Interim Results
Amlin PLC
12 September 2002
12 September 2002
For Immediate Release
AMLIN plc
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2002
HIGHLIGHTS
• £30 million improvement in profit from a pre-tax loss of £12.6 million
to a profit of £18.2 million
• £123 million of equity finance raised
• Improvement in combined ratio from 105% to 101%
• Gross premium written increased by 30%, from £355.8 million to £461.1
million
• 11 September losses in line with those previously announced
• Dividend resumed at 0.75p per share
• Successful capacity offer gives Amlin 100% ownership of its business
• Syndicate 2001 able to write up to £1.1 billion (net of brokerage) for
2003
• FTSE 250 Index entry on 23 September 2002
Six months Six months Twelve months
2002 2001 2001
£m £m £m
Gross premium written 461.1 355.8 585.0
Net premium written 365.6 287.9 485.1
Earned premium 247.3 165.6 341.5
Technical profit before 11 September loss 29.1 5.0 15.7
Movement in 11 September loss (7.8) - (63.9)
Continuing technical profit/(loss) 21.3 5.0 (48.2)
Profit/(loss) on ordinary activities before taxation 18.2 (12.6) (81.5)
Earnings per share 6.3p (7.9p) (33.3p)
Dividends per share 0.75p - -
Net assets £193.4m £188.4m £137.2m
Net assets per share 74.0p 94.0p 67.8p
Charles Philipps, Chief Executive, commenting on the results, said
'We have achieved a great deal since we reported our final results. We have
raised new capital, acquired 100% ownership of our business and continue to
experience first rate trading conditions. Amlin is now well positioned and we
are ever more confident that we will deliver excellent returns to our
shareholders over the next few years'.
Charles Philipps, Amlin plc 0207 746 1000
Richard Hextall, Amlin plc 0207 746 1000
David Haggie, Haggie Financial Limited 0207 417 8989 / 07768 332486
OPERATIONAL AND FINANCIAL REVIEW
From an underwriting and strategic perspective the first six months of 2002 have
witnessed major steps forward for the Group. As expected, underwriting
conditions have improved dramatically in most of our core lines. Our
underwriters have been a major driving force in the market, and at June we have
achieved a 30% increase in written premium income to £461 million. We have now
raised £123 million of fresh equity capital to support our growth. Finally,
subject to the Council of Lloyd's consent, we have successfully completed the
acquisition of the capacity on our managed syndicate.
The Group's operating profit of £18.2 million (30 June 2001: loss of £12.6
million) for the six months is a good start. It largely reflects the improved
performance of business written last year. Of the business expected to be
written in 2002, only 14% is earned to date. Whilst loss incidence has been
lower than normal for the six months to 30 June, we would expect the second half
year underwriting performance to be better than the first in the absence of any
abnormally large events. However, the first half profit has been augmented by a
better than expected investment return which we would not expect to be repeated
in the second half.
The underwriting performance of each division has continued to improve, with a
lower overall combined ratio, at the syndicate level, of 101% compared with 105%
for the first six months of 2001. Excluding the 11 September loss estimate
movements, this ratio comes down to a satisfactory 97%.
As previously announced, we have increased our 11 September loss estimate.
However, this deterioration is included in our operating profit underlining the
strength of the underwriting performance of our business. The movements in loss
estimates originate from our property reinsurance accounts where we received a
small number of material late advices. Whilst this is disappointing, it is
encouraging that the majority of contracts have behaved as expected and we have
not experienced claims from a large number of unexpected sources. During the
period we have reviewed our aviation exposures in the light of information now
available and have reduced reserves held on an assured from policy limits to
what we now consider a more realistic level.
A significant issue faced by the group remains the litigation with the
leaseholder of the World Trade Center, with the court dates now set for
November.
Divisional overview
Operationally we are organised into four client focused divisions. The
performance of each division, at the 100% managed syndicate level, has been as
follows.
Harvey Bowring
The combined ratio of the division was 116% which reflects the impact of the
movement in the 11 September losses, which are concentrated in this division.
Absent this, the first six months ratio was 105% (30 June 2001: 113%). Premium
income increased 4% to £367 million, compared to the six months to 30 June 2001.
We believe that these results are unrepresentative of the underlying
improvement in performance, owing to two key issues.
