Preliminary Results

RNS Number : 2907B

Amlin PLC

03 March 2014

 



AMLIN PLC

PRESS RELEASE

For immediate release

3 March 2014

Preliminary results for the year
ended 31 December 2013

Strong financial performance delivers return on equity of 19.8%

Highlights

·      Profit before tax up 23.3% at £325.7 million (2012: £264.2 million)

·      Return on equity of 19.8% (2012: 17.4%), above our estimated cost of capital of 8.5%

·      Combined ratio of 86% (2012: 89%)

·      Solid underwriting performance, with limited major catastrophe activity

·      Strong performance from Amlin London and Amlin Bermuda, with continued improvement from Amlin Europe

·      Frequency of European catastrophe activity impacts Amlin Re Europe

·      Average renewal rate down 2.1% at January 2014, with catastrophe rates decreased by an average of 8.4%

·      Excellent investment return of £160.4 million, equivalent to 3.6% on average invested assets
(2012: £165.3 million, 4.1%)

·      Dividend declared increased by 8.3% to 26.0 pence per share (2012: 24.0 pence per share)

·      Net tangible assets per share of 288.7 pence (2012: 259.8 pence)

Charles Philipps, Chief Executive, commented as follows:

"Our 2013 result is a testament to the strength of our talent and reinforces our capability and potential. With a number of businesses improving their performance, and our actions to drive profitability forward, we are well placed to continue to deliver good returns for shareholders."

Enquiries:
Charles Philipps, Chief Executive, Amlin plc	0207 746 1000
Richard Hextall, Group Finance & Operations Director, Amlin plc	0207 746 1000
Analysts and Investors
Julianne Jessup, Head of Investor Relations, Amlin plc	0207 746 1961
Media
Ed Berry, FTI Consulting	0207 269 7297

Financial highlights¹

	2013 £m	2012 £m	2011 £m	2010 £m	2009 £m
Gross written premium	2,467.4	2,405.6	2,304.1	2,172.5	1,543.9
Net written premium	2,107.4	2,058.6	2,013.2	1,910.3	1,332.6
Net earned premium	2,077.4	1,970.5	1,927.4	1,748.1	1,317.3
Profit attributable to underwriting	283.1	207.1	(146.0)	185.6	355.2
Investment return	160.4	165.3	40.5	175.0	207.5
Other costs2	(117.8)	(108.2)	(88.3)	(101.4)	(53.6)
Result before tax	325.7	264.2	(193.8)	259.2	509.1
Return on equity	19.8%	17.4%	(8.6)%	13.9%	37.0%
Net assets	1,678.6	1,497.7	1,420.4	1,729.9	1,593.1
Net tangible assets	1,439.5	1,286.3	1,201.5	1,545.4	1,430.3
Per share amounts (in pence)
Earnings	60.0	50.1	(30.3)	45.0	94.1
Net assets	336.7	302.5	287.2	350.6	322.6
Net tangible assets	288.7	259.8	243.0	313.2	289.6
Dividend under IFRS3	24.3	23.3	23.0	20.7	17.5
Dividends declared for the calendar year3	26.0	24.0	23.0	23.0	20.0
Group operating ratios4
Claims ratio	52%	57%	78%	60%	43%
Expense ratio	34%	32%	30%	29%	30%
Combined ratio	86%	89%	108%	89%	73%

Source: Amlin

Note:

¹ The financial highlights are presented on the basis of management information provided to the Group Management Committee. The reconciliation between this information and the International Financial Reporting Standards (IFRS) consolidated statement of profit or loss is included in note 5c to the consolidated financial statements.

²Other costs comprise other non-underwriting expenses, finance costs, other operating income and share of profit or loss after tax of associates.

³All per share dividends are the actual dividends for each share in issue at the time.

⁴Claims ratio is net claims incurred divided by net earned premium for the year. Expense ratio is underwriting expense incurred divided by net earned premium for the year. The expense ratio does not include expenses that have not been attributed to underwriting, including employee incentive costs and finance costs. Combined ratio is the total of the claims and expense ratios.

Comparative data in the financial highlights above and the Preliminary Results Statement have been restated for changes in the Group's accounting policies following the adoption of new or revised IFRSs. These changes and the impact of their retrospective application on previously reported information are set out in note 1 to the consolidated financial statements.

Chairman's statement

Our results and dividend

Amlin's result for 2013 reflects a good performance across much of our business, with another strong underwriting result from our Amlin London and Bermudian businesses and continued improvement from Amlin Europe.

Major catastrophe activity in the year was relatively benign. However, European flooding in May and June together with numerous small catastrophe events, including hail in France and windstorms in October and December across the UK and Northern Europe, led to a small loss in Amlin Re Europe and impacted performance in the UK.

Amlin UK continued to benefit from the upward trend in UK commercial market pricing, particularly fleet motor. Amlin London and Amlin Bermuda benefited from peak or near peak catastrophe reinsurance rates at January 2013 renewals, although US catastrophe pricing came under significant pressure as the year progressed.

Whilst catastrophe losses resulted in a small loss in Amlin Re Europe, we continued to grow its portfolio, territorially and by client, and we are confident in the prospects for this business.

Amlin Europe's contribution to overall profit increased again, as work to improve the marine portfolio, implement Amlin business practices and integrate the business with the wider Group bore fruit.

In continuing volatile investment markets, another strong investment return of 3.6% contributed to our overall growth in pre-tax profit to £325.7 million, with a return on equity of 19.8%. Amlin's balance sheet is strong and capital headroom increased to £573.9 million above management's assessed capital needs.

We remain committed to managing our capital efficiently in the best interests of shareholders. To this end, we regularly review the level of capital relating to opportunities and constraints offered by the trading environment and the requirements of Amlin's strategic objectives.  With the strength of our market positions, particularly in reinsurance and marine, we believe that there are still good opportunities to grow the business while generating a cross cycle return of at least 15%.

The Board has proposed an increase of 10.3% in the final dividend to 18.2 pence per share (2012: 16.5p). The final dividend will be paid on 29 May 2014 (subject to shareholder approval) to shareholders on the register on 22 April 2014.

Building our strategy

During 2013, we focused on positioning Amlin for the future so the Group can keep delivering long-term value to our shareholders, clients, employees and other stakeholders. Notably, the Board and senior management reviewed Amlin's strategy and it confirmed that while remaining focused on our Vision of being the benchmark for quality in our markets, we will place client intimacy higher up the agenda as a means of driving profitable growth, will seek to increase synergies across the Group, particularly between Leadenhall Capital Partners and our traditional reinsurance businesses, and will look to achieve meaningful efficiencies through an organisational review which takes account of the growth of the Group in recent years.

We continued investing in systems and resources to enhance efficiency. These included Nexus: a major project to improve financial processes, systems and reporting across the Group. Nexus will enable us to produce high-quality business information quickly, providing enhanced analytical capabilities, and meeting evolving business and regulatory reporting requirements.

People are our key asset and, during the year, we developed our Talent Management strategy. We are continuing to invest in high-calibre people across a range of disciplines. This will ensure we have the resource to support a larger and more diverse business.

We also reviewed Group-wide remuneration during the year. We intend to make remuneration structures more comparable across the business and enable greater staff mobility within the Group.

Outlook

Our marketplace is changing rapidly, particularly for London specialty insurance and for global catastrophe reinsurance. Our scale in our chosen markets, as well as our diverse portfolio and investment, particularly in Leadenhall Capital Partners, position us well to meet these challenges and exploit opportunities.

The Board, management team and employees are united in one goal: to position our business for continued success.

Governance and the Board

In 2012, an external review of the Board's performance delivered a broadly positive outcome. The review also identified areas for development, in particular, succession planning, which was reviewed again in 2013.

During 2013, the Remuneration Committee has been reviewing the way we report our Directors' remuneration and has recently consulted with our major shareholders on our policy.

Marty Feinstein was appointed Senior Independent Director following Nigel Buchanan's retirement. I am pleased to report that Marty is performing exceptionally well in his new role.

As previously reported, Brian Carpenter will be retiring during 2014. Brian has been a Board member since 2000 and his extensive market knowledge and underwriting experience have been invaluable as the Group has developed. His legacy as Underwriting Director of Amlin UK, reflected in the business' long-term growth and excellent performance, speaks for itself. I wish him well in his retirement.

Sir Alan Collins, an independent Non-Executive Director, has also announced that he wishes to retire at the AGM in May 2014. I would like to thank Sir Alan for his insight and the experience he has shared with the Board and to wish him well in his future Non-Executive career.

Richard Davey

Chairman

Chief Executive's review

The year at a glance

In 2013, Amlin achieved a strong financial performance, with a solid underwriting result and an outstanding investment return in difficult markets. At 19.8%, our return on equity (ROE) far exceeded our cross-cycle target of at least 15%. Our ten year weighted average ROE of 18.0% places us amongst the top performers in the industry globally.

Amlin Europe's continued progress was particularly pleasing. The business achieved a combined ratio of 95% for the year, while in May 2013 Fitch Ratings recognised its improving risk profile, upgrading its rating from A (Positive) to A+ (Stable).

Overcoming trading challenges

The year was relatively benign in terms of major catastrophes although there was a high frequency of smaller events, particularly in Europe. However, rapid change in some of our key markets brought fresh challenges, in particular, alternative or 'convergence' capital continued to flow into the reinsurance market. This capital is sourced from pension funds and institutional investors, attracted by relatively uncorrelated risk at good rates of return.

The major global brokers increasingly consolidated capacity by channelling premium to fewer, larger carriers through placement platforms and exclusive agreements with selected insurers. This was particularly evident in the London subscription market.

At Amlin, we are well placed to keep meeting these challenges, thanks to our strong franchise and lead market position. We have a particularly robust position in reinsurance. Amlin is a preferred counterparty for all three global reinsurance brokers, and has a lead position on more than 50% of our London-market business. Amlin Re Europe, which was established in 2010, has further broadened the scope of our reinsurance offering in Continental Europe. Reinsurance is increasingly becoming a two-tier market and Amlin is benefiting from its position in the premier tier.

With Leadenhall Capital Partners, we have a valuable and growing foothold in the 'convergence' capital space. Leadenhall has significantly grown its assets under management in 2013 by £437.7 million to £966.0 million. The complementary strengths of Leadenhall and our traditional reinsurance underwriting have enabled us to provide a unique client proposition. We can now offer key clients substantially more capacity in catastrophe reinsurance and other classes, such as terrorism insurance.

Amlin is also a major underwriter of marine insurance. The marine and aviation practice wrote gross written premium of £504.6 million for the 2013 underwriting year with Amlin leading more than 40% of its London marine portfolio.

Diversifying distribution has been a key strategy for some years. In this time, we have focused on building relationships with a wide range of brokers. So while we have close strategic relationships with the 'big three' global brokers, others account for over 70% of our insurance book. Equally important, the largest broker is different for each of our insurance businesses.

As leader of more than 50% of our London market insurance business, we are in a strong position to benefit from the consolidating subscription market. We have built long-term client relationships on excellent service standards and financial strength, which are reflected in high Group retention ratios, averaging 86% over the past five years.

Setting out our strategy

While Amlin is in a strong current position, we continue to focus on ensuring our long-term sustainability. We recognise that when choosing counterparties, clients increasingly seek the comfort of size. So we must grow profitably at a rate that maintains our relevance to clients and brokers. To achieve these goals, in 2013, we undertook a thorough review of Amlin's strategy and objectives.

As a result of this review, our Vision to become the reference point for quality remains. However, we have identified a number of priorities to help enhance organic growth in both developed and developing markets. In particular, we will invest in more effective marketing, focussed on achieving client intimacy.

Achieving intimacy with clients will be at the heart of our approach and differentiate us from our competitors. We will achieve it by building on our world-class customer service and expertise, underpinned by operational excellence. Our people's skills will also be crucial. We will continue investing in our people by proactively managing talent and performance, while creating an environment in which we can deploy people's skills more effectively across the Group. We are currently reviewing our organisational design and employee incentive arrangements to increase their alignment with our strategy.

We will continue developing the synergies between Leadenhall Capital Partners and our reinsurance business. We currently have a 40% partnership share and we expect to increase this either partly or fully, during 2014. In the longer term, our strategic goal for Leadenhall is to be one of the top-three global fund managers in insurance-linked securities. Over time, we expect that Leadenhall's growth, and its ability to supplement Amlin's reinsurance capacity, will help us grow our share of the global reinsurance market.

Selective acquisitions remain an important aspect of our strategy. In 2013, we bought RaetsMarine, one of the world's leading providers of fixed premium P&I liability insurance, to further enhance our global marine offering.

Our ability to execute acquisitions has been enhanced through the development of the Group Underwriting function and integration management resource.

We also reviewed the Amlin brand and how we present ourselves to clients and other stakeholders. To align our brand with Amlin's core values and future strategy, we have adopted 'Continuity' as our central promise to customers, brokers, investors and employees.

Progressing through our people

In 2013, we progressed a range of strategic initiatives regarding our people. These are summarised in more detail in our Annual Report.

The quality and commitment of our people drives our continued success. I am grateful for their unstinting enthusiasm and hard work through a period of considerable change and development. It is particularly pleasing to see excellent cooperation across geographies and divisions within the Practice Boards and other cross-discipline working groups.

Brian Carpenter, Underwriting Director of Amlin UK, has decided to retire during 2014. Under his leadership, Amlin UK's gross written premium has more than doubled to £336.3 million and the business has consistently outperformed its UK peers on its cross-cycle combined ratio and risk-adjusted return on capital. He has built a team in Amlin UK which is capable of continuing its success. I am grateful to Brian for his invaluable contribution to developing Amlin UK and the Group. I wish him well in his retirement.

Looking forward to 2014

We are experiencing rapid change in some of our key markets, notably reinsurance. This presents challenges, but also opportunities. Our business model is robust and adaptable and I believe our strategy will ensure we grasp these opportunities and strengthen our franchise.

While positioning Amlin for long-term profitable growth, we will maintain underwriting discipline across the insurance cycle.

A number of our businesses are experiencing improving trends. We have also made some material changes to our outwards reinsurance programmes, reducing spend whilst increasing mean expected profitability.  This is expected to compensate for the lower margins in catastrophe reinsurance.

Therefore, even though reinsurance rates have come under downward pressure, we continue to believe that the Group can continue to deliver attractive returns on capital.

Charles Philipps

Chief Executive

Financial performance

	2013 £m	2012 £m	2011 £m	2010 £m	2009 £m
Gross written premium	2,467.4	2,405.6	2,304.1	2,172.5	1,543.9
Net written premium	2,107.4	2,058.6	2,013.2	1,910.3	1,322.6
Net earned premium	2,077.4	1,970.5	1,927.4	1,748.1	1,317.3
Profit attributable to underwriting	283.1	207.1	(146.0)	185.6	355.2
Investment return	160.4	165.3	40.5	175.0	207.5
Other costs	(117.8)	(108.2)	(88.3)	(101.4)	(53.6)
Result before tax	325.7	264.2	(193.8)	259.2	509.1
Return on equity	19.8%	17.4%	(8.6)%	13.9%	37.0%

Source: Amlin

Amlin delivered a strong financial performance in 2013, with a profit before tax of £325.7 million (2012: £264.2 million) and a ROE of 19.8% (2012: 17.4%). The underwriting return was good, supported by recent growth in premium, lower catastrophe activity and increased profitability at Amlin Europe. The investment return was excellent at 3.6% (2012: 4.1%).

Amlin's performance over the longer term has been robust. Despite material catastrophe activity across recent years and difficult investment markets, the Group has recorded a weighted average ROE since 2004 of 18.0% and since 2009 of 14.3%. This compares with our cross cycle target of 15% and exceeds our estimated cost of capital over that period of 8.5%.

Underwriting generated a combined ratio of 86% for the year, contributing a profit of £283.1 million (2012: 89% and £207.1 million). Major catastrophe activity was relatively limited, amounting to £18.5 million (2012: £152.3 million). However, there was a relatively high frequency of smaller catastrophe and large risk losses in the year, totalling £62.0 million and £76.0 million respectively (2012: £26.2 million and £3.2 million respectively). Reserve releases amounted to £133.5 million (2012: £94.2 million). However, the Group's reserve margin remained at more than £160 million above the actuarial best estimate.

Amlin London and Amlin Bermuda generated healthy underwriting profits of £113.7 million and £149.7 million respectively (2012: £63.5 million and £122.4 million respectively). The Bermuda result includes an underwriting contribution of £60.3 million generated by intercompany arrangements with other Group entities. Amlin Europe achieved a pleasing underwriting profit of £19.1 million (2012: £7.9 million), supported by improved claims performance and reserve releases. Amlin UK generated a small underwriting profit of £1.5 million (2012: £14.1 million), whilst Amlin Re Europe was impacted by flood, wind and hail losses across Europe during the year and returned an underwriting loss of £7.0 million (2012: profit of £1.5 million).

The investment environment continued to prove challenging, with interest rates across most of the developed world remaining low. However, with strong performance from our equity and property portfolios, the investment return was an excellent 3.6% (2012: 4.1%), giving a contribution from investments of £160.4 million (2012: £165.3 million).

Net foreign exchange losses in the statement of profit and loss amounted to £5.1 million (2012: loss £2.7 million). A net loss, after hedges, of £16.0 million relating to translation on our subsidiary net assets exposures was taken to reserves (2012: loss £53.4 million), with sterling strengthening against the US dollar during the year.

Underwriting performance

	2013	2012	2011	2010	2009
Claims ratio	52%	57%	78%	60%	43%
Expense ratio	34%	32%	30%	29%	30%
Combined ratio	86%	89%	108%	89%	73%

Gross written premium was £2,467.4 million, an increase of 2.6% (2012: £2,405.6 million). The average renewal rate for the Group for the period was flat with renewal retention high at 86% (2012: increase 3.7% and 84%). At constant rates of exchange, written premium for the 2013 underwriting year was up 7.8%.

As previously reported, reductions to premium estimates on binding authorities were made to 2012 premium. Notably, Amlin UK reduced estimates on binding authorities by £42.2 million. This portfolio has expanded rapidly in recent years, with significant new business, making the income estimation process inherently more difficult.

Medium term growth has been healthy, with gross written premium increasing by 13.6% across the last three years. This, together with disciplined underwriting and changes in business mix, has provided healthy momentum to earned premium. Notably, catastrophe reinsurance income (before reinstatement premium) has increased by 28.0% during this period. The majority of this income has been written at strong or near peak margins.

Outwards reinsurance expenditure was £360.0 million, representing 14.6% of gross written premium (2012: £347.0 million and 14.4%). While costs remained relatively stable, we reduced catastrophe reinsurance account event retentions, providing a better risk reward equation for 2013 than had been possible in recent years and through the Tramline II bond, increased coverage for North American earthquake risk.

Net earned premium increased by 5.4% to £2,077.4 million (2012: £1,970.5 million).

The Group claims ratio was 52% (2012: 57%). Major catastrophe activity in the year was low with large catastrophe losses totalling £18.5 million (2012: £152.3 million). The only notable large catastrophe event for Amlin in the year was the European flooding in May and June. However, there was a relatively high frequency of smaller catastrophes, and large risk losses, totalling £62.0 million and £76.0 million respectively (2012: £26.2 million and £3.2 million respectively). Claims development continued to be better than expected, with releases from reserves amounting to £133.5 million (2012: £94.2 million), supported by positive claims development in Amlin London, Amlin Bermuda and Amlin Europe. Excluding the impact of both large and smaller catastrophe losses and large risk losses, together with prior period releases, the underlying claims ratio has slightly improved at 51% (2012: 52%).

Segmental commentary

Amlin London

Amlin London once again performed strongly, delivering a combined ratio of 85% (2012: 91%).

Gross written premium increased by 6.4% to £1,134.8 million (2012: £1,066.1 million). The average renewal rate decrease was 1.0% (2012: increase 4.3%) with a retention ratio of 86% (2012: 83%). Underlying growth in income was largely attributable to the Property & Casualty business, which benefitted from an average rate increase of 0.9% and the addition of £78.5 million of new business, £16.9 million of which was from the new international casualty class. In addition, Amlin Reinsurance Managers Inc. generated £6.3 million of income in its first full year of trading.

Net earned premium was £734.8 million (2012: £716.4 million).

The claims ratio was excellent at 44% (2012: 53%). Although the impact of large catastrophe losses was limited at £5.6 million (2012: £80.3 million), there was a higher frequency of smaller catastrophe and large risk losses, totalling £58.4 million to the business (2012: £19.5 million). Together, these losses added 10% to the claims ratio (2012: 15%). Reserve releases were £43.7 million, with continued positive claims development across old years, improving the combined ratio by 6% (2012: £31.3 million and 4%).

The expense ratio increased to 41% (2012: 38%), reflecting higher acquisition costs on new business and higher operating expenses.

Amlin UK

Amlin UK delivered a combined ratio of 99% (2012: 95%). Before the whole account quota share to Amlin Bermuda the ratio was 98% (2012: 93%).

Gross written premium was £336.3 million (2012: £372.6 million). The decrease is after a £42.2 million reduction to income estimates on binding authorities, noted earlier, mostly relating to 2012 underwriting. Underlying growth on the 2013 underwriting year was 12.6%, reflecting the increase in fleet motor business.

Average rate increases for the division were 4.9% (2012: 5.0%) with a retention ratio of 85% (2012: 81%). Fleet motor rates increased by 9.8% (2012: 9.7%) and there were modest positive trends across liability classes. We expect these developments to continue.

Net earned premium amounted to £274.6 million (2012: £266.0 million), reflecting recent growth in gross written premium.

The claims ratio was disappointing at 62% (2012: 57%). Reserve releases were lower at £10.0 million, with a 4% impact to the claims ratio (2012: £21.0 million and 8%). The adjustments to prior year income estimates reduced the underwriting result by approximately £5 million.

The expense ratio was stable at 37% (2012: 38%).

Amlin Bermuda

Amlin Bermuda delivered an excellent combined ratio of 70%, benefitting from limited major catastrophe activity (2012: 74%).

Gross written premium increased to £552.0 million (2012: £544.0 million), with direct income at £354.2 million (2012: £336.6 million). Rates declined by an average of 3.0% in the period, but growth in direct business was achieved through the addition of new proportional reinsurance business of £17.6 million. The retention ratio was 83% (2012: 87%). The business franchise is strong, supported by an excellent reputation for client service and recent marketing initiatives.

Net earned premium was £506.5 million (2012: £475.7 million).

The claims ratio was 49%, with large catastrophe losses limited to £9.7 million in the year (2012: 56% and £70.5 million). Losses attributable to smaller catastrophe and large risk events totalled £38.5 million (2012: £4.1 million). Combined, these losses added 9% to the claims ratio (2012: 17%). Reserve releases contributed £22.0 million (2012: £11.3 million) to the underwriting result.

The expense ratio increased to 21% (2012: 18%), largely driven by increased acquisition costs on new proportional reinsurance business and foreign exchange.  The core expense ratio (excluding acquisition costs and foreign exchange) was stable at 4%.

Amlin Re Europe

The business continues to develop steadily and has achieved further growth in its client base. Gross written premium was £210.8 million, an increase of 22.8% on the prior year (2012: £171.7 million). The average rate increase was 2.3% with a retention ratio of 90% (2012: 2.2% and 91%).

As the business begins to mature, net earned premium increased by 31.5% to £166.2 million (2012: £126.4 million).

The combined ratio was 104% (2012: 99%). The underwriting result reflects net losses of £21.2 million attributable to European flood, wind and hail losses, impacting the claims ratio by 13%. Reserve releases were £4.5 million (2012: strengthening £1.6 million).

The expense ratio was 30% (2012: 26%). This increase reflects growth in acquisition costs; the core expense ratio (excluding acquisition costs and foreign exchange) was stable at 9%. The targeted long-term expense ratio is expected to be around 20%, with a planned income base of approximately £450 million.

Amlin Europe

Amlin Europe achieved a pleasing combined ratio of 95% (2012: 98%).

Gross written premium was £454.5 million (2012: £476.2 million). Renewal rates were broadly stable for the fourth consecutive year, however, the retention ratio was very healthy at 88% (2012: 84%).

Net earned premium was £404.6 million (2012: £390.8 million).

The claims ratio improved to 57% (2012: 59%). Reserve releases were £53.3 million (2012: £32.2 million), reflecting positive development on prior year claims reserves across the portfolio. However, the reserve margin for the business increased modestly across the year.

The expense ratio was 38% (2012: 39%) and reflects the recent reduction in written income. The core expense ratio (excluding acquisition costs and foreign exchange) was 22% (2012: 19%). This is too high and is being addressed through a strategy focused on the addition of profitable income, improved reinsurance efficiency and the removal of expense inefficiencies. Together, these actions are expected to reduce the underlying expense ratio to more acceptable levels.

Investment performance

	2013				2012
	Average Asset Allocation		Return		Average Asset Allocation		Return
	£m	%	%		£m	%	%
Bonds	3,332	74.5	1.8		2,880	69.4	5.0
Other liquid investments	572	12.8	0.1		886	21.3	0.6
Global equities	377	8.5	21.5		247	6.0	9.6
Property funds	190	4.2	9.7		138	3.3	0.2
Total	4,471	100.0	3.6		4,151	100.0	4.1

The Group investment return for the year was 3.6%, with average funds under management of £4.5 billion (2012: 4.1% and £4.2 billion), giving a contribution of £160.4 million to the 2013 result (2012: £165.3 million).

Our multi-asset, multi-manager investment process continued to deliver a good risk-adjusted return. With yields at such low levels, we maintained a defensive stance towards interest rate risk during the year. We continued to hold exposure to non-government bonds, which offered better relative value compared to generally expensive sovereign debt. Elsewhere, we increased our exposure to equities and property during the year, whilst remaining comfortably inside our overall risk appetite.

Although not without its challenges, 2013 was a year when markets started to make the transition from bouts of risk-on/risk-off to being more fundamentally driven. The calm that the European Central Bank had restored in European bond markets during the summer of 2012 remained, providing scope for further reductions to peripheral bond yields, helped by the Eurozone economy bottoming out. Economic growth picked up in the US and UK during the year, which was supportive for equity and property returns but not so for government bonds, as yields rose.

The insurance linked securities portfolio continues to be managed by Leadenhall Capital Partners. Amlin's investment return on its funds, which averaged £65.7 million, was £4.1 million or 6.2% (2012: £72.1 million, £4.4 million and 6.1%).

Expenses

	Amlin London		Amlin UK		Amlin Bermuda		Amlin Re Europe		Amlin Europe		Group
	2013	2012	2013	2012	2013	2012	2013	2012	2013	2012	2013	2012
Acquisition costs	29%	27%	25%	27%	16%	15%	20%	16%	16%	19%	22%	21%
Underwriting expenses	11%	9%	12%	12%	4%	4%	9%	9%	22%	19%	12%	10%
Underwriting foreign exchange losses/(gains)	1%	2%	-	(1)%	1%	(1)%	1%	1%	-	1%	-	1%
Expense ratio	41%	38%	37%	38%	21%	18%	30%	26%	38%	39%	34%	32%

Total expenses, including underwriting, non-underwriting, and finance costs increased to £827.2 million (2012: £753.1 million).

Underwriting expenses, excluding foreign exchange movements, totalled £690.7 million (2012: £628.3 million). These costs relate to the acquisition and administration of insurance business and claims payments. Acquisition costs accounted for £28.4 million of the increase in underwriting expenses, largely driven by growth in income and representing 18.5% of gross earned premium (2012: 18.2%). The remaining variance in underwriting expenses is driven by the inclusion of RaetsMarine and general inflationary increases. Prior to acquisition, costs associated with RaetsMarine were included within acquisition costs.

Non-underwriting expenses, excluding foreign exchange movements and finance costs, were £102.4 million (2012: £94.5 million). These expenses include employee incentives, investment management fees and corporate expenses not directly attached to underwriting businesses. Employee incentives increased by £18.6 million in line with 2013 performance, increasing annual bonuses and long-term incentive accruals. Amlin Europe's separation and integration costs were £nil (2012: £20.6 million).

Taxation

Profit source	2013 Profit before tax £m	2013 Effective tax rate %	2012 Profit before tax £m	2012 Effective tax rate %
UK	83.2	19.8	42.5	13.7
Bermuda	196.4	0.2	179.4	-
Continental Europe	46.1	21.9	42.3	25.3
Group	325.7	8.3	264.2	6.2

The effective rate of tax for the period is 8.3% (2012: 6.2%). It is below the UK rate of corporation tax primarily due to Amlin AG's Bermudian branch, which operates in Bermuda with no local corporation tax. Profits arising on operations in Switzerland are taxed at a combined federal and cantonal rate of 21.2% (2012: 21.2%). We continue to believe that Amlin AG is exempt from the UK Controlled Foreign Company regime.

Dividends
The Board proposes a final ordinary dividend of 18.2 pence per share. Taken together with the interim dividend of 7.8 pence per share, this provides total dividends of 26.0 pence per share (2012: 24.0 pence per share).

Financial management

Determining our capital requirement

Amlin uses Dynamic Financial Analysis (DFA) to model its capital. Assessed capital is management's estimate of capital required for current trading purposes.

·      For Syndicate 2001, the assessed capital requirement at 31 December 2013 amounted to £540.6 million (2012: £542.7 million). This capital supports the 2014 business plan approved by Lloyd's.

·      We continue to believe that $1.0 billion is the minimum amount of capital required by Amlin AG to trade with its preferred client base. This is in excess of the minimum capital required by the Swiss Financial Market Supervisory Authority (FINMA) and the Bermuda Monetary Authority (BMA). At the year end, Amlin AG had net assets of £1.0 billion (2012: £1.0 billion).

·      For Amlin Europe N.V., assessed capital at 31 December 2013 is £209.4 million. This represents the estimated Solvency II requirement, using our internal model, plus a 35% uplift less the current reserve margin.

We plan to retain a level of capital sufficient to allow material growth in the business following a major insurance disaster or to respond to other opportunities to enhance long term profitable growth.

Amlin capital analysis
At 31 December	2013 £m	2012 £m
Net tangible assets	1,439.5	1,286.3
Subordinated debt	289.5	290.4
Undrawn bank facilities1	198.6	180.0
Available capital	1,927.6	1,756.7
Assessed capital	1,353.7	1,377.9
	573.9	378.8
1 Bank facilities are subject to a number of covenants.

We aim to create good returns for shareholders by growing earnings over the long term while delivering a cross-cycle return on equity of at least 15%. This is intended to support growth in the dividend and net tangible assets per share. In managing our equity capital our priorities are therefore to:

·      maintain a robust level of capital in support of the risks of our business;

·      support profitable growth, particularly in periods of high margins; and

·      ensure continuity of our ability to return dividends to shareholders.

We have returned £557.3 million to our shareholders over the last five years, through a combination of dividends and share buy-backs.

With the proposed final dividend in respect of 2013 of 18.2 pence per share, giving total dividends for the year of 26.0 pence per share (2012: 24.0 per share), dividend growth for the year was 8.3%. Net tangible assets per share increased to 288.7 pence per share (2012: 259.8 pence per share).

Estimating outstanding claims reserves

Estimation of claims reserves is a key feature of financial management. Not only does it impact overall profitability, but it also impacts investment mix as different approaches are taken for capital and policyholders' funds. At 31 December 2013 net claims reserves totalled £2.6 billion (2012: £2.6 billion).

Much of Amlin's business is large commercial insurance or reinsurance, which can be volatile and difficult to estimate ultimate claims levels for. The subjectivities that must be considered when assessing the level of outstanding liabilities include the risk profile of an insurance policy, class of business, timeliness of notification of claims, validity of claims made against a policy and valuation of the claim. At any time there are a range of possible outcomes at which the claims reserves could ultimately settle, however, as time passes the uncertainty surrounding likely claims settlement reduces.

Given uncertainty, we adopt a prudent approach to the assessment of liabilities with consistency of reserving strength an overall goal.

We estimate that the Group as a whole holds reserves on an accident year basis of at least £160 million in excess of an actuarial best estimate (2012: at least £160 million).

Net tangible assets

The Group's net assets increased by 12.1% to £1,678.6 million (2012: £1,497.7 million). In addition to profit through the statement of profit and loss, the key movements are:

·     Dividends totalling £121.4 million (2012: £115.4 million).

·     £16.5 million of losses from the currency retranslation of overseas operations (2012: loss £57.1 million) offset by £0.5 million of gains from the revaluation of associated hedge instruments (2012: gain £3.7 million) in accordance with hedge accounting rules of IAS39. Currency losses reflect the strengthening of sterling against the US dollar during 2013.

·     Defined benefit pension fund gain of £9.4 million (2012: loss of £9.5 million).

·     Intangibles increased by £27.7 million to £239.1 million (2012: £211.4 million), primarily reflecting the acquisition of RaetsMarine offset by amortisation charges in the year.

As a result, net tangible assets have increased by 11.9% from £1,286.3 million at 31 December 2012 to £1,439.5 million at 31 December 2013.

Outlook

Undoubtedly the reinsurance trading environment is becoming more challenging, but Amlin is well positioned to benefit from the changing market dynamics, due to its strong and growing franchise. Furthermore recent growth in capital market activity in reinsurance markets is complemented by our strategic investment in Leadenhall Capital Partners.

However, Amlin is not just a catastrophe reinsurance business. The strength of our London insurance business and the diversity afforded by Amlin UK, Amlin Europe and Amlin Re Europe provides a well diversified platform from which to generate further profitable growth. We continue to review and adapt our strategy to ensure that Amlin continues to deliver on target cross-cycle returns, while remaining focused on profitable cross-cycle underwriting.

Despite the more challenging environment, particularly for catastrophe reinsurance underwriting, Amlin's January 2014 renewals exceeded plan with £1,077.4 million of gross written premium, 4.9% more than in January 2013. With the exception of catastrophe reinsurance, rates in most lines of business have to date renewed on similar terms to last year. However, renewal rates in Amlin UK's motor portfolio have continued their upward trend, with an average 10.1% recorded in January. Overall, the average rate decrease was 2.1%, compared to an average increase of 1.2% at the start of 2013.

Amlin has a strong catastrophe reinsurance franchise, founded on underwriting expertise and service capability. This, and the shape of its internationally diversified account, with a focus on regional insurers in the United States, enabled Amlin to increase January 2014 catastrophe reinsurance gross written premium by 2.0%, while recording an average rate decline of only 8.4%, less than is believed to be the case for the catastrophe reinsurance market as a whole.

The combination of Amlin's traditional reinsurance offering with that of Leadenhall Capital Partners is proving attractive to clients and resulting in preferential signings, access to business which is not available in the open market and, on some business, better pricing than in the open market.

This, coupled with the closure of the Special Purpose Syndicate 6106 sidecar, which accounted for £35.9 million of reinsurance premium in 2013, and improved retrocessional purchase, is expected to increase reinsurance account net income in 2014. Notably, retrocessional reinsurance rates are lower and more cover has become available on attractive terms.

While catastrophe reinsurance margins are lower, a number of areas are expected to contribute increased levels of profitability:

·     Amlin UK's 2013 result did not reflect the consistent improvement in fleet motor pricing seen since 2010 and was affected by the reversal of overstated 2012 binding authority gross written premium. Fleet motor prices are continuing to rise and there is gradual improvement in its liability account pricing, with some improvement expected in property lines following winter storm activity;

·     Amlin Europe is expected to grow modestly again in 2014 and the action being taken to address its expense ratio should start to bear fruit. Specifically, we anticipate growth in property and casualty business, with new strategies for regional markets in the Netherlands and a new binder offering in Belgium beginning to contribute;

·     Amlin Re Europe, which suffered from an unusually high frequency of catastrophe losses in 2013, is continuing to grow with its underlying combined ratio improving as more premium is earned. Premium growth of 26.8% was achieved in the January renewals. Rate changes and improved mix, both product and territorial, enabled this growth to be achieved with an improved expected profit; and

·     Leadenhall Capital Partners, which has started to generate good returns, having contributed £4.4 million to profit before tax in 2013 from our 40% share and facilitation fees earned by Amlin.

