30th Aug 2007 07:01
Amlin PLC30 August 2007 AMLIN PLC PRESS RELEASEFor immediate release30 August 2007 Interim Results for the six months ended 30 June 2007 AMLIN DELIVERS RECORD INTERIM RESULT Highlights •Annualised first half return on equity of 31.8% (H1 2006: 24.2%) •Profit before tax up 54.0% to £185.0 million (H1 2006: £120.1 million) •Strong underlying underwriting contribution up 17.2% to £146.6 million (H1 2006: £125.1 million) •Group combined ratio 71% (H1 2006: 79%) •Investment performance increased by 73.2% to £65.3 million (H1 2006: £37.7 million) •Interim dividend increased 19.0% to 5.0p per share (H1 2006: 4.2p per share) •Small exposure to the sub-prime market •Positive outlook for the full year and for 2008 Charles Philipps, Chief Executive, commented as follows: "This is a record result driven by an exceptional underwriting performance andstrong investment returns. Our outlook for the remainder of 2007 and for 2008 ispositive." Enquiries: Charles Philipps, Chief Executive, Amlin plc 0207 746 1000Richard Hextall, Finance Director, Amlin plc 0207 746 1000Hannah Bale, Head of Communications, Amlin plc 0207 746 1118David Haggie, Haggie Financial 0207 471 8989 / 07768 332486Peter Rigby, Haggie Financial 0207 471 8989 / 07803 851426 Financial highlights 6 months 6 months 12 months 2007 2006 2006 £m £m £m--------------------- ---------- --------- ----------Gross premium written 805.2 846.21 1113.81Net premium written 732.9 766.51 1013.51Earned premium 514.5 481.81 973.91--------------------- ---------- --------- ----------Profit before tax 185.0 120.1 342.7Profit after tax 148.6 94.9 267.8Return on equity 15.9% 12.1% 34.0%--------------------- ---------- --------- ----------Net assets 984.4 817.1 936.4Net tangible assets 918.4 751.1 870.4--------------------- ---------- --------- ----------Per share amountsEarnings 27.9p 17.9p 50.4pDividend under IFRS 15.8p 6.2p 10.4pDividend (paid, declared and proposedin respect of the period/year) 5.0p 4.2p 20.0pNet assets 184.0p 153.5p 175.6pNet tangible assets 171.7p 141.1p 163.2p--------------------- ---------- --------- ----------Group operating ratiosClaims ratio 43% 49% 41%Expense ratio 28% 30% 31%Combined ratio 71% 79% 72%Syndicate 2001 combined ratio 76% 84% 76%Amlin Bermuda Ltd combined ratio 52% 49% 48%--------------------- ---------- --------- ---------- INTERIM RESULTS STATEMENT We are pleased to report another excellent set of first half results with anincrease of 54.0% in profit before tax to a record £185.0 million. Strongunderwriting and improved investment returns were the drivers behind theincrease. Return on equity was an impressive 15.9% for the six months ended 30June 2007 (H1 2006: 12.1%) increasing our weighted average return on equitysince 2002 to 29.3%. Additionally, we have reduced net exposures to major catastrophe events relativeto 2006 with increased reinsurance protection and have taken steps to increaseour long term growth potential. Results Profit before tax increased to £185.0 million at the half year (H1 2006: £120.1million). Our underlying profit, after removing the positive effect of a £28.6million swing in the foreign exchange translation of net non-monetaryliabilities relative to 20061, rose by 25.3% to £179.7 million (H1 2006: £143.4million). The underlying result is analysed as follows: Table 1: Analysis of result Profit before tax Underwriting contribution --------- --------- --------- --------- H1 2007 H1 2006 H1 2007 H1 2006 £m £m £m £m --------- --------- --------- ---------As reported 185.0 120.1 151.9 101.8IFRS translation adjustment (5.3) 23.3 (5.3) 23.3 --------- ---------- --------- ----------Underlying result 179.7 143.4 146.6 125.1 ========= ========== ========= ========== Underwriting performance was again strong. Our London operations produced anunderwriting return of £97.7 million (H1 2006: £101.5 million) and AmlinBermuda's contribution more than doubled to £48.9 million (H1 2006: £23.6million). Gross premium written increased modestly in original currency with growth inwell priced classes such as US catastrophe reinsurance, including in Bermuda,and further volume reductions in classes which have continued to come underrating pressure, such as UK commercial motor. However, with 61.4% of grosspremium written in US dollars, reported gross premium written, at £805.2million, is 4.8% less than in the prior half year (2006 H1: £846.2 million). Gross earned premium was 7.3% higher at £572.8 million (H1 2006: £533.6 million)reflecting the earnings lag on the growth in business written in 2006,particularly with Amlin Bermuda in start up phase in the first half of thatyear. Net premium earned increased by 6.8% (excluding the premium forreinsurance to close the remainder of Syndicate 2001 from third parties). The Group combined ratio was 71% (H1 2006: 79%). The improvement was due to areduced claims ratio of 43% (H1 2006: 49%) with relatively modest lossesestimated from the Kyrill windstorm and the June UK floods, and few new largerisk losses. The contribution from investments was higher at £65.3 million (H1 2006: £37.7million) with strong returns made from equities in the first part of the year.Overall, half year bond returns improved even though they were held back by alow sterling return. Earnings per share increased 55.9% to 27.9p (H1 2006: 17.9p). Dividend The Board has declared an interim dividend of 5.0 pence per share (H1 2006: 4.2pence per share). This will be paid on 19 October 2007 to shareholders on theregister at the close of business on 21 September 2007. A dividend reinvestmentplan, details of which may be obtained from the Company's registrar or from theCompany's website, is available to shareholders in respect of this dividend. As indicated in our 2006 Annual Report, we will keep under review theappropriate level of capital for the future needs of the Group, mindful of ourdesire to enhance long term shareholder returns through active balance sheetmanagement. Subject to the level of major catastrophe activity in the secondhalf, we expect to have capital which is surplus to requirements. In this event,we intend to return capital to shareholders, retaining sufficient to takeadvantage of opportunities which may arise to enhance the longer term growthpotential of the Group. Underwriting conditions and premium Gross premium written in the first half year was strongly weighted to businesswhere risks remain for the most part well priced: Marine, Non-marine and AmlinBermuda, which together represented 84.4% of gross premium written. Our Aviationand UK Commercial businesses, which represented 15.6% of gross premium written,continued to suffer from intensifying competition and we have therefore reducedexposures where rating levels have fallen below our return requirements.Overall, the renewal rate reduction across all business was 3.4%, with a numberof our larger classes continuing to trade at or near to peak pricing levels. Therenewal retention ratio for the half year was 81% (H1 2006: 79%). Table 2: Average renewal and retention rates Average Average renewalSix months 2007 Gross written premium renewal rate retention ratio change H1 2007 £m H1 2006 £m % %----------------- ---------- ---------- ---------- ----------Amlin Bermuda(direct only) 96.4 78.0 (3.8) 93Aviation 36.8 42.4 (10.3) 79Marine 145.2 161.0 (2.1) 81Non-marine 437.8 475.0 (3.1) 80UK Commercial 89.0 89.8 (4.0) 77----------------- ---------- ---------- ---------- ----------Total / average 805.2 846.2 (3.4) 81----------------- ----------- ----------- ----------- ---------- Our rating indices (Table 3) illustrate the pricing trends for a number of majorclasses. Table 3: Rating indices for major classes (based on renewal) 2 Class 2000 2001 2002 2003 2004 2005 2006 2007----------------- ------ ------ ------ ------ ------ ------ ------ -------US catastrophereinsurance 100 115 146 150 143 144 185 185Non US catastrophereinsurance 100 120 157 161 145 131 138 132US large propertyinsurance 100 125 171 163 143 136 166 152UK fleet motor 100 121 136 143 141 137 135 134Per risk propertyreinsurance 100 122 189 191 170 146 170 151Energy 100 140 172 189 170 175 258 244US casualty 100 123 172 217 234 239 235 230Professional indemnity 100 110 149 178 181 165 154 142Marine hull 100 115 148 171 183 189 191 190War 100 250 288 244 220 206 191 178Airline hull andliabilities 100 301 283 235 216 201 171 136UK employers'liability 100 115 144 158 159 144 135 122----------------- ------ ------ ------ ------ ------ ------ ------ ------- Outwards reinsurance The first half of 2007 has seen retrocessional reinsurance becoming morereasonably priced, and as a consequence Syndicate 2001 has purchased morereinsurance to protect its own reinsurance account than in 2006, when we tookthe view that the price of cover had become uneconomic and operated withsignificantly less retrocessional reinsurance than in previous years. Higherlevels of cover have also been purchased on the direct Marine and Non-marineaccounts. Despite the increased cover purchased for the Syndicate, reinsurance expenditureas a proportion of gross written premium has fallen to 9.0% from 9.4% for thesame period in the prior year. This is due to a two factors. Firstly, AmlinBermuda now represents an increasing part of the business relative to last yearand to date it has operated without the purchase of any reinsurance. Secondly,more reinsurance is bought for the Syndicate dollar account than for thesterling business. As the dollar weakens, this lowers the apparent reinsuranceexpenditure. Claims The Group claims ratio improved on the prior half year to 43% (H1 2006: 49%). Natural catastrophe activity in the United States was a little below long termaverages for the first six months. However, the UK and Australian floods in Juneare major losses to the international insurance markets. Windstorm Kyrill, whichswept across Northern Europe in January, is also estimated to have caused a lossof €3 - 4 billion to the insurance industry. Our exposures to these events havebeen contained, in part owing to our positioning on reinsurance programmes andrisk retained by cedants, and in part due to our comparatively small exposure tothe UK direct household and small commercial sectors. Conservative estimates ofour losses from Kyrill, and the UK and Australian floods respectively are £1.5million, £24.6 million and £8.5 million, and there is a good possibility thatthey will be less. Elsewhere, there have been only a small number of risk losses with exposure toonly one of the three major marine hull losses and our Aviation business, havingbecome increasingly selective in the face of