Interim Results
Amlin PLC
04 September 2003
Press Release
For Immediate Release
4 September 2003
Amlin plc
Interim Results for the six months ended 30 June 2003
AMLIN'S FIRST HALF PRE TAX PROFITS EXCEED RECORD FULL YEAR 2002
Amlin, the leading Lloyd's insurer, reports record interim profits and a
positive outlook.
Highlights
• Pre-tax profit up 248% to £63.3 million
• Gross premiums written up 44.2% to £664.9 million
• Combined ratio of 83% compares with 101% in H1 2002
• Earnings per share up 82.5% to 11.5p
• Interim dividend of 0.85p per share with scrip alternative
• Six month return on equity of 14.2%
• Outlook strong
Six months Six months Twelve months
2003 2002 2002
FINANCIAL HIGHLIGHTS £m £m £m
Gross premiums written 664.9 461.1 717.1
Net premiums written 541.5 365.6 573.0
Earned premiums 326.5 247.3 494.1
Operating profit before tax
(based on longer term investment returns) 64.8 17.0 45.6
Profit on ordinary activities before tax 63.3 18.2 55.4
Per share amounts
Operating profit 16.5p 7.1p 19.0p
Earnings 11.5p 6.3p 14.1p
Net assets 91.8p 74.0p 81.1p
Net tangible assets 76.5p 68.3p 65.4p
Dividend 0.85p 0.75p 2.0p
Operating ratios
Claims ratio 51% 73% 63%
Expense ratio 32% 28% 32%
Combined ratio 83% 101% 95%
Commenting on record first half profits, Chief Executive Charles Philipps said:
'We are delighted to be reporting a further quantum leap in profitability. This
begins to show what our business is capable of delivering in a strong market,
and is testimony to the skill base of our team. With further growth in Amlin's
premium income planned for next year and the financing now in place and a
positive outlook for trading conditions, we can look forward to continuing
success'.
Enquiries:
Charles Philipps, Chief Executive, Amlin plc 0207 746 1000
Richard Hextall, Finance Director, Amlin plc 0207 746 1000
David Haggie, Haggie Financial 0207 417 8989 / 07768 332486
Peter Rigby, Haggie Financial 0207 417 8989 / 07803 851426
INTERIM RESULTS STATEMENT
Our task for 2003 is to build on our record 2002 performance and to consolidate
our leading market position. Our interim results reflect a strong momentum in
earnings progression established by successfully growing our market share into
an exceptionally positive underwriting environment.
The Group's profit before tax of £63.3 million (30 June 2002 : £18.2 million)
exceeds our pre-tax profits for the whole of 2002. Our underwriting result
increased 255.4% to £75.7 million (30 June 2002 : £21.3 million) with all
divisions showing a strong underwriting performance, and our investment return
contributed a healthy £18.3 million (30 June 2002 : £15.0 million).
Earnings per share increased by 82.5% to 11.5p (30 June 2002 : 6.3p) and our six
months return on equity was 14.2%.
The Board has declared an interim dividend of 0.85p per share (30 June 2002 :
0.75p) which will be paid on 3 November 2003 to shareholders on the register at
the close of business on 19 September 2003. This reflects our continued
leveraged underwriting position and the restrictions imposed on our free cash by
Lloyd's three year settlement system. Following demand shown for last year's
scrip dividend, we are again offering that alternative to shareholders.
Trading conditions and written premium
We have continued to experience exceptionally good trading conditions in the
year to date even though, as explained in our 2002 annual report, rates in some
areas have peaked and renewal terms on some risks are coming off the heights
that prevailed in the aftermath of the 11 September 2001 tragedy.
Those classes of business which experienced the strongest rate improvements in
late 2001 and early 2002, such as airlines, major commercial property risks,
energy and the war account have experienced pressure on renewal terms but remain
at healthy levels. Most other classes, and in particular our casualty classes,
have continued to experience improving rates. Moreover, good positioning and
strong underwriting has meant that, overall, a rate rise of 6.9% has been
achieved on renewals in the first six months, with a positive movement in each
division as shown in Table 1.
