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					   INVESTING IN LLOYD’S

(Incorporating the New Member Statement)




                2011
AGENT’S CONFIRMATION

We confirm that the information contained in this brochure has been prepared in accordance with the
provisions and requirements for the New Member Statement contained in clauses 7.3 to 7.7 of the Revised
Code for Members Agents: Responsibilities to Members 1999.




James Sparrow                                               Mrs Emma Royds




This document remains the property of Alpha Insurance Analysts Limited (Alpha) and is intended solely for the use of
the individual to whom it has been sent. It may not be duplicated, retyped, photocopied or reproduced (in whole or
part) except with the express permission of Alpha Insurance Analysts Limited.

Alpha Insurance Analysts Ltd is authorised and regulated by the Financial Services Authority.

These services are NOT being offered publicly to US persons or in the United States, nor are they being offered publicly
in any other jurisdiction where such offers may be unlawful.

Past performance is not necessarily a guide to future performance.

Registered Office: 5th Floor, 107 Fenchurch Street, London EC3M 5JF;
Registered in England and Wales Number: 2915929
INVESTING IN LLOYD’S 2011

CONTENTS
WHAT IS LLOYD’S?                                            2

I   The Lloyd’s Market
I   The Performance Management Directorate
I   Equitas

REASONS TO INVEST IN LLOYD’S                                3

I   The Advantages
I   The Risks
I   Independent Advice

WHY INVEST IN LLOYD’S NOW?                                  3

I   Twelve months ago
I   Twelve months on
I   Prospects for 2012

WHY INVEST THROUGH ALPHA?                                    5

I   Who is Alpha?
I   What sets Alpha apart?
I   Company Policy

METHODS OF INVESTMENT                                        7

I   Nameco or LLP
I   Funds at Lloyd’s
I   Fidentia Services LLP

LOOKING AT THE OPTIONS                                       8

I   Investment through a Nameco
I   Investment through a LLP

LLOYD’S RECENT RESULTS                                      10

ACQUISITION OF SYNDICATE CAPACITY                           11

I   Capacity Auctions
I   Pre-emptions and De-emptions
I   Capacity Value

CASH FLOW AND EXIT                                          12

I   Cash flow
I   Exit

COSTS                                                       13

ALPHA INSURANCE ANALYSTS LTD                                14

I   Board Members
I   Directors’ and Staff Underwriting and Share Ownership

ALPHA CAPACITY FOR 2011                                     17
2   INVESTING IN LLOYD’S 2011


    WHAT IS LLOYD’S?

    The Lloyd’s Market

    Lloyd's is one of the major specialist insurance markets in the world and is regulated by the UK Financial Services
    Authority (FSA). For over 300 years, Lloyd’s has never failed to pay a valid insurance claim. This has been achieved
    by building a Central Guarantee Fund behind each of the trading units at Lloyd’s (known as syndicates) which is
    there to protect policyholders and to ensure all valid claims can be paid. The current value of the Central
    Guarantee Fund is in the region of £2.4 billion. For 2011, the Lloyd's market is likely to underwrite gross premium
    income of approximately £20 billion which makes it one of the larger insurance providers in the world.

    Lloyd's is not an insurance company but is a market composed of different managing agents that operate a total
    of 87 syndicates. Investors in the market can provide capital to one or more of these syndicates. Each syndicate
    is an annual venture and investment is for one calendar year. The syndicate then reconstitutes itself for the
    following year. At the start of 2011, there were 26 syndicates open to third party capital plus 5 Special Purpose
    Syndicates (SPSs), but there may be more syndicates seeking third party capital for 2012. Each of these
    syndicates has different areas of expertise and transacts a wide variety of insurance business on behalf of its capital
    providers. Capital providers receive a share of the profits that accrue from the underwriting business of these
    syndicates in relation to the amount of capital provided or, in times of loss, are responsible for paying their share
    of the trading losses of these syndicates. The Lloyd’s market benefits from a unique system of overseas business
    licences that gives syndicates direct access to virtually all overseas markets. To participate within the
    market, syndicates are given a licence to trade by the Performance Management Directorate (previously
    Franchise Performance Directorate) of Lloyd's.

    The Performance Management Directorate

    In recent years, there has been a widely publicised improvement in the results of the Lloyd's market. There are
    now far fewer syndicates than there once were and the general level of underwriting competence is far higher.
    The establishment of the Franchise Performance Directorate in 2002, which has subsequently been re-named the
    Performance Management Directorate (PMD), under the initial leadership of Rolf Tolle, has been critical.

    The principal purpose of the PMD is to monitor and improve the performance of Lloyd's syndicates. Its role is to
    review and approve business plans, ensure a competent level of underwriting across all syndicates in the market
    and, particularly, to improve the performance of the bottom quartile syndicates. To date it has been very successful
    in this endeavour, especially in the years 2004 and 2005 when the worldwide insurance market, including Lloyd’s,
    witnessed an unprecedented level of major catastrophe losses. In January 2010, Tom Bolt became the Director
    of Performance Management and we look forward to the further development of the cycle management
    process. A.M. Best, Fitch and Standard and Poor’s reaffirmed Lloyd’s financial strength ratings of ‘A’ (Excellent),
    ‘A+’ (Strong) and ‘A+’ (Strong) respectively.

    Equitas

    The non-life liabilities of Lloyd’s for the years 1992 and prior were reinsured into Equitas Limited in 1995 after
    the market had been threatened by major exposure to asbestosis and pollution. This meant that the market had
    no continuing liability to business underwritten prior to the 1993 year of account. In late 2006 a deal was
    concluded with US reinsurer Berkshire Hathaway whereby Equitas was acquired by Berkshire Hathaway as part
    of a two phase arrangement. In 2009, the High Court approved the statutory transfer of the 1992 and prior non-
    life business of members and former members of Lloyd’s to Equitas Insurance Ltd which effectively completed
    the transaction. This gives Lloyd’s a significant trading advantage over many of its industry peers that still have
    exposure to those risks.
                                                                                                                   3

Despite these improvements, prospective members should be aware that Lloyd's is still a high risk investment.
The insurance market is potentially exposed to all manner of natural and man-made loss scenarios and could well
lose money at some point in the future. It is a high risk/high reward investment.

