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OPERATING AND FINANCIAL REVIEW / THE COMPANY / VISION, STRATEGY, DELIVERY

VISION, STRATEGY, DELIVERY

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CHARLES PHILLIPS CHARLES PHILIPPS CHIEF EXECUTIVE

“Our vision for 2009 is to become the ‘global reference point for quality’ in our markets.”
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Since October 2000 Amlin has been focussed on delivering its Vision for 2005. In 2000 we set out to:
  • Become the most astute leader of insurance risks, with exceptional risk management expertise;
  • Become recognised by brokers, insureds and reinsurers for financial strength, durability and client responsiveness;
  • Become “the place to work” in the industry;
  • Deliver excellent returns to shareholders.
Our performance in meeting these objectives is detailed in the remainder of this Operating and Financial Review. We have made good progress and this is evidenced by:
  • Syndicate 2001’s performance, measured as average return on capacity for the 2001, 2002 and 2003 years of account1, has been the highest among the 10 largest managing agents in Lloyd’s – a sign of astute underwriting and risk management;
  • In a survey conducted during 2004 among some 400 placing brokers Syndicate 2001 was top ranked for perceived financial strength among Lloyd’s businesses;
  • In a survey of employees conducted by MORI in May 2004, Amlin compared extremely favourably against financial services company norms for employee satisfaction. Retention of our senior underwriters has been greater than 95% for the fourth year in succession;
  • Amlin’s total shareholder return since 1 January 2000, of 96%, has been high relative to insurers internationally.
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NEW VISION
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The progress made to date provides the platform for future success. During 2004, we have set a new Vision for 2009 which is intended to stretch our leadership position in the London insurance market.

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Our aim is to become “the global reference point for quality” in our markets. In achieving this we will concentrate on:

Profit focused underwriting excellence – this is the principal driver of our financial performance;

Improving our understanding of client needs and market trends – so that we can target good areas of growth in the future;

The delivery of first class client service standards – so that we can grow our appeal to clients and attract the quality and volume of business that we want to underwrite;

Cycle management, combining underwriting, reinsurance, capital and investment strategies – to optimise risk weighted shareholder returns over the insurance cycle.
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We expect 2009 to coincide with the bottom of the insurance pricing cycle. Financially, our aims are to:
  • Deliver a cross cycle return on equity (covering the period 2002 to 2009) of at least 15%, considerably above our cross cycle cost of equity of approximately 8.5%, and
  • Trade profitably through the soft part of the cycle, something we along with most of our peers failed to do in the last soft market.
The achievement of these goals will make Amlin a rare breed in our industry. We recognise that the most difficult part of the cycle lies ahead. However, the Group’s positioning in terms of skills, shared understanding of underwriting strategy and management information is significantly better than in the last downturn.

The achievement of our Vision and financial goals will require the successful implementation of strategies covering:

Underwriting and the proper contraction of exposures as competitive forces drive down margins to less attractive levels;

Investments, so that we optimise returns from our pool of investment assets (up 186% over the past four years) in a period when we expect lower underwriting returns;

Clients, their needs and our ability to deliver the level of service to which we aspire;

People, their expertise, experience and motivation to meet the standards we require;

Infrastructure, in particular our use of technology to support our underwriting and client service plans;

Risk management, so that we can more clearly and easily identify risks to the achievement of our ambitions, giving us more scope to successfully address them;

Balance sheet management, so that we successfully balance the need for capital to support the business over the long term, with the aim of meeting our return on equity target and of continuing to deliver superior total shareholder returns.

In some areas these strategies are well developed. In others, such as the claims aspects of client service, they are undergoing detailed review and enhancement so that their implementation gives us the best possible prospects of becoming “the global reference point for quality” in our markets. Each area is addressed further in the relevant part of this Operating and Financial Review.

With our focus on “quality” we intend that we will be in an enviable position to successfully deliver and manage good long term organic growth recognising that, in the period to 2009, there will most likely be a period of contraction as insurance rates soften.

1 Based on managing agents’ published results and forecasts as 30 September 2004

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