Further Information

Corporate website
The Group’s corporate website is atwww.admiralgroup.co.uk. A range of information
about the Admiral Group is presented, including theGroup’s history; financial reports and press releases;
corporate responsibility and governance.

Admiral Group businesses

The website also includes contact details for investor
relations and any other information.

elephantwww.elephant.co.uk

Financial calendar
Final 2012 dividend
1 May 2013 – Ex dividend date
3 May 2013 – Record date
24 May 2013 – Payment date

Diamondwww.diamond.co.uk

Interim Management Statement
25 April 2013

Price Comparison:
Confused.com
www.confused.com

The Group does not produce printed copies of interim
results for shareholders unless requested.
The interim results will be available on thecorporate website from 29 August 2013.
Head office
Capital Tower
Greyfriars Road
Cardiff
CF10 3AZ

Bell
www.bell.co.uk

Annual Report 2012

Interim results
29 August 2013

Admiral Group plc

Annual General Meeting
25 April 2013UK
Car Insurance:
Admiralwww.admiral.com

Confused.com

Van Insurance:
Gladiator
www.gladiator.co.uk
Spain
Car Insurance:
Balumbawww.balumba.es
Car Insurance:
Qualitas Auto brand
www.qualitasauto.com
Price Comparison:
Rastreator
www.rastreator.com
Italy
Car Insurance:
ConTe
www.conte.it
USA
Car Insurance:
Elephant Autowww.elephant.com

WinnerBest Large UK Workplace 2012

Price Comparison:
Comparenow
www.comparenow.com

4th
Best European Workplace 2012

FranceCar Insurance:
L’olivier Assurances
www.lolivier.fr

This report is printed on Lumi Silk that is
manufactured from 100% post-consumer
ECF (Elemental Chlorine Free) recycled pulp
and meets the highest environmental standards.
Designed and produced by Carnegie Orr+44 (0)20 7610 6140 www.carnegieorr.co.uk

Price Comparison:
LeLynxwww.lelynx.fr

6thBest UK Companies to WorkFor 2012

Registered Number: 03849958.
Admiral Group plc, Capital Tower,
Greyfriars Road, Cardiff CF10 3AZ
www.admiralgroup.co.uk

An

nua

l Re

por

t 20
12

Working together
for 20 years
About us
The Group’s core UK car insurance businesslaunched in 1993 and the Group has grown every
year since. In the UK, the Group has an 11% shareof private car insurance through four brands:
Admiral, Elephant, Diamond and Bell. It also
owns Confused.com, one of the leading UK pricecomparison websites. Outside the UK, Admiraloperates car insurance businesses in Spain, Italy,
France and the USA which now insure over
430,000 vehicles.
The Group also owns price comparison
businesses in Spain, France and the USA. At theend of 2012 Admiral had 3.6 million customers infive countries. It employs over 6,500 people ineight countries.
Admiral’s recent achievements include:
WinnerBest Large UK Workplace 2012

4th
Best European Workplace 2012

6th
Best UK Companies to WorkFor 2012“We have a simple philosophy at Admiral: if people
like what they do, they’ll do it better. So we goout of our way to make this a good place to work.
The result: happier staff, record profits.”
Henry Engelhardt, CEO

The Admiral Group celebrates
its 20th birthday this year.
Turn to pages 2 and 3 to discoversome of the key moments defining
our success.

01

Admiral Group plc
Annual Report 2012

Financial Highlights

Turnover

2008

2009

2010

2010

2011

2012

350

60

54%

48

57%

£344.6m£265.5m£202.5m

210£215.8m

280

60%£299.1m£344.6m

36
24
12

0

0
2009

2010

2011

2012

2008

2009

Earnings per share

Full year dividend

95

90

36

19

68.1p

95.1p

54

57.5p

72.3p

72

52.5p

38

54.9p

57

59.0p

76

90.6p
81.9p

95.1p

90.6p

2008

75.6p

70

3.6m
2012

Return on capital

140

3.4m
2011

60%

2012

59%

2011

Profit before tax

18

0

0
2008

2009

2010

2011

2012

2008

2009

2010

2011

Staff satisfaction:
I am happy at Admiral

Following a claim, I would
renew with Admiral

100

100

20

90%

20

91%

40

92%

60

40

93%

60

93%

91%

89%

88%

91%

80

2008

2009

2010

2011

2012

0

0
2008

2009

2010

2011

2012

Other information

90%

2012

90%

91%
80

Find out more
www.admiralgroup.co.uk

2.7m

0
2010

59%

0

2.1m

£1,077m£1,585m

£910m

2009

1

Financial statements

		Other information
94 Directors and Advisers
IBC Further Information

2008

2

Governance		Financial statements
58 Consolidated Income Statement
59	Consolidated Statementof Comprehensive Income
60	Consolidated Statement of
Financial Position
61	Consolidated Cash Flow
Statement
62	Consolidated Statement of
Changes in Equity
63	Notes to the Financial Statements
90	Parent Company Financial
Statements
91	Notes to the Parent Company
Financial Statements
93	Consolidated Financial Summary

880

3

Performance		Governance
29 Corporate Governance
30 The Admiral Board
32 Corporate Governance continued
44 Directors’ Report
48 Remuneration Report57	Independent Auditor’s Report to
the Members of Admiral Group plc

1320

5
4

1.7m

		Performance
11 Business Review
11 Group Financial Review
12 UK Car Insurance Review
16 International Car Insurance
18 Price Comparison
20 Other Group Items
22	Principal Risks
and Uncertainties
24 Corporate Responsibility

440

2200
1760

3.6m
£2,215m£2,215m£2,190m

		Overview
01 Financial Highlights
02	Admiral’s 20 Years ofGrowth,1993-201204	Admiral’s Markets and Businesses
06 Chairman’s statement
08	Chief Executive’s statement
10	UK Car Insurance Review

Vehicles insured

Overview

Contents

02

Admiral Group plc
Annual Report 2012

Admiral’s 20 Years ofGrowth, 1993-2012
1997

Admiral launches its
Diamond and Bell
Direct brands.

1993

Gladiator launches as
a commercial vehicle
insurance intermediaryselling van insurance
on behalf of a panelof insurers.

1993

1999

2 August
The first ever Admiral TV
commercial is broadcast.

2007

2002

On 12 December,
Admiral joins the
FTSE 100 with a shareprice of £10.93 andmarket capitalisationof £2.9 billion.

Admiral launches its fifthbrand, elephant.co.uk.

1998

2 January
Admiral launches in
Cardiff with just one
brand, zero insured
vehicles and 57
members of staff. The
first policy is sold over
the telephone at 9.10am.

2000

Successful managementbuy-out of Admiral fromthe Brockbank Group,
then owned by XL CapitalLtd. Barclays Private
Equity backs the MBO.
Admiral enters into
co- and re-insurance
arrangements with
Munich Re and Swiss Re.
Both remain partners ofAdmiral today.

1995

Admiral’s website
goes live.

AdmiralDirekt.delaunches in Cologne,
selling car insurancein Germany.

Confused.com launches,as the Group’s sixth
brand and the UK’s firstcar insurance pricecomparison website.

2008

Conte.it launches
in Rome, selling car
insurance in Italy.

Munich Re acquires
an 18.6% shareholding
and Admiral’s debt
is refinanced with
Lloyds TSB.

2009

2004

Rastreator.com, a
car insurance pricecomparison website,launches in Madrid, Spain.

On 23 September,
Admiral floats on the
London Stock Exchangewith a share price of£2.75 and market
capitalisation of£711 million.

