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Millennium Insurance Company LimitedFinancial Statements for 2013

Reykjavik, Iceland

LETTER FROM THE PRESIDENT

MANAGEMENT REPORT 2013

-Report presentation

-Business review

-Future developments

CuENTAS ANuALES 2013

-Technical accounts

-Non-technical accounts

-Balance

-Cashflow

-Solvency margin

SPECIFIC INFORMATION ON FINANTIAL STATEMENTS

AuDIT REPORT 2013

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7Millennium Insurance Company Limited - Financial Statements for 2013

It gives me a great satisfaction to have the opportunity to be able to share with you this Annual Report which presents

the results of the Millennium Insurance Company for 2013, as well as my vision and views on the future, particularly

for our Company.. There is no doubt that it was a special year for Millennium, which has shown the consolidation of the

Company in the Spanish market and the opening up in new countries.

The high point of this period has been Millennium Insurance Company topping the ranking of the premium volume

corresponding to the 2013 within the Suretyship sector. This annual ranking, elaborated by the ICEA (Insurance

Statistics and Studies Service in Spain), is available on their website, which includes classification by entity as well as by

Groups at the past annual closing.

Millennium issued a total of €12,024,702.17 in 2013, which means for a growth rate of 106.65% in the Surety field,

with a market share of 19.2%. With these values the Company would become the leader in Spain in the Surety area

surpassing entities such as Asefa, Crédito y Caución, Mapfre, HCC, CESCE y Generali, according to the figures published

by ICEA and in the 2013 ranking in this insurance sector.

Within the general ranking of all insurance companies in Spain, and in the Non-Life area, Millennium appears as the

highest growth company in 2013 with an 82% increase over the previous year. The Company, with a volume of direct

insurance premiums of €17,397,648 in 2013, means to be within the top 40 companies in a maximum period of three

years.

We diversify our business in products as well as in different countries. The flexibility in our operations is one of the

qualities that helps us to progress in a strategic manner. We specialize in designing any custom-made product.

However, none of this would be possible if Millennium were an entity without VALUES and a very clear and focused

PHILOSOPHY of work since the Company’s beginnings. Those values underlie our actions and the entity’s social

commitment to help companies and individuals to feel more at ease with their business and their risks.

The values our Company provides are quite simple: solidity, trustworthiness, loyalty and commitment, flexibility and

dynamism, financial guarantee, optimization of managerial services and the confirmed experience and professionalism

of our team.

2014 is being a challenge in itself with grand expectations. We are aware that the path of our success lies in the

consolidation of our values and in expanding our services. To go beyond – but always at the service of the customers by

helping them to manage their assets and risks in the most optimal way possible. With no doubt this is an exciting path to

follow.

Antonio Morera Vallejo

Letter from the President1

Brussels, Belgium


RepoRt pResentation

The directors present their report and the audited financial statements of Millennium Insurance Company Limited

(“the Company”) for the year ended 31 December 2013.

Principal activities and ownership

The Company is licensed by the Gibraltar Financial Services Commission under the Financial Services (Insurance

Companies) Act to underwrite the following insurance classes:

Accident

Sickness

Goods in transit

Fire and natural forces

Damage to property

General liability

Credit

Suretyship

Miscellaneousfinancialloss

Legal expenses

The principal activity of the Company is that of a direct insurance underwriter, offering its products for sale in the

European Union.

Lisbon, Portugal

2013 Management Report2

1110 Millennium Insurance Company Limited - Financial Statements for 2013Millennium Insurance Company Limited - Financial Statements for 2013

ReVieW oF tHe BUsiness

In 2013, the global economy has gained strength, but very slowly. The euro area is growing again but is not expected

to accelerate rapidly: it will be another two years or so before trend growth is achieved. In this global environment,

inflation is expected to remain subdued and long-term yields on government bonds will rise only gradually in the

advanced economies.

In this environment of gradual but slow recovery, Millennium has maintained the growth achieved over the past

years, thanks to the consolidation in the markets it currently operates, and the addition of new country markets.

Thus, in year 2013, Millennium has achieved an increase of the total company premiums of 50% compared to year

2012. Thanks to the diversification process that Millennium began to develop in 2010, premiums in Spain now

represent 45% of the total, while the 55% remaining are split between the 7 different countries where Millennium

operated in 2013 (4 in 2012), with particular importance of UK and France, where Millennium is starting to become

one of the major alternatives to the traditional companies in these markets.

With regard to the Spanish market, Millennium has consolidated in 2013 as the leading company in the bond market,

as well as the non-life insurance company with the highest growth percentage (81%) of the entire Spanish market

(statistics compiled by ICEA). It is important to remark once again the great subscription made in this insurance

branch, where the market loss ratio is above 500%, and Millennium’s loss ratio was below 50%.

As we have published in previous years, the work done by the Underwriting Agencies in all countries where

Millennium operates allows us to achieve partnerships with local agencies, which provide us their knowledge and

know-how. This, combined with Millennium’s team expertise and capabilities of the company, created important

synergies that enabled our country and product diversification, with loss ratios near 30%, and especially, cost levels

far below the European average.