poor airline risk pricing, hasmanaged to avoid exposure to the vast majority of airline losses incurred in theyear to date. £40.9 million (H1 2006: £26.0 million) was released from reserves in the period,as claims on prior underwriting years developed better than expected. Ourreserving policy remains unchanged. The margin of net claims reserves for the2006 and prior underwriting years, that we have accounted for above the bestestimate level assessed by our internal actuarial team, was over £150 million at30 June 2007. Underwriting contribution The underwriting contribution, after removing the effect of foreign exchangetranslation differences on non- monetary liabilities, increased by 17.2% to£146.6 million (H1 2006: £125.1 million). Of this, Syndicate 2001 and AmlinBermuda contributed £97.7 million (H1 2006: £101.5 million) and £48.9 million(H1 2006: £23.6 million) respectively. The combined ratio, on a similar basis,was 72% (H1 2006: 75%). Net earned premium rose by 6.8% to £514.5 million (H12006: £481.8 million, excluding the premiums associated with the reinsurance toclose of our increased share of capacity). This growth is attributable to theearnings lag on increased business written in 2006. Segmental commentary The following commentary and Table 4 is provided after removing the effect ofthe foreign exchange translation of non-monetary liabilities to allow focus onbusiness trends. Table 4: Divisional combined ratios Non-marine Marine UK Commercial Aviation Amlin Bermuda Intra group Total--------------- ------- ------- -------- -------- ------- -------- -------Gross premiumwritten (£m) 437.8 145.2 89.0 36.8 169.7 (73.3) 805.2Net premiumsearned (£m) 236.1 85.0 71.8 23.9 101.5 (3.8) 514.5Release fromreserves (£m) 19.1 (4.0) 16.0 5.8 4.0 - 40.9 Combined ratios before removing the effect of foreign exchange translation of non-monetary liabilities Claims ratio 34% 57% 59% 37% 40% 43%Expense ratio 33% 38% 24% 41% 12% 28%--------------- ------- ------- -------- -------- ------- -------- -------Combined ratioH1 2007 67% 95% 83% 78% 52% 71%Combined ratioH1 2006 73% 97% 87% 126% 49% 79%--------------- ------- ------- -------- -------- ------- -------- ------- Combined ratios after removing the effect of foreign exchange translation of non-monetary liabilities Claims ratio 36% 59% 59% 39% 40% 44%Expense ratio 31% 38% 24% 41% 12% 28%--------------- ------- ------- -------- -------- ------- -------- -------Combined ratioH1 2007 67% 97% 83% 80% 52% 72%Combined ratioH1 2006 67% 91% 86% 116% 49% 75%--------------- ------- ------- -------- -------- ------- -------- ------- Non-marine (45% of net earned premium in period) US catastrophe reinsurance pricing remained strong, with rates in the early partof the year increasing, albeit not to the same levels evident in the middle oflast year. The market remained disciplined with a sensible balance betweenpotential return and risk underwritten. Action by the State of Florida toincrease the State supported catastrophe fund was less disruptive thanoriginally feared. The increase was less than initially stated, primary insurerspurchased more cover and market behaviour was rational and pricing firmrecognising the increased hurricane threat faced. International catastrophe pricing was disappointing, with pressure growing asmore reinsurers looked to diversify their portfolios. However, pricing incapacity constrained zones such as Europe and the Caribbean remained adequate. The low level of catastrophe losses incurred by the division in the first half,aided by limited claims development on prior period reserves, resulted in aclaims ratio of 36% (H1 2006: 39%). The rise in the expense ratio is mostlycaused by a 4% reduction in net earned premiums. This reflects deterioration inthe US dollar against sterling. Our Non-marine combined ratio of 67% (H1 2006: 67%) is another excellent result. Amlin Bermuda (20% of net earned premium in period) Amlin Bermuda wrote £96.4 million or $189.9 million (H1 2006: £78.1 million or$139.8 million) of direct business in addition to quota share and otherreinsurances of Syndicate 2001 which increased its overall premium written to£169.7 million or $334.3 million (H1 2006: £161.8 million or $289.7 million).Growth has been constrained by many primary carriers choosing to maintain ourshare of risks at last year's levels in the face of growing competition forlines. This is more satisfactory than fierce competition on price. Importantly the quality and diversity of business written is good and we havenot compromised our underwriting standards in order simply to meet premiumincome targets. This, over the long term, should deliver out- performance. Theunderwriting team has been augmented by two joiners who will help broaden AmlinBermuda's marketing ability. With a full year's trading behind it, Amlin Bermuda's net earned premium hasincreased by 113% to £101.5 million. The claims ratio of 40% reflects the lowlevel of catastrophe losses, with 95.8% of direct/non-Group income being derivedfrom property reinsurance. The expense ratio has remained static at 12%. The combined ratio of 52% (H1 2006: 49%) is a pleasing result. Marine (16% of net earned premium in period) Rating levels for the Marine division have remained good for the first sixmonths of the year. The average rate reduction for the energy account was 6% andthe war account continued to become more competitive. However, the attritionalMarine classes, such as cargo, hull and yacht, experienced only modest falls inpremium rate. Net earned premium is relatively stable year on year. The claims ratio hasincreased to 59% (H1 2006 56%), largely as a result of increased prior periodreserving. The expense ratio has increased due to lower net earned premium in2007 as reinsurance ceded has increased. The Marine division's combined ratio has increased to 97% (H1 2006: 91%). Wewould expect, in the normal course, for the Marine division's full year combinedratio to improve from this position. UK Commercial (14% of net earned premium in period) Our UK Commercial division saw continued rating pressure in all classes. In thisenvironment our teams have retained their focus on risk selection andunderwriting profitability, as well as the delivery of high levels of service toa core client base which has a record of continuity with the business. The 9% reduction in net earned premium was offset by an improved claims ratio of59% (H1 2006: 62%). The expense ratio is stable at 24% with expenses beingcontrolled in line with the reduction in business written. A combined ratio of 83% (H1 2006: 86%) represents a pleasing result in thecontext of highly competitive market conditions. Aviation (5% of net earned premium in period) Little airline business renews in the first half of the year with activityfocused on non-airline classes. These areas have come under more pressure as newcapacity in the aviation market has sought to increase market share. Net earned premium has decreased by 20% reflecting continued challenging marketconditions with rates across classes under pressure. The claims ratio hasimproved to an excellent 39% (H1 2006: 81%) as a result of negligible newairline losses to which the account is exposed and limited claims development inthe period. The expense ratio has increased to 41% (H1 2006: 35%) largely as aconsequence of the reduction in net earned premium in the first half. The result is much improved on the prior half year period, with a combined ratioof 80% (H1 2006: 116%). Investment return The overall investment return was 2.6% for the six months ended 30 June 2007and, with assets under management at £2.4 billion (H1 2006: £2.3 billion),investments contributed £65.3 million to the half year results (H1 2006: 1.5%and £37.7 million). All asset classes performed better than in the first half of last year. Due tothe short-tail nature of the underwriting business, against which thepolicyholders' assets are matched, and the decision to hold short-dated bondsfor solvency capital, 67.6% of the Group's assets were held in short-datedbonds. These delivered a weighted average return of 1.3%, dampened by risingbond yields during the period. Cash made up 18.3% of the assets and returned2.6%. The average equity weighting during the period was 12.1% and our managersproduced a strong return of 9.6%. Indirect property made up the balance andreturned 5.5%. Table 5: H1 2007 investment mix and returns Average balance in H1 Policyholders' Capital Total Total Investment assets return £m £m £m % % ------------------------------------------------------ Cash and cash equivalents 240.5 202.9 443.4 18.3 2.6Debt securities 1,131.6 504.8 1,636.4 67.6 1.3Equities - 293.4 293.4 12.1 9.6Property 45.3 2.2 47.5 2.0 5.5 ------------------------------------------------------ 1,417.4 1,003.3 2,420.7 100.0 2.6 ------------------------------------------------------ Expenses Total expenses, including finance costs, increased to £176.8 million from £166.1million in the prior half year. Business acquisition costs of £100.7 million, representing 17.6% of gross earnedpremium, were broadly similar to the prior half year (H1 2006: 18.3%). Theseinclude a component of the foreign exchange translation of non-monetary assetsand liabilities and other foreign exchange movements, which taken togetherreduced first half expenses by £6.4 million. The underlying movement in other operating expenses is mostly attributable tostaff costs, including staff incentives, part of which relates to businessbuilding in Amlin Bermuda. Taxation The effective rate of tax for the period is 19.7% (H1 2006: 21.0%), thereduction being largely attributable to the reduction in UK corporation tax. Itis below the UK rate of tax primarily due to Amlin Bermuda, which operateslocally with no corporation tax. As we believe that Amlin Bermuda meets therequirements to be exempt from controlled foreign company status in the UK, nocurrent tax is provided. However, deferred tax is provided to take account oftax that will become payable on distribution of profits from Bermuda. One thirdof Bermuda profits have been deemed taxable for these purposes, leading to adeferred tax provision of £13.5 million. Balance sheet management We aim strategically to manage capital over the insurance cycle with a view toenhancing financial returns whilst retaining a robust financial position for ourclients. Our approach to underwriting will reduce exposures when margins becomeunacceptable and we expect that we will generate capital which is surplus torequirements and thus be in a position to return capital to shareholders. The amount of capital available for return