Gable : Final Results for the year ended 31 December 2015

15 July 2016

This announcement contains inside information

Gable Holdings Inc.

('Gable' 'the Company' or 'the Group')

Final Results for the year ended 31 December 2015

Gable (AIM: GAH), the European non-life insurance company ('Gable', 'the Group' or 'the Company'), announces its results for the year ended 31 December 2015 and an update on the strategic review of the Group's business model.

Re-alignment of Gable's business model to meet Solvency II requirements

- Strategic review of the Group's existing business and operations:

· Evaluating a broad range of strategic options for the Company;

· Assessed impact and costs of meeting historical Solvency I targets;

· Evaluating different business models for Solvency II ('SII') regulatory capital compliance;

· Objective to achieve accelerated SII compliance; and

· Engaging with potential partners to evaluate their capabilities across a range of possible solutions.

- Whilst the strategic review is an ongoing process, the Board is initially implementing a Strategic Restructuring Plan for Gable that will enable it to:

· Implement a new business model with supporting commercial arrangements in order to deliver a profitable future business under the SII regulatory environment;

· Continue to support its existing policyholders through leveraging off the strength and capabilities of larger insurance partners; and

· Write niche lines of business (on a significantly smaller scale) which will be fully SII compliant, with the balance being transferred to SII compliant multi-national insurance carriers.

Current Trading and Outlook

- Momentum of new business opportunities has continued into 2016 driving GWP;

- Profitable trading in the first quarter of 2016;

- Continued good cash generation, current cash and investment balances of £74.5m as at 30 June 2016; and

- Passporting into Europe is unaffected by the UK's exit from the EU due to Gable's Liechtenstein location.

Business Overview 2015

- £100m of business written in the year;

- Reported Gross Written Premiums of over £91.1m, representing a 14% increase over the prior year;

- Retention rates and new referrals continued to drive strong growth in GWP across all markets;

- Pre-tax loss for the group of £24.3 million which includes the following previously announced non-recurring adjustments:

· £7.5 million provision to eliminate the remaining balance of the pre-2012 historical reserving gap;

· Increased £7.9 million provision (from £6.0 million) to fully write off the debtor relating to an after the event ('ATE') insurance policy;

· Provisions for claims arising from the significant floods experienced in the UK and Europe in December 2015, the impact of which is limited by reinsurance arrangements amounted to a net loss of £2.0million; and

· In addition, the goodwill of £4.25 million relating to the acquisition of Gable Insurance AG in 2005 has been written off to recognise the impact of the restructuring required as a result of the strategic review;

- Cash and liquid investment balances have increased by over 45% in the financial year and were £61.6m as at the year end.

Commenting, William Dewsall,Chief Executive, said: 'Over the ten years since start up in 2005, we have grown a significant business in terms of written premiums, commercial reach and capability, underwriting across a core of customers and strategic niche classes of business in nine European countries and building a strong brand of trust with SMEs.

'Following the announcement of a strategic review of Gable's business, I can confirm that, after consultation with our regulator, the FMA, we are taking steps to implement a solution which will operate under the new Solvency II regime.

'The regulatory landscape since we started the business has changed dramatically which has necessitated the strategic review and we are now proceeding with discussions with a range of parties which will require a significant restructuring of the Group's business and scale of underwriting operations in order to provide a solution to ensure compliance with Solvency II across all lines of business.'

Enquiries:

About Gable Holdings Inc.

Gable is a European non-life insurance company underwriting a comprehensive range of specialist policies for the commercial sectors in the UK, Denmark, France, Germany, Italy, the Netherlands, Norway, Spain and Sweden. Gable benefits from a low-cost online underwriting platform and the Company has continued to develop its business geographically whilst simultaneously exploiting a range of niche insurance segments which exist across the EU, which is delivered through the EU passporting mechanism.

Gable Holdings Inc. is quoted on the London Stock Exchange's AIM market (ticker: GAH.L GAH.LN). For further information please visit www.gableholdings.com.

Chairman's Statement

2015 has been a mixed year for Gable. We have delivered strong organic growth, with Gross Written Premiums exceeding £90 million, for the first time. However, we have needed to take decisive action in dealing with a number of significant non-recurring items that have severely impacted the profitability of the business in the 2015 financial year.

In the ten years since start-up, a great deal has been achieved and the management team has built selected distribution channels into our chosen European markets, providing bespoke commercial insurance products for small and medium sized enterprises across numerous market segments.

We are adapting our business model to meet the challenges of the new regulatory environment brought about by the introduction of Solvency II. This will require a considerable reorganisation of our business and we are actively working with potential partners to bring about a Solvency II compliant solution.

Whilst significant changes in Gable's business and scale of underwriting operations will be implemented during the current financial year, trading to date has started well, with the first quarter demonstrating continued growth compared with the first quarter of 2015.

Once again I would like to thank all of Gable's stakeholders for their continued support and we look forward to updating you further as we progress the reorganisation of the business.

Jost Pilgrim

Chairman

15 July 2016

Chief Executive's Review

Strategic Review

Gable was established to grow a niche insurance business which could develop quickly by providing bespoke market products across a number of EU countries with a focus on high levels of service to meet the requirements of a range of market segments for SMEs in Europe. We have achieved this goal and created a business with over £90 million of annualised gross written premiums and cash balances of over £60 million at the end of 2015. Since inception ten years ago we have written cumulative premium income exceeding £350 million and during that time have managed the Group's financial resources to sustain the challenges of adverse claims activity in any single trading year.

The Gable business model under the Solvency I framework allowed the Company to write premiums at approximately five times its capital base calculated broadly in accordance with generally accepted accounting principles. Under this model Gable quickly expanded with the objective of achieving a scale necessary to enable it to withstand the impact of major claims. Gable now carries full reserves at actuarial best estimate as supported by peer review undertaken by Grant Thornton.

Notwithstanding the recent result of the UK's Referendum on its membership of the European Community, European Member states and Regulators have been given considerable discretion as to when and how they implement Solvency II as in 2015 the Chairman of EIOPA announced that member states should have a further 5-year period in which to implement the European Directive into local law. This effectively defers harmonisation of the Solvency II regime across Europe. For those countries that have already encapsulated the Solvency II Directive within local law, which includes Liechtenstein, the Solvency II regime commenced on 1 January 2016.

The rules of Solvency II require the retention of capital at levels that are at a multiple of that under Solvency I. Our actuarial team has calculated that the business written in 2015 would have required an additional £47 million of capital under Solvency II. On a forward looking basis for 2016 and 2017, with an unchanged business plan, the Solvency II rules indicate potentially an additional capital requirement of over £100 million, a capital to GWP ratio of nearly one to one. In recent announcements we have made it clear that raising such a sum is unrealistic.

In May, we announced that a strategic review of the group's business and operations was underway. This review includes investigating a range of potential options for the business and has led to the development of the Board's Strategic Restructuring Plan. Accordingly, we engaged in discussions with a number of different parties in order to develop a solution which best fits the requirements of our Strategic Restructuring Plan moving forward.

