Performance

Profitability and return – exceptional financial performance

  • Record profit before tax of £445.0 million (2006: £342.7 million).
  • Return on equity of 37.8%.
  • The weighted average return on equity since 2002 is 32.0%, in excess of our estimated cost of equity of 10%.
  • A record combined ratio of 63% (2006: 72%).

The financial performance of the Group has again been excellent with a record profit before tax of £445.0 million (2006: £342.7 million) and return on equity of 37.8% (2006: 34.0%). Returns from both underwriting and investments were strong. Our underlying profit before tax, after removing the positive effect of a £42.6 million swing in the foreign exchange translation of net non-monetary liabilities relative to 2006, increased by 16.1% to £430.3 million (2006: £370.6 million).

Underwriting contributed £355.0 million (2006: £267.9 million) to the pre tax result; £238.8 million (2006: £198.9 million) for London and £116.2 million (2006: £69.0 million) for Amlin Bermuda. The result reflects the relatively benign claims environment experienced in 2007.

The underwriting contribution includes run off profits from reserves of £109.0 million (2006: £68.9 million). This is the largest release that we have made. However, we have continued to maintain consistent levels of reserving strength for liabilities assessed at 31 December 2007 as in previous years, with reserves set at a level above an actuarial best estimate of possible outcomes. With this approach, if ‘normal’ claims development is experienced, releases will be made from reserves over time.

Financial performance
Financial performance
Click here for full sized image

Underwriting performance – Syndicate & Amlin Bermuda
Underwriting performance - Syndicate and Amlin Bermuda
Click here for full sized image

Investment return was an impressive £157.0 million (2006: £115.1 million) with strong returns made from all asset classes.

Over the longer term, our performance has been very strong with a weighted average return on equity since 2002 of 32.0% compared to our cross cycle target of 15% and our estimated cost of capital of 10.0%.