REASONS TO INVEST IN LLOYD’S

The Advantages

Lloyd's offers a unique investment that has the capability of producing high returns. The main benefits of Lloyd’s
membership now include:-

         •   Direct investment into a specialist insurance market
         •   Double use of assets
         •   Limited liability investment
         •   Tax planning opportunities, including pension and inheritance tax benefits for UK residents
         •   Exposure to a non-correlated asset class
         •   The potential for both underwriting profits and capital gains

The Risks

Prospective members should note that underwriting at Lloyd's involves a significant degree of risk and those
investing in the market will be exposed to the risk of underwriting losses, both past and present. Members
remain liable for losses even after death, until the liabilities of all syndicates participated upon have been closed
by means of reinsurance. Even then, in the event of failure of the reinsurer, the ultimate liability remains with the
member.

Independent Advice

Underwriting membership of Lloyd’s is not suitable for all and prospective members should seek independent
financial advice before committing to join the market. Alpha places great emphasis on the unlimited members'
"Know Your Principal" form or limited members' "Risk Profile'' form in order to give members advice that is
tailored to the personal and financial circumstances and risk profile of each member.

WHY INVEST IN LLOYD’S NOW?

Twelve months ago......

         • Rates in most classes of business were reducing following benign loss experience in 2009.
         • US Property and Reinsurance rates were still at historic high levels but International rates were under
            pressure despite the earthquake in Chile and other losses, as were the casualty (liability) classes.
         • UK Motor underwriters were reacting to the onslaught of bodily injury claims resulting from fraud
           and aggressive marketing from lawyers. Rates were increasing sharply, but so was claims inflation.
         • Interest rates worldwide were low in reaction to economic slowdown so investment returns for
           Lloyd’s syndicates were markedly reduced.
         • A surplus of capital for reinsurers existed owing to capital markets regarding the insurance
            sector favourably.
4   INVESTING IN LLOYD’S 2011

    Twelve months on......

             • The reinsurance market has been hit by further International losses, including two earthquakes in New
               Zealand and floods in Queensland. Japan has suffered the devastating effect of a tsunami triggered
               by an earthquake.
             • Energy rates are increasing following the BP Deepwater and Aban Pearl total losses.
             • UK Motor rates continue to increase as some postcodes become virtually uninsurable. Civil actions
               brought by insurers against fraudsters seem imminent. The Government recommends that insurers
              fund a dedicated police unit to combat bodily injury fraud. There is also proposed legislation to
               discourage ‘no win no fee’ litigation.
             • The US Casualty market appears to have bottomed out and small rate increases are noticeable in some
               areas.
             • Interest rates remain low despite evidence of inflation emerging. Longer tail insurance classes look less
               attractive in this environment.
             • Surplus capital will be eroded by at least US$70bn of insured catastrophe losses. All major reinsurers
               are reviewing their pricing models.
             • RMS, a catastrophe modelling agency, which almost all insurers use, has revised upwards its
               assumptions regarding loss severity for property damage following windstorm to non coastal locations
               in the US. This will either increase capital requirements for insurers or the demand for reinsurance
               protection, both of which should stimulate rate increases in the US.
             • Rate cutting appears to have ceased.

    Prospects for 2012

    The plethora of large claims during 2010 and the first quarter of 2011 has changed the underwriting
    environment. Insurers and reinsurers will be forced to reassess their underwriting approach and reprice business
    that does not provide an adequate return on capital. Demand for insurance is likely to increase as a reaction to
    these natural catastrophes at the precise moment that insurers’ capital is being eroded. Many Lloyd’s underwriters
    have called the bottom of the insurance cycle.

    Japanese earthquake renewals are being extended to 1st July which will coincide with many of the large US,
    Australian and New Zealand reinsurance renewals. This will be a key date in the Lloyd’s calendar this year and
    there is likely to be upward pressure on rates.

    Rate increases will be pushed higher still if the 2011 hurricane season in the North Atlantic proves to be above
    average, or if the world suffers further earthquakes during the remainder of 2011.

    The outlook for investment returns remains unexciting. Interest rates may rise but not to any significant extent.

    In the event of a strong move in rates at 1st July, it seems likely that syndicates will look to increase their capacity for
    2012. This will depend on their anticipated ability to impose rate rises in 2012 and also, to a lessor extent, on prevalent
    US exchange rates later in 2011. Should syndicate pre-emptions be substantial, auction prices may become more
    reasonable as the supply of capacity increases.

    2012 may mark the beginning of a prolonged upturn in insurance rates and Alpha believes that the prospects
    for membership of Lloyd’s are extremely encouraging.
                                                                                                                     5


WHY INVEST THROUGH ALPHA?

Who is Alpha?

Alpha Insurance Analysts Ltd is a Lloyd's members' agency that represents and advises third party members of
Lloyd's on their underwriting affairs, whether participation is on an unlimited or limited liability basis.

Alpha is regulated by the Financial Services Authority. The company was set up by James Sparrow and Emma
Royds in September 2007. It is the first new Lloyd's members' agency that has been set up since 1986. Prior to
the establishment of Alpha, there were only two members' agents active in the Lloyd's market, which meant that
there was much less choice for third party investors than had once been the case.

