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Annual Report & Financial Statements 2009Through Transport Mutual Insurance Association Limitedfor the year ended 31 December 2009

transport insurance plus

Through Transport Mutual Insurance Association Limited

Contents


Directors and Management 2

Financial Highlights 2009 3

Chairman’s Review 4

Directors’ Report 6

Statement of Directors' Responsibilities 16

Notice of Meeting 17

Independent Auditors’ Report 18

Consolidated Income and Expenditure Account 19

Balance Sheets 21

Consolidated Cash Flow Statement 23

Notes to the Financial Statements 24

TT Club Mutual Insurance Limited


Directors' Report 46




Income and Expenditure Account 55

Balance Sheet 57


Directors and Management

ChairmanK Pontoppidan 1 2Copenhagen

DirectorsS Bradford 2Port of Melbourne Corporation, Melbourne

J Callahan Nautilus International Holding Corporation, Los Angeles

P S de M CottaAlianca Navegacaoe Logistica Ltde., Rio de Janeiro

M EngelstoftA P Møller-Maersk, Copenhagen

J Erlund PSA International (Pte) Ltd, Singapore

T Faries Appleby, Bermuda

G A Gluck M&S Shipping Group Plc, London

K Hellmann Hellmann Worldwide Logistics GmbH & Co KG,Osnabrück

B Hsieh (appointed 18 March 2010)Evergreen Group, Taipei

D JürgensenThe Bertling Group, Hamburg

Y M KimHanjin Shipping Ltd, Seoul

U Kranich 3Hapag-Lloyd AG, Hamburg

J Kuttel (appointed 25 June 2009)Ermewa, Geneva

B Louie 2OOCL Ltd, Hong Kong

Registered OfficeFirst FloorChevron House11 Church StreetHamilton HM11Bermuda

Telephone +1 441 292 4724Telefax +1 441 292 3694

Company Registration number1750

Deputy ChairmanJ A Dorto 2Virginia International Terminals Inc, Norfolk

B Menzinger (retired 25 June 2009) 1 2 3Basle

J E Meredith (resigned 6 July 2009)Hutchison Port Holdings Limited, Hong Kong

Y NarayanDP World, Dubai

O RakkenesAtlantic Container Line AB, New Jersey

C SadoskiCarrix Inc, Seattle

Shi Meisi COSCO Container Lines Ltd, Shanghai

T Shimizu (appointed 28 October 2009)Kawasaki Kisen Kaisha Ltd, Tokyo

I Shintani (retired 25 June 2009) 2Kawasaki Kisen Kaisha Ltd, Tokyo

G Sjöholm 1 3Port of Gothenburg, Gothenburg

P J Standish FCA 3Woking

CK Tan (appointed 25 June 2009)Pacific International Lines (Pte) Ltd, Singapore

S S Teo (retired 25 June 2009)Pacific International Lines (Pte) Ltd, Singapore

Sir David Thomson, Bt 1Edinburgh

A Wang (resigned 18 March 2010)Evergreen Marine Corp (Taiwan) Ltd, Taipei

ManagersThomas Miller (Bermuda) Ltd

SecretaryD W R Hunter

1 Chairman’s Committee member2 Nominations Committee member3 Audit Committee member

2 Through Transport Mutual Insurance Association Limited

Financial Highlights 2009

2009 2008

US$000s US$000s

Results for financial yearGross earned premiums 165,204 192,154

Brokerage and commission (21,766) (19,090)

Net earned premiums 143,438 173,064

Reinsurance premiums ceded (39,489) (39,490)

Investment income, gains and losses, and other income 16,450 65

Net claims incurred (82,019) (102,575)

Expenses, taxation and minority interest (30,683) (36,339)

Overriding commission on quota share 2,023 –

Surplus on ordinary activities after tax and minority interest 9,720 (5,275)

2009 2008

US$000s US$000s

Summary balance sheet

Total cash and investments 456,500 429,347

Other assets 121,537 142,712

Total assets 578,037 572,059

Gross unearned premiums and claims reserves (395,470) (406,564)

Other liabilities (22,195) (14,900)

Subordinated loan (29,012) (28,955)

Total surplus and reserves 131,360 121,640


Chairman’s Review

The story of 2009 for the Club and the wider insurance sector has been one of dealing withthe downturn in the global economy, rather than as has been the case in recent years, withnatural disasters. In 2009 the Club found itself operating in an environment where trade flowswere significantly reduced as a result of the wider impact of the global credit crunch and whereits Members were under significant pressure to reduce cost as part of their own efforts to copewith the economic downturn. In spite of that, I am pleased to tell you that the Clubperformed satisfactorily in the year.

Trading Performance

As in recent years, the Club’s competitive environment continued to be challenging also in2009. Industry commentators reported the continuing availability of capital to the sector as aresult of insurance companies on the whole continuing to deliver acceptable returns to theirinvestors. In the absence of other opportunities for this capital to earn reasonable returns at lowrisk elsewhere, investors continue to see commercial insurance as a good investment.

Whilst this competition put pressure on premium rates, which were already struggling fromreduced freight volumes, it was very pleasing to note that the Club was able to maintain itsretention rate and also that a significant amount of new business attached during the year. Thisis a particularly important factor as it provides affirmation of the continuing value of the Club’sproduct and services.

A key element of the Club’s service to its Members is on claims and it was notable that smaller,‘run of the mill’ claims cost the Club significantly less in 2009 than in 2008. This reductionwas in part, a result of the reduced activity levels across all the Club’s operational sectors, and isan experience that has been reported by other insurers too. During the year the Club had,however, a small number of large claims and these had a negative impact on claims levels overall.You will read in the financial statements that the Club made a sizeable release of claims reservesin relation to the years 2008 and prior policy years. The release which totals US$ 25 millioncompares with a release in 2008 of US$7 million and an average release during the previousfive years of US$8million. The release is the result of significant improvements that have beenmade to the processes used by the Club’s actuaries to assess the right level of claims reserves,and is also a consequence of the passage of time since as claims are settled in a year the true costcan be assessed more accurately.

In last year’s review I set out the key elements of the strategy and Business Plan for the years2009-2011. In essence the Plan called for the Club to focus on those products and services thatwere at the heart of the Club’s brand and which were most valued by the market. The Planwas produced in anticipation of difficult operating conditions in 2009 and was aimed atpositioning the Club to weather those conditions and then to take advantage of the up-turnthat would follow.

Judging by the reaction of the Club’s Members, their brokers and the wider market - thisapproach has resonated well and consequently our focus through 2010 will be on continuing tostrengthen product and service delivery to Club Members and their brokers. During 2010 wewill be publishing a service commitment which will set out the standards Members are entitled


to expect in dealing with the Club. We will also be focussing in 2010 on loss preventionactivities and the specifically on working more closely with individual Members to assist themin their risk management practices and in enabling them to compare their own performanceagainst similar operators.

During the year the Club maintained its leadership position in issues at the heart of thetransport industry and has been working on Members’ behalf in connection with issues ofbroad concern. This has included the implications of the potential introduction of theRotterdam Rules, and issues that have directly arisen from risk assessments or claims. The Clubbroadly supports the Rotterdam Rules and started organising a series of seminars exploring theramifications throughout the industry, which will continue through the coming year.

The risk team regularly highlight concerns around the correct declaration and stowage of cargo,including dangerous goods (where training of shoreside staff became mandatory in Jan 2010),which impact attritional damage claims as well as high profile injuries and casualties. Similarly,the Club has teamed up with ICHCA International and PEMA to develop a baseline standardfor safety equipment on quayside cranes. These ‘macro’ level risk initiatives are supplementedby involvement with individual Members to assist mitigating the affects of specific risks andclaims.

While 2009 was always going to be a challenging year for the Club; the painful cost reductionmeasures taken at the end of 2008 did position the Club well to manage the competitivechallenges in a turbulent environment. Although 2010 looks to be an equally challenging year,given the Club’s strong balance sheet and high level of solvency, the Club is positioned well forthe eventual economic up-turn expected and desired by all.

Directors and Officers

Four Directors retired from the Board in 2009, Bernd Menzinger, SS Teo, Isao Shintani andJohn Meredith and we thank them all for their valuable contribution during their terms ofoffice. I would like to make special mention of Bernd Menzinger who was a Director of theClub from 1987 and served as a Deputy Chairman from 1996. During this period he made amajor contribution to the development of the Club, and in particular during the period of asignificant change to the regulatory and governance environments within which the Cluboperated.

Also during 2009 Paul Neagle handed the reins of TT over to Charles Fenton and I am pleasedto note that the transition has taken place very smoothly. Charles leads a strong andexperienced team through the challenges we face, and I wish them well in the year ahead.

I would like to take this opportunity to thank all our Members, brokers, reinsurers and suppliersfor their continued support and I wish you all well in the challenging conditions that we allface.

K Pontoppidan, Chairman18 March 2010


Chairman’s Review (continued)

Directors’ Report

The Directors present herewith their Report and the consolidated financial statements ofThrough Transport Mutual Insurance Association Limited ("the Association" or “Company”).The Association and its subsidiary, TT Club Mutual Insurance Limited, trade collectively as the“TT Club”.

This report is addressed to, and written for, the Members of the Company, and the Directorswish to draw attention to a number of financial and environmental uncertainties, including butnot limited to the rate of claims and costs inflation, foreign exchange movements and economicgrowth, which mean that the actual results in the future may vary considerably from bothhistoric and projected outcomes contained within any ‘forward-looking statements’.

Principal activities

The principal activities of the TT Club during the year were the provision of insurance andreinsurance in respect of the equipment, property and liabilities of its Members in theinternational transport and logistics industry.

Business review

Strategy and values

The Group’s business is the provision of liability and asset insurances and related riskmanagement services to the international transport and logistics industry. It consists of twomutual insurance companies with separate corporate governance arrangements but operating asa single business, and is owned by its policyholder members.

Its business strategy is to provide superior insurance products and claims handling to itspolicyholder members at a competitive price, whilst maintaining excellent financial securityover the long term. Insurance is very much a cyclical business, with premium rates fluctuatingin accordance with the supply of capital in the market and with the investment returns availableto the owners of that capital.

The Group has outsourced the entire management function, including that relating toinvestment management, to companies within the Thomas Miller Holdings Limited group ofcompanies.


Financial performance, capital strength and solvency

The Group’s financial performance in 2009 has continued to be affected by softening premiumrates which fell by an average of 5% during the year. Gross earned premiums amounted toUS$165.2 million which was 14% lower than 2008 due to the fall in rates together with thenon-renewal of some loss making business.

The forecast ultimate loss ratio for the 2009 policy year is marginally up on the 2008 year.Prior policy years claims have developed within expectations resulting in a release of prior yearclaims reserves, excluding currency effects, of US$25.0 million (2008 : US$6.6 million).

Operating expenses, including brokerage and commissions, fell 9% compared to 2008, due tothe cost savings made at the end of 2008 and one-off exceptional items incurred in the prioryear.

The technical result for 2009, after allowing for the attribution of investment income on theclaims reserves, was a surplus of US$4.1 million (2008: deficit of US$3.9 million). Theunderlying investment return, excluding currency effects, was 1.4%. The non-technical accounttherefore produced a surplus of US$5.6 million (2008: deficit of US$1.4 million), resulting inan overall net surplus after tax of US$9.7 million (2008: deficit of US$ 5.3 million).

As a result the Group’s surplus and reserves now stand at US$ 131.4 million (2008: US$ 121.6million). In addition to this, the Group’s regulatory capital includes US$ 30 million insubordinated loan notes issued by the parent company in October 2006. The notes mature in2036 and are repayable at the company’s option from October 2011, subject to regulatoryapproval. They are fully admissible for regulatory (FSA) purposes until 2031 and credit rating(AM Best) purposes until 2016, after which the level of admissibility will gradually decline.

The principal KPIs by which performance is monitored by the Board are detailed below.

1. Financial strength – AM Best rating

Year Rating

2004 to 2005 B++ (Very Good)

2006 to 2009 A– (Excellent)


Directors’ Report (continued)

2. Solvency – capital as a percentage of FSA Enhanced Capital Requirement (ECR)

3. Capital – surplus and reserves

The Group’s financial strategy, approved by the Board, is to maintain within the businesssufficient capital to meet regulatory requirements, and to maintain an AM Best rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case. TheDirectors are satisfied that both elements of this strategy have been maintained throughout 2009.


