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 Â£m Â£m Â£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 Â£m account Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£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 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£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 Â£1m. 6. Insurance claims and loss adjustment expenses -------------------------- ----------- ---------- --------- Six months Six months 12 months 2006 2005 2005 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m (restated) (restated) Â£m Â£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 Â£m (restated) (restated) Â£m Â£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 Â£m Â£m Â£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 Â£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 Â£94.9m Â£100.0m Â£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 Â£817.1m Â£538.4m Â£784.8m Adjustments for intangible assets Â£(66.0m) Â£(66.0m) Â£(66.0m) -------------------------- ----------- ------------ ------------ Tangible net assets Â£751.0m Â£472.4m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£m Â£m Â£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 Â£m Â£m Â£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 Â£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 Â£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 Â£m Â£m Â£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 Â£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: â€¢ A Â£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 Â£150 million of the facility has been utilised to date and of this Â£100 million was repaid in June 2006, Â£36 million in July 2006 and the balance of Â£14 million was repaid in August 2006. â€¢ A Â£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. â€¢ 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. â€¢ A Â£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) Â£m Â£m Â£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 Â£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 Â£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 The company news service from the London Stock Exchange

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