31 Contingent liabilities
The Group has no contingent liabilities at year end. During the year, the guarantees given by the Group under various deeds of covenant in respect of certain corporate member subsidiaries to meet each such subsidiary’s obligations to Lloyd’s were released (2007 guarantee: £16.7 million).
32 Commitments
There were no capital commitments at the end of the financial year except the commitments made to Leadenhall Capital Partners LLP as described in note 34 (2007: £nil).
Throughout the year the Group leased certain land and buildings on short-term operating leases, under which the minimum annual commitments were £2.8 million (2007: £2.8 million). The leases relating to £0.5 million (2007: £nil) expire within one year, £2.3 million (2007: £nil) expire in between 2 and 5 years, the remainder expire in over 5 years (2007: £2.2 million).
33 Cash generated from operations
| Notes | 2008 £m |
2007 £m |
|
Profit on ordinary activities before taxation |
121.6 | 445.0 | |
Adjustments: |
|||
Depreciation charge |
13 | 3.3 | 3.0 |
Amortisation charge |
21 | 1.4 | 0.8 |
Finance costs |
12 | 21.2 | 20.0 |
Interest received |
6 | (94.3) | (102.9) |
Dividends received |
6 | (11.9) | (12.5) |
Losses/(gains) on investments realised and unrealised |
6 | 88.2 | (41.6) |
Movement in operating assets and liabilities: Net sales/(purchases) of financial investments |
17 | 155.4 | (232.1) |
Exchange (gains)/losses on investments |
17 | (547.5) | (2.5) |
Decrease in loans and receivables |
(157.4) | 51.9 | |
Decrease in reinsurance contract assets |
(100.0) | 69.2 | |
Decrease in insurance contract liabilities |
441.0 | (136.4) | |
Increase in trade and other payables |
37.2 | 16.2 | |
Increase in retirement benefits |
1.2 | (4.7) | |
Exchange losses/(gains) on long term borrowings |
18.1 | (0.8) | |
Exchange losses on other non-operating assets and liabilities |
250.2 | – | |
Other non-cash movements |
(5.3) | (2.1) | |
Cash generated from operations |
222.4 | 70.5 |
34 Related party transactions
Amlin plc is a publicly owned company listed on the London Stock Exchange. Major shareholders are presented in the Directors’ Report.
The following transactions were carried out with related parties:
Key management compensation
Key management personnel are those directors and senior managers responsible for planning and control of the activities of the Group. Key management comprises sixteen executive directors and employees and eight non-executive directors (2007: nine and seven respectively). Compensation paid during the year to key management personnel is analysed below:
| 2008 £m |
2007 £m |
|
Short term employee benefits |
11.3 | 8.5 |
Post-employment benefits |
0.9 | 0.4 |
Share-based payments |
0.7 | 0.5 |
| 12.9 | 9.4 |
Transactions with directors
Certain directors of the Company are also directors of other companies, as described in the directors’ biographical details. Such other companies may, and in some cases do, conduct business with companies in the Amlin Group, including GeoVera Insurance Ltd (of which Mr Feinstein is a non-executive director) and TrygVesta A/S (of which Mrs Bosse is Group Chief Executive Officer), which both purchase reinsurance from the Amlin Group. In all cases transactions between the Amlin Group and such other companies are carried out on normal arms length commercial terms without any involvement by the director concerned on either side of the transaction.
Sir Mark Wrightson Bt and a family company currently insure a number of motor vehicles on a group policy with the Amlin UK division of Syndicate 2001. The policy was placed on the recommendation of a broker on normal commercial terms and has an annual premium of £2,490 per annum. There are no claims pending. As with any motor policy meeting UK statutory requirements, there is no policy limit in the case of such events as third party damage and personal injury (extreme instances of which are covered by the Syndicate’s usual reinsurance protections).
Reinsurance contracts between Syndicate 2001 and Amlin Bermuda Ltd (ABL)
Syndicate 2001 placed a number of reinsurance contracts with ABL, a wholly owned subsidiary of the Group.
The reinsurance contracts placed with ABL in the year ended 31 December 2008 are:
- nine proportional treaty reinsurance contracts for Marine, direct property, special risks, specie, war, excess of loss treaty, combined hull, cargo and liability and miscellaneous classes of business;
- a whole account quota share for the 2008 underwriting year; and
- one excess of loss reinsurance contract for Aviation.
In the year ended 31 December 2008 ABL placed one excess of loss reinsurance contract with Syndicate 2001.