Capital resources as a % of ECR

Year

200

250

150

100

50

0

2005 2006 2007 2008 2009

%

Surplus and reserves

Year

100

105

110

115

120

125

130

135

2005 2006 2007 2008 2009

US

$m


4 (a). Operating ratios - loss ratio, expense ratio and combined ratio as a percentage of netearned premiums, including prior year claims reserves movements and exchange movements on claims reserves

Combined ratio

4 (b). Operating ratios - loss ratio, expense ratio and combined ratio, restated to exclude the estimated effect of exchange movements on claims reserves

Combined ratio


Combined ratio

Year

0

20

40

60

80

100

120

2005 2006 2007 2008 2009

%

Loss ratio

Expense ratio

Combined ratio

Year

0

20

40

60

80

100

120

2005 2006 2007 2008 2009

%

Loss ratio

Expense ratio


5(a). Investment performance – return gross of tax and including exchange movements

Investment return

5(b). Investment performance – return gross of tax and excluding exchange movements

Investment return


Investment return

Year

-5

0

5

10

15

20

25

30

2005 2006 2007 2008 2009

US

$m

Investment return

Year

20

25

15

10

5

0

2005 2006 2007 2008 2009

US

$m


6. Net result – income and expenditure surplus after tax

7. Customer satisfaction – index (scored out of a maximum of 10) compiled by independent research


Investment return

Year

-10

-5

0

5

10

15

20

25

2005 2006 2007 2008 2009

US

$m

Customer Satisfaction Index

Year

8.0

10.0

6.0

4.0

2.0

-

2005 2006 2007 2008 2009


12

Corporate and social

The Directors are of the opinion that the environmental impact of the Group’s activities is low,due to the small size and the nature of its business. There are therefore currently no KPIsrelating to environmental matters. The business is however conscious of its environmentalresponsibility, and continues to invest in electronic claims handling and underwriting systemsdesigned to increase efficiency and reduce reliance on paper-based records. It is also investingin website technology in order to facilitate electronic distribution of its products andinformation to Members, brokers, suppliers and third parties.

As the Group has outsourced all of its management activities to independent professionalmanagers there are no employee matters to report.

Risks and risk management

The Board has adopted a risk management policy which is designed to protect the Group fromoccurrences that hinder sustainable achievement of our objectives and financial performanceand to ensure that the Group complies with regulatory requirements in the jurisdictions inwhich it operates.

The following key principles outline the Group’s approach to risk management:

• The Board is responsible for risk management and internal control;

• The Board is responsible for ensuring that a framework exists which sets out riskappetite, risk management and control and business conduct standards; and

• The Board is responsible for ensuring that the Managers implement and maintain asound system of internal control.

All types of risk facing the business are analysed and each one is rated according to its severity(impact on the business) and probability of occurrence, adjusted for any mitigation measuresthat have been implemented. The residual risks are prioritised, with the most highly rated itemsbeing considered as fundamental risks. Each fundamental risk is monitored and managed by amember of the executive management. All risks identified are summarised, categorised andprioritised in a Risk Log which is reviewed and approved by the Board, at least annually andmore frequently if required.

The principal risks and uncertainties faced by the business are summarised as follows:

Insurance risk

Insurance risk is the potential adverse financial impact on the Group as a result of:

• Inaccurate pricing of risk when underwritten

• Inadequate reinsurance protection

• Fluctuations in the timing, frequency and severity of claims and claimssettlements relative to expectations

• Inadequate claims reserves.



Risks and risk management (continued)

Insurance risk is mitigated by means of:

• Prior approval of all quotations by a minimum of two senior underwriters

• Underwriters’ authority levels based on experience and competence

• Technical underwriting and claims file reviews by management

• Key performance indicators and key risk indicators relating to underwritingand claims functions

• Actuarial, management and Board review of claims reserves (every fourmonths)

• Management review of reinsurance adequacy and security.

Financial risks

Financial risks consist of:

• Market risk

• Currency risk

• Credit risk

• Liquidity and cashflow risk.

Information on the use of financial instruments by the Association and its management offinancial risks is disclosed in Note 3 to the financial statements.

Operational risk

Operational risk arises from inadequately controlled internal processes or systems, humanerror and from external events. Operational risks include, for example, risks arising fromoutsourcing, information technology, information security, project management, humanresources, taxation, legal, fraud and compliance.

The Directors have assessed the mitigation and controls environment relating to each of thesetypes of insurance, financial, and operational risk and have made an assessment of the capitalrequired to meet the residual risks faced by the business. That individual capital assessment hasbeen reviewed and agreed with the FSA.



Directors & Officers

The names of the Directors of the Association who served during the year are shown on page2. All the Directors retiring at the Annual General Meeting and seeking re-election were re-elected. At the meeting of the Directors following the Annual General Meeting in June 2009,Mr K Pontoppidan was re-appointed as Chairman of the Board. Mr J Dorto was appointed asa Deputy Chairman. The Directors of TT Club Mutual Insurance Limited are shown at thefront of TT Club Mutual Insurance Limited annual report.

Meetings of the Directors

The Board of the Association met formally on three occasions during the year to carry out thegeneral and specific responsibilities entrusted to it by the Members under the Bye-Laws of theAssociation. The number of Directors present at these meetings was 21, 19 and 15 respectively.

Amongst the matters considered, the Directors received and discussed written reports from theManagers on the Group's financial development, with particular reference to underwritingpolicy, investment of its funds, insurance reserves and the major claims paid or outstanding.

Reports on the results of the negotiations for the renewal of Members at the start of andduring the 2009 policy year were received and the Directors reviewed the list of new entriesand of those Members whose entries had terminated.

The Annual Report and Financial Statements for the year ended 31 December 2008 wereapproved by the Board for submission to the Members of the Association at the Annual GeneralMeeting. The Directors also confirmed their intention not to levy any supplementary premiumfor the 2008 policy year.

Board Committees

The Board has delegated specific authority to a number of committees. The Board is appraisedas to the main issues discussed and all minutes of meetings of the committees are distributed tothe Board.

The Chairman’s Committee provides governance between Board meetings with specific focuson strategy, investment policy and finance. The Chairman’s Committee met on elevenoccasions during 2009.

The Nominations Committee ensures that the Board is appropriately skilled to direct a mutualinsurance company, that the Directors are appropriately senior and representative of themembership, and that there is a proper balance of Directors taking account of the differentcategories of Member, different sizes of businesses insured and different locations of Members’businesses. The Nominations Committee met on three occasions during 2009.



Board Committees (continued)

The Audit Committee assists the Board in discharging its responsibilities for the integrity of the Group’s financial statements, the assessment of the effectiveness of the systems of internalcontrol, monitoring the effectiveness and objectivity of the internal and external auditors andcompliance with regulatory requirements in relevant jurisdictions. The Audit Committee meton five occasions during 2009.

Charitable and political donations

During the year, the Group made charitable donations to UNICEF, Child Hope and WestpacHelicopter Rescue Service totalling US$9,000 (2008: UNICEF and Westpac HelicopterRescue Service US$9,000). No donations were made for political purposes.

Auditors

PricewaterhouseCoopers LLP have indicated their willingness to continue in office and aresolution that they be re-appointed will be proposed at the annual general meeting.

By order of the Board.

D W R Hunter, Secretary18 March 2010



Statement of Directors' Responsibilities

The Directors are responsible for preparing the financial statements in accordance withapplicable laws and regulations in Bermuda.

The Directors have elected to prepare the financial statements in accordance with UnitedKingdom Accounting Standards. The financial statements are required to give a true and fairview of the state of affairs of the Group and Parent Company and of the surplus or deficit ofthe Group for that year.

In preparing those 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 United Kingdom Accounting Standards have beenfollowed, subject to any material departures disclosed and explained in the financialstatements; and

• prepare the financial statements on the going concern basis unless it is inappropriateto presume that the Group and Parent Company will continue in business, inwhich case there should be supporting assumptions or qualifications as necessary.

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

The Directors are responsible for keeping adequate accounting records which disclose withreasonable accuracy at any time the financial position of the Group and Parent Company and toenable them to ensure that the financial statements comply with applicable law and UnitedKingdom Accounting Standards. They are also responsible for safeguarding the assets of theParent Company and hence for taking reasonable steps for the prevention and detection offraud and other irregularities.


Notice of Meeting

Notice is hereby given that the forty-first Annual General Meeting of the Members of theAssociation will be held at Hotel Majestic, Barcelona on the twenty-fourth day of June 2010 at 8.30 am for the following purposes:

To receive the Directors' Report and Financial Statements for the year ended 31 December 2009 and, if they are approved, to adopt them.

To elect Directors.

To appoint auditors and to authorise the Directors to fix their remuneration.

To transact any other business of an Ordinary General Meeting.


D W R Hunter, Secretary18 March 2010


Independent Auditors’ Report

To the Members of Through Transport Mutual Insurance Association LimitedWe have audited the Group and parent company financial statements (the ‘‘financialstatements’’) of Through Transport Mutual Insurance Association Limited for the year ended 31 December 2009 which comprise the Consolidated Income and Expenditure Account, theConsolidated and Parent company Balance Sheets, the Consolidated Cash Flow Statement, andthe related notes. The financial reporting framework that has been applied in their preparationis applicable law in Bermuda and United Kingdom Accounting Standards as issued by the UKAccounting Standards Board.

Respective responsibilities of directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance withapplicable law in Bermuda and International Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the UK Auditing Practices Board’s Ethical Standards forAuditors.

This report, including the opinion, has been prepared for and only for the company’s membersas a body in accordance with Section 90 of The Companies Act 1981 (Bermuda) and for noother purpose. We do not, in giving the opinion, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financialstatements sufficient to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the group’s and parent company’scircumstances and have been consistently applied and adequately disclosed; the reasonablenessof significant accounting estimates made by the directors; and the overall presentation of thefinancial statements.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the group’s and the parent company’s affairsas at 31 December 2009 and of the group’s surplus and cash flows for the year thenended;

• have been properly prepared in accordance with United Kingdom AccountingStandards; and

• have been prepared in accordance with the requirements of the Companies Act1981 (Bermuda).

PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsLondon, United Kingdom

30 March 2010


Consolidated Income and Expenditure Accountfor the year ended 31 December 2009

All activities derive from continuing operations.


Technical Account

Note 2009 2008

US$000s US$000s US$000s US$000s

Gross written premiums 175,784 169,664Reinsurance premiums ceded (46,406) (29,270)

Premiums written, net of reinsurance 129,378 140,394

Change in provision for unearned premiumsGross (10,580) 22,490Reinsurers' share 6,917 (10,220)

(3,663) 12,270

Earned premiums, net of reinsurance 125,715 152,664

Allocated investment return transferred from the non-technical account 2(j) 9,388 (517)

Commission income 1,395 1,255Other technical income 47 47

Claims paidGross 4 (130,566) (137,846)Reinsurers' share 5 52,549 37,101

(78,017) (100,745)

Change in the provision for claimsGross 21,674 16,190Reinsurers' share (25,677) (18,020)

(4,002) (1,830)

Claims incurred, net of reinsurance (82,019) (102,575)

Net operating expenses 6 (50,460) (54,746)

Balance on the technical account 4,066 (3,872)

Consolidated Income and Expenditure Account for the year ended 31 December 2009 (continued)


Note 11 details the movements on the Reserve Fund during the year. There are no recognisedgains or losses other than those shown in the Consolidated Income and Expenditure Account.Accordingly, no statement of total recognised gains and losses has been prepared.

The notes on pages 24 to 43 form an integral part of these financial statements.