For the 2011 account, Alpha represents 198 Lloyd's members, who collectively underwrite £364 million of capacity
in the Lloyd's insurance market. These members either trade on an unlimited liability basis as traditional Names
(85 members), or on a limited liability basis either as Namecos or Limited Liability Partnerships (LLPs) (113 members).
Alpha does not have any members trading within the Scottish Limited Partnership (SLP) framework and does not
offer that option which requires a General Partner in Scotland.

The shareholders of Alpha comprise Alpha employees together with a number of unlimited and limited members
of Lloyd's. The shareholding of the business is currently split 60% external shareholders and 40% management.

What sets Alpha apart?

Alpha is a business run by insurance analysts. Members have direct access to our analysts rather than dealing via
Names Executives. Our advice to members is based on objective analysis of current trading conditions in different
sectors of the insurance market and on Alpha’s assessment of individual syndicates trading at Lloyd’s. The aim is
to ensure that members’ results outperform the Lloyd’s average throughout the insurance cycle but without taking
excessive risk. Advice given will also be consistent across the agency.

Alpha believes that personal service is of paramount importance in a private client business. As well as our six
analysts based in London, Alpha outsources the administrative aspects of Alpha’s members to Market Services at
Lloyd’s in Chatham where a team of experienced personnel are dedicated to Alpha members.

Alpha’s fee structure differs from its competitors in that it does not charge profit commission to its members. This
makes its pricing structure very competitive. Alpha considers its role is to provide best advice to its members on
their underwriting portfolios at all times, regardless of market conditions and income to Alpha. The decision not
to charge profit commission removes a potential conflict of interest between members and their agent.

Company Policy

Individual Service

Our members’ underwriting portfolios are based on the personal and financial circumstances, the objectives and
the risk profile of each member and we recommend the tailoring of underwriting portfolios accordingly.

We conduct an annual review of a member’s underwriting against the background of continuing appraisal of
each member’s financial and personal circumstances. Know Your Principal (KYP) and Risk Profile forms and regular
contact with our members are vital in ensuring that our advice to members in respect of their underwriting
commitments is appropriate to their individual circumstances.
6   INVESTING IN LLOYD’S 2011

    We also seek to satisfy ourselves that each member has an adequate understanding of the risks inherent in
    underwriting. We believe that a member’s risk profile is particularly important, as the range of risks that
    a member is prepared to accept should be reflected in the quantum of the member’s underwriting (relative to
    the member’s overall financial position), together with the selection and spread of syndicates and categories of
    business underwritten and thus exposure to certain Realistic Disaster Scenarios.

    Members are also subject to an annual review to ensure that they comply with Lloyd’s minimum requirements
    with regard to wealth, solvency and Funds at Lloyd’s. It is important that a member’s assets comprise an
    appropriate level of liquidity as a contingency for losses or cash calls and that such assets are in excess of the
    minimum levels required by Lloyd’s.

    Members are also required to notify us of any significant changes to their personal or financial circumstances that
    would impact on their ability to continue underwriting at their current level or at all.

    Research and Analysis

    Our research covers all the Lloyd’s syndicates that are open to third party capital, as well as any new ventures
    that are proposed. We also analyse their competitors in the Lloyd’s, London and worldwide insurance markets.
    In addition, we evaluate Lloyd’s and insurance markets in general in the context of the UK and other economies.

    Underwriting Philosophy

    It is a critical objective of Alpha to have a coherent approach to the structure of each underwriting portfolio,
    which should contain a suitable spread of syndicate participations. We determine which syndicates we should
    consider during each auction season and advise on the optimum mix of classes of business and disaster scenarios
    each portfolio should have. We believe that this coherent approach benefits all our clients. We can then tailor
    members’ portfolios to their own needs.

    Allocation of Capacity

    Our portfolio allocation policy is reviewed in July each year and the revised version is published in the annual
    Syndicate and Auction Review book in August. Changes to members’ portfolios are principally effected through
    the capacity auctions, which usually take place from September to November each year. We seek to buy and sell
    syndicate capacity at the most advantageous prices possible. We also execute the specific trading wishes of our
    members.

    In assessing portfolio structure, we take account of prevailing capacity prices and avoid buying syndicate
    participations where we believe that a high price makes participation unattractive on a risk/reward basis.

    Currently it is a guideline of Alpha that no one syndicate in a member’s portfolio should represent more than
    15% of the overall allocated premium limit. In this way it is intended that a severe loss by an individual syndicate
    will have less impact on the overall underwriting.

    Some members may elect to participate on syndicates not recommended by Alpha. Such syndicates are known
    as “starred” syndicates. In these circumstances, the member is asked to confirm in writing that the selection is
    made at his or her specific request.
                                                                                                                      7

Conflicts of Interest

As mentioned earlier, it is possible to underwrite through Alpha in a variety of ways. Whilst such variety is a benefit,
it can increase the possibility of conflicts of interest arising. We seek to minimise, wherever possible, the
circumstances in which conflicts of interest may occur. We do not operate any MAPAs (managed funds) or run
any corporate underwriting vehicles for 2011, which reduces many of the conflicts of interest which can arise.
Where the possibility of conflict of interest is identified, the circumstances are fully disclosed and properly
managed by Alpha by the imposition of validated “Chinese Wall” procedures.

METHODS OF INVESTMENT

Nameco or LLP

All new third party investors in the Lloyd's market must invest on a limited liability basis through one of the three
members' agents and the relationship is governed through an underwriting agency agreement. A new investor
seeking to enter the Lloyd’s market through Alpha can use either a Nameco (limited company) or a Limited
Liability Partnership (LLP) for such an investment. Traditionally, members invested on an unlimited liability basis
and were known as Names. Corporate capital was introduced into the market for the 1994 account and the first
unlimited Names began to convert to limited liability underwriting status in 1996 with the introduction of
Scottish Limited Partnerships. Namecos were introduced for the 1997 account and this meant that members
could underwrite on a limited liability basis in a limited company over which they had complete control. This is
not the case with the Scottish Limited Partnership model, where underwriting decisions are made by the General
Partner, based in Scotland. Alpha does not offer the opportunity to invest at Lloyd’s through a Scottish Limited
Partnership as we do not run a General Partner. English Limited Liability Partnerships were introduced into Lloyd’s
for the 2007 year of account. They are corporate vehicles which retain a separate legal identity from their
partners (or ‘members’), of which there must be at least three, two of which can be provided by a service company.
The LLP is the corporate member and the individuals are the partners.

