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OPERATING AND FINANCIAL REVIEW / BUSINESS CONTEXT / AMLIN & LLOYDS

AMLIN & LLOYDS

Currently, all of Amlin’s insurance business is underwritten through its wholly owned Lloyd’s operation, Syndicate 2001, which is the largest independent business in the Lloyd’s market. Amlin’s share of the Lloyd’s market was 7% in 2004, as measured by underwriting capacity.

In the specialist sector of the insurance market occupied by Lloyd’s businesses, often dealing with complex commercial risks for large international corporations or the reinsurance of volatile exposures, the financial security of an insurer is a major influencing factor in the selection of carriers by brokers and clients.

Lloyd’s position in the global insurance market has been particularly vibrant and successful of late, providing an excellent environment for Amlin. Its operating performance has been strong and its relative Insurance Financial Strength Rating, as assessed by Standard & Poor’s, has strengthened when compared with its major international competitors. A M Best, another rating agency that is widely used by brokers and clients in the United States, upgraded Lloyd’s from ‘A-’ to ‘A’, citing “Lloyd’s improving prospective capitalisation, strong operating performance, its global reach and improvements in risk management”.

Much of the business written is in the “subscription” market, where individual insurers underwrite a proportion of the policy rather than the entire risk. Substantial available market capacity allows brokers to efficiently place this type of insurance in the London market. In 2004 Lloyd’s total underwriting capacity grew to a record £15 billion, up 4% from 2003 and 49% since 2000.

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As can be seen below, partly as a result of a successful capacity offer made in 2002, Amlin has grown its capacity more than the market over this period, by 222%.

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Both Lloyd’s and Amlin source close to 70% of their business from North America and the United Kingdom. Lloyd’s is the second largest surplus lines insurer in the United States after AIG and in the UK has an approximate 10% share of the domestic market.

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Globally, Lloyd’s is particularly strong in the marine and aviation markets with shares of approximately 13% and 21% respectively, and in the area of underwriting large commercial risk, its global market share is estimated at approximately 5%.

In each of its chosen fields of expertise, Amlin enjoys a leading market position as shown in the following table:

AMLIN'S MARKET SHARE OF LLOYDS (2003)
Source: Moody's
CLASS MARKET
SHARE
MARKET
RANKING
Reinsurance 11.0% 1st
Motor 12.2% 3rd
Aviation 8.5% 4th
Marine 4.7% 6th
Property 4.7% 8th
Liability 4.1% 11th


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