Preliminary Results

RNS Number : 1721G

Amlin PLC

02 March 2015

Amlin PLC

Press release

For immediate release

2 March 2015

Preliminary results for the year

ended 31 December 2014

A solid financial performance with increased dividend returns to shareholders

Highlights

· Profit before tax of £258.7 million (2013: £325.7 million)

· Return on equity of 14.1% (2013: 19.8%); return on net tangible assets of 16.4% (2013: 23.2%)

· Growth in net written premium of 8.1% to £2,278.9 million (2013: £2,107.4 million), supported by improved reinsurance purchase

· Average renewal rate decrease of 3.6% at January 2015, with catastrophe rates down by an average of 8.3%

· Combined ratio of 89% (2013: 86%)

· Reorganisation of business into three global Strategic Business Units improves global presence and client focus

· Investment return of £118.5 million, equivalent to 2.7% on average investments (2013: £160.4 million, 3.6%)

· Ordinary dividend declared increased by 3.8% to 27.0 pence per share (2013: 26.0 pence per share)

· Special dividend declared of £75 million or 15.0 pence per share

· Net tangible assets per share of 304.1 pence per share (2013: 288.7 pence per share)

Charles Philipps, Chief Executive, commented as follows:

"This is a solid result in a more competitive trading environment. We have delivered an attractive return on equity and our confidence in the business has allowed us to increase our ordinary dividend as well as declare a special dividend of £75 million whilst retaining a strong capital position.

The strength of our franchise, underwriting expertise and ability to adapt are powerful advantages as the market evolves. Amlin is well positioned to take advantage of the opportunities created by the pace of change in our markets, and has an excellent track record of cross-cycle underwriting discipline. We continue to believe that we can deliver attractive returns on equity."

Enquiries:
Charles Philipps, Chief Executive, Amlin plc	0207 746 1000
Richard Hextall, Chief Finance & Operations Officer, Amlin plc	0207 746 1000

Analysts and Investors
Julianne Jessup, Head of Investor Relations, Amlin plc	0207 746 1961

Media
Ed Berry, FTI Consulting	0203 727 1046

2014 highlights¹

	2014 £m	2013 £m	2012 £m	2011 £m	2010 £m
Gross written premium	2,564.0	2,467.4	2,405.6	2,304.1	2,172.5
Net written premium	2,278.9	2,107.4	2,058.6	2,013.2	1,910.3
Net earned premium	2,183.4	2,077.4	1,970.5	1,927.4	1,748.1
Result attributable to underwriting	246.0	283.1	207.1	(146.0)	185.6
Investment return	118.5	160.4	165.3	40.5	175.0
Other costs²	(105.8)	(117.8)	(108.2)	(88.3)	(101.4)
Profit/(loss) before tax	258.7	325.7	264.2	(193.8)	259.2
Return on equity	14.1%	19.8%	17.4%	(8.6)%	13.9%
Net assets³	1,782.8	1,678.6	1,497.7	1,420.4	1,729.9
Net tangible assets³	1,519.2	1,439.5	1,286.3	1,201.5	1,545.4

Per share amounts (in pence)
Earnings	47.4	60.0	50.1	(30.3)	45.0
Net assets³	356.8	336.7	302.5	287.2	350.6
Net tangible assets³	304.1	288.7	259.8	243.0	313.2
Ordinary dividend under IFRS⁴	26.3	24.3	23.3	23.0	20.7
Ordinary dividends declared for the calendar year⁴	27.0	26.0	24.0	23.0	23.0
Special dividend declared for the calendar year⁴	15.0	-	-	-	-

Operating ratios⁵
Claims ratio	56%	52%	57%	78%	60%
Expense ratio	33%	34%	32%	30%	29%
Combined ratio	89%	86%	89%	108%	89%

Note:

1. The financial highlights are presented on the basis of management information provided to the Amlin Management Committee. The reconciliation between this information and the International Financial Reporting Standards (IFRS) consolidated statement of profit or loss is included in note 4c to the consolidated financial statements.

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

3. Following the increase in the Group's interest in Leadenhall Capital Partners to 75% in the year, net assets, net tangible assets and related per share amounts from 2014 exclude non-controlling interests.

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

5. Claims ratio is net claims incurred divided by net earned premium for the year. Expense ratio is underwriting expense incurred, including expenses for the acquisition of insurance contracts, 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.

Chairman's statement

With our diversified portfolio, strong franchise, a proven ability to perform across the insurance cycle and good strategic positioning, I believe that Amlin is well placed to deliver healthy long-term returns to shareholders.

Results and dividend

Amlin's result for 2014 was satisfactory. Profit was lower through a combination of reduced reserve releases after high levels in 2013, and a fall in investment return reflecting weak economic growth in the world economy and low interest rates.

Markets became more competitive during 2014. This was particularly true for reinsurance. The combination of an influx of new capital from Insurance Linked Securities (ILS) markets and profitability of traditional participants led to an inevitable drop in prices. However, the strength of the Amlin franchise allowed catastrophe business to be held at stable levels reflecting the belief that rates remained adequate and non-catastrophe reinsurance business grew.

Viewed from the perspective of our new global Strategic Business Units, performance was solid across each segment. The Reinsurance business benefited from limited major catastrophe losses, although the year was not benign, with activity characterised by a significant number of smaller international and US regional events. Marine continued to trade with good margins and the Lloyd's and European Property & Casualty operations delivered profitable growth. The only disappointment was the domestic UK Property & Casualty business which had a combined ratio of 105%, after winter flooding and other large risk losses.

With competitive markets in many of our core business lines, it is unlikely that we will see significant growth in the short term. We aim to provide long term continuity to our clients and our profit focused underwriting philosophy may lead to contraction if rating levels do not provide acceptable returns for the risk that we bear. In addition, competitive reinsurance markets have allowed more effective purchasing for our own risk management. Consequently, we do not see significant capital pressure from organic growth in the short term.

We remain committed to steadily growing our dividend over time and the Board has declared an increase for the year of 3.8% to 27.0 pence per share (2013: 26.0 pence per share). The final dividend will be paid on 28 May 2015 (subject to shareholder approval) to shareholders on the register on 17 April 2015.

Our confidence in the business has also allowed us to declare a special dividend of £75 million or 15.0 pence per share which will be paid on 28 May 2015. The Group's capital position remains strong.

Progress on goals

During 2014 we made good progress in respect of the goals and objectives that the Board established following the strategic review in 2013.

The reorganisation of our underwriting into three global Strategic Business Units reflects our determination to enhance further our ability to deliver superior service. Our goal is to make client intimacy a key differentiator from competitors, and good progress has been made towards increasing our understanding of clients' needs and enhancing our client proposition. We also consolidated our claims and support functions, which will result in increased efficiency and scalability.

A further objective is to increase our access to attractive underwriting opportunities in both established and new markets, whether through organic or acquisition-led growth. With this in mind, during the year we established an office in Miami to underwrite Latin American reinsurance, with an office in Dubai scheduled to begin underwriting in the first half of 2015.

We continued to invest in our people, with further development of our global Talent Management Programme and closer alignment of our remuneration structure with Amlin's strategic objectives. It was pleasing to see that a number of people from our talent programme were promoted into new roles in our reorganisation.

Preparation for Solvency II remains a priority. I believe that the effort and commitment shown by the teams involved over several years has positioned Amlin well for the expected finalisation of this regulatory regime in 2016.

In October 2014, we agreed to increase our interest in Leadenhall Capital Partners (LCP) from 40% to 75%. This increases our exposure to the growth of ILS and is already increasing the synergies between LCP and our reinsurance business. There is no doubt that Amlin's reinsurance franchise is benefiting from having a foot in both camps and I believe it was prescient of Amlin to have established LCP in 2008.

We remain focused on identifying similar opportunities to strengthen our market position and generate long term returns for shareholders, whether through organic growth, start-ups such as LCP, or selected acquisitions in our target markets.

Outlook

The pace of change in traditional insurance markets, particularly London, combined with weaker pricing in market segments where surplus capacity is driving competition, present a more challenging trading environment in 2015. The changes we made in 2014 have enhanced Amlin's ability to meet these challenges and to pursue the opportunities for profitable growth that continue to present themselves. Amlin's financial strength, established franchise and first rate underwriting and risk management capabilities place us in a strong position.

Governance and the Board

During 2014, Amlin undertook a review of its remuneration arrangements which culminated in the adoption of a revised Directors' Remuneration Policy and a new five year long term incentive share plan being adopted at an EGM in November. Sir Mark Wrightson oversaw both shareholder consultations and led the discussions concerning the revised Policy. The Board would like to extend our thanks to Sir Mark for his efforts in this area and, as Sir Mark will be retiring at the May AGM, for all his sage advice throughout his tenure as a director.

Brian Carpenter retired from the Board in September after 14 years of service. His extensive market knowledge and underwriting experience were instrumental in establishing our UK business as a significant part of our underwriting portfolio.

Oliver Peterken joined us as an independent non-executive director in September, following the retirement of Sir Allan Collins. He has joined the Risk & Solvency, Nomination and Audit Committees, and has been appointed to the Remuneration Committee with effect from 1 March 2015. Oliver brings with him over 20 years of risk, insurance and reinsurance expertise. We look forward to his input in this fast evolving market.

Richard Davey

Chairman

Chief Executive's strategic review

Amlin's new structure will enhance organic growth potential, enable greater efficiency and scalability, and move us closer to our Vision, to be the global reference point for quality in each of our markets.

Positioning for success in an evolving market

As announced in August 2014, following a review of our medium term strategy, we decided to organise our client facing operations into three global Strategic Business Units: Reinsurance, Marine & Aviation and Property & Casualty. This is in line with our goal to make client intimacy a key competitive differentiator, and the logical next step of the Practice Board strategy which we started to develop in 2012. While we have retained our regulated underwriting entities in Lloyd's, Zurich, Bermuda and the Netherlands, the objective is to organise our business around clients' needs rather than capital structure, thereby enabling us to make optimum use of our capacity and expertise through a globally coordinated approach.

This reorganisation will improve our global presence and client focus, as well as making more efficient use of the investment required to drive superior levels of service consistently across Amlin. Attaining our Vision - of being the global reference point for quality in each of our markets - requires continued effort to clearly differentiate Amlin from our competitors. Currently, this is being realised most fully in our reinsurance business.

2014's financial result, whilst benefiting from a low level of major catastrophes, was impacted by a higher frequency of smaller catastrophes and large risk losses. Prior year reserve releases were also lower, in part resulting from a material increase in cedents' estimates of claims from the 2010/11 New Zealand earthquakes to which we have again chosen to add margins of prudence. The result benefited from the changes made to our outwards reinsurance programme at the beginning of the year and continued improvement in the profitability of Amlin Europe.

Our achievements are the result of the dedication and hard work of our people. Significant demands were made of them during 2014, and huge thanks are due to them.

Reinsurance

Reinsurance capital is at an all-time high at $575 billion¹, an increase of 6% compared to year end 2013. On top of this, there is now significant capital markets capacity which is mainly directed at reinsurance. The inevitable consequence is increased competition and lower pricing. To date this has been most evident in reinsurance but it is spreading to other lines of business.

Our position as a preferred partner to many reinsurance clients has meant that in 2014 we have been able to retain and grow our business in areas where technical pricing has remained adequate. While many insurers are retaining more risk, resulting in reduced demand, they are also directing more of their programmes towards strategic partners such as Amlin.

Amlin has reinsurance expertise across a wide range of products, not just catastrophe reinsurance. Non-catastrophe classes have grown from 40% of our reinsurance gross written premium in 2009 to 56% in 2014, driven mainly by the growth of our Zurich business. Our reorganisation provides further scope to offer a wider range of products to clients for whom we have historically provided only catastrophe reinsurance. This increases our longer term growth potential. As well as providing greater balance within Amlin's overall reinsurance portfolio, the different risk profile of non-catastrophe reinsurance makes it less vulnerable to direct competition from the capital markets, as demonstrated by the greater stability of rating in these areas of the market.

Capital markets development

The growth of Insurance Linked Securities (ILS) in reinsurance is having a profound effect on the market. It is estimated that up to 11%¹ of global catastrophe reinsurance capacity is now provided by ILS funding, and that pension and hedge funds and other capital market ILS investors have introduced an estimated $62 billion¹ of capacity worldwide. Five years ago their involvement was minimal.

For these new investors, the ILS market represents a new asset class with low correlation to other asset classes, providing a portfolio diversification that also offers attractive returns in the current interest rate environment. Much of this capital is directed either at the high layers of reinsurance programmes where the risk of loss is more remote, and the risk-adjusted returns unattractive for Amlin; or at providing retrocessional reinsurance which allows reinsurers, such as Amlin, to protect their own catastrophe exposures.

However, the risk appetite of capital market investors has increased and broadened with the growth in the quantity of capital deployed.

We believe that, having entered the market, most of these investors will be there for the long term, continuing to provide an alternative source of reinsurance capital even when interest rates rise.

Some of this capital is competing with Amlin and other traditional reinsurers. Yet we believe that the combination of Amlin's recognised franchise and our ILS fund manager, Leadenhall Capital Partners (LCP), means we are better placed than many of our competitors to continue to succeed in the face of continued expansion of ILS capacity.

Synergies between Amlin and LCP have enabled us to expand our reinsurance client offering in a way which differentiates Amlin from most of our competitors. At the same time Amlin provides LCP with access to transactions that are not available to other ILS providers. This has enhanced their business proposition and ability to attract new investments.

Seeing good prospects for long-term growth in LCP's funds under management and realising further synergies between our two businesses, we increased our ownership of the partnership in October 2014 from 40% to 75%.

1. Aon Benfield Reinsurance Market Outlook, January 2015

Insurance

In our London market insurance classes, the major brokers are seeking efficiency gains in the placement of their business. Increased use of data and analytics has given them better insight into the economics of placing risks of differing scale and complexity. This is resulting in an increasing number of broker facilities, which funnel multiple risks into pre-arranged schemes, particularly for smaller and less complex business.

The major brokers are also seeking to reduce the number of carriers with whom they deal, with an increasing focus on business with those they consider to be strategic partners. Brokers, who might once have placed risk with thousands of insurers around the world, are now looking to reduce this significantly.

We believe business will gravitate to those carriers who are most relevant to their brokers and clients and as such are able to write meaningful lines, are willing and able to participate in broker facilities and have the skills and ability to lead and service business.

While Amlin already has strong leadership and service capabilities in many lines, we intend to reinforce these and to respond to the brokers' need to improve their efficiency in placing business. In 2014, we increased our participation in broker facilities and, in so doing, have ensured that our ability to influence the selection and pricing of risk is sufficient to both safeguard Amlin and generate an acceptable return.

Furthermore, to enhance our attractiveness to brokers as a strategic partner, and thereby help drive long-term growth, we have started to invest more meaningfully in our marketing capability. This has resulted in increased engagement with brokers, a more informed understanding of how they are planning to change their business models, and new business leads which we may not have previously seen.

In 2015 we plan to invest further in this area by implementing a client relationship management system, and enhance our understanding of our distribution relationships by introducing net promoter scoring.

Reorganisation

The new structure enables each underwriting unit to formulate and drive a global strategy specific to its particular lines of business, with an increased focus on the needs of its client segments. It will also enable each global Strategic Business Unit, and the Amlin brand to have greater impact in the market. Amlin is now one of the world's top 30 non-life reinsurers, and ranked higher for property lines alone. It is also a leading global marine insurer. We believe that we have the capability to rise up the global league table in both categories.

In addition to the reorganisation of the underwriting businesses into the three global Strategic Business Units described above, our claims and all support functions are now centrally managed, with resources allocated according to the needs of the underwriting units.

The reorganisation will make our decision making quicker and better, and our operations more scalable. Increased efficiencies, both through investing in technology in support of the business, and the streamlining of processes, should improve the expense ratio as we grow.

Emerging markets

We expect growth in emerging economies to continue to outpace those of the more mature economies and that, over the next ten years, the (re)insurance needs of many emerging economies will become significant. While the London market has maintained or grown its market share in its more established markets, it has weak penetration in emerging markets. Our key trading partners, such as Aon, Marsh, Willis and JLT, however, are building their networks in these markets and this provides Amlin with the opportunity to leverage our relationships internationally.

Our expertise in reinsurance and specialty insurance, such as marine, will become increasingly relevant in Asia, Latin America and the Middle East. We have been taking steps to position Amlin, for the long term, through the establishment of local offices in countries in which our trading partners are focusing activities, and which we expect to become regional hubs serving these markets.

In October, we opened an office in Miami to access reinsurance business in Latin America, another developing market with growing demand.

Elsewhere, we believe that Dubai will become a hub for the Middle East in the way that Singapore has for Asia - and we plan to begin operating there in the first half of 2015.

We are also reinforcing our position in Asia by participating in the Lloyd's platform in Shanghai from the first quarter of 2015, having made good progress in Singapore since 2008.

We recognise that entering new markets carries risk and that it is important to gain a thorough understanding of local dynamics before seeking significant growth. We therefore do not expect significant profit contributions from these new offices in the short term, but will seek opportunities to use our skills profitably while laying the foundations for longer term success as these markets' needs increase.

2014 performance

We delivered a satisfactory result in 2014 with a return on equity of 14.1%, close to our cross cycle target of 15%. Most parts of the business performed well with the result below 2013 largely due to lower reserve releases, after a very strong performance in 2013, and a reduced investment return.

The combined ratio was 3 points higher than it was in 2013 at 89%. There were limited major catastrophe losses in the period but 2014 was similar to last year, characterised by frequency of small to medium sized catastrophe losses around the world and a number of large risk events, notably in the aviation sector. Performance of our UK Property & Casualty business was disappointing and management are actively taking steps to address particular lines where pricing has proved inadequate. The performance of Amlin Europe, however, was excellent and its new office in Hamburg made a good start.

Outlook

The combination of increasing price competition and the continued low interest rate environment makes the outlook more challenging. We nevertheless expect to continue to deliver attractive returns on equity.

Amlin is well positioned for this environment. We have highly experienced underwriting teams and pricing discipline is in our DNA. Our market positions, together with an increased marketing capability, mean we are better able to seek out and grow in areas which offer more favourable return potential.

Where necessary, we will temper our growth ambitions and, in some areas, will even retract if pricing falls below levels we consider to be technically sound. With the lower pricing in catastrophe reinsurance we have reduced our catastrophe risk appetite.

Insurance markets are undergoing fundamental changes and Amlin is in a good position to gain from these changes.

Charles Philipps

Chief Executive

Financial review

Financial performance	2014 £m	2013 £m	2012 £m	2011 £m	2010 £m
Gross written premium	2,564.0	2,467.4	2,405.6	2,304.1	2,172.5
Net written premium	2,278.9	2,107.4	2,058.6	2,013.2	1,910.3
Net earned premium	2,183.4	2,077.4	1,970.5	1,927.4	1,748.1
Result attributable to underwriting	246.0	283.1	207.1	(146.0)	185.6
Investment return	118.5	160.4	165.3	40.5	175.0
Other costs	(105.8)	(117.8)	(108.2)	(88.3)	(101.4)
Profit/(loss) before tax	258.7	325.7	264.2	(193.8)	259.2
Return on equity	14.1%	19.8%	17.4%	(8.6)%	13.9%
Claims ratio	56%	52%	57%	78%	60%
Expense ratio	33%	34%	32%	30%	29%
Combined ratio	89%	86%	89%	108%	89%

Overview

Amlin delivered a return on equity of 14.1% for 2014, just short of our cross cycle target of 15%. Ten year return on equity stands at 17.4%, compared to an estimated cost of equity of 8.5%. Profit before tax was £258.7 million (2013: £325.7 million). Strong profits in the Bermudian business pushed the effective tax rate to 8.6 %, with profit after tax at £236.4 million (2013: £298.7 million). This supports an increase in the ordinary dividend per share of 3.8% to 27.0 pence per share. In addition, the Board has agreed to return £74.9 million to shareholders by way of a special dividend of 15.0 pence per share.

Underwriting returns were solid at £246.0 million (2013: £283.1 million). Gross written premium was up by 3.9%, claims from larger catastrophes were higher and large loss activity across a number of our business lines was above normal. Reserves releases, at £89.6 million, were £43.9 million lower than 2013, but remained healthy. The overall combined ratio was 89% (2013: 86%) with strong performance from Amlin Bermuda, Amlin London and Amlin Europe. Claims from European hail storms reduced Amlin Re Europe to a marginal loss. However, Amlin UK disappointed, impacted by UK floods and the third highest large loss incidence in its history.

A creditable investment return of 2.7% (2013: 3.6%) was achieved against a backdrop of low interest rates and slow global economic recovery.

Underwriting performance

Gross written premium rose by 3.9% in 2014 to £2,564.0 million. The combined ratio was a satisfactory 89% (2013: 86%).

Renewal rates reduced by 3.6% on average, with the trend across different parts of the business mixed; average rate reductions of 7.0% were experienced for Reinsurance lines, reductions of 3.3% for Marine & Aviation and small rises were recorded across the Property & Casualty business. Within Property & Casualty, the strongest rate increases continued to be achieved for UK domestic business, particularly our commercial motor business. With rating adequacy satisfactory for most classes of business, our retention ratios were high at 86% (2013: 86%).

The softening trend in reinsurance markets led to some clients seeking multi-year policies. Gross written premium includes £86.3 million of premium on that basis, an increase of £68.8 million on the previous year.

Underlying premium growth was 7.1% when measured at constant exchange rates and after removing the effect of multi year contracts.

Growth in net written premium was 8.1% (2013: 2.4%), coming from the increase in gross written premium explained above and a more efficient reinsurance programme purchased for 2014. Outwards reinsurance expenditure was £285.1 million (2013: £360.0 million) representing 11.1% of gross written premium (2013: 14.6%). The improvement was achieved through a combination of lower pricing and more efficient structuring. This was particularly the case for our retrocessional programme. Notably Special Purpose Syndicate 6106, a Lloyd's Names sidecar, was closed saving £35.9 million of premium with the exposures covered under our core excess of loss protections.

The Group claims ratio was 56% (2013: 52%). Large catastrophe activity increased to £60.9 million (2013: £18.5 million). The largest events impacting Amlin were the European hail storms in June 2014, which cost £26.9 million, and a large US tornado in June 2014, amounting to £34.0 million. Similar to last year, there was a notable incidence of smaller catastrophes characterised by a frequency of international events, and large risk losses which totalled £34.6 million (2013: £62.0 million) and £57.0 million (2013: £76.0 million) respectively.

