Chairman's statement
 

  Roger Taylor
  
Chairman

Amlin delivered an outstanding financial performance in 2006 with pre-tax profits up 83.6% at £342.7 million and earnings per share up 46.9% at 50.4p.

This result is influenced by the low level of natural catastrophes in 2006 which was in stark contrast to the previous two years. However, we were well placed, having formed Amlin Bermuda, to grow our catastrophe income into very buoyant market conditions. This was achieved while managing our downside risk through fundamental changes in the reinsurance markets.

Return on equity is a key measure for our business and I am particularly pleased that our 2006 ROE of 34% was a record for Amlin and increases our five year weighted average ROE to 27.9%.

Total shareholder return for 2006 was 35.7%, and over the last five years has been 378%, one of the highest returns of a non-life insurer worldwide over that period.

Dividend and balance sheet management

The Board proposes a final ordinary dividend of 7.8p per share and an additional special dividend of 8.0p per share. This makes ordinary dividends for 2006, including the interim already paid, of 12.0p per share (2005: 10.2p per share) and a total dividend for 2006 of 20.0p per share. These payments materially exceed our commitmentto pay at least 30% of earnings for 2006.

We will keep under review the appropriate level of capital for the future needs of the Group mindful of the Company’s potential to enhance long term shareholder returns through active balance sheet management. The strong cash generation of the business, together with the cyclical nature of the non-life insurance industry, means that Amlin may return significant capital to shareholders over the coming years. The amount will depend on major event loss experience and strategic considerations.

Both the final and special dividends are to be paid on 30 May 2007, subject to shareholder approval at the Annual General Meeting to be held on 24 May 2007, in respect of shares on the register on 30 March 2007. The Company’s dividend reinvestment plan is available to shareholders in respect of both dividends.

Current trading and prospects

Trading conditions remain good in most of our business areas, although we anticipate increasing competition and, in our UK commercial and airline insurance areas, conditions have already become very competitive.

There has been an increased divergence between our classes of business in their cyclical patterns in 2006. This could well enhance our cross cycle fortunes as, with Amlin’s excellent diversity of risk, there is an increased ability to allocate capital between classes according to market conditions.

With a record net unearned premium reserve of £507.8 million and still buoyant conditions in many classes of business, 2007 holds out prospects of being another excellent year.

Governance

The Board of Amlin is committed to the highest standards of corporate governance. It also seeks to ensure that the Company is managed within risk guidelines established by the Board and that the strategy as proposed by the Executive is appropriate for the continued delivery of growth in shareholder value.

In a climate where governance arrangements are under increased scrutiny, Amlin has adopted a transparent approach to its reporting which both increases accountability and, we intend, will result in increased confidence in the Company. I was pleased that in 2006 we won our second Building Public Trust Award for “telling it how it is” in our Annual Report, this time for our People reporting.

Following the closure of the 2003 Lloyd’s year of account in 2006, which was the last year of account on which independent capital participated on Syndicate 2001, we decided to increase the alignment of membership of the Amlin plc and Amlin Underwriting Ltd boards. This has resulted in greater efficiency as well as providing the Board with another level of depth of reporting on its principal trading business.

Board

The Board welcomed Sir Mark Wrightson as a new non-executive Director in March 2006.

Lord Stewartby, my former Deputy Chairman and the Senior non-executive Director, retired from Amlin at our AGM in May 2006. He first became involved with our business through a subsidiary in 1993 and was Deputy Chairman of Amlin from its formation in 1998. We have benefited enormously from his contribution throughout this period and thank him for his service to the Company.

Nigel Buchanan has taken on his responsibilities as the Senior non-executive Director.

At our AGM in May 2007 one of our US directors, Tom Kemp, will be retiring. Tom was originally a director of Murray Lawrence and has served this Company since its formation in 1998. The Company has consistently received valuable insights to its trading, particularly in the United States, from where 49% of our premium originates, and we owe a great deal to him for his contribution.

The Amlin team

2006 has been a very successful year as we produced another set of record results and completed the first year of trading in our new company in Bermuda. I would like to thank Charles Philipps, his executive team and all our employees for their skill, effort and teamwork.


Roger Taylor
Chairman