Table 1: Half year 2003 renewal rate changes
Harvey Amlin
Bowring Aviation
Coles AIS Total
Gross premiums written (£m) 384.3 102.9 35.8 95.8 618.8
Renewals % 76.3% 69.4% 83.8% 79.6% 76.1%
New business % 23.7% 30.6% 16.2% 20.4% 23.9%
Rate rise on renewals 4.7% 10.8% 11.0% 10.3% 6.9%
Amlin's leading position in the Lloyd's market, combined with its strong
reputation and skill base, has assisted a policy of maintaining good levels of
risk selectivity while growing premium income. Syndicate 2001 has written £777
million of gross premiums in the first six months, an increase of 21.8% over the
same period in 2002. Amlin's share of this, at £664.9 million, is up 44.2% over
2002, boosted by our increased ownership of the Syndicate.
Underwriting result
The strong underwriting performance across each of our operating divisions is
reflected in the improvement in our combined ratio from 101% to 83% at the 100%
managed syndicate level. A divisional analysis is shown in Table 2.
Table 2: Half year 2003 divisional analysis
Harvey Coles Amlin AIS Total
Bowring Aviation
Net premium earned £224.2m £69.6m £42.5m £95.5m £431.8m
Claims ratio 46% 53% 55% 61% 51%
Expense ratio 29% 35% 115% 27% 32%
Combined ratio 75% 88% 170% 88% 83%
Combined ratio H1 2002 116% 92% 100% 89% 101%
Net earned premiums have increased by 22% overall to £431.8 million, reflecting
the growth in written premiums both last year and in the first six months of
2003, as well as our success in containing the cost of Syndicate 2001's
reinsurance programme. 63% of the premium earned in the first six months was
written in 2002 with most of the balance written in 2003. Amlin plc's share of
net earned premiums was up 32% to £326 million.
Each of the divisions has delivered a strong underwriting performance in the
period. The year to date, like 2002 at the same stage, has seen a relatively
low level of major losses. Moreover, claims development on income earned in
2002 and prior years has been favourable.
The Harvey Bowring combined ratio is an excellent result. The division has
benefited from rapid growth in a strong rating environment for most of its core
lines of business. In addition the low loss incidence to date on property,
property reinsurance and catastrophe reinsurance classes has materially enhanced
profitability. US casualty claims, which were a concern in 2002, now appear to
be trending satisfactorily around the reserving levels established at 31
December 2002. Our estimated ultimate loss from the 11 September 2001 terrorist
atrocities has improved with some settlements falling inside previously reserved
levels. At this stage, we have not taken full credit for this and have
increased our general IBNR reserve by £4 million.
The Coles figures are again strong despite it being commonly acknowledged that
the marine market has been slower to improve its terms than other markets. Most
marine classes are performing well and the division has also benefited from low
loss incidence in the more volatile energy and war accounts.
The airline industry has suffered few major losses in the last 18 months and
Amlin Aviation's numbers reflect this. SARS, however, reduced premium income
due from some airlines and the US government's formation of a mutual to take on
US airlines' terrorism risk also resulted in premium repayments. Even with
this reduced income the claims ratio was still low. As normal, given that
renewal income is heavily weighted towards the fourth quarter whilst expenses
are evenly spread throughout the year, the first half combined ratio is not
reflective of performance. In the first half of 2003 this has been exacerbated
by the repayment of premiums.
Amlin Insurance Services' combined ratio of below 90% is a highly commendable
performance from a business focused on UK attritional classes. The commercial
motor account has continued to attract modest rate improvements ahead of claims
inflation. However, the significant growth in new business which we have
experienced in the last three years has tailed off as the division has retained
a focus on profitability rather than market share. The division's liability
account, principally UK employers' liability and professional indemnity where
conditions have strengthened markedly, has grown to balance this.