Claims development did not match the excellent performance of 2013, but continued to be healthy, with releases from reserves of £89.6 million (2013: £133.5 million). The nature of Amlin's business, being large commercial insurance and reinsurance, means claims development can be volatile creating some uncertainty over the required level of claims reserves required. Given this uncertainty, we adopt a prudent approach to assessment of liabilities, trying to deliver a consistent level of relative reserving strength. During the year an actuarial led reserving approach was adopted for the first time for Amlin London, Amlin Bermuda and Amlin UK. All reserving assessment is now carried out on a consistent basis of estimation and is believed to be more robust. The changes led to an acceleration of earned premium recognition, due to seasonality being explicitly considered for US hurricane reinsurance contracts, and also larger losses were analysed at lower levels, which is believed to have accelerated claims recognition. We estimate that the Group, as a whole, holds reserves on an accident year basis of approximately £150 million in excess of an actuarial best estimate (2013: approximately £160 million). The relative strength of claims reserves, measured by percentile of a distribution of outcomes, remained broadly unchanged.

The only significant reserve deterioration during the year was £24.4 million in respect of the three New Zealand earthquakes in 2010/11. The losses have continued to be challenging for our cedants to provide reliable estimates. However, given the scale of the deterioration in the year, much of our exposure to these events has been exhausted. In addition, where exposures remain material, loadings are carried to client estimates. Taken together, these factors significantly reduce the risk of any future deterioration for these events.

The underlying claims ratio increased to 53% (2013: 51%) in line with the rate movement experienced on the renewal business.

Segmental highlights

Amlin London

	2014		2013
	Total £m	Pre WAQS¹ £m	Total £m	Pre WAQS¹ £m
Gross written premium	1,212.1	1,212.1	1,134.8	1,134.8
Net written premium	888.5	1,003.7	775.1	883.1
Net earned premium	841.5	952.7	734.8	839.0
Reserve releases	7.5	8.3	43.7	46.6
Result attributable to underwriting	121.8	149.8	118.2	148.6
Renewal rate movement	(5.2)%	(5.2)%	(1.0)%	(1.0)%
Retention ratio	84%	84%	86%	86%
Claims ratio	47%	50%	44%	47%
Expense ratio	38%	34%	40%	35%
Combined ratio	85%	84%	84%	82%

Note:

1. Whole account quota share (WAQS). Segmental commentary is provided on this basis.

Gross written premium for Amlin London grew by 6.8% in the year. Markets were competitive and rates fell by 5.2% on average. Notably, catastrophe reinsurance rates fell by 10.8% but our market position was maintained due to continued adequacy of achieved rating. Growth of £36.4 million was achieved in the Property & Casualty insurance lines, with initiatives to broaden US property facility and international casualty classes.

The largest catastrophe events for the year were the Nebraskan tornado in June 2014 and European hailstorms in June 2014, amounting to £23.9 million and £4.3 million, respectively. Other smaller catastrophe events amounted to £8.7 million with the frequency of small tornado occurrence notable. Large risk losses amounted to £20.6 million. The aviation war account was heavily impacted by claims in the year with involvement in the two Malaysian airline hull losses and the terrorist attacks on Tripoli airport. In aggregate these events led to net claims of £12.8 million.

Reserve releases were lower at £8.3 million (2013: £46.6 million) with deterioration on the New Zealand earthquake claims amounting to £8.5 million for the year.

Amlin Bermuda

	2014		2013
	Total £m	Pre WAQS¹ £m	Total £m	Pre WAQS¹ £m
Gross written premium	601.3	424.7	552.0	396.9
Net written premium	558.9	382.3	500.4	345.3
Net earned premium	534.1	368.0	506.5	353.4
Reserve releases	8.5	7.1	22.0	19.7
Result attributable to underwriting	110.1	83.5	149.7	115.2
Renewal rate movement	(8.4)%	(8.4)%	(3.0)%	(3.0)%
Retention ratio	84%	84%	83%	83%
Claims ratio	56%	49%	49%	40%
Expense ratio	23%	29%	21%	28%
Combined ratio	79%	78%	70%	68%

Note:

1. Whole account quota share (WAQS). Segmental commentary is provided on this basis

Gross written premium grew by £27.8 million during the year. Underlying growth, after taking account of the boost from multi-year contracts was achieved in proportional property reinsurance, casualty and trade credit.

The major loss event for Bermuda in 2014 was the Nebraskan tornado amounting to £10.1 million. Smaller catastrophe events amounted to £15.9 million and large risk losses amounted to £12.7 million. In addition, attritional losses increased by £18.0 million, including £12.0 million from ten smaller tornado events in the season.

Reserves releases were also lower at £7.1 million (2013: £19.7 million) with £15.9 million deterioration on the New Zealand earthquake exposures.

Amlin UK

	2014		2013
	Total £m	Pre WAQS¹ £m	Total £m	Pre WAQS¹ £m
Gross written premium	325.5	325.5	334.0	334.0
Net written premium	270.4	310.8	279.4	320.4
Net earned premium	277.7	320.6	274.6	314.8
Reserve releases	(0.4)	0.2	10.0	9.4
Result attributable to underwriting	(16.3)	(17.7)	0.0	4.1
Renewal rate movement	3.3%	3.3%	4.9%	4.9%
Retention ratio	89%	89%	85%	85%
Claims ratio	70%	74%	62%	65%
Expense ratio	35%	30%	38%	33%
Combined ratio	105%	104%	100%	98%

Note:

1. Whole account quota share (WAQS). Segmental commentary is provided on this basis

During 2014, the London market financial institutions and professional indemnity business that was historically written in Amlin UK was transferred to Amlin London. In 2013 this amounted to £35.3 million. On an underlying basis, gross written premium increased by 9.0%. Overall rates increased across the division by 3.3%, with growth in commercial motor of 5.4% and retention remained high at 89%.

The overall result for the business was disappointing, with a combined ratio of 105% for the year (2013: 100%). The claims ratio increased to 70% from 62%, driven by claims from winter floods of £10.0 million which added 3%, and a higher than normal frequency of large losses on the commercial motor account, particularly the haulage sub sector. 2014 was the third worst year for large loss activity for the motor account over the last thirty years.

In addition reserves releases were modest at £0.2 million (2013: release of £9.4 million).

Amlin Re Europe

	2014 £m	2013 £m
Gross written premium	257.0	210.8
Net written premium	213.0	173.8
Net earned premium	188.2	166.2
Reserve releases	6.3	4.5
Result attributable to underwriting	(1.5)	(7.0)
Renewal rate movement	(1.0)%	2.3%
Retention ratio	92%	90%
Claims ratio	76%	74%
Expense ratio	24%	30%
Combined ratio	100%	104%

Amlin Re Europe continued to grow, with a 21.9% increase in premium to £257.0 million. Rate reductions, at 1.0%, were more subdued in the European reinsurance segment. The business was written at a consistent technical rate to 2013, with growth coming from the core markets of France, Germany and the UK.

The business delivered a combined ratio of 100%. The overall performance was heavily impacted by the European hail storm event in June with claims totalling £15.8 million. This added 8% to the overall ratio. Claims were incurred on both the motor and catastrophe accounts, not helped by the skew of the business mix towards France.

The underlying combined ratio was helped by an improvement in the expense ratio to 24% as the business continued to mature.

Amlin Europe

	2014 £m	2013 £m
Gross written premium	433.2	454.5
Net written premium	370.7	385.4
Net earned premium	360.4	404.6
Reserve releases	67.7	53.3
Result attributable to underwriting	35.5	16.2
Renewal rate movement	(0.2)%	0.0
Retention ratio	87%	88%
Claims ratio	50%	56%
Expense ratio	40%	40%
Combined ratio	90%	96%

The Amlin Europe portfolio contracted by 4.7% in 2014 with market conditions remaining competitive. Overall rates were stable and retention rates remained high. Importantly growth initiatives started to pay off with 5.2% growth achieved in the Netherlands Property & Casualty business through re-engagement with regional brokers.

The lower growth in net earned premium is principally due to slower recognition of business from RaetsMarine following its acquisition and a reappraisal of the patterns of Belgian engineering business.

The combined ratio was excellent at 90% despite £6.8 million of claims arising from the hail storms in June 2014. Reserve releases were again material at £67.7 million (2013: £53.3 million) with healthy claims settlement patterns and continued reduction in volatility of the business.

The expense ratio remains high at 40% (2013: 40%) with savings made in operating costs during the year offset by reduced net earned premium.

Investment management and performance

The Group's investment management approach is led by investment risk appetite. This appetite takes into account perceived risk and returns of the asset classes which can be invested in, the underwriting trading environment and strength of the financial position of the Group. Importantly, an absolute investment return is not targeted; rather, return is maximised for a level of risk that is accepted. Once the risk appetite is decided on:

· Strategic asset allocations are set using quantitative and qualitative analysis;

· Short term tactical positions are taken if short term opportunities are identified;

· Skilled external managers are used to manage the underlying assets.

As with all insurance companies there is a distinction between underwriting assets, or premiums held before claims are settled, and capital assets. For underwriting assets risk appetite is low with assets held in government bonds and funds which hold a mix of bonds, bond derivatives and currencies. Duration of liabilities is referenced for consideration of the duration of assets, but if yields are expected to rise duration is likely to be shortened - which is currently the case.

Capital assets are with a longer term time horizon which allows investment in more volatile assets such as equities or property.

The current asset allocation is shown below.

	at 31 December 2014				at 31 December 2013
Asset Allocation at 31 December 2014	Underwriting assets £m	Capital assets £m	Total assets £m	%	Total assets £m	%
Type of asset
Bonds	2,139.8	618.3	2,758.1	61.7	2,953.8	66.2
Other liquid investments	592.4	201.0	793.4	17.8	802.5	18.0
Equities	4.0	654.7	658.7	14.8	522.4	11.7
Property	-	255.5	255.5	5.7	181.0	4.1
Total	2,736.2	1,729.5	4,465.7	100.0	4,459.7	100.0
Assets by region
United Kingdom	212.3	220.3	432.6	16.6	335.6	12.7
US and Canada	366.8	502.6	869.4	33.5	1,265.4	47.9
Europe (ex UK)	770.4	199.0	969.4	37.4	751.2	28.5
Far East	107.8	187.3	295.1	11.4	235.2	8.9
Emerging markets	5.2	22.6	27.8	1.1	51.5	2.0
Grand Total	1,462.5	1,131.8	2,594.3	100.0	2,638.9	100.0

Note:

The regional table excludes pooled vehicles.

The investment return for 2014 was 2.7% (2013: 3.6%), with average funds under management of £4.4 billion (2013: £4.5 billion). The income statement contribution amounted to £118.5 million (2013: £160.4 million). The returns by asset class and average asset allocations for the year are shown below.

	2014			2013
	Average Asset Allocation		Return	Average Asset Allocation		Return
Investment performance	£m	%	%	£m	%	%
Bonds	3,258	73.9	1.8	3,332	74.5	1.8
Other liquid investments	320	7.3	0.5	572	12.8	0.1
Equities	604	13.7	4.7	377	8.5	21.5
Property	224	5.1	8.4	190	4.2	9.7
Total	4,406	100.0	2.7	4,471	100.0	3.6

Again, in 2014 economic growth undershot forecasters' initial expectations. This was partly due to factors such as extreme cold weather in the US and Russia's annexing of Crimea in the first quarter. Policy also played its part, such as the ongoing rebalancing of the Chinese economy towards consumption and the impact of sales tax in Japan. The Eurozone economy grew in 2014 but austerity and deleveraging remain headwinds to growth and are deflationary. The fall in the oil price in the second half of the year, pushing headline inflation down, also led to speculation that global demand was weakening further. However, we believe that the oil price move is predominantly due to unwinding of speculative positions, which had pushed the oil price up since 2011, and the subsequent increased supply in response to this elevated price. This supply shock is effectively a tax cut for net oil importing countries.

With this backdrop the global property and equity portfolios performed satisfactorily during the year. However, the defensive stance was maintained towards interest risk throughout 2014, which meant that the full benefit of the drop in bond yields to new historical lows was not captured. During the year the allocation in the bond portfolio towards non-government bonds was reduced due to concerns over both valuations and liquidity.

The Insurance Linked Securities portfolio continues to be managed by Leadenhall Capital Partners (LCP) in the form of two standalone investment funds. The return on £63.1 million of average funds under management was £3.9 million or 6.2% (2013: £65.7 million, £4.1 million and 6.2%).

Expenses

Total expenses, increased to £843.1 million (2013: £827.2 million).

	2014 £m	2013 £m
Acquisition costs	473.0	450.9
Underwriting expenses	241.2	250.3
Non underwriting expenses	101.9	97.0
Finance costs	27.0	29.0
Total Expenses	843.1	827.2

Acquisition expenses are largely driven by levels of income and represent 19.1% of gross earned premium (2013: 18.5%). The increase in the ratio was due to a change in mix of business, for example, with relative growth in proportional treaty business in Zurich and Bermuda which incurs higher commissions.

Expenses relating to underwriting, excluding acquisition costs, relate to the administration of insurance business and claims payments. Excluding the impact of foreign exchange, these expenses improved by £2.2 million during the year.

Non underwriting expenses decreased by £7.2 million, excluding foreign exchange differences, largely due to a reduction in employee incentives.

Taxation

The effective rate of tax for the period is 8.6% (2013: 8.3%). This is below the UK rate of corporation tax primarily due to Amlin AG's Bermuda branch, which operates with no local corporation tax in Bermuda. Sources of profit and taxation by geography are shown in the following table.

	2014		2013
Profit source	Profit/(loss) before tax £m	Effective tax rate %	Profit/(loss) before tax £m	Effective tax rate %
UK & other	19.5	26.1	83.2	19.8
Bermuda	131.0	0.4	196.4	0.2
Continental Europe	108.2	15.4	46.1	21.9
Group	258.7	8.6	325.7	8.3

Capital position and dividend

The Group's net assets increased by 6.2% to £1,782.8 million (2013: £1,678.1 million). In addition to profit after tax through the statement of profit or loss, net assets were adjusted by items including:

· Dividends totalling £131.2 million (2013: £121.3 million);

· £3.4 million of currency gains (2013: £16.0 million losses) from net translation of foreign operations, translation of intangibles arising from investments in foreign operations and instruments that hedge investments in foreign operations. Gains reflect US Dollar strengthening and Euro weakening against the Pound respectively; and

· An increase in net pension liability of £7.4 million (2013: £7.1 million decrease).

Net tangible assets increased to £1,519.2 million at 31 December 2014 (2013: £1,439.5 million).

Long term, regulatory compliant subordinated debt is also deployed in the Group's capital structure. It is unsecured and contains no financial covenants. At 31 December 2014, subordinated debt amounted to £261.5 million (2013: £289.5 million). During November 2014, $50.0 million of debt was repaid to bond holders after the Group exercised an option to redeem. A further $50.0 million will be redeemed in March 2015.

Additionally, a £300 million unsecured revolving credit facility is available, and was undrawn at the end of the year. The facility expires in August 2017 and is expected to be deployed to provide short term organic growth capital or to support small acquisitions.

The table below shows the capital position at 31 December 2014 against our management's view of assessed capital requirement. The capital requirement reflects regulatory requirements for Syndicate 2001, Amlin Europe and also includes $1 billion for Amlin AG. The latter is believed to be the minimum amount of capital required by Amlin AG to trade with its preferred client base. This is in excess of FINMA requirements.

	2014	2013
Net tangible assets	1,519.2	1,439.5
Subordinated debt	261.5	289.5
Undrawn bank facilities	300.0	198.6
Available capital	2,080.7	1,927.6
Core regulatory requirement (plus economic uplift) for S2001 and Amlin Europe	754.7	750.0
Amlin AG (1$bn)	641.4	603.7
Assessed capital	1,396.1	1,353.7
	684.6	573.9

Over the long term we aim to deploy this capital in order to deliver our target cross cycle return on equity of at least 15% and to grow earnings per share. We manage our capital to:

· Provide robust levels of equity and debt capital to support our current business;

· Retain sufficient levels to support long term profitable growth;

· Support payment of our ordinary dividend per share.

Our focus has been on providing shareholders with an increasing ordinary dividend stream over time. This is a committed policy and manages the level of capital effectively. Consideration is also given to the need to supplement this with further capital returns.

With solid earnings in 2014 the ordinary dividend per share has been increased by 3.8% to 27.0 pence per share.

The capital position of the Group has improved during the year and consideration has been given to whether there should be an additional return to shareholders. The main drivers of capital need for the business are overall growth and the level of net catastrophe exposure. In a more competitive market, Amlin's underwriting philosophy is to curb growth and to focus on the bottom line. In the current environment more growth is expected to come from non-catastrophe classes, where markets are currently seeing less pricing pressure. This growth provides diversification benefits and more effective reinsurance is also controlling, and reducing, our catastrophe exposures. Therefore in the short term little capital pressure is evident from organic growth. Consequently, the Board has decided to return £74.9 million to shareholders by way of a special dividend of 15.0 pence per share.

Outlook

The competitive markets in which Amlin operates are going through a period of significant change. The factors behind this are numerous: capital is abundant and in open markets it will seek out opportunities where relatively strong returns can be delivered, regulatory attention is heightened following the financial crisis and technology continues to dramatically impact the manner in which data can be analysed and products distributed. These factors will continue to have an impact on the business in 2015.

The strength of Amlin's franchise, the diversity of its business model and the skill of its people are essential for success in this environment. Amlin has a track record of being disciplined in difficult markets - a core focus on profitability and ability to adapt are essential.

The reorganisation of the business into three Strategic Business Units facing core markets is a clear demonstration that the business has the ability to adapt and make effective use of the Group skill base to pursue the Group's goals.

Reinsurance

In Reinsurance, rating pressure has been intense but profitability has remained good. Underlying rating adequacy was acceptable in 2014 but during 2015 is expected to see continued downward pressure. During the 2015 January renewals, rates fell across the reinsurance account by an average of 6.1%. Parts of the portfolio are now reaching levels where return expectations are barely adequate for the risk taken. Our broad-based reinsurance offering, and our ability to lead terms and handle claims professionally continues to be attractive to brokers and clients. However, underwriting discipline and skill remain key to success - reducing lines or coming off layers where rating is inadequate. Consequently, less business has been renewed with the retention rate falling to 83% (2014: 86%).

After taking account of the distorting impact of multi-year contracts and foreign exchange, written income was down modestly by 3.6%, with the strong dollar helping to hold premium levels.

There are parts of the portfolio where rating pressure is less severe and growth has been possible, such as in continental European non-catastrophe classes.

Importantly, the influx of capital into the industry and increased competitiveness have also helped to make the purchase of retrocessional reinsurance more efficient. The same amount of reinsurance premium was spent for 2015 but cover was purchased across the Business Unit as a whole and deeper levels of cover were available at acceptable prices. This is clear through the reduction in Realistic Disaster Scenarios.

Marine & Aviation

The Marine & Aviation Business Unit delivered good performance in 2014 with a pro-forma combined ratio of 89%. Rating pressure increased but was not as intense as for Reinsurance, with pressure evident where sharp increases have been achieved in recent years, such as energy and marine liability classes. For January 2015, rates fell by 2.6% with pressure most pronounced in energy. However, retention rates remained high at 89% and the renewals were a little ahead of plan. It is expected that this pattern will continue through 2015.

The marine reinsurance programme for the business unit was combined for the first time to cover the London and European business. This was placed with a small reduction in premium but significantly broader coverage.

Property & Casualty

The Property & Casualty business is diverse, covering the Lloyd's operation and domestic UK and Continental European insurance. The pro-forma combined ratio for 2014 was 94%. Both the Lloyd's and European businesses produced good results, with poor performance in the year for the UK business, due to flooding and heightened large loss activity.

At 1 January 2015, rating was flat across the Business Unit, with modest reductions in Lloyd's, stability in Continental Europe and continued improvement in the UK with commercial motor renewals achieving rate improvements of around 4.2%. Retention rates were high at 91%.

Good growth was again possible in Europe, with a 7.8% increase on the previous year building on the success of 2014 and the new office in Germany. 70% of planned business was written at 1 January due to the skew of continental renewals to 1 January inception dates.

In the UK, action continued to be taken to correct poor performing parts of the business, particularly the haulage sub sector of the motor account where volatility was evident in 2014. This led to modest contraction at 1 January but with improvement in expected profitability of the balance of the account.

Investments

Investment markets are expected to remain challenging for 2015. Global growth remains weak with significant variance across the global economy. Falling inflation expectations led the European Central Bank to embark on a quantitative easing program in January 2015. In addition, while the fall in the oil price has generated debate about whether this is supply or demand led, the result is effectively a tax cut for net oil importing countries and in particular their consumers. This boost to the world economy is expected to be marginally offset by the negative impact on oil producers, including the US shale oil industry.

Even without these additional stimuli, global economic growth is expected to have a stronger bias this year than last. Notably, in the US unemployment is back to levels last seen in 2008 and is rapidly approaching the point below which the Federal Reserve believes the slack in the labour market has been used up and wage pressure will cause inflation to accelerate; when it reaches that point the current emergency level of interest rates may no longer be appropriate.

There also appears to be sufficient scope for policy moves to keep Chinese growth around the authorities' target 7%, as they rebalance the economy away from investment and towards consumption.

Consequently, equities and property are expected to outperform bonds in the short to medium-term. However, care is needed as valuations across asset classes are at the higher end of the scale and higher market volatility is expected. In this environment, a well diversified portfolio will be retained.

Historically, Amlin's outperformance of its competitors has increased in tougher market conditions and by maintaining strong underwriting discipline among our highly experienced underwriting teams, this is our aim over the coming period. While reinsurance and insurance rates are under pressure in a broadening number of classes, for the most part rates remain at acceptable levels with opportunities for growth, helped by our increased marketing and focus on client intimacy. While returns on equity will be affected by a lower margin environment, we continue to believe that we can deliver attractive returns on equity.

