Report & Accounts - JLT

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Chairman’s Statement3During 2005, we undertook a review of the supportcosts of our London businesses. This review identifiedopportunities for cost reduction and reaffirmed our beliefthat the underlying cost base of our business must bereduced. This increased attention to costs is referred toin more detail in the report of the Chief Executive.In JLT Services, our USA based employee benefitsbusiness, the trading margin fell from 15% in 2004 to12%, reflecting an increasingly competitive operatingenvironment and sale of part of the affinity book ofbusiness, as the company was repositioned in linewith previous plans.Employee BenefitsTurnover for the combined Employee Benefits groupincreased by 6% to £87.7 million against £82.9 million in2004. Trading profit was £13.5 million, an increase of13% and reflecting a trading margin of 15%.The UK Employee Benefits business achieved turnoverof £70.6 million in the year, an increase of 19% over theprior year. Significantly, the trading margin of 16%exceeded our long-term goal of 15% for the first time.During the year, Profund, the pensions software companyacquired in 2004, was successfully integrated into thebusiness. The resultant expertise and resource hasproved of considerable value both in our own processesand in our ability to provide a complete solution to ourclients' servicing needs.In our UK Employee Benefits business, competitionremains intense. During 2005, we both streamlined ourmarketing and sales capabilities and combined previouslyseparate consulting teams. This has been achieved inorder to provide a more integrated service to clients andhighlights the importance placed on maintaining anddeveloping client relationships.Insurance Market OverviewOur assessment of the market cycle in 2004 was that2005 would continue to be very competitive and thisproved to be correct. The hurricanes in August,September and October had a significant impact on thecost of insurance in certain specific areas. However,based on our experience to date, the impact of thehurricanes has only been on those areas of businessdirectly at risk such as energy and property catastropherisks. We estimate that around 15% of JLT’s Risk &Insurance revenue is affected by the hurricanes and theconsequent increase in rates. At present, there stillremains sufficient capacity; we believe much of the freshcapital raised in Bermuda and London towards the end of2005 largely missed the opportunity to participate in the1st January 2006 renewal season.Meanwhile, the vast majority of business remainsunaffected by the impact of the hurricanes and mostmarkets therefore remain just as competitive as before thehurricane season with continuing downward pressure onpricing. Absent unforeseen events, it is our opinion thatthis will remain the position for the foreseeable future.As a result of the changes brought about by the Spitzerenquiry and market conditions generally, competitionbetween brokers to retain and grow market share is verycompetitive, leading to intense pressure on fees. JLT willcontinue to seek remuneration for its services on a scalethat properly reflects its professional contribution andservice to clients.Jardine Lloyd Thompson Group plc Annual Report & Accounts 2005
Chairman’s StatementChairman’s Statement4The FSA assumed regulatory responsibility for UKinsurance brokers in January 2005. JLT plays an activerole in market initiatives created to respond to FSAdemands and whilst the cost of regulation is increasingwe believe that our clients and the industry will benefitfrom them in the longer term. For example, the FSA'srequirement for contract certainty will ensure that thereis complete and final agreement of all contract termsbetween the insured and the insurer prior to inceptionof the insurance policy.DividendsSubject to shareholder approval, an unchanged finaldividend of 12.0p per share for the year to 31stDecember 2005 will be paid on 28th April 2006 toshareholders on the register at 31st March 2006.This brings the total dividend for the year to 20.5p pershare, unchanged over the prior year.AGM in April 2006. At that time I will retire from the Boardand Geoffrey Howe, presently Joint Deputy Chairman, willbe appointed Chairman in my place.Mike Hammond resigned from the Board and the Groupon 1st December 2005 and Dominic Collins, Chairman ofJLT Risk Solutions, assumed executive responsibility forthat business from that date.With effect from 13th December 2005, Dominic Burkerelinquished board responsibility for JLT's UK CorporateRisks business, which was assumed by Dominic Collinsin addition to his existing responsibilities for JLT RiskSolutions. Board responsibility for Agnew HigginsPickering & Company Limited and Lloyd & PartnersLimited passed from Dominic Collins to Dominic Burke asChief Executive. Dominic Burke has also assumed boardresponsibility for JLT Reinsurance Brokers Limited (JLTRe), which commenced trading from 1st January 2006.Jardine Lloyd Thompson Group plc Annual Report & Accounts 2005Group BoardAt the AGM in April 2005, Claude Chouraqui, John Lloydand Richard Sermon retired from the Board andsubsequently Tony Hobson retired on 31st July 2005.Nick MacAndrew and Chris Keljik were appointed to theBoard on 1st July and 1st November 2005 respectively.Both are independent non-executive directors and serveon the Nominations, Audit and Compliance andRemuneration Committees. Nick MacAndrew wasappointed Chairman of the Audit and ComplianceCommittee on 1st August 2005 in succession toTony Hobson.On 1st December 2005, we announced the appointmentof Dominic Burke as Chief Executive with immediate effectand that I was standing down as Executive Chairmanfrom that date but would remain as Chairman until theGroup StrategyFollowing the appointment of Dominic Burke as theGroup's new Chief Executive in December 2005, a reviewof our operations is being undertaken. This review willevaluate prospective developments in the broking industryand enable us to clarify and refine our strategy to betterequip the Group for the challenges the business facestoday. It is already underway and we anticipate that theoutput will clearly define the future direction of the Group,provide us with a route map for the business and enableus to set appropriate financial objectives.In the meantime, where we already believe there are clearbenefits to taking immediate action, changes are alreadybeing implemented provided that they have been properlyconsidered and validated. An example of this is ourintention to bring together our UK based insurance
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Registered Office:6 Crutched Friars
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Report & Accounts - JLT

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