In addition, outwards reinsurance spend for our insurance classes is expected to be approximately £10.0 million less than in 2013.  With the assistance of our more sophisticated modelling, we have taken the decision to internalise a proportion of a number of programmes. Given the diversifying nature of many of our insurance classes, this has the effect of increasing mean expected profitability whilst only modestly increasing extreme tail risk.

After a few years of strong performance, valuations of risk assets, such as equities, non-government bonds and property, are no longer as compelling as they were, so future returns are likely to be more muted. Upward pressure on bond yields is expected to continue, which will also depress returns. We therefore do not expect a repeat of the 2013 overall returns this year. We continue to aim to deliver optimal risk adjusted returns by dynamic asset allocation and a flexible investment approach, such as that offered by the absolute return bond funds.

Amlin has a strong franchise in many of its markets, demonstrated by consistently high retention ratios. There is scope to further improve our market positions through more active marketing and as brokers seek to direct business to fewer, stronger carriers. While pricing in some lines is expected to continue to come under downward pressure, requiring increased vigilance and continued discipline, and making organic growth harder to achieve, we continue to believe Amlin is capable of delivering good returns for shareholders.

Consolidated statement of profit or loss

For the year ended 31 December 2013

	Note	2013 £m	Restated 2012 £m
Gross earned premium	5,6	2,440.6	2,319.0
Reinsurance premium ceded	5,6	(346.0)	(332.6)
Net earned premium	5,6	2,094.6	1,986.4
Investment return	5,7	143.2	149.4
Other operating income	5	4.3	5.6
Total income		2,242.1	2,141.4
Insurance claims and claims settlement expenses	5,8	(1,153.1)	(1,197.3)
Insurance claims and claims settlement expenses recoverable from reinsurers	5,8	60.0	72.7
Net insurance claims	8	(1,093.1)	(1,124.6)
Expenses for the acquisition of insurance contracts	5,9	(450.9)	(422.5)
Other operating expenses	10	(347.3)	(303.0)
Total expenses		(798.2)	(725.5)
Results of operating activities		350.8	291.3
Finance costs	5,13	(29.0)	(27.6)
Share of profit after tax of associates	4,5	3.9	0.5
Profit before tax	5,14	325.7	264.2
Tax	15	(27.0)	(16.4)
Profit for the year		298.7	247.8
Attributable to:
Owners of the Parent Company		298.7	247.8
Earnings per share attributable to owners of the Parent Company
Basic	25	60.0p	50.1p
Diluted	25	59.1p	49.5p

The attached notes form an integral part of these consolidated financial statement

Consolidated statement of other comprehensive income

For the year ended 31 December 2013

	Note	2013 £m	Restated 2012 £m
Profit for the year		298.7	247.8
Items that will not be reclassified to profit or loss
Defined benefit pension fund gains/(losses)	32	9.4	(9.5)
Deferred tax relating to items that will not be reclassified	15	(2.3)	1.6
		7.1	(7.9)
Items that may be reclassified subsequently to profit or loss
Foreign exchange losses on translation of foreign operations, net of designated hedges	16	(16.0)	(53.4)
Unrealised gains on financial assets designated as available-for-sale	18	-	0.5
Current tax relating to items that may be reclassified	15	0.5	0.3
		(15.5)	(52.6)
Other comprehensive expense for the year, net of tax		(8.4)	(60.5)
Total comprehensive income for the year		290.3	187.3
Attributable to:
Owners of the Parent Company		290.3	187.3

The attached notes form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity
For the year ended 31 December 2013

		Attributable to owners of the Parent Company
For the year ended 31 December 2013	Note	Share capital £m	Share premium £m	Other reserves £m	Treasury shares £m	Retained earnings £m	Total £m	Non-controlling interests £m	Total £m
At 1 January 2013		141.2	300.4	121.6	(20.8)	954.7	1,497.1	0.6	1,497.7
Total comprehensive (expense)/income for the year		-	-	(8.4)	-	298.7	290.3	-	290.3
Employee share option schemes:
- share-based payment reserve		-	-	(0.5)	-	-	(0.5)	-	(0.5)
- proceeds from shares issued	24	-	0.1	-	2.0	(0.9)	1.2	-	1.2
Dividends paid	27	-	-	-	-	(121.3)	(121.3)	(0.1)	(121.4)
Deferred tax relating to share option schemes	15	-	-	(0.3)	-	-	(0.3)	-	(0.3)
Issue of new shares	24	0.8	10.8	-	-	-	11.6	-	11.6
Transactions with the owners of the Group for the year		0.8	10.9	(0.8)	2.0	(122.2)	(109.3)	(0.1)	(109.4)
At 31 December 2013		142.0	311.3	112.4	(18.8)	1,131.2	1,678.1	0.5	1,678.6

Consolidated statement of financial position

At 31 December 2013

Assets	Note	2013 £m	Restated 2012 £m
Cash and cash equivalents	17	164.5	190.6
Financial assets	18	4,368.8	4,205.0
Reinsurance assets
- reinsurers' share of outstanding claims	19	343.1	478.6
- reinsurers' share of unearned premium	19	45.1	46.8
Loans and receivables, including insurance and reinsurance receivables
- insurance and reinsurance receivables	20	1,013.8	1,003.2
- other loans and receivables	20	88.4	82.2
Deferred acquisition costs	21	246.1	239.3
Current income tax assets		23.0	12.3
Deferred tax assets	15	6.1	15.8
Property and equipment	22	22.6	20.4
Goodwill and intangible assets	23	239.1	211.4
Investments in associates	4	12.5	9.3
Total assets		6,573.1	6,514.9
Equity and reserves
Share capital	24	142.0	141.2
Share premium		311.3	300.4
Other reserves	26	112.4	121.6
Treasury shares		(18.8)	(20.8)
Retained earnings		1,131.2	954.7
Equity attributable to owners of the Parent Company		1,678.1	1,497.1
Non-controlling interests		0.5	0.6
Total equity and reserves		1,678.6	1,497.7
Liabilities
Insurance liabilities
- outstanding claims	19	2,897.1	3,083.5
- unearned premium	19	1,093.9	1,054.8
Other payables, including insurance and reinsurance payables
- insurance and reinsurance payables	30	273.3	275.0
- other payables	30	137.5	118.6
Financial liabilities	18	4.7	5.7
Current income tax liabilities		0.1	0.4
Borrowings	31	391.6	410.4
Retirement benefit obligations	32	32.6	40.9
Deferred tax liabilities	15	63.7	27.9
Total liabilities		4,894.5	5,017.2
Total equity, reserves and liabilities		6,573.1	6,514.9

The attached notes form an integral part of these consolidated financial statements.

The financial statements were approved by the Board of Directors and authorised for issue on 28 February 2014. They were signed on its behalf by:

Charles Philipps Chief Executive

Richard Hextall Group Finance & Operations Director

Consolidated statement of cash flows

For the year ended 31 December 2013

	Note	2013 £m	2012 £m
Cash flows from operating activities
Cash generated from/(utilised in) operations	36	127.9	(74.2)
Interest received		21.5	37.2
Dividends received		16.3	11.3
Income taxes paid		(0.1)	(12.1)
Net cash inflows/(outflows) from operating activities		165.6	(37.8)
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired		(8.8)	-
Deferred payment for acquired subsidiary		(0.2)	(0.1)
Investments in associates	4	0.9	(0.5)
Purchase of property and equipment		(7.5)	(6.5)
Purchase and development of intangible assets		(2.3)	(2.2)
Net cash outflows from investing activities		(17.9)	(9.3)
Cash flows from financing activities
Net proceeds from issue of ordinary shares, including treasury shares		12.8	0.9
Dividends paid to owners of the Parent Company	27	(121.3)	(115.3)
Dividends paid to non-controlling interests	27	(0.1)	(0.1)
Interest paid		(24.4)	(21.9)
Purchase of ESOT and treasury shares		(5.5)	-
Net (repayment)/drawdown of revolving credit facility	31	(24.1)	122.8
Net cash outflows from financing activities		(162.6)	(13.6)
Net decrease in cash and cash equivalents		(14.9)	(60.7)
Cash and cash equivalents at beginning of year		190.6	256.3
Effect of exchange rate changes on cash and cash equivalents		(11.2)	(5.0)
Cash and cash equivalents at end of year	17	164.5	190.6

The attached notes form an integral part of these consolidated financial statements.

1.   Summary of significant accounting policies and critical accounting judgements and estimates

Amlin plc (the Company) is a public limited company registered in England and Wales. The address of the registered office is St Helen's, 1 Undershaft, London EC3A 8ND.

The basis of preparation, basis of consolidation and significant accounting policies adopted in the preparation of Amlin plc and subsidiaries' (the Group) consolidated financial statements are set out below.

Notes to the accounts

For the year ended 31 December 2013

 

Basis of preparation

These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations issued by the IFRS Interpretation Committee (IFRICs), as adopted for use in the European Union (EU). The consolidated financial statements comply with Article 4 of the EU IAS regulation and Companies Act 2006.

The consolidated financial statements have been prepared on the historical cost basis except for cash and cash equivalents, financial assets and financial liabilities, share options, contingent consideration and pension assets, which are measured at their fair value.

Except where otherwise stated, all figures included in the consolidated financial statements are presented in millions of British Pounds Sterling (sterling) shown as £m rounded to the nearest £100,000.

The accounting policies adopted in preparing these financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012, unless otherwise stated.

In accordance with IFRS 4, 'Insurance contracts', the Group has applied existing accounting practices for insurance contracts, modified as appropriate, to comply with the IFRS framework and applicable standards.

 

Basis of consolidation

The financial statements consolidate the accounts of the Company and subsidiaries, including the Group's underwriting through participation on Lloyd's syndicates. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of all subsidiaries are prepared for the same reporting year as the Parent Company. Consolidation adjustments are made to convert subsidiary accounts prepared under different accounting standards into IFRS so as to remove the effects of any different accounting policies that may exist. Subsidiaries are consolidated from the date that control is transferred to the Group and cease to be consolidated from the date that control is transferred out.

All inter company balances, profits and transactions are eliminated.

Details of principal subsidiaries included within the consolidated financial statements can be found in note 4.

 

Going concern

The Group's business, risk and financial management, performance and position, together with factors that are likely to affect future development, are described in the Financial Performance Review of this Annual Report. Capital management strategy, which covers how regulatory and economic capital needs are measured and how capital is deployed, is described under Financial Management. The financial position of the Group, including commentary on cash and investment levels, currency management, insurance liability management, liquidity and borrowings, is also covered in that section. In addition, note 2 describes capital management needs and policies and note 3 covers underwriting, market, liquidity and credit risk which may affect the financial position of the Group.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

The Group has considerable financial resources to meet its financial needs and, in much of the Group, manages a mature portfolio of insurance risk through an experienced and stable team. The Directors believe that the Group is well positioned to manage its business risk successfully in the current economic environment.

After making enquiries, the Directors have a reasonable expectation that the Company, and the Group, have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

Adoption of new and revised standards

(a) Standards, amendments to published standards and interpretations effective on or after 1 January 2013

The Group has adopted the following new and amended IFRSs effective as of 1 January 2013:

·      IAS 19 (revised), 'Employee benefits'

·      IFRS 13, 'Fair value measurement'

·      IFRS 7 (amended), 'Financial instruments: Disclosures - Offsetting financial assets and financial liabilities'

·      IAS 1 (amended), 'Presentation of financial statements - Presentation of items of other comprehensive income'

·      IAS 12 (amended), 'Income taxes - Deferred taxes - Recovery of underlying assets'

·      Annual improvements to IFRSs 2009-2011 cycle

The effects of these changes are as follows:

IAS 19 (revised), 'Employee benefits'

The amendments principally affect the accounting for, and disclosure of, defined benefit plans. It eliminates the option to defer the recognition of actuarial gains and losses under the 'corridor' approach, applies a single rate to the net defined asset or liability to calculate the net interest income or expense, removes the options for the presentation of gains and losses and enhances disclosure requirements in respect of defined benefit plans and the risks arising on those plans. The amendments have been applied retrospectively with comparative information restated accordingly. The impact of the restatement is presented in note 32.

IFRS 13, 'Fair value measurement'
IFRS 13 is a new standard which establishes a single source of guidance under IFRS for fair value measurement and introduces new disclosures to help users to better assess the valuation techniques and inputs used to measure fair value. The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).

The standard has been applied prospectively in accordance with the transitional provisions. The disclosure requirements of the standard have been applied in this set of financial statements. The adoption of the standard has had no impact on the Group's or Company's measurement of assets and liabilities measured at fair value.

IFRS 7 (amended), 'Financial instruments: Disclosures - Offsetting financial assets and financial liabilities'
The amendments introduce new disclosure requirements intended to better compare the different offsetting of financial assets and financial liabilities under IFRS and US GAAP. The amendments require entities to disclose more information about the right of offset and related arrangements for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments have been applied retrospectively and required disclosures are provided in note 18(b).

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

IAS 1 (amended), 'Presentation of financial statements - Presentation of items of other comprehensive income'

The amendments to IAS 1 require items of other comprehensive income to be grouped into those that will not be reclassified to profit or loss and those that may be reclassified subsequently to profit or loss when specific conditions are met. The aggregate amount of income tax relating to items of other comprehensive income is also allocated to these two categories. These amendments have been reflected in the consolidated statement of other comprehensive income, with comparative information reclassified accordingly.

IAS 12 (amended), 'Income taxes - deferred taxes: Recovery of underlying assets'

The amendments to IAS 12 relate to the measurement of deferred tax on investment properties and have had no impact on the financial statements of the Group or Company on adoption. 

 

Annual improvements to IFRSs 2009-2011 cycle

The International Accounting Standards Board (IASB) uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of a major project. The amendments primarily remove inconsistencies and clarify wording. Adoption of these amendments has not had a material impact on the financial statements of the Group or Company. 

(b) Standards, amendments to published standards and interpretations early adopted by the Group

The Group has early adopted the following new and amended IFRSs in its financial statements for the year ended 31 December 2013.

IFRS 10, 'Consolidated financial statements', IFRS 11, 'Joint arrangements', IFRS 12, 'Disclosure of interests in other entities', IAS 27 (amended), 'Separate financial statements' and IAS 28 (amended), 'Investment in associates and joint ventures'

The Group early adopted the requirements of IFRS 10, IFRS 11, IFRS 12, IAS 27 (amended) and IAS 28 (amended), from 1 January 2012, details of which were provided in the 2012 Annual Report.

 

IAS 32 (amended), 'Financial instruments: Presentation - Offsetting financial assets and financial liabilities'

The amendments to IAS 32 clarify the requirements for offsetting financial instruments. The amendments have had no impact on the financial statements of the Group or Company.

(c) Standards, amendments to published standards and interpretations that are not yet effective and have not been earlyadopted by the Group

Standards, amendments to published standards and interpretations issued but not yet effective up to the date of issuance of the Group's financial statements are listed below. The Group intends to adopt these standards when they become effective.

IFRS 9, 'Financial instruments: Classification and measurement'

IFRS 9 as originally issued in 2009, reflects the first phase of the IASB's work on the replacement of IAS 39, 'Financial instruments: Recognition and measurement', and applies to the classification of financial instruments. The standard was subsequently reissued in 2010, incorporating the requirements of accounting for financial liabilities and, carrying over from IAS 39, the requirements for derecognition of financial assets and financial liabilities. The IASB is currently considering limited modifications to the classification and measurement requirements of IFRS 9.

In November 2013, the IASB issued a new model for hedge accounting, together with the corresponding disclosures about risk management activities. The IASB is currently addressing the impairment of financial assets. IFRS 9 as originally issued had a mandatory effective date of 1 January 2013.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

However, during 2013 the IASB tentatively decided to defer the mandatory effective date and leave it open pending the finalisation of the impairment and classification and measurement requirements.

The adoption of IFRS 9 will have an effect on the classification and measurement of the Group's financial instruments. The Group has determined that the effect shall be quantified in conjunction with the impairment model when issued. Consideration will also be given to the emerging requirements and expected timetable of the IASB's insurance contracts project in addressing the Group's classification and measurement approach.

IFRS 10, IFRS 12 and IAS 27 (amended), 'Investment entities'

The IASB issued amendments to IFRS 10, IFRS 12 and IAS 27 in October 2012 to address the accounting for investments controlled by investment entities. The amendments define an investment entity and require an investment entity to measure its subsidiaries at fair value through profit or loss. The amendments do not permit the 'roll-up' of fair value accounting in the consolidated financial statements of a non-investment entity parent. The amendments are applicable for annual periods beginning on or after 1 January 2014 and will not have an impact on the financial statements of the Group and Company on adoption.

IFRIC 21, 'Levies'

IFRIC 21 sets out the accounting for a liability to pay levies that are imposed by governments. The interpretation requires a liability to be recognised when the obligating event to pay a levy occurs, which might arise at a point in time or progressively over time. IFRIC 21 is effective for annual periods beginning on or after 1 January 2014¹ and should be applied retrospectively. The interpretation is not expected to have a significant impact on the financial statements of the Group. 

IAS 36 (amended), 'Impairment of assets - Recoverable amount disclosures for non-financial assets'

The amendments remove the requirement to disclose recoverable amount when a cash generating unit contains goodwill or indefinite life intangible assets but there has been no impairment. However, the amendments will require additional information about fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. The amendments are effective for annual periods beginning on or after 1 January 2014 and are not expected to have a material impact on the financial statements of the Group.

IAS 39 (amended), 'Financial instruments: recognition and measurement - Novation of derivatives and continuation of hedge accounting'

The amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendments are effective for annual periods beginning on or after 1 January 2014¹ and are not expected to have a material impact on the financial statements of the Group.

IAS 19 (amended), 'Employee benefits - Defined benefit plans: employee contributions'

The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendments are effective from 1 July 2014¹ and are not expected to have a material impact on the financial statements of the Group.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Insurance contract liabilities

The most significant estimate made in the financial statements relates to unpaid insurance claim reserves and related loss adjustment expenses of the Group.

The estimated provision for the total level of claims incurred changes as more information becomes known about the actual losses for which the initial provisions were set up. The change in claims costs for prior period insurance claims represents the claims development of earlier reported years incurred in the current accounting period. The carrying value of the Group's net outstanding claims reserves at 31 December 2013 is £2,554.0 million (2012: £2,604.9 million). In 2013, there has been a net positive development of £133.5 million (2012: £94.2 million positive) for the Group. Note 3.1 provides further details of the method the Group applies in estimating insurance contract liabilities.

Insurance contract premium

Gross written premium is recognised on insurance contracts incepting during the

Note:

1. Subject to EU endorsement

financial year and includes an estimate of the total premium expected to be

received under each contract.  Revenue recognised on policies written through contracts with third parties, such as binding authorities and line slips, is deemed to be written in full at the inception of such contracts and therefore this estimate is particularly judgemental.  Adjustments to estimates from previous years are included in the reported premium.

The premium estimation processes use expert judgement, the quality of the estimate being influenced by the nature and maturity of the portfolio, availability of timely data, relevant underwriting input to the estimating process and management review. Therefore, gross written premium estimates are reviewed on a quarterly basis using underwriter estimates and actuarial projections.

Financial assets and financial liabilities

The Group uses pricing vendor sources in determining the fair value of financial assets and financial liabilities. Depending on the methods and assumptions used (for example, in the fair valuation of Level 2 and Level 3 financial assets), the fair valuation of financial assets and financial liabilities can be subject to estimation uncertainty. Details of these methods and assumptions are described in note 3.3. The carrying values of the Group's financial assets and financial liabilities at 31 December 2013 are £4,368.8 million (2012: £4,205.0 million) and £4.7 million (2012: £5.7 million) respectively.

Intangible assets

Intangible assets are recognised on the acquisition of a subsidiary, on the purchase of specific rights to renew a particular underwriting portfolio, on the acquisition of syndicate capacity and on internally developed computer software.

The value of intangible assets arising from the acquisition of a subsidiary, syndicate capacity or on the purchase of renewal rights is largely based on the expected cash flows of the business acquired and contractual rights on that business.

The internally developed computer software principally relates to cost directly attributable to the development of a new IT platform for Amlin Europe N.V.

The assumptions made by management in performing impairment tests of intangible assets are subject to estimation uncertainty. The results of the impairment test may result in the value of the intangible being impaired in the current period. Note 23 provides further details on these assumptions.

The carrying value of the Group's intangible assets (excluding goodwill) at 31 December 2013 is £150.0 million (2012:

£136.3 million).

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Goodwill impairment

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating unit to which goodwill is allocated. Details of the key assumptions used in the estimation of the recoverable amounts are contained in note 23.

The Group has allocated goodwill to cash generating units based on a number of factors, which include how the entity's operations are monitored. Note 23 provides further details. The carrying value at the reporting date of goodwill is £89.1 million (2012: £75.1 million).

Tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The wide range of international business relationships and the long-term nature and complexity of existing contractual agreements could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the country of the respective Group company's domicile.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profits will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

The carrying value at the reporting date of the deferred tax asset is £6.1 million (2012 restated: £15.8 million), and of the deferred tax liability is £63.7 million (2012: £27.9 million).

Staff incentive plans

The Group recognises a liability and expense for certain staff incentive plans based on a formula that takes into consideration the underwriting profit after certain adjustments. Underwriting profit is estimated based on current expectation of premiums and claims and will change as more information is known or future events occur. Where estimates change, related staff incentive plan liabilities may also change.

The carrying value at the reporting date of the liability for the staff incentive plans is £53.0 million (2012: £39.8 million).

Retirement benefit obligations

The Group participates in the Lloyd's Superannuation Fund defined benefit scheme and also operates defined benefit schemes in the Netherlands, Belgium and Switzerland.

The amounts included in these financial statements are sensitive to changes in the assumptions used to derive the value of the scheme assets and liabilities.

A gain of £9.4 million (2012 restated: loss of £9.5 million) has been recognised in other comprehensive income and an expense of £7.2 million (2012: £6.4 million) has been recognised in the statement of profit or loss. Note 32 provides further details on the Group's retirement benefit obligations. At 31 December 2013, the Group recognised a liability of £32.6 million (2012 restated: £40.9 million) in respect of its defined benefit plans.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Determining control of entities

The significant judgements and assumptions made by the Group in reaching its control and consolidation conclusions for certain investments held by the Group are outlined in note 4(b).

Significant accounting policies

Foreign currency translation

The Group and Company present their accounts in sterling since they are subject to regulation in the United Kingdom and the net assets, liabilities and income of both are currently weighted towards sterling. US dollar and euro revenues are significant but the sterling revenue stream is currently material. Group entities conduct business in a range of economic environments, although these are primarily the UK, USA and Continental Europe.

Transactions denominated in foreign currencies are translated using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities are translated at the rates of exchange at the reporting date. Non-monetary assets and liabilities are translated at the rate prevailing in the period in which the asset or liability first arose or, where such items are revalued, at the latest valuation date. Exchange differences are recognised within other operating expenses.

The results and financial position of those Group entities whose functional currency is not sterling ('foreign operations') are translated into sterling as follows:

·      Assets and liabilities for each statement of financial position presented are translated at the closing exchange rate at the reporting date;

·      Income and expenses for each statement of profit or loss are translated at the exchange rates at the date of each transaction, or a practical approximation to these rates; and

·      On consolidation, all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Where contracts to sell currency have been entered into prior to the year end, the contracted rates have been used. Differences arising on the translation of foreign currency amounts on such items are included in other operating expenses.

Details of the principal exchange rates used are included in note 33.

 

Product classification

Insurance contracts are defined as those containing significant insurance risk if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, excluding scenarios that lack commercial substance, at the inception of the contract.

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Insurance contracts underwritten by the Group under which the contract holder is another insurer (inwards reinsurance) are included within insurance contracts.

The significance of insurance risk is dependent on both the probability of an insured event and the magnitude of its potential effect. Any contracts not considered to be insurance contracts under IFRS 4 are classified as financial instruments.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Based on the current assessment, all of the products underwritten by the Group's insurance entities are insurance contracts within the scope of IFRS 4. Certain risk transfer contracts held by the Group, for example catastrophe linked instruments, do not meet the definition of an insurance contract and are therefore accounted for as financial instruments in accordance with IAS 39.

Insurance contracts premium

Gross written premium comprise premium on insurance contracts incepting during the financial year together with adjustments to premium written in previous accounting periods. The estimated premium income in respect of facility contracts, for example binding authorities and lineslips, is deemed to be written in full at the inception of the contract.

Premium is disclosed before the deduction of brokerage and taxes or duties levied on them.

The proportion of gross written premium, gross of commission payable, attributable to periods after the reporting date is deferred as a provision for unearned premium. The change in this provision is taken to the statement of profit or loss in order that revenue is recognised over the period of the risk.

Premium is recognised as earned over the policy contract period. The earned element is calculated separately for each contract on a basis where the premium is apportioned over the period of risk. For premium written under facilities, the earned element is calculated based on the estimated inception date and coverage period of the underlying contracts.

Acquisition costs

Acquisition costs comprise brokerage incurred on insurance contracts written during the financial year. They are incurred on the same basis as the earned proportions of the premium they relate to. Deferred acquisition costs are amortised over the period in which the related revenues are earned. Deferred acquisition costs are reviewed at the end of each reporting period and are impaired where they are no longer considered to be recoverable.

 

Reinsurance premium ceded

Reinsurance premium ceded comprise premium on reinsurance arrangements bought which incept during the financial year, together with adjustments to premium ceded in previous accounting periods. The proportion of reinsurance premium ceded attributable to periods after the reporting date is deferred as reinsurers' share of unearned premium. Reinsurance premium ceded is earned over the policy contract period in accordance with the terms of the reinsurance contract.

 

Insurance contracts liabilities

Claims paid are defined as those claims transactions settled up to the reporting date including internal and external claims settlement expenses allocated to those transactions.

Unpaid claims reserves are made for known or anticipated liabilities under insurance contracts which have not been settled up to the reporting date. Included within the provision is an allowance for the future costs of settling those claims. This is estimated based on past experience and current expectations of future cost levels.

Unpaid claims reserves are estimated on an undiscounted basis. Unpaid claims reserves acquired through a business combination are measured at fair value, using an applicable risk-free discount rate and having regard to the expected settlement dates of the claims. Provisions are subject to a detailed quarterly review where forecast future cash flows and existing amounts provided are reviewed and reassessed. Any changes to the amounts held are adjusted through profit or loss. Provisions are established above an actuarial best estimate, reflecting a risk premium relating to the uncertainty of the actual level of claims incurred. Although it is possible that claims could develop and exceed the reserves carried, there is therefore a reasonable chance of release of reserves from one year to the next.

The unpaid claims reserves also include, where necessary, a reserve for unexpired risks where, at the reporting date, the estimated costs of future claims and related deferred acquisition costs are expected to exceed the unearned premium provision.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Reinsurance recoveries

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as longer-term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract.

Where there is objective evidence that a reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the statement of profit or loss.

Salvage and subrogation reimbursements

Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).

Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognised in insurance and reinsurance receivables when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property.

Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other loans and receivables when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.

Investment return

Dividends and any related tax credits are recognised as income on the date that the related listed investments are marked ex-dividend. Other investment income and interest receivable are recognised on an accruals basis.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, which is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Group Management Committee.

Business combinations

i. Business combinations before 1 January 2010

The acquisitions of subsidiaries are accounted for using the purchase method. The cost of acquisition is measured as the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange, plus any costs directly attributable to the business combination. Identifiable assets acquired and liabilities and contingent liabilities assumed, meeting the conditions for recognition under IFRS 3, 'Business combinations', are recognised at their fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

ii. Business combinations after 1 January 2010

The Group policy is to apply IFRS 3 (revised) to all acquisitions taking place on or after 1 January 2010. Business combinations are accounted for using the acquisition method.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

The cost of acquisition is measured as the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Group at the date of exchange. Under IFRS 3 (revised), with the exception of the costs of registering and issuing debt and securities that are recognised in accordance with IAS 32 and IAS 39 (i.e. as a reduction in proceeds), all other acquisition related costs are to be expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed, meeting the conditions for recognition under IFRS 3, are recognised at their fair value at the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the fair value of consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

For each business combination, the Group measures any non-controlling interests in the acquiree at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

Investments in associates

Investments in associates are accounted for using the equity method.

Associates are all entities over which the Group has significant influence but no control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The Group's share of its associates' post-acquisition profits and losses after tax is recognised in the statement of profit or loss each period, and its share of the movement in associates' net assets is reflected in the investments' carrying values in the statement of financial position.

Intangible assets

i. Syndicate capacity

Lloyd's syndicate participations that have been purchased in the Lloyd's capacity auctions are capitalised at cost. Syndicate capacity is considered to have an indefinite life as it will provide benefits over an indefinite future period and is therefore not subject to an annual amortisation charge. The continuing value of the capacity is reviewed for impairment annually by reference to the expected future profit streams to be earned from the cash generating units to which the intangible asset is allocated, with any impairment in value being charged to profit or loss.

ii. Goodwill

Goodwill arising on acquisitions prior to 1 January 1999 was written off to reserves. Goodwill recognised between 1 January 1999 and the date of transition to IFRS (1 January 2004) was capitalised and amortised on a straight-line basis over its estimated useful life. Following the transition to IFRS this goodwill is stated at net book value at 1 January 2004. Goodwill that was recognised subsequent to 1 January 2004 is capitalised.

Goodwill is tested for impairment annually, or when events or changes in circumstance indicate that it might be impaired, by comparing the net present value of the future earnings stream of the cash generating unit to which goodwill has been allocated, against the carrying value of the goodwill and the carrying value of the related net assets.

iii. Other intangible assets

Other intangible assets comprise costs directly attributable to securing the intangible rights to broker and customer relationships and costs directly attributable to internally developed software. Costs are recognised as intangible assets where they can be identified separately and measured reliably and it is probable that they will be recovered by directly related future economic benefits. Other intangible assets are reviewed for impairment losses at each reporting date or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Other intangible assets are carried at cost less accumulated amortisation and impairment losses. Amortisation is recognised in line with the consumption of the benefits based on the estimated useful economic life of the assets, which is estimated to be between five and fifteen years, and is charged to other operating expenses in the statement of profit or loss.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation and provision for impairment where appropriate. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is calculated on the straight-line basis to write down the cost of such assets to their residual values over their estimated useful lives as follows:

Leasehold land and buildings	Over period of lease or 2% per annum
Freehold buildings	2% to 5% per annum
Motor vehicles	33% per annum
Computer equipment	20% to 33% per annum
Furniture, fixtures and leasehold improvements	20% per annum

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstance indicate that the carrying value may be impaired. If any such condition exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment and the difference is charged to profit or loss.

Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are recorded in the statement of profit or loss. Repairs and renewals are charged to profit or loss when the expenditure is incurred. The freehold land is not depreciated.

Financial assets

The Group classifies its financial assets at fair value through profit and loss (FV) or available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Other than investments in certain unlisted insurance intermediaries (see below), the Group classifies its financial investments at FV. This classification requires all fair value changes to be recognised immediately within the investment return line in the statement of profit or loss. Within the FV category, fixed income securities, equity securities, property funds and certain derivatives are classified as 'trading' as the Group buys with the intention to resell. All other assets at FV are classified as 'other than trading' within the FV category as they are managed and their performance is evaluated on a FV basis.

The Group has investments in certain unlisted insurance intermediaries which are treated as available-for-sale and are measured at fair value, unless their fair value cannot be reliably measured, in which case they are valued at cost less impairment.

Changes in the fair value of these investments are included in other comprehensive income in the period in which they arise. They are tested for impairment annually, or when events or changes in circumstances indicate that impairment might have occurred. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of profit or loss as gains and losses from investment securities.

Purchases and sales of investments are recognised on the trade date, which is the date the Group commits to purchase or sell the assets. These are initially recognised at fair value, and are subsequently re-measured at fair value based on quoted bid prices. Transaction costs are recognised directly in the statement of profit or loss when incurred. Changes in the fair value of investments are included in the statement of profit or loss in the period in which they arise. The uncertainty around valuation is discussed further in note 3.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Derivative financial instruments

Derivative financial instruments primarily include currency swaps, currency and interest rate futures, currency options, catastrophe linked instruments and other financial instruments that derive their value mainly from underlying interest rates, foreign exchange rates or catastrophe risk. Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into. They are subsequently measured at fair value, with their fair values obtained from quoted market prices or, where these are not available, by using valuation techniques such as discounted cash flow models or option pricing models. Changes in the fair value of derivative instruments are recognised immediately in the statement of profit or loss unless the derivative is designated as a hedging instrument. As defined by IAS 39, the Group designates certain foreign currency derivatives as hedges of net investments in foreign operations.

The Group documents at the inception of each hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values of hedged items.

Any gain or loss on the hedging instrument related to the effective portion is recognised in other comprehensive income. The fair values of derivative instruments used for hedging purposes are disclosed in note 18. Gains and losses accumulated in equity are included in the statement of profit or loss when the foreign operation is partially disposed of or sold.

Embedded derivatives with risks and characteristics which are not closely related to the host contract, and where the combined instrument is not measured at fair value with changes in fair value recognised in the statement of profit or loss, are separated from the host contract and measured at fair value.

Loans and receivables

Loans and receivables are initially recognised at fair value and subsequently measured at amortised cost using an effective interest rate. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of profit or loss when there is evidence that the asset is impaired. These are reversed when the triggering event that caused the impairment is reversed.

Borrowings

Borrowings are stated initially at the consideration received net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between amortised cost and the redemption value is recognised in the statement of profit or loss over the period of the borrowings. Transaction costs on borrowings are charged to profit or loss over the period of the borrowings.

Finance costs

Finance costs mainly comprise interest payable on subordinated loans and the revolving credit facility, together with commissions charged for the utilisation of letters of credit. These costs are charged to profit or loss as finance costs, as incurred. Fees paid for the arrangement of debt, the revolving credit facility and letter of credit facilities are charged to finance costs over the life of the facility.

Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at fair value. For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand, deposits held on call with banks and other short-term, highly liquid investments which are believed to be subject to insignificant risk of change in fair value.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Treasury shares

Treasury shares are deducted from equity. No gain or loss is recognised on the purchase, sale, issue or cancellation of the treasury shares. Any consideration paid or received is recognised directly in equity.

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) and treasury shares are excluded from the weighted average number of shares.

Basic earnings per share are calculated by dividing profit after tax by the weighted average number of issued shares during the year.

Diluted earnings per share are calculated by dividing profit after tax by the adjusted average number of shares in issue. The adjusted average number of shares assumes conversion of dilutive potential ordinary shares, being shares from the Executive Share Option Scheme, Long Term Incentive Plan (LTIP), Performance Share Plan (PSP), Share Incentive Plan (SIP) and the Sharesave scheme.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards to the Group. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to profit or loss in the period in which they become payable in accordance with the terms of the lease, which is representative of the time pattern of the Group's benefit.

Employee benefits

i. Retirement benefit obligations

The Group participates in a number of pension schemes, including several defined benefit schemes and defined contribution schemes.

The Lloyd's Superannuation Fund scheme is a multi-employer defined benefit scheme. Amlin Europe N.V. participates in two defined benefit schemes. Amlin Re Europe's pension scheme is classified as a defined benefit scheme in accordance with IAS 19.

The defined benefit obligation and associated pension costs are calculated annually by independent actuaries using the projected unit credit method. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final liability. The cost of providing these benefits is charged to profit or loss to spread the pension cost over the service lives of employees. Any re-measurements arising from the recognition and funding of the Group's pension obligations are recognised in other comprehensive income during the period in which they arise.

