4th Sep 2006 07:02
Amlin PLC04 September 2006 AMLIN PLC PRESS RELEASE For immediate release 4 September 2006 AMLIN DELIVERS ANOTHER STRONG RESULT Annualised first half return on equity, at 24.2%, above 20% for fourthconsecutive year. Profit before tax of £120.1 million, down 13.2% owing to lower investmentreturns and IFRS currency translation •First half yield on average funds invested of only 1.5%, compared to 2.9% in H1 2005 £€45.5 million adverse effect of foreign exchange translation on net non-monetary liabilities relative to 2005 Underlying underwriting performance stronger •Gross premiums written up 25% to £846.2 million (H1 2005: £675.8 million) •London underwriting profit up 7.5% at £101.5 million (H1 2005: £94.4 million) •Solid start to Amlin Bermuda with underwriting profit of £23.6 million •Catastrophe exposures successfully reshaped Interim dividend increased 5% to 4.2p per share (H1 2005: 4p per share) Balance sheet materially strengthened with £230 million subordinated debt issue Positive outlook for full year and 2007 •Earned premiums expected to be skewed to second half more than in recent years •Net unearned premium reserve at 30 June 2006 up 19% to £779 million (at 30 June 2005: £653 million) •Average renewal rate increase to 31 July of 8.6% for London operation Charles Philipps, Chief Executive, commented as follows: "This has been a busy and productive first half for Amlin. The six month resultagain demonstrates the strength of our business. While the profit is a touchdown on last year, owing to exchange rate fluctuations, our annualised return onequity is still a very healthy 24%. With Amlin Bermuda building its potentialand our reinsurance exposures repositioned to address changes in the market weare well placed going forward." 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 Limited 0207 417 8989 / 07768 332486Peter Rigby, Haggie Financial Limited 0207 417 8989 / 07803 851426 Financial highlights Six months Six months 2005 12 months 2005 2006 (restated) (restated) £m £m £m---------------------------------------------------------------------------------------------------------Gross premiums written (1) 846.2 675.8 993.5Net premiums written (1) 766.5 556.5 829.3Earned premiums 481.8 395.5 822.1---------------------------------------------------------------------------------------------------------Profit before tax 120.1 138.4 186.7---------------------------------------------------------------------------------------------------------Per share amountsOperating profit 22.3p 34.4p 44.9pEarnings 17.9p 25.2p 34.3pNet assets 153.5p 135.2p 148.7pNet tangible assets 141.1p 118.7p 136.2p---------------------------------------------------------------------------------------------------------Group operating ratios (2)Claims ratio 49% 44% 57%Expense ratio 30% 25% 25%Combined ratio 79% 69% 82% Amlin Bermuda Ltd combined ratio 49% - -Syndicate 2001 combined ratio 84% 69% 82%--------------------------------------------------------------------------------------------------------- (1) excluding premiums associated with the reinsurance to close of our increasedshare of capacity (2) the combined ratios include Syndicate 2001 as if the Group owned 100% ofcapacity in all years INTERIM RESULTS STATEMENT We have had yet another excellent first half. In addition to delivering a verysolid set of results, our exposures to catastrophe risk have been successfullyrepositioned to take account of the significant changes to risk appraisal andreinsurance markets following last year's hurricane season. With this, and avery promising start for Amlin Bermuda, we believe that we remain well placed tocontinue to deliver strong returns for our shareholders. Our first half pre-tax profit of £120.1 million (H1 2005 as restated: £138.4million) is pleasing when taking account of an adverse £45.5 million change inthe foreign exchange translation of net non-monetary liabilities relative to2005(1). Six month return on equity was 12.1% increasing our weighted averageannual return on equity since 2001 to 19.7%. Amlin Bermuda, in its first trading period, made a strong contribution recordinga profit before tax of £36.8 million. The underlying result is analysed as follows: Table 1: Analysis of result Profit before tax Underwriting contribution H1 2006 H1 2005 H1 2006 H1 2005 £m £m £m £mAs reported 120.1 138.4 101.8 116.6IFRS translation adjustment 23.3 (22.2) 23.3 (22.2) -------------------------------------------------Underlying result 143.4 116.2 125.1 94.4 ================================================= The underlying underwriting contribution was strong with our London operationsdelivering a return of £101.5 million and Amlin Bermuda a return of £23.6million. This results from a healthy increase in premium income earned, coupledwith a benign period for catastrophe events. Aggregate premium income written grew by 25%. Gross earned premium growth waslower at 13% reflecting the natural lag in recognition of earned premium as theportfolio grows. Net premium earned increased by 22% (excluding the premium forreinsurance to close the remainder of Syndicate 2001 from third parties). Thisreflects