For the last three years we have reported an improving trend of first half
combined ratios:
2000 110%
2001 105%
2002 101%
2003 83%
In this phase of the cycle we would typically expect our full year combined
ratio to be better than the half-year ratio. This is because we have grown our
gross premium income again in 2003, but have earned only 11% of net premium at
this stage, because we expense the cost of our reinsurance programme evenly over
the year. Also, Amlin Aviation's expense ratio is higher in the first half for
the reasons explained above.
However, the 83% ratio is heavily influenced by premium earned during 2003 but
written in 2002 on which the incurred loss ratios on property and property
reinsurance have been extraordinarily low. We believe that our reserves for
2002 remain cautious. Excepting further improvement in these anticipated
claims, the principal contributor to the second half will be premium income
written in 2003. While this is being written at very good rates, a continued
low level of loss incidence would be required to improve on the half year
combined ratio.
Investment return
The Group's total investment return increased by 22% to £18.3 million (30 June
2002: £15 million), notwithstanding the low level of interest rates and the vast
majority of our funds being invested in cash and bonds.
The Syndicate bond portfolio return marginally under performed our long term
expectations but given the volatility of bonds, and a decision to adopt a
shorter duration portfolio than our long term benchmark, the performance was
satisfactory. We believe that bond markets will face a difficult period during
the rest of 2003 as interest rate expectations begin to rise. The continued
growth in syndicate assets, with Amlin's share increasing by 21.9% to £652.7
million, should help to counteract a low return.
Our corporate portfolio, valued at £229.6 million, has been adjusted to reflect
our cautious view on bonds. The bond content, where the average bond duration
was 7 years and on which we earned excellent returns in 2002, was sold in March
and July with the proceeds invested in equities and cash. We increased our
benchmark weighting in equities to 25% of the corporate portfolio and to date
have invested 15% in equities. We were pleased to appoint Taube Hudson Stonex
to manage an active global portfolio for us.
During the period we have strengthened our resources dedicated to managing our
asset allocations with the appointment of a Chief Investment Officer and
formation of the Investment Advisory Panel. We believe these changes will allow
us to improve our long term returns from an increasingly significant asset base.
Outlook and 2004 underwriting
Over the last eighteen months, Lloyd's position in the global insurance market
has improved enormously, with good new business being attracted to the market as
so many other parts of the industry are in disarray.
Amlin's emergence as the leading independent Lloyd's business places us in an
exceptionally good position in trading conditions that continue to be very
favourable and where clients are becoming increasingly selective. We anticipate
continued good conditions into 2004 albeit that increased levels of competition
are bound to occur in some classes.
Lloyd's new Franchise regime is showing signs of stamping on poor practice and
this, together with a greater focus on technical pricing by many underwriting
firms, continued turmoil in the industry and a low interest rate environment,
could well help a healthy market to endure for longer than previously
anticipated.
Against this background we expect to maintain Syndicate 2001's regulatory
capacity at around £1.0 billion for 2004, with Amlin taking up the £138 million
of capacity over which third parties have a limited tenancy arrangement for the
current year. To enable us to support this additional capacity a group of banks
led by Lloyds TSB has recently signed a new two year Letter of Credit facility
for £130 million. This will replace the existing facility of £70 million when
we commit our Funds at Lloyd's for 2004. We appreciate the continued support of
our banking partners.
With our financial strength, our leading position at Lloyd's, our proven
underwriting performance and strong market conditions, Amlin can look forward to
the prospect of continued good performance next year, following upon what we
expect to be a strong outcome for 2003.
