Interim Results part 2
Amlin PLC
04 September 2006
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2006
Six months Six months 12 months
2006 2005 (restated) 2005 (restated)
Notes £m £m £m
------------------------ ------- ---------- ---------- -----------
Gross premiums earned 4 533.6 471.2 986.7
Insurance premium revenue
from the receipt of
reinsurance to close 4 78.8 78.6 78.6
Reinsurance premium ceded 4 (51.8) (75.7) (164.6)
------------------------ ------- ---------- ---------- -----------
Net earned premium 4 560.6 474.1 900.7
revenue
------------------------ ------- ---------- ---------- -----------
Investment return 5 37.7 41.3 90.9
Other operating income 1.0 1.1 1.4
------------------------ ------- ---------- ---------- -----------
Net income 599.3 516.5 993.0
------------------------ ------- ---------- ---------- -----------
Insurance claims and loss
adjustment expenses 6 (271.4) (231.0) (912.1)
Insurance claims and loss
adjustment expenses
relating to
the receipt of
reinsurance to
close 6 (78.8) (78.6) (78.6)
Insurance claims and loss
adjustment expenses
recovered
from reinsurers 6 37.1 54.5 436.4
------------------------ ------- ---------- ---------- -----------
Net insurance claims 6 (313.1) (255.1) (554.3)
------------------------ ------- ---------- ---------- -----------
Expenses for the
acquisition of 7 (97.4) (83.6) (170.2)
insurance contracts
Other operating expenses 8 (56.3) (35.9) (71.4)
------------------------ ------- ---------- ---------- -----------
Expenses (153.7) (119.5) (241.6)
------------------------ ------- ---------- ---------- -----------
------------------------ ------- ---------- ---------- -----------
Results of operating
activities 132.5 141.9 197.1
------------------------ ------- ---------- ---------- -----------
Finance costs (12.4) (3.5) (10.4)
------------------------ ------- ---------- ---------- -----------
Profit before tax 120.1 138.4 186.7
Tax 9 (25.2) (38.4) (46.5)
------------------------ ------- ---------- ---------- -----------
Profit for the period
attributable to equity
shareholders 2 94.9 100.0 140.2
------------------------ ------- ---------- ---------- -----------
Earnings per share
Basic 11 17.9p 25.2p 34.3p
Diluted 11 17.7p 24.8p 33.7p
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2006
------------------------ ----- ------- -------- -------- -------- --------
Notes Share capital Share premium Other reserves Retained Total
earnings
£m account £m £m £m
£m
------------------------ ----- ------- -------- -------- -------- --------
At 1 January
2006 132.5 344.0 51.0 265.1 792.6
IAS19 Employee
benefits prior
period
adjustment 2 - - - (7.8) (7.8)
------------------------ ----- ------- -------- -------- -------- --------
At 1 January
2006 restated 132.5 344.0 51.0 257.3 784.8
------------------------ ----- ------- -------- -------- -------- --------
Gains on
revaluation of
employee share
ownership
trust
recognised
directly in
equity - - 1.3 - 1.3
Currency
translation
differences on
overseas
operations - - (42.1) - (42.1)
Deferred tax - - (0.2) - (0.2)
Profit for the
financial
period - - - 94.9 94.9
------------------------ ----- ------- -------- -------- -------- --------
Total
recognised
income for the
period - - (41.0) 94.9 53.9
------------------------ ----- ------- -------- -------- -------- --------
Employee share option
schemes:
- share based payment
reserve - - - 0.5 0.5
- proceeds from shares
issued 0.8 2.1 - - 2.9
Dividends paid 10 - - - (25.0) (25.0)
------------------------ ----- ------- -------- -------- -------- --------
0.8 2.1 - (24.5) (21.6)
------------------------ ----- ------- -------- -------- -------- --------
At 30 June 2006 133.3 346.1 10.0 327.7 817.1
------------------------ ----- ------- -------- -------- -------- --------
------------------------ ----- ------- -------- -------- -------- --------
Notes Share capital Share premium Other reserves Retained Total
account earnings
£m £m £m £m £m
------------------------ ----- ------- -------- -------- -------- --------
At 1 January
2005 98.8 154.2 43.5 163.3 459.8
IAS19 Employee
benefits prior
period
adjustment 2 - - - (10.6) (10.6)
------------------------ ----- ------- -------- -------- -------- --------
At 1 January
2005 restated 98.8 154.2 43.5 152.7 449.2
------------------------ ----- ------- -------- -------- -------- --------
Gains on
revaluation of
employee share
ownership
trust
recognised
directly in
equity - - 1.2 - 1.2
Profit for the
financial
period
(restated) 2 - - - 100.0 100.0
------------------------ ----- ------- -------- -------- -------- --------
Total
recognised
income for the
period - - 1.2 100.0 101.2
------------------------ ----- ------- -------- -------- -------- --------
Employee share option
schemes:
- share based payment
reserve - - 0.3 - 0.3
- proceeds from shares
issued 1.4 6.0 - - 7.4
Dividends paid 10 - - - (19.7) (19.7)
------------------------ ----- ------- -------- -------- -------- --------
1.4 6.0 0.3 (19.7) (12.0)
------------------------ ----- ------- -------- -------- -------- --------
At 30 June
2005
(restated) 100.2 160.2 45.0 233.0 538.4
------------------------ ----- ------- -------- -------- -------- --------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2006 (continued)
------------------------ ----- ------- ------- -------- --------- --------
