23 Technical provisions
|
|
|
|
|
|
Provision for
unearned
premiums
£m |
|
Claims
outstanding
£m |
|
Total
£m |
|
|
| Gross |
|
|
|
|
|
|
|
|
| At 1 January 2004 |
|
|
429.6 |
|
999.5 |
|
1,429.1 |
|
| Exchange adjustments |
|
|
(16.8 |
) |
(37.2 |
) |
(54.0 |
) |
| Movement in the provisions |
|
|
88.0 |
|
213.0 |
|
301.0 |
|
|
| At 31 December 2004 |
|
|
500.8 |
|
1,175.3 |
|
1,676.1 |
|
|
| Reinsurance amount |
|
|
|
|
|
|
|
|
| At 1 January 2004 |
|
|
(29.3 |
) |
(265.4 |
) |
(294.7 |
) |
| Exchange adjustments |
|
|
1.1 |
|
10.8 |
|
11.9 |
|
| Movement in the provisions |
|
|
4.1 |
|
(64.0 |
) |
(59.9 |
) |
|
| At 31 December 2004 |
|
|
(24.1 |
) |
(318.6 |
) |
(342.7 |
) |
|
| Net |
|
|
|
|
|
|
|
|
| At 31 December 2004 |
|
|
476.7 |
|
856.7 |
|
1,333.4 |
|
|
| At 1 January 2004 |
|
|
400.3 |
|
734.1 |
|
1,134.4 |
|
|
The claims outstanding balance is further analysed between notified outstanding claims and incurred but not reported claims below:
|
|
|
|
|
|
|
|
2004
£m |
|
2003
£m |
|
|
| Notified outstanding claims |
|
|
|
|
791.9 |
|
618.0 |
|
| Claims incurred but not reported |
|
|
|
|
383.4 |
|
381.5 |
|
|
| Claims outstanding |
|
|
|
|
1,175.3 |
|
999.5 |
|
|
Back to top
24 Provisions for other risks, charges and deferred tax
a) Spread portfolio and other provisions
|
|
|
|
|
|
|
|
|
|
Provisions
for spread
underwriting losses
£m |
|
|
| At 1 January 2004 |
|
|
|
|
|
|
3.0 |
|
| Utilised during the year |
|
|
|
|
|
|
(1.0 |
) |
| Additions |
|
|
|
|
|
|
2.6 |
|
|
| At 31 December 2004 |
|
|
|
|
|
|
4.6 |
|
|
Included in the provision above is £0.1 million (2003: £0.4 million) representing the estimated loss attributable to the Group in respect of its
underwriting through Stace Barr Angerstein PLC and its subsidiary, SBA Underwriting Limited, the accounts of which are not yet available.
b) The deferred tax (liability) asset is attributable to timing differences arising on the following:
|
|
Underwriting
results
£m |
|
Provisions
for losses
£m |
|
Unrelieved
trading losses
carried forward
£m |
|
Other
timing
differences
£m |
|
Total
£m |
|
|
| At 1 January 2004 |
40.7 |
|
(1.0 |
) |
(15.2 |
) |
(7.6 |
) |
16.9 |
|
| Deferred tax charge for the year |
31.0 |
|
(0.3 |
) |
6.4 |
|
(1.6 |
) |
35.5 |
|
|
| At 31 December 2004 |
71.7 |
|
(1.3 |
) |
(8.8 |
) |
(9.2 |
) |
52.4 |
|
|
25 Other creditors including taxation and social security
|
|
|
|
2004
£m |
|
2003
£m |
|
|
| Loan stock |
|
|
- |
|
6.9 |
|
| Bank loan |
|
|
30.3 |
|
0.4 |
|
| Finance lease creditors (see note 26) |
|
|
0.1 |
|
0.1 |
|
| Proposed dividend (see note 12) |
|
|
19.6 |
|
6.4 |
|
| Corporation tax |
|
|
5.6 |
|
11.9 |
|
| Other creditors |
|
|
17.1 |
|
6.4 |
|
|
|
|
|
72.7 |
|
32.1 |
|
|
A subsidiary, Amlin Underwriting Group plc, had £6.9 million of unsecured loan stock outstanding at 31 December 2003, which was repaid in full
to loan note holders in April 2004.
