bscusign pe 1D: 2 993F20-7042-4758-9009-E07CC3AG07A5 TOKIOMARINE Hcc GCUBE UNDERWRITING LIMITED FINANCIAL STATEMENTS Year ended 31 December 2020 155 Fenchurch Street London CSM GAL Registered number: 06245947 *AAESUNRF* Aa owtor2021 #146 COMPANIES HOUSE | = 'DDocuSign Envelope 1D: 2F983F20-70A2-4758-9009-£07CC3A90786 A) TOKIOMARINE, cc GCUBE UNDERWRITING LIMITED CONTENTS PAGE Company information 2 Strategic Report 3 Directors report 6 Independent auditor's report 8 Profit and loss account and other comprehensive income Ft Balance sheet 2 statement of changes in shareholder's equity 33 Notes to the financial statements 14.26DDosuSign Envelope 10: 2F 993° 20-70A2-4758-8009-E07CC3ASO766 TOKIO MARINE HCC GCUBE UNDERWRITING LIMITED COMPANY INFORMATION DIRECTORS. ‘COMPANY SECRETARIES. REGISTERED NUMBER REGISTERED OFFICE INDEPENDENT AUDITORS B J Cook (appointed 29 May 2020) K LLetsinger (appointed 29 May 2020) ‘Button (appointed 29 May 2020) FG Mclachlan AJ Rand ‘A'S Barnes (resigned 29 May 2020) JL Holliday. 06245947 155 Fenchurch Street London EC3M 6AL 800 LP Chartered Accountants and Statutory Auditors 55 Baker Street Marylebone London Wi 7EUDDocusign Envelope 1D: 2F993F20.70A2-4758,90D8-E07CC3ASD7E6 TOKIOMARINE. HCC GCUBE UNDERWRITING LIMITED STRATEGIC REPORT ‘The directors present their Strategic Report of GCube Underwriting Limited (‘the Company’) for the year ended 31 December 2020. Directors ‘The directors of the Company who were in office during the year and up to the date of signing the financial statements were: B J Cook (appointed 29 May 2020) KL Letsinger (appointed 29 May 2020) Button (appointed 29 May 2020) FG Mclachlan AJ Rand AS Barnes (resigned 29 May 2020) incipal activities ‘The principal activity of the Company is that of a managing general agent, writing renewable energy business under binding authorities for various insurers and iti authorised and regulated by the Financial Conduct Authority (FCA). ‘The Company is part of the Tokio Marine Group (the TM Group], whose ultimate holding company is Tokio Marine Holdings, inc. The TM Group is a leading international insurance group located in Tokyo, Japan that has 252 subsidiaries and 22 affiliates located worldwide, which undertake non-life and life insurance and operate within the financial and general business sector (including consulting and real estate). ‘As of 31 December 2020, TM Group had total assets of ¥25.6 trillion (December 2019: ¥24.4 trillion) and shareholders’ equity of ¥1.9 tilion (December 2019: ¥1.9 trillion). The TM Group and a number of its major Insurance companies have a financial strength rating of A+ (Stable) from Standard & Poor's Financial Services LLC (58), Change of ownership The Company was acquired by HCC International Insurance Company Plc on 29 May 2020 from MMC UK Group LUmited, a company within the Marsh & McLennan Companies Inc. group. Business review Results and dividends ‘The Company made a loss after tax for the financial year of £2,490k (2019: proft ater tax of £1,781k restated). Shareholder's funds as at 31 December 2020 totalled £7,424k (2019: £10,714k restated). A dividend of £800k (2019: nil) was declared and paid during the year, Key performance indicators ‘The directors monitor two key performance indicators for the Company: 2020 2019 000 £000 Turnover 8,440 9959 (Loss}/Profit on ordinary activities before taxation (2,508) 2.254 Future outlook ‘The directors will continue to keep under review opportunities to develop the business through growth, or through acquisition of suitable existing businesses. Whether or not dividends will be declared in the future is a strategic decision resting with the Company's ultimate parent company. See also post balance sheet events below.DDocuSign Envelope ID: 2F093F20-70A2-4758-9009-£07CC3AD7B6 TOKIOMARINE HCC GCUBE UNDERWRITING LIMITED STRATEGIC REPORT Risk management ‘The directors oversee the effective operation of the risk management framework and set the risk appetite for the Company (see Note 5). Good Company approach The Company shares the TM Group's Good Company vision Empower Dalivat on cur people PP commitments The core principles of this vision are integral to the Company's culture, business and the creation of sustainable growth and value for all its stakeholders (customers, employees, distribution network, suppliers, shareholders, regulators, and the community}. ‘To support the Good Company approach to being a sustainable and responsible business, the Company has 2 sustainability governance structure that covers a wide range of Environmental, Social and Corporate Governance (€SG) issues relevant to its business and stakeholders. The Company's approach to sustainability includes the following areas of focus: Charity and community Investing in our wider community by developing partnerships with charities as well as organising relevant fundraising and volunteering initiatives and actively engaging employees in these projects to make a difference, ‘The Company strives to be @ Good Company, and one of the core principles of this vision i acting for the benefit of society and the communities in which it operates. To do this, the TMHCC International's Charity Committee has 2 strategy to: © Support employees’ charitable efforts - either through additional time off (each employee is allowed two volunteer days per annum), or financial contribution towards charitable fundraising undertaken by employees. © Formation of multi-year charity partnerships that provide annual financial contributions to chosen charities. Employees are encouraged to be actively involved with charity partners through fundraising, volunteering, raising awareness and educational activities. The aims of the TMHCC International's charity strategy are to make a difference within local communities and to educate and inspire employees to generate positive change.DDocuSign Envelope ID: 2F993*20-70A2-4758-9008-E07CC3AGD7B6 X Q TOKIO MARINE HCC ‘GCUBE UNDERWRITING LIMITED. STRATEGIC REPORT