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OPERATING AND FINANCIAL REVIEW / FINANCIAL PERFORMANCE
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The £121.6 million (2003: £120.3 million) before
tax profit is another strong financial performance,
particularly given the £74 million of net hurricane
and typhoon claims incurred in the year. Return on
equity was 22.3% (2003: 27.0%).
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IFRS Summary, please click here
Underwriting contributed £102.5 million
(2003: £119.4 million) to the pre tax result
with a small rise in the claims ratio being offset
by a fall in the expense ratio. Different levels of
ownership of capacity across the recent years of
account meant that the Group’s underwriting
performance was slightly worse than for
Syndicate 2001 as a whole. Specifically, the
impact of the hurricanes fell on 2004 but
reserve releases benefitted prior years of
account. Investments added £50.6 million
(2003: £32.0 million) reflecting increased
investment balances, a greater allocation of
funds to cash, which generated good average
returns, away from bonds and a strong
performance from our equity investments. Net
other costs amounted to £31.5 million (2003:
£31.1 million) largely unchanged for the year.
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| UNDERWRITING PERFORMANCE |
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The contribution from underwriting remained
healthy in 2004, despite claims from the
hurricane and typhoon catastrophes in the
third quarter. Underlying trading conditions
were strong in 2004 with an overall renewal
rate reduction of only 4%. Our retention ratio
was 79%.
Gross premiums grew by 0.9%. The 14%
increase in participation in our managed
syndicate was offset by the impact of the
stronger dollar against sterling (average rate
for 2004: $1.83/ £1; 2003: $1.64/£1). At
constant rates, gross premium written by
Syndicate 2001 fell by 8%.
Net premiums written increased by 0.3%. The
reinsurance protection was largely unchanged
for the full year but less business was ceded to
reinsurers through whole account quota share
arrangements. This was offset to a degree by
reinstatement costs from the windstorm losses.
Overall, 17% of gross income was ceded to
reinsurers, the same percentage as 2003.
Net earned premium was up by 1.7% to
£696.3 million (2003: £684.7 million). 1%,
44% and 55% of the earned premium was
written in the 2002, 2003 and 2004 years
of account respectively.
The total cost to Amlin of the US hurricanes is
now estimated to be $265 million gross and
$118.6 million net of reinsurance.
MOVEMENT IN HURRICANE ESTIMATES
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ORIGINAL FORECAST
$m
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CURRENT
$m |
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MOVEMENT
$M |
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| Charley |
61.2 |
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65.7 |
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4.5 |
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| Frances |
63.0 |
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90.4 |
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27.4 |
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| Ivan |
70.1 |
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79.2 |
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9.1 |
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| Jeanne |
51.4 |
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29.7 |
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(21.7 |
) |
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| Gross loss |
245.7 |
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265.0 |
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19.3 |
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| Reinsurance recoveries |
126.7 |
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139.6 |
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12.9 |
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119.0 |
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125.4 |
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6.4 |
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| Net reinstatement premiums |
(4.0 |
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(6.8 |
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(2.8 |
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| Net loss |
115.0 |
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118.6 |
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3.6 |
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Overall, the gross loss has increased by 8%
against our original estimate. Frances has
increased substantially, whilst Jeanne has
reduced, as claimants have allocated losses
from these hurricanes which followed similar
paths. Net of reinsurance, the movement is 3%.
In contrast our loss estimate for Typhoon Songda
has increased by £5 million from our initial
forecast which was at a very early stage. This
loss is now more fully developed and our reserve
estimate appears prudent.
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