+--------------------------------------------------+----------+-+---------+-+----------+
| - arising from prior year claims | | | 4,706 | | 4,937 |
+--------------------------------------------------+----------+-+---------+-+----------+
| Balance at the end of the period | | | 10,103 | | 9,803 |
+--------------------------------------------------+----------+-+---------+-+----------+
(v) Assumptions and sensitivities
Process used to determine the assumptions
The sources of data used as inputs for the assumptions behind insurance
provisions are internal, using detailed studies that are carried out annually by
external advisors. The assumptions are checked to ensure that they are
consistent with observable market trends or other published information with
more emphasis placed on current trends.
The nature of insurance business makes it very difficult to predict with
certainty the likely outcome of any particular claim and the ultimate cost of
notified claims. Each notified claim is assessed on a separate, case by case
basis with due regard to the claim circumstances and historical evidence of the
size of similar claims. Case estimates are reviewed regularly and are updated as
and when new information arises. The provisions are based on information
currently available. However, the ultimate liabilities may vary as a result of
subsequent developments. The impact of many of the items affecting the ultimate
costs of the loss is difficult to estimate. The degree of complexity involved
will also differ by book of business due to differences in the underlying
insurance contract, claim complexity, the volume of claims and the individual
severity of claims, determining the occurrence date of a claim, and reporting
lags.
The value of outstanding claims and the IBNR provisions are estimated using
various statistical methods. Such methods extrapolate the development of paid
and incurred claims, average cost per claim and ultimate claim numbers for each
underwriting year based upon observed development of earlier years and expected
loss ratios.
The key methods, which remain unchanged from prior years, are:
* chain ladder methods, which use historical data to estimate the paid and
incurred to date proportions of the ultimate claim cost;
* expected loss ratio methods, which use the AP Group's expectation of the loss
ratio for a class of business; and
* benchmarking methods, which use the experience of comparable, more mature,
classes to estimate the cost of claims
The actual method or blend of methods used varies by underwriting year being
considered and for observed historical claims development.
To the extent that these methods use historical claims development information
they assume that the historical claims development pattern will occur again in
the future. There are reasons why this may not be the case, which, in so far as
they can be identified, have been allowed for by modifying the methods. Such
reasons include:
* changes in processes that affect the development / recording of claims paid and
incurred (such as changes in claim reserving procedures);
* economic, legal, political and social trends (resulting in, for example, a
difference in expected levels of inflation);
* changes in mix of business; and
* random fluctuations, including the impact of large losses.
* IBNR provisions are estimated at a gross level and a separate calculation is
carried out to estimate the size of any reinsurance recoveries.
Assumptions
The assumptions that have the greatest effect on the measurement of insurance
contract provisions are the expected loss ratios for the most recent
underwriting years excluding the current underwriting year which will be
significantly underdeveloped. The expected loss ratios assumed for the
underwriting years 2006 and 2007 are 68.5% and 72.5% respectively.
Changes in assumptions and sensitivities to changes in key variables.
The Group believes that the liability for claims reported in the balance sheet
is adequate. However, it recognises that the process of estimation is based upon
certain variables and assumptions, which could differ when claims arise.
The impact of a 1% change in the loss ratio across all underwriting years (2003
to 2008) would equate to a GBP529,000 pre-tax change in the reported income.
24 Deferred tax
Recognised deferred tax
Deferred tax balances are attributable to the following:
+--------------------------------------------------+----------+--+----------+--+----------+
| | | | | | |
+--------------------------------------------------+----------+--+----------+--+----------+
| | | | 2008 | | 2007 |
+--------------------------------------------------+----------+--+----------+--+----------+
| | | | GBP000 | | GBP000 |
+--------------------------------------------------+----------+--+----------+--+----------+
| | | | | | |
+--------------------------------------------------+----------+--+----------+--+----------+
| Other intangible assets | | (541) | | - |
+-------------------------------------------------------------+--+----------+--+----------+
| Property, plant and equipment | | | 38 | | 12 |
+--------------------------------------------------+----------+--+----------+--+----------+
| Income taxable on remittance to the UK | | | (2,060) | | (1,727) |
+--------------------------------------------------+----------+--+----------+--+----------+
| Transfers to equity settled share incentive | | | 46 | | |
| reserve | | | | | |
+--------------------------------------------------+----------+--+----------+--+----------+
| Other timing differences | | | 51 | | 5 |
+--------------------------------------------------+----------+--+----------+--+----------+
| Total deferred tax | | | (2,466) | | (1,710) |
+--------------------------------------------------+----------+--+----------+--+----------+
Certain deferred tax assets and liabilities have been offset. The following is
the analysis of the deferred tax balances for financial reporting purposes:
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | 2008 | | 2007 |
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | GBP000 | | GBP000 |
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | | | |
+--------------------------------------------------+----------+-+---------+-+----------+
| Deferred tax liabilities | | | (2,601) | | (1,727) |
+--------------------------------------------------+----------+-+---------+-+----------+
| Deferred tax assets | | | 135 | | 17 |
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | (2,466) | | (1,710) |
+--------------------------------------------------+----------+-+---------+-+----------+
There are no unrecognised deferred tax assets or liabilities.
25 Trade and other receivables
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | 2008 | | 2007 |
+--------------------------------------------------+----------+-+---------+-+----------+
| | | | GBP000 | | GBP000 |
+--------------------------------------------------+----------+-+---------+-+----------+
| Receivables arising from insurance and | | | | | |
| reinsurance contracts: | | | | | |
+--------------------------------------------------+----------+-+---------+-+----------+
| - premiums due from insurers | | | 4,226 | | 3,997 |
+--------------------------------------------------+----------+-+---------+-+----------+
| - trade debtors | | | 11,731 | | 10,342 |
+--------------------------------------------------+----------+-+---------+-+----------+
| Other receivables: | | | | |
+-------------------------------------------------------------+-+---------+-+----------+
| - other prepayments and accrued income | | | 997 | | 1,041 |
+--------------------------------------------------+----------+-+---------+-+----------+
| - amounts due from related parties | | | 924 | | 985 |
+--------------------------------------------------+----------+-+---------+-+----------+
| - other debtors | | | 798 | | 1,575 |
+--------------------------------------------------+----------+-+---------+-+----------+
| Total insurance and other receivables | | 18,676 | | 17,940 |
+-------------------------------------------------------------+-+---------+-+----------+
| | | | | | | |