Workplace Developing TMHCC International's diversity and inclusion practices, ensuring and promoting the health and wellbeing of employees, and providing training and development opportunities forall employees. Marketplace and environment The identification, assessment and management of Physical, Transitional and Liability risks and opportunities from climate change and the development of initiatives to minimise the Company's environmental impact from its ‘business and operations. Business conduct and ethics ‘The Company is committed to carrying out its business activities fairly, honestly, transparently and in accordance with applicable legal and regulatory requirements, with a view to engendering stakeholder trust. This approach is embedded in the Company's business and governance framework and through the operation ofits three lines of defence, with application of appropriate policies, procedures and compliance monitoring, KLLetsinger Docaiome Rndnge 29 September 2021DDocuSign Envelope 1D: 2F993F20-70A2-4758-9008-E07CC3AS0786 TOKIOMARINE Hcc ‘GCUBE UNDERWRITING LIMITED DIRECTORS’ REPORT The directors present their Director's Report and the audited financial statements of the Company for the year ‘ended 31 December 2020. The Company registered number is 06245947. actors The directors of the Company who were in office during the year and up to the date of signing the financial statements were: B J Cook (appointed 29 May 2020) K LLetsinger (appointed 29 May 2020) '$ Button (appointed 29 May 2020) FG Mclachlan AJRand [AS Barnes (resigned 29 May 2020) Independent auditors 800 LLP were appointed as the Company's auditors on 8th June 2020, following the resignation of Deloitte LLP. 8DO LLP have expressed their willingness to continue in office as the Company's auditors. The auditors are deemed to bbe reappointed under section 487(2) of the Companies Act 2006. Statement of disclosure of information to auditors Each of the persons who is a director at the date of this report confirms that ‘+ 50 far as each of them is aware, there is no information relevant to the audit of the Company's financial statements for the year ended 31 December 2020 of which the auditors are unaware; and ‘+ each of them has taken all steps that they ought to have taken in their duty as a director in order to make themselves aware of any relevant audit information and to establish that the Company's euditors are aware of that information,DDocusign Envelope 1D: 2F999F20-70A2-4758-9008-£07CC3A90785 A TOKIOMARINE, cc GCUBE UNDERWRITING LIMITED DIRECTORS’ REPORT Statement of directors’ responsibilities ‘The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted ‘Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors ‘must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit of loss of the Company for that period. In preparing these financial statements, the directors are required to: ‘© select suitable accounting policies and then apply them consistently; ‘+ make judgements and accounting estimates that are reasonable and prudent; ‘+ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and ‘+ prepare the financial statements on the going concern basis unless itis inappropriate to presume that the Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company ‘and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention ‘and detection of fraud and other irregularities. Post Balance Sheet Events There have been no material events after the year end and up to the date of this report which require disclosure. (On behalf of the board — Tovey Company secretary 155 Fenchurch Street London CaM GAL 29 September 2021DDocusign Envelope ID: 2F993F20-70A2-4758-9009-E07CC3AS0786 INDEPENDENT AUDITOR'S REPORT TO THE BOARD OF GCUBE UNDERWRITING LIMITED Opinion In our opinion the financial statements: + givea true and fair view of the state of the Company's affairs as at 31 December 2020 and of its loss for the year then ended; + have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and + have been prepared in accordance with the requirements of the Companies Act 2006, We have audited the financial statements of GCube Underwriting Limited ("the Company") for the year ended 31 December 2020 which comprise the Profit and Loss Account and Other Comprehensive Income, Balance Sheet, ‘Statement of Changes in Shareholder’s Equity and notes to the financial statements, including @ summary of Significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting. Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK} (ISAs (UK]) and applicable law. ‘Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and ‘appropriate to provide a basis for our opinion. Independence We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of ‘accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's abilty to continue asa going concern for a period of at least twelve months from when the financial statements are authorised for issue. ur responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in ‘our report, we do not express any form of assurance conclusion thereon. In connection with our audit ofthe financial statements, our responsibilty is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material ‘misstatement in the financial statements or a material misstatement ofthe other information. If, Based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report inthis regard.DDocuSign Envelope ID: 2F99320-70A2-4758,9009-£07CC3AN07B6 INDEPENDENT AUDITOR'S REPORT TO THE BOARD OF GCUBE UNDERWRITING LIMITED Opinions on other matters prescribed by the Companies Act 2006 Incur opinion, based on the work undertaken in the course of the audit: ‘= the information given in the Strategic Report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ‘© the Strategic Report and the Directors’ report have been prepared in accordance with applicable legal requirements In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have nat identified material misstatements in the Strategic Report