Pine Walk Capital Limited
Annual report and consolidated financial statements
For the year ended 31 December 2023
Section 172 (1) Statement
The directors have considered and applied their statutory duty to promote the success of the Company under S172 of the Companies Act 2006, and in so doing, have regarded the issues, factors and stakeholders relevant to each of the following:
(i) The likely consequences of any decision in the long term
As part of the business planning process, which is reviewed three times a year, the possible consequences of decisions made including those in the longer term, are considered. All strategic decisions, including changes to the Group’s capital, corporate and Board structures, dividend declarations and changes to accounting and outsourcing policies, are approved by the Board as per the Board Terms of Reference and Matters Reserved for the Board.
(ii) The interests of the Group’s employees
A set of legally compliant, culturally appropriate and best practice human resources policies underpins the interest of the Group’s employees. The human resources function delivers an annual performance management and compensation review which includes the benchmarking of employees’ salaries against market data and a calibration of fairness and consistency across multiple variables including function, gender, and ethnicity. The performance management system in particular takes a balanced scorecard approach which includes assessment against the Group ethos, a key element of the working culture. Ownership for professional development sits with employees and is supported by managers and by the human resources infrastructure which includes a learning and development portal housed on the Group’s intranet. The Group has a vision for diversity and inclusion, ‘Bring Your Whole Self to Work’. This vision, and the associated diversity and inclusion strategy and annual plan is intended to establish a culture whereby all employees can thrive and share in the rewards of a successful business.
(iii) The need to foster the Group’s business relationships with suppliers, customer and others
As a regulated financial service company, the Group is obliged to treat its customers and suppliers fairly at all times.
(iv) The impact of the Group’s operations on the community and the environment
As member of The Fidelis Partnership, the Group is a committed leader in the industry with respect to standards for environmental, social and governance (“ESG”) matters. The Group aims to embed ESG factors and restrictions in its underwriting processes where appropriate. These underwriting restrictions include not directly insuring thermal coal (including dedicated infrastructure projects such as ports and railways), tar sand extraction, Arctic oil and gas exploration and drilling and fracking operations. The Group will continue to incorporate ESG assessments in the underwriting process and refine the process for reviewing individual insurance risks.
For some time we have used policy language to mitigate the potential risks of inadvertently supporting modern slavery or human trafficking within our business in particular in our marine cargo business and other lines of business where relevant. We are also cooperating with the U.K. Independent Anti-Slavery commissioner and Anti-Slavery International, a non-profit organization to develop a commitment to which insurers and brokers can sign up.
The Fidelis Partnership strongly believes in supporting communities and charities that operate both locally, and around the world via its charitable foundation (the “Foundation”). The Foundation provides a platform for staff to contribute to a culture of altruism and philanthropy aligned with The Fidelis Partnership values. The Foundation funds charities that are efficient, financially sustainable and have measurable impacts and currently includes those spanning human rights, education and environmental issues. These attributes are part of our selection process criteria.
(v) The desirability of the Group maintaining a reputation for high standards of business conduct
The Group has a compliance function which seeks to be a trusted advisor to the business, driving and supporting innovation whilst partnering with the business and regulators to ensure regulatory obligations are met. The compliance function seeks to ensure that the Group’s culture and behaviours put clients’ interests at the heart of its business activities and that the Group acts with integrity in the market.
(vi) The need to act fairly between members of the Group
All interactions with other Group entities are carried out at arm’s length and are governed by service level agreements.
Key performance indicators
Key performance indicators (“KPI”) are factors by reference to which the performance or position of the business of the Group can be measured effectively.
Management monitors the progress of the Group by reference to the following financial KPIs (expressed in millions of US dollars):
| 2023 | 2022 | |||
|---|---|---|---|---|
| $m | $m | |||
| Profit before taxation | 186.0 | 50.6 | ||
| Cash and cash equivalents | 191.7 | 86.6 | ||
| Net current assets | 182.6 | 46.9 | ||
| EBITDA (refer page 8) | 178.8 | 50.6 |
Principal risks and uncertainties
The Group’s operations are exposed to cyclical factors that affect the insurance market and therefore the level of premiums written and commissions earned. The Group operates in a highly competitive market and faces competition from other insurance intermediaries and underwriters.
The Group is not directly exposed to any ultimate underwriting losses on business written but participates in underwriting profits by way of a profit commission which may vary significantly year on year. The Group is reliant on third party underwriting capital and is exposed to potential changes in underwriting policy and practice by its capital providers.
The Group conducts its business whilst being fully aware of the risks arising from non-compliance with either local or international regulations and operates within a business framework which seeks to minimize the risk of financial crime (including bribery and corruption) occurring.
The Group is dependent on its IT systems for delivery of its functions. The Group believes its IT systems and those systems provided by third parties are reliable and well protected, notwithstanding that they require updating and maintenance to ensure ongoing suitability. The Group’s success is reliant upon attracting and retaining key staff. The Group maintains contracts of employment and, where possible, succession planning processes.
European Trading Solution
The Group continues to utilise the regulatory permissions of fully owned subsidiary – Pine Walk Europe SRL, a Mandated Underwriter domiciled in Belgium with a Branch in UK and Ireland. This has provided a successful route for the Group’s EU/EEA domiciled clients to access the services of the Group.
Sustainability
The Group recognises the importance of long-term sustainability and the impact on the environment brought about by climate change but needs to balance this with the nature of the business the Company is here to support through its insurance products. The Group will continue to work with its own team, clients and business partners to mitigate the environmental impact of its products and operations.
The Group has worked throughout the year to develop a strategic approach that will over realistic timeframes align with internationally recognized ESG standards. This creates additional challenges for a business focused in supporting the Energy sector. The approach will continue to be refined and enhanced over the current and future years to ensure the business is moving to a balanced ESG strategy that is effective in moving the Group to a more sustainable basis.
Financial risk management
(a) Liquidity risk
Liquidity risk relates to the risk of the Group being unable to meet its liabilities as they fall due because of a lack of available cash. The Group’s exposure to liquidity risk is regularly reviewed through monitoring of cash flows and management of liquid assets to ensure that cash is available to meet its obligations.
(b) Currency risk
Currency risk exposures arise due to assets being held in differing currencies. Whilst the Group accepts a degree of currency risk as a natural consequence of operating across multiple currencies, it has no desire for speculative exposure as a means to value creation.
Recognising that the variability in individual currencies is something over which the Group has no control, it therefore seeks to limit its exposure to currency risk through asset liability matching. Where this is not possible for material exposures the Group will endeavour to purchase an appropriate financial instrument, although none have been purchased in the current year.
(c) Credit risk
Credit risk exposures relate to the potential failure of the Group’s debtors to meet their financial obligations. The debtors are primarily entities under management, of which the Group has direct oversight over the controls and procedures.
Future developments
The directors consider that the principal activity of the Group will remain unchanged in the foreseeable future. Growth and development of the business will continue to be encouraged and supported by the Board.