Performance

Underwriting performance

With a low level of catastrophe incidence in the year, a good underwriting result is to be expected but the Group’s overall combined ratio of 63% (2006: 72%) is exceptional.

Gross premium written remained relatively unchanged in original currency, with growth in well priced classes such as US catastrophe reinsurance offset by further volume reductions in classes that have continued to come under pressure, such as UK Commercial motor. With 62% of gross premium written in US dollars, which weakened relative to sterling by 8% during the year, reported gross premium written of £1,044.7 million, is 6.2% less than in the prior year (2006: £1,113.8 million).

Overall, the renewal rate reduction across all business was 5% with a renewal retention ratio of 77%.

In 2006 we took the decision to operate with significantly less retrocessional reinsurance cover than we had in previous years on the basis that the price of cover had become uneconomic. In 2007 the price of retrocessional cover had became more reasonably priced and as a consequence Syndicate 2001 purchased more cover, albeit not as much as had been in force during 2005.

However reinsurance expenditure as a proportion of gross premium written has increased only modestly from 9.0% to 10.2%. This is due to two factors. Firstly, Amlin Bermuda now represents a larger part of the Group and has so far operated without the purchase of any reinsurance. Secondly, more reinsurance is bought for the Syndicate dollar account than for the sterling business. As the dollar weakens, this lowers the apparent reinsurance expenditure.

Net earned premium (excluding the premium associated with reinsurance to close) was marginally lower at £972.3 million (2006: £973.9 million), reflecting the earnings lag on premium income written in 2006, particularly with Amlin Bermuda in start up mode in the first part of that year, offset by the impact of a weakening US dollar.

© Copyright Amlin 2007