Notes to the accounts

21 Share options

Details of the Amlin Executive Share Option Schemes are set out in the Directors’ remuneration report starting on page 58. At 31 December 2006 the following options over new shares, which are potentially exercisable between three and ten years after grant, or earlier in special circumstances such as redundancy, were outstanding under these executive schemes:

Usual first month of exercise	Option price per share	Number of shares
June 2003	72.95p	9,690
May 2005	76.33p	359,612
October 2002	80.16p	27,754
May 2004	108.09p	79,372
September 2001	108.54p	91,196
April 2006	110.82p	1,025,441
March 2007	152.85p	2,683,054
March 2008	161.77p	2,367,018
March 2009	293.00p	2,173,915
		8,817,052

The following changes in new shares under option pursuant to these executive schemes took place during the year:

	Number of shares 2006	Weighted average exercise price 2006 (pence)	Number of shares 2005	Weighted average exercise price 2005 (pence)
At 1 January	10,751,095	128.29	11,342,736	114.83
Granted during the year	2,290,481	293.00	2,441,903	161.77
Exercised during the year	(3,710,443)	98.00	(3,591,499)	86.48
Lapsed during the year	(514,081)	187.00	(107,858)	129.19
Adjustments during the year	–	–	665,813	127.41
At 31 December	8,817,052	180.40	10,751,095	128.29

The weighted average remaining contractual life of the executive options outstanding at 31 December 2006 was 7.4 years (2005: 7.4 years).

In addition to these executive options, the following employee Sharesave options over new shares were outstanding at 31 December 2006:

Savings period Usual first month of exercise Option price per share Number of shares

	Usual first month of exercise	Option price per share	Number of shares
5 years	December 2007	78.89p	149,485
5 years	July 2006	91.87p	4,775
3 years	July 2007	134.11p	324,490
5 years	July 2009	134.11p	142,628
3 years	December 2008	146.49p	497,353
5 years	December 2010	146.49p	205,508
			1,324,239

The following changes in new shares under option pursuant to the Sharesave scheme took place during the year:

	Number of shares 2006	Weighted average exercise price 2006 (pence)	Number of shares 2005	Weighted average exercise price 2005 (pence)
At 1 January	1,611,327	127.7	1,417,195	101.53
Granted during the year	–	–	690,234	146.49
Exercised during the year	(183,150)	74.46	(556,893)	68.87
Lapsed during the year	(103,926)	82.03	(63,721)	107.01
Adjustments during the year	(12)	106.5	124,512	117.42
At 31 December	1,324,239	123.17	1,611,327	127.70

The weighted average remaining contractual life of the Sharesave options outstanding at 31 December 2006 was 3.0 years (2005: 3.0 years).

The trustee of the Group’s Employee Share Ownership Trust (ESOT) held 774,579 ordinary shares as at 31 December (2005: 2,227,489), of which 201,959 shares (2005: 1,654,869) were reserved to meet potential future exercises of executive options, in addition to the options over new shares detailed above. In addition, there are arrangements whereby the ESOT will provide upto 1,389,582 Performance Share Plan (PSP) shares, normally not until 2009, 2010 or 2011. The ESOT shares are valued at the lower of cost and net realisable value. The market value of Amlin plc ordinary shares at 31 December 2006 was 325.25p per share (2005: 248.5p).

The assets, liabilities, income and costs of the ESOT are incorporated into the consolidated financial statements. The ESOT waives the right to dividends in excess of 0.01p per each share ranking for an interim or final dividend.

A charge has been made to the income statement for options granted after 7 November 2002 pursuant to the executive and Sharesave option schemes and the PSP, details of which are as follows:

Executive and Sharesave option schemes

The weighted average share price of Amlin plc throughout the year was 269.9 pence (2005: 186.3 pence)

The “Black Scholes” option pricing model has been used to determine the fair value of the option grants listed above. The assumptions used in the model are as follows:

	2006	2005
Weighted average share price	185.43p	156.64p
Weighted average exercise price	159.02p	134.73p
Expected volatility	30.0%	30.0%
Expected life (years)	3.25 – 7.5	3.25 – 7.5
Risk free rate of return	4.30% – 4.50%	4.30% – 4.50%
Expected dividend yield	2.00% – 5.00%	2.00% – 5.00%

Volatility

The volatility of the Amlin share price is calculated as a normalised standard deviation of the log of the daily return on the share price. In estimating a 30% volatility, the volatility of return for six months, one year and three year intervals are considered. As a guide to the reasonableness of the volatility estimate similar calculations are performed on a selection of Amlin’s peer group.