Regulatory Capital

As previously announced on 25 May, the Company was looking at the provision of additional regulatory capital

amounting to £10 million and we examined various mechanisms to address that regulatory capital shortfall which included:

- additional retrospective reinsurance facilities; together with

- a transfer of the renewal rights for a small component of our UK business; and finally

- a guarantee/cash injection which I offered to provide.

These mechanisms would only provide Solvency I capital, would be costly to implement and would not address the ultimate requirement for the Group to comply with the requirements of Solvency II. In addition, the retrospective

reinsurance facility would need to be unwound and replaced with an alternative structure under our Strategic

Restructuring Plan. Although a change of approach to that indicated in our announcements in March and May, we

have decided to move directly to the Solvency II regime and complete the implementation of our Strategic Restructuring Plan in as short a timeframe as possible.

Strategic Restructuring Plan

The business model developed under the Strategic Restructuring Plan is intended to:

- Provide support from multi-national insurance carriers for Gable's historical written premium base in the UK and Europe including the possibility of a risk transfer of the historical book;

- Facilitate the transfer of existing business to these rated insurance carriers via managing general agents (MGA), a specialised type of insurance agent/broker that, unlike traditional agents/brokers, is vested with underwriting and claims handling authority from an insurer;

- Retain sufficient capital to enable Gable to operate as a niche and profitable business (on a significantly smaller scale) under Solvency II moving forward; and

- Realign the costs to fit the needs of the restructured business.

There remains significant uncertainty regarding the implementation of the Strategic Restructuring Plan and there is no guarantee that, following its implementation, the group will retain sufficient capital to enable it to support the proposed retained business. The Board has made good progress in its discussions with third parties regarding the implementation of the Strategic Restructuring Plan and on this basis, the Directors have a reasonable expectation that the Company will be able to continue in operational existence for the foreseeable future. Whilst our negotiations with third parties provide the basis for the Board's view on Going Concern, this forms insufficient evidence for the auditors to form an opinion on the Group accounts. However, accounts for our insurance subsidiary, GIAG, were approved by the auditors and filed and

accepted in Liechtenstein on 4 July 2016.

Full details of the preferred solution and partners will be announced once the Company has concluded the discussions which are currently ongoing.

We have already commenced implementing the Strategic Restructuring Plan and have instructed our broker network to cease writing new business with immediate effect, subject to local jurisdictions and laws.

The Board has taken the decision that it would not be prudent to continue writing new business within Gable when we are aware that with effect from 1 October 2016 we will be introducing this business to our new carriers. We will be working with our brokers and policyholders to ensure a seamless transfer.

Trading Results

Throughout 2015 and continuing for the year to date in 2016, Gable has experienced robust renewal business alongside growth in new business in the UK and Europe, reflecting the excellent relationships that Gable enjoys with its growing network of brokers across Europe and the very strong core of policyholders that have built-up during the ten years of trading for the Group.

The overall performance of the insurance business was impacted at the year-end by the severe December storms and floods, and we were once again quick to respond to our customers' requirements in getting many businesses back in action following the storms, whilst Gable was also well protected through its reinsurance arrangements, limiting the ultimate financial impact.

Subsequent to the year end, we also received an update regarding the settlement of an ATE litigation insured by Gable. The update received suggested that prospects of successful recovery within previously anticipated amounts and timescales was reduced. Following further consideration, we have taken the prudent decision to make a full write-off (by set-off against GWP) against the recoverable balance although we are taking action to investigate and enforce the recovery that had previously been anticipated and may yet be achieved.

In light of the Strategic Review, we have reviewed the historical goodwill asset held on the Balance Sheet (which arose on the acquisition of Gable Insurance AG in 2005) and it has been determined appropriate to make a full write-off against the carrying value of the goodwill to reflect the likely impact of necessary changes to the business.

For the year ended 31 December 2015 reported Gross Written Premiums were 14 per cent higher at £91.1 million (2014: £80.0 million). The reported loss before tax of £24.3 million is stated after a number of material non-recurring items, as already highlighted, the most significant of which are the final additional reserve set aside of £7.5 million, a write-off of £7.9 million against the ATE debtor and a write- off of the £4.25 million goodwill balance. The loss per share is 17.89p (2014 loss per share: 3.57p).

Total cash, cash equivalents and investments at the year-end was 45 per cent higher at £61.6 million (2014: £42.4 million).

Convertible Loan Note Instrument

On 21 December 2015 Gable announced the issue of a Convertible Loan Note Instrument with a term of three years led by myself under which £3.96m of Loan Notes were issued immediately. We subsequently announced on 31 March 2016 that no further Notes would be issued under the Instrument.

Dividend Policy

To date the growth of our capital base has been our primary objective and, for this reason, the Board has been of the view that the retention of earnings within the business is in the current interests of shareholders. The requirements of SII and impact of the strategic review are unlikely to change this status in the short to medium term.

Board and Management

In February 2015, we announced the appointment to the Gable Holdings Inc. board of Andrew Trott as a Non- Executive Director. Andrew, who is Chairman of Gable's Remuneration Committee, is an experienced and respected insurance liability lawyer in the London Insurance Market. Additional non-executive director appointments were made with the appointment of Julian Connerty, who is a partner at Signature Litigation LLP, one of Britain's leading litigation and insurance legal practices, in July 2015 and Kevin Alcock in December 2015. Kevin is a Chartered Accountant and management consultant by background with a focus on the investment management industry. He is a non-executive director of a number of UK and South African financial services companies. Kevin is Chairman of the Audit Committee.

Our Customers, Brokers and People

I would like to thank all of our customers and brokers across our countries of operation for their support during the last year. It is also a credit to my team that we have been able to deliver excellent service in a highly competitive business environment during challenging economic conditions. Despite these conditions, we have been able to respond extremely quickly to our clients' needs, most notably following the storms and floods in late 2015.

Current Trading and Outlook

The regulatory landscape since we started the business has changed dramatically which has played a fundamental part in prompting a Strategic Review and which will require a significant restructuring of the Group's operations. We are now proceeding with necessary actions to enable this significant restructuring of the Group's business and downscaling of underwriting operations, but should provide a solution to ensure compliance with Solvency II across all lines of business.

William Dewsall

Chief Executive

15 July 2016

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2015

All operations are continuing.

No statement of Comprehensive Income is presented as there is no other comprehensive income.

GROUP STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2015

The financial statements have been signed by the Board and authorised for issue on 15 July 2016.

William Dewsall Mike Hirschfield

Chief Executive Group Finance Director

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2015

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

Notes to the Group Financial Statements

For the year ended 31 December 2015

1. Basis of preparation

The Company was incorporated as a Corporation in the Cayman Islands which does not prescribe the adoption of any particular accounting framework. The Board had previously resolved that the Group would follow IFRS and voluntarily apply the UK Companies Act 2006 when preparing its annual financial statements.

