11 Profit on ordinary activities before taxation

Profit on ordinary activities before taxation is stated after charging/(crediting) the following amounts:

	2005 £m	2004 £m
Depreciation
- Owned assets	2.4	2.5
Operating lease charges	2.3	2.3
Auditors' remuneration
- Group audit fees	0.4	0.3
- Other services	0.1	0.2
Foreign exchange (gains) and losses (note 13)	(31.9)	(4.1)

Company audit fees amounted to £42,304 (2004: £38,850). Group audit fees include £158,560 (2004: £145,611) representing the Group's share of fees paid in relation to the audit of the managed syndicates. The Audit Committee Chairman is required to approve any non-audit work commissioned from the auditors where any single piece of work attracts a fee over £25,000.

For further details of the Audit Committee's activities click here.

Fees paid to the Group's auditors for other services comprise the following amounts:

	2005 £	2004 £
Amounts charged to the income statement
Taxation advice	12,400	43,990
Consultation on remuneration policy	30,000	-
IFRS opening balance sheet related audit	47,000	23,000
Internal audit and controls advice	-	39,625
Service company FSA authorisations	-	21,143
Systems testing	14,300	28,000
Liquidation services	-	12,100
Other	9,240	880
	112,940	168,738
Amounts capitalised on the balance sheet
Debt issue related services	-	26,000
Rights issue related services	77,250	-
Potential acquisition due diligence services	111,758	-
	189,008	26,000
	301,948	194,738

	2005 £m	2004 £m
Current tax
UK corporation tax	34.3	(0.3)
Foreign tax	(1.6)	0.4
	32.7	0.1
Deferred tax - current year
Movement in assets	2.9	3.1
Movement in liabilities	9.7	34.7
	12.6	37.8
Taxes on income	45.3	37.9

	2005 £m	2005 %	2004 £m	2004 %
Profit on ordinary activities before taxation	182.7		128.9
Taxation on profit on ordinary activities calculated at the standard rate of corporation tax in the UK	54.8	30.0%	38.6	30.0%
Non-deductible or non-taxable items	(0.2)	(0.1)%	0.1	0.1%
Utilisation of unprovided for capital losses	(7.1)	(3.9)%	(0.9)	(0.8%)
Over provision in respect of prior periods	(0.6)	0.3%	(0.3)	(0.2%)
Irrecoverable overseas tax	(1.6)	(0.9)%	0.4	0.3%
Taxes on income	45.3	24.8%	37.9	29.4%

Underwriting profits or losses are recognised in the technical account on an annual accounting basis, recognising the results in the period in which they are earned. Corporation tax is charged in the period in which the underwriting profits are actually paid by the Syndicate to the corporate names.

Deferred tax is provided on the annually accounted underwriting result with reference to the forecast ultimate result of each of the years of account included in the annually accounted underwriting. Where the forecast ultimate result for a year of account is a taxable profit, deferred tax is provided in full on the movement on that year of account included in this period's annually accounted underwriting result. Where the forecast ultimate result for a year of account is a loss, deferred tax is only provided for on the movement on that year of account included in this period's annually accounted underwriting result to the extent that forecasts show that the taxable loss will be utilised in the foreseeable future. Deferred tax has been provided on the annually accounted underwriting result for this accounting period of £143.3 million (2004: £114.3 million).

Deferred tax assets on non-aligned syndicate loss provisions (see note 17) are only provided for to the extent that forecasts show that it is more likely than not that the ultimate taxable underwriting losses represented by these provisions will be utilised within the foreseeable future. Deferred tax has been provided in full on non-aligned syndicate loss provisions of £4.5 million (2004: £4.6 million).

A deferred tax asset of £5.7 million (2004: £1.9 million) has been taken on existing capital losses to match against deferred tax provisions of £5.7 million (2004: £1.9 million) on unrealised capital gains arising within the Group during this accounting period.

The Group is subject to US tax on its share of the Syndicate's US underwriting profits. No provision has been made in respect of such tax arising in 2005 as any provision is likely to be immaterial and because of the existence of US tax losses brought forward in the Group. In 2004 a net provision of US tax of £1.5 million was made which has been written back in 2005 as the submitted syndicate US tax computations for 2004 show a loss (2004: there was a charge of £0.4 million in respect of irrecoverable US tax).

Deferred income tax
The deferred tax asset is attributable to temporary differences arising on the following:

	Provisions for Losses £m	Other provisions £m	Unrelieved losses carried forward £m	Capital losses £m	Other timing differences £m	Total £m
At 1 January 2005	1.3	6.2	8.8	1.9	4.3	22.5
Movements in the year	(0.1)	1.6	(8.8)	3.8	0.4	(3.1)
Movement through equity in the year	-	-	-	-	1.7	1.7
At 31 December 2005	1.2	7.8	-	5.7	6.4	21.1

The deferred tax liability is attributable to temporary differences arising on the following:

	Underwriting results £m	Unrealised capital gains £m	Syndicate capacity £m	Total £m
At 1 January 2005	68.2	1.9	2.4	72.5
Movements in the year	5.3	3.8	0.6	9.7
At 31 December 2005	73.5	5.7	3.0	82.2

Deferred tax assets have not been provided on capital losses of £12.7 million (2004: £36.2 million) and US net operating losses of £43.3 million (2004: £30.6 million) carried forward due to uncertainty over their future use.