Millennium has been reinsured by large continental reinsurance companies, such as Mapfre Re, Nacional de

Reaseguro, Catlin Re or Endurance, as well as supported by major Lloyd’s syndicates. The good work done by

Millennium has been shown in new renewals by the reinsurers, with increases in capacities, and even doubling them

in some lines of business compared to 2012.

For the year 2013, Millennium continues adapting and forming their resources, both human and technological, to

make possible our organic growth, and to respond adequately to the new requirements and needs that the market

itself and the insurance sector are developing, such as Solvency II.

Therefore, and in conclusion, we can affirm that in 2013 Millennium has managed, once again, to exceed all

expectations of growth and diversification, with great results, and building trust between their collaborators

(agencies, brokers, reinsurers) and customers.

Gross Premium Growth/DeveloPment (€ 000)

total assets Growth/DeveloPment (€ 000)

2009 2010 2011 2012 2013

5.000 10.000

0

10.000 20.000

15.00030.000

20.00040.000

25.00050.000

30.000

60.00035.000

70.00040.000

2009 2010 2011 2012 2013


evolution

SPAIN PORTUGAL POLAND HUNGARY IRELAND UK FRANCE ITALY TOTAL

Premiums 2012 10.462.829,00 € 662.721,00 € - - - 8.923.057,00 € 2.376.571,00 € 41.104,00 € 22.466.283,00 €

Premiums 2013 15.305.044,00 € 578.105,53 € 1.318.620,37 € 136.354,18 € 59.225,00 € 8.111.571,00 € 8.010.572,00 € 209.410,00 € 33.728.902,00 €

Premium growth between years

46,3% -12,08% 100,00% 100,00% 100,00% -9,1% 237,1% 409,5% 50,1%

% split by country 45,38 % 1,71% 3,91% 0,40% 0,18% 24,05% 23,75% 0,62% 100,00%

2009 2010 2011 2012 2013 2014 Objective

Premiums 5.375.513,00 € 8.055.698,00 € 15.493.460,00 € 22.466.283,00 € 33.728.902,00 € 50.575.000,00 €

Profits 1.037.904,00 € 2.973.433,00 € 1.075.562,00 € 2.110.772,00 € 5.304.329,00 € 5.756.215,00 €

Assets 40.309.981,00 € 41.425.699,00 € 51.167.967,00 € 51.369.325,00 € 65.504.870,00 € 71.002.204,00 €

Growth over the previous year 2013

Assets 27,52%

Premiums 50,13%

Profits 151,30%

45,38% - SPAIN1,71% - PORTUGAL3,91% - POLAND0,40% - HUNGARY0,18% - IRELAND24,05% - UK23,75% - FRANCE0,62% - ITALY

ranking

This ranking has been elaborated from the following data: Insurance Market evolution. Statistics as of

December 2013. ICEA Association 2014.

(*) Those entities belonging to Grupo Caser do not appear as their information was provided as a Group without breakdown of entities.

According to ICEA, the sector’s

average decreased by over 4%, while

Millennium increased by more than

106% in the Sureties area, obtaining a

market share of almost 20%.

Regarding Accident the sector average

surpasses 500% while the Company

maintains a balance of under 50%.

Nº Entity (*) Premiums issues Growth Market direct (Euros) share

1. Millennium 12.024.702,17 106,65% 19,20%

2. Crédito y Caución 9.754.387,37 4,57% 15,57%

3. HCC Europa 7.049.339,31 0,59% 11,25%

4. Mapfre Global Risks 6.352.066,59 -16,95% 10,14%

5. Asefa 5.937.336,97 -38,01% 9,48%

6. Cesce 5.825.741,39 -6,20% 9,30%

7. AXA Seguros Generales 4.891.498,00 -1,76% 7,81%

8. Generali Seguros 3.993.894,96 -31,93% 6,38%

9. Zurich Insurance 1.415.465,11 -32,57% 2,26%

10. Fidelidade Mundial 298.850,55 28,70% 0,48%

11. Amaya 177.693,00 -9,80% 0,28%

12. AIG Europe 73.851,89 -3,79% 0,12%

2012 2013

% Loss Ratio Surety (ICEA 2013 282,56% 535,52%

% Growth over 2012

Premiums Surety (Icea 2013) 62.640.629,00 € -4,14%

Premiums Surety Millennium 2013 12.024.702,17 € 106,65%

Market share 2013 19,20%

14 Millennium Insurance Company Limited - Financial Statements for 2013

FUtURe DeVeLopMents

In 2014, growth will likely accelerate in South America, the Euro area and the UK, and remain largely unchanged in

Japan and China. Our stronger-growth baseline forecast assumes, that there are no major policy errors in the Euro

area and that the UK’s robust growth momentum continues.

Following the same policy than previous years, Millennium will keep its premium policy and try to increase its

existing premium volumes whilst at the same time looking for new geographical areas to diversify into. Likewise,

Millennium will do this whilst at the same time consolidating developed markets and searching for new products and

great business opportunities which are demanded by consumers.

In this sense, international expansion remains a main objective of the Company both in new European countries and

worldwide. To achieve these aims, the Company will continue working closely with its underwriting agencies and

looking for new potential partners that may contribute to the development and diversification of the Company.

