ATRIUM SYNDICATES 570 & 609 UNDERWRITING YEAR …reView of the 2009 cLoSed yeAr of Account Syndicate...

AT R I U M SY N D I C AT E S 5 7 0 & 6 0 9UNDERWRITING YEAR ACCOUNTS FOR THE 2009 YEAR OF ACCOUNT

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Atrium SyndicAteS 570 & 609 – underwriting yeAr AccountS

1 Report of the Directors of the Managing Agent

5 Statement of Managing Agent’s Responsibilities

6 Independent Auditors’ Report

7 Principal Accounting Policies

SyndicAte 570

9 Underwriter’s Report

10 Profit and Loss Account

11 Balance Sheet

12 Statement of Cash Flows

13 Notes to the Financial Statements

21 Seven Year Summary of Results

SyndicAte 609

22 Underwriter’s Report

24 Profit and Loss Account

25 Balance Sheet

26 Statement of Cash Flows

27 Notes to the Financial Statements

35 Seven Year Summary of Results

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report of the directorS of the mAnAging Agent

The Managing Agent presents its report at 31 December 2011 for the 2009 closed year of account.

This report is prepared in accordance with the Lloyd’s Syndicate Accounting Byelaw (No 8 of 2006). It accompanies the underwriting year accounts prepared on an underwriting year basis of accounting as required by Statutory Instrument No 1950 of 2008, the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations (“the 2008 Regulations“).

reView of the 2009 cLoSed yeAr of Account

Syndicate 570The 2009 year of account closed with a profit of £17.1m after standard personal expenses (13.6% of capacity). There was an underwriting surplus of £11m attributable to business reinsured into the 2009 year of account. Further details on the underwriting results are included within the Underwriter’s Report.

Syndicate 609The 2009 year of account closed with a profit of £57.8m after standard personal expenses (28.9% of capacity). There was an underwriting surplus of £18m attributable to business reinsured into the 2009 year of account. Further details on the underwriting results are included within the Underwriter’s Report.

principAL riSKS And uncertAintieS

GovernanceThe Board recognises the critical importance of having efficient and effective risk management systems in place but also recognises that it can only mitigate risks, and not eliminate them entirely. In preparation for the proposed Solvency II regime, the Board has developed its Own Risk and Solvency Assessment (‘ORSA’), comprising the entirety of the processes that it uses to identify, assess, monitor and report the risks faced by its managed syndicates and to determine the capital necessary to mitigate retained risks. Critical to the efficacy of the ORSA are the effective operation of the Risk Management Framework (‘RMF’) and the Governance Structure. The RMF comprises the so-called “Three lines of Defence” approach to risk management and reporting.

The RMF is the mechanism through which Atrium ensures it is implementing effective and enterprise wide risk management practices across its business. Key to Atrium’s business is the management of risk, return and capital, against which all significant strategic and operational business decisions are evaluated. Over many years Atrium has established systems of governance and risk management that enable it to manage its business prudently. The RMF is the articulation of these systems of risk management and governance and how the various elements interact.

The RMF encompasses the broad range of activities undertaken across the organisational hierarchy to ensure that risks are managed appropriately, spanning from the high level strategy set by the Board to the day to day underwriting decisions being made by syndicate staff and the controls in place to govern these. The RMF comprises the following categories:

Strategy: This describes the Atrium strategy setting process and explains how this filters down through the organisation; incorporating the Syndicate’s Business Strategy, Risk Strategy, Business Plan, Risk Policy Statement and Risk Policies.

Business Activities: The individual syndicate and agency business units are responsible for implementing the strategy and business plans in accordance with the framework set out in the risk policies. The people, controls, management information, processes and senior management oversight in place across the business units serve as the “First Line of Defence” in the RMF.

Risk Governance Structure: The Board has established a Risk Governance Structure in order to ensure that risk is appropriately identified, monitored, managed and reported across the organisation; to review the activities of the business units; and to ensure that the RMF is effectively designed, implemented and governed. The Risk Governance Structure is comprised of the Executive Risk Committee, which fulfils the role of Atrium’s Risk Management Function, and its three Risk Sub-Committees, discussed further below.

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Independent Assurance: Atrium has in place a Compliance Function and an Actuarial Function in addition to the Risk Management Function (fulfilled by the Executive Risk Committee as referenced in the previous paragraph). Each of these functions has specific responsibilities documented in its terms of reference and is fulfilled by fit and proper individuals with suitable qualifications, expertise and experience. The activities of these functions seek to provide the Board with assurance as to the appropriateness and effectiveness of the various elements of the RMF, the internal control environment, and the calculation of capital. There are a number of risk management tools (such as the Risk Register, Controls Register and Loss Log) which support independent assessment and reporting of risk. Taken together this Independent Assurance comprises the “Second line of Defence”.

Independent Oversight: The RMF provides for independent oversight and challenge via the operation of the Internal Audit Function and the External Auditors as well as the Audit Committee and Risk Committee, both of which are Committees of the Board with membership comprised of Non Executive Directors. These four groups together operate to provide the “Third line of Defence”. The Risk Committee is charged with providing independent oversight and review of Atrium’s RMF and its constituent parts whilst the Audit Committee, along with its broader responsibilities for the financial statements and financial reporting process, has oversight of internal controls and the Internal Audit process.

Risk governance is comprised of the Executive Risk Committee and its three risk sub-committees.

The Executive Risk Committee fulfils the Risk Management Function and coordinates the risk management activities conducted for the Agency’s managed syndicates. It is responsible for ensuring that the RMF operates effectively, and for maintaining an aggregated and holistic view of risks to the syndicates and reporting on them to the Board, Committees and management as appropriate.

To support delivery of the Executive Risk Committee’s responsibilities, three Sub-Committees have been established, each being responsible for oversight, review and challenge of the activities of the syndicates and in particular ensuring that activities are within risk policies, that risks are suitably identified, monitored and reported, and that appropriate contingency plans are in place.

The principal risks to which the syndicates are exposed are discussed below together with the mitigation techniques adopted. For clarity, the risks are analysed by reference to the Sub-Committees that have responsibility for the relevant risk area.

Insurance Risks Sub-Committee (IRSC)The IRSC is responsible for oversight of insurance risk which includes underwriting, claims, reserving, and reinsurance. Insurance risk includes the risks that the policy might be written for too low a premium or provide inappropriate cover (underwriting risk), that the frequency or severity of insured events might be higher than expected (claims risk), or that estimates of claims subsequently prove to be insufficient (reserving risk).

Underwriting risk is mitigated through numerous controls including underwriter peer review, authority limits, independent review of risks written and purchase of an appropriate reinsurance programme. The Syndicate Business Forecast is completed for each syndicate annually and stipulates those classes of business and concentration by class that will be written during the forthcoming year. It is reviewed by the IRSC and approved by the Board prior to being submitted to the Lloyd’s Franchise Board for approval. Actual performance during the year is monitored by reference to the Syndicate Business Forecast.

Claims risk is mitigated where possible by using catastrophe modelling software to model maximum probable losses from catastrophe-exposed business. The syndicates have a defined risk appetite which determines the net loss that each intends to retain for major catastrophe events and where deemed appropriate reinsurance is purchased to limit the impact of losses. Although the likelihood of occurrence is considered to be remote, there may be circumstances where the loss from a particular catastrophe event exceeds the net risk appetite perhaps due to the occurrence of a loss that has not been modelled or where the reinsurance purchased proves to be insufficient.

Reserving risk is mitigated by the robust reserve adequacy exercise that is performed on a quarterly basis by the Head Actuary and approved by the Board. The quarterly exercise involves a review of the paid and outstanding claims and an assessment of the appropriate provision for incurred but not reported (IBNR) claims. The reserves are considered by the IRSC and approved by the Board. The reserving is carried out based on historical development data, the claims environment and information provided by lawyers and third party claims adjusters. Although a thorough review is carried out the reserves carried may be more or less than adequate to meet the final cost of claims.

The IRSC also reviews the syndicates’ proposed reinsurance programmes that are used to protect capital from frequency and severity of losses that may be sustained through underwriting the varied lines of business written by the syndicates. The review includes analysis of the reinsurance cover being purchased and assessment of the proposed counterparties.


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Financial Risks Sub-Committee (FRSC)The FRSC is responsible for the oversight of the syndicates’ financial risks and the steps taken to mitigate them as they arise from investments, asset/liability management, credit, liquidity and concentration risks. These risks are discussed further below.

Investment risk is the risk that the syndicates’ earnings are adversely affected by changes in the value of the investment portfolio; such changes in value may be driven by changes in the economic and political environment and by movements in interest and foreign exchange rates. The Agency manages the syndicates’ investments in accordance with investment guidelines established by the Board that are reviewed on a regular basis. The FRSC monitors the performance of the external investment manager and the custodians responsible for the safekeeping of the investments, and reports regularly to the Board.

Asset/liability mis-match is the risk that the syndicate could incur a loss through inadequate matching of its investments with its liabilities. Due to the short-tail nature of the liabilities the syndicates do not seek to achieve a precise matching with the investment portfolio, instead developing an investment duration guideline that is broadly in line with the average payment profile of the liabilities. However the syndicates substantially mitigate exposure to currency mis-match by investing premiums in the currency in which subsequent claims are most likely to be incurred. The majority of the syndicates’ business is denominated in US dollars and accordingly the substantial part of the investment portfolio is in US dollar denominated investments.