Interest rate

The risk free interest rate is consistent with government bond yields.

Dividend yield

The assumptions are consistent with the information given in the report and accounts for each relevant valuation year.

Staff turnover

The option pricing calculations are split by staffing grades as staff turnover is higher for more junior grades. Furthermore historical evidence suggests that senior employees tend to hold their options for longer whereas more junior levels within the organisation appear to exercise earlier. In addition senior employees hold a larger proportion of the options but represent a smaller group of individuals.

Market conditions

Amlin issues options that include targets for the Group’s performance against a number of market and non-market conditions. Failure to meet these targets can reduce the number of options exercisable. In some circumstances no options may be exercised. Assumptions are made about the likelihood of meeting the market and non-market conditions based on the outlook at the time of each option grant.

22 Reserves

	Share Premium account £m	Other reserves £m	Treasury shares £m	Minority interest £m	Retained earnings £m
At 1 January 2006 (restated)	344.0	51.3	(0.3)	–	257.3
Issues of share capital on exercise of options over new shares	3.6	–	1.3	–	–
Gain on defined benefit pension scheme	–	0.1	–	–	–
Share option valuation charge	–	1.1	–	–	–
Deferred tax	–	1.3	–	–	–
Currency translation differences on overseas operations	–	(77.2)	–	–	–
Profit for the financial year	–	–	–	0.3	267.5
Dividends (note 27)	–	–	–	–	(47.4)
At 31 December 2006	347.6	(23.4)	1.0	0.3	477.4

Other reserves is comprised of £45.7 million (2005: £45.7 million) being the cumulative amount of goodwill written off to reserves on acquisitions prior to January 1999, a capital redemption reserve, charges for share options issued, deferred tax in respect of share options and the cumulative foreign exchange losses of £73.4 million (2005: £3.8 million gain) on investments in overseas operations.

23 Trade and other payables and deferred income

	2006 £m	2005 £m
Trade payables and accrued expenses	66.3	66.1
Social security and other tax payables	2.1	1.0
	68.4	67.1
	2006 £m	2005 £m
Current portion	57.9	56.4
Non-current portion	10.5	10.7
	68.4	67.1

24 Borrowings

	2006 £m	2005 £m
Bank loans	0.9	241.0
Finance lease creditors	–	0.1
Subordinated debt	277.9	57.1
	278.8	298.2
	2006 £m	2005 £m
Current portion	0.9	148.8
Non-current portion	277.9	149.4
	278.8	298.2

The directors’ estimation of the fair value of the Group’s borrowings is £306.3 million (2005: £299.1 million).

The Group’s borrowings comprise three issues of subordinated debt.

Details of the subordinated debt issues are as follows:

Issue date	Principal amount	Reset date	Maturity date	Interest rate to reset date %	Interest rate from reset date to maturity date %
23 November 2004	$50m	Nov 2014	Nov 2019	7.11	LIBOR + 3.48
15 March 2005	$50m	Mar 2015	Mar 2020	7.28	LIBOR + 3.32
20 April 2006	£230m	Apr 2016	Apr 2026	6.50	LIBOR + 3.48

The bonds will be redeemed on the maturity dates at the principal amounts, together with accrued interest. The Company has the option to redeem the bonds in whole, subject to certain requirements, on the reset dates or any interest payment date thereafter at the principal amount plus accrued interest.

The old debt facility, entered into in November 2005, consisted of the following arrangements:

• A £170 million term loan bridge facility. The rate of interest was LIBOR plus 0.75% up to 30 June 2006 and LIBOR plus 1.0% thereafter. Only £150 million of the facility has been utilised to date and of this £100 million was repaid in June 2006, £36 million in July 2006 and the balance of £14 million was repaid in August 2006.
• A £20 million term loan. The rate of interest is LIBOR plus 1.5%, plus mandatory costs. The loan was repaid in full in April 2006.
• A $125 million revolving credit facility. The rate of interest is LIBOR plus 1.5%, plus mandatory costs. $105 million of the loan was repaid in April 2006 and the balance of $20 million was repaid in June 2006.
• A £150 million letter of credit (LOC) facility. This was deposited with Lloyd’s in November 2005 as part of the Group’s Funds at Lloyd’s (FAL) required to support underwriting on Syndicate 2001. The LOC was replaced with part of the proceeds from the issue of the subordinated debt in April 2006. Currently the facility is not being utilised but is being retained to provide additional financial strength and flexibility.