In order to get this, the Company will continue to strengthen its relationships with the reinsurance companies that it

has been supporting with for many years whilst at the same time seeking out new reinsurance partners (and facilities)

to work with.

Another core objective of Millennium will be maintaining its loss ratio which has provided such good results over the

years. In particular, in the Spanish market, Millennium will work for keeping the surety loss ratio further from the

market ratio. To do this, Millennium is making great efforts to recruit the right people with the right knowledge of the

business written in each sector and to maintain its conservative risk policy.

Moreover, the Company continues to work towards full compliance with all requirements set by future Solvency II.

In conclusion, based on the evolution of the Company in the last years (and the change of the world economy), 2014

seems to be a year of consolidation in several markets and organic growth of Millennium. This continuous, constant

and healthy growth will make Millennium’s stakeholders remains confident on the development of the business.

Warsaw, Poland


teCHniCaL aCCoUnt

Annual Accounts 20133

non-teCHniCaL aCCoUnt

the Company had no discontinued operations in the year and therefore the past performance of the company relate only to continuing operations.

Results and dividends

The company’s profit for the financial year after taxation was €5,304,329.

No dividends were declared, and the retained profit of €5,304,329 has been transferred to reserves.

Año 2013 (€) Año 2012 (€)

TOTAL TECHNICAL INCOME 23.206.424 14.772.371

Gross premiums written 33.728.902 22.466.283

Net premiums written 25.535.584 16.234.871

Change in the provision for unearned premiums

(3.472.607) (2.464.344)

Reinsurers’ share 1.143.447 1.001.844

Total (2.329.160) (1.462.500)

TOTAL TECHNICAL CHARGES (18.360.786) (12.652.491)

Claims paid (9.953.012) (5.916.222)

Change in the provision for claims (1.088.605) (1.339.760)

Claims incurred, net of reinsurance (11.041.617) (7.255.982)

Net operating expenses (7.319.169) (5.396.509)

Balance on the technical account for general business

4.845.638 2.119.880

2013 (€) 2012 (€)

Balance on the general business technical account 4.845.638 2.119.880

Gains on investments 492.752 153.320

Investment expenses and charges (16.506) (16.205)

Profit/(loss) on ordinary activities before taxation 5.321.884 2.256,995

Tax on profit/(loss) on ordinary activities (17.555) (146.223)

Profit on ordinary activities 5.304.329 2.110.772

Profit/(loss) for the financial year 5.304.329 2.588,617


BaLanCe

Thanks to our good results, the Company in 2012 year covered an investment fund as unadmitted assets. This

measure affected the Company’s Equity in 2012 by reducing it to being below the share capital. In 2013 Company

Equity once again became greater than the share capital.

ASSETS 2013 (€) 2012 (€)

INvESTMENTS 803.567 6.635.496

Land and buildings 458.376 470.140

Other financial investments 345.191 6.165.356

REINSURERS’ SHARE OF TECHNICAL PROvISIONS 11.868.647 9.925.405

Provision for unearned premiums 7.911.091 6.767.644

Claims outstanding 3.957.556 3.157.761

DEBTORS 30.751.616 25.709.041

Debtors arising out of direct insurance operations-in-termediaries

12.259.196 10.562.701

Debtors arising out of reinsurance operations 13.666.813 7.737.759

Other debtors 1.143.296 3.726.270

Subrogation and recoveries 3.682.311 3.682.311

OTHER ASSETS 15.123.250 2.715.163

Cash at bank and in hand 15.123.250 2.715.163

TOTAL 6.957.790 6.384.220

Deferred acquisition costs – gross amounts 6.528.378 5.818.160

Other prepayments and accrued income 429.412 566.060

TOTAL ASSETS 65.504.870 51.369.325

LIABILITIES 2013 (€) 2012 (€)

CAPITAL AND RESERvES 13.472.052 8.167.723

Called up share capital 10.000.000 10.000.000

Profit and loss account 3.472.052 (1.832.277)

TECHNICAL PROvISIONS 34.577.296 29.216.290

Provision for unearned premiums – gross amount 23.990.375 20.517.768

Claims outstanding – gross amount 10.586.921 8.698.522

DEPOSITS RECEIvED FROM REINSURERS 537.356 315.195

CREDITORS 16.757.218 13.089.304

Creditors arising out of direct insurance operations 3.292.500 2.338.713

Creditors arising out of reinsurance operations 13.171.366 10.553.267

Other creditors including taxation and socials security 293.352 197.324

ACCRUALS AND DEFERRED INCOME 160.948 580.813

TOTAL LIABILITIES 65.504.870 51.369.325

20 Millennium Insurance Company Limited - Financial Statements for 2013

CasH-FLoW

Millennium’s policy is to reinvest in the Company the profit obtained from the increase in reserves. This action

improves solvency and provides greater solidity to the Company thus allowing it to tackle payments regarding any

third party.

The Solvency Margin gives a greater degree of guarantee and solidity to the group of measures that, in the long

term, shape Millennium’s technical and economic balance.

