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Operating & Financial Review
Financial performance - reporting strong results |
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The financial performance of the Group has once again been excellent with a record profit before tax of £182.7 million (2004: £128.9 million) and return on equity of 28.4%. This includes a one-off accounting gain on foreign exchange of £16 million arising out of the initial investment in Amlin Bermuda.
| Financial performance |
| |
**2001
£m |
**2002
£m |
**2003
£m |
*2004
£m |
*2005
£m |
|
| Gross premium |
587.4 |
717.1 |
937.4 |
945.6 |
993.5 |
|
| Net premium |
486.5 |
573.0 |
787.6 |
790.2 |
829.3 |
|
| Net earned premium |
339.1 |
493.3 |
701.1 |
722.4 |
822.1 |
|
| Underwriting contribution |
-85.5 |
17.1 |
117.1 |
106.6 |
137.1 |
|
| Investment contribution |
9.5 |
43.7 |
33.5 |
52.1 |
90.9 |
|
| Other costs |
7.4 |
16.0 |
32.8 |
29.8 |
45.3 |
|
| Profit before tax |
-83.4 |
44.8 |
117.8 |
128.9 |
182.7 |
|
| Return on equity |
-33.7% |
16.7% |
26.6% |
24.1% |
28.4% |
|
| (*/** see Financial Highlights for basis of preparation) |
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This year's performance is particularly notable given the £130.1 million of hurricane losses incurred for the 2005 storms (2004: £74 million for hurricane and typhoon losses).
| Underwriting performance - 100% Syndicate |
| |
**2001
£m |
**2002
£m |
**2003
£m |
*2004
£m |
*2005
£m |
|
| Gross premium |
874.1 |
988.3 |
1,097.50 |
942.2 |
990.0 |
|
| Net earned premium |
547.8 |
699.4 |
890.6 |
782.0 |
827.5 |
|
| Claims ratio % |
89 |
63 |
50 |
50 |
57 |
|
| Expense ratio % |
33 |
33 |
36 |
32 |
25 |
|
| Combined ratio % |
122 |
96 |
86 |
82 |
82 |
|
| Underwriting contribution |
-118.8 |
21.7 |
134.2 |
139.3 |
152.0 |
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Note: This table includes 100% of Syndicate 2001. The financial performance and
underwriting performance, comment on Amlin's share unless otherwise stated. In 2005 Amlin owned 100% of 2004 and 2005 years but only 86.2% of the 2003 underwriting year.
(*/** see Financial Highlights for basis of preparation) |
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Underwriting contributed £137.1 million (2004: £106.6 million) to the pre tax result. The hurricane losses noted above increased the claims ratio by 15.1% but releases from prior period reserves amounted to £79.7 million (for Amlin's share of the syndicate). However, consistent reserving strength has been maintained for liabilities assessed at 31 December 2005 when compared to last year.
Investments produced a £90.9 million (2004: £52.1 million) return as investment balances continued to grow and returns from both bonds and equities were greater than for the previous year. Net costs amounted to £45.3 million(2004: £29.8 million) after financing costs.
Looking to the longer term, our performance has been strong with the weighted average return on equity since 2001 of 17.4% against our cross cycle return target of 15% and our estimated cost of equity of 8.5%. To put this into context, this period includes three years with the worst cumulative catastrophe insured losses on record, namely 2001, 2004 and 2005. The weighted average combined ratio since 2001 for Syndicate 2001 is 91% at a time when gross premium income has grown by 69% to £993.5 million.
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