These financial statements have been prepared under the historical cost convention and in accordance with the requirements of International Financial Reporting Standards ('IFRS') endorsed by the European Union ('EU').

The Group financial statements consolidate the financial statements of Gable Holdings Inc. and subsidiary undertakings made up to 31 December 2015. Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Inter-company transactions, balances and unrealised gains on transactions between the Group companies are eliminated. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

In relation to the preparation of these financial statements, the Directors have been cognisant of the particular uncertainties outlined in note 3. The financial statements have been prepared on a going concern basis and it is the opinion of the Directors, based upon the information available and the information set out in the statement as to Going Concern in the Directors' Report, that Gable Insurance AG and the Group will be able to maintain its solvency requirements and meet its liabilities when they fall due.

While a number of new or amended IFRS and IFRIC standards have been issued there are no new standards that have a material impact on the Group.

The Board believes that the Company and all of its subsidiaries currently have Sterling as a functional currency. The financial statements are presented in Sterling. It is likely that the functional currency will change to Euros for the reporting period of 31 December 2016 and beyond.

2. Principal accounting policies

Business combinations

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at

the acquisition date. The excess of the cost of acquisition over the fair value of the net assets acquired is recorded as goodwill.

Goodwill

Goodwill is recognised in the statement of financial position at cost less any impairment.

Goodwill is tested annually for impairment. Where there is any reduction in the carrying amount, this would be recognised in the income statement for the period in which the reduction is determined.

Foreign currency translation

Transactions in foreign currencies are translated into sterling at the exchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rate ruling at the end of the reporting period, and the resulting foreign exchange gain or loss is recognised in the income statement.

Non-monetary assets and liabilities are translated using the exchange rate at the date of the transaction; no exchange differences therefore arise.

Underwriting transactions

The results for all classes of insurance business are determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of insurance, net of reinsurance as follows:

1. Premiums written comprise the premiums on contracts incepting in the financial year, together with any differences in premiums between booked premiums for prior years and those previously accrued, and include estimates of premiums due but not yet receivable or notified, less allowance for cancellations;

2. Unearned premiums represent the proportion of the premiums written in that year that relate to unexpired terms of policies in force at the end of the reporting period. For ATE business, premium of 75% is earned at inception (after a 25% early settlement discount) where the premium is fixed, or on the determination of the event where the premium is variable and dependent on the outcome of such a future event such as a court award of damages. Where the amount of such a premium is variable, a best estimate of the amount expected to be received is recognised;

3. Reinsurance premiums and any related reinsurance recoveries are accounted for in the same accounting period as premiums and claims incurred. Reinsurance premiums are earned over the period in which premiums on the related policies are earned;

4. Acquisition costs, which represent commission and other related expenses, are deferred and recognised over the period in which premiums from the related policies are earned;

5. Claims incurred represent claims and related expenses paid in the year and changes in the provisions for outstanding claims, including provisions for claims incurred but not reported (IBNR) and

related expenses, together with any adjustments to claims from prior years. Where applicable, recoveries due from reinsurers are disclosed separately;

6. Claims outstanding represent the estimated ultimate cost of settling all claims (including direct and indirect claims settlement costs) arising from events that

have occurred up to the end of the reporting period, including provisions for claims incurred but not reported, less any amounts paid in respect of those claims; and

7. Provision for the cost of handling future claims is only made if this cost materially exceeds future investment income from the claims fund maintained.

Expenses incurred in insurance activities and other operating expenses

Expenses incurred in insurance activities and other operating expenses are recognised on an accruals basis.

Taxation

The tax expense represents the sum of the tax currently payable and any deferred tax provided. The tax payable is based on the taxable income for the year. Taxable profit differs from profit for the year as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates applicable at the end of the reporting period.

Deferred income tax is generally provided on temporary differences arising between the tax bases of assets

and liabilities and the carrying value in the financial statements. However, if the deferred income tax arises from the initial recognition of goodwill, or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.

Deferred income tax is determined using tax rates enacted or substantively enacted at the end of the reporting period and expected to apply when the related deferred tax asset or liability is realised or settled.

Deferred income tax assets are recognised to the extent that future taxable profit will be available against which the temporary differences can be used.

Deferred income tax is provided on the temporary differences arising on the investments in subsidiaries, except where the Group controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset only where there is a legal right of offset and the deferred taxes relate to the same fiscal authority.

Leasing and hire purchase commitments

Rentals payable under operating leases are charged in the Income Statement on a straight line basis over the lease term. Lease incentives are recognised over the lease term on a straight line basis.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment. Depreciation is calculated to write off the cost of tangible

fixed assets over the estimated useful lives as follows:

IT systems and software: 20% per annum

Motor vehicles: 20% per annum

Furniture and fittings: 20% per annum

Leasehold improvements remaining term of lease, up to a maximum of 10 years

The gain or loss arising on the disposal of an item of property, plant or equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Impairment of assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment reviews are carried out more frequently if there is an indication that the asset may have been impaired.

The recoverable amount is the higher of fair value less cost to sell and value in use. In assessing value in use, the current estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement immediately. Except for goodwill where impairment losses cannot be reversed, where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of the impairment loss is recognised immediately.

Investments

The Group has designated on initial recognition its financial assets held for investment purposes (investments) at fair value through profit or loss. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets are based on quoted market bid and ask price for both financial assets and financial liabilities respectively.

Financial instruments

Financial assets comprise solely trade and other receivables and cash and cash equivalents. Financial liabilities comprise solely trade and other payables (classified as held at amortised cost) and loan notes with their associated embedded derivatives.

Trade receivables and payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment in the case of receivables. Cash and cash equivalents are carried in the consolidated balance sheet at amortised cost and include cash in hand, deposits held on call with banks and other short-term highly liquid investments with a maturity of three months or less at the date of purchase.

Provisions and contingencies

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Where a reimbursement is expected, this is recognised only when it is virtually certain that the reimbursement will take place and the amount to be reimbursed is known.

Contingent liabilities are liabilities that represent a possible obligation arising from a past event whose existence is dependent on one or more uncertain future events not within the control of the Group or a present obligation where it is not probable that an outflow will be required for settlement of the obligation.

Contingent liabilities are not disclosed where the likelihood of the uncertain future event is remote, unless the disclosure of the contingent liability adds clarity to the financial statements.

Contingent assets, which relate to possible assets and depend on the outcome of uncertain future events, are not recognised. Such an asset is disclosed only where the inflow of economic benefit is virtually certain.

Segment information

A business segment is a component of an entity whose results are regularly reviewed by the entity's chief operating decision maker and for which discrete financial information is available.