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the fair value of plan assets less the present value of the defined benefit obligation at the reporting date, together with adjustments for restrictions on the recognition of a defined benefit asset due to an asset ceiling. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using discount rates set on the basis of the yield of high-quality debt instruments (AA rated or equivalent) issued by blue chip companies, with maturities consistent with those of the defined benefit obligations.

In respect of the defined benefit schemes in the Netherlands and Belgium for Amlin Europe N.V., the fair value of the plan assets reflects the benefits that accrue to Amlin Europe N.V. under the insurance policy taken out to meet its obligations. This is also the case for Amlin Re Europe's defined benefit scheme.

Pension contributions to defined contribution plans are charged to profit or loss when due.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

ii. Equity compensation plans (equity-settled)

The Company operates a number of executive and employee share schemes. Options issued after 7 November 2002 are accounted for using the fair value method where the cost for providing equity compensation is based on the fair value of the share option or award at the date of the grant. The fair value is calculated using an option pricing model and the corresponding expense is recognised in the statement of profit or loss over the vesting period. The accrual for this charge is recognised in equity shareholders' funds. When the options are exercised, the proceeds received net of any transaction costs are credited to share capital for the par value and the surplus to share premium.

iii. Other benefits

Other employee incentive schemes and long-term service awards, including the Amlin Capital Builder Plan and sabbatical leave, are recognised when they accrue to employees. A provision is made for the estimated liability for long-service leave as a result of services rendered by employees up to the reporting date.

Other operating income

Fee income received on insurance-related services is recognised as the benefits of the services are provided.

Tax

Income tax expense represents the sum of the current tax payable and deferred tax. The current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of profit or loss because it excludes items of income or expense that are taxable or deductible in other years or that are never taxable or deductible. The Group's and Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised in respect of taxable temporary differences arising on investments in subsidiaries and associates, except where the Group and Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the substantively enacted tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case the deferred tax is also charged or credited directly to other comprehensive income or equity respectively.

Deferred tax is recognised on the profits of foreign subsidiaries where it is reasonably foreseeable that distribution of the profit back to the UK will take place and the UK dividend exemption is not expected to apply.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's and Company's financial statements in the period in which the dividends are approved by the Company's shareholders.

1.   Summary of significant accounting policies and critical accounting judgements and estimates continued

Other payables

Other payables are initially recognised at fair value and subsequently measured at amortised cost. They represent liabilities to pay for goods or services that have been received or supplied in the normal course of business, invoiced by the supplier before the period end, but for which payment has not yet been made.

2.   Capital

The capital structure of the Group consists of equity attributable to owners of the Company, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity and note 26, and subordinated debt as disclosed in note 31. For business planning purposes, account is also taken of the Group's debt facilities as disclosed in note 31.

The method by which the Group manages its capital base is described in the Financial Management section.

During the current and prior periods, the Group complied with all external capital requirements to which it is subject.

In addition to regulatory capital requirements, the Group believes that it should retain a level of capital within the Group to allow it to grow its business in the aftermath of a major insurance disaster, but also to respond to other opportunities to enhance long-term growth, for example through acquisition. The overall capital held by the Group is driven by the business mix, nature and objectives of each division and its context within the wider Group.

UK regulated entities

Amlin Corporate Member Limited

Amlin Corporate Member Limited, which supports Syndicate 2001, is required to hold regulatory capital in compliance with the prudential rules issued by the UK's Prudential Regulation Authority (PRA) and is also subject to Lloyd's capital requirements, including maintaining Funds at Lloyd's (FAL).

Under PRA rules, the corporate member must hold capital in excess of the higher of two amounts. The first is the Minimum Capital Requirement (MCR), as prescribed by EU directives, calculated by applying fixed percentages to premium and claims and allowing for historic reinsurance recoveries.

The second is an Individual Capital Assessment (ICA) calculated internally under the Individual Capital Adequacy Standards (ICAS) regime. The ICA is defined as the level of capital that is required to contain the probability of insolvency, over a one year timeframe, to no greater than 0.5% (1:200).

Lloyd's require the preparation of a Lloyd's Capital Return (LCR), including a statement of financial position prepared under Solvency II principles and the calculation of an ultimate Solvency Capital Requirement (uSCR). The uSCR takes account of one year of new business in full attaching to the next underwriting year and the risks over the lifetime of the liabilities ('to ultimate'). The requirements include risks for all business attaching to the next underwriting year. This is an equivalent recognition of risks and exposures at a 1:200 confidence level as required under ICAS at Lloyd's.

The final capital requirement, the Economic Capital Assessment (ECA), is then subject to a minimum of 40% (2012: 40%) of the Syndicate's agreed premium capacity limit. At 31 December 2013, the agreed ECA as a percentage of the agreed underwriting capacity for the following underwriting year was 46.4% (2012: 44.3%).

The Syndicate also benefits from mutualised capital within the Lloyd's Central Fund, for which a variable annual levy, for 2013 of 0.5% (2012: 0.5%) of Syndicate gross premium, is payable.

The LCR is expected to be reviewed annually by Lloyd's (as was the ICA previously) and periodically by the PRA. The PRA expects management to apply their rules continuously. If a firm's capital falls below its ECA, steps must be taken to restore capital adequacy. Due to the nature of the Lloyd's capital setting process, FAL requirements are formally assessed and funded twice yearly at discrete periods and must be met for the Syndicate to continue underwriting.

2.   Capital continued

At 31 December 2013, Amlin Corporate Member Limited funded the agreed FAL requirement of £649.6 million (2012: £620.2 million) to support underwriting for the 2014 underwriting year. Net of credit for the reserve margin this equates to £540.6 million (2012: £542.7 million).

The increase of £29.4 million is largely driven by anticipated rate reductions for 2014 renewals, predominantly on catastrophe exposed accounts; and the impact of weaker sterling rates of exchange at the time of Lloyd's planning and capital-setting.

The Group does not seek to retain any assets in excess of the Lloyd's capital requirement within the Lloyd's framework and any surplus is paid to the corporate entities in the Group.

Amlin Insurance (UK) Limited

Amlin Insurance (UK) Limited is also required to hold minimum levels of regulatory capital in compliance with the prudential rules issued by the PRA. The MCR for Amlin Insurance (UK) Limited is currently the sterling equivalent of €3.7 million (£3.1 million). In addition to holding overall admissible capital in excess of MCR, Amlin Insurance (UK) Limited is required to pass a number of capital tests to demonstrate solvency, with rules restricting admissibility of certain types of capital.

Other regulated entities

Amlin AG

Amlin AG is supervised by the Swiss Financial Market Supervisory Authority (FINMA) as well as the Bermuda Monetary Authority (BMA).

FINMA supervision is composed of various qualitative assessments, governance requirements and minimum solvency levels. Amlin AG provides regulatory solvency reporting to FINMA, under the rules of Solvency I and the Swiss Solvency Test (SST). Solvency I is based on the Swiss statutory financial statements and the required capital is calculated as a fixed percentage of premiums, claims incurred and/or net amounts at risk. The SST is based on an economic view and required capital is derived from an internal capital model.

Whilst the internal model is still subject to final approval by FINMA, it has been temporarily approved by FINMA until 31 December 2015. Amlin AG calculates available and required capital under the SST using the aforementioned model. The minimum ratio for Solvency I as well as for the SST is set at 100% (the SST minimum ratio became legally binding in 2011). For both ratios Amlin AG exceeds the 100% minimum ratio.

Under BMA regulations, Amlin AG is licensed as a Class IV insurer and the minimum solvency margin is the greater of US$100 million, 50% of net premiums written in the current financial year, 15% of claims reserves and the Enhanced Capital Requirement (ECR).

The ECR is calculated on an annual basis through either the Bermuda Solvency Capital Requirement (BSCR) model or an approved internal model. In addition, as a Class IV insurer, the company is required to maintain a minimum liquidity ratio such that the value of 'relevant assets' is not less than 75% of its 'relevant liabilities'. Amlin AG met this requirement at 31 December 2013.

For trading purposes, Amlin AG believes that it is necessary to hold at least US$1 billion of capital, which is currently in excess of the minimum required by the BMA and FINMA.

 

Amlin Europe N.V.

Amlin Europe N.V. is required to hold regulatory capital in compliance with the rules issued by its regulator De Nederlandsche Bank (DNB), and as prescribed by EU directives. DNB supervision comprises various qualitative assessments, governance requirements and minimum solvency levels. Currently Amlin Europe N.V. provides regulatory solvency reporting to DNB, under the rules of Solvency I.

2.   Capital continued

At 31 December 2013, the minimum required capital for Amlin Europe N.V. amounted to €95.8 million (2012: €105.3 million). The minimum capital requirement is calculated by applying fixed percentages to premiums and claims.

At 31 December 2013, Amlin Europe N.V. complied with external capital requirements. For trading purposes, Amlin Europe N.V. holds capital in excess of the minimum required by the DNB.

3.   Risk disclosures

3.1  Underwriting risk

The Group accepts underwriting risk in a range of classes of business through Lloyd's Syndicate 2001, Amlin Europe N.V., Amlin AG (including its branch operation, Amlin Bermuda) and Amlin Insurance (UK) Limited. Syndicate 2001's portfolio is underwritten by Amlin London and Amlin UK. The bias of the Group's portfolio is towards short-tail property and accident risk but liability coverage is also underwritten.

In underwriting insurance or reinsurance policies, the Group's underwriters use their skill and knowledge to assess each risk. Exposure information and data on past claims experience is used to evaluate the likely claims cost and therefore the premium that should be sufficient (across a portfolio of risks) to cover claims costs, expenses and to produce an acceptable profit. However, due to the nature of insurance risk, there is no guarantee that the premium charged will be sufficient to cover claims costs. This shortfall may originate either from insufficient premium being calculated and charged or may result from an unexpected, or unprecedented, high level of claims.

A number of controls are deployed to control the amount of insurance exposure underwritten. Each year a business plan is prepared and agreed by the boards of Amlin plc and its subsidiaries. This plan is used to monitor the amount of premium income, and exposure, written in total and for each class of business. Progress against this plan is monitored during the year.

Apart from the UK, European and international comprehensive motor liability portfolios, which have unlimited liability, all policies have a per loss limit which caps the size of any individual claim. For larger sum insured risks, facultative reinsurance coverage may be purchased. The Group operates line guides that determine the maximum liability per policy that can be written for each class (on a gross or net of facultative reinsurance basis) by each underwriter. These limits can be exceeded in exceptional circumstances with the approval of senior management.

The Group is also exposed to catastrophe losses which may impact many risks in a single event. Reinsurance is purchased to limit the impact of loss aggregation from such events. These reinsurance arrangements are described in the section on page 50.

Insurance policies are written through individual risk acceptances, reinsurance treaties or through facilities whereby the Group is bound by other underwriting entities. Facility arrangements delegate underwriting authority to other underwriters, or to agents acting as coverholders, that use their judgement to write risks on the Group's behalf under clear authority levels.

The insurance policies underwritten by the Group are reviewed on an individual risk, or contract, basis and through review of portfolio performance. Claims arising are reserved upon notification. Each quarter the entire portfolio of business is subject to a reserving process whereby levels of paid and outstanding (advised but not paid) claims are reviewed. Potential future claims are assessed with a provision for incurred but not reported (IBNR) claims being made. Whilst a detailed and disciplined exercise is carried out to provide for claims notified, it is possible that known claims could develop and exceed the reserves carried.

3.   Risk disclosures continued

Furthermore, there is increased uncertainty in establishing an accurate provision for IBNR claims and there is a possibility that claims may arise which, in aggregate, exceed the reserve provision established. This is partly mitigated by the reserving policy adopted by the Group which is to carry reserves in excess of the strict 50:50 actuarial best estimate.

The review of claims arising may result in underwriters adjusting pricing levels to cater for an unexpectedly higher trend of claims advices or payments. However, this may not be possible in a competitive market and underwriters may respond either by accepting business with lower expected profit margins or declining to renew policies and thus reducing income. Also, there is a portfolio of risks already underwritten which cannot be re-priced until renewal at the end of the policy period.

The Group is exposed to the impact of large catastrophe events such as windstorms, earthquakes or terrorist incidents. Exposure to such events is controlled and measured through loss modelling. It is possible that a catastrophe event could exceed the maximum expected event loss. This is particularly the case for the direct property proportion of the loss exposure, where models are used to calculate a damage factor representing the amount of damage expected to exposed aggregate insured values from a particular scenario. Errors, or incorrect assumptions in the damage factor calculation, can result in incurred catastrophe event claims higher, or lower, than predicted due to unforeseen circumstances, or inadequacies in data, or the models used.

As explained on page 50, reinsurance is purchased to protect against the impact of any individual or series of severe catastrophes. However, the price and availability of such cover is variable and the amount of loss retained by the Group may therefore also increase or reduce. The Group will alter its insurance and reinsurance exposures to take account of changes in reinsurance availability and cost, capital levels and profitability in order to remain within the risk appetite guidelines.

Sections A and B below describe the insurance and reinsurance portfolios written by the Group and the associated risks of such business. Section C summarises the business written by each operating division.

A. Direct insurance and facultative reinsurance

A. (i) Property - direct and facultative

Property cover is provided to large commercial enterprises with high-value, single locations and/or many locations, and also for small commercial property. The perils covered include fire, flood, wind and earthquake damage. Business interruption cover is also provided for loss of earnings sustained due to the perils and properties covered but may also be extended to connected enterprises.

There may also be a risk of contingent business interruption claims.

Terrorism cover is given on a limited basis, particularly where required by local regulation, but nuclear and bio-chemical coverage is excluded from standard property cover in most territories.

Property insurance is written for the full value of the risk, on a primary or excess of loss basis, through individual placements, or by way of delegated underwriting facilities given to coverholders ('binding authorities'). Binding authority arrangements delegate the day-to-day underwriting to underwriting agents and therefore, for these contracts, the Group is reliant on coverholders exercising underwriting judgement on its behalf. Coverholders must have local regulatory approval (including Lloyd's where relevant), and also be approved by the Local Binding Authority Committees.

3.   Risk disclosures continued

For binding authority facilities, the Group receives monthly or quarterly bordereaux which are checked by underwriting staff. The underwriting is controlled by setting clear authority levels for coverholders stipulated within the binding authority agreement, regularly monitoring performance and periodically carrying out underwriting visits and/or commissioning third party audits.

The coverholder is incentivised to produce an underwriting profit through the payment of profit commission. However, with the day to day underwriting not controlled by the Group, there is a risk that coverholder underwriting, or claim decisions, are made which would not have been made by Amlin underwriters or claims staff.

As well as natural catastrophes, the property portfolio is also exposed to an above average frequency of individual fire, explosion or weather related claims. The premium charged for the coverage given may not be sufficient to cover all claims made in any year, particularly in a year in which there is an abnormal frequency of claims. The US account is particularly exposed to large catastrophe events, such as California earthquake, tornado and hurricane losses.

In the UK, standalone property protection is written mainly on a 100% basis for small and medium commercial and household properties. Package policies combine one or more liability coverages (mainly employers' and public liability) with motor and/or property damage protection.

This portfolio is exposed to European weather conditions whereby a large windstorm, flood or winter freeze could result in a large number of small claims.

The European property account mainly comprises large schedules of properties (e.g. for municipalities) written on a co-insurance basis in the Netherlands and larger commercial industrial clients in Belgium and France. Overseas exposure is written mainly from the large commercial industrial portfolio where there are client or other incidental operations overseas. The engineering book includes contractors all risks, machinery breakdown and some computer equipment.

A. (ii) Casualty - direct insurance

The US casualty insurance account provides insurance cover to individuals, or companies, in order to indemnify them against legal liability arising from their activities and actions or for incidents occurring on their property.

The portfolio is made up of specialist general casualty, professional indemnity, medical malpractice and errors and omissions cover. Small amounts of directors' and officers' liability and auto liability are also written. Professional lines liability cover is written by a dedicated underwriting team. This class includes professional indemnity cover given to US lawyers, accountants, architects and engineers.

The casualty portfolio is mostly written on a claims notified basis (responding to all claims made during a defined period) except for small amounts of general liability business which may be written on a losses occurring basis (the policy responds to losses which occur during the period even if reported after the policy has expired).

Claims from this class emanate from professional error, negligence or an accident which causes injury, damage or financial loss. The account is vulnerable to a high frequency of claims, but not individual large losses as the cost to the Group of any individual claim is small due to line size. Claims frequency may be impacted by a generic claim type which impacts many individuals and (re)insurance policies such as poor housing design or bad medical practice. The size of many individual claims is subject to the decisions arising from the US court system which can be higher than anticipated. There is also the potential for US courts to impose a 'bad faith' judgement on insurers if it is deemed that the insurer has acted improperly in trying to avoid contractual obligations. Such awards can, in exceptional circumstances, be much higher than the value of the insurance claim.

3.   Risk disclosures continued

The Group's international liability portfolio predominantly protects insured's domiciled in the UK, Ireland, France, Belgium and the Netherlands. There is also some Canadian business. An international casualty team was established in 2012 to develop business in other territories, including Australia. A portfolio of professional indemnity and general liability business is written in the Netherlands, on a claims made basis with a particular focus on property related professions and miscellaneous professions such as travel operators. In Belgium, medical liability and general liability are written on a losses occurring basis.

In the UK and Ireland employers' liability insurance protects employers against accident or injury to employees. This is written on a losses occurring basis.

Public liability insurance in the same territories provides coverage, often written in conjunction with employers' liability, for accident or injury occurring to clients, customers or other third parties as a result of contact with the insured's personnel, property or products. This is written on a losses occurring basis.

Professional indemnity business written in the UK covers liability which may arise from services provided by the assured, for example, as a result of negligence or error which may lead to financial or physical loss. This includes, but is not limited to, services from architects, engineers, surveyors, advertising firms, medical professionals and financial advisors. This portfolio is written on a claims made basis.

Through AUA Insolvency Risk Services Limited, a FCA registered broker, the Group writes a portfolio of UK insolvency practitioners business providing protection against fraud or negligence committed by the practitioners. Such cover also protects the property assets under their management.

The Group also writes a small account of financial institutions policies covering fidelity, professional indemnity and directors' and officers' liability for companies providing financial services. Approximately half of the income is from western European financial institutions with the balance spread broadly by territory. Coverage is given on a claims made basis.

The expected claims costs from these lines of business may be impacted by larger than anticipated damage awards to injured parties, as well as due to an unforeseen increase in generic claims such as industrial disease or other health hazards. It is expected that claims frequency will increase during an economic downturn as unemployment leads to an increase in action against employers and people are more likely to seek redress for third party advice or behaviour which may have led to financial loss or injury. It is also possible that multiple claims could arise under multiple policies from a common cause such as financial advice or generic building defects. The financial institutions account could be affected by a major fraud or a series of related liability claims arising from banking, investment activity, stockbroking or other practices.

A. (iii) Motor - direct insurance

The Group's UK motor insurance account provides protection for fire, theft, collision and third party property and bodily injury liability. Under the requirements of UK law, third party liability coverage is unlimited, but matching reinsurance is purchased. The account is biased towards commercial clients such as coach operators, haulage companies, commercial vehicle fleets and company executive fleets. A small UK agriculture facility, a taxi book and a specialist private car account are also written.

The Benelux commercial motor account is comprised of domestic company fleets including a large leasing and rental fleets, portfolio written in the Netherlands and a smaller portfolio in Belgium. Cars, vans or commercial vehicles account for over 70% of the book.

3.   Risk disclosures continued

Claims frequency has improved in recent years due to car and road safety measures, but can fluctuate due to factors such as weather conditions. Inflation is a key factor in determining the size of motor claims. Car values affect the size of theft claims and for physical damage claims size is linked to repair costs. Inflationary pressure on court awards within the European legal systems impacts liability claim values. This issue is evidenced in the UK through the provision for Periodic Payment Orders (PPOs) which spread insurers' payment liabilities for bodily injury claims over future years. Government intervention, such as liability award limit changes or expense recoveries for government bodies, for example the UK National Health Service, will also impact claim size. For the motor account, severe bodily injury and catastrophe damage claims (e.g. UK flood) are limited through the purchase of a reinsurance programme, the highest layer of which is unlimited.

Motor insurance is a highly competitive area of insurance and pricing levels fluctuate. Whilst underwriters accept business subject to sufficient rates per vehicle, in a year where there is an unexpectedly high level of claims the total premium may not be sufficient to cover all the claims. There is also a risk that legal changes impact bodily injury payments and result in a requirement to increase reserves for outstanding claims.

Auto business is also written covering property damage only (fire, theft and collision) in the US and property damage and third party motor liability combined cover in other international territories. This class could be impacted by unexpected claim frequency, a multi vehicle event, such as a severe flood and also large bodily injury award claims emanating from an accident.

A. (iv) Personal accident - direct insurance

The accident and health class is written through medical expense schemes in the US and direct personal accident cover on a worldwide basis. Medical expense cover is subject to a high frequency of claim and significant medical cost inflation. Personal accident insurance could be impacted by a single or series of accidents to high-value insured individuals or from a multiple death and injury event such as an air crash or natural catastrophe. 

A. (v) Marine and aviation - direct insurance and facultative reinsurance

The hull and cargo account is worldwide, covering property damage to ships and loss, or damage, to a large variety of cargo or goods in transit. The hull account can include machinery breakdown and the portfolio written includes lower-value tonnage, smaller 'brown water' vessels and fishing boats as well as larger 'blue water' ocean hull risks such as cruise liners, tankers and bulk carriers. These accounts can be impacted by attritional claims of a small size as well as a single individual large claim. The cargo account in particular could also be involved in a major natural catastrophe loss. In an economic recession, it is expected that premium income will fall as trade reduces and hull values are impacted by reduced freight rates. It is also possible that claims frequency could increase due to increased economic pressures affecting fraud and theft claims.

The Benelux portfolio includes a commodities book for Belgian and French trading corporations, in addition to hull, land equipment, shipbuilders' risk, inland hull and large yachts.

The energy portfolio is mainly offshore rig and construction policies, which may be impacted by large individual claims from construction fault or property damage such as fire or explosion, but is also exposed to severe catastrophe losses, for example, in the North Sea and Gulf of Mexico. The account includes control of well to limit loss of oil and avoid pollution and also some business interruption cover which indemnifies companies for loss of production.

War business includes marine, aviation and on land terrorism coverage. The account is exposed to single incidents or a series of losses arising from concerted action. Political risk, confiscation and contract frustration business is also written.

3.   Risk disclosures continued

Yacht business covers property damage and third party injury for small leisure boats and craft. The UK domestic account is comprised of smaller value yachts in the UK and Europe, although there are a number of binders written by coverholders elsewhere, such as Scandinavia, Canada and Australia. There is an expectation of a large number of small claims, as average values are low in comparison to other policies written in the Group. Third party liability yacht claims arise from injury or damage caused by one of our policyholders to third parties. There is also the potential for a large catastrophe loss, such as a UK windstorm, where there are large aggregate sums insured in coastal regions such as southern England. Amlin Europe and the wholly owned coverholder Lead Yacht write shares of a portfolio of large private yachts.

The marine liability portfolio is written to protect ship-owners, harbours, charterers and energy companies against damage or injury to crew or third parties. This includes the potential for pollution damage and clean up claims. The account could suffer a large catastrophe incident from a collision causing death of crew and passengers or an oil, or chemical, spill which could incur large clean up costs.

Specie, bloodstock and livestock business are also written within the Marine and Aviation Business Unit of Syndicate 2001.

Specie business consists of the insurance against damage or theft to fine art, the contents of vaults and other high-value goods including jewellers' block and cash in transit. The fine art may be shown at exhibitions which have very high aggregate values at risk. The class is therefore exposed to the potential for a frequency of small claims and also large individual losses. Some specie is written in catastrophe zones, e.g. California, and may be exposed to terrorist events.

The bloodstock account provides coverage for death, illness or injury to horses mainly in the UK. Business from the US, Australia and South Africa is also written. This covers racing or eventing horses and breeding studs. The average value insured is below £1 million but there is the potential for an aggregate loss, such as a stable fire, which could cause multiple claims.

Crowe Livestock, a leading Lloyd's coverholder for the insurance of livestock, writes a broad portfolio of protection for livestock and specialist products such as zoo animals, with a maximum line of any one policy of US$10 million. The company also writes employers' liability cover for livestock business up to a limit of £10 million. Again, an event affecting several animals across many policies such as disease could result in a loss significantly higher than this.

The aviation airline account is exposed to large claims arising from property damage, death or injury arising from aircraft accidents. The domicile of the airline and passengers has a notable influence on the cost of claims, for example, US court awards are generally higher. The general aviation account covers smaller aircraft or cargo and covers owners or operators, against loss or damage and third party injury. The risk excess account is a book of general aviation reinsurance business written to protect a small number of insurers against large general aviation claims.

Airport liability insurance covers airport operators, refuellers and air traffic controllers against losses arising from injury caused by their activities or occurring on their premises. Product liability covers manufacturers against accidents arising from faulty parts or equipment, or poor servicing of aircraft. Both airport and product liability coverage is written on a losses occurring basis, meaning that claims advices can be made after the policy has expired. Space liability insurance covers launch and operation of satellites whilst in orbit for a limited period, normally
of one year.

The aviation account is subject to both small and large claims. Claims involving loss of life or serious injury to high-earning passengers or third parties are subject to the ongoing inflation of court awards particularly in the US. Large accidents involving the potential death of 500 or more passengers are feasible and could potentially result in a gross claim to the business of more than the vertical reinsurance programme if, for example, two large aircraft were to collide.

3.   Risk disclosures continued

A. (vi) Special risks - direct insurance

The direct special risks class is largely made up of insurance of nuclear installations, contingency business and film finance risk.

Transmission and distribution business is also written. This account is generally written without reinsurance protection.

There is a small portfolio of captive business written in Belgium where Amlin Europe acts as a fronting carrier for captive reinsurers of large industrial companies. Captives are subject to detailed financial analysis to manage potential credit risk.

B. Treaty reinsurance

B. (i) Property - reinsurance

Catastrophe reinsurance protects insurance companies against catastrophic losses, such as windstorm or earthquake, which may impact more than one risk written by the client. The catastrophe excess of loss portfolio is a key part of the reinsurance risk written by the Group.

These programmes are placed on a layered or excess of loss basis. Territorial exposures, from a number of programmes, are carefully recorded and analysed through loss simulations or realistic disaster scenarios but represent significant loss exposure to natural or man-made catastrophes.

Aggregate excess of loss programmes are also written providing protection in the event of multiple loss events.

Per risk property reinsurance is also written on an excess of loss basis but covers loss or damage to any single risk within the reinsured's portfolio. This portfolio protects insureds against large individual property losses and will also be affected by large catastrophe losses.

Proportional property reinsurance covers a proportionate share of a reinsured's portfolio of business subject to payment of commission and/or profit commission. Proportional property business is normally written with an occurrence limit.

The Group's portfolio of property reinsurance business is written with the aim of achieving territorial diversification. However, as experienced in 2011, a single or series of severe catastrophes to major economic zones in Europe, Japan, Australasia or the US is likely to result in a loss to the portfolio prior to retrocessional reinsurance. For each operating division, overall catastrophe loss limits are applied in relation to specific scenarios as an allocation of total Group tolerances.

B. (ii) Casualty - reinsurance

The US casualty reinsurance account provides cover for reinsureds in respect of legal liability arising from insureds' activities and actions or for incidents occurring on insureds' properties. The portfolio is written on both an excess of loss and proportional basis but most underlying policies are on a claims notified basis (responding to all claims made during a defined period). The portfolio includes specialist general casualty, professional indemnity, medical malpractice and errors and omissions cover. Small amounts of directors' and officers' liability and auto liability are also written.

US Workers Compensation Act/casualty class excess of loss business may be impacted by large catastrophic events such as earthquake.

International liability reinsurance business is mainly general third party liability protecting companies against significant public or products liability claims, written on a proportional or excess of loss basis. The liability account also includes some professional liability reinsurance.

3.   Risk disclosures continued

The construction and engineering portfolio provides liability and property reinsurance cover for construction projects which maybe of several years' duration.

B. (iii) Motor - reinsurance

Motor reinsurance is written on a proportional and excess of loss basis. This portfolio is at risk from increases in frequency or severity of motor accident claims and bodily injury or third party property claims payments which may take several years to settle. Unlimited and limited motor business is written. Whilst the original premium and the investment income generated are expected to be more than sufficient to meet such claims, there is no guarantee that this will be the case, particularly due to inflation or superimposed inflation resulting from changes to court awards. The aim is to diversify the portfolio across several territories in order to reduce the impact of a single legal jurisdiction revising its claims policy.

B. (iv) Personal accident - reinsurance

Personal accident reinsurance is written on a worldwide basis. Such business could be impacted by a single or series of accidents to high value insured individuals or from a multiple death and injury event, such as an air crash or natural catastrophe.

 

B. (v) Marine and aviation - reinsurance

The Group's portfolio of aviation and marine excess of loss reinsurance protects insurers against losses to their direct portfolios of business on a worldwide basis. This will include offshore energy business, specie and other static risks written in reinsured companies' marine portfolios. The marine account, in particular, is exposed to catastrophe losses as well as large individual risk losses.

B. (vi) Special risks - reinsurance

The special risks reinsurance account is predominantly made up of terrorism excess of loss and nuclear reinsurance emanating from all parts of the world and written without excess of loss reinsurance protection. The portfolio also includes short-term trade credit and contingency business as well as trade credit reinsurance which protects reinsureds against the non-payment of monies or goods or services due from trade partners locally or overseas. Satellite physical damage cover is also written in the special risks account.

.     Risk disclosures continued

C. Business written and maximum risk limit by operating divisions

Direct insurance and facultative reinsurance

At 31 December 2013	Amlin London Gross written premium £m	Amlin UK Gross written premium £m	Amlin Europe Gross written premium £m	Amlin London Max line size £m	Amlin UK Max line size £m	Amlin Europe Max line size £m	Amlin London Average line size £m	Amlin UK Average line size £m	Amlin Europe Average line size £m
(i) Property - direct and facultative
Direct and facultative property	123	-	-	23	-	-	2	-	-
Binding authorities	41	-	-	2	-	-	1	-	-
UK/Europe property/package	-	123	104	-	52	42	-	<1	3
(ii) Casualty - direct insurance
International casualty	22	-	-	17	-	-	6	-	-
Casualty	31	-	-	3	-	-	1	-	-
Professional lines	13	-	-	7	-	-	1	-	-
Employers' liability	-	25	-	-	27	-	-	10	-
Liability	-	-	81	-	-	11	-	-	2
Public/products liability	-	23	-	-	12	-	-	4	-
Financial institutions fidelity and liability	-	7	-	-	16	-	-	2	-
Professional indemnity	-	45	-	-	16	-	-	2	-
Engineering	-	-	22	-	-	21	-	-	3
(iii) Motor - direct insurance
US/International auto	35	-	-	1	-	-	1	-	-
UK/Europe motor	-	154	43	-	Unlimited	Unlimited	-	Unlimited	Unlimited
(iv) Personal accident - direct insurance
Accident and health	26	-	-	3	-	-	1	-	-
(v) Marine and aviation - direct insurance and facultative reinsurance
Hull	47	-	69	13	-	21	2	-	2
Cargo	36	-	43	20	-	21	6	-	1
Energy	57	-	-	25	-	-	4	-	-
War and terrorism	33	-	-	50	-	-	9	-	-
Specie	16	-	-	24	-	-	6	-	-
Bloodstock/livestock	24	-	-	4	-	-	1	-	-
Yacht (hull & liability)	34	-	-	5	-	-	2	-	-
Liability	39	-	-	33	-	-	7	-	-
Protection and indemnity	-	-	55	-	-	42	-	-	14
Airline (hull & liability)	20	-	-	67	-	-	23	-	-
General aviation (hull & liability)	14	-	-	40	-	-	14	-	-
Risk excess	4	-	-	57	-	-	7	-	-
Airports liability	8	-	-	57	-	-	24	-	-
Products	5	-	-	50	-	-	19	-	-
Space (liability)	-	-	-	-	-	-	-	-	-
(vi) Special risks - direct insurance
Special risks	7	-	18	97	-	21	5	-	4
Total direct insurance and facultative reinsurance	635	377	435

Note:

1.  Amlin London limits are set in US dollars converted to sterling at a rate of exchange of £1=US$1.5 and Amlin Europe limits are set in Euros converted to sterling at a rate of exchange of £1=€1.2. Therefore, currency rate of exchange changes may increase or reduce the sterling limits.

2.  Amlin London maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda.

3.  Gross written premium is stated gross of acquisition costs and excludes adjustments in respect of prior periods.

4. Gross written premiums are converted to sterling using the year end average rates set out in note 33.

3.   Risk disclosures continued

At 31 December 2012	Amlin London Gross written premium £m	Amlin UK Gross written premium £m	Amlin Europe Gross written premium £m	Amlin London Max line size £m	Amlin UK Max line size £m	Amlin Europe Max line size £m	Amlin London Average line size £m	Amlin UK Average  line size £m	Amlin Europe Average  line size £m
(i) Property - direct and facultative
Direct and facultative property	112	-	-	23	-	-	3	-	-
Binding authorities	33	-	-	2	-	-	<1	-	-
UK/Europe property/package	-	140	110	-	52	42	-	1	4
(ii) Casualty - direct insurance
International casualty	3	-	-	17	-	-	8	-	-
Casualty	19	-	-	3	-	-	<1	-	-
Professional lines	6	-	-	7	-	-	1	-	-
Employers' liability	-	22	-	-	27	-	-	10	-
Liability	-	-	79	-	-	11	-	-	2
Public/products liability	-	24	-	-	12	-	-	4	-
Financial institutions fidelity and liability	-	7	-	-	6	6	-	2	2
Professional indemnity	-	38	-	-	16	-	-	2	-
Engineering	-	-	22	-	-	21	-	-	3
(iii) Motor - direct insurance
US/International auto	28	-	-	1	-	-	1	-	-
UK/Europe motor	-	132	37	-	Unlimited	Unlimited	-	Unlimited	Unlimited
(iv) Personal accident - direct insurance
Accident and health	30	-	-	3	-	-	1	-	-
(v) Marine and aviation - direct insurance and facultative reinsurance
Hull	40	-	65	13	-	21	2	-	3
Cargo	31	-	59	20	-	21	5	-	1
Energy	67	-	-	25	-	-	4	-	-
War and terrorism	34	-	-	50	-	-	10	-	-
Specie	15	-	-	24	-	-	6	-	-
Bloodstock/livestock	27	-	-	4	-	-	1	-	-
Yacht (hull & liability)	30	-	-	5	-	-	2	-	-
Liability	36	-	-	57	-	-	6	-	-
Protection and indemnity	-	-	61	-	-	42	-	-	17
Airline (hull & liability)	19	-	-	83	-	-	26	-	-
General aviation (hull & liability)	8	-	-	57	-	-	15	-	-
Risk excess	5	-	-	57	-	-	8	-	-
Airports liability	8	-	-	57	-	-	27	-	-
Products	5	-	-	50	-	-	20	-	-
Space (liability)	2	-	-	40	-	-	14	-	-
(vi) Special risks - direct insurance
Special risks	6	-	19	97	-	21	8	-	4
Total direct insurance and facultative reinsurance	564	363	452

Note:

1.  Amlin London limits are set in US dollars converted to sterling at a rate of exchange of £1=US$1.5 and Amlin Europe limits are set in Euros converted to sterling at a rate of exchange of £1=€1.2. Therefore, currency rate of exchange changes may increase or reduce the sterling limits.