Non-technical Account

Note 2009 2008

US$000s US$000s


Investment income 2,149 9,926

Unrealised gains on investments 3,042 –

Investment expenses and charges (244) (70)

Unrealised losses on investments – (1,245)

Interest payable on subordinated loan (1,207) (2,010)

Exchange gains/(losses) 11,268 (7,838)

7 15,008 (1,237)

Allocated investment return transferred to the technical account 2(j) & 7 (9,388) 517

Surplus/(deficit) on ordinary activities before tax 9,686 (4,592)

Tax on ordinary activities 8 34 (695)

Surplus/(deficit) on ordinary activities after tax 9,720 (5,287)

Minority interests – 12

Surplus/(deficit) for the financial year 11 9,720 (5,275)

Balance Sheetsas at 31 December 2009


Note 2009 2008 2009 2008

US$000s US$000s US$000s US$000s

Assets

InvestmentsShares in subsidiary undertakings 9 – – 11 11

Other financial investments 10 426,916 411,142 358,352 346,527

Reinsurers' share of technical provisionsProvision for unearned premiums 8,552 1,635 – –

Claims outstanding 62,194 87,871 3,643 17,944

70,746 89,506 3,643 17,944

DebtorsArising out of direct insurance operations

- policyholders 25,132 24,685 18 60

Arising from reinsurance ceded 14,512 19,140 45,371 42,136

Corporation tax debtor 137 25 – –

Amount due from subsidiary company – – – 2,022

Other debtors 1,708 2,850 140 2,075

41,489 46,700 45,529 46,293

Cash at bank and in hand 29,584 18,205 3,959 3,443

Prepayments and accrued incomePrepayments 178 216 85 50

Accrued interest 1,374 1,491 1,347 1,417

Deferred acquisition costs 7,750 4,799 57 6

9,302 6,506 1,489 1,473

Total assets 578,037 572,059 412,983 415,691

Parent CompanyConsolidated

Balance Sheetsas at 31 December 2009 (continued)

The financial statements on pages 19 to 43 were approved by the Board of Directors on 18 March 2010 and were signed on its behalf by:

K Pontoppidan, DirectorJ A Dorto, Director

Company Number 1750



Note 2009 2008 2009 2008

US$000s US$000s US$000s US$000s

Liabilities and reservesReservesStatutory reserve 240 240 240 240

Surplus and reserves 11 131,120 121,400 78,052 71,495

131,360 121,640 78,292 71,735

Subordinated liabilities 12 29,012 28,955 29,012 28,955

Technical provisionsProvision for unearned premiums – gross 55,414 44,834 35,293 38,986

Claims outstanding – gross 340,056 361,730 256,589 268,680

395,470 406,564 291,882 307,666

CreditorsArising out of direct insurance operations 751 223 – –

Arising from reinsurance ceded 5,817 1,828 – 103

Provision for taxation – – 89 57

Amount due to Group undertakings – – 3,532

Accrued expenses and sundry creditors 15,663 12,885 10,176 7,175

22,231 14,936 13,797 7,335

Equity minority interest (36) (36) – _

Total liabilities and reserves 578,037 572,059 412,983 415,691

Parent CompanyConsolidated

Consolidated Cash Flow Statementfor the year ended 31 December 2009


Note 2009 2008

US$000s US$000s

Operating activitiesPremiums received from Members 160,001 160,416

Reinsurance premiums paid (42,417) (35,353)

Claims paid (133,045) (136,543)

Reinsurance receipts in respect of claims 57,177 37,728

Investment income 2,012 8,705

Management fee paid (20,650) (30,924)

Expenses paid (8,382) (1,438)

Other operating cash movements 1,480 1,086

Overriding commissions on quota share reinsurance (2,116) –

Net cash inflow from operating activities 14 14,064 3,677

Interest payable on subordinated loan (1,150) (1,972)

Taxation paid (78) (687)

(1,228) 1,018

Financing activities:Net cash inflow from financing activities 12,836 1,018

Cash flows were invested as follows:Increase in cash holdings 15 11,379 10,376

Net portfolio investments 16

Net purchase of UCITS (12,487) (86,369)

Purchase of bonds and other fixed interest securities 330,415 252,050

Sale of bonds and other fixed interest securities (316,471) (162,787)

Sale of absolute return funds – (12,252)

1,457 (9,358)

Net investment of cash flows 12,836 1,018

Notes to the Financial Statements31 December 2009

Note 1: Constitution and ownershipThe Association is incorporated in Bermuda under the Through Transport Mutual InsuranceAssociation Limited Consolidation and Amendment Act 1993 as an exempted company. Theliability of Members is limited to the supplementary premiums set by the Directors and, in theevent of its liquidation, any net assets of the Association (including the Statutory Reserve ofUS$240,000) are to be distributed equitably to those Members insured by it during its finalunderwriting year. There is no ultimate parent company or controlling party.

Note 2: Accounting policies

(a) Basis of preparationThese Group financial statements which consolidate the accounts of the Association and itssubsidiary undertakings have been prepared under the Bermuda Companies Act 1981, andalso under the provisions of Schedule 3 to the UK Companies Act 2006. The accounts havebeen prepared in accordance with applicable accounting standards in the United Kingdomand the Statement of Recommended Practice on Accounting for Insurance Business issuedin December 2005 (as amended in December 2006) by the Association of British Insurers.The accounts of all group companies are made up to 31 December. The Association hasnot prepared a Parent company income and expenditure account under the exemption inSection 408 of the UK Companies Act 2006.

The accounts have been prepared under the provisions of The Large and Medium-sizedCompanies and Groups (Accounts and Reports) Regulations 2008 relating to insurancegroups.

During the financial year, the Association adopted the amendment to Financial ReportingStandard 29 which requires additional disclosure relating to the valuation of investment heldat fair value. The amendment is limited to additional disclosure and there is therefore noimpact on brought forward reserves or surplus in the year.

(b)PremiumsPremiums written relate to business incepted during the year, together with any differencesbetween booked premiums for prior years and those previously accrued, and includeestimates of provisions for anticipated adjustment premiums, less an allowance forcancellations.

Premiums are stated before the deduction of commissions and brokerage but net of taxesand duties levied.

(c) Unearned premiumsPremiums written during the financial year are earned as revenue on a daily pro-rata basisover the period of cover provided, in line with the incidence of risk. Amounts relating toperiods after the year end are treated as unearned and included within liabilities on theBalance Sheets.


(d)Commission incomeCommission income is earned on the Group's general reinsurance programme and oninsurance arranged by the Group on behalf of Members and others. Overridingcommission on quota share premiums is shown as a reduction of net operating expenses.

(e) ClaimsProvision is made for all claims incurred during the year, whether paid, estimated orunreported, claims management costs and adjustments to claims provisions brought forwardfrom previous years. In addition, claims includes claims management costs and an allowancefor estimated costs expected to be incurred in the future in the management of claims.

Estimated claims stated in currencies other than the functional currency are converted atyear end rates of exchange and any exchange difference is included within claims incurredin the Income and Expenditure account.

The provision for claims outstanding includes both estimates for known outstanding claimsand for claims incurred but not reported (IBNR). The estimates for known outstandingclaims are based on the best estimate and judgement of the likely final cost of eachindividual claim based on current information. The estimation of claims IBNR is generallysubject to a greater degree of uncertainty than the estimation of cost of settling claimsalready notified to the Company, where more information is generally available.

The best estimate of unreported claims on each policy year and the eventual outcome mayvary from the original assessment. As a result of this inherent uncertainty, sophisticatedestimation techniques are required to determine an appropriate provision. The estimate ismade using a range of standard actuarial projection techniques, such as the Chain Ladderand Bornheutter-Ferguson methods. Such methods extrapolate the development of claimsfor each policy year, based on the claims patterns of earlier years and the expected loss ratios.The main assumption underlying these techniques is that past claims developmentexperience can be used to project ultimate claims costs. Judgement is used to assess theextent to which past trends may not apply in future and alternative approaches are appliedas appropriate.

An estimate for Members and general reinsurance in relation to the provision forunreported claims has been made by reference to the relationship between gross and netclaims on current and prior policy years and having due regard to recoverability.

(f) Reinsurance recoveriesThe liabilities of the Group are reinsured above certain levels and for certain specific risks.The figure credited to the Income and Expenditure Account for reinsurance recoveriesincludes receipts and amounts due to be recovered on claims already paid together withchanges in the amount of recoveries to be made on outstanding claims. An assessment isalso made of the recoverability of reinsurance recoveries having regard to market data onthe financial strength of each of the reinsurance companies.


Notes to the Financial Statements 31 December 2009 (continued)

(g)Acquisition costsBrokerage and commission payments and other direct costs incurred in relation to securingnew contracts and rewriting existing contracts are deferred to the extent that they areattributable to premiums unearned at the balance sheet date and are shown as assets in theBalance Sheets.

(h)Financial assetsFinancial assets are classified between the following categories: financial assets at fair valuethrough profit or loss, loans and receivables and available-for-sale financial assets. Theclassification depends on the purpose for which the assets were acquired and is determinedat initial recognition and this is re-evaluated at every reporting date.

Fair value through profit and lossAssets, including all of the investments of the Group, which are classified as fair valuethrough the profit and loss and are designated as such by management to minimise anymeasurement or recognition inconsistency with the associated liabilities.

Investments are included in the Balance Sheet at market value translated at year end rates ofexchange. The market value of listed investments is based on current bid prices as at thebalance sheet date.

The costs of investments denominated in currencies other than US dollars are translatedinto US dollars on the date of purchase. Any subsequent changes in value, whether arisingfrom market value or exchange rate movements, are charged or credited to the Income andExpenditure Account and are then accumulated within the Investment RevaluationReserve until realised. The movement in unrealised investment gains and losses includes thereversal of previously recognised unrealised gains and losses on investments disposed of inthe current period.

Net gains or losses arising from changes in fair value of financial assets at fair value throughprofit or loss are presented in the Income and Expenditure Account within ‘Unrealisedgains/(losses) on investments’ in the period in which they arise.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. Receivables arising from insurancecontracts are also classified in this category and are reviewed for impairment as part of theimpairment review of loans and receivables. A bad debt provision is created against anybalances that may be impaired.



(h)Financial assets (continued)

Available for saleAvailable-for-sale financial assets are non-derivative financial assets that are either designatedin this category or not classified in any of the other categories. No available for sale assetsare held.

Derivative financial instruments Derivative financial instruments include open foreign currency contracts. They are classifiedas held for trading. They are initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at their fair value.Changes in fair value are charged or credited to the Income and Expenditure Account. Fairvalues are obtained from quoted market prices in active markets. All derivatives are carriedas assets when the fair value is positive and as liabilities when the fair value is negative.

Cash and cash equivalentsCash and cash equivalents include cash in hand, UCITS and deposits held at call with banks.The UCITS are Undertakings for Collective Investments of Transferable Securities, and areused as an alternative to short term cash deposits. They are classified as cash equivalents asthey are short term, highly liquid investments that can be readily converted to cash.

(i) Impairment of financial assetsAt each balance sheet date, an assessment is made as to whether there is objective evidencethat a financial asset is impaired. A financial asset or group of financial assets is impairedonly if there is objective evidence of impairment as a result of one or more events that haveoccurred after the initial recognition of the asset and it is expected that the event will havean impact on estimated future cash flows of the financial asset or group of financial assets.The Group must be able to reliably estimate the impact on future cash flows.

If the carrying value of an asset is greater than its recoverable amount, the carrying value isreduced through a charge to the Income and Expenditure account in the period ofimpairment.

(j) Investment returnInvestment income comprises dividend income from equities, income on fixed interestsecurities, interest on deposits and cash and realised and unrealised gains and losses oninvestments.

Dividends are recognised as income on the date the relevant securities are marked ex-dividend. Other investment income is recognised on an accruals basis.



(j) Investment return (continued)The movement in unrealised gains and losses on investments represents the differencebetween the fair value at the balance sheet date and their purchase price (if purchased in thefinancial year) or the fair value at the last balance sheet date, together with a reversal ofpreviously recognised unrealised gains and losses on investments disposed of in the currentperiod.

The Group allocates a proportion of its investment return to the technical account based onthe average ratio of outstanding claims to funds available to meet outstanding claims. Thistransfer is made so that the balance on the technical account is based on a longer-term rateof investment return and is not subject to distortion from short-term fluctuations ininvestment return (SORP para. 294).

(k) Foreign currenciesRevenue transactions are translated into US dollars at the rate applicable for the month inwhich the transaction took place. Assets and liabilities have been translated at the closingUS dollar exchange rate. The resulting differences, apart from those relating to estimatedfuture claims or investments, are shown separately in the Income and Expenditure Account.

Exchange gains or losses arising on non-US dollar cash holdings are treated as realised andare included in the Income and Expenditure Account.

(l) Policy year accountingWhen considering the results of individual policy years for the purposes of membershipaccounting, premiums, reinsurance premiums payable, claims and reinsurance recoveries areallocated to the policy years to which they relate based on the period of cover of eachinsurance policy. The fixed portion of the management fee is charged to the current policyyear while any performance related management fee is allocated to the Reserve Fund.General administration expenses are charged against the current policy year.

Investment income and exchange gains or losses are allocated proportionately to the averagebalance on each open policy year and the Reserve Fund.

UK taxation, which is based on investment income, is allocated proportionately betweenthe open policy years and the Reserve Fund. Other taxation is allocated entirely to thepolicy years to which it relates

(m)Closure of policy years On formal closure of a policy year, a sum equivalent to the anticipated future investmentincome on the balance on that year is transferred from the Reserve Fund to the credit ofthe closing year. Thereafter, any income derived from such funds is credited to the ReserveFund, thereby offsetting the amount originally debited.



(m)Closure of policy years (continued)For closed policy years, the Group retains a balance sufficient to meet the estimated netoutstanding claims and claims incurred but not reported on that year. Future adjustments tothese amounts as well as differences between the estimates and the ultimate payments willbe met by transfers to or from the Reserve Fund.

(n) Unexpired risk reserveFull provision is made for unexpired risks when it is anticipated that unearned premiums,net of associated acquisition costs, will be insufficient to meet the expected claims andexpenses of business as at the year end after taking account future investment income.