It is very important to consider carefully whether to underwrite through a LLP or Nameco as this is dependent on
each member’s personal and financial circumstances. This decision must be made at the outset of the application as
it is difficult, and in some cases impossible, to change the structure after set up. The differences in the type of
vehicle which must be considered cover the tax treatment including inheritance tax and pensions, the initial capital
provision, the addition of new participants and the distribution of profits or payment of losses. Please refer to
our “Guide to Participation at Lloyd’s: Limited Liability Partnerships and Namecos” which covers these issues, as
well as consulting both an independent personal financial advisor and Fidentia Services LLP before making a final
decision.

Funds at Lloyd’s

All members are required to lodge Funds at Lloyd's (FAL) to support their underwriting. The level at which members'
FAL is required to be maintained is related to premium income limits and economic capital assessment ratios,
both of which are subject to change by the Council of Lloyd's. Releases from FAL are subject to the Lloyd's Capital
Adequacy Test. Losses can be settled from FAL, if no other arrangements are made, but any reductions in FAL
will affect future underwriting premium limits. Most members are required to deposit FAL equivalent to between
45% and 50% of their premium income limits.
8   INVESTING IN LLOYD’S 2011

    Fidentia Services LLP

    A number of the Namecos and LLPs owned by Alpha members are administered by Fidentia Services LLP
    (Fidentia). Fidentia is jointly owned by Alpha and Duncan & Toplis (an accountancy firm based in Grantham).
    Fidentia’s services include all the administration necessary to ensure the proper management and conduct of each
    company or LLP. Fidentia looks after the compliance, accounting, audit arrangements and reporting to HM
    Revenue and Customs.

    LOOKING AT THE OPTIONS

    Investment through a Nameco

    Key features

            • Individuals underwrite at Lloyd’s within the structure of a limited liability company.
            • A single individual or a group can participate in a Nameco.
            • The minimum funding requirement for a new-money Nameco is £350,000. The minimum funding
              requirement for a single unlimited member converting to a Nameco is £100,000.
            • Namecos can be set up new, or can be purchased from existing owners, subject to availability.
            • Ownership of the Nameco can be bequeathed on death so that the company can continue to under
              write at Lloyd’s.
            • If the owner of the Nameco wishes to resign from the market, the entire company can be sold, subject
               to demand. The potential price of such a sale would include the value of the syndicate capacity and
              a proportion of the pipeline profits.
            • When a Nameco ceases to underwrite, Lloyd’s requires the company to remain in existence as a
              dormant entity. When this stage is reached, Fidentia will offer terms to acquire the company for a one-
              off fixed fee.
            • Shares in a Nameco can be gifted and bequeathed. Holdover relief for gains should be available on gifts.
            • Alpha charges for a new money or ‘family’ member Nameco a fee of £10,000, which covers the current
              Lloyd’s and Fidentia set-up costs. An unconnected group will be charged £30,000, which again
              covers Lloyd’s and Fidentia set up costs.
            • Alpha charges £4,000 for a single conversion member, which covers the Lloyd’s set-up cost. A further
              £250 will be charged for each additional participant to the vehicle at the date of conversion, which
              will cover the Lloyd’s additional charge.
            • Fidentia will charge an administration fee for conversion of £1,500 + VAT.
            • For 2011, the annual running cost of the company will be £2,500 + VAT through Fidentia. This includes
              all accounting, audit and tax requirements of the Nameco.

    Tax treatment

            • Namecos are liable to pay corporation tax on any profits or capital gains realised during an accounting
              period at the normal corporation tax rates; currently 21%/28%.
            • The Nameco can choose to retain its underwriting profits, or pay some or all of them out as dividends
              or salary. Dividends carry a tax credit which is deemed to cover a tax payer’s basic rate liability. Higher
              rate tax payers will be subject to a further liability, depending on the level of the individual shareholder’s
              other income.
            • Losses sustained by the underwriting activities of the Nameco can be relieved against the following
              for the Nameco: gains in the same year, future profits of the same trade and profits of the previous
              accounting period. They cannot be relieved against income of the shareholders.
                                                                                                                    9

       • Entrepreneurs Relief may be available to shareholders on the sale of their entire stake in a Nameco,
         giving an effective rate of tax of 10% on some or all of the gain. Generally for the 2011 tax year, gains pre
         23/6/2010 are taxed at 18%, and gains from 23/6/2010 onwards at 18% for the amount of gain
         falling into a tax-payer's basic rate tax band, and 28% for gains falling into the higher/additional
         rate tax bands.