In 2013 the joint resources made up by our uncommitted assets in order to maximize guaranteeing the

commitments to those insured was reflected in a solvency margin of 217.64%.

soLVenCY MaRGin

Paris, France

2013 (€) Net (€)

NET CASH INFLOw BEFORE FINANCING 1.888,533 414.376

Net cash inflow from operating activities 1.974,448 716.658

Taxation paid (85.915) (302.282)

EqUITY DIvIDENDS PAID TO SHAREHOLDERS 0 0

NET CASH INFLOw 1.888,533 414.376


Doolin, Ireland

1. aCCoUntinG poLiCies

Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,asmodifiedforinvestmentsat

fairvaluethroughprofitandloss.Thefinancialstatementshavealsobeenpreparedundertheaccountingpolicies

set out below, applicable legislation and in accordance with Gibraltar Accounting Standards. Gibraltar legislation

appliedinthepreparationofthesefinancialstatementsincludestheCompaniesAct,theFinancialServices(Insurance

Companies) Act and the Insurance Companies (Accounts Directive) Regulations 1997.

The Statement of Recommended Practice issued by the Association of British Insurers (“the ABI SORP”) on Accounting

forInsuranceBusinessdatedDecember2005,hasalsobeenappliedinpreparingthesefinancialstatements.

1.1 Basis of accounting

The Company issues contracts that transfer insurance risk. Insurance contracts are those contracts that transfer

significantinsurancerisk.TheCompanydefinessignificantinsuranceriskasthepossibilityofhavingtopaybenefits

ontheoccurrenceofaninsuredeventthatareatleast10percentmorethanthebenefitspayableiftheeventdidnot

occur.AlloftheCompany’sproductsareclassifiedasinsurancecontracts.

The results are determined on an annual basis, whereby the incurred cost of the claims, commission and related

expenses are charged against the earned proportion of premiums, net of reinsurance.

1.2 Premiums written

Premiums written relate to business incepted during the year, together with any differences between the booked

premiums for prior years and those previously accrued, and include estimates of premiums due but not yet receivable

ornotifiedtotheCompany.

Decennial policies which involve a number of buildings as part of a single construction project, often referred to

as “Group Policies” are deemed to have gone on risk when individual buildings within the construction project are

completed.

Specific information on state of finances

4


1.3 Reinsurance

Outward reinsurance premiums are accounted for in the same accounting period as the related insurance business.

1.4 unearned premiums

Unearned premiums represent the proportion of premiums written in the year that relate to the unexpired terms of

the policies in force at the balance sheet date, calculated on a time apportioned basis.

1.5 Prior year adjustments

Anadjustmentinpreviousyearswasreflectedinthefinancialstatesfortheyearending31stDecember2011,in

order to recognize the effects of an excessive underwriting loss contracted by the Company which came into effect

at the end of 2010, causing a total cost of €2,236,536 that includes the 31st April 2012 period.

1.6 Pre-paid insurance policies

Deposits on insurance policies which have not yet come on risk are accounted for as deferred income.

Reinsurance and brokerage commission paid on pre-paid policies that have not yet come on risk are accounted for

as deferred expenses.

1.7 acquisition costs

Acquisition costs comprise brokerage and service company acquisition costs incurred on insurance contracts

writtenduringthefinancialyear.Theyarespreadoveraperiodequivalenttothatoverwhichthepremiumsonthe

underlying business are earned.

Prepaid policies that are yet to come on risk are still liable to pay brokerage commission on a percentage basis of the

prepaid policy premium. Deferred acquisition costs represent the proportion of acquisition costs incurred in respect

of unearned premiums at the balance sheet date.

1.8 Processing costs

Processing costs are included within net operating expenses and comprise service company charges incurred in

handling insurancecontractswrittenduringthefinancialyear.Thischarge incorporatesclaimshandlingcharges.

They are spread over a period equivalent to that over which the premiums on the underlying business are earned.

Deferred processing costs represent the proportion of processing costs incurred in respect of unearned premiums

at the balance sheet date.

1.9 levies

Levies payable to the Spanish authorities for the insurance compensation scheme and natural disaster fund are

recognised within net operating expenses.

1.10 Claims incurred

Claims incurred represents claim payments adjusted for the movement in the outstanding claims liability, net of

salvage and subrogation recoveries. Reinsurance recoveries are accounted for in the same accounting period as the

claims for the related business being reinsured.

The outstanding claims liability is measured as the value of expected future payments relating to claims incurred at

the reporting date. The expected future payments include those in relation to claims reported but not yet paid or not

yet paid in full and claims incurred but not reported (“IBNR”) and the anticipated direct and indirect claims handling

costs. The liability is not discounted to present value.

The estimation of the outstanding claims liability involves a number of key assumptions and is the most critical

accounting estimate. See note 2 for further details.


1.11 Reinsurance recoveries

Reinsurance recoveries in respect of claims incurred but not reported are assumed to be consistent with the historical

pattern of such recoveries, adjusted to reflect changes in the nature and extent of the Company’s reinsurance

programme over time. An assessment is also made of the recoverability of reinsurance recoveries having regard to

marketdataonthefinancialstrengthofeachofthereinsurancecompanies.