First, the 2002 reinsurance programme is bought to protect all premium earned in
the year. The expected increase in premium income for business written in 2002
is substantial and the reinsurance purchased to protect this has increased in
line. However, whereas much of the reinsurance was purchased at 1 January 2002,
only 16% of the division's expected ultimate premium for business written in
2002 has been earned in the first half. This mismatch between recognised
reinsurance expense and earned income impacts the combined ratio in the first
half negatively, but is expected to reverse over time.
Second, we have strengthened our casualty reserves in response to development in
the first six months, for both syndicates 2001 and 1141.
There is good cause for optimism. Terms have improved markedly in all areas and
the division is exceeding initial expectations for its income for the current
year. To date the loss incidence has been low. However, we have remained
cautious with our estimates of the ultimate outturn of business written in 2002
because of its immature stage of claims development.
Amlin Insurance Services
The performance of Amlin Insurance Services for the first six months has been
excellent. Premium income is up by 66% compared to the same period in 2001.
The combined ratio has steadily improved from 98% for the six months to 30 June
2001, to 95% for the year to 31 December 2001 and now to 89% for the first six
months of 2002. This reflects the rate rises of the last few years, which have
continued into this year, such that we have achieved better margins, net of
estimated claims inflation.
Building on the excellent market position of the commercial motor account we
have modestly grown the small UK professional indemnity and employers' liability
accounts in good market conditions. We have also acquired the renewal rights to
the UK business of Aioi, which has given the division access to an excellent
network of provincial brokers with whom we look forward to building our
relationship.
Amlin Aviation
As we have noted in the past, the first half combined ratio for aviation is
usually high compared to the ratio achieved for the whole of the year. This is
because this division's income is heavily weighted towards the fourth quarter
whilst its expenses are recognised throughout the year.
Given this, the combined ratio of 100% (30 June 2001: 102%) is promising, with a
claims ratio of only 43%. This reflects the rate increases achieved on business
written in the last quarter of 2001 and a relatively low level of loss incidence
in the year to date. Premium income has risen 53% to £57 million, compared to
the six months to 30 June 2001.
Coles
Coles has experienced the least attractive terms of our divisions over the last
twelve months. However, there is now clear evidence of improvement across all
classes. Conditions in the war and energy markets have been extremely good.
Gross premium written has increased to £97 million (30 June 2001: £79 million).
Our underwriting focus has been more skewed towards the latter two classes this
year but a balance of attritional business has been maintained in hull, yacht
and cargo.
However, unlike many in the marine market, Coles is building from an acceptable
underlying level of performance which was achieved through careful underwriting
through the down cycle. The combined ratio of 92% (30 June 2001: 88%) is highly
satisfactory given that the 2001 numbers also benefited from the run off of the
highly profitable excess of loss account which has been transferred to Harvey
Bowring.
Investment performance
As we explained in the annual report, we adopted a more conservative stance on
the Group investment portfolio after the 11 September losses. To date this has
proved to be beneficial, with good returns in the first six months. Similarly
our syndicate portfolios have performed well and we have exceeded our
expectations in the year to date. However, markets remain volatile and our
cautious view of equity and bond returns over the next year is unchanged.
Consequently, we have continued to hold a greater proportion of cash than we
would normally.
Investment performance has been helped by strong cash flow. Since December
2001, syndicate cash and investments have increased by £63 million to £730
million reflecting strong premium flows, low loss incidence in the year to date,
and active management of our reinsurance recoveries/advances relating to the 11
September loss.
Capacity offer
In August 2002 we made an offer to acquire the remaining 28% of Syndicate 2001
capacity which we did not already own. The offer for each £1 of capacity was
Amlin shares then valued at 22p, with a cash alternative of 20p, and with third
party capital retaining the right to participate on the syndicate, for the 2003
year of account only, with the equivalent of a premium income limit of 50p per
£1 of capacity then held. The offer became wholly unconditional on 2 September
2002 with acceptances at the first closing date, on 30 August 2002, of 85% of
non-aligned capacity. The offer closes on 16 September 2002. This level of
support will allow us, subject to the consent of the Council of Lloyd's, to
purchase compulsorily the remaining capacity on the syndicate, thereby meeting
our strategic goal of owning 100% of our syndicate.
The final cost of the offer is expected to be approximately £46.4 million, with
the holders of an estimated 25% of capacity choosing the share offer option.
Therefore the total acquisition cost of syndicate capacity to date has been
£63.6 million, which represents an average 6.4p per £1 of capacity (based on
forecast 2003 capacity).
We believe that we can now operate with a more flexible and efficient structure
and, given the expectation of a continuing profitable market, quickly recoup the
costs of the investment.