Consolidated statement of profit or loss

For the year ended 31 December 2014

	Note	2014 £m	2013 £m
Gross earned premium	4(c),5(a)	2,476.4	2,440.6
Reinsurance premium ceded	4(c),5(a)	(275.8)	(346.0)
Net earned premium	4(c),5(a)	2,200.6	2,094.6

Investment return	4(c),6	101.3	143.2
Other operating income	4(c)	8.0	4.3
Total income		2,309.9	2,242.1

Insurance claims and claims settlement expenses	4(c),5(b)	(1,306.8)	(1,153.1)
Insurance claims and claims settlement expenses recoverable from reinsurers	4(c),5(b)	83.6	60.0
Net insurance claims	5(b)	(1,223.2)	(1,093.1)

Expenses for the acquisition of insurance contracts	4(c),7(a)	(473.0)	(450.9)
Other operating expenses	7(b)	(343.1)	(347.3)
Total expenses		(816.1)	(798.2)

Results of operating activities		270.6	350.8
Finance costs	4(c),7(f)	(27.0)	(29.0)
Share of profit after tax of associates	4(c),18(b)	3.7	3.9
Gain on revaluation of existing investment	3(a),4(c)	11.4	-
Profit before tax	4	258.7	325.7
Tax	8	(22.3)	(27.0)
Profit for the year		236.4	298.7

Attributable to:
Owners of the Parent Company		236.5	298.7
Non-controlling interests		(0.1)	-
		236.4	298.7

Earnings per share attributable to owners of the Parent Company
Basic	11	47.4p	60.0p
Diluted	11	46.6p	59.1p

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

Consolidated statement of other comprehensive income

For the year ended 31 December 2014

	Note	2014 £m	2013 £m
Profit for the year		236.4	298.7
Items that will not be reclassified to profit or loss
Defined benefit pension fund (losses)/gains	16(a)	(9.8)	9.4
Income tax relating to items that will not be reclassified	8	2.4	(2.3)
		(7.4)	7.1
Items that may be reclassified subsequently to profit or loss
Foreign exchange gains/(losses) on translation of foreign operations, net of designated hedges	9(a)	3.4	(16.0)
Net unrealised losses on assets designated as available-for-sale	12(b)	(0.1)	-
Income tax relating to items that may be reclassified	8	(0.5)	0.5
		2.8	(15.5)

Other comprehensive expense for the year, net of tax		(4.6)	(8.4)

Total comprehensive income for the year		231.8	290.3

Attributable to:
Owners of the Parent Company		231.9	290.3
Non-controlling interests		(0.1)	-
		231.8	290.3

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

Consolidated statement of changes in equity

For the year ended 31 December 2014

		Attributable to owners of the Parent Company
For the year ended 31 December 2014	Note	Share capital £m	Share premium £m	Other reserves £m	Treasury shares £m	Retained earnings £m	Total £m	Non-controlling interests £m	Total equity and reserves £m
At 1 January 2014		142.0	311.3	112.4	(18.8)	1,131.2	1,678.1	0.5	1,678.6
Total comprehensive (expense)/income for the year		-	-	(4.6)	-	236.5	231.9	(0.1)	231.8
Employee share option schemes:
- share-based payment reserve		-	-	2.0	0.7	-	2.7	-	2.7
- proceeds from shares issued		-	0.1	-	2.0	(0.4)	1.7	-	1.7
Dividends paid	10	-	-	-	-	(131.2)	(131.2)	-	(131.2)
Deferred tax relating to share option schemes	8	-	-	(0.6)	-	-	(0.6)	-	(0.6)
Issue of new shares	17(a)	-	0.3	-	-	-	0.3	-	0.3
Changes in non-controlling interests in subsidiaries	3	-	-	(0.1)	-	-	(0.1)	2.7	2.6
Transactions with the owners of the Group for the year		-	0.4	1.3	2.7	(131.6)	(127.2)	2.7	(124.5)
At 31 December 2014		142.0	311.7	109.1	(16.1)	1,236.1	1,782.8	3.1	1,785.9

		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 equity and reserves £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		-	0.1	-	2.0	(0.9)	1.2	-	1.2
Dividends paid	10	-	-	-	-	(121.3)	(121.3)	(0.1)	(121.4)
Deferred tax relating to share option schemes	8	-	-	(0.3)	-	-	(0.3)	-	(0.3)
Issue of new shares		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

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

Consolidated statement of financial position

At 31 December 2014

	Note	2014 £m	2013 £m
Assets
Cash and cash equivalents	12(a)	204.8	164.5
Financial assets	12(b)	4,390.3	4,368.8
Reinsurance assets
- reinsurers' share of outstanding claims	13(a)	305.9	343.1
- reinsurers' share of unearned premium	13(c)	44.0	45.1
Loans and receivables, including insurance and reinsurance receivables
- insurance and reinsurance receivables	13(e)	1,046.9	1,013.8
- other loans and receivables	12(c)	85.5	88.4
Deferred acquisition costs	13(d)	270.7	246.1
Current income tax assets		11.6	23.0
Deferred tax assets	8	5.7	6.1
Property and equipment	14	35.9	22.6
Goodwill and intangible assets	15	267.4	239.1
Investments in associates	18(b)	7.0	12.5
Total assets		6,675.7	6,573.1

Equity and reserves
Share capital	17(a)	142.0	142.0
Share premium		311.7	311.3
Other reserves	17(b)	109.1	112.4
Treasury shares		(16.1)	(18.8)
Retained earnings		1,236.1	1,131.2
Equity attributable to owners of the Parent Company		1,782.8	1,678.1
Non-controlling interests		3.1	0.5
Total equity and reserves		1,785.9	1,678.6

Liabilities
Insurance liabilities
- outstanding claims	13(a)	2,928.2	2,897.1
- unearned premium	13(c)	1,168.4	1,093.9
Other payables, including insurance and reinsurance payables
- insurance and reinsurance payables	13(f)	196.2	273.3
- other payables	12(d)	178.6	137.5
Financial liabilities	12(b)	28.6	4.7
Current income tax liabilities		0.6	0.1
Borrowings	12(e)	262.1	391.6
Retirement benefit obligations	16(a)	41.4	32.6
Deferred tax liabilities	8	85.7	63.7
Total liabilities		4,889.8	4,894.5
Total equity, reserves and liabilities		6,675.7	6,573.1

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 27 February 2015. They were signed on its behalf by:

Charles Philipps Richard Hextall
Chief Executive Chief Finance & Operations Officer

Consolidated statement of cash flows

For the year ended 31 December 2014

	Note	2014 £m	2013 £m
Profit before tax		258.7	325.7

Adjustments:
Depreciation charge	14,7(g)	5.4	7.4
Amortisation charge	15,7(g)	10.7	11.2
Finance costs	7(f)	27.0	29.0
Interest income	6	(22.0)	(30.4)
Dividend income	6	(22.9)	(16.3)
Gains on investments realised and unrealised	6	(56.4)	(96.5)
Gain on revaluation of existing investment	3(a),4(c)	(11.4)	-
Other non-cash movements		3.0	1.5
Movement in operating assets and liabilities:
Net sales/(purchases) of financial investments	12(b)	71.5	(92.1)
Foreign exchange (gains)/losses on investments	12(b)	(8.9)	28.9
Increase in loans and receivables		(14.6)	(0.4)
Decrease in insurance and reinsurance contract assets		5.2	120.7
Increase/(decrease) in insurance and reinsurance contract liabilities		28.5	(152.9)
Increase/(decrease) in other payables		11.4	(2.9)
(Decrease)/increase in retirement benefit obligations		(1.0)	1.1
Foreign exchange gains on long-term borrowings		-	(0.3)
Foreign exchange losses/(gains) on other non-operating assets and liabilities		9.6	(5.8)
Cash generated from operations		293.8	127.9
Interest received		20.1	21.5
Dividends received		22.9	16.3
Income taxes received/(paid)		13.2	(0.1)
Net cash inflows from operating activities		350.0	165.6

Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired		2.0	(8.8)
Deferred payment for acquired subsidiary		(0.4)	(0.2)
Investments in associates		4.8	0.9
Purchase of property and equipment		(16.5)	(7.5)
Purchase and development of intangible assets		(9.9)	(2.3)
Net cash outflows from investing activities		(20.0)	(17.9)

Cash flows from financing activities
Net proceeds from issue of ordinary shares, including treasury shares		1.7	12.8
Dividends paid to owners of the Parent Company	10	(131.2)	(121.3)
Purchase of non-controlling interest	3(b)	(0.4)	-
Dividends paid to non-controlling interests	10	-	(0.1)
Interest paid		(22.1)	(24.4)
Purchase of ESOT and treasury shares		(4.0)	(5.5)
Net repayment of borrowings	12(e)	(131.8)	(24.1)
Net cash outflows from financing activities		(287.8)	(162.6)

Net increase/(decrease) in cash and cash equivalents		42.2	(14.9)
Cash and cash equivalents at beginning of year		164.5	190.6
Effect of exchange rate changes on cash and cash equivalents		(1.9)	(11.2)
Cash and cash equivalents at end of year	12(a)	204.8	164.5

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.

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

Notes to the financial statements

For the year ended 31 December 2014

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.

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 2013, 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 a Lloyd's syndicate. 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 financial statements 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 18.

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 Review section of the Annual Report. Capital management strategy, which covers how regulatory and economic capital needs are measured and how capital is deployed, is described in the Financial Review section of the Annual Report. 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, note 13(g) covers underwriting risk, and note 12(h) covers market, liquidity and credit risk which may affect the financial position of the Group.

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.

Changes to financial reporting

The Group operates a process of continual review and update of its consolidated financial statements and this has resulted in the reorganisation of the notes. In making changes, the Group has considered the findings of the Financial Reporting Council's Financial Reporting Lab reports: Accounting Policies and Integration of Related Financial Information and Towards Clear and Concise Reporting, issued in July 2014 and August 2014 respectively. The presentation of related disclosures enables greater understanding of the Group's performance and financial position.

The Group's consolidated financial statements have been divided into 5 sections:

· Primary (pages 16 to 20) contains the Group's consolidated primary statements;

· Policy, Capital and Business combinations (pages 21 to 33) includes the critical judgements and accounting policies that have had a material impact on financial reporting; together with details of the Group's capital requirements and significant transactions that have occurred during the year;

· Performance (pages 34 to 49) includes the segmental analysis and other notes which are integral to understanding the Group's financial performance;

· Position (pages 50 to 96) provides details on the key areas of financial position and the Group's approach to management of related risks; and

· Other notes (pages 97 to 100) covers disclosures required to be compliant with accounting standards or the Companies Act. This information is important, but less significant to understanding the Group's business and performance.

Adoption of new and revised standards

(a) Standards, amendments to published standards and interpretations effective on or after 1 January 2014

The Group has adopted the following new and amended IFRSs effective as of 1 January 2014:

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

The amendments remove the requirement to disclose the recoverable amount when a cash generating unit contains goodwill or indefinite life intangible assets but there has been no impairment. However, the amendments 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 have had no impact on the financial statements of the Group.

Investment entities (amendments to IFRS 10, 'Consolidated Financial Statements', IFRS 12, 'Disclosure of Interest in Other Entities' and IAS 27, 'Separate Financial Statements')

IFRS 10, IFRS 12 and IAS 27 have been amended 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 have had no 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 have had no impact on the financial statements of the Group.

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

The Group has early adopted the following new and amended IFRSs for the year ended 31 December 2014:

IFRIC 21, 'Levies'

The interpretation was endorsed by the EU for periods commencing on or after 13 June 2014. This has been early adopted by the Group from 1 January 2014 and requires retrospective application. The interpretation 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. The interpretation has had no significant impact on the financial statements of the Group.

(c) Standards, amendments to published standards and interpretations that are not yet effective and have not been early adopted 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'

In July 2014, the IASB issued the final version of IFRS 9, bringing together the classification and measurement, impairment and hedge accounting phases of the IASB's project to replace IAS 39 'Financial Instruments: Recognition and Measurement' and all previous versions of IFRS 9.

The final standard has a mandatory effective date of 1 January 2018 with early adoption permitted¹.

Note:

1. Subject to EU endorsement

The adoption of IFRS 9 will have an effect on the classification and measurement and impairment model applied to the Group's financial instruments. Work is ongoing to quantify the impact of these changes. Consideration will also be given to the interaction with emerging requirements and expected timetable of the IASB's insurance contracts project in addressing the Group's classification and measurement approach.

IFRS 15, 'Revenue from Contracts with Customers'

In May 2014 the IASB and FASB issued a converged standard on the recognition of revenue from contracts with customers, applicable for periods beginning on or after 1 January 2017, with early adoption permitted¹.

The underlying principle is that an entity will recognise revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services, based on the satisfaction of performance objectives.

Adoption of this standard replaces existing revenue recognition guidance applied by the Group, IAS 18 'Revenue'. It is not expected to have a material impact on the Group but could impact the timing and recognition of service company commission income.

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 for periods commencing on or after 1 July 2014 and are not expected to have a material impact on the financial statements of the Group.

Annual improvements to IFRSs 2010-2012, 2011-2013 and 2012-2014

The 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 clarify existing guidance and do not give rise to significant changes in existing accounting practice. The improvements are not expected to significantly impact the Group's consolidated financial statements.

The annual improvements are applicable for periods beginning on or after 1 July 2014 (2010-2012 and 2011-2013 cycles) and 1 January 2016¹ (2012-2014 cycle).

Disclosure Initiative (amendments to IAS 1)

Disclosure Initiative (amendments to IAS 1) was issued in December 2014 and is applicable for periods beginning on or after 1 January 2016. The amendment clarifies, rather than specifically changes existing IAS 1 requirements. The Group has assessed its impact and incorporated some improvements relating to the ordering of notes to the financial statements.

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.

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.

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 the statement of profit or loss.

During 2014 the Group transitioned to an actuarial-led reserving process, based on an actuarial best estimate plus an explicit management margin, which reflects the risk premium relating to the uncertainty of the actual level of claims incurred. The move to an actuarial-led reserving process has refined the judgement about the profile of risk over the coverage period applied to certain classes of business. Consequently, changes in the estimate of claims should be considered in conjunction with the impact on earned premium, described below.

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 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 2014 is £2,622.3 million (2013: £2,554.0 million). In 2014, there has been a net positive development of £89.6 million (2013: £133.5 million positive) for the Group. Note 13(i) 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 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.

With over supply of capital, particularly in the reinsurance market, clients have increasingly requested multi-year placements of their reinsurance programme. A number of contracts include cancellation clauses which can be enforced by the client. Judgement is therefore required to be applied in calculating the estimated total premium at the inception of these contracts.

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.

The estimation of earned premium uses judgement about the profile of risk over the coverage period of (re)insurance contracts. During 2014, improvements in those estimates have been made to better reflect the seasonal nature of certain classes of business. This more closely aligns the earning of premium with the seasonal basis of reserving claims and the impact should be considered in conjunction with the offsetting effect of moving to an actuarial-led reserving process. Such enhancements follow the move to actuarial-led best estimate reserving and the ongoing development of new Group finance systems. The impact on net earned premium in 2014 is £19.9 million.

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.

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.

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 12(f). The carrying values of the Group's financial assets and financial liabilities at 31 December 2014 are £4,390.3 million (2013: £4,368.8 million) and £28.6 million (2013: £4.7 million) respectively. These include £262.2 million (2013: £189.6 million) of Level 3 investments, principally comprising property funds.

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 an IT platform for Amlin Europe N.V. and new Group finance systems.

The assumptions made by management on initial recognition and valuation of intangible assets, together with the performance of impairment tests, 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 15 provides further details on these assumptions.

The carrying value of the Group's intangible assets (excluding goodwill) at 31 December 2014 is £161.3 million (2013: £150.0 million). The carrying value at the reporting date of goodwill is £106.1 million (2013: £89.1 million).

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 15.

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 15 provides further details.

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 £5.7 million (2013: £6.1 million), and of the deferred tax liability is £85.7 million (2013: £63.7 million). Further analysis is included in note 8.

Determining control of entities

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

i. Leadenhall Capital Partners LLP (LCP)

The Group acquired an additional 25% of the voting rights in LCP on 23 October 2014, taking its ownership to 75%. Having previously held a significant influence over LCP and equity accounted for this as an investment in associate, a detailed control assessment was performed in accordance with IFRS 10, 'Consolidated Financial Statements'.

The Group determined that through its rights to appoint board members with a majority of the voting rights over the relevant activities and its exposure to variable returns, through its share of growth in the capital value and profits, the Group has control over LCP and it should consolidate from the acquisition date of the additional stake. LCP is therefore accounted for as a subsidiary and consolidated in the financial statements at 31 December 2014.

ii. 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 may hold 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'. Note 12(g) provides further details on these investments.

LCP valuation

The LCP acquisition accounting required significant judgements to be made in determining the fair value of the deferred contingent consideration and the original investment held by the Group, in addition to judgements in respect of control, goodwill and intangible assets referred to above.

The deferred contingent consideration was estimated, being payable as a multiple of 2013, 2014 and 2015 profits. Judgement was exercised in selecting the forecast used for 2015. The fair value of the original investment made reference to the consideration for the new stake and market benchmarks, whilst allowing a discount for the absence of control. Note 3 provides further details and the carrying value of these items.

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 loss of £9.8 million (2013: £9.4 million gain) has been recognised in other comprehensive income and an expense of £6.4 million (2013: £7.2 million) has been recognised in the statement of profit or loss. Note 16(a) provides further details on the Group's retirement benefit obligations. At 31 December 2014, the Group recognised a liability of £41.4 million (2013: £32.6 million) in respect of its defined benefit plans.

Significant accounting policies

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.

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.

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 and subrogation reimbursements are included as allowances in the measurement of the insurance liability for unpaid claims, and recognised in insurance and reinsurance receivables when the liability is settled.

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.

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 years. 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 year and are impaired where they are no longer considered to be recoverable out of future margins in the related revenues.

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 years. 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.

Financial assets

The Group classifies its financial assets at fair value through profit and loss (FVPL) 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 FVPL. 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 FVPL 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 FVPL are classified as 'other than trading' within the FVPL category as they are managed and their performance is evaluated on a FVPL 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 year 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 year in which they arise. The uncertainty around valuation is discussed further in note 12(h).

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 12(b). 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.

Intangible assets

i. 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.

ii. 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 the statement of profit or loss.

iii. Broker and customer relationships, computer software and other intangible assets

The Group recognises intangible assets in respect of rights to broker and customer relationships acquired through business combinations. Costs directly attributable to internally developed computer software are capitalised and recognised as intangible. Other intangible assets, which do not fall under the aforementioned categories, include the recognition of acquired renewal rights to certain underwriting portfolios.

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. 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. These 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.

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 applies IFRS 3 (revised) to all acquisitions taking place on or after 1 January 2010. Business combinations are accounted for using the acquisition 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. 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.

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 year when the liability is settled or the asset is realised. Deferred tax is charged or credited to the statement of 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.

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 the statement of 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 year 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 Amlin Europe N.V. and Amlin Re Europe, the fair value of the plan assets reflects the benefits that accrue under the insurance policy taken out to meet its obligations.

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

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.

Foreign currency translation

The Group and Company present their financial statements 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 year 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 9(b).

Other accounting policies

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 Amlin Management Committee.

Exceptional items

Exceptional items are those that, in the Directors' view, are required to be separately disclosed by virtue of their nature or incidence to enable a full understanding of the Group's financial performance.

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 year, and its share of the movement in associates' net assets is reflected in the investments' carrying values in the statement of financial position.

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.

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 the statement of 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 the statement of profit or loss when the expenditure is incurred. The freehold land is not depreciated.

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 the statement of 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 the statement of 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.

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 year. 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 the statement of profit or loss in the year 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.

Other operating income

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

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 year in which the dividends are approved by the Company's shareholders.

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 year 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 17, and subordinated debt as disclosed in note 12(e). For business planning purposes, account is also taken of the Group's debt facilities as disclosed in note 12(e).

The method by which the Group manages its capital base is described in the Financial Review section of the Annual Report.

During the current and prior financial years, 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, and 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.

Solvency II

Solvency II, a new regulatory regime for (re)insurers in the European Economic Area, introduces a new basis for assessing capital. This assessment includes a market-consistent economic balance sheet and a Solvency Capital Requirement, using either an internal model or the standard formula. It will impact the Group, Amlin Corporate Member Ltd (as part of Lloyd's) and, at a solo level, Amlin Insurance (UK) Ltd and Amlin Europe N.V. and is effective from 1 January 2016.

The Group is currently implementing the new requirements and, as part of the preparatory phase, is providing interim information on this basis to regulators in 2015.

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.

For the final capital requirement, the Economic Capital Assessment (ECA), Lloyd's take the 'to ultimate' LCR and apply an uplift currently at 35%. This is then subject to a minimum of 40% (2013: 40%) of the Syndicate's agreed premium capacity limit. At 31 December 2014, the agreed ECA as a percentage of the agreed underwriting capacity for the following underwriting year was 50.0% (2013: 46.4%).

The Syndicate also benefits from mutualised capital within the Lloyd's Central Fund, for which a variable annual levy, for 2014 of 0.5% (2013: 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.

At 31 December 2014, Amlin Corporate Member Limited funded the agreed FAL requirement of £576.0 million (2013: £540.6 million) to support underwriting for the 2015 underwriting year. The increase of £35.4 million is largely driven by changes in underlying risk profile reflecting softening market conditions coupled with planned growth.

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 (£2.9 million) (2013: €3.7 million and £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. For the year ending 31 December 2013, Amlin AG calculated a SST ratio of 214%. The minimum ratio for Solvency I as well as for the SST is set at 100%. Amlin AG is expected to exceed the minimum ratios for the year ending 31 December 2014.

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, Amlin AG 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 calculated an ECR of US$543.1 million for the year ending 31 December 2013, and is expected to have an ECR for the year ending 31 December 2014 that exceeds the minimum requirements.

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.

At 31 December 2014, the minimum required capital for Amlin Europe N.V. amounted to €88.7 million (2013: €95.8 million). The minimum capital requirement is calculated by applying fixed percentages to premiums and claims.

At 31 December 2014, 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. Business combinations

a) Acquisition of subsidiary - Leadenhall Capital Partners LLP

On 23 October 2014, the Group increased its interest in Leadenhall Capital Partners LLP (LCP) to 75% for consideration of US$29.1 million (£18.1 million), payable over a three year period. The acquisition is a key part of the Group's strategy to continue to provide its clients with a comprehensive range of reinsurance products.

This acquisition increases the Group's interest in the partnership from 40% to 75% and its share of the voting rights from 50% to 75% and consequently control has been assessed as passing to the Group. LCP is an investment fund manager wholly focused on structuring and managing insurance linked investment portfolios for institutional investors. At 31 December 2014, LCP had funds under management of US$1,880.8 million (£1,206.3 million equivalent) (2013: US$1,591.8 million; £961.0 million equivalent). The provisional acquisition-date fair value of the total consideration transferred, identifiable assets acquired and resulting goodwill are as follows:

	£m
Initial cash consideration	4.1
Fair value of equity shares issued	0.3
Fair value of contingent consideration	13.7
Total purchase consideration	18.1

Fair value of previously held investment in LCP	16.7
Non-controlling interest in net assets of LCP	3.0
	37.8
Fair value of assets acquired (see below)	(17.4)
Goodwill	20.4

The assets acquired and liabilities assumed as of the acquisition date are as follows:

	Acquiree's carrying amount £m	Fair value and accounting policy adjustments £m	Fair value £m
Cash and cash equivalents	6.1	-	6.1
Loans and receivables, including insurance and reinsurance receivables
- Other receivables	6.9	-	6.9
Goodwill and intangible assets	-	15.1	15.1
Total assets	13.0	15.1	28.1
Other payables, including insurance and reinsurance payables
- other payables	0.6	6.2	6.8
Current income tax liabilities	-	0.9	0.9
Deferred tax liability	-	3.0	3.0
Total liabilities	0.6	10.1	10.7
Net assets acquired	12.4	5.0	17.4

The goodwill shown above relates to the premium paid for the opportunities for further growth through a more comprehensive product offering, the potential to exploit synergies, and the ability of the Group to leverage its existing presence in the reinsurance market to attract new business to LCP. No provision for impairment of goodwill has been made at the acquisition date. The total amount of goodwill which is expected to be deductible for tax purposes is £nil.

