Notes to the consolidated
financial statements
continued
3 Management of risk continued
3.2 Financial risk continued
(d) Credit risk continued
Senior Subordinated
AAA AA A BBB B Sub-total A BBB Sub-total Total
31 December 2011 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
United States
of America – – 73,615 2,723 – 76,338 – 1,372 1,372 77,710
United Kingdom 319 8,505 23,912 – – 32,736 3,327 1,148 4,475 37,211
Australia – 7,314 295 – – 7,609 – – – 7,609
Belgium – – 3,429 – – 3,429 – – – 3,429
Canada 1,241 12,240 7,840 604 – 21,925 2,884 – 2,884 24,809
Denmark – – 1,544 – – 1,544 – – – 1,544
Finland – 1,518 – – – 1,518 – – – 1,518
France 3,889 4,750 7,573 – – 16,212 712 – 712 16,924
Germany – – 3,720 – – 3,720 – – – 3,720
Italy – – – 4,294 – 4,294 – 319 319 4,613
Netherlands 2,329 7,348 6,415 – – 16,092 691 – 691 16,783
New Zealand – 2,768 – – – 2,768 – – – 2,768
Norway 130 – 378 – 1,431 1,939 – – – 1,939
Spain 928 – 1,920 – – 2,848 – – – 2,848
Sweden – 6,359 4,733 – – 11,092 – – – 11,092
Switzerland – – 11,597 – – 11,597 – – – 11,597
Other – – 594 429 – 1,023 – – – 1,023
Total 8,836 50,802 147,565 8,050 1,431 216,684 7,614 2,839 10,453 227,137
Included in the table above, are £222 million in relation to holdings in debt securities and £5 million held as cash equivalents.
(e) Liquidity risk
The Group is exposed to daily calls on its available cash resources mainly from claims arising from insurance and reinsurance contracts.
Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Board sets limits on
the minimum level of cash and maturing funds available to meet such calls and on the minimum level of borrowing facilities that should
be in place to cover unexpected levels of claims and other cash demands.
A significant proportion of the Group’s investments is in highly liquid assets which could be converted to cash in a prompt fashion and at
minimal expense. The deposits with credit institutions largely comprise short-dated certificates for which an active market exists and which
the Group can easily access. The Group’s exposure to equities is concentrated on shares and funds that are traded on internationally
recognised stock exchanges.
The main focus of the investment portfolio is on high-quality short duration debt and fixed income securities, and cash. There are no
significant holdings of investments with specific repricing dates. Notwithstanding the regular interest receipts and also the Group’s ability
to liquidate these securities and the majority of its other financial instrument assets for cash in a prompt and reasonable manner,
the contractual maturity profile of the fair value of these securities at 31 December was as follows:
Debt and Deposits Cash
Fair values at balance sheet date fixed income with credit and cash 2012 2011
securities institutions equivalents Total Total
analysed by contractual maturity £000 £000 £000 £000 £000
Less than one year 497,658 12,957 657,662 1,168,277 1,082,200
Between one and two years 468,475 – – 468,475 487,678
Between two and five years 808,545 246 – 808,791 822,245
Over five years 349,761 – – 349,761 265,897
Sub-total 2,124,439 13,203 657,662 2,795,304 2,658,020
Other non-dated instruments 70,427 – – 70,427 53,602
Total 2,194,866 13,203 657,662 2,865,731 2,711,622
The Group’s equities and shares in unit trusts and other non-dated instruments have no contractual maturity terms but could also
be liquidated in an orderly manner for cash in a prompt and reasonable timeframe within one year of the balance sheet date.
70 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2012