A secured term facility of £30 million was arranged on 24 November 2004 for the Company by a group of banks led by Lloyds TSB Bank plc for a
period of 12 months, with the first interest period being 25 November 2004 to 25 February 2005. The rate of interest is the aggregate of the LIBOR
on the first day of the interest period, plus margin (fixed at 2.25%) and mandatory cost if any, the last of which is calculated by reference to banks’
minimum reserve requirements. After the initial interest period, the Company is required to select an interest period of one, two, three or six months
or any other period agreed by the lender. The Company may repay all or part of the loan at the end of any interest period by giving notice of no less
than 10 business days.
26 Creditors: amounts falling due after more than one year
|
|
|
|
2004
£m |
|
2003
£m |
|
|
| Subordinated bond |
|
|
25.6 |
|
- |
|
| Bank loan |
|
|
2.7 |
|
3.0 |
|
| Finance lease creditors |
|
|
0.1 |
|
0.1 |
|
| Performance related incentive schemes |
|
|
18.3 |
|
14.4 |
|
| Other creditors |
|
|
- |
|
2.3 |
|
|
|
|
|
46.7 |
|
19.8 |
|
|
Obligations due under finance leases and hire purchase contracts are payable as follows:
|
|
|
|
2004
£m |
|
2003
£m |
|
|
| Within one year |
|
|
0.1 |
|
0.1 |
|
| Within two to five years |
|
|
0.1 |
|
0.1 |
|
|
|
|
|
0.2 |
|
0.2 |
|
|
|
| Company |
|
|
2004
£m |
|
2003
£m |
|
|
| Subordinated bond |
|
|
25.6 |
|
- |
|
| Bank loan |
|
|
2.7 |
|
3.0 |
|
|
|
|
|
28.3 |
|
3.0 |
|
|
The Group’s Employee Share Ownership Trust (ESOT) had a loan from Lloyds TSB Bank plc at the year end of £3.0 million (2003: £3.4 million)
secured by a fixed charge over a proportion of the Company’s shares held by the ESOT. This loan is pursuant to a new facility agreed in September
2003 which replaced the ESOT’s previous such facility and also enabled the repayment by the ESOT of a loan from the Company of £2.3 million
in 2003. The new loan is repayable over 10 years and is guaranteed by the Company. It is anticipated that it will be repaid from the proceeds of
exercises of options over Amlin plc ordinary shares held by the ESOT.
A US$50 million subordinated bond was issued by the Company on 23 November 2004. The bond bears an interest rate of 7.11% from the issue
date to a reset date of 23 November 2014, payable semi-annually in arrears on 23 May and 23 November in each year. The interest between the
reset date and the maturity date, being the interest payment date in November 2019, is payable quarterly at the rate of three month US$ LIBOR
plus 3.48%. The bond will be redeemed on the maturity date at the principal amount, together with the accrued interest. However, the Company
has the option to redeem the bond in whole, subject to fulfilling certain requirements, on the reset date or any interest payment date thereafter at
the principal amount plus accrued interest.
27 Commitments
There were no capital commitments or authorised but uncontracted capital commitments at the end of the financial year.
The Group leases certain land and buildings on short-term operating leases, under which the minimum annual commitments were £2.3 million
(2003: £2.3 million). The leases expire in over five years.