A liability of US$22.1 million (£13.7 million) is recognised as of the acquisition date for contingent consideration. This is calculated based on the discounted cash flow model that has been used in determining the fair value of LCP. The core acquisition consideration is split into three tranches, the first payable at the acquisition date. The remaining amounts are payable in June 2015 and May 2016 with 90% payable in cash and 10% payable in Amlin plc shares. The total consideration has been capped at US$110.0 million. The outcomes are based on pre-tax profits and earnings multiples and the undiscounted range of the final amount payable is US$nil (£nil) to US$110.0 million (£68.6 million).

The Group's existing 40% interest in LCP, held as an investment in associate and equity accounted, is re-measured at the acquisition date to fair value of US$26.7 million (£16.7 million) and deemed part of the consideration paid by the Group to obtain control of LCP. Accordingly, the fair value of the investment is included in the determination of goodwill.

Re-measuring the carrying value of the investment in associate gives rise to a gain of US$18.3 million (£11.4 million). This is shown under the line item 'Gain on revaluation of existing investment' within the consolidated statement of profit or loss.

In accordance with the Group's accounting policy the non-controlling interest is calculated as the proportionate share of the fair value of the identifiable net assets of LCP.

The gross contractual amount of receivables as of the acquisition date is £6.9 million and are all expected to be received within the next 12 months.

An intangible asset of £15.1 million has been recognised, representing the fair value of acquired customer relationships.

The assets and liabilities as of the acquisition date are stated at their provisional fair values and may be amended during the following 12 months if further evidence of the appropriate fair values is received, in accordance with paragraph 45 of IFRS 3, 'Business combinations'.

A new priority distribution and bonus scheme was introduced, for partners and employees respectively of LCP, at acquisition. 30% of the business's operating profit will be available for incentivisation. As part of this arrangement there is a scheme to protect the non-controlling interest in the event that a partner leaves. A component of the priority distribution will be retained undistributed within LCP and will be distributed in a future period to any partner when they reduce their partnership interest on retirement or departure from the business.

An enhanced profit share arrangement has been put in place for the non-controlling interest. For the 2014 and 2015 accounting years, the enhanced profit share will be 48.3% and 36.7% respectively, before reducing to reflect the non-controlling interest in LCP of 25% thereafter. The enhanced profit share is accounted for as remuneration.

The undeclared priority distributions, bonus awards and profit share for 2014 to the date of acquisition have been accrued as part of the fair value adjustments of the acquired net assets, and included in Other payables as £6.2 million.

Total acquisition-related costs were £0.9 million. Of these costs £0.7 million is recognised as an expense within Other operating expenses for the year ended 31 December 2014. The remainder of the acquisition-related costs were incurred in 2013.

LCP generated £0.6 million of profit for the Group from the acquisition date to 31 December 2014. If the acquisition of LCP had been on 1 January 2014, its profit generated for the year to 31 December 2014 would have been £4.2 million.

b) Purchase of non-controlling interest in Amlin Plus Limited

On 20 May 2014, the Group acquired the 40% non-controlling interest in Amlin Plus Limited for consideration of £0.4 million, resulting in a £0.3 million reduction to the non-controlling interest and a £0.1 million decrease in other reserves. The acquisition supports the Group's strategy to develop its equine and bloodstock business.

4. Segmental reporting

a) Basis of segmentation

Management has determined the Group's operating segments based on the management information reviewed during the year 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'.

Segments represent the distinct units through which the Group is organised and managed. Segments are as follows:

· Amlin London, consisting of the Reinsurance, Property & Casualty, and Marine & Aviation business units, underwritten 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; specialised, commercial SME property and casualty business in Germany 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, primarily eliminating transactions between segments.

Consolidation adjustments relating to transactions within segments that were previously reported through the intra group items column, are now reported through the segment to which the adjustment relates. The most significant impact is in respect of service company commission income recognised as acquisition expenses in Amlin London, Amlin UK and Amlin Europe. The segmental analyses for the comparative year have been restated accordingly.

Investment return generated from centrally managed investments and managing agency expenses that were previously reported through the other corporate companies column, are now reported through segments that support the business. The segmental analyses for the comparative year have been restated accordingly.

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 revenues are allocated based on the country in which the insured is located. Prior year geographic disclosures have been re-presented to reflect this. Management considers its external customers to be the individual policyholders, and as such the Group is not reliant on any individual customer.

During 2014, management reviewed the Group operating structure. As from 1 September 2014, the Group changed its structure to operate as three Strategic Business Units (SBU): Reinsurance, Marine & Aviation and Property & Casualty. Reporting to the chief operating decision maker for the 2015 financial year will reflect the change in allocation of responsibility and the financial statements will be adjusted accordingly. As a result, unaudited comparable SBU financial information for 2014 has been included in the Underwriting management section of the Annual Report for the first time.

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 4(c).

Income and expenses by business segment Year ended 31 December 2014	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	247.2	258.2	266.8	38.5	22.8	-	(241.5)	592.0
North America	640.1	12.7	198.7	2.8	3.2	-	-	857.5
Europe	95.6	25.9	54.5	200.8	373.9	-	(23.6)	727.1
Other	229.2	28.7	81.3	14.9	33.3	-	-	387.4
Gross written premium	1,212.1	325.5	601.3	257.0	433.2	-	(265.1)	2,564.0
Net written premium	888.5	270.4	558.9	213.0	370.7	-	(22.6)	2,278.9

Gross earned premium	1,170.0	330.9	579.0	228.6	420.4	-	(252.5)	2,476.4
Reinsurance premium ceded	(328.5)	(53.2)	(44.9)	(40.4)	(60.0)	-	234.0	(293.0)
Net earned premium	841.5	277.7	534.1	188.2	360.4	-	(18.5)	2,183.4
Insurance claims and claims settlement expenses	(568.0)	(241.2)	(299.8)	(169.8)	(208.5)	-	180.5	(1,306.8)
Insurance claims and claims settlement expenses recoverable from reinsurers	169.5	45.6	(1.8)	26.0	26.5	-	(182.2)	83.6
Expenses for the acquisition of insurance contracts	(241.4)	(68.2)	(92.7)	(33.9)	(60.3)	-	23.5	(473.0)
Underwriting expenses	(79.8)	(30.2)	(29.7)	(12.0)	(82.6)	-	(6.9)	(241.2)
Result attributable to underwriting	121.8	(16.3)	110.1	(1.5)	35.5	-	(3.6)	246.0
Investment return	53.9	7.2	39.9	3.9	26.5	8.9	(21.8)	118.5
Other operating income	1.4	2.6	1.9	0.1	1.5	2.7	(2.2)	8.0
Other non-underwriting expenses	(21.0)	(2.3)	(5.5)	(2.6)	(8.6)	(79.5)	17.6	(101.9)
Result of operating activities	156.1	(8.8)	146.4	(0.1)	54.9	(67.9)	(10.0)	270.6
Finance costs								(27.0)
Share of profit after tax of associates								3.7
Gain on revaluation of existing investment								11.4
Profit before tax								258.7
Claims ratio	47%	70%	56%	76%	50%			56%
Expense ratio	38%	35%	23%	24%	40%			33%
Combined ratio	85%	105%	79%	100%	90%			89%

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

Included within the gross written premium of Amlin Bermuda is premium ceded from Amlin London, Amlin UK and Amlin Europe amounting to £221.0 million on reinsurance contracts undertaken at commercial rates (2013: £197.8 million).

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	50%	74%	49%	76%	50%	56%
Expense ratio	34%	30%	29%	24%	40%	33%
Combined ratio	84%	104%	78%	100%	90%	89%

Restated 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	269.6	237.8	25.6	18.9	-	(217.0)	524.1
North America	621.5	11.6	203.2	2.3	-	-	-	838.6
Europe	89.9	21.3	40.3	171.7	435.6	-	(1.7)	757.1
Other	234.2	31.5	70.7	11.2	-	-	-	347.6
Gross written premium	1,134.8	334.0	552.0	210.8	454.5	-	(218.7)	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	333.4	560.3	207.1	469.8	-	(216.7)	2,440.6
Reinsurance premium ceded	(351.9)	(58.8)	(53.8)	(40.9)	(65.2)	-	207.4	(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)	(216.9)	(249.4)	(148.2)	(241.0)	-	142.2	(1,153.1)
Insurance claims and claims settlement expenses recoverable from reinsurers	119.7	46.8	1.6	24.3	14.6	-	(147.0)	60.0
Expenses for the acquisition of insurance contracts	(210.5)	(65.8)	(83.5)	(32.8)	(70.8)	-	12.5	(450.9)
Underwriting expenses	(86.0)	(38.7)	(25.5)	(16.5)	(91.2)	-	7.6	(250.3)
Result attributable to underwriting	118.2	-	149.7	(7.0)	16.2	-	6.0	283.1
Investment return	41.0	11.2	51.7	2.3	44.5	24.2	(14.5)	160.4
Other operating income	2.5	0.8	1.0	0.1	1.1	0.2	(1.4)	4.3
Other non-underwriting expenses	(25.9)	(3.7)	(9.4)	(0.9)	(15.7)	(37.1)	(4.3)	(97.0)
Result of operating activities	135.8	8.3	193.0	(5.5)	46.1	(12.7)	(14.2)	350.8
Finance costs								(29.0)
Share of profit after tax of associates								3.9
Profit before tax								325.7
Claims ratio	44%	62%	49%	74%	56%			52%
Expenses ratio	40%	38%	21%	30%	40%			34%
Combined ratio	84%	100%	70%	104%	96%			86%

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

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

Restated Excluding WAQS intra group reinsurance arrangements	Amlin London	Amlin UK	Amlin Bermuda	Amlin Re Europe	Amlin Europe	Total
Claims ratio	47%	65%	40%	74%	56%	52%
Expenses ratio	35%	33%	28%	30%	40%	34%
Combined ratio	82%	98%	68%	104%	96%	86%

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 2014			Year ended 31 December 2013
	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	2,564.0	-	2,564.0	2,467.4	-	2,467.4
Net written premium	2,278.9	17.0	2,295.9	2,107.4	18.2	2,125.6

Gross earned premium	2,476.4	-	2,476.4	2,440.6	-	2,440.6
Reinsurance premium ceded	(293.0)	17.2	(275.8)	(363.2)	17.2	(346.0)
Net earned premium	2,183.4	17.2	2,200.6	2,077.4	17.2	2,094.6
Insurance claims and claims settlement expenses	(1,306.8)	-	(1,306.8)	(1,153.1)	-	(1,153.1)
Insurance claims and claims settlement expenses recoverable from reinsurers	83.6	-	83.6	60.0	-	60.0
Expenses for the acquisition of insurance contracts	(473.0)	-	(473.0)	(450.9)	-	(450.9)
Underwriting expenses	(241.2)	-	(241.2)	(250.3)	-	(250.3)
Result attributable to underwriting	246.0	17.2	263.2	283.1	17.2	300.3
Investment return	118.5	(17.2)	101.3	160.4	(17.2)	143.2
Other operating income	8.0	-	8.0	4.3	-	4.3
Other non-underwriting expenses	(101.9)	-	(101.9)	(97.0)	-	(97.0)
Result of operating activities	270.6	-	270.6	350.8	-	350.8
Finance costs	(27.0)	-	(27.0)	(29.0)	-	(29.0)
Share of profit after tax of associates	3.7	-	3.7	3.9	-	3.9
Gain on revaluation of existing investment	11.4	-	11.4	-	-	-
Profit before tax	258.7	-	258.7	325.7	-	325.7

The reconciling items relate to items of income and expense under the Group's risk transfer contracts with Tramline Re Ltd and Tramline Re II Ltd, the risk periods of which incepted on 1 January 2012 and 1 July 2013 respectively. 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 provided to the chief operating decision maker. 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.

d) Non-current assets by location

The Group's non-current assets, consisting of property and equipment, goodwill and intangible assets, and investments in associates are £310.3 million (2013: £274.2 million) of which £178.3 million (2013: £151.0 million) is located in the UK and £132.0 million (2013: £123.2 million) is located in foreign countries such as Bermuda, the US and Continental Europe.

5. Underwriting activities

a) Net earned premium

	Note	2014 £m	2013 £m
Gross earned premium
Gross written premium	4,13(c)	2,564.0	2,467.4
Change in unearned premium		(87.6)	(26.8)
		2,476.4	2,440.6

Reinsurance premium ceded
Reinsurance premium payable	13(c)	(268.1)	(341.8)
Change in reinsurers' share of unearned premium		(7.7)	(4.2)
		(275.8)	(346.0)
		2,200.6	2,094.6

b) Net insurance claims

	Note	2014 £m	2013 £m
Insurance claims and claims settlement expenses
Current year insurance claims and claims settlement expenses	13(a)	1,387.2	1,303.6
Reduced costs for prior period insurance claims	13(a)	(80.4)	(150.5)
		1,306.8	1,153.1

Insurance claims and claims settlement expenses recoverable from reinsurers
Current year insurance claims and claims settlement expenses recoverable from reinsurers	13(a)	(74.4)	(77.0)
(Increased)/reduced income from prior period insurance claims recoverable from reinsurers	13(a)	(9.2)	17.0
		(83.6)	(60.0)
		1,223.2	1,093.1

6. Investment return

	Note	2014 £m	2013 £m
Investment income
- dividend income		22.9	16.3
- interest income		20.5	27.5
- cash and cash equivalents interest income		1.5	2.9
		44.9	46.7
Net realised gains/(losses)
on assets held for trading
- equity securities		26.0	25.6
- debt securities		50.5	71.9
- property funds		(0.1)	3.6
- derivative instruments		(5.7)	(6.2)
- derivative instruments relating to the Group's contracts with Tramline Re Ltd and Tramline Re II Ltd	4(c)	(17.9)	(15.7)
on assets classified as other than trading
- participation in investment pools		1.7	2.0
		54.5	81.2
Net unrealised gains/(losses)
on assets held for trading
- equity securities		26.0	44.7
- debt securities		(19.2)	(48.9)
- property funds		5.5	0.4
- derivative instruments		(10.0)	19.0
- derivative instruments relating to the Group's contracts with Tramline Re Ltd and Tramline Re II Ltd	4(c)	0.7	(1.5)
on assets classified as other than trading
- other		(1.1)	1.6
		1.9	15.3
		101.3	143.2

Note: Included within debt securities held for trading are realised losses and unrealised gains of £1.7 million and £4.8 million respectively, relating to the investment in the funds managed by Leadenhall Capital Partners LLP (2013: £0.2 million realised gains and £3.9 million unrealised gains).

7. Expenses

a) Expenses for the acquisition of insurance contracts

	Note	2014 £m	2013 £m
Expenses for the acquisition of insurance contracts deferred during the year	13(d)	501.0	458.2
Changes in deferred expenses for the acquisition of insurance contracts		(28.0)	(7.3)
		473.0	450.9

b) Other operating expenses

	2014 £m	2013 £m
Expenses relating to underwriting
Employee expenses, excluding employee incentives	133.5	132.6
Lloyd's expenses	20.2	20.9
Other administrative expenses	83.9	86.3
Underwriting foreign exchange losses	3.6	10.5
	241.2	250.3
Other expenses
Employee expenses, excluding employee incentives	22.4	18.9
Employee incentive and related social security costs	43.7	53.4
Asset management fees	8.9	14.0
Other administrative expenses	20.2	16.1
Non-underwriting foreign exchange losses/(gains)	6.7	(5.4)
	101.9	97.0
	343.1	347.3

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

c) Employee benefit expenses

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

	2014	2013
Senior underwriters	132	135
Other underwriters	274	281
Underwriting support	408	377
Claims staff	108	114
Claims support	262	256
Operational	328	292
Operational support	387	407
	1,899	1,862

The allocation of headcount has been enhanced to align with the presentation of management information. The comparative for 2013 has also been updated to reflect this change.

	2014	2013
By location
UK	1,168	1,123
Continental Europe	634	654
Bermuda	59	51
Singapore	33	30
US	5	4
	1,899	1,862

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

	Note	2014 £m	2013 £m
Wages and salaries		127.2	122.5
Employee incentive and related social security costs		43.7	53.4
Equity-settled share options and awards granted to Directors and employees	7(d)	6.2	5.1
Social security costs		17.2	16.5
Other pension costs	16	14.7	15.0
		209.0	212.5

d) Long-term employee incentive schemes

During the year ended 31 December 2014, 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	2014 £m	2013 £m
Equity-settled share-based payment schemes	7(c)	6.2	5.1
Cash-settled share-based payment schemes		5.3	2.6
Total expense arising from long-term employee incentive schemes		11.5	7.7

i) Equity-settled share-based payment schemes

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 2014	Weighted average exercise price per share (pence)	Number of shares 2013	Weighted average exercise price per share (pence)
Outstanding at 1 January	2,574,934	277	2,676,348	266
Granted during the year	1,103,855	355	506,531	312
Exercised during the year	(640,404)	254	(490,876)	247
Forfeited during the year	(118,613)	289	(117,069)	289
Total shares outstanding at 31 December	2,919,772	311	2,574,934	277
Total shares exercisable at 31 December	536,895	268	610,953	267

The weighted average share price at the date of exercise for share options exercised during the year was 451 pence (2013: 430 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 2014	Weighted average remaining contractual life (years)	Number of outstanding shares under option 2013	Weighted average remaining contractual life (years)
£1.12 - £1.62	62,674	0.25	120,500	1.23
£1.63 - £2.46	-	-	23,145	0.42
£2.47 - £2.93	868,792	1.68	1,423,031	2.28
£2.94 - £3.55	1,988,306	3.06	1,008,258	3.51

Share awards

Details of the Group's share awards are set out in the Directors' Remuneration Report in the Governance section of the Annual Report.

At 31 December 2014, 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 2014	Vesting period	Number of shares under conditional award 2013	Vesting period
LTIP grants	5,154,988	2015 to 2017	5,121,807	2014 to 2016
PSP grants	3,123,994	2015 to 2019	2,736,126	2013 to 2018
SIP grants	2,265,938	2010 to 2017	1,630,581	2010 to 2016
Amlin Special	261,636	2015 to 2019	271,248	2014 to 2016
Group Bonus Scheme DSP	132,149	2017	-	-

LTIP and PSP awards are normally exercisable from three and five years after grant respectively.

Modifications to share-based payment arrangements

There have been no modifications to share-based payment arrangements in 2014.

Options from the ESOT

The trustee of the ESOT held 1,769,796 ordinary shares as at 31 December 2014 (2013: 1,962,534 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 2014, was 478.2 pence per share (2013: 458.9 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.

Fair value of options and awards

At 31 December 2014, the weighted average fair values of options and awards granted during the year were 58.80 pence per option and 233.45 pence per award respectively (2013: 60.57 pence and 157.51 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:

	2014	2013
Weighted average share price on grant (pence)	400.11	377.10
Weighted average exercise price (pence)	306.49	282.61
Expected volatility	30.00%	30.00%
Expected life (years)	1.00 - 5.25	3.00 - 5.25
Risk free rate of return	1.00% - 3.00%	1.00% - 4.50%
Expected dividend yield	5.00% - 7.00%	5.00% - 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.

ii) Cash-settled share-based payment shemes

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 2014 is £6.9 million (2013: £4.8 million) and is recorded in other payables.

e) Directors' remuneration

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

	2014 £m	2013 £m
Remuneration of Executive Directors	3.4	3.6
Remuneration of Non-Executive Directors	0.6	0.6
Amounts (excluding equity-settled share options and awards) receivable under long-term incentive schemes	1.7	2.5
	5.7	6.7
Pension contributions	0.1	0.1
	5.8	6.8

Details of Directors' remuneration, pension benefits and gains on the exercise of share options, 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 a stakeholder defined contribution scheme for two (2013: two) Executive Directors and to a stakeholder defined contribution scheme for one (2013: one) other Executive Director.

f) Finance costs

	2014 £m	2013 £m
Letter of credit commission	1.3	1.8
Revolving credit facility	2.3	3.2
Subordinated debt interest	19.4	19.5
Other similar charges	4.0	4.5
	27.0	29.0

g) Profit before tax

Profit before tax is stated after charging the following amounts:

	Note	2014 £m	2013 £m
Depreciation	14	5.4	7.4
Amortisation	15	10.8	11.2
Operating lease expenditure	20(b)	9.9	9.6
Foreign exchange losses	7(b)	10.3	5.1

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

	2014 £'000	2013 £'000
Audit
Audit of the Group's and Company's annual financial statements	157.5	151.6
Audit of subsidiaries	1,023.8	966.7
	1,181.3	1,118.3
Assurance services
Audit-related assurance services	277.8	286.9
Other assurance services	12.0	19.3
	289.8	306.2
Services relating to taxation
Tax advisory services	3.0	40.0
	3.0	40.0
Other non-audit services
Other services	38.6	202.3
	38.6	202.3
Total fees	1,512.7	1,666.8

8. Tax

	2014 £m	2013 £m
Current tax - current year
Corporate income tax	0.6	(13.7)
Foreign tax	1.6	2.8
	2.2	(10.9)
Current tax - adjustments in respect of previous years
Corporate income tax	(2.0)	0.1
Deferred tax - current year
Origination and reversal of temporary differences	19.3	41.5
Deferred tax - adjustments in respect of previous years
Movements for the year	4.9	1.9
Impact of change in UK tax rate	(2.1)	(5.6)
	2.8	(3.7)
Income tax expense	22.3	27.0

In addition to the above, tax of £1.9 million (2013: £1.8 million charge) has been credited directly to other comprehensive income as follows:

	2014 £m	2013 £m
Deferred tax on defined benefit pension fund actuarial (losses)/gains	(2.4)	2.3
Income tax on items that will not be reclassified to profit or loss	(2.4)	2.3
Current tax on foreign exchange gains/(losses) on translation of foreign operations, net of designated hedges	0.6	(0.5)
Deferred tax charged on other items within the other comprehensive income	(0.1)	-
Income tax on items that may be reclassified subsequently to profit or loss	0.5	(0.5)
Taxes (credited)/charged to other comprehensive income	(1.9)	1.8

In addition to the above, tax of £0.6 million (2013: £0.3 million) has been charged directly to other reserves as follows:

	2014 £m	2013 £m
Deferred tax relating to employee share option schemes	0.6	0.3
Taxes charged to other reserves	0.6	0.3

The cumulative tax in reserves was £30.8 million (2013: £29.5 million), as per note 17(b).