The key aspect of credit risk is the risk of default by one or more of the syndicates’ reinsurers, their investment counterparties, or insurance intermediaries. Reinsurance is placed with those reinsurers that comply with the Atrium reinsurance policy. The exposure to credit risk in the investment portfolio is mitigated through adherence to the investment guidelines which require the syndicates’ investment portfolios to be held in government and corporate debt with a high credit quality rating and with a relatively short duration, thus substantially mitigating the risk of sustaining losses from default. Exposure to intermediaries is mitigated by rigorous review of new intermediaries, contractual terms of business, regulated or segregated client accounts, monitoring of balances and credit control procedures.

Liquidity risk is the risk that the syndicates will not be able to meet their short term liabilities as they fall due, owing to a shortfall in cash. This risk is mitigated through holding invested funds in high credit quality and short duration investments, and cash-flow projections are also reviewed on a regular basis. The need for overdraft facilities in case of unprojected cash flow deficit is also reviewed regularly.

Concentration risk is the exposure to loss that could arise if the bulk of the amounts recoverable by the syndicates was dependent on a limited number of reinsurers, or if investments were restricted to limited numbers of counterparties or sectors. The risk is mitigated by restricting the permitted cessions to individual reinsurers for any one underwriting year and through the investment guidelines which limit exposure to individual investment counterparties and sectors.

Operational Risks Sub-Committee (ORSC)The ORSC is responsible for oversight of the syndicates’ exposures to operational, group and regulatory risks.

Operational risk includes exposure to loss from errors caused by people, processes or systems, group risk and emerging risks. The agency seeks to manage these risks by operating a control based environment which consists of documented procedures, segregation of duties and appropriate levels of review. Regular reviews are performed by the internal audit department to ensure that any deviations from the agency’s policies are identified and reported to the appropriate level of management when considered necessary.

The Regulatory risk is the risk of loss owing to a breach of regulatory requirements or failure to respond to regulatory change. The agency has a compliance officer and team who monitor regulatory developments and assess the impact on agency policy. They also carry out a compliance monitoring programme.

deVeLopmentS – SyndicAte mergerOn 28 April 2011 the Company wrote to the Council of Lloyd’s giving notice of the Agency Board’s intention to merge Syndicate 570 and Syndicate 609 with effect from the commencement of the 2012 year of account. Copies of the notification were sent to the syndicates’ capital providers and, as required, a ballot of both syndicates’ members was conducted. The ballot resulted in more than 99% of the votes (by capacity, of each syndicate) being recorded in support of the merger and on 19 July 2011 the Council of Lloyd’s granted consent to the Company to implement the merger with effect from the 2012 year of account.

The two syndicates have written complementary books of business with limited commonality and Syndicate 609’s business plan for the 2012 year of account, which was approved by Lloyd’s in October 2011, reflected the expectation that all existing lines of business written by Syndicate 570 and Syndicate 609 will continue to be written in Syndicate 609. Syndicate 570 will run-off its 2010 and 2011 years of account. It is anticipated that, in accordance with usual market practice, the 2010 year of account of Syndicate 570 will be reinsured to close into the 2011 year of account of Syndicate 570, and that the 2011 year of account will be reinsured to close into the 2012 year of account of Syndicate 609.

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Following Kevin Wilkins’ retirement, Richard Harries the Active Underwriter of Syndicate 609 has been appointed as Active Underwriter of Syndicate 570 with effect from 1 January 2012.

The Agency Board believes that the larger and more diverse underwriting unit that results on implementation of the merger will be better able to meet the demands of the future market. Syndicate 609 will continue to transact the current classes of general insurance and reinsurance business previously underwriten by both syndicates. If opportunities arise to write new classes of business, these will be investigated at the appropriate time.

directorS & officerSThe Directors and Officers of the managing agent who served during the year ended 31 December 2011 were as follows:

Andrew BaddeleyMartha Bruce, David Venus & Company Limited (Company Secretary) Steve CookSimon CooperToby DrysdaleRichard Harries (Active Underwriter 570 and 609)Ann GodbehereJames LeeRichard Lutenski Nick MarshScott MoserGeorge RivazKevin Wilkins (resigned effective 13 March 2012)Andrew Winyard

The following Director was appointed after the end of the year but before the date of this report:

Samit Shah (appointed effective 4 January 2012)

directorS’ intereStSDetails of Directors’ interests can be found in Note 16 to the accounts.

By order of the Board

Andrew BaddeleyFinance Director12 March 2012


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StAtement of mAnAging Agent’S reSponSibiLitieS

The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 require the managing agent to prepare syndicate underwriting year accounts at 31 December in respect of any underwriting year which is being closed by reinsurance to close which give a true and fair view of the result of the underwriting year at closure. Detailed requirements in respect of the underwriting year accounts are set out in the Lloyd’s Syndicate Accounting Byelaw (No 8 of 2005).

In preparing the syndicate underwriting year accounts, the managing agent is required to:

1. select suitable accounting policies which are applied consistently and where there are items which affect more than one year of account, ensure a treatment which is equitable as between the members of the syndicate affected. In particular, the amount charged by way of premium in respect of the reinsurance to close shall, where the reinsuring members and reinsured members are members of the same syndicate for different years of account, be equitable as between them, having regard to the nature and amount of the liabilities reinsured;

2. take into account all income and charges relating to a closed year of account without regard to the date of receipt or payment;

3. make judgements and estimates that are reasonable and prudent; and

4. state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the underwriting year accounts.

The managing agent is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the syndicate and enable it to ensure that the syndicate underwriting year accounts comply with the Regulations. It is also responsible for safeguarding the assets of the syndicate and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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We have audited the syndicates’ underwriting year accounts for the 2009 year of accounts of syndicate 570 and 609 for the three years ended 31 December 2011, which comprise the Profit and Loss Account, Balance Sheet, Statement of Cash Flows , the related notes 1 to 16 and the Statement of Managing Agent’s Responsibilities. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the syndicates’ members, as a body, in accordance with The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. Our audit work has been undertaken so that we might state to the syndicates’ members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the syndicates’ members as a body, for our audit work, for this report, or for the opinions we have formed.

reSpectiVe reSponSibiLitieS of the mAnAging Agent And AuditorSAs explained more fully in the Statement of Managing Agent’s Responsibilities set out on page 5, the managing agent is responsible for the preparation of the syndicate underwriting year accounts, under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and in accordance with the Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005), which give a true and fair view. Our responsibility is to audit and express an opinion on the syndicate underwriting year accounts in accordance with the applicable legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the Audit of the SyndicAte underwriting yeAr AccountSAn audit involves obtaining evidence about the amounts and disclosures in the syndicate underwriting year accounts sufficient to give reasonable assurance that the syndicate underwriting year accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the syndicate’s circumstances and have been consistently applied and adequately disclosed; the

reasonableness of significant accounting estimates made by the managing agent; and the overall presentation of the syndicate underwriting year accounts. In addition we read all the financial and non-financial information in the Underwriting Year Report and Accounts to identify material inconsistencies with the audited underwriting year accounts. If we become aware of any apparent material mis-statements or inconsistencies we consider the implications for our report.

opinion on SyndicAte underwriting yeAr AccountSIn our opinion the syndicate underwriting year accounts:

• giveatrueandfairviewoftheprofitforthe2009closedyear of account;

• havebeenproperlypreparedinaccordancewiththeUnitedKingdom Generally Accepted Accounting Practice; and

• havebeenpreparedinaccordancewiththerequirementsofTheInsurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and have been properly prepared in accordance with the Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005).

mAtterS on which we Are reQuired to report by eXceptionWe have nothing to report in respect of the following matters where The Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005) requires us to report to you if, in our opinion:

• themanagingagentinrespectofthesyndicatehasnotkeptproper accounting records; or

• thesyndicateunderwritingyearaccountsarenotinagreementwith the accounting records.

Angus Millar (Senior Statutory Auditor)For and on behalf of Ernst & Young LLP (Statutory Auditor)London13 March 2012

independent AuditorS’ report

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principAL Accounting poLicieSSyndicAteS 570 And 609 – 31 december 2011

1. bASiS of prepArAtionThese accounts have been prepared in accordance with the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2006) and applicable Accounting Standards in the United Kingdom and comply with the Statement of Recommended Practice on Accounting for Insurance Business issued in December 2005 (as amended in December 2006) by the Association of British Insurers.

Members participate on a syndicate by reference to a year of account and each syndicate year of account is a separate annual venture. These accounts relate to the 2009 year of account which has been closed by reinsurance to close as at 31 December 2011.

Consequently the balance sheet represents the assets and liabilities of the 2009 year of account at the date of closure. The profit and loss account and statement of cash flows reflect the transactions for that year of account during the three year period until closure.

These accounts cover the three years from the date of inception of the 2009 year of account to the date of closure. Accordingly, this is the only reporting period and so corresponding amounts are not shown.

2. Accounting poLicieSThe underwriting accounts for each year of account are normally kept open for three years before the result on that year is determined. At the end of the three year period, outstanding liabilities can normally be determined with sufficient accuracy to permit the year of account to be closed by payment of a reinsurance to close premium to the successor year of account.

Premiums WrittenGross premiums are allocated to years of account on the basis of the inception date of the policy. Premiums in respect of insurance contracts underwritten under a binding authority, line slip or consortium arrangement are allocated to the year of account corresponding to the calendar year of inception of the arrangement. Premiums are shown gross of brokerage payable and exclude taxes and duties levied on them.

Premiums written are treated as fully earned.