Capacity and capital management
In line with our strategy to increase premium income in strong market
conditions, Amlin currently anticipates Syndicate 2001 underwriting up to around
£1 billion of premium income (net of brokerage) next year, up 17% on the current
year's forecast premium income. Our quota share facilities with XL Re and
Montpelier Re allow the Syndicate to write up to another £100 million of
premium.
We are pleased that our shareholders supported both our rights issue and our
subsequent placing and open offer. With the £123 million of additional equity
raised, and after the cash consideration payable under the Capacity Offer, we
are in a strong position, with additional debt finance, to support the Group's
own estimated £860 million of 2003 capacity. For Amlin this is a 49% increase in
underwriting capacity.
Dividend
With the underlying performance of the business now starting to be realised in
the results we are pleased to resume the payment of dividends. At this time,
the Company is growing its underwriting capacity and therefore needs to retain
capital to support its underwriting. Taking this into account, the Board has
declared an interim dividend of 0.75p per share, which will be paid on 25
October 2002 to shareholders on the register at the close of business on 27
September 2002. On this occasion the Board is not offering a scrip dividend
alternative.
Outlook
As highlighted in our Annual Report, we believe there is a reasonable prospect
of the current hard market enduring for some time. Lower investment returns
combined with increased reserving for asbestosis claims, particularly in the US
property and casualty sector will, we expect, maintain the focus on underwriting
profit. Against this background we are in a very strong position to benefit
from our strategic positioning and we look forward with confidence.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2002
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
Notes £m £m £m
Gross premium written
Continuing operations 1 461.1 355.8 585.0
Discontinued operations 1 - - 2.4
461.1 355.8 587.4
Continuing operations
Earned premiums, net of reinsurance 247.3 165.6 341.5
Allocated investment return transferred from
the non-technical account 13.4 14.9 24.6
Claims incurred, net of reinsurance (176.7) (121.3) (301.7)
Net operating expenses (62.7) (54.2) (112.6)
Balance on the technical account 21.3 5.0 (48.2)
Comprising:
Technical profit before 11 September loss 29.1 5.0 15.7
11 September loss (7.8) - (63.9)
Continuing operations 1 21.3 5.0 (48.2)
Discontinued operations 1 - - (7.8)
Balance on the technical account
for general business 21.3 5.0 (56.0)
Investment return 5 15.0 (0.7) 8.4
Allocated investment return included
within the technical account (13.2) (14.8) (27.9)
23.1 (10.5) (75.5)
Other income 0.7 0.4 1.5
Other charges (5.6) (2.5) (7.5)
Operating profit/(loss)
Continuing operations 18.2 (12.6) (73.7)
Discontinued operations - - (7.8)
18.2 (12.6) (81.5)
Comprising:
Operating profit/(loss) based
upon longer term investment return 17.0 1.3 (61.7)
Short term fluctuations in investment return 1.2 (13.9) (19.8)
Profit/(loss) on ordinary activities before taxation 18.2 (12.6) (81.5)
Taxation on profit/(loss) on ordinary activities 7 (2.3) (3.3) 14.5
Profit/(loss) on ordinary activities after taxation 15.9 (15.9) (67.0)
Equity dividends 8 (2.9) - -
Retained profit/(loss) for the period 13.0 (15.9) (67.0)
Earnings per ordinary share
- basic 9 6.3p (7.9p) (33.3p)
- diluted 9 6.3p (7.9p) (33.3p)
There are no other recognised gains or losses other than those reported in the
profit and loss account for the current and preceding periods, and therefore no
statement of recognised gains or losses is included.