Elephant Auto Insurance
launches in Richmond,
Virginia selling car
insurance in the UnitedStates of America.
Today it operates in
Virginia, Maryland,
Illinois and Texas.

2005

Admiral launches
MultiCar, enabling UK
customers to insure two
or more cars on the same
policy, with all carseligible for a discount.

Inspop Technologies
Pvt. Ltd. launches inHaryana, India, to provide
IT support to the Group’s
price comparison
operations.

2006

Balumba.es launches
in Seville, selling car
insurance in Spain.

£373m
£320m
£262m
£207m

£18m
1993

£47m
1994

£73m

1995

£100m

1996

£120m

1997

£150m

1998

1999

2000

2001

2002

Admiral Group plc
Annual Report 201203

For more information:
UK Car Insurance Review
Go to page 10

Overview

2012

2010

Chiarezza, theGroup’s Italian pricecomparison website,
is sold to BlackFin
Assurance Courtage.

LeLynx, a car insurance
price comparison website,launches in Paris, France.

£2.22bn

On 18 December,
Admiral launches UK
household insurance.

Chiarezza.it, a car
insurance pricecomparison website,launches in Milan, Italy.
L’olivier launches in
Paris selling car insurance
in France.

On 28 December CEO Henry
Engelhardt sells his first car
insurance policy over thephone, during a management
training course.

£2.19bn

Performance

Admiral is named theUK’s best large workplaceby the Great Place toWork® Institute. Detailsof our other awards areavailable in the Corporate
Responsibility report.

As of 31 December, theclosing price share priceis £11.60 and Admiral has
a market capitalisation of£3.2 billion.

AdmiralDirekt.de is soldto Itzehoer Versicherung.

Governance

The Admiral Groupcelebrates its 20th birthdaywith 13 brands, 3.6 million
insured vehicles and over
6,500 members of staff ineight countries.

2011£1.58bn£1.08bn

Financial statements

£910m

£808m

£698m
£627m
£540m

2003

Other information

£422m

2004

2005

2006

2007

2008

2009

2010

2011

2012

04

Admiral Group plc
Annual Report 2012

Admiral’s Markets
and Businesses
Admiral is one of the largest and mostprofitable private car insurers in the UK.
The Group also owns Confused.com,
one of the UK’s leading price comparison
websites and Gladiator, a commercial
vehicle insurance broker.

Outside the UK, the Group has
four car insurance and three pricecomparison operations.

UK Car Insurance

International Car Insurance

Highlights

Highlights

TurnoverTurnoverVehicles£1,936m 89.7%£163m

436,000

2011: £1,966m -2%

2011: 91.3%

2011: £122m +33%

2011: 306,000 +42%

VehiclesPre-tax profit

Combined ratio

Pre-tax loss

3.02m

£372.8m

177%£24.5m2011: 2.97m +2%

2011: £313.6m +19%

2011: 164%2011: Loss £9.5m

Combined ratio• The Group’s core business is UK private
car insurance – it accounts for 87% of
turnover and 85% of customers.
• Market share in 2012 was stable ataround 11%.
• Profit increased by 19% to £372.8 million.
• Lower combined ratio in 2012 versus 2011
primarily driven by higher reserve releases.

Admiral employees
When an employee joins
Admiral they receive a jigsaw
piece, from Henry Engelhardt
the CEO, to reinforce thatevery person is part of theAdmiral picture.

• The Group has four car insurers outside
the UK, in Spain, Italy, the US and France.
• Continued growth in turnover andcustomers in each business.
• Combined ratio higher in 2012 versus 2011,
predominantly due to growth in lessmature markets.

05

Admiral Group plc
Annual Report 2012

1. United Kingdom
Since 1993
2. India
Since 2001
3. Gibraltar
Since 2003
4. Spain
Since 2006

57

1

6. Italy
Since 2008
7. US
(Texas, Virginia,
Maryland and Illinois)
Since 2009

US and Canada

Europe5. Canada(Halifax, Nova Scotia)
Since 2007

Overview

Geographical locations

8
6

India

4
3

2

Price Comparison

Other Group Activities

Performance

8. France
Since 2010

Confused.com

International
Highlights

Highlights

UK revenue

International revenue*

Gladiator revenue

Investment &interest income£82.7m £20.7m£12.5m £15.9m

2011: £77.6m +7%

2011: £12.4m +67%

2011: £11.7m +7%

2011: £13.7m +16%

Operating profit

International quotes*

Gladiator operating
profitGroup cash plus
investments£2.5m£1,818m

2011: £2.8m -11%

2011: £1,393m +31%

£18.2m 4.3m
2011: £16.1m +13%

2011: 3.3m +29%

* Revenue includes Chiarezza, quotes excludes Chiarezza• Gladiator decreased profit to £2.5 million
due to an increasingly competitive
commercial vehicle market.
• The Group remains low-risk in its
investment strategy. Investment andinterest income increased on higher
total cash and investment balances.

Financial statements• Confused.com generated profit of£18.2 million in a fiercely competitive
UK market.
• International price comparison operations
grew strongly and improved productivity.
• The Group exited Italian price comparison
market with the sale of Chiarezza in April.

Governance

UK Highlights

Other information

06

Admiral Group plc
Annual Report 2012

Chairman’s statement

Profit before tax

Return on capital

2012

2012

60%

2011

59%

£344.6m
2011

60%£344.6m£299.1m

Earnings per share

95.1p
2012
2011

% of customers
who would renew
following a claim

90%
95.1p
81.9p

2012

90%

2011

91%

In my statement last year I commented that I was very
confident, given the quality of our management andour staff, that 2012 would demonstrate their capability
and commitment to put the 2011 issue of higher than
expected claims behind us and restore lost shareholder
value. This confidence has, I believe, been fully justified
with pre-tax profits 15% higher at £345m; reserve
releases from the 2010 and 2011 years; and a share pricethat was 36% higher at the end of the year than the start.
This level of profitability delivered a 60% return on capital
employed and supported total dividends of 90.6 pence
per share, which represents a distribution of 95% of
our earnings. Our normal dividend, growing in linewith our growth in profits based on a 45% pay-out ratio,
amounted to 42.7 pence per share, whilst our available
surplus, after taking into account our required solvency,
provision for our overseas expansion plans, and a margin
for contingencies, made possible a further special
dividend of 47.9 pence per share.
Our UK Business
UK motor insurance is cyclical. As rates harden andprofitability improves so too interest in growth increases
amongst insurers, raising marketing spend; developing
new offerings; and, in turn, leading to lower prices to growshare. This phase continues until the market recognisesthat the new business it is attracting is unprofitable for
most, leading to a further turn. It makes good economic