Approved by the Board of Directors
3 September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
Notes £m £m £m
Gross premiums written 664.9 461.1 717.1
Net premiums written 541.5 365.6 573.0
Earned premiums, net of reinsurance 326.5 247.3 494.1
Allocated investment return transferred from
the non-technical account 19.7 13.2 31.1
Claims incurred, net of reinsurance (168.8) (176.7) (308.5)
Net operating expenses (101.7) (62.5) (158.6)
Balance on the technical account 75.7 21.3 58.1
Investment return 5 18.3 15.0 42.5
Allocated investment return included
within the technical account (19.7) (13.2) (31.1)
74.3 23.1 69.5
Other income 2.7 0.7 2.0
Other charges (13.7) (5.6) (16.1)
Operating profit 63.3 18.2 55.4
Comprising:
Operating profit based
upon longer term investment return 64.8 17.0 45.6
Short term fluctuations in investment return (1.5) 1.2 9.8
Profit on ordinary activities before taxation 2 63.3 18.2 55.4
Taxation on profit on ordinary activities 7 (19.3) (2.3) (11.2)
Profit on ordinary activities after taxation 44.0 15.9 44.2
Equity dividends 8 (3.3) (2.9) (7.6)
Retained profit for the period 40.7 13.0 36.6
Earnings per ordinary share
- basic 9 11.5p 6.3p 14.1p
- diluted 9 11.4p 6.3p 14.1p
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 has been presented.
CONSOLIDATED BALANCE SHEET
at 30 June 2003
30 June 2003 30 June 2002 31 Dec 2002
(unaudited) (unaudited) (audited)
Assets Notes £m £m £m
Intangible assets 58.6 14.6 60.1
Investments 10 882.3 589.3 762.3
Reinsurers' share of technical provisions
Provision for unearned premiums 13 83.7 50.4 34.0
Claims outstanding 13 280.8 344.0 321.1
Debtors 524.1 396.0 432.3
Other assets
Cash at bank and in hand 45.5 72.4 28.5
Tangible assets 7.3 10.7 9.0
Own shares 2.6 2.8 2.8
Prepayments and accrued income 144.1 98.8 82.2
Total assets 2,029.0 1,579.0 1,732.3
30 June 2003 30 June 2002 31 Dec 2002
(unaudited) (unaudited) (audited)
Liabilities Notes £m £m £m
Equity shareholders' funds 12 351.8 193.4 309.6
Technical provisions
Provision for unearned premiums 13 614.4 425.3 354.8
Claims outstanding 13 927.8 896.7 922.0
Provisions for other risks and charges 2.5 1.0 2.9
Creditors 115.8 58.0 133.7
Creditors: amounts falling due after more than one year 0.7 1.1 0.7
Accruals and deferred income 16.0 3.5 8.6
Total liabilities 2,029.0 1,579.0 1,732.3
Net assets per ordinary share
- basic 9 91.8p 74.0p 81.1p
- tangible 9 76.5p 68.3p 65.4p
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2003
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
Notes £m £m £m
Net cash inflow from 15 140.9 127.3 209.1
operating activities
Net cash outflow from (0.2) (0.3) (0.5)
servicing of finance
Corporation tax - - 0.9
repayments received
Net purchases of (0.3) (0.3) (46.9)
tangible and intangible
assets
Equity dividends paid (3.6) - (2.9)
Net cash (outflow) (0.3) 43.2 134.7
inflow from financing
activities
Net cash flows 16 136.5 169.9 294.4
Cash flows were
invested as follows:
Increase in cash 14.3 43.0 7.7
holdings
Increase in deposits 2.7 11.0 2.4
17.0 54.0 10.1
Net purchases of 119.5 115.9 284.3
investments
Net investment of cash 136.5 169.9 294.4
flows
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 2002, 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, either directly, or 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 at 30 June 2003 and 30 June
2002 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 2003 and June 2002 and the
audited balance sheet at 31 December 2002 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. The statement for the
six month period to 30 June 2002 was reviewed by Deloitte & Touche. The report
for the six months to 30 June 2003 has been reviewed by the Company's auditors,
Deloitte & Touche LLP, and their report for the six months to 30 June 2003 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 2002, adjusted as described above,
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 31 December 2002 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
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Profit before taxation
Underwriting and investment 66.5 18.9 57.7
Managing agencies (3.2) (0.7) (2.3)
Total 63.3 18.2 55.4
Net assets
Underwriting and investment 347.9 189.7 307.1
Managing agencies 3.9 3.7 2.5
Total 351.8 193.4 309.6
In the profit and loss account, the income and costs of the managing agency are
reported within 'other income' and 'other charges'. All business is transacted
through the Lloyd's of London market in the United Kingdom.