to shareholders will be influenced bythe extent of major event losses, risk based capital requirements, the strengthof cash flow and balance sheet and our desire to be in a position both torespond to opportunities to enhance long term growth, for example throughacquisition, and to grow the business rapidly when underwriting conditionsbecome positive again. Risk based capital requirements are affected by the anticipated margins in thebusiness and, as margins in the business reduce, the risk based capital ratiowill increase. Our policy of managing down exposures as margins reduce isexpected to help to compensate for the rise in ratio, limiting the additionalcapital required. With the steps taken last year to improve the quality of debt finance, the Groupnow enjoys a more robust, flexible and higher quality balance sheet. Thefinancial success of the last eighteen months has enhanced that position and ourdebt to total capital ratio now stands at 22.0% (31 December 2006: 22.9%). Ournet debt to total capital ratio, after taking account of free cash availablewithin the Group is nil (31 December 2006: nil). This, together with the longterm nature of our debt and the existence of meaningful uncalled facilities,gives us increased confidence of being able to respond to opportunities and anupturn in the underwriting cycle, whilst maintaining risk based capitalrequirements and returning capital to shareholders. The unknown at this stage is the extent of major event losses and we intend toconsider plans for capital return following the end of this year's windstormseason. As well as managing solvency capital, we are continually seeking to improve thequality of assets. We have continued to focus on managing reinsurance assets,which were materially increased following the 2005 hurricane season. Recoveriesin the first half amounted to £45.8 million, increasing to £267 million thetotal collected to date in respect of the 2005 hurricanes, equivalent to 80.4%of notified reinsurance recoverables. Overall reinsurance balances have reducedfrom £604.6 million at the end of 2005 to £307.4 million at 30 June 2007. On the investment front, markets have recently become more volatile as investorsreact to the slowing US housing market and sub-prime mortgage crisis. Generallyour bond portfolios are conservative, with benchmarks based on government bonds,diversified and are short term in duration. Tables 6, 7 and 8 show the breakdownof our portfolios by type of asset, our asset/mortgage backed securities andcorporate bond by credit quality, and the geographic disposition of the bondportfolio. Table 6: Debt security by type At 30 Jun 2007 At 31 Dec 2006 £m % £m %------------------- ------- ------- ------- -------Government securities 810.8 51.6 855.6 52.3Government index-linked securities 21.8 1.4 44.2 2.7Government agencies 46.8 3.0 2.1 0.1Superannuation 5.7 0.4 16.8 1.0Asset backed securities 106.5 6.8 137.3 8.4Mortgage backed securities 201.2 12.8 207.5 12.7Corporate bonds 303.1 19.3 297.9 18.2Pooled vehicles 75.4 4.8 75.8 4.6------------------- ------- ------- ------- ------- 1,571.3 100.0 1,637.2 100.0------------------- ------- ------- ------- ------- Table 7: Credit rating of asset and mortgage backed debt securities andcorporate bonds at 30 June 2007 Using Standard & Poor's as rating sources, the credit ratings of the Group'sasset and mortgage backed securities are: Credit rating AAA AA A BBB------------------- ------- ------- ------- -------Mortgage backed securities 100% - - -Asset backed securities - all 96.4% 1.8% 0.6% 1.1%Asset backed securities - sub prime 95.0% 5.0% - -Corporate bonds 9.1% 40.8% 32.0% 18.1%------------------- ------- ------- ------- ------- Table 8: Debt security by location At 30 Jun 07 At 31 Dec 06United Kingdom 16.7% 29.5%USA and Canada 62.0% 61.4%Europe (ex UK) 19.1% 7.5%Far East 1.1% 0.9%Emerging markets 0.9% 0.6%Other 0.2% 0.1% ------- ------- 100.0% 100.0% ------- ------- Amlin has limited exposure to sub-prime mortgages, with most of our mortgagebond exposure focused on the prime end of the market. All of the sub-prime debtis included in the asset backed securities category. 2.4% of the Group's bondholdings were in bonds backed by sub-prime loans and of these, 95% were ratedAAA and 5% AA. There were minimal holdings of asset backed collateralised debtobligations, the securities upon which much of the recent focus has been. With the fall in government bond yields arising from the market turmoil, ouroverall bond portfolio has increased in value since the half year. Our equityportfolio, however, has given up some of the gains made in the first half.Taking our bond and equity portfolios together, their valuation had increased byapproximately 0.7% in the period between 30 June 2007 and 24 August 2007, inspite of the turmoil in the markets, although for many of the debt securitiesliquidity is presently limited. During the period we recorded an exchange loss of £16.2 million throughconsolidated reserves on the retranslation of Amlin's Bermudian companies. AsAmlin Bermuda's business is predominantly dollar denominated risk, we have thusfar opted not to hedge its balance sheet. Underwriting risk With the purchase of retrocessional and increased reinsurance cover aspreviously mentioned, the Group's combined potential major event losses havebeen reduced. Our largest modelled loss at 1 July 2007, being a major Northeast US windstormaffecting several states, indicated a potential loss of £299 million, equivalentto 32.6% of net tangible assets at 30 June 2007. This compares with our largestmodelled loss at 1 January 2007 of £364 million, which was a European windstormaffecting both the UK and several continental countries, which represented 41.8%of net tangible assets at 31 December 2006. It should be recognised that each ofthese are extreme events. All single zone events which we model are expected toincur losses materially less than these, in most cases less than £220 million. Business development We are entering a period where we believe that organic growth through competingon price in a softening market is inappropriate. We continue to develop ouroperational capability aimed at facilitating our ability to handle increasedvolumes of risk when conditions are right and improving our client service. Inaddition we will actively explore opportunities for enhancing our long termgrowth potential. We will consider acquisitions where strategically they will help build thediversity of our portfolio so that we maintain a good balance of risk. Havinggrown the amount of catastrophe business which we underwrite with the start-upin 2005 of Amlin Bermuda, we will examine opportunities to balance that growthwith more business which is not catastrophe exposed. In July we purchased the Allied Cedar Insurance Group in the UK, which whilemodest, will provide us with greater access to UK property business, an area weare keen to grow when conditions improve. We are opening in Singapore in thefourth quarter to develop access to regional Asian business which does not reachthe London market. Of particular note is the progress we have made to enhance our electronictrading capability. During the period, we believe Amlin became the firstorganisation successfully to integrate with and receive live risks through amarket hub using ACORD compliant messaging. Over 40% of our total reinsurancerenewals for the April 2007 season were received in this way and we are nowusing this methodology for processing endorsements to policies, speeding up theprocess and increasing efficiency for our brokers. Outlook Over the next twelve months our future underwriting performance is underpinnedby the current good margins in reinsurance, areas of our property account andthe Marine division. At 30 June 2007 net unearned premium reserves were £722.0million, 7.4% less than at the prior year (H1 2006: £779.4 million). Thereduction is driven by lower gross written premium in 2007 coupled with higherrecent rates of exchange. The final 2007 underwriting contribution will, asusual, be influenced by the extent of second half major event activity. Asindicated, we have brought down overall net exposures for our largest modelledlosses. We also expect losses from the July floods in the UK and from hurricaneDean to be only modest. Looking further out, generally we expect that rating trends as a whole willsoften over the next eighteen months. This is simply a reflection of thecyclical nature of our business, which is driven by net capital flows into, orout of, the industry. With the industry at large recording satisfactory profits,and capital returns to shareholders unlikely to match these flows, this willlead to greater competition. However, in a number of our larger classes, ratesare still at or near their historic peaks and we anticipate that, overall, ourportfolio will remain capable of generating a satisfactory margin in 2008. Our aim, by focusing on the acceptability of underwriting margin, rather thangrowth in an increasingly competitive market, is to continue to deliverreasonable returns on equity, even through the trough of the underwriting cycle.We expect that our diversity will contribute to our ability to consistentlydeliver for our shareholders. In recent years our out-performance of many of our competitors has beensignificant but, historically, the out- performance of the core syndicatebusiness has grown as rating trends have softened. This has resulted fromdisciplined underwriting, with exposures reducing as rates decline. We intend toremain resolute in our core underwriting principles. Large and unexpected claims activity, or recognition of unacceptable performancefrom consistent under pricing of risk usually turns an insurance cycle at thebottom. Two of our divisions are currently suffering from poor pricing -Aviation and UK Commercial. In our view the wider UK commercial market istrading with low, or non-existent profit margins, even before the impact of therecent floods is taken into account. If the financial pain in the UK market issufficient, taking account of the flood losses, it may result in an improvementin rating. Since Hurricane Katrina in 2005 there has been increased divergence in thecyclical patterns between our business classes. It is very possible that we willexperience improving trading conditions in the UK commercial market which willhelp offset the loss of margin in the marine, property and reinsurance accounts.If this occurs, it will help us sustain better returns than we would havepreviously envisaged during the next trough of the London market insurancecycle. Notwithstanding the recent