our strategy of purchasing less reinsurance protection for our ownLondon reinsurance account and currently writing Amlin Bermuda's businesswithout any reinsurance protection. The contribution from investments was marginally down at £37.7 million (H1 2005:£41.3 million). Average investment balances increased to £2.3 billion for theperiod (H1 2005: £1.6 billion) but weak bond markets and a lower, albeitsatisfactory, return from our equity portfolio led to the reduction. Whilst earnings per share, at 17.9p (H1 2005 restated: 25.2p) were lower than inthe first half of 2005, we expect earned premium to be more weighted to thesecond half than in prior years owing to the start up of Amlin Bermuda and theother factors highlighted under Outlook below. Dividend The Board has declared an interim dividend of 4.2 pence per share (H1 2005: 4.0pence per share). This will be paid on 20 October 2006 to shareholders on theregister at the close of business on 29 September 2006. 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. Trading conditions For the first time for a number of years trading conditions by class havediverged. During the first half of 2006 catastrophe exposed classes haveexperienced a pricing reappraisal with rate rises being most significant whereavailable reinsurance capacity is scarce. However, in less catastrophe exposedlines, for example UK commercial classes and airlines, we have seen continuedpricing pressure as good profits in recent years have led to more intensecompetition. Our rating indices (Table 2) illustrates this divergence whilstconfirming the continued acceptable level of rates in most areas. Table 2: Rating indices for major classes (based on renewal)Class 2000 2001 2002 2003 2004 2005 2006--------------------------------------------------------------------------------------------------------------US catastrophe reinsurance 100 115 146 150 143 144 195Non US catastrophe reinsurance 100 120 157 162 146 131 139US large property insurance 100 125 180 166 143 136 176Fleet motor 100 121 136 142 140 136 136Per risk property reinsurance 100 122 190 192 171 145 163Energy 100 140 172 189 170 176 282US casualty 100 123 172 215 232 237 235Professional indemnity 100 110 149 178 180 164 146Marine hull 100 115 148 171 183 188 190War 100 250 288 244 220 206 195Airline hull and liabilities 100 296 278 234 215 191 163Employers' liability 100 115 144 158 159 144 136-------------------------------------------------------------------------------------------------------------- Overall the renewal rate increase to the end of July for Syndicate 2001 was 8.6%with 79% of the 2005 account being retained. Given that both Amlin Bermuda's andSyndicate 2001's new business has been concentrated in areas where rateincreases have been the strongest, our expected underwriting margins will havegrown by more than the renewal rate increase. The reappraisal of catastrophe exposed risk, whether through revised models usedby reinsurers to assess possible claims costs from catastrophe events or throughchanges to business strategy driven by increased capital needed to support an'A' financial strength rating, has had a far reaching effect on catastrophelines and the speed of change has accelerated through the year. The level ofre-pricing at the 1 January renewal season for property catastrophe reinsuranceand property insurance was modest, especially so for non-US risk. However, whenit became clear that the retrocessional reinsurance market (reinsurance ofreinsurance) had shrunk, or was demanding huge rate increases, the pricingclimate hardened. The effect on pricing has been pronounced in the United Stateswhere demand has outstripped available capacity. International catastrophe riskhas seen lower rate rises but upward pressure on rates is increasing. We are positioned well to take advantage of these market conditions. With AmlinBermuda commencing trading on 1 December 2005, property reinsurance is expectedto make up 39% of our portfolio for 2006 (2005: 34%). Importantly, this growthhas been controlled with risk management continuing to be a key area of focusfor the business and reflecting our desire to maintain a well diversifiedexposure to underwriting risk. Underwriting performance Underwriting contribution, after removing the effect of exchange translationdifferences on non monetary liabilities, increased by £30.7 million to £125.1million. The contributions of Syndicate 2001 and Amlin Bermuda were respectively£101.5 million and £23.6 million. The combined ratio, on a similar basis, was75% (H1 2005: 74%). Net earned premium (excluding the premiums associated withthe reinsurance to close of our increased share of capacity) rose by 22% to£481.8 million (H1 2005: £395.5 million). This growth is attributable to both anincrease in business written by the Group and lower reinsurance expenditure. Premium income Gross premium written increased by 25% to £846.2 million with growthconcentrated in the property, energy and reinsurance accounts in London, and thesuccessful start up of Amlin Bermuda. Gross premium written reduced most in ourUK commercial account as retention rates fell in the face of more