Notes Share capital Share premium Other reserves Retained Total
earnings
£m £m £m £m £m
------------------------ ----- ------- ------- -------- --------- --------
At 1 January
2005 98.8 154.2 43.5 163.3 459.8
IAS19 Employee
benefits prior
period
adjustment 2 - - - (10.6) (10.6)
------------------------ ----- ------- ------- -------- --------- --------
At 1 January
2005 restated 98.8 154.2 43.5 152.7 449.2
------------------------ ----- ------- ------- -------- --------- --------
Gains on
revaluation of
employee share
ownership
trust
recognised
directly in
equity - - 1.3 - 1.3
Currency
translation
differences on
overseas
operations - - 3.8 - 3.8
Deferred tax - - 1.7 - 1.7
Profit for the
financial year
(restated) 2 - - - 140.2 140.2
------------------------ ----- ------- ------- -------- --------- --------
Total
recognised
income for the
year - - 6.8 140.2 147.0
------------------------ ----- ------- ------- -------- --------- --------
Rights issue
proceeds, net
of issue costs 31.9 182.8 - - 214.7
Employee share option
schemes:
- share based payment
reserve - - 0.7 - 0.7
- proceeds from shares
issued 1.8 7.0 - - 8.8
Dividends paid 10 - - - (35.6) (35.6)
------------------------ ----- ------- ------- -------- --------- --------
33.7 189.8 0.7 (35.6) 188.6
------------------------ ----- ------- ------- -------- --------- --------
At 31 December
2005
(restated) 132.5 344.0 51.0 257.3 784.8
------------------------ ----- ------- ------- -------- --------- --------
CONDENSED CONSOLIDATED BALANCE SHEET
At 30 June 2006
30 June 2005 31 December
30 June 2006 (restated) 2005 (restated)
ASSETS Notes £m £m £m
-------------------------- ------- ---------- ---------- -----------
Cash and cash
equivalents 31.8 35.7 65.6
Financial
investments at
fair value
through income 12 2,247.0 1,526.7 2,078.2
Reinsurance assets
- reinsurers' share of outstanding claims 13 448.8 297.9 604.6
- reinsurers' share of unearned premiums 13 53.4 68.5 24.2
- debtors arising from reinsurance operations 13 415.3 329.7 387.3
Loans and receivables, including insurance receivables
- insurance receivables 372.6 311.3 214.3
- loans and receivables 78.1 66.9 132.9
Current income
tax assets 1.5 8.9 3.7
Deferred tax
assets 14 20.1 21.0 24.4
Property and
equipment 6.5 5.5 6.0
Intangible
assets 15 66.0 66.0 66.0
-------------------------- ------- ---------- ---------- -----------
Total assets 3,741.1 2,738.1 3,607.2
-------------------------- ------- ---------- ---------- -----------
EQUITY
Share capital 16 133.3 100.2 132.5
Share premium
account 346.1 160.2 344.0
Other reserves 9.2 46.3 51.3
Treasury shares 0.8 (1.3) (0.3)
Retained
earnings 327.7 233.0 257.3
-------------------------- ------- ---------- ---------- -----------
Total
shareholders'
equity 2 817.1 538.4 784.8
-------------------------- ------- ---------- ---------- -----------
LIABILITIES
Insurance contracts
- outstanding claims 13 1,552.1 1,194.0 1,704.3
- unearned premiums 13 832.8 721.8 523.8
- creditors arising from insurance operations 13 47.5 32.5 114.8
Trade and other
payables 50.0 59.6 67.1
Current income
tax liabilities 28.3 13.6 19.6
Financial
liabilities -
borrowings 17 330.4 67.6 298.2
Retirement
benefit
obligations 7.9 12.3 12.4
Deferred tax
liabilities 14 75.0 98.3 82.2
-------------------------- ------- ---------- ---------- -----------
Total
liabilities 2,924.0 2,199.7 2,822.4
-------------------------- ------- ---------- ---------- -----------
Total
liabilities and
shareholders'
equity 3,741.1 2,738.1 3,607.2
-------------------------- ------- ---------- ---------- -----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2006
Six months 2006 Six months 2005 12 months 2005
(restated) (restated)
Notes £m £m £m
------------------------- ------- --- ---------- ---------- -----------
Cash generated
from
operations 18 (104.7) (37.0) (474.2)
Cash flows from investing activities
Interest
received 53.3 31.0 65.3
Dividends
received 2.7 1.5 2.0
Acquisition of
subsidiary,
net of cash
acquired - - (0.2)
Purchase of
property,
plant and
equipment (1.9) (0.5) (1.9)
------------------------- ------- --- ---------- ---------- -----------
Net cash used
in investing
activities 54.1 32.0 65.2
------------------------- ------- --- ---------- ---------- -----------
Cash flows from financing activities
Proceeds from
issue of
ordinary
shares 2.9 2.3 223.5
Proceeds from
borrowings 227.7 26.2 266.1
Repayment of
borrowings (188.8) (20.8) (32.0)
Dividends paid
to
shareholders (25.0) (14.6) (30.6)
------------------------- ------- --- ---------- ---------- -----------
Net cash from
financing
activities 16.8 (6.9) 427.0
------------------------- ------- --- ---------- ---------- -----------
Net increase
in cash and
cash
equivalents (33.8) (11.9) 18.0
Cash and cash
equivalents at
beginning of
period 65.6 47.6 47.6
------------------------- ------- --- ---------- ---------- -----------
Cash and cash
equivalents at
end of period 31.8 35.7 65.6
------------------------- ------- --- ---------- ---------- -----------
1. Basis of preparation of Condensed Interim Financial Statements
The interim financial statements have been prepared in accordance with the
Listing Rules of the Financial Services Authority (FSA) and International
Financial Reporting Standards, (IFRS).
