Report & Accounts - JLT

Chairman’s StatementChairman’s Statement2Ken CarterChairmanOn 1st December 2005, we announced that DominicBurke would become Chief Executive with immediateeffect and that I would remain Chairman until thecompany’s AGM, on 27th April 2006, when GeoffreyHowe, current Joint Deputy Chairman, would succeedme as Chairman.As Executive Chairman for most of 2005, I will thereforereport on the results for that period and Dominic willaddress JLT going forward in his Chief Executive’s Report.Risk & InsuranceTurnover grew by 4% to £395.3 million. Trading profitwas £65.0 million compared to £87.7 million in 2004,producing a trading margin of 16% compared to 23%for 2004.These results reflected the competitive insurance marketconditions that prevailed throughout the year andparticularly in the second half of the year in several ofour overseas retail businesses.Jardine Lloyd Thompson Group plc Annual Report & Accounts 2005For the year ended 31st December 2005 JLT recordeda profit before tax of £73.8 million compared to a restated£85.0 million in 2004. Profit before tax, exceptional itemsand impairment charges of £76.8 million for the yearcompared to £96.2 million for 2004, a reduction of£19.4 million. Of this reduction, 80% was accounted forby two factors; firstly, the impact of currency transactions,the effect of which was to reduce profits before tax by£9.3 million and secondly, earnings from Market orPlacement Service Agreements (PSAs) reduced by£6.4 million. Competitive insurance market conditionsprevailed throughout 2005 and this further impacted theresults in our insurance broking businesses.Fees and commissions (Turnover) increased by 3% to£484.4 million compared to £468.1 million in 2004, or 5%at constant rates of exchange. The Group’s trading profit,defined as turnover less expenses and excludingexceptional items and impairment charges, reduced by21% to £66.3 million against £84.0 million in 2004.This reflected a trading margin of 14%, although atconstant rates of exchange the trading profit would havebeen £75.8 million and the trading margin 15%.The results were also adversely affected by a combinationof lower profits from JLT Risk Solutions, the adverseimpact of currency transactions, the effect of which wasto reduce profit before tax by £9.3 million, and reducedearnings from PSAs, which were £6.4 million lower thanthe previous year. The PSA income of £4.9 million in 2005represented less than 1.5% of the Group's 2005 revenue.SIACI, our French associate, had a good year increasingits contribution to Group profits by 10% to £2.5 million.Following the commencement of the Spitzer enquiry inOctober 2004, we expected a period of turmoil in thebroking industry as clients, insurers and brokers grappledwith its ramifications. JLT foresaw opportunities to attractnew colleagues to join our existing teams of professionalsand to win new business. As anticipated, JLT benefitedfrom these developments. In 2005, over 120 newcolleagues joined or agreed to join JLT from its largerglobal competitors and we also won over 200 newaccounts with annual income of £14.0 million from theopportunities presented post Spitzer. The true value of thisexpansion will become clearer as we move forward.