Reinsurance Premium CededInitial reinsurance premiums paid to purchase policies which give excess of loss protection are charged to the year of account in which the protection commences. Premiums for other reinsurances are charged to the same year of account as the risks being protected. Reinsurance premiums paid to purchase protection in respect of the run-off of syndicate 570’s business are charged to the same year of account as the risks being protected.

Claims Paid and Related RecoveriesGross claims paid include internal and external claims settlement expenses and, together with reinsurance recoveries less amounts provided for in respect of doubtful reinsurers, are attributed to the same year of account as the original premium for the underlying policy. Reinstatement premiums payable in the event of a claim being made are charged to the same year of account as that to which the recovery is credited.

Reinsurance to Close Premium PayableThe net reinsurance to close premium is determined on the basis of estimated outstanding liabilities and related claims settlement costs (including claims incurred but not reported), net of estimated collectible reinsurance recoveries, relating to the closed year of account and all previous years of account reinsured therein. The estimate of claims outstanding is assessed on an individual case basis and is based on the estimated ultimate cost of all claims notified but not settled by the balance sheet date. It also includes the estimated cost of claims incurred but not reported (‘IBNR’) at the balance sheet date based on statistical methods.

These methods generally involve projecting from past experience of the development of claims over time to form a view of the likely ultimate claims to be experienced for more recent underwriting, having regard to variations in the business accepted and the underlying terms and conditions. For the most recent years, where a high degree of volatility arises from projections, estimates may be based in part on output from rating and other models of the business accepted and assessments of underwriting conditions. The amount of salvage and subrogation recoveries is separately identified.

The reinsurers’ share is based on the amounts of outstanding claims and projections for IBNR, net of estimated irrecoverable amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the year and the current security rating of the reinsurance companies involved. A number of statistical methods are used to assist in making these estimates.

The two most critical assumptions as regards claims estimates are that the past is a reasonable predictor of the likely level of claims development and that the rating and other models used for current business are fair reflections of the likely level of ultimate claims to be incurred.

The directors consider that the estimates of gross claims and related reinsurance recoveries are fairly stated on the basis of the information currently available to them. However, it is implicit in the estimation procedure that the ultimate liabilities will be at variance from the reinsurance to close premium so determined.

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Foreign CurrenciesTransactions, other than reinsurance to close, in US Dollars, Canadian Dollars and Euros are translated at the average rates of exchange for the period. Reinsurance to close premiums receivable and payable, and underwriting transactions denominated in other foreign currencies, are included at the rate of exchange ruling at the transaction date.

Assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the balance sheet date.

Exchange differences are included in the technical account.

Where Canadian Dollars or Euros are sold or bought relating to the profit or loss of the closed underwriting account after 31 December, any exchange profit or loss arising is reflected in the underwriting account into which the liabilities of that year have been reinsured. Where United States Dollars relating to the profit or loss of a closed underwriting account are bought or sold by members on that year, any exchange profit or loss accrues to those members.

InvestmentsInvestments are stated at current value at the balance sheet date. For this purpose listed investments are stated at market value and deposits with credit institutions are stated at cost. Unlisted investments for which a market exists are stated at the average price at which they are traded on the balance sheet date or the last trading day before that date.

Investment ReturnInvestment return comprises all investment income, realised investment gains and losses and movements in unrealised gains and losses, net of investment expenses, charges and interest. The returns on the Joint Asset Trust Funds and Illinois Deposit are allocated to the year of account as notified by Lloyd’s. The returns on other assets arising in a calendar year are apportioned to years of account open during the calendar year in proportion to the average funds available for investment on each year of account.

Realised gains and losses on investments carried at market value are calculated as the difference between sale proceeds and purchase price. Unrealised gains and losses on investments represent the difference between the valuation at the balance sheet date and their valuation at the previous balance sheet date, or purchase price, if acquired during the year, together with the reversal of unrealised gains and losses recognised in earlier accounting periods in respect of investment disposals in the current period.

Investment return is initially recorded in the non-technical account.

A transfer is made from the non-technical account to the general business technical account. Investment return has been wholly allocated to the technical account as all investments relate to the technical account.

Operating ExpensesWhere expenses are incurred by or on behalf of the managing agent on the administration of managed syndicates, these expenses are apportioned using varying methods depending on the type of expense. Expenses which are incurred jointly for the agency company and managed syndicates are apportioned between the agency company and the syndicates on bases depending on the amount of work performed, resources used and the volume of business transacted. Syndicate operating expenses are allocated to the year of account for which they are incurred.

TaxationUnder Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic rate income tax from trading income. In addition, all UK basic rate income tax deducted from syndicate investment income is recoverable by managing agents and consequently the distribution made to members or their members’ agents is gross of tax. Capital appreciation falls within trading income and is also distributed gross of tax.

No provision has been made for any United States Federal Income Tax payable on underwriting results or investment earnings. Any payments on account made by the syndicates’ during the year are included in the balance sheet under the heading ‘other debtors’.

No provision has been made for any overseas tax payable by members on underwriting results.

Pension CostsAtrium Underwriters Limited operates a defined contribution scheme. Pension contributions relating to syndicate staff are charged to the syndicate and included within net operating expenses.

Profit CommissionProfit commission is charged by the managing agent at a rate of 20% of profit subject to the operation of a deficit clause. Where profit commission is charged, it is included within members’ standard personal expenses within administrative expenses.

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underwriterS reportSyndicAte 570

This is my first report to you as Active Underwriter to Syndicate 570, where my role is to ensure an orderly run off of the syndicate whilst it completes its merger with Atrium Syndicate 609 and report to you the results of the 2009, 2010 and 2011 Years of Account.

Firstly I should like to start by thanking you for the resounding vote in favour of merging your Syndicate with Syndicate 609. We are very excited about the opportunities the merged syndicate will provide and I look forward to serving you as Active Underwriter both as Syndicate 570’s business runs off for the 2010 and 2011 years, and as you participate on Syndicate 609 for the 2012 year of account and beyond.

Secondly I should like to thank Kevin Wilkins your previous Active Underwriter who oversaw a very successful period for the syndicate both on a results basis and by creating a very strong platform for the future for the business to develop from. Over his time with Syndicate 570 Kevin has looked after your interests passionately and I intend to do same as part of the merged syndicate.

2009 yeAr of Account

I am pleased to report that the year has closed with a profit of 13.6 % after all personal expenses but before members’ agent’s fees. This was on gross written income of £97m (net of acquisition costs). The result is welcome as at the start of the period, we did not have high expectations for the 2009 underwriting year. Despite a positive upturn in US Reinsurance rates due to Hurricane Ike in 2008, the market for our core classes had continued to soften. The better than expected result has been driven both by the lack of natural perils losses on the catastrophe exposed business and favourable development on the back years which has allowed the syndicate to release £10.6m.

There was very strong performance from A&H and Property Reinsurance with nearly all other accounts producing profits. The one exception being the professional liability account which has been further affected by the syndicates participation on an a contract covering negligence by Italian Notaries. Fortunately 2009 is the last year we are on this contract.

Investment returns have been disappointing but, in the context of the turmoil created first through the credit crisis and latterly from the Euro zone’s sovereign debt travails, executing an investment plan that focuses on a short duration and high credit quality portfolio means that we are trading some potential return for the security of the assets we hold on your behalf.


While our premium income is ahead of 2009, the underwriting conditions in 2010 did not improve as much as we had hoped when planning the year’s business. Competition has continued and, while we have gained some accounts and AuGold has performed well, we will not make the expected premium income in our business plan.

There were no US catastrophe losses, but the Syndicate did carry exposures to the Chile and New Zealand earthquakes that hit the underwriting year in 2010. The year of account was also impacted by the second New Zealand earthquake in early 2011 and the Japanese earthquake and resulting tsunami that soon followed. These losses have hit the reinsurance account which has been a significant contributor of profit for the syndicate but not so in 2010.

At this stage our expectation is that 2010 will be profitable. The forecast range is -2.5% to 7.5%. Premium income is estimated to be £100m which represents 69% of stamp.


2011 has been a difficult year for the insurance industry and Syndicate 570 has not been immune to natural catastrophes that have taken place during the year. The reinsurance account has again been impacted and for the first time in many years it will not be profitable. The direct property account has also suffered losses from the Tornadoes, Hurricane Irene and some large theft claims.

Our A&H , Casualty and Casualty Reinsurance accounts continue to perform well, whilst the UK and International Property will definitely out perform the market just by making a modest profit. The Professional Liability account continues to trade effectively in a difficult market place and we expect there to be many opportunities ahead as the market wakes up to the severe under pricing in this class which will be further exposed by the low interest rate environment.

It is encouraging to note in 2011 the first signs of the market hardening in the US Property and Casualty accounts with rate rises being achieved and the syndicate did take advantage of a few new opportunities

Premium income will be slightly ahead of last year and is estimated to be £103m which represents a utilisation of 71% of stamp.

At this very early stage in the development of the year of account and as a result of the number of catastrophic events in 2011 and the tough trading conditions in other classes, our mid point forecast is a loss with a range of -10% to 0% on capacity.