The financial information for the year ended 31 December 2005 presented in this
interim report does not constitute statutory accounts as defined in section 240
of the Companies Act 1985. A copy of the statutory accounts for that year has
been delivered to the Registrar of Companies. The auditors' report on those
accounts was not qualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.
2. Accounting policies
The accounting policies adopted in preparing these interim financial statements
are those that the Group expects to apply for the year ending 31 December 2006.
They are consistent with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2005 with the exception of
IAS19, Employee Benefits (IAS19) as detailed below.
IAS19, Employee Benefits: change in accounting policy and prior period
adjustment
The Group participates in a number of pension schemes, full details of which are
provided in the Group's financial statements for the year ended 31 December
2005. One of the schemes in which the Group participates, the Lloyd's
Superannuation Fund (the Fund), is a defined benefit scheme which is classified
as a multi-employer scheme under the criteria set out in IAS19. As such, the
Group recognises its pension costs for this scheme as if it were a defined
contribution scheme. Historically, the implication of this has been that the
Group did not report the assets and liabilities of the fund in its own balance
sheet, but did charge contributions made to the fund in the period in which they
were made.
In December 2004 an amendment was introduced to IAS19 that requires full
provision to be made for the net present value of any future contractual
contributions into a multi-employer pension scheme. This amendment is now
mandatory and has been fully adopted by the Group. In 2004, Amlin agreed with
the Fund's trustee a schedule of annual payments into the Fund commencing in
2004 and concluding in 2009. Previously, these payments were being expensed as
they were paid and were not provided for in advance. However, in accordance with
the requirements of the amendment to IAS19, a prior period adjustment has been
made to the net assets at 1 January 2005, 30 June 2005 and 31 December 2005 and
the reported profit for the six months to 30 June 2005 and the year ended 31
December 2005.
The effects of the restatement on the condensed consolidated income statement
and balance sheet are detailed below:
-------------------------------- --------- -------- --------
Six months Six months 12 months
2006 2005 2005
£m £m £m
-------------------------------- --------- -------- --------
Reported profit for the period under
previous accounting policy after tax 91.4 96.9 137.4
Payments made included within other
operating expenses 4.6 4.6 4.6
Movement in discount on present value of
future payments 0.2 (0.3) (0.5)
Movement in deferred tax (1.3) (1.2) (1.3)
-------------------------------- --------- -------- --------
Restated profit for the period under new
accounting policy after tax 94.9 100.0 140.2
-------------------------------- --------- -------- --------
-------------------------------- --------- -------- --------
30 June 31 December
2005 2005
£m £m
-------------------------------- --------- -------- --------
Net assets as reported 545.9 792.6
Increase in retirement benefit liabilities (10.8) (11.1)
Increase in associated deferred tax asset 3.3 3.3
------------------------------------- --------- ---------
Restated net assets 538.4 784.8
------------------------------------- --------- ---------
3. Segmental reporting
The tables below show segmental information by business segment. Business
segments are primary segments and represent the way in which the business is
managed. The London market business segments comprise aviation, non-marine,
marine and UK commercial business. Amlin Bermuda Limited writes reinsurance
business, including reinsurance ceded by Syndicate 2001. Further information on
the performance of each segment is provided in the statement accompanying this
interim report.
Income and expenses by Aviation Non-marine Marine UK London Amlin Intra Other Total
business segment commercial total Bermuda group technical
Six months ended 30 Ltd
June 2006 £m £m £m £m £m £m £m £m £m
----------------- ------- ------ ------- ------- ------- ------- ------- ------ ------
Gross premiums written 42.4 475.0 161.0 89.8 768.2 161.8 (83.7) (0.1) 846.2
----------------- ------- ------ ------- ------- ------- ------- ------- ------ ------
Gross premiums earned 45.1 281.0 97.3 87.4 510.8 45.9 (23.0) (0.1) 533.6
Reinsurance premiums
ceded (15.3) (34.3) (13.8) (8.4) (71.8) - 20.0 - (51.8)
----------------- ------- ------ ------- ------- ------- ------- ------- ------ ------
Net premiums 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 (7.6) 66.4 2.8 10.7 72.3 23.6 - 5.9 101.8
underwriting
----------------- ------- ------ ------- ------- ------- ------- ------- ------ ------
Investment return 24.5 13.2 37.7
Personal 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%
----------------- ------- ------ ------- ------- ------- ------- ------- ------ ------
3. Segmental reporting (continued)
Income and expenses by Aviation Non-marine Marine UK London Amlin Intra Other Total
business segment commercial total Bermuda group technical
Six months ended 30 Ltd
June 2005 £m £m £m £m £m £m £m £m £m
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Gross premiums written 42.4 413.4 120.7 98.4 674.9 - - 0.9 675.8
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Gross premiums earned 44.1 259.6 76.7 89.9 470.3 - - 0.9 471.2
Reinsurance premiums
ceded (15.0) (44.7) (7.4) (8.3) (75.4) - - (0.3) (75.7)