2.  Amlin London maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda.

3.  Gross written premium is stated gross of acquisition costs and excludes adjustments in respect of prior periods.

4. Gross written premiums are converted to sterling using the year end average rates set out in note 33.

3.   Risk disclosures continued

C. Business written and maximum risk limit by operating divisions

Treaty reinsurance

At 31 December 2013	Amlin London Gross written premium £m	Amlin Bermuda Gross written premium £m	Amlin Re Europe Gross written premium £m	Amlin London Max line size £m	Amlin Bermuda Max line size £m	Amlin Re Europe Max line size £m	Amlin London Average line size £m	Amlin Bermuda Average line size £m	Amlin Re Europe Average line size £m
(i) Property - reinsurance
Catastrophe reinsurance (per programme)	270	183	33	57	50	17	4	4	3
Per risk property reinsurance (per programme)	63	35	16	23	9	17	2	2	2
Proportional reinsurance	58	73	47	5	9	17	1	1	1
Engineering	-	-	23	-	-	17	-	-	2
(ii) Casualty - reinsurance
International casualty	-	-	-	-	-	-	-	-	-
Casualty	38	9	-	3	3	-	<1	1	-
Liability	-	-	26	-	-	17	-	-	1
(iii) Motor - reinsurance
Motor (limited)	-	-	45	-	-	17	-	-	2
(iv) Personal accident - reinsurance
Accident and health	9	-	-	3	-	-	1	-	-
Personal accident	-	2	2	-	7	17	-	3	1
(v) Marine and aviation - reinsurance
Marine reinsurance (per programme)	27	4	7	76	50	17	2	4	1
Aviation reinsurance (per programme)	6	-	-	31	-	-	2	-	-
(vi) Special risks - reinsurance
Special risks	29	35	6	38	27	17	3	3	3
Surety	-	-	2	-	-	4	-	-	1
Total treaty reinsurance	500	341	207

Note:

1.  Amlin London and Amlin Bermuda limits are set in US dollars converted to sterling at a rate of exchange of £1=US$1.5 and Amlin Re Europe limits are set in Euros converted to sterling at a rate of exchange of £1=€1.2. Therefore, currency rate of exchange changes may increase or reduce the sterling limits.

2.  Amlin London maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda.

3.  Gross written premium is stated gross of acquisition costs and excludes adjustments in respect of prior periods.

4. Gross written premiums are converted to sterling using the year end average rates set out in note 33.

3.   Risk disclosures continued

At 31 December 2012	Amlin London Gross written premium £m	Amlin Bermuda Gross written premium £m	Amlin Re Europe Gross written premium £m	Amlin London Max line size £m	Amlin Bermuda Max line size £m	Amlin Re Europe Max line size £m	Amlin London Average line size £m	Amlin Bermuda Average line size £m	Amlin Re Europe Average line size £m
(i) Property - reinsurance
Catastrophe reinsurance (per programme)	274	196	32	57	50	17	4	5	3
Per risk property reinsurance (per programme)	71	38	17	23	9	17	2	2	3
Proportional reinsurance	42	48	37	5	9	17	2	1	1
Engineering	-	-	18	-	-	17	-	-	1
(ii) Casualty - reinsurance
International casualty	1	-	-	17	-	-	4	-	-
Casualty	36	6	-	3	3	-	1	1	-
Liability	-	-	11	-	-	17	-	-	1
(iii) Motor - reinsurance
Motor (limited)	-	-	36	-	-	17	-	-	2
(iv) Personal accident - reinsurance
Accident and health	-	-	-	-	-	-	-	-	-
Personal accident	-	2	2	-	7	17	-	3	1
(v) Marine and aviation - reinsurance
Marine reinsurance (per programme)	25	2	7	76	50	17	2	9	1
Aviation reinsurance (per programme)	4	-	-	31	-	-	2	-	-
(vi) Special risks - reinsurance
Special risks	27	42	5	38	27	17	3	3	2
Surety	-	-	1	-	-	4	-	-	1
Total treaty reinsurance	480	334	166

Note:

1.  Amlin London and Amlin Bermuda limits are set in US dollars converted to sterling at a rate of exchange of £1=US$1.5 and Amlin Re Europe limits are set in Euros converted to sterling at a rate of exchange of £1=€1.2. Therefore, currency rate of exchange changes may increase or reduce the sterling limits.

2.  Amlin London maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda.

3.  Gross written premium is stated gross of acquisition costs and excludes adjustments in respect of prior periods.

4. Gross written premiums are converted to sterling using the year end average rates set out in note 33.

3.   Risk disclosures continued

Reinsurance and other risk mitigation arrangements

Syndicate 2001 purchases proportional reinsurance to supplement line size and to reduce exposure on individual risks, notably for large property risks. Part of the premium ceded under such facilities is placed with Amlin Bermuda and Amlin Europe N.V.  Since 2009, a separate proportional facility has protected the excess of loss reinsurance portfolio through a Special Purpose Syndicate (SPS) at Lloyd's, Syndicate 6106. The SPS was not renewed at 1 January 2014.

Syndicate 2001 purchases a number of excess of loss reinsurances to protect itself from severe frequency or size of losses. The structure of the programme and type of protection bought will vary from year to year depending on the availability and price of cover.

On large risks, individual facultative reinsurance may be bought which protects against a loss to that specific risk.

Specific risk excess of loss reinsurance is purchased for each class of business. The amount of cover bought depends upon the line size written for each class. The deductibles, or amounts borne prior to recovery, vary from class to class as do the amounts of co-reinsurance or unplaced protection. Specific programmes are purchased to deal with large individual risk losses, such as fire or large energy losses, and these programmes may be combined at a higher level into a general programme for larger losses.

UK direct property business is protected by a European wind programme which also protects Amlin Europe N.V.

The combined claims to Syndicate 2001 from several policies which may aggregate in a single catastrophe event are protected by catastrophe cover. A separate excess of loss programme is purchased to protect the excess of loss reinsurance portfolio against such losses.

For 2014, the Florida windstorm deductible is US$75 million for a first loss with lower deductibles applicable for second and subsequent losses.  Lower deductibles apply for other territories and perils.  Aggregate protection has been renewed to provide lower level cover in the event of multiple losses to the portfolio.

The excess of loss programme purchased by Amlin Bermuda provides first event cover for international losses at a similar level to the Amlin London placement. With effect from 1 January 2014, increased lower level cover and restructured vertical protection have replaced the expiring combined aggregate and catastrophe excess of loss programme.

Amlin Re Europe places quota share and catastrophe excess of loss reinsurance to protect the property portfolio. Motor excess of loss protection is also purchased.

Amlin Europe N.V. purchases a comprehensive programme for each class of business. Specific cover is placed for engineering, personal accident, motor, liability and marine exposures. The property account is protected by both per risk and catastrophe excess of loss programmes, with the latter additionally protecting European property business written by Amlin UK.

In December 2011, the Group acquired coverage for US hurricane, US earthquake and European windstorm perils of up to US$150 million from a Bermudian special purpose insurer, Tramline Re Ltd, which in turn placed a catastrophe bond into the capital markets. This transaction provides the Group with fully collateralised protection over a three year period from 1 January 2012 and is in addition to the protection the Group purchases through the traditional reinsurance marketplace. The bond provides significant protection against a remote aggregation of catastrophe events for the Group. Through the use of an aggregate trigger it protects against both severity and frequency of losses.

3.   Risk disclosures continued

In July 2013, the Group acquired coverage for US and Canadian earthquake perils of up to US$75 million from a Bermudian special purpose insurer, Tramline Re II Ltd, which in turn placed a catastrophe bond into the capital markets. This transaction provides the Group with fully collateralised protection over a four year period from 1 July 2013 and is in addition to the protection the Group purchases through the traditional reinsurance marketplace. The bond provides protection against a remote catastrophic event for the Group.

There is no guarantee that reinsurance coverage will be available to meet all potential loss circumstances as, for very severe catastrophe losses, it is possible that the full extent of the cover bought is not sufficient. Any loss amount which exceeds the programme would be retained by the Group. It is also possible that a dispute could arise with a reinsurer which reduces the recovery made. The reinsurance programme is bought to cover the expected claims arising on the original portfolio. However, it is possible for there to be a mismatch, or a gap in cover, which would result in a higher than expected retained loss.

Many parts of the programme also have limited reinstatements and therefore the number of claims which may be recovered from second or subsequent major losses is limited. It is possible for the programme to be exhausted by a series of losses in one annual period and it may not be possible to purchase additional reinsurance at all or for an acceptable price. This would result in the Group bearing higher losses from further events occurring. It should also be noted that the renewal date of the reinsurance programmes does not necessarily correspond to that of the business written. Where business is not protected by risk attaching reinsurance (which provides coverage for the duration of all the policies written) this reinsurance protection could expire resulting in an increase in possible loss retained by the Group if renewal of the programme is not achieved.

Realistic Disaster Scenario (RDS) analysis

The Group has a defined event risk tolerance which determines the maximum net loss that the Group intends to limit its exposure with respect to major modelled catastrophe event scenarios. Currently this is a maximum of £350 million for the Group. The Group Underwriting Risk team are responsible for aggregating potential scenarios and at 1 January 2014, levels of exposure were below the potential maximum tolerance, one of the largest being the North-East US windstorm scenario at £279 million for the Group. At present the Group is not utilising the full extent of its risk tolerance.

These scenarios are extraordinary events - with an occurrence probability of less than 1 in 100 years estimated for natural peril or elemental losses. The Group also adopts risk tolerance maximum net limits for a number of other non-elemental scenarios, including aviation collision and North Sea rig loss.

The risk tolerance policy recognises that there may be circumstances in which the net event limit could be exceeded. Such circumstances include changes in rates of exchange, non-renewal or delay in renewal of reinsurance protection, reinsurance security failure, or regulatory and legal requirements.

A detailed analysis of catastrophe exposures is carried out every quarter and measured against risk tolerance. The following assumptions and procedures are used in the process:

·     The data used reflects the information supplied to the Group by insureds and ceding companies. This may prove to be incomplete, inaccurate or could develop during the policy period;

·     The exposures are modelled using a mixture of stochastic models and underwriter input to arrive at 'damage factors' - these factors are then applied to the assumed aggregate exposure to produce gross loss estimates. The damage factors may prove to be inadequate;

·     The reinsurance programme as purchased is applied - a provision for reinsurer counterparty failure is included in the analysis but may prove to be inadequate; and

·     Reinstatement premiums both payable and receivable are included.

3.   Risk disclosures continued

There is no guarantee that the assumptions and techniques deployed in calculating these event loss estimate figures are accurate.

Furthermore, there could also be a loss which exceeds these figures. The likelihood of such a catastrophe is considered to be remote, but the most severe scenarios modelled are simulated events and these simulations could prove to be unreliable.

 

Insurance liabilities and reinsurance assets: Calculation of incurred but not reported (IBNR) and claims development

The Group adopts a rigorous process in the calculation of an adequate provision for insurance claim liabilities. The overriding aim is to establish reserves which are expected to be at least adequate and that there is consistency from year to year. Therefore, the level of reserves are set at a level above the strict 50:50 actuarial 'best estimate' position. However, there is a risk that, due to unforeseen circumstances, the reserves carried are not sufficient to meet insurance claim liabilities reported in future years on policy periods which have expired.

Process and methodology

The reserving process commences with the proper recording and reporting of claims information which consists of paid and notified or outstanding claims. For the London market business information is received through Xchanging plc (the London market bureau) and, in the case of Amlin UK service companies and Amlin Europe, Amlin Bermuda and Amlin Re Europe, directly from brokers and policyholders. Claims records are maintained for each policy and class. For notified or outstanding claims, a case reserve is established based on the views of underwriting management and claims managers, using external legal or expert advice where appropriate. This reserve is expected to be sufficient to meet the claim payment when it is finally determined. For some classes of business, particularly liability business, settlement may be several years after the initial notification of the claim, as it may be subject to complexities or court action. For claims received from Xchanging plc, the market reserve is generally set by the lead underwriter, but there are circumstances on larger claims where the Group will post higher reserves than those notified.

To assist with the process of determining the reserves, triangulation statistics for each class are produced which show the historical development of premium, as well as paid and incurred losses, for each underwriting year (using either accident year or underwriting year cohorts). In all cases, the different potential development of each class of business is fully recognised. The development period varies by class, by method of acceptance and is also determined by the deductible of each policy written. For casualty business, the policy form will determine whether claims can be made on a claims made (as advised) or as a losses occurring (determined by date of loss) basis. This has a significant impact on the reporting period in which claims can be notified.

Amlin London, Amlin UK and Amlin Bermuda

To establish a provision for IBNR claims, the underwriting and claims teams in the UK and Bermuda use their experience and knowledge of the class of business to estimate the potential future development of each class for every underwriting year. In setting the IBNR provision estimates are made for the ultimate premium and ultimate gross claims value for each underwriting year. Allowance is then made for anticipated reinsurance recoveries to reach a net claim position. Reinsurance recoveries are calculated for outstanding and IBNR claims, sometimes through the use of historical recovery rates or statistical projections, and provisions are made as appropriate for bad debt or possible disputes. The component of ultimate IBNR provision estimates and reinsurance recoveries that relates to future events occurring to the existing portfolio is removed in order to reflect generally accepted accounting practice.

3.   Risk disclosures continued

The actuarial team independently produce ultimate premium and claims projections on a strict best estimate basis utilising the same data as the underwriting and claims teams. Meetings are held for each Division in which executive management, actuarial staff and business management discuss claims issues and the estimates produced by the underwriting and claim teams are compared against the actuarial estimates. Any unexpected differences are discussed and investigated further if necessary. Best estimate IBNR is adjusted in a similar manner to the proposed IBNR in order to remove the element that relates to future events and is once more compared with the proposed IBNR. All of this is undertaken for inwards business gross of reinsurance and for outwards reinsurance separately.

 

Amlin Europe and Amlin Re Europe

For Amlin Europe and Amlin Re Europe the process is similar to that for Amlin London, Amlin UK and Amlin Bermuda except for the following differences. The underwriting and actuarial teams together produce a proposed best estimate onto which an appropriate margin is added and there is therefore only one set of numbers for discussion. For Amlin Europe, given that data is readily available in this format, triangles with accident year cohorts are used together with earned premiums to estimate the IBNR required on a GAAP basis directly. Triangles on an underwriting year basis are available for Amlin Europe marine business and projections based on those triangles also feed into the reserving discussions.

During 2014, it is anticipated that the reserving process for Amlin London, Amlin UK and Amlin Bermuda will transition towards the process currently adopted in Amlin Europe and Amlin Re Europe.

Areas of uncertainty

The reserves established can be more or less than adequate to meet eventual claims arising. The level of uncertainty varies significantly from class to class but can arise from inadequate case reserves for known large losses and catastrophes or from inadequate provision for IBNR claims. The impact on profit before tax of a 1% improvement/deterioration in the total net claims reserves would be £25.5 million gain/loss (2012: £26.0 million).

Large loss case reserves are determined through careful analysis of the individual claim, often with the advice of lawyers. Claims arising from events such as the 11 September 2001 terrorist attacks in the US are examples of cases where there continues to be some uncertainty over the eventual value of claims.

Property catastrophe claims, such as earthquake or hurricane losses, can take several months, or years, to develop as adjusters visit damaged property and agree claim valuations. Until all the claims are settled it requires an analysis of the area damaged, contracts exposed and the use of models to simulate the loss against the portfolio of exposure in order to arrive at an estimate of ultimate loss to the Group. There is uncertainty over the adequacy of information and modelling of major losses for a period of several months after a catastrophe loss. Account should also be taken of factors which may influence the size of claims such as increased inflation or a change in law.

The long tail liability classes, for which a large IBNR has to be established, represent the most difficult classes to reserve because claims are notified and settled several years after the expiry of the policy concerned. This is particularly the case for liability business written on a losses occurring basis.

The use of historical development data is fundamental to reserving these classes. It is used in conjunction with the advice of lawyers and third party claims adjusters on material single claims. Known changes to wordings or the claims environment are also considered.

The allocation of IBNR to the reinsurance programme is an uncertain exercise as there is limited knowledge of the size or number of future claims advices. The assumption over future reinsurance recoveries may be incorrect and unforeseen disputes could arise which would reduce recoveries made.

3.   Risk disclosures continued

The estimated premium income in respect of facility contracts, for example, binding authorities and lineslips, is deemed to be written in full at the inception of the contract but actual premium may exceed or fail to meet initial estimates. The magnitude of claims arising from such facilities may differ from estimates as a result of differences between estimated and actual premium.

 

Internal capital modelling of risk

To improve the Group's risk management capability, and assessment of capital requirements, the Group has developed a stochastic financial model. This enables standalone modelling for each entity as well as a consolidated Group total position. The output from the model includes a distribution of financial outcomes for all material risks. The main output of the model gives a full distribution of potential profit or loss scenarios allowing the future profitability of the business to be managed on a risk adjusted basis.

The model requires the input of a large number of explicit parameters. Those inputs are based on many different sources of information including detailed historical data on premium and claims, forecast income and exposures, estimated rating levels and catastrophe loss data from proprietary models applied to the Group's portfolio. It enables projection of an estimated mean ultimate loss ratio and the distribution of results around it. The model explicitly recognises diversification credit, since class results are not all strongly correlated and thus individual classes are unlikely to all produce losses (or profits) in the same year. Due to the inherent uncertainty of predicting the key drivers of business performance, including in particular claims levels, any individual simulation of the model viewed in isolation cannot be relied upon as an accurate forecast. However, the output from many thousands of simulated results can provide a picture of the possible distribution of business results. This output is useful in developing an understanding of the losses which may be borne by the business at varying levels of probability.

There are a large number of uncertainties and difficulties in achieving accurate results from the model. Some of the key issues are:

·     The model is based on a best estimate view of business volumes and rate expectations, which may not be borne out in practice;

·     A significant change in the portfolio of business could result in the past not being a reliable guide to the future;

·     Changing external environmental factors may not be assessed accurately;

·     Model risk may be significant in such a complex and developing discipline;

·     Key assumptions over levels of correlation between classes may over time prove to be incorrect; and

·     Catastrophe model inputs, which estimate the severity and frequency of large catastrophes on the portfolio, may be incorrect.

The result reproduced in the table below represents the modelled capital amounts required to be able to absorb an extreme loss at the 1 in 200 year level (i.e. at the 0.5 percentile). This probability is the calculation benchmark required under Solvency II. However, it does not represent the level of capital required for the Group to support current and expected business levels.

3.   Risk disclosures continued

Furthermore, the Group is required to carry higher levels of capital which are considered sufficient by the rating agencies and clients.

2014 forecast (unaudited)	£m
Underwriting risk	408
Reserving risk	250
Credit (reinsurance counterparty risk)	27
Investment (market risk)	28
Liquidity risk	4
Operational risk	52
Currency risk	46
Diversified result	815

Note:

1.  All figures are based on business plan forecasts which are subject to regular review to take account of changes in the trading environment, interest rate outlook and movements in rates of exchange.

2.  These figures are derived from the Group Internal Model and based on data as at 31 December 2013.

3.  Capital has been allocated to risk categories using the Percentile Layer Capital Allocation approach. It should be recognised that allocating capital has a number of limitations and different allocations can be obtained by using alternative allocation approaches.

4.  No dividend is considered.

5.  Investment (market) risk includes explicit modelling of currency risk.

6.  Non-sterling amounts have been converted at market rates of exchange as at 31 December 2013 (US$1.66: CAN$1.76: €1.20).

7.  Figures include an allowance for investment returns generated on assets backing the insurance liabilities (i.e. discounting).

8.  Investment income includes Group corporate (surplus) assets.

9.  No credit has been taken for carried reserve margins.

3.   Risk disclosures continued

Claims development

The tables below illustrate the development of the estimates of ultimate cumulative claims for the consolidated Group (excluding Amlin Europe), Amlin London, Amlin UK, Amlin Bermuda and Amlin Re Europe after the end of the underwriting year, illustrating how amounts estimated have changed from the first estimates made. Tables for Amlin Europe have been constructed on an accident year basis. All tables are prepared on an undiscounted basis and exclude the effect of intra Group reinsurance arrangements. Non-sterling balances have been converted using 2013 exchange rates to aid comparability.

Group (excluding Amlin Europe) Gross basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	1,058.7	1,066.6	1,214.3	1,161.1	1,137.4	1,307.5	1,402.8	1,676.6	1,855.3	2,015.0
Current gross earned premium	1,058.7	1,066.6	1,214.3	1,161.1	1,137.4	1,307.5	1,402.8	1,666.1	1,813.3	1,155.6
Estimate of cumulative claims
at end of underwriting year	701.3	968.8	586.0	618.2	856.1	663.7	856.9	1,126.0	1,059.5	1,104.8
One year later	690.2	1,005.7	485.5	542.5	725.3	630.8	1,199.8	1,052.0	928.7
Two years later	652.6	969.5	463.3	497.4	695.0	595.1	1,181.0	1,004.5
Three years later	625.8	934.7	438.6	482.9	688.0	586.9	1,177.1
Four years later	611.3	918.0	428.0	471.7	684.4	578.4
Five years later	607.1	898.1	422.9	466.7	682.7
Six years later	604.8	894.0	417.7	454.9
Seven years later	597.2	877.2	405.4
Eight years later	592.9	879.6
Nine years later	592.3
Cumulative payments	577.6	861.2	385.2	422.0	620.4	469.1	901.6	662.4	499.4	80.8
Estimated balance to pay	14.7	18.4	20.2	32.9	62.3	109.3	275.5	342.1	429.3	1,024.0

Net basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of underwriting year	564.6	598.7	532.5	554.2	706.2	597.2	769.2	956.4	958.0	1,004.5
One year later	512.0	587.4	433.7	491.6	606.1	564.2	1016.8	909.0	862.3
Two years later	472.4	565.7	421.9	449.3	572.1	536.5	1007.8	867.8
Three years later	452.4	537.8	399.7	436.6	568.2	526.3	1001.2
Four years later	436.0	525.3	388.7	426.4	562.1	515.4
Five years later	430.7	505.6	383.9	419.0	557.7
Six years later	424.4	501.5	379.7	410.0
Seven years later	416.9	491.2	366.5
Eight years later	413.3	495.1
Nine years later	392.1
Cumulative payments	378.1	480.1	350.1	386.2	509.0	429.3	758.3	620.8	487.5	79.2
Estimated balance to pay	14.0	15.0	16.4	23.8	48.7	86.1	242.9	247.0	374.8	925.3

The Group's net aggregate reserve releases from all prior years amounted to £133.5 million (2012: £94.2 million). In part, this arises from the Group's reserving philosophy which aims to make the most recent years, with the greatest uncertainty of result, prudently reserved leaving a potential for subsequent release.

This differs from the £198.3 million release in reserves stated in the claims development table above as the table is on an underwriting year basis and the surpluses in this narrative are on an annually accounted basis. The table above excludes any net aggregate reserve releases from 2003 and prior years. Also the table above excludes Amlin Europe, which is disclosed on an accident year basis and for which net reserve releases are £53.3 million. The Amlin Europe table also excludes any net aggregate reserve releases from 2003 and prior years.

Further details on these reserve releases and other aspects of the underwriting performance are included in the Performance section of this Annual Report.

3.   Risk disclosures continued

Amlin London Gross basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	866.3	894.1	925.6	848.6	768.4	859.4	855.5	951.4	1,021.8	1,096.8
Current gross earned premium	866.3	894.1	925.6	848.6	768.4	859.4	855.5	951.4	1,013.2	619.9
Estimate of cumulative claims
at end of underwriting year	574.7	853.4	440.7	447.7	591.2	432.4	513.1	625.0	577.7	571.1
One year later	577.6	893.5	355.2	388.2	490.3	403.3	708.1	578.6	505.9
Two years later	547.5	865.8	333.0	350.2	449.7	357.2	678.8	537.4
Three years later	533.7	844.5	318.8	336.8	446.1	352.2	673.9
Four years later	523.7	827.8	310.8	329.2	443.5	342.8
Five years later	519.5	817.5	304.6	326.3	437.6
Six years later	515.2	810.1	300.5	323.6
Seven years later	508.5	797.9	296.1
Eight years later	508.0	801.1
Nine years later	506.9
Cumulative payments	495.5	786.2	285.2	304.3	410.6	279.7	520.4	377.3	299.7	41.6
Estimated balance to pay	11.4	14.9	10.9	19.3	27.0	63.1	153.5	160.1	206.2	529.5

Net basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of underwriting year	453.5	494.2	395.3	390.3	455.1	372.9	433.7	486.2	500.8	501.8
One year later	409.7	485.7	311.7	347.8	384.7	345.9	562.9	465.1	460.2
Two years later	378.5	467.9	298.0	313.1	341.2	306.9	537.2	426.5
Three years later	363.9	449.1	285.3	299.3	338.6	301.6	532.6
Four years later	351.8	436.6	274.5	293.6	333.2	293.2
Five years later	346.5	426.5	269.1	288.8	328.7
Six years later	341.6	421.8	265.9	285.0
Seven years later	335.1	414.8	261.7
Eight years later	334.3	419.4
Nine years later	315.5
Cumulative payments	304.9	407.4	252.0	272.0	306.6	242.3	399.3	356.5	293.2	40.5
Estimated balance to pay	10.6	12.0	9.7	13.0	22.1	50.9	133.3	70.0	167.0	461.3

3.   Risk disclosures continued

Amlin UK Gross basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	192.4	171.4	151.1	146.8	159.3	209.7	259.7	291.1	333.3	376.8
Current gross earned premium	192.4	171.4	151.1	146.8	159.3	209.7	259.7	291.1	314.1	158.2
Estimate of cumulative claims
at end of underwriting year	126.6	115.4	102.9	101.4	117.9	137.1	168.1	198.9	210.4	221.0
One year later	112.6	111.5	106.9	103.0	124.2	151.3	177.6	192.0	195.7
Two years later	105.1	103.4	102.5	102.4	126.7	156.7	174.4	189.3
Three years later	92.1	89.9	95.1	104.4	126.6	155.1	178.2
Four years later	87.6	89.9	93.1	103.5	124.7	156.6
Five years later	87.6	80.3	94.4	101.1	128.7
Six years later	89.6	83.6	93.6	92.3
Seven years later	88.7	79.0	85.9
Eight years later	84.9	78.2
Nine years later	85.4
Cumulative payments	82.1	74.7	76.8	79.6	95.2	116.8	123.4	119.6	96.5	20.4
Estimated balance to pay	3.3	3.5	9.1	12.7	33.5	39.8	54.8	69.7	99.2	200.6

Net basis Underwriting year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of underwriting year	111.1	104.5	94.8	94.8	104.1	130.1	159.8	192.1	200.4	213.1
One year later	102.3	101.0	98.6	92.5	110.6	142.1	169.3	185.1	187.4
Two years later	93.9	97.5	96.1	91.4	112.3	149.1	169.1	187.8
Three years later	88.5	88.4	89.7	95.6	114.3	145.7	169.7
Four years later	84.2	88.4	90.1	93.8	112.7	143.8
Five years later	84.2	78.8	90.9	90.9	112.6
Six years later	82.8	79.4	90.2	86.0
Seven years later	81.8	76.1	81.4
Eight years later	79.0	75.4
Nine years later	76.6
Cumulative payments	73.2	72.4	74.9	76.1	87.8	114.7	121.2	122.4	96.3	20.1
Estimated balance to pay	3.4	3.0	6.5	9.9	24.8	29.1	48.5	65.4	91.1	193.0

3.   Risk disclosures continued

Amlin Bermuda Gross basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	1.1	137.6	165.7	209.7	238.4	284.8	332.6	328.4	339.8
Current gross earned premium	1.1	137.6	165.7	209.7	238.4	284.8	332.5	320.9	229.7
Estimate of cumulative claims
at end of underwriting year	-	42.4	69.1	147.0	94.2	173.6	232.5	158.0	159.0
One year later	0.7	23.4	51.3	110.8	76.2	311.9	211.1	118.8
Two years later	0.3	27.8	44.8	118.6	81.2	325.9	208.8
Three years later	0.3	24.7	41.7	115.3	79.6	323.2
Four years later	0.3	24.1	39.0	116.2	79.0
Five years later	0.3	23.9	39.3	116.4
Six years later	0.3	23.6	39.0
Seven years later	0.3	23.4
Eight years later	0.3
Cumulative payments	0.3	23.2	38.1	114.6	72.6	256.9	140.7	65.6	11.4
Estimated balance to pay	-	0.2	0.9	1.8	6.4	66.3	68.1	53.2	147.6

Net basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of underwriting year	-	42.4	69.1	147.0	94.2	173.6	210.6	158.0	159.0
One year later	0.7	23.4	51.3	110.8	76.2	282.4	190.1	118.8
Two years later	0.3	27.8	44.8	118.6	80.5	299.6	186.1
Three years later	0.3	24.7	41.7	115.3	79.0	297.1
Four years later	0.3	24.1	39.0	116.2	78.4
Five years later	0.3	23.9	39.3	116.4
Six years later	0.3	23.6	39.0
Seven years later	0.3	23.4
Eight years later	0.3
Cumulative payments	0.3	23.2	38.1	114.6	72.3	236.9	118.7	65.6	11.4
Estimated balance to pay	-	0.2	0.9	1.8	6.1	60.2	67.4	53.2	147.6

Amlin Re Europe Gross basis Underwriting year	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	2.8	101.5	171.8	201.6
Current gross earned premium	2.8	91.1	165.1	147.8
Estimate of cumulative claims
at end of underwriting year	2.1	69.6	113.4	153.7
One year later	2.2	70.3	108.3
Two years later	1.9	69.0
Three years later	1.8
Cumulative payments	0.9	24.8	37.6	7.4
Estimated balance to pay	0.9	44.2	70.7	146.3
Net basis Underwriting year	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of underwriting year	2.1	67.5	98.8	130.6
One year later	2.2	68.7	95.9
Two years later	1.9	67.4
Three years later	1.8
Cumulative payments	0.9	23.2	32.4	7.2
Estimated balance to pay	0.9	44.2	63.5	123.4

3.   Risk disclosures continued

Amlin Europe Gross basis Accident year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Current ultimate gross written premium	464.8	483.5	496.5	545.5	633.8	613.5	686.8	561.3	477.2	449.1
Current gross earned premium	455.7	483.1	492.0	525.1	615.4	642.0	598.7	592.2	478.2	456.7
Estimate of cumulative claims
at end of accident year	233.5	257.8	293.2	325.9	524.3	428.6	438.5	444.6	300.2	283.7
One year later	267.8	356.6	306.9	339.3	514.9	439.4	513.0	457.2	326.8
Two years later	248.8	342.1	307.4	363.9	506.1	439.5	470.6	422.1
Three years later	244.0	325.8	294.5	353.2	506.8	457.0	433.8
Four years later	235.5	317.2	291.7	342.5	488.6	447.5
Five years later	211.2	310.1	289.6	340.6	481.9
Six years later	209.5	308.2	287.2	337.3
Seven years later	206.1	307.5	282.6
Eight years later	205.7	308.2
Nine years later	206.1
Cumulative payments	188.7	287.4	260.6	301.4	426.5	350.0	364.7	289.7	194.1	81.2
Estimated balance to pay	17.4	20.8	22.0	35.9	55.4	97.5	69.1	132.4	132.7	202.5

Net basis Accident year	2004 £m	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m
Estimate of cumulative claims
at end of accident year	174.5	209.6	239.7	287.2	403.0	399.5	404.4	399.2	278.2	267.7
One year later	202.5	225.6	253.9	286.9	400.3	411.6	451.8	418.8	279.8
Two years later	187.7	209.1	247.8	297.7	391.5	416.6	411.7	384.9
Three years later	183.2	195.5	242.7	279.1	379.7	398.5	393.3
Four years later	172.7	192.7	235.9	262.6	363.2	388.5
Five years later	169.8	183.8	232.9	273.4	358.3
Six years later	174.1	179.9	228.8	267.5
Seven years later	169.9	181.1	229.3
Eight years later	169.5	181.5
Nine years later	169.6
Cumulative payments	155.2	164.7	214.0	241.0	326.9	315.0	344.7	275.1	171.7	77.4
Estimated balance to pay	14.4	16.8	15.3	26.5	31.4	73.5	48.6	109.8	108.1	190.3

3.   Risk disclosures continued

3.2  Financial risk

Risk management

The following section describes the Group's Investment risk management from a quantitative and qualitative perspective.

The Group has two main categories of assets:

·     Underwriting assets - premium received and held to meet future insurance claims.

·     Capital assets - capital required by the regulators to support the underwriting business plus working capital and surplus funds. Apart from the outstanding borrowings, these assets do not have specific current liabilities attached to them.

Investment governance

The Group manages its investments in accordance with investment frameworks that are set by the Boards of Amlin plc and its subsidiaries (the Boards). These frameworks determine investment governance and the investment risk tolerance. They are reviewed on a regular basis to ensure that the Boards' fiduciary and regulatory responsibilities are being met. Day-to-day management of the investments is delegated to the Investment Management Executive or members of the relevant subsidiary's executive, who are advised by the Chief Investment Officer.

The Investment Management Executive comprises the Chief Executive, Group Finance & Operations Director and Chief Investment Officer, and meets quarterly to consider whether the strategic asset allocation and tactical asset allocation ranges are appropriate to optimise investment returns within the risk tolerances set by the Boards. Group Investments, led by the Chief Investment Officer, is responsible for tactical asset allocation and the appointment of external investment managers and custodians.

Risk tolerance

Investment risk tolerances are set by the Board of Amlin plc and its subsidiaries. The investment process is driven from the risk tolerance which is determined by reference to factors such as the underwriting cycle and the requirements of the capital providers. In a hard underwriting market capital preservation is paramount in order to support the insurance business and, therefore, the risk tolerance for the capital assets will be low. Conversely, the risk tolerance for the underwriting assets under these circumstances will be relatively high due to the strong cash flow. In a soft underwriting market the opposite applies.

Investment risk is monitored by Group Investments using a market-recognised third-party risk model. Risk reporting is generated by Group Investments and an independent review conducted by the Corporate Centre Risk department. These reports are then circulated to the Investment Management Executive and to the Group Risk Committee.

Strategic asset allocation

Each of the Group's principal subsidiaries has its own strategic asset allocation which is set according to its risk tolerance and liabilities.

The strategic asset allocations for capital assets are set by using a Value at Risk (VaR¹) model to determine the optimum asset allocation for the current risk tolerance, which ensures that appropriate solvency levels are maintained.

The expected timescale for future cash flows in each currency is calculated by the Group Actuarial team; the average of these form the basis of our asset liability duration management. 

Tactical ranges around these strategic asset allocations provide flexibility to ensure that an appropriate risk/reward balance is maintained in changing investment markets.

3.   Risk disclosures continued

Investment management

Investments are run on a multi-asset, multi-manager basis. Exposure to the asset classes is achieved using physical holdings of the asset class or derivative instruments and may be managed by Group Investments or by outsourced managers, on a segregated, pooled or commingled basis². Manager selection is based on a range of criteria that leads to the expectation that they will add value to the funds over the medium to long-term. The managers have discretion to manage the funds on a day-to-day basis within investment guidelines or prospectuses applicable to their funds that ensure that they comply with the investment frameworks. The managers' performance, compliance and risk are monitored on an ongoing basis.

Note:

1. VaR is a statistical measure which calculates the possible loss over a year in normal market conditions. As VaR estimates are based on historical market data this should not be viewed as an absolute gauge of the level of risk to the investments.

2. Segregated funds are managed separately for the Group. Pooled funds are collective investment vehicles in which the Group and other investors purchase units. Commingled funds combine the assets of several clients.