All reinsurance contracts were agreed on an arms length basis with terms that are consistent with those negotiated with third parties. These reinsurance contracts are eliminated on consolidation of the Group’s results and the effects on the income statements of such eliminations can be seen in note 4, segmental reporting under the column “intra group”.
The amount of gross written premium ceded to ABL during the period ended 31 December 2008 was £106.0 million (31 December 2007: £90.3 million) being £36.3 million (31 December 2007: £35.7 million) of specific variable cessions and £69.7 million (31 December 2007: £54.6 million) of Syndicate 2001 whole account quota share. ABL recorded a profit of £34.9 million on these reinsurance contracts for the same period (31 December 2007: profit £32.3 million)
At 31 December balances included within ABL with respect to Syndicate 2001 reinsurance contracts include:
| 2008 £m |
2007 £m |
|
Insurance receivables |
56.2 | 38.5 |
Insurance contracts |
||
– outstanding claims |
(102.2) | (50.8) |
– unearned premium |
(69.7) | (44.4) |
– creditors arising from insurance operations |
(18.7) | (11.3) |
Cash amounting to £55.6 million (2007: £71.2 million) was paid by Syndicate 2001 to ABL in respect of these contracts.
Sale of goods and services
The Group, through its wholly owned subsidiary Amlin Corporate Services Limited, purchases goods and services on behalf of all Group companies and Syndicate 2001. In addition, Amlin plc, the ultimate parent company of the Group, procures certain services.
Amlin plc charges SBA Underwriting Limited £15,000 per annum for accounting and administration services which is collected on a quarterly basis throughout the year. AUT Holdings Limited, a subsidiary of Amlin plc, holds a 30% interest in the parent company and underwriting of SBA Underwriting Limited.
Purchases of goods and services
Amlin plc, the ultimate parent company within the Group, purchased goods and services from fellow Group companies. The values of these are disclosed below. All goods and services were purchased at cost with the exception of Amlin Bermuda Ltd.
Company |
||
| 2008 £m |
2007 £m |
|
Purchases of goods and services: |
||
– Amlin Corporate Services Limited |
7.7 | 7.8 |
Other Group companies
In April 2008, a wholly owned subsidiary Amlin Illinois, Inc. was incorporated in the United States of America with authorised capital of 10,000 US dollars and an initial capital contribution by Amlin plc of 1,000 US dollars.
During the year, Amlin Corporate Services Limited invested £1.5 million in a 50% owned joint venture named Leadenhall Capital Partners LLP (LCP). LCP was established as a new asset management agency focused on insurance linked investments. The Group has committed to pay up to $6 million to support the operations of the agency as part of the joint venture agreement and a further $75 million seed capital to the business.
Amlin Underwriting Limited and Lycetts Holdings Limited, the owners of Lycett, Browne-Swinburne and Douglass Limited and Lycetts Hamilton Limited, own 60% and 40% respectively of the share capital of Amlin Plus Limited (Amlin Plus). The business of Amlin Plus (bloodstock insurance) is written under a binding authority agreement with Syndicate 2001, some of which is sourced through a single broker, Lycett, Browne-Swinburne and Douglas Limited. Syndicate 2001 is managed by Amlin Underwriting Limited. The capacity on Syndicate 2001 is underwritten by fellow subsidiaries in the Amlin Group. All transactions between Amlin Plus and its related parties are conducted on an arm’s length basis.
During the year Amlin Plus wrote £15.5 million (2007: £17.2 million) of premium under the binding authority agreement, of which £7.7 million (2007: £6.8 million) was produced by Lycett, Browne-Swinburne and Douglass Limited and its predecessor earning brokerage commission of £1.1 million (2007: £1.1 million) on this business. At the year end, Syndicate 2001 was owed £4.1 million (2007: £4.8 million) by Amlin Plus and Lycett, Browne-Swinburne and Douglass Limited owed £2.3 million (2007: £1.4 million) to Amlin Plus.
Year end balance with related parties
Cash resources are held centrally within the Group. This eliminates the need for many of the Group’s subsidiary companies to maintain bank accounts and optimises the management of cash resources. As a result of this practice many transactions within the Group are accounted for through intercompany accounts.
The following table shows the balances outstanding at the year end between Amlin plc and its related parties. The balances are all unsecured and no provisions are required for bad or doubtful debts.