Share based payments

Options

The Group issues equity-settled share-based awards to certain employees (including directors). Equity-settled share-based awards are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based awards is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest. Fair value is measured using the Black-Scholes model.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. No adjustment is made to the expense recognised in prior periods if fewer share options are ultimately exercised than originally estimated. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The credit in the statement of profit or loss represents the movement in cumulative expense recognised as at 31 December 2014 as a result of vesting conditions not being likely to be met. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of shares issued are allocated to share capital with any excess being recorded as share premium.

Warrants

The Group has also issued equity settled share-based awards in respect of services provided. The share-based award is measured at fair value of the services provided at the grant date. The expense is allocated on a straight- line basis over the vesting period.

Loan Notes and Embedded derivatives

On 18 December 2015 the Company issued Loan Notes with a base value of £3.96 million for cash. IAS39 requires the Loan Notes to be considered as containing a hybrid instrument with an embedded derivative 'conversion feature' within the host instrument. The value of this embedded derivative has been calculated using the Black Scholes method as having a value of

£68,000 (2014: £Nil) and this is disclosed separately on the Group Statement of Financial Position. The embedded derivative will be re-measured at fair value at each reporting date. The liability host component (being the balancing amount of £3,982,000 (2014: £Nil)) was recorded as a liability at the date of issue of the Loan Notes. Between the date of issue and the year end IAS39 requires the Loan Notes to be amortised over their expected life with a corresponding charge to the Income statement. This charge amounted to £6,000 during the period (2014: £Nil) with a corresponding liability being added to the carrying value of the Loan Note liability (hence increasing the value to £3,988,000 (2014: £Nil). On conversion the company will recognise a gain or loss determined by reference to the fair value of the shares issued, effectively reversing the charges recognised in 2015.

Critical accounting estimates and judgements in applying accounting policies

The preparation of financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

The most critical accounting estimate made by the Group is the estimate of the ultimate claims liability under insurance contracts underwritten. The estimation of the liability considers historical data, with most relevance given to recent data, of claims experience. The ultimate cost of outstanding claims is estimated based on experience and current business conditions. Whilst claims need to be notified without delay, the settlement of claims and accordingly the ultimate cost of such claims cannot be known with certainty at the end of the reporting period. In particular, estimates of technical provisions inevitably contain inherent uncertainties because significant periods of time may elapse between the occurrence of an insured loss, the reporting of that claim, payment of the claim and the receipt of reinsurance recoveries. While the Directors consider that the estimate of claims is fairly calculated, on the basis of the information currently available to them, the ultimate liability remains inherently uncertain and may change as a result of subsequent information and events which may result in the eventual cost of settling these liabilities being higher or lower than the amount calculated. When estimating the required level of provisions, management will consider the results of a variety of actuarial techniques. The projections given by the various methodologies assist in setting the range of possible outcomes and facilitate management's selection of the most appropriate estimation technique taking into account the development of the Group's book of business. Any subsequent inadequacies or surpluses are adjusted and recognised in the income statement in the year in which they occur.

Over the last few years, GIAG has launched a number of new products in Europe, which remain at early stages of development, both in premium written and claims experience. In respect of the former in relation to ATE business, the Directors make assumptions as to the best estimate of any variable premium, which in the future may be higher or lower than the amounts recognised. Judgement is also required in selecting an appropriate accounting policy for fixed premiums on ATE business which only become payable when the underlying litigation is resolved. The group takes the view that these premiums are earned when the policy is written because the risk that is being insured has already occurred. If a different policy were applied, for example treating such premiums as earned only when the underlying litigation is resolved, premiums and associated profits would be recognised in later periods and net assets would be reduced. With regard to claims experience, the Directors have made a number of assumptions as to what the ultimate claims experience might be. Estimates of potential future settlements levels for open claims are based on the experience of the underwriting years to date. Taking these factors into account there is the potential that the amount at which claims will be settled in the future may be substantially higher or lower than the amounts currently provided in the financial statements. Having regard to this significant uncertainty inherent in the business of the insurance subsidiary and in the light of the information presently available, in the opinion of the Directors the provisions for outstanding claims and IBNR in the Group financial statements are fairly stated.

3. Risk management

The principal activity of the Group is that of an insurance company. As such, there are a number of specific risks that attach to such an undertaking. Insurance in its simplest form is the acceptance by an insurer of the risk to pay future claims, the compensation for which is an insurance premium. As such, the insurer must manage its risk in a number of specific areas.

Of the risks identified and managed by the Group, those of most significance at the current stage of the Group's development as identified by the Board and company management are underwriting, claims reserving and operational risks.

Underwriting risk

Definition

Underwriting risk concerns the uncertainty inherent within insurance business and the potential for both profit and loss emergence that is outside of expectation.

Risk effects

Underwriting risk affects GIAG by way of losses arising from claims; particularly where they are either individually significant or where there is an aggregation of many smaller claims.

Unprofitable expansion of existing lines of business or the introduction of new lines of business at unprofitable rates, can lead to significant business model strain.

Having completed an own risk assessment during the year; underwriting risk, and specifically the risk of aggregation of smaller claims, has been identified as GIAG's most significant risk over the three-year planning period.

Risk management considerations

The management of underwriting risk includes the use of pricing, policy wording, claim limits and reinsurance protection to enable an acceptable return on capital deployed. Experience monitoring is used to trigger management actions when necessary.

Pricing and policy wording

The key focus of the underwriting team is to manage the downside risks of writing insurance, in particular by focusing on securing business at rate that will, over a long term average, enable insurance profits.

To the greatest extent possible, GIAG uses underwriting limits and policy wording to reduce the potential exposure to large or catastrophic losses; however the risk of such loss events is inherent in writing some classes of business.

Reinsurance

Excess of loss ('XL') reinsurance is used to further manage GIAG's exposure to large losses. XL reinsurance is also used in a positive manner to enable GIAG to underwrite better quality but larger risks providing considerable benefits to the business whilst limiting exposure to large losses. In certain circumstances facultative insurance is purchased to protect GIAG against specific exposures.

Our XL reinsurance programme means that GIAG's exposure to any one loss is limited to £1 million or €1million (2014: £2 million or €2 million).

Quota share ('QS') reinsurance is used to reduce the volatility of the claims experience. QS reinsurance works to reduce the impact of attritional losses on GIAG, allowing for more risks to be underwritten, increasing diversification within the portfolio. The effect of this diversification should be to stabilise net claims experience over time.

Experience monitoring

The second aspect of managing the claims element of underwriting risk is the protection from the effects of the aggregation of a large number of small claims, which on their own are not considered troublesome to GIAG, but collectively amount to claim levels in excess of those expected at the time of pricing the business.

GIAG monitors both frequency and severity of claims over time, assessing change and adjusting underwriting policies accordingly. One example of such risk management has been an identification of risk and potential losses within the Danish portfolio which was addressed through the implementation of premium increases which has led to an improvement in the profitability of the book in 2015.

Risk ownership

Chief Executive Officer/Chief Underwriting Officer.

Claims reserving risk

Definition

Reserving risk involves the possibility that the value of provisions set aside for the payment of future claims is materially different to the eventual value of claims payments that are made in due course.