On 13 November 2006 the Company entered into a new debt facility with its banks, which replaced the 2005 facility. The new facility is available for three years from the signing date and provides an unsecured £200 million multicurrency revolving credit facility available by way of cash advances or sterling letters of credit. The facility is guaranteed by the Company’s subsidiaries Amlin Corporate Services Limited and Amlin Investments Limited.

In December 2006 Amlin Bermuda Ltd entered into a $300 million LOC and Revolving Credit Facility. The facility comprised a secured LOC facility for $200 million for a three year term and an unsecured revolving credit facility for $100 million for a term of 364 days, twice renewable. The secured LOC facility is secured by a registered charge over a portfolio of assets managed by Aberdeen Asset Management Limited with State Street Bank and Trust Company as custodian. As at 31 December 2006 $1.7 million LOCs were issued with an additional $8.8 million issued in January 2007.

Obligations due under finance leases and hire purchase contracts are payable as follows:

	2006 £m	2005 £m
Within one year	0.1	0.1
Within two to five years	–	0.1
	0.1	0.2

25 Retirement benefit obligations

The Group participates in a number of pension schemes, including defined benefit, defined contribution and personal pension schemes. The total charge to the income statement for these schemes is shown in the table below:

	2006 £m	2005 £m restated
Defined benefit schemes
Lloyd’s Superannuation Fund	(0.2)	(0.4)
J E Mumford (Underwriting Agencies) Ltd retirement benefit scheme	0.1	(0.2)
	(0.1)	(0.6
Defined contribution schemes	2.7	2.4
	2.6	1.8

A summary of retirement benefit liabilities at 31 December 2006 is shown in the table below:

	2006 £m	2005 £m
Lloyd’s Superannuation Fund (see section a))
Opening net present value of contractual cash payments	11.1	15.2
Payments during the year	(4.7)	(4.6)
Unwinding of discount	0.3	0.5
Closing net present value of contractual cash payments	6.7	11.1
J E Mumford (Underwriting Agencies) Ltd retirement benefit scheme (see section a))
Benefit obligation at end of year	3.0	3.3
Fair value of plan assets at end of year	(2.2)	(2.0)
Net scheme deficit	0.8	1.3
Total retirement benefit obligations	7.5	12.4

The information provided on pages 112-115 on the pension schemes reflects the position as at 31 December 2006 and does not reflect the changes described above.

a) The Lloyd’s Superannuation Fund funded defined benefit scheme

The scheme is operated as part of the Lloyd’s Superannuation Fund (the Fund). Historically the Fund has catered for a number of employers in the Lloyd’s market. As a consequence of the consolidation in the market, employers closing final salary schemes and some companies failing, there are now only around five (2005: six) employers with active members in the Fund. A large proportion of the liability of the Fund relates to employers no longer participating in the Fund. The assets of the Fund are pooled and the current active employers are responsible collectively for the funding of the Fund as a whole.

For the purposes of determining contributions to be paid, the Trustees have split the Fund into a number of notional sections. This is a notional split and has no legal force. Previously this notional split allowed for separate sections in respect of each employer’s active members and one combined section for non-employed members of all current and former employers.

With effect from 31 December 2002, the Trustees altered this notional split so that, from that date, the active employers contributing to the Fund, including the Amlin Group, have individual notional sections comprising the notionally allocated assets in respect of their active employees, deferred pensioners and pensioners, and their corresponding liabilities. A separate notional fund is maintained for members whose former employers no longer contribute to the Fund (Orphan Schemes). Amlin is also liable for a proportion of the Orphan Scheme’s liabilities.

Since this alteration Amlin can now more clearly identify its expected contribution requirement to the Fund. However, as the asset allocation is notional and at the discretion of the Trustee, it is not possible for Amlin to be certain of its overall surplus or deficit at any time. Indeed, as other employers have bought themselves out of the scheme in recent years, Amlin has been notionally allocated an increased share of the scheme. For this reason the scheme continues to be classified as a multi-employer scheme for the purposes of International Accounting Standard No 19 (IAS 19), Employee Benefits. Due to an amendment to IAS 19 the Group is now required to recognise the net present value of any contribution schedule that has been agreed with the Trustees. A prior period adjustment has been made this year and details of the effect of this can be found in the accounting policies section to these accounts on page 77. Therefore, £0.2 million (2005: £0.4 million) was charged to the Group result relating to the unwinding of the discount on the future contractual payments.