Alastair Lyons, CBE
Chairmansense to grow in the up-cycle and refrain from chasing
the market down in the down-cycle. This is even more
the case for a player such as Admiral that has a significant
combined ratio advantage over the market as a whole andcan, therefore, afford to raise rates less quickly than themarket as a whole when the cycle turns up. The UK market
reached its low point in 2009, a year that saw a totallyunsustainable overall market combined ratio of 127%,
and then raised rates significantly over the subsequent
two years to reflect the increasing cost of claims, inparticular those relating to bodily injury. By contrast, in2009 Admiral had achieved a combined ratio of 94% andwas, therefore, able to take advantage of these market
conditions to add material growth to its UK motor book,finishing 2011 almost 60% larger than two years previously.
Similarly in 2012, as the second largest UK private motor
insurer, we have not sought to add to the downward
pressure on prices but have been content to hold ourshare broadly steady.
Admiral has always had a low appetite for risk. This isdemonstrated by the fact that we reinsure 75% of ourbook either through co-insurance or quota share; weonly invest in the highest quality assets with no equity
exposure; and when we enter new markets we do soslowly through organic growth, adopting a test and learn
approach. Nowhere is this low risk appetite more evident
than our approach to reserving against motor claims. We
establish initial reserves at the prudent end of potential
outcomes, reviewing how claims develop in subsequent
years and releasing parts of the reserve to profit as andwhen justified. In our reserving we seek to reflect not only
what we know but what may happen, such as potentialchanges to discount rates and increasing numbers of
periodic payment orders. Our approach to reserving
is conservative; how conservative will vary with ourassessment of the level of uncertainty and volatility
to which our business is exposed.
Currently the UK motor market is undergoing significant
change – the implementation of the EU gender directive;
the OFT referral to the Competition Commission; thebanning of referral fees; and the emergence of telematics
offerings are all potentially disruptive events. Admiralhas, however, built its business to embrace and profit
from change, rather than fear it and we have been astransparent as we can as to the likely effects of thesechanges on our business. The management team hasdeveloped a flexible responsive, low-cost, data-richbusiness model that allows the effect of change to be
identified quickly, measured accurately, and responded
to effectively. By seeking to minimise bureaucracy,
encourage individual managers to use their initiative,
and avoid management by committee which leads toan absence of decision-taking and the abrogation of
responsibility, we aim to react more quickly than ourcompetitors to changes in our environment. Through our
all-employee Free Share scheme we seek to motivate allof our people to work together to achieve the best
outcome for what is their business, creating a totalalignment between their interests and those of ourAdmiral Group plc
Annual Report 201207

For more information:
Corporate Responsibility
Go to page 24
Governance
Go to page 29

Alastair Lyons, CBE
Chairman
5 March 2013

Other information

Our Board
Over the past couple of years we have added to our
Board beyond its normal size in anticipation of threeof our Non-Executive Directors reaching the end of thenine years following which they are no longer regarded
as independent under the UK Corporate GovernanceCode. By structuring this overlap we aim to maintain thecontinuity of Board process and the strength of personal
interaction which underlies the effectiveness of the Board
as a team. The first of these, Keith James, stood down

Financial statements

We are already seeing the results of investing in pricecomparison in new markets in order to kick start theprocess of change to more active switching of car
insurance provider by consumers. Market data shows
price comparison growth in Italy, Spain and France andwe are delighted to see others being attracted by our
initiative to establish their own price comparison sites inmarkets where we provide motor insurance – the launchof Les Furets in France is a case in point. The more impact
price comparison can have the stronger the potential
for direct insurance in these markets.

Thank YouA business is only as good as its people and every
individual has their particular contribution to the successof the whole. It is, therefore, everyone in Admiral acrossall the various markets and functions that now make up
our Group that I must thank for what has been achievedin 2012. Whilst there are many elements to why Admiral
is different, for me the most significant is that the
management team has been successful in designinga business where the overwhelming majority of those I
meet enjoy coming to work and through enjoying what
they do, and the environment within which they work,
are more successful in what they do. It is, therefore,no surprise that the average length of service of our
20 most senior UK managers is 13 years in a company
that is itself just 20 years old. I am confident that thisdepth of focused knowledge and commitment withina supportive environment will lead to a continued
strong performance within our markets.

Governance

Admiral Overseas
We have continued to grow our overseas businesses
at the measured pace dictated by a strategy of organic
growth and within the constraints of the challenging
economic environment, particularly as affects southern
Europe. We are still very much at the stage of learning
how best to compete in each of these markets and shallfocus in the near term on building the businesses that wehave established over the past six years. When each year
I visit our international operations I always know that I am
in Admiral, testament to the effectiveness with which our
can-do culture, management ethos, and approach to ourcustomers and employees have been exported.

I would also like to extend this thanks more generally
to all of our Non-Executives for the time they give and thecommitment they make to our business. As our businessexpands and broadens, and against the backdrop ofchallenging economics and a demanding regulatoryenvironment, what is expected of Non-Executives, andin particular Committee Chairs, bears little relation to
the position that existed when Admiral floated in 2004.
During 2012 all Non-Executives visited at least one of
our overseas businesses in addition to the normal Board
process. It is only by such active engagement withthe business and the opportunity to spend time withmanagement across many levels that Non-Executives
can gain a real understanding of its underlying healthand potential. In a business that has sustained profitable
growth as its objective the depth and breadth ofmanagement is both the key enabler and the potential
greatest inhibitor. Our Board, therefore, aims to assess
not only the plans for immediate succession but, at leastas, if not more, importantly, the emerging bench strength
for five to 10 years time. Throughout 2012 we have had
three senior managers join the Board in each of its
meetings in order to broaden their understanding of
the Group’s strategy and Board process and contributeactively to Board deliberations.

Performance

The customer is at the centre of everything we do.
We design our products and processes in order tomeet their needs better than our competitors, and weare now pleased to be able to offer our UK customers
household insurance alongside motor insurance. We seek
feedback after every interaction in order to learn how we
can improve our service. Last year we received over
140,000 individual items of feedback – in the critical areaof claims processing over 90% of those claiming under
their policy said that they would take motor insurance
from us again. All departments have quality scoresagainst their relevant key performance indicators, andcompete to win Quality Awards. For customer-facing
departments these quality measures underpin theregulatory assessment of our compliance with theprinciples of Treating Customers Fairly. We fully support
initiatives that can reduce the overall cost of providing
motor insurance, in turn making possible a reduction in
the premiums insurers have to charge their customers.
Minimising the potential for fraudulent claims andreducing incidental claims costs both have their partto play.

at our 2012 AGM although he continues to bring his
knowledge of our business and his wise counsel to bearthrough his chairmanship of our principal UK-regulated
operating subsidiaries. May I take this opportunity tothank Keith for everything that he added to our debate
during his time on the Board.

Overview

shareholders. We were, therefore, delighted to be named
best large UK workplace by the Great Place to Work®
Institute in 2012.

08

Admiral Group plc
Annual Report 2012

Chief Executive’s
statement
Turnover

Profit before tax£2,215m£344.6m

2012£2,215m

2012

2011

£2,190m

2011

Earnings per share

95.1p
2012
2011

£344.6m£299.1m

Full year dividend
per share

90.6p
95.1p
81.9p

2012
2011

90.6p
75.6p

We’ve done the heavy lifting: the first 20 years. We’ve put
the hole in the ground and we’ve got the cranes in place.
All that’s left to do is to build the metaphorical skyscraper.
We’ve had our ups and downs, good moments and, well,less good moments, over the first 7,304 days (we started
on 2 January 1993 and there have been five leap years
along the way, but who’s counting?). In 20 years, we’ve
done a lot of car insurance (total turnover? £13 billion, our
combined ratio over the first 20 years? 84%), we’ve had a
lot of laughs, lost (quite) a few hairs and gained a few
pounds. But the net result is my belief that the next 20
years will make the first 20 seem downright pedestrian for
Admiral Group. And if I do my job well, then when the next
wave of management takes over, it will inherit a very strong
foundation upon which to construct their skyscraper.
Before we attack the next 20 years, let’s take a look at
the 20th!
In 2012 the return to form of the UK business was heartwarming to all of us. We enjoyed substantial reductionsin the actuarial view of best estimate for the back years,
which has in turn allowed us to release some reserves
and increase the reserve stock for the future. The upshotof all this is a 15% increase in profits at Group level. Nice.
In addition, we did not chase growth. A common
misconception seems to surround the question ofpolicyholder growth and profit growth. If one tries tomake a simple link between these two it would