Richard Harries Active Underwriter, Synidicate 570 12 March 2012

570

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profit And LoSS Account: technicAL Account - generAL buSineSSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

profit And LoSS Account:non-technicAL Account - generAL buSineSSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

Notes £’000

Syndicate allocated capacity 125,296

Earned premiums, net of reinsurance

Gross premiums written 1 138,452

Outward reinsurance premiums (10,244)

Earned premiums, net of reinsurance 128,208

Reinsurance to close premium received, net of reinsurance

At transaction rates of exchange 141,066

Revaluation to closing rates of exchange 1,066

Reinsurance to close premium received, net of reinsurance at closing rates of exchange 2 142,132

270,340

Allocated investment return transferred from the non-technical account 3,867

Claims incurred, net of reinsurance

Claims paid

Gross amount 59,817

Reinsurers’ share (4,356)

55,461

Reinsurance to close premium payable, net of reinsurance 3 146,324

201,785

Net operating expenses 4 55,366

Balance on the technical account for general business 8 17,056

Notes £’000

Balance on the technical account for general business 17,056

Investment income 7 5,450

Unrealised losses on investments (249)

Investment expenses and charges 7 (1,334)

Allocated investment return transferred to general business technical account (3,867)

Profit for the 2009 closed year of account 17,056

570

11

570bALAnce Sheetfor the 2009 cLoSed yeAr of Account At 31 december 2011

Notes £’000

Assets

Investments 9 128,615

Deposits with ceding undertakings 110

Debtors 10 13,317

Reinsurance recoveries anticipated on gross reinsurance to close premium payable to close the account 3 8,319

Other assets

Cash at bank and in hand 8,374

Overseas deposits 29,858

Prepayments and accrued income 232

Total assets 188,825

Liabilities

Amounts due to members 11 11,215

Reinsurance to close premium payable to close the account - gross amount 3 154,643

Creditors 12 22,967

Accruals and deferred income -

Total liabilities 188,825

The 2009 closed year underwriting accounts were approved at a meeting of the Board of Directors of Atrium Underwriters Limited, and by the Active Underwriter, on 12 March 2012 and were signed on its behalf by:

Andrew Baddeley Richard Harries Finance Director Active Underwriter 12 March 2012 12 March 2012

12

StAtement of cASh fLowSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

Notes £’000

Net cash inflow from operating activities 13 (7,629)

Transfer to members in respect of underwriting participations (5,064)

Members’ agents’ fees paid on behalf of members (777)

14 (13,470)

Cash flows were invested as follows:

Increase in cash holdings 14 8,374

Decrease in overseas deposits 14 (766)

Net portfolio investment 14,15 (21,078)

Net investment of cash flows (13,470)

570

13

570

1. Segmental Analysis

An analysis of the underwriting result before investment return is set out below:

Gross premiums Gross claims Reinsurance written incurred Gross operating balance (note 1) (note 2) expenses (note 3) Total £’000 £’000 £’000 £’000 £’000

Direct insurance:

Accident and health 28,130 7,550 13,692 (3,210) 3,678

Motor (third party liability) 302 36 35 (42) 189

Motor (other classes) 1,792 1,068 1,085 23 (338)

Marine, aviation and transport 16,366 5,726 6,751 1,053 4,942

Fire and other damage to property 25,061 11,204 11,675 (1,384) 798

Third party liability 35,408 22,631 15,470 (1,755) (4,448)

Credit and suretyship 1,785 1,326 645 (58) (244)

108,844 49,541 49,353 (5,373) 4,577

Reinsurance 29,608 12,153 8,161 (1,896) 7,398

138,452 61,694 57,514 (7,269) 11,975

RITC received 142,132 152,766 - 11,848 1,214

Total 280,584 214,460 57,514 4,579 13,189

1. Gross premiums written are treated as fully earned. 2. Gross claims incurred comprises gross claims paid and gross reinsurance to close premium payable. 3. The reinsurance balance comprises reinsurance premiums ceded less reinsurance recoveries on claims paid and reinsurance recoveries anticipated on

reinsurance to close payable. 4. All premiums are concluded in the UK.

2. Reinsurance to Close Premium Receivable

£’000

Gross notified outstanding claims 63,642

Reinsurance recoveries anticipated (5,163)

Net notified outstanding claims 58,479

Provision for gross claims incurred but not reported 89,316


Provision for net claims incurred but not reported 82,587

Reinsurance to close premium receivable, net of reinsurance at transaction rates of exchange 141,066


Reinsurance to close premium receivable, net of reinsurance at closing rates of exchange 142,132

noteS to the finAnciAL StAtementSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

14

570

3. Reinsurance to Close Premium Payable

£’000







Reinsurance to close premium payable, net of reinsurance 146,324

The reinsurance to close is effected to the 2010 year of account of Syndicate 570.

4. Net Operating Expenses

£’000

Acquisition costs 46,281

Administrative expenses 11,221

Gain on exchange (1,054)

Allocation to reinsurance to close premium receivable, net of reinsurance 1,066

57,514

Reinsurance commissions receivable (2,148)

55,366

Administrative expenses include: £’000

Auditors’ remuneration

Audit services 130

Other services 11

Managing agent’s profit commission 4,244

Members’ standard personal expenses are included within administrative expenses and amount to £6,089,000.

noteS to the finAnciAL StAtementS CONTINUEDfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

15

570

5. Staff Numbers and Costs All staff are employed by Atrium Group Services Limited. The following amounts were recharged to the syndicate in respect of staff costs:

£’000

Wages and salaries 4,424

Social security costs 621

Other pension costs 540

5,585

The average number of employees employed by Atrium Group Services Limited, but working for the syndicate during the three years, was as follows: Number

Management 3

Underwriting 20

Claims 5

Administration 16

44

6. Emoluments of the Directors of Atrium Underwriters Limited The thirteen Directors of Atrium Underwriters Limited received the following aggregate remuneration charged to the syndicate and included within net operating expenses: £’000

Emoluments 625

The Active Underwriter received the following remuneration charged as a syndicate expense: £’000

Emoluments 195

7. Investment Return £’000

Investment income:

Income from investments 5,232

Gains on the realisation of investments 218

5,450

Investment expenses and charges:

Investment management expenses, including interest (226)

Losses on the realisation of investments (1,108)

(1,334)

16

570

8. Balance on Technical Account £’000

Balance excluding investment return and operating expenses

Profit attributable to business allocated to the 2009 pure year of account 57,495

Profit attributable to business reinsured into the 2009 year of account 11,060

68,555


Net operating expenses (55,366)

17,056

9. Investments Market value Cost £’000 £’000

Shares and other variable yield securities and units in unit trusts 8,445 8,445

Debt securities and other fixed income securities 116,384 115,510

Loans secured by mortgage 3,748 3,746

Deposits with credit institutions 38 38

128,615 127,739

Debt securities and other fixed income securities and loans secured by mortgage are all listed on recognised stock exchanges.

10. Debtors £’000

Arising out of direct insurance operations

Due from intermediaries 9,431

Arising out of reinsurance operations 3,477

Other 409

13,317

11. Amounts Due to Members £’000


Members’ agents’ fee advances (777)

Distributions to members to date (5,064)

Amounts due to members at 31 December 2011 11,215


17

12. Creditors £’000


Due to intermediaries 11,528



Other 7,410

22,967 Other creditors include inter year loans of £6,962,000.

13. Reconciliation of Profit for the Year of Account to Net Cash Outflow from Operating Activities £’000

Profit for the year of account 17,056

Realised and unrealised investment gains including foreign exchange 997

Decrease in debtors 4,714

Decrease in creditors (40,209)

Non-cash consideration for net RITC receivable (136,511)

Net reinsurance to close premium payable 146,324

Net cash outflow from operating activities (7,629)

Consideration for net RITC receivable comprised:

£’000

Non-cash consideration:

Portfolio investments 150,982

Deposits with credit institutions 39


Debtors 18,373

Creditors (63,176)

136,511

Cash 4,555

141,066

570

18

570

14. Movement in Opening and Closing Portfolio Investments Net of Financing £’000

Net cash inflow from the three years 8,374

Cash flow

Decrease in overseas deposits (766)

Portfolio investments (21,078)

Movement arising from cash flows (13,470)

Received as consideration for net RITC receivable



Changes in market value and exchange rates (997)

Total movement in portfolio investments 166,847

Portfolio at 1 January 2009 -

Portfolio at 31 December 2011 166,847

Movement in Cash, Portfolio Investments and Financing Received as At consideration Changes to At 1 Jan for net RITC market value 31 Dec 2009 Cash flow receivable and currencies 2011 £’000 £’000 £’000 £’000 £’000

Cash at bank and in hand - 3,819 4,555 - 8,374

Overseas deposits - (766) 30,293 331 29,858

Portfolio investments:

Shares and other variable yield securities and units in unit trusts - (10,647) 18,938 154 8,445

Debt securities and other fixed income securities - (11,110) 128,163 (669) 116,384

Loans secured by mortgage - 680 3,881 (813) 3,748

Deposits with credit institutions - (1) 39 - 38

Total portfolio investments - (21,078) 151,021 (1,328) 128,615

Total cash, portfolio investments and financing - (18,025) 185,869 (997) 166,847

The changes to market values and currencies include £1.4m relating to currency revaluation of non-Sterling denominated investments and deposits.

15. Net Cash Outflow on Portfolio Investments £’000

Purchase of debt securities and other fixed income securities (117,195)

Purchase of loans secured by mortgage (1,001)

Sale of shares and other variable yield securities 10,647

Sale of debt securities and other fixed income securities 128,305

Sale of loans secured by mortgage 321

Sale of deposits with credit institutions 1

Net cash outflow on portfolio investments 21,078


19

570

16. Disclosures of Interest

Ariel Holdings Limited (AHL), a company incorporated under the laws of Bermuda, is the ultimate holding company of Atrium Underwriting Group Limited (AUGL).