The total amounts paid in respect of the Fund for Syndicate 2001 and Amlin Group companies are analysed in the table below.

	2006 £m	2005 £m
Contributions relating to:
2004 valuation deficit – Amlin scheme	1.2	1.2
2004 valuation deficit – Orphan scheme	3.5	3.5
Ongoing funding	1.3	1.3
	6.0	6.0
Group share of total payment	6.0	5.5

The funding position of the Fund is assessed every three years by an independent qualified actuary. Contributions are made at the funding rates recommended by the actuary, which vary across different sections of the Fund reflecting the notional sections then adopted, and typically include adjustments to amortise any funding surplus or shortfall over a period. Amounts borne under the scheme are charged to Syndicate 2001 or other Group companies. However, actuarial amounts quoted below are for Group’s share of the scheme.

The last formal valuation of the Fund was as at 31 March 2004 and was carried out by Mr P Lofthouse, Fellow of the Institute of Actuaries, and used the projected unit credit actuarial method. This valuation has since been updated to 31 December 2005 and 2006 using appropriate techniques and the following assumptions:

	2006 % pa	2005 % pa
Price inflation	3.1	2.8
Rate of increase in pay	–	4.8
Rate of increase in pensions payment
LPI (maximum 5% pa)	3.1	2.8
LPI (minimum 3% pa, maximum 5% pa)	3.25	3.25
LPI (maximum 3% pa)	3.0	2.8
Rate of increase of statutory revaluation on deferred pension	3.1	2.8
Discount rate	5.1	4.7

During 2005 the Group reviewed its remaining defined benefit arrangements and made a number of changes to the schemes’ operations, which were implemented during the year. In particular, in order to remove much of the risk associated with salary inflation, the scheme was changed to allow members to continue accruing additional years’ service under the schemes, but these accruals would be generally based on March 2006 pensionable salaries. Future salary increases are pensionable through the defined contribution schemes. Therefore the salary inflation assumption used for the ongoing valuation is now nil%.

The mortality assumptions used in the latest valuation included the following life expectancies:

Life expectancy (years) at age 65 for a member currently:	male	female	male	female
Aged 65	19.6	22.6	19.5	22.6
Aged 45	20.9	23.9	20.9	23.9

The analysis of the Fund’s assets and the expected rate of return at the balance sheet date are as follows:

	Amlin Section	Orphans Section	Amlin Section	Orphans Section	31 December 2006	31 December 2005
Equities	45%	20%	50%	20%	7.5%	7.5%
Bonds	55%	80%	50%	80%	4.9%	4.5%

The long term rates of return are estimated by the Directors based upon current expectations of future investment performance.

The updated assessment at 31 December 2006 showed that the assets relating to the Amlin section of the Fund were £146 million (2005: £136.9 million), being £4 million greater than (2005: £9.6 million less than) the amount required to fund members’ accrued liabilities on the assumptions adopted, resulting in a surplus of 2.8% (2005: shortfall of 6.5%). In 2004 Amlin agreed with the Trustee that it would make six annual payments to the Fund of £1.2 million. This agreement was based on the formal valuation at 31 March 2004 and not the updated valuation at 31 December 2004. The first payment was made in December 2004 and five subsequent annual payments were agreed commencing on 31 March 2005.

In addition, the updated assessment at 31 December 2005 showed that the assets notionally allocated to Amlin for the orphans’ section of the Fund were £169 million (2005: £168 million), being £7 million greater than (2005: £3.8 million greater than) the amount required to fund members’ accrued liabilities on the assumptions adopted. However, it should be noted that there is currently uncertainty concerning the eligibility of another part of the notional Orphan scheme for statutory revaluation of their benefits. This matter is under legal scrutiny and the figures noted above assume that no such revaluation applies. If it were to apply and the Trustees allocated Amlin proportionate liability to the remainder of the Orphan scheme, the past service obligations would increase up to £7 million.

In 2004 Amlin agreed to pay contributions to the notional orphans’ section to rectify a share of the funding shortfall revealed in the actuarial valuation at 31 March 2004, when the Group and Syndicate’s share of the shortfall was estimated to be £11.4 million and £12.8 million respectively. The first payment of £3.5 million was made on 31 December 2004. Three subsequent annual payments of £3.5 million were agreed commencing on 31 March 2005.