The managers as at 31 December 2013 were as follows:

Manager	Asset class
Segregated funds
Aberdeen Asset Managers Limited	US dollar bonds
Artemis Investment Management LLP	Global equities
Barclays Bank plc	New Zealand dollar and US dollar money market deposits
Bank of Butterfield	US dollar money market deposits
CBRE Global Collective Investors (UK) Limited	Global property
Insight Investment Management (Global) Limited	Sterling and euro bonds
Lloyds Bank plc	New Zealand dollar money market deposits
Townsend Group Europe Limited	Global property
Veritas Asset Management LLP	Active global equity
Wellington Management International Limited	US dollar and Canadian dollar bonds
Pooled vehicles - liquidity funds
Blackrock Investment Management (UK) Limited	Sterling, euro and US dollar liquidity funds
Citibank	New Zealand dollar and Australian dollar cash management
Goldman Sachs Asset Management International	Sterling, euro and US dollar liquidity funds
HSBC Global Asset Management (France)	Euro liquidity funds
Insight Investment Management (Global) Limited	Sterling liquidity funds
JP Morgan Asset Management	Euro, Japanese yen and US dollar liquidity funds
Royal Bank of Scotland	Sterling liquidity funds
Western Asset Management Company	US dollar liquidity funds
Pooled vehicles - bonds and LIBOR plus funds
Bluebay Asset Management LLP	Euro bonds
Goldman Sachs Asset Management International	LIBOR plus funds
H2O AM LLP	LIBOR plus funds
Insight Investment Management (Global) Limited	LIBOR plus funds
PIMCO Global Advisers (Ireland) Limited	Sterling and US dollar bonds
Wellington Management International Limited	LIBOR plus funds
Pooled vehicles - insurance linked securities
Leadenhall Capital Partners LLP	Insurance linked securities
Commingled funds
Corporation of Lloyd's Treasury Services	US dollar, Canadian dollar, Australian dollar, South African rand and Japanese yen bonds
Fiera Capital Corporation (formerly Union Bank of Switzerland)	Canadian dollar and US dollar liquidity funds

3.   Risk disclosures continued

The funds under management with each manager are shown below:

Manager	31 December 2013		31 December 2012
	Total assets £m	Total %	Total  assets £m	Total %
Segregated funds
Aberdeen Asset Managers Limited	257.6	5.8	248.4	5.9
Artemis Investment Management LLP	327.3	7.4	111.6	2.6
Barclays Bank plc	22.6	0.5	46.2	1.1
Bank of Butterfield	12.0	0.3	-	-
CBRE Global Collective Investors (UK) Limited	85.0	1.9	73.3	1.7
Insight Investment Management (Global) Limited	228.8	5.2	571.9	13.5
Lloyds Bank plc	14.3	0.3	15.2	0.4
Townsend Group Europe Limited	109.7	2.5	86.6	2.0
Veritas Asset Management LLP	227.3	5.1	181.1	4.3
Wellington Management International Limited	407.4	9.2	372.5	8.8
Pooled vehicles - liquidity funds
Blackrock Investment Management (UK) Limited	102.8	2.3	217.4	5.1
Citibank	0.4	-	3.4	0.1
Goldman Sachs Asset Management International	2.9	0.1	41.2	1.0
HSBC Global Asset Management (France)	23.9	0.5	184.7	4.4
Insight Investment Management (Global) Limited	-	-	69.2	1.6
JP Morgan Asset Management	120.0	2.7	146.7	3.5
Royal Bank of Scotland	-	-	33.5	0.8
Western Asset Management Company	0.1	-	70.2	1.6
Pooled vehicles - bonds and LIBOR plus funds
Bluebay Asset Management LLP	330.9	7.6	379.2	8.9
Goldman Sachs Asset Management International	547.0	12.4	488.8	11.5
H20 AM LLP	455.4	10.3	192.0	4.5
Insight Investment Management (Global) Limited	71.6	1.6	-	-
PIMCO Global Advisers (Ireland) Limited	439.3	9.9	379.5	9.0
Wellington Management International Limited	369.8	8.4	33.4	0.8
Pooled vehicles - insurance linked securities
Leadenhall Capital Partners LLP	62.2	1.4	59.4	1.4
Commingled funds
Corporation of Lloyd's Treasury Services	140.6	3.2	171.9	4.1
Fiera Capital Corporation (formerly Union Bank of Switzerland)	60.8	1.4	60.5	1.4
	4,419.7	100.0	4,237.8	100.0

Note: The table above excludes the Group's directly held securities of £29.4 million (2012: £9.4 million) comprising insurance linked securities £5.0 million (2012: £4.6 million), unlisted equities £6.0 million (2012: £4.0 million) and other liquid investments £18.4 million (2012: £0.8 million). The table also excludes £10.6 million (2012: £2.4 million) unrealised gains accruing to a series of foreign exchange contracts placed on behalf of the Group to hedge portfolio currency exposures.

3.   Risk disclosures continued

Asset allocation

The total value of investments in the following tables is reconciled to note 18, financial assets and financial liabilities, as follows:

	2013 £m	2012 £m
Net financial investments per note 18	4,364.1	4,199.3
Assets/(liabilities) shown separately in the notes to the accounts:
Accrued income	5.9	7.6
Net unsettled receivables/(payables) for investments sold/(purchased)	32.0	(15.9)
Cash funds held by financial institutions	59.1	59.7
Assets not analysed in the investment asset allocation tables:
Liquid investments	(3.2)	(0.8)
Unlisted equities	(0.7)	(0.7)
Margin and collateral relating to derivative instruments	2.5	0.4
Total investments in asset allocation tables below	4,459.7	4,249.6

The asset allocation of the Group's investments is set out below.

	31 December 2013				31 December 2012
	Underwriting assets £m	Capital assets £m	Total assets £m	Total %	Underwriting assets £m	Capital assets £m	Total  assets £m	Total %
Global equities	-	522.4	522.4	11.7	-	283.6	283.6	6.7
Bonds
Government securities	639.1	25.7	664.8	14.9	497.4	206.1	703.5	16.6
Government agencies/guaranteed bonds	43.3	-	43.3	1.0	88.9	5.9	94.8	2.2
Supranational	2.3	-	2.3	0.1	8.3	3.4	11.7	0.3
Asset backed securities - Home equity	0.5	-	0.5	-	-	0.2	0.2	-
Asset backed securities - Autos	43.6	-	43.6	1.0	21.4	3.4	24.8	0.6
Asset backed securities - Cards	14.3	-	14.3	0.3	5.3	1.3	6.6	0.2
Asset backed securities - Other	31.8	-	31.8	0.7	18.2	5.3	23.5	0.5
Mortgage backed securities - Prime	101.1	-	101.1	2.3	80.9	97.4	178.3	4.2
Corporate bonds	226.3	-	226.3	5.1	150.0	100.8	250.8	5.9
Pooled vehicles	1,114.4	706.4	1,820.8	40.7	965.9	398.9	1,364.8	32.1
Insurance linked securities	5.0	-	5.0	0.1	4.6	-	4.6	0.1
	2,221.7	732.1	2,953.8	66.2	1,840.9	822.7	2,663.6	62.7
Property funds	-	181.0	181.0	4.1	-	153.6	153.6	3.6
Other liquid investments
Liquidity funds and other liquid investments	499.0	303.5	802.5	18.0	861.3	287.5	1,148.8	27.0
	2,720.7	1,739.0	4,459.7	100.0	2,702.2	1,547.4	4,249.6	100.0

Government agencies/guaranteed bonds at 31 December 2013 include £1.2 million of corporate bonds (2012: £11.2 million) and £nil mortgage backed securities (2012: £1.6 million).

Pooled vehicles held are represented by 23.4% government/agency bonds (2012: 16.3%), 26.0% corporate bonds (2012: 28.4%), 19.9% mortgage backed and asset backed securities (2012: 31.7%), 3.5% insurance linked securities (2012: 4.3%) and 27.2% other liquid investments (2012: 19.3%).

3.   Risk disclosures continued

The industry and geographical splits were as follows:

	31 December 2013			31 December 2012
Industry	Corporate bonds %	Global equities %	Total %	Corporate bonds %	Global equities %	Total %
Oil & gas	7.6	7.8	7.7	8.1	12.7	10.4
Basic materials	1.0	2.7	2.2	0.2	2.5	1.4
Industrials	8.6	13.4	12.0	6.4	9.7	8.1
Consumer goods & services	10.4	22.0	18.4	10.9	19.6	15.4
Healthcare	6.9	18.7	15.1	4.0	16.1	10.2
Government guaranteed	0.2	-	0.1	4.2	-	2.0
Telecommunications	5.2	9.2	8.0	4.6	13.0	9.0
Utilities	5.4	1.1	2.4	2.0	0.6	1.3
Financials	50.5	12.3	23.9	54.8	14.5	34.0
Technology	4.2	12.8	10.2	3.0	10.1	6.7
Other industries	-	-	-	1.8	1.2	1.5
	100.0	100.0	100.0	100.0	100.0	100.0

Note: The table above excludes government bonds but includes £1.2 million (2012: £11.2 million) of corporate bonds with government guarantees and pooled vehicles of £1,820.8 million (2012: £1,364.8 million).

	31 December 2013			Restated 31 December 2012
Region	Bonds %	Global equities %	Total %	Bonds %	Global equities %	Total %
UK	1.5	13.6	5.4	7.0	15.7	8.5
US and Canada	61.6	45.0	56.4	53.1	40.8	50.9
Europe (excluding UK)	27.9	19.3	25.1	30.4	19.6	28.4
Far East	6.8	17.0	10.0	8.7	14.3	9.8
Emerging markets	2.2	5.1	3.1	0.8	9.6	2.4
	100.0	100.0	100.0	100.0	100.0	100.0

Note: The table above includes all bond and equity investments, but excludes pooled vehicles.

Market risk

Valuation risk

Where possible, Group assets are marked to market at bid price. Prices are supplied by the Group's custodians whose pricing processes are covered by their published annual controls reports. In accordance with their pricing policies, prices are sourced from market recognised pricing vendor sources. These pricing sources use closing trades or, where more appropriate in illiquid markets, pricing models. These models typically use broker quotes or other independent valuation techniques such as discounted cash flow models using observable or unobservable market inputs.

The Group has an established control framework with respect to fair value measurement which ensures the valuation of financial assets and financial liabilities meets the requirements of IFRS.  As part of this process, the Group reviews the valuation policies of its custodians along with the evidence provided by the custodians to support fair value measurement. The prices are also reconciled to the fund managers' records to check for reasonableness.

As an additional level of governance over pricing, the Group validates the prices provided by pricing vendor sources against information obtained from Bloomberg where available. A review of stale prices was also conducted at 31 December 2013; though the impact of stale prices on the Group's investment valuation is considered immaterial. Further details of the fair value measurement of financial assets and financial liabilities are included in note 3.3.

The valuation of investments is sensitive to equity risk. The impact on profit before tax of a 1% improvement/deterioration in the total market value of shares and other variable yield securities would be a £5.2 million gain/loss (2012: £2.8 million). Sensitivities in relation to other risks are considered in the remainder of note 3.2.

3.   Risk disclosures continued

Interest rate risk

Investors' expectations for interest rates will impact bond yields³. Therefore, the value of the Group's bond holdings is subject to fluctuation as bond yields rise and fall. If yields fall the capital value will rise, and vice versa. The sensitivity of the price of a bond is indicated by its duration⁴. The greater the duration of a security, the greater its possible price volatility. Typically, the longer the maturity of a bond the greater its duration. The maturity bands of the Group's bond holdings as at 31 December 2013 are shown below.

	31 December 2013			31 December 2012
	Underwriting assets £m	Capital assets £m	Total £m	Underwriting assets £m	Capital assets £m	Total £m
Less than 1 year	106.5	11.4	117.9	293.8	75.5	369.3
1-2 years	309.9	1.4	311.3	38.9	27.3	66.2
2-3 years	302.7	1.9	304.6	152.8	67.1	219.9
3-4 years	134.5	1.0	135.5	154.4	15.1	169.5
4-5 years	75.6	-	75.6	114.6	29.0	143.6
Over 5 years	178.1	10.0	188.1	120.4	209.9	330.3
	1,107.3	25.7	1,133.0	874.9	423.9	1,298.8

Note: The table above excludes pooled vehicles of £1,820.8 million (2012: £1,364.8 million).

The duration of underwriting assets is set with reference to the duration of the underlying liabilities. It should be noted that the liabilities are not currently discounted and therefore their value is not impacted by interest rate movements. Cash is raised, or the duration of the portfolio reduced, if it is believed that yields may rise and therefore capital values will fall.

The average durations of the bond and cash portfolios for the underwriting assets and associated insurance liabilities as at 31 December 2013 were as follows:

	31 December 2013		31 December 2012
Underwriting assets/liabilities	Assets Years	Liabilities Years	Assets Years	Liabilities Years
Sterling	(0.3)	4.1	0.1	2.2
US dollars	0.7	2.5	0.7	2.2
Euro	0.2	3.4	1.5	3.4
Canadian dollars	1.0	4.0	1.5	3.7

Note: The table above includes pooled vehicles.

The asset durations above are calculated by the custodian and are checked against those reported by the fund managers. Liabilities durations are calculated by the Group Actuarial team.

An indication of the potential sensitivity of the value of the bond and cash funds to changes in yield is shown below.

	Syndicate 2001							Amlin AG		Amlin Europe N.V.		Net (reduction)/ increase in value £m
Shift in yield (basis points)	U/wtg Sterling %	U/wtg US$ %	U/wtg CAN$ %	U/wtg  Euro %	U/wtg  NZ$ %	U/wtg JPY %	Capital Sterling  %	U/wtg %	Capital  %	U/wtg %	Capital %
100	(1.3)	(1.5)	(0.7)	(0.7)	2.0	2.0	-	(0.9)	-	(1.4)	1.0	(29)
75	(1.0)	(1.1)	(0.5)	(0.6)	1.5	1.5	-	(0.7)	-	(1.1)	0.8	(22)
50	(0.6)	(0.7)	(0.4)	(0.4)	1.0	1.0	-	(0.5)	-	(0.7)	0.5	(15)
25	(0.3)	(0.4)	(0.2)	(0.2)	0.5	0.5	-	(0.2)	-	(0.4)	0.3	(7)
- 25	0.2	0.3	0.2	0.2	(0.5)	(0.5)	(0.1)	0.2	(0.1)	0.2	(0.3)	5
- 50	0.4	0.6	0.4	0.3	(1.0)	(1.0)	(0.1)	0.3	(0.2)	0.2	(0.5)	7
- 75	0.6	0.8	0.5	0.4	(1.5)	(1.5)	(0.2)	0.3	(0.3)	0.2	(0.8)	8
- 100	0.9	1.0	0.7	0.5	(2.0)	(2.0)	(0.3)	0.4	(0.4)	0.3	(1.1)	10

Note: The table above includes pooled vehicles.

Note:

3. The yield is the rate of return paid if a security is held to maturity. The calculation is based on the coupon rate, length of time to maturity and the market price. It assumes coupon interest paid over the life of the security is reinvested at the same rate.

4. The duration is the weighted average maturity of the security's expected cash flows, where the present values of the cash flows serve as the weights.

3.   Risk disclosures continued

Foreign exchange risk

The exposures to translation, revaluation and asset liability currency matching risk combine to form the Group's overall exposure to foreign exchange risk. The Group's reporting currency is sterling and significant subsidiary functional currencies are sterling, euro and US dollar. The Group holds asset and liability balances in base currencies of sterling, euro, US dollars, Canadian dollars, New Zealand dollars and Japanese yen.

Translation risk

Foreign exchange translation risk arises when business is written in non-functional currencies. These transactions are translated into the functional currency of the relevant Group entity at the prevailing spot rate at the inception date of the premium. Consequently, there is exposure to currency movements between the inception date and the date premium is received. Claims incurred in non-functional currencies are recorded at the prevailing spot rate on the date of the loss event and then translated back from the functional currency at the time a claim is to be settled; therefore the Group is exposed to exchange rate risk between the date the claim is made and the date of settlement.

Revaluation risk

The Group is subject to revaluation risk as a result of the translation into the Group's sterling reporting currency of the Group entities that have a non-sterling functional currency. At 31 December 2013, the Group was exposed to net investments in foreign operations balances totaling US$1,343.8 million (2012: US$1,330.8 million) and €873.4 million (2012: €499.0 million). Foreign exchange gains and losses on investments in foreign subsidiaries are recognised in other comprehensive income in accordance with IAS 21, 'The effects of changes in foreign exchange rates'.

The loss recognised in other comprehensive income for the year ended 31 December 2013 was £16.5 million (2012: £57.1 million). This reflects the movement in the US dollar rate from 1.62 at the start of the year to 1.66 at the balance sheet date and the movement in the euro rate from 1.23 at the start of the year to 1.20 at the balance sheet date. In order to mitigate the impact of these currency fluctuations, the Group adopts a policy of hedging approximately 50% of the net currency exposure resulting from the net investments in foreign operations.

For this purpose, the Group uses a combination of subordinated debt, drawdowns on the revolving credit facility and options that are accounted for as hedges of net investments in foreign operations, in accordance with the hedge accounting requirements of IAS 39. The effective portion of all unrealised and realised gains and losses on the designated portion of the hedging instruments is taken to the consolidated statement of other comprehensive income to match the underlying movement in the valuation of the net investment in foreign operations, with the ineffective portion recognised in consolidated statement of profit or loss. At the year end, hedges were in place for US$702.0 million (2012: US$628.0 million) and €397.0 million (2012: €257.0 million). The net realised and unrealised gain from hedging recognised in consolidated statement of other comprehensive income during the year was £0.5 million (2012: £3.7 million gain).

In relation to revaluation of the net investment in foreign operations, if the US$/GBP exchange rates were to improve by 10%, this would result in an additional exchange gain of £98.4 million recognised in other comprehensive income. This gain would be offset by a valuation loss of £23.3 million on the designated portion of the hedging instruments. The same exchange rate deterioration would result in an additional £63.9 million exchange loss through other comprehensive income. This loss would be offset by a valuation gain of £39.1 million on the designated portion of the hedging instruments.

3.   Risk disclosures continued

If the EUR/GBP exchange rate were to improve by 10%, this would result in an additional exchange gain of £72.1 million recognised in other comprehensive income. This gain would be offset by a valuation loss of £10.3 million on the designated portion of the hedging instruments. The same exchange rate deterioration would result in an additional £73.1 million exchange loss through other comprehensive income. This loss would be offset by a valuation gain of £20.4 million on the designated portion of the hedging instruments.

Asset liability matching by currency risk

If a liability in a currency other than the functional currencies of sterling, euro and US dollars is considered to be sufficiently large following a major event, for example such as the 2010 and 2011 New Zealand earthquakes, that currency will be bought and held as a base currency to cover the potential liability.

Underwriting assets are held in the base currencies of sterling, euros, US dollars, Canadian dollars, New Zealand dollars and Japanese yen, which represent the majority of the Group's liabilities by currency, thus limiting the underwriting asset liability matching currency risk.

3.   Risk disclosures continued

The table below presents the Group's assets and liabilities by currency. The amounts are stated in the sterling equivalent of the local currency, in order that the amounts can be reconciled to the Group's consolidated statement of financial position. The local currency amounts have been converted into sterling using the exchange rates as disclosed in note 33.

	31 December 2013
Currency risk	Sterling £m	US$ £m	CAN$ £m	Euro £m	NZ$ £m	JPY £m	Total £m
Cash and cash equivalents	31.3	60.8	0.1	61.8	9.3	1.2	164.5
Financial assets	994.4	1,740.9	84.3	1,376.5	126.1	46.6	4,368.8
Reinsurance assets	190.3	22.2	16.8	148.7	7.3	2.9	388.2
Loans and receivables and deferred acquisition costs	351.5	551.2	29.3	389.7	22.4	4.2	1,348.3
Current income tax assets	17.2	3.2	1.8	0.8	-	-	23.0
Deferred tax assets	(0.3)	0.1	-	6.3	-	-	6.1
Property and equipment	16.0	1.2	-	5.4	-	-	22.6
Goodwill and intangible assets	128.9	-	-	110.2	-	-	239.1
Investments in associates	9.3	3.2	-	-	-	-	12.5
Total assets	1,738.6	2,382.8	132.3	2,099.4	165.1	54.9	6,573.1
Insurance liabilities	685.1	1,734.9	85.1	1,316.6	143.6	25.7	3,991.0
Other payables, including insurance and reinsurance payables	6.5	255.3	14.1	134.7	0.1	0.1	410.8
Financial liabilities	0.3	2.1	-	2.3	-	-	4.7
Current income tax liabilities	(1.5)	1.5	-	0.1	-	-	0.1
Borrowings	229.2	161.7	-	0.7	-	-	391.6
Retirement benefit obligations	7.4	-	-	25.2	-	-	32.6
Deferred tax liabilities	48.9	-	-	14.8	-	-	63.7
Total liabilities	975.9	2,155.5	99.2	1,494.4	143.7	25.8	4,894.5
Net assets	762.7	227.3	33.1	605.0	21.4	29.1	1,678.6

	31 December 2012
Restated Currency risk	Sterling £m	US$ £m	CAN$ £m	Euro £m	NZ$ £m	JPY £m	Total £m
Cash and cash equivalents	25.6	31.3	0.1	77.6	33.3	22.7	190.6
Financial assets	927.8	1,782.6	84.4	1,191.3	179.0	39.9	4,205.0
Reinsurance assets	173.9	163.1	10.8	163.0	13.1	1.5	525.4
Loans and receivables and deferred acquisition costs	346.8	595.7	18.1	329.1	30.4	4.6	1,324.7
Current income tax assets	3.7	5.9	1.5	1.2	-	-	12.3
Deferred tax assets	(0.4)	-	-	16.2	-	-	15.8
Property and equipment	14.4	1.7	-	4.3	-	-	20.4
Goodwill and intangible assets	131.8	-	-	79.6	-	-	211.4
Investments in associates	9.3	-	-	-	-	-	9.3
Total assets	1,632.9	2,580.3	114.9	1,862.3	255.8	68.7	6,514.9
Insurance liabilities	700.2	1,828.8	66.3	1,274.6	213.1	55.3	4,138.3
Other payables, including insurance and reinsurance payables	(6.4)	270.6	10.2	118.6	-	0.6	393.6
Financial liabilities	2.0	2.1	-	1.6	-	-	5.7
Current income tax liabilities	(1.4)	1.4	-	0.4	-	-	0.4
Borrowings	228.9	181.5	-	-	-	-	410.4
Retirement benefit obligations	9.1	-	-	31.8	-	-	40.9
Deferred tax liabilities	18.4	-	-	9.5	-	-	27.9
Total liabilities	950.8	2,284.4	76.5	1,436.5	213.1	55.9	5,017.2
Net assets	682.1	295.9	38.4	425.8	42.7	12.8	1,497.7

3.   Risk disclosures continued

If the base currencies were to improve/deteriorate by 10%, the movement in the monetary net underwriting assets and liabilities and borrowings of the Group, excluding foreign operations, would result in the following gains/(losses) in the consolidated statement of profit or loss at 31 December 2013:

	31 December 2013
Currency	10% improvement £m	10% deterioration £m
US dollars	11.1	(9.1)
Canadian dollars	6.5	(5.3)
Euro	3.5	(2.9)
New Zealand dollars	9.3	(7.6)
Japanese yen	1.4	(1.1)
	31.8	(26.0)

Further foreign exchange risk arises until non-sterling profits or losses are converted into sterling. Foreign exchange risk is mitigated by converting the subsidiaries' functional currency profits into the Group's reporting currency. Given the inherent volatility in some business classes, a cautious approach is adopted on the speed and level of sales, but the Group seeks to extinguish all currency risk on earned profit during the second year after the commencement of each underwriting year. It is not the intention to take speculative currency positions in order to make currency gains.

At 31 December 2013, the investment managers held some forward foreign exchange contracts in their portfolios to hedge non-base currency investments. These were transacted with banks with a short-term rating of at least A and are marked to market in investment valuations.

Liquidity risk

It is important that the Group's entities can pay their obligations as they fall due. Levels of cash are therefore managed on a daily basis and buffers of liquid assets are held in excess of the immediate requirements. This is to reduce the risk of being forced sellers of any of the Group's assets, which may result in realising prices below fair value, especially in periods of below normal investment market liquidity.

The Group funds its insurance liabilities with a portfolio of cash and debt securities exposed to market risk. The following table indicates the contractual timing of cash flows arising from assets and liabilities for management of insurance contracts at 31 December 2013:

	Contractual cash flows (undiscounted)
31 December 2013 Financial assets	No stated maturity £m	0-1 yr £m	1-3 yrs £m	3-5 yrs £m	>5 yrs £m	Carrying amount £m
Shares and other variable yield securities	521.9	0.5	-	-	-	522.4
Debt and other fixed income securities5	1,820.8	218.2	563.0	255.1	193.9	2,953.8
Property funds	181.0	-	-	-	-	181.0
Liquidity funds and other liquid investments	769.1	-	-	-	-	769.1
Derivative financial instruments, net	12.8	20.6	-	-	-	33.4
Total	3,305.6	239.3	563.0	255.1	193.9	4,459.7

	Expected cash flows (undiscounted)
Insurance liabilities	No stated maturity £m	0-1 yr £m	1-3 yrs £m	3-5 yrs £m	>5 yrs £m	Carrying amount £m
Outstanding claims	-	1,083.8	980.4	381.3	463.9	2,897.1
Less reinsurers' share of outstanding claims	-	(141.8)	(100.3)	(45.7)	(57.4)	(343.1)
Total	-	942.0	880.1	335.6	406.5	2,554.0
Difference in contractual cash flows	3,305.6	(702.7)	(317.1)	(80.5)	(212.6)	1,905.7

Note:

5. Debt and other fixed income securities include pooled vehicles of £1,820.8 million (2012: £1,364.8 million) which have no stated maturity.

3.   Risk disclosures continued

	Contractual cash flows (undiscounted)
31 December 2012 Financial assets	No stated maturity £m	0-1 yr £m	1-3 yrs £m	3-5 yrs £m	>5 yrs £m	Carrying amount £m
Shares and other variable yield securities	283.3	0.3	-	-	-	283.6
Debt and other fixed income securities	1,364.8	285.5	523.3	373.9	125.0	2,663.6
Property funds	153.6	-	-	-	-	153.6
Liquidity funds and other liquid investments	1,145.5	1.9	-	-	-	1,147.4
Derivative financial instruments, net	1.4	-	-	-	-	1.4
Total	2,948.6	287.7	523.3	373.9	125.0	4,249.6

	Expected cash flows (undiscounted)
Insurance liabilities	No stated maturity £m	0-1 yr £m	1-3 yrs £m	3-5 yrs £m	>5 yrs £m	Carrying amount £m
Outstanding claims	-	1,126.4	1,103.9	427.2	472.5	3,083.5
Less reinsurers' share of outstanding claims	-	(190.3)	(172.5)	(59.4)	(64.0)	(478.6)
Total	-	936.1	931.4	367.8	408.5	2,604.9
Difference in contractual cash flows	2,948.6	(648.4)	(408.1)	6.1	(283.5)	1,644.7

Liquidity, in the event of a major disaster, is tested regularly using internal cash flow forecasts and realistic disaster scenarios. Liquidity is supported by pre-arranged revolving credit facilities as detailed in note 31. If a major insurance event occurs the investment strategy is reviewed to ensure that sufficient liquidity is also available in the assets.

A breakdown of the current and non-current portions of the other non-derivative financial liabilities is available in notes 30 and 31.

3.   Risk disclosures continued

Credit risk

Credit risk is the risk that the Group becomes exposed to losses if a specific counterparty fails to perform its contractual obligations in a timely manner, impacting the Group's ability to meet its claims as they fall due. Credit risk can also arise from underlying causes that have an impact upon the creditworthiness of all counterparties of a particular description or geographical location. The Group's credit risk is mitigated by the collateral received from counterparties, details of which are given in note 29. The Group is exposed to credit risk in its investment portfolio and with its premium and reinsurance receivables. The table below shows the breakdown at 31 December 2013 of the exposure of the bond portfolio, liquidity funds and insurance and reinsurance receivables by credit quality⁶.

31 December 2013	Debt securities £m	%	Liquidity funds £m	%	Insurance and reinsurance receivables7 £m	%	Reinsurers' share of outstanding claims £m	%
AAA	811.5	27.5	365.2	100.0	16.2	1.6	7.5	2.2
AA	959.5	32.5	-	-	18.2	1.8	104.5	30.5
A	955.8	32.4	-	-	82.9	8.2	188.2	54.8
BBB	152.2	5.1	-	-	0.9	0.1	1.5	0.4
Other	74.8	2.5	-	-	895.6	88.3	41.4	12.1
	2,953.8	100.0	365.2	100.0	1,013.8	100.0	343.1	100.0

31 December 2012	Debt securities £m	%	Liquidity funds £m	%	Insurance and reinsurance receivables £m	%	Reinsurers' share of outstanding claims £m	%
AAA	950.1	35.7	974.9	100.0	-	-	25.2	5.3
AA	927.6	34.8	-	-	13.0	1.3	148.1	30.9
A	494.9	18.6	-	-	116.5	11.6	250.5	52.4
BBB	153.0	5.7	-	-	0.6	0.1	4.0	0.8
Other	138.0	5.2	-	-	873.1	87.0	50.8	10.6
	2,663.6	100.0	974.9	100.0	1,003.2	100.0	478.6	100.0

Note:

6. Credit ratings on debt securities are State Street composite ratings based on Standard & Poor's, Moody's and Fitch, depending on which agency/agencies rate each bond.

7. Other includes £580.7 million (2012: £577.6 million) of premium receivable from policyholders and £314.9 million (2012: £295.5 million) of premium receivable from intermediaries
that are not rated.

Insurance and reinsurance

The table includes premium receivables, representing amounts due from policyholders. The quality of these receivables is not graded, but based on historical experience there is limited default risk relating to these amounts. Premium credit risk is managed through a number of controls that include broker approval, annual financial review and internal rating of brokers and regular monitoring of premium settlement performance.

Also included are reinsurance receivables, which represent the amounts due at 31 December 2013, as well as amounts expected to be recovered on unpaid outstanding claims (including IBNR) in respect of earned risks. These are stated net of provisions for impairment. The credit risk in respect of reinsurance receivables, including reinsurers' share of outstanding claims, is primarily managed by review and approval of reinsurance security by the Group's Reinsurance Security Committee prior to the purchase of the reinsurance contract. Guidelines are set, and monitored, that restrict the purchase of reinsurance security based on the Group's own ratings for each reinsurer and Standard & Poor's ratings.

3.   Risk disclosures continued

The Group holds collateral from certain reinsurers including those that are non-rated as security against potential default. The details of reinsurance collaterals held and placed with third party trust funds are provided in note 29. At 31 December 2013, the Group held collateral of £436.0 million (2012 restated: £459.1 million). Provisions are made against the amounts due from certain reinsurers, depending on the age of the debt and the current rating assigned to the reinsurer. The impact on profit before tax of a 1% variation in the reinsurance assets would be £3.9 million (2012: £5.3 million). The details of overdue reinsurance assets and insurance receivables are provided in notes 19 and 20.

Investments

As well as failure of a counterparty to perform its contractual obligations, the price of government and corporate bond holdings will be affected by investors' perception of a borrower's creditworthiness. Credit risk within the investment funds is managed through restrictions on the exposures by credit rating, as determined by the rating agencies, and by holding diversified portfolios. £0.6 million of bonds held at 31 December 2013 were subject to downgrades during the year (2012: £30.3 million).

The Group's largest non-government counterparty as at 31 December 2013, excluding liquidity funds, has an A rating and is valued at £72.3 million (2012: £56.5 million). The investment comprises cash of £57.8 million (2012: £53.4 million), corporate bonds of £8.7 million (2012: £2.3 million), asset backed securities of £0.1 million (2012: £nil), equities of £5.7 million (2012: £nil) and mortgage backed securities of £nil (2012: £0.8 million). The largest counterparty is not necessarily the same year on year.

The table below shows the credit rating of the Group's non-government bonds.

Non-government bonds 31 December 2013	Total £m	AAA	AA	A	BBB	Other
Corporate - Financials	108.7	5.5%	28.0%	63.2%	3.3%	-
Corporate - Other	116.4	1.6%	10.5%	57.6%	28.2%	2.1%
Mortgage backed securities	103.0	84.7%	7.2%	2.9%	0.5%	4.7%
Asset backed securities	90.2	90.7%	4.4%	4.7%	-	0.2%
Insurance linked securities	5.0	-	-	-	-	100%

Non-government bonds 31 December 2012	Total £m	AAA	AA	A	BBB	Other
Corporate - Financials	141.4	14.5%	30.2%	54.1%	1.2%	-
Corporate - Other	109.4	-	11.5%	57.8%	30.7%	-
Mortgage backed securities	179.9	91.3%	4.7%	0.4%	0.2%	3.4%
Asset backed securities	55.1	95.8%	1.7%	2.1%	-	0.4%
Insurance linked securities	4.6	-	-	-	-	100%

The table excludes pooled investments and £1.2 million (2012: £11.2 million) of corporate bonds with explicit government guarantees but includes £1.9 million (2012: £1.6 million) of government agency mortgage backed securities.

3.   Risk disclosures continued

3.3 Fair value methodology

For financial instruments carried at fair value the Group has categorised the measurement basis into a fair value hierarchy as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market is one in which transactions for the asset occur with sufficient frequency and volume to provide readily and regularly available quoted prices.

Level 2 - Inputs to a valuation model other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs to a valuation model for the asset or liability that are not based on observable market data (unobservable inputs) and are significant to the overall fair value measurement. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions it is considered that market participants would use in pricing the asset.

Shares and other variable yield securities

Listed equities traded on a primary exchange in an active market are classified as Level 1.

Unlisted equities included in Level 3 are valued using adjusted net asset valuation techniques where adjustments are made to the net asset position based on management's assessment of future profitability.

Debt and other fixed income securities

The fair value is based upon quotes from pricing services where available. These pricing services derive prices based on an average of quotes provided by brokers. Where multiple quotes are not available, the fair value is based upon evaluated pricing services, which typically use proprietary cash flow models and incorporate observable market inputs, such as credit spreads, benchmark quotes and other trade data. If such services do not provide coverage of the asset, then fair value is determined manually using indicative broker quotes, which are corroborated by recent market transactions in similar or identical assets.

Where there is an active market for these assets and their fair value is the unadjusted quoted market price, these are classified as Level 1. This is typically the case for government bonds. Level 1 also includes bond funds, where fair value is based upon quoted prices. Where the market is inactive or the price is adjusted, but significant market observable inputs have been used by the pricing sources, then these are considered to be Level 2. This is typically the case for government agency debt, corporate debt, mortgage and asset backed securities and catastrophe bonds. Certain assets, for which prices or other market inputs are unobservable, are classified as Level 3.

Property funds

The Group's property fund portfolios are valued using the most recent net asset value provided by the fund managers. The net asset values, which may be a quarter in arrears, are determined by the fund managers using proprietary cash flow models. In such cases, adjustments may be made to bring the net asset value to a more current valuation. The inputs into that valuation, such as discount rates, are primarily unobservable and, as such, these assets are classified as Level 3. Where an investment is made into a new property fund the transaction price is considered to be the fair value if it is the most recent price available.

3.   Risk disclosures continued

Participation in investment pools

These are units held in money market funds and the value is based upon unadjusted, quoted and executable prices provided by the fund manager and these are classified as Level 1.

Derivatives

Listed derivative contracts, such as futures, that are actively traded are valued using quoted prices from the relevant exchange and are classified as Level 1. Over the counter currency options are valued by the counterparty using quantitative models with multiple market inputs such as foreign exchange rate volatility. The market inputs are observable and the valuation can be validated through external sources. These are classified as Level 2. The Group's contracts with Tramline Re Ltd and Tramline Re II Ltd have been classified as derivative instruments. The valuation of these instruments is based on forecast cash flow models which contain principally unobservable market inputs, and as such are classified as Level 3.