AUGL is the holding company of the following wholly owned susidiaries; Atrium Underwriters Limited (AUL), Atrium 5 Limited, Atrium Underwriting Holdings Limited (AUHL), Atrium Insurance Agency Limited (AIAL), Atrium Group Services Limited (AGSL), Atrium Insurance Agency (Asia) Pte. Ltd (ASIA), Atrium Risk Management Services (Washington) Ltd (ARMS) and Atrium Risk Management Services (British Columbia) Ltd (ARMSBC). AUL is the managing agent of Syndicates 570 and 609 (the ‘managed syndicates’). AUHL is the holding company of ten non-continuing corporate members of Lloyd’s.

AUGL participates on the managed syndicates through its corporate member subsidiary, Atrium 5 Limited whose participation on each year of account is as follows: 2009 2010 2011 2012 Capacity Capacity Capacity Capacity £m £m £m £m

Syndicate 570 31.0 35.9 35.9 -

Syndicate 609 51.5 70.9 70.9 106.8 Atrium 5 Limited’s participation on the managed syndicates as % of syndicate capacity: Year of account 2009 2010 2011 2012 % % % %

Syndicate 570 24.8 24.8 24.8 -

Syndicate 609 25.8 25.8 25.8 25.4

On 28 April 2011, Atrium wrote to the Council of Lloyd’s with a notice of the intention to merge Syndicate 570 and Syndicate 609 with effect from the commencement of the 2012 year of account. Consent to the merger was granted on 19 July. Richard Harries was appointed Underwriter of Syndicate 570 with effect from 1 January 2012. In order to service the run-off and merged syndicate, underwriters have authorities that enable them to underwrite on behalf of both managed syndicates.

AHL is the ultimate holding company of Ariel Reinsurance Company Ltd (Ariel Re). On 1 March 2012 it was announced that Goldman Sachs intended to acquire Ariel Reinsurance’s Bermuda-based insurance and reinsurance operations, with an expected completion date of 1 April 2012. On 3 March 2012 it was announced that Arch Capital Group Ltd intended to acquire Ariel Reinsurance’s Switzerland-based reinsurance operations, with an expected completion date of 1 April 2012, subject to regulatory approval.

AIAL is a registered Lloyd’s UK coverholder and authorised and regulated by the Financial Services Authority. Both managed syndicates participate on a binding authority granted to AIAL to underwrite Space business. The binding authority is led by Syndicate 609. Under the terms of the binding authority, fees and profit commission are payable to AIAL. Fee income of US$66,000 is included within these accounts in relation to premium earned on the 2009 year of account. Profit commission of US$205,000 is due in relation to the 2009 year of account.

AGSL is a group service company. All employee contracts and, where possible, all material service provider contracts are held by AGSL. A service agreement is in place whereby AGSL provides all management services to all Atrium Group companies. Under the service agreement AGSL will charge the costs to each Atrium group company, including AUL, for the respective services provided.

ASIA carries on for its own account the business of insurance intermediation in Singapore, operating on the Lloyd’s Asia platform. In this capacity it has been granted authority by Syndicate 609 to bind certain risks (including marine hull, energy, aviation and non-marine property risks) as a service company coverholder. Under the terms of the arrangement ASIA charges fees to Syndicate 609 equal to its operating costs plus a small margin for tax reasons. Fees of S$1,686,000 were paid by Syndicate 609 on the 2009 year of account.

ARMS is incorporated in Washington and supports the Syndicates’ strategy to maintain and grow its North American direct portfolio and distribution network. ARMS charges fees to the Syndicates equal to its operating costs plus a small margin for tax reasons. No fees were paid in respect of the 2009 year of account.

ARMSBC is incorporated in British Columbia and supports the Syndicates’ strategy to maintain and grow its North American direct portfolio and distribution network. ARMSBC charges fees to the Syndicates equal to its operating costs plus a small margin for tax reasons. No fees were paid in respect of the 2009 year of account.

20

570

16. Disclosures of Interest continued

AUL manages four underwriting consortia. The Atrium Aviation Consortium is an internal consortium arrangement between Syndicate 570 & 609 on a 40%/60% split basis. Lloyd’s approval was given on 21st July 2003 for this arrangement. An overrider is charged by Syndicate 609 to Syndicate 570. The Atrium Airline Hull War and Allied Perils Consortium and the two Atrium Aviation Reinsurance Consortia are led by Syndicate 609 and supported by various other Lloyd’s syndicates, including Syndicate 570. Lloyd’s approval is not required under the Multiple Syndicates Byelaw for these consortia. Fees and profit commission are payable by all consortium members including Syndicate 570. AUL processes the fees and profit commission on behalf of Syndicate 609 but currently retains no remuneration in its role as manager of these consortia. Two Aviation Reinsurance quota share treaties are in place that replicate the Atrium Reinsurance Consortia. Profit commissions and overriders are payable by Syndicate 570 to Syndicate 609 under this arrangement.

Syndicate 609 has entered into a quota share contract of their Space account for the 2009, 2010 and 2011 years of account with Ariel Re. Permission was given by Lloyd’s on 30 December 2008. Income expected to be ceded under this arrangement for the 2012 year of account is US$1.0m (actual 2011 year of account - US$2.3m).

A quota share of Syndicate 609 by Syndicate 570 was entered into in relation to Aviation business underwritten on behalf of Syndicate 609 by ASIA. Under the terms of the quota share an overriding commission is payable by Syndicate 570 to Syndicate 609. The terms were set and agreed by the respective Active Underwriters. Lloyd’s gave consent of a waiver under the Multiple Syndicates Byelaw on 9 November 2009. No overriding commission has been paid by Syndicate 570 in calendar year 2011.

The impact of the syndicate merger has resulted in the related party transactions between the two managed syndicates ceasing with effect from the 2012 year of account.

It is possible that further transactions may be entered into between the managed syndicates and Ariel Re.

With effect from 2012 certain reinsurances purchased will be for the benefit of both Syndicates 570 and 609. The board determined that this was the most efficient process to protect both the ongoing and run-off business. There is the possibility of one or other syndicate exhausting the available coverage, in which case we would consider the purchase of back-up coverage. Costs will be charged on an equitable basis determined by the board.

The Directors’ participations on Syndicates 570 & 609 via Nomina No. 207 LLP are as follows:

Syndicate 570 Syndicate 609 2009 yoa 2010yoa 2011 yoa 2012 yoa 2009 yoa 2010yoa 2011 yoa 2012 yoa £ £ £ £ £ £ £ £

Andrew Baddeley - 7,534 7,534 - - 14,289 14,289 28,793

Steve Cook 9,641 11,213 11,213 - 15,359 21,266 21,266 37,438

Simon Cooper 34,752 40,788 40,788 - 55,367 77,357 77,357 135,145

Toby Drysdale 4,820 9,212 9,212 - 7,680 17,472 17,472 29,173

Richard Harries 35,893 52,242 52,242 - 57,185 99,079 99,079 199,973

Nick Marsh 91,292 37,671 37,671 - 145,445 71,444 71,444 109,115

Samit Shah 8,688 10,197 10,197 - 13,842 19,339 19,339 36,500

AUL has made a loan to a director of the company during 2011. The loan is an interest-free travel season ticket loan that is repayable in monthly instalments.

Amount outstanding at Amount outstanding at Maximum amount outstanding 1 January 2011 31 December 2011 during the year £ £ £

T D Drysdale 3,715 - 3,715

Managing agency fees of £874,000 were paid by the syndicate to AUL. Profit commission of £4,244,000 is payable by the syndicate to AUL in relation to the 2009 year of account result. The managing agents agreement was amended in 2007 to enable managing agents to make payments on account of profit commission, prior to the closure of a year of account. Payments on account can be made when the syndicate transfers open year surpluses from the syndicate level premium trust funds to the members’ personal reserve fund. A payment of £1,505,000 was made in 2011. Included within creditors is £2,739,000 in respect of profit commission payable to AUL in relation to the 2009 year of account.


21

570

Year of Account 2009 2008 2007 2006 2005 2004 2003 Notes £m £m £m £m £m £m £m

Syndicate allocated capacity 125 125 125 150 150 164 164

Aggregate net premiums 128 117 129 124 124 141 157

Number of underwriting members 2,377 2,347 2,253 2,351 2,338 2,931 3,575

Results for an illustrative share of £10,000 £ £ £ £ £ £ £

Gross premiums 11,050 10,299 11,161 8,997 9,301 9,332 10,220

Gross premiums % 1 110.5% 103.0% 111.6% 90.0% 93.0% 93.3% 102.2%

Net premiums 10,232 9,371 10,329 8,290 8,245 8,576 9,541

Net premiums % 2 102.3% 93.7% 103.3% 82.9% 82.5% 85.8% 95.4%

Premium for the reinsurance to close an earlier year of account 3 11,343 11,330 10,404 9,157 6,031 5,461 3,802

Net claims 4 4,426 5,269 4,918 3,490 3,597 3,207 2,715

Premium for the reinsurance to close the year of account 11,678 11,254 11,124 9,578 6,791 5,504 5,461

Underwriting profit 5,471 4,178 4,691 4,379 3,888 5,326 5,167

(Profit)/loss on exchange 1 (908) (959) (628) 155 779 (90)

Syndicate operating expenses 4,002 3,534 3,967 3,038 2,701 2,675 2,936

Balance on technical account 1,468 1,552 1,683 1,969 1,032 1,872 2,321

Balance on technical account % 5 13.3% 15.1% 15.1% 21.9% 11.1% 20.7% 22.6%

Investment return 309 471 663 612 682 458 249

Profit for closed year of account 1,777 2,023 2,346 2,581 1,714 2,330 2,570

Illustrative managing agent’s profit commission 339 388 438 486 324 417 451

Illustrative personal expenses 77 75 151 150 100 245 315

Profit after illustrative profit commission and illustrative personal expenses 6 1,361 1,560 1,757 1,945 1,290 1,668 1,804

Notes

1. Gross premiums as a percentage of illustrative share.

2. Net premiums as a percentage of illustrative share.

3. The reinsurance to close premium that has been received by the 2009 year of account has been retranslated to the rates of exchange that were applicable as at 31 December 2011. Reinsurance to close premiums receivable in respect of the 2008 and prior years of account have not been restated.