Reconciliation of tax expense

The UK standard rate of corporation tax is 21.5% (2013: 23.25%), whereas the tax charged for the year ended 31 December 2014 as a percentage of profit (2013: profit) before tax is 8.6% (2013: 8.3%). The reasons for this difference are explained below:

	2014 £m	2014 %	2013 £m	2013 %
Profit before tax	258.7		325.7

Taxation on profit on ordinary activities at the standard rate of corporation tax in the UK	55.6	21.5	75.7	23.3
Non-deductible or non-taxable items	(1.8)	(0.7)	(2.9)	(0.9)
Tax rate differences on foreign subsidiaries	(33.9)	(13.1)	(45.0)	(13.8)
Adjustments in respect of previous years	2.9	1.1	2.0	0.6
Irrecoverable foreign tax	1.6	0.6	2.8	0.8
UK deferred tax rate change	(2.1)	(0.8)	(5.6)	(1.7)
Income tax expense	22.3	8.6	27.0	8.3

Deferred tax

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

	Provisions for losses £m	Other provisions £m	Pension provisions £m	Other temporary differences £m	Total £m
At 1 January 2013	28.2	1.5	8.3	(22.2)	15.8
Amounts (charged)/credited to statement of profit or loss	(12.9)	0.8	(1.9)	16.3	2.3
Amounts (charged)/credited to statement of other comprehensive income	-	-	(2.3)	0.5	(1.8)
Amounts charged to statement of changes in equity	-	-	-	(0.3)	(0.3)
Amounts netted off against deferred tax liabilities	-	-	-	(9.0)	(9.0)
Other movements	-	-	-	(0.9)	(0.9)
At 31 December 2013	15.3	2.3	4.1	(15.6)	6.1
Amounts credited/(charged) to statement of profit or loss	1.3	1.3	(0.3)	(4.9)	(2.6)
Amounts credited/(charged) to statement of other comprehensive income	-	-	2.4	(0.5)	1.9
Amounts charged to statement of changes in equity	-	-	-	(0.6)	(0.6)
Amounts netted off against deferred tax liabilities	-	-	-	(1.4)	(1.4)
Other movements	0.2	-	0.1	2.0	2.3
At 31 December 2014	16.8	3.6	6.3	(21.0)	5.7

Deferred tax assets of £3.0 million, £6.4 million and £7.1 million (2013: £2.4 million, £9.4 million and £3.2 million) have been recognised in respect of tax losses arising in Amlin AG (federal taxes only), Amlin Europe N.V. and Amlin plc respectively. These assets have been recognised as management consider it probable that future taxable profits will be available against which the losses can be utilised.

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 2013	(7.2)	13.2	6.8	9.7	5.4	27.9
Amounts charged/(credited) to statement of profit or loss	27.3	(1.9)	(0.3)	(1.3)	16.3	40.1
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	-	(0.6)	-	-	(0.5)	(1.1)
At 31 December 2013	20.1	10.7	6.5	14.0	12.4	63.7
Amounts (credited)/charged to statement of profit or loss	(1.4)	2.8	0.5	(2.1)	19.7	19.5
Opening balances recognised on acquisition of subsidiaries	-	-	-	3.0	-	3.0
Amounts netted off against deferred tax assets	-	-	-	-	(1.4)	(1.4)
Other movements	0.1	-	-	(0.6)	1.4	0.9
At 31 December 2014	18.8	13.5	7.0	14.3	32.1	85.7

The movements disclosed in the tables above have been enhanced to present the impact on individual primary statements. Comparative information has been re-presented accordingly.

A deferred tax liability of £65.7 million (2013: £37.4 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 21.0% was enacted on 2 July 2013 and applies from 1 April 2014. The final rate reduction announced in the March 2013 budget, also enacted on 2 July 2013, will reduce the main rate to 20.0% and is applicable 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 £19.9 million (2013: £21.5 million liability).

The Group is subject to US tax on US underwriting profits generated by Syndicate 2001. No provision has been made in respect of such tax arising in 2014 (2013: £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 2014 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% (2013: nil%). The combined rate of Swiss cantonal and federal taxes, applicable to profits arising from the Swiss operation only, is 21.2% (2013: 21.2%).

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% (2013: 20.0%);

· The Netherlands - 25.0% (2013: 25.0%);

· Bermuda - nil% (2013: nil%); and

· Switzerland - 21.2% (2013: 21.2%).

9. Foreign exchange

a) Net foreign exchange movements

The following exchange movements have been charged directly to other comprehensive income:

	2014 £m	2013 £m
Gains/(losses) on translation of foreign operations:
- Amlin Bermuda	30.8	(17.0)
- RaetsMarine Insurance B.V.	0.4	(0.8)
- Amlin France SAS	0.2	(0.1)
- Amlin Europe N.V.	(8.0)	2.1
- Amlin Re Europe	-	0.1
- Solo Absolute Bonds & Currency Fund	(16.4)	(1.0)
	7.0	(16.7)
(Losses)/gains on translation of intangibles arising from investments in foreign operations	(5.5)	0.2
Gains on financial instruments that hedge investments in foreign operations	1.9	0.5
Foreign exchange gains/(losses) on translation of foreign operations, net of designated hedges	3.4	(16.0)

b) 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
	2014	2013	2014	2013
US dollar	1.65	1.56	1.56	1.66
Canadian dollar	1.82	1.61	1.81	1.76
Euro	1.24	1.18	1.29	1.20
New Zealand dollar	1.99	1.91	1.99	2.01
Japanese yen	174.22	152.80	186.79	174.36

c) 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 major 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 (or suitable equivalent) 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 net assets of the Group entities that have a non-sterling functional currency. At 31 December 2014, the Group was exposed to net investments in foreign operations balances totalling US$1,302.5 million (2013: US$1,343.8 million) and €1,004.0 million (2013: €873.4 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 gains recognised in other comprehensive income for the year ended 31 December 2014 was £1.5 million (2013: £16.5 million loss). This reflects the movement in the US dollar rate from 1.66 at the start of the year to 1.56 at the balance sheet date and the movement in the euro rate from 1.20 at the start of the year to 1.29 at the balance sheet date. In order to mitigate the impact of these currency fluctuations, the Group adopts a policy of hedging approximately 50% (2013: 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$638.0 million (2013: US$702.0 million) and €495.0 million (2013: €397.0 million). The net realised and unrealised gains from hedging recognised in the consolidated statement of other comprehensive income during the year was £1.9 million (2013: £0.5 million gain).

In relation to revaluation of the net investment in foreign operations, if the US$/GBP exchange rates were to improve by 10% at 31 December 2014, this would result in an additional exchange gain of £83.5 million recognised in other comprehensive income. This gain would be offset by a valuation loss of £35.1 million on the designated portion of the hedging instruments. The same exchange rate deterioration would result in an additional £55.2 million exchange loss through other comprehensive income. This loss would be offset by a valuation gain of £10.6 million on the designated portion of the hedging instruments.

If the EUR/GBP exchange rate were to improve by 10% at 31 December 2014, this would result in an additional exchange gain of £53.9 million recognised in other comprehensive income. This gain would be offset by a valuation loss of £7.1 million on the designated portion of the hedging instruments. The same exchange rate deterioration would result in an additional £77.5 million exchange loss through other comprehensive income. This loss would be offset by a valuation gain of £28.4 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 primarily 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.

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 above.

	31 December 2014
Currency risk	Sterling £m	US$ £m	CAN$ £m	Euro £m	NZ$ £m	JPY £m	Total £m
Total assets	1,592.4	2,652.1	136.3	2,159.1	97.4	38.4	6,675.7
Total liabilities	1,356.9	1,967.5	104.4	1,343.0	98.5	19.5	4,889.8
Net assets	235.5	684.6	31.9	816.1	(1.1)	18.9	1,785.9

	31 December 2013
Currency risk	Sterling £m	US$ £m	CAN$ £m	Euro £m	NZ$ £m	JPY £m	Total £m
Total assets	1,738.6	2,382.8	132.3	2,099.4	165.1	54.9	6,573.1
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

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 for the year ended 31 December 2014:

	31 December 2014
Currency	10% improvement £m	10% deterioration £m
US dollars	14.1	(11.5)
Canadian dollars	6.6	(5.4)
Euro	(0.2)	0.2
New Zealand dollars	5.0	(4.1)
Japanese yen	0.7	(0.6)
	26.2	(21.4)

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 2014, the investment managers held some forward foreign exchange contracts in their portfolios to hedge non-base currency investments.

10. Dividends

The amounts recognised as distributions to equity holders are as follows:

Group	2014 £m	2013 £m
Final dividend for the year ended:
- 31 December 2013 of 18.2 pence per ordinary share	90.8	-
- 31 December 2012 of 16.5 pence per ordinary share	-	82.4
Interim dividend for the year ended:
- 31 December 2014 of 8.1 pence per ordinary share	40.4	-
- 31 December 2013 of 7.8 pence per ordinary share	-	38.9
- 31 December 2012 of Amlin Plus Limited to non-controlling interests of 12.0 pence per ordinary share	-	0.1
	131.2	121.4

A final ordinary dividend of 18.9 pence per ordinary share for 2014, amounting to £94.4 million, payable in cash, and a special dividend of 15.0 pence per ordinary share, amounting to £74.9 million, payable in cash, were agreed by the Board on 27 February 2015, subject to shareholder approval at the AGM on 21 May 2015, and have not been included as a liability as at 31 December 2014.

11. Earnings per share

Basic and diluted earnings per share are as follows:

	2014	2013
Profit attributable to owners of the Parent Company	£236.5m	£298.7m
Weighted average number of shares in issue	498.9m	498.1m
Dilutive shares	8.6m	7.1m
Adjusted average number of shares in issue	507.5m	505.2m
Basic earnings per share	47.4p	60.0p
Diluted earnings per share	46.6p	59.1p

12. Financial assets and liabilities

a) Cash and cash equivalents

	2014 £m	2013 £m
Cash and cash in hand	168.7	125.8
Short-term deposits	36.1	38.7
	204.8	164.5

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.

b) Net financial investments

	At valuation 2014 £m	At valuation 2013 £m	At cost 2014 £m	At cost 2013 £m
Assets
Financial assets held for trading at fair value through profit or loss
Shares and other variable yield securities	652.4	515.9	562.8	452.4
Debt and other fixed income securities	2,978.5	3,128.2	2,853.6	3,069.6
Property funds	255.5	181.0	258.8	185.7
Derivative instruments	32.5	18.9	-	0.6
Other financial assets at fair value through profit or loss
Participation in investment pools	280.6	379.2	280.6	379.2
Deposits with credit institutions	176.7	119.4	176.7	119.4
Other	1.4	2.6	1.4	1.1
Available-for-sale financial assets
Unlisted equities	6.6	6.7	6.7	6.7
Other
Derivative instruments in designated hedge accounting relationships	6.1	16.9	-	-
Total financial assets	4,390.3	4,368.8	4,140.6	4,214.7

Liabilities
Financial liabilities held for trading at fair value through profit or loss
Derivative instruments	(21.6)	(4.7)	-	(0.6)
Other
Derivative instruments in designated hedge accounting relationships	(7.0)	-	-	-
Total financial liabilities	(28.6)	(4.7)	-	(0.6)
Net financial assets	4,361.7	4,364.1	4,140.6	4,214.1

Debt and other fixed income securities include pooled funds, investing in bonds and other fixed income securities. The valuation of these funds is £1,871.4 million (2013: £1,820.8 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.

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

	2014 £m	2013 £m
At 1 January	4,364.1	4,199.3
Foreign exchange gains/(losses)	8.9	(28.9)
Net (sales)/purchases	(71.5)	92.1
Net realised gains on assets held for trading or other than trading	54.5	81.2
Net unrealised gains on assets held for trading or other than trading	1.9	15.3
Net unrealised losses on assets designated as available-for-sale	(0.1)	-
Acquisition through business combination	-	0.1
Net realised and unrealised gains on derivative instruments in designated hedge accounting relationships	3.9	5.0
At 31 December	4,361.7	4,364.1

c) Other loans and receivables

	2014 £m	2013 £m
Other receivables	50.5	63.8
Prepayments and other accrued income	35.0	24.6
	85.5	88.4

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

	2014 £m	2013 £m
Current portion	84.4	84.7
Non-current portion	1.1	3.7
	85.5	88.4

Other receivables comprise principally of amounts receivable from investment managers for financial investments sold, input VAT and other sundry receivables.

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

d) Other payables

	2014 £m	2013 £m
Accrued expenses and deferred income	112.5	92.7
Other liabilities	56.5	36.2
Social security and other tax payables	9.6	8.6
	178.6	137.5

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

	2014 £m	2013 £m
Current portion	155.4	122.2
Non-current portion	23.2	15.3
	178.6	137.5

Other liabilities comprise principally of amounts payable to investment managers for financial investments purchased, collateral repayable on derivative contracts and other sundry payables.

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

e) Borrowings

	2014 £m	2013 £m
Subordinated debt	261.5	289.5
Revolving credit facility	-	101.4
Other	0.6	0.7
	262.1	391.6

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

	2014 £m	2013 £m
Current portion	32.2	101.6
Non-current portion	229.9	290.0
	262.1	391.6

Details of the Group's two 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 %
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 Group has the option to redeem the subordinated debt 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 Group has contractually agreed to redeem the US$50.0 million subordinated debt in March 2015.

The Directors' estimation of the fair value of the Group's subordinated debt is £287.0 million (2013: £326.0 million) and £nil million (2013: £98.3 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 1.2% (2013: 1.9%).

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 Ltd and Amlin (Overseas Holdings) Ltd. The secured LOC is secured by a fixed charge over a portfolio of assets managed by Insight Investment Management (Global) Ltd with State Street Bank and Trust Company as custodian. As at 31 December 2014, the revolving credit facility was not drawn down (2013: £101.4 million).

In addition to the £100.0 million net repayment of the multicurrency revolving credit facility during the year, a redemption of $50.0 million (£31.8 million) in subordinated debt was made in November 2014.

Amlin AG has a LOC facility US$280.0 million (2013: 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. One further LOC is arranged for NZ$75.0 million (2013: NZ$41.5 million; AU$16.2 million) and is secured by time deposits. As at 31 December 2014, US$216.9 million of LOC were issued (2013: US$268.0 million). The total value of restricted assets as at 31 December 2014 was US$226.0 million (2013: US$286.8 million).

Amlin Europe N.V. has a credit facility with ABN AMRO N.V. as arranger. The facility provides a daily revocable overdraft of up to €5.0 million (2013: €5.0 million), a guarantee facility to a third party of up to €10.0 million (2013: €10.0 million) and a guarantee/standby LOC for up to the Euro equivalent of £22.5 million (2013: £22.5 million).

At 31 December 2014, €40.1 million of guarantees were issued (2013: €25.1 million); €17.8 million (2013: €4.3 million) from the guarantee facility and €22.3 million (2013: €20.8 million) from the guarantee/standby LOC. There are no restricted assets to secure the facility. The amount drawn on the guarantee facility exceeded the facility granted. However, this was in agreement with the lender and a new facility limit for €30.0 million (replacing the previous facility of €10.0 million) was signed on 6 February 2015.

f) Fair value hierarchy

i) 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.

There were no changes to the valuation techniques during the year.

Shares and other variable yield securities

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

Available-for-sale unlisted equities represent the Group's investments in broker businesses and do not have a quoted price in an active market. As such they are valued using a discounted cash flow of future income method adjusted for management expectation of market exit prices which is largely unobservable. Hence, they have been included in Level 3 with fair value movements being recognised in other comprehensive income.

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.

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 risk transfer 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.

In 2013, the options relating to Leadenhall Capital Partners LLP, which allowed either the Group or partnership management to purchase the remaining shares and voting rights, were also classified as Level 3. These options expired during 2014. The valuation of these options was judgemental as no liquid market existed and estimation of future cash flows was highly subjective. Therefore both a forecast cash flow model and limited observable market data were used in 2013.

ii) Net financial investments by fair value grouping

	Fair value hierarchy				Fair value hierarchy
	Level 1 £m	Level 2 £m	Level 3 £m	Total 2014 £m	Level 1 £m	Level 2 £m	Level 3 £m	Total 2013 £m
Assets
Financial assets held for trading at fair value through profit or loss
Shares and other variable yield securities¹	652.4	-	-	652.4	515.9	-	-	515.9
Debt and other fixed income securities²	2,722.1	256.4	-	2,978.5	2,602.6	525.6	-	3,128.2
Property funds	-	-	255.5	255.5	-	-	181.0	181.0
Derivative instruments	-	32.5	-	32.5	-	18.9	-	18.9
Other financial assets at fair value through profit or loss
Participation in investment pools	280.6	-	-	280.6	379.2	-	-	379.2
Deposits with credit institutions	176.7	-	-	176.7	119.4	-	-	119.4
Other	1.3	-	0.1	1.4	0.6	-	2.0	2.6
Available-for-sale financial assets
Unlisted equities	-	-	6.6	6.6	-	-	6.7	6.7
Other
Derivative instruments in designated hedge accounting relationships	-	6.1	-	6.1	-	16.9	-	16.9
Total assets	3,833.1	295.0	262.2	4,390.3	3,617.7	561.4	189.7	4,368.8

Liabilities
Financial liabilities held for trading at fair value through profit or loss
Derivative instruments	-	(21.6)	-	(21.6)	-	(4.6)	(0.1)	(4.7)
Other
Derivative instruments in designated hedge accounting relationships	-	(7.0)	-	(7.0)	-	-	-	-
Total liabilities	-	(28.6)	-	(28.6)	-	(4.6)	(0.1)	(4.7)

Net financial investments	3,833.1	266.4	262.2	4,361.7	3,617.7	556.8	189.6	4,364.1

Notes:

1. Comparative hierarchy information for Shares and other variable yield securities have been represented to exclude accrued income as this is shown separately within Other loans and receivables. The amendments amounted to £0.6 million for the year ending 31 December 2013.

2. Comparative hierarchy information for Debt and other fixed income securities have been represented to exclude accrued income as this is shown separately within Other loans and receivables. The amendments amounted to £5.3 million for the year ending 31 December 2013.

The table above excludes the Group's holdings of cash and cash equivalents of £204.8 million (2013: £164.5 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 12(e). These are categorised as Level 3 in the fair value hierarchy.

The table also excludes the Group's loans and receivables and other payables, included in notes 12(c) and 12(d) respectively, which are carried at amounts that approximate to the fair value and are categorised as Level 3 in the fair value hierarchy.

The majority of the Group's investments are valued based on quoted market information or other observable market data. The Group holds 6.0% (2013: 4.3%) 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 might result in a higher or lower fair value measurement, though this is unlikely to be significant.

iii) Transfers between levels of 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 Levels 1, 2, and 3 during the year or in the comparative reporting year.

The table below analyses the movements in assets and liabilities classified as Level 3 investments during 2014:

	Debt and other fixed income securities £m	Property funds £m	Derivative instruments £m	Other £m	Unlisted equities £m	Total £m
At 1 January 2014	-	181.0	(0.1)	2.0	6.7	189.6
Total net gains/(losses) recognised in investment return in profit or loss	-	5.4	(17.2)	(1.2)	(0.1)	(13.1)
Sales	-	(20.2)	-	-	-	(20.2)
Purchases	-	86.8	-	-	-	86.8
Settlements	-	(1.5)	16.9	-	-	15.4
Foreign exchange gains/(losses)	-	4.0	0.4	(0.7)	-	3.7
At 31 December 2014	-	255.5	-	0.1	6.6	262.2
Total net unrealised gains for the year recognised in investment return in profit or loss for assets and liabilities held at the end of the reporting year						2.4

	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 net unrealised losses for the year recognised in investment return in profit or loss for assets and liabilities held at the end of the reporting year						1.1

g) Financial 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 Amlin Investment Management Committee comprises the Chief Executive, Chief Finance & Operations Officer 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. Amlin 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 Amlin Investments using a market-recognised third-party risk model. Risk reporting is generated by Amlin Investments and an independent review conducted by the Amlin Risk function. These reports are then circulated to the Amlin Investment Management Committee, the Executive Underwriting & Risk committee and the Risk & Solvency 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.

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 Amlin 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.

Notes:

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 funds under management with each manager are shown below:

	31 December 2014		31 December 2013
Manager	Total assets £m	Total %	Total assets £m	Total %
Segregated funds
Aberdeen Asset Managers Ltd	133.2	3.0	257.6	5.8
Artemis Investment Management LLP	370.4	8.3	327.3	7.4
Barclays Bank plc	26.3	0.6	22.6	0.5
Bank of Butterfield	12.9	0.3	12.0	0.3
CBRE Global Collective Investors (UK) Ltd	134.4	3.0	85.0	1.9
Fiera Capital Corporation (Formerly Union Bank of Switzerland)	72.3	1.6	-	-
Insight Investment Management (Global) Ltd	112.3	2.5	228.8	5.2
Lloyds Bank plc	-	-	14.3	0.3
Townsend Group Europe Ltd	129.3	2.9	109.7	2.5
Veritas Asset Management LLP	332.2	7.5	227.3	5.1
Wellington Management International Ltd	361.3	8.1	407.4	9.2
Pooled vehicles - liquidity funds
BlackRock Investment Management (UK) Ltd	126.4	2.8	102.8	2.3
Citibank	0.4	-	0.4	-
Goldman Sachs Asset Management International	3.0	0.1	2.9	0.1
HSBC Global Asset Management (France)	39.8	0.9	23.9	0.5
JP Morgan Asset Management	-	-	120.0	2.7
Western Asset Management Company	-	-	0.1	-
Pooled vehicles - bonds and LIBOR plus funds
Bluebay Asset Management LLP	342.0	7.7	330.9	7.6
Goldman Sachs Asset Management International	571.3	12.8	547.0	12.4
H20 AM LLP	584.3	13.2	455.4	10.3
Insight Investment Management (Global) Ltd	304.7	6.8	71.6	1.6
PIMCO Global Advisers (Ireland) Ltd	350.0	7.9	439.3	9.9
Wellington Management International Ltd	235.5	5.3	369.8	8.4
Pooled vehicles - insurance linked securities
Leadenhall Capital Partners LLP	63.7	1.4	62.2	1.4
Commingled funds
Corporation of Lloyd's Treasury Services	111.6	2.5	140.6	3.2
Fiera Capital Corporation (formerly Union Bank of Switzerland)	37.1	0.8	60.8	1.4
	4,454.4	100.0	4,419.7	100.0

Note: The table above excludes the Group's directly held securities of £14.4 million (2013: £29.4 million) comprising insurance linked securities £0.7 million (2013: £5.0 million), unlisted equities £5.9 million (2013: £6.0 million) and other liquid investments £7.8 million (2013: £18.4 million). The table also excludes £3.1 million unrealised losses (2013: £10.6 million unrealised gains) accruing to a series of foreign exchange contracts placed on behalf of the Group to hedge portfolio currency exposures.