Unexpired risk surpluses and deficits are offset where business classes are managed togetherand provision is made if a deficit arises.

(o)Deferred taxationDeferred taxation is provided in full on timing differences that result in an obligation at thebalance sheet date to pay more tax, or a right to pay less tax, at a future date. The rates usedin these calculations are those which are expected to apply when the timing differencescrystallise, based on current tax rates and law. Timing differences arise from the inclusion ofitems of income and expenditure in taxation computations in periods different from thosein which they are included in the financial statements. Deferred tax assets are recognised tothe extent that it is regarded as more likely than not that they will be recovered. Deferredtax balances are not discounted.

(p) Subordinated liabilitiesIn accordance with FRS 26 Financial Instruments: Recognition and Measurement, thesubordinated loan liability is recognised at amortised cost with the transaction costs directlyattributable to the issue being amortised through the Income and Expenditure account overthe expected duration of the liability.

Note 3: Management of Financial Risk

Financial Risk Management ObjectivesThe Group is exposed to financial risk primarily through its financial investments, reinsuranceassets and liabilities to policyholders. In particular, the key financial risk is that the proceedsfrom financial investments are not sufficient to fund the obligations arising from insurancepolicies as they fall due. The most important components of this financial risk are market riskor investment risk (comprised of interest rate risk, equity price risk and currency risk) togetherwith credit risk and liquidity risk.

The Group manages these risks using a risk governance structure incorporating the Managers’Risk Review Committee and the Audit Committee. Further details are set out in theDirectors’ Report on page 12.



Financial Risk Management Objectives (continued)The Boards of the Associations are responsible, advised by the Chief Executive working withthe Investment Manager, for setting investment policy and the appropriate level of market orinvestment risk. This is set with reference to the overall risks faced by the Group which areanalysed as part of the Individual Capital Assessment (“ICA”) process.

The processes used to manage risks within the Group are unchanged from the previous periodand are set out in the Directors’ Report.

(a) Market risk

(i) Interest rate riskInterest rate risk arises primarily from investments in fixed interest securities. In addition, tothe extent that claims inflation is correlated to interest rates, liabilities to policyholders areexposed to interest rate risk.

The Group’s investment policy is set to ensure that the duration of the investment portfoliois appropriately matched to the duration of the policyholder liabilities. Interest rate risk isthen monitored by comparing the mean duration of the investment portfolio and that ofthe policyholder liabilities. The mean duration is an indicator of the sensitivity of the assetsand liabilities to changes in current interest rates.

The sensitivity analysis for interest rate risk illustrates how changes in the fair value or futurecash flows of a financial instrument will fluctuate because of changes in market interest ratesat the reporting date. An increase of 100 basis points in interest rates at the year end date,with all other factors unchanged would result in a US$3.95 million fall in market value ofthe Group’s investments (2008: US$3.89 million fall). A decrease in 100 basis points ininterest rates would result in a US$3.95 million increase in the market value of the Group’sinvestments (2008: US$3.89 million increase).

(ii)Absolute return funds price riskThe Group sold its absolute return fund investments during 2008. These consisted of alimited number of listed investments in “fund of fund” hedge funds, with the aim being toreduce volatility through diversification. Absolute return fund sub-managers were selectedwith complementary investment strategies with non-directional strategies being emphasised.

The Group’s investment policy set a limit on the Group’s exposure to absolute return funds.As the Group is no longer holding any absolute return fund investment and therefore thereis no exposure to price risk (2008: US$nil).



(b) Currency risk

The Group is exposed to currency risk in respect of liabilities under policies of insurancedenominated in currencies other than US dollar. The most significant currencies to whichthe Group is exposed to are pounds sterling and the Euro. From time to time the Groupuses forward currency contracts or options to protect against adverse in year exchangemovements.

The following table shows the Group’s assets by currency. The Group seeks to mitigatesuch currency risk by matching the estimated foreign currency denominated liabilities withfinancial investments denominated in the same currency.

At 31 December 2009, if the US dollar weakened/strengthened by 5% against the pound,with all other factors unchanged, the surplus for the year would have increased/decreasedby US$0.22 million (2008: US$0.03 million). At 31 December 2009, if the US dollarweakened/strengthened by 5% against the Euro, with all other factors unchanged, thesurplus for the year would have increased/decreased by US$1.37 million (2008: US$0.38million).



As at 31 December 2008:

USD GBP EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 138,732 9,516 88,542 _ 236,790

Assets arising from reinsurance contracts held 108,215 41 100 290 108,646

Assets arising from insurance contracts 19,243 1,789 3,162 491 24,685

Other debtors 2,205 453 – 217 2,875

Cash and cash equivalents 160,004 7,943 22,446 – 190,393

Total 428,399 19,742 114,250 998 563,389

As at 31 December 2009:

USD GBP EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 192,536 18,606 55,561 – 266,703

Assets arising from reinsurance contracts held 78,952 (270) 5,053 1,523 85,258

Assets arising from insurance contracts 16,281 2,649 2,595 3,607 25,132

Other debtors 254 (306) 58 1,702 1,708

Cash and cash equivalents 141,377 12,451 19,813 15,644 189,285

Total 429,400 33,130 83,080 22,476 568,086

(c) Credit risk

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

• Reinsurers’ shares of insurance liabilities;

• Amounts due from reinsurers in respect of claims already paid;

• Amounts due from policyholders;

• Amounts due from insurance intermediaries;

• Amounts due from corporate bond issuers; and

• Counterparty risk with respect to derivative transactions.

Reinsurance is used to manage insurance risk. This does not, however, discharge theGroup’s liability as primary insurer. If a reinsurer fails to pay a claim, the Group remainsliable for the payment to the policyholder. The creditworthiness of a reinsurer is consideredbefore it is used and strict criteria are applied (including the financial strength of thereinsurer) before a reinsurer is approved.

The following tables provide information regarding aggregated credit risk exposure, forfinancial assets with external credit ratings, as at 31 December 2009. The credit rating bands are provided by independent ratings agencies:



2009 AAA AA A BBB or Total

US$000s US$000s US$000s US$000s US$000s

Debt securities 251,883 11,591 3,229 – 266,703

Assets arising from reinsurance contracts held – 29,376 53,707 2,175 85,258

Debtors arising out of direct insurance – – – 25,132 25,132

Other debtors – – – 1,708 1,708

Cash and cash equivalents 189,285 – – – 189,285

Total 441,168 40,967 56,936 29,015 568,086

2008

Debt securities 230,325 4,359 2,106 – 236,790

Assets arising from reinsurance contracts held – 94 107,000 1,552 108,646


Other debtors – – – 2,875 2,875


Total 420,718 4,453 109,106 29,112 563,389

less ornot rated

(c) Credit risk (continued)

The Group’s policy is to make a full provision against all reinsurance debts with an age inexcess of two years and a fifty percent provision for reinsurance debts between one and twoyears old. The Group also provides against all amounts due from policyholders andinsurance intermediaries that are more than nine months overdue.

After assessing all other financial assets at the end of the period, no objective evidence wasfound to suggest that any were impaired (2008: no impairments).

(d) Liquidity and cashflow risk

Liquidity and cashflow risk is the risk that cash may not be available to pay obligations asthey fall due at a reasonable cost. The Group maintains holdings in short term deposits toensure there are sufficient funds available to cover anticipated liabilities and unexpectedlevels of demand. As at 31 December 2009, the Group’s short term deposits (including cashand UCITs) amounted to US$189.3 million (2008:US$190.4 million).

The tables below provide a maturity analysis of the Group’s financial assets:



2009 Past due but not impairedFinancial Carrying

Neither past assets that value in thedue nor 0-3 3-6 6 months- have been balanceimpaired months months 1 year > 1 year impaired sheet

US$000s US$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 266,703 – – – – – 266,703

Reinsurance debtors 70,746 13,922 – – 590 – 85,258

Insurance debtors 22,628 2,504 – – – – 25,132

Other debtors – 914 140 21 633 – 1,708

Cash and cash equivalents 189,285 – – – – – 189,285

Total 549,362 17,340 140 21 1,223 – 568,086

2008

Debt securities 236,790 – – – – – 236,790

Reinsurance debtors 89,506 18,465 106 231 – 338 108,646

Insurance debtors 17,760 6,508 296 (37) 158 – 24,685

Other debtors 25 1,735 282 319 514 – 2,875


Total 534,474 26,708 684 513 672 338 563,389

(d) Liquidity and cashflow risk (continued)

The tables below show a maturity analysis of the Group’s derivative contracts:

The tables below provide a maturity analysis of the Group’s financial assets and liabilities:



2009 0-3 3-6 6 monthsmonths months –1 year > 1year TotalUS$000s US$000s US$000s US$000s US$000s

Forward currency contracts 512 – – – 512

Total 512 – – – 512

2008

Forward currency contracts 2,164 – – – 2,164

Total 2,164 – – – 2,164

2009 < 6 months Between 6 Between Betweenor on months & 1 and 2 2 and 5

demand 1 year years years > 5 years TotalUS$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 69,004 39,807 42,321 111,873 3,698 266,703

Insurance debtors 21,521 3,611 – – – 25,132

Other debtors 1,708 – – – – 1,708

Cash and cash equivalents 189,285 – – – – 189,285

Subordinated loan – – – – 29,012 29,012

Creditors 18,908 (10) – – – 18,898

Total 300,426 43,408 42,321 111,873 32,710 530,737

2008

Debt securities 104,601 2,047 44,509 67,866 17,767 236,790


Other debtors 2,875 – – – – 2,875


Subordinated loan – – – – 28,955 28,955

Creditors 14,437 229 168 23 79 14,936

Total 320,894 3,936 44,677 67,889 46,801 498,634



(e) Capital management

The Group maintains an efficient capital structure from a combination of policyholders’funds (surplus and reserves) and long term borrowings (subordinated debt), consistent withthe Group’s risk profile. The Group’s strategy is to maintain sufficient capital to meetregulatory requirements and to maintain an AM Best financial strength rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case.

The Group’s principal regulator is the Financial Services Authority (FSA) in the UnitedKingdom. Under the FSA’s ICA regime the Group is obliged to assess and maintain theamount of capital required to meet the risks that it faces based on a 99.5% confidence levelof solvency over one year or a longer timeframe with an equivalent probability. Throughoutthe period the Group complied with the FSA’s capital requirements and the requirementsin other countries where it has regulated operations.

As at 31 December 2009 the Group’s total regulatory capital available amounted toUS$160.37 million (2008: US$150.60 million) made up surplus and reserves of US$131.36million (2008: US$121.64 million) and subordinated debt of US$29.01 million (2008:US$28.96 million).

As at 31 December 2009 the Group held deposits and letters of credit totalling of US$40.6million to meet overseas regulatory requirements (2008: US$35.3 million). This includesletters of credit amounting to US$40.0 million (2008: $34.9 million) in relation to HongKong and a trust fund deposit of US$19.6 million (2008: US$16.5 million) in relation tothe US.

(f) Fair value estimations

From 1 January 2009, the group adopted the amendment to FRS 29. This requires, forfinancial instruments held at fair value in the balance sheet, disclosure of fair valuemeasurements by level of the following fair value hierarchy

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable forthe assets or liability, either directly (that is, prices) or indirectly (that is, derivedfrom prices)

Level 3 – Inputs for the assets or liability that are not based on observable market data (thatis, unobservable inputs)

All of the Group’s financial assets and liabilities that are measured at fair value at both 31December 2009 and 31 December 2008 fall into the Level 2 category.

The fair value of financial instruments traded in active markets is based on quoted bid pricesas at the balance sheet date. All valuations are taken from external price feeds based uponmarket prices or broker quotes.



Note 4: Claims paidClaims paid include claims handling charges paid to the Managers totalling US$8.40 million(2008: US$9.17 million).

Net claims payments and the provision for claims outstanding at the end of the year in respect of 2008 and prior policy years were US$17.2 million lower than the provision for claimsoutstanding at the beginning of the year (2008: US$15.3 million).

When the impact of fluctuations in foreign currency exchanges rates is excluded from themovement in claims outstanding, the reduction in provisions for claims outstanding exceeds net claims paid in respect of 2008 and prior policy years by US$25.2 million (2008: US$6.6million).

