More on Amlin
Amlin: Trading update
Strong trading, low claim levels and a good investment performance will push Lloyds insurer Amlin’s half year results ahead of market expectations. The company said that results would be significantly ahead of last year and group pre-tax profits will “not less than £120m”. Amlin reported pre-tax profits of £74.2m in the first half of last year.
The strong trading conditions has seen the company revise the syndicate forecasts (ie the expected returns) for the years of account 2003 and 2004. The year 2003 is expected to return 18%-23% (the previous forecast was 17% to 22%) and the year 2004 is expected to return 8%-13% (previously 7%-12%).
The company’s equity portfolio has generated a return of 10.3%. Amlin has also improved returns on its cash holdings (2.5%) and bond portfolios (Sterling: 3.4%; US dollar: 1.2%) compared to last year.
Premium income declined slightly to £572m (2004:586m) and renewal rates were around 4% below the first half of last year. The company succeeded in retaining around 83% of last years’ business.
Amlin’s business tends to be better in the first half, the second half being usually affected by the hurricane season. The first half results were boosted by exceptionally low claims level and a good investment return. The company admits that it is “unlikely to repeat the first half performance in the second half of 2005″. The reduction in the renewal rates is high, an indication of more competitive markets and needs to be watched.
The share trades at 182.25p, on a prospective PE (2005 earnings) of 7.2x, within the sector range. The greater volatility in insurers earnings means that they trade on lower PE multiples (a range 4-8) than banks (8-13). The yield is 4.3%.
Random picks: ARM | Aviva | Boots | French Connection | Greggs | Halma | Investec | Kelda | Land Securities | Cadbury Schweppes