Henry Engelhardt, CBE
Chief Executive Officercompletely miss the third part of the triangle: margin.
Prices in the market fell more than 10% in 2012. We chased
it some of the way down but not all the way down. As aresult we kept some integrity with regard to margin.
We believe that to have chased the market further, suchthat we could present greater year-end policyholder
growth, would have meant sacrificing profit in both theshort- and long-term.
The UK car insurance market has, historically, been
violently cyclical: some profitable years followed by big
losses. There is no reason to believe that the market willstop being cyclical, although the extent of the future
violence is as yet unknown. Therefore there will be far
better opportunities to grow at the next turn in the cycle,
when rates begin going up faster than claims inflation.
Admiral is in the enviable position of being profitablethroughout the cycle. This allows us to choose when
we grow and how much we grow and what margins
we maintain.
It was also a good sign that Confused.com, for the firsttime in four years, made more profit than the year before.
However, the trading environment for Confused will beeven more challenging in 2013. The rate of aggregator
growth in the market is slowing. This isn’t a surprise fortwo reasons: first, so many people are already using
price comparison that there aren’t that many new people
left! Secondly, as rates tumble in the market consumers
get renewal notices with premiums lower than last year.
This only serves to dampen their enthusiasm for shopping.
Confused is doing a lot of interesting things however totry and insulate itself from the vagaries of the car insurance
market. It has, for example, a very sophisticated offeringof credit cards and it has developed a very nifty app tohelp drivers find parking wherever they’re at in the UK.
2012 saw Admiral take a big but small step. After 19 years,
11 months and 16 days of having car insurance as the
only stand-alone, underwritten product, we launchedhousehold insurance in the UK on 18 December, 2012. It’sa big step because we have, for the first time, diversified
the product range which we underwrite. It’s a small step
because the business is intended to be very small in thefirst year or two. Test and learn, test and learn…
The results outside the UK were mixed.
The insurance businesses made some strides towards
being growing, profitable, sustainable businesses,
however, these strides were not as long as anticipated.
Overall the opportunities are well worth the investment
but we do need to pick up our game and make moreprogress, more quickly.
The non-UK price comparison businesses each had agood year. The results for Rastreator and LeLynx, in Spainand France respectively, were better than expected.
These two businesses are poised for great things, butachieving greatness is never easy.

Admiral Group plc
Annual Report 2012

For more information:
Business Review –UK Car Insurance
Go to page 122012 WinnerBest Large UK
Workplace
Voted 4th Best
Workplace inEuropeOur business model

Admiral Group’s strategy is not complicated. Based on
the premise that the internet is an irresistible force, ourstrategy is to continue to progress in the UK market while
taking what we know and do well, which is internet andtelephone delivery of car insurance, beyond the UK.
Translation: keep doing what we’re doing but do it better
than we did it last year.

3. Low risk
	No debt, cash balances conservatively
managed and loss protection through theuse of co- and reinsurance.

And that in itself will be challenging because the bar was
raised again in 2012 with a new record for profits (which
we’ve done every year since we went public in 2004 andactually a few years before) and a return on capital of 60%.

5. Aligned interests
	Significant share distribution throughout
the organisation.

Henry Engelhardt, CBE
Chief Executive Officer

5 March 2013

Our strategic priorities
1.	Grow profitably our share of the UK private motor
insurance market.
2. 	Exploit the knowledge, skills and resources
attaching to our established UK businesses topromote our expansion overseas in both private
motor and price comparison.
3. 	Learn by taking relatively small and inexpensive
steps to test different approaches and identify
the best way forward.
4.	Operate a ‘capital-light’ business modeltransferring a significant proportion of ourunderwriting risk to reinsurance partners,
which in turn allows Admiral to distributethe majority of our earnings as dividends.
5. 	Give all our staff a stake in what they create bymaking them shareholders.
6.	Recognise the responsibility we have to thecommunities of which we are a part.

2012 was the year of the
kangaroo: it bounced
around a little bit but itturns out to be pretty big,strong and energetic withthe babies protected in
the mother’s pouch.

Other information

Great. We‘re off to a good start. Let’s get on with thenext 20 years.

6. High return on capital
Enabled by a capital light strategy.

Financial statements

In sum, 2012 was the year of the kangaroo: it bounced
around a little bit but it turns out to be pretty big,strong and energetic with the babies protected in
the mother’s pouch.

4. Cash generative
Strong cash flow and high dividend payout ratio.

GovernanceThis experience was a real eye-opener. We all learned agreat deal about our business doing this but the biggest
learning point was first-hand knowledge of how great thepeople who work for us are. It was a pleasure to be trainedby them, helped by them, play games with them and learn
from them. We all came away with a huge respect forour staff’s ability to tackle the challenges created by acomplicated product, systems, regulation, etc. and still
give great customer service every day. We also cameaway reinforced in our belief that if you treat customers
well they appreciate it and will treat you well too.

2. Growing	100% organic, long-term approach to growththat adjusts according to market conditions.

Performance

Finally, it was a year marked by a long-overdue action. In
the last half of December David Stevens, co-founder and
COO, several other senior managers and I went throughan entry-level sales training course and then got on thephones with customers. So after 19 years and 50 weeks,
I made my first sale!

1. Profitable
Focused on delivering year on year growth.

Overview

Following on from the success of Rastreator and LeLynx,
just after the end of the year we launched the beta version
of a price comparison site in the US, Comparenow.com.
Until now no one has done European-style pricecomparison in the US and so Comparenow will plough
new ground. Comparenow is attempting to change
normal shopping patterns on a big scale and successis sure to be challenging and exciting in equal parts.

Financial milestones are great but one of the mostrewarding moments of the first 20 years came in 2012
when we were named the best large company to work
for in the UK and the 4th best multinational company towork for in Europe, by the Great Place to Work® Institute.
We have a simple philosophy at Admiral: if people likewhat they do, they’ll do it better. So we go out of our way
to make this a good place to work. The result: happierstaff, record profits.

09

10

Admiral Group plc
Annual Report 2012

UK Car Insurance Review

Twenty years ago, Admiral launched on a grey Saturday
in Wales – the seventh of what ultimately becamea couple of dozen Direct Line ‘clones’; new players
and subsidiaries of big, established insurers, copying
the over‑the-‘phone ‘cut out the middle man’ model.
For such a superficially dull industry, those twenty years
have seen an astonishing pace of change.
For a start, of the top five private car insurers in 1993, only
one made it into the top five in 2011 (Royal, Sun Alliance,
AGF, Eagle Star, Direct Line in 1993 – Direct Line, Admiral,
Aviva, LV & AXA in 2011).
Back in 1993, one in five customers made a claim eachyear and almost all of those were for bent metal or cartheft. Twenty years on, it’s heading towards one in ten
making a claim, but most of the cost of those claims is
now attributable to ‘bodily injury’. Of course, moststrikingly, none of the business in 1993 came via theinternet, and only a minority over the ‘phone. Now,
almost three quarters of new customers start theirjourney on the internet.
But some things don’t change. The market average
expense ratio in 1993 was 26%. Last year, after two
decades of industry consolidation, I.T. investment,
adaption of direct distribution, exploitation of theinternet, the industry average expense ratio was 26%.
Admiral’s was 13%; delivering an eighteenth year of
better-than-industry average expense ratio, and atenth year of beating it by over ten percentage points.
Our claims ratio has also bettered industry averages, atleast since the millennium. Our rapid rise up the league
tables to be the UK’s second largest car insurer, byvehicles covered, is all down to this sustained superior
underwriting performance over many years.