intensepricing competition. In its first six months of trading, Amlin Bermuda wrote £161.8 million ofbusiness, of which £78.1million was new to the Group. We are pleased with thequality of business being written by Amlin Bermuda and while income to date issomewhat lower than the original plan, it still represents an excellent startfor the company. Most of the shortfall arose at the beginning of the year, asthe company received its financial strength ratings a little too late to takefull advantage of the 1 January renewal season. Additionally, competition forinternational catastrophe business early in the year made it initially moredifficult to satisfactorily build that part of the account. As explained below,Amlin Bermuda's risk appetite was also reduced to help compensate for greatercatastrophe risk being carried by Syndicate 2001. Outwards reinsurance Reinsurance expenditure as a proportion of gross written premium has fallen to9.4% from 17.7% for the same period last year. This reflects Amlin Bermudawriting business without reinsurance protection and reduced expenditure for theLondon business. Claims The claims environment over the last six months has been favourable with nomajor natural catastrophes impacting the Group. However, we have experienced ahigher frequency of larger risk losses on the marine, property and aviationaccounts in this period, underscoring in part the exceptionally low level oflosses that we have seen in recent years. The prior year run off profit in the period was £26 million (H1 2005: £30million). Looking forward, our reserving policy remains unchanged and we wouldexpect to continue seeing a positive contribution from our prior period reservesif normal development is experienced. We have continued to receive notifications and updates from our clients relatingto last year's hurricanes. We have been able to make a small release from ouroverall reserves and still consider that the reserves held are robust. Overall, the claims ratio was again very creditable, at 49% (2005 H1: 44%). Expenses Business acquisition costs were similar to the same period in 2005, atapproximately 18% of gross earned premium. The increase in other operating expenses is attributable to the movement inexchange rates on the value of net non monetary liabilities. We have madesavings in Lloyd's and some other costs which have offset the additionalexpenses of Amlin Bermuda. Segmental commentary The following commentary and Table 3 is provided on the basis that Amlin ownedall of Syndicate 2001's capacity for all relevant underwriting years so thatchanges in ownership do not distort the performance. In addition, the commentaryis after removing the effect of the foreign exchange translation of non monetaryliabilities to allow focus on the business trends. Table 3: Divisional combined ratios Non- UK Amlin Total marine Marine commercial Aviation Bermuda-----------------------------------------------------------------------------------------------------------------Net premiums earned (£m) 246.7 83.5 79.0 29.8 45.9 484.9 Combined ratios before removing the effect of foreign exchange translation of non monetary liabilitiesClaims ratio 40% 57% 63% 84% 37% 49%Expense ratio 33% 40% 24% 42% 12% 30%-----------------------------------------------------------------------------------------------------------------Combined ratio H1 2006 73% 97% 87% 126% 49% 79%Combined ratio H1 2005 62% 68% 79% 80% - 69%----------------------------------------------------------------------------------------------------------------- Combined ratios after removing the effect of foreign exchange translation of non monetary liabilitiesClaims ratio 39% 56% 62% 81% 37% 48%Expense ratio 28% 35% 24% 35% 12% 27%-----------------------------------------------------------------------------------------------------------------Combined ratio H1 2006 67% 91% 86% 116% 49% 75%Combined ratio H1 2005 69% 73% 79% 90% - 74%----------------------------------------------------------------------------------------------------------------- Non- marine (51% of net earned premium in period) Our London non-marine combined ratio at 67% (H1 2005: 69%) is another excellentfirst half result. Net earned premium has increased by 15% reflecting growth inthe property and property reinsurance accounts into strengthening marketconditions. The claims ratio reflects the benign environment for catastrophe losses in thefirst half. The fall in the expense ratio largely reflects a shift towardsreinsurance which carries lower brokerage costs. Amlin Bermuda (10% of net earned premium in period) Amlin Bermuda's combined ratio of 49% is a very solid start. With 97% of itsdirect/non-group income being derived from property reinsurance it is notsurprising that it has benefited from the benign claims environment noted above. The company has made excellent strides towards its strategic aim of building adiverse reinsurance portfolio similar to the high quality account of Syndicate2001. Marine (17% of net earned premium in period) The marine division's combined ratio has increased to 91% (H1 2005: 73%). Theclaims ratio has increased to 56% from 42% reflecting higher than