Asset allocation

The total value of investments in the following tables is reconciled to note 12(b), financial assets and financial liabilities, as follows:

	2014 £m	2013 £m
Net financial investments per note 12(b)	4,361.7	4,364.1

Assets/(liabilities) shown separately in the notes to the financial statements:
Accrued income	6.3	5.9
Net unsettled (payables)/ receivables for investments (purchased)/sold	(7.1)	32.0
Cash funds held by financial institutions	112.2	59.1

Assets not analysed in the investment asset allocation tables:
Liquid investments	(2.2)	(3.2)
Unlisted equities	(0.7)	(0.7)
Margin and collateral relating to derivative instruments	(4.5)	2.5
Total investments in asset allocation tables below	4,465.7	4,459.7

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

	31 December 2014				31 December 2013
	Underwriting assets £m	Capital assets £m	Total assets £m	Total %	Underwriting assets £m	Capital assets £m	Total assets £m	Total %
Global equities	4.0	654.7	658.7	14.8	-	522.4	522.4	11.7
Bonds
Government securities	667.6	20.6	688.2	15.4	639.1	25.7	664.8	14.9
Government agencies/guaranteed bonds	27.4	-	27.4	0.6	45.6	-	45.6	1.1
Asset backed securities	8.9	-	8.9	0.2	90.2	-	90.2	2.0
Mortgage backed securities - Prime	56.5	-	56.5	1.3	101.1	-	101.1	2.3
Corporate bonds	105.0	-	105.0	2.3	226.3	-	226.3	5.1
Pooled vehicles	1,273.7	597.7	1,871.4	41.9	1,114.4	706.4	1,820.8	40.7
Insurance linked securities	0.7	-	0.7	-	5.0	-	5.0	0.1
	2,139.8	618.3	2,758.1	61.7	2,221.7	732.1	2,953.8	66.2
Property funds	-	255.5	255.5	5.7	-	181.0	181.0	4.1
Other liquid investments
Liquidity funds and other liquid investments	592.4	201.0	793.4	17.8	499.0	303.5	802.5	18.0
	2,736.2	1,729.5	4,465.7	100.0	2,720.7	1,739.0	4,459.7	100.0

Pooled vehicles held are represented by 33.4% government/agency bonds (2013: 23.4%), 39.3% corporate bonds (2013: 26.0%), 10.4% mortgage backed and asset backed securities (2013: 19.9%), 3.4% insurance linked securities (2013: 3.5%) and 13.5% other liquid investments (2013: 27.2%).

The industry and geographical splits were as follows:

	31 December 2014			31 December 2013
Industry	Corporate bonds %	Global equities %	Total %	Corporate bonds %	Global equities %	Total %
Oil & gas	4.1	2.7	2.9	7.6	7.8	7.7
Basic materials	0.9	4.1	3.7	1.0	2.7	2.2
Industrials	3.6	14.1	12.6	8.6	13.4	12.0
Consumer goods & services	10.8	18.0	17.0	10.4	22.0	18.4
Healthcare	0.4	23.1	20.0	6.9	18.7	15.1
Government guaranteed	1.1	-	0.1	0.2	-	0.1
Telecommunications	3.0	8.6	7.8	5.2	9.2	8.0
Utilities	3.0	1.0	1.2	5.4	1.1	2.4
Financials	71.0	18.7	26.0	50.5	12.3	23.9
Technology	2.1	9.7	8.7	4.2	12.8	10.2
	100.0	100.0	100.0	100.0	100.0	100.0

Note: The table above excludes government bonds and pooled vehicles but includes £1.2 million (2013: £1.2 million) of corporate bonds with government guarantees.

	31 December 2014			31 December 2013
Region	Bonds %	Global equities %	Total %	Bonds %	Global equities %	Total %
UK	2.0	10.7	5.7	1.5	13.6	5.4
US and Canada	68.3	50.2	60.6	61.6	45.0	56.4
Europe (excluding UK)	23.5	17.6	21.0	27.9	19.3	25.1
Far East	5.6	18.0	10.9	6.8	17.0	10.0
Emerging markets	0.6	3.5	1.8	2.2	5.1	3.1
	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.

h) Market risk

Market risk concerns the risks associated with valuation, interest rates, liquidity and counterparty credit. Foreign exchange risk is described in note 9(c).

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 2014, 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 12(f).

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 £6.6 million gain/loss (2013: £5.2 million). Sensitivities in relation to other risks are considered in the following pages and 9(c).

Interest rate risk

Investors' expectations for interest rates will impact bond yields¹. 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 duration². 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 2014 are shown below.

	31 December 2014			31 December 2013
	Underwriting assets £m	Capital assets £m	Total £m	Underwriting assets £m	Capital assets £m	Total £m
Less than 1 year	60.4	0.9	61.3	106.5	11.4	117.9
1-2 years	238.0	-	238.0	309.9	1.4	311.3
2-3 years	227.3	-	227.3	302.7	1.9	304.6
3-4 years	95.3	2.7	98.0	134.5	1.0	135.5
4-5 years	83.6	-	83.6	75.6	-	75.6
Over 5 years	161.5	17.0	178.5	178.1	10.0	188.1
	866.1	20.6	886.7	1,107.3	25.7	1,133.0

Note: The table above excludes pooled vehicles of £1,871.4 million (2013: £1,820.8 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 2014 were as follows:

	31 December 2014		31 December 2013
Underwriting assets/liabilities	Assets Years	Liabilities Years	Assets Years	Liabilities Years
Sterling	0.5	4.1	(0.3)	4.1
US dollars	0.1	2.5	0.7	2.5
Euro	0.1	3.4	0.2	3.4
Canadian dollars	1.0	4.0	1.0	4.0

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 %	Net (reduction)/ increase in value £m
100	(0.9)	(2.0)	(0.7)	(0.9)	1.4	1.4	(0.2)	(0.4)	(0.4)	(0.3)	0.1	(24)
75	(0.7)	(1.5)	(0.5)	(0.7)	1.0	1.1	(0.1)	(0.3)	(0.3)	(0.2)	0.1	(18)
50	(0.5)	(1.1)	(0.3)	(0.4)	0.7	0.7	(0.1)	(0.2)	(0.2)	(0.2)	-	(12)
25	(0.2)	(0.6)	(0.2)	(0.2)	0.3	0.4	(0.1)	(0.1)	(0.1)	(0.1)	-	(6)
- 25	0.2	0.5	0.2	0.2	(0.4)	(0.4)	0.1	0.1	0.1	0.1	-	5
- 50	0.3	0.9	0.3	0.5	(0.7)	(0.7)	0.1	0.2	0.2	0.1	-	11
- 75	0.5	1.4	0.5	0.7	(1.1)	(1.1)	0.2	0.3	0.3	0.2	(0.1)	16
- 100	0.7	1.9	0.7	0.9	(1.4)	(1.4)	0.2	0.3	0.4	0.3	(0.1)	22

Note: The table above includes pooled vehicles.

Notes:

1. 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.

2. 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.

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 2014:

	Contractual cash flows (undiscounted)
31 December 2014 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	658.2	0.5	-	-	-	658.7
Debt and other fixed income securities	1,871.4	144.8	396.0	235.7	203.8	2,758.1
Property funds	255.5	-	-	-	-	255.5
Liquidity funds and other liquid investments	784.5	-	-	-	-	784.5
Derivative financial instruments, net	(1.3)	10.2	-	-	-	8.9
Total	3,568.3	155.5	396.0	235.7	203.8	4,465.7

	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	0.1	1,109.1	1,019.9	388.6	429.9	2,928.2
Less reinsurers' share of outstanding claims	-	(117.3)	(109.8)	(42.4)	(38.6)	(305.9)
Total	0.1	991.8	910.1	346.2	386.3	2,622.3
Difference in contractual cash flows	3,568.2	(836.3)	(514.1)	(110.5)	(182.5)	1,843.4

Note: Debt and other fixed income securities include pooled vehicles of £1,871.4 million (2013: £1,820.8 million) which have no stated maturity.

	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 securities	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

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 12(e). 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 12(d), 12(e) and 13(f).

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 12(j). 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 2014 of the exposure of the bond portfolio, liquidity funds and insurance and reinsurance receivables by credit quality¹.

31 December 2014	Debt securities £m	%	Liquidity funds £m	%	Insurance and reinsurance receivables² £m	%	Reinsurers' share of outstanding claims £m	%
AAA	582.3	21.1	272.0	100.0	-	-	1.9	0.6
AA	778.5	28.3	-	-	26.0	2.5	103.2	33.8
A	1,161.6	42.1	-	-	41.5	4.0	174.1	56.9
BBB	111.2	4.0	-	-	-	-	0.7	0.2
Other	124.5	4.5	-	-	979.4	93.5	26.0	8.5
	2,758.1	100.0	272.0	100.0	1,046.9	100.0	305.9	100.0

31 December 2013	Debt securities £m	%	Liquidity funds £m	%	Insurance and reinsurance receivables £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

Notes:

1. 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.

2. Insurance and reinsurance receivables includes £748.2 million (2013: £580.7 million) of premium receivable from policyholders and £231.2 million (2013: £314.9 million) of premium receivable from intermediaries that are not rated.

i) Insurance and reinsurance

The table above 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 2014, 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. 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 12(j). At 31 December 2014, the Group held collateral of £476.8 million (2013: £436.0 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 £3.5 million (2013: £3.9 million). The details of overdue reinsurance assets and insurance receivables are provided in notes 13(a) and 13(e).

ii) 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. No bonds held at 31 December 2014 were subject to downgrades during the year (2013: £0.6 million).

The Group's largest non-government counterparty as at 31 December 2014 has an A rating. The investment held with this counterparty is valued at £98.2 million (2013: £72.3million) at 31 December 2014 and comprises solely liquid funds.

i) 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 consolidated 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.

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

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

31 December 2014	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
31 December 2014	Gross amounts of recognised financial assets £m			Financial instruments £m	Cash collateral received £m	Net amount £m
Derivative instruments held for trading	1,575.2	(1,542.7)	32.5	-	(19.9)	12.6
Derivative instruments in designated hedge accounting relationships	78.4	(72.3)	6.1	-	(2.1)	4.0
	1,653.6	(1,615.0)	38.6	-	(22.0)	16.6

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
31 December 2013	Gross amounts of recognised financial assets £m			Financial instruments £m	Cash collateral received £m	Net amount £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

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

31 December 2014	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
31 December 2014	Gross amounts of recognised financial liabilities £m			Financial instruments £m	Cash collateral pledged £m	Net amount £m
Derivative instruments held for trading	1,564.3	(1,542.7)	21.6	-	(8.4)	13.2
Derivative instruments in designated hedge accounting relationships	79.3	(72.3)	7.0	-	(5.0)	2.0
	1,643.6	(1,615.0)	28.6	-	(13.4)	15.2

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
31 December 2013	Gross amounts of recognised financial liabilities £m			Financial instruments £m	Cash collateral pledged £m	Net amount £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

j) Restricted funds held/placed by the Group

At 31 December 2014, 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 £3,271.3 million (2013: £3,100.5 million), offset by gross liabilities of £2,703.7 million (2013: £2,557.0 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. The Funds at Lloyd's, as set out in note 2, represent the restricted capital for regulatory purposes. Furthermore, £17.7 million (2013: £15.4 million) of Amlin Singapore Pte Ltd'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 2014, £145.0 million (2013: £173.1 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 12(e). At 31 December 2014, Syndicate 2001 recognised £0.7 million (2013: £0.7 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 2014, included in other receivables and other payables are £8.6 million (2013: £4.7 million) margins and collaterals pledged and £13.0 million (2013: £16.4 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 £nil (2013: £26.6 million).

Reinsurance collateral received

Collateral of £304.3 million (2013: £259.8 million) is held in third party trust funds to guarantee Syndicate 2001 against reinsurance counterparties. Furthermore, collateral of £151.7 million (2013: £137.6 million) and £20.8 million (2013: £38.6 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 2014, £0.7 million (2013: £3.5 million) of the funds placed in trust by counterparties of Amlin Bermuda were related to specific reinsurance assets.

Insurance collateral placed

Syndicate 2001 holds £367.1 million (2013: £374.6 million) of collateral in a US trust fund to meet US regulatory requirements, which are recognised as an asset to the Group. As part of the quarterly reserving process these funds can be released to match paid claims. Amlin Europe N.V. has £32.7 million (2013: £20.9 million) of bank guarantees in place to cover insurance counterparties.

Funds withheld as premium/claim deposits

At 31 December 2014, the Group had net funds of £23.2 million (2013: £46.3 million) placed as claim deposits and net £0.6 million (2013: £nil) premium deposits placed with/receivable from external brokers. Amlin Re Europe and Amlin Bermuda have placed a further £34.0 million (2013: £16.3 million) and £2.5 million (2013: £2.1 million) respectively into pledge accounts to collateralise against losses due to reinsurance cedants.

Funds in escrow

At 31 December 2014, the Group holds £14.2 million (2013: £14.1 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 16(a).

13. Insurance liabilities and reinsurance assets

a) Net outstanding claims

		2014			2013
Outstanding claims	Note	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
At 1 January		2,897.1	(343.1)	2,554.0	3,083.5	(478.6)	2,604.9

Claims incurred during the current year	4(a),5(b)	1,387.2	(74.4)	1,312.8	1,303.6	(77.0)	1,226.6
Movements arising from prior year claims	4(a),5(b)	(80.4)	(9.2)	(89.6)	(150.5)	17.0	(133.5)
		1,306.8	(83.6)	1,223.2	1,153.1	(60.0)	1,093.1

Claims paid during the year		(1,288.7)	133.3	(1,155.4)	(1,330.2)	183.5	(1,146.7)
Accretion of fair value adjustment		3.8	(0.6)	3.2	4.7	(0.8)	3.9
Other movements		-	-	-	-	(0.5)	(0.5)
Exchange adjustments		9.2	(11.9)	(2.7)	(14.0)	13.3	(0.7)
At 31 December		2,928.2	(305.9)	2,622.3	2,897.1	(343.1)	2,554.0

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.

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. The carrying value at 31 December 2014 of the reduction was £14.1 million and £2.3 million (2013: £19.2 million and £3.1 million) to outstanding claims and reinsurers' share of outstanding claims respectively.

Further information on the calculation of outstanding claims and the risks associated with them is provided in notes 13(i) and 13(g).

Outstanding claims are further analysed between notified outstanding claims and claims incurred but not reported below:

	2014			2013
Outstanding claims	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
Notified outstanding claims	2,068.0	(254.9)	1,813.1	2,125.6	(291.0)	1,834.6
Claims incurred but not reported	860.2	(51.0)	809.2	771.5	(52.1)	719.4
	2,928.2	(305.9)	2,622.3	2,897.1	(343.1)	2,554.0

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

	2014			2013
Outstanding claims	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
Current portion	1,108.7	(118.2)	990.5	1,082.5	(141.5)	941.0
Non-current portion	1,819.5	(187.7)	1,631.8	1,814.6	(201.6)	1,613.0
	2,928.2	(305.9)	2,622.3	2,897.1	(343.1)	2,554.0

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

	2014 £m	2013 £m
Reinsurers' share of outstanding claims	(324.3)	(359.0)
Less provision for impairment of receivables from reinsurers	18.4	15.9
	(305.9)	(343.1)

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 12(h).

As at 31 December 2014 there were £1.7 million (2013: £nil) reinsurers' share of outstanding claims greater than three months overdue. The Group holds collateral of £26.2 million (2013: £64.6 million) in relation to reinsurers' share of outstanding claims. Details are included in note 12(j).

b) 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 average 2014 exchange rates to aid comparability.

Group (excluding Amlin Europe) Gross basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	1,098.9	1,255.7	1,200.4	1,176.1	1,351.1	1,448.6	1,714.5	1,910.7	2,057.9	2,229.4
Current gross earned premium	1,098.9	1,255.7	1,200.4	1,176.1	1,351.1	1,448.6	1,708.6	1,908.0	1,977.8	1,205.2
Estimate of cumulative claims at end of underwriting year	1,007.8	604.8	635.6	890.5	682.5	883.4	1,157.6	1,085.9	1,122.4	1,236.3
One year later	1,043.3	498.9	558.5	752.2	649.6	1,233.2	1,079.0	949.4	1,066.4
Two years later	1,008.5	475.9	510.6	721.9	612.6	1,211.9	1,028.2	918.5
Three years later	974.7	450.3	496.0	715.1	604.0	1,212.9	1,049.1
Four years later	957.8	439.1	484.4	711.1	594.4	1,215.1
Five years later	937.3	433.7	479.3	708.6	590.1
Six years later	933.0	428.5	467.2	707.1
Seven years later	916.5	416.1	464.4
Eight years later	919.9	420.2
Nine years later	920.0
Cumulative payments	903.5	399.4	442.6	662.8	509.4	1,021.2	791.5	591.4	504.2	139.2
Estimated balance to pay	16.5	20.8	21.8	44.3	80.7	193.9	257.6	327.1	562.2	1,097.1
Net basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	618.2	549.9	569.6	731.8	612.8	791.3	979.3	980.8	1,020.5	1,135.4
One year later	604.5	446.3	504.5	625.2	578.9	1,043.7	929.3	881.3	976.7
Two years later	584.0	433.2	460.4	591.0	550.5	1,033.3	885.9	858.1
Three years later	555.8	409.8	447.6	587.7	540.1	1,025.8	897.2
Four years later	543.1	398.7	437.2	580.9	528.9	1,029.7
Five years later	522.6	393.6	429.4	577.1	528.3
Six years later	518.2	389.4	420.7	574.6
Seven years later	507.9	376.4	418.8
Eight years later	512.4	380.2
Nine years later	512.6
Cumulative payments	498.2	363.2	402.4	543.3	469.1	864.8	657.8	576.8	480.8	139.1
Estimated balance to pay	14.4	17.0	16.4	31.3	59.2	164.9	239.4	281.3	495.9	996.3

										Total £m
Net claims reserve (strengthen)/release	(0.2)	(3.8)	1.9	2.5	0.6	(3.9)	(11.3)	23.2	43.8	52.8

The Group's net aggregate reserve releases from all prior years amounted to £89.6 million (2013: £133.5 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 £52.8 million release in reserves stated in the claims development table above because:

· the table is on an underwriting year basis and the surpluses in this narrative are on an annually accounted basis;

· the table excludes any net aggregate reserve releases from 2004 and prior years; and

· the table excludes Amlin Europe, which is disclosed on an accident year basis and for which net reserve releases are £56.3 million. The Amlin Europe table also excludes any net aggregate reserve releases from 2004 and prior years.

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

Amlin London Gross basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	926.9	960.3	880.3	797.7	892.5	887.9	987.1	1,069.1	1,140.9	1,226.7
Current gross earned premium	926.9	960.3	880.3	797.7	892.5	887.9	987.1	1,069.1	1,091.8	628.7
Estimate of cumulative claims at end of underwriting year	892.7	457.7	462.7	618.9	447.5	531.7	647.6	603.7	592.5	644.4
One year later	931.5	367.8	402.7	512.9	418.4	724.3	599.1	528.8	556.0
Two years later	905.1	344.6	362.0	471.3	370.4	693.5	556.3	503.9
Three years later	885.0	329.7	348.4	467.6	365.6	695.1	566.8
Four years later	868.0	321.4	340.4	465.0	355.7	686.4
Five years later	857.3	315.0	337.6	458.8	353.4
Six years later	849.8	310.8	334.8	460.0
Seven years later	837.8	306.2	331.0
Eight years later	841.9	306.2
Nine years later	841.8
Cumulative payments	827.9	295.7	319.3	437.4	300.0	590.2	442.3	334.6	271.9	82.3
Estimated balance to pay	13.9	10.5	11.7	22.6	53.4	96.2	124.5	169.3	284.1	562.1

Net basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	514.1	410.9	403.5	474.1	384.7	447.9	501.4	522.3	520.0	568.8
One year later	503.1	323.4	359.3	399.6	356.9	574.3	480.1	480.7	496.7
Two years later	486.6	308.3	322.8	354.9	316.6	548.2	441.0	460.9
Three years later	467.5	294.7	308.8	352.4	311.8	544.2	442.5
Four years later	454.8	284.0	302.9	346.8	303.7	540.3
Five years later	444.1	278.4	298.0	343.3	302.8
Six years later	439.2	275.1	294.5	342.5
Seven years later	432.1	271.0	291.9
Eight years later	437.2	271.1
Nine years later	437.0
Cumulative payments	424.9	261.3	282.9	326.5	265.2	463.4	332.4	328.5	260.7	82.0
Estimated balance to pay	12.1	9.8	9.0	16.0	37.6	76.9	110.1	132.4	236.0	486.8

Amlin UK Gross basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	170.8	150.4	146.2	158.4	209.0	258.2	281.8	333.5	377.9	369.5
Current gross earned premium	170.8	150.4	146.2	158.4	209.0	258.2	281.8	333.4	359.3	151.4
Estimate of cumulative claims at end of underwriting year	115.1	102.5	101.0	117.3	136.6	167.4	198.5	209.8	220.2	233.2
One year later	111.2	106.4	102.6	123.4	150.9	177.0	191.1	194.9	228.3
Two years later	103.0	102.1	101.9	125.7	156.2	173.7	188.5	195.4
Three years later	89.4	94.5	103.6	125.5	154.5	177.4	192.5
Four years later	89.4	92.3	102.6	123.7	156.0	182.2
Five years later	79.7	93.6	100.3	127.6	155.7
Six years later	83.0	92.8	91.5	124.2
Seven years later	78.4	85.3	92.0
Eight years later	77.7	89.3
Nine years later	77.9
Cumulative payments	75.3	79.2	82.5	104.0	132.5	141.2	136.4	113.9	115.1	20.8
Estimated balance to pay	2.6	10.1	9.5	20.2	23.2	41.0	56.1	81.5	113.2	212.4

Net basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	104.1	94.4	94.3	103.5	129.6	159.1	191.6	199.8	212.3	221.4
One year later	100.6	98.2	92.1	109.8	141.7	168.7	184.2	186.6	220.0
Two years later	97.1	95.7	90.8	111.2	148.6	168.3	187.0	189.4
Three years later	88.0	89.1	94.7	113.3	145.1	168.9	189.5
Four years later	88.0	89.3	93.0	111.7	143.2	170.0
Five years later	78.2	90.1	90.0	111.6	145.0
Six years later	78.8	89.4	85.3	109.1
Seven years later	75.5	80.8	85.4
Eight years later	74.9	84.4
Nine years later	75.3
Cumulative payments	73.0	77.3	78.6	95.5	127.6	138.7	136.4	113.3	113.7	20.7
Estimated balance to pay	2.3	7.1	6.8	13.6	17.4	31.3	53.1	76.1	106.3	200.7