or the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires sto report to you! in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by Us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. ‘Matters on which we are required to report by exce In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Directors’ Report We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion ‘© adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or ‘© the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation ofthe financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from. ‘material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. ‘Auditor's responsibilities for the audit of the financial statements ‘Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance isa high level of assurance, but is nota guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the ‘economic decisions of users taken on the basis of these financial statements.+ DocuSign Envelope 1D: 2°999F20-70A2-4758-0008-E07CC3A90786 INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF GCUBE UNDERWRITING LIMITED Extent to which the audit wos copable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: agreement of the financial statement disclosures to underlying supporting documentation; ur responses to significant audit risks (revenue recognition and management override of controls) are Intended to sufficiently address the risk of fraudulent manipulation. Specifically, we review adjustments. ‘made to the financial statements, unusual journal postings and the timing of revenue recognition around the year end; ‘= our response to revenue recognition included the assessment of profit commission, assessment of the cut off risk associated with commission income and correct commission rates applied to commission income; ‘© communication of relevant identified laws and regulations and potential fraud risks to all engagement team. ‘members, discussion of how and where these might occur and remaining alert to any indications of fraud for non-compliance with laws and regulations throughout the audit; enquiries of management; review of minutes of board meetings throughout the period; ‘obtaining an understanding of the legal and regulatory framework applicable to the Company's operations; and ‘© obtaining an understanding of the control environment in monitoring compliance with laws and regulations. ‘Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting, ‘one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations ‘F through collusion. There are inherent limitations in the audit procedures performed and the further removed ‘non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it further description of our eesponsiblities is available on the Financial Reporting Council's website at: https://www fre.org.uk/auditorsresponsibilties. This description forms part of our auditor's report Use of our report This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. ur audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do nat accept or assume responsibilty to anyone other than the Company and the Company's ‘members as @ body, for our audit work, for this report, or for the opinions we have formed. Docusigned by: (Rape. Livingstone TEPARGSEORE rir statutory Auditor For and on eat of BOO LP, statutory Ausitor London, UK BDO LLP isa limited liability partnership registered in England and Weles (with the registered number 0305127) 29 September 2021 10DDocuSign Envelope IO: 2F993F20-70A2-4758-9008-€07CC3A9D786 TOKIOMARINE Hcc (GCUBE UNDERWRITING LIMITED PROFIT AND LOSS ACCOUNT AND OTHER COMPREHENSIVE INCOME For the year ended 31 December 2020 Note Turnover 6 ‘Operating expenses 7 Operating (1oss)/profit Interest receivable and similar income n Interest payable and similar expense (Loss)/profit on ordinary activities before taxation Tax credit/(charge) on (loss}/profit on ordinary activities 2 (Loss)/profit for the financial year Other comprehensive income Foreign exchange hedges Total comprehensive (Loss)/income for the financial year All amounts relate to continuing operations. ‘The notes on pages 14 to 26 form part of these financial statements n 2020 000 8,440 (20,980) 12540) 7 (5) (2508) 8 2.490) 2019 £000 (Restated) 9,959 (7941) 2018 238 2) 2254 (473) 178 197 1978DDocuSign Envelope 1D: 2-993F20-70A2-4758-9009-E07CC3AGD7B6 ‘XQ TOKIOMARINE N HCC ‘GCUBE UNDERWRITING LIMITED BALANCE SHEET ‘As at 31 December 2020 Note 2020 2019 000 £000 Fixed assets (Restated) Intangible assets B : 1,339 Tangible assets 4 3 20 8 3,359 Current assets Debtors as 7,362 14,848 Deferred tax 16 428 11 Cash at bank and in hand v 43,552 37,520 51,342 52,779 Current liabilities Creditors: amounts falling due within one year e aa er Net current assets 3028 9359 Total assets less current lal 18 036 Non-current liabilities Creditors; amounts falling due after more than one year 19 (612) (604) Net assets az Capital and reserves Called up share capital 20 508, 508 Profit and loss account 6,936 10,206 Total shareholder's funds 28 ‘The financial statements on pages 11 to 26 were approved by the board of directors and were signed on its behalf by: Ooeustomeby Reta, KL letsinger Director 29 September 2021 ‘The notes on pages 14 to 26 form part of these financial statements, 2DDocuSign Envelope ID: 2999F20-70A2.4758-9009-E07CC3A90786 CQ TOKIOMARINE HCC (GCUBE UNDERWRITING LIMITED ‘STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY For the year ended 31 December 2020 Called up Profit and Hedging Total share capital _loss account Reserves shareholder's funds Capital and reserves £000 #000 e000 £000 ‘At January 2019 as previously 508 3507 (137) 3818 presented Goodwill amortisation (Note : (91) : (oy) lb) ‘At L January 2019 restated 308 aie 037) Bra Profit for the year (as restated) 4781 : 1,781 Other comprehensive income 197 197 Other reserve movements 6 7 6 Capital contribution : 3 7 3 ‘At 31 December 2019 restated 508 30206 10714 (Loss) for the year : (2,490) : (2,480) Dividend (800) (800) [At 31 December 2020 508, 6916 5 7,A24 ‘The notes on pages 14 to 26 form part of these financial statements, 310: 2F993F20-70A2-4758-6009-E07CC3R90786 TOKIOMARINE HCC (GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS, 1 General information ‘The Company's principal activity of the Companys that of a managing general agent, writing renewable energy business under binding authorities for various insurers and it is authorised and regulated by the Financial Conduct Authority (FCA). The Company isa private company limited by shares and is incorporated in England, ‘The address of ts registered office is 155 Fenchurch Street, London, EC3M GAL. ‘Statement of compliance ‘The individual financial statements of the Company have been prepared in compliance with United Kingdom ‘Accounting Standards, including Financial Reporting Standard 102 -The Financial Reporting Standard applicable in the United kingdom and the Republic of Ireland (FRS 102) and the Companies Act 2006. ‘Summary of significant accounting policies, ‘The principal accounting policies applied in the preparation of these financial statements are set out below. ‘These policies have been consistently applied to all the years presented, unless otherwise stated. a) Basis of preparation Following the acquisition of the company by HCC International Insurance Company Plc, it was decided by the Directors to change the basis of preparation of the Company's Financial Statements from Financial Reporting Standard 101 "Reduced Disclosure Framework” to Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” consistent with its immediate ‘new parent company. ‘Otherwise the financial statements continue to be prepared in accordance with the Companies Act 2006 on the historical cost basis. The financial statements have been prepared in pound sterling which is the functional currency of the Company. ‘The Company has obtained its shareholder approval to take advantage of the exemptions conferred by FRS 102 listed in (c) below, as the Company is 2 wholly owned subsidiary and the ultimate parent company’s financial statements, in which the Company is included, are publicly available. b) Restatement [As a consequence of the change in basis of preparation noted above, an adjustment was made as shown ‘below to the 2039 Balance Sheet, Income Statement and Shareholders Equity in respect of goodwill which Jn accordance with FRS102 is required to be amortised whereas previously under FRS102 it was only subject to an annual impairment review. 31 December 2019 £000 £000 £000 Previously Reporteg Adjustment Restated Intangible assets goodwill -Cost 160 30 250 ~ Amortisation (198) ___(298) Net Book Value 160) 208) 32, £7000 000 £000 Retained earnings at 1 January 2019 8507 (01) Charge for year 1,807 «an, Retained earnings at 31 December 2019 10.314 (108) 4DDocusign Envelope ID: 2F993F20-70A2-4758.9009-E07CC3A9D786 TOKIO MARINE HCC GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS. ©) Exemptions for qualifying entities under FRS 102 ‘As allowed by FRS 102, the Company has applied certain exemptions as follows: i. preparing a statement of cash flows li, related party disclosures. 9) Going concern Having assessed the principal risks (See note 5), the directors considered it appropriate to adopt the going. concern basis of accounting in preparing the financial statements. e) Tumover, ‘Turnover comprises agency commission for the services undertaken to place and administer contracts of insurance and for other related services. Revenue may comprise a combination of fees, commissions and ‘other forms of variable consideration. The transaction price considers all of the elements for each contract ‘and applies constraints to variable consideration based on the past performance of similar contracts. ‘The Company satisfies some performance obligations at a point in time, and others over time where the ‘customer is recelving a simultaneous benefit, or the Company has a contractual right to payment for the ‘work both performed and transferred to the client. Where the value of turnoveris beyond the control of the Company and it cannot be estimated reliably, it will ‘not be recognised until the amount is known with reasonable certainty. in these cases any associated costs are expensed as incurred. Contract fulfilment costs are capitalised and amortised to profit or loss on a systematic basis to match the recognition of revenue as the service is delivered to the client. Such costs are capitalised only where the Company expects to recover these costs. Additionally, in respect of contract fulfilment costs, these costs ‘must relate directly to the contract, generate assets used to satisfy the contractual performance obligations, and do not qualify to be recognised as an asset under other accounting standards. Assets recognised on the Company's balance sheet arising from the capitalisation of incremental costs to obtain a contract and contract fulfilment costs are presented as part of contract assets. Insurance broking related services Revenue may comprise a combination of agency commissions and other forms of variable consideration. Where the contract specifically identifies the performance obligations then revenue is recognised accordingly. Where there is no separate arrangement, revenue is considered to be wholly related to the placement activity and recognised at the later of the policy inception date, or the date on which the placement is complete and confirmed. Where there are separate arrangements or where other performance obligations are separate and distinct from placement, revenue Is deferred to cover the provision of services that are ‘more than administrative in nature and that are separate and distinct. In the main these post-placement. performance obligations relate to the provision of claims related services. Contract modifications are treated on a cumulative catch-up basis or as a new contract depending on the circumstances in each case A deferral of revenue is made to cover the likelihood of contract cancellation. Revenue deferrals and fulfilment costs are mainly calculated on a portfolio basis, with estimates made based on past histor. 