4. Net claims include internal claims settlement expenses.

5. Balance on technical account as a percentage of gross premiums.

6. Illustrative personal expenses, including illustrative profit commission, are based on a calculation of amounts incurred by a member writing an illustrative share. For this purpose minimum fee charges are ignored.

Memorandum Item Year of Account 2009 2008 2007 2006 2005 2004 2003For an illustrative share of £10,000 £ £ £ £ £ £ £

Aggregation of annual fee, profit commission and syndicate expenses 889 1,007 1,106 901 741 779 614

SeVen yeAr SummAry of reSuLtSSyndicAte 570 At 31 december 2011

22

underwriterS reportSyndicAte 609

2009 yeAr of AccountI am delighted to report that Syndicate 609 is declaring a profit of £57.8m (28.9% of capacity) for the 2009 Year of Account. The result is after personal expenses but before members’ agents’ fees, and includes a £18m (9%) contribution from favourable development on the run-off of back years.

It is also the largest monetary profit ever produced by the syndicate and is particularly noteworthy in the current very low interest rate environment, with returns from our investment portfolio contributing a much lower proportion of the syndicate’s result compared to the long term average.

All classes written were profitable with exceptional results being produced by our Space and Terrorism accounts. At the 36 month stage none of the incurred loss ratios from any class exceeded 60% which again is another first for the syndicate.

The year obviously benefited from the absence of US hurricanes making landfall and as a result the Lloyd’s syndicates whose performance is most dependent on US catastrophe risk will produce some excellent results. What differentiates 609 is that we would still have made a double digit return even if the market had borne its share of a $112bn major US hurricane (as defined in the Lloyd’s Realistic Disaster Scenario).


The 2010 Year of Account has continued to be affected by catastrophic events. In my last report I talked about Australian Floods and a New Zealand Earthquake. Subsequently, the year has been hit by two further earthquakes in Christchurch and the earthquake off the coast of Japan, and the associated tsunami. I have shown in the table below the current estimated net losses to the syndicate arising from the recent catastrophe losses, analysed by year of account. These catastrophes will mean that the Non Marine Property and Reinsurance accounts will be loss making for the year.

The major risk loss to affect the 2010 Year of Account was from the damage to, and subsequent loss of station of, the Maersk Gryphon FPSO. This seemingly innocuous loss, due to heavy but not uncommon weather in the North Sea, will cost insurers in the region of $1bn. The syndicate’s share of the loss, borne in the Upstream Energy account, is £9.3m gross and £4.2m net.

The remainder of our classes have performed well with good results expected from Aviation Direct, War and Reinsurance. Our Cargo and Fine Art book continues to produce strong results, whilst Terrorism and Marine War have been outstanding, especially relative to others who have had Piracy losses and losses from the riots in Thailand.

Overall the year is expected to be profitable and our current forecast is for a profit in the range of 2.5% - 12.5%. Final syndicate income is estimated to be £190m which represents a stamp utilisation of 69%.

2011 Major Losses Net Loss £’m 2010 YOA and Prior

2011 YOA

Japanese Quake 15.6 80% 20%

thai floods 9.0 - 100%

february nZ Quake 9.5 78% 22%

maersk gryphon 4.2 100% -

hurricane irene 2.0 - 100%


2011 has been a very challenging year for the Insurance Industry as a whole and the syndicate has not been immune from the loss activity. The 2011 Year of Account was impacted by the natural catastrophes occurring early in the year as mentioned above, tornadoes in the US, (2011 being the most active season for 50 years with over 1,600 tornadoes forming), Hurricane Irene which swept up the Eastern Seaboard, and finally the very extensive flooding in Thailand.

The losses in Thailand have proven to be the most shocking in terms of quantum and type of event. The market loss estimate has increased from $5bn to up to $20bn in the last 4 months and there is continuing uncertainty about the loss in particular Business Interruption costs and from the number of events the flooding may constitute from a reinsurance standpoint. As I write, extrapolation of the publicly declared loss estimates from insurers falls some way short of the top loss estimates, suggesting there could be worse news to follow. We expect 609’s estimate to move, but not materially. It is estimated that the insurance bill for the catastrophes will be in excess of $100 billion making 2011 the second worst year in terms of insured losses after 2005.

The syndicate will be exposed to losses from the capsizing of the Costa Concordia, we currently estimate that based on a $1bn event the loss to the syndicate will be £5.6m gross and £4.6m net. For a possible $1bn Marine event our share of the loss is small and there are other $1bn Marine events on which the syndicate would have a much larger participation. In this instance it is down to a combination of both luck and skill. We would have written a larger line on the vessel if it was offered but we deliberately reduced our line on the liabilities as we did not think the pricing was reflective of the risk. We will enjoy the luck when it happens but it is the skill of our underwriters that is responsible for our long term success.

At this very early stage the syndicate is forecasting a range of results between -2.5% to +7.5%. Final syndicate income is expected to be £193m which represents a stamp utilisation of 70%.

609

23

609

2012 And beyond

Thank you very much for your overwhelming support for the merger of syndicates 570 and 609, creating undoubtedly a stronger and more balanced syndicate. I welcome the 570 team into Syndicate 609 and know as a merged unit we will be better positioned to survive the soft market and flourish when conditions change.

The merger process has gone smoothly mainly thanks to an enormous amount of work done by our talented support teams. A key objective was retention of all key underwriting staff and that has been achieved. For 2012 we have been able to allocate more capacity to our growing AuGold driven US P&C book and retain more risk in our War and Terrorism accounts.

After over $100bn of losses last year, the market conditions are disappointing. There is still considerable competition for business. It is true that loss affected classes are showing some price increases but they are not sufficient to make us want to increase our underwriting. We are seeing some evidence of rises in the US P&C book which is encouraging but in the more profitable areas of the account where we trade, competition is fierce. Our AuGold platform and North American based marketing (ARMS) capability provide non-price related differentiators to the syndicate but they require maintenance and further investment. The syndicate has written new profitable business as a result of ARMS but this is only the early stages of the development of our ambitions in this area.

The Singapore office continues to increase its income moderately in a very tough trading environment. It is however benefitting by being located in a region with growing economies where clients have new boats and helicopters to insure. Interestingly our largest concentration of Terrorism aggregate exposure has recently moved from Manhattan to the Central Business District in Singapore.

In the immediate future I do not foresee a general hardening of the market as was enjoyed in the years after 1986, 1992 and 2001 but anticipate hardening within specific areas for short periods following events. It will therefore be those operations which respond quickest that will be able to take advantage of those situations. It is therefore important that as non-aligned syndicates we continue to work closely with Lloyd’s to ensure we can take advantage of any short term opportunities that arise and not be restricted by the annual capital setting exercise.

On the regulatory theme I would like to congratulate the team led by Andrew Baddeley, James Lee, Samit Shah, James Cox and Justin Emrich on the amazing quality and quantity of work they have produced to ensure that Atrium is in a strong position to be fully compliant with the requirements of Solvency II by 2013. We have approached this project in typical Atrium fashion, by working very hard, using talented people, independence of thought and embracing all elements that we feel will make our business better. While the current industry bill for consultants alone may be in excess of £2 billion and rising, we have neither incurred significant external fees nor dramatically increased our headcount. Your syndicate is undoubtedly both financially and structurally better off as a result of the Solvency II work done in house by the agency’s team.

Toby Drysdale has once again proved to be a very able deputy and the class underwriters have produced another outstanding result for 2009 year of account. I thank them on your behalf and I thank you for your continued support.