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Net premiums earned 29.1 214.9 69.3 81.6 394.9 - - 0.6 395.5
Insurance claims and
loss adjusting expenses (19.8) (121.5) (34.1) (55.7) (231.1) - - 0.1 (231.0)
Reinsurance recoveries 4.2 36.3 5.1 8.9 54.5 - - - 54.5
Underwriting expenses (7.6) (55.2) (20.8) (17.9) (101.5) - - (0.9) (102.4)
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Profit attributable to
underwriting 5.9 74.5 19.5 16.9 116.8 - - (0.2) 116.6
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Investment return 41.3 41.3
Personal expenses (1) (1.3) (9.6) (2.3) (1.9) (15.1) 15.1 -
Other non-underwriting
expenses (2) (16.0)
Financing costs (2) (3.5)
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Profit before taxation 138.4
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
Combined ratio (3) 80% 62% 68% 79% 69% 69%
----------------- ------ ------ ------- ------- ------- ------- ------- ------ ------
3 . Segmental reporting (continued)
Income and expenses Aviation Non-marine Marine UK London Amlin Intra Other Total
by business segment commercial total Bermuda group technical
Year ended 31 Ltd
December 2005 £m £m £m £m £m £m £m £m £m
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Gross premiums
written 83.0 558.0 172.8 175.5 989.3 2.9 (0.3) 1.6 993.5
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Gross premiums earned 93.0 546.6 164.7 181.1 985.4 0.1 (0.3) 1.5 986.7
Reinsurance premiums
ceded (23.6) (100.6) (25.9) (14.2) (164.3) - - (0.3) (164.6)
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Net premiums earned 69.4 446.0 138.8 166.9 821.1 0.1 (0.3) 1.2 822.1
Insurance claims and
loss adjusting
expenses (50.1) (651.2) (105.7) (105.0) (912.0) - (2.7) 2.6 (912.1)
Reinsurance
recoveries 15.1 347.0 55.3 19.1 436.5 - - (0.1) 436.4
Underwriting expenses (14.4) (113.6) (40.8) (37.6) (206.4) (0.1) (1.0) (1.8) (209.3)
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Profit attributable
to underwriting 20.0 28.2 47.6 43.4 139.2 - (4.0) 1.9 137.1
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Investment return 90.9 - 90.9
Personal expenses (1) (3.9) (24.9) (4.2) (5.0) (38.0) - 38.0 - -
Other
non-underwriting (30.9)
expenses (2)
Financing costs (2) (10.4)
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Profit before
taxation 186.7
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
Combined ratio (3) 70% 93% 63% 72% 82% - 82%
----------------- ------ ------ ------ -------- ------- ------ ------- ------ ------
(1) Personal 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 cannot be allocated to
particular segments.
(3) The combined ratios are calculated assuming a constant 100% ownership
over the period from which premiums have been earned.
4. Net earned premium
--------------------------------- --------- --------- ---------
Six months Six months 12 months
2006 2005 2005
£m £m £m
--------------------------------- --------- --------- ---------
Insurance contracts premiums
Gross premiums written 846.2 675.8 993.5
Change in unearned premium provision (312.6) (204.6) (6.8)
--------------------------------- --------- --------- ---------
Gross premiums earned 533.6 471.2 986.7
Insurance premium revenue from the
receipt of reinsurance to close 78.8 78.6 78.6
Reinsurance premiums ceded
Reinsurance premiums payable (79.8) (119.3) (164.2)
Change in unearned reinsurance premium
provision 28.0 43.6 (0.4)
--------------------------------- --------- --------- ---------
(51.8) (75.7) (164.6)
--------------------------------- --------- --------- ---------
Net earned premiums 560.6 474.1 900.7
--------------------------------- --------- --------- ---------
The insurance premium revenue from the receipt of reinsurance to close at 30
June 2006 represents the premium received from the third party syndicate members
on the 2003 year of account (30 June 2005 and 31 December 2005: 2002 year of
account) who sold the remainder of their capacity to Amlin, for use by Amlin's
corporate members for the following year of account. An identical amount is
recorded as a movement in claims, representing the additional liabilities taken
on by Amlin from the third party members. Overall these transactions have no
impact on profit for the period.
5. Investment return
-------------------------- ----- ----------- ----------- -----------
Six months Six months 12 months
2006 2005 2005
£m £m £m
-------------------------- ----- ----------- ----------- -----------
Investment income
- dividend income 2.7 1.5 2.1
- interest income 51.1 23.7 66.6
Cash and cash equivalents interest
income 2.2 7.3 2.5
-------------------------- ----- ----------- ----------- -----------
56.0 32.5 71.2
-------------------------- ----- ----------- ----------- -----------
Net realised (losses)/gains on financial assets
- equity securities 8.6 6.0 12.2
- debt securities (14.2) (1.3) (6.0)
-------------------------- ----- ----------- ----------- -----------
(5.6) 4.7 6.2
-------------------------- ----- ----------- ----------- -----------
Net fair value (losses)/gains on assets at fair value through income statement
- equity securities (0.1) 1.6 12.5
- debt securities (12.6) 2.5 1.0
-------------------------- ----- ----------- ----------- -----------
(12.7) 4.1 13.5
-------------------------- ----- ----------- ----------- -----------
Total 37.7 41.3 90.9
-------------------------- ----- ----------- ----------- -----------
Included within net fair value gains on equity securities is an amount of £0.3m
being the net profit to date from the purchase of an equity put option. The
option was taken out in the second quarter of 2006 to protect the Group's equity
investments against falls in market value. The cost of this option was £1m.