Investment through a LLP

Key features

       • LLPs were introduced for the 2007 account, so that individuals could underwrite at Lloyd’s within an
         English limited liability partnership structure.
       • A single individual or a group can form a LLP.
       • The minimum funding requirement for a new-money LLP is £350,000, subject to each individual partner
         providing a minimum of £100,000. The minimum funding requirement for a single unlimited member
          converting to a LLP is £100,000.
       • A partner's trading losses can be offset against a partner's share of gains and future profits made by
          the LLP, or against his/her other income in the current or previous tax year.
       • If a partner wishes to resign from the market, his share is first offered to the other underwriting partners.
         If all the underwriting partners wish to cease involvement then the LLP may be sold to a third party.
          Alternatively, the capacity is sold and the LLP liquidated with cash from realised assets and pipeline
          profits, as they are paid out by Lloyd’s, being distributed to the partners.
       • When a LLP ceases to underwrite, Lloyd’s requires the LLP to remain in existence as a dormant entity.
          When this stage is reached, Fidentia will offer terms to acquire the LLP for a one-off fixed fee.
       • Alpha charges for a new money or ‘family’ member LLP a fee of £10,000, which covers the current
         Lloyd’s and Fidentia set-up costs. An unconnected group will be charged £30,000, which again covers
         Lloyd’s and Fidentia set-up costs.
       • Alpha charges £4,000 for a single conversion member, which covers the Lloyd’s set-up cost. A further
         £250 will be charged for each additional participant to the vehicle at the date of conversion, which
          will cover the Lloyd’s additional charge.
       • Fidentia will charge an administration fee for conversion of £1,500 + VAT.
       • For 2011, the annual running cost of the LLP is £2,500 + VAT through Fidentia. This includes all
          accounting, audit and tax requirements of the LLP.

Tax treatment

       • A LLP does not exist for tax purposes and is, therefore, tax transparent as far as the individual
         members are concerned.
       • Underwriting profits are deemed to be earned income and are taxed as such. Earnings from the LLP
         are pensionable, subject to any maximum contribution levels which may appertain to an individual’s
         circumstances at the time, and are dealt with and taxed at individual partner level and not at LLP level.
       • A partner’s trading losses can be offset against a partner’s share of gains and future profits made by
         the LLP, or against other income in the current or previous tax year. Claims as to loss offset are made
         on an individual partner basis and do not have to be the same for each partner.
       • 100% Business Property Relief is available on a partner’s share of the underwriting capital and assets
         of a LLP after 2 years of trading. This reduces the inheritance tax liability on a partner's estate.
10   INVESTING IN LLOYD’S 2011

              • When a partner disposes of his entire interest in a LLP, Entrepreneurs Relief may be available which
                can reduce the effective tax rate to 10% on some or all of the gain. Generally for the 2011 tax year,
                gains pre 23/6/2010 are taxed at 18%, and gains from 23/6/2010 onwards at 18% for the amount
                of gain falling into a tax-payer’s basic rate tax band, and 28% for gains falling into the higher/
                additional rate tax bands.

     LLOYD’S RECENT RESULTS

     The following table shows the historical results of the Lloyd's market (on a three year accounting basis) since the
     2001 year of account.


                                         Market Result/      Market Result/
                          Capacity £                                             Syndicate Best     Syndicate Worst
                                         Forecast as %       Forecast as %
                           Millions                                              Result/Forecast     Result/Forecast
                                          of Capacity          of Capital

       2009 Account
       at 31/12/10           18,136           9.2%                23.0%               60.0%               -34.0%
       (estimate)

       2008 Account
                             16,106           10.4%               26.0%               72.6%               -56.0%
       at 31/12/10

       2007 Account
                             16,460           17.0%               42.4%               66.5%               -20.9%
       at 31/12/09

       2006 Account
                             15,005           25.5%               63.8%               73.3%                0.6%
       at 31/12/08

       2005 Account
                             13,796           2.6%                6.5%                42.8%               -74.4%
       at 31/12/07

       2004 Account
                             15,092           10.4%               26.0%               40.6%               -18.9%
       at 31/12/06

       2003 Account
                             14,859           18.6%               46.5%               39.2%               -21.9%
       at 31/12/05

       2002 Account
                             13,239           11.4%               28.5%               41.1%               -57.8%
       at 31/12/04

       2001 Account
                             11,263          -18.4%              -46.0%               41.3%               -87.6%
       at 31/12/03


       Source: Lloyd's Global results, 2009 managing agents’ mid-point estimates and syndicate best & worst
       results/forecasts for those reporting a three year result. Result as % of capital assumes ECA ratio of 40%.
       Past performance is not necessarily a guide to future potential profitability.
                                                                                                                                               11

Alpha started up in September 2007 and did not participate in the 2007 auctions, so could only have limited
influence on members’ portfolios for 2008. The average 2008 result for Alpha members is 9.9%. Third party
capital generally had a much higher UK motor content, which has suffered very large losses, than the dedicated
corporate capital and therefore underperformed the market average, which is unusual. The latest mid-point
forecast for the 2009 account is a profit of 11.8%.

ACQUISITION OF SYNDICATE CAPACITY

Capacity Auctions

Regardless of being an unlimited Name, Nameco or LLP, a member generally underwrites with a spread portfolio of
individual syndicates. Capacity on these syndicates can be bought and sold at the three main capacity auctions
that are traditionally held during September and October each year. This is the main method for members to
build or add to a syndicate portfolio. Capacity is bought during the auctions in September and payment is settled
in October prior to the start of the year of underwriting. There is also a limited Fourth Auction in November.

Pre-emptions and De-emptions

Depending on market circumstances, syndicates can either reduce (de-empt) or increase (pre-empt) their capacity
each year. Members have no option but to accept syndicate de-emptions, but can elect either to take up or sell
any pre-emptions at auction. Members do not have to pay for pre-emption rights, nor do they receive payment
when syndicates de-empt.

Capacity Value

Syndicate capacity is owned by third party members and is an asset that can either appreciate or depreciate in
value, depending on market circumstances. When members choose to resign from the market, or reduce their
underwriting commitment, they can try to sell syndicate capacity through the auction system. Any net proceeds
will be liable to capital gains tax in the UK. The auctions are fairly illiquid due to the small amounts of capacity
available to be traded.