Thereinsurers’shareofclaimsincurredintheprofitandlossaccountreflectstheamountreceivedorreceivablefrom

reinsurers in respect of those claims incurred during the year. Reinsurance liabilities are primarily premiums payable

for reinsurancecontractsandare recognised in theprofitand lossaccountas “Outward reinsurancepremiums”

when due.

1.12 salvage and subrogation recoveries

Some insurance contracts permit the Company to sell (usually damaged) property acquired in settling a claim (for

example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs (for

example, subrogation). Salvage and subrogation recoveries are included in other assets. For salvage recoveries, the

amount recognised is the amount that can be reasonably recovered from the disposal of the property. For subrogation

reimbursements, the amount recognised is the amount that can reasonably be expected to be recovered from the

action against the liable third party.

1.13 Profit commission

UndersomereinsurancecontractsenteredintobytheCompany,theCompanyisentitledtoslidingscaleorprofit

commission depending on the overall result derived on the line of business covered by that particular reinsurance

contract.GiventhattheoverallresultgeneratedbytheCompanyissubjecttosignificantuncertaintyasallclaims

datamaynotbeknownuntilsubsequentperiods,thecompanycanfinditdifficulttoestimateslidingscaleandprofit

commission.

1.14 taxation and deferred tax

Provisionismadeattheapplicablerateforcorporationtaxpayableonprofitfortheyear,asadjustedfortaxpurposes.

Spanish capital gains tax is payable on certain realised gains on investments. Deferred tax is recognised in respect of all

timing differences that have originated but not reversed at the balance sheet date. Timing differences are differences

betweenthetaxableprofitsandtheresultsasstatedinthefinancialstatementsthatarisefromtheinclusionofgains

andlossesintaxassessmentsinperiodsdifferentfromthoseinwhichtheyarerecognisedinthefinancialstatements.

A net deferred tax asset is treated as recoverable.

Deferred tax is measured on a non-discounted basis, using the tax rates that are expected to apply in the periods in

which the timing difference are expected to reverse based on tax rates and laws that have been enacted by the balance

sheet date.

1.15 insurance premium tax and levies

Insurance premium taxes and levies (IPS, Clea and Consorcio) are based on a percentage of Net Written Premiums.

Gross premiums written are recognised net of insurance premium taxes whereas levies are recognised as direct

insurance costs within operating expenses.

1.16 trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the

effective interest method, less provision for impairment. A provision for impairment of trade receivables is

established when there is objective evidence that the Company will not be able to collect all amounts due according

to the original terms of the receivables.


1.17 Financial instruments

Classification

Thecompanyclassifiesitsfinancialassetsinthefollowingcategories:

-loans and receivables and: Investmentsatfairvaluethroughprofitand lossaccount.Managementdeterminestheclassificationof its

financialassetsatinitialrecognition.

-loans and receivables:Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenot

quoted in an active market. The Company’s loans and receivables comprise debtors and cash at bank and in

hand in the balance sheet.

-Investments at fair value through profit and loss account:Investments at fair value through profit and loss are financial assets that are principally acquired for the

purposeofsellingintheshorttermandarerecordedwithin“otherfinancialinvestments”onthebalancesheet.

1.18 Recognition and measurement

Regularpurchasesandsalesoffinancialassetsarerecognisedonthetrade-date-thedateonwhichtheCompany

commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs.

Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheinvestmentshaveexpiredorhave

been transferred and the Company has transferred substantially all risks and rewards of ownership. Investments at

fair value are carried at the bid price. Loans and receivables are carried at amortised cost using the effective interest

method.

Dividend income fromfinancial assets is recognised in the income statement as part of other incomewhen the

Company’s right to receive payments is established.

The market values of quoted investments are based on current bid prices. These include the use of recent arm’s

lengthtransactions,referencetootherinstrumentsthataresubstantiallythesame,discountedcashflowanalysis,

and option pricing models.

1.19 impairment of assets

Financial assets

TheCompany assesses at each balance sheet datewhether there is objective evidence that a financial asset is

impaired.A financial asset is impaired and impairment losses are incurred only if there is objective evidence of

impairment as a result of one or more events that have occurred after the initial recognition of the asset (a ‘loss

event’)andthatlossevent(orevents)hasanimpactontheestimatedfuturecashflowsofthefinancialassetthatcan

bereliablyestimated.Objectiveevidencethatafinancialassetisimpairedincludesobservabledatathatcomesto

the attention of the Company about the following events:

(i) Significantfinancialdifficultyoftheissuerordebtor;

(ii) Abreachofcontract,suchasadefaultordelinquencyinpayments;

(iii) Itbecomingprobablethattheissuerordebtorwillenterbankruptcyorotherfinancialreorganisation;

(iv) Thedisappearanceofanactivemarketforthatfinancialasset;

(v) Observabledataindicatingameasurabledecreaseintheestimatedcashflowfromthosefinancialassets.

If there is objective evidence that an impairment loss has been incurred on trades and other receivables, the amount

of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated

futurecashflows(excludingfuturecreditlossesthathavebeenincurred)discountedatthefinancialasset’soriginal

effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the

profitandlossaccountfortheperiod.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to

an event occurring after the impairment was recognised (such as improved credit rating), the previously recognised

impairmentlossisreversedandtheamountofthereversalisrecognisedintheprofitandlossaccountfortheperiod.