Note 5: Reinsurers' share of claims paid 2009 2008

US$000s US$000s

Members' reinsurance 4,164 8,464

General reinsurance 33,801 20,129

Traditional quota share reinsurance 14,560 7,765

Change in provision for potential irrecoverable reinsurance 24 743

52,549 37,101



2009 2008

US$000s US$000sAcquisition costsBrokerage and commission 21,766 18,391

Management fee in respect of underwriting 12,596 18,966

General expenses in respect of underwriting 326 219

Change in deferred acquisition costs (2,951) 699

31,737 38,275

Management fee in respect of management and investment costs 8,053 12,292

Performance related management fee 8,943 (334)

General expenses 1,748 2,399

Directors' fees 779 739

Directors' travelling costs 554 725

Auditors' remunerationParent company audit 207 155

Subsidiary company audit 169 126

Non-audit services– Other services pursuant to legislation, including the audit of the regulatory returns 47 52

– Tax services 237 264

– Other services not covered above 9 53

20,746 16,471

Total operating expenses before overriding commission 52,483 54,746

Overriding commission on quota share reinsurance (2,023) –

50,460 54,746

The Directors’ fees for the highest paid director during 2009 amounted to US$137,000 (2008:US$123,000).

The parent company’s surplus for the financial year was US$6.6 million (2008: deficit ofUS$1.64 million).

Note 6: Net operating expenses



Note 7: Investment return

2009 2008

US$000s US$000s

Investment incomeIncome from financial assets held at fair value through profit or loss 6,105 10,770

Net losses on the realisation of investments (3,957) (844)

2,148 9,926


13,417 2,088

Investment expenses and chargesInterest payable on subordinated loan (1,207) (2,010)

Other investment management expenses (244) (70)

Net unrealised gains/(losses) on investments 3,042 (1,245)

Total investment return 15,008 (1,237)

Investment return is analysed between:

Allocated investment return transferred to the technical business account 9,388 (517)

Net investment return included in the non-technical account 5,620 (720)

Total investment return 15,008 (1,237)

Note 8: Tax on ordinary activities

2009 2008

US$000s US$000s

(i) Analysis of tax charge on ordinary activitiesForeign tax for the current period 95 118

Adjustments in respect of prior periods (129) 577

(34) 695



Note 8: Tax on ordinary activities (continued)

2009 2008

US$000s US$000s

(ii) Factors affecting Tax Charge for the current period

The tax assessed for the period is higher than that resulting from applying the standard rate of corporation tax in Bermuda: 0% (2008: 0%) – the differences are explained below:


Tax at 0 % thereon – –

Effects of:Tax levied outside Bermuda:United Kingdom 65 128

United States 15 –

Singapore 15 –

Overprovision in previous years (129) (10)

Deferred taxation – 577

Current tax charge for period (34) 695

The taxation charge comprises a charge for UK taxation based at a rate of 28% based on 10% ofthe group's investment return excluding that taxed within an overseas branch. The overseas taxcharges relate to overseas income taxed at the prevailing rate in the respective jurisdictions.

A potential deferred tax asset of US$2.2m in respect of certain unutilised tax losses has not beenrecognised as there is insufficient evidence that it will be recoverable. This asset would berecovered should sufficient taxable profits be generated in future which would be eligible forrelief against the unutilised tax losses.



Note 9: Shares in subsidiary undertakings and interests in joint ventures

Proportion of Country of Class of Principal shares held

Name incorporation shares held activity and voting rights

TT Club Mutual Insurance Limited United Kingdom N/A General insurance 75% ofand reinsurance Members' votes

TT (Bermuda) Services Limited Bermuda Ordinary Holding company 90%(incorporated 30 January 1998)

TT Neptunus Services Limited Bermuda Ordinary Repair management 50%

Carrying Value Purchase Price


Note 10: Other financial investmentsThe Group’s financial investments are summarised below by measurement category in the tablebelow:

2009 2008 2009 2008Consolidated US$000s US$000s US$000s US$000s

Held at fair value through profit and loss:

– debt securities 266,703 236,790 262,832 235,985

– derivative financial instruments 512 2,164 – –

– UCITS 159,701 172,188 159,701 172,188

Financial assets held at fair value through profit and loss 426,916 411,142 422,533 408,173

2009 2008 2009 2008Parent Company US$000s US$000s US$000s US$000s

Held at fair value through profit and loss:

– debt and other fixed interest securities 257,008 227,005 253,176 226,329

– forward currency contracts 512 2,164 – –

– UCITS 100,832 117,358 100,832 117,358

Financial assets held at fair value through profit and loss 358,352 346,527 354,008 343,687



Note 10: Other financial investments (continued)

The UCITS are Undertakings for Collective Investments of Transferable Securities, and are usedas an alternative to short term cash deposits. They are classified as cash equivalents as they areshort term, highly liquid investments that can be readily converted to cash.

The financial assets with a maturity of less than one year total US$108.8 million (2008:US$106.6 million) with the remainder recoverable after more then one year.

As described in note 2(h), the investments of US$426.9 million (2008:US$411.1 million) arevalued in the financial statements at market value.

Note 11: Surplus and reserves

Open InvestmentReserve policy Capital revaluation Total Total

fund years reserve reserve 2009 2008US$000s US$000s US$000s US$000s US$000s US$000s

Transfer to closed policy year balance of future investment income, plus policy year deficit on closure, 2006 (2005) 13,834 – – – 13,834 12,316

Investment income and exchange gains less losses, expenses and taxation 1,260 – – – 1,260 (1,660)

Transfer from closed policy years (7,929) – – – (7,929) 3,540

2.5% Members' contribution to Reserve Fund 3,909 – – – 3,909 4,733

Net movements on open policy years – (4,396) – – (4,396) (22,959)

Unrealised gains arising during the year – – – 3,042 3,042 (1,245)

Net transfer to reserves 11,074 (4,396) – 3,042 9,720 (5,275)

Balance at beginning of year 129,727 (24,694) 12,980 3,387 121,400 126,675

Balance at end of year 140,802 (29,090) 12,980 6,429 131,120 121,400

The parent company surplus for the year ended 31 December 2009 was US$6.6 million (2008:deficit US$1.64 million).



Note 12: Subordinated loanOn 10 October 2006, the Association issued US$30 million of subordinated loan notes. Interestis payable on the loan notes at a rate of 2.95% plus three month US dollar LIBOR. The loannotes have a maturity date of 9 October 2036 and are repayable, in whole or in part, after fiveyears at the Association’s option, subject only to regulatory approval.

The Group has an obligation to deliver cash or, for interest settled under the alternativesettlement mechanism, equivalent financial assets at maturity in 2036 or earlier as permitted bythe terms of the loan notes and to pay interest up until the loan notes are repaid. Hence, despitequalifying as regulatory capital, the loan notes have been included in subordinated liabilities.

The fair value and amortised cost of the subordinated loan is US$29 million (2008: US$28.9million).

Note 13: Segmental information

2009 2008

US$000s US$000s

Gross premiums written– Members located in UK 10,226 11,220

– Members located in other EU states 41,442 48,189

– Members located outside EU 124,116 110,255

175,784 169,664

The Group writes only marine, aviation and transport business.

The geographical analysis of surplus on ordinary activities before tax and net assets has not beendisclosed as this, in the view of the Directors, would be prejudicial to the interest of theMembers.

Note 14: Reconciliation of surplus to net cash inflow from operating activities

2009 2008

US$000s US$000s

Surplus/(deficit) before taxation 9,686 (4,592)

Unrealised investment gains (3,042) (8,429)

Exchange (gains)/losses (11,278) 16,360

Interest payable on subordinated loan 1,150 1,972

Servicing of finance 57 38

Decrease in debtors 2,526 9,540

Increase/(decrease) in creditors 7,297 (772)

Increase/(decrease) in net technical provisions 7,666 (10,440)

Net cash inflow from operating activities 14,062 3,677



Note 15: Movement in cash, portfolio investments and financing

Changes to1 January market value 31 December

2009 Cash flow & currencies 2009US$000s US$000s US$000s US$000s

Cash at bank 18,205 11,379 – 29,584

UCITS 172,188 (12,487) – 159,701

Bond and other fixed interest securities 236,790 13,944 15,969 266,703

Forward currency contract 2,164 – (1,652) 512

429,347 12,836 14,317 456,500

Note 16: Movement in opening and closing portfolios net of financing

2009 2008

US$000s US$000s

Net cash inflow 11,379 10,376

Portfolio investments 1,457 (9,358)

Movements arising from cash flows 12,836 1,018

Changes in market values and exchange rates 14,317 (8,587)

Total movement in portfolio investments net of financing 27,153 (7,569)

Portfolio investments net of financing as at 1 January 429,347 436,916

Portfolio investments net of financing as at 31 December 456,500 429,347

Note 17: Guarantees and commitments

Investments to the value of US$42.21 million (2008: US$42.34 million) have been charged ascollateral in respect of letters of credit as security for holders of insurance policies in Canadaand for regulatory purposes in Singapore and Hong Kong. The Association has issued aguarantee, not to exceed US$ 2.5 million, to TT Club Mutual Insurance Limited to enable it tocomply with the solvency margin requirements of the Financial Services and Markets Act 2000.The amount withdrawn as 31 December 2009 amounted to nil (2008: nil).

Note 18: Related party transactions

All material related party transactions are disclosed separately within the financial statements.

Annual Report & Financial Statements 2009TT Club Mutual Insurance Limitedfor the year ended 31 December 2009

Contents



Directors' Report 46




Income and Expenditure Account 55

Balance Sheet 57



Directors and Management

ChairmanK Pontoppidan 1 Copenhagen

DirectorsD Davies Essex

C Fenton (appointed 18 March 2009)Through Transport Mutual Services (UK) Ltd,London

J Kuttel (appointed 3 September 2009)Ermewa, Geneva

Registered Office90 Fenchurch StreetLondonEC3M 4ST

Telephone +44 (0) 20 7204 2626Telefax +44 (0) 20 7204 2727

Company Registration number2657093

Deputy ChairmanG Sjöholm 2Port of Gothenburg, Gothenburg

B Menzinger (retired 25 June 2009) 1 2Basle

P Neagle (resigned 18 March 2009)Through Transport Mutual Services (UK) Ltd,London

Managers & SecretaryThrough Transport Mutual Services (UK) Ltd

1 Nominations Committee member2 Audit Committee member

45 TT Club Mutual Insurance Limited

Directors’ Report

The Directors present herewith their Report and the financial statements of TT Club MutualInsurance limited ("the Association" or “Company”).

This report is addressed to, and written for, the Members of the company, and the Directorswish to draw attention to a number of financial and environmental uncertainties, including butnot limited to the rate of claims inflation, costs inflation, foreign exchange movements andeconomic growth, which mean that the actual results in the future may vary considerably fromboth historic and projected outcomes contained within any ‘forward-looking statements’.

Principal activities

The principal activities of the Association during the year were the provision of insurance andreinsurance in respect of the equipment, property and liabilities of its Members in theinternational transport and logistics industry.

The Association operates in the UK and through branches in Singapore, Hong Kong andAustralia.

Business review

Strategy and values

The Association’s business is the provision of liability and asset insurances and related riskmanagement services to the international transport and logistics industry. The Association is amutual company, limited by guarantee. It is a subsidiary of Through Transport MutualInsurance Association Limited (“TT Bermuda”), a mutual insurance company based inBermuda. The two companies have separate corporate governance arrangements but operate asa single business.

The Association has entered into a 90% quota share reinsurance contract with TT Bermuda.The reinsurance contract also includes a stop loss element to protect the Association from anexcess accumulation of claims within its 10% retention.

The Association’s business strategy is to provide superior insurance products and claimshandling to its policyholder Members at a competitive price, whilst maintaining excellentfinancial security over the long term. Insurance is a very much cyclical business, with premiumrates fluctuating in accordance with the supply of capital in the market and with the investmentreturns available to the owners of that capital.

The Association has outsourced the entire management function, including that relating toinvestment management, to companies within the Thomas Miller Holdings Limited group ofcompanies.


Financial performance, capital strength and solvency

The Association’s underwriting performance in 2009 continued to be affected by marketpressure on premium rates in 2009. The technical result for 2009, after allowing for theattribution of investment income on the claims reserves, was a surplus of US$1.05 million(2008: deficit of US$2.4 million). The non-technical account produced a surplus of US$1.89million (2008: deficit of US$0.6 million), resulting in an overall surplus after tax of US$2.94million (2008: surplus of US$3.6 million).

As a result the Association’s surplus and reserves were US$53.1 million (2008: US$50.1 million)

The principal KPIs are set out in the charts below. The position is shown as at the end of 2009and 2008.

AM Best rating

2009 2008

AM Best rating A- (Excellent) A- (Excellent)

Surplus and reserves US$53.1m US$50.1m

Technical result (before attribution of investment return) US$0.2m US$(2.1)m

Investment return (incl. exchange gains and losses) US$2.8m US$(0.9)m

Net result US$2.9m US$(3.6)m

Customer satisfaction index – on a scale of 1 to 10 (compiled by independent research) 8 8.2

The Association’s financial strategy, approved by the Board, is to maintain within the businesssufficient capital to meet regulatory requirements, and to maintain an AM Best rating of A-(Excellent) over the insurance market cycle, with a substantial margin in each case. TheDirectors are satisfied that both elements of this strategy have been maintained throughout2009.