The options relating to Leadenhall Capital Partners LLP, which allow either the Group or partnership management to purchase the remaining shares and voting rights, are also classified as Level 3. The valuation of these options is judgmental as no liquid market exists and estimation of future cash flows is highly subjective. Therefore both a forecast cash flow model and limited observable market data have been used.

3.   Risk disclosures continued

	Fair value hierarchy				Fair value hierarchy
	Level 1 £m	Level 2 £m	Level 3 £m	Total 2013 £m	Level 1 £m	Level 2 £m	Level 3 £m	Total 2012 £m
Assets
Financial assets held for trading at fair value through profit or loss
Shares and other variable yield securities	516.5	-	-	516.5	279.6	-	-	279.6
Debt and other fixed income securities	2,606.9	526.6	-	3,133.5	2,089.7	622.8	12.2	2,724.7
Property funds	-	-	181.0	181.0	-	-	153.6	153.6
Derivative instruments	-	18.9	-	18.9	-	6.8	-	6.8
Other financial assets at fair value through profit or loss
Participation in investment pools	379.2	-	-	379.2	997.1	-	-	997.1
Deposits with credit institutions	119.4	-	-	119.4	42.9	-	-	42.9
Other	0.6	-	2.0	2.6	0.6	-	0.6	1.2
Available-for-sale financial assets
Unlisted equities	-	-	6.7	6.7	-	-	4.7	4.7
Other
Derivative instruments in designated hedge accounting relationships	-	16.9	-	16.9	-	2.0	-	2.0
Total assets	3,622.6	562.4	189.7	4,374.7	3,409.9	631.6	171.1	4,212.6
Liabilities
Financial liabilities held for trading at fair value through profit or loss
Derivative instruments	-	(4.6)	(0.1)	(4.7)	-	(5.0)	-	(5.0)
Other
Derivative instruments in designated hedge accounting relationships	-	-	-	-	-	(0.7)	-	(0.7)
Total liabilities	-	(4.6)	(0.1)	(4.7)	-	(5.7)	-	(5.7)
Net financial assets	3,622.6	557.8	189.6	4,370.0	3,409.9	625.9	171.1	4,206.9
Assets shown separately in the notes to the accounts
Accrued income				(5.9)				(7.6)
Net financial investments (note 18)				4,364.1				4,199.3

The table above excludes the Group's holdings of cash and cash equivalents of £164.5 million (2012: £190.6 million). These are measured at fair value and are categorised as Level 1.

The table also excludes the Group's borrowings which are not measured at fair value but for which fair value information is provided in note 31.

These are categorised as Level 3 in the fair value hierarchy.

The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the relevant reporting period during which the transfers are deemed to have occurred.

There has been no transfer between the different levels during the year.

3.   Risk disclosures continued

The table below analyses the movements in assets and liabilities classified as Level 3 investments during 2013:

	Debt and other fixed income securities £m	Property funds £m	Derivative instruments £m	Other £m	Unlisted equities £m	Total £m
At 1 January 2013	12.2	153.6	-	0.6	4.7	171.1
Total net gains/(losses) recognised in investment return in profit or loss	0.2	4.1	(17.2)	1.7	-	(11.2)
Sales	(10.7)	(27.2)	-	-	-	(37.9)
Purchases	-	54.4	-	-	2.0	56.4
Settlements	(1.5)	(2.6)	17.1	(0.2)	-	12.8
Foreign exchange losses	(0.2)	(1.3)	-	(0.1)	-	(1.6)
At 31 December 2013	-	181.0	(0.1)	2.0	6.7	189.6
Total unrealised gains for the period recognised in investment return in profit or loss for assets and liabilities held at the end of the reporting period						1.1

	Debt and other fixed income securities £m	Property funds £m	Derivative instruments £m	Other £m	Unlisted equities £m	Total £m
At 1 January 2012	0.6	117.3	-	1.6	4.2	123.7
Total net gains/(losses) recognised in investment return in profit or loss	0.1	(2.0)	-	-	-	(1.9)
Sales	(0.5)	(4.5)	-	(1.0)	-	(6.0)
Purchases	12.6	47.1	-	-	-	59.7
Unrealised gains on investments designated as available-for-sale	-	-	-	-	0.5	0.5
Transfer out of Level 3	(0.6)	-	-	-	-	(0.6)
Foreign exchange losses	-	(4.3)	-	-	-	(4.3)
At 31 December 2012	12.2	153.6	-	0.6	4.7	171.1
Total unrealised losses for the period recognised in investment return in profit or loss for assets and liabilities held at the end of the reporting period						(1.4)

The majority of the Group's investments are valued based on quoted market information or other observable market data. The Group holds 4.3% (2012: 4.1%) of its net financial investments at a fair value based on estimates and recorded as Level 3 investments. Where estimates are used, these are based on a combination of independent third party evidence and internally developed models, calibrated to market observable data where possible. While such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions would not change the fair value significantly.

3.   Risk disclosures continued

3.4 Retirement benefit obligations

The Group participates in a number of pension arrangements, including defined contribution schemes, defined benefit schemes and personal pension schemes.

Defined benefit schemes

The Group participates in four funded defined benefit schemes, being: the Lloyd's Superannuation Fund located in the United Kingdom, Amlin Europe schemes located in The Netherlands and Belgium and the Amlin Re Europe scheme in Switzerland.

Scheme descriptions

Lloyd's Superannuation Fund - United Kingdom

The scheme is operated as part of the Lloyd's Superannuation Fund (the Fund). The Fund is administered by an entity which is legally separate from the Group. The Board of the pension fund, the Board of Trustees, is made up by a majority of Independent Directors, an Amlin Employers' Director and an Amlin Members' Director. The Trustees are required by legislation and by its articles of association to act in the interests of the pension scheme and the plan participants. The Trustees are responsible for the investment strategy of the Fund, in accordance with the Statement of Investment Principles. The Trustees are also responsible for the appointment of custodians and actuaries for the Fund, in addition to consulting with the employers of the Fund.

Historically the Fund has catered for a number of employers in the Lloyd's market. As a consequence of market consolidation, employers closing final salary schemes and some companies failing, during 2013 Amlin became the only active employer (2012: two) in the Fund.

Previously, the Trustee operated separate notional accounts for the scheme of each contributing employer and also a section relating to former employees of employers no longer contributing to the fund (known as the Orphans' section). Following the exit of the other employer from the Fund during the year, making Amlin the sole participating employer, the Trustee has stopped notionally segregating the assets. The Company is now ultimately responsible for the assets and liabilities of the Fund, including 100% of the Orphan liabilities (2012: 93.5%). This has resulted in an increase in the defined benefit obligation by £2.9 million and an increase in the assets of the Fund by £19.0 million (net of the insurance contract noted below), which are included in the actuarial gains and losses in the consolidated statement of other comprehensive income (as per note 32).

Further to the exit of the remaining other employer, the Trustee has entered into a contract with an insurance company to secure the liabilities relating to the employer exiting the Fund and to some of the liabilities of the Orphans' section. The Fund has paid £40.6 million to the insurance company in respect of this transaction. No liability in respect of scheme members included in this insurance contract has been included in the Company's defined benefit obligation.

Amlin Europe schemes - Netherlands and Belgium

Amlin Europe N.V. operates two defined benefit pension schemes covering the majority of its employees. These plans are governed by the Amlin Europe Board in accordance with Dutch and Belgian legislation. Under these schemes, benefits are based on years of service and level of salary. Benefits also include other post-employment benefits which continue to be granted to employees after retirement. These plans are insured and are funded partly by means of employee contributions.

3.   Risk disclosures continued

Amlin Re Europe scheme - Switzerland

Amlin Re Europe operates a pension scheme which meets the classification of a defined benefit scheme under IAS 19. In accordance with Swiss legislation, Amlin Re Europe provides for occupational pension insurance, the regulations of which, as may be amended from time to time, apply to both Amlin Re Europe and the employee. The Amlin Re Europe Board retains overall responsibility for deciding on such fundamental aspects as the level and structure of plan benefits.

The insured salary is based on the agreed compensation exclusive of bonus and/or other benefits granted by Amlin Re Europe. The employees pay a portion of the premiums determined in the applicable pension fund regulations.

Risks to which the Group is exposed through its defined benefit schemes

The defined benefit schemes expose the Group to the following risks:

·     Changes in bond yields - The discount rate used in calculating the present value of the defined benefit obligation is based upon the yield of high-quality debt instruments issued by blue chip companies, with maturities consistent with those of the defined benefit obligations. A decrease in bond yields is likely to increase the defined benefit obligation.

·     Asset volatility - There is a risk that the return on the plan assets underperforms the yield on corporate bonds, thereby reducing the surplus or increasing the deficit.

·     Inflation risk - The defined benefit obligation is linked to inflation and therefore should the inflation rate increase, there will be an increase in the plan obligation.

·     Life expectancy - The present value of the defined benefit obligation is calculated based on certain mortality assumptions as stated below. An increase in the life expectancy of the plan participants will result in an increase in the defined benefit obligation. 

·     Risk of insurer default - for the insured schemes, if the insurer is unable to meet its obligations, or if the contract is cancelled by either party; it will fall to the Group to provide the benefits to members in accordance with the relevant scheme assets.

Significant actuarial assumptions

The significant actuarial assumptions used as at 31 December 2013 were:

	UK % pa	The Netherlands % pa	Belgium % pa	Switzerland % pa
Discount rate for pension benefits	4.4	3.7	2.5	2.3
Price inflation (CPI/RPI for UK)	2.5/3.0	2.0	2.0	1.5
Expected salary increases - general	-	2.0	2.0	2.5
Expected salary increases - merit	-	-	1.5	-
Indexation for active and formerly active employees	-	2.0	-	-

The significant actuarial assumptions used as at 31 December 2012 were:

	UK % pa	The Netherlands % pa	Belgium % pa	Switzerland % pa
Discount rate for pension benefits	4.4	3.2	2.5	1.8
Price inflation	3.0	2.0	2.0	1.5
Expected salary increases - general	-	2.0	2.0	2.5
Expected salary increases - merit	-	0-6.75	1.5	-
Indexation for active and formerly active employees	-	2.0	-	-

3.   Risk disclosures continued

The mortality assumptions used in the 31 December 2013 valuation included the following life expectancies:

Life expectancy (years) at age 60 for a member currently:	UK		The Netherlands		Belgium		Switzerland
	Male	Female	Male	Female	Male	Female	Male	Female
Aged 60	28.0	29.4	26.8	28.0	26.7	30.9	26.3	28.9
Aged 45	30.0	31.0	27.9	28.8	26.7	30.9	27.7	30.3

The mortality assumptions used in the 31 December 2012 valuation included the following life expectancies:

Life expectancy (years) at age 60 for a member currently:	UK		The Netherlands		Belgium		Switzerland
	Male	Female	Male	Female	Male	Female	Male	Female
Aged 60	27.9	29.3	26.5	27.9	22.1	25.9	26.1	28.8
Aged 45	29.9	30.9	27.9	28.8	22.1	25.9	27.6	30.2

Significant actuarial assumptions - sensitivities

The table below shows the impact on the defined benefit obligation that a change in certain key assumptions would have:

Assumption change				£m
(Increase)/decrease in discount rate by 0.25%				(18.2)/20.5
(Decrease)/increase in inflation rate by 0.25%				(10.9)/11.3
(Decrease)/increase in salary rate by 0.5%				(0.5)/0.6
(Decrease)/increase in indexation rate by 0.5%				(6.6)/7.6
(Decrease)/increase in life expectancy by one year				(13.6)/13.5

The above sensitivities of the significant actuarial assumptions have been calculated by changing each assumption in turn whilst all remaining assumptions are held constant. The limitation of this sensitivity analysis is that in practice assumptions may be correlated and therefore are unlikely to change in isolation.  There has been a change in the method used in calculating the life expectancy sensitivity to present an increase or decrease of one year to reflect a standardised approach under IAS 19 revised.

3.   Risk disclosures continued

Analysis of scheme assets

The analysis of the scheme assets at the reporting date is as follows:

		31 December 2013				31 December 2012
		Quoted £m	Unquoted £m	Total £m	Total %	Quoted £m	Unquoted £m	Total £m	Total %
	Cash and cash equivalents	-	15.8	15.8	3.4	-	67.0	67.0	15.3
	Equity instruments
	United Kingdom	72.8	-	72.8	15.6	41.4	-	41.4	9.5
	Europe	12.2	-	12.2	2.6	13.3	-	13.3	3.0
	North America	27.0	-	27.0	5.8	22.2	-	22.2	5.1
	Asia	5.5	-	5.5	1.2	6.1	-	6.1	1.4
	Rest of World	8.1	-	8.1	1.7	7.7	-	7.7	1.8
	Bonds
	Government	97.8	-	97.8	20.9	82.3	-	82.3	18.9
	Corporate	136.7	-	136.7	29.1	115.4	-	115.4	26.4
	Property
	United Kingdom	28.1	-	28.1	6.0	21.6	-	21.6	4.9
	Total directly managed scheme assets - United Kingdom	388.2	15.8	404.0	86.3	310.0	67.0	377.0	86.3
	The Netherlands			51.7	11.1			49.1	11.3
	Belgium			3.4	0.7			3.0	0.7
	Switzerland			9.0	1.9			7.5	1.7
Insured scheme assets				64.1	13.7			59.6	13.7
Total scheme assets				468.1	100.0			436.6	100.0

The analysis of the scheme assets by asset class are not provided for the Amlin Re Europe and Amlin Europe defined benefit schemes as the investment decisions are at the discretion of the third parties to whom Amlin Re Europe and Amlin Europe have ceded investment risk under the insurance policies taken out to meet their obligations. These scheme assets are shown as insured scheme assets in the table above.

Asset-liability matching strategies

In accordance with the governance arrangements set out above, investment strategies are in place to maintain long-term investments which are aligned to the obligations under the defined benefit pension schemes. The Group actively monitors how the duration and expected yield of the investments match the expected cash outflows arising from the pension obligations.

In addition, for the scheme in the UK, a proportion of the Fund's assets are invested in a liability driven investment portfolio. The objective of this portfolio is to match these assets to a proportion of the Fund's liabilities.

The Group has not changed the processes used to manage its risks from prior period.

Maturity profile of the defined benefit obligations

The weighted average duration of the defined benefit obligation is as follows:

	UK	The Netherlands	Belgium	Switzerland
Weighted average duration of the defined benefit obligation (years)	17	22	12	19

The expected maturity analysis of the undiscounted pension benefits is as follows:

	UK £m	The Netherlands £m	Belgium £m	Switzerland £m
Less than a year	16.0	1.4	0.2	0.5
Between 1-2 years	16.4	1.5	0.3	0.5
Between 2-5 years	51.6	4.9	1.3	1.8
Over 5 years	1,016.0	313.2	15.7	35.8
Total as at 31 December 2013	1,100.0	321.0	17.5	38.6

3.   Risk disclosures continued

Expected contributions

The effect of the defined benefit plans on the Group's future cash flows as a result of the expected contributions for the year ending 31 December 2014 is as follows:

	UK £m	The Netherlands £m	Belgium £m	Switzerland £m
Contributions from the Group	2.6	3.3	0.4	0.8
Contributions from plan participants	0.2	0.7	-	0.3
Total contributions to the schemes	2.8	4.0	0.4	1.1

 

Funding arrangements

Lloyd's Superannuation Fund

Contributions are paid to provide for the cost of benefit accrual. The rate of contribution agreed with the Trustee is 16% (2012: 16%) paid by the employer plus 5% (2012: 5%) member contributions, in each case of pensionable earnings, and additional contributions as agreed with the Trustee. Contributions totalled £2.8 million at 31 December 2013 (2012: £2.8 million).

The funding position of the Fund is assessed every three years by an independent qualified actuary. Contributions are made at the funding rates recommended by the actuary and typically include adjustments to amortise any funding surplus or shortfall over a period. Amounts paid under the scheme are charged to Syndicate 2001 or other Group companies.

The last completed formal valuation of the Fund was as at 31 March 2010 and was completed in June 2011 by Mr R N Wharmby, Fellow of the Institute of Actuaries, and used the projected unit credit actuarial method.

On 30 June 2011, the Group agreed a schedule of contributions with the Trustee. The schedule requires seven separate payments of £2.0 million to the Fund over a period of seven years. The present value of the future payments has been recognised as a liability at 31 December 2013, to the extent that the contributions will not be available after they are paid into the Fund, as the Fund's rules do not allow the Group to receive a refund of contributions in any circumstances.

The Group has also entered into an agreement with the Trustee to hold certain funds within an escrow account. These funds would be transferred to the Trustee in full for the purpose of defined benefit funding if any one of a number of enforcement events within the agreement were to occur. The Group made a payment to the escrow account of £4.0 million in May 2013, bringing the total payments made to £14.0 million. The Group considers it unlikely that any one of the enforcement events defined within the agreement will occur.

The triennial valuation of the Fund as at 31 March 2013 is currently underway, and is being performed by Mr D Wilding, Fellow of the Institute of Actuaries.

Other schemes

Funding for the other schemes in operation are in accordance with related insurance arrangements and regulations described above.

4.   Subsidiaries and associates

a) Acquisition of subsidiary - RaetsMarine Insurance B.V.

On 1 March 2013, the Group acquired 100% of the share capital and voting rights in RaetsMarine Insurance B.V. and its subsidiaries ('RaetsMarine') for US$49.8 million (£33.1 million). RaetsMarine is a broker, specialising in protection and indemnity (P&I) and marine liability insurance.

The acquisition is a key part of the Group's strategy to grow its marine business and provide its clients with a comprehensive range of marine insurance products.

The provisional acquisition date fair value of the total consideration transferred, identifiable assets acquired and resulting goodwill is as follows:

	£m
Initial cash consideration	28.3
Deferred cash consideration	4.8
Fair value of contingent consideration	-
Total purchase consideration	33.1
Fair value of assets acquired (see below)	19.6
Goodwill	13.5

The goodwill shown above arose from the premium paid for the opportunities to exploit further growth and dislocation opportunities in the market, and the ability of the Group to leverage its existing presence in London and Singapore to attract new business to RaetsMarine. No provision for impairment of goodwill has been made at the reporting date.

The assets and liabilities as of the acquisition date were stated at their provisional fair values in the 2013 Interim Report. Further evidence of the appropriate fair values was received in the second half of 2013 and adjustments have been made, in accordance with paragraph 45 of IFRS 3, 'Business combinations', as follows:

	Provisional acquisition date fair value (2013 Interim Report) £m	Fair value adjustments £m	Revised acquisition date fair value £m
Cash and cash equivalents	19.5	-	19.5
Financial assets	0.1	-	0.1
Loans and receivables, including insurance and reinsurance receivables
- insurance and reinsurance receivables	18.5	-	18.5
- other loans and receivables	3.8	-	3.8
Property and equipment	2.4	-	2.4
Goodwill and intangible assets	22.4	-	22.4
Total assets	66.7	-	66.7
Other payables, including insurance and reinsurance payables
- insurance and reinsurance payables	28.4	-	28.4
- other payables	12.2	-	12.2
Borrowings	0.7	-	0.7
Deferred tax liabilities	5.9	(0.1)	5.8
Total liabilities	47.2	(0.1)	47.1
Net assets acquired	19.5	0.1	19.6

The corresponding adjustment is to goodwill on acquisition.

Goodwill and intangible assets of £22.4 million shown above relate to broker and customer relationships.

The gross contractual amount of insurance and reinsurance receivables is £18.7 million. The best estimate of the contractual cash flows not expected to be received as of the acquisition date is £0.2 million.

Total acquisition related costs were £0.6 million. Of these costs £0.3 million have been recognised as an expense within other operating expenses for the period ended 31 December 2013. The remainder of the acquisition related costs were incurred in prior periods.

4.   Subsidiaries and associates continued

As part of the acquisition agreement, the Group has a contractual obligation for contingent consideration relating to an earn out arrangement. The final amount is payable by 1 April 2015 and is based on RaetsMarine's hull and cargo claims ratios for the 2010, 2011 and 2012 underwriting years. The undiscounted range of outcomes of the final amount payable is US$nil (£nil) to US$15.0 million (£9.9 million). The fair value of the contingent consideration has been determined using a discounted cash flow model, with the key input being the forecast claims ratios for the relevant lines of business. At the reporting date the fair value of the contingent consideration was US$nil (£nil).

The Group also entered into a management incentive plan arrangement with the management of RaetsMarine which has been recognised separately from the acquisition. The transaction comprises an initial payment totalling US$4.0 million (£2.6 million) and a management incentive pool of up to US$12.0 million (£7.9 million), with the final amount payable based on the future net written premium growth and claims ratio performance of RaetsMarine's P&I business. In the period to 31 December 2013, £2.6 million has been recognised in other operating expenses in the consolidated statement of profit or loss, and £0.5 million has been recognised in other payables in the consolidated statement of financial position at 31 December 2013.

b) Significant judgements in determining control

The Group has made significant judgements and assumptions in reaching its control conclusions for the following entities:

i. Investment funds

The Group holds financial investments in a number of pooled vehicles, which are typically sub-funds of umbrella structures. In certain instances the Group holds a majority of the voting rights in particular sub-funds. The Group has determined that it neither controls nor significantly influences these sub-funds despite owning a majority of the voting rights, on the basis that direction of the relevant activities of the sub-funds is by the umbrella vehicle, over which the Group has no significant rights. Such entities are accounted for as financial investments in accordance with IAS 39 'Financial instruments: Recognition and measurement'.

ii. Leadenhall Capital Partners LLP (LCP)

The Group holds 50% of the voting rights in LCP. Owing to the Group's historical contractual commitments to LCP, as detailed below, the potential voting rights arising from an option held to acquire the share of the partnership not already held, and its interests in the funds managed by LCP, the Group has assessed whether it has de facto control over the entity. The Group has determined that it does not have controlling power over LCP as significant decision making requires the consent of more than one party to the arrangement and LCP is therefore collectively controlled. However, such significant decisions do not require the unanimous consent of all the controlling parties and therefore LCP does not meet the definition of a joint arrangement under IFRS 11. The Group is therefore considered to have significant influence over LCP and its interest is accounted for as an investment in associate using the equity method accordingly.

4.   Subsidiaries and associates continued

c) Principal subsidiaries

The principal subsidiaries at 31 December 2013 which are consolidated in these financial statements are detailed below. Unless otherwise stated, the Group owns 100% of ordinary share capital and voting rights in these entities:

Subsidiaries	Principal activity	Registered in
Allied Cedar Insurance Group Limited	Intermediate holding company	England and Wales
Amlin AG	Reinsurance company	Switzerland
Amlin Bermuda Holdings Limited	Finance company	Bermuda
Amlin Corporate Member Limited	Corporate member at Lloyd's	England and Wales
Amlin Corporate Services Limited	Group service, employing and intermediate holding company	England and Wales
Amlin Europe N.V.	Insurance company	The Netherlands
Amlin France Holdings SAS	Intermediate holding company	France
Amlin France SAS**	Lloyd's coverholder	France
Amlin Insurance (UK) Limited	Insurance company	England and Wales
Amlin (Overseas Holdings) Limited	Intermediate holding company	England and Wales
Amlin Plus Limited*	Lloyd's coverholder	England and Wales
Amlin Singapore Pte Limited	Lloyd's service company	Singapore
Amlin Underwriting Limited	Lloyd's managing agency	England and Wales
Amlin Underwriting Services Limited	Lloyd's coverholder	England and Wales
AUA Insolvency Risk Services Limited	Regulated broker	England and Wales
JR Clare Underwriting Agencies Limited	Lloyd's coverholder	England and Wales
Lead Yacht Underwriters Limited	Lloyd's coverholder	England and Wales
RaetsMarine Insurance B.V.	Broker	The Netherlands

Note:

* 60% owned by the Group

**  On 22 January 2014, Amlin France SAS became a branch of Amlin Europe N.V.

Some subsidiaries have been omitted from this statement to avoid providing particulars of excessive length but none materially affects the results or net assets of the Group.

d) Investments in associates

The Group owns interests in three associates: Miles Smith Holdings Limited, Manchester Underwriting Management Limited and Leadenhall Capital Partners LLP. The aggregate amount of the Group's share of profit after tax from these investments during the year is as follows:

	2013 £m	2012 £m
Share of profit after tax of associates	3.9	0.5
Total comprehensive income	3.9	0.5

At 31 December 2013, the Group had an aggregate balance receivable from associates, excluding loans as detailed below, of £6.4 million (2012: £9.9 million). No amounts were provided for doubtful recovery of outstanding balances and no expense was recognised during the year in respect of bad or doubtful debts due from associates.

The Group has a loan to Miles Smith Holdings Limited of £0.2 million (2012: £0.3 million). The loan is repayable in three instalments, with the final instalment due on 31 December 2014. Interest on the loan is charged at 4.0% over the three-month LIBOR. Convertible loan stock of £0.7 million (2012: £0.7 million) has been issued by the associate to the Group. The conversion date is 31 December 2015. Interest on the convertible loan stock is accrued at 5.0% over five-year gilts.

The Group has a loan to Manchester Underwriting Management Limited of £2.7 million (2012: £1.0 million). The loan is repayable in full on dates between 31 December 2014 and 21 November 2018. Interest is charged at rates between 5.0% and 5.5% above the Bank of England base rate.

4.   Subsidiaries and associates continued

The Group had a contractual commitment to pay up to US$7.0 million to support the operations of Leadenhall Capital Partners LLP. At 31 December 2013, £2.5 million (2012: £2.5 million) was drawn on this agreement which is included within the Group's investment in associate balance. This contractual commitment expired on 31 December 2012.

e) Interests in unconsolidated structured entities

As noted above, the Group holds financial investments in certain pooled vehicles which are typically sub-funds of umbrella structures. These sub-funds meet the definition of structured entities under IFRS 10 as voting and similar rights are not the dominant factor in determining who controls the entity. Decision making at the sub-fund level is typically restricted to administrative tasks only, and instead it is the voting rights at the umbrella level which determines the control of the sub-funds.

The investments which meet the definition of structured entities are the Group's investments in pooled vehicles - liquidity funds and pooled vehicles - bonds and LIBOR plus funds, as listed in note 3.2. The funds under management with each of the fund managers in these pooled vehicles are also included within the same note. These amounts are recorded within financial assets on the Group's consolidated statement of financial position.

The maximum exposure to loss from the Group's interests in unconsolidated structured entities is 100% of the funds invested in those entities, should the fair value of the assets held deteriorate to nil.

The Group has provided no financial or other support to any unconsolidated structured entities in the period outside of transactions in the ordinary course of investment management, and has no current intentions to do so.

5.   Segmental reporting

a) Basis of segmentation

Management has determined the Group's operating segments based on the management information reviewed by the chief operating decision maker that is used to make strategic decisions. All operating segments used by management meet the definition of a reportable segment under IFRS 8, 'Operating segments'.

The Group is organised into six operating segments. Segments represent the distinct units through which the Group is organised and managed.

These segments are as follows:

·     Amlin London, underwriting Reinsurance, Property & Casualty and Marine & Aviation business, via Syndicate 2001;

·     Amlin UK, underwriting commercial insurance in the UK domestic market, via Syndicate 2001 and Amlin Insurance (UK) Limited;

·     Amlin Bermuda, which writes predominantly property reinsurance business, via Amlin AG, including reinsurance ceded by Syndicate 2001;

·     Amlin Re Europe, which writes Continental European non-life reinsurance business, via Amlin AG;

·     Amlin Europe, including Amlin Europe N.V., a leading provider of marine, corporate property and casualty insurance in the Netherlands and Belgium and specialty business in France; and

·     Other corporate companies, comprising all other entities of the Group including holding companies.

Included within the intra Group items column are consolidation adjustments.

5.   Segmental reporting continued

Transactions between segments are carried out at arm's length. The revenue from external parties reported to the chief operating decision maker is measured in a manner consistent with that in the consolidated statement of profit or loss and for the geographic segmental splits revenues are allocated based on the country in which the insurance risk is located. Management considers its external customers to be the individual policyholders, and as such the Group is not reliant on any individual customer.

b) Segmental information

Segmental information for the reportable segments of the Group is provided below. A reconciliation between this information and the consolidated statement of profit or loss is provided in note 5(c).

Income and expenses by business segment Year ended 31 December 2013	Amlin London £m	Amlin UK £m	Amlin Bermuda £m	Amlin Re Europe £m	Amlin Europe £m	Other corporate companies £m	Intra group  items £m	Total £m
Analysed by geographic segment:
UK	189.2	271.9	237.8	25.6	18.9	-	(219.3)	524.1
North America	621.5	11.6	203.2	2.3	-	-	-	838.6
Europe	89.9	21.3	40.3	171.7	266.9	-	(1.7)	588.4
Worldwide	10.0	29.4	-	-	168.7	-	-	208.1
Other	224.2	2.1	70.7	11.2	-	-	-	308.2
Gross written premium	1,134.8	336.3	552.0	210.8	454.5	-	(221.0)	2,467.4
Net written premium	775.1	279.4	500.4	173.8	385.4	-	(6.7)	2,107.4
Gross earned premium	1,086.7	334.6	560.3	207.1	469.8	-	(217.9)	2,440.6
Reinsurance premium ceded	(351.9)	(60.0)	(53.8)	(40.9)	(65.2)	-	208.6	(363.2)
Net earned premium	734.8	274.6	506.5	166.2	404.6	-	(9.3)	2,077.4
Insurance claims and claims settlement expenses	(439.8)	(217.9)	(249.4)	(148.2)	(244.5)	-	146.7	(1,153.1)
Reinsurance recoveries	119.7	47.8	1.6	24.3	14.6	-	(148.0)	60.0
Expenses for the acquisition of insurance contracts	(215.0)	(68.9)	(83.5)	(32.8)	(64.4)	-	13.7	(450.9)
Underwriting expenses	(86.0)	(34.1)	(25.5)	(16.5)	(91.2)	-	3.0	(250.3)
Profit attributable to underwriting	113.7	1.5	149.7	(7.0)	19.1	-	6.1	283.1
Investment return	11.7	2.0	56.5	2.3	44.5	57.9	(14.5)	160.4
Other operating income1	27.0	9.1	1.0	0.1	1.3	5.9	(40.1)	4.3
Agency expenses2	(24.5)	(8.3)	-	-	(0.2)	-	33.0	-
Other non-underwriting expenses	(1.9)	(1.1)	(9.4)	(0.9)	(15.6)	(69.4)	1.3	(97.0)
Result of operating activities	126.0	3.2	197.8	(5.5)	49.1	(5.6)	(14.2)	350.8
Finance costs3								(29.0)
Share of profit after tax of associates								3.9
Profit before tax								325.7
Claims ratio	44%	62%	49%	74%	57%			52%
Expense ratio	41%	37%	21%	30%	38%			34%
Combined ratio	85%	99%	70%	104%	95%			86%

Note:

1.  Other operating income is mainly agency fees payable by Syndicate 2001 to Amlin Underwriting Limited and external commission income earned by service companies.

2.  Agency expenses allocated to segments represent fees and commission payable to Amlin Underwriting Limited.

3.  Finance costs are incurred in support of the entire business of the Group and have not been allocated to particular segments.

5.   Segmental reporting continued

Included within the gross written premium of Amlin Bermuda is premium ceded from Amlin London, Amlin UK and Amlin Europe amounting  to £197.8 million on reinsurance contracts undertaken at commercial rates (2012: £207.4 million).

Investment return in other corporate companies includes a £40.0 million gain (2012: £14.2 million gain) generated from investments in Funds at Lloyd's that support the business reported in the Amlin London, Amlin UK and Amlin Europe segments. The table below illustrates the claims, expense and combined ratio excluding whole account quota share (WAQS) intra group reinsurance arrangements:

Excluding WAQS intra group reinsurance arrangements	Amlin London	Amlin UK	Amlin Bermuda	Amlin Re Europe	Amlin Europe			Total
Claims ratio	47%	65%	40%	74%	57%			52%
Expense ratio	36%	33%	28%	30%	38%			34%
Combined ratio	83%	98%	68%	104%	95%			86%

Restated Income and expenses by business segment Year ended 31 December 2012	Amlin London £m	Amlin UK £m	Amlin Bermuda £m	Amlin Re Europe £m	Amlin  Europe £m	Other corporate companies £m	Intra group  items £m	Total £m
Analysed by geographic segment:
UK	170.3	316.7	244.2	17.6	24.2	-	(223.0)	550.0
North America	589.4	10.3	184.3	1.9	-	-	-	785.9
Europe	85.6	22.2	30.9	141.7	282.1	-	(2.0)	560.5
Worldwide	15.9	17.0	-	-	169.9	-	-	202.8
Other	204.9	6.4	84.6	10.5	-	-	-	306.4
Gross written premium	1,066.1	372.6	544.0	171.7	476.2	-	(225.0)	2,405.6
Net written premium	739.4	303.3	488.3	138.5	394.0	-	(4.9)	2,058.6
Gross earned premium	1,037.7	323.6	537.2	154.9	471.4	-	(205.8)	2,319.0
Reinsurance premium ceded	(321.3)	(57.6)	(61.5)	(28.5)	(80.6)	-	201.0	(348.5)
Net earned premium	716.4	266.0	475.7	126.4	390.8	-	(4.8)	1,970.5
Insurance claims and claims settlement expenses	(508.0)	(185.7)	(259.8)	(103.1)	(273.9)	-	133.2	(1,197.3)
Reinsurance recoveries	129.6	35.6	(5.0)	11.0	42.7	-	(141.2)	72.7
Expenses for the acquisition of insurance contracts	(193.5)	(72.8)	(71.8)	(20.2)	(74.3)	-	10.1	(422.5)
Underwriting expenses	(81.0)	(29.0)	(16.7)	(12.6)	(77.4)	-	0.4	(216.3)
Profit attributable to underwriting	63.5	14.1	122.4	1.5	7.9	-	(2.3)	207.1
Investment return	22.0	6.6	60.9	2.3	60.5	20.2	(7.2)	165.3
Other operating income1	23.5	7.7	1.4	-	1.9	8.4	(37.3)	5.6
Agency expenses2	(20.1)	(6.5)	-	-	(0.7)	-	27.3	-
Other non-underwriting expenses	(0.8)	(0.1)	(4.4)	(2.5)	(24.8)	(61.7)	7.6	(86.7)
Result of operating activities	88.1	21.8	180.3	1.3	44.8	(33.1)	(11.9)	291.3
Finance costs3								(27.6)
Share of profit after tax of associates								0.5
Profit before tax								264.2
Claims ratio	53%	57%	56%	73%	59%			57%
Expenses ratio	38%	38%	18%	26%	39%			32%
Combined ratio	91%	95%	74%	99%	98%			89%

Note:

1.   Other operating income is mainly agency fees payable by Syndicate 2001 to Amlin Underwriting Limited and external commission income earned by service companies.

2.   Agency expenses allocated to segments represent fees and commission payable to Amlin Underwriting Limited.

3.   Finance costs are incurred in support of the entire business of the Group and have not been allocated to particular segments.

5.   Segmental reporting continued

The table below illustrates the claims, expense and combined ratio excluding whole account quota share (WAQS) intra group reinsurance arrangements:

Excluding WAQS intra group reinsurance arrangements	Amlin London	Amlin UK	Amlin Bermuda	Amlin Re Europe	Amlin  Europe			Total
Claims ratio	56%	60%	47%	73%	59%			57%
Expenses ratio	34%	33%	24%	26%	39%			32%
Combined ratio	90%	93%	71%	99%	98%			89%

c) Reconciliation between management information and the consolidated statement of profit or loss

The table below shows the reconciliation between the management information provided to the chief operating decision maker and the consolidated statement of profit or loss.