Amlin Bermuda Gross basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	1.2	145.1	173.9	220.1	249.6	299.7	349.5	345.4	347.9	389.9
Current gross earned premium	1.2	145.1	173.9	220.1	249.6	299.7	349.5	345.3	344.6	256.3
Estimate of cumulative claims at end of underwriting year	-	44.7	71.8	154.2	98.4	182.3	246.4	166.5	166.2	175.2
One year later	0.7	24.7	53.1	115.9	80.3	329.9	223.1	124.5	138.0
Two years later	0.4	29.3	46.8	124.9	86.0	343.0	219.1	121.3
Three years later	0.3	26.1	44.0	122.0	83.9	338.8	223.8
Four years later	0.3	25.4	41.3	122.5	82.6	344.7
Five years later	0.3	25.2	41.4	122.2	81.0
Six years later	0.3	24.9	40.9	122.9
Seven years later	0.3	24.7	41.4
Eight years later	0.3	24.8
Nine years later	0.3
Cumulative payments	0.3	24.6	40.8	121.3	76.9	288.8	183.3	93.8	61.5	27.0
Estimated balance to pay	-	0.2	0.6	1.6	4.1	55.9	40.5	27.5	76.5	148.2

Net basis Underwriting year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	-	44.7	71.8	154.2	98.4	182.3	223.2	166.5	166.2	175.2
One year later	0.7	24.7	53.1	115.9	80.3	298.6	200.8	124.5	138.0
Two years later	0.4	29.3	46.8	124.9	85.3	315.0	195.0	121.3
Three years later	0.3	26.1	44.0	122.0	83.2	311.0	200.8
Four years later	0.3	25.4	41.3	122.5	82.0	317.6
Five years later	0.3	25.2	41.4	122.2	80.4
Six years later	0.3	24.9	40.9	122.9
Seven years later	0.3	24.7	41.4
Eight years later	0.3	24.8
Nine years later	0.3
Cumulative payments	0.3	24.6	40.8	121.3	76.3	261.8	161.0	93.8	61.5	27.0
Estimated balance to pay	-	0.2	0.6	1.6	4.1	55.8	39.8	27.5	76.5	148.2

Amlin Re Europe Gross basis Underwriting year	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	2.8	96.2	162.7	191.1	243.4
Current gross earned premium	2.8	90.3	160.1	182.2	168.9
Estimate of cumulative claims at end of underwriting year	2.0	65.0	105.9	143.5	183.5
One year later	2.0	65.6	101.1	144.2
Two years later	1.8	64.4	97.9
Three years later	1.7	65.9
Four years later	1.8
Cumulative payments	1.0	29.4	49.1	55.8	9.1
Estimated balance to pay	0.8	36.5	48.8	88.4	174.4

Net basis Underwriting year	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	2.0	63.0	92.3	122.0	170.1
One year later	2.0	64.2	89.5	122.0
Two years later	1.8	62.9	86.5
Three years later	1.7	64.5
Four years later	1.8
Cumulative payments	1.0	28.0	41.2	45.0	9.4
Estimated balance to pay	0.8	36.5	45.3	77.0	160.7

Amlin Europe Gross basis Accident year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Current ultimate gross written premium	451.5	463.6	509.4	591.8	572.5	641.4	524.6	445.2	419.4	409.7
Current gross earned premium	451.1	459.5	490.3	574.7	599.1	559.1	553.4	447.2	426.5	402.4
Estimate of cumulative claims at end of underwriting year	240.7	273.8	304.3	489.6	400.2	409.5	415.2	280.3	264.9	254.0
One year later	333.0	286.6	316.8	480.9	410.3	479.1	426.9	304.2	273.0
Two years later	319.4	287.1	339.8	472.6	410.4	464.2	394.2	310.0
Three years later	304.2	275.0	329.9	473.3	424.6	429.8	387.3
Four years later	296.2	272.4	319.8	453.9	415.8	438.6
Five years later	289.6	270.4	314.7	447.6	388.5
Six years later	287.8	265.2	311.6	443.7
Seven years later	285.2	262.9	303.2
Eight years later	285.8	258.9
Nine years later	283.0
Cumulative payments	270.0	246.6	285.1	408.1	334.9	383.2	299.1	227.1	171.6	67.6
Estimated balance to pay	12.0	12.3	18.1	35.6	53.6	55.4	77.2	82.9	101.4	186.4

Net basis Accident year	2005 £m	2006 £m	2007 £m	2008 £m	2009 £m	2010 £m	2011 £m	2012 £m	2013 £m	2014 £m
Estimate of cumulative claims at end of underwriting year	195.7	223.8	268.2	376.4	373.1	377.7	372.8	259.8	250.0	244.5
One year later	210.7	237.1	267.9	373.8	384.3	421.9	391.1	260.3	253.2
Two years later	195.3	231.4	278.0	365.6	389.0	384.5	359.4	250.7
Three years later	182.5	226.6	260.6	354.5	372.1	367.3	338.1
Four years later	180.0	220.3	245.2	339.2	362.8	383.0
Five years later	171.7	217.4	255.3	334.6	332.7
Six years later	168.0	213.7	249.8	331.0
Seven years later	169.1	214.2	242.6
Eight years later	169.5	212.8
Nine years later	167.5
Cumulative payments	155.1	202.0	228.1	313.7	302.3	342.8	277.1	196.4	159.7	64.6
Estimated balance to pay	12.4	10.8	14.5	17.3	30.4	40.2	61.0	54.3	93.5	179.9

										Total £m
Net claims reserve release/(strengthen)	2.0	1.4	7.2	3.6	30.1	(15.7)	21.3	9.6	(3.2)	56.3

c) Net unearned premium

Unearned premiums are further analysed between written and earned premium below

		2014			2013
Unearned premium	Note	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
At 1 January		1,093.9	(45.1)	1,048.8	1,054.8	(46.8)	1,008.0
Premium written during the year	4(c),5(a)	2,564.0	(268.1)	2,295.9	2,467.4	(341.8)	2,125.6
Premium earned during the year	4(c),5(a)	(2,476.4)	275.8	(2,200.6)	(2,440.6)	346.0	(2,094.6)
Foreign exchange (losses)/gains		(13.1)	(6.6)	(19.7)	12.3	(2.5)	9.8
At 31 December		1,168.4	(44.0)	1,124.4	1,093.9	(45.1)	1,048.8

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

	2014			2013
Unearned premium	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m	Insurance liabilities £m	Reinsurers' share £m	Net liabilities £m
Current portion	1,041.4	(28.6)	1,012.8	976.6	(27.7)	948.9
Non-current portion	127.0	(15.4)	111.6	117.3	(17.4)	99.9
	1,168.4	(44.0)	1,124.4	1,093.9	(45.1)	1,048.8

d) Deferred acquisition costs

The reconciliation of opening and closing deferred acquisition costs is as follows:

	Note	2014 £m	2013 £m
At 1 January		246.1	239.3
Expenses for the acquisition of insurance contracts deferred during the year	7(a)	501.0	458.2
Amortisation	7(a)	(473.0)	(450.9)
Foreign exchange losses		(3.4)	(0.5)
At 31 December		270.7	246.1

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

	2014 £m	2013 £m
Current portion	244.9	220.0
Non-current portion	25.8	26.1
	270.7	246.1

e) Insurance and reinsurance receivables

	2014 £m	2013 £m
Receivables arising from insurance and reinsurance contracts	1,069.5	1,033.1
Less provision for impairment of receivables from contract holders and agents	(22.6)	(19.3)
Insurance and reinsurance receivables	1,046.9	1,013.8

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

	2014 £m	2013 £m
Current portion	998.8	980.7
Non-current portion	48.1	33.1
	1,046.9	1,013.8

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.

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 2014, insurance and reinsurance receivables at a nominal value of £55.4 million (2013: £51.2 million) were greater than three months overdue and provided for on the basis of credit rating to the value of £11.3 million (2013: £10.8 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:

	2014 £m	2013 £m
Not overdue or less than 3 months	1,014.1	981.9
3 to 6 months	21.1	20.3
6 to 9 months	7.9	14.5
Greater than 9 months	26.4	16.4
	1,069.5	1,033.1

Movements on the Group's provision for impairment of receivables from contract holders and agents are as follows:

	2014 £m	2013 £m
At 1 January	(19.3)	(18.4)
Increase in the provision	(8.7)	(2.8)
Utilised provision	0.3	0.7
Release of unused provision	5.1	1.3
Foreign exchange losses	-	(0.1)
At 31 December	(22.6)	(19.3)

f) Insurance and reinsurance payables

	2014 £m	2013 £m
Insurance and reinsurance payables	196.2	273.3

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

	2014 £m	2013 £m
Current portion	165.7	216.0
Non-current portion	30.5	57.3
	196.2	273.3

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.

g) 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) Ltd. 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. With effect from 1 September 2014 the Group established three Strategic Business Units (Reinsurance, Marine & Aviation and Property & Casualty) operating across regional and national boundaries to provide a global service.

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 section 12(h).

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.

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 mean 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. The Group's broad risk appetite guidelines are set out in the Risk Management section of the Annual Report. 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, inadequacies in data, or shortcomings in the models used.

As explained in note 13(h), 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, B and C below describe the insurance and reinsurance portfolios written by the Group and the associated risks of such business. Section D summarises the business written within each group of insurance and reinsurance portfolios.

A. Property & Casualty portfolios

A. (i) Property

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 such as suppliers or customers that provide potential for 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 internal Binding Authority Committees.

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.

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 clients or other incidental operations overseas. The engineering book includes contractors all risks, machinery breakdown and some computer equipment.

These portfolios are exposed to European weather conditions whereby a large windstorm, flood or winter freeze could result in a large number of small claims.

Bloodstock and livestock business are also written within the Property & Casualty business unit of Syndicate 2001. 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.

The livestock account provides 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 Group 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.

A. (ii) Casualty

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 to individual large losses as the cost to the Group of any individual claim is lower than property due to line size restrictions. 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.

The Group's international liability portfolio predominantly protects insured's domiciled in the UK, Ireland, France, Germany, Belgium and the Netherlands. An international casualty team was established in 2012 to develop business in other territories, including Canada and 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 also 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 Ltd, a Financial Conduct Authority (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

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.

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

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) Special risks

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. Marine & Aviation portfolios

B. (i) Hull

The hull account is worldwide covering property damage to ships. Coverage may include machinery breakdown. 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. Inland hull and builders' risks are also written. The hull account can be impacted by attritional claims of a small size as well as single individual large claims. In an economic recession, premium income is likely to fall as trade reduces and hull values are impacted by reduced freight rates.

B. (ii) Cargo

The cargo account is also worldwide and covers loss or damage, to a large variety of cargo or goods in transit. This portfolio is exposed to small attritional claims and single individual large claims. The cargo account could be involved in a major natural catastrophe loss or be impacted by an economic recession when claims frequency could increase due to increased economic pressures leading to fraud and theft claims.

The Continental European portfolio includes a commodities book for Belgian and French trading corporations.

B. (iii) Energy

The energy portfolio mainly comprises 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.

B. (iv) War and terrorism

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.

B. (v) Yacht

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, USA, 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 N.V. and Syndicate 2001 write shares of a portfolio of large private yachts.

B. (vi) Marine liability

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.

B. (vii) Specie

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, for example California, and may be exposed to terrorist events.

B. (viii) Aviation

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.

C. Reinsurance portfolios

C. (i) Property

Catastrophe reinsurance protects insurance companies against 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 response to 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.

C. (ii) Casualty

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 clash 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.

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

C. (iii) Motor

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.

C. (iv) Personal accident

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.

C. (v) Marine and aviation

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.

C. (vi) Special risks

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 reinsured's 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.

D. Business written and, maximum and average line sizes by operating divisions

On the following pages are tables summarising the business written, in both gross written premium and line size, across the insurance and reinsurance portfolios of the Group, per operating division.

The following points apply to each of the tables:

· Amlin London limits are set in US dollars converted to sterling at a rate of exchange of £1=US$1.5, Amlin Europe 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.

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

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

· Gross written premiums are converted to sterling using the year end average rates set out in note 9(b).

Property & Casualty portfolios

At 31 December 2014	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 property	122	-	-	23	-	-	2	-	-
Binding authorities	40	-	-	2	-	-	1	-	-
UK/Europe property/package	-	124	95	-	100	42	-	1	3
Engineering	-	-	22	-	-	21	-	-	3
Bloodstock/livestock	21	-	-	7	-	-	1	-	-
(ii) Casualty
International casualty	33	-	-	17	-	-	6	-	-
Casualty	41	-	-	3	-	-	1	-	-
Professional lines	18	-	-	13	-	-	2	-	-
Employers' liability	-	22	-	-	27	-	-	10	-
Liability	-	-	81	-	-	21	-	-	2
Public/products liability	-	16	-	-	12	-	-	4	-
Financial institutions fidelity and liability	6	-	-	14	-	-	2	-	-
Professional indemnity	40	-	-	8	-	-	2	-	-
(iii) Motor
US/International auto	51	-	-	1	-	-	1	-	-
UK/Europe motor	-	154	46	-	Unlimited	Unlimited	-	Unlimited	Unlimited
(iv) Personal accident
Accident and health	24	-	-	3	-	-	2	-	-
(v) Special risks
Special risks	6	-	20	97	-	21	6	-	4
Total Property & Casualty	402	316	264

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 property	123	-	-	23	-	-	2	-	-
Binding authorities	41	-	-	2	-	-	1	-	-
UK/Europe property/package	-	123	104	-	52	42	-	<1	3
Engineering	-	-	22	-	-	21	-	-	3
Bloodstock/livestock	24	-	-	4	-	-	1	-	-
(ii) Casualty
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	-
(iii) Motor
US/International auto	35	-	-	1	-	-	1	-	-
UK/Europe motor	-	154	43	-	Unlimited	Unlimited	-	Unlimited	Unlimited
(iv) Personal accident
Accident and health	26	-	-	3	-	-	1	-	-
(v) Special risks
Special risks	7	-	18	97	-	21	5	-	4
Total Property & Casualty	322	377	268

Marine & Aviation portfolios

At 31 December 2014	Amlin London Gross written premium £m	Amlin Europe Gross written premium £m	Amlin London Max line size £m	Amlin Europe Max line size £m	Amlin London Average line size £m	Amlin Europe Average line size £m
(i) Hull	52	54	17	21	4	2

(ii) Cargo	41	37	20	21	7	1

(iii) Energy	66	-	53	-	8	-

(iv) War and terrorism	33	-	53	-	10	-

(v) Yacht	33	6	35	8	3	6

(vi) Marine Liability	40	48	62	67	14	14

(vii) Specie	15	-	24	-	6	-

(viii) Aviation
Airline (hull & liability)	18	-	83	-	20	-
General aviation (hull & liability)	10	-	57	-	13	-
Risk excess	5	-	69	-	14	-
Airports liability	6	-	57	-	24	-
Products	4	-	50	-	22	-
Total Marine & Aviation	323	145

At 31 December 2013	Amlin London Gross written premium £m	Amlin Europe Gross written premium £m	Amlin London Max line size £m	Amlin Europe Max line size £m	Amlin London Average line size £m	Amlin Europe Average line size £m
(i) Hull	47	69	13	21	2	2

(ii) Cargo	36	43	20	21	6	1

(iii) Energy	57	-	25	-	4	-

(iv) War and terrorism	33	-	50	-	9	-

(v) Yacht	34	-	5	-	2	-

(vi) Marine Liability	39	55	33	42	7	14

(vii) Specie	16	-	24	-	6	-

(viii) Aviation
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	-
Total Marine & Aviation	313	167

Reinsurance portfolios

At 31 December 2014	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
Catastrophe (per programme)	279	179	36	50	50	17	5	5	4
Per risk property (per programme)	54	33	17	20	9	17	2	2	2
Proportional	53	89	51	13	9	17	2	1	2
Engineering	-	-	28	-	-	17	-	-	3
(ii) Casualty
Casualty	33	20	-	7	10	-	3	1	-
Liability	-	-	40	-	-	17	-	-	2
(iii) Motor
Motor	-	-	61	-	-	Unlimited	-	-	Unlimited
(iv) Personal accident
Accident and health	7	-	-	3	-	-	1	-	-
Personal accident	-	2	3	-	7	17	-	3	1
(v) Marine and aviation
Marine (per programme)	27	3	8	67	50	17	2	7	1
Aviation (per programme)	6	-	-	27	-	-	3	-	-
(vi) Special risks
Special risks	38	47	6	33	27	17	4	4	3
Surety	-	-	2	-	-	4	-	-	1
Total Reinsurance	497	373	252

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
Catastrophe (per programme)	270	183	33	57	50	17	4	4	3
Per risk property (per programme)	63	35	16	23	9	17	2	2	2
Proportional	58	73	47	5	9	17	1	1	1
Engineering	-	-	23	-	-	17	-	-	2
(ii) Casualty
International casualty	-	-	-	-	-	-	-	-	-
Casualty	38	9	-	3	3	-	<1	1	-
Liability	-	-	26	-	-	17	-	-	1
(iii) Motor
Motor	-	-	45	-	-	Unlimited	-	-	Unlimited
(iv) Personal accident
Accident and health	9	-	-	3	-	-	1	-	-
Personal accident	-	2	2	-	7	17	-	3	1
(v) Marine and aviation
Marine (per programme)	27	4	7	76	50	17	2	4	1
Aviation (per programme)	6	-	-	31	-	-	2	-	-
(vi) Special risks
Special risks	29	35	6	38	27	17	3	3	3
Surety	-	-	2	-	-	4	-	-	1
Total Reinsurance	500	341	207

h) Reinsurance and other risk mitigation arrangements

Proportional reinsurance is purchased to supplement line size and to reduce exposure on individual risks, notably for large property risks. Part of the premium ceded under such facilities by Syndicate 2001 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.

The Group purchases a number of excess of loss reinsurances to protect its portfolio from severe frequency or size of losses. The structure of these programmes 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 purchased to protect against a loss to that specific risk.

Specific risk excess of loss reinsurance is purchased for certain portfolios 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 protect against 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.

The combined claims from several policies which may aggregate in a single catastrophe event are protected by catastrophe cover. UK and European direct property accounts are protected by a European property catastrophe programme. There is also a worldwide catastrophe programme protecting direct and facultative property business.

A separate retrocessional excess of loss programme is purchased by the Group to protect the excess of loss reinsurance portfolio written in London, Bermuda and Zurich against such losses.

With effect from 1 January 2015, the programme deductible for all territories and perils is US$125.0 million for a first loss with a lower deductible applicable for second and subsequent Florida windstorm losses. Aggregate protection has been renewed to provide lower level cover in the event of multiple losses to the portfolio.

Excess of loss protection is also purchased to protect the motor treaty reinsurance account written in Zurich.

In July 2013, the Group acquired coverage for US and Canadian earthquake perils of up to US$75.0 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.

In December 2014, the Group acquired coverage for US hurricane, US earthquake and European windstorm perils of up to US$200.0 million from Tramline Re II Ltd, which in turn placed a second catastrophe bond into the capital markets. This transaction replaces the coverage provided by Tramline Re Ltd (which expired on 31 December 2014) and provides the Group with fully collateralised protection over a four year period from 1 January 2015. This is in addition to the protection the Group purchases through the traditional reinsurance marketplace. The bond provides significant protection against remote but substantial catastrophe events 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 £350.0 million (2013: £350.0 million) for the Group. The Group Underwriting Risk team are responsible for aggregating potential scenarios and at 1 January 2015, levels of exposure were below the potential maximum tolerance, one of the largest being the San Francisco Earthquake at £271.0 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 which increase original claims levels.

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.

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.

i) Claims reserving and IBNR

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 reserves are set at a level above the mean 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 (accident year for Amlin Europe). 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 on a losses occurring (determined by date of loss) basis. This has a significant impact on the reporting period in which claims can be notified.

IBNR

To establish a provision for IBNR claims, the local actuarial teams use their experience and knowledge of the classes of business to estimate the potential future development of the incurred claims for each class for every underwriting year (accident year for Amlin Europe). This is known as the 'best estimate'. In setting the IBNR provision, estimates are made for the ultimate premium and ultimate gross claims value for each underwriting year ('ultimate' earned claims for each accident year for Amlin Europe). 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.

Meetings are initially held in which underwriters and actuaries discuss the initial proposed estimates and revise them if it is felt necessary. At the next round of meetings, local management discuss reserving issues with the actuaries and underwriters and challenge the proposed estimates. At this meeting, local management propose the 'margin' for risk to be added to the best estimate, assisted by diagnostics produced from the internal model. The margin is proposed on a net of reinsurance basis only. Further meetings are then held at which further review and challenge is provided by central teams, led by Amlin Risk.

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 £26.2 million gain/loss (2013: £25.5 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 that can range from several months to a number of years after a catastrophe loss. Account should also be taken of factors which may influence the size of claims such as increased repair cost inflation or a change in law.

The long tail liability classes represent the most difficult classes to project because often 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.

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.

j) 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 the level of claims, 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;

· Forecasting changes to external environmental factors may be incorrectly assessed;

· 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 turn out to overstate or understate the risk.

The results 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.

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

Forecast (unaudited)	2015 £m	2014 £m
Underwriting risk	340	408
Reserving risk	264	250
Credit (reinsurance counterparty risk)	35	27
Investment (market risk)	35	28
Liquidity risk	1	4
Operational risk	48	52
Currency risk	62	46
Diversified result	785	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 capital model and are based on data as at 31 December 2014.

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 in the internal capital model have been converted using business planning rates of exchange as at 31 December 2014 (US$1.66: CAN$1.83: €1.21) (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.

