Operating & Financial Review

Aviation

The Aviation division writes a mixture of classes including airline, general aviation, airport and product liabilities and satellite insurance. Each class is exposed to large loss events and potentially to catastrophic losses. The line size required to write in this area is also large and a comprehensive reinsurance programme is a fundamental to writing this business.

The airline portfolio has reduced again in 2006 with continued intense competition forcing rating declines. Average renewal rate reductions in 2006 were 19%. The lack of major airline losses is the principal driver behind the falls in rating but we do not believe that the falls are warranted given the risk exposures that we underwrite. Consequently we have continued to reduce our exposures. The airline account represented only 25% of total aviation premium written.

The other aviation related classes remained relatively stable in 2006, although claims inflation in the liability classes reduces expected profit margins.

Given this background the combined ratio was strong at 84% (2005: 75%) with a busy large loss environment in the first half of the year evened out by a relatively benign second half. Reserve releases amounted to £8.0 million (2005: £9.4 million)

© Copyright Amlin 2006