Interim Results

Amlin PLC 14 September 2000 AMLIN PLC Interim results for the six months ended 30 June 2000 Highlights * Purchase of a further 10% of managed syndicate capacity in Lloyd's auctions to date - owned capacity now at 67.5%; * Managed syndicates continue to outperform the Lloyd's average; * Improvement in key ratios of managed syndicates; - Combined ratio 5% lower at 110% - Expense ratio 6% lower at 29% * Premium income increased from £85.8 million to £187.4 million owing to growth in underlying business and strategy to increase managed syndicate capacity ownership; * Technical result improved from a loss of £1.5 million to a profit of £1.5 million; * Fleet motor rates continue to rise at 27% for second quarter 2000; * Operating loss and net assets reflect adverse investment return fluctuation - largely recouped since 30 June; * Interim dividend of 1.4p per share up 8%. Six months Six months Twelve months 2000 1999 1999 £m £m £m ------------------------------------------------------------------------ Gross premium written 187.4 85.8 161.4 Net premium written 131.4 57.3 126.8 Earned premium 97.2 46.1 106.4 Continuing technical 1.5 (1.5) 2.4 profit/(loss) Discontinued technical loss (1.3) (2.2) (1.1) Operating (loss)/profit (11.4) 5.0 14.2 Earnings per share (pence) (8.4) 2.3 5.9 Dividends per share (pence) 1.4 1.3 3.8 Net assets 209.5 223.6 226.9 Net assets per share (pence) 106.6 108.1 110.0 Enquiries: Amlin plc : Charles Philipps 020 7746 1059 Richard Hextall 020 7746 1058 Haggie Financial : David Haggie 020 7417 8989 Chairman's and Chief Executive's Joint Statement Amlin continues to progress towards its strategic goal of building a specialist commercial insurance company. We have continued to successfully develop our insurance operations by acquiring managed syndicate capacity and growing premium income as we capitalise on the early stages of improvement in trading conditions. The Group's reported results belie the improvements in our core underwriting operations, where the incurred loss ratios on business incepting in 2000 are approximately 18% better than their 1999 equivalents. The results have been affected by a number of factors highlighted under 'Interim results' below. The technical result on our core continuing operations has improved but our strategy of rapidly increasing our ownership of managed syndicate capacity leads to a short term strain on our results. The Group's net assets at 30 June 2000 are £17.4 million below those at 31 December 1999, reflecting a £7.4 million share buyback and an investment loss of £7.2 million on our FTSE 350 portfolio. The portfolio has performed better since 30 June and these losses have been largely recouped. The Board remains confident of the prospects of the Group as it continues to align its capital to support its own managed capacity and, accordingly, it has increased the dividend by 8% to 1.4p per share (1999: 1.3p) which will be paid on 2 November 2000 to shareholders on the register at the close of business on 29 September 2000. Ownership of managed capacity The Group has acquired an additional £59.4 million, or 10.3%, of managed syndicate capacity at an average price of 6.2p per £ in the four auctions held to date. We now own 67.5% of our managed syndicate capacity and we expect to make further progress in the remaining 2000 auctions. Syndicate merger In May 2000 we obtained overwhelming approval to merge our three syndicates, Syndicates 902, 1141 and 2001 with effect from the 2001 year of account. Trading as one syndicate from 2001 we will have greater operational flexibility and will generate cost savings in our reinsurance programmes and in other areas. Reflecting these benefits and improving market conditions, we have decided to increase the capacity of Syndicate 2001 by 6.9% to £575 million for the 2001 year, to enable us to write 15% more premium income. E-commerce development Our principal e-commerce business, Amlin Credit continues to grow. The merits of the business were endorsed externally with its nomination for the e-commerce award at the British Insurance Awards. The team continues to develop the product and we expect sustained growth during the latter half of 2000. We believe that e-commerce provides an added dimension to our traditional London Market business and our in-house 'e-Group' has been working on a number of fresh initiatives which we intend to launch over the coming months. Managed underwriting We are pleased to report that our Coles and Amlin Insurance Services Divisions are performing well, with improvements in their combined ratios. The Harvey Bowring