14th Nov 2007 07:01
Amlin PLC14 November 2007 AMLIN PLC PRESS RELEASE For immediate release 14 November 2007 TRADING UPDATE Positive trading update and announcement of return of capital to shareholders Amlin plc, the leading insurer, today released the following update on trading. Key points: • £120 million return of capital announced • Pricing for Non marine, Marine and Bermudian operations remains satisfactory • UK Commercial and Aviation pricing remains under competitive pressure • 2.1% return on investment portfolio for the third quarter 2007 (4.7% for the nine months to 30th September) Return of capital Over recent years profitability has been strong, with a weighted average returnon equity over the period from 31 December 2001 to 30 June 2007 of 29.3%. Whilstunderwriting conditions remain satisfactory for Non Marine, Marine and AmlinBermuda we do not expect a material increase in the absolute level of requiredcapital in the medium term. Consequently the Board has today announced a return of capital of £120 million.This return is being effected by the issuance of B shares combined with a shareconsolidation. Full details are provided in a separate press release issuedtoday. Trading environment and premiums written The Group underwrites a diverse portfolio of insurance and reinsurance business.Our Non Marine, Marine and Bermudian operations are trading in a satisfactorypricing environment and offer good prospective margins. These operationsrepresent approximately 80% of our expected premiums for 2007. The trading conditions in our other two divisions, UK Commercial and Aviationremain competitive. Consequently our teams in these areas have remained focusedon good risk selection and profitability. The Group's gross written premium (before deduction of brokerage costs) in thenine months ended 30 September 2007 was £913.1 million (2006: £959.6 million at30 September 2007 exchange rates). Syndicate 2001's gross written premium was £792.5 million, approximately 8%less, at comparable rates of exchange, than for the first nine months of 2006.Of this income, £34.0 million (2006: £31.3 million) was specifically written tobe ceded to Amlin Bermuda and a further 10% has been ceded to Bermuda under awhole account quota share reinsurance contract. Amlin Bermuda has written £120.6 million of direct income in the nine months to30 September, in addition to the reinsurance of Syndicate 2001 noted above. Thisis an increase of 22% at comparable rates of exchange over the same period in2006. We are pleased with the quality and diversity of the portfolio that hasbeen built to date. The average renewal rate reduction for the Group for the first nine months was4.6% with renewal retention at 79%. The reduction in renewal rates for AmlinBermuda and Non Marine was influenced by pricing reductions for the US windstormexposures in July which were coming off the rate peaks achieved in 2006. Howeverthe rates achieved remained acceptable. The following table shows the written income, renewal rate change and retentionratio by division: 2007 gross Renewal rate Renewal premiums to 30 change retention ratio September £ million % %Amlin Bermuda 120.6 (6.8) 79Aviation 43.0 (9.7) 79Marine 166.1 (2.5) 78Non Marine 482.1 (4.2) 79UK Commercial 101.3 (4.3) 77Total/Average 913.1 (4.6) 79 Claims development The underwriting loss ratios at the third quarter are excellent. There hascontinued to be a low level of natural catastrophe activity, most notably forthe Atlantic windstorm season. Consequently this is expected to enhanceprofitability for 2007. Development of claims on prior underwriting years has been better than expectedand since June 2007 we have been able to make releases from reserves of £29.7million. Investment and foreign exchange management During the third quarter Amlin's diversified investment portfolio, whichaveraged £2.5 billion, delivered a return of 2.1%, making a return of 4.7% forthe nine months ended 30 September. The breakdown of assets, the returns for thethird quarter and for the year to 30 September 2007, by asset class, is shownbelow: Average third Third quarter Investment quarter assets Investment return to 30 return September £million % %Cash andequivalents 561.8 1.4 4.1Debt securities 1,572.2 2.6 3.9Equities 284.4 0.6 10.2Property 68.6 2.4 8.7 2,487.0 2.1 4.7 Increased uncertainty for markets and economic fundamentals led the Group toreduce its equity weighting from 13% of group assets at the end of June to 11%at the end of September. In addition, during the equity rally which followed theUS Federal Reserve Bank's 50 basis point interest rate cut in September, optionstrategies were put in place covering 26% of the remaining equity holdings.These provide protection for that proportion of the equity portfolio against afall in major indices of more than 5% from 19 September 2007 to 31 December2007, at a cost of limiting gains over the same period to approximately 4.5%. The Group's sub prime bond holdings remain modest equating to approximately 1%of total cash and investments. During the third quarter the Board also considered its foreign exchangemanagement policy in respect of its balance sheet exposure to the net assets ofAmlin Bermuda. The Board considered that over time it would be appropriate tohedge half of the investment. To date, options have been acquired, which expireon 4 September 2008, which protect $100 million of net assets against the USdollar falling below an exchange rate of $2.0650. The cost of this protection islimiting gains in the US dollar to a rate of $1.92. In addition Amlin Bermudahas sold retained profits of $100 million at an average rate of $1.98:£1. Charles Philipps, Amlin's CEO, commented as follows: "The strong third quarter,and a US windstorm season to date without major loss, means that Amlin's resultsfor 2007 will most likely exceed current market forecasts. It also puts us in astrong position to now return cash to shareholders and thereby enhance nextyear's return on equity." 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 1000Peter Rigby/David Haggie, Haggie Financial Limited 0207 417 8989 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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