I am delighted to report another year of excellent progress for Amlin. The financial results are exceptional, a product of strong underwriting and investment returns. The last few years have represented a period of sustained delivery, with our weighted average return on equity since 2002 now standing at 32.0%.

Importantly for our business the senior underwriting team has again remained stable. Their exceptional underwriting skills have delivered the performance of recent years and places us in an excellent position to continue this into a more difficult underwriting climate.

The strength of our business is now recognised by strong financial ratings from all of the rating agencies that we deal with. During the year AM Best upgraded both the Syndicate and Amlin Bermuda to A+ and A respectively. This places the Syndicate as the only current Lloyd’s operation with this higher rating and Amlin Bermuda at a level that is ahead of many of its Class of 2005 Bermudian peers.

Results and dividend

Our profit before tax of £445.0 million (2006: £342.7 million) is a record result. It reflects strong underwriting returns, with a remarkable combined ratio of 63% (2006: 72%) following a second year of benign catastrophe events. The investment return of 6.6% across our portfolio was equally impressive given the volatile market environment. Our weighting towards high grade and government bonds helped, together with a reduction in our equity exposure in the autumn, as the extent of the credit market problems began to become apparent.

The Board proposes a final dividend of 10.0 pence per share making total dividends declared for the year of 15.0 pence per share (for each share in issue at the time). This is a 25.0% increase on the 2006 ordinary dividend. Looking forward we would expect to be able to steadily grow the dividend and deliver healthy income returns for our shareholders. Additionally the Board has authorised a buy back programme for our ordinary shares in order to continue to efficiently manage our equity capital. This, combined with the return of £120.4 million of capital at the end of the year and the special dividend announced this time last year, delivers on our commitment to actively manage our capital.

Strategic progress

The Board has continued to review the Group’s strategic direction to ensure that Amlin builds upon its strengths and long term potential. We strive to lead change in the London market with a view to enhancing the service that our clients receive and our appeal to them. Good progress has been made. A solid foundation has also been built at our new Bermudian operation. While only modest growth was achieved in the year, in a competitive market, with an expanded team of underwriters, we look to the future with some confidence.

With Amlin’s core business in a good position we have examined the changing face of distribution in our markets during the year. The UK, global specialty and reinsurance markets are all evolving rapidly and we intend to be alert to the opportunities that are presented to us.

During the year we purchased a UK insurance operation, Allied Cedar, with the intention of strengthening our UK property offering. We also set up Amlin Singapore to bring a local presence to the thriving Asia-Pacific region with a view to writing energy and property business.

Outlook

Undoubtedly, rating conditions became more challenging in 2007 and into the start of 2008. Nevertheless, our Non-marine, Marine and Bermuda businesses continue to enjoy good market conditions with the potential to deliver acceptable returns to shareholders. However, we have reduced our risk appetite as margins have fallen. In our other two areas of underwriting we believe that we are towards the trough of the cycle. The aviation market has been disappointing, with competitors seemingly happy to expand their underwriting with little prospect of an adequate return for the risk assumed. The UK commercial market has also been highly competitive with only limited signs to date of a return to more rational behaviour. However it is increasingly likely that these business areas will start to turn to provide a source of future growth.

While conditions may now be more difficult, this is when we would expect our outperformance against our peers to grow. Our team shares a well understood underwriting philosophy that focuses on profitability, we are well reserved and we are constantly striving to improve our risk management and management information to enable us to steer a steady course.

Board

The Board welcomed Mr Marty Feinstein as a new non-executive Director in December 2007. Marty, as one of our US directors, brings considerable insurance industry experience to our deliberations, after a distinguished career at Farmers Group Inc., where he was CEO for 10 years.

Tom Kemp, another of our US directors, retired from Amlin at our AGM in May 2007 after serving as a director since 1998. We received excellent advice from him throughout this period and thank him for his service to the company.

At our AGM in April 2008, Roger Joslin will be retiring. Roger, who was previously Vice Chairman at State Farm, joined the Board in 2001 and has taken a keen interest in the development of Amlin for which we are very grateful.

Tony Holt, Amlin’s Underwriting Director is currently absent from work undergoing medical treatment. We wish him a speedy return. In his absence Simon Beale and Brian Carpenter have jointly assumed his Group Underwriting Director role.

The Amlin team

A record breaking profit has been produced in 2007. The continued effort of Charles Philipps, his management colleagues and all our employees has allowed the Group to attain a market leadership position and strength that is so valuable in challenging times. I would like to thank them all for their skill and hard work.

 
Roger Taylor
Chairman

© Copyright Amlin 2007