CONSOLIDATED BALANCE SHEET
at 30 June 2002
30 June 2002 30 June 2001 31 Dec 2001
(unaudited) (unaudited) (audited)
Assets Notes £m £m £m
Intangible assets 10 14.6 15.5 15.0
Investments 11 589.3 413.4 474.3
Reinsurers' share of technical provisions
Provision for unearned premiums 14 50.4 45.6 14.4
Claims outstanding 14 344.0 159.7 394.7
Debtors 396.0 233.1 439.1
Other assets
Cash at bank and in hand 72.4 46.8 18.4
Tangible assets 10.7 10.1 12.6
Own shares 2.8 2.9 2.8
Prepayments and accrued income 98.8 66.0 59.0
Total assets 1,579.0 993.1 1,430.3
30 June 2002 30 June 2001 31 Dec 2001
(unaudited) (unaudited) (audited)
Liabilities Notes £m £m £m
Equity shareholders' funds 13 193.4 188.4 137.2
Technical provisions
Provision for unearned premiums 14 425.3 280.9 271.1
Claims outstanding 14 896.7 466.7 907.4
Provisions for other risks and charges 1.0 8.5 1.0
Creditors 58.0 38.3 106.8
Creditors: amounts falling due after
more than one year 1.1 6.1 1.6
Accruals and deferred income 3.5 4.2 5.2
Total liabilities 1,579.0 993.1 1,430.3
Net assets per ordinary share
- basic 9 74.0p 94.0p 67.8p
- tangible 9 68.3p 86.1p 60.4p
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2002
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
Note £m £m £m
Net cash inflow from operating activities 16 127.3 71.8 116.8
Net cash outflow from servicing of finance (0.3) (0.4) (0.7)
Corporation tax repayments received - 0.6 3.7
Net purchases of tangible and
intangible assets (0.3) (2.2) (6.7)
Equity dividends paid - - (4.1)
Net cash inflow from financing activities 43.2 0.8 0.3
Net cash flows 17 169.9 70.6 109.3
Cash flows were invested as follows:
Increase in cash holdings 43.0 27.1 16.1
Increase/(decrease) in deposits 11.0 5.9 (11.7)
54.0 33.0 4.4
Net purchases of investments 115.9 37.6 104.9
Net investment of cash flows 169.9 70.6 109.3
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 2001, 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
2002 and 30 June 2001 reflects only changes to open years' loss provisions.
• the assets and liabilities in respect of non-aligned participations are
not analysed in detail in the balance sheets at June 2002 and June 2001 and the
audited balance sheet at 31 December 2001 has been restated onto the same basis.
• 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.
b) Status of the interim statement
The statements for the two interim periods are unaudited but have been reviewed
by the company's auditors, Deloitte & Touche, and their report for the six
months to 30 June 2002 is included with this report. 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 2001 are based on the statutory Group
accounts, which received an unqualified audit opinion and did not contain a
statement under section 237(2) or (3) of the Act. The audit report on the
accounts for the year ended 31 December 2001 referred to the uncertainties
arising from the impact of the terrorist attacks on 11 September 2001 and stated
'In forming our opinion, we have considered the adequacy of the disclosure made
in note 3 to the accounts concerning the losses and reinsurance recoveries
arising thereon from the terrorist attacks of 11 September 2001. This note
refers to greater than normal uncertainty over the loss estimates. The Group
has made provisions for losses and reinsurance recoveries based on the
assumptions set out in the note. The eventual settlement of claims may result
in net losses greater or lower than those provided. Our opinion is not
qualified in this respect'. The 31 December 2001 accounts 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:
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Profit/(loss) before taxation
Underwriting and investment 18.9 (12.2) (80.0)
Managing agencies (0.7) (0.4) (1.5)
Total 18.2 (12.6) (81.5)
Net assets
Underwriting and investment 189.7 185.4 135.1
Managing agencies 3.7 3.0 2.1
Total 193.4 188.4 137.2
In the profit and loss account, the income and costs of the managing agency are
reported within 'other income' and 'other charges'.
3 Managed syndicates' results
The table below summarises the performance of the Group's managed syndicates.
The Group has increased its participation on the syndicates during the period
and comparisons of the Group's share of the results are distorted by the change
in participation by year of account. Therefore, to make more meaningful
comparisons, the figures represent the results of the syndicates in total rather
than Amlin's share of the results.
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Gross premium written 637.7 539.1 874.1
Net premium written 503.6 436.8 723.1
Earned premium, net of reinsurance 353.1 288.1 554.6
Claims incurred, net of reinsurance (258.1) (210.5) (484.3)
Claims ratio (%) 73% 73% 87%
Brokerage (118.0) (113.6) (168.3)
Syndicate expenses (19.2) (18.7) (42.0)
Lloyd's charges (3.1) (5.7) (9.3)
Increase in deferred acquisition costs 47.0 47.9 35.7
Net operating expenses (93.3) (90.1) (183.9)
Expense ratio (%) 28% 32% 30%
Combined ratio (%) 101% 105% 117%
By division the results are as follows:
Amlin Amlin Harvey
Total Coles * Aviation Insurance Bowring *
Gross premium written £637.7 £97.4 £56.8 £116.3 £367.2
Net premium written £503.6 £93.4 £21.5 £111.3 £277.4
Claims ratio 73% 64% 43% 73% 85%
Combined ratio 101% 92% 100% 89% 116%
Combined ratio
(excl 11 September movements) 97% 88% 108% 89% 105%
30 June 2001 combined ratio 105% 88% 102% 98% 113%
* Coles includes ceased syndicate 902, Harvey Bowring includes ceased syndicate
1141
4 Impact of terrorist attacks of 11 September 2001
The attacks of 11 September 2001 resulted in losses to all the Group's managed
syndicates. Due to the scale of these losses, and the reinsurance recoveries
thereon, at this stage the estimation of the loss is highly complex. Therefore,
greater uncertainty exists over the loss estimates than would normally be the
case. The table below shows the comparison between the forecast losses for
managed syndicates as reported in the 31 December 2001 report and accounts, and
the currently forecast position.