average specieclaims during the period. Gross premium written has increased by 33%, with growth concentrated in theenergy account where income has been increased by 91% in the first six monthswhile exposures to modelled losses have successfully been reduced. Net earnedpremium has increased by only 20%, however, as higher reinsurance costs havebeen expensed faster than this new premium is earned. This effect will unwindover time. The expense ratio has also increased due to growth in classes that carry higherbrokerage costs including energy and yacht. UK commercial (16% of net earned premium in period) The UK commercial combined ratio of 86% (H1 2005: 79%) is another good result.The claims ratio remains healthy at 62% despite increasingly competitive marketconditions in commercial motor and liability classes and has been helped by acontinuing good run off of prior years. The expense ratio increase reflects lower levels of gross written and net earnedpremium, down 8.7% and 3.2% respectively, and a change in mix of business awayfrom motor to liability business which has higher brokerage rates. Aviation (6% of net earned premium in period) The aviation result is disappointing with a combined ratio of 116% (H1 2005:90%). Written and earned income are relatively stable but well down from thehighs in 2001 and 2002. The airline account continues to be under pressure butthe other aviation classes continue to attract rate increases. The swing in the result reflects the continued shrinkage of the higher marginbut more volatile airline account in the face of increased competition coupledwith a series of small to medium sized airline losses. On a small income basewhere pricing has become less attractive, frequency of claims can quickly turn agood combined ratio to negative. However, we continue to believe that ourstrategy of reducing exposures and becoming more selective is correct in theseconditions. Reinsurance and exposure management strategy A major focus during the period, as a consequence of the enormously changingreinsurance markets, has been our decision to reshape our exposures to helpensure that we continue to generate acceptable returns while managingappropriately the downside risk of major catastrophes. Historically Amlin has bought significant levels of reinsurance to reduce thevolatility of the underwriting result, and to manage the risk of severe eventsweakening the Group's financial strength. We were able to renew our reinsurance programmes for direct insurance accounts(for example property, marine, aviation and UK commercial) in a similar mannerto the previous year, albeit at an increased total cost. However, we consideredthe pricing and levels at which we were offered both retrocessional cover, (toprotect our Syndicate reinsurance account), and umbrella cover, (a whole accountprotection that has sat above all of our insurance and reinsurance protections),to be uneconomic. We have therefore bought significantly less of these types ofreinsurance and decided to reduce our gross catastrophe exposures in Syndicate2001. By managing down these exposures we believe that the risk return equationis better for Amlin, particularly taking account of the significantly improvedpricing for inwards catastrophe business. In Syndicate 2001, much of this reduction in exposure has focused on thereinsurance account by reducing or non renewing lines. Also, in the early partof the year Amlin Bermuda, which initially had little exposure of its own, wasable to offer Syndicate 2001 retrocessional cover so as to contain the netexposure of the London business to acceptable levels. The cost of thisprotection was $12 million and has all expired without loss - effectivelydelivering a cost saving to the Group as a whole. With no umbrella protection, we have also actively managed down our property andenergy exposures. To illustrate this: by 1 July 2006 the gross loss for ourmodelled Gulf of Mexico Syndicate realistic disaster scenario had been reducedby 27% and 40% for our direct property insurance and energy portfoliosrespectively when compared to scenarios as at 1 January 2006. Recognising the additional volatility being borne by Syndicate 2001, and withAmlin Bermuda writing a quota share of the syndicate, Amlin Bermuda also reducedits risk appetite by $50 million to $200 million for a single zone and $250million for multi zone perils. Having implemented the above changes, we believe we have satisfactorily reducedthe Group's gross exposures such that the Group is within its risk appetite forthe US windstorm season. All of our current modelled single zone event scenarionet losses are under £225 million, with the highest modelled event loss being apotential Japanese earthquake. For multi zone scenarios our highest modelledevent loss, being a $65billion US northeast windstorm, has been successfullymanaged down to approximately £330 million. Set against this we have savedapproximately $70 million of reinsurance cost compared to 2005. Finally, maintaining our underwriting diversity, by class and within classes,continues to provide a cushion to the catastrophe exposure. Investment return Table 4: H1 2006 investment