6. Insurance claims and loss adjustment expenses
-------------------------- ----------- ---------- ---------
Six months Six months 12 months
2006 2005 2005
£m £m £m
-------------------------- ----------- ---------- ---------
Gross
Current year insurance
claims and loss 288.4 261.0 991.6
adjustment expenses
Reduced costs for prior
period insurance
claims (17.0) (30.0) (79.5)
-------------------------- ----------- ---------- ---------
271.4 231.0 912.1
Insurance claims and loss
adjustment
expenses relating to the
receipt of
reinsurance to close 78.8 78.6 78.6
Reinsurance
Current year insurance
claims and loss
adjustment expenses (28.1) (54.5) (436.2)
recoverable from
reinsurers
Reduced costs for prior
period claims (9.0) - (0.2)
recoverable from reinsurers
-------------------------- ----------- ---------- ---------
(37.1) (54.5) (436.4)
-------------------------- ----------- ---------- ---------
Total net insurance claims
and loss
adjustment expenses 313.1 255.1 554.3
-------------------------- ----------- ---------- ---------
7. Expenses for the acquisition of insurance contracts
-------------------------- ---------- ------------- ---------
Six months Six months 12 months
2006 2005 2005
£m £m £m
-------------------------- ---------- ------------- ---------
Expenses for the acquisition of
insurance contracts 162.0 146.5 173.4
Changes in deferred expenses for the
acquisition of insurance contracts (64.6) (62.9) (3.2)
97.4 83.6 170.2
8. Other operating expenses
-------------------------- ---------- ------------- ---------
Six months Six months 12 months
2006 2005 2005
£m (restated) (restated)
£m £m
-------------------------- ---------- ------------- ---------
Foreign exchange losses/(gains) on
non-monetary assets 19.7 (17.7) (25.8)
Other foreign exchange (gains)/losses (8.0) 1.1 (6.1)
-------------------------- ---------- ------------- ---------
11.7 (16.6) (31.9)
Administrative and other expenses 44.6 52.5 103.3
-------------------------- ---------- ------------- ---------
56.3 35.9 71.4
-------------------------- ---------- ------------- ---------
9. Tax
-------------------------- ---------- ------------- ---------
Six months Six months 12 months
2006 2005 2005
£m (restated) (restated)
£m £m
-------------------------- ---------- ------------- ---------
Current tax
- UK corporation tax 28.3 6.8 34.3
- Foreign tax 0.1 0.2 (1.6)
-------------------------- ---------- ------------- ---------
28.4 7.0 32.7
-------------------------- ---------- ------------- ---------
Current year deferred tax
- movement in asset 4.0 5.6 4.1
- movement in liability (7.2) 25.8 9.7
-------------------------- ---------- ------------- ---------
(3.2) 31.4 13.8
-------------------------- ---------- ------------- ---------
25.2 38.4 46.5
-------------------------- ---------- ------------- ---------
10. Dividends
The amounts recognised as distributions to equity holders are as follows:
-------------------------- ---------- ------------ ----------
Six months Six months 12 months
2006 2005 2005
£m £m £m
-------------------------- ---------- ------------ ----------
Final dividend for the year ended:
- 31 December 2005 of 6.2 pence per
ordinary share 25.0 - -
- 31 December 2004 of 5.0 pence per
ordinary share - 19.7 19.7
Interim dividend for the year ended:
- 31 December 2005 of 4.0 pence per
ordinary share - - 15.9
-------------------------- ---------- ------------ ----------
25.0 19.7 35.6
-------------------------- ---------- ------------ ----------
The interim dividend of 4.2p per ordinary share for 2006, amounting to £22.4
million, was approved by the Board on 1 September 2006 and has not been included
as a liability as at 30 June 2006.
11. Earnings per share
Earnings per share are based on the profit attributable to shareholders 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 Six months Six months 12 months
per share are as follows: 2006 2005 (restated) 2005 (restated)
------------------------- ---------- ------------ --------------
Profit for the period £94.9m £100.0m £140.2m
------------------------- ---------- ------------ --------------
Weighted average number of
shares
in issue 530.8m 396.3m 408.8m
Dilutive shares 7.5m 6.0m 6.6m
------------------------ ---------- ------------ --------------
Adjusted average number of
shares
in issue 538.3m 402.3m 415.4m
------------------------ ---------- ------------ --------------
Basic earnings per share 17.9p 25.2p 34.3p
Diluted earnings per share 17.7p 24.8p 33.7p
------------------------ ---------- ------------ --------------
Basic and tangible net 30 June 30 June 31 December
assets per share are as 2006 2005 (restated) 2005 (restated)
follows:
------------------------ ---------- ------------ --------------
Net assets £817.1m £538.4m £784.8m
Adjustments for intangible
assets £(66.0m) £(66.0m) £(66.0m)
-------------------------- ----------- ------------ ------------
Tangible net assets £751.0m £472.4m £718.8m
-------------------------- ----------- ------------ ------------
Number of shares in issue
at end of
period 533.0m 400.6m 530.1m
Adjustment for ESOT shares (0.8m) (2.5m) (2.2m)
-------------------------- ----------- ------------ ------------
Basic number of shares
after ESOT
adjustment 532.2m 398.1m 527.9m
-------------------------- ----------- ------------ ------------
Net assets per share 153.5p 135.2p 148.7p
-------------------------- ----------- ------------ ------------
Tangible net assets per
share 141.1p 118.7p 136.2p
-------------------------- ----------- ------------ ------------
12. Financial investments
--------------------------------- --------- --------- ---------
At valuation At valuation At valuation
30 June 2006 30 June 2005 31 December
2005
£m £m £m
--------------------------------- --------- --------- ---------
Shares and other variable
yield securities 185.3 89.0 116.2
Debt and other fixed income
securities 1,214.8 799.4 1,142.1
Participation in investment
pools 783.5 429.5 703.8
Deposits with credit
institutions 2.5 157.2 62.3
Overseas deposits 59.1 48.3 51.9
Other 1.8 3.3 1.9
--------------------------------- --------- --------- ---------
2,247.0 1,526.7 2,078.2
--------------------------------- --------- --------- ---------
In Group owned companies 1,082.4 453.8 920.7
In Syndicate 2001 1,159.0 1,066.7 1,151.7
In non-aligned syndicates 5.6 6.2 5.8
--------------------------------- --------- --------- ---------
2,247.0 1,526.7 2,078.2
--------------------------------- --------- --------- ---------
Listed investments included in Group
owned total are as follows:
--------------------------------- --------- --------- ---------
Shares and other variable
yield securities 171.0 89.0 116.2
Debt and other fixed income
securities 171.2 109.8 104.1
--------------------------------- --------- --------- ---------
342.2 198.8 220.3
--------------------------------- --------- --------- ---------
All financial investments are recognised at fair value, with all gains and
losses, realised and unrealised, recorded through the income statement. Fixed
maturity and equity securities are classified as trading assets as the Group
buys with the intention to resell.