Risk effects

Reserving risk is, for most insurance firms, one of the largest risks within the business and has exposure both to the upside and downside, meaning that the emergent experience may be either favourable or adverse.

Risk management considerations

Management of reserving risk not only includes the holding of provisions but also the development and understanding of an internally agreed appetite towards reserving risk that complements the company's strategic aims.

Holding provisions

One approach to managing reserving risk is to set claims provisions at a high level to reduce the likelihood of the eventual claims payments being greater than expected and so can lead to holding excess levels of provisions. Whilst this method of mitigation is effective in reducing downside reserve risk, it increases the likelihood that reserve run off will be favourable to expectation and

thus the likelihood of reserves having been held unnecessarily. Setting the level of reserves is therefore more complex than just ensuring the firm has set aside enough to pay all claims, it requires a balanced approach to ensure that its resources are applied in the best possible manner for the ongoing success of the business.

Experience monitoring

GIAG monitors the claims development of all products from their respective launch and uses this analysis and the management expertise available to it to develop what the directors believe to be a reasonable reserving

position at each year end. Continued monitoring of the position has been and will be carried out for each underwriting year

Risk appetite development

Historically, Gable has favoured accepting higher levels of downside reserving risk, due to the niche nature of its business and to the significant opportunity cost of capital. In accepting higher levels of downside reserving risk Gable selected to target held reserves below the actuarial best estimate, although always within the actuarially assessed range of possible outcomes.

In more recent years, Gable has experienced significant growth, in terms of the number of territories business is written in, the variety of products written and in premium volume. As a result of having a larger number of relatively immature accounts, the uncertainty within the actuarially assessed reserves increased, making for a wider range of possible outcomes and increasing the potential impact from both upside and downside reserving risk. Whilst maintaining carried reserves at a consistent level compared to the actuarial best estimate, the widening of the range of possible outcomes risks being considered as an inadvertent increase of the level of reserving risk Gable is subject to.

As a response to this development in risk profile, in 2013 Gable reassessed its appetite to reserving risk and implemented a plan to strengthen reserves to eliminate the gap between the carried reserve and the actuarial best estimate. During the year GIAG made additional provisions amounting to £7.5 million (2014: £6.3 million) and as at 31 December 2015 GIAG holds claims provisions that are at least equal to the actuarial best estimate.

As the business moves into its next phase, it is appropriate that the Group re-evaluates its processes and conventions to ensure they remain appropriate in the changing market. This does not mean that historical risk appetites were incorrect, nor does it necessarily mean that management believe that the underlying performance of the accounts has changed; but reflects only the changing business environment, regulatory environment and maturity of Gable's book of business.

Continuing Uncertainty

In assessing the actuarial best estimate it should be noted that at the date of these financial statements, GIAG's claims experience for all products, even those launched in the UK in 2006 following the foundation of the business, has been developed over a short period of time. For those launched more recently the claims development experience carries an even higher degree

of uncertainty. For any insurance entity, it takes a number of years, not just to determine an actual result for a particular underwriting year but, and more importantly, to develop an experience of a particular book of business. Understanding the experience is essential so that claims reserving trends can be identified and applied. Whilst specific underwriting years may be close to establishing a result (i.e. 2006), it takes a much longer period to draw definitive conclusions against which future underwriting years may be judged. This feature of insurance business adds to the uncertainty of the actuarial best estimate, potentially widens the range of possible outcomes and increases the level of reserve risk, both upside and downside, that GIAG is subject to.

The Directors believe that a reasonable approach has been taken to reserving, as described in Note 13, for each of GIAG's underwriting years but in doing this, acknowledge that the significant uncertainty outlined above will remain with the Group's reserving conclusions for the immediate future. The conclusions drawn by the Directors rely on a number of assumptions. These, inter alia, include an assumption that future claim settlements will follow a similar trend to those experienced on settled claims to date. In addition, the performance of new products launched is dependent on a future claims development profile. Whilst the Directors believe that a reasonable approach has been taken in the early periods of account for these products, the ultimate claims experience will have a high degree of uncertainty until the claims experience has developed further. A 1% movement in the net loss ratio for the current underwriting year will increase/decrease profit by £596,800 (2014: £513,900).

Claims development

Claims development information is disclosed in order to illustrate the sources of significant uncertainty outlined above. The table compares ultimate claims estimates with the payments made to date. The first section of the table shows current estimates of cumulative claims and demonstrates how these claims have developed in subsequent years. The table below has been presented using actuarial best estimate figures for each period to show how the account has developed over time on a basis consistent with the management's long term objectives. Given that 2015 is only the tenth year of underwriting and volume and business mix has changed as the Group has grown, users of the financial statements are cautioned against extrapolating the below as representative of future claims development.

3. Risk management continued

The Board believes that the estimate of total claims outstanding at 31 December 2015 is adequate. The reserving methodologies used are outlined in note 13.

Risk ownership

Board of Directors

Operational risk

Definition

Operational risk is the risk of losses to GIAG arising from inadequate or failed internal processes, personnel or systems, or from external events.

Risk effects

As part of the own risk assessment of operational risks, the Board and management have identified the loss of a key function holder and the occurrence of a significant cyber-attack as those with greatest potential impact to GIAG, similar to that of market risk.

Risk management considerations

Gable manages its operational risks though streamlined processes, implementation of policies, functional terms of reference, compliance controls and appropriate staff training. Gable has engaged external expert consultants to review and advise it on its policies and controls.

Risk ownership

General Managers of GIAG

Claims settlement risk

Definition

Claims settlement risk is the potential for GIAG to incur unnecessary claims cost due to settlement of invalid claims, or settlement of claims at inappropriately high levels.

Risk effects

Increased costs to GIAG drive the Group's profit down. Additionally, the occurrence of this risk can increase reserving risk, with either claims provisions being insufficient due to this risk, or being set at levels in excess of true requirement having based future claims expectations on claims settled at inappropriately high levels in the past.

Risk management considerations

GIAG works to ensure that processes are in place such that only valid claims are paid and at appropriate settlement levels.

Enforcing rapid notification

Under each insurance contract the insured is required to notify GIAG (by way of its appointed agent in the relevant jurisdiction) of any event, which may give rise to a claim. Such notification must be made within a specific period of the event.

Using experts wisely

Upon receipt of a claim, GIAG makes an initial determination of its contractual liability and, where relevant, engages external experts to provide it with loss information.

Quick settlement

It is recognised that claims that are settled quickly incur less cost. As such GIAG seeks to agree and settle a claim as expeditiously as possible.

Risk ownership

General Managers of GIAG

Credit risk

Definition

Credit risk for the Group comprises:

- non-payment of insurance premium by insured, including for ATE business where the majority of premiums only become payable when the underlying litigation is resolved:

- non-payment of reinsurance recoveries: for Gable's reinsurance programmes,

Risk effects

Non-payment of amounts owed results in losses for GIAG, reducing profit and solvency.