28 Reconciliation of profit before taxation to net cash inflow from operating activities
|
|
|
|
2004
£m |
|
2003
£m |
|
|
| Profit on ordinary activities before taxation |
121.6 |
|
120.3 |
|
| Net movement on Premium Trust Funds for non-aligned participations |
(3.0 |
) |
- |
|
| Depreciation charge |
2.6 |
|
4.1 |
|
| Syndicate capacity amortisation charge |
3.1 |
|
3.1 |
|
| Amortisation of goodwill |
0.4 |
|
- |
|
| Realised losses on investments |
0.3 |
|
3.4 |
|
| Unrealised (gains) losses on investments |
(0.2 |
) |
3.1 |
|
| (Increase) decrease in debtors |
(72.2 |
) |
3.7 |
|
| Increase in prepayments and accrued income |
(2.7 |
) |
(28.4 |
) |
| Increase in insurance debtors, prepayments and accrued income |
(29.8 |
) |
(8.1 |
) |
| Increase in technical provisions |
266.0 |
|
116.9 |
|
| (Increase) decrease in reinsurers’ share of technical provisions |
(58.3 |
) |
76.7 |
|
| Increase in provisions for other risks and charges |
7.7 |
|
17.0 |
|
| Increase (decrease) in insurance creditors, accruals and deferred income |
4.9 |
|
(73.9 |
) |
| (Decrease) increase in other creditors relating to operating activities |
(9.6 |
) |
27.7 |
|
| Increase in accruals and deferred income |
7.7 |
|
17.0 |
|
| Finance servicing costs |
5.1 |
|
6.6 |
|
|
| Net cash inflow from operating activities |
243.6 |
|
289.2 |
|
|
29 Movements in cash, portfolio investments and financing
|
|
At 31
December
2003
£m |
|
Cash flow
£m |
|
Changes
to market
value and
currencies
£m |
|
At 31
December
2004
£m |
|
|
| Cash at bank and in hand |
23.2 |
|
16.6 |
|
- |
|
39.8 |
|
| Shares and other variable yield securities |
50.6 |
|
36.0 |
|
3.9 |
|
90.5 |
|
| Debt and other fixed income securities |
739.0 |
|
(26.7 |
) |
(3.9 |
) |
708.4 |
|
| Participations in investments pools |
128.3 |
|
177.1 |
|
- |
|
305.4 |
|
| Deposits with credit institutions |
80.4 |
|
60.4 |
|
- |
|
140.8 |
|
| Overseas deposits |
34.5 |
|
7.0 |
|
- |
|
41.5 |
|
| Other investments |
4.0 |
|
(1.1 |
) |
- |
|
2.9 |
|
|
| Managed cash and investments |
1,060.0 |
|
269.3 |
|
- |
|
1,329.3 |
|
|
| Non aligned cash and investments |
14.9 |
|
- |
|
- |
|
14.9 |
|
|
| Total cash and investments |
1,074.9 |
|
269.3 |
|
- |
|
1,344.2 |
|
|
| Loans due within one year |
(7.3
|
) |
(23.0 |
) |
- |
|
(30.3 |
) |
| Loans due after one year |
(3.0 |
) |
(25.3 |
) |
- |
|
(28.3 |
) |
|
|
(10.3 |
) |
(48.3 |
) |
- |
|
(58.6 |
) |
|
|
1,064.6 |
|
221.0 |
|
- |
|
1,285.6 |
|
|
Back to top
30 Group owned net assets
The assets and liabilities attributable to Group owned companies, as opposed to the Group’s syndicate participations, are summarised below:
|
|
In Group
owned
companies
2004
£m |
|
In
syndicates
2004
£m |
|
Total
2004
£m |
|
In Group
owned
companies
2003
£m |
|
In
syndicates
2003
£m |
|
Total
2003
£m |
|
|
| Investments |
|
|
|
|
|
|
|
|
|
|
|
|
| Other financial investments |
309.7 |
|
991.7 |
|