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
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Gross premiums written 777.0 637.7 988.3
Net premiums written 633.3 503.6 793.1
Earned premiums, net of 431.8 353.1 700.6
reinsurance
Claims incurred, net of (220.8) (258.1) (438.5)
reinsurance
Claims ratio (%) 51% 73% 63%
Brokerage (158.0) (118.0) (192.2)
Syndicate expenses (34.8) (19.2) (46.3)
Lloyd's charges (3.9) (3.1) (11.2)
Increase in deferred 59.9 47.0 24.7
acquisition costs
Net operating expenses (136.8) (93.3) (225.0)
Expense ratio (%) 32% 28% 32%
Combined ratio (%) 83% 101% 95%
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. Greater uncertainty exists over the loss estimates than would
normally be the case. The table below shows the comparison between the forecast
losses for Amlin's managed syndicates as reported in the 30 June 2002 interim
report and 31 December 2002 year end report and accounts, and the current
forecast position.
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
$m $m $m
Total gross loss 596.9 638.3 611.7
Reinsurance recoveries (net of bad debt) (454.1) (478.1) (454.3)
Total net loss 142.8 160.2 157.4
Amlin Group share 99.5 108.9 105.6
Amlin Group share (converted sterling £60.3 £71.7 £65.6
millions)
The basis for the calculation of the loss estimates is unchanged from the
methodology described in the 2002 Annual Report and the key assumptions remain
unchanged.
The estimates, and the assumptions and methodology from which they are derived,
do not, and may not be taken to, constitute an admission that the Group is
liable either in respect of a particular class of business or under a particular
contract of insurance or reinsurance.
The estimated loss position has improved since 31 December 2002, through
settlement of losses within outstanding reserves. A general IBNR provision has
been retained out of these settlements. This general provisional is not
included in the figures within the table.
At 30 June 2003 the total amount of the gross loss paid amounted to $279
million. Of the reinsurance recoveries at 30 June 2003, $200 million had been
received. Of the remaining $254 million, letters of credit and outstanding
claims advances totalling $68 million had been received securing the debt. Of
the balance of un-collateralised debt, 95.2% is rated by Standard & Poor's (or
equivalent rating agency) as A grade debt or higher.
A number of insurance companies and Lloyd's syndicates, including syndicate
2001, are currently in dispute with the leaseholder of the World Trade Center,
Silverstein Holdings, as to whether the terrorist attack and destruction of the
buildings constitutes one or two insured occurrences. Amlin believes that the
attacks on the World Trade Center are one occurrence. Legal guidance that
supports this belief has been obtained. In the event that the World Trade
Center losses were judged to be two occurrences and two total losses to the
excess layers underwritten, it is estimated that the Group's loss could increase
by up to approximately £22 million. However, given the legal advice received
and the high excess point of the layer on which Syndicate 2001 participated,
this is considered to be unlikely.
5 Investment return
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Income from investments 18.8 17.0 40.2
Gains/(losses) on 2.0 (2.5) 0.3
realisation of investments
Unrealised (losses)/gains on (1.8) 1.1 3.2
investments
Investment expenses and (0.7) (0.6) (1.2)
charges
Total investment return 18.3 15.0 42.5
In respect of equity investments and fixed interest securities the longer term
rate of return has been determined by having regard to the Group's historical
and expected returns and current portfolio strategy. The rates of return are:
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
UK equities 7.0% 7.0% 7.0%
Fixed interest securities 5.5% 5.5% 5.5%
These returns are applied to the average, over the period, of the investments
attributable to the shareholders and insurance technical provisions of the
aligned syndicate participations. The attributable shareholders' funds are
based on the Funds at Lloyd's which represent the estimated risk based capital
supporting the insurance business.
The actual return on investments since 1 January 1998, compared with the
aggregate longer term return over the same period, is set out below. All
figures are gross of expenses.
