Performance
Outlook for 2009
The impact of exchange rate movements
Another important variable for an international company such as Amlin is the level of exchange rates. Over recent years the strength of sterling has eroded trading margins in our core US market. The dramatic weakening of sterling against the dollar, yen and the euro should be highly beneficial for reported profitability. In simple terms, all other things being equal, the level of premium for 2009 will increase by 18% to £1.2 billion if the sterling/dollar exchange rate stays at around US$1.46:£1.00.
However, a consequence of sterling weakness is that risk exposures have increased. Amlin’s robust capital position will allow some increased exposure to be absorbed but we will reduce some peak net exposures as a result of this and lower retrocessional capacity. Consequently in late 2008 we set up a Special Purpose Lloyd’s Syndicate (Syndicate 6106) which will write a 15% share of our excess of loss reinsurance account. This is supported by individual Lloyd’s members and benefits from the security of the Lloyd’s Central Fund. From a financial perspective, Amlin will receive a fee for providing the syndicate and a profit share if a pre determined level of profit is met.
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