A deferred tax liability has not been provided on the undistributed profits of the Group's overseas subsidiaries of £2.4 million (2004: nil) as the parent company has determined not to distribute these profits in the foreseeable future.

13 Net foreign exchange gains

Total foreign exchange gains of £31.9 million (2004: £4.1 million) are recognised within other operating expenses.

14 Cash and cash equivalents

Group	2005 £m	2004 £m
Cash at bank and in hand	65.2	47.6
Short term bank deposits	0.4	-
	65.6	47.6

Short-term bank deposits can be recalled within 24 hours.

Company	2005 £m	2004 £m
Cash at bank and in hand	0.7	0.9

Short-term bank deposits can be recalled within 24 hours.

15 Financial investments

Group	At valuation 2005 £m	At valuation 2004 £m	At cost 2005 £m	At cost 2004 £m
Shares and other variable yield securities	116.2	90.1	96.2	82.7
Debt and other fixed income securities	1,142.1	718.6	1,149.5	723.1
Participation in investment pools	703.8	307.5	688.7	305.4
Deposits with credit institutions	62.3	140.9	62.3	140.5
Overseas deposits	51.9	42.5	51.9	42.5
Other	1.9	2.9	1.9	2.9
	2,078.2	1,302.5	2,050.5	1,297.1
In Group owned companies	920.7	310.9	885.8	301.9
In Syndicate 2001	1,151.7	979.7	1,158.9	983.3
In non-aligned syndicates (see note 17)	5.8	11.9	5.8	11.9
	2,078.2	1,302.5	2,050.5	1,297.1
Listed investments included in Group owned total are as follows:
Shares and other variable yield securities	116.2	90.1	96.2	82.7
Debt and other fixed income securities	104.1	84.0	103.3	75.7
	220.3	174.1	199.5	158.4

As explained in the investment risk disclosure note and note 30, £277 million (2004: £252 million) of the Group's investments are charged to Lloyd's to support the Group's underwriting activities and £583 million (2004: £nil) are supporting the Bermuda business which commenced trading on 1 December 2005.

Overseas deposits represent balances held with overseas regulators to permit underwriting in certain territories. The assets are managed by Lloyd's on a pooled basis.

	2005 £m	2004 £m
At 1 January	1,302.5	1,050.6
Exchange adjustments	46.0	(32.2)
Purchases	1,989.3	1,558.7
Sales	(1,279.3)	(1,274.2)
Realised gains on disposals	6.2	(0.3)
Unrealised investment gains/(losses)	13.5	(0.1)
At 31 December	2,078.2	1,302.5

The cost and valuation of the Company's investments are as follows:

Company	At valuation 2005 £m	At cost 2004 £m	At valuation 2005 £m	At cost 2004 £m
Participations in investment pools	15.1	12.5	15.1	12.5

16 Other investments

Company	Subsidiary undertakings £m
At 1 January 2005	208.6
Additions during the year	578.8
At 31 December 2005	787.4

The additions during the year includes £578.6 million, being the investment made in Amlin Bermuda Ltd on 1 December 2005. The investment was made wholly in cash and represents a contribution to the surplus capital of Amlin Bermuda Ltd. The share capital of Amlin Bermuda Ltd is wholly owned by another company within the Amlin Group.

The principal undertakings of Amlin plc at 31 December 2005 which are consolidated in these financial statements and all of which operate in the UK or Bermuda are listed below:

Subsidiary undertakings	Principal activity	Registered in
Amlin Bermuda Limited	Reinsurance company	Bermuda
Amlin Corporate Member Limited	Corporate member at Lloyd's	England and Wales
Amlin Corporate Services Limited	Group service and employing company	England and Wales
Amlin Investments Limited	Investment company	England and Wales
Amlin Plus Limited	Lloyd's service company	England and Wales
Amlin Underwriting Group Limited	Intermediate holding company	England and Wales
AUT (No 2) Limited	Corporate member at Lloyd's	England and Wales
AUT (No 6) Limited	Corporate member at Lloyd's	England and Wales
AUT (No 7) Limited	Corporate member at Lloyd's	England and Wales
AUT (No 8) Limited	Corporate member at Lloyd's	England and Wales
Delian Beta Limited	Corporate member at Lloyd's	England and Wales
Delian Delta Limited	Corporate member at Lloyd's	England and Wales

All of the above are wholly owned, with the exception of Amlin Plus Limited which is 60% owned by the Group.

