniques based significantly on observable market data. Instruments in this category are valued using: a) quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or b) valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data. The type of instruments that trade in markets that are not considered to be active, but are based on quoted market prices, broker dealer quotations, or alternative pricing sources with reasonable levels of price transparency and those instruments valued using techniques include most government agency securities, investment-grade corporate bonds, less liquid listed equities, state and municipal obligations, and certain money market securities and loan commitments and most OTC derivatives. Level 3 The syndicate has no financial instruments in level 3, which is the category where instruments have been valued using a valuation technique where at least one input (which could have a significant effect on the instrument’s valuation) is not based on observable market data. Where inputs can be observed from market data without undue cost and effort, the observed input is used. Otherwise, the syndicate determines a reasonable level for the input. 10 Financial risk The activities of the syndicate expose it to financial risks such as market risk (including currency risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The syndicate’s risk management framework recognises the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the syndicate. The key objectives of the syndicate’s asset and liability management strategy are to ensure sufficient liquidity is maintained at all times to meet the syndicate’s obligations, including its settlement of insurance liabilities and, within these parameters, to optimise investment returns for the syndicate. 35 QBE Syndicate 2999 Annual report 2009
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- Page 5 and 6: Major events in 2009 • Growth ach
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- Page 11 and 12: QBE Marine and Energy Syndicate 103
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- Page 15 and 16: Report of the directors of the mana
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- Page 19 and 20: Investment performance The total in
- Page 21 and 22: Statement of managing agent’s res
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- Page 25 and 26: Profit and loss account: technical
- Page 27 and 28: Balance sheet As at 31 December 200
- Page 29 and 30: Statement of cash flows For the yea
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- Page 33 and 34: 1 Accounting policies continued g)
- Page 35: 4 Claims outstanding During the yea
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Notes to the financial statements<br />
continued<br />
For the year ended 31 December <strong>2009</strong><br />
8 Investment income, expenses <strong>and</strong> charges<br />
Income from investments<br />
34<br />
<strong>QBE</strong> <strong>Syndicate</strong> <strong>2999</strong><br />
<strong>Annual</strong> report <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
£000 £000<br />
Income from investments 24,542 46,590<br />
Gains on the realisation of investments 6,285 3,810<br />
Investment expenses <strong>and</strong> charges<br />
30,827 50,400<br />
<strong>2009</strong> 2008<br />
£000 £000<br />
Investment management expenses 1,428 1,317<br />
9 Other financial investments<br />
a) Designated at fair value through profit <strong>and</strong> loss<br />
Cost Fair value<br />
<strong>2009</strong> 2008 <strong>2009</strong> 2008<br />
£000 £000 £000 £000<br />
Shares <strong>and</strong> other variable yield securities <strong>and</strong> units in unit trusts 89,876 66,075 89,876 66,075<br />
Debt securities <strong>and</strong> other fixed income securities 1,126,818 1,286,232 1,128,312 1,283,884<br />
Participation in investment pools 60,968 57,078 60,968 57,078<br />
Deposits with credit institutions 8,507 7,346 8,507 7,346<br />
Derivatives – – 426 –<br />
None of the above investments are quoted on recognised stock exchanges.<br />
1,286,169 1,416,731 1,288,089 1,414,383<br />
b) Derivative financial instruments<br />
<strong>2009</strong> 2008<br />
Fair value<br />
Foreign currency derivatives<br />
£000 £000<br />
Other investments 426 –<br />
Other creditors (6,969) (30,891)<br />
Foreign currency derivatives<br />
The syndicate uses forward foreign exchange derivatives in order to hedge its exposure to foreign currencies. These are valued using the underlying<br />
foreign exchange rates at the year end. Contractual amounts for foreign currency exchange derivatives outst<strong>and</strong>ing at the balance sheet date include<br />
foreign exchange contracts to transact the net equivalent of £6,543,000 (2008 £30,891,000).<br />
The forward foreign exchange derivatives outst<strong>and</strong>ing at year end expired by 5 February 2010 (2008 5 February <strong>2009</strong>).<br />
During the year an unrealised loss of £6,542,000 (2008 £30,891,000) relating to such contracts was recognised. This is included in the net foreign<br />
exchange loss of £1,403,000 (2008 gain £99,591,000) in the profit <strong>and</strong> loss technical account.
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