30 June 31 December
2002 2001
(unaudited) (audited)
$m $m
Total gross loss 638.3 667.3
Reinsurance recoveries (478.1) (527.8)
Total net loss 160.2 139.5
Allocated by year of account:
2000 year of account 30.6 27.7
2001 year of account 129.6 111.8
160.2 139.5
Amlin Group share 108.9 93.3
Amlin Group share (Converted sterling millions) £71.7 £63.9
The basis for the calculation of the loss estimates is unchanged from the
methodology described in the 2001 Annual Report and the key assumptions remain
unchanged. These assumptions are:
• the terrorist attacks leading to the collapse of the World Trade Center
towers in New York were one occurrence;
• the Washington and Pittsburgh losses were two further distinct
occurrences;
• there will be no material failures of reinsurance security;
• all reinsurers will reinstate reinsurance cover in accordance with the
relevant contract provision;
• there will be no material contractual disputes with any reinsurers;
• there will be no subrogation recoveries or financial support from third
parties, including the US government or associated agencies; and
• war exclusions on policies do not apply and all of the occurrences were
caused by terrorist action.
Compared to the position at 31 December, there are now considerably more
notified claims, reducing the element of estimation as a proportion of the total
loss.
The net loss is arrived at by deducting the estimated reinsurance recoveries,
net of reinstatement premiums, from the gross loss. Reinsurance recoveries have
been estimated by mapping the estimated losses against the reinsurance cover
available. The recovery estimate is based on the amount of recovery that can be
made against the relevant policies. The cost of reinsurance premiums to
reinstate reinsurance cover has been calculated under the terms of applicable
policies and is included within the net estimate. Recoveries under a number of
reinsurance contracts are triggered by the overall market property insured loss
reaching certain levels. The property market loss assumed is US$25 billion or
greater.
The variances between the two gross loss positions is due to two underlying
factors. Firstly there has been an increase in notifications from reinsured
clients on our property reinsurance account. This is offset by a reduction in
our estimate for aviation losses following a review of the legal position. The
increased loss net of reinsurance is due to higher property reinsurance claims,
which are not recoverable from reinsurers, while most of the benefit of the
improvement in the estimated aviation loss falls to the syndicates' reinsurers.
The 11 September loss is almost exclusively a US dollar loss. As such the
result is impacted by the exchange rates used. At 31 December 2001, the
exchange rate used to convert the forecast liabilities to sterling was $1.46:£1.
The rate at which the liabilities were denoted at 30 June 2002 was $1.52:£1.
This has effected the results for the first half of 2002, resulting in a profit
on exchange of £2.5 million.
There continues to be a legal dispute between the leaseholder of the World Trade
Center and its insurers. The trial date has been set as 12 November 2002, but
it is not yet known how long the case will last. We believe the attacks on the
World Trade Center are one occurrence. We have legal guidance that supports this
belief. However, the leaseholder of the twin towers is seeking to claim that
the attacks were two distinct events. Therefore there is potential for
additional claims. In the event that the World Trade Center losses were judged
to be two occurrences, it is estimated that our gross loss would increase by
approximately £30 million.
5 Investment return
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Income from investments 17.0 12.2 28.9
Losses on realisation of investments (2.5) (0.4) (17.2)
Unrealised gains/(losses) on investments 1.1 (11.5) (2.2)
Investment expenses and charges (0.6) (1.0) (1.1)
15.0 (0.7) 8.4
The Group's underwriting result within the balance on the technical account
includes an allocation of longer term investment returns on bonds and equities
held during the period. The longer term rates of return applied during 2001 and
2002 are 7% for UK equities and 5.5% for fixed interest securities. These rates
were first applied for the 31 December 2001 profit and loss account. The
interim accounts to 30 June 2001 were calculated on the basis of an 8% return
for UK equities and 6% for bonds. The long term rates were revised in the light
of a reduction in the global outlook for bond returns. The rate for UK equities
was applied until the disposal of the portfolio in September 2001.