                                       300                                                    25.0
                                                                                                        Weighted Average Auction Price (p/£)




                                             263
      Volume of Capacity Traded (£m)




                                       250
                                                                                              20.0
                                                    214
                                       200
                                                                                              15.0
                                                                         160        161
                                       150                 149
                                                                  117                         10.0
                                       100


                                        50                                                    5.0


                                         0                                                    0.0

                                             2005   2006   2007   2008   2009      2010
12   INVESTING IN LLOYD’S 2011

     The average price for acquiring capacity in the 2010 auctions was 17.9p per £1 of capacity. Alpha members buying a
     new good quality, spread portfolio which included some ‘free’ Special Purpose Syndicate (SPS) capacity paid an
     average of around 32p per £1 of capacity.

     Over the past few years, a number of managing agents have launched SPSs which have been offered to members
     at no cost for an unspecified, but limited, period. These vehicles operate in the same way as traditional syndicates,
     but are generally set up to take advantage of specific market conditions or circumstances. Members do not buy
     and sell these syndicates through the auction process. Members surrender capacity when the SPS ceases to trade.

     CASH FLOW AND EXIT

     Cash flow

     Lloyd's syndicates have traditionally operated a three year accounting system, so as to allow adequate time for
     claims to develop before reserves are set. Syndicates now also operate a one year accounting system in parallel
     with the three year accounting system. Three year accounting means that an investor does not normally receive
     any profit that has accrued from underwriting until the close of the account at 36 months. Cash calls, however,
     can be made at any time. Profits are paid out in the May following closure (month 41 of the account). Under the
     dual accounting systems, syndicates can now make early cash releases prior to this time.

     Upon joining a syndicate, a member will assume both the assets and liabilities in respect of business underwritten
     before the date of joining the syndicate through the reinsurance to close (RITC) mechanism. It should be noted
     that the assets may not necessarily be sufficient to cover the liabilities. This is known as "inherited liability".

     Normally, a syndicate's year of account will be closed after three years with either a profit or loss declared. The
     closing of a year of account is effected by a RITC. It must be noted that whilst in practice the RITC creates
     finality for a member for that particular year of account, in the event of failure (of the reinsurer) the ultimate liability
     remains with the member.

     Exit

     Membership of Lloyd’s should be considered as a part of a larger and longer term investment strategy. Due to
     the annual nature of underwriting, once membership has been resigned, Funds at Lloyd’s are required to remain
     in place until the last year of account of every syndicate has been closed.

     If a RITC cannot be effected after three years, usually because there is too much uncertainty surrounding the
     liabilities within the account at a given time, the syndicate's year of account will remain open. In this event,
     liability remains with the members (or their estates) participating in such a year of account until satisfactory
     reinsurance arrangements can be made. This could take several years and during this period a full release of
     Funds at Lloyd's of the member cannot take place.

     Subsequent to all underwriting liabilities being reinsured, the Department of Trade and Industry still require
     members to file annual returns. The only method of avoiding this requirement is to sell the Nameco or LLP, where
     there is a limited market.
                                                                                                                  13


COSTS

Together with the setting up and running costs of the individual underwriting vehicles, all investors need to
appoint a members’ agent.

Alpha members will be charged a fee of £3,500 plus 0.5% of a member's overall premium limit (OPL) allocated
by Alpha, subject to a minimum fee of £5,000 and a maximum fee of £30,000.

For members writing over £10 million, the annual fee will apply with no maximum, but fees may be negotiable.

For any mid-year increase in a member’s underwriting, Alpha will calculate the adjusted fee on the above basis
for the increased premium, pro-rated for the number of months of trading.

For members with underwriting through another members' agent, 0.30% of the member's aggregate premium
limit allocated by agents other than Alpha for the relevant year may be charged.

Members currently in full time employment in the Lloyd's market will be offered a discount of 10% of their
annual fee.

A group of members (either through common ownership, family or other groups) may be able to receive a
discount on the agency fee if they appoint a single spokesperson for the group. This discount is 20% of the fee
for each member of the group, or a 25% discount if the group is made up of three or more underwriting members.
This discount cannot be used in conjunction with a discount for working members.

A winding-up fee equivalent to the highest annual fee payable to Alpha in respect of the last three years of
account is payable at the commencement of the winding-up.

No auction transaction fees will by charged by Alpha.

A syndicate transaction fee of up to 3% of proceeds may be charged per transaction (which includes a syndicate
cash or share offer). This will only be charged to cover our costs.

No profit commission is charged by Alpha to any member.

A fee of £10,000 is charged for the setting up of a new LLP or Nameco underwriting at Lloyd’s for the following year
of account. This will cover the Lloyd’s and Fidentia application and set-up fees.

A fee of £4,000 is charged to members converting their underwriting to a Nameco or LLP for the following year
of account. This fee will cover the Lloyd’s application fee for the convertor and conversion vehicle. An additional
£250 will be charged for additional new participants.

A fee of £750 is charged to all vehicles to cover the administration costs of adding a new participant
(member/controller/director) for a year of account. Any additional participants will be charged a further £500.

For sellers of limited liability vehicles a fee equivalent to the highest annual fee payable to Alpha in respect of the
last three years of account will be charged to cover the cost of the valuation of the vehicle, dealing with enquiries
and any administration costs connected with the sale.
14   INVESTING IN LLOYD’S 2011


     ALPHA INSURANCE ANALYSTS LTD

     Alpha has nine staff based in the London office. There are six analysts, a systems analyst, a compliance
     officer/company secretary and an office manager/PA. Alpha’s analysts are an experienced group and some have
     worked together since 1999 (previously with another members’ agency). Currently three Lloyd’s employees are
     based in Chatham, Kent and are dedicated to the Lloyd’s administration of our clients.