Risk management consideration

Ongoing monitoring

Premium outstanding is monitored on a regular basis and each insurance contract contains a specific warranty as to requisite payment period. Cover may be voided should premium not be paid.

The Group has insurance receivables that are past due but not impaired at the reporting date. An aged analysis of the carrying amounts of these receivables net of provisions is disclosed below:

The ageing of debtors reflects the payment terms on the products offered. As part of its debtor management procedures, the Directors monitor past due debtors and undertake all requisite actions to recover these amounts (see note 15). The Directors have, therefore, made certain assumptions in respect of the recoverability of long-term debtors, which they consider to be reasonable. In respect of premiums receivable the Group holds an impairment provision of £0.4m (2014:£1.1m). In order to mitigate counterparty risk on bank deposits, the Group maintains a policy of holding not more than£15.0m (2014: £7.5m) in any one banking group where practical. The following table shows movements in impairment provisions in the year:

Quality of reinsurance

GIAG's annual reinsurance programme in general runs from 1 July to 30 June and is placed with international and global reinsurers that have a credit rating of A or above. The reinsurance programmes are placed by our brokers AON and Arthur J. Gallagher.

The Group recognises that its reinsurance arrangements do not relieve it of its ultimate liability to policyholders and as such the Group is exposed to credit risk to the extent that any reinsurer is unable to meet obligations assumed under such reinsurance arrangements. As at 31 December 2015 the balance due from reinsurers in respect of recoveries on quota share arrangements was £10.1 million (2014: £0.1 million). As at 31 December 2015 the balance due from reinsurers in respect of amounts recoverable on flood claims was £2.8m. As the reinsurance arrangements are made with a panel of rated insurers, the Board is comfortable that there is no material concentration of credit risk within reinsurance assets.

Risk ownership

Group Head of Finance

Currency risk

Definition

Currency risk is the risk of losses to the company that result from adverse movements in foreign exchange rates.

Risk effects

Changes in foreign exchange rates can result in a reduction of the net assets of the Group. This has adverse impacts of solvency. The movement of exchange rate between GBP and other currencies poses an exchange rate risk to GIAG.

In addition, indirect foreign currency exposure exists from policies where the insured events are settled in other currencies.

Risk management considerations

Currency matching

GIAG retains its policy income and settles claims in the currency in which the contract is made and, therefore, mitigates currency risk by regularly reviewing currency assets and liabilities and converting excess assets or liabilities into Sterling to leave, as far as possible, a matched currency position.

For the year ended 31 December 2015 and 2014, all premium income was denominated in GBP, Euro, Danish Kroner or Norwegian Kroner and claims arising therefrom will be settled in each relevant currency. Due to Gable Insurance AG being a Liechtenstein registered company, certain monetary assets are denominated in Swiss Francs.

The sterling equivalent of monetary assets and liabilities held by the Group denominated in Euro, Norwegian Kroner, Swiss

Francs, Danish Kroner and United States Dollar at the year-end were as follows:

A 10% increase/decrease in the exchange rates applied to convert the currencies above against GBP would impact the value of the Group's net assets and its profit as at 31 December 2015 by approximately £3,363,000 (2014: £2,701,000).

Risk ownership

Group Head of Finance

Interest rate risk

Definition

Interest rate risk is the risk of losses to the Group arising from unfavourable movements in interest rates.

Risk effects

The Group's main exposure to fluctuations in interest rates arises in its effect on the yield that is received on its short term deposits. This is not a significant risk to the Group.

Risk Management Considerations

When placing funds, consideration is given to achieving a competitive return on the amount invested. An increase or decrease of 10% in interest rates would decrease/increase Group profit by less than £67,000 (2014: £10,000).

Risk ownership

Group Head of Finance

Liquidity risk

Definition

Liquidity risk is the risk that Gable is unable to realise investments and other assets in order to settle its financial obligations when they fall due.

Risk effects

The impact of a liquidity risk event includes adverse impacts on the Group's reputation should obligations not be met when they fall due. When considered alongside the other risks faced by the Group, liquidity risk is not a significant risk.

Risk Management Considerations

Investing in liquid assets

Net premium income received by GIAG is retained in its base currency and placed on short term deposit with recognised banking institutions. As the business develops, premium is written and claims experience develops, the Group will seek to extend the period of its deposits, whilst retaining a range of maturity dates to ensure that financial resources are available to meet its known financial requirements and provide the ability to meet efficiently potential loss liabilities.

Considering the link to other risks

As part of its annual risk assessment, GIAG has considered the relationship between underwriting risk and liquidity risk. Whilst liquidity risk is not a significant risk for GIAG there is potential that it becomes so should significantly lower than expected levels of premium income occur simultaneously to adverse claims experience and result in greater levels of cash outflows compared to inflows.

Loan Notes and Embedded derivatives

On 18 December 2015 the Company issued Loan Notes with a base value of £3.96 million for cash. These loan notes are

due to be repaid in December 2018, but it is open to the Company to convert these into new ordinary shares to be issued at prices between 10p and 15p, therefore reducing liquidity risk.

In managing underwriting risk the Board and management are therefore cognisant of its potential links to liquidity risk.

Risk ownership

Group Head of Finance

Regulatory and Capital risk management

GIAG is regulated by the Financial Market Authority in Liechtenstein and is subject to its regulatory requirements. Failure to comply may lead to sanctions being placed on GIAG and, therefore, affect its ability to conduct business. GIAG is also reliant on the continued existence of legislation allowing EEA based companies to passport into the EU. The UK held a referendum on continuing membership of the European Union ('EU') and voted to exit from the EU. Accordingly, there is some uncertainty relating to the mechanism under which EU and EEA based companies will conduct their business in the UK. The business currently undertaken by Gable in non-UK countries will not be affected.

The Directors have overall responsibility for managing the Group's capital base with the principal objective of maintaining sufficient capital to satisfy regulatory requirements. The Directors also recognise the need to maintain a strong capital base that provides the necessary protection to policyholders and creditors and at the same time generating sufficient returns to create shareholder value.

GIAG is a regulated insurance company in Liechtenstein. Liechtenstein regulations require insurance companies to meet the solvency requirements in that jurisdiction and to hold reserves set at an actuarial best estimate or otherwise be in technical breach of the regulations.

GIAG holds claims reserves set at or above actuarial best estimate. In past years, GIAG held reserves set at a management best estimate which, over time, had diverged from the actuarial estimate for the reasons set out elsewhere in these accounts. Throughout that historical period the carried reserves were accepted by the regulator. As explained earlier in this note, the Company made additional provisions in 2013, 2014 and 2015 to eliminate this historical gap. Whilst this has had a material adverse impact on the reported result for the current year and that of the comparative period, uncertainties relating to the financial performance and position arising from carrying a reserve different from that determined by actuarial assessment have been significantly reduced.