Corporate and social

The Directors are of the opinion that the environmental impact of the Association’s activities islow, due to the small size and the nature of its business. There are therefore currently no KPIsrelating to environmental matters. The business is however conscious of its environmentalresponsibility, and continues to invest in electronic claims handling and underwriting systemsdesigned to increase efficiency and reduce reliance on paper-based records. It is also investingin website technology in order to facilitate electronic distribution of its products andinformation to Members, brokers, suppliers and third parties.

As the Association has outsourced all of its management activities to independent professionalmanagers there are no employee matters to report.

Risks and risk management

The Board has adopted the Group risk management policy which is designed to protect theAssociation from occurrences that hinder sustainable achievement of our objectives andfinancial performance and to ensure that the Association complies with regulatory requirementsin the jurisdictions in which it operates.

The following key principles outline the Association’s approach to risk management:

• The Board is responsible for risk management and internal control;

• The Board is responsible for ensuring that a framework exists which sets out riskappetite, risk management and control and business conduct standards; and

• The Board is responsible for ensuring that the Managers implement and maintain asound system of internal control.

All types of risk facing the business are analysed and each one is rated according to its severity(impact on the business) and probability of occurrence, adjusted for any mitigation measuresthat have been implemented. The residual risks are prioritised with the most highly rated itemsbeing considered as fundamental risks. Each fundamental risk is monitored and managed by amember of the executive management. All risks identified are summarised, categorised andprioritised in a Risk Log which is reviewed and approved by the Board, at least annually andmore frequently if required.

The principal risks and uncertainties faced by the business are summarised as follows:

Insurance risk

Insurance risk is the potential adverse financial impact on the Association as a result of:

• Inaccurate pricing of risk when underwritten;

• Inadequate reinsurance protection;

• Fluctuations in the timing, frequency and severity of claims and claims settlementsrelative to expectations; and

• Inadequate claims reserves.



Insurance risk is mitigated by means of:

• Prior approval of all quotations by a minimum of two senior underwriters

• Underwriters’ authority levels based on experience and competence

• Technical underwriting and claims file reviews by management

• Key performance indicators and key risk indicators relating to underwriting andclaims functions

• Actuarial, management and Board review of claims reserves (every four months)

• Management review of reinsurance adequacy and security.

Financial risks

Financial risks consist of:

• Market risk

• Currency risk

• Credit risk

• Liquidity and cash flow risk.

Information on the use of financial instruments by the Association and its management offinancial risks is disclosed in Note 3 to the financial statements.

Operational risk

Operational risk arises from inadequately controlled internal processes or systems, human errorand from external events. Operational risks include, for example, risks arising from outsourcinginformation technology, information security, project management, human resources, taxation,legal, fraud and compliance.

The Directors have assessed the mitigation and control environment relating to each of thesetypes of risk and have made an assessment of the capital required to meet the residual risksfaced by the business. That assessment has been reviewed and agreed with the Club’s regulatoryauthority.

Directors & Officers

The names of the Directors of the Association who served during the year are shown on page45. All the Directors retiring at the Annual General Meeting and seeking re-election were re-elected. At the meeting of the Directors following the Annual General Meeting in June 2009,Mr K Pontoppidan was appointed Chairman of the Board and Mrs G Sjoholm was appointedas Deputy Chairman.



Meetings of the Directors

The Board of the Association met formally on eleven occasions during 2009, with its mainfocus being to direct the operations of underwriting, sales, the external reinsurance programme,service, claims management, information technology and general administration. The Boardalso monitored performance against budget.

Board Committees

The Board has delegated specific authority to a number of committees. The Board is appraisedas to the main issues discussed and all minutes of meetings of the committees are distributed tothe Board.

The Nominations Committee aims to ensure that the Board is appropriately skilled to direct amutual insurance company, and has sufficient policyholder representation. The NominationsCommittee met on three occasions during 2009.

The Audit Committee assists the Board in discharging its responsibilities for the integrity of thefinancial statements, the assessment of the effectiveness of the systems of internal control,monitoring the effectiveness and objectivity of the internal and external auditors andcompliance with regulatory requirements in relevant jurisdictions. The Audit Committee meton five occasions during 2009.

Charitable and political donations

During the year the Association did not make any charitable donations (2008: US$nil). Nodonations were made for political purposes.

Statement of disclosure of information to auditors

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

1) So far as each of them is aware, there is no information relevant to the audit of theAssociation’s financial statements for the year ended 31 December 2009 of which theauditors are unaware; and

2) The Director has taken all steps that he/she ought to have taken in his/her duty as aDirector in order to make him/herself aware of any relevant audit information and toestablish that the Association’s auditors are aware of that information.

Auditors

PricewaterhouseCoopers LLP have indicated their willingness to continue in office and aresolution that they be re-appointed will be proposed at the annual general meeting.

By order of the Board

Through Transport Mutual Services (UK) Limited, Secretary18 March 2010



Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual report and the financial statements inaccordance with applicable laws and regulations. United Kingdom company law requires theDirectors to prepare financial statements for each financial year which give a true and fair viewof the state of affairs of the Association and of the surplus or deficit of the Association for thatperiod. In preparing those financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently, with theexception of changes arising on the adoption of new accounting standards in theyear;

• Make judgments and estimates that are reasonable and prudent;

• Prepare the financial statements on the going concern basis unless it isinappropriate to presume that the Association will continue in business; and

• State whether applicable accounting standards have been followed, subject to anymaterial departures disclosed and explained in the financial statements.

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

The Directors are responsible for keeping proper accounting records which disclose withreasonable accuracy at any time the financial position of the Association and to enable them toensure that the financial statements comply with the Companies Act 1985. They are alsoresponsible for safeguarding the assets of the Association and hence for taking reasonable stepsfor the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the company’s website.Legislation in the United Kingdom governing the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.


Notice of Meeting

Notice is hereby given that the nineteenth Annual General Meeting of the Members of TTClub Mutual Insurance Limited will be held at Hotel Majestic, Barcelona on the twenty-fourthday of June 2010 at 8.40am for the following purposes:

To receive the Directors' report and financial statements for the year ended 31 December2009 and, if they are approved, to adopt them.

To elect Directors.

To appoint auditors and to authorise the Directors to fix their remuneration.

To transact any other business of an Ordinary General Meeting.


Through Transport Mutual Services (UK) Ltd, Secretary18 March 2010


Independent Auditors’ Report

To the Members of TT Club Mutual Insurance Limited

We have audited the financial statements of TT Club Mutual Insurance Limited for the yearended 31 December 2009 which comprise the Income and Expenditure Account, the BalanceSheet and the related notes. The financial reporting framework that has been applied in theirpreparation is applicable law and United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice).

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give atrue and fair view. Our responsibility is to audit the financial statements in accordance withapplicable law and International Standards on Auditing (UK and Ireland). Those standardsrequire us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s membersas a body in accordance with Sections 495 and 496 of the Companies Act 2006 and for noother purpose. We do not, in giving these opinions, accept or assume responsibility for anyother purpose or to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financialstatements sufficient to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the company’s circumstances and have beenconsistently applied and adequately disclosed; the reasonableness of significant accountingestimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements In our opinion the financial statements:

• give a true and fair view of the state of the company’s affairs as at 31 December2009 and of its surplus for the year then ended;

• have been properly prepared in accordance with United Kingdom GenerallyAccepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act2006.


Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the financial year forwhich the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audithave not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records andreturns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

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

Tom RobbFor and on behalf of PricewaterhouseCoopers LLPStatutory AuditorLondon

18 March 2010


Independent Auditors’ Report (continued)

Income and Expenditure Account for the year ended 31 December 2009


TT Club Mutual Insurance Limited55

Technical Account

Note 2009 2008

US$000s US$000s US$000s US$000s

Gross written premiums 13 174,857 167,770

Reinsurance premiums ceded (139,091) (144,263)

Premiums written, net of reinsurance 35,766 23,507

Change in provision for unearned premiumsGross (10,372) 19,085

Reinsurers' share 3,056 (11,943)

(7,316) 7,142

Earned premiums, net of reinsurance 28,450 30,649

Allocated investment return transferredfrom the non-technical account 2(h) 898 (280)

Commission income 2 (d) 19,594 25,930

Other technical income 47 37

Claims paidGross 4 (114,433) (127,043)

Reinsurers' share 5 107,217 117,771

(7,216) (9,272)

Change in the provision for claimsGross (4,856) 40,422

Reinsurers' share 3,063 (39,654)

(1,793) 768

Claims incurred, net of reinsurance (9,009) (8,504)

Net operating expenses 6 (38,928) (50,231)


Income and Expenditure Account for the year ended 31 December 2009 (continued)


Note 12 details the movements on the Reserve Fund during the year. There are no recognisedgains or losses other than the surplus for the current and previous financial year. Accordinglyno statement of total recognised gains and losses has been prepared.



Non-technical Account

Note 2009 2008

US$000s US$000s


Investment income 807 1,458

Unrealised gains on investments – 129

Investment expenses and charges (46) (8)

Unrealised losses on investments (90) –


7 2,815 (894)

Allocated investment return transferred to the technical account 2(h) (898) 280


Tax on ordinary activities 8 (31) (611)

Surplus/(deficit) on ordinary activities after tax 10 2,938 (3,624)

Balance Sheetas at 31 December 2009


Note 2009 2008

US$000s US$000s

Assets

Other financial investments 9 68,564 64,615

Reinsurers' share of technical provisionsProvision for unearned premiums 43,641 40,585

Claims outstanding 281,097 278,034

324,738 318,619

DebtorsArising out of direct insurance operations

– policyholders 25,114 24,625

Arising from reinsurance ceded 4,193 18,196

Amounts due from Parent company 3,819 –

Corporation tax debtors 226 82

Other debtors 1,319 1,040

34,671 43,943

Cash at bank 25,625 14,762

Prepayments and accrued incomePrepayments 93 166

Accrued interest 28 74

Deferred acquisition costs 7,693 4,793

7,814 5,033

Total assets 461,412 446,972

Balance Sheetas at 31 December 2009 (continued)

These financial statements on pages 55 to 75 were approved by the Board of Directors on 18 March 2010 and were signed on its behalf by:

K Pontoppidan, DirectorG Sjoholm, Director

Company Number 2657093



Note 2009 2008

US$000s US$000s

Liabilities and reservesSurplus and reserves 12 53,080 50,142

Technical provisionsProvision for unearned premiums – gross 55,170 44,798

Claims outstanding – gross 306,013 301,157

361,183 345,955

CreditorsArising out of direct insurance operations 751 223

Arising from reinsurance ceded 14 40,869 42,917

Amount due to subsidiary company – 2,022

Accrued expenses and sundry creditors 5,529 5,713

47,149 50,875

Total liabilities and reserves 461,412 446,972

Note 1: Constitution

The Association was incorporated as a mutual company limited by guarantee in the UnitedKingdom under the Companies Act 1985 on 24 October 1991. The liability of Assureds islimited to the supplementary premiums set by the Directors. Under the Association'sMemorandum of Association, individual Members' liabilities are limited, in the event of theAssociation being wound up, to a maximum of £5 and, under the Association's Articles, in theevent of its liquidation, any net assets of the Association are to be distributed equitably amongstthe Members.

Note 2: Accounting policies

The financial statements are prepared in accordance with applicable United Kingdom Law andaccounting standards. The significant accounting policies adopted are described below.

(a) Basis of presentation

These financial statements have been prepared under the provisions of Schedule 3 of theCompanies Act 2006. The accounts have been prepared in accordance with applicableaccounting standards and the Statement of Recommended Practice on Accounting forInsurance Business issued in December 2005 (as amended in December 2006) by theAssociation of British Insurers. The accounts have been prepared under the provisions ofThe Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations2008 relating to insurance companies. Under Financial Reporting Standard 1: Cash Flowstatements, no cash flow has been presented in these Financial Statements as the Associationis deemed to be a wholly owned subsidiary of Through Transport Mutual InsuranceAssociation Limited and the cash flows of the Association are included within theconsolidated accounts of that entity.

During the financial year, the Association adopted the amendment to Financial ReportingStandard 29 which requires additional disclosure relating to the valuation of investment heldat fair value. The amendment is limited to additional disclosure and there is therefore noimpact on brought forward reserves or surplus in the year.

(b)Premiums

Premiums written relate to business incepted during the year, together with any differencesbetween booked premiums for prior years and those previously accrued, and includeestimates of provisions for anticipated adjustment premiums, less an allowance forcancellations. Premiums are stated before the deduction of commissions and brokerage butnet of taxes and duties levied.