1 July 1998 to 1 June 1997 to 1 Jan 1998 to
30 June 2003 30 June 2002 31 Dec 2002
(unaudited) (unaudited) (unaudited)
£m £m £m
Actual return attributable 124.5 92.0 117.8
to the technical account
Longer term return 144.4 119.0 136.2
attributable to the
technical account
Effect of short term (19.9) (27.0) (18.4)
fluctuations over the period
6 Principal exchange rates
The principal exchange rates used in the financial statements are:
Six months 2003 Six months 2002 Twelve months 2002
Period Period Period Period Period Period
average rate end rate average rate end rate average rate end rate
US dollar 1.61 1.65 1.45 1.52 1.51 1.61
Euro 1.46 1.44 1.61 1.54 1.59 1.53
Canadian dollar 2.34 2.24 2.27 2.32 2.36 2.54
7 Taxation on profit on ordinary activities
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
UK corporation tax - - 3.0
Overseas taxation - - 0.1
Deferred taxation 19.3 2.3 8.1
19.3 2.3 11.2
8 Equity dividends
Six months Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Interim dividend of 0.85 pence (2002: 0.75 pence) per share 3.3 2.9 7.6
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 2003 of £44.0 million (six months ended 30 June 2002:
£15.9 million; twelve months ended 31 December 2002: £44.2 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
2003 2002 2002
(unaudited) (unaudited) (audited)
Profit for the period £44.0m £15.9m £44.2m
Weighted average number 383.0m 250.4m 312.4m
of shares in issue
Dilutive shares to be 4.6m 0.8m 1.3m
issued
Adjusted average number 387.6m 251.2m 313.7m
of shares in issue
Basic earnings per 11.5p 6.3p 14.1p
share
Diluted earnings per 11.4p 6.3p 14.1p
share
Basic and tangible net assets per share are as follows:
30 June 2003 30 June 2002 31 Dec 2002
(unaudited) (unaudited) (audited)
Net assets £351.8m £193.4m £309.6m
Adjustment for intangible net assets £(58.6m) £(14.6m) £(60.1m)
Tangible net assets £293.2m £178.8m £249.5m
Number of shares in issue at end of period 389.7m 268.1m 388.3m
Adjustment for ESOT shares (5.6m) (6.2m) (6.1m)
Basic number of shares after ESOT adjustment 384.1m 261.9m 382.2m
Basic net assets per share 91.8p 74.0p 81.1p
Tangible net assets per share 76.5p 68.3p 65.4p
10 Investments
At valuation
30 June 2003 30 June 2002 31 Dec 2002
(unaudited) (unaudited) (audited)
£m £m £m
Shares and other 10.4 0.4 0.7
variable yield
securities
Debt securities and 640.1 440.1 559.8
other fixed income
securities
Participation in 120.0 114.6 134.3
investment pools
Deposits with credit 74.0 - 49.0
institutions
Overseas deposits 32.5 25.1 26.2
Other 5.3 9.1 3.9
882.3 589.3 773.9
In Group owned 229.6 183.5 227.0
companies
In managed syndicates 652.7 405.8 535.3
882.3 589.3 762.3
In non aligned - - 11.6
syndicates
882.3 589.3 773.9
Breakdown of debt 30 June 2003 30 June 2002 31 Dec 2002
securities by credit (unaudited) (unaudited) (audited)
rating % % %
Government / Government 60.5 66.0 59.1
Agency
AAA/Aaa 16.4 16.3 20.2
AA/Aa 9.9 9.4 9.3
A 11.8 6.9 10.0
BBB/Baa 1.4 1.4 1.4
100.0 100.0 100.0
As explained in note 17, some of the Group investments are charged to Lloyd's to
support its underwriting activities.
11 Share capital
Authorised ordinary shares of 25p each Number £m
At 1 January 2003 and 30 June 2003 562,000,000 140.5
Allotted, called up and fully paid: Number £m
At 1 January 2003 388,323,251 97.1
Share options exercised 376,013 0.1
Scrip dividend shares issued 1,018,449 0.3
At 30 June 2003 389,717,713 97.5
The above shares issued in respect of exercises of options were issued on
various dates at an average price of 82.19p per share. The above scrip dividend
shares were issued on 6 June 2003 at 112.17p per share.