The significant growth in business enjoyed by the group in recent years has resulted in an accelerating regulatory capital requirement. The ability of GIAG to build its capital base through the retention of profits has been materially restricted by the additional claims provisions set aside since 2013 amounting to some £15.2 million and the impact of adverse claims experience in 2014 and flood claims in December 2015. Gable increased its regulatory capital partly through the injection of new capital into GIAG and partly through the use of a Quota Share reinsurance policy which is effective for the 2015 calendar year. However, the impact of the additional provision against an ATE debtor announced earlier this year has reduced GIAG's own funds to below the required level. As discussed earlier in these accounts, whilst the Board examined a variety of mechanisms to address this situation under Solvency I, the Board, after consultation with its regulator, the FMA, is taking action to move directly into the Solvency II regime.

The company meets with the regulator on a regular basis and is constantly updating capital plans for future years. With the implementation of Solvency II with effect from 1 January 2016, the Board recognises that its historical business plan under which a £100 million business has been built from scratch in 2006, is no longer appropriate and a Strategic Restructuring Plan has been developed. The Board has reasonable expectation that the implementation of this plan will enable GIAG to meet its regulatory capital requirements under Solvency II within the required timetable. Further details are provided in the comment on going concern below.

Going concern

The Directors have assessed going concern from both a financial and regulatory aspect, as outlined in the Report of the Directors.

Gable has prepared a financial model comprising a detailed projection and budget for the year ahead plus a further two-year premium projection prepared on a line-by-line basis for each business class. All financial models contain a great deal of uncertainty as they are based on assumptions which may prove inaccurate. Factors outside of the control of the Company such as changes in the economic environment, foreign exchange movements, competitor actions, regulatory changes and tax law changes can render a financial model inaccurate. In addition, whilst projections are based on expected future developments from historical experience, there is no guarantee that the past experience proves to be an accurate predictor of the future.

With regards to the non-financial assessment of going concern, the Company's ability to continue to trade is dependent on maintaining its licences to write business across Europe. Gable's insurance operations are based in Liechtenstein and its ability to trade in Europe is conditional on the maintenance of the Passporting mechanism allowing EEA based business to trade within the European Union.

The Company must also maintain sufficient regulatory capital for the level of business written. The calculation of the required level of capital under Solvency II is based on a complex standard model which is poorly understood by the markets and is widely criticised. Whilst the Board is supportive of the move towards a more risk based approach to regulatory capital, Gable believes that the Solvency II approach adopted by Europe is deeply flawed.

Small changes to assumptions input to the Solvency II model can provide large changes to the required capital. In addition, as Gable is a small company operating in niche areas it is not able to materially benefit from diversification. The key risks involved in determining the regulatory capital position include unexpected growth in premiums driving an excess capital requirement, changes in the mix of business which has an adverse impact on the capital requirement and any financial impact which depletes own funds such as large claims, bad debts or financial impairment of assets. In addition, the Board's Strategic Restructuring Plan involves the transfer of all UK business plus the majority of its European business to multi- national insurance carriers via MGAs, the implementation of reinsurance products or a risk transfer to provide Solvency II cover for the historical book of business and the retention of sufficient capital to provide Solvency II support for its retained Europe based business.

There remains significant uncertainty regarding the implementation of the Strategic Restructuring Plan. The insurance carriers with whom we are currently in negotiation are conducting an independent assessment of our insurance book and related assets and liabilities. The outcome of this assessment will determine the pricing of the risk transfer or reinsurance product and there is no guarantee that the group will retain sufficient capital to enable it to support the retained business.

The Board has made good progress in its discussions with third parties regarding the implementation of the Strategic Restructuring Plan and on this basis, the Directors have a reasonable expectation that the Company will be able to continue in operational existence for the foreseeable future. Whilst our negotiations with third parties provide the basis for the Board's view on Going Concern, this forms insufficient evidence for the auditors to form an opinion on the Group accounts. However, accounts for our insurance subsidiary, GIAG, were approved by the auditors and filed and accepted in Liechtenstein on 4 July 2016.

Financial Investments

Financial investments are carried in the statement of financial position at fair value. The carrying amount of financial investments at the date of the statement of financial position was £15.1m (2014: nil).

The Group value investments using designated methodologies, estimations and assumptions. These securities, which are reported at fair value on the statement of financial position, represent the majority of the invested assets. The measurement basis for assets carried at fair value is categorised into a 'fair value hierarchy' in accordance with the valuation inputs and consistent with IFRS 13 'Fair Value Measurement'. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (level one); the middle priority to fair values other than quoted prices based on observable market information (level two); and the lowest priority to unobservable inputs that reflect the assumptions that we consider market participants would normally use (level three). At 31 December 2015, Financial investments amounting to £15.1m (2014: nil) were classified as level two.

The classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. Any change to investment valuations may affect our results of operations and reported financial condition.

4. Segment information

International Financial Reporting Standard 8 'Operating Segments' ('IFRS 8') requires that segments represent the level at which financial information is reported to the Board, being the chief operating decision maker as defined in IFRS 8. The reportable segments have been identified as follows:

· Insurance activities, which comprises the Group's insurance subsidiary

· Administration activities, which comprises all other activities of the Group

Segment information - segment result

Transactions between reportable segments include management fees that are set on a commercial basis intended to provide a small profit on management services provided but subject to the overall group result and affordability.

4. Segment information continued

No single customer represents more than 10% of total revenue.

5. Profit on ordinary activities

The profit on ordinary activities was derived from the principal activities of the Group. The profit on ordinary activities is stated after charging:

6. Net investment return

7. Directors and employees

The total wages, salaries and staff costs incurred (including Directors' fees) in the year ended 31 December 2015 were

£1,906,000 (2014: £1,719,000). Details of the Directors' emoluments are set out in the Report on Remuneration.

8. Taxation

The tax charge for the period arises from local taxation in Liechtenstein (where the ordinary tax rate is 12.5%) and the UK (where the applicable tax rate for the year is 20.25%), payable in Gable Insurance AG and Gable Services (London) Limited respectively. Gable Holdings Inc., the group's holding company is resident in the Cayman Islands and therefore subject to an expected tax rate of 0%.

The following table provides a reconciliation of the expected tax charge for Gable Holdings Inc. to the tax charge of the group:

A deferred tax liability as at 31 December 2015 of £nil (2014: £nil) has been recognised in the financial statements in respect of consolidation adjustments for temporary differences between Liechtenstein GAAP and IFRS. Asat 31 December 2015, a deferred tax asset of £nil (2014: £nil) has been recognised for the impact of the prior year restatements in Gable Insurance AG. A deferred tax asset of £1,363,000 relating to tax losses recorded by Gable Insurance AG has not been recognised.

9. Earnings and net asset value per share

The calculation of the basic and diluted earnings per share is based on the loss for the year of £24,209,000 (2014: loss of £4,822,000) divided by the weighted average number of shares in issue during the year of 135,319,833 (2014: 135,022,347). Option and warrant shares are not considered dilutive in 2015 due to recorded losses for the year.