(c) Unearned premiums

Premiums written during the financial year are earned as revenue on a daily pro-rata basisover the period of cover provided, in line with the incidence of risk. Amounts relating toperiods after the year end are treated as unearned and included within liabilities on theBalance Sheet.


Notes to the Financial Statements 31 December 2009

(d)Commission income

Commission income is earned on the Association's quota share reinsurance with the parentcompany, the Association's general reinsurance programme and on insurance arranged bythe Association on behalf of Members and others. Commission income also includesoverriding commission on quota share reinsurance premiums.

(e) Claims

Provisions made for all claims incurred during the year, whether paid, estimated orunreported, claims management costs and adjustments to claims provisions brought forwardfrom previous years. In addition, claims includes claims management costs and an allowancefor estimated costs expected to be incurred in the future in the management of claims.Estimated claims stated in currencies other than the functional currency are converted atyear end rates of exchange and any exchange difference is included within claims incurredin the Income and Expenditure account.

The provision for claims outstanding includes both estimates for known outstanding claimsand for claims incurred but not reported (IBNR). The estimates for known outstandingclaims are based on the best estimate and judgement of the likely final cost of eachindividual claim based on current information. The estimation of IBNR is generally subjectto a greater degree of uncertainty than the estimation of cost of settling claims alreadynotified to the Association, where more information is generally available.

The best estimate of unreported claims on each policy year and the eventual outcome mayvary from the original assessment. As a result of this inherent uncertainty, sophisticatedestimation techniques are required to determine an appropriate provision. The estimate ismade using a range of standard actuarial projection techniques, such as the Chain Ladderand Bornheutter-Ferguson methods. Such methods extrapolate the development of claimsfor each policy year, based on the claims patterns of earlier years and the expected loss ratios.The main assumption underlying these techniques is that past claims developmentexperience can be used to project ultimate claims costs. Judgement is used to assess theextent to which past trends may not apply in future and alternative approaches are appliedas appropriate.

An estimate for Members and general reinsurance in relation to the provision forunreported claims has been made by reference to the relationship between gross and netclaims on prior policy years and having due regard to recoverability.

(f) Reinsurance recoveries

The liabilities of the Association are reinsured above certain levels and for certain specificrisks. In addition, the Association has a quota share reinsurance agreement with the parentcompany covering all risks insured by the Association.



(f) Reinsurance recoveries (continued)

The figure credited to the Income and Expenditure Account for reinsurance recoveriesincludes receipts and amounts due to be recovered on claims already paid together withchanges in the amount of recoveries to be made on outstanding claims. An assessment isalso made of the recoverability of reinsurance recoveries having regard to market data onthe financial strength of each of the reinsurance companies.

(g) Acquisition costs

Brokerage and commission payments and other direct costs incurred in relation to securingnew contracts and rewriting existing contracts are deferred to the extent that they areattributable to premiums unearned at the balance sheet date and are shown as assets in theBalance Sheet.

(h) Financial assets

Financial assets are classified between the following categories: financial assets at fair valuethrough profit or loss, loans and receivables and available-for-sale financial assets. Theclassification depends on the purpose for which the assets were acquired and is determined atinitial recognition and this is re-evaluated at every reporting date.

Fair value through profit and lossAssets, including all of the investments of the Association, which are classified as fair valuethrough the profit and loss and are designated as such by management to minimise anymeasurement or recognition inconsistency with the associated liabilities.

Investments are included in the Balance Sheet at market value translated at year end rates ofexchange. The market value of listed investments is based on current bid prices as at thebalance sheet date.

The cost of investments denominated in currencies other than the US dollar, are convertedinto US dollars on the date of purchase. Any subsequent changes in value, whether arisingfrom market value or exchange rate movements, are charged or credited to the Income andExpenditure Account and are then accumulated within the Investment RevaluationReserve until realised. The movement in unrealised investment gains and losses includes thereversal of previously recognised unrealised gains and losses on investments disposed of inthe current period.

Net gains or losses arising from changes in fair value of financial assets at fair value throughprofit or loss are presented in the Income and Expenditure Account within ‘Unrealisedgains/(losses) on investments’ in the period in which they arise.



(h) Financial assets (continued)

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. Receivables arising from insurancecontracts are also classified in this category and are reviewed for impairment as part of theimpairment review of loans and receivables. A bad debt provision is created against anybalances that may be impaired.

Available for saleAvailable-for-sale financial assets are non-derivative financial assets that are either designatedin this category or not classified in any of the other categories. No available for sale assetsare held.

Derivative financial instruments Derivative financial instruments include open foreign currency contracts. They are classifiedas held for trading. They are initially recognised at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at their fair value.Changes in fair value are charged or credited to the Income and Expenditure Account. Fairvalues are obtained from quoted market prices in active markets. All derivatives are carriedas assets when the fair value is positive and as liabilities when the fair value is negative.

Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks andUCITS.

The UCITS are Undertakings for Collective Investments of Transferable Securities, and areused as an alternative to short term cash deposits. They are classified as cash equivalents asthey are short term, highly liquid investments that can be readily converted to cash.

(i) Impairment of financial assets

At each balance sheet date an assessment is made whether there is objective evidence that afinancial asset is impaired. A financial asset is impaired only if there is evidence of one ormore events that have occurred giving rise to a reduction in estimated future cash flows.The Association must be able to reliably estimate the impact on future cash flows.

If the carrying value of an asset is greater than its recoverable amount, the carrying value isreduced through a charge to the Income and Expenditure account in the period ofimpairment.



(j) Investment return

Investment income comprises income on fixed interest securities, interest on deposits andcash and realised and unrealised gains and losses on investments. Other investment incomeis recognised on an accruals basis.

The movement in unrealised gains and losses on investments represents the differencebetween the fair value at the balance sheet date and their purchase price (if purchased in thefinancial year) or the fair value at the last balance sheet date, together with a reversal ofpreviously recognised unrealised gains and losses on investments disposed of in the currentperiod.

The Association allocates a proportion of its investment return to the technical accountbased on the average ratio of outstanding claims to funds available to meet outstandingclaims. This transfer is made so that the balance on the technical account is based on alonger-term rate of investment return and is not subject to distortion from short-termfluctuations in investment return (SORP para. 294).

(k) Foreign currencies

Revenue transactions are translated into US dollars at the rate applicable for the month inwhich the transaction took place. Assets and liabilities have been translated at the closingUS dollar exchange rate. The resulting differences, apart from those relating to estimatedfuture claims or investments, are shown separately in the Income and Expenditure Account.

Exchange gains or losses arising on non-US dollar cash holdings are treated as realised andare included in the Income and Expenditure Account.

(l) Policy year accounting

When considering the results of individual policy years, premiums, reinsurance premiumspayable, claims and reinsurance recoveries are allocated to the policy years to which theyrelate based on the period of cover of each insurance policy. The management fee andgeneral administration expenses are charged against the current policy year.

Investment income and exchange gains or losses are allocated proportionately to the averagebalance on each open policy year and the Reserve Fund. UK taxation, which is based oninvestment income, is allocated proportionately between the open policy years and theReserve Fund. Other taxation is allocated entirely to the policy years to which it relates.

(m)Closure of policy years

On formal closure of a policy year, a sum equivalent to the anticipated future investmentincome on the balance on that year is transferred from the Reserve Fund to the credit ofthe closing year. Thereafter, any income derived from such funds is credited to the ReserveFund, thereby offsetting the amount originally debited.



(m)Closure of policy years (continued)

For closed policy years, the Association retains a balance sufficient to meet the estimated netoutstanding claims and claims incurred but not reported on that year. Future adjustments tothese amounts as well as differences between the estimates and the ultimate payments willbe met by transfers to or from the Reserve Fund.

(n)Unexpired risk reserve

Full provision is made for unexpired risks when it is anticipated that unearned premiums,net of associated acquisition costs, will be insufficient to meet the expected claims andexpenses of business as at the year end after taking account future investment income.Unexpired risk surpluses and deficits are offset where business classes are managed togetherand provision is made if a deficit arises.

(o)Deferred Taxation

Deferred taxation is provided in full on timing differences that result in an obligation at thebalance sheet date to pay more tax, or a right to pay less tax, at a future date, at ratesexpected to apply when they crystallise based on current tax rates and law. Timingdifferences arise from the inclusion of items of income and expenditure in taxationcomputations in periods different from those in which they are included in the financialstatements.

Deferred tax assets are recognised to the extent that it is regarded as more likely than notthat they will be recovered. Deferred tax balances are not discounted.

Note 3: Management of Financial Risk

Financial Risk Management Objectives

The Association is exposed to financial risk through its financial investments, reinsurance assetsand liabilities to policyholders. In particular, the key financial risk is that the proceeds fromfinancial investments are not sufficient to fund the obligations arising from policies as they falldue. The most important components of this financial risk are market risk or investment risk(comprised of interest rate risk, equity price risk and currency risk) together with credit riskand liquidity risk.

The Association manages these risks using a risk governance structure incorporating theManagers’ Risk Review Committee and the Audit Committee. Further details can be found inthe Directors’ report on page 48.



Financial Risk Management Objectives (continued)

The Boards of the Association is responsible, advised by the Chief Executive working with theInvestment Manager, for setting investment policy and the appropriate level of market orinvestment risk. This is set with reference to the overall risks faced by the Association whichare analysed as part of the ICA process.

The processes used to manage risks within the Association are unchanged from the previousperiod.

(a) Market risk

(i) Interest rate risk

Interest rate risk arises primarily from investments in fixed interest securities. In addition, tothe extent that claims inflation is correlated to interest rates, liabilities to policyholders areexposed to interest rate risk.

The Association’s investment policy is set to ensure that the duration of the investmentportfolio is appropriately matched to the duration of the policyholder liabilities. Interestrate risk is then monitored by comparing the mean duration of the investment portfolio andthat of the policyholder liabilities. The mean duration is an indicator of the sensitivity ofthe assets and liabilities to changes in current interest rates.

(ii)Equity price risk

The Association is not exposed to equity price risk as it does not hold any equityinvestments.

(b) Currency risk

The Association is exposed to currency risk in respect of liabilities under policies ofinsurance denominated in currencies other than US dollar. The most significant currenciesto which the Association is exposed to are pounds sterling and the euro.

The following table shows the Association’s assets by currency. The Association seeks tomitigate the risk by matching the estimated foreign currency denominated liabilities withfinancial investments denominated in the same currency.



(b) Currency risk (continued)

At 31st December 2009, if the US dollar weakened/strengthened by 5% against the pound,with all other factors unchanged, the surplus for the year would have increased/decreasedby US$0.7 million (2008: US$0.19 million). If the US dollar weakened/strengthened by5% against the euro, with all other factors unchanged, the surplus for the year would haveincreased/decreased by US$1.3 million (2008: US$0.21 million).

(c) Credit risk

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

• Reinsurers’ shares of insurance liabilities;

• Amounts due from reinsurers in respect of claims already paid;

• Amounts due from policyholders;

• Amount due from insurance intermediaries;

• Amounts due from corporate bond issuers; and

• Counterparty risk with respect to derivative transactions.



2009 USD GBP EUR Other TotalUS$000s US$000s US$000s US$000s US$000s

Debt securities 9,695 – – – 9,695

Assets arising from reinsurancecontracts held 323,306 (186) 5,052 759 328,931

Assets arising from insurance contracts 16,263 2,649 2,595 3,607 25,114

Other debtors 1,500 26 58 (265) 1,319

Cash and cash equivalents 60,542 1,824 6,485 15,643 84,494

Total 411,306 4,313 14,190 19,744 449,553

2008 USD GBP EUR Other TotalUS$000s US$000s US$000s US$000s US$000s


Assets arising from reinsurance contracts held 336,810 34 100 (129) 336,815

Assets arising from insurance contracts 19,467 1,789 2,905 464 24,625

Other debtors 562 343 – 217 1,122

Cash and cash equivalents 65,117 493 3,982 – 69,592

Total 431,741 2,659 6,987 552 441,939



(c) Credit risk (continued)

Reinsurance is used to manage insurance risk. This does not, however, discharge theAssociation’s liability as primary insurer. If a reinsurer fails to pay a claim, the Associationremains liable for the payment to the policyholder. The creditworthiness of a reinsurer isconsidered before it is used and strict criteria are applied (including the financial strength of thereinsurer) before a reinsurer is approved.

The following table provides information regarding aggregated credit risk exposure, forfinancial assets with external credit ratings, as at 31 December 2009. The credit rating bands areprovided by independent ratings agencies:

The Association’s policy is to make a full provision against all reinsurance debts with an agein excess of two years and a fifty percent provision for reinsurance debts between one andtwo years old. The Association also provides against all amounts due from policyholders andinsurance intermediaries that are more than nine months overdue.