	Year ended 31 December 2013			Year ended 31 December 2012
	Management information £m	Reconciling  items £m	IFRS Consolidated statement of profit or loss £m	Management information £m	Reconciling  items £m	IFRS Consolidated statement of profit or loss £m
Gross written premium	2,467.4	-	2,467.4	2,405.6	-	2,405.6
Net written premium	2,107.4	18.2	2,125.6	2,058.6	15.9	2,074.5
Gross earned premium	2,440.6	-	2,440.6	2,319.0	-	2,319.0
Reinsurance premium ceded	(363.2)	17.2	(346.0)	(348.5)	15.9	(332.6)
Net earned premium	2,077.4	17.2	2,094.6	1,970.5	15.9	1,986.4
Insurance claims and claims settlement expenses	(1,153.1)	-	(1,153.1)	(1,197.3)	-	(1,197.3)
Reinsurance recoveries	60.0	-	60.0	72.7	-	72.7
Expenses for the acquisition of insurance contracts	(450.9)	-	(450.9)	(422.5)	-	(422.5)
Underwriting expenses	(250.3)	-	(250.3)	(216.3)	-	(216.3)
Profit attributable to underwriting	283.1	17.2	300.3	207.1	15.9	223.0
Investment return	160.4	(17.2)	143.2	165.3	(15.9)	149.4
Other operating income	4.3	-	4.3	5.6	-	5.6
Other non-underwriting expenses	(97.0)	-	(97.0)	(86.7)	-	(86.7)
Result of operating activities	350.8	-	350.8	291.3	-	291.3
Finance costs	(29.0)	-	(29.0)	(27.6)	-	(27.6)
Share of profit after tax of associates	3.9	-	3.9	0.5	-	0.5
Profit before tax	325.7	-	325.7	264.2	-	264.2

The reconciling items disclosed in the table above relate to items of income and expense under the Group's contracts with Tramline Re Ltd and Tramline Re II Ltd. From a management information perspective, these instruments are insurance linked and therefore these balances are included within the Group's profit attributable to underwriting in the segmental information. Under IAS 39, the instruments are classified as derivatives and therefore such items of income and expense are reported through investment return in the Group's consolidated statement of profit or loss.

6.   Net earned premium

	Note	2013 £m	2012 £m
Gross earned premium
Gross written premium	5, 19	2,467.4	2,405.6
Change in unearned premium		(26.8)	(86.6)
		2,440.6	2,319.0
Reinsurance premium ceded
Reinsurance premium payable	19	(341.8)	(331.1)
Change in reinsurers' share of unearned premium		(4.2)	(1.5)
		(346.0)	(332.6)
		2,094.6	1,986.4

7.   Investment return

	Note	2013 £m	2012 £m
Investment income
- dividend income		16.3	11.3
- interest income		27.5	31.1
- cash and cash equivalents interest income		2.9	5.6
		46.7	48.0
Net realised gains/(losses) on assets held for trading
- equity securities		25.6	7.0
- debt securities1		71.9	28.4
- property funds		3.6	(0.1)
- derivative instruments		(6.2)	(6.9)
- derivative instruments relating to the Group's contracts with Tramline Re Ltd and Tramline Re II Ltd	5	(15.7)	(15.9)
on assets classified as other than trading
- participation in investment pools		2.0	3.3
		81.2	15.8
Net unrealised gains/(losses) on assets held for trading
- equity securities		44.7	11.5
- debt securities1		(48.9)	77.7
- property funds		0.4	(2.7)
- derivative instruments		19.0	(0.9)
- derivative instruments relating to the Group's contracts with Tramline Re Ltd and Tramline Re II Ltd	5	(1.5)	-
on assets classified as other than trading
- other		1.6	-
		15.3	85.6
		143.2	149.4

        Notes:

1.             Included within debt securities held for trading are realised and unrealised gains of £0.2 million and £3.9 million respectively, relating to the investment in the funds managed by Leadenhall Capital Partners LLP (2012: £1.8 million gains and £2.6million gains).

8.   Net insurance claims

	Note	2013 £m	2012 £m
Insurance claims and claims settlement expenses
Current year insurance claims and claims settlement expenses	19	1,303.6	1,291.6
Reduced costs for prior period insurance claims	19	(150.5)	(94.3)
		1,153.1	1,197.3
Insurance claims and claims settlement expenses recoverable from reinsurers
Current year insurance claims and claims settlement expenses recoverable from reinsurers	19	(77.0)	(72.8)
Reduced income from prior period insurance claims recoverable from reinsurers	19	17.0	0.1
		(60.0)	(72.7)
		1,093.1	1,124.6

9.   Expenses for the acquisition of insurance contracts

	Note	2013 £m	2012 £m
Expenses for the acquisition of insurance contracts	21	458.2	454.8
Changes in deferred expenses for the acquisition of insurance contracts		(7.3)	(32.3)
		450.9	422.5

10. Other operating expenses

	Note	2013 £m	2012 £m
Expenses relating to underwriting
Employee expenses, excluding employee incentives		132.6	115.3
Lloyd's expenses		20.9	19.3
Other administrative expenses		86.3	71.2
Underwriting foreign exchange losses	16	10.5	10.5
		250.3	216.3
Other expenses
Employee expenses, excluding employee incentives		18.9	13.9
Employee incentive and related social security costs		53.4	34.8
Asset management fees		14.0	6.4
Other administrative expenses		16.1	18.8
Amlin Europe N.V. disentanglement and integration costs		-	20.6
Non-underwriting foreign exchange gains	16	(5.4)	(7.8)
		97.0	86.7
		347.3	303.0

Employee and other administrative expenses not relating to underwriting represent costs associated with the corporate activities of the Group.

Amlin Europe N.V. disentanglement and integration costs include expenditure incurred on the systems replacement programme which completed in 2012.

11. Directors' remuneration

The aggregate remuneration of the Directors of the Company, including amounts received from subsidiaries, was:

	2013 £m	2012 £m
Remuneration of Executive Directors	3.6	3.0
Remuneration of Non-Executive Directors	0.6	0.6
Amounts (excluding equity settled share options and awards) receivable under long-term incentive schemes	2.5	1.1
	6.7	4.7
Pension contributions	0.1	0.1
	6.8	4.8

Details of Directors' remuneration and pension benefits, including those of the highest paid Director, are included in the Remuneration Report in the Governance section of the Annual Report. Payments were made to both a defined benefit pension scheme and stakeholder defined contribution scheme for two (2012: two) Executive Directors and to stakeholder defined contribution schemes for one (2012: two) other Executive Director.

12. Employee benefit expenses

The average number of persons employed by the Group, including individuals on fixed term contracts and Directors, were:

	2013	2012
Underwriting divisions
Underwriting, claims and reinsurance	924	787
Administration and support	665	595
Corporate Centre functions
Operations	214	188
Finance	44	43
Internal audit and compliance	15	15
	1,862	1,628

	2013	2012
By location
UK	1,123	1,038
Continental Europe	654	530
Bermuda	51	46
Singapore	30	13
US	4	1
	1,862	1,628

The aggregate payroll costs incurred by Group companies are analysed as follows:

	Note	2013 £m	2012 £m
Wages and salaries		122.5	111.8
Employee incentive and related social security costs		53.4	34.8
Equity settled share options and awards granted to Directors and employees	28	5.1	4.4
Social security costs		16.5	14.4
Pension costs - defined contribution schemes	32	7.8	6.6
Pension costs - defined benefit schemes	32	7.2	6.4
		212.5	178.4

13. Finance costs

	2013 £m	2012 £m
Letter of credit commission	1.8	1.1
Revolving credit facility	3.2	1.8
Subordinated debt interest	19.5	20.2
Other similar charges	4.5	4.5
	29.0	27.6

14. Profit before tax

Profit before tax is stated after charging the following amounts:

	Note	2013 £m	2012 £m
Depreciation	22	7.4	6.2
Amortisation	23	11.2	7.3
Operating lease expenditure	35	9.6	9.7
Foreign exchange losses	16	5.1	2.7

Fees paid to the Group's auditors in respect of the financial year are set out below:

	2013 £'000	2012 £'000
Audit
Audit of the Group's and Company's annual financial statements	151.6	161.3
Audit of subsidiaries	966.7	1,106.1
	1,118.3	1,267.4
Assurance services
Audit-related assurance services	286.9	308.6
Other assurance services	19.3	23.3
	306.2	331.9
Services relating to taxation
Tax advisory services	40.0	84.7
	40.0	84.7
Other non-audit services
Internal audit services	-	20.0
Services related to corporate finance transactions	-	100.3
Other services1	202.3	617.8
	202.3	738.1
Total fees	1,666.8	2,422.1

Note:

1. Other services include £nil in 2013 (2012: £562,000) relating to advisory work to assess the Group's financial reporting systems and scope a finance transformation project. For more detailed explanation of the process for authorisation see the Audit Committee report.

15. Tax

	2013 £m	Restated 2012 £m
Current tax - current year
Corporate income tax	(13.7)	23.3
Foreign tax	2.8	6.4
Double tax relief	-	(3.8)
	(10.9)	25.9
Current tax - adjustments in respect of previous years
Corporate income tax	0.1	(7.2)
Deferred tax - current year
Origination and reversal of temporary differences	41.5	(1.3)
Deferred tax - adjustments in respect of previous years
Movements for the year	1.9	1.5
Impact of change in UK tax rate	(5.6)	(2.5)
	(3.7)	(1.0)
Income tax expense	27.0	16.4

15. Tax continued

In addition to the above, tax of £1.8 million (2012 restated: £1.9 million credit) has been charged directly to other comprehensive income as follows:

	2013 £m	Restated 2012 £m
Deferred tax on defined benefit pension fund actuarial gains/(losses)	2.3	(1.6)
Income tax on items that will not be reclassified to profit or loss	2.3	(1.6)
Current tax on foreign exchange losses on translation of foreign operations, net of designated hedges	(0.5)	(1.0)
Current tax charged on other items within other comprehensive income	-	0.7
Income tax on items that may be reclassified subsequently to profit or loss	(0.5)	(0.3)
Taxes charged/(credited) to other comprehensive income	1.8	(1.9)

In addition to the above, tax of £0.3 million (2012: £0.1 million credited) has been charged directly to other reserves as follows:

	2013 £m	2012 £m
Deferred tax relating to employee share option schemes	0.3	(0.1)
Taxes charged/(credited) to other reserves	0.3	(0.1)

Reconciliation of tax expense

The UK standard rate of corporation tax is 23.25% (2012: 24.5%), whereas the tax charged for the year ended 31 December 2013 as a percentage of profit (2012: profit) before tax is 8.3% (2012 restated: 6.2%). The reasons for this difference are explained below:

	2013 £m	2013 %	Restated 2012 £m	Restated 2012 %
Profit before tax	325.7		264.2
Taxation on profit on ordinary activities at the standard rate of corporation tax in the UK	75.7	23.3	64.8	24.5
Non-deductible or non-taxable items	(2.9)	(0.9)	0.1	-
Tax rate differences on foreign subsidiaries	(45.0)	(13.8)	(42.9)	(16.2)
Adjustments in respect of previous years	2.0	0.6	(5.7)	(2.1)
Irrecoverable foreign tax	2.8	0.8	2.6	0.9
UK deferred tax rate change	(5.6)	(1.7)	(2.5)	(0.9)
Income tax expense	27.0	8.3	16.4	6.2

Deferred tax

The deferred tax asset is attributable to temporary differences arising on the following:

2012 Restated	Provisions for losses £m	Other provisions £m	Pension provisions £m	Other temporary differences £m	Total £m
At 1 January 2012	38.4	5.1	8.0	(24.6)	26.9
Movements in the year	(10.2)	(3.6)	0.3	(7.9)	(21.4)
Amounts netted off against deferred tax liabilities	-	-	-	10.3	10.3
At 31 December 2012	28.2	1.5	8.3	(22.2)	15.8
Movements in the year	(12.9)	0.8	(4.2)	15.6	(0.7)
Amounts netted off against deferred tax liabilities	-	-	-	(9.0)	(9.0)
At 31 December 2013	15.3	2.3	4.1	(15.6)	6.1

15. Tax continued

The deferred tax liability is attributable to temporary differences arising on the following:

	Underwriting results £m	Unrealised capital gains £m	Syndicate capacity £m	Intangibles £m	Other temporary differences £m	Total £m
At 1 January 2012	10.5	7.5	6.7	11.4	6.3	42.4
Movements in the year	(17.7)	5.7	0.1	(1.7)	(11.8)	(25.4)
Amounts netted off against deferred tax assets	-	-	-	-	10.3	10.3
Other movements	-	-	-	-	0.6	0.6
At 31 December 2012	(7.2)	13.2	6.8	9.7	5.4	27.9
Movements in the year	27.3	(2.5)	(0.3)	9.8	(1.6)	32.7
Opening balances recognised on acquisition of subsidiaries	-	-	-	(5.6)	(0.2)	(5.8)
Amounts netted off against deferred tax assets	-	-	-	-	9.0	9.0
Other movements	-	-	-	0.1	(0.2)	(0.1)
At 31 December 2013	20.1	10.7	6.5	14.0	12.4	63.7

A deferred tax liability of £37.4 million (2012 restated: £21.0 million) is expected to crystallise more than 12 months after the consolidated statement of financial position date.

UK tax rate

Recent UK budgets have announced changes in the main rate of UK corporation tax. The current rate of 23.0% was enacted on 3 July 2012 and applies from 1 April 2013. Further rate reductions have been announced, with the most recent being announced in the March 2013 budget, which will ultimately reduce the main rate to 20.0% applying from 1 April 2015.

Underwriting profits

Underwriting profits and losses are recognised in the consolidated statement of profit or loss on an annual accounting basis, recognising the results in the period in which they are earned. UK corporation tax on Syndicate 2001's underwriting result is charged in the period in which the underwriting profits are actually paid by the Syndicate to the corporate member subsidiary. This creates a deferred tax position.

Deferred tax is provided on the underwriting result with reference to the forecast ultimate result of each of the years of account. Where this is a taxable loss, deferred tax is only provided on the movement on that year of account to the extent that forecasts show that the taxable loss will be utilised in the foreseeable future. A deferred tax liability (before netting off) has been recognised on the underwriting result for this accounting period of £27.3 million (2012: £17.7 million asset).

The Group is subject to US tax on US underwriting profits. No provision has been made in respect of such tax arising in 2013 (2012: £nil) as any net provision is likely to be immaterial.

Controlled Foreign Companies legislation

Amlin AG operates in Switzerland as Amlin Re Europe, with the Bermudian business operating as a branch. The Group's tax provision for 2013 has been prepared on the basis that Amlin AG is non-UK resident for UK corporation tax purposes and is exempt from the UK controlled foreign company regime. The corporation tax rate for profits earned by the Bermudian branch of Amlin AG is currently nil% (2012: nil%). The combined rate of Swiss cantonal and federal taxes, applicable to profits arising from the Swiss operation only, is 21.2% (2012: 21.2%).

15. Tax continued

Deferred tax rate

Deferred tax has been provided for at the local tax rate in force when the temporary differences are expected to reverse. The tax rates used are:

·     UK - 20.0% (2012: 23.0%);

·     The Netherlands - 25.0% (2012: 25.0%);

·     Bermuda - nil% (2012: nil%); and

·     Switzerland - 21.2% (2012: 21.2%).

The UK tax rate applied for deferred tax purposes (20.0%) was substantively enacted on 2 July 2013.

16. Net foreign exchange losses

The Group recognised net foreign exchange losses of £5.1 million (2012: £2.7 million) in the consolidated statement of profit or loss during the year.

The Group writes business in many currencies and although a large proportion of the Group's consolidated statement of financial position assets and liabilities are matched, minimising the effect of movements in foreign exchange rates on the Group's result, it is not practical to match exactly all assets and liabilities in currency. Accounting standards also require that certain classes of assets and liabilities be translated at different rates (see foreign currency translation accounting policy in note 1).

Included within the Group's foreign exchange losses in the consolidated statement of profit or loss are:

	2013 £m	2012 £m
Underwriting exchange losses	(10.5)	(10.5)
Non-underwriting exchange gains	5.4	7.8
Total net foreign exchange losses	(5.1)	(2.7)

In addition, the following exchange movements have been charged directly to other comprehensive income:

	2013 £m	2012 £m
Gains/(losses) on translation of foreign operations:
- Amlin Bermuda	(17.0)	(51.6)
- RaetsMarine Insurance B.V.	(0.8)	-
- Amlin France SAS	(0.1)	0.1
- Amlin Europe N.V.	2.1	3.3
- Amlin Re Europe	0.1	0.2
- Solo Absolute Bonds & Currency Fund	(1.0)	(7.2)
	(16.7)	(55.2)
Gains on financial instruments that hedge investments in foreign operations	0.5	3.7
Gains/(losses) on translation of intangibles arising from investments in foreign operations	0.2	(1.9)
Foreign exchange losses on translation of foreign operations, net of designated hedges	(16.0)	(53.4)

17. Cash and cash equivalents

	2013 £m	2012 £m
Cash and cash in hand	125.8	153.3
Short-term deposits	38.7	37.3
	164.5	190.6

Cash and cash equivalents represent cash at bank and in hand, short-term bank deposits and other short-term highly liquid investments that are subject to insignificant risk of changes in fair value.

18. Financial assets and financial liabilities

a) Net financial investments

	At valuation 2013 £m	At valuation 2012 £m	At cost 2013 £m	At cost 2012 £m
Assets
Financial assets held for trading at fair value through profit or loss
Shares and other variable yield securities	515.9	279.3	452.4	259.7
Debt and other fixed income securities	3,128.2	2,717.4	3,069.6	2,797.6
Property funds	181.0	153.6	185.7	158.8
Derivative instruments	18.9	6.8	0.6	-
Other financial assets at fair value through profit or loss
Participation in investment pools	379.2	997.1	379.2	997.1
Deposits with credit institutions	119.4	42.9	119.4	42.9
Other	2.6	1.2	1.1	1.2
Available-for-sale financial assets
Unlisted equities	6.7	4.7	6.7	4.7
Other
Derivative instruments in designated hedge accounting relationships	16.9	2.0	-	-
Total financial assets	4,368.8	4,205.0	4,214.7	4,262.0
Liabilities
Financial liabilities held for trading at fair value through profit or loss
Derivative instruments	(4.7)	(5.0)	(0.6)	-
Other
Derivative instruments in designated hedge accounting relationships	-	(0.7)	-	-
Total financial liabilities	(4.7)	(5.7)	(0.6)	-
Net financial assets	4,364.1	4,199.3	4,214.1	4,262.0

Debt and other fixed income securities include pooled funds, investing in bonds and other fixed income securities. The valuation of these funds is £1,820.8 million (2012: £1,364.8 million).

Participation in investment pools includes units held in money market funds.

The Group holds hedging and non-hedging derivatives. Hedging derivatives are designated at inception and qualify for hedge accounting under IAS 39. Non-hedging derivatives either do not qualify for hedge accounting or the option to hedge account has not been taken.

18. Financial assets and financial liabilities continued

The reconciliation of opening and closing financial investments is as follows:        

	2013 £m	2012 £m
At 1 January	4,199.3	3,972.9
Foreign exchange losses	(28.9)	(109.6)
Net purchases	92.1	234.1
Net realised gains on assets held for trading or other than trading	81.2	15.8
Net unrealised gains on assets held for trading or other than trading	15.3	85.6
Net unrealised gains on assets designated as available-for-sale	-	0.5
Acquisition through business combination	0.1	-
Net realised and unrealised gains on derivative instruments in designated hedge accounting relationships	5.0	-
At 31 December	4,364.1	4,199.3

b) Offsetting financial assets and financial liabilities

The Group's derivative transactions with respect to over-the-counter options and currency forwards are subject to International Swaps and Derivatives Association (ISDA) master netting agreements. Transactions under such agreements meet the criteria for offsetting in the Group's consolidated statement of financial position. The Group also receives and pledges collateral in the form of cash in respect of the derivative transactions. The fair value of the Group's options and currency forwards are not offset by such collaterals as they create a right of set-off that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties.

The Group's listed futures are transacted under Global Principal Clearing agreements and are not subject to offsetting in the statement of financial position. In addition, the Group and its counterparties do not intend to settle on a net basis or to realise the assets and the liabilities simultaneously.

18. Financial assets and financial liabilities continued

The disclosure provided in the tables below include derivatives that are set off in the Group's statement of financial position.

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

31 December 2013	Gross amounts of recognised financial assets £m	Gross amounts of recognised financial liabilities set off in the statement of financial position £m	Net amounts of financial assets presented in the statement of financial position £m	Related amounts not set off in the statement of financial position		Net amount £m
				Financial instruments £m	Cash collateral received £m
Derivative instruments held for trading	1,040.5	(1,021.6)	18.9	(0.2)	(3.7)	15.0
Derivative instruments in designated hedge accounting relationships	95.7	(78.8)	16.9	-	(16.2)	0.7
	1,136.2	(1,100.4)	35.8	(0.2)	(19.9)	15.7

31 December 2012	Gross amounts of recognised financial assets £m	Gross amounts of recognised financial liabilities set off in the statement of financial position £m	Net amounts of financial assets presented in the statement of financial position £m	Related amounts not set off in the statement of financial position		Net amount £m
				Financial instruments £m	Cash collateral received £m
Derivative instruments held for trading	539.2	(532.4)	6.8	(0.1)	(0.7)	6.0
Derivative instruments in designated hedge accounting relationships	3.3	(1.3)	2.0	-	(1.2)	0.8
	542.5	(533.7)	8.8	(0.1)	(1.9)	6.8

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

31 December 2013	Gross amounts  of recognised financial liabilities £m	Gross amounts of recognised financial assets set off in the statement of financial position £m	Net amounts of financial liabilities presented in the statement of financial position £m	Related amounts not set off in the statement of financial position		Net amount £m
				Financial instruments £m	Cash collateral pledged £m
Derivative instruments held for trading	1,026.3	(1,021.6)	4.7	(0.2)	(2.4)	2.1
Derivative instruments in designated hedge accounting relationships	78.8	(78.8)	-	-	-	-
	1,105.1	(1,100.4)	4.7	(0.2)	(2.4)	2.1

31 December 2012	Gross amounts of recognised financial liabilities £m	Gross amounts of recognised financial assets set off in the statement of financial position £m	Net amounts of financial liabilities presented in the statement of financial position £m	Related amounts not set off in the statement of financial position		Net amount £m
				Financial instruments £m	Cash collateral pledged £m
Derivative instruments held for trading	537.4	(532.4)	5.0	(0.1)	(1.5)	3.4
Derivative instruments in designated hedge accounting relationships	2.0	(1.3)	0.7	-	(1.0)	(0.3)
	539.4	(533.7)	5.7	(0.1)	(2.5)	3.1

19. Insurance liabilities and reinsurance assets

Outstanding claims		2013			2012
	Note	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
At 1 January		3,083.5	478.6	2,604.9	3,273.6	617.0	2,656.6
Claims incurred during the current year	8	1,303.6	77.0	1,226.6	1,291.6	72.8	1,218.8
Movements arising from prior year claims	8	(150.5)	(17.0)	(133.5)	(94.3)	(0.1)	(94.2)
Claims paid during the year		(1,330.2)	(183.5)	(1,146.7)	(1,295.6)	(195.5)	(1,100.1)
Accretion of fair value adjustment		4.7	0.8	3.9	4.7	0.8	3.9
Other movements		-	0.5	(0.5)	-	(1.9)	1.9
Exchange adjustments		(14.0)	(13.3)	(0.7)	(96.5)	(14.5)	(82.0)
At 31 December		2,897.1	343.1	2,554.0	3,083.5	478.6	2,604.9

In connection with the purchase accounting for the acquisition of Amlin Europe N.V., the Group adjusted outstanding claims and related reinsurers' share of outstanding claims to fair value on acquisition. The reduction to the original carrying value of £39.1 million and £6.4 million to outstanding claims and reinsurers' share of outstanding claims respectively is being recognised through a charge to the consolidated statement of profit or loss over the period the claims are settled. This net charge was £3.9 million in 2013 (2012: £3.9 million).

The fair value was based on the present value of the expected cash flows with consideration for the uncertainty inherent in both the timing of, and the ultimate amount of, future payments for losses and receipts of amounts recoverable from reinsurers. The nominal amounts were discounted to their present value using an applicable risk-free discount rate.

Further information on the calculation of outstanding claims and the risks associated with them is provided in the risk disclosures in note 3. Outstanding claims are further analysed between notified outstanding claims and claims incurred but not reported below:

Outstanding claims	2013			2012
	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
Notified outstanding claims	2,125.6	291.0	1,834.6	2,200.6	394.2	1,806.4
Claims incurred but not reported	771.5	52.1	719.4	882.9	84.4	798.5
	2,897.1	343.1	2,554.0	3,083.5	478.6	2,604.9

The current and non-current portions for outstanding claims are expected to be as follows:

	2013			2012
Outstanding claims	Insurance  liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
Current portion	1,082.5	141.5	941.0	1,126.4	190.3	936.1
Non-current portion	1,814.6	201.6	1,613.0	1,957.1	288.3	1,668.8
	2,897.1	343.1	2,554.0	3,083.5	478.6	2,604.9

19. Insurance liabilities and reinsurance assets continued

Unearned premium		2013			2012
	Note	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance  liabilities £m	Reinsurers' share £m	Net liabilities £m
At 1 January		1,054.8	46.8	1,008.0	998.0	50.4	947.6
Premium written during the year	6	2,467.4	341.8	2,125.6	2,405.6	331.1	2,074.5
Premium earned during the year	6	(2,440.6)	(346.0)	(2,094.6)	(2,319.0)	(332.6)	(1,986.4)
Exchange adjustments		12.3	2.5	9.8	(29.8)	(2.1)	(27.7)
At 31 December		1,093.9	45.1	1,048.8	1,054.8	46.8	1,008.0

The current and non-current portions for unearned premium are expected to be as follows:

	2013			2012
Unearned premium	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance  liabilities £m	Reinsurers' share £m	Net liabilities £m
Current portion	976.6	27.7	948.9	926.1	28.6	897.5
Non-current portion	117.3	17.4	99.9	128.7	18.2	110.5
	1,093.9	45.1	1,048.8	1,054.8	46.8	1,008.0

The total reinsurers' share of outstanding claims and unearned premium is set out in the table below:

	2013 £m	2012 £m
Reinsurers' share of insurance liabilities	404.1	541.6
Less provision for impairment of receivables from reinsurers	(15.9)	(16.2)
Reinsurance assets	388.2	525.4

The Group assesses its reinsurers' share of outstanding claims for impairment on a quarterly basis by reviewing counterparty payment history  and credit grades provided by rating agencies. The credit ratings of the Group's reinsurers' share of outstanding claims are shown in note 3.2.  As at 31 December 2013 there were £nil million (2012: £1.2 million) reinsurance assets greater than three months overdue. The Group holds collateral of £64.6 million (2012 restated: £102.5 million) in relation to reinsurers' share of outstanding claims. Details are included in note 29.  The Group has recognised a £nil total net impairment loss (2012: £nil) on reinsurance assets and insurance and reinsurance receivables.

20. Loans and receivables, including insurance and reinsurance receivables

	2013 £m	2012 £m
Receivables arising from insurance and reinsurance contracts	1,033.1	1,021.6
Less provision for impairment of receivables from contract holders and agents	(19.3)	(18.4)
Insurance and reinsurance receivables	1,013.8	1,003.2
Other receivables	63.8	56.4
Prepayments and other accrued income	24.6	25.8
Other loans and receivables	88.4	82.2
	1,102.2	1,085.4

Receivables arising from reinsurance contracts are comprised principally of amounts recoverable from reinsurers in respect of paid claims and premium receivables on inward reinsurance business, including reinstatement premium. Other receivables comprise principally of amounts receivable from investment managers for financial investments sold, input VAT and other sundry receivables.

The current and non-current portions are expected to be as follows:

	2013 £m	2012 £m
Current portion	1,065.4	1,037.2
Non-current portion	36.8	48.2
	1,102.2	1,085.4

20. Loans and receivables, including insurance and reinsurance receivables continued

The Group assesses its insurance and reinsurance receivables for impairment on a quarterly basis by reviewing counterparty payment history and for circumstances which may give rise to a dispute or default. At 31 December 2013, insurance and reinsurance receivables at a nominal value of £51.2 million (2012: £16.8 million) were greater than three months overdue and provided for on the basis of credit rating to the value of £10.8 million (2012: £9.0 million).

The carrying amounts disclosed above are reasonably approximate to the fair value at the reporting date.

The ageing analysis of insurance and reinsurance receivables overdue, before impairment provision, is as follows:

	2013 £m	2012 £m
3 to 6 months	20.3	6.2
6 to 9 months	14.5	3.7
Greater than 9 months	16.4	6.9
	51.2	16.8

The Netherlands and Belgium business of Amlin Europe N.V. did not produce an ageing report for insurance receivables in 2012 due to the interaction of local market practice and the office's internal systems. For comparative purposes, the 2013 values relating to The Netherlands and Belgium business of Amlin Europe N.V. are £13.1 million for 3 to 6 months, £7.9 million for 6 to 9 months and £10.4 million for greater than 9 months.

Movements on the Group's provision for impairment of receivables from contract holders and agents are as follows:

	2013 £m	2012 £m
At 1 January	18.4	20.0
Increase in the provision	2.8	6.2
Utilised provision	(0.7)	(3.5)
Release of unused provision	(1.3)	(3.7)
Foreign exchange movements	0.1	(0.6)
At 31 December	19.3	18.4

21. Deferred acquisition costs

The reconciliation of opening and closing deferred acquisition costs is as follows:

	Note	2013 £m	2012 £m
At 1 January		239.3	207.7
Expense deferred	9	458.2	454.8
Amortisation	9	(450.9)	(422.5)
Other movements		(0.5)	(0.7)
At 31 December		246.1	239.3

The current and non-current portions are expected to be as follows:

	2013 £m	2012 £m
Current portion	220.0	209.9
Non-current portion	26.1	29.4
	246.1	239.3

22. Property and equipment

	Note	Freehold land and buildings £m	Leasehold land and buildings £m	Motor vehicles £m	Computer equipment £m	Fixtures, fittings and leasehold improvements £m	Total £m
Cost
At 1 January 2013		7.2	-	0.1	40.8	14.9	63.0
Additions		1.5	2.2	0.3	2.6	0.7	7.3
Acquisition through business combination		-	-	0.6	0.4	1.4	2.4
Disposals		-	-	(0.1)	(0.2)	-	(0.3)
Foreign exchange losses		-	-	(0.1)	-	(0.2)	(0.3)
At 31 December 2013		8.7	2.2	0.8	43.6	16.8	72.1
Accumulated depreciation
At 1 January 2013		0.4	-	-	33.1	9.1	42.6
Charge for the year	14	0.1	-	0.2	4.8	2.3	7.4
Disposals		-	-	(0.1)	(0.2)	-	(0.3)
Foreign exchange gains		-	-	-	(0.1)	(0.1)	(0.2)
At 31 December 2013		0.5	-	0.1	37.6	11.3	49.5
Net book value
At 31 December 2013		8.2	2.2	0.7	6.0	5.5	22.6
At 1 January 2013		6.8	-	0.1	7.7	5.8	20.4

	Note	Freehold land and buildings £m	Leasehold land and buildings £m	Motor vehicles £m	Computer equipment £m	Fixtures, fittings and leasehold improvements £m	Total £m
Cost
At 1 January 2012		6.8	-	0.1	36.9	14.4	58.2
Additions		0.4	-	-	4.4	2.1	6.9
Disposals		-	-	-	(0.3)	(1.5)	(1.8)
Foreign exchange losses		-	-	-	(0.2)	(0.1)	(0.3)
At 31 December 2012		7.2	-	0.1	40.8	14.9	63.0
Accumulated depreciation
At 1 January 2012		0.3	-	-	28.8	9.2	38.3
Charge for the year	14	0.1	-	-	4.6	1.5	6.2
Disposals		-	-	-	(0.2)	(1.5)	(1.7)
Foreign exchange gains		-	-	-	(0.1)	(0.1)	(0.2)
At 31 December 2012		0.4	-	-	33.1	9.1	42.6
Net book value
At 31 December 2012		6.8	-	0.1	7.7	5.8	20.4
At 1 January 2012		6.5	-	0.1	8.1	5.2	19.9

23. Goodwill and intangible assets

	Note	Goodwill £m	Syndicate participations £m	Broker and customer relationships £m	Computer software £m	Other intangibles £m	Total £m
Cost
At 1 January 2013		75.5	63.2	49.4	44.2	2.9	235.2
Additions		-	-	-	2.2	0.3	2.5
Acquisition through business combination	4	13.5	-	22.4	-	-	35.9
Foreign exchange gains/(losses)		0.5	-	(0.1)	0.3	-	0.7
At 31 December 2013		89.5	63.2	71.7	46.7	3.2	274.3
Accumulated amortisation
At 1 January 2013		0.4	-	18.6	2.6	2.2	23.8
Charge for the year	14	-	-	5.4	5.3	0.5	11.2
Foreign exchange losses		-	-	0.2	-	-	0.2
At 31 December 2013		0.4	-	24.2	7.9	2.7	35.2
Net book value
At 31 December 2013		89.1	63.2	47.5	38.8	0.5	239.1
At 1 January 2013		75.1	63.2	30.8	41.6	0.7	211.4

	Note	Goodwill £m	Syndicate participations £m	Broker and customer relationships £m	Computer software £m	Other intangibles £m	Total £m
Cost
At 1 January 2012		77.0	63.2	50.3	42.6	2.5	235.6
Additions		-	-	-	1.9	0.4	2.3
Adjustments to prior acquisitions		(0.2)	-	-	-	-	(0.2)
Foreign exchange losses		(1.3)	-	(0.9)	(0.3)	-	(2.5)
At 31 December 2012		75.5	63.2	49.4	44.2	2.9	235.2
Accumulated amortisation
At 1 January 2012		0.4	-	14.6	-	1.7	16.7
Charge for the year	14	-	-	4.2	2.6	0.5	7.3
Foreign exchange gains		-	-	(0.2)	-	-	(0.2)
At 31 December 2012		0.4	-	18.6	2.6	2.2	23.8
Net book value
At 31 December 2012		75.1	63.2	30.8	41.6	0.7	211.4
At 1 January 2012		76.6	63.2	35.7	42.6	0.8	218.9

Syndicate participations represent the ongoing rights to trade on Syndicate 2001 within the Lloyd's insurance market.

Goodwill and the intangible asset in relation to syndicate participations are considered to have an indefinite life. As such, they are tested for impairment annually. All other intangible assets are tested for impairment only if an indication exists that the asset may be impaired at the reporting date.

Broker and customer relationship intangibles include those acquired in relation to AUA Insolvency Risk Services Limited, Amlin Europe N.V. and RaetsMarine Insurance B.V., the net book value being £9.0 million (2012: £10.0 million), £18.2 million (2012: £19.4 million) and £20.3 million (2012: £nil) respectively. These intangibles are being amortised over a period of 13, 15 and 15 years respectively, and their remaining amortisation life is 10, 11 and 14 years respectively.

The broker and customer relationship intangible asset in relation to Amlin France Holdings SAS became fully amortised during the period (2012 net book value: £1.4 million).

23. Goodwill and intangible assets continued

Computer software represents the costs that the Group has incurred on internally developed software and predominantly relates to a new platform for Amlin Europe N.V. This IT platform is being amortised over 10 years.

For the purpose of impairment testing, intangible assets are allocated to the Group's cash generating units (CGUs), identified according to the way in which management operates and monitors the business. The intangible asset relating to the syndicate participations supports the underwriting in Amlin London and Amlin UK.