The rates of return are applied to the average level of investments which are
attributable to the shareholders' funds 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 1997, compared with the aggregate
longer term return over the same period, is set out below. All figures are gross
of expenses.
1 June 1997 to 1 June 1996 to
30 June 2002 30 June 2001
(unaudited) (unaudited)
£m £m
Actual return attributable to the technical account 92.0 74.2
Longer term return attributable to the technical account 119.0 96.9
Effect of short term fluctuations over the period (27.0) (22.7)
6 Principal exchange rates
The principal exchange rates used in the financial statements are:
Six months 2002 Six months 2001 Twelve months 2001
Period Period Period Period Period Period
average rate end rate average rate end rate average rate end rate
US dollar 1.45 1.52 1.44 1.42 1.44 1.46
Euro 1.61 1.54 1.62 1.66 1.61 1.63
Canadian dollar 2.27 2.32 2.21 2.24 2.23 2.32
7 Taxation on profit/(loss) on ordinary activities
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
UK corporation tax - 0.2 1.2
Overseas taxation - - (0.3)
Deferred taxation 2.3 3.1 (15.4)
2.3 3.3 (14.5)
8 Equity dividends
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Interim dividend of 0.75 pence (2001: nil) per share 2.9 - -
There was no interim or final dividend in respect of 2001.
9 Earnings and net assets per ordinary share
Earnings per share is based on the profit attributable to shareholders for the
six months ended 30 June 2002 of £15.9 million (six months ended 30 June 2001:
loss of £15.9 million; twelve months ended 31 December 2001: loss of £67.0
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:
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
Profit/(loss) for the period £15.9m (£15.9m) (£67.0m)
Weighted average number of shares in issue 250.4m 200.2m 201.3m
Dilutive shares to be issued 0.8m (0.1m) -
Adjusted average number of shares in issue 251.2m 200.1m 201.3m
Basic earnings per share 6.3p (7.9p) (33.3p)
Diluted earnings per share 6.3p (7.9p) (33.3p)
Basic net assets per share are as follows:
30 June 2002 30 June 2001 31 Dec 2001
(unaudited) (unaudited) (audited)
Net assets £193.4m £188.4m £137.2m
Adjustment for intangible net assets £(14.6m) £(15.5m) £(15.0m)
Tangible net assets £178.8m £172.9m £122.2m
Number of shares in issue at end of period 268.1m 207.2m 208.5m
Adjustment for ESOT shares (6.2m) (6.3m) (6.1m)
Basic number of shares after ESOT adjustment 261.9m 200.9m 202.4m
Basic net assets per share 74.0p 94.0p 67.8p
Tangible net assets per share 68.3p 86.1p 60.4p
10 Intangible assets
Purchased
syndicate
participations
(unaudited)
£m
Cost
At 1 January and 30 June 2002 17.2
Amortisation
At 1 January 2002 2.2
Charge for the period 0.4
At 30 June 2002 2.6
Net book value
At 30 June 2002 14.6
At 1 January 2002 15.0
11 Investments
At valuation
30 June 2002 30 June 2001 31 Dec 2001
(unaudited) (unaudited) (audited)
£m £m £m
Shares and other variable yield securities 0.4 87.6 0.4
Debt securities and other fixed income securities 440.1 305.8 366.0
Participation in investment pools 114.6 17.5 80.5
Overseas deposits 25.1 - 18.3
Deposits with credit institutions - - 1.6
Other 9.1 2.5 7.5
589.3 413.4 474.3
In Group owned companies 183.5 181.8 169.5
In managed syndicates 405.8 231.6 304.8
589.3 413.4 474.3
As explained in note 18, some of the Group investments are charged to Lloyd's to
support it's underwriting activities.
12 Share capital
Authorised ordinary shares of 25p each Number £m
At 1 January 2002 300,000,000 75.0
Increase on 15 January 2002 65,000,000 16.3
At 30 June 2002 365,000,000 91.3
Allotted, called up and fully paid: Number £m
At 1 January 2002 208,540,106 52.1
Rights issue 59,582,887 14.9
At 30 June 2002 268,122,993 67.0
The rights issue closed on 4 February 2002 and the new shares were issued on the
following day. The 2 for 7 issue raised £45.9 million gross, and £43.2 million
net of expenses. The balance of the capital raised not included in share
capital, £28.3 million, is included in the share premium reserve.
