Review

Liquidity and cash management

The Group’s cash and investments have increased by £266.3 million as highlighted in the graph opposite. The growth represents further profitable trading in 2007. Cash and investments represent a multiple of 2.5 times (2006: 2.5 times) shareholders’ equity.

The strong level of these funds illustrates our ability to respond quickly to claims in the event of a large catastrophic loss which is fundamental to our proposition as insurer of choice. In particular the Group can readily absorb the losses from the worst of our realistic disaster scenarios.

Additionally a US$200 million secured LOC facility is available for Syndicate regulatory funding purposes and Amlin Bermuda has a US$200 million LOC facility to provide collateral to clients when required. These funding facilities add to the working capital strength of the Group for funding future catastrophe losses.

Efficient cash flow management is an important source of value to an insurer. On average we retain premium for around three years before claims are settled. On large claims where reinsurance recoverables are due, we have to pay out the claim before collection is made from reinsurers and rapid reinsurance response is important. Accordingly, strong credit management of premiums and reinsurance collectibles improves our performance.

Overall reinsurance balances have reduced to £372.8 million from £417.5 million at the prior year end. The credit quality of the debt remains good, as shown in the chart below.

© Copyright Amlin 2007