mix and returns Average balances in H1 Syndicate Corporate Total Total Investment return £m £m £m % %--------------------------------------------------------------------------------------------------Property 5.9 - 5.9 0.2% -1.3%Equities - 129.3 129.3 5.7% 6.4%Debt securities 1,144.7 103.0 1,247.7 54.7% 0.5%Cash and cash equivalents 133.7 764.9 898.6 39.4% 2.3%-------------------------------------------------------------------------------------------------- 1,284.3 997.2 2,281.5 100.0% 1.5% Investments contributed £37.7 million to the first half result (H1 2005: £41.3million). Overall the investment base rose with average investments amounting to£2.3 billion for the first half compared to £1.6 billion in the same period lastyear. However, the reduction in return reflects lower contributions from thebond and equity portfolios compared to 2005. Much of the increase in the investment base arises out of the capitalisation ofAmlin Bermuda late last year through new equity and debt issues. The Bermudaassets amount to $1 billion and are invested against US dollar benchmarks. Inthe first six months these assets were invested in cash funds and returned 2.3%,a good return when compared to US dollar bonds. The Syndicate's policyholders' funds, amounting to average funds of £1.3 billionfor the period (H1 2005: £1.2 billion), were invested in short dated bonds.However, the continued increases in interest rates by the Federal Reserve in theUnited States as well as concerns over inflation and nervousness over rate risesin the United Kingdom, resulted in a poor period for bonds with our sterlingreturn amounting to only 0.8% (H1 2005: 3.4%) and US dollar returns of only 0.3%(H1 2005: 1.2%). The London corporate funds have continued to be invested in equities and cashfor much of the first half although part of the cash balance has now beeninvested in short dated sterling bonds. The cash funds returned 2.3% (H1 2005:2.4%). The equity portfolio produced a good return of 6.4% (H1 2005: 10.3%) in morechallenging markets, with our equity manager outperforming their benchmark by7.4%. Performance through the first half year in equity markets was volatile,with a stronger than expected first quarter and disappointing second quarter. Wetook advantage of better first quarter performance to purchase an equity putoption, which expires on 29 December 2006, for approximately 20% of theportfolio at its then value. Taxation The effective rate of tax for the period is 21.0% (H1 2005: 27.7%). The loweffective rate is due to a combination of factors. First, Amlin Bermuda operates locally with no corporation tax. As we believe thecompany meets the requirements to be exempt from controlled foreign companystatus in the UK, no current tax is provided. Deferred tax has been provided totake account of tax that will become due on distribution of profits fromBermuda. Secondly we have again utilised brought forward unprovided capitallosses to offset capital gains from the equity portfolio. Balance sheet strength and flexibility The Group's balance sheet has continued to be strengthened. Cash flow within the Group has been healthy and we were pleased to see therelease of £196 million from our Syndicate trust funds through the new quickerLloyd's distribution system. In April, Amlin issued its first public debt placement raising £230 million ofsubordinated debt in the UK market and opening up access to another source oflong term capital. The subordinated debt provides the Group with better qualitydebt capital. It is long term, repayable after 20 years with a call date after10 years. Historically we have had to renegotiate our bank facilities at leastevery two years. Additionally, it is unsecured, contains no financial covenantswhich could lead to early repayment and is eligible as capital under FSA rules. The purpose of the debt issue was to refinance part of the short term debt of£243 million that was raised in November 2005 to initially finance AmlinBermuda. This has all now been repaid out of free cash flow or the proceeds ofour long term debt issue. The changes to the debt structure are reflected in the increase in financingcosts from £3.5 million to £12.4 million for the first half. Historically Amlinhas used letters of credit to finance part of its Lloyd's capital. Only thecommission charges were recognised as finance costs because no cash was receivedby Amlin. With the subordinated debt, Amlin's cash and investments are increasedand we benefit from the investment return on the monies raised. Our internal modelling confirms the strength of our current capital positionwith the total debt to capital ratio now standing at 26% (31 December 2005:36%), an acceptable position at this point in the cycle. We would expect thatthis ratio will decline as we move through the cycle such that the financialrisk is reduced when margins on the underwriting business are lower. Another area of focus in the first six months has been the effective managementof the Group's reinsurance assets, which were materially increased following thehurricane events of last year. To date we have collected $265 million fromreinsurers out of $306 million