But that’s history. What does the future hold? The
headlines (unusually in the popular press, as well as thetrade press) are dominated by the current slew of actualand potential legislative and regulatory change – theCompetition Commission, hot on the heels of the OFT
enquiry, the Jackson reforms, possible further changes
to the administration of, and costs associated with bodily
injury claims, the banning of gender-based rating, thenewly-formed Financial Conduct Authority’s focus onvalue for money add-ons. But it’s not the ultimate
outcome of this frenetic activity that will determine thehealth of Admiral’s core UK operation in twenty years’
time. Current and proposed changes, as long as they’re
implemented and enforced even-handedly and universally
across the market, don’t affect relative competitive
strength, over anything but the very short-term. Nor dothey affect overall industry profitability. It is, as it has
always been, the ability to execute better than othersin dozens of individually insignificant, but collectively
important, ways, and to respond to fundamental
underlying changes more quickly and more adeptly
than competitors that will be the key to future success.
Late last year, we launched our first major productextension ever, with the launch of household insurance.
One question we will be able to answer in twenty years, or
possibly sooner, is whether we’ve developed an industrybeating competence in a second £6 billion market without
losing our edge in the ever more massive car insurance
market.
In terms of concrete future guidance on household, all I
can really say is ‘so far, so good’. Ten weeks in. For what
that’s worth.

David Stevens, CBE
Chief Operating Officer
5 March 2013

David Stevens, CBE
Chief Operating Officer

Admiral Group plc
Annual Report 201211

Business Review
Group Financial Review
2012£2,215.1m

2011£2,190.3m

2010
2009
2008

£1,585.8m£1,077.4m£910.2m

Customers
2012

3.6m

2011

3.4m
2.7m

2009
2008

2.1m
1.7m

Profit before tax
2012£344.6m

2011£299.1m

2010
2009
2008

£265.5m£215.8m£202.5m

2012

The Group’s UK price comparison business, Confused.com,
delivered a pre-tax profit of £18.2 million – around£2 million higher than 2011’s result, on 7% higher revenue.
Outside the UK, Admiral’s international price comparison
businesses (Rastreator.com in Spain and LeLynx.fr inFrance) made a combined loss of only £0.2 million (2011:
loss of £5.6 million) whilst combined revenue increasedby nearly 70%. The Group sold its Italian price comparison
business Chiarezza.it in April 2012.
Admiral’s capital-efficient and highly profitable businessmodel led to return on capital employed of 60% (2011:59%). A key feature of the business model is the extensive
use of co- and reinsurance across the Group. During thefirst half of 2012 Admiral announced extensions to its UK
reinsurance arrangements until at least the end of 2014.
Admiral’s long-term UK co-insurance agreement (covering
40% of the business) runs to at least the end of 2016.

2012

60%

2011

59%

Other Group key performance indicators include:• Group loss ratio of 78.9%, in line with 2011
(an improved UK loss ratio offsetting a higher
international ratio).
• Group expense ratio 17.7%, up from 16.8% in 2011 (animproved UK ratio offset by a higher international ratio).
• Group combined ratio at 96.6% (2011: 95.7%).

81.9p

2010
2009
2008

72.3p
59.0p
54.9p

Return on capital

2010
2009
2008

59%
54%
57%

Admiral Group grew pre-tax profits in 2012 by 15%
to £344.6 million (2011: £299.1 million) and earnings per
share by 16% to 95.1 pence (2011: 81.9 pence).

The Group’s results are presented in three key segments– UK Car Insurance, International Car Insurance and Price
Comparison. Other Group items are summarised in a
fourth section.

Other information

Turnover increased slightly to £2,215.1 million(2011: £2,190.3 million), whilst net revenue rose 13%
to £984.3 million (2011: £870.3 million). Customer numbers
were 6% higher at the end of 2012 at 3.55 million (2011:3.36 million).

Total dividends paid and proposed for the financial
year amount to 90.6 pence per share (£245 million), an
increase of 20% on the previous year (2011: 75.6 pence;£203 million). The final dividend proposed is 45.5 pence
per share (25% higher than the final 2011 dividend of
36.5 pence).

Financial statements

95.1p

2011

Governance

Earnings per share

Admiral’s international car insurance businesses continue
to develop, with turnover rising 33% to £162.9 million(2011: £122.1 million) and customer numbers reaching
435,900 – an increase of 42% on a year earlier. The
combined loss from the operations was, however,higher, at £24.5 million (2011: loss of £9.5 million). Thiswas predominantly a result of growth in the younger
businesses and some strengthening of back year
claims reserves in the more mature businesses.

Performance2010

UK Car Insurance delivered a profit of £372.8 million – up
19% on 2011’s result of £313.6 million, primarily driven byhigher net insurance premium revenue and an improved
combined ratio (along with associated profit commission).
Turnover for this core business accounted for 87% of theGroup total (2011: 90%) and 85% of customers (2011: 88%).
Growth in the UK was moderated in 2012 in response tomarket conditions in the UK market.

Overview

Turnover12

Admiral Group plc
Annual Report 2012

Business Review continued

UK Car Insurance Review
UK Car Insurance KPIs
Vehicle base and growth
2012

3.02

2011

2.97

2010

2.46

2009
2008

1.86
1.59

• Sustained, organic growth: 17% compound
annual growth over five years.
• 2% increase in vehicle base in 2012 (growthslowed due to market conditions).
• Over 11% share of UK market.
Motor combined ratios
2012

76.1%

13.6%

2011

77.3%

14.0%

2010

68.3%

2009

68.1%

2008

62.0%

15.2%
18.0%
19.0%

• Consistent outperformance compared to market
in underwriting profitability.
• Combined ratio improved in 2012 to 90% from 91%.
• Expense ratio at 14% – around half themarket average.

• The Group’s core business is selling and underwriting
private car insurance in the UK through four brands –Admiral, Bell, Diamond and elephant.co.uk• Policies are distributed through price comparison
websites and direct channels (Admiral’s own websites
and the telephone).
• Admiral accounts for around 11% of the UK private
car insurance market in vehicle terms, insuring overthree million cars at the end of 2012. Total UK premiumin 2012 was over £1.7 billion.
• Admiral’s main operations are in Cardiff, Swansea and
Newport in South Wales; customers are also serviced
from Nova Scotia, Canada and Bangalore, India.
UK Car Insurance Strategy
The strategy for Admiral’s UK business is unchanged
and remains relevant and simple:• The Group aims to grow profitably its share of the UK
private motor insurance market whilst maintaining
a capital-efficient structure.
• At the same time, Admiral endeavours always togive excellent service to customers, whilst providing
a positive environment in which staff can workand develop.
Non-GAAP*1 format income statement
£m

2010

2011

2012

Turnover*2
Total premiums written*3

1,419.7
1,237.6

1,966.0
1,728.8

1,936.2
1,748.7

Net insurance
premium revenue
Investment income
Net insurance claims
Net insurance expenses

269.4
8.3
(192.6)(32.4)

418.6
10.6(335.5)(46.7)

455.6
13.9(355.1)(50.0)

52.7
67.0
142.4
13.7

47.0
61.8
181.5
23.3

64.4
108.4
170.9
29.1

275.8

313.6

372.8

Other revenue per vehicle
2012

£79

2011

£84

2010

£84

2009

£77

2008

£76

• Significant profit generated alongside motor
underwriting – £205 million profit generated
in 2012.
• Other revenue per vehicle of £79 in 2012(2011: £84).
(KPIs on staff and customers are included in the
Corporate Responsibility section on page 24).