     James Sparrow ACII - Managing Director

     After Law School, James joined CT Bowring, the insurance broking group in 1976 as a management trainee. He
     worked there, heading up the non-US non marine Casualty team, until 1985, when he left to join Donner
     Underwriting Agencies. Following its sale to Sturge in 1990 he, with three colleagues including Emma Royds,
     acquired a majority shareholding in Philip N Christie, the members’ agency arm of the Charman Group. This was
     merged with Brockbank Shipton Agencies in 1993, to form the Christie Brockbank Shipton (later CBS Private
     Capital (CBSPC)) members’ agency. Throughout his career in members’ agencies James has been responsible for
     syndicate analysis. He has been a member of Lloyd’s since 1977 and currently underwrites on an unlimited basis.
     He was a director of CBSPC until the ongoing client business was acquired by Hampden Agencies Ltd in 2006.
     In 2007 he, together with a group of investors including Emma Royds, founded Alpha which started operations
     in September 2007. James is a significant shareholder in Alpha.

     Emily Apple BA - Director

     Emily joined Christie Brockbank Shipton (later CBSPC) in 1999 as a syndicate analyst, having been at Oxford
     University. Her primary focus was to develop the internal modelling systems used by the analysis team. Following
     the acquisition of the ongoing client business of CBSPC by Hampden Agencies Ltd, Emily moved over to work
     with ICP, the CBS corporate vehicle, as the primary syndicate analyst. She worked closely with James on the
     formation of Alpha and formally joined Alpha in October 2007. Emily is a shareholder of the company.

     Andrew Hussey - Director

     Andrew was a director of various members’ agencies including Stace Barr Wellington, where he was heavily
     involved in syndicate analysis and looking after both corporate and individual members. Over recent years
     Andrew has been managing director of ABSA Syndicate Investments Ltd, a corporate spread fund underwriting
     at Lloyd’s, which produced excellent results throughout its underwriting career. He joined Alpha as a Director in
     January 2010. Andrew is an unlimited member of Lloyd’s and is a shareholder at the company.

     Emma Royds BA ACII - Director

     Emma started at an independent members’ agency, Donner Underwriting Agencies, in 1983 having finished at
     Exeter University. From 1985 she has concentrated on the syndicate analysis side of the business and moved to
     Philip N Christie in 1990 following the sale of Donner to Sturge. She was part of the founding team who went
     on to merge the agency with Brockbank Shipton Agencies to form the Christie Brockbank Shipton (later CBS
     Private Capital (CBSPC)) members’ agency for the 1994 account. She was the director in charge of the syndicate
     analysis team until the ongoing client business of CBSPC was acquired by Hampden Agencies Ltd in 2006. Emma
     is part of the founding team at Alpha which started operations in September 2007 and is a shareholder of the
     company.
                                                                                                             15

Jenny Doyle BA ACII - Company Secretary & Compliance Officer

Jenny began working in the Lloyd's market in 1988 when she joined John Heynes and Company. In 1993 she
joined Wellington Members' Agency (later taken over by Stace Barr which merged with Murray Lawrence to
become Amlin and then CBSPC) as a Names' Executive until she took on the role of Compliance Officer in 2004.
She worked at CBSPC for 13 years until the ongoing client business was acquired by Hampden Agencies Ltd in
2006. Jenny resigned from Hampden in April 2008 and joined Alpha as Compliance Officer on 3rd November
2008. She has since also taken over the role of Company Secretary.

Rufaro Butau MSc - Analyst

Rufaro joined Alpha in April 2010 as a senior syndicate analyst from the Performance Management Directorate
at Lloyd’s. Rufaro was responsible for co-ordinating performance monitoring data with managing agents with-
in the analysis section of the Underwriting Performance team.

Charlotte Hanbury-Williams BA - Analyst

Charlotte is a graduate from Bristol University and is our newest addition to the analysis team having previously
been our personal assistant and office manager since January 2010. She supports the analysts as her knowledge
and experience develops and she is taking her ACII exams.

Kiran Barvé BA - Systems Analyst

Kiran began working in the Lloyd's market in 1991 when he joined Anton Members’ Agency Ltd. In 1994 he
joined CBS Members' Agency in a technical role. He worked there for 12 years until the ongoing client business
was acquired by Hampden Agencies Ltd in 2006. He resigned from Hampden in April 2009 and joined Alpha as
Systems Analyst and Developer in July 2009.

Lorraine Canns - Office Manager/PA

Lorraine joined us in early 2011 as our office manager and PA and is already proving to be a very valuable
member of the team.

Administration in Chatham

Claire Chalmers-Stevens

Claire joined Hayter Brockbank Shipton as a Names' Executive in 1991, having previously worked in the
Corporation of Lloyd's. Following the merger of Philip N Christie and Brockbank Shipton in 1994, she continued
in this role for Christie Brockbank Shipton (later CBS Private Capital (CBSPC)) until the ongoing client business
was acquired by Hampden Agencies Ltd in 2006. At Hampden, she looked after a number of members based in
the USA and Canada, as well as in the UK. Claire rejoined Lloyd’s in April 2008 and was immediately assigned
to Alpha. Sadly Claire has recently resigned to spend more time with her family, but will be with us until the end
of June. Her replacement has not been confirmed at the time of going to print.

Frances Farley

Frances joined Lloyd's in June 1984 as an administrator/team leader in the New Names department, dealing with
the admission and election of Names. Since then Frances has worked in various processing and technical areas
within the Members' Services Unit (now Market Services), most recently on the Distribution Team with specific
responsibility for the New Central Fund and Special Reserve Fund and assisting with the annual results exercise.
Frances was seconded to the Alpha team in September 2007, working mainly with corporate members.
16   INVESTING IN LLOYD’S 2011

     Nicola Baldwin

     Nicola joined Lloyd's in April 1984 working within the New Names department. In August 1990 Nicola was
     appointed as a Names Executive at Barder & Marsh, which became Marlborough Underwriting Agency, following
     re-organisation. She was involved with all aspects of members’ agency work and from 1994 undertook the role
     of Compliance Officer, leaving in November 1996 to raise her family. After various part time employments, Nicola
     returned to The Corporation of Lloyd's in August 2008, working as a technician with the Direct Corporate
     Participants team before joining Alpha in July 2010.