Contributions will also be paid to provide for the cost of benefit accrual after the date of the valuation. The rate of contribution agreed with the Trustee is 30% (2005: 30%) paid by the employer plus 5% (2005: 5%) member contributions, in each case of pensionable earnings, and totalled £1.3 million (2005: £1.3 million).

b) J E Mumford (Underwriting Agencies) Limited retirement benefit scheme

The scheme consists of a closed funded defined benefit scheme for certain past employees of a subsidiary of the Company, Angerstein Underwriting Limited. In February 2007, the liabilities of the scheme were closed into the Lloyd’s Superannuation Fund.

Contributions to the scheme are determined by an independent qualified actuary, based upon triennial valuations, using the attained age actuarial method. The last formal valuation of the scheme was carried out at 1 July 2004 by Mr S Hymans, Fellow of the Institute of Actuaries. This valuation has since been updated to 31 December 2005 and 2006 using appropriate techniques and the following key assumptions:

	2006 % pa	2005 % pa
Price inflation 3.1 2.8
Rate of increase in pay	–	4.8
Rate of increase of pensions in payment	3.1	2.8
Rate of increase of pensions in deferment	3.1	2.8
Discount rate	5.1	4.7
Expected long-term return on plan assets	7.5	6.5

As described in section a) above the salary inflation assumption has been reduced to nil% due to changes that were made to the operation of the Group’s defined benefit schemes in 2006. The amount recognised in income in respect of this defined benefit scheme is analysed as follows:

Components of pension costs	2006 £m	2005 £m
Current service cost	0.1	0.1
Interest cost	0.2	0.1
Expected return on plan assets	(0.1)	(0.1)
Actuarial loss recognised immediately	(0.1)	0.4
Total pension cost recognised in the income statement	0.1	0.5

The actual return on the scheme’s assets was £0.2 million (2005: £0.3 million).

The amount included in the consolidated balance sheet arising from the Group’s obligations in respect of this scheme is as follows:

Components of pension costs	2006 £m	2005 £m	2004 £m
Present value of defined benefit obligations	3.0	2.2	0.8
Fair value of scheme assets	3.3	2.0	1.3
Liability recognised in the balance sheet	2.8	1.3	1.5

Movements in the present value of scheme’s defined benefit obligations were as follows:

Movements in benefit obligation	2006 £m	2005 £m	2004 £m
Benefit obligation at beginning of the year	3.3	2.8	2.3
Current service cost	0.1	0.1	0.1
Interest cost	0.1	0.1	0.1
Members’ contributions	–	0.1	0.1
Past service costs	(0.3)	–	–
Actuarial loss	(0.1)	0.6	0.3
Benefits paid	(0.1)	(0.4)	(0.1)
Benefit obligation at end of year	3.0	3.3	2.8

Movements in fair value of scheme’s assets were as follows: Movements in scheme assets

Movements in scheme assets	2006 £m	2005 £m	2004 £m
Fair value of plan assets at beginning of the year	2.0	1.3	1.0
Expected return on plan assets	0.1	0.1	0.1
Actuarial gain	0.1	0.2	0.1
Employer contribution	0.2	0.6	0.1
Members’ contributions	–	0.1	0.1
Benefits paid	(0.2)	(0.3)	(0.1)
Fair value of plan assets at end of year	2.2	2.0	1.3

The analysis of the Fund’s assets and the expected rate of return at the balance sheet date was as follows:

	2006	2005	2006	2005
Equities	99%	99%	7.5%	7.5%
Cash	1%	1%	4.0%	4.0%

The long term rates of return are estimated by the directors based on their current expectations of future investment performance.

The recent history of experience gains and losses is as follows:

History of experience gains and losses	2006	2005	2004
Difference between the expected and actual return on scheme assets:
Amount (£ million)	0.1	0.2	0.1
Percentage of scheme assets	3%	12%	8%
Experience losses on scheme liabilities:
Amount (£ million)	(0.1)	0.6	0.3
Percentage of scheme assets	(3%)	18%	11%

The estimated contributions expected to be paid into the scheme during the current financial year are £0.2 million.

c) The stakeholder defined contribution scheme

The defined contribution scheme operated by the Group is a stakeholder arrangement. The total contributions for the year ended 31 December 2006 to the scheme were £2.7 million (2005: £2.4 million).

d) Other arrangements

Other pension arrangements include an occupational money purchase scheme which provides Death In Service protection for all employees. Regular contributions, expressed as a percentage of employees’ earnings, are paid into this scheme and are allocated to accounts in the names of the individual members, which are independent of the Group’s finances. There were no outstanding contributions at 31 December 2006 (2005: £nil).