Balances during 2008 |
||||
| Highest £m |
Lowest £m |
2008 £m |
2007 £m |
|
Balances outstanding at the year end: |
||||
– Syndicate 2001* |
(0.2) | (130.8) | (0.2) | – |
– AUT Holdings Limited |
(4.7) | (4.7) | (4.7) | (4.7) |
– Amlin Investments Limited |
(131.4) | (188.4) | (149.4) | (188.1) |
– St Margaret’s Insurance Services Limited |
1.3 | 1.3 | 1.3 | 1.3 |
– Amlin Corporate Services Limited |
87.6 | (21.3) | 87.6 | (15.5) |
– Amlin Corporate Member Limited |
333.1 | 58.6 | 81.8 | 338.6 |
– AUT (1 – 10) Limited companies |
(50.4) | (75.1) | (60.2) | (44.6) |
– Delian A – L Limited companies |
(4.4) | (6.1) | (4.9) | (5.4) |
– Amlin (Overseas Holdings) Limited |
32.5 | 0.1 | 32.5 | 0.1 |
– Amlin Underwriting Services Limited |
2.9 | 2.4 | 2.9 | 2.4 |
– Amlin Underwriting Limited |
4.9 | (0.1) | 0.1 | 1.4 |
– Allied Cedar Insurance Group Limited |
0.1 | – | – | 0.1 |
– Amlin Plus Limited |
0.3 | 0.2 | 0.3 | 0.2 |
– Amlin Credit Limited |
(2.8) | (2.8) | (2.8) | (2.8) |
– Amlin (Firebreak No. 1) Limited |
4.6 | – | 4.6 | – |
| (11.1) | 83.0 | |||
* Excludes balances on intra-group reinsurances detailed above.
All of the above intra-group debt is repayable on demand and corporation tax provisions reflect arms-length prices for the transactions between the Company and its subsidiaries.
Principal subsidiary companies
The principal subsidiary undertakings at 31 December 2008 which are consolidated in these financial statements, all of which are wholly owned, operate in the UK, Bermuda, the US, France and Singapore:
Subsidiary undertakings |
Principal activity |
Registered in |
Amlin Underwriting Limited |
Lloyd’s managing agency |
England and Wales |
Amlin Corporate Services Limited |
Group service, employing and intermediate holding company |
England and Wales |
Amlin Investments Limited |
Investment company |
England and Wales |
Allied Cedar Insurance Group Limited |
Intermediate holding company |
England and Wales |
Amlin Underwriting Services Limited |
Lloyd’s service company |
England and Wales |
Amlin Plus Limited* |
Lloyd’s service company |
England and Wales |
AUT Holdings Limited |
Intermediate holding company |
England and Wales |
Amlin Corporate Member Limited |
Corporate member at Lloyd’s |
England and Wales |
AUT (No 2) Limited |
Corporate member at Lloyd’s |
England and Wales |
AUT (No 6) Limited |
Corporate member at Lloyd’s |
England and Wales |
AUT (No 7) Limited |
Corporate member at Lloyd’s |
England and Wales |
AUT (No 8) Limited |
Corporate member at Lloyd’s |
England and Wales |
Delian Delta Limited |
Corporate member at Lloyd’s |
England and Wales |
Amlin (Overseas Holdings) Limited |
Intermediate holding company |
England and Wales |
Amlin Bermuda Ltd |
Reinsurance company |
Bermuda |
Amlin Singapore Pte Limited |
Lloyd’s service company |
Singapore |
Amlin Illinois, Inc. |
Service company |
United States of America |
Amlin France SAS** |
Intermediate holding company |
France |
Anglo French Underwriters SAS** |
Lloyd’s coverholder |
France |
Some subsidiaries have been omitted from this statement to avoid providing particulars of excessive length but none materially affects the results or assets of the Group.
* 60% owned by the Group
** 96.53% owned by the Group
35 Acquisition of subsidiary
On 25 November 2008, the Group acquired 96.53% of the share capital and voting rights in Financière Europe Assurances SAS (FEA), the holding company of Anglo French Underwriters SAS and Anglo French UK Ltd. The FEA group is a Lloyd’s approved general insurance coverholder in France specialising in SME speciality business. The remaining 3.47% is owned by executive management, over which Amlin Group has an option to buy, the price being dependent on the performance of the business.
The purpose of the acquisition was to strengthen the Group’s market position in targeted continental European business segments and to acquire the skilled workforce to drive future profitability in those segments.