17 Insurance contracts and reinsurance assets

Group	Claims reserves £m	Unearned premium reserves £m	Other insurance assets and liabilities £m	Total £m
Insurance liabilities
At 1 January 2004	988.1	453.7	55.4	1,497.2
Movement in period	152.4	63.6	(7.8)	208.2
Exchange adjustments	(37.2)	-	(1.6)	(38.8)
At 31 December 2004	1,103.3	517.3	46.0	1,666.6
Movement in period	525.5	6.5	65.6	597.6
Exchange adjustments	75.5	-	3.2	78.7
At 31 December 2005	1,704.3	523.8	114.8	2,342.9
Reinsurance assets
At 1 January 2004	265.4	30.9	223.8	520.1
Movement in period	64.0	(6.0)	47.9	105.9
Exchange adjustments	(10.8)	-	(10.4)	(21.2)
At 31 December 2004	318.6	24.9	261.3	604.8
Movement in period	262.0	(0.7)	106.8	368.1
Exchange adjustment	24.0	-	19.2	43.2
At 31 December 2005	604.6	24.2	387.3	1,016.1

Other insurance liabilities is comprised principally of premiums payable for reinsurance, including reinstatement premiums. Other insurance assets is comprised principally of amounts recoverable from reinsurers in respect of paid claims and premiums receivable on inwards reinsurance business, including reinstatement premiums.

Further information on the calculation of claims reserves and the risks associated with them is provided in the Risk disclosures section.

The claims reserves are further analysed between notified outstanding claims and incurred but not reported claims below:

	2005 £m	2004 £m
Notified outstanding claims	1,121.8	715.3
Claims incurred but not reported	582.5	388.0
Insurance contracts claims reserve	1,704.3	1,103.3

It is estimated, using historical settlement trends, that £497.4 million (2004: £414.6 million) of the claims reserves included in the above analysis, as at 31 December 2005, will settle in the next twelve months.

Included within the claims provisions in the table above are provisions in respect of "non-aligned syndicate participations".

From 1994 to 1999 the Group participated on a number of Lloyd's syndicates other than those managed by the Group (non-aligned syndicates). From 2000 the Group ceased to underwrite directly on non-aligned syndicates. However, a number of syndicates remain "open" and Amlin's final liabilities are still to be finalised. Provisions are made for potential future insurance claims. Syndicates that remain open are set out in the table below.

Managing agent	Non-aligned Syndicate	1999 £m	1998 £m	1997 £m
Non-marine
Jago Managing Agency Ltd	205	2.25	-	-
A E Grant (Underwriting Agencies) Ltd	991	2.93	2.35	-
Duncanson & Holt Syndicate Management Ltd	1101	-	2.50	2.50
Total non-marine		5.18	4.85	2.50
Motor
Ockham Personal Insurance Agency Ltd	37	4.64	-	-
Aviation	957	-	3.00	3.00
Duncanson & Holt Syndicate Management Ltd
Total capacity
Capacity remaining open at 31 December 2005		9.82	7.85	5.50

18 Loans and receivables, including insurance receivables

Group	2005 £m	2004 £m
Receivables arising from insurance contracts	103.9	106.9
Deferred acquisition costs	110.4	107.2
Insurance receivables	214.3	214.1
Other debtors	116.4	46.6
Prepayments and other accrued income	16.5	21.1
Loans and receivables	132.9	67.7
Current portion	347.2	281.8
Non current portion	-	-
The reconciliation of opening and closing deferred acquisition costs is as follows: Group
Balance as at 1 January	107.2	93.9
Movement in year	3.2	13.3
Balance as at 31 December	110.4	107.2
Company
Amounts due from subsidiary undertakings	136.8	205.0
	136.8	205.0
Current portion	136.8	205.0
Non current portion	-	-
	136.8	205.0

19 Property and equipment

Group	Leasehold land and buildings £m	Motor vehicles £m	Computer equipment £m	Fixtures, fittings and leasehold improvements £m	Total £m
Cost
At 1 January 2005	1.9	0.3	13.6	5.5	21.3
Additions	-	-	2.0	0.2	2.2
At 31 December 2005	1.9	0.3	15.6	5.7	23.5
Accumulated depreciation
At 1 January 2005	0.1	0.1	10.6	4.3	15.1
Charge for the year	-	-	1.6	0.8	2.4
At 31 December 2005	0.1	0.1	12.2	5.1	17.5
Net book value
At 31 December 2005	1.8	0.2	3.4	0.6	6.0
At 1 January 2005	1.8	0.2	3.0	1.2	6.2

Company	Leasehold land and buildings £m
Cost
At 1 January and 31 December 2005	1.9
Accumulated depreciation
At 1 January 2005	0.1
Charge for the year	-
At 31 December 2005	0.1
Net book value
At 31 December 2005	1.8
At 1 January 2005	1.8

20 Intangible assets

Group	Syndicate participations £m	Goodwill £m	Total £m
Cost and carrying amount
At 1 January 2005 and 31 December 2005	63.2	2.8	66.0

Syndicate participations represent the ongoing rights, acquired in Lloyd's auctions, to trade on Syndicate 2001 within the Lloyd's insurance market. As this right is indefinite syndicate participations are classified as indefinite life intangible assets, but are subject to annual impairment reviews. The Group's participation on Syndicate 2001 is set out below.

Year of account	2006 £m	2005 £m	2004 £m	2003 £m
Amlin participation	1,000.0	850.0	1,000.0	861.6
Syndicate capacity	1,000.0	850.0	1,000.0	999.6
Percentage owned by Amlin	100.0%	100.0%	100.0%	86.2%