Underwriting profit
Profit commission
Net ancillary income
Instalment income
UK Car Insurance
profit before tax
*1
*2
*3

GAAP = Generally Accepted Accounting PracticeTurnover (a non-GAAP measure) comprises total premiums written and other revenue
Total premiums written (non-GAAP) includes premium underwritten by co-insurers

Split of 2012 underwriting profit
£m

Motor

Ancillary

Total

Underwriting profit

59.6

4.8

64.4

Admiral Group plc
Annual Report 201213

Business Review continued

£m

2010

2011

Overview

Key performance indicators
2012

Reported motor loss ratio
68.3% 77.3% 76.1%
Reported motor expense ratio 15.2% 14.0% 13.6%
Reported motor combined ratio 83.5% 91.3% 89.7%
Written basis motor
expense ratio
14.4% 13.2% 13.0%
Claims reserve releases£23.5m £10.3m £17.6m
Vehicles insured at year‑end
2.46m 2.97m 3.02m
Other revenue per vehicle
£84
£84
£79

Performance

Arrangements for 2012 to 2014
In early 2012 the Group was pleased to announce
extensions to its arrangements such that capacity is
fully placed until the end of 2014. The underwriting
splits can be summarised as follows:

2013

2014

The proportion underwritten by Great Lakes (a UKsubsidiary of Munich Re) is on a co-insurance basis,such that 40% of all motor premium and claims for the2012 year accrues directly to Great Lakes and does notappear in the Group’s income statement. Similarly,
Great Lakes reimburses the Group for its proportional
share of expenses incurred in acquiring andadministering the motor business.
That contract will run until at least the end of 2016, andwill see Great Lakes co-insure 40% of the UK businessfor the remaining period. Admiral has committed toretain at least 25% for the duration, whilst the allocationof the balance is at Admiral’s discretion.

Financial statements

The two principal advantages of the arrangements are:
• Capital efficiency – The majority of the capital
supporting the underwriting is held outside theGroup. As Admiral is typically able to retain muchof the profit generated via profit commission,
the return on Group capital is higher than in an
insurance company with a standard business model.
• Risk mitigation – Co-and reinsurers bear their
proportional shares of claims expenses andhence provide protection should results
worsen substantially.

2012

Admiral
25.00% 25.00% 25.00%
Great Lakes (Munich Re) 40.00% 40.00% 40.00%
New Re13.25% 13.25% 13.25%
Hannover Re
8.75%
8.75%
8.75%
Swiss Re
7.50%
7.50%
9.00%
Mapfre Re
3.00%
3.00%
4.00%
XL Re
2.50%
2.50%
–
Total
100.00% 100.00% 100.00%

Governance

UK Car Insurance – Co-insurance and Reinsurance
Admiral (in the UK and internationally) makes significant
use of proportional risk sharing agreements, where
insurers outside the Group underwrite a majority of therisk generated, either through co-insurance or quota
share reinsurance contracts. These arrangements
include profit commission terms which allow Admiral toretain a significant portion of the profit generated.

All other agreements are quota share reinsurance.
Other information

The European and US arrangements are explained
below in the International Car Insurance section.

14

Admiral Group plc
Annual Report 2012

Business Review continued

UK Car Insurance Review continued
Claims Reserving
Admiral’s reserving policy (both within theclaims function and in the financial accounts) is
initially to reserve conservatively, above internal
and independent projections of ultimate loss ratios.
This is designed to create a margin held in reserves
to allow for unforeseen adverse development inopen claims and typically results in Admiral making
above industry average reserve releases.

UK Car Insurance Financial PerformanceCommentary on Admiral’s UK Car Insurance businessresult and its market is contained in Chief Operating
Officer David Stevens’ review on page 10.
As noted in the Group’s interim 2012 results, the UK
Car Insurance market became substantially more pricecompetitive in 2012 than it had been over 2010 and 2011,
over which period Admiral grew its business significantly.
Whilst the number of customers continued to grow, therate of growth was slowed significantly as Admiral opted
to preserve margin rather than chase growth.

As profit commission income is recognised in theincome statement in line with loss ratios accounted
for on Admiral’s own claims reserves, the reserving
policy also results in profit commission income being
deferred and released over time.

Total premium written in 2012 was broadly flat compared
to 2011 at just over £1.7 billion, whilst the number ofcustomers rose 2% year-on-year to 3.02 million at
31 December 2012. Vehicle count in the second halfof the year was flat. Across new business and renewals,
Admiral cut its rates by around 6% in 2012. Average
written premium for the year was around £580, down 9%
on 2011, due in part to rate cuts and in part to portfoliochanges (notably a shift in favour of renewal business).
Profit from UK Car Insurance increased by 19% to£372.8 million (2011: £313.6 million).
UK Car Insurance Underwriting Result andProfit Commission
The UK combined ratio improved by around two
percentage points in 2012 as follows:
UK Car Insurance Combined Ratio

Loss ratio excluding
reserve releases
Reserve releases
Loss ratio net of releases
Expense ratio
Combined ratio

2011

2012

79.8%
2.5%
77.3%
14.0%
91.3%

80.0%
3.9%
76.1%
13.6%
89.7%

The loss ratio before releases was broadly flat in theyear, though larger reserve releases (3.9% of net earned
premium compared to 2.5%) led to an improved net loss
ratio of 76.1%.
The higher level of releases compared to 2011 reflected
the positive development during the year in projected
ultimate outcomes on prior underwriting years (notably
2011 and 2010). Claims development in general during
2012 was encouraging; with no repeat of the spike inlarge bodily injury claims that occurred during H2 2011.
The projected ultimate combined ratio for Admiral for the2012 accident year is 83%, compared to 82% for the 2011
year. The reported combined ratio for the UK market for2011 was 105%.

The improved combined ratio, along with the significant
growth in the size of the business since 2009, has led to amaterial increase in profit commission income recognisedin 2012 – at £108.4 million compared to £61.8 million(though the comparative figure was subdued by thedisappointing claims experience in 2011). Note 4c tothe financial statements analyses profit commission
income by underwriting year.
Total profit from car insurance underwriting andprofit commission increased significantly, by 54%
to £168.0 million from £108.8 million.
UK Car Insurance Other Revenue –Analysis of Contribution:£mAncillary contribution
Underwritten
ancillary profit
Instalment income
Other revenue
Internal costs
Net other revenue
Other revenue
per vehicle

2010

2011

2012

168.3

213.9

205.2

–
13.7
182.0
(25.9)
156.1

–
23.3
237.2
(32.4)
204.8

4.8
29.1
239.1
(34.3)
204.8

£84

£84

£79

Admiral Group plc
Annual Report 201215

Business Review continued

The most material contributors to net other revenue are:
• Profit earned from motor policy upgrade products
underwritten by Admiral, including breakdown, carhire and personal injury covers.
• Profit from other insurance products, not underwritten
by Admiral.
• Vehicle Commission (see opposite).
• Fees – administration fees, waster leads and referral
income (see below).
• Instalment income – interest charged to customers
paying for cover in instalments.

In additional, in 2012 Admiral earned around £5 pervehicle in credit hire referral fees (£13.6 million). Admiralnotes that the UK Competition Commission has recently
embarked upon a review of the car insurance market
and a potential outcome of the review is a further ban
on credit hire referral fees.

However, the accounting recognition and treatment ofvehicle commission results in Other Revenue per vehicle
in 2012 being reduced by approximately £6 (£16 million in
total). Further detail on the intra-group element of vehiclecommission is set out in note 3.

