Notes to the accounts

1 Segmental reporting by business group

The tables below show segmental information by business segment. Business segments are primary segments and represent the way in which the business is managed. Each segment underwrites sub-classes of business which fall within the broad classes of aviation, marine, non-marine and UK commercial business. The segments are discussed in more detail in the operating and financial review. The non-marine business group is large and comprises direct and reinsurance books of business.

The segmental disclosure excludes insurance premium, income and claims expenses from the receipt of reinsurance to close as detailed in note 2 as these have no impact on profit for the year.

Year ended 31 December 2006

Income and expenses by business segment
Assets and liabilities by business segment

Year ended 31 December 2005

Income and expenses by business segment
Assets and liabilities by business segment

2 Net earned premium

	2006 £m	2005 (restated) £m
Insurance contracts premium
Gross premium written	1,113.8	993.5
Change in unearned premium provision	(26.5)	(6.8)
Gross premium earned	1,087.3	986.7
Insurance premium revenue from the receipt of reinsurance to close	78.8	78.6
Reinsurance premium ceded
Reinsurance premium payable	(100.3)	(164.2)
Change in unearned reinsurance premium provision	(13.1)	(0.4)
	(113.4)	(164.6)
Net earned premium	1,052.7	900.7

The insurance premium revenue from the receipt of reinsurance to close represents the premium received from the third party syndicate members on the 2003 year of account (2005: 2002 year of account) who sold their capacity to Amlin, for use by Amlin’s corporate members for the following year of account of Syndicate 2001. An identical amount is recorded as a movement in claims, representing the additional liabilities taken on by Amlin from the third party members. Overall these transactions have no impact on profit for the year. For the 2004 year of account and onwards 100% of Syndicate 2001 capacity is owned by the Group.

3 Investment return

	2006 £m	2005 £m
Investment income
– dividend income	4.5	2.1
– interest income	67.7	66.7
Cash and cash equivalents interest income	26.5	2.4
	98.7	71.2
Net realised gains/(losses) on financial assets
– equity securities	7.4	12.2
– debt securities	(0.3)	(6.0)
	7.1	6.2
Net fair value gains on assets at fair value through income statement
– equity securities	10.3	12.5
– debt securities	(1.0)	1.0
	9.3	13.5
	115.1	90.9

4 Other operating income

	2006 £m	2005 £m
Information fee income	0.7	0.6
Other income	1.1	0.8
	1.8	1.4

5 Insurance claims and loss adjustment expenses

	2006 £m	2005 (restated) £m
Gross
Current year insurance claims and loss adjustment expenses	515.7	991.6
Reduced costs for prior period insurance claims	(55.0)	(79.5)
	460.7	912.1
Insurance claims and loss adjustment expenses relating to the receipt of reinsurance to close (note 2)	78.8	78.6
Reinsurance
Current year insurance claims and loss adjustment expenses recoverable from reinsurers	(44.7)	(436.2)
Additional costs for prior period claims recoverable from reinsurers	(13.8)	(0.2)
	(58.5)	(436.4)
Total net insurance claims and loss adjustment expenses	481.0	554.3

6 Expenses for the acquisition of insurance contracts

	2006 £m	2005 £m
Expenses for the acquisition of insurance contracts	203.4	173.4
Changes in deferred expenses for the acquisition of insurance contracts	(8.0)	(3.2)
	195.4	170.2

7 Other operating expenses

Expenses related to underwriting	2006 £m	2005 (restated) £m
Administrative expenses	71.9	64.8
Underwriting exchange losses/(gains)	36.5	(25.7)
	108.4	39.1
Other expenses
Central management and other expenses	7.2	2.8
Asset management fees	1.3	2.3
Marketing and administration	0.5	0.6
Depreciation	0.3	2.4
Employee incentives	18.6	24.2
Group company exchange gains	(9.6)	–
	18.3	32.3
Total	126.7	71.4

8 Directors’ remuneration

The aggregate remuneration of the directors of the Company, including amounts received from subsidiaries, was:

	2006 £m	2005 £m
Emoluments of executive directors (including payments made under long term incentive plans)	6.6	3.0
Fees to non-executive directors	0.5	0.4
	7.1	3.4
Pension contributions	0.2	0.2
	7.3	3.6

Remuneration includes remuneration during the period of office only. Details of directors’ remuneration and pension benefits, including those of the highest paid director, are included in the Directors’ remuneration report starting on page 58. Payments were made to defined benefit pension schemes for two executive directors and to defined contribution schemes for two executive directors.

9 Employee benefit expenses

The average number of persons employed by the Group, including individuals on fixed term contracts and directors, were:

	2006	2005
Underwriting divisions
Underwriting, claims and reinsurance	361	356
Administration and support	122	125
Central functions
Operations	68	66
Finance	68	68
Internal audit and compliance	8	10
	627	625
	2006	2005
By location
UK	617	625
Bermuda	10	–

The aggregate payroll costs incurred by Group companies and Syndicate 2001 are analysed as follows:

	2006 £m	2005 £m
Wages and salaries	29.4	29.0
Employee incentive and related social security costs	18.6	24.2
Share options granted to directors and employees	1.1	0.7
Social security costs	6.0	5.6
Pension costs – defined contribution schemes (note 25)	3.1	2.4
Pension costs – defined benefit schemes (note 25)	1.3	5.8
	59.5	67.7
Payroll costs attributable to third party members	–	(0.8)
Payroll costs retained in the Group	59.5	66.9

10 Finance costs

	2006 £m	2005 £m
Letter of credit commissions	1.3	2.3
Subordinated bond interest	21.0	4.3
Loan interest	1.5	3.8
	23.8	10.4

© Copyright Amlin 2006