Division, however, has performed below expectations and steps have been taken to restore its performance. Our overall underwriting performance, on a 100% owned basis, is shown below: Six months Six months Twelve 2000 1999 months £m £m 1999 £m --------------------------------------------------------- Gross premium written 348.0 250.2 446.2 Net premium written 237.9 164.2 340.8 Earned premium, net 212.6 168.0 345.3 of reinsurance ------ ------- ------- Claims ratio 81% 80% 71% Expense ratio 29% 35% 37% Combined ratio 110% 115% 108% ------- ------- ------- Coles Division The combined ratio of the Division improved to 101% in the period (six months ended 30 June 1999: 103%), due to a better claims ratio. Premium income for the Division is beginning to expand, reflecting improving market conditions, but is partially offset by increased reinsurance costs. The Division's excess of loss account is benefiting from a very low loss frequency in the first six months of the year, but we have taken a cautious view of ultimate loss ratios given that the windstorm season is not yet over. On an underwriting year basis, incurred loss ratios stand at 3.4% compared with 31.8% for 1999 at the same stage of development. This, combined with hardening rates, should lead to an improvement in the result for 2000 taken as a whole. The direct marine account is starting to see limited rate improvements. While terms are beginning to tighten, the Division intends to hold income at low levels until there is clear evidence of a return to sustainable profitability. The aviation account is geared towards the latter part of the financial year, particularly for airline accounts. This leads to an artificially high expense ratio in the first six months which we estimate has impacted the Group's combined ratio by 2% (six months ended 30 June 1999: 3%). Loss experience has been promising and renewals to date have shown an increase in both rate and premium. The heaviest renewal period is in the fourth quarter which will be a key indicator to the future profitability of this account. Harvey Bowring Division With the exception of its marine and excess of loss accounts, the results of this Division have been disappointing. The performance of most lines of non- marine business has been poor, with the US casualty and US binding authority accounts proving particularly unsatisfactory. The combined ratio in the six months to 30 June 2000 increased to 114% (six months ended 30 June 1999: 110%) as a result of a worse claims ratio owing to a higher level of attritional losses in 1999, higher levels of settlement on our US casualty accounts and a strengthening of reserves in Syndicate 1141 following a detailed assessment by our syndicate monitoring team. The latter reassessment added 6% to the Group's claims ratio. Management is focused on restoring performance in this Division and underwriters have been adopting greater selectivity in underwriting risks as well as demanding better terms. Casualty income has been reduced. Binding authority business is being refocused with a tough line being taken on those accounts which have been unsatisfactory. The Division's short-tail account, which has performed better, is expected to grow by some £30 million in 2000. On an underwriting year basis, incurred loss ratios are 25% compared with 43% for 1999 at the same stage of development. As with the Coles Division we have taken a cautious view of ultimate loss ratios and, in the absence of material developments, the result for the full year should be improved. Amlin Insurance Services Division The Division's fleet motor account continues to achieve renewals with an average rate increase of 27.5% with renewal retention stable at a healthy 88%. The improving claims ratio reflects rate increases achieved in 1999 and the 2000 rate increases will continue this trend. The combined ratio in the period has improved significantly to 107% compared to 129% in the corresponding 1999 period owing to an improved claims ratio. The result would have been even better were it not for the private car account which has continued to perform poorly. Steps have been taken to scale back this account and to focus on the successful commercial motor account. The liability account, which became part of the Division in 1999, has remained relatively small with premium income for 2000 forecast to reach just over £20 million. The account has returned to profitability and is showing signs of growth as multi-year deals written elsewhere in the market expire and competitive capacity begins to shrink. Interim results The Group's reported loss on ordinary activities