The FSA regulates two Group companies involved in thebusiness – EUI Limited (an insurance intermediary) and
Admiral Insurance Company Limited (an insurer); whilst
the FSC regulates Admiral Insurance (Gibraltar) Limited(also an insurer).
All three companies are required to maintain capital atlevels prescribed by their regulator, and all three maintainsurpluses above those required levels at all times.

Governance

Vehicle Commission
With effect from 1 April 2012, Admiral no longer earns
Other Revenue from the sale of legal protection policies.
In addition, the Group began charging its panel ofco- and reinsurers a vehicle commission. Admiral’s car
insurance policies will continue to include legal protection
as an integral feature and there has been no impact on
customers in the level of cover or cost of policies as aresult of this change. The planned overall economic
impact of these two changes is not significant.

Regulatory Environment
The UK Car Insurance business operates predominantly
under the regulation of the UK Financial Services
Authority (FSA), and, through a Gibraltar based insurancecompany, under the Financial Services Commission (FSC)in that territory.

Performance

Referral Fees
As previously noted, personal injury referral fees
will be banned with effect from 1 April 2013. In 2012
Admiral earned approximately £6 per vehicle insured(£18.6 million) from personal injury referral fees.

Overview
Overview

Admiral generates other revenue from a portfolio
of insurance products that complement the core car
insurance product, and also fees generated over the lifeof the policy. There is also some (less significant) income
from other products unconnected to car insurance.

Financial statements
Other information

16

Admiral Group plc
Annual Report 2012

Business Review continued

International Car Insurance
The Group has four direct car insurance businesses
operating outside the UK:• Admiral Seguros (Seville, Spain): The most mature of
the Group’s international businesses, having tradedsince October 2006. The business trades via twobrands – Balumba.es and Qualitas Auto.
• ConTe (Rome, Italy): Launched in May 2008,
ConTe is the largest of the non-UK insurers
within the Group.
• Elephant Auto (based in Richmond, Virginia, USA):
Launched in October 2009 and provides car
insurance in four US states (Virginia, Maryland,
Illinois and Texas) with a market size greater thanthe UK.
• L’olivier Assurances (Paris, France): The Group’s
youngest (and smallest) international insurance
business, launched in December 2010.
International Car Insurance Strategy
An important element of Group strategy is to exploit theknowledge, skills and resources attaching to Admiral’sestablished UK businesses in order to promote expansion
overseas in both private car insurance and pricecomparison. Admiral’s objective is to create profitable,
sustainable and growing businesses, aiming where
possible to minimise any negative financial impact
on the Group.
Admiral initially identified five markets into which
expansion was desirable (based on, among otherthings, the size of the market and the nature of
distribution and regulation), and having sold German
insurer AdmiralDirekt.de in 2011, the Group has anactive presence in the remaining four.
Overall business progress and performance isdiscussed in the following sections.

International Car Insurance Financial Performance
Non‑GAAP format income statement*1
£m

2010

2011

2012

TurnoverTotal premiums written

77.6
71.0

122.1
112.5

162.9
148.5

Net insurance premium
revenue
Investment income
Net insurance claims
Net insurance expenses

18.7
0.1
(15.9)(16.5)

27.2
0.2(28.3)(16.2)

43.3
0.1(49.4)(27.4)

Underwriting result
Net ancillary income
Other revenue and charges(13.6)
5.3
0.3(17.1)
8.0(0.4)(33.4)
8.9–

International Car
Insurance result

(8.0)

(9.5)

(24.5)

Note – Pre-launch costs excluded

Key Performance Indicators*1£mReported loss ratio
Reported expense ratio
Reported combined ratio
Vehicles insured
Other revenue per vehicle

2010

2011

2012

85%
88%
173%

104%
60%
164%

114%
63%
177%

195,000 306,000 436,000
£34
£32
£25

*1 Figures include Admiral Direkt (sold in January 2011)

Admiral Group plc
Annual Report 2012

The arrangements for 2013 will remain the same, otherthan in Spain, where Admiral will retain 30% of therisk, down from 35% in 2012. The balance of 70% will
be shared equally between Munich Re and Swiss Re.

Growth in the younger businesses, along with someadverse prior year claims development in the moremature operations, led to a higher combined ratio
however, which increased to 177% from 164%. The higher
combined ratio, in conjunction with higher net insurance
premium revenue led to a higher loss, of £24.5 million in2012, up from £9.5 million in 2011.
As the Group’s new insurance operations grow, it isexpected that they will make losses until appropriate
scale has been achieved. Although the 2012 loss washigher than anticipated, the Group is satisfied withthe progress each business continues to maketowards the goal of becoming a sustainable,
growing, profitable operation.

Performance

All contracts are subject to certain caps on thereinsurers’ exposures and all contracts have profit
commission terms that allow Admiral to receive a
proportion of the profit earned on the underwriting
once the business reaches cumulative profitability.
The contracts include proportional sharingof ancillary profits.

International Car Insurance Financial Performance
Admiral’s international insurance businesses (in aggregate
and individually) continued to grow, adding 130,000
customers and ending 2012 42% larger than a year earlier.
Turnover grew 33% to £162.9 million (2011: £122.1 million).

Overview

International Car Insurance Co-insurance
and Reinsurance
Reinsurance arrangements for the 2012 year remained
the same as 2011 in all countries, with Admiralretaining 35% (Spain and Italy), 30% (France) and
one third (USA) of the underwriting risk respectively.

17

Regulatory Environment
Admiral’s European insurance operations are subject
to the same regulation as the UK car insurance business,details of which are summarised above.
Governance

The Group’s US insurer, Elephant Insurance Company isregulated by the Virginia State Corporation Commission’s
Bureau of Insurance. The Company is required to maintaincapital at levels prescribed by the regulator, and holds a
surplus above these requirements at all times.

Financial statements
Other information

18

Admiral Group plc
Annual Report 2012

Business review continued

Price Comparison
UK
Price Comparison• Confused.com is an insurance and financial
services comparison website.
• Operating in the UK, the site allows consumers
to compare a range of general insurance andfinancial services products across price andpolicy benefits.
• Confused’s income is primarily generated fromcommissions paid by the product provider on thesale of an insurance policy or financial product.
• Confused is one of the UK’s leading car and homeinsurance comparison websites.
Price Comparison Strategy• Confused’s strategy is focused on car insurancecomparison and is aimed at making Confused
the most competitive car insurance pricecomparison website in the UK market.
International
Price Comparison• At the end of 2012, the Group had two pricecomparison businesses operating outside the UK:–– In Spain, Rastreator.com (launched in March2009) offers comparison on motor, home,
motorcycle and life insurance.
–– LeLynx.fr in France (launched January 2010)
offers comparison on a similar range of products.
Price Comparison Strategy• A key part of the Group’s overall strategy is to
exploit UK expertise in insurance and pricecomparison and export this overseas.
• To date Admiral has targeted four markets(Spain, France, Italy and the USA).
• The Group disposed of its Italian operation(Chiarezza.it) in April 2012.
• In early 2013, Admiral launched comparenow.com– a price comparison business based in the USA.
Success in delivering against the strategy for pricecomparison is measured against a large number ofkey performance indicators which are common acrossthe UK and international businesses. These include
market share, quote volumes, conversion rates, sales
volumes, income per sale, revenue per customer andcost per sale.

Price Comparison Financial Performance
Non-GAAP format income statement
£m

2010

2011

2012

Revenue:
Car insurance
price comparison
Other
Total
Operating expenses

59.6
16.1
75.7
(63.6)

72.2
18.2
90.4
(79.9)

82.5
21.0
103.5
(85.5)

Operating profit

12.1

10.5

18.0

Confused.com profit
International Price
Comparison result*

16.9

16.1

18.2

(4.8)
12.1

(5.6)
10.5

(0.2)
18.0

* Excludes pre-launch costs. Figures include results of Chiarezza.it, which was soldin April 2012. The disposal did not have material impact on the income statement.