The net asset value per share is calculated by dividing the total equity of £3,026,000 (2014: £27,309,000) by the number of shares in issue at the end of the period, 135,319,833 (2014: 135,319,833).

Details of the potentially dilutive instruments utilised in the calculations above are set out in note 17.

10. Intangible assets

The goodwill brought forward from 1 January 2014 arose from the acquisition of the Group's insurance subsidiary, Gable Insurance AG. An impairment review has been carried out on this asset in light of the proposed strategic restructuring referred to in the CEO report and it has been determined appropriate to make a full provision against the carrying value of the goodwill to reflect the impact of the significant restructuring of the business under the Strategic Restructuring Plan.

The recoverable amount of the cash generating unit to which the goodwill impairment charge has been allocated is £nil. The methods applied to determine the recoverable amount is disclosed in note 2.

11. Investments

12. Property, plant and equipment

Depreciation is charged to other operating expenses.

13. Insurance assets and liabilities

At 31 December 2015 the Group has set reserves at the actuarial best estimate as set by our in-house Actuary on a basis subject to independent peer review by Grant Thornton.

Historically, since inception, the Group used a consistent, simplified formulaic approach to calculate reserves in respect of its insurance liabilities at the balance sheet date. The approach was based on a fixed percentage of premiums across the entire portfolio. This is not uncommon in the absence of directly comparable and relevant empirical data, which is often the case for insurance portfolios at a relatively early stage of development. In keeping with best practice, the Group prepares an actuarial best estimate (which is subject to an independent actuarial peer review) of its reserves which has provided a 'best estimate'. Historically, in the absence of its own mature experience, this assessment has necessitated the use of certain market level benchmark data, hence such reviews can never fully capture the impact of the Group's 'niche underwriting' strategy, tight policy wording and beneficial impact of a proactive and efficient claim handling process.

For the current year and beyond, Gable carries reserve at actuarial best estimate and will apply a reserving policy based on an internal, class-specific actuarial assessment prepared by Gable's in house actuary on an ongoing basis. The internal assessment is based on a more granular, bottom-up approach, taking into account coverage, claims reporting patterns and wording restrictions. The Board fully believes that its niche underwriting strategy will demonstrate loss ratios which outperform the wider market.

13. Insurance assets and liabilities continued

-

The insurance reserves carried by the Group are calculated using a number of methods to project gross and net insurance liabilities:

· a case by case review of notified claims; and

· actuarial techniques such as the chain-ladder method and the Bornhütter-Ferguson method.

The Group has undertaken an actuarial assessment of its reserves which has been independently peer reviewed by Grant Thornton, to ensure that the reserves included in the year end results are within a range of possible outcomes.

13. Insurance assets and liabilities continued

The major assumptions underlying the reserves established by the Group are:

· The Group's claims experience for the ten years ended 31 December 2015 can be used to project future claims development factors; and

· Benchmarking exercises used in the assessment of ultimate claims provide a reasonable basis to compare against the Group's reserve position (after adjusting for differences in the business underwritten and the relevant factors).

The aim of these assumptions is to arrive at an estimate of the possible future obligations and cash outflow of the Group. The estimates selected and disclosed in the financial statements are sensitive to various factors including:

· Future cost inflation of loss adjusters and the advisors who assist the Group with the settlement of claims; and

· The development of the Group's claims experience as it develops its presence in the market. Whilst there is the potential for claims experience to deviate from that estimated this is kept under constant review by management.

The assumption that has the greatest effect on the measurement of the insurance contract provisions is the expected loss ratios. The expected loss ratio is the ratio of expected claims to premiums.

As at 31 December 2014 the estimated gross reserve on an underwriting year basis (that is encompassing both business that is earned and business that his unearned at the time of valuation) was £74.2m. In the year ending 31 December 2015, an amount equal to 33.3% of this reserve was paid out as claims settlements for claims relating to underwriting years 2014 and prior.

An analogous review undertaken as at 31 December 2014 indicated that just over 20% of the estimated gross reserve as at 31 December 2013 was paid out as claims in the year ending 31 December 2014. Taking these two assessments, we might expect in excess of 20% of the technical provisions as at 31 December 2015 to be settled by 31 December 2016.

14. Prepayments and accrued income

2015 2014

£000s £000s

Prepayments 659 126

659 126

15. Trade and other receivables

Following the receipt of new information in respect of an ATE Insurance policy relating to a US litigation case, the Board have determined to write off in full the premium not yet due of £7.9 million, which was shown in the 2014 report and accounts. Previously the premium receivable by the Group for this policy consists of an initial fixed premium (which has been collected) plus a variable element calculated on a fixed percentage of the award receivable by the plaintiff. The US Court initially awarded damages in 2012 for breach of contract and the Group recognised a recoverable balance of $5.5m based on this initial award. Since that court ruling substantial further information on quantum of this settlement was discovered and in light of this information, Management revised its best estimate of the amount likely to be recovered through further judicial process to the US$12.6 million (£7.9m) historically recorded in the financial statements.

15. Trade and other receivables continued

Both parties to the litigation raised appeals against certain aspects of the original ruling, all of which were rejected by the courts in a hearing in April 2015. A hearing to finally determine quantum was set for October 2015 but the parties reached a private settlement immediately prior to the hearing taking place. The Board took steps to determine the nature of the private agreement and the quantum agreed and, at the end of May 2016, obtained information that the settlement had been agreed at an amount substantially below that of even the initial award. Accordingly, and after further consultation, the Board has decided it will be prudent to write down the recoverable amount to £nil (2014: £7.9 million) to reflect this new information. Management is dissatisfied with the outcome of this case, not least because the terms of the policy required the parties to consult the Group on any proposed settlement and this did not occur. The Group is taking steps to seek additional recoveries for, amongst other reasons, breach of contract but there remains uncertainty regarding the amount and the timing of any additional premium recoverable by the Group.

The amount and timing of receipt of other ATE premiums not yet due is dependent on factors outside of the Company's control and is therefore uncertain and a significant portionof this balance could become recoverable after more than one year. ATE Insurance policies are no longer being written.

All other trade and receivables are due within one year.

16. Cash and cash equivalents

17. Share capital and premium

The totalauthorised number of shares is 4,000 million (2014: 4,000 million), with a nominal value of 0.25 pence each. All issued shares are fully paid.

Share options

On 9 July 2010 share options were granted to directors, management and key employees (the '2010 Options'). All 2010

Options had vested as at 31 December 2014. On 25 June 2014 share options were issued to directors and management

(the '2014 Options') which will vest, subject to performance conditions, on 25 June 2017. The performance conditions were not met during the year and the Board consider it unlikely that these options will ever vest, accordingly the charge made in the prior year has been reversed. Subject to vesting, options can be exercised from after three years from the date of grant until ten years from the date of grant. Options are settled in equity once exercised.