before tax of £18.2 million (six months ended 30 June 1999: profit of £5.0 million) is not reflective of the performance of the Group's core continuing operations which recorded a technical account profit of £1.5 million compared to a loss of £1.5 million in the corresponding 1999 period. The loss on ordinary activities before tax was particularly affected by two features. Firstly, the investment return in the six months to 30 June 2000 was £16 million lower than in the period to 30 June 1999. This is due largely to the under-performance of our indexed FTSE 350 portfolio which contributed a negative investment return of £7.2 million. Since 30 June 2000 this has largely been recouped by positive performance from the portfolio. Secondly, the results include a charge of £9.4 million in respect of goodwill relating to the members' agency business sold during the period. Goodwill was previously written off directly to reserves and accounting standards now require this to be charged through the profit and loss account on disposal. This has no impact on net assets as an equal and opposite adjustment is made in the balance sheet. The technical account provides the best indicator of our managed underwriting operations and in the six months under review is affected by the performance of policies predominantly underwritten in 1999 as well as changes to reserving levels required for business underwritten in prior years. At the bottom of the insurance cycle this is a satisfactory result, particularly as it has been impacted by new business strain which is a short term phenomenon resulting from the growth in our share of managed capacity. In common with insurance companies which are growing, expenses and reinsurance costs are incurred in advance of receiving the benefit of underwriting profit and investment income. Also, Amlin has one of the larger catastrophe accounts in the London Market where, in the year to date, loss frequency has been particularly low, with an incurred ratio of less than 5%. We have assumed an ultimate loss ratio of approximately 75%, based on a 'normal' level of loss experience, on the catastrophe premium income earned in the first six months of 2000. The Group's net assets at 30 June 2000 were £209.5 million compared to £226.9 million at 31 December 1999. This reduction was substantially caused by £7.4 million spent on buying back shares at an average price of 68p per share, which has resulted in an enhancement to net assets per share, and the investment loss (now largely recouped) described earlier. Outlook Incurred loss ratios on business incepting in 2000 are, on average, 18% better than in 1999 at the same stage and, if the improvement is maintained, the trend of improving results will continue for the year as a whole. We expect this to be reinforced by the continued improvements in motor rates and by the modest hardening we have seen in other classes. The past six months have seen further signs of the recent adverse underwriting conditions having an impact on available capacity, which we expect will continue to reduce over the coming months. Amlin remains in a strong position to benefit from this and the better market conditions which we expect to materialise. Consolidated Profit and Loss Account for the six months ended 30 June 2000 Restated Restated Six Six Twelve months months months 2000 1999 1999 (unaudited) (unaudited) (audited) Notes £m £m £m ------------------------------------------------------------------------- Gross premium written Continuing operations 1 187.4 85.8 161.4 Discontinued operations 1 - - 91.4 ------------------------------------------------------------------------- 187.4 85.8 252.8 ------------------------------------------------------------------------- Balance on the technical account Continuing operations 1 1.5 (1.5) 2.4 Discontinued operations 1 (1.3) (2.2) (1.1) ------- ------- -------- 0.2 (3.7) 1.3 Investment return 4 2.8 18.6 35.3 Allocated investment return included within the Technical account 4 (10.8) (10.0) (24.7) ------------------------------------------------------------------------- (7.8) 4.9 11.9 Other income 1.3 14.7 30.0 Other charges (4.9) (14.6) (27.7) ------------------------------------------------------------------------- Operating (loss)/profit Continuing operations (10.3) 4.3 8.9 Discontinued operations (1.1) 0.7 5.3 ------- ------- ------- (11.4) 5.0 14.2 ------------------------------------------------------------------------- Comprising: Operating (loss)/profit based (7.2) 2.1 12.0 upon longer term investment return Short term fluctuations in (4.2) 2.9 2.2 investment return ------------------------------------------------------------------------- Profit on sale of syndicate participations - - 5.0 ------------------------------------------------------------------------- Profit/(loss) on sale of 2 2.6 - (0.3) subsidiary undertakings Less: goodwill written off 2 (9.4) - (1.1) ------------------------------------------------------------------------- (6.8) - (1.4) ------------------------------------------------------------------------- (Loss)/profit on ordinary (18.2) 5.0 17.8 activities before taxation Taxation on profit on 7 1.3 (0.3) (5.7) ordinary activities ------------------------------------------------------------------------- (Loss)/profit on ordinary (16.9) 4.7 12.1 activities after taxation Equity dividends 8 (2.5) (2.7) (7.8) ------------------------------------------------------------------------- Retained (loss)/profit for (19.4) 2.0 4.3 period ------------------------------------------------------------------------- Earnings per ordinary share 6 - basic (8.4p) 2.3p 5.9p - diluted (8.2p) 2.2p 5.6p - before goodwill written (3.7p) 2.2p 6.2p off on sale of subsidiaries ------------------------------------------------------------------------- Consolidated Statement of Total Recognised Gains and Losses for the six months ended 30 June 2000 Restated Six Six Twelve months months months 2000 1999 1999 (unaudited)(unaudited) (audited) Notes £m £m £m ------------------------------------------------------------------------ (Loss)/profit for the period (16.9) 4.7 12.1 ------------------------------------------------------------------------ Total recognised gains for (16.9) 4.7 12.1 the period Prior period adjustment 1 - (9.5) (9.5) ------------------------------------------------------------------------ Total gains and losses recognised (16.9) (4.8) 2.6 ------------------------------------------------------------------------ Reconciliation of Movements in Equity Shareholders' Funds for the six months ended 30 June 2000 Restated Six Six Twelve months months months 2000 1999 1999 (unaudited)(unaudited) (audited) Notes £m £m £m ------------------------------------------------------------------------- (Loss)/profit attributable to (16.9) 4.7 12.1 shareholders Less: dividends (2.5) (2.7) (7.8) ------------------------------------------------------------------------- Retained (loss)/profit for the (19.4) 2.0 4.3 period Issue of capital - - 0.6 Share repurchase 12 (7.4) - - Shares to be issued - - (0.5) Goodwill written back on 2 9.4 - 1.1 disposals Goodwill charged in the period - - (0.2) ------------------------------------------------------------------------- Net addition to shareholders' (17.4) 2.0 5.3 funds Shareholders' funds at 1 226.9 221.6 221.6 January ------------------------------------------------------------------------- Shareholders' funds at 30 June 209.5 223.6 226.9 /31 December ------------------------------------------------------------------------- Consolidated Balance Sheet at 30 June 2000 Restated Restated 30 June 2000 30 June 1999 31 December 1999 (unaudited) (unaudited) (audited) ASSETS Notes £m £m £m ----------------------------------------------------------------------------- Intangible assets 10 12.1 4.7 12.4 Investments 9 348.7 316.8 337.5 Reinsurers'share of technical provisions Provision for unearned premiums 31.1 16.1 6.5 Claims outstanding 99.8 49.1 54.2 Debtors 131.5 50.9 69.2 Other assets Cash at bank & in hand 25.6 34.2 7.2 Tangible assets 2.7 3.1 1.5 Own shares 4.2 2.8 3.9 Prepayments and accrued income 26.2 15.0 16.1 ---------------------------------------------------------------------------- Total assets 681.9 492.7 508.5 ---------------------------------------------------------------------------- Restated Restated 30 June 2000 30 June 1999 31 December 1999 (unaudited) (unaudited) (audited) LIABILITIES Notes £m £m £m --------------------------------------------------------------------------- Equity shareholders' funds 209.5 223.6 226.9 Technical provisions Provision for unearned premiums 122.9 62.1 64.6 Claims outstanding 274.5 135.2 126.5 Provisions for other risks 7.6 4.7 6.9 and charges Creditors 57.2 42.2 63.8 Creditors:amounts falling due 5.3 14.6 9.8 after more than one year Accruals and deferred income 4.9 10.3 10.0 --------------------------------------------------------------------------- Total liabilities 681.9 492.7 508.5 --------------------------------------------------------------------------- Net assets per ordinary share 6 - basic 106.6p 108.1p 110.0p - diluted 103.3p 104.7p 106.9p --------------------------------------------------------------------------- Consolidated Cash Flow