Annual Report 2008

Results and dividend

Our profit before tax of £121.6 million (2007: £445.0 million) is a good result, reflecting a satisfactory underlying underwriting performance despite major loss activity and a materially lower investment return of 0.6% (2007 6.6%). While in absolute terms the investment return is low, it is an excellent performance in the context of the markets and reflects our cautious investment strategy.

Stepping back it is encouraging to see that, despite a more challenging year, our long term weighted average return on equity since 2003 is 25.5%: a sustained high quality financial performance

Much of our business activity is conducted overseas and exchange rate volatility has also impacted the business in 2008. With sterling, our Group reporting currency, weakening materially against the US dollar and the euro, profit potential on this overseas income has increased. Equally our investment in our Bermudian business was made in US dollars and we have recorded a net gain of £140.9 million on that investment, much of which has been taken to reserves.

The Board proposes a final dividend of 11.0 pence per share making total dividends declared for the year of 17.0 pence per share. This is a 13% increase on the 2007 ordinary dividend. Going forward, our goal remains to steadily grow the dividend and deliver healthy income returns for our shareholders.

The Group operated a share buy back programme during the year and purchased 10.8 million shares at an average price of 256.6p per share. With conditions in a number of our key markets improving, whilst the buy back authority from the Board remains, we do not expect to make further purchases in the near term.

Strategic progress

Amlin’s core business is undoubtedly strong: it is well capitalised, has an excellent stable underwriting team and strong operational management. This is reflected in our Financial Strength Ratings from leading rating agencies.

Amlin achieved another milestone on being elevated to the FTSE 100 in December 2008.

Good risk management is at the heart of any insurance operation. Our underwriting catastrophe management and investment skills were tested this year and both stood up well. However, in an uncertain world, we recognise that it is important to continually challenge ourselves to think the unthinkable and to stress test the business.

Looking to the future we continue to review the Group’s strategic direction to ensure that we are able to build upon our recent achievements and develop our potential.

During 2008, the Group’s structure was broadened to ensure that Amlin is not only well positioned to sustain and develop existing business, but also to support future strategic growth plans.

We were also pleased to welcome new colleagues in France and the UK. The acquisition of Anglo French Underwriters SAS (AFU), based in Paris in November 2008, was an important step. AFU is the largest Lloyd’s approved coverholder in France, focusing on SME specialty business. It is intended to provide a platform for growth in property and casualty business in continental Europe.

Outlook

The outlook for trading is in marked contrast to six months ago. Overall our expectation is that the rating environment will continue to improve for many of our classes, though the speed and extent of change will vary. We expect that reinsurance, our largest business segment, will see a strong rise in pricing levels in 2009 and catastrophe exposed insurance business, such as energy and large commercial property, will also benefit from rate increases.

We expect that the response in other areas will be slower but we have started to see more signs of rate increases in our commercial motor account.

Amlin is in an excellent position to respond to improving markets. The Group has a strong balance sheet with sufficient capital to support organic growth in the business.

Board

The Board welcomed Mrs Christine Bosse as a new non-executive director in November 2008. Christine is from Denmark and brings additional insurance industry experience to our deliberations as CEO of TrygVesta.

Roger Joslin retired from Amlin at our AGM in April 2008 after serving as a non-executive director since 2001. We appreciate the excellent contribution that Roger made over the years and thank him for his service to the Group.

At our AGM in May 2009, Ram Mylvaganam will be retiring from the Board after a long involvement which started at Murray Lawrence before the creation of Amlin. He has always been keenly interested and helpful in the development of the Group for which we are very grateful.

The Amlin team

A key member of our team, Tony Holt, retired from his executive role as Group Underwriting Director on 31 December 2008. However, he is continuing as a member of the Board in a non-executive capacity. Tony built his career as an underwriter at Lloyd’s and was promoted to join the Amlin board in 2000. He has not only demonstrated great personal skill but also developed a team of colleagues who I am confident will build on his well deserved reputation for underwriting excellence. We acknowledge Tony’s valued contribution and wish him a very happy retirement.

The combination of major insurance losses and economic turbulence has been a stern challenge, yet we have still produced a sound result. This is due to the excellent performance of Charles Philipps, his management colleagues and all our employees who have continued to reach new goals whilst maintaining high service standards. I would like to thank them all for a job well done.

Roger Taylor
Chariman

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