Richard HarriesActive Underwriter, Syndicate 60912 March 2012

24

profit And LoSS Account:technicAL Account - generAL buSineSSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

profit And LoSS Account:non-technicAL Account - generAL buSineSSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

609

Notes £’000

Syndicate allocated capacity 199,588

Earned premiums, net of reinsurance

Gross premiums written 1 240,933

Outward reinsurance premiums (46,171)

Earned premiums, net of reinsurance 194,762

Reinsurance to close premium received, net of reinsurance

At transaction rates of exchange 156,922


Reinsurance to close premium received, net of reinsurance at closing rates of exchange 2 158,258

353,020


Claims incurred, net of reinsurance

Claims paid

Gross amount 85,487

Reinsurers’ share (16,246)

69,241

Reinsurance to close premium payable, net of reinsurance 3 159,045

228,286

Net operating expenses 4 72,903

Balance on the technical account for general business 8 57,757

Notes £’000

Balance on the technical account for general business 57,757

Investment income 7 8,914

Unrealised losses on investment (781)

Investment expenses and charges 7 (2,207)

Allocated investment return transferred to general business technical account (5,926)


25

609bALAnce Sheet for the 2009 cLoSed yeAr of Account At 31 december 2011

Notes £’000

Assets

Investments 9 211,084

Debtors 10 31,441

Reinsurance recoveries anticipated on gross reinsurance to close premium payable to close the account 3 41,749

Other assets

Cash at bank and in hand 19,741


Prepayments and accrued income 49

Total assets 309,596

Liabilities

Amounts due to members 11 26,164

Reinsurance to close premium payable to close the account - gross amount 3 200,794

Creditors 12 82,225

Accruals and deferred income 413

Total liabilities 309,596

The 2009 closed year underwriting accounts were approved at a meeting of the Board of Directors of Atrium Underwriters Limited, and by the Active Underwriter, on 12 March 2012 and were signed on its behalf by:

Andrew Baddeley Richard Harries Finance Director Active Underwriter 12 March 2012 12 March 2012

26

609StAtement of cASh fLowSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

Notes £’000

Net cash inflow from operating activities 13 67,146

Transfer to members in respect of underwriting participations (30,387)

Members’ agents’ fees paid on behalf of members (1,206)

14 35,553

Cash flows were invested as follows:

Increase in cash holdings 14 19,741

Decrease in overseas deposits 14 (2,298)

Net portfolio investment 14,15 18,110

Net investment of cash flows 35,553

27

609noteS to the finAnciAL StAtementSfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

1. Segmental Analysis

An analysis of the underwriting result before investment return is set out below: Gross premiums Gross claims Reinsurance written incurred Gross operating balance (note 1) (note 2) expenses (note 3) Total £’000 £’000 £’000 £’000 £’000

Direct insurance:

Accident and health 49 (118) 156 8 19

Motor (other classes) (6) (37) (1) 2 34

Marine, aviation and transport 144,879 53,674 50,601 (11,113) 29,491

Fire and other damage to property 56,202 12,940 18,810 (8,788) 15,664

Third party liability 26,402 14,520 9,012 (1,850) 1,020

Credit and suretyship 669 24 146 (419) 80

228,195 81,003 78,724 (22,160) 46,308

Reinsurance 12,738 4,005 3,925 (299) 4,509

240,933 85,008 82,649 (22,459) 50,817

RITC received 158,258 201,273 - 44,029 1,014

Total 399,191 286,281 82,649 21,570 51,831

1. Gross premiums written are treated as fully earned.

2. Gross claims incurred comprises gross claims paid and gross reinsurance to close premium payable.

3. The reinsurance balance comprises reinsurance premiums ceded less reinsurance recoveries on claims paid and reinsurance recoveries anticipated on reinsurance to close payable.

4. All premiums are concluded in the UK.

2. Reinsurance to Close Premium Receivable

£’000







Reinsurance to close premium receivable, net of reinsurance at transaction rates of exchange 156,922


Reinsurance to close premium receivable, net of reinsurance at closing rates of exchange 158,258

28

609noteS to the finAnciAL StAtementS CONTINUEDfor the 2009 cLoSed yeAr of Account for the three yeArS ended 31 december 2011

3. Reinsurance to Close Premium Payable

£’000







Reinsurance to close premium payable, net of reinsurance 159,045

The reinsurance to close is effected to the 2010 year of account of Syndicate 609.

4. Net Operating Expenses

£’000

Acquisition costs 53,234

Administrative expenses 27,034

Loss on exchange 1,045

Allocation to reinsurance to close premium receivable, net of reinsurance 1,336

82,649

Reinsurance commissions receivable (9,746)

72,903

Administrative expenses include: £’000

Auditors’ remuneration

Audit services 130

Other services 10


Members’ standard personal expenses are included within administrative expenses and amount to £17,649,000.

29

609

5. Staff Numbers and Costs All staff are employed by Atrium Group Services Limited. The following amounts were recharged to the syndicate in respect of salary costs: £’000

Wages and salaries 6,386

Social security costs 756

Other pension costs 712

7,854

The average number of employees employed by Atrium Group Services Limited, but working for the syndicate during the three years, was as follows: Number

Management 4

Underwriting 35

Claims 4

Administration 21

64

6. Emoluments of the Directors of Atrium Underwriters Limited The thirteen Directors of Atrium Underwriters Limited received the following aggregate remuneration charged to the syndicate and included within net operating expenses: £’000

Emoluments 693

The Active Underwriter received the following remuneration charged as a syndicate expense: £’000

Emoluments 195

7. Investment Return £’000

Investment income:

Income from investments 8,403

Gains on the realisation of investments 511

8,914

Investment expenses and charges:

Investment management expenses, including interest (356)

Losses on the realisation of investments (1,851)

(2,207)

30


8. Balance on Technical Account £’000

Balance excluding investment return and operating expenses

Profit attributable to business allocated to the 2009 pure year of account 106,754

Profit attributable to business reinsured into the 2009 year of account 17,980

124,734


Net operating expenses (72,903)

57,757

9. Investments Market value Cost £’000 £’000

Shares and other variable yield securities and units in unit trusts 26,050 26,050

Debt securities and other fixed income securities 169,278 164,324

Loans secured by mortgage 15,756 15,291

211,084 205,665

Debt securities and other fixed income securities and loans secured by mortgage are all listed on recognised stock exchanges.

10. Debtors £’000


Due from intermediaries 26,606


Other 10

31,441

11. Amounts Due to Members £’000


Members’ agents’ fee advances (1,206)

Distributions to members to date (30,387)

Amounts due to members at 31 December 2011 26,164

12. Creditors £’000


Due to intermediaries 40,459



Other 33,856

82,225 Other creditors include inter year loans of £32,317,000.

31

13. Reconciliation of Profit for the Year of Account to Net Cash Inflow from Operating Activities £’000

Profit for the year of account 57,757

Realised and unrealised investment gains including foreign exchange 6,472

Decrease in debtors 11,712

Decrease in creditors (15,374)

Non-cash consideration for net RITC receivable (152,466)

Net reinsurance to close premium payable 159,045

Net cash inflow from operating activities 67,146

Consideration for net RITC receivable comprised:

£’000

Non-cash consideration:



Debtors 43,202

Creditors (98,012)

152,466

Cash 4,456

156,922

14. Movement in Opening and Closing Portfolio Investments Net of Financing £’000

Net cash inflow from the three years 19,741

Cash flow

Decrease in overseas deposits (2,298)


Movement arising from cash flows 35,553

Received as consideration for net RITC receivable



Changes in market value and exchange rates (6,472)

Total movement in portfolio investments 236,357

Portfolio at 1 January 2009 -

Portfolio at 31 December 2011 236,357

609

32


14. Movement in Opening and Closing Portfolio Investments Net of Financing continued

Movement in Cash, Portfolio Investments and Financing Received as At consideration Changes to At 1 Jan for net RITC market value 31 Dec 2009 Cash flow receivable and currencies 2011 £’000 £’000 £’000 £’000 £’000

Cash at bank and in hand - 15,285 4,456 - 19,741

Overseas deposits - (2,298) 7,804 26 5,532

Portfolio investments:

Shares and other variable yield securities and units in unit trusts - (9,749) 35,552 247 26,050

Debt securities and other fixed income securities - 18,077 149,581 1,620 169,278

Loans secured by mortgage - 9,782 14,339 (8,365) 15,756

Total portfolio investments - 18,110 199,472 (6,498) 211,084

Total cash, portfolio investments and financing - 31,097 211,732 (6,472) 236,357

The changes to market values and currencies include £2.9m relating to currency revaluation of non-Sterling denominated investments and deposits.

15. Net Cash Outflow on Portfolio Investments £’000

Purchase of debt securities and other fixed income securities (388,567)

Purchase of loans secured by mortgage (13,279)

Sale of shares and other variable yield securities 9,749

Sale of debt securities and other fixed income securities 370,490

Sale of loans secured by mortgage 3,497

Net cash outflow on portfolio investments (18,110)

16. Disclosures of Interest

Ariel Holdings Limited (AHL), a company incorporated under the laws of Bermuda, is the ultimate holding company of Atrium Underwriting Group Limited (AUGL).

AUGL is the holding company of the following wholly owned susidiaries; Atrium Underwriters Limited (AUL), Atrium 5 Limited, Atrium Underwriting Holdings Limited (AUHL), Atrium Insurance Agency Limited (AIAL), Atrium Group Services Limited (AGSL), Atrium Insurance Agency (Asia) Pte. Ltd (ASIA), Atrium Risk Management Services (Washington) Ltd (ARMS) and Atrium Risk Management Services (British Columbia) Ltd (ARMSBC). AUL is the managing agent of Syndicates 570 and 609 (the ‘managed syndicates’). AUHL is the holding company of ten non-continuing corporate members of Lloyd’s.

AUGL participates on the managed syndicates through its corporate member subsidiary, Atrium 5 Limited whose participation on each year of account is as follows: 2009 2010 2011 2012 Capacity Capacity Capacity Capacity £m £m £m £m

Syndicate 570 31.0 35.9 35.9 -Syndicate 609 51.5 70.9 70.9 106.8 Atrium 5 Limited’s participation on the managed syndicates as % of syndicate capacity: Year of account 2009 2010 2011 2012 % % % %

Syndicate 570 24.8 24.8 24.8 -Syndicate 609 25.8 25.8 25.8 25.4

33

609


On 28 April 2011, Atrium wrote to the Council of Lloyd’s with a notice of the intention to merge Syndicate 570 and Syndicate 609 with effect from the commencement of the 2012 year of account. Consent to the merger was granted on 19 July. Richard Harries was appointed Underwriter of Syndicate 570 with effect from 1 January 2012. In order to service the run-off and merged syndicate, underwriters have authorities that enable them to underwrite on behalf of both managed syndicates.