15ID: 2983F20-70A2-4758-8008-E07CC3AGD786 TOKIOMARINE HCC GCUBE UNDERWRITING LIMITED [NOTES TO THE FINANCIAL STATEMENTS a ) Contract assets Where services are transferred to the customer before the customer pays consideration, or before payment Is due, Contract assets are recognised. Contract assets are included in the balance sheet and represent the right to consideration for services provided. Contract assets are classified as current or non-current based on the company’s normal operating cycle and are assessed for impairment at each reporting date, Capitalisation of costs to fulfila contract ‘The costs of fulfilling a contract with a customer are recognised as an asset ifthe company expects to recover them. The company incurs costs such as the amount of direct labour spent to renew the facility to fulfil a contract. Judgement is applied by the company when determining what costs qualify to be capitalised in particular when considering whether these costs are expected to be recoverable. Costs to fulfil @ contract are included in the balance sheet as a separate class of asset. These assets are subsequently charged to the income statement over the expected contract period using a systematic basis that mirrors the pattern in which the company supplies services to the customer. The capitalisation and ‘amortisation charge Is included in the income statement in Staff Costs. Judgement is applied to determine this period which, for the Company, would be the following twelve months. Interest receivable Interest on deposits is creeited as it s earned. Exchange rates The Company records transactions in original currency at the rate of exchange at the date of the transaction. Monetary assets and liabilities in foreign currencies are revalued into the functional currency at the rates ruling at the balance sheet date which for GBP Sterling was $1.3579 (2019: $1.2708). Gains or losses arising from the revaluation of foreign currencies into the functional currency, together with the settlement of foreign currency transactions, are included in the profit and loss account and other comprehensive income. Taxation Corporation taxis provided at the current rate of taxation on the result for the year as adjusted for items of income and expenditure which are disallowed for taxation purposes. Deferred taxation Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is calculated at the rates at which it is expected that the tax will arise. Deferred tax is recognised in the profit and loss account for the period, except to the extent that its attributable toa gain or loss that is recognised directly in the statement of other comprehensive income. Deferred tax assets are recognised only to the extent that its probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax balances are not discounted. Dividends Dividends are accounted for in the year in which they are approved by directors and declared as payable, Goodwill Goodwill recognised represents the purchase price of a book of binder authority business in 2008 and is amortised on a straight: ine basis over its expected useful life of 15 years. Intangible assets Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. 16DDocuSign Envelope 10: 2°99320-70A2-4758-9008-€07CC3A90786 TOKIOMARINE HCC (GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS. 'm) Insurance agency debtors and creditors ) ) Insurance brokers act as agents in placing the insurable rsks of thei clients with insurers and, as such, are not liable as principals for amounts arising from such transactions. in recognition ofthis relationship, debtors from insurance broking transactions are not included as an asset of the Company. Other than the receivable for commissions earned on a transaction, no recognition of the insurance transaction occurs until the Company receives cash in respect of premiums or claims, at which time a corresponding liability Is establishedin favour of the insurer or the client. In certain circumstances, the Company advances premiums, refunds or claims to insurance underwriters or clients prior to collection. These advances are reflected in the balance sheet as part of trade debtors. CCash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts ‘Trade creditors ‘Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non- current liabilities ‘Trade creditors are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method. Financial Instruments, Financial assets and liabilities are recognised when the Company becomes party tothe contractual provisions (of the financial instrument. The Company holds basic financial instruments, which comprise cash at bank and. in hand, other debtors and other creditors. The Company has chosen to apply the measurement and recognition provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues! in ful Financial assets ~ classified as basic financial instruments Other debtors Other debtors are initially recognised at the transaction price, including any transaction costs, and are subsequently measured at amortised cost using the effective interest method, less any provision for impairment, Amounts that are receivable within one year are measured at the undiscounted amount of the amount expected to be receivable, net of any impairment. [At the end of each reporting year, the Company assesses whether theres objective evidence that any financial asset amount may be impaired. A provision for impairment 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 financial assets. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The amount of the provision is recognised immediately in profit or loss. Financial liabilities ~ classified as basic financial instruments Other creditors Other creditors are initially measured at the transaction price, including any transactions costs, and subsequently measured at amortised cost using the effective interest method. ‘Amounts that are payable within one year are measured at the undiscounted amount of the amount expected. tobe payable. vDocusign Envelope ID: 2F993°20-70A2-4758-6009-£07C3A90786 TOKIOMARINE HCC (GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS, @) Defined contribution pension The Company is charged by HCC Service Company Inc. (UK branch) in respect of the services of employees. Included within this charge is a cost of pension contributions into a defined contribution pension scheme. ‘Once the contributions have been paid the Company has no further payment obligations. 1) Share based compensation ‘Marsh & McLennan Companies Inc. schemes Prior to acquisition of the company by HCC International Insurance Company Plc, the Company's ultimate parent company, Marsh & McLennan Companies, Inc,, maintained multiple equity-settled share-based payment arrangements in the UK, under which employees were awarded grants of Stock Options, Save As You Earn (SAVE) awards, Stock Units and Share Purchase Plans. Share-based payments were measured at the fair value at grant, expensed over a vesting period, based on the company’s estimate of shares that would eventually vest an were adjusted for the effect of non-market vesting conditions. ‘Stock options vested at 25% per annum beginning one year from the date of grant and have a maximum contractual term of 10 years Fair value was measured using the Black-Scholes pricing model. The expected life used in the models was ‘estimated using the contractual term of the option and the effects of the employees’ expected exercise and post-vesting employment termination behaviour. SAVE awards vested over a period of either 3 or 5 years. Options needed to be exercised within 6 months of vesting Stock units vested over a period of 3 years, after taking into account the estimated effect of forfeitures. Members were not enttied to receive dividend payments during the vesting period, ‘The company also provided employees with the ability to purchase Marsh & McLennan Companies, Inc’s ‘ordinary shares at 95% of the current market value. The Company recorded an expense on the date the shares were purchased. ALT schemes. The Company's previous ultimate parent company, JLT Group, operated a number of equity-settled share- based payment schemes under which the company received services from employees as consideration for ‘equity instruments (options) of ultimate parent company Jardine Lioyd Thompson Group ple. The fair value of the employee services received in exchange for the grant of the options were recognised as an expense. ‘The total amount expensed over the vesting period was determined by reference to the fair value of the ‘options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions were included in the assumptions about the number of ‘options that are expected to become exercisable. At each balance sheet date, the entity revised its estimates (of the number of options that were expected to become exercisable. It recognised the impact of the revision of original estimates, i any inthe income statement, and a corresponding adjustment to equity The proceeds received net of any directly attributable transaction costs were credited, in the ultimate parent company, to share capital (at nominal value) and share premium (excess over nominal value) when the ‘options are exercised. As a result of acquisition by HCC International Insurance Company Pic, participation in these schemes ceased with no further expense to the Company. 3). Share capital (Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as @ deduction, net of tax, from the proceeds. FryID: 2F999F20-70A2-4758-G009-E07CC3A90786 TOKIO MARINE Hcec GCUBE UNDERWRITING LIMITED. NOTES TO THE FINANCIAL STATEMENTS 4. Critical accounting judgements and estimation uncertainty Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, Significant estimate assumptions in applying the accounting policies ‘The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. a) Revenue Revenue is required to be recognised on the basis of completed performance obligations. The extent of contract assets and liabilities recognised 's dependent on a number of judgements namely: the number of performance obligations in a single contract; the expected likelinood and timing of post placement activities; the determination of whether a performance obligation has been completed; the costs and time associated with the various performance obligations; and the profit margins attributable to residual performance obligations. ‘The Company determines these judgements for a portfolio of contracts based on the geographical location of the underlying business based on the results of various surveys conducted. if actual experience differs from what was originally expected this may have an impact on the profits. Revenue on insurance broking activities is determined on the residual basis, which isthe total transaction price adjusted for post placement activities. Key judgements applied in the insurance broking activities involve the identification and valuation ofthe post placement obligations. The value of revenue attributed to post placement obligations is determined by the cost of fulfilling post placement obligations and an appropriate profit margin. The revenue attributable to post placement obligation isrecognised inthe income statement over the estimated pattern of service. Variable consideration in insurance broking activites is only recognised when itis highly probable that it will be received, ) Capitalisation of fulfilment costs The company capitalises some costs of fulfilling a contract with a customer. The extent of costs capitalised is mainly dependent on judgements as to whether the costs are directly attributable to fulfiling customer contracts Risk Management ‘The directors oversee the effective operation of the risk management framework and set the risk appetite for the