Using Standard & Poor's and Moody's as rating sources, the credit ratings of the
Group's debt and other fixed income securities is set out below:
---------------------------------- -------- --------- ---------
Credit rating 30 June 30 June 31 December
2006 2005 2005
£m £m £m
---------------------------------- -------- --------- ---------
AAA/Aaa 1,015.9 499.7 870.5
AA/Aa 79.6 129.2 134.8
A 89.1 142.7 120.1
BBB/Baa 25.0 22.4 16.7
---------------------------------- -------- --------- ---------
1,209.6 794.0 1,142.1
---------------------------------- -------- --------- ---------
Non-aligned syndicates 5.2 5.4 -
---------------------------------- -------- --------- ---------
1,214.8 799.4 1,142.1
---------------------------------- -------- --------- ---------
13. Insurance contracts and reinsurance assets
----------------------- ----------- ---------- ---------- ---------
Claims reserves Unearned Other insurance Total
premium assets and
reserves liabilities
£m £m £m £m
----------------------- ----------- ---------- ---------- ---------
Insurance liabilities
At 1 January
2005 1,098.7 517.3 46.0 1,662.0
Movement in
period 50.4 204.5 (15.3) 239.6
Exchange
adjustments 44.9 - 1.8 46.7
----------------------- ----------- ---------- ---------- ---------
At 30 June 2005 1,194.0 721.8 32.5 1,948.3
Movement in
period 475.1 (198.0) 80.9 358.0
Exchange
adjustments 35.2 - 1.4 36.6
----------------------- ----------- ---------- ---------- ---------
At 31 December
2005 1,704.3 523.8 114.8 2,342.9
Movement in
period (77.1) 309.0 (61.6) 170.3
Exchange
adjustments (75.1) - (5.7) (80.8)
----------------------- ----------- ---------- ---------- ---------
At 30 June 2006 1,552.1 832.8 47.5 2,432.4
----------------------- ----------- ---------- ---------- ---------
Reinsurance assets
At 1 January
2005 318.6 24.9 261.3 604.8
Movement in
period (35.4) 43.6 56.8 65.0
Exchange
adjustments 14.7 - 11.6 26.3
----------------------- ----------- ---------- ---------- ---------
At 30 June 2005 297.9 68.5 329.7 696.1
Movement in
period 297.4 (44.3) 50.0 303.1
Exchange
adjustments 9.3 - 7.6 16.9
----------------------- ----------- ---------- ---------- ---------
At 31 December
2005 604.6 24.2 387.3 1,016.1
Movement in
period (125.4) 29.2 47.5 (48.7)
Exchange
adjustments (30.4) - (19.5) (49.9)
----------------------- ----------- ---------- ---------- ---------
At 30 June 2006 448.8 53.4 415.3 917.5
----------------------- ----------- ---------- ---------- ---------
The claims reserves are further analysed between notified outstanding claims and
incurred but not reported claims below:
------------------------------ ---------- ---------- ---------
30 June 30 June 31 December
2006 2005 2005
£m £m £m
------------------------------ ---------- ---------- ---------
Notified outstanding claims 960.2 709.9 1,121.8
Claims incurred but not reported 591.9 484.1 582.5
------------------------------ ---------- ---------- ---------
Insurance contracts claims reserve 1,552.1 1,194.0 1,704.3
------------------------------ ---------- ---------- ---------
14. Deferred tax
The deferred tax asset is attributable to timing differences arising on the
following:
---------------- -------- -------- -------- --------- -------- --------
Provisions for Other Capital losses Pensions Other timing Total
losses provisions provisions differences
£m £m £m £m £m £m
---------------- -------- -------- -------- --------- -------- --------
At 1 January
2006
(restated) 1.2 7.8 5.7 3.3 6.4 24.4
---------------- -------- -------- -------- --------- -------- --------
Movements in
the period - (1.8) (1.3) (1.3) 0.4 (4.0)
Movement
through equity
in the period - - - - (0.3) (0.3)
--------------- -------- -------- -------- --------- -------- ---------
At 30 June 2006 1.2 6.0 4.4 2.0 6.5 20.1
--------------- -------- -------- -------- --------- -------- ---------
At 30 June
2005
(restated) 1.3 7.0 5.6 3.3 3.8 21.0
--------------- -------- -------- -------- --------- -------- ---------
The deferred tax liability is attributable to timing differences arising on the
following:
----------------------- --------- -------- -------- -------- -------
Underwriting Unrealised Syndicate Overseas Total
results capital gains capacity earnings £m
£m £m £m £m
----------------------- --------- -------- -------- -------- -------
At 1 January
2006 73.5 5.7 3.0 - 82.2
Movements in
the period (9.6) (1.3) 0.4 3.3 (7.2)
---------------------- --------- -------- --------- -------- -------
At 30 June 2006 63.9 4.4 3.4 3.3 75.0
--------------------- --------- -------- --------- --------- -------
At 30 June 2005 90.1 5.6 2.6 - 98.3
--------------------- --------- -------- --------- --------- -------
15. Intangible assets
-------------------------------- --------- -------- ---------
Purchased Goodwill Total
syndicate
participations
£m £m £m
-------------------------------- --------- -------- ---------
Net book value
At 30 June 2006 63.2 2.8 66.0
-------------------------------- --------- -------- ---------
At 30 June 2005 and 31
December 2005 63.2 2.8 66.0
-------------------------------- --------- -------- ---------
16. Ordinary share capital