AHL is the ultimate holding company of Ariel Reinsurance Company Ltd (Ariel Re). On 1 March 2012 it was announced that Goldman Sachs intended to acquire Ariel Reinsurance’s Bermuda-based insurance and reinsurance operations, with an expected completion date of 1 April 2012. On 3 March 2012 it was announced that Arch Capital Group Ltd intended to acquire Ariel Reinsurance’s Switzerland-based reinsurance operations, with an expected completion date of 1 April 2012, subject to regulatory approval.

AIAL is a registered Lloyd’s UK coverholder and authorised and regulated by the Financial Services Authority. Both managed syndicates participate on a binding authority granted to AIAL to underwrite Space business. The binding authority is led by Syndicate 609. Under the terms of the binding authority, fees and profit commission are payable to AIAL. Fee income of US$1,033,000 is included within these accounts in relation to premium earned on the 2009 year of account. Profit commission of US$1,652,000 is due in relation to the 2009 year of account.

AGSL is a group service company. All employee contracts and, where possible, all material service provider contracts are held by AGSL. A service agreement is in place whereby AGSL provides all management services to all Atrium Group companies. Under the service agreement AGSL will charge the costs to each Atrium group company, including AUL, for the respective services provided.

ASIA carries on for its own account the business of insurance intermediation in Singapore, operating on the Lloyd’s Asia platform. In this capacity it has been granted authority by Syndicate 609 to bind certain risks (including marine hull, energy, aviation and non-marine property risks) as a service company coverholder. Under the terms of the arrangement ASIA charges fees to Syndicate 609 equal to its operating costs plus a small margin for tax reasons. Fees of S$1,686,000 were paid by Syndicate 609 on the 2009 year of account.

ARMS is incorporated in Washington and supports the Syndicate’s strategy to maintain and grow its North American direct portfolio and distribution network. ARMS charges fees to the Syndicates equal to its operating costs plus a small margin for tax reasons. No fees were paid in respect of the 2009 year of account.

ARMSBC is incorporated in British Columbia and supports the Syndicate’s strategy to maintain and grow its North American direct portfolio and distribution network. ARMSBC charges fees to the Syndicates equal to its operating costs plus a small margin for tax reasons. No fees were paid in respect of the 2009 year of account.

AUL manages four underwriting consortia. The Atrium Aviation Consortium is an internal consortium arrangement between Syndicate 570 & 609 on a 40%/60% split basis. Lloyd’s approval was given on 21st July 2003 for this arrangement. An overrider is charged by Syndicate 609 to Syndicate 570. The Atrium Airline Hull War and Allied Perils Consortium and the two Atrium Aviation Reinsurance Consortia are led by Syndicate 609 and supported by various other Lloyd’s syndicates, including Syndicate 570. Lloyd’s approval is not required under the Multiple Syndicates Byelaw for these consortia. Fees and profit commission are payable by all consortium members including Syndicate 570. AUL processes the fees and profit commission on behalf of Syndicate 609 but currently retains no remuneration in its role as manager of these consortia. Two Aviation Reinsurance quota share treaties are in place that replicate the Atrium Reinsurance Consortia. Profit commissions and overriders are payable by Syndicate 570 to Syndicate 609 under this arrangement.

Syndicate 609 has entered into a quota share contract of their Space account for the 2009, 2010 and 2011 years of account with Ariel Re. Permission was given by Lloyd’s on 30 December 2008. Income expected to be ceded under this arrangement for the 2012 year of account is US$1.0m (actual 2011 year of account - US$2.3m).

A quota share of Syndicate 609 by Syndicate 570 was entered into in relation to Aviation business underwritten on behalf of Syndicate 609 by ASIA. Under the terms of the quota share an overriding commission is payable by Syndicate 570 to Syndicate 609. The terms were set and agreed by the respective Active Underwriters. Lloyd’s gave consent of a waiver under the Multiple Syndicates Byelaw on 9 November 2009. No overriding commission has been paid by Syndicate 570 in calendar year 2011.

The impact of the syndicate merger has resulted in the related party transactions between the two managed syndicates ceasing with effect from the 2012 year of account.

34


It is possible that further transactions may be entered into between the managed syndicates and Ariel Re.

With effect from 2012 certain reinsurances purchased will be for the benefit of both Syndicates 570 and 609. The board determined that this was the most efficient process to protect both the ongoing and run-off business. There is the possibility of one or other syndicate exhausting the available coverage, in which case we would consider the purchase of back-up coverage. Costs will be charged on an equitable basis determined by the board.

The Directors’ participations on Syndicates 570 & 609 via Nomina No. 207 LLP are as follows:

Syndicate 570 Syndicate 609 2009 yoa 2010 yoa 2011 yoa 2012 yoa 2009 yoa 2010 yoa 2011 yoa 2012 yoa £ £ £ £ £ £ £ £

Andrew Baddeley - 7,534 7,534 - - 14,289 14,289 28,793

Steve Cook 9,641 11,213 11,213 - 15,359 21,266 21,266 37,438

Simon Cooper 34,752 40,788 40,788 - 55,367 77,357 77,357 135,145

Toby Drysdale 4,820 9,212 9,212 - 7,680 17,472 17,472 29,173

Richard Harries 35,893 52,242 52,242 - 57,185 99,079 99,079 199,973

Nick Marsh 91,292 37,671 37,671 - 145,445 71,444 71,444 109,115

Samit Shah 8,688 10,197 10,197 - 13,842 19,339 19,339 36,500

AUL has made a loan to a director of the company during 2011. The loan is an interest-free travel season ticket loan that is repayable in monthly instalments.

Amount outstanding at Amount outstanding at Maximum amount outstanding 1 January 2011 31 December 20110 during the year £ £ £

T D Drysdale 3,715 - 3,715

Managing agency fees of £1,392,000 were paid by the syndicate to AUL. Profit commission of £14,371,000 is payable by the syndicate to AUL in relation to the 2009 year of account result. The managing agents agreement was amended in 2007 to enable managing agents to make payments on account of profit commission, prior to the closure of a year of account. Payments on account can be made when the syndicate transfers open year surpluses from the syndicate level premium trust funds to the members’ personal reserve fund. A payment of £8,185,000 was made in 2011. Included within creditors is £6,187,000 in respect of profit commission payable to AUL in relation to the 2009 year of account.


35

SeVen yeAr SummAry of reSuLtSSyndicAte 609 At 31 december 2011

Year of Account 2009 2008 2007 2006 2005 2004 2003 Notes £m £m £m £m £m £m £m

Syndicate allocated capacity 200 215 215 214 214 179 160

Aggregate net premiums 195 167 147 135 141 151 155

Number of underwriting members 2,991 2,976 2,906 2,668 2,789 3,544 3,761

Results for an illustrative share of £10,000 £ £ £ £ £ £ £

Gross premiums 12,072 9,290 8,860 8,557 8,274 10,264 11,615

Gross premiums % 1 120.7% 92.9% 88.6% 85.6% 82.7% 102.6% 116.2%

Net premiums 9,758 7,739 6,847 6,299 6,577 8,430 9,748

Net premiums % 2 97.6% 77.4% 68.5% 63.0% 65.8% 84.3% 97.5%

Premium for the reinsurance to close an earlier year of account 3 7,929 6,842 6,441 7,619 4,635 4,850 3,730

Net claims 4 3,469 3,763 4,769 2,914 3,466 3,185 2,321

Premium for the reinsurance to close the year of account 7,969 7,287 6,747 7,139 5,714 5,544 5,443

Underwriting profit 6,249 3,531 1,772 3,865 2,032 4,551 5,714

(Profit)/loss on exchange 119 (814) (469) (858) 94 705 (50)

Syndicate operating expenses 2,719 2,063 1,836 1,888 1,672 2,216 2,398

Balance on technical account 3,411 2,282 405 2,835 266 1,630 3,366

Balance on technical account % 5 28.3% 24.6% 4.6% 33.1% 3.2% 16.5% 28.9%

Investment return 298 383 555 444 538 461 303

Profit for closed year of account 3,709 2,665 960 3,279 804 2,091 3,669

Illustrative managing agent’s profit commission 720 515 161 625 141 369 677

Illustrative personal expenses 95 76 150 150 100 245 284

Profit after illustrative profit commission and illustrative personal expenses 6 2,894 2,074 649 2,504 563 1,477 2,708

Notes

1. Gross premiums as a percentage of illustrative share.

2. Net premiums as a percentage of illustrative share.

3. The reinsurance to close premium that has been received by the 2009 year of account has been retranslated to the rates of exchange that were applicable as at 31 December 2011. Reinsurance to close premiums receivable in respect of the 2008 and prior years of account have not been restated.

4. Net claims include internal claims settlement expenses.

5. Balance on technical account as a percentage of gross premiums.

6. Illustrative personal expenses, including illustrative profit commission, are based on a calculation of amounts incurred by a member writing an illustrative share. For this purpose minimum fee charges are ignored.

Memorandum Item Year of Account 2009 2008 2007 2006 2005 2004 2003For an illustrative share of £10,000 £ £ £ £ £ £ £

Aggregation of annual fee, profit commission and syndicate expenses 1,330 973 594 1,038 481 717 910

609

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ATRIUM UNDERWRITERS LIMITED ROOM 790LLOYD’S1 LIME STREETLONDONEC3M 7DQ

TEL: +44 (0)20 7327 4877FAX: +44 (0)20 7327 4878WEB: www.atrium-uw.com

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ATRIUM SYNDICATES 570 & 609 UNDERWRITING YEAR …reView of the 2009 cLoSed yeAr of Account Syndicate...

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