Company. The directors have assessed the risks to which the Company is exposed and consider the following as the material risks: © 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 = rebates due from information providers; and = amounts due from insurance contract holders in respect of administration fees due. ‘The Company places limits on its exposures to a single counterparty, or groups of counterparties, and to geographical and industry segments. The payment history and financial security of policyholders is, reviewed when assessing credit risk © Liquidity risk Luidity risk arises where cash may not be available to pay obligations when due at reasonable cost. The Company's policys to hold sufficient liquid assets, or assets that can be converted into liquid assets at short notice and without any significant capital loss to settle its liabilities as they fall due thus minimising its exposure to liquidity risk 9+ DocuSign Envelope 1D: 2F903F20-70A2-4758-6009-E07CC3ABD785 TOKIOMARINE HCC GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS Turnover ‘Turnover totalling £8,439,303 (2019: £9,958,709) represents the value of commission and profit commission receivable, Revenue by location is split as follows; United Kingdom Europe North America Rest of World Performance obligations are specified within our contracts with customers. Contract assets arise where services are transferred to the customer before the customer pays consideration, or before payments dve. Contract liabilities (deposits from customers) relate to consideration received when the company still has an obligation to deliver services for that consideration. 7. Operating profit on ordinary activities before taxation Thisis stated after charging 2020 2019 000 £7000 Amortisation of intangible assets - goodwill (Note 13) 52 v7 Depreciation of tangible fixed assets (Note 14) 2 2 Foreign exchange losses 308 66 Operating leases - office rental 263, 263 Employee share options and other staff rewards (See (1) and (2) below) 2,608 261 Write-off of software development costs 3,287 : FX contract casts. S 26 (1) Additional operating expenses of £3,895k recognised within in the profit and loss account in 2020 arising 2a result of the sale of the company to HCC International insurance Company Plc are bonuses and accelerated costs of share options totalling £2,608k and the write off of software development costs of £1,287k (see note 13) (2) In 2019 expenses arising as a result of the sale of the company to Marsh & McLennan Companies Ine. Included retention and reward accruals (€261k), acceleration of share-based payment expense (E9k) and FX close-outs (£226k). 8, Auditor's remuneration 2020 2019 £7000 £7000 Fees payable to the Company's auditor (2019- previous auditor) 35 37 Total fees 35 37 20DDocuSign Envelope ID: 2F99320-70A2-4758-90D8.€07CC3A8D786 TOKIO MARINE Hoc ‘GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS 9. Directors’ remuneration Aggregate emoluments Pension contributions Total fees 2020 #7000 2,628 4 642 During the year the number of directors receiving benefits and share Incentives was as follows; Received or were enti schemes ‘Accruing benefits under defined benefit pension scheme in respect of the highest paid director 1d to receive shares under long term incentive Highest paid director ‘Aggregate emoluments, Company contributions to defined contribution pension schemes 10, Staff costs 2020 No. 1 2 2020 £000 1,949 uu ‘960 2019 £000 1,339 25 7364 2019 No. 2019 £000 1,041 10 2051 Al staff are employed by HCC Service Company Ine. (UK branch], a group service company, and all staff costs are incurred by HCC Service Company Inc. (UK branch). From May 2020 2 recharge of £2,499,395 was made to the Company in respect of the post-acquisition expenses within; Wages and salaries Social security costs Pension costs Share-based payment expenses Other employee expense Total staff costs ‘Average staff numbers during the year were; Broking and technical ‘Administration and support 11, Interest receivable and similar income 2020 3,635 564 2a1 2020 No. 3 4 35 Interest receivable totalling £37,528 (2019: £238,185) comprises amounts earned on funds. a 2019 £000 3,694 466 192 2019 No. 31 3512. Taxon profit on ordinary activi ID: 2F999F20-70A2-4758-9D08-E07CC3A9D786 TOKIOMARINE Hcc GCUBE UNDERWRITING LIMITED. NOTES TO THE FINANCIAL STATEMENTS. The tax charge for the year comprises the following 2020 000 Current tax Current UK Corporation Tax on profit for the year 448 Prior year adjustment 581 7029 Deferred tax Origination and reversal of timing differences (2,023) ‘Tax (credit)/charge on profit on ordinary activities 18 2019 £000 (668) (23) (651) 218 (473) ‘The tax assessed for the year is lower than (2019: higher than) the standard rate of corporation tax in the UK. The differences are explained below: 2020 £7000 (Loss}/profit on ordinary activities before taxation (2,508) ‘Tax on (loss)/profit on ordinary activities at standard rate of 19.00% (2019: 16 19.00%) Prior year adjustment (229) Expenses not deductible for tax purposes (60) Tax rate changes on deferred tax balances 48 Group relief (84) Other a Tax on (loss)/profit on ordinary activities, 18 2 2019 #7000 2,254 (431) 6 (4) (20) (24) wa)DocuSign Envelope ID: 2F993F20-70A2-4758.9008-E07CC3AGD786 TOKIO MARINE N Hcc GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS 13. Intangible assets Other Goodwill intangible Total (Restated) assets _ (Restated) Cost £7000 £000 £000 ‘At 1 January 2020 20 1,287 1,537 ‘At 31 December 2020 250. 3,287 4537 Accumulated amortisation [At LJanuary 2020 198 198 Charge for the year ” v Write off 35 1,287 2,322 ‘At 31 December 2020 250 3,287 3537 Net book value 31 December 2020 : 31 December 2019 2 3.287 7339 A balance of £35k of goodwill remaining at the end of 2020 was written off as a result of the cessation of ‘underwriting through Binding authorities from the start of 2021, Software development costs of £1,287k included within Other intangible assets were written off following the change in ownership of the company in May 2020. 