Statement for the six months ended 30 June 2000 Restated Restated Six months Six months Twelve months 2000 1999 1999 (unaudited) (unaudited) (audited) £m £m £m ---------------------------------------------------------------------------- Net cash inflow from operating 46.5 46.4 61.7 activities ---------------------------------------------------------------------------- Net cash outflow from servicing of (0.2) (0.4) (1.1) finance ---------------------------------------------------------------------------- Corporation tax paid (0.5) (6.0) (20.9) ---------------------------------------------------------------------------- Net (purchase)/sales of tangible (1.7) 0.1 (0.9) and intangible assets ---------------------------------------------------------------------------- Net disposals of subsidiary 1.2 - (1.7) undertakings ---------------------------------------------------------------------------- Equity dividends paid - - (9.9) ---------------------------------------------------------------------------- Net cash (outflow)/inflow from (8.4) (0.4) 0.7 financing activities ---------------------------------------------------------------------------- Net cash flows 36.9 39.7 27.9 ---------------------------------------------------------------------------- Cash flows were invested as follows: Increase/(decrease) in cash holdings 18.0 23.1 (5.7) Decrease in deposits (3.3) (6.3) (7.0) Early releases from Lloyd's premium - (0.2) (0.2) trust funds ---------------------------------------------------------------------------- 14.7 16.6 (12.9) ---------------------------------------------------------------------------- Net purchases of investments 22.2 23.1 40.8 ---------------------------------------------------------------------------- Net investment of cash flows 36.9 39.7 27.9 ---------------------------------------------------------------------------- Cash flows relating to non-aligned participations are included only to the extent that cash is transferred between the Premium Trust Funds and the group. Notes 1. Basis of Preparation of Interim Accounts a) accounting policies The unaudited interim financial statements have been prepared in accordance with the accounting policies set out in the consolidated financial statements for the year to 31 December 1999, except as set out below: * underwriting results for participations on syndicates that are not managed by Amlin ('non-aligned' participations)are provided by the managing agents of those syndicates through an information exchange facility operated by Lloyd's. At 30 June, comprehensive underwriting information is not available from within the Lloyd's market. Therefore, the balance on the technical account for non-aligned participations (reported as discontinued operations) at 30 June 2000 and 30 June 1999 reflects only changes to open years' loss provisions, the allocation of investment return and for 2000, a credit in respect of the refund from Lloyd's of members' special contributions. * the assets and liabilities in respect of non-aligned participations are excluded from the balance sheets at June 2000 and June 1999 and the audited balance sheet at 31 December 1999 has been restated onto the same basis. * Financial Reporting Standard 16, 'Current Tax', was published in December 1999 and has been reflected in these financial statements. The principal requirement of the standard is that dividend income should be reported without any attributable tax credit. Comparatives for the six months to 30 June 1999 and the twelve months to 31 December 1999 have been restated. This accounting policy change does not affect the reported profit after taxation or shareholders' funds. The impact of the change in accounting policy on operating profit before taxation and on profit on ordinary activities before taxation, is a reduction of £0.3 million (six months to 30 June 1999: £0.3 million; twelve months 1999: £0.5million). b) restatement of the comparative results for the six months to 30 June 1999 The comparative results to June 1999 have been restated to reflect the three accounting policy changes that were implemented in the consolidated financial statements for the year to 31 December 1999, being the adoption of : * the annual accounting basis of reporting the results of the group's managed ('aligned') syndicates rather than the three year accounting basis. * longer term investment returns on the investments supporting managed syndicates. * average rather than period end rates of exchange for US and Canadian dollar income and expenditure. The consolidated profit and loss account for the six months to 30 June 1999 and the