12 Reconciliation of movements in equity shareholders' funds
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Profit attributable to 44.0 15.9 44.2
shareholders
Less: dividends (3.3) (2.9) (7.6)
Retained profit for the 40.7 13.0 36.6
period
Issue of capital 1.5 43.2 136.2
Shares to be issued - - (0.4)
Net increase to equity 42.2 56.2 172.4
shareholders' funds
Equity shareholders' 309.6 137.2 137.2
funds at 1 January
Equity shareholders' 351.8 193.4 309.6
funds at 30 June/31
December
13 Technical provisions
Provision for
unearned Claims
premiums outstanding Total
£m £m £m
Gross
At 1 January 2003 (audited) 354.8 957.4 1,312.2
Adjustment for non-aligned balances - (35.4) (35.4)
At 1 January 2003 (as adjusted) 354.8 922.0 1,276.8
Exchange adjustments (4.1) (11.3) (15.4)
Movement in provisions 263.7 17.1 280.8
At 30 June 2003 (unaudited) 614.4 927.8 1,542.2
Reinsurance amount
At 1 January 2003 (audited) (34.0) (337.4) (371.4)
Adjustment for non-aligned balances - 16.3 16.3
At 1 January 2003 (as adjusted) (34.0) (321.1) (355.1)
Exchange adjustments 0.4 4.6 5.0
Movement in provisions (50.1) 35.7 (14.4)
At 30 June 2003 (unaudited) (83.7) (280.8) (364.5)
Net
At 30 June 2003 (unaudited) 530.7 647.0 1,177.7
At 1 January 2003 (as adjusted) 320.8 600.9 921.7
At 1 January 2003 (audited) 320.8 620.0 940.8
At 30 June 2002 (unaudited) 374.9 552.7 927.6
14 Deferred tax
Unrelieved
trading losses
Other
Underwriting Provisions carried timing
results for losses forward differences Total
£m £m £m £m £m
At 1 January 2003 (audited) 5.1 0.5 11.2 1.6 18.4
Movements in the period (26.9) 0.3 5.4 1.9 (19.3)
At 30 June 2003 (unaudited) (21.8) 0.8 16.6 3.5 (0.9)
At 30 June 2002 (unaudited) 18.5 - 9.2 0.6 28.3
15 Reconciliation of profit before taxation to net cash inflow from operating
activities
Six months Six months Twelve months
2003 2002 2002
(unaudited) (unaudited) (audited)
£m £m £m
Profit on ordinary activities before taxation 63.3 18.2 55.4
Net movement on Premium Trust Funds for
non-aligned participations 1.1 0.8 3.7
Depreciation charge 2.0 2.1 4.4
Syndicate capacity amortisation charge 1.5 0.4 0.9
Realised gains less (losses) on investments (2.0) 2.5 (0.3)
Unrealised losses (gains) on investments 1.8 (2.0) (7.6)
Decrease in debtors 30.4 58.9 15.7
Increase in prepayments and accrued income (2.2) (3.8) (4.1)
Increase in insurance debtors, prepayments and
accrued income (198.6) (64.6) (57.3)
Increase in technical provisions 265.4 143.7 98.4
(Increase) decrease in reinsurers' share of technical
provisions (9.5) 14.7 54.1
(Decrease) increase in provisions for other risks and charges (0.4) - 1.9
(Decrease) increase in insurance creditors, accruals
and deferred income (19.5) (56.5) 45.5
Increase (decrease) in other creditors relating to
operating activities 0.1 14.1 (5.4)
Increase (decrease) in accruals and deferred income 7.3 (1.5) 3.3
Interest expense 0.2 0.3 0.5
Net cash inflow 140.9 127.3 209.1
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.