turmoil in financial markets, the consequential fallin yield of government bonds in recent weeks has resulted in good overall secondhalf bond performance to date. The outlook for the equity content of ourportfolio will depend on the extent to which the fall out from the "sub-prime"debacle affects the economic outlook of major economies. The earnings outlook for both 2007 and 2008 are good with 2007 holding outprospects, subject to second half catastrophe activity, of being a furtherexcellent year. With our stable team of high quality underwriters, who have arecord of stronger out-performance in softer market conditions, and asignificantly improved risk management capability since the last soft market, weare confident of our ability to trade successfully through the more challengingtimes when they come. CONDENSED CONSOLIDATED INCOME STATEMENTFor the six months ended 30 June 2007 6 months 6 months 12 months Notes 2007 2006 2006 £m £m £m ---------------------------- ----- ------- ------- -------Gross premium earned 4,5 572.8 533.6 1,087.3 Insurance premium revenue from the receipt of reinsurance to close 5 - 78.8 78.8 Reinsurance premium ceded 4,5 (58.3) (51.8) (113.4)---------------------------- ----- ------- ------- ------- Net earned premium 5 514.5 560.6 1,052.7 Investment return 6 65.3 37.7 115.1 Other operating income 1.8 1.0 1.8 ---------------------------- ----- ------- ------- -------Total income 581.6 599.3 1,169.6 ---------------------------- ----- ------- ------- -------Insurance claims 4,7 (237.4) (271.4) (460.7) Insurance claims relating to the receipt of reinsurance to close 7 - (78.8) (78.8) Insurance claims recovered from reinsurers 4,7 17.6 37.1 58.5 ---------------------------- ----- ------- ------- -------Net insurance claims and loss adjustment expenses 7 (219.8) (313.1) (481.0) Expenses for the acquisition of insurance contracts 8 (100.7) (97.4) (195.4) Other operating expenses 9 (66.3) (56.3) (126.7) ---------------------------- ----- ------- ------- -------Total expenses (167.0) (153.7) (322.1) ---------------------------- ----- ------- ------- ------- ---------------------------- ----- ------- ------- -------Results of operating activities 194.8 132.5 366.5 ---------------------------- ----- ------- ------- -------Finance costs (9.8) (12.4) (23.8) ---------------------------- ----- ------- ------- -------Profit before tax 185.0 120.1 342.7 Tax 10 (36.4) (25.2) (74.9) ---------------------------- ----- ------- ------- -------Total recognised profit for the period/year 148.6 94.9 267.8 ---------------------------- ----- ------- ------- ------- Attributable to: ---------------------------- ----- ------- ------- ------- Equity holders of the Parent Company 148.6 94.9 267.5 Minority Interests - - 0.3 ---------------------------- ----- ------- ------- ------- 148.6 94.9 267.8 Earnings per share from continuing operations attributable to equity holders of the Parent Company Basic 12 27.9p 17.9p 50.4p Diluted 12 27.5p 17.7p 49.8p CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2007 ------------------ ---- ------ -------- ------- ------- ------- ------- -------- Share Share premium Other Treasury Minority Retained capital account reserves shares interest earnings Total Notes £m £m £m £m £m £m £m------------------ ---- ------ -------- ------- ------- ------- ------- --------At 1 January 2007 133.5 347.6 (21.8) (0.6) 0.3 477.4 936.4------------------ ---- ------ -------- ------- ------- ------- ------- --------Net purchase of treasury shares - - - (1.5) - - (1.5)Gains on revaluation ofemployee shareownership trustrecognised directlyin equity - - - - - - -Currency translationdifferences onoverseas operations - - (16.2) - - - (16.2)Deferred tax - - (1.1) - - - (1.1)Profit for thefinancial period - - - - - 148.6 148.6------------------ ---- ------ -------- ------- ------- ------- ------- --------Total recognisedincome for theperiod - - (17.3) (1.5) - 148.6 129.8Employee shareoption schemes: - share based payment reserve - - 0.4 - - - 0.4 - proceeds from shares issued 0.5 1.7 - - - - 2.2Dividends paid 11 - - - - - (84.4) (84.4)------------------ ---- ------ -------- ------- ------- ------- ------- -------- 0.5 1.7 0.4 - - (84.4) (81.8)------------------ ---- ------ -------- ------- ------- ------- ------- --------At 30 June 2007 134.0 349.3 (38.7) (2.1) 0.3 541.6 984.4------------------ ---- ------ -------- ------- ------- ------- ------- -------- Share Share premium Other Treasury Minority Retained capital account reserves shares interest earnings Total Notes £m £m £m £m £m £m £m------------------ ----- ------- -------- ------- ------- ------- ------- ------ At 1 January2006 132.5 344.0 52.7 (1.7) - 257.3 784.8------------------ ----- ------- -------- ------- ------- ------- ------- ------Net sale oftreasuryshares - - - 1.0 - - 1.0Gains onrevaluation ofemployee shareownershiptrustrecogniseddirectly inequity - - 0.3 - - - 0.3Currencytranslationdifferences onoverseasoperations - - (42.1) - - - (42.1)Deferred tax - - (0.2) - - - (0.2)Profit for thefinancialperiod - - - - - 94.9 94.9------------------ ----- ------- -------- ------- ------- ------- ------- ------Totalrecognisedincome for theperiod - - (42.0) 1.0 - 94.9 53.9Employee shareoption schemes: - share based payment reserve - - - - - 0.5 0.5 - proceeds from shares issued 0.8 2.1 - - - - 2.9Dividends paid 11 - - - - - (25.0) (25.0)------------------ ----- ------- -------- ------- ------- ------- ------- ------ 0.8 2.1 - - - (24.5) (21.6)------------------ ----- ------- -------- ------- ------- ------- ------- ------At 30 June 2006 133.3 346.1 10.7 (0.7) - 327.7 817.1------------------ ----- ------- -------- ------- ------- ------- ------- ------ CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2007 (continued) ------------------ ---- ------ ------- ------- ------- ------- ------- ------ Notes Share capital Share premium Other reserves Treasury shares Minority Retained Total interest earnings £m £m £m £m £m £m £m------------------ ---- ------ ------- ------- ------- ------- ------- ------ At 1 January2006 132.5 344.0 52.7 (1.7) - 257.3 784.8------------------ ---- ------ ------- ------- ------- ------- ------- ------Net sale oftreasuryshares - - - 1.1 - - 1.1Gains onrevaluation ofemployee shareownershiptrustrecogniseddirectly inequity - - 0.2 - - - 0.2Currencytranslationdifferences onoverseasoperations - - (77.2) - - - (77.2)Gain ondefinedbenefit scheme - - 0.1 - - - 0.1Deferred tax - - 1.3 - - - 1.3Profit for thefinancial year - - - - 0.3 267.5 267.8------------------ ---- ------ ------- ------- ------- ------- ------- ------Totalrecognisedincome for theyear - - (75.6) 1.1 0.3 267.5 193.3Employee shareoption scheme: - share based payment reserve - - 1.1 - - - 1.1 - proceeds from shares issued 1.0 3.6 - - - - 4.6Dividends paid 11 - - - - - (47.4) (47.4)------------------ ---- ------ ------- ------- ------- ------- ------- ------ 1.0 3.6 1.1 - - (47.4) (41.7)------------------ ---- ------ ------- ------- ------- ------- ------- ------At 31 December2006 133.5 347.6 (21.8) (0.6) 0.3 477.4 936.4------------------ ---- ------ ------- ------- ------- ------- ------- ------ CONDENSED CONSOLIDATED BALANCE SHEET At 30 June 2007 30 June 30 June 31 December 2007 2006 2006ASSETS Notes £m £m £m---------------------------- ------ ---------- --------- -----------Cash and cash equivalents 12.7 31.8 16.5Financial investments atfair value throughincome 13 2,413.2 2,247.0 2,367.7Reinsurance assets - reinsurers' share of outstanding claims 14 307.4 448.8 357.0 - reinsurers' share of unearned premiums 14 52.8 53.4 37.7 - debtors arising from reinsurance operations 14 431.7 415.3 300.6Loans and receivables, including insurance receivables - insurance receivables 296.7 372.6 216.3 - loans and receivables 82.8 78.1 51.6Current income tax assets 7.1 1.5 6.3Deferred tax assets 15 16.4 20.1 20.9Property and equipment 5.8 6.5 6.2Intangible assets 16 66.0 66.0 66.0---------------------------- ------ ---------- --------- -----------Total assets 3,692.6 3,741.1 3,446.8---------------------------- ------ ---------- --------- ----------- EQUITYShare capital 17 134.0 133.3 133.5Share premium account 349.3 346.1 347.6Other reserves (38.7) 10.7 (21.8)Treasury shares (2.1) (0.7) (0.6)Retained earnings 541.6 327.7 477.4---------------------------- ------ ---------- --------- -----------Equity attributable toequity holders of theparent 984.1 817.1 936.1Minority 0.3 - 0.3---------------------------- ------ ---------- --------- -----------Total equity andreserves 984.4 817.1 936.4---------------------------- ------ ---------- --------- ----------- LIABILITIESInsurance contracts - outstanding claims 14 1,402.7 1,552.1 1,417.5 - unearned premiums 14 774.8 832.8 545.5 - creditors arising from insurance operations 14 35.1 47.5 68.6Trade and other payables 83.9 50.0 68.4Current income taxliabilities 29.0 28.3 28.7Financial liabilities - borrowings 18 276.8 330.4 278.8Retirement benefitobligations 2.9 7.9 7.5Deferred tax liabilities 15 103.0 75.0 95.4---------------------------- ------ ---------- --------- -----------Total liabilities 2,708.2 2,924.0 2,510.4---------------------------- ------ ---------- --------- ----------- Total liabilities andshareholders' equity 3,692.6 3,741.1 3,446.8---------------------------- ------ ---------- --------- ----------- CONDENSED CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2007 6 months 6 months 12 months 2007 2006 2006 Notes £m £m £m------------------------- ------- --- ---------- ---------- -----------Cash generated fromoperations 19 53.7 (77.3) (20.2)Income taxes paid (25.9) (17.5) (50.4)------------------------- ------- --- ---------- ---------- -----------Net cash generatedfrom/(used in) operatingactivities 27.8 (94.8) (70.6)------------------------- ------- --- ---------- ---------- ----------- Cash flows from investing activitiesInterest received 48.4 53.3 97.5Dividends received 5.1 2.7 4.5Purchase of property, plantand equipment (1.0) (1.9) (3.6)------------------------- ------- --- ---------- ---------- -----------Net cash generatedfrom/(used in) investingactivities 52.5 54.1 98.4------------------------- ------- --- ---------- ---------- ----------- Cash flows from financing activitiesProceeds from issue ofordinary shares 2.2 2.9 4.6Proceeds from borrowings - 227.7 227.7Repayment of borrowings - (188.8) (238.0)Dividends paid toshareholders 11 (84.4) (25.0) (47.4)Interest paid (1.8) (9.9) (24.1)------------------------- ------- --- ---------- ---------- -----------Net cash (used in)/generatedfrom financing activities (84.0) 6.9 (77.2)------------------------- ------- --- ---------- ---------- ----------- Net decrease in cash andcash equivalents (3.7) (33.8) (49.4)Cash and cash equivalents atbeginning of period 16.5 65.6 65.6Effect of rate changes oncash and cash equivalents (0.1) - 0.3------------------------- ------- --- ---------- ---------- -----------Cash and cash equivalents atend of period/year 12.7 31.8 16.5------------------------- ------- --- ---------- ---------- ----------- 1. Basis of preparation of Condensed Interim Financial Statements The financial information contained in this document for the year ended 31December 2006 does not constitute statutory accounts as defined in section 240of the Companies Act 1985. A copy of the statutory accounts for the year ended31 December 2006 has been delivered to the Registrar of Companies. Theauditors' report on those accounts was not qualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. The interim financial statements were approved by the Board on 29 August 2007. 