Authorised ordinary shares of 25p each Number £m
-------------------- ----------------------- ---------
At 30 June and 31 December 2005 562,000,000 140.5
-------------------- ----------------------- ---------
At 30 June 2006 800,000,000 200.0
-------------------- ----------------------- ---------
Allotted, called up and fully paid Number £m
-------------------- ----------------------- ---------
At 1 January 2006 530,113,127 132.5
Shares issued on exercise of options 2,928,361 0.8
-------------------- ----------------------- ---------
At 30 June 2006 533,041,488 133.3
-------------------- ----------------------- ---------
17. Financial liabilities - borrowings
------------------------------- --------- -------- ---------
30 June 30 June 31 December
2006 2005 2005
£m £m £m
------------------------------- --------- -------- ---------
Bank loans falling due in less than one
year 49.6 10.3 241.0
Bank loans falling due after more than
one year 0.1 2.0 0.1
Subordinated bonds 280.7 55.3 57.1
------------------------------- --------- -------- ---------
330.4 67.6 298.2
------------------------------- --------- -------- ---------
The Group's borrowings comprise three issues of subordinated debt and a debt
facility arrangement with a consortium of banks.
Details of the subordinated debt 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 + 3.48
15 March $50m March 2015 March 2020 7.28 LIBOR + 3.32
2005
20 April
2006 £230m April 2016 April 2026 6.50 LIBOR + 3.48
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 bonds
in whole, subject to certain requirements, on the reset dates or any interest
payment date thereafter at the principal amount plus accrued interest.
The debt facility arrangement was entered into in November 2005 and consists of
the following arrangements:
• A £170 million term loan bridge facility. The rate of interest was LIBOR
plus 0.75% up to 30 June 2006 and LIBOR plus 1.0% thereafter. Only £150
million of the facility has been utilised to date and of this £100 million
was repaid in June 2006, £36 million in July 2006 and the balance of £14
million was repaid in August 2006.
• A £20 million term loan. The rate of interest is LIBOR plus 1.5%, plus
mandatory costs. The loan was repaid in full in April 2006.
• A $125 million revolving credit facility. The rate of interest is LIBOR
plus 1.5%, plus mandatory costs. $105 million of the loan was repaid in
April 2006 and the balance of $20 million was repaid in June 2006.
• A £150 million letter of credit (LOC) facility. This was deposited with
Lloyd's in November 2005 as part of the Group's Funds at Lloyd's (FAL)
required to support underwriting on Syndicate 2001. The LOC was replaced
with part of the proceeds from the issue of the subordinated debt in April
2006. Currently the facility is not being utilised but is being retained to
provide additional financial strength and flexibility.
The debt facility is secured by fixed and floating charges over all of the
assets of the Company and its subsidiary, Amlin Corporate Services Limited
(ACS). In addition Amlin Bermuda Holdings Limited (ABH) has granted a charge
over the shares it holds in Amlin Bermuda Ltd (ABL). The facility is also
guaranteed by ACS, ABH and its intermediate holding company, Amlin (Overseas
Holdings) Limited, and Amlin Investments Limited. The floating charge over the
Company's assets ranks behind the floating charge in favour of Lloyd's.
18. Cash generated from operations
---------------------------- ---------- ---------- ----------
Six months Six months 12 months
2006 2005 (restated) 2005 (restated)
£m £m £m
---------------------------- ---------- ---------- ----------
Profit on ordinary activities
before taxation 120.1 138.4 186.7
Net movement on Premium Trust Funds
for non-aligned participations - (2.9) (2.9)
Depreciation charge 1.4 1.2 2.1
Interest paid 9.9 2.7 9.2
Interest received (53.3) (31.0) (65.3)
Dividends received (2.7) (1.5) (2.0)
Net losses/(gains) on investments 18.3 (8.8) (13.5)
Net purchases of financial
investment (227.7) (185.4) (757.7)
Increase in loans and receivables (151.8) (77.5) (64.9)
Decrease/(increase) in reinsurance
contract assets 98.6 (63.5) (411.5)
Increase in insurance contract
liabilities 89.7 215.2 679.2
Increase/(decrease) in trade and
other payables 24.6 (14.2) (2.7)
Increase in retirement benefits (4.4) (4.3) (4.1)
---------------------------- ---------- ---------- ----------
(77.3) (31.6) (447.4)
Income taxes paid (17.5) (2.7) (17.6)
Interest paid (9.9) (2.7) (9.2)
---------------------------- ---------- ---------- ----------
Cash generated from operations (104.7) (37.0) (474.2)
---------------------------- ---------- ---------- ----------
The Group classifies the cash flows for the purchase and disposal of financial
assets in its operating cash flows, as the purchases are funded from the cash
flows associated with the origination of insurance contracts or the capital
required to support underwriting, net of the cash flows for payments of
insurance claims. Therefore cash generated from operations is net of £227.7
million used to purchase financial investments.