At an Extraordinary General Meeting held on 4 July 2002, resolutions were passed
to increase the authorised share capital to 505 million ordinary shares of 25p
each and to issue, via a Firm Placing and a Placing and Open Offer, 104,047,728
new shares. These new shares were issued on 5 July 2002.
At an Extraordinary General Meeting held on 21 August 2002, resolutions were
passed to increase the authorised share capital to 562 million ordinary shares
of 25p each and to approve the issue, for the purposes of a Capacity Offer, of
up to 56,708,346 new shares.
Further details are included in note 19.
13 Reconciliation of movements in equity shareholders' funds
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Profit/(loss) attributable to shareholders 15.9 (15.9) (67.0)
Less: dividends (2.9) - -
Retained profit/(loss) for the period 13.0 (15.9) (67.0)
Issue of capital 43.2 1.1 2.6
Shares to be issued - 1.1 (0.5)
Net increase/(reduction) to equity shareholders' funds 56.2 (13.7) (64.9)
Equity shareholders' funds at 1 January 137.2 202.1 202.1
Equity shareholders' funds at 30 June/31 December 193.4 188.4 137.2
14 Technical provisions
Provision for
unearned Claims
premiums outstanding Total
(unaudited) (unaudited) (unaudited)
£m £m £m
Gross
At 1 January 2002 271.1 907.4 1,178.5
Exchange adjustments (5.8) (5.2) (11.0)
Movement in provisions
- Excluding 11 September 160.0 20.1 180.1
- Impact of 11 September - (25.6) (25.6)
At 30 June 2002 425.3 896.7 1,322.0
Reinsurance amount
At 1 January 2002 (14.4) (394.7) (409.1)
Exchange adjustments (0.1) (1.3) (1.4)
Movement in provisions
- Excluding 11 September (35.9) 24.6 (11.3)
- Impact of 11 September - 27.4 27.4
At 30 June 2002 (50.4) (344.0) (394.4)
Net
At 30 June 2002 374.9 552.7 927.6
At 1 January 2002 256.7 512.7 769.4
15 Deferred tax
Unrelieved
trading losses Other
Underwriting carried timing
results forward differences Total
(unaudited) (unaudited) (unaudited) (unaudited)
£m £m £m £m
At 1 January 2002 24.1 6.0 0.5 30.6
Movements in the period (5.6) 3.2 0.1 (2.3)
At 30 June 2002 18.5 9.2 0.6 28.3
16 Reconciliation of profit/(loss) before taxation to net cash inflow
from operating activities
Six months Six months Twelve months
2002 2001 2001
(unaudited) (unaudited) (audited)
£m £m £m
Profit/(loss) on ordinary activities before taxation 18.2 (12.5) (81.5)
Net movement on Premium Trust Funds for
non-aligned participations 0.8 - (23.4)
Depreciation charge 2.1 1.5 3.2
Syndicate capacity amortisation charge 0.4 0.3 0.8
Realised gains less losses on investments 2.5 0.4 17.2
Unrealised (gains) losses on investments (2.0) 11.9 1.3
Decrease (increase) in debtors 58.9 22.1 (12.6)
(Increase) decrease in prepayments and accrued income (3.8) 2.6 1.2
Increase in insurance debtors, prepayments and
accrued income (64.6) (137.3) (219.3)
Increase in technical provisions 143.7 48.7 639.5
Decrease (increase) in reinsurers' share of technical
provisions 14.7 (10.1) (249.3)
Increase in provisions for other risks and charges - 3.3 6.9
(Decrease) increase in insurance creditors, accruals
and deferred income (56.5) 142.4 32.6
Increase (decrease) in other creditors relating to
operating activities 14.1 (1.1) (0.7)
(Decrease) increase in accruals and deferred income (1.5) (0.8) 0.2
Interest expense 0.3 0.4 0.7
Net cash inflow 127.3 71.8 116.8
17 Movements in cash, portfolio investments and financing
Changes to
At 1 January market value At 30 June
2002 Cash flow and currencies 2002
(audited) (unaudited) (unaudited) (unaudited)
£m £m £m £m
Cash at bank and in hand 18.4 54.0 - 72.4
Shares and other variable yield securities 7.1 - - 7.1
Debt and other fixed income securities 446.5 109.2 (1.0) 554.7
Deposits with credit institutions 23.6 6.7 - 30.3
495.6 169.9 (1.0) 664.5
Loans due within one year (10.0) (0.2) - (10.2)
Loans due after one year (1.5) 0.4 - (1.1)
(11.5) 0.2 - (11.3)
Total 484.1 170.1 (1.0) 653.2
18 Contingencies and Guarantees
The Group has entered into various deeds of covenant in respect of certain
corporate member subsidiaries to meet each such subsidiary's obligations to
Lloyd's. The total guarantee given by the Group under these deeds of covenant
(subject to limited exceptions) amounts to approximately £162.0 million (30 June
2001: £201.3 million). The obligations under the deeds of covenant are secured
by a fixed charge of the same amount over investments, and a floating charge
over the investments and other assets of the Group, in favour of Lloyd's.