Non-financial assets

Assetsthathavean indefiniteuseful lifearenotsubjecttoamortisationandaretestedannually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which

the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair

value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest

levels for which there are separately.


Anyimpairmentisrecognisedintheprofitandlossaccountintheperiodinwhichthelossoccurs.Ifanexternalevent

givesrisetoareversaloftheimpairmentloss,thereversalisrecognisedintheprofitandlossaccountbyincreasing

the carrying amount of the asset in the period in which it occurs.

The carrying amount of the asset will only be increased to the amount that it would have been had the original

impairment not occurred.

1.20 investment return

Investment return comprises all investment income, realised investment gains and losses and movements in

unrealised gains and losses, net of investment expenses, charges and interest.

Dividends are recorded on the date on which the shares are quoted ex-dividend and include the imputed tax credits.

Interest and expenses are accounted for on an accruals basis.

Realised gains and losses on investments carried at market value are calculated as the difference between net sales

proceeds and purchase price. Movements in unrealised gains and losses on investments represent the difference

between the valuation at the balance sheet date and their purchase price or, if they have been previously valued,

their valuation at the last balance sheet date, 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 recorded in the non-technical account.

1.21 Fixed assets

Thecostoffixedassetsistheirpurchasecost,togetherwithanyincidentalexpensesofacquisition.

Depreciationiscalculatedsoastowriteoffthecostoftangiblefixedassets,lesstheirestimatedresidualvalues,on

a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used

for this purpose are:

Building 47 years (over the term of the lease)

Computer equipment 4 years

1.22 Operating leases

Rentalspayableunderoperatingleasesarechargedtotheprofitandlossaccountasincurredovertheleaseterm.

1.23 Foreign currency translation

All assets and liabilities in foreign currency are translated into Euros at the rates of exchange ruling at the balance

sheet date. Transactions denominated in foreign currency are translated into Euros at the rate ruling on the date of

thetransactionortheaverageratefortheperiod,providedthattherearenosignificantfluctuationsintheexchange

rateduringthistime.Anydifferencesarisingonexchangearedealtwiththroughtheprofitandlossaccount.

1.24 Cash at bank and in hand

Cash at bank and in hand includes cash in hand and balances available on demand held with banks.

1.25 Other financial investments

Otherfinancialinvestmentsincludealldepositbalancesheldwithbanksthatrequirenotificationofmorethan24

hours prior to any withdrawal of cash and equity investments.

1.26 trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective

interest method.


2. CRitiCaL aCCoUntinG estiMates

Claims provisions and related recoveries

Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date,

including the cost of claims incurred but not yet reported to the Company. The estimated cost of claims includes expenses

to be incurred in settling claims and is recorded gross of any expected value of salvage and other recoveries. The Company

takes all reasonable steps to ensure that it has appropriate information regarding the claims exposures. However, given

theuncertainty inestablishingclaimsprovisions, it is likelythat thefinaloutcomewillprovetobedifferent fromthe

original liability established.

The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the

estimationofthecostofsettlingclaimsalreadynotifiedtotheCompany,wheremoreinformationabouttheclaimeventis

generally available. IBNR may often not be apparent to the insurer until many years after the event giving rise to the claim

has happened. Classes of business where the IBNR proportion of the total reserve is high will typically display greater

variationsbetweentheinitialestimatesandthefinaloutcomesbecauseofthegreaterdegreeofdifficultyofestimating

those reserves. Classes of business where claims are typically reported relatively quickly after the claim event will tend to

display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation

techniques, generally based upon statistical analyses of historic experience, which assumes that the development pattern

of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties

which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or

reduce when compared with the cost of previously settled claims including:

• Changes in company processes which might accelerate or slow down the development and/or recording of

paidorincurredclaimscomparedwiththestatisticsfrompreviousperiods;

•Changesinthelegalenvironment;

•Theeffectofinflation;

•Changesinthemixofbusiness;

•Theimpactoflargelosses;and

• Movements in industry benchmarks.

Acomponentof theseestimated techniques isusually theestimationof thecostofnotifiedbutnotpaidclaims.

In estimating the cost of these the Company has regard to the claim circumstances as reported, any information

available from loss adjusters and information on the cost of settling claims with similar characteristics in previous

periods.

The IBNR is calculated on a class by class basis based on the historical data available for each class of business.

Further information on the techniques used for the major business classes is provided below.

decennial

The Decennial IBNR is determined as 10 per cent of the net earned premium recognised by the Company for the

yearsfrom2013to2010andfivepercentfrom2009to2003.TheDecennialIBNRisconsideredonacumulative

basis and the IBNR provision is accumulated over the life of the policies issued which are earned over a ten year

period. In calculating the appropriate level of reserves, consideration has been given to the historical data obtained

from the industry as a whole as well as market experience for these types of policy which is at around 20 per cent.

However during the period 2000 to 2013 the level of claims experienced by the Company compared to the gross

value of premiums written has at no point in time exceeded 6 per cent.