Purchase consideration: |
£m |
– Initial consideration |
26.3 |
– Deferred cost consideration |
3.8 |
– Direct cost relating to the acquisition |
1.0 |
Total purchase consideration |
31.1 |
Fair value of assets acquired (see below) |
3.6 |
Goodwill |
27.5 |
The assets and liabilities arising from the acquisition are as follows:
| Fair value £m |
Acquiree’s carrying amount £m |
|
Cash and cash equivalents |
4.3 | 4.3 |
Property, plant and equipment |
0.1 | 0.1 |
Insurance receivables |
3.0 | 3.0 |
Intangible assets |
7.9 | 5.4 |
Financial liabilities |
(4.8) | (4.8) |
Insurance liabilities |
(8.1) | (8.1) |
Other assets and liabilities |
1.3 | 1.3 |
Net tax liability |
(0.1) | (0.1) |
Net assets acquired |
3.6 | 1.1 |
Intangible assets relate to the customer relationships held between FEA, its subsidiaries and its customers comprising renewal rights and customer lists. This was calculated based of past and forecast underwriting cash flows of the business principally from underwriting on existing business expected to be renewed using existing customer relationships.
The goodwill shown above arose from the premium paid for strengthening the Group’s market position in targeted business segments and acquiring the skilled workforce to drive future profitability in those segments. No provision for impairment of goodwill has been made at the balance sheet date.
The acquiree’s carrying amount shown represents the balance sheet of FEA group as at 25 November 2008 prepared in accordance with French GAAP adjusted for material differences to IFRS. The FEA group contributed £0.3 million to the Group’s profit before tax for the period between 25 November 2008 and 31 December 2008. If the acquisition of FEA group had been completed on the first day of the financial year the Group result for the period would have been £80.2 million.
The Group’s intention following the acquisition of the FEA group is to underwrite, through Syndicate 2001, much of the business that was previously introduced by the FEA group to other underwriters. If the Group had commenced underwriting the business managed by the FEA group on the first day of the financial year, the acquisition would have contributed an additional £28.6 million gross premium written to the Group’s Income Statement.
36 Group owned net assets
Accounting policies
Basis of Preparation
Amlin plc (the Company), domiciled in the United Kingdom, is the ultimate parent company for the Amlin Group.
The separate financial statements of the Company are prepared as required by the Companies Act 1985. The balance sheet of the parent company has also been prepared in accordance with IFRS as adopted for use in the European Union (EU). In accordance with the extension permitted under section 230 of the Companies Act 1985, the income statement of the parent company is not presented as part of these accounts. The profit after taxation for the year of the parent company was £119.5 million (2007: £85.4 million).
The financial statements have been prepared on the historical cost basis except for financial investments, loans and receivables, share options and pension assets and liabilities which are measured at their fair value.
The accounting policies that are used in preparation of these statements are consistent with the accounting policies used in the preparation of the consolidated financial statements of the Group as set out in those financial statements.
The additional accounting policies that are specific to the separate financial statements of the Company are set out below.
Investment in subsidiaries
Other financial investments in Group undertakings are stated at cost and are reviewed for impairment when events, or changes in circumstances, indicate the carrying value may be impaired.
Dividend income
Dividend income from investments in subsidiaries is recognised when the right to receive payment is established.
37 Cash and cash equivalents
Cash and cash equivalents represents cash at bank and in hand and short-term bank deposits which can be recalled within 24 hours.
38 Financial investments
The cost and valuation of the Company’s investments are as follows:
| At valuation 2008 £m |
At valuation 2007 £m |
At cost 2008 £m |
At cost 2007 £m |
|
Financial assets at fair value through income |
||||
Participation in investment pools |
23.0 | 70.5 | 23.0 | 70.5 |
Debt and other fixed income securities |
28.7 | 50.8 | 28.9 | 50.0 |
Derivatives |
(40.2) | (1.3) | 14.6 | – |
Available for sale financial assets |
||||
Unlisted equities |
4.0 | – | 4.0 | – |
Total |
15.5 | 120.0 | 70.5 | 120.5 |
Unlisted equity investment is the parent company’s acquisition of 19.9% of the shares in TL Dallas Group Limited for £4.0 million on 13 August 2008. Further details are in note 17 in the notes to the Group accounts.
39 Loans and receivables
| 2008 £m |
2007 £m |
|
Amounts due from subsidiary undertakings |
214.2 | 340.6 |
| 2008 £m |
2007 £m |
|
Current portion |
213.7 | 340.6 |
Non-current portion |
0.5 | – |
| 214.2 | 340.6 |
40 Investments in subsidiary undertakings
Company |
2008 £m |
2007 £m |
At 1 January |
802.5 | 786.2 |
Adjustments during the year |
– | 16.3 |
At 31 December |
802.5 | 802.5 |
Further details on investments in subsidiary undertakings are contained in note 34 of Group notes for further details.
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