2. Accounting policies The interim financial statements have been prepared in accordance with theListing Rules of the Financial Services Authority (FSA) and computed inaccordance with International Financial Reporting Standards (IFRS). The same accounting policies, presentation and methods of computation arefollowed in the interim financial statements as applied in the Group's latestannual audited financial statements. Change in accounting policies In the current financial year, the Group will adopt IFRS 7 'Financialinstruments: Disclosures' for the first time. As IFRS 7 is a disclosurestandard, there is no impact of that change in accounting policy on the interimfinancial statements. Full details of the change will be disclosed in our annualreport for the year ending 31 December 2007. 3. Seasonality of interim operations The Group derives insurance premium revenue from a diverse range of underwritingclasses and geographical locations. Depending on the class and location of therisk, there may be a seasonal pattern to incidence of claims. A large proportionof the Group's premium revenue originates in North America (49% at 31 December2006) where it may be exposed to large risk losses as a result of windstorms.The US hurricane season from May to November and the level of windstorm activityarising during this period may materially impact on the Group's claimsexperience during the second half of 2007. The table below shows the Group's historical claims ratios for the 6 monthperiods to 30 June and 31 December. Claims Ratio -------------- H1 H2 Full Year ------ ------ ------ ------ 2000 81% 87% 84% ------ ------ ------ ------ 2001 73% 101% 87% ------ ------ ------ ------ 2002 73% 53% 63% ------ ------ ------ ------ 2003 51% 51% 51% ------ ------ ------ ------ 2004 42% 58% 50% ------ ------ ------ ------ 2005 44% 70% 57% ------ ------ ------ ------ 2006 49% 33% 41% ------ ------ ------ ------ 4 Segmental reporting The tables below show segmental information by business segment. Businesssegments are primary segments and represent the way in which the business ismanaged. The London market business segments comprise Aviation, Non-Marine,Marine and UK commercial business. Amlin Bermuda Limited writes reinsurancebusiness, including reinsurance ceded by Syndicate 2001. Further information onthe performance of each segment is provided in the statement accompanying thisinterim report. Income and expensesby business segment Total Amlin UK UK Bermuda Intra OtherSix months ended Aviation Non-marine Marine Commercial division Ltd group technical Total30 June 2007 £m £m £m £m £m £m £m £m £m Gross premium written Analysed by geographicsegment UK 7.5 46.2 46.5 76.4 176.6 86.5 (73.3) - 189.8 US 13.3 263.0 28.9 0.1 305.3 50.8 - - 356.1 Europe 9.8 34.6 26.6 3.5 74.5 9.7 - - 84.2 Worldwide 0.2 16.0 14.7 1.2 32.1 - - - 32.1 Other 6.0 78.0 28.5 7.8 120.3 22.7 - - 143.0 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total 36.8 437.8 145.2 89.0 708.8 169.7 (73.3) - 805.2 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Gross premium earned 39.3 287.4 104.4 82.9 514.0 101.6 (42.8) - 572.8 Reinsurance premium ceded (15.4) (51.3) (19.4) (11.1) (97.2) (0.1) 38.9 0.1 (58.3)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Net premium earned 23.9 236.1 85.0 71.8 416.8 101.5 (3.9) 0.1 514.5 Insurance claims and loss adjusting expenses (17.5) (89.7) (61.9) (50.8) (219.9) (40.1) 23.0 (0.4) (237.4) Reinsurance recoveries 8.6 8.4 13.9 8.1 39.0 - (21.6) 0.2 17.6 Underwriting expenses (9.8) (77.3) (32.7) (16.8) (136.6) (12.5) 2.5 3.8 (142.8)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Profit attributable to underwriting 5.2 77.5 4.3 12.3 99.3 48.9 - 3.7 151.9 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Investment return 45.3 20.0 - - 65.3 Agency expenses (1) (1.1) (6.8) (2.4) (2.5) (12.8) - 12.8 - - Other non-underwriting expenses (2) - - - - - - - - (22.4) Financing costs (2) - - - - - - - - (9.8) -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Profit before taxation 185.0 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Combined ratio 78% 67% 95% 83% 76% 52% 71% -------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- (1) Agency expenses allocated to segments represent fees and commissions payable to Amlin Underwriting Limited. (2) Other non-underwriting expenses and financing costs are incurred in support of the entire business of the Group and are not allocated to particular segments. (3) Excludes insurance premium from the receipt of reinsurance to close (refer note 5) Assets and liabilities by business segmentAt 30 June 2007 Total Amlin UK UK Bermuda Intra Other Aviation Non-marine Marine Commercial division Ltd group technical Total £m £m £m £m £m £m £m £m £m-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Assets attributable to business segments 265.9 1,128.4 444.4 543.4 2,382.1 900.9 (82.3) 9.4 3,210.1 Assets that cannot be allocated to business segments - - - - 482.5 - - - 482.5 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total Assets 3,692.6 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Liabilities Liabilities attributable to business segments 259.9 982.0 439.3 526.8 2,208.0 251.2 (82.3) 7.8 2,384.7 Liabilities that cannot be allocated to business segments - - - - 323.5 - - - 323.5 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total liabilities 2,708.2 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total net assets 984.4 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- 4. Segmental reporting (continued) Income and expensesby business segmentSix months ended 30 June 2006 Total Amlin UK UK Bermuda Intra Other Aviation Non-marine Marine Commercial division Ltd group technical Total £m £m £m £m £m £m £m £m £m-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Gross premium written -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Analysed by geographic segment UK 9.6 43.5 49.7 78.4 181.2 91.6 (83.7) - 189.1 US 16.0 284.7 35.0 0.1 335.8 50.8 - - 386.6 Europe 8.9 33.6 28.3 3.6 74.4 3.2 - - 77.6 Worldwide 0.3 15.2 16.1 0.8 32.4 - - - 32.4 Other 7.6 98.0 31.9 6.9 144.4 16.2 - (0.1) 160.5 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total 42.4 475.0 161.0 89.8 768.2 161.8 (83.7) (0.1) 846.2 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Gross premium earned (3) 45.1 281.0 97.3 87.4 510.8 45.9 (23.0) (0.1) 533.6 Reinsurance premium ceded (15.3) (34.3) (13.8) (8.4) (71.8) - 20.0 - (51.8) -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Net premium earned 29.8 246.7 83.5 79.0 439.0 45.9 (3.0) (0.1) 481.8 Insurance claims and loss adjusting Expenses (36.9) (99.0) (76.0) (52.5) (264.4) (16.9) 10.2 (0.3) (271.4) Reinsurance recoveries 12.1 0.9 28.7 3.2 44.9 - (8.0) 0.2 37.1 Underwriting expenses (12.6) (82.2) (33.4) (19.0) (147.2) (5.4) 0.8 6.1 (145.7)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Profit attributable to underwriting (7.6) 66.4 2.8 10.7 72.3 23.6 - 5.9 101.8 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Investment return - - - - 24.5 13.2 - - 37.7 Agency expenses (1) (1.1) (5.9) (1.5) (1.9) (10.4) - 10.4 - - Other non-underwriting expenses (2) - - - - - - - - (7.0) Financing costs (2) - - - - - - - - (12.4) -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Profit before taxation 120.1 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Combined ratio 126% 73% 97% 87% 84% 49% 79% -------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Assets and liabilities by business segment At 30 June 2006 Total Amlin UK UK Bermuda Intra Other Aviation Non-marine Marine Commercial division Ltd group technical Total £m £m £m £m £m £m £m £m £m-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Assets Assets attributable to business segments 275.1 1,247.2 465.0 539.6 2,526.9 708.9 (135.9) 13.5 3,113.4 Assets that cannot be allocated to business segments 627.7 627.7 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total Assets 3,741.1-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Liabilities Liabilities attributable to business segments 278.5 1,200.2 445.3 502.7 2,426.7 130.8 (135.9) 11.7 2,433.3 Liabilities that cannot be allocated to business segments 490.7 490.7 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total liabilities 2,924.0 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total net assets 817.1 -------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- 4. Segmental reporting (continued) Income and expenses by business segmentYear ended 31 December 2006 Total Amlin UK UK Bermuda Intra Other Aviation Non-marine Marine Commercial division Ltd group technical Total £m £m £m £m £m £m £m £m £m-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Gross premiums written-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Analysed by geographicsegment UK 12.7 49.5 53.1 133.7 249.0 110.3 (100.8) - 258.5US 29.5 344.2 51.6 0.3 425.6 88.8 - - 514.4Europe 14.1 37.9 39.5 5.8 97.3 3.7 - - 101.0Worldwide 0.4 15.8 19.2 1.6 37.0 1.8 - - 38.8Other 19.0 107.2 47.5 8.6 182.3 18.9 - (0.1) 201.1-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total 75.7 554.6 210.9 150.0 991.2 223.5 (100.8) (0.1) 1,113.8-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Gross premiumsearned (3) 88.8 569.5 192.7 163.2 1,014.2 132.5 (59.3) (0.1) 1,087.3Reinsurancepremiums ceded (29.2) (87.3) (31.8) (21.4) (169.7) - 56.3 - (113.4)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Net premiumsearned 59.6 482.2 160.9 141.8 844.5 132.5 (3.0) (0.1) 973.9 Insuranceclaims andloss adjustingexpenses (48.9) (179.8) (111.0) (103.0) (442.7) (47.5) 29.8 (0.3) (460.7)Reinsurancerecoveries 19.6 7.7 41.2 20.6 89.1 - (30.8) 0.2 