Professional liability

The Professional Liability IBNR is calculated using loss triangulation methods based on average claims development

over the period from 2005 to 2013. Market data shows that claims experience can well exceed the 50 per cent levels

forthisclassofbusiness.HoweverthepolicieswrittenbytheCompanyallowforaoneyearnotificationperiodplus

afurtheroneyeardiscoveryperiodandaccordinglytheliabilityisshorttail,givingtheCompanysufficientreliable

data to use triangulation methods in arriving at its ultimate loss ratio.

suretyship and Credit

As a result of the change in accounting policy for unearned premiums, the directors have reconsidered the related claims

provision and now consider the use of triangulation method on a claims-made basis to be most appropriate. The IBNR for

suretyship/credit class of business is now calculated using loss triangulation methods based on the average claims development

over the period from 2008 to 2013.


uK property

As the Company only commenced writing UK property business in 20I0 the IBNR has been based on claims data for

the last four years.

France

The Company only commenced writing France insurance business in 2011. Given the limited historical information,

the Company considered several IBNR calculations to arrive at an appropriate range of estimates. The Company

considered the loss ratio for the 2011 and 2012 years and has also considered projected post year-end claims data.

Reinsurance commission

Reinsurance commission is accrued on business written using ultimate loss ratios to calculate the commission in

accordance with quota share agreements. Given that these amounts are based on the ultimate loss ratios, they are

subject to the same uncertainties as for the estimation of the IBNR described above.

Recoveries

For salvage recoveries, the amount recognised is the amount that can be reasonably recovered from the disposal

of the property. For subrogation reimbursements, the amount recognised is the amount that can reasonably be

expected to be recovered from the action against the liable third party. Given that these relate to uncertain future

events, the directors have based the recoverable amount on a prudent estimate of the total recoveries that are being

pursued by the Company.

The estimation of salvage and subrogation, however, can be subject to a high degree of uncertainty where the claims

have only recently been incurred and there is little historical and current data to support how the events are likely to

develop and the eventual outcomes.

TheCompanyattemptstoobtainthemostrecentfinancial informationoncompaniesfromwhomrecoveriesare

anticipated and has a legal and underwriting team to consider the probabilities of success at court and the likely

outcomefrompursuingtherecoveriesbeforedecidingtheamounttoincludeasrecoveriesinthefinancialstatements.

(a) Market Risk 2013 (€) 2.012 (€)

Fixed interest rate bearing financial assets 600.000 1.990.000

Floating rate interest rate bearing financial assets 15.168.225 12.794.552

Total 15.768.225 14.784.552

(b) Credit Risk

Deposit with financial institutions 45.000 5.380.000

Debtors arising out of direct insurance opera-tions-intermediaries

12.259.196 10.562.701

Loans and receivables 600.000 1.990.000

Assets arising from reinsurance contracts held 17.624.369 10.895.520

Cash at bank in hand 15.123.250 2.715.163

Other debtors 543.296 1.736.270

Subrogation and recoveries 3.682.311 3.682.311

Total assets bearing credit risk 49.877.422 36.961.965

(b1) Asset arising from reinsurance contracts held

A 17.624.369 10.710.225

BBB - 185.295

17.624.369 10.895.520

Millennium supports its insurance management through agreements with high level reinsurers and rating A.

In addition to these Continental reinsurers, Millennium is included in some of the most prestigious syndicates of Lloyd´s.

3. RisK


(a) Market risk

Cash flow and fair value interest rate risk

Cashflowinterestrateriskistheriskthatthefuturecashflowsofafinancialinstrumentwillfluctuatebecauseof

changesinmarketinterestrates.Fairvalueinterestrateriskistheriskthatthevalueofafinancialinstrumentwill

fluctuatebecauseofchangesinmarketinterestrates.Inaddition,totheextentthatclaimsinflationiscorrelatedto

interestrates,liabilitiestopolicyholdersareexposedtointerestraterisk.TheCompanydoesnothaveanysignificant

interest bearing liabilities.

Interestrateriskarisesprimarilyfrominvestmentsinfixedinterestsecuritiesandloans,floatingratedebtsecurities

and short term deposits with Financial Institutions.

Equity price risk

TheCompanyisexposedtoequitysecuritiespriceriskasaresultof itsholdings inequity investments,classified

asfinancialassetsat fairvalue throughprofitor loss.Exposures to individualcompaniesand toequityshares in

aggregate are monitored in order to ensure compliance with the relevant regulatory limits for solvency purposes.

Listed equity securities represent 100 % (2012: 100%) of the total equity investments at fair value. If equity

market indices had increased/decreased by 5%, with all other variables held constant, and all the Company’s equity

investmentsmovingaccordingtothehistoricalcorrelationwiththeindex,theprofitfortheyearwouldincrease/

decrease by €15,010 (2012: €39,268).

(b) Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the

Company is exposed to credit risk are:

•Reinsurers’shareofinsuranceliabilities;

•Amountsduefromreinsurersinrespectofclaimsalreadypaid;

•Amountsduefrominsurancecontractholders;

•Amountsduefrominsuranceintermediaries;and

•Amountsduefromcounterpartiesandfinancialinstitutions.