consolidated balance sheet at 30 June 1999, reported in last year's interim statement, have also been restated to include the underwriting transactions, investments, other assets and liabilities relating to managed syndicates. c) status of the interim statement The statements for the two interim periods are unaudited but have been reviewed by the auditors, Deloitte & Touche and their report for the six months to 30 June 2000 is on page 16. The interim accounts do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results for the year ended 31 December 1999 are based on the statutory Group accounts which received an unqualified audit report and have been filed with the Registrar of Companies. 2. Segmental Information The results and attributable net assets of the Group's principal business segments are as follows: Restated Restated Six months Six months Twelve months 2000 1999 1999 (unaudited) (unaudited) (audited) £m £m £m ------------------------------------------------------------------------- Profit before taxation Underwriting and investment (11.3) 2.2 9.8 Managing agencies (0.1) 0.4 1.6 Members' agencies (6.8) 0.3 3.1 Other insurance services - 2.1 3.3 ------------------------------------------------------------------------ Total (18.2) 5.0 17.8 ------------------------------------------------------------------------ Net assets Underwriting and investment 207.1 212.6 221.5 Managing agencies 2.4 7.1 2.0 Members' agencies - 1.9 3.4 Other insurance services - 2.0 - ------------------------------------------------------------------------ Total 209.5 223.6 226.9 ------------------------------------------------------------------------ In the profit and loss account, the income and costs of the managing agencies, members' agencies and other insurance services are reported separately within 'other income' and 'other charges'. The group's members' agency business, Amlin Private Capital, was sold in March 2000. The profit before taxation for the six months 2000 includes a break-even result up to the date of sale. The sale proceeds of £6.2 million represent a premium to net assets of £2.6 million. Goodwill of £9.4 million relating to the members' agency has been previously written off against reserves and accounting standards require that this amount should be charged through the current period's profit and loss account. The reported loss on sale is therefore £6.8 million. This goodwill adjustment has no effect on the group's net assets. Other insurance services comprise the Whittington Group which was sold in November 1999. The results of the members' agency and other insurance services businesses are reported in the profit and loss account as discontinued operations. 3. Managed Syndicates' Results The table below summarises the performance of the group's managed syndicates 902, 1141 and 2001, on an annual accounting basis, together with key ratios and the syndicate investment return on a smoothed basis. The group has increased its participation on the syndicates during the period and comparisons of the group's share of the results is distorted by the change in participation by year of account. Therefore, to make meaningful comparisons, the figures represent the results of the syndicates in total rather than Amlin's share of the results. MANAGED SYNDICATES' RESULTS AT 100% LEVEL Six Six Twelve months months months 2000 1999 1999 (unaudited)(unaudited) (audited) £m £m £m ----------------------------------------------------------------- Gross premium written 348.0 250.2 446.2 Net premium written 237.9 164.2 340.8 Earned premium, net of 212.6 168.0 345.3 reinsurance ----------------------------------------------------------------- Claims incurred, net of (172.5) (133.7) (246.6) ----------------------------------------------------------------- Claims ratio (%) 81% 80% 71% ----------------------------------------------------------------- Brokerage (46.3) (37.8) (76.5) Syndicate expenses (19.1) (16.1) (39.2) Lloyd's charges (3.4) (2.9) (7.7) Increase in deferred 12.4 6.8 0.2 acquisition costs ----------------------------------------------------------------- Net operating expenses (56.4) (50.0) (123.2) ----------------------------------------------------------------- Expense ratio (%) 29% 35% 37% ----------------------------------------------------------------- Combined ratio (%) 110% 115% 108% ----------------------------------------------------------------- Syndicate investment return 17.9 15.6 33.2 after smoothing1 ----------------------------------------------------------------- 1.6 (0.1) 8.7 ----------------------------------------------------------------- 1 Excludes allocation of corporate investment return. The group first reported annually accounted results for managed syndicates in respect of the year ended 31 December 1998. The combined ratio for 1998 was 117%, comprising a claims ratio of 78% and expense ratio of 39%. 