14. 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 2014		8.7	2.2	0.8	43.6	16.8	72.1
Additions		13.7	-	0.4	1.6	3.3	19.0
Disposals		-	-	(0.4)	(2.9)	-	(3.3)
Foreign exchange losses		-	-	-	-	(0.2)	(0.2)
At 31 December 2014		22.4	2.2	0.8	42.3	19.9	87.6
Accumulated depreciation
At 1 January 2014		0.5	-	0.1	37.6	11.3	49.5
Charge for the year	7(g)	0.1	0.1	0.2	2.9	2.1	5.4
Disposals		-	-	(0.3)	(2.9)	-	(3.2)
At 31 December 2014		0.6	0.1	-	37.6	13.4	51.7
Net book value
At 31 December 2014		21.8	2.1	0.8	4.7	6.5	35.9
At 1 January 2014		8.2	2.2	0.7	6.0	5.5	22.6

	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	7(g)	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

15. 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 2014		89.5	63.2	71.7	46.7	3.2	274.3
Additions		-	-	-	9.9	-	9.9
Acquisition through business combination	3(a)	20.4	-	15.1	-	-	35.5
Adjustment to prior acquisition		-	-	-	0.1	(0.2)	(0.1)
Foreign exchange losses		(3.4)	-	(3.2)	(1.0)	-	(7.6)
At 31 December 2014		106.5	63.2	83.6	55.7	3.0	312.0
Accumulated amortisation
At 1 January 2014		0.4	-	24.2	7.9	2.7	35.2
Charge for the year	7(g)	-	-	4.3	6.3	0.2	10.8
Foreign exchange gains		-	-	(1.2)	(0.2)	-	(1.4)
At 31 December 2014		0.4	-	27.3	14.0	2.9	44.6
Net book value
At 31 December 2014		106.1	63.2	56.3	41.7	0.1	267.4
At 1 January 2014		89.1	63.2	47.5	38.8	0.5	239.1

	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		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	7(g)	-	-	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

The amortisation charge for the year is included within 'Other administrative expenses' in note 7(b).

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., RaetsMarine Insurance B.V. and Leadenhall Capital Partners LLP; the net book value being £8.0 million (2013: £9.0 million), £15.4 million (2013: £18.2 million), £17.6 million (2013: £20.3 million) and £15.3 million (2013: nil) respectively. These intangibles are being amortised over a period of 13, 15, 15 and 12 years respectively, and their remaining amortisation life is 9, 10, 13 and 12 years respectively.

Included within the net book value of £15.3 million broker and customer relationship intangibles for Leadenhall Capital Partners LLP is the net book value of £3.8 million relating to the non-controlling interest's share.

Computer software represents the costs that the Group has incurred on internally developed software and predominantly relates to current development of Group finance systems and to a new underwriting platform for Amlin Europe N.V. developed in 2012. The amortisation of the Group finance systems will commence at the point of completion. Costs relating to Amlin Europe N.V. are being amortised over 10 years, with 8 years remaining.

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:

	2014					2013
	Amlin London £m	Amlin UK £m	Amlin Europe £m	Leadenhall Capital Partners £m	Total £m	Amlin London £m	Amlin UK £m	Amlin Europe £m	Total £m
Goodwill	18.8	4.8	61.5	21.0	106.1	18.8	4.8	65.5	89.1
Syndicate participations	57.1	6.1	-	-	63.2	55.2	8.0	-	63.2
	75.9	10.9	61.5	21.0	169.3	74.0	12.8	65.5	152.3

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 (2013: £11.5 million).

The Amlin Europe goodwill balance comprises the goodwill from one CGU, following the acquisition of Amlin France Holdings SAS by Amlin Europe N.V., its formation as a branch and further integration of operations. The largest individual balance is the goodwill from the acquisition of Amlin Europe N.V. totalling £27.0 million (2013: £28.5 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% (2013: 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% (2013: 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, expected cost of borrowing, and different risk factors attaching to each CGU.

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.

16. Retirement benefit obligations

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

a) 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 in the Fund.

Prior to Amlin becoming the sole participating employer, the Trustee operated separate notional accounts for the scheme of each contributing employer and also a section relating to former employees of the employers no longer contributing to the fund (known as the Orphans' section). Since becoming the sole participating employer, the Trustee has stopped notionally segregating the assets and therefore the Company continues to be ultimately responsible for the assets and liabilities of the Fund, including 100% of the Orphan liabilities (2013: 100%).

Following the exit of the remaining other employer during 2013, the Trustee 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. During 2014, the Trustee subsequently decided that they would not be securing seven members of the exiting employer outside the Fund under this insurance contract. Instead the Trustee opted to retain them in the Fund as Orphan section members and maintain their cover with the insurance contract. This has resulted in an increase in the defined benefit obligation by £5.8 million and a corresponding (and equal) increase in the assets of the Fund as at 31 December 2014.

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.

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 pension scheme's Management Board (equally consisting of employer as well as employee representatives) 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 premium determined in the applicable pension fund regulations.

Net defined benefit liability

Amount recognised in the consolidated statement of financial position in respect of the Group's defined benefit schemes is as follows:

	2014 £m	2013 £m
Present value of defined benefit obligation	(572.3)	(470.3)
Fair value of scheme assets	535.1	468.1
Deficit in schemes	(37.2)	(2.2)
Restriction to defined benefit asset due to asset ceiling	(4.2)	(30.4)
Net defined benefit liability	(41.4)	(32.6)

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 2014	(470.3)	468.1	(2.2)	(30.4)	(32.6)
Interest (expense)/income	(19.3)	19.6	0.3	(1.3)	(1.0)
Current service cost	(5.1)	-	(5.1)	-	(5.1)
Past service cost	0.9	-	0.9	-	0.9
Administration expenses	0.4	(1.6)	(1.2)	-	(1.2)
(Charged)/credited to consolidated statement of profit or loss	(23.1)	18.0	(5.1)	(1.3)	(6.4)
Re-measurements:
Actuarial gains and losses arising from :
- changes in demographic assumptions	(8.6)	-	(8.6)	-	(8.6)
- changes in financial assumptions	(66.5)	11.5	(55.0)	-	(55.0)
- changes in experience	(26.4)	5.8	(20.6)	-	(20.6)
Return on plan assets, excluding amounts included in interest (expense)/income	-	46.9	46.9	-	46.9
Changes in asset ceiling, excluding amounts included in interest (expense)/income	-	-	-	27.5	27.5
(Charged)/credited to consolidated statement of other comprehensive income	(101.5)	64.2	(37.3)	27.5	(9.8)
Exchange differences	5.8	(4.1)	1.7	-	1.7
Participant contributions	(1.1)	1.1	-	-	-
Benefits paid	17.9	(17.9)	-	-	-
Employer contributions	-	5.7	5.7	-	5.7
At 31 December 2014	(572.3)	535.1	(37.2)	(4.2)	(41.4)

A plan amendment has resulted in a reduction in past service costs of £0.8 million (2013: £1.6 million) due to the increase in the retirement age in the Netherlands effective from 1 January 2014.

	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	(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)

Other actuarial gains relate to the impact of the exit of the remaining other employer from Lloyd's Superannuation Fund in the UK.

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% (2013: 16%) paid by the employer plus 5% (2013: 5%) member contributions, in each case of pensionable earnings, and additional contributions as agreed with the Trustee. Contributions totalled £2.6 million at 31 December 2014 (2013: £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 2013 and was completed in June 2014 by Mr D Wilding, Fellow of the Institute of Actuaries, and used the projected unit credit actuarial method.

On 20 June 2014, the Group agreed a schedule of contributions with the Trustee, to run over ten years. The schedule requires four separate payments of £2.0 million to the Fund, followed by six separate payments of £1.2 million to the Fund. The present value of the future payments attributable to past service has been recognised as a liability at 31 December 2014, to the extent that the contributions will not be available after they are paid into the Fund through a refund or a reduction in future contributions.

The Group has also entered into an agreement with the Trustee to hold certain funds within an escrow account. The Group has made payments totalling £14.0 million to the escrow account, with the most recent made in May 2013, and it is now fully funded. Following the 2013 triennial actuarial valuation, the escrow account is being held as security against certain of the assumptions used in the valuation. Further details are provided in note 12(j).

Other schemes

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

Restriction to defined benefit asset due to asset ceiling

The Lloyd's Superannuation 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 2014, 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.

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 - Where the schemes have entered into insurance arrangement, 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 2014 were:

	UK % pa	The Netherlands % pa	Belgium % pa	Switzerland % pa
Discount rate for pension benefits	3.6	2.1	1.4	1.0
Price inflation (CPI/RPI for UK)	2.1/3.1	2.0	1.9	1.3
Expected salary increases - general	-	1.5-2.0	1.9	2.3
Indexation for active and formerly active employees	-	1.0-1.5	-	-

For the Lloyd's Superannuation Fund, there are no expected salary increases (2013: nil) because the plan participants' salaries have been capped at the date of buy out. They continue to accrue additional years' service but do not benefit from salary increases.

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)	2.5/3.5	2.0	2.0	1.5
Expected salary increases - general	-	2.0	2.0	2.5
Indexation for active and formerly active employees	-	2.0	-	-

The mortality assumptions used in the 31 December 2014 valuation included the following life expectancies:

Life expectancy (years) at age 60 for a member currently:	UK		The Netherlands		Belgium		Switzerland
Life expectancy (years) at age 60 for a member currently:	Male	Female	Male	Female	Male	Female	Male	Female
Aged 60	28.2	30.0	26.8	28.0	26.7	30.9	26.4	29.0
Aged 45	29.7	31.6	27.9	28.8	26.7	30.9	27.7	30.3

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
Life expectancy (years) at age 60 for a member currently:	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

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	2014 £m	2013 £m
(Increase)/decrease in discount rate by 0.25%	(22.9)/25.5	(18.2)/20.5
(Decrease)/increase in inflation rate by 0.25%	(9.7)/12.1	(10.9)/11.3
(Decrease)/increase in salary rate by 0.5%	(1.3)/1.5	(0.5)/0.6
(Decrease)/increase in indexation rate by 0.5%	(9.4)/11.5	(6.6)/7.6
(Decrease)/increase in life expectancy by one year	(19.0)/19.0	(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.

Analysis of scheme assets

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

	31 December 2014				31 December 2013
	Quoted £m	Unquoted £m	Total £m	Total %	Quoted £m	Unquoted £m	Total £m	Total %
Cash and cash equivalents	-	13.7	13.7	2.6	-	15.8	15.8	3.4
Equity instruments
United Kingdom	77.0	-	77.0	14.5	72.8	-	72.8	15.6
Europe	12.0	-	12.0	2.2	12.2	-	12.2	2.6
North America	30.6	-	30.6	5.7	27.0	-	27.0	5.8
Asia	6.6	-	6.6	1.2	5.5	-	5.5	1.2
Rest of World	6.6	-	6.6	1.2	8.1	-	8.1	1.7
Bonds
Government	167.6	-	167.6	31.3	97.8	-	97.8	20.9
Corporate	111.8	-	111.8	20.9	136.7	-	136.7	29.1
Property
United Kingdom	32.1	-	32.1	6.0	28.1	-	28.1	6.0
Total directly managed scheme assets - United Kingdom	444.3	13.7	458.0	85.6	388.2	15.8	404.0	86.3
The Netherlands			64.2	12.0			51.7	11.1
Belgium			3.6	0.7			3.4	0.7
Switzerland			9.3	1.7			9.0	1.9
Insured scheme assets			77.1	14.4			64.1	13.7
Total scheme assets			535.1	100.0			468.1	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 (years) is as follows:

	2014	2013
UK	17	17
The Netherlands	26	22
Belgium	13	12
Switzerland	18	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	16.1	1.3	0.3	0.5
Between 1-2 years	16.5	1.4	0.3	0.6
Between 2-5 years	51.5	4.8	1.5	1.7
Over 5 years	905.9	213.9	14.3	34.0
Total as at 31 December 2014	990.0	221.4	16.4	36.8

	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

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 2015 is as follows:

	UK £m	The Netherlands £m	Belgium £m	Switzerland £m
Contributions from the Group	2.5	1.2	0.4	0.7
Contributions from plan participants	0.1	0.6	-	0.3
Total contributions to the schemes	2.6	1.8	0.4	1.0

b) 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 2014 are £8.3 million (2013: £7.8 million).

c) 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 2014 (2013: £nil).

17. Capital & reserves

a) Share capital

	2014 Number	2014 £m	2013 Number	2013 £m
Allotted, called up and fully paid ordinary shares
At 1 January issued ordinary shares of 28.125p each	504,799,359	142.0	502,076,006	141.2
Ordinary shares of 28.125 pence each issued in the year	66,541	-	2,723,353	0.8
At 31 December issued ordinary shares of 28.125p each	504,865,900	142.0	504,799,359	142.0

The Company transferred 756,372 shares out of treasury during the year at a cost of £1.9 million (2013: 716,586 shares at a cost of £1.8 million). The shares have been transferred to meet exercises of employee share options, leaving 3,495,713 shares in treasury at 31 December 2014 (2013: 4,252,085 shares). This number does not include shares held by the trustee of the Group's Employee Share Ownership Trust as disclosed in note 7(d).

The Group issued 66,541 ordinary shares on 7 November 2014 in conjunction with the acquisition of Leadenhall Capital Partners LLP, as per note 3(a). The shares issued have the same rights as all other shares in issue. The fair value of the shares issued is £0.3 million (434.115 pence per share).

b) Other reserves

All items of other comprehensive income in 2014 and 2013 are charged to 'Other reserves'. Other reserves are as follows:

	Note	2014 £m	2013 £m
Capital redemption reserve		123.1	123.1
Defined benefit pension reserve		(49.9)	(40.1)
Foreign operations translation reserve		(8.1)	(9.6)
Employee share option reserve		11.3	9.3
Hedge accounting reserve		(41.1)	(43.0)
Merger reserve		87.7	87.7
Pre-1999 goodwill write-off		(45.7)	(45.7)
Other		1.0	1.2
Tax relating to components of other reserves	8	30.8	29.5
		109.1	112.4

c) Net assets per share

Net assets and tangible net assets per share are as follows:

	Note	2014	2013
Net assets		£1,785.9m	£1,678.6m
Non-controlling interests		(£3.1m)	(£0.5m)
Equity attributable to owners of the Parent Company		£1,782.8m	£1,678.1m
Adjustments for goodwill and intangible assets (excluding non-controlling interest's share)	15	(£263.6m)	(£239.1m)
Tangible net assets (excluding non-controlling interest's share in 2014)		£1,519.2m	£1,439.5m

Number of shares in issue at end of the year		504.9m	504.8m
Adjustment for ESOT and treasury shares		(5.3m)	(6.2m)
Basic number of shares after ESOT and treasury shares adjustment		499.6m	498.6m

Basic net assets per share		356.8p	336.7p
Basic tangible net assets per share		304.1p	288.7p

Note: The calculation of Tangible net assets was amended in 2014 to incorporate an adjustment for Non-controlling interests included in the Equity attributable to owners of the Parent Company.

18. Subsidiaries and associates

a) Principal subsidiaries

The principal subsidiaries at 31 December 2014 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.¹	Insurance company	The Netherlands
Amlin Insurance (UK) Limited	Insurance company	England and Wales
Amlin (Overseas Holdings) Limited	Intermediate holding company	England and Wales
Amlin Plus Limited²	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
Leadenhall Capital Partners LLP³	Investment adviser and fund manager	England and Wales
RaetsMarine Insurance B.V.	Broker	The Netherlands

Note:

1. Pursuant to a merger agreement dated 27 March 2014, all the assets and liabilities of Amlin France Holdings SAS were transferred to Amlin France SAS. Following this merger, Amlin France SAS was wound up without liquidation effective 04 December 2014 and all its business operations and employees transferred into Amlin Europe NV
where it now operates as the French branch of Amlin Europe N.V.

2. The non-controlling interest in Amlin Plus Limited (40%) was acquired by the Group on 20 May 2014.

3. Amlin Group has a 75% share in Leadenhall Capital Partners LLP, effective from 23 October 2014, see note 3(a) for more details.

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.

b) Investments in associates

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

	2014 £m	2013 £m
Share of profit after tax of associates¹	3.7	3.9
Total comprehensive income	3.7	3.9

Investment in associates²	7.0	12.5
Total assets	7.0	12.5

Notes:

1. Includes the Group's share of profit from its investment in Leadenhall Capital Partners LLP of £3.4 million (2013: £3.6 million) prior to the Group acquiring a controlling
interest.

2. Includes the Group's equity accounted investment in Leadenhall Capital Partners LLP of £nil (2013: £5.7 million) prior to the Group acquiring a controlling interest.

At 31 December 2014, the Group had an aggregate balance receivable from associates, excluding loans as detailed below, of £4.2 million (2013: £6.4 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's loan to Miles Smith Holdings Limited of £0.2 million was settled during the year (2013: £0.2 million). Convertible loan stock of £0.7 million (2013: £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 £2.2 million (2013: £2.7 million). The loan is repayable in full on dates between 1 January 2015 and 21 November 2018. Interest is charged at rates between 5.0% and 5.5% above the Bank of England base rate.

c) Interests in unconsolidated structured entities

As per note 12(b), 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 12(g). 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.

d) Subsidiaries exempt from statutory audit

The subsidiaries at 31 December 2014 which are consolidated in these financial statements but are exempt from statutory audit are detailed below. The Group owns 100% of ordinary share capital and voting rights in these entities:

Subsidiaries	Principal activity	Status	Registered in
Amlin Netherlands Holdings BV	Intermediate holding company	Active	The Netherlands
Amlin Reinsurance Managers Inc.	Reinsurance company	Active	United States of America
Haven Knox-Johnston Limited	Lloyd's service company	Dormant	England and Wales
Just Law Limited	Service company	Dormant	England and Wales
St Margaret's Insurance Services Limited	Intermediate holding company	Dormant	England and Wales
Summit Insurance Group	Insurance company	Dormant	England and Wales

19. 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 16(a), and the contingent consideration relating to the acquisition of Leadenhall Capital Partners LLP, as described in note 3(a), the Group has no material contingent liabilities at 31 December 2014 (2013: £nil).

20. Commitments

a) Capital commitments

The Group has agreed to redeem the US$50.0 million subordinated debt in March 2015 as described in note 12(e). In addition to the commitments made to RaetsMarine Insurance B.V. below and to Leadenhall Capital Partners LLP as described in note 3(a), the Group has made a contractual commitment for the construction of a new office building (Victoria Road, Chelmsford) at 31 December 2014 of £3.6 million (2013: £13.5 million).

The Group has also made commitments to subscribe to property funds at 31 December 2014 of £68.6 million (2013: £41.5 million) in the normal course of investment activities.

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 £9.9 million (2013: £9.6 million), as disclosed in note 7(g).

The future aggregate minimum lease payments under the non-cancellable portion of the Group's operating leases are as follows:

	2014 £m	2013 £m
No later than 1 year	9.0	9.5
Later than 1 year and no later than 5 years	23.6	26.6
Later than 5 years	59.0	103.4
	91.6	139.5

The basis for calculating the lease commitments relating to The Leadenhall Building has been amended in 2014 to reflect the expected cash flows up until the first break clause.

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 and this remains ongoing. RMI's potential financial exposure under this cross-guarantee agreement can vary but should not exceed €3.3 million (2013: €6.0 million). Amlin has withheld US$7.5 million due to the sellers pending resolution of this issue.

21. Related party transactions

a) Transactions and balances with related parties

i) Amlin Plus

As per note 3(b), the non-controlling interest in Amlin Plus Limited, held previously by Lycetts Holdings Limited, was acquired by Amlin Underwriting Limited on 20 May 2014. As a result Lycett, Browne-Swinburne and Douglas Limited, a subsidiary of Lycetts Holdings Limited and a producer of premium income for Amlin Plus Limited, is no longer a related party of the Group. However, Lycett, Browne-Swinburne and Douglas Limited continue to provide premium income for Amlin Plus Limited following the acquisition.

During the period until acquisition Amlin Plus wrote £3.2 million (2013: £11.5 million) of premium under the binding authority agreement, of which £0.8 million (2013: £3.7 million) was produced by Lycett, Browne-Swinburne and Douglas Limited earning brokerage commission of £0.1 million (2013: £0.5 million) on this business.

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 18(b).

iii) Syndicate 6106

For the 2013 underwriting year of account Special Purpose Syndicate (S6106), managed by Amlin Underwriting Limited, wrote a 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. This quota share contract was not renewed for the 2014 underwriting year of account.

iv) Funds managed by Leadenhall Capital Partners LLP

Leadenhall Capital Partners LLP (LCP), a partnership controlled by the Group, is an investment fund manager wholly focused on managing insurance linked investment portfolios for institutional investors. As per note 3(a), the total funds under management at 31 December 2014 were US$1,880.8 million (£1,206.3 million equivalent) (2013: US$1,591.8 million; £961.0 million equivalent). For the period since control in the partnership was established to 31 December 2014, LCP earned £2.4 million in management and performance fees. At 31 December 2014, LCP had net receivables due of £7.6 million from the funds it manages in outstanding management and performance fees.

v) Transactions by the Funds managed by Leadenhall Capital Partners LLP

At 31 December 2014, funds managed by LCP held US$5.5 million and US$1.0 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 13(h).

Syndicate 2001 and Amlin AG (through its branches in Zurich and Bermuda) 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 LCP have invested within these segregated accounts. During the year Syndicate 2001 and Amlin AG wrote £25.1 million (2013: £15.1 million) of gross premium and received £1.7 million (2013: £0.6 million) of commission through this arrangement. At 31 December 2014, £10.2 million (2013: £5.5 million) was net receivable from Horseshoe Re, of which £4.8 million (2013: £0.2 million) was reinsurance receivables on paid and outstanding claims, £13.0 million (2013: £6.0 million) was reinsurers' share of insurance liabilities and £7.6 million (2013: £0.7 million) was reinsurance payables.

vi) Transactions with the Funds managed by Leadenhall Capital Partners LLP

At 31 December 2014, Amlin AG (through its branch in Bermuda) holds investments of £63.7 million (2013: £62.2 million) in funds managed by LCP. The return on this investment is included in note 6.

b) Compensation of key management personnel

Key management personnel are those Amlin plc Board Directors and Amlin Management Committee members responsible for planning and control of the activities of the Group. Key management comprises eleven Executive Directors and employees and six Non-Executive Directors (2013: twelve and seven respectively). Compensation during the year to key management personnel is analysed below:

	2014 £m	2013 £m
Short-term employee benefits	9.4	8.9
Long-term employee benefits	2.7	4.1
Post-employment benefits	0.5	0.5
Equity-settled share-based payments	1.7	1.5
Cash-settled share-based payments	1.0	0.4
	15.3	15.4

c) Transactions with companies with common 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.

22. 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 other than stated below:

Catastrophe bond - Tramline Re II Ltd

During the period, the Group acquired coverage for US earthquake and storm and European Windstorm perils of up to US$200.0 million from a Bermudian special purpose insurer, Tramline Re II Ltd, which in turn has placed a catastrophe bond into the markets. This transaction provides the Group with fully collateralised protection over a four year period with effect from 1 January 2015.

23. 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 2014 or 2013, but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 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 2014 are expected to shareholders by no later than 10 April 2015. 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 9.00am on Thursday 21 May 2015.

The preliminary Results were approved by the Board on 27 February 2015.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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