Cash flows relating to participations on syndicates not managed by the group are
included only to the extent that cash is transferred between the Premium Trust
Funds and the Group.
19. Contingent liabilities
Amlin is one of many insurer and broker defendants in litigation filed in the
second quarter of 2006 in Federal Court in Georgia, USA, relating to the use of
contingent commissions. Amlin is robustly defending the various allegations that
it considers are without merit. Amlin expects the litigation to persist for at
least 12 months. Amlin consider that their financial exposure will be limited to
defence fees only. Given the nature of complex federal litigation in the US, it
is not possible at this time to provide a precise figure on the extent of those
defence fees, save that they are not expected to be material.
20. Related party transactions
Reinsurance contracts between Syndicate 2001 and Amlin Bermuda Ltd
Syndicate 2001 placed a number of reinsurance contracts with Amlin Bermuda Ltd
(ABL), a wholly owned subsidiary of the Group, during 2005 and 2006.
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;
- a whole account quota share; and
- an excess of loss reinsurance contract.
All reinsurance contracts were agreed on an arms length basis with terms that
are consistent with those negotiated with third parties. These reinsurance
contracts are eliminated on consolidation of the Group's results and the effects
on the income statements of such eliminations can be seen in the note 3
Segmental reporting under the column 'intra group'.
21. Principal exchange rates
The principal exchange rates used in translating foreign currency assets,
liabilities, income and expenditure in the production of these financial
statements were:
------ ---------- --------- --------- ---------- --------- ---------
H1 At 30 June H1 At 30 June 2005 At 31
2006 Average 2006 2005 Average 2005 Average rate December
rate rate 2005
------ ---------- --------- --------- ---------- --------- ---------
US dollar 1.79 1.85 1.87 1.79 1.82 1.72
Canadian dollar 2.04 2.06 2.31 2.20 2.21 2.01
Euro 1.46 1.45 1.46 1.40 1.46 1.46
------ ---------- --------- --------- ---------- --------- ---------
Independent Review Report to Amlin plc
for the six months ended 30 June 2006
INDEPENDENT REVIEW REPORT TO AMLIN PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprise the consolidated income
statement, the consolidated balance sheet, the consolidated cash flow statement,
the consolidated statement of changes in equity and related notes 1 to 21. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) 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 that
should be made to the financial information as presented for the six months
ended 30 June 2006.
Deloitte & Touche LLP
Chartered Accountants
London
1 September 2006
Shareholder information
The additional information consisting of the shareholder information and
directors and advisers has been prepared from the records of the Company. Whilst
it does not form part of the interim statement, it should be read in conjunction
with it and with the responsibilities section of the independent review report
thereon.
Financial Calendar
2006
20 October Payment of 2006 interim dividend
2007
March Announcement of results for the year ending 31 December 2006
May/June Payment of 2006 final dividend, subject to shareholder approval
Shareholders' dealings
The Company's stockbroker, Hoare Govett Limited, offers a low cost postal
dealing service, which enables UK resident investors to buy or sell certificated
holdings of the Company's shares in what may be a convenient manner. Basic
commission is 1% of the transaction value, with a minimum charge of £15.
Transactions are executed and settled by Pershing Securities Limited. Forms may
be obtained from the Company Secretarial Department, Amlin plc, St Helen's, 1
Undershaft, London EC3A 8ND (Tel. 020 7746 1006) or direct from Hoare Govett
Limited, 250 Bishopsgate, London EC2M 4AA (Tel 020 7678 8300). This service is
not available to non-UK residents who may, however, contact Hoare Govett Limited
for details of other services that may be available. Hoare Govett Limited and
Pershing Securities Limited are each authorised and regulated by the Financial
Services Authority.
Shareholder enquiries, register and website
Please call our Investor Relations Unit on 0207 746 1111, or, for enquiries
concerning share registration, call our Registrar, Computershare Investor
Services PLC, on 0870 702 0000.
Amlin's website is at www.amlin.com
DIRECTORS AND ADVISERS
Directors Registered Office
Roger Taylor (Chairman)* St Helen's
Nigel Buchanan+* 1 Undershaft
Brian Carpenter London
Richard Davey* EC3A 8ND
Richard Hextall (Finance Director)
Tony Holt
Roger Joslin*
Thomas Kemp*
Ramanam Mylvaganam*
Charles Philipps (Chief Executive)
Sir Mark Wrightson Bt*
+ Senior independent non-executive
* non-executive
Auditors
Deloitte & Touche LLP
Stonecutter Court
1 Stonecutter Street
London EC4A 4TR
Investment Bankers
Lexicon Partners Limited
No. 1 Paternoster Square
London EC4M 7XD
Audit Committee Stockbrokers
Nigel Buchanan (Chairman) Hoare Govett Limited
Richard Davey 250 Bishopsgate
Roger Joslin London EC2M 4AA
Ramanam Mylvaganam
Remuneration Committee Corporate Lawyers
Ramanam Mylvaganam (Chairman) Linklaters
Nigel Buchanan One Silk Street
Sir Mark Wrightson Bt London EC2Y 7HQ
Nomination Committee Principal Bankers
Roger Taylor (Chairman) Lloyds TSB Bank PLC
Nigel Buchanan 25 Gresham Street
Roger Joslin London EC2V 7MN
Ramanam Mylvaganam
Charles Philipps
Secretary Registrar
Charles Pender FCIS FSI Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
This information is provided by RNS
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