16 Movements in cash, portfolio investments and financing
Changes to
At 1 January market value At 30 June
2003 Cash flow and currencies 2003
(audited) (unaudited) (unaudited) (unaudited)
£m £m £m £m
Cash at bank and in hand 28.5 17.0 - 45.5
Shares and other variable yield securities 0.7 9.6 0.1 10.4
Debt and other fixed income securities 682.7 77.0 0.4 760.1
Deposits with credit institutions 78.8 32.9 0.1 111.8
790.7 136.5 0.6 927.8
Loans due within one year (9.8) 0.6 - (9.2)
Loans due after one year (0.6) - - (0.6)
(10.4) 0.6 - (9.8)
Total 780.3 137.1 0.6 918.0
17 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 £209.1 million (30 June
2002: £162.0 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 £70.0 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 12.7% shareholder
State Farm Mutual Automobile Insurance Company, and £30.7 million of the
sterling LOCs were deposited at Lloyd's for the first time in November 2002 to
support increased underwriting for the 2003 year of account.
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 2003
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the consolidated profit and
loss account, the consolidated balance sheets, the consolidated cash flow
statement and related notes 1 to 17. 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 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.
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 2003.
Deloitte & Touche LLP
Chartered Accountants
London
3 September 2003
The additional information consisting of the shareholder information and
directors and advisers has been prepared from the accounting records of the
company. While it does not form part of the interim statement, it should be
read in conjunction with them and the responsibilities section of the
independent review report thereon.
SHAREHOLDER INFORMATION
Financial calendar
The Company's forthcoming financial calendar is expected to be as follows:
2003 3 November Payment of 2003 interim dividend
2004 March Announcement of results for the year ending 31 December 2003
April Publication of 2003 Annual Report
May Annual General Meeting
June/July Payment of 2003 final dividend
Shareholders' dealings
The Company's stockbroker, Hoare Govett Limited, offers a low-cost postal
dealing service, which enables 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 £10. 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 1005) or direct from Hoare Govett Limited, 250
Bishopsgate, London EC2M 4AA (Tel 020 7678 8300).
Shareholder enquiries, Registrar and website
Please call our Investor Relations Unit on 020 7746 1111 or, for enquiries
concerning share registration, call our Registrar, Computershare Investor
Services PLC, on 0870 702 0000. The Registrar's address is PO Box 82, The
Pavilions, Bridgwater Road, Bristol BS99 7NH and it also maintains a website at
www.computershare.com.
Amlin's own corporate website is at www.amlin.com.
DIRECTORS AND ADVISERS
Directors Registered Office
Roger Taylor* (Chairman) St Helen's
Brian Carpenter 1 Undershaft
Richard Hextall (Finance Director) London EC3A 8ND
Tony Holt
Roger Joslin* Auditors
Thomas Kemp* Deloitte & Touche LLP
John Kennedy* Stonecutter Court
Ramanam Mylvaganam* 1 Stonecutter Street
Charles Philipps (Chief Executive) London EC4A 4TR
John Sanders*
John Stace (Vice Chairman) Investment Bankers
Lord Stewartby* (Deputy Chairman) Lexicon Partners Limited
No 1 Cornhill
* non-executive London EC3V 3ND
Audit Committee Stockbrokers
Lord Stewartby (Chairman) Hoare Govett Limited
John Kennedy 250 Bishopsgate
Ramanam Mylvaganam London EC2M 4AA
John Sanders
Corporate Lawyers
Remuneration Committee Linklaters
John Kennedy (Chairman) One Silk Street
Thomas Kemp London EC2Y 8HQ
John Sanders
Roger Taylor Principal Bankers
Lloyds TSB Bank plc
Nomination Committee 39 Threadneedle Street
Roger Taylor (Chairman) London EC2R 8AU
Roger Joslin
Charles Philipps Registrar
John Stace Computershare Investor
Services PLC
Lord Stewartby PO Box 82
The Pavilions
Secretary Bridgwater Road
Charles Pender Bristol BS99 7NH
Amlin plc T 020 7746 1000
St Helen's, 1 Undershaft F 020 7746 1696
London EC3A 8ND www.amlin.com
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