58.5 Underwritingexpenses (24.0) (162.4) (67.6) (37.8) (291.8) (16.0) 4.0 - (303.8)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Profitattributabletounderwriting 6.3 147.7 23.5 21.6 199.1 69.0 - (0.2) 267.9-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------InvestmentReturn - - - - 83.1 32.0 - - 115.1 Personalexpenses (1) (2.6) (14.3) (3.3) (4.5) (24.7) - 24.7 - -Othernon-underwriting expenses (2) - - - - - - - - (16.5)Financingcosts (2) - - - - - - - - (23.8)-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Profit beforetaxation 342.7-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Combined ratio 89% 69% 85% 85% 76% 48% 72%-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- Assets and liabilitiesby business segmentAt 31 December 2006 Total Amlin UK UK Bermuda Intra Other Aviation Non-marine Marine Commercial division Ltd group technical Total £m £m £m £m £m £m £m £m £m-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Assets Assetsattributableto businesssegments 268.1 1,012.8 417.4 546.0 2,244.3 739.4 (99.6) 13.5 2,897.6Assets thatcannot beallocated tobusinesssegments 549.2 549.2-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total Assets 3,446.8-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- LiabilitiesLiabilitiesattributableto businesssegments 255.4 873.2 374.0 492.4 1,995.0 135.7 (99.6) 11.7 2,042.8-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Liabilitiesthat cannot beallocated tobusinesssegments 467.6 467.6-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total liabilities 2,510.4-------------------- ------- ------- ------ ------- ------- ------- ------- ------- -------Total net assets 936.4-------------------- ------- ------- ------ ------- ------- ------- ------- ------- ------- 5. Net earned premium --------------------------------- --------- -------- -------- 6 months 6 months 12 months 2007 2006 2006 £m £m £m--------------------------------- --------- -------- --------Insurance contracts premiumGross premium written 805.2 846.2 1,113.8Change in unearned premium provision (232.4) (312.6) (26.5)--------------------------------- --------- -------- --------Gross premium earned 572.8 533.6 1,087.3Insurance premium from the receipt ofreinsurance to close - 78.8 78.8Reinsurance premium cededReinsurance premium payable (72.3) (79.8) (100.3)Change in unearned reinsurance premiumprovision 14.0 28.0 (13.1)--------------------------------- --------- -------- -------- (58.3) (51.8) (113.4)--------------------------------- --------- -------- --------Net earned premium 514.5 560.6 1,052.7--------------------------------- --------- -------- -------- The insurance premium from the receipt of reinsurance to close at 30 June 2006and 31 December 2006 represents the premium received from the third partysyndicate members on the 2003 year of account who sold the remainder of theircapacity to Amlin for the following year of account. An identical amount isrecorded as a movement in claims, representing the additional liabilities takenon by Amlin from the third party members. Overall these transactions had noimpact on profit for the period. 6. Investment return -------------------------- ----- ---------- ------------ --------- 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------- ----- ---------- ------------ ---------Investment income- dividend income 5.1 2.7 4.5- interest income 48.4 51.1 67.7Cash and cash equivalents interest income 2.2 2.2 26.5-------------------------- ----- ---------- ------------ --------- 55.7 56.0 98.7-------------------------- ----- ---------- ------------ ---------Net realised gains/(losses) on financial assets- equity securities 10.1 8.6 7.4- debt securities (5.4) (14.2) (0.3)-------------------------- ----- ---------- ------------ --------- 4.7 (5.6) 7.1-------------------------- ----- ---------- ------------ --------- Net fair value gains/(losses) on assets at fair value through income statement- property funds 1.7 - -- equity securities 12.0 (0.1) 10.3- debt securities (8.8) (12.6) (1.0)-------------------------- ----- ---------- ------------ --------- 4.9 (12.7) 9.3-------------------------- ----- ---------- ------------ --------- 65.3 37.7 115.1-------------------------- ----- ---------- ------------ --------- 7. Insurance claims and loss adjustment expenses -------------------------- ------------ ------------ --------- 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------- ------------ ------------ ---------GrossCurrent year insurance claims and lossadjustment expenses 282.0 288.4 515.7Reduced costs for prior period insuranceclaims (44.6) (17.0) (55.0)-------------------------- ------------ ------------ --------- 237.4 271.4 460.7Insurance claims and loss adjustmentexpenses relating to the receipt ofreinsurance to close (Note 5) - 78.8 78.8ReinsuranceCurrent year insurance claims and lossadjustment expenses recoverable fromreinsurers (21.3) (28.1) (44.7)Reduced costs for prior period claimsrecoverable from reinsurers 3.7 (9.0) (13.8)-------------------------- ------------ ------------- --------- (17.6) (37.1) (58.5)-------------------------- ------------ ------------- ---------Total net insurance claims and lossadjustment expenses 219.8 313.1 481.0-------------------------- ------------ ------------- --------- 8. Expenses for the acquisition of insurance contracts 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------- ---------- ------------ ----------Expenses for the acquisition of insurancecontracts 144.6 162.0 203.4Changes in deferred expenses for theacquisition of insurance contracts (43.9) (64.6) (8.0)-------------------------- ---------- ------------ ---------- 100.7 97.4 195.4-------------------------- ---------- ------------ ---------- 9. Other operating expenses 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------- ---------- ------------ ----------Foreign exchange losses on non-monetaryassets and liabilities 5.1 19.7 27.9Other foreign exchange losses/(gains) 0.2 (8.0) (1.0)-------------------------- ---------- ------------ ---------- 5.3 11.7 26.9Administrative and other expenses 61.0 44.6 99.8-------------------------- ---------- ------------ ---------- 66.3 56.3 126.7-------------------------- ---------- ------------ ---------- 10. Income tax expense 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------- ---------- ------------ ----------Current tax- UK corporation tax 24.5 28.3 57.0- Prior period under provision 0.1 - -- Foreign tax 0.8 0.1 (0.1)-------------------------- ---------- ------------ ---------- 25.4 28.4 56.9-------------------------- ---------- ------------ ----------Deferred tax- Current year movement in asset 3.0 4.0 4.8- Charge resulting from reduction in UK tax rate 0.4 - --------------------------- ---------- ------------ ---------- 3.4 4.0 4.8-------------------------- ---------- ------------ ----------- Current year movement in liabilities 10.1 (7.2) 13.2- Prior period over provision (0.3) - -- Credit resulting from reduction in UK tax rate (2.2) - --------------------------- ---------- ------------ ---------- 7.6 (7.2) 13.2-------------------------- ---------- ------------ ----------Total tax expense 36.4 25.2 74.9-------------------------- ---------- ------------ ---------- In addition to the above £1.1 million (June 2006: £0.2million) has been crediteddirectly to equity. 11. Dividends The amounts recognised as distributions to equity holders are as follows: 6 months 6 months 12 months 2007 2006 2006 £m £m £m-------------------------------------------- ---------- ------------ ----------Final dividend for the year ended:- 31 December 2006 of 7.8 pence per ordinary share 41.7- 31 December 2005 of 6.2 pence per ordinary share 25.0 25.0Interim dividend for the year ended:- 31 December 2006 of 4.2 pence per ordinary share 22.4Special dividend for the year ended:- 31 December 2006 of 8.0 pence per ordinary share 42.7-------------------------------------------- ---------- ------------ ---------- 84.4 25.0 47.4-------------------------------------------- ---------- ------------ ---------- The interim dividend of 5.0p per ordinary share for 2007, amounting to £26.8million, was approved by the Board on 29 August 2007 and has not been includedas a liability as at 30 June 2007. 12. Earnings per share Earnings per share are based on the profit attributable to shareholders and theweighted average number of shares in issue during the period. Shares held by theEmployee Share Ownership Trust ('ESOT') are excluded from the weighted averagenumber of shares as the ESOT waives the right to dividends in excess of 0.01pper each share ranking for an interim or final dividend. ------------------------- ---------- ------------ ----------Basic and diluted earningsper share are as follows: 6 months 6 months 12 months 2007 2006 2006 ------------------------- ---------- ------------ ----------Profit for the period/yearattributable to equity holders £148.6m £94.9m £267.5m------------------------- ---------- ------------ ----------Weighted average number of shares in issue 533.4m 530.8m 531.8mDilutive shares 6.9m 7.5m 6.4m------------------------- ---------- ------------ ----------Adjusted average number of shares in issue 540.3m 538.3m 538.2m ------------------------- ---------- ------------ ----------Basic earnings per share 27.9p 17.9p 50.4pDiluted earnings per share 27.5p 17.7p 49.8p------------------------- ---------- ------------ ----------Basic and tangible net assets pershare are as follows: 30 June 30 June 31 December 2007 2006 2006 ------------------------- ---------- ------------ ----------Net assets £984.1m £817.1m £936.1mAdjustments for intangible £(66.0m) £(66.0m) £(66.0m)assets ---------- ------------ -----------------------------------Tangible net assets £918.1m £751.1m £870.1m Number of shares in issueat end of 536.0m 533.0m 534.0mperiod/yearAdjustment for ESOT shares (1.3m) (0.8m) (0.8m)------------------------- ---------- ------------ ----------Basic number of shares 534.7m 532.2m 533.2mafter ESOT adjustment Net assets per share 184.0p 153.5p 175.6p------------------------- ---------- ------------ ----------Tangible net assets per share 171.7p 141.1p 163.2p------------------------- ---------- ------------ ---------- 13. Financial investments--------------------------------- --------- --------- --------- At valuation At valuation At valuation 30 June 2007 30 June 2006 31 December 2006 £m £m £m--------------------------------- --------- --------- ---------Shares and other variableyield securities 263.1 171.0 248.3Debt and other fixed incomesecurities 1,555.9 1,214.8 1,599.6Participation in investmentpools 466.9 783.5 126.6Deposits