     Board Members

     Clive Richards OBE DL FCA - Non-Executive Chairman

     Clive qualified as an accountant with KPMG before joining Wedd Durlacher, where he became managing partner.
     In 1970 he became chief executive of Rothschild Investment Trust and in 1974 Group Finance Director of NM
     Rothschild & Sons Limited. In 1976 he left Rothschilds to establish his own investment and financial services
     company, Clive Richards & Co, which specialises in venture capital, where he remains chairman and proprietor.
     He has financed and listed several companies during this period including Micro Business Systems plc, Steel Burrill
     Jones Group plc, Security Archives plc, Industrial Control Services Group plc, Intelligent Environments Group plc
     and Xpertise Group plc. Clive and his wife underwrite through a LLP and Clive is a shareholder of the company.

     Alan Lovell MA FCA - Non-Executive Director

     After reading Classics at Oxford University, Alan qualified as a Chartered Accountant with Price Waterhouse. He
     went on to hold a variety of positions with Plessey. In 1989 he joined Conder Group plc, moving to the Costain
     Group plc in 1992. Alan then joined Dunlop Slazenger in 1997. In October 2004 he was appointed as chief
     executive of Jarvis plc to oversee both a financial and an operational turnaround of the business. Alan is a member of
     the Council of Lloyd’s, a director of the Association of Lloyd’s Members and is Chairman of the Appeal Committee of
     the Mary Rose Trust. Alan and his wife underwrite through a LLP and Alan is a shareholder of the company.

     Michael Meacock - Non-Executive Director

     Michael is the active underwriter of syndicate 727 at Lloyd’s and a director of the managing agency, SA Meacock &
     Co. He and various members of his family are substantial unlimited members of Lloyd’s underwriting through Alpha.

     Directors’ and Staff Underwriting and Share Ownership


                                                           2011           Number of                         Number of
                                                                                          Percentage of
                                                        Underwriting       ordinary                         preference
                                                                                           share capital
                                                            (£)             shares                            shares

       WSC Richards (per LLP)                             9,269,302          46,250           9.25%           46,250
       AC Lovell (per LLP)                                2,416,354          43,750           8.75%           43,750
       MJ Meacock                                         7,646,723             -                0               0
       Mrs RJR Meacock (wife of MJ Meacock)               2,303,068             -                0               0
       Mrs EL Royds                                            -             35,000           7.00%              0
       AJ Sparrow                                         1,436,895         137,500          27.50%              0
       Mrs EL Apple                                            -             17,500           3.50%              0
       AD Hussey                                           695,494           10,000           2.00%              0
                                                                                                          17


CAPACITY FOR 2011

The table below shows the Alpha syndicate capacity allocations for 2011.


  Syndicate    Star     Managing Agents                            Underwriter          2011 Capacity £

  33                    Hiscox Syndicates Ltd                     R Merrett                  35,873,000
  218                   Equity Syndicate Management Ltd           M Bacon                    24,101,171
  260            *      Canopius Managing Agents Ltd              C Hart                        335,000
  308                   Kiln & Co. Ltd                            C Toomey                    1,700,869
  318            *      Beaufort Underwriting Agency Ltd          M S F Pritchard             1,418,776
  386                   Limit Underwriting Ltd                    A Bathia                   14,871,574
  510                   R. J. Kiln & Co. Ltd                      R Hargreaves               53,730,338
  557                   R. J. Kiln & Co. Ltd                      D Huckstepp                 7,427,623
  570                   Atrium Underwriters Ltd                   K Wilkins                  14,041,164
  609                   Atrium Underwriters Ltd                   R Harries                  31,426,879
  623                   Beazley Furlonge Ltd                      N Maidment                 13,759,173
  727                   S. A. Meacock & Company Ltd               M J Meacock                19,153,328
  779            *      Jubilee Managing Agency Ltd               J Clarke                    1,698,458
  807            *      R. J. Kiln & Co. Ltd                      L Tunnicliffe               1,474,001
  958                   Omega Underwriting Agents Ltd             D Vanous                   29,095,422
  1176                  Chaucer Syndicates Ltd                    M G Dawson                    505,211
  1200                  Heritage Managing Agency Ltd              N Chapman                   3,263,378
  1969                  Flagstone Syndicate Management Ltd        N Jones                     6,417,831
  2010                  Cathedral Underwriting Ltd                J Hamblin                  19,443,610
  2121           *      Argenta Syndicate Management Ltd          P Hunt                      2,846,274
  2525                  Whittington Capital Management Ltd        D Dale                     10,811,742
  2526                  Whittington Capital Management Ltd        A Doré                     11,157,469
  2791                  Managing Agency Partners Ltd              R Trubshaw                 41,498,025
  6103                  Managing Agency Partners Ltd              MAP SPS                     4,768,889
  6104                  Hiscox Syndicates Ltd                     Hiscox SPS                  8,474,188
  6106                  Amlin Underwriting Ltd                    Amlin SPS                   3,768,879
  6107                  Beazley Furlonge Ltd                      Beazley SPS                 1,277,179
                                                                  TOTAL                     364,339,451



A ‘*’ represents a syndicate participation which is not recommended by Alpha. A commentary on the performance
of each syndicate on which members through Alpha participate is provided in our Syndicate and Auction Review
book published in August each year.
CONTACT DETAILS

For further information about underwriting
membership through Alpha, please contact:-

James Sparrow/Andrew Hussey

Tel: 020 7767 3420 • Fax: 020 7022 8781
Email: james@aianalysts.com
Email: andrew@aianalysts.com

Alpha Insurance Analysts Ltd
107 Fenchurch Street
London EC3M 5JF




www.aianalysts.com

				
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