1,301.4 |
|
235.7 |
|
812.7 |
|
1,048.4 |
|
| Debtors |
|
|
|
|
|
|
|
|
|
|
|
|
| Other debtors |
49.6 |
|
75.8 |
|
125.6 |
|
12.6 |
|
40.0 |
|
52.6 |
|
| Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Intangible assets |
56.7 |
|
- |
|
56.7 |
|
57.0 |
|
- |
|
57.0 |
|
| Tangible assets |
6.2 |
|
- |
|
6.2 |
|
6.4 |
|
- |
|
6.4 |
|
| Cash at bank and in hand |
28.9 |
|
13.9 |
|
42.8 |
|
3.5 |
|
23.0 |
|
26.5 |
|
| Prepayments and accrued income |
13.6 |
|
8.0 |
|
21.6 |
|
9.8 |
|
9.2 |
|
19.0 |
|
| Other syndicate assets |
- |
|
818.0 |
|
818.0 |
|
- |
|
741.5 |
|
741.5 |
|
|
| Total assets |
464.7 |
|
1,907.4 |
|
2,372.1 |
|
325.0 |
|
1,626.4 |
|
1,951.4 |
|
|
| Provisions for other risks and charges |
(57.0 |
) |
- |
|
(57.0 |
) |
(19.9 |
) |
- |
|
(19.9 |
) |
|
| Creditors |
- |
|
- |
|
|
|
|
|
|
|
|
|
| Amounts due within one year |
(60.3 |
) |
(12.4 |
) |
(72.7 |
) |
(14.3 |
) |
(17.8 |
) |
(32.1 |
) |
| Amounts due after more than one year |
(46.7 |
) |
- |
|
(46.7 |
) |
(19.8 |
) |
- |
|
(19.8 |
) |
| Accruals and deferred income |
(29.8 |
) |
- |
|
(29.8 |
) |
(11.8 |
) |
(0.1 |
) |
(11.9 |
) |
|
|
(136.8 |
) |
(12.4 |
) |
(149.2 |
) |
(45.9 |
) |
(17.9 |
) |
(63.8 |
) |
|
| Other syndicate liabilities |
- |
|
(1,722.0 |
) |
(1,722.0 |
) |
- |
|
(1,484.4 |
) |
(1,484.4 |
) |
|
| Consolidated shareholders’ funds at 31 December |
270.9 |
|
173.0 |
|
443.9 |
|
259.2 |
|
124.1 |
|
383.3 |
|
|
The assets of the syndicates included above are only available to pay syndicate related expenditure.
31 Contingent liabilities
a) Funds at Lloyd’s – Deeds of Covenant and Letters of Credit
The Group has entered into various deeds of covenant in respect of certain corporate member subsidiaries to meet each such subsidiary’s
obligations to Lloyd’s. At 31 December 2004, the total guarantee given by the Group under these deeds of covenant (subject to limited exceptions)
amounted to £252.2 million (2003: £209.5 million). The obligations under the deeds of covenant are secured by a fixed charge of the same
amount over investments, and a floating charge over the investments and other assets of the Group, in favour of Lloyd’s. Lloyd’s has the right to
retain the income on the charged investments, although it is not expected to exercise this right unless it considers there to be a risk that one or
more of the covenants might need to be called and, if called, might not be honoured in full.
As liability under each deed of covenant is limited to a fixed monetary amount, the enforcement by Lloyd’s of any deed of covenant in the event
of a default by a corporate member, where the total value of investments has fallen below the total of all amounts covenanted, may result in the
appropriation of a share of the Group’s Funds at Lloyd’s that is greater than the proportion which that subsidiary’s overall premium limit bears to
the total overall premium limit of the Group.