with creditinstitutions 12.5 2.5 294.2Overseas deposits 52.2 59.1 55.9Property funds 60.8 14.3 43.1Other 1.8 1.8 ---------------------------------- --------- --------- --------- 2,413.2 2,247.0 2,367.7--------------------------------- --------- --------- ---------In Group owned companies 1,198.1 1,082.4 1,105.0In Syndicate 2001 1,210.8 1,159.0 1,257.1In non-aligned syndicates(refer note 14) 4.3 5.6 5.6--------------------------------- --------- --------- --------- 2,413.2 2,247.0 2,367.7--------------------------------- --------- --------- ---------Listed investments included in Group:--------------------------------- --------- --------- ---------Shares and other variableyield securities and propertyfunds 323.9 171.0 291.4Debt and other fixed incomesecurities 1,555.9 171.2 1,596.7--------------------------------- --------- --------- --------- 1,879.8 342.2 1,888.1--------------------------------- --------- --------- --------- Overseas Deposits represent balances held with overseas regulators to permitunderwriting in certain territories. Assets are managed by Lloyd's on a pooledbasis. All financial investments are classified as fair value, with all gains andlosses, realised and unrealised, recorded through the income statement. Fixedmaturity and equity securities are classified as trading assets as the Groupbuys with the intention to resell. Using Standard & Poor's and Moody's as rating sources, the credit ratings of theGroup's investments in debt and other fixed income securities is set out below: Credit rating 30 June 30 June 31 December 2007 2006 2006 £m £m £m---------------------------------- -------- --------- ---------AAA/Aaa 1,193.2 1,015.9 1,257.0AA/Aa 125.7 79.6 78.6A 99.3 89.1 151.5BBB/Baa 58.0 25.0 57.2---------------------------------- -------- --------- --------- 1,476.2 1,209.6 1,544.3Non-aligned syndicates 4.3 5.2 5.3Pooled debt funds for which rating notavailable 75.43 - 50.0---------------------------------- -------- --------- --------- 1,555.9 1,214.8 1,599.6---------------------------------- -------- --------- --------- 14. Insurance contracts and reinsurance assets Claims Unearned Other insurance Total premium assets and reserves reserves liabilities £m £m £m £m----------------------- ---------- ---------- ---------- ---------Insurance liabilitiesAt 1 January2006 1,704.3 523.8 114.8 2,342.9Movement inperiod (77.1) 309.0 (61.6) 170.3Exchangeadjustments (75.1) - (5.7) (80.8)----------------------- ---------- ---------- ---------- ---------At 30 June 2006 1,552.1 832.8 47.5 2,432.4Movement inperiod (79.7) (281.3) 25.5 (335.5)Exchangeadjustments (54.9) (6.0) (4.4) (65.3)----------------------- ---------- ---------- ---------- ---------At 31 December2006 1,417.5 545.5 68.6 2,031.6Movement inperiod 2.6 233.2 (32.1) 203.7Exchangeadjustments (17.4) (3.9) (1.4) (22.7)----------------------- ---------- ---------- ---------- ---------At 30 June 2007 1,402.7 774.8 35.1 2,212.6----------------------- ---------- ---------- ---------- --------- From 1994 to 1999 the Group participated on a number of Lloyd's syndicates otherthan those managed by the Group. From 2000 the Group ceased to underwritedirectly on non-aligned syndicates. However, a number of syndicates remain"open" and Amlin's liabilities are still to be finalised. Provisions are madefor potential future insurance claims. Included within the claims provisions inthe table above are provisions in respect of "non-aligned syndicateparticipations" of £4.1 million (31 December 2006: £4.2 million). The claims reserves are further analysed between notified outstanding claims andincurred but not reported claims below: 30 June 30 June 31 December 2007 2006 2006 £m £m £m------------------------------- ---------- ---------- ---------Notified outstanding claims 784.0 960.2 843.4Claims incurred but not reported 618.7 591.9 574.1------------------------------- ---------- ---------- ---------Insurance contracts claims reserve 1,402.7 1,552.1 1,417.5------------------------------- ---------- ---------- --------- Claims Unearned Other insurance Total premium assets and reserves reserves liabilities £m £m £m £m----------------------- ---------- ---------- ---------- ---------Reinsurance assetsAt 1 January 2006 604.6 24.2 387.3 1,016.1Movement in period (125.4) 29.2 47.5 (48.7)Exchange adjustments (30.4) - (19.5) (49.9)----------------------- ---------- ---------- ---------- ---------At 30 June 2006 448.8 53.4 415.3 917.5Movement in period (73.3) (15.7) (102.0) (191.0)Exchange adjustments (18.5) - (12.7) (31.2)----------------------- ---------- ---------- ---------- ---------At 31 December 2006 357.0 37.7 300.6 695.3Movement in period (44.3) 15.1 136.9 107.7Exchange adjustments (5.3) - (5.8) (11.1)----------------------- ---------- ---------- ---------- ---------At 30 June 2007 307.4 52.8 431.7 791.9----------------------- ---------- ---------- ---------- --------- 15. Deferred tax The deferred tax asset is attributable to timing differences arising on thefollowing: Provisions for Other Capital losses Pensions Other timing Total losses provisions provisions differences £m £m £m £m £m £m------------------- -------- -------- -------- -------- -------- -------At 1 January2007 1.1 5.7 5.4 2.0 6.7 20.9------------------- -------- -------- -------- -------- -------- -------Movement inperiod (0.1) (0.2) (2.3) (1.4) 0.6 (3.4)Movementthrough equityin the period - - - - (1.1) (1.1)------------------ -------- -------- -------- -------- -------- -------At 30 June 2007 1.0 5.5 3.1 0.6 6.2 16.4----------------- -------- -------- -------- -------- -------- -------At 30 June 2006 1.2 6.0 4.4 2.0 6.5 20.1----------------- -------- -------- -------- -------- -------- ------- The deferred tax liability is attributable to timing differences arising on thefollowing: -------------------- -------- --------- --------- ---------- ------ Underwriting Unrealised Syndicate Overseas Total results capital gains capacity earnings £m £m £m £m £m -------------------- -------- --------- --------- ---------- ------At 1 January 2007 76.0 6.4 4.1 8.9 95.4Movement in period 1.5 1.5 0.1 4.5 7.6-------------------- -------- --------- --------- ---------- ------At 30 June 2007 77.5 7.9 4.2 13.4 103.0-------------------- -------- --------- --------- ---------- ------At 30 June 2006 63.9 4.4 3.4 3.3 75.0-------------------- -------- --------- --------- ---------- ------ The underwriting results of the Group's participation on Syndicate 2001 aretaxed when profits are distributed from the Syndicate in the year following theclosure of that underwriting year. An underwriting year usually closes 3 yearsafter its commencement, accordingly deferred tax is provided for profitsattributable to each underwriting year prior to closure which are included inthe annual accounting result. The provision is released only when theunderwriting year result is distributed and taxed. As a result the deferred taxprovisions contains amounts relating to the future tax liabilities arising onthe 2004, 2005, 2006 and 2007 underwriting year results that have been accountedfor in the Group's income statement to date. 16. Intangible assets ---------------------------- ------------- -------- --------- Purchased Goodwill Total syndicate participations £m £m £m---------------------------- ------------- -------- ---------Net book valueAt 30 June 2007, 30June 2006 and 31December 2006 63.2 2.8 66.0---------------------------- ------------- -------- --------- 17. Share capital Authorised ordinary shares of 25p each Number £m-------------------- ----------------------- -------------At 30 June and 31 December 2006 800,000,000 200.0-------------------- ----------------------- -------------At 30 June 2007 800,000,000 200.0-------------------- ----------------------- ------------- Allotted, called up and fully paid Number £m-------------------- ----------------------- -------------At 1 January 2006 530,113,127 132.5Shares issued on exercise of options 2,928,361 0.8-------------------- ----------------------- -------------At 30 June 2006 533,041,488 133.3Shares issued on exercise of options 965,232 0.2-------------------- ----------------------- -------------At 31 December 2006 534,006,720 133.5Shares issued on exercise of options 2,014,756 0.5-------------------- ----------------------- -------------At 30 June 2007 536,021,476 134.0-------------------- ----------------------- ------------- 18. Financial liabilities - borrowings -------------------------------- --------- -------- --------- 30 June 30 June 31 December 2007 2006 2006 £m £m £m-------------------------------- --------- -------- ---------Bank loans falling due in less than oneyear - 49.6 0.9Bank loans falling due after more thanone year - 0.1 -Subordinated bonds 276.8 280.7 277.9-------------------------------- --------- -------- --------- 276.8 330.4 278.8-------------------------------- --------- -------- --------- The Group's borrowings comprise three issues of subordinated debt and a debtfacility arrangement with a consortium of banks. Details of the subordinated bond issues are as follows: Issue date Principal Reset date Maturity date Interest rate Interest rate amount to reset date from reset date to maturity date % % ----------- ---------- ----------- ----------- --------- ----------- 23 November 2004 $50m November 2014 November 2019 7.11 LIBOR + 3.4815 March 2005 $50m March 2015 March 2020 7.28 LIBOR + 3.3220 April 2006 £230m December 2016 April 2026 6.50 LIBOR + 2.66 The bonds will be redeemed on the maturity dates at the principal amounts,together with accrued interest. The Company has the option to redeem the bondsin whole, subject to certain requirements, on the reset dates or any interestpayment date thereafter at the principal amount plus accrued interest. 18. Financial liabilities - borrowings (continued) On 13 November 2006 the Company entered into a debt facility with its bankswhich is available for three years from the signing date and provides anunsecured £200 million multicurrency revolving credit facility available by wayof cash advances or sterling letters of credit (LOC). The facility is guaranteedby the Company's subsidiaries Amlin Corporate Services Limited and AmlinInvestments Limited. In December 2006 Amlin Bermuda Ltd entered into a $300 million LOC and RevolvingCredit Facility. The facility comprised a secured LOC facility for $200 millionfor a three year term and an unsecured revolving credit facility for $100million for a term of 364 days, twice renewable. The LOC facility is secured bya registered charge over a portfolio of assets managed by Aberdeen AssetManagement Limited with State Street Bank and Trust Company as custodian. As at30 June 2007 $10.8 million (31 December 2006: $1.7 million) LOCs were issued. 