The Company manages the levels of credit risk it accepts by spreading its exposure to a wide range of counterparties.

Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’s liability as primary

insurer. If a reinsurer fails to pay a claim, the Company remains liable for the payment to the policyholder. The

creditworthiness of counterparties and reinsurers can be considered on reviewing credit grades provided by rating

agenciesandotherpubliclyavailablefinancialinformation.Depositsfromreinsurersarealsoheldascollateral.

(b1) Debtors arising out of direct insurance operations

Debtors arising from direct insurance operations are due from OM Suscripción de Riesgos S.A. and Greenwich

Underwriting Limited. Both have 6 months credit terms based on the service level agreement with the Company.

As at 31 March 2014, €nil of the debtors arising out of insurance operations were past due. Management expects to

recover the balance in full as part of the ongoing settlement process with its intermediary.


4. seGMentaL RepoRtinG 5. CLaiMs inCURReD, net oF ReinsURanCe

6. net opeRatinG expenses

2013 Gross premiums written (€)

Gross premiums earned (€)

Gross claims incurred (€)

Gross operating expenses (€)

Reinsurers’ share (€)

Accident and sickness 762,550 379,845 293,793 11,942 54,522

Third party liability 7,152,464 8,342,743 818,007 4,022,693 1,482,980

Fire and other damage to property

13,310,533 12,859,522 8,312,365 1,559,430 1,187,227

Surety 12,490,725 8,660,285 7,771,213 724,662 (1,622,330)

Legal expenses 12,630 13,900 6,498 (6,050) (52,209)

Total 33,728,902 30,256,295 17,201,876 3,312,623 1,102,347

2012

Accident and sickness 392,008 248,376 276,062 89,265 (84,520)

Third party liability 2,846,142 3,678,271 (439,002) 969,423 1,104,955

Fire and other damage to property

12,669,248 11,257,887 6,084,074 4,296,595 1,286,532

Surety 6,545,339 4,802,216 4,169,765 1,494,616 (1,369,797)

Legal expenses 13,546 15,189 (14,106) 8,621 15,576

Total 22,466,283 20,001,939 10,076,793 6,852,520 952,746

2013 (€) 2012 (€)

Acquisition costs 9,312,490 6,749,028

Change in deferred acquisition costs (847,739) (830,929)

Administrative expenses 1,015,228 934,421

Reinsurance commission and profit participation (2,160,810) (1,456,011)

7,319,169 5,396,509

2013 Gross (€) Reinsurers’ share (€) Net (€)

Premiums written 33,728,902 (8,193,318) 25,535,584

Unearned premiums carried forward (23,990,375) 7,911,091 (16,079,284)

Unearned premiums brought forward 20,517,768 (6,767,644) 13,750,124

Change in the provision for unearned premiums (3,472,607) 1,143,447 (2,329,160)

Earned premiums 30,256,295 (7,049,871) 23,206,424

2012

Premiums written 22,466,283 (6,231,412) 16,234,871

Unearned premiums carried forward (20,517,768) 6,767,644 (13,750,124)

Unearned premiums brought forward 18,053,424 (5,765,800) 12,287,624

Change in the provision for unearned premiums (2,464,344) 1,001,844 (1,462,500)

Earned premiums 20,001,939 (5,229,568) 14,772,371


8. sHaRe CapitaL

7. inVestMents

2013 (€) 2012 (€)INvESTMENTS INCOME 526.357 286.687

Income from financial investments 250.519 257.154Realised gains on investments 275.838 29.533

TOTAL 526.357 286.687

The underwritten and paid up Company Equity is €10,000,000 which is divided into 10,000,000 shares of €1 value per share.

9. poRtFoLio inVestMents

(ii) Movement in cash, portfolio investments and financing

(i) Movement in portfolio investments net of financing

2013 (€) 2012 (€)

10,000,000 ordinary share of €1 each 10,000,000 10,000,000

Allotted and fully paid share capital 10,000,000 10,000,000

2013 (€) 2012 (€)

Net cash inflow 1,888,533 414,376

Cash and portfolio investments at 1 January 13,579,908 13,165,532

Cash and portfolio investments at 31 December 15,468,441 13,579,908

At 1 January 2013 (€) At 31 December 2013 (€)

Cash at bank and in hand 7,414,552 15,123,250

Deposits with credit institutions 5,380,000 45,000

Other investments 785,356 300,191

Total 13,579,908 15,468,441

Vienna, Austria


auDitor’ s resPonsaBilities

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are

free from material misstatement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinion.

Audit report 20135

The directors’ are responsible for the preparation and true and fair presentation of these financial statements in

accordance with applicable law in Gibraltar and Gibraltar Generally Accepted Accounting Practice.

This report, including the opinion, has been prepared for and only for the Company’s member as a body in accordance

with Section 182 of the Gibraltar Companies Act and for no other purpose.

According to the 2013 Audit Report carried out by BDO Limited auditors, the Financial Statement of the Millennium

Insurance Company reflect a faithful image of fulfilling the 1977 Gibraltar Company Law concerning insurance

companies (Accounts Management) Regulations.


6

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