4. Investment Return a) Investment return reported in the profit and loss account is as follows: Restated Restated Six Six Twelve months months months 2000 1999 1999 (unaudited) (unaudited) (audited) £m £m £m -------------------------------------------------------------------- Income from investments 11.0 7.7 21.9 (Losses)/gains on realisation of (0.7) (1.1) 4.2 investments Unrealised (losses)/gains on (6.8) 12.8 10.8 investments Investment expenses and charges (0.7) (0.8) (1.6) -------------------------------------------------------------------- 2.8 18.6 35.3 -------------------------------------------------------------------- b) Allocation of Investment Return to the technical account The group's underwriting result for managed business within the balance on the technical account includes an allocation of longer term investment returns on UK equities and bonds. The longer term rates of return applied during 1999 and 2000 are 8% for UK equities and 6% for fixed interest securities. The rates of return are applied to the average, over the period, of the investments attributable to the shareholders and insurance technical provisions of the managed syndicates. The attributable shareholders' funds are based on the Funds at Lloyd's which represent the estimated risk based capital supporting the insurance business. In the profit and loss account, the longer term return is included within the technical account. The actual return on investments since 1 June 1995, compared with the aggregate longer term return over the same period, is set out below. All figures are gross of expenses. 1 June 1995 1 June 1995 to 30 June to 31 December 2000 1999 £m £m ----------------------------------------------------------------- Actual return attributable to the 81.4 75.7 technical account Longer term return attributable to 84.8 74.0 the technical account ----------------------------------------------------------------- Effect of short term fluctuations (3.4) 1.7 over the period ----------------------------------------------------------------- 5. Principal Exchange Rates The principal exchange rates used in the financial statements are: Six months Six months Twelve months 2000 1999 1999 ----------------------------------------------------------------------- Period Period Period Period Period Period Average End Average End Average End Rate Rate Rate Rate Rate Rate ----------------------------------------------------------------------- US Dollar 1.59 1.50 1.62 1.59 1.61 1.61 6. Earnings and Net Assets Per Ordinary Share a) Earnings per share is based on the loss attributable to shareholders for the six months ended 30 June 2000 of £16.9 million (six months ended 30 June 1999: profit £4.7 million; twelve months ended 31 December 1999: profit £12.1 million) and the weighted average number of shares in issue during the period. Shares held by the Employee Share Ownership Trust ('ESOT') are excluded from the weighted average number of shares. Basic and diluted earnings per share are as follows: Restated Six months Six months Twelve months 2000 1999 1999 (unaudited) (unaudited) (audited) ---------------------------------------------------------------------- (Loss)/profit for the period (£16.9m) £4.7m £12.1m ---------------------------------------------------------------------- Weighted average number of 201.0m 206.7m 206.5m shares in issue Dilutive shares to be issued 6.1m 8.0m 6.3m ---------------------------------------------------------------------- Adjusted average number of 207.1m 214.7m 212.8m shares in issue ---------------------------------------------------------------------- ---------------------------------------------------------------------- Basic earnings per share (8.4p) 2.3p 5.9p Diluted earnings per share (8.2p) 2.2p 5.6p ---------------------------------------------------------------------- Excluding the goodwill of £9.4 million written back through the profit and loss account on the sale of the members' agency business, both the basic and diluted earnings per share for the six months ended 30 June 2000 would be (3.7p). Dilutive shares to be issued represent an adjustment for shares which are expected to be issued to satisfy deferred consideration for acquisitions together with outstanding warrants and options which may be issued, after taking into account the respective option and warrant prices and the