19. Cash generated from operations 6 months 6 months 12 months 2007 2006 2006 £m £m £m--------------------------------------- -------- ------- -------Profit on ordinary activities beforetaxation 185.0 120.1 342.7 Adjustments for non-operating cashmovements:Depreciation charge 1.3 1.4 3.2Interest paid 9.8 9.9 24.1Interest received (50.6) (53.3) (97.5)Dividends received (5.1) (2.7) (4.5)Net realised/unrealised (gains)/losses on investments (9.6) 18.3 (16.4)Net purchases of financial investment (51.0) (227.7) (349.4)(Increase)/decrease in loans and receivables (111.3) (151.8) 79.3(Increase)/decrease in reinsurancecontract assets (96.7) 98.6 320.8Increase/(decrease) in insurancecontract liabilities 181.1 89.7 (311.1)Increase in trade and other payables 6.7 24.6 1.3Decrease in retirement benefits (4.6) (4.4) (4.9)Exchange gains (1.3) - (11.6)Other non-cash movements - - 3.8---------------------------- ---------- ---------- ----------Cash generated from operations 53.7 (77.3) (20.2)---------------------------- ---------- ---------- ---------- The Group classifies the cash flows for the purchase and disposal of financialassets in its operating cash flows, as the purchases are funded from the cashflows associated with the origination of insurance contracts or the capitalrequired to support underwriting, net of the cash flows for payments ofinsurance claims. Therefore cash generated from operations is net of £51 million(30 June 2006: £227.7 million) being cash generated in the period that has beenused to purchase financial investments. Cash flows relating to participations on syndicates not managed by the Group areincluded only to the extent that cash is transferred between the Premium TrustFunds and the Group. 20. Contingent liabilities The Group has entered into various deeds of covenant in respect of certainsubsidiaries to meet each such subsidiary's obligations to Lloyd's. At 30 June2007, the total guarantee given by the Group under these deeds of covenant(subject to limited exceptions) amounted to £382.1 million (31 December 2006:£382.1 million; 30 June 2006: £276.7m). The obligations under the deeds ofcovenant are secured by a fixed charge over investments of the same value at therelevant valuation date and a floating charge over all the investments and otherassets of Amlin Investments Limited, in favour of Lloyd's. A floating chargegranted to Lloyd's by the Company was released by Lloyd's in January 2007.Lloyd's has the right to retain the income on the charged investments, althoughit is not expected to exercise this right unless it considers there to be a riskthat one or more of the covenants might need to be called and, if called, mightnot be honoured in full. As liability under each deed of covenant is limited to a fixed monetary amountthe enforcement by Lloyd's of any deed of covenant in the event of a default bya corporate member, where the total value of investments has fallen below thetotal of all amounts covenanted, may result in the appropriation of a share ofthe Group's Funds at Lloyd's that is greater than the proportion which thatsubsidiary's overall premium limit bears to the total overall premium limit ofthe Group's Lloyd's underwriting. The secured LOC facility for Amlin Bermuda Ltd (see note 18) is secured by aregistered charge over a portfolio of assets managed by Aberdeen AssetManagement Limited with State Street Bank and Trust Company as custodian. As at30 June 2007 $10.8 million (31 December 2006: $1.7 million) LOCs were issued. 21. Related party transactions Reinsurance contracts between Syndicate 2001 and Amlin Bermuda Ltd (ABL) Syndicate 2001 placed a number of reinsurance contracts with ABL, a wholly ownedsubsidiary of the Group, during 2006 and 2007. At 30 June 2007, the reinsurance contracts placed with ABL are: - eight proportional treaty reinsurance contracts for marine, direct property, special risks, specie, war, excess of loss treaty and miscellaneous classes of business; and - a whole account quota share for both years ended 2006 and 2007. ABL placed one excess of loss reinsurance contract with Syndicate 2001 during2006. All reinsurance contracts were agreed on an arms length basis with terms thatare consistent with those negotiated with third parties. These reinsurancecontracts are eliminated on consolidation of the Group's results and the effectson the income statements of such eliminations can be seen in note 4, segmentalreporting, under the column "intra group". The amount of gross written premium ceded to ABL during the period ended 30 June2007 was £73.3 million (31 December 2006: £100.8 million) being £24.9 million(31 December 2006: £28.6 million) of specific variable cessions and £48.4million (31 December 2006: £65.4 million) of Syndicate 2001 whole account quotashare. ABL recorded a profit of £16.7 million on these reinsurance contracts forthe same period (31 December 2006: £25.5 million). At 30 June 2007, balances included within ABL with respect to Syndicate 2001reinsurance contracts include: ---------------------------------------------- -------- --------- 30 June 31 December 2007 2006 £m £m---------------------------------------------- -------- ---------Insurance receivables 44.2 37.0Insurance contracts - outstanding claims (13.9) (24.7) - unearned premium (29.9) (39.0) - creditors arising from insurance operations (8.3) (4.4)---------------------------------------------- -------- --------- In addition, cash amounting to £24.0 million (31 December 2006: £56.5 million)was paid by Syndicate 2001 to ABL in respect of these contracts. 22. Principal exchange rates The principal exchange rates used in translating foreign currency assets,liabilities, income and expenditure in the production of these financialstatements were: H1 At 31 At 30 June H1 At 30 June 2006 2007 Average 2007 2006 Average 2006 Average rate December rate rate 2006------------------ --------- -------- -------- --------- --------- -------- US dollar 1.97 2.01 1.79 1.85 1.84 1.96Canadian dollar 2.24 2.13 2.04 2.06 2.09 2.28Euro 1.48 1.49 1.46 1.45 1.47 1.48------------------ --------- -------- -------- --------- --------- -------- Independent Review Report to Amlin plc for the 6 months ended 30 June 2007 Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated cash flow statement,the consolidated statement of changes in equity and related notes 1 to 22. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLP Chartered Accountants London 29 August 2007 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. Shareholder information The additional information consisting of the shareholder information anddirectors and advisers has been prepared from the records of the Company. Whilstit does not form part of the interim statement, it should be read in conjunctionwith it and with the responsibilities section of the independent review reportthereon. Financial Calendar 2007 21 September Record date for interim dividend 28 September Last date for receipt of elections and cancellations re. dividend reinvestment plan for interim dividend 19 October Payment of interim dividend26 October Dividend reinvestment plan shares credited on register 1 November Dividend reinvestment plan share certificates posted 2008 March Announcement of results for the year ending 31 December 2007May Payment of 2007 final dividend, subject to shareholder approval Shareholders' dealings The Company's stockbroker, Hoare Govett Limited, offers a low cost postaldealing service, which enables UK resident investors to buy or sell certificatedholdings of the Company's shares in what may be a convenient manner. Basiccommission is 1% of the transaction value, with a minimum charge of £15.Transactions are executed and settled by Pershing Securities Limited. Forms maybe obtained from the Company Secretarial Department, Amlin plc, St Helen's, 1Undershaft, London EC3A 8ND (Tel. 020 7746 1006) or direct from Hoare GovettLimited, 250 Bishopsgate, London EC2M 4AA (Tel 020 7678 8300). This service isnot available to non-UK residents who may, however, contact Hoare Govett Limitedfor details of other services that may be available. Hoare Govett Limited andPershing Securities Limited are each authorised and regulated by the FinancialServices Authority. Shareholder enquiries, register and website Please call our Investor Relations Unit on 0207 746 1111, or, for enquiriesconcerning share registration, call our Registrar, Computershare InvestorServices PLC, on 0870 703 6165. Amlin's website is at www.amlin.com DIRECTORS AND ADVISERS Directors Registered OfficeRoger Taylor (Chairman)* St Helen'sNigel Buchanan+* 1 UndershaftBrian Carpenter LondonRichard Davey* EC3A 8NDRichard Hextall (Finance Director)Tony HoltRoger Joslin*Ramanam Mylvaganam*Charles Philipps (Chief Executive)Sir Mark Wrightson Bt*+ Senior independent non-executive* non-executive Auditors Deloitte & Touche LLP London Investment Bankers Lexicon Partners Limited No. 1 Paternoster Square London EC4M 7DXAudit Committee StockbrokersNigel Buchanan (Chairman) Hoare Govett LimitedRichard Davey 250 BishopsgateRoger Joslin London EC2M 4AARamanam MylvaganamRemuneration Committee Corporate LawyersRamanam Mylvaganam (Chairman) Linklaters LLPNigel Buchanan One Silk StreetSir Mark Wrightson Bt London EC2Y 7HQNomination Committee Principal BankersRoger Taylor (Chairman) Lloyds TSB Bank PLCNigel Buchanan 25 Gresham StreetRoger Joslin London EC2V 7MNRamanam MylvaganamCharles PhilippsSecretary RegistrarCharles Pender FCIS FSI Computershare Investor Services PLC PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH -------------------------- 1 The exchange difference on net non-monetary liabilities arises throughtranslation of unearned premium reserves, deferred reinsurance expenditure anddeferred acquisition costs at average historical rates, whereas all otherrelated monetary balance sheet items are translated at the closing rate ofexchange. 2 This table is completed by our underwriters and covers their views of ratemovements from year to year. These views are supported by actual recordedrenewal rate movements on the underwriting system. Subjective judgement is usedto account for subtle changes in exposure or terms and conditions. Claimsinflation is not systematically taken into account in the calculation of theserate movements and therefore, particularly in relation to long tail business,some of the benefit of rate increases has been eroded. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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