The Group has also entered into Lloyd’s deposit trust deeds for Funds at Lloyd’s by which letters of credit (LOCs) for a total amount
of £130 million (2003: £130 million and US$90 million) have been deposited. The sterling LOCs were deposited at Lloyd’s in
November 2003 pursuant to a bank LOC facility agreed in September 2003 which replaced the previous such facility. US$90 million
of dollar denominated LOCs, which were procured in 2001 by agreement with the Company’s 9.8% shareholder State Farm Mutual
Automobile Insurance Company, were released by Lloyd’s in November 2004.
b) Reinsurance to close (RITC) on spread portfolio
RITC is a particular type of reinsurance contract entered into by Lloyd’s syndicates whereby the members of a syndicate for a particular year
of account (the closing year) agree with the members of that or another syndicate for a later year of account (the reinsuring members) that the
reinsuring members will indemnify, discharge or procure the discharge of all the known and unknown liabilities of the closing year arising out
of insurance business underwritten by the syndicate in the closing year of account.
In the event that a corporate member resigns from a syndicate or reduces its participation relative to the other members of the syndicate, it will make
a net payment of an RITC premium. The payment of the RITC premium does not release members from ultimate responsibility for claims payable on
risks they have written and in the event that the reinsuring members were unable to pay and the other elements in the Lloyd’s chain
of security fail, the members would remain liable for the payment of any outstanding claims. Payment of an RITC premium is conventionally treated
as settling a member’s outstanding claims for the closing year and this convention has been adopted in these accounts.
There is no mechanism for the Group to account for the gross claims payments and recoveries made from the reinsuring members or to quantify
the ongoing exposure in respect of closed years of account. The directors consider that the possibility of the corporate members having to assume
these liabilities is remote.
32 Related party transactions
During the period under review Mr B D Carpenter, a director, was a member of Syndicate 2001, managed by the Group, as set out below. Under
the terms of an offer made in 2002 to all external members he exercised the right to participate in the 2003 year of account for 50% of his 2002
capacity and all profit commission payable to the Group was waived. As a result of the offer, Mr Carpenter does not participate in the Syndicate for
the 2004 or subsequent years of account.
Capacity underwritten
|
| Year of account |
2002
£000 |
|
2003
£000 |
|
2004
£000 |
|
2004
£000 |
|
|
| B D Carpenter |
291 |
|
182 |
|
- |
|
- |
|
|
The aggregate of fees and profit commission paid by Mr Carpenter was £1,200 (2003: £1,527), of which none was overdue at 31 December 2004
(2003: £nil).
State Farm Mutual Automobile Insurance Company, a major shareholder, procured for the Group unsecured letters of credit. This facility was
provided at a commission rate of 5% and £2.2 million (2003: £4.0 million) was paid under this arrangement to State Farm in respect of the year.
This arrangement concluded in November 2004, when the final part of the letters of credit were released by Lloyd’s.
The Group holds a 60% shareholding in Amlin Plus Limited (APL), a company which underwrites insurance business, principally bloodstock, on
behalf of Syndicate 2001 at Lloyd’s. APL placed £12,852,484 (2003: £5,467,973) of premium during 2004 and earned brokerage commission
totalling £2,564,243 (2003: £962,472).
33 Principal exchange rates
The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the production of these
accounts were:
|
|
Average rate |
|
Year end rate |
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
| US dollar |
1.83 |
|
1.64 |
|
1.92 |
|
1.79 |
|
| Canadian dollar |
2.38 |
|
2.29 |
|
2.30 |
|
2.31 |
|
| Euro |
1.47 |
|
1.45 |
|
1.41 |
|
1.42 |
|
|
The table below sets out the Group’s share of the currency exposures of the Syndicate at 31 December:
|
|
Assets
£m |
|
Liabilities
£m |
|
Net
2004
£m |
|
Net
2003
£m |
|
|
| US dollar |
960.7 |
|
939.1 |
|
21.6 |
|
84.6 |
|
| Canadian dollar |
50.3 |
|
40.0 |
|
10.3 |
|
10.0 |
|
| Euro |
80.1 |
|
72.1 |
|
8.0 |
|
5.3 |
|
|
|
1,091.1 |
|
1,051.2 |
|
39.9 |
|
99.9 |
|
|