Lloyd's has the right to retain the income on the charged investments, although
it is not expected to exercise this right unless it considers there to be a risk
that one or more of the covenants might need to be called and, if called, might
not be honoured in full.
As liability under each deed of covenant is limited to a fixed monetary amount,
the enforcement by Lloyd's of any deed of covenant in the event of a default by
a corporate member, where the total value of investments has fallen below the
total of all amounts covenanted, may result in the appropriation of a share of
the Group's Funds at Lloyd's that is greater than the proportion which that
subsidiary's overall premium limit bears to the total overall premium limit of
the Group.
The Group has also entered into Lloyd's deposit trust deeds for Funds at Lloyd's
by which letters of credit ('LOCs') for total amounts of £39.3 million and
US$130 million have been deposited. Of these LOCs, all of the US$ denominated
LOCs, which were procured by agreement with the Company's 13% shareholder State
Farm Mutual Automobile Insurance Company, and £10.7 million of the sterling LOCs
were deposited at Lloyd's for the first time in November 2001 to support
increased underwriting for the 2002 year of account.
19 Post Balance Sheet Events
On 11 June 2002 the Company announced a Firm placing of 52,023,864 new Amlin
shares and a Placing and Open Offer of 52,023,864 new Amlin shares, both at 81
pence per share. Conditional approvals were obtained at an Extraordinary
General Meeting on 4 July 2002. Both issues were fully underwritten (to the
extent that they were not the subject of prior undertakings to subscribe) and
raised approximately £80 million net of expenses. The issues closed on 2 July
2002 and the new shares were issued on 5 July 2002. There is no profit and loss
account impact from the issue of these shares.
On 2 August 2002 the Company announced an offer (on behalf of its wholly owned
subsidiary, Amlin Corporate Member Limited) to acquire the whole of the
outstanding capacity on Syndicate 2001 not already owned by the Group. The
offer comprised a share offer, with a cash alternative, with, in each case, a
limited right to participate on the 2003 year of account on Syndicate 2001. The
offer was conditional upon shareholder approval, which was received at an
Extraordinary General Meeting on 21 August 2002. As at 10 September 2002, the
share offer had been accepted in respect of £55,340,552 of capacity representing
approximately 25.0% of the outstanding capacity, and resulted in the issue of
13,868,427 new Amlin shares on 2 September 2002, with a further 287,538 shares
to be issued shortly. As at the same date the cash alternative had been accepted
in respect of a further £140,263,418 of capacity, representing approximately a
further 63.3% of the outstanding capacity, which will result in the payment of
approximately £28.1 million. This capacity offer has no impact on the profit
and loss account in 2002, as the cost of capacity is amortised over twenty
years, beginning in the underwriting year in which the purchased syndicate
participation commences.
---------------
The Interim Report will be despatched to all registered holders of ordinary
shares in the Company. Copies of this statement may be obtained from the
Secretary at the Registered Office of the Company, St Helen's, 1 Undershaft,
London EC3A 8ND.
---------------
INDEPENDENT REVIEW REPORT TO AMLIN PLC
for the six months ended 30 June 2002
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2002 which comprises the profit and loss account,
the balance sheets, the cash flow statement and related notes 1 to 19. 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.
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 should be 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 United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Impact of the terrorist attacks of 11 September 2001
In arriving at our review conclusion, we have considered the adequacy of the
disclosures made in note 4 to the Interim Report concerning the losses and
reinsurance recoveries arising thereon from the terrorist attacks of 11
September 2001. The note refers to the greater than normal uncertainty over the
loss estimates. The Company has made provisions for losses and reinsurance
recoveries based upon the assumptions that have been set out in the note. The
eventual settlement of claims may result in net losses greater or lower than
those provided. Our review conclusion is not qualified in respect of this
matter.
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 2002.
Deloitte & Touche
Chartered Accountants
London
11 September 2002
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