The analysis of goodwill and indefinite life intangible assets by CGU is shown below:

	2013				2012
	Amlin London1 £m	Amlin UK £m	Amlin Europe2 £m	Total £m	Amlin London £m	Amlin UK £m	Amlin Europe £m	Total £m
Goodwill	18.8	4.8	65.5	89.1	18.8	4.8	51.5	75.1
Syndicate participations	55.2	8.0	-	63.2	53.6	9.6	-	63.2
	74.0	12.8	65.5	152.3	72.4	14.4	51.5	138.3

        Note:

1.   The Amlin London goodwill balance comprises the goodwill from three CGUs. The largest individual balance is the goodwill from the acquisition of Lead Yacht Underwriters Limited totalling £11.5 million (2012: £11.5 million).

2.   The Amlin Europe goodwill balance comprises the goodwill from two CGUs. The largest individual balance is the goodwill from the acquisition of Amlin Europe N.V. totalling £28.5 million (2012: £28.0 million).

When testing for impairment, the recoverable amount of a CGU is determined based on value in use calculations. Value in use is calculated for each CGU using a discounted cash flow projection based on business plans and growth assumptions approved by management and discounted at an appropriate discount rate.

Key assumptions used in the calculation are as follows:

·     Cash flow projections are based on the budgeted profit before tax for each CGU contained within the most recent business plans approved by management, adjusted for non-cash items such as depreciation. As such, these forecasts reflect the best estimate of future cash flows based on historical trends and expected growth rates. The period covered by the projections is five years. The most significant assumptions used to derive the operating profit include an assessment of the market cycle, retention rates, claims inflation, outwards reinsurance expenditure and long-term investment return;

·     In order to extrapolate future cash flows beyond the business plan period, a long-term average growth rate of 2.5% (2012: 2.5%) has been assumed for all CGUs, based on historical growth rates and management's estimates of future growth; and

·     A risk adjusted pre-tax discount rate of 8.5% (2012: 8.5%), has been applied to each CGU's cash flow projection, which reflects a combination of factors including the Group's expected cost of equity and cost of borrowing.

In each case, the results of this exercise indicate that the recoverable amount exceeds the intangible asset's carrying value and would not be sensitive to reasonable possible changes in assumptions.

24. Share capital

	2013 Number	2013 £m	2012 Number	2012 £m
Allotted, called up and fully paid ordinary shares
At 1 January issued ordinary shares of 28.125p each	502,076,006	141.2	502,076,006	141.2
Ordinary shares of 28.125 pence each issued in the period	2,723,353	0.8	-	-
At 31 December issued ordinary shares of 28.125p each	504,799,359	142.0	502,076,006	141.2

The Company transferred 716,586 shares out of treasury during the year at a cost of £1.8 million (2012: 418,721 shares at a cost of £1.1 million). The shares have been transferred to meet exercises of employee share options, leaving 4,252,085 shares in treasury at 31 December 2013 (2012: 4,968,671 shares). This number does not include shares held by the trustee of the Group's Employee Share Ownership Trust as disclosed in note 28.

The Group issued 2,723,353 ordinary shares on 1 March 2013 in conjunction with the purchase of RaetsMarine Insurance B.V. The shares issued have the same rights as all other shares in issue. The fair value of the shares issued amounted to £11.6 million (£4.24 per share).

25. Earnings and net assets per share

Basic and diluted earnings per share are as follows:

	2013	Restated 2012
Profit attributable to owners of the Parent Company	£298.7m	£247.8m
Weighted average number of shares in issue	498.1m	494.8m
Dilutive shares	7.1m	6.0m
Adjusted average number of shares in issue	505.2m	500.8m
Basic earnings per share	60.0p	50.1p
Diluted earnings per share	59.1p	49.5p

Net assets and tangible net assets per share are as follows:

	Note	2013	Restated 2012
Net assets		£1,678.6m	£1,497.7m
Adjustments for goodwill and intangible assets	23	(£239.1m)	(£211.4m)
Tangible net assets		£1,439.5m	£1,286.3m
Number of shares in issue at end of the year		504.8m	502.1m
Adjustment for ESOT and treasury shares		(6.2m)	(7.0m)
Basic number of shares after ESOT and treasury shares adjustment		498.6m	495.1m
Basic net assets per share		336.7p	302.5p
Basic tangible net assets per share		288.7p	259.8p

26. Other reserves

All items of other comprehensive income in 2013 and 2012 are charged to 'Other reserves'. Other reserves are as follows:

	2013	Restated 2012
Capital redemption reserve	123.1	123.1
Defined benefit pension reserve	(40.1)	(48.9)
Foreign operations translation reserve	(9.6)	6.9
Employee share option reserve	9.3	9.8
Hedge accounting reserve	(43.0)	(43.5)
Merger reserve	87.7	87.7
Other	(44.5)	(44.7)
Tax relating to components of other reserves	29.5	31.2
	112.4	121.6

The 'Other' in the above table includes goodwill on pre-1999 acquisitions written off of £45.7 million (2012: £45.7 million).

27. Dividends

The amounts recognised as distributions to equity holders are as follows:

Group	2013 £m	2012 £m
Final dividend for the year ended:
- 31 December 2012 of 16.5 pence per ordinary share	82.4	-
- 31 December 2011 of 15.8 pence per ordinary share	-	78.2
- 31 December 2011 of Amlin Plus Limited to non-controlling interests	-	0.1
Interim dividend for the year ended:
- 31 December 2013 of 7.8 pence per ordinary share	38.9	-
- 31 December 2012 of Amlin Plus Limited to non-controlling interests	0.1	-
- 31 December 2012 of 7.5 pence per ordinary share	-	37.1
	121.4	115.4

The final ordinary dividend of 18.2 pence per ordinary share for 2013, amounting to £90.7 million, payable in cash, was agreed by the Board on
28 February 2014, subject to shareholder approval at the AGM on 22 May 2014, and has not been included as a liability as at 31 December 2013.

28. Long-term employee incentive schemes

During the year ended 31 December 2013, the Group operated a number of long-term employee incentive schemes. The total cost recognised in the consolidated statement of profit or loss for these schemes is shown below:

	Note	2013 £m	2012 £m
Equity settled schemes	12	5.1	4.4
Capital Builder Plan		2.6	3.1
Total expense arising from long-term employee incentive schemes		7.7	7.5

a) Equity settled share-based payment schemes

i) Share options

Details of the Group's executive and all employee share option schemes are set out in the Directors' Remuneration Report.

A summary of the status and the changes to new or treasury shares under option during the year were as follows:

	Number of shares 2013	Weighted average exercise price per share (pence)	Number of shares 2012	Weighted average exercise price per share (pence)
Outstanding at 1 January	2,676,348	266	2,672,806	258
Granted during the year	506,531	312	431,700	311
Exercised during the year	(490,876)	247	(320,733)	263
Forfeited during the year	(117,069)	289	(107,425)	270
Total shares outstanding at 31 December	2,574,934	277	2,676,348	266
Total shares exercisable at 31 December	610,953	267	828,189	251

The weighted average share price at the date of exercise for share options exercised during the year was 430 pence (2012: 363 pence).

The following table summarises information about options outstanding at the end of the year:

Range of exercise prices	Number of outstanding shares under option 2013	Weighted average remaining contractual life (years)	Number of outstanding shares under option 2012	Weighted average remaining contractual life (years)
£0.76 - £1.11	-	-	10,647	0.33
£1.12 - £1.62	120,500	1.23	248,753	1.85
£1.63 - £2.46	23,145	0.42	165,146	1.42
£2.47 - £2.93	1,423,031	2.28	1,579,962	3.28
£2.94 - £3.34	1,008,258	3.51	671,840	3.48

ii) Share awards

Details of the Group's share awards are set out in the Directors' Remuneration Report in the Governance section.

At 31 December 2013, the total awards over new or treasury shares outstanding, or committed to be met by the Group's Employee Share Ownership Trust (ESOT), or shares held in trust under these schemes are summarised below:

	Number of shares under conditional award 2013	Vesting period	Number of shares under conditional award 2012	Vesting period
LTIP grants	5,121,807	2014 to 2016	4,857,704	2011 to 2015
PSP grants	2,736,126	2013 to 2018	3,183,555	2011 to 2017
SIP grants	1,630,581	2010 to 2016	1,545,266	2010 to 2014
Amlin Special	271,248	2014 to 2016	209,961	2013 to 2015

LTIP and PSP awards are normally exercisable from three and five years after grant respectively.

28. Long-term employee incentive schemes continued

iii) Modifications to share-based payment arrangements

There have been no modifications to share-based payment arrangements in 2013.

iv) Options from the ESOT

The trustee of the ESOT held 1,962,534 ordinary shares as at 31 December 2013 (2012: 2,023,644 ordinary shares) to meet potential future exercises of executive awards and long-term incentive plans. The ESOT shares are valued at the lower of cost and net realisable value. The market value of Amlin plc ordinary shares on the last trading day of the year, being 31 December 2013, was 458.9 pence per share (2012: 379.0 pence per share).

The assets, liabilities, income and costs of the ESOT are incorporated into the consolidated financial statements. The ESOT waives the right to dividends on ordinary shares in excess of 0.01 pence per each share ranking for an interim or final dividend.

v) Fair value of options and awards

At 31 December 2013, the weighted average fair values of options and awards granted during the year were 60.57 pence per option and 157.51 pence per award respectively (2012: 58.14 pence and 131.94 pence).

The Black-Scholes option pricing model has been used to determine the fair value of the option grants and share awards listed above. The assumptions used in the model are as follows:

	2013	2012
Weighted average share price on grant (pence)	377.10	361.83
Weighted average exercise price (pence)	282.61	281.79
Expected volatility	30.00%	30.00%
Expected life (years)	3.00 - 5.25	3.00 - 5.25
Risk free rate of return	1.00% - 4.50%	1.00% - 5.00%
Expected dividend yield	5.00% - 7.00%	4.50% - 7.00%

Volatility

The volatility of Amlin plc's share price is calculated as a normalised standard deviation of the log of the daily return on the share price. In estimating 30% volatility, the volatility of return for six months, one year and three year intervals are considered. As a guide to the reasonableness of the volatility estimate, similar calculations are performed on a selection of Amlin's peer group.

Interest rate

The risk free interest rate is consistent with government bond yields.

Dividend yield

The assumptions are consistent with the information given in the financial statements for each relevant valuation year.

Staff turnover

The option pricing calculations are split by staffing grades as staff turnover is higher for more junior grades. Furthermore, historical evidence suggests that senior employees tend to hold their options for longer whereas more junior levels within the organisation appear to exercise earlier. In addition, senior employees hold a larger proportion of the options but represent a smaller group of individuals.

Market conditions

The Group issues options that include targets for the Group's performance against a number of market and non-market conditions. Failure to meet these targets can reduce the number of options exercisable. In some circumstances, no options may be exercised. Assumptions are made about the likelihood of meeting the market and non-market conditions based on the outlook at the time of each option grant.

28. Long-term employee incentive schemes continued

b) Capital Builder Plan

The Group rewards senior underwriters through payments under the Capital Builder Plan (the Plan) if they achieve performance below the target loss ratio for their class(es) of business or business area over the five-year period of each award under the Plan. Under the scheme rules, the Group has the option to settle the awarded bonus in the shares of the Company or as a cash payment.

Provision for payments of an award under the Plan is calculated every year where actual profits exceed the target profit on a cumulative basis over the performance period to date under the Plan. The rate of accrual for each five-year performance period is determined at the start of the period, reflecting the share of the excess return payable and committed under the terms of the Plan.

Under this approach, the services received and the related liability are recognised as the services are rendered, in that the liability at any point in time for the Plan reflects the level of actual performance by underwriters in relation to the target.

The carrying amount of the liability under the Plan at 31 December 2013 is £4.8 million (2012: £4.1 million) and is recorded in other payables.

29. Restricted funds held/placed by the Group

At 31 December 2013, the Group holds restricted funds in the form of trust fund investments, letter of credit (LOC) collaterals, initial margin calls on derivative financial instruments and collateral received from reinsurance counterparties.

Trust funds

Syndicate 2001 holds gross assets of £3,100.5 million (2012: £3,086.9 million), matched by gross liabilities of £2,557.0 million (2012: £2,656.0 million), which are held within individual trust funds. The Group cannot obtain or use these assets until such time as each Syndicate underwriting year is closed and profits are distributed, or an advance profit release is made. Furthermore, £15.4 million (2012: £16.0 million) of Amlin Singapore Pte Limited's and Amlin Labuan Limited's assets are held within trust funds and restricted from use within the working capital of the Group until settlement has been made to Syndicate 2001.

LOC facilities

At 31 December 2013, £173.1 million (2012: £176.5 million) of Amlin Bermuda's assets are restricted for use by the Group. These assets are collateral for the LOC facility drawn at the end of the year. Details are included in note 31. At 31 December 2013, Syndicate 2001 recognised £0.7 million (2012: £0.8 million) of cash drawn down from LOC facilities as a liability on the consolidated statement of financial position. This has been received from reinsurance counterparties as a guarantee for business written and is included within total funds held by Syndicate 2001.

Derivative margins and collateral

Derivative instruments traded across the Group give rise to collateral being placed with, or received from, external counterparties. At 31 December 2013, included in other receivables and other payables are £4.7 million (2012: £5.8 million) margins and collaterals pledged and £16.4 million (2012: £2.0 million) margins and collaterals held respectively in relation to listed futures margins and over-the-counter options.

Collaterals received under reverse repurchase agreements

Collateral assets received under reverse repurchase agreements amounted to £26.6 million (2012: £nil). These collateral assets have been included in other receivables in note 20.

29. Restricted funds held/placed by the Group continued

Reinsurance collateral received

Collateral of £259.8 million (2012: £241.8 million) is held in third party trust funds to guarantee Syndicate 2001 against reinsurance counterparties. Furthermore, collateral of £137.6 million (2012: £184.5 million) and £38.6 million (2012: £32.8 million) is held in third party trust funds as a guarantee against reinsurance counterparties to Amlin Bermuda and Amlin Re Europe respectively. Collateral held in third party trust funds is not recognised as assets pertaining to the Group but is available for immediate drawdown in the event of a default. At 31 December 2013, £3.5 million (2012: £25.6 million) of the funds placed in trust by counterparties of Amlin Bermuda related to specific reinsurance assets.

Insurance collateral placed

Syndicate 2001 holds £374.6 million (2012: £342.9 million) of collateral in a US trust fund to meet US regulatory requirements. The Group cannot obtain or use these funds for any other purpose and they are recognised as an asset to the Group. Amlin Europe N.V. has £20.9 million (2012: £22.1 million) of bank guarantees in place to cover insurance counterparties.

Funds withheld as premium/claim deposits

At 31 December 2013, the Group had net funds of £46.3 million (2012: £29.1 million) placed as claim deposits and net £nil (2012: £3.7 million) premium deposits placed with/receivable from external brokers. Amlin Re Europe and Amlin Bermuda have placed a further £16.3 million (2012: £4.4 million) and £2.1 million (2012: £nil) respectively into pledge accounts to collateralise against losses due to reinsurance cedants.

Funds in escrow

At 31 December 2013, the Group holds £14.1 million (2012: £10.0 million) of funds in an escrow account to meet any potential funding requirements of the Lloyd's Superannuation Fund. Further details are provided in note 3.4.

30. Other payables, including insurance and reinsurance payables

	2013 £m	2012 £m
Insurance and reinsurance payables	273.3	275.0
Trade payables	36.2	39.3
Accrued expenses and other liabilities	92.7	71.6
Social security and other tax payables	8.6	7.7
Other payables	137.5	118.6
	410.8	393.6

The current and non-current portions are expected to be as follows:

	2013 £m	2012 £m
Current portion	338.2	307.6
Non-current portion	72.6	86.0
	410.8	393.6

The carrying amounts disclosed above are reasonably approximate to the fair value at the reporting date.

Insurance payables are comprised principally of premium payable for reinsurance, including reinstatement premium.

31. Borrowings

	2013 £m	2012 £m
Subordinated debt	289.5	290.4
Revolving credit facility	101.4	120.0
Other	0.7	-
	391.6	410.4

The current and non-current portions are expected to be as follows:

	2013 £m	2012 £m
Current portion	101.6	-
Non-current portion	290.0	410.4
	391.6	410.4

Details of the Group's three subordinated debts issued by Amlin plc are as follows:

Issue date	Principal amount	Reset date	Maturity date	Interest rate to reset date %	Interest rate from reset date to maturity date %
23 November 2004	US$50m	November 2014	November 2019	7.11	LIBOR + 3.48
15 March 2005	US$50m	March 2015	March 2020	7.28	LIBOR + 3.32
25 April 2006	£230m	December 2016	December 2026	6.50	LIBOR + 2.66

The subordinated debt will be redeemed on the maturity dates at the principal amounts, together with any outstanding accrued interest. The Group 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 any outstanding accrued interest.

The Directors' estimation of the fair value of the Group's subordinated debt is £326.0 million (2012: £352.0 million) and £98.3 million (2012: £122.0 million) for the revolving credit facility. The aggregate fair values are based on a discounted cash flow model. This model uses a current yield curve appropriate for the remaining terms to maturity. The discount rate used was 1.9% (2012: 0.9%).

The Company and certain of its subsidiaries have a debt facility with its banks which is available until August 2017 and provides an unsecured £300.0 million multicurrency revolving credit facility available by way of cash advances and a secured US$200.0 million letter of credit (LOC). The facility is guaranteed by the Company's subsidiaries Amlin Corporate Services Limited and Amlin (Overseas Holdings) Limited. The secured LOC is secured by a fixed charge over a portfolio of assets managed by Insight Investment Management (Global) Limited with State Street Bank and Trust Company as custodian. As at 31 December 2013, the revolving credit facility was drawn down by £101.4 million (2012: £120.0 million).

Amlin AG has a LOC facility with Lloyds Bank plc and the Royal Bank of Scotland plc as lead arrangers of US$280.0 million (2012: US$280.0 million). The facility is secured by a registered charge over a portfolio of assets managed by Aberdeen Asset Management Inc with State Street Bank and Trust Company as custodian. Three further LOCs are arranged - Barclays Bank plc: US$nil million (2012: US$20 million) and NZ$30.0 million (2012: NZ$30.0 million) and Lloyds Bank plc: NZ$11.5 million (2012: NZ$28.5 million) and AU$16.2 million (2012: AU$nil); and are secured by time deposits. As at 31 December 2013, US$268.0 million of LOC were issued (2012: US$244.4 million). The total value of restricted assets as at 31 December 2013 was US$286.8 million (2012: US$286.8 million).

Amlin Europe N.V. has a credit facility with Fortis Bank Nederland N.V. as arranger. The facility provides a daily revocable overdraft of up to €5.0 million, a guarantee facility to a third party of up to €10.0 million and a guarantee/standby LOC for up to £22.5 million. At 31 December 2013, €25.1 million of guarantees were issued (2012: €27.3 million); €4.3 million (2012: €4.3 million) from the guarantee facility and €20.8 million (2012: €23.0 million) from the guarantee/standby LOC. There are no restricted assets to secure the facility.

32. Retirement benefit obligations

a) Adoption of IAS 19 (revised) Employee benefits

As stated in note 1, the Group has adopted the accounting and disclosure requirements of IAS 19 (revised). In accordance with this standard, the change in accounting policy was applied retrospectively and the comparative financial information has been restated accordingly. The amount of the restatement for each financial statement line item affected by the retrospective application of IAS 19 (revised) for the year ended 31 December 2012 is provided below:

Consolidated statement of profit or loss	As reported 12 months 2012 £m	IAS 19 (revised)	Restated 12 months 2012 £m
Profit before tax	264.2	-	264.2
Tax	(16.5)	0.1	(16.4)
Profit for the year	247.7	0.1	247.8
Attributable to:
Owners of the Parent Company	247.7	0.1	247.8
Earnings per share from continuing operations attributable to owners of the Parent Company
Basic	50.0p	0.1p	50.1p
Diluted	49.4p	0.1p	49.5p

Consolidated statement of other comprehensive income	As reported 12 months 2012 £m	IAS 19  (revised)	Restated 12 months 2012 £m
Profit for the year	247.7	0.1	247.8
Items that will not be reclassified to profit or loss
Defined benefit pension fund losses	(17.5)	8.0	(9.5)
Income tax relating to items not reclassified	3.4	(1.8)	1.6
	(14.1)	6.2	(7.9)
Other comprehensive expense for the year, net of tax	(66.7)	6.2	(60.5)
Total comprehensive income for the year	181.0	6.3	187.3
Attributable to:
Owners of the Parent Company	181.0	6.3	187.3

Consolidated statement of financial position	As reported 31 December 2012 £m	IAS 19 (revised)	Restated 31 December 2012 £m
Deferred tax assets	17.5	(1.7)	15.8
Total assets	6,516.6	(1.7)	6,514.9
Other reserves	112.9	8.7	121.6
Retained earnings	957.1	(2.4)	954.7
Equity attributable to owners of the Parent Company	1,490.8	6.3	1,497.1
Total equity and reserves	1,491.4	6.3	1,497.7
Retirement benefit obligations	48.9	(8.0)	40.9
Total liabilities	5,025.2	(8.0)	5,017.2
Total equity, reserves and liabilities	6,516.6	(1.7)	6,514.9

32. Retirement benefit obligations continued

Consequential amendments have also been made to the notes to the financial statements. The impact of retrospective application on each component of equity is shown in the consolidated statement of changes in equity, as required by IAS 1.

Opening statement of financial position as at 1 January 2012

The Group has not presented a statement of financial position for the beginning of the earliest comparative period as the impact is not material.

b) Defined benefit schemes

The Group participates in a number of defined benefit schemes, details of which are provided in note 3.4.

Amount recognised in the consolidated statement of financial position in respect of the Group's defined benefit schemes is as follows:

	2013 £m	Restated 2012 £m
Present value of defined benefit obligation	(470.3)	(454.4)
Fair value of scheme assets	468.1	436.6
Deficit in schemes	(2.2)	(17.8)
Restriction to defined benefit asset due to asset ceiling	(30.4)	(23.1)
Net defined benefit liability	(32.6)	(40.9)

The movement in the net defined benefit liability is as follows:

	Present value of obligation £m	Fair value of scheme assets £m	Deficit in schemes £m	Effect of asset ceiling £m	Net defined benefit liability £m
At 1 January 2013 (restated)	(454.4)	436.6	(17.8)	(23.1)	(40.9)
Interest (expense)/income	(18.4)	18.2	(0.2)	(1.0)	(1.2)
Current service cost	(6.0)	-	(6.0)	-	(6.0)
Past service cost	1.6	-	1.6	-	1.6
Administration expenses	-	(1.6)	(1.6)	-	(1.6)
(Charged)/credited to consolidated statement of profit or loss	(22.8)	16.6	(6.2)	(1.0)	(7.2)
Re-measurements:
Actuarial gains and losses arising from :
- changes in demographic assumptions	0.9	-	0.9	-	0.9
- changes in financial assumptions	(4.6)	(2.4)	(7.0)	-	(7.0)
- other actuarial gains	(2.9)	19.0	16.1	-	16.1
Return on plan assets, excluding amounts included in interest (expense)/income	-	5.7	5.7	-	5.7
Changes in asset ceiling, excluding amounts included in interest (expense)/income	-	-	-	(6.3)	(6.3)
(Charged)/credited to consolidated statement of other comprehensive income	(6.6)	22.3	15.7	(6.3)	9.4
Exchange differences	(2.2)	1.2	(1.0)	-	(1.0)
Participant contributions	(1.2)	1.2	-	-	-
Benefits paid	16.9	(16.9)	-	-	-
Employer contributions	-	7.1	7.1	-	7.1
At 31 December 2013	(470.3)	468.1	(2.2)	(30.4)	(32.6)

A plan amendment has resulted in a reduction in past service costs of £1.6 million (2012: £nil) due to the increase in the retirement age in the Netherlands effective from 1 January 2014.

Other actuarial gains relate to the impact of the exit of the remaining other employer from the Lloyd's Superannuation Fund in the UK. Further details on this transaction are provided in note 3.4.

Restated	Present value of obligation £m	Fair value of scheme assets £m	Deficit in Schemes £m	Effect of asset ceiling £m	Net defined benefit liability £m
At 1 January 2012	(417.9)	421.3	3.4	(34.2)	(30.8)
Interest (expense)/income	(18.9)	19.5	0.6	(1.6)	(1.0)
Current service cost	(4.1)	-	(4.1)	-	(4.1)
Administration expenses	-	(1.3)	(1.3)	-	(1.3)
(Charged)/credited to consolidated statement of profit or loss	(23.0)	18.2	(4.8)	(1.6)	(6.4)
Re-measurements:
Actuarial gains and losses arising from :
- changes in demographic assumptions	5.6	-	5.6	-	5.6
- changes in financial assumptions	(35.4)	9.2	(26.2)	-	(26.2)
Return on plan assets, excluding amounts included in interest (expense)/income	-	(1.6)	(1.6)	-	(1.6)
Changes in asset ceiling, excluding amounts included in interest (expense)/income	-	-	-	12.7	12.7
(Charged)/credited to consolidated statement of other comprehensive income	(29.8)	7.6	(22.2)	12.7	(9.5)
Exchange differences	1.6	(1.1)	0.5	-	0.5
Participant contributions	(1.1)	1.1	-	-	-
Benefits paid	15.8	(15.8)	-	-	-
Employer contributions	-	5.3	5.3	-	5.3
At 31 December 2012	(454.4)	436.6	(17.8)	(23.1)	(40.9)

Restriction to defined benefit asset due to asset ceiling

On 30 June 2011, the Group agreed a schedule of contributions with the Trustee of the Lloyd's Superannuation Fund. The schedule requires seven separate payments of £2.0 million to the Fund over a period of seven years. The Fund's rules do not allow the Group to receive a refund of contributions in any circumstances. Therefore, the present value of the future payments has been recognised as a liability at 31 December 2013, to the extent that the contributions will not be available after they are paid into the Fund. A restriction to the defined benefit asset has therefore been recognised.

c) The stakeholder defined contribution schemes

The defined contribution schemes operated by the Group are stakeholder arrangements. The total contributions to the schemes for the year ended 31 December 2013 are £7.8 million (2012: £6.6 million).

d) Other arrangements

In addition to the defined benefit schemes and defined contribution schemes, the Group has an occupational money purchase scheme which provides death in service protection for all employees. Regular contributions, expressed as a percentage of employees' earnings, are paid into this scheme and are allocated to accounts in the names of the individual members, which are independent of the Group's finances. There were no outstanding contributions at 31 December 2013 (2012: £nil).

33. 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:

	Average rate		Year end rate
	2013	2012	2013	2012
US dollar	1.56	1.59	1.66	1.62
Canadian dollar	1.61	1.58	1.76	1.61
Euro	1.18	1.23	1.20	1.23
New Zealand dollar	1.91	1.96	2.01	1.97
Japanese yen	152.80	126.55	174.36	140.78

34. Contingent liabilities

Aside from the escrow account entered into with the Trustee of the Lloyd's Superannuation Fund defined benefit pension scheme, as described in note 3.4, and the contingent consideration relating to the acquisition of RaetsMarine Insurance B.V. and subsidiaries, as described in note 4, the Group has no material contingent liabilities at 31 December 2013 (2012: £nil).

35. Commitments

a) Capital commitments

In addition to the commitments made to RaetsMarine Insurance B.V. and to Leadenhall Capital Partners LLP as described in note 4, the Group also made commitments to subscribe to property funds at 31 December 2013 of £41.5 million (2012: £19.2 million) and has made a contractual commitment for the construction of the Amlin UK head office (Victoria Road, Chelmsford) at 31 December 2013 of £13.5 million.

b) Operating lease commitments

The Group leases various offices under operating lease agreements. The Group is required to give notice for the termination of these agreements. The lease expenditure charged to the consolidated statement of profit or loss during the year is £9.6 million (2012: £9.7 million), as disclosed in note 14.

The future aggregate minimum lease payments under the non-cancellable portion of the Group's operating leases are as follows:

	2013 £m	2012 £m
No later than 1 year	9.5	8.2
Later than 1 year and no later than 5 years	26.6	25.2
Later than 5 years1	103.4	2.3
	139.5	35.7

Note:

1.  As disclosed in the interim 2013 Financial Statements, the Group has signed an agreement to lease 95,000 square feet at The Leadenhall Building currently under construction at 122 Leadenhall Street, London EC3. The date of commencement of the lease is currently expected to be mid-2014.

c) Other commitments

RaetsMarine Insurance B.V. ('RMI'), which was acquired by Amlin in 2013, remains a guarantor for the liabilities of certain formerly related companies under a credit facility issued by the F. van Lanschot Bank. Amlin has demanded that the seller procure the release of RMI from this obligation as required under the terms of the RMI Share Purchase Agreement, but the seller has not yet complied. RMI's potential financial exposure under this cross-guarantee agreement can vary but should not exceed €6.0 million.  Amlin has withheld US$7.5 million due to the sellers pending resolution of this issue.

36. Cash flows from operations

	Note	2013 £m	2012 £m
Profit before tax		325.7	264.2
Adjustments:
Depreciation charge	14	7.4	6.2
Amortisation charge	14	11.2	7.3
Finance costs	13	29.0	27.6
Interest income	7	(30.4)	(36.7)
Dividend income	7	(16.3)	(11.3)
Gains on investments realised and unrealised	7	(96.5)	(101.4)
Other non-cash movements		1.5	4.5
Movement in operating assets and liabilities:
Net (purchases)/sales of financial investments	18	(92.1)	(234.1)
Foreign exchange losses on investments	18	28.9	109.6
Increase in loans and receivables		(0.4)	(45.3)
Decrease in insurance and reinsurance contract assets		120.7	72.2
Decrease in insurance contract liabilities		(152.9)	(77.1)
Decrease in other payables		(2.9)	(8.8)
Increase in retirement benefit obligations		1.1	0.6
Foreign exchange gains on long-term borrowings		(0.3)	(1.9)
Foreign exchange gains on other non-operating assets and liabilities		(5.8)	(49.8)
Cash generated from/(utilised in) operations		127.9	(74.2)

The Group includes cash flows from purchase and disposal of financial assets in its operating cash flows as these transactions are generated by the cash flows associated with the origination and settlement of insurance contract liabilities or capital requirements to support underwriting. Cash of £92.1 million from net purchases/sales of financial investments was utilised in operations during the year (2012: £234.1 million from net purchases).

37. Related party transactions

a) Transactions and balances with related parties

i) Amlin Plus

Amlin Underwriting Limited and Lycetts Holdings Limited, the owners of Lycett, Browne-Swinburne and Douglas Limited and Lycetts Hamilton Limited, own 60% and 40% respectively of the share capital of Amlin Plus Limited (Amlin Plus). The business of Amlin Plus (bloodstock insurance) is written under a binding authority agreement with Syndicate 2001, some of which is sourced through a single broker, Lycett, Browne-Swinburne and Douglas Limited. Syndicate 2001 is managed by Amlin Underwriting Limited. The capacity on Syndicate 2001 is underwritten by a fellow subsidiary in the Amlin Group. All transactions between Amlin Plus and its related parties are conducted on an arm's length basis.

During the year Amlin Plus wrote £11.5 million (2012: £13.8 million) of premium under the binding authority agreement, of which £3.7 million (2012: £5.6 million) was produced by Lycett, Browne-Swinburne and Douglas Limited earning brokerage commission of £0.5 million (2012: £0.8 million) on this business. At 31 December 2013, Syndicate 2001 had a receivable of £1.9 million (2012: £2.4 million) from Amlin Plus and Lycett Browne-Swinburne and Douglas Limited had a payable of £0.5 million (2012: £0.9 million) to Amlin Plus.

ii) Associates

The Group enters into transactions with its associates in the normal course of business. The sales to, and purchases from, associates are made at normal market prices. Details of the Group's associates are given in note 4.

37. Related party transactions continued

iii) Syndicate 6106

For the 2013 underwriting year of account Special Purpose Syndicate (S6106), managed by Amlin Underwriting Limited, wrote a 10.0% (2012: 10.0%) quota share contract of the excess of loss reinsurance account of Syndicate 2001. The transactions provide external members' capital to support 2013 underwriting, enabling Syndicate 2001 to take advantage of opportunities in peak zones in the US, Japan and Europe. All transactions with S6106 are undertaken on an arm's length basis. The quota share contract has not been renewed for the 2014 underwriting year of account.

iv) Transactions with Funds managed by Leadenhall Capital Partners LLP

At 31 December 2013, funds managed by Leadenhall Capital Partners LLP held US$5.0 million and US$1.8 million in the catastrophe bonds issued by Tramline Re Ltd and Tramline Re II Ltd respectively. Details of the Group's transaction with Tramline Re Ltd and Tramline Re II Ltd can be found in Note 3.

Syndicate 2001 and Amlin Re Europe participate in fronting arrangements whereby they write inwards reinsurance contracts which are 100% reinsured by Horseshoe Re Limited on behalf of its segregated accounts. Funds managed by Leadenhall Capital Partners, an associate of the Group, has invested within these segregated accounts. During the year Syndicate 2001 and Amlin Re Europe wrote £15.1 million of gross premium and received £0.6 million of commission through this arrangement. At 31 December 2013, £5.5 million was receivable from Horseshoe Re, of which £0.2 million was reinsurance receivables on paid and outstanding claims, £6.0 million was reinsurers' share of insurance liabilities and £0.7 million was reinsurance payables.

b) Compensation of key management personnel

Key management personnel are those Amlin plc Board Directors and Group Management Committee members responsible for planning and control of the activities of the Group. Key management comprises twelve Executive Directors and employees and seven Non-Executive Directors (2012: twelve and six respectively). During the year, Mr Buchanan ceased in his role as Non-Executive Director. Compensation during the year to key management personnel is analysed below:

	2013 £m	2012 £m
Short-term employee benefits	8.9	8.5
Long-term employee benefits	4.1	1.9
Post-employment benefits	0.5	0.4
Equity-settled share-based payments	1.5	1.2
Cash-settled share-based payments	0.4	0.4
	15.4	12.4

c) Transactions with Directors

Certain Directors of the Company are also Directors of other companies, as described in the Directors' biographical details of the Annual Report. Such other companies (and/or their subsidiaries) may, and in some cases do, conduct business with companies in the Amlin Group, including Aberdeen Asset Managers Limited (of which Ms Chakraverty is a Non-Executive Director). In all cases transactions between the Amlin Group and such other companies are carried out on normal arm's length commercial terms.

d) Internal reinsurance arrangements

During the current and prior year, there were a number of reinsurance arrangements entered into in the normal course of trade between various Group companies, i.e. the reinsurance contracts between Syndicate 2001 and Amlin Bermuda, Syndicate 2001 and Amlin Europe, Amlin Re Europe and Amlin Europe and between Amlin Bermuda and Amlin Europe.

The related results of these transactions have been eliminated on consolidation.

38. Events after the reporting period

No significant events have been identified between the date of the consolidated statement of financial position and the date on which the financial statements were authorised.

39. Financial information and posting of accounts

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2013 or 2012, but is derived from those accounts.  Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's Annual General Meeting.  The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The audited Annual Report and Accounts for 2013 are expected to shareholders by no later than 5 April 2014.  It will also be posted by that date on the Company's website.  Copies of the Report may be obtained, once it is published, by writing to the Company Secretary.  Amlin plc, St Helen's, 1 Undershaft, London, EC3A 8ND.  The Annual General Meeting of the Company will be held at the same address at noon on Thursday 22 May 2014.

The preliminary Results were approved by the Board on 28 February.

 

END

 

 

FR UGUBPWUPCGCG