weighted average market value of Amlin plc shares during the relevant periods. The last exercise date for the outstanding warrants was 31 August 2000, on which date most of them lapsed. b) Basic and diluted net assets per share are as follows: Restated 30 June 30 June 31 December 2000 1999 1999 (unaudited) (unaudited) (audited) -------------------------------------------------------------------- Net assets £209.5m £223.6m £226.9m -------------------------------------------------------------------- Number of shares in issue at 205.6m 215.9m 215.8m end of period Adjustment for ESOT shares (9.0m) (9.1m) (9.4m) -------------------------------------------------------------------- Basic number of shares after 196.6m 206.8m 206.4m ESOT adjustment Dilutive shares to be issued 6.4m 6.7m 5.9m -------------------------------------------------------------------- Adjusted number of shares 203.0m 213.5m 212.3m -------------------------------------------------------------------- -------------------------------------------------------------------- Basic net assets per share 106.6p 108.1p 110.0p Diluted net assets per share 103.3p 104.7p 106.9p -------------------------------------------------------------------- For net assets per share purposes, the number of dilutive shares is taken as at the balance sheet date. 7. Taxation on (Loss)/Profit on Ordinary Activities Restated Restated Six months Six months Twelve months 2000 1999 1999 (unaudited) (unaudited) (audited) £m £m £m ---------------------------------------------------------------------- UK corporation tax 1.1 3.5 8.8 Overseas taxation - - 0.1 Deferred taxation (2.4) (3.2) (3.2) ---------------------------------------------------------------------- (1.3) 0.3 5.7 ---------------------------------------------------------------------- 8. Equity Dividends An interim dividend in respect of the six months to 30 June 2000 of 1.4p per share (30 June 1999 interim: 1.3p per share; 31 December 1999 final: 2.5p) has been declared, to be paid to shareholders on the register at the close of business on 29 September 2000. 9. Investments At valuation --------------------------------------------- Restated Restated 30 June 2000 30 June 1999 31 December 1999 (unaudited) (unaudited) (audited) £m £m £m ---------------------------------------------------------------------------- Shares and other variable 106.3 161.6 117.3 yield securities Debt securities and other 216.2 130.8 160.5 fixed income securities Participation in investment pools 1.0 - 11.7 Loans secured by mortgages 4.4 - 0.7 Deposits with credit institutions 18.8 18.1 45.6 Other 2.0 6.3 1.7 ---------------------------------------------------------------------------- 348.7 316.8 337.5 ---------------------------------------------------------------------------- In Group owned companies 230.5 264.4 265.4 In managed syndicates 118.2 52.4 72.1 ---------------------------------------------------------------------------- 348.7 316.8 337.5 ---------------------------------------------------------------------------- As explained in note 11, some of the group investments are charged to Lloyd's to support the group's underwriting activities. 10. Intangible Assets At 30 June 2000, intangible assets of £12.1 million comprised the cost of purchasing syndicate capacity, £13.2 million, less the amortisation of capacity over its estimated useful life of 20 years, £1.1 million. 11. Contingencies and Guarantees The group has entered into various deeds of covenant in respect of certain corporate member subsidiaries to meet their obligations to Lloyd's. The total guarantee given by the group (subject to limited exceptions) amounts to £205.4 million and the obligations under these covenants are secured by a fixed charge of the same amount over investments and a floating charge over investments and other assets of the group in favour of Lloyd's. The group has also entered into a Lloyd's deposit trust deed for Funds at Lloyd's by which a letter of credit (LOC) for £5 million has been deposited. The LOC is secured by a reinsurance contract and, in the event of this being drawn down by Lloyd's to meet the group's obligations, the reinsurers would have recourse to the future profits of the group. 12. Share Repurchase During the six months ended 30 June 2000, a total of 10,818,885 ordinary shares of 25p each were repurchased for a total consideration, including expenses, of £7.4 million. This amount has been charged against reserves. 13. Posting of Interim Report to Shareholders Copies of the Interim Report will be posted to Shareholders shortly.
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