26 Earnings and net assets per share

Earnings per share are based on the profit attributable to shareholders and the weighted average number of shares in issue during the period. Shares held by the Employee Share Ownership Trust (ESOT) are excluded from the weighted average number of shares.

Basic and diluted earnings per share are as follows:

	2006	2005 restated
Profit attributable to equity holders of the Parent Company	£267.5m	£140.2m
Weighted average number of shares in issue	531.8m	408.8m
Dilutive shares	6.4m	6.6m
Adjusted average number of shares in issue	538.2m	415.4m
Basic earnings per share	50.4p	34.3p
Diluted earnings per share	49.8p	33.7p

Basic and tangible net assets per share are as follows:

	2006	2005 restated
Net assets	£936.4m	£784.8m
Adjustments for intangible assets	(£66.0m)	(£66.0m)
Tangible net assets	£870.4m	£718.8m
Number of shares in issue at end of period	534.0m	530.1m
Adjustment for ESOT shares	(0.8m)	(2.2m)
Basic number of shares after ESOT adjustment	533.2m	527.9m
Net assets per share	175.6p	148.7p
Tangible net assets per share	163.2p	136.2p

27 Dividends

The amounts recognised as distributions to equity holders are as follows:

Group	2006 £m	2005 £m
Final dividend for the year ended:
– 31 December 2004 of 5.0 pence per ordinary share	–	19.7
– 31 December 2005 of 6.2 pence per ordinary share	25.0	–
Interim dividend for the year ended:
– 31 December 2005 of 4.0 pence per ordinary share	–	15.9
– 31 December 2006 of 4.2 pence per ordinary share	22.4	–
	47.4	35.6

The dividends for 2004 and 2005 were paid in a combination of cash and scrip dividend shares. The 2006 interim dividend was paid solely in cash. The amounts paid in cash and scrip dividend shares were as follows:

	2006 £m	2005 £m
Cash	22.4	30.5
Scrip dividend	–	5.1
	22.4	35.6

The final ordinary dividend of 7.8 pence per ordinary share for 2006, amounting to £41.7 million, payable in cash and a special dividend of 8.0 pence per ordinary share, amounting to £42.7 million, payable in cash, were approved by the Board on 2 March 2007 and have not been included as a liability as at 31 December 2006.

28 Principal exchange rates

The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the production of these financial statements were:

	2006	2005	2006	2005
US dollar	1.84	1.82	1.96	1.72
Canadian dollar	2.09	2.21	2.28	2.01
Euro	1.47	1.46	1.48	1.46

29 Contingent liabilities

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 2006, the total guarantee given by the Group under these deeds of covenant (subject to limited exceptions) amounted to £382.1 million (2005: £276.7 million). The obligations under the deeds of covenant are secured by a fixed charge over investments of the same value at the relevant valuation date and a floating charge over all the investments and other assets of Amlin Investments Limited, in favour of Lloyd’s. A floating charge granted to Lloyd’s by the Company was also outstanding at the year end but has since been released by Lloyd’s in January 2007. 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’s Lloyd’s underwriting.

£150 million of LOCs deposited with Lloyd’s in November 2005 pursuant to the Lloyd’s deposit trust deeds for Funds at Lloyd’s were replaced with £150 million of assets on 3 May 2006.

The new debt facility is guaranteed by the Company’s subsidiaries Amlin Corporate Services Limited and Amlin Investments Limited (see note 24).

The new debt facility for Amlin Bermuda Ltd is secured by a registered charge over a portfolio of assets managed by Aberdeen Asset Management Limited with State Street Bank and Trust Company as custodian (see note 24). As at 31 December 2006 $1.7 million LOCs were issued with an additional $8.8 million of LOCs issued in January 2007.

30 Commitments

There were no capital commitments at the end of the financial year (2005: £nil).

Throughout the year the Group leased certain land and buildings on short-term operating leases, under which the minimum annual commitments were £2.3 million (2005: £2.3 million). The leases expire in over five years.

© Copyright Amlin 2006