After assessing all other financial assets at the end of the period, no objective evidence wasfound to suggest that any were impaired (2008: no impairments).

2009 AAA AA A BBB+ or Total

US$000s US$000s US$000s US$000s US$000s


Assets arising from reinsurancecontracts held – 23,244 303,519 2,168 328,931


Other debtors – – – 1,319 1,319


Total assets bearing credit risk 94,189 23,244 303,519 28,601 449,553

2008


Assets arising from reinsurancecontracts held – 36 335,407 1,372 336,815


Other debtors – – – 1,122 1,122


Total assets bearing credit risk 79,377 36 335,407 27,119 441,939

less ornot rated



(d) Liquidity and cash flow risk

Liquidity and cash flow risk is the risk that cash may not be available at a reasonable cost topay obligations as they fall due. The Association maintains holdings in short term depositsto ensure there are sufficient funds available to cover anticipated liabilities and unexpectedlevels of demand. As at 31 December 2009 the Association’s short term deposits (includingcash and UCITs) amounted to US$83.8 million (2008: US$70 million).

The tables below provide a maturity analysis of the Association’s financial assets:

2009 Past due but not impairedFinancial Carrying

Neither past assets that value in thedue nor 0-3 3-6 6 months- have been balanceimpaired months months 1 year > 1 year impaired sheet

US$000s US$000s US$000s US$000s US$000s US$000s US$000s

Debt securities 9,695 – – – – – 9,695

Reinsurance debtors 324,738 3,933 45 70 145 – 328,931

Insurance debtors 22,393 2,721 – – – – 25,114

Other debtors – (210) (402) 895 1,036 – 1,319


Total 441,320 6,444 (357) 965 1,181 – 449,553

2008

Debt securities 9,785 – – – – – 9,785

Reinsurance debtors 318,619 17,725 64 69 – 338 336,815

Insurance debtors 17,727 6,481 296 (37) 158 – 24,625

Other debtors 82 443 274 248 75 – 1,122


Total 415,805 24,649 634 280 233 338 441,939



2009 < 6 months Between 6 Between Betweenor on months & 1 and 2 2 and 5

demand 1 year years years > 5 years TotalUS$000s US$000s US$000s US$000s US$000s US$000s

Debt securities – 4,388 5,307 – – 9,695


Other debtors 1,319 – – – – 1,319


Creditors 52,489 202 65 – – 52,756

Total 159,840 8,166 5,372 – – 173,378

2008

Debt securities – – 4,400 5,385 – 9,785


Other debtors 1,122 – – – – 1,122


Creditors 50,496 217 162 – – 50,875

Total 144,176 1,876 4,562 5,385 – 155,999

The table below provides a maturity analysis of the Association’s financial assets and liabilities:

(e) Capital management

The Association maintains capital, comprising of policyholders’ funds (surplus and reserves),consistent with the Association’s risk profile. As at 31 December 2009, the total regulatorycapital available amounted to US$53.1 million (2008: US$49.5 million), which exceededthe UK Financial Services Authority requirements.

As at 31 December 2009, the Association held deposits and letters of credit totalling ofUS$40.6 million to meet overseas regulatory requirements (2008: US$35.3 million). Thisincluded a letters of credit amounting to US$40.0 million (2008: US$34.9 million) inrelation to Hong Kong and a trust fund deposit of US$9.6 million (2008: US$6.6 million)in relation to the US.

The Association’s strategy is to maintain sufficient capital to meet regulatory requirementsand to maintain an AM Best rating of A- (Excellent) over the insurance market cycle, with asubstantial margin in each case.



(f) Fair value estimations

From 1 January 2009, the company adopted the amendment to FRS 29. This requires, forfinancial instruments held at fair value in the balance sheet, disclosure of fair valuemeasurements by level of the following fair value hierarchy

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable forthe assets or liability, either directly (that is, prices) or indirectly (that is, derivedfrom prices)

Level 3 – Inputs for the assets or liability that are not based on observable market data (thatis, unobservable inputs)

All of the assets and liabilities that are measured at fair value at both 31 December 2009 and31 December 2008 fall into the Level 2 category.

The fair value of financial instruments traded in active markets is based on quoted bid pricesas at the balance sheet date. All valuations are taken from external price feeds based uponmarket prices or broker quotes.

Note 4: Claims paid

Claims paid include claims handling charges paid to the Managers totalling US$7.60 million(2008: US$8.5 million).

Net claims payments and the provision for claims outstanding at the end of the year in respectof 2008 and prior policy years were US$0.7 million higher than the provision for claimsoutstanding at the beginning of the year.

Note 5: Reinsurers' share of claims paid 2009 2008

US$000s US$000s

Members' reinsurance 4,161 7,554

General reinsurance 25,505 20,720

Quota share reinsurance 11,118 5,434

Quota share with parent company 66,409 83,444

Change in provision for potential unrecoverable reinsurance 24 619

107,217 117,771



Note 6: Net operating expenses

2009 2008

US$000s US$000sAcquisition costsBrokerage and commission 21,628 18,165

Management fee in respect of underwriting 11,318 17,254

General expenses in respect of underwriting 292 216

Change in deferred acquisition costs (2,900) 216

30,338 35,851

Administration expensesManagement fee in respect of management and investment 7,236 10,879

General expenses 2,743 1,880

Directors' fees 337 412

Directors' travelling costs 66 890

Auditors' remuneration:– Audit fee 169 126

Non-audit services– Other services pursuant to legislation,

including the audit of the regulatory returns 9 42

– Tax services 23 108

– Other services not covered above 9 43

10,592 14,380

Total operating expenses before overriding commission 40,930 50,231

Overriding commission on quota share reinsurance (2,002) –

38,928 50,231

The Directors of the Association and its parent company, TT Bermuda, agree a management feecovering the management of the Association as a whole.



Note 7: Investment return

2009 2008

US$000s US$000s

Investment incomeIncome from financial assets held at fair value through profit or loss 800 2,120

Net (losses)/gains on the realisation of investments 7 (662)

807 1,458

Exchange losses 2,144 (2,473)

Other investment management expenses (46) (8)

Net unrealised gains on investments (90) 129

Total investment return 2,815 (894)

Investment return is analysed between:

Allocated investment return transferred to the technical business account 898 (280)

Net investment return included in the non-technical account 1,917 (614)

Total investment return 2,815 (894)

Note 8: Tax on ordinary activities

2009 2008

US$000s US$000s

(i) Analysis of tax charge on ordinary activitiesUnited Kingdom corporation tax at 28% (2008: 28%)– Under / (over) provision in previous periods 4 3

– charge in current period 4 31

Foreign tax – overprovision in previous periods 8 –

– charge in current period 15 –

Reduction in deferred tax – 577

31 611



Note 8: Tax on ordinary activities (continued)

2009 2008

US$000s US$000s

(ii) Factors affecting tax charge for the current periodThe tax assessed for the period is higher thanthat resulting from applying the standard rate of corporation tax in the UK: 28% (2008: 28%) – the differences are explained below:


Tax at 28% hereon 823 (844)

Effects of:Inland Revenue agreement – 10% of investment profits 284 (529)

Foreign tax 23 –

Technical account result (295) 673

Unrealised losses on investments 25 (36)Exchange gains (600) 692

Allocated investment return transferred to the technical account (252) 78

Current tax credit for period 8 34

A potential deferred tax asset of US$1.6m in respect of certain unutilised tax losses has not beenrecognised as there is insufficient evidence that it will be recoverable. This asset would berecovered should sufficient taxable profits be generated in future which would be eligible forrelief against the unutilised tax losses.

Note 9: Financial investments

The Association’s financial investments are summarised below by measurement category in thetable below;

2009 2008 2009 2008Consolidated US$000s US$000s US$000s US$000s

Held at fair value through profit or loss:

– debt securities 9,695 9,785 9,695 9,656

– UCITS 58,869 54,830 58,869 54,830

68,564 64,615 68,564 64,486




Note 10: Surplus and reserves

Open InvestmentReserve policy revaluation Total Total

fund years reserve 2009 2008US$000s US$000s US$000s US$000s US$000s

Net transfer to closed policy year balance of deficit less future investment income on closure, 2006 (2005) (2,553) – – (2,553) 944

Investment income and exchange gains less losses, expenses and taxation (3,172) – – (3,172) (1,480)

Transfer to closed policy years 3,681 – – 3,681 (271)

2.5% Members' contribution to Reserve Fund 3,889 – – 3,889 4,526

Net movements on open policy years – 1,183 – 1,183 (7,472)

Unrealised gains arising during the year – – (90) (90) 129

Net transfer to reserves 1,845 1,183 (90) 2,938 (3,624)

Balance at beginning of year 68,846 (18,701) (3) 50,142 53,766

Balance at end of year 70,691 (17,518) (93) 53,080 50,142

Of the surplus and reserves, US$ 3.1 million (2008: US$ 2.94 million) is shown in the accountsof TT Club Mutual Insurance Limited’s Singapore branch.

Note 11: Guarantee from parent company

TT Bermuda has issued a guarantee, not to exceed US$ 2.5 million, to the Association to enableit to comply with the solvency margin requirements of the Financial Services and Markets Act2000. The amount withdrawn as 31 December 2009 amounted to nil (2008: nil).

Note 12: Creditors arising from reinsurance ceded

2009 2008

US$000s US$000s

Reinsurance premiums ceded 5,820 1,423

Accrual for future reinsurance premiums ceded 35,049 41,494

40,869 42,917

75

Note 13: Segmental information

2009 2008

US$000s US$000s

Gross premiums written

- Members located in UK 10,233 11,220

- Members located in other EU states 41,469 48,189

- Members located outside EU 123,155 108,361

174,857 167,770

The Association writes only marine, aviation and transport business.

The geographical analysis of surplus on ordinary activities before tax and net assets has not beendisclosed as this, in the view of the Directors, would be prejudicial to the interest of theMembers.

Note 14: Related party transactionss

Reinsurers’ share of the provision for unearned premiums includes US$35.0 million (2008:US$38.95 million) in relation to the quota share with the parent company. Reinsurers’ share ofthe provision for outstanding claims includes US$222.5 million (2008: US$208.1 million) inrelation to the quota share with the parent company.

All other material related party transactions are disclosed separately within the financialstatements.

Note 15: Ultimate parent company

The Association’s immediate and ultimate parent company and controlling party is ThroughTransport Mutual Insurance Association Limited, a company incorporated in Bermuda.



The TT Club underwriting centres

LondonThrough Transport Mutual Services (UK) Ltd90 Fenchurch StreetLondon EC3M 4STUnited Kingdom

T +44 (0)20 7204 2626F +44 (0)20 7549 4242E [email protected]

Hong KongThomas Miller (Hong Kong) LtdSuite 1201-1204 Sino Plaza255 - 257 Gloucester RoadCauseway BayHong Kong

T +852 2832 9301F +852 2574 5025 & 2574 5062E [email protected]

New JerseyThomas Miller (Americas) IncHarborside Financial CenterPlaza Five, Suite 2710Jersey CityNew Jersey 07311United States of America

T +1 201 557 7300F +1 201 946 0167E [email protected]

The TT Club Network

AntwerpT +32 3 206 9250F +32 3 206 9259

AucklandT +64 9 303 1900F +64 9 308 9204

BarcelonaT +34 93 23 09310F +34 93 23 09311

Buenos AiresT +54 11 4311 3407/09F +54 11 4314 1485

DubaiT +971 488 10167F +971 488 10955

DurbanT +27 31 368 5050F +27 31 332 4455

GenoaT +39 010 83 33301 F +39 010 83 17006

HamburgT +49 40 36 98 180 F +49 40 36 98 1819

For further information contact the TT Club at one of its underwriting centres or at any point in the network.

www.ttclub.com

SingaporeThomas Miller (South East Asia) Pte Ltd61 Robinson Road#10-02 Robinson CentreSingapore 068893

T +65 6323 6577F +65 6323 6277E [email protected]

SydneyThomas Miller (Australasia) Pty LtdSuite 1001, Level 10117 York StreetSydney NSW 2000Australia

Postal AddressPO Box Q697QVB Post OfficeNSW 1230Australia

T +61 2 8262 5800F +61 2 8262 5858E [email protected]

MoscowT +7 495 935 8620F +7 495 981 1529

San FranciscoT +1 415 956 6537F +1 415 956 0685

SeoulT +82 2776 4319F +82 2771 7150

ShanghaiT +86 21 6321 7001F +86 21 6321 0206

TaipeiT +866 2 2736 2986F +866 2 2736 2976

TokyoT +81 3 5442 5001F +81 3 5442 5002

WellingtonT +64 4 473 5742F +64 4 473 5745

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