14. Tangible assets Other Property, Fixtures and plant and fittings equipment Total Cost £000 £000 £000 [At L January 2020 224 27 401 ‘At 31 December 2020 224 277 401 Accumulated depreciation ‘At January 2020 120 261 381 Charge for the year 4 8 2 At 31 December 2020 ia 268 393) Net book value 31 December 2020 8 8 31 December 2019 16 20 23+ Docusign Envelope ID: 2F983*20-70A2-4758-8D08-E07CC3AG0786 TOKIOMARINE HCC GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS 15. Debtors: amounts falling due within one year 2020 2019 £7000 000 ‘Amounts due from group companies 369 6999 Other debtors 193 213 Contract cost asset - costs to fulfila contract 185 ‘Trade debtors 4840 4755 Contract assets 1,878 2,590 Prepayments and accrued income 106 14ea8 Included in trade receivables are amounts due after one year of £16k (2019; £92k). 16, Deferred tax 2020 2019 £000 £000 ‘At January an 250 Other timing differences v7 161 ‘At 31 December a8 ai. 17. Cash and cash equivalents Fiduciary funds ‘Own funds 43,552 Fiduciary funds include Insurer money held In the form of premiums due to underwriters and claims paid by insurers due to policyholders, which are held in the Company's Trust accounts. The fiduciary funds held are controlled by the Company and economic benefits are derived from them. As such these funds are recognised 2 an asset on the Company’s balance sheet. Fiduciary funds are not available for general corporate purposes. Within own funds, also known as corporate funds, £307,000 (2019: £307,000) are held in a ring-fenced account ‘as deemed restricted in accordance with the requirements made by the Financial Conduct Authority 18. Creditors: amounts falling due within one year 2020 2019 £000 £000 ‘Amounts due to group companies 1,242 662 Corporation tax 184 1,034 Trade cresitors 37,778 36,293 Social security and other taxes B 90 Other creditors 300 un Contract liabilities 693 ean ‘Accrued expenses 2,617 3,989 43,316 __ 42,820 ‘The fair value of the trade and other payables classified as financial instruments are disclosed in the financial instruments note. The company's exposure to market and liquidity risks, including maturity analysis, related to trade and other creditors is disclosed in the financial risk management and impairment note. 242 999F20-70A2-4758-6009-E07CC3AG0786 TOKIOMARINE HCC GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS 19. Creditors: amounts falling due after more than one year 2020 2019 £7000 £7000 Accrued office dilapidations expenses 65 65 Contract creditors 547 489 Other creditors : 50 e2. 604 No amounts are due after more than five years. 20. Called up share capital 2020 2019 Issued and fully paid £7000 £000 $508,000 (2019: 508,000) ordinary shares of £1 each 508 508, Dividends paid in the year 2020 2019 £000 £000 Final dividend of £1.57 per share 800, 22, Financial commitments [At 31 December 2020, the Company had future amounts payable under non-cancellable operating leases a5. follows: 2020 2019 Land and buildings: £7000 £7000 = Within one year 150 263 - Between one and five years 13 + Later than five years Operating lease payments represent office rental. There are no contingent rental payments arrangements. 22. Share based payments and other incentive schemes ‘Schemes in payment (2) Group Incentive and Profit Share Plan. ‘The plan provides for deferred cash bonus payments based on annual profits and comprises a Senior Executive ‘component as wel asa discretionary profit share scheme forall staff. The amounts accrued for payments under the plan are £2.5m (2019; £3.8m) Discontinued schemes (b) Marsh & McLennan Companies inc. schemes Certain employees of the company, along with other employees of MMC, were awarded stock units, which were payable, when the units vested, in shares in the ultimate parent company, Marsh & McLennan Companies, Inc. ‘The MMC Compensation Committee determined the restrictions on such units, when the restrictions lapse, when the units vested and were paid, and under what terms the units are forfeited. The cost of these awards was recognised over the vesting period, which is generally three years. 25+ Docasign Envelope ID: 2F403F20-70A2-4758-6009-£07CC3A9D786 TOKIO MARINE HCC GCUBE UNDERWRITING LIMITED NOTES TO THE FINANCIAL STATEMENTS, 23. 24, 25, The company recognised a share-based payment expense based on the fair value of the awards granted, and ‘an equivalent credit directly in equity. The fair value was deemed to be the market price of MMC shares on the rant date. In 2020 payments totalling £503,890 were made to stock unit holders. This amount is included in the Employee share options and other rewards expenses totalling £2,608,308 as disclosed in Note 7. During 2019, 8,765 stock units were awarded at a weighted average fair value of £84.60 per unit. As at 31 December 2019, 8,765 stock units remained unvested. During 2020 the 8,765 stock units fully vested. {€) LT share-based payment schemes ‘The JLT Group's equity-settled share-based payments comprise the JLT Long Term Incentive Plan (2004/2013), Senior Executive Share Scheme and the Sharesave Scheme. Due to the acquisition of the JLT Group by MMIC on 1 April 2019 the schemes became fully vested Capital commitments There was no capital expenditure either authorised by the directors and not contracted for or contracted for ‘but not provided in the financial statements. Untimate parent company ‘The Group's ultimate parent company and controlling party is Tokio Marine Holdings, Inc. (‘TMHD'). TMHD is incorporated in and its head office is located in Tokyo, Japan. Copies of the consolidated financial statements (of TMIHD can be obtained from its website at http://www.tokiomarinehd.com/en/ir/library/annual_report. HCC International insurance Company Plc isthe immediate parent company. Post balance sheet events ‘The Directors confirm that there are no significant post balance sheet events requiring disclosure, 26