Charles Phillips   Chief Executive

We believe that our Vision for 2009, introduced in 2004, to become the "global reference point for quality in our markets" is a stretching but attainable goal and one which is appealing to our employees. To achieve it we set shorter term goals and priorities, aim to ensure that they are well understood by employees and measure our performance in meeting the goals.

For a business which is so dependent on its people, the alignment between employees and a vision and strategy which stretches the Group's potential will be a major determinant of its ability to sustain superior performance in the long term.

Our goals for 2005, apart from the delivery of our target return on equity, were aimed at advancing the Group's potential and creating momentum towards our Vision for 2009.

Achieving our vision for 2009

Sustaining superior returns
Our primary business objective is to archieve long term growth in shareholder value through developing sustainable insurance underwriting excellence and the successful long term growth of the Group's earnings, recognising the cyclical nature of the insurance industry. Our ability to retain and grow the skills and competencies of our employees will be critical to our success, as it is they who position the Group for both short term performance and longer term potential.

Return on equity (ROE) focus
We believe that the principal driver to building shareholder value is return on equity and this is our primary measure of performance. Our ROE of 28.4% for 2005 was nine points better than plan and brings our weighted average five year ROE to 17.4%, placing us in a good position to meet our cross cycle average ROE target of at least 15% per annum.

This compares with a theoretical cost of equity, of 8.5%, suggesting that achievement of our cross cycle ROE goal should be value enhancing.

We believe that five key features have contributed to our ability to deliver these superior returns,
even with the significant catastrophes experienced over the last two years:

• A well diversified business by class of business and geographically;
• Attention to the management of risk and exposures so that single risk and event losses are contained within an acceptable risk appetite;
• A business underwriting for gross profits and focused on the optimal use of capacity;
• A business model which allows the balance sheet to be leveraged at the right time in the cycle with close alignment of our underwriting and balance sheet strategies; and
• A well reserved balance sheet that is unlikely to deliver material adverse surprises.

Consistent with our underwriting philosophy, we had been reluctant to start a new business in an environment which was becoming more competitive as insurers' capital and surplus had been growing in 2003 and 2004. However, the unprecedented hurricane activity in 2005 altered our expectations for the medium term outlook for the reinsurance segment of our business in particular, and we therefore decided that the time was right to expand by starting a new company in Bermuda.

Amlin Bermuda started trading on 1 December 2005 so that it could participate in the 1 January renewal season. To be attractive to its intended client base it was important for it to be well capitalised and well rated.

Amlin Bermuda provides new impetus to continue the growth achieved over recent years. It provides us with access to a market which has become increasingly important in reinsurance and large commercial business, and reduces the risks of the Group operating only in Lloyd's.