that has fallen due in respect of last year'shurricanes. This leaves a further $330 million to collect once we have paid theunderlying claims. The quality of the overall outstanding reinsurance recoveriesremains good with 97% from reinsurers with an Insurance Financial StrengthRating of A- or better. During the period we recorded an exchange loss of £42 million throughconsolidated reserves on the retranslation of Amlin's Bermudian companies. WithAmlin Bermuda writing predominantly dollar denominated risk and it being theCompany's start-up year, we have not hedged its balance sheet. Operational improvements We set out in our 2005 annual report a number of initiatives for 2006 that wouldmove us closer to our vision of Amlin in 2009. A number of these initiativeswere focused on effecting operational change within the business. They includedincreasing our electronic trading capability and claims services to ensure thatAmlin's team are operating with the best systems and Amlin's clients arereceiving top quality service. During 2006 to date we have made big strides in delivering these ambitions. Thishas included a range of projects where we have worked with a number of otherLloyd's agents, collectively known in the market as 'G6', to act as a catalystfor change. This recognises that, as we operate as part of a subscriptionmarket, only solutions that work for the majority will benefit our clients. We are now in a position where we can trade and transfer informationelectronically with two of our main broking partners and expect that otherbrokers will quickly follow. This should help to increase speed of placement,enhance service to our clients and make the whole process more efficient. We have continued to enhance our London Market claims offering through enhancingskills and systems. Again, this will improve our service and will make theclaims process more efficient for us and brokers. Outlook Our outlook for the full year remains good. We recognise that the windstormseasons in the Atlantic and Pacific are still to pass but rating conditions haveadjusted to reflect an increased frequency and severity of storms. We expect net earned premium to be more skewed to the second half of 2006 thanin recent years. This is due to the growth in gross premium written generated inthe first six months, with rate increases accelerating through the period.Therefore, as we earn premium income through the whole policy period, the impactof this growth in the period on earned premium is more muted than for writtenpremium. This effect will unwind through the year, particularly as the renewaldates for the classes of business in which we are growing most are concentratedin the first half of the year. Also, with less reinsurance purchased in Londonand none in Bermuda, the growth in gross earned premium will feed more directlyinto the results. Indeed, net unearned premium at 30 June 2006 has increased to £779 million; a£126 million or 19% increase on that at the same date last year. As has become afeature of our results we expect to continue to generate run-off profits fromour prudently set reserves as long as we experience normal, or better thannormal, claims development. We would normally expect that the investment side of the business shouldgenerate a bigger contribution than we have reported in the first half of 2006.As noted above the bond market was particularly testing in the period but webegan the second half of the year with higher yields. In addition, our cash andinvestment balances remain strong and are 2.8 times the size of our equityshareholders' funds. In line with our strategy we have grown income most in lines where conditionshave been strongest, such as catastrophe reinsurance and energy insurance, andhave contracted where weakening conditions are resulting in more questionablemargins, such as our UK commercial classes and airlines. While our growth inincome this year has been in some of our more volatile accounts, our overallexposures have been managed to contain our downside catastrophe risk withinacceptable limits. We also expect to grow the attritional content of ourcatastrophe exposed accounts when conditions are supportive of growth. We anticipate that catastrophe exposed risk will remain well priced into 2007,and most probably beyond. The extent of severe events and fresh capital intothis part of the industry going forward will be major determinants of actualconditions. In other areas we anticipate that there will be a gradual softeningof rates but are hopeful that there will not be a slide and that some areas,such as UK commercial motor insurance, may take a positive turn before too long. With market conditions diverging between business lines, we expect the value ofour diversity to be realised once again through our ability to allocate capitalbetween lines with a view to optimising the relationship between our risk andexpected return. We continue to look to the future confident of our ability todeliver our target returns. (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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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