UK Price Comparison – Confused.com
Confused.com continues to operate in the very competitive
UK price comparison market, which has been dominatedby four businesses for a number of years. Media spend
remained high, though growth in the number of car
insurance policies distributed via the channel in 2012
was lower than in prior years.

Admiral Group plc
Annual Report 2012

Revenue from non-car insurance comparison sources
increased in actual terms and continued to represent
around one fifth of total revenue. Confused.com’s
operating margin improved slightly to 22% (2011: 21%).

The combined revenue from the operations in 2012
(on a like-for-like basis) increased by 67% to £21 million,
with 29% more quotes delivered. Both Rastreator and
LeLynx have strong positions and brands in theirrespective markets.

The disposal of Chiarezza had an insignificant impact on
the income statement.
In March 2013, Admiral launched a new price comparison
operation in the USA (based in Virginia), trading as
comparenow.com. The initial investment in the new
business is not expected to be material in the context
of the Group. Pre-launch costs are included in Other
Group Items, below.
Regulatory Environment
Confused.com is regulated by the UK FSA as an insuranceintermediary and is subject to all relevant intermediation
rules, including those on solvency capital.

Performance

International Price Comparison
Following the sale of the Italian price comparison
operation (Chiarezza) during H1 2012 and the launchin Q1 2013 of a new operation in the USA, Admiral now
operates three price comparison businesses outside
the UK: in Spain (Rastreator), France (LeLynx) and theUSA (comparenow.com).

The combined result for International Price Comparison
was a loss of £0.2 million – notably improved from a£5.6 million loss in 2011.

Overview

Against this backdrop, Confused.com delivered an
improved result, with revenue 7% higher at £82.7 million(2011: £77.6 million) and profit up £2.1 million to£18.2 million (2011: £16.1 million). Market share in
car insurance price comparison was stable.

19

The European operations are all structured as branchesof UK companies, with the UK insurance intermediarypermission passported into Europe. Comparenow.com
is a regulated insurance agency in Virginia, USA.

Governance
Financial statements
Other information

20

Admiral Group plc
Annual Report 2012

Business review continued

Other Group Items£m

Gladiator operating profit
Group net interest income
Share scheme charges
Expansion costs
Other central overhead

2010

2011

2012

2.7
1.1
(15.0)
(1.1)
(2.1)

2.8
2.9
(18.6)
(0.8)
(1.8)

2.5
1.9
(20.6)(2.1)(3.4)

Gladiator
Gladiator is a commercial vehicle insurance broker
offering van insurance and associated products, typicallyto small businesses. Distribution is via telephone andinternet (including price comparison websites).
Non-GAAP income statement and key
performance indicators
£m

2010

2011

2012

Revenue
Expenses

11.8
(9.1)

11.7
(8.9)

12.5
(10.0)

Operating profit

2.7

2.8

2.5

Operating margin
Customer numbers

23%
94,50024%
87,90020%
94,800The van insurance broking market remained competitive
during 2012, and although Gladiator increased revenue
to £12.5 million (2011: £11.7 million), operating margin
was lower at 20% and resulting operating profit fell to£2.5 million from £2.8 million.
Gladiator increased its customer base by around 8%
to 94,800.
Share Scheme Charges
These costs relate to the Group’s two share schemes,
further detail on which is set out in the notes to the financial
statements. The increase in the charge relates to a higher
number of shares awarded in 2012 compared to 2011
(resulting from increased headcount across the Group).
UK Household Insurance
In December 2012, the Group launched a UK household
insurance product, underwritten within the Group andbased in the Group’s Cardiff offices. Common with otherlaunches, initial plans are modest, and the business is
supported by proportional reinsurance covering 70% of
the underwriting risk (shared between Munich Re, 40%
and Swiss Re, 30%).
Investments and CashInvestment Strategy
Admiral maintained a low-risk investment strategy
throughout the year, with a broadly consistent allocationof funds to the three main asset categories (cash at bank,cash deposits and money market funds) as in recent years.
The key focus of the Group’s investment strategy iscapital preservation, with additional priorities including
low volatility of returns and high levels of liquidity.

The Group’s Investment Committee continues toperform regular reviews of the strategy to ensure it
remains appropriate.
Cash and Investments Analysis
31 December 2012
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Money market
funds andshort-dated
debt securities 1,074.5
Cash deposits 370.5
Cash
125.0
Total

1,570.0

76.7
5.3
50.2
132.2

–
–
25.4

Other
£m

Total
£m

74.6 1,225.8– 375.8
16.0 216.6

25.4 90.6 1,818.2

31 December 2011
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Money market
funds
Cash deposits
Cash
Total

Other
£m

Total
£m

862.1
297.0
224.6

761.1
290.7
117.8

66.0
6.3
38.9

– 35.0––8.8 59.1

1,169.6

111.2

8.8 94.1 1,383.7

The only notable change in asset allocation during 2012
was a higher proportion invested in money market funds
and short-dated debt securities and a move away fromcash compared to 2011. All investment objectives
continue to be met.
Investment and interest income in 2012 was £15.9 million,
up 16% on 2011 (£13.7 million). The rate of return was
similar to 2011, at slightly less than 1%.
The Group continues to generate substantial amounts ofcash, and its capital efficient business model enables the
distribution of the majority of post-tax profits as dividends.
£mOperating cash flow,
before transfers toinvestments
Transfers to financial
investments
Operating cash flow
Tax and interest
payments
Investing cash flows(capital expenditure)
Financing cash flows(largely dividends)
Foreign currencytranslation impact
Net cash movement
Net increase in cash andfinancial investments

2010

2011

2012

522.0

779.1

742.0

(240.8)(493.9)(441.9)

281.2

285.2

300.1

(69.5)(95.3)(79.7)(11.1)(13.2)(10.9)(164.9)(197.8)(214.8)

(0.8)

(1.0)

(2.7)

34.9

(22.1)

(8.0)

276.9

473.8

434.5

21

Admiral Group plc
Annual Report 2012£m

Profit after tax

Operating cash flow,
before transfers toinvestments

2011

2012

221.3

258.4

129.7

244.3

200.0

101.4

203.7

163.0

Capital continues to be held in equity form, with no debt.

25.4

32.0

34.4

71.9

77.8

86.2

The majority of the Group’s capital requirement is derived
from its European insurance operations, Admiral Insurance(Gibraltar) Limited (AIGL) and Admiral Insurance Company
Limited (AICL). The minimum capital requirements andsurplus position at the end of the 2012 for those companies,
along with the overall Group position was as follows:

522.0

779.1

742.0
£m

Other Financial Items
Taxation
The taxation charge in the income statement is£86.2 million (2011: £77.8 million), which equates to25.0% (2011: 26.0%) of profit before tax. The averagerate of UK Corporation Tax in 2012 was 24.5%.
Earnings Per Share
Basic earnings per share rose by 16% to 95.1 pence from
81.9 pence. The change is in line with profit growth.

The payment date is 24 May 2013, ex-dividend date
1 May and record date 3 May.

AICL

Group

£85m

£395m

£78m

£25m

£122m

£92m

£60m

£273m

Total regulatory capitalrequirement
Surplus over regulatory
capital requirement

£240m
£155m

The Directors note the delay in the progress towards
implementing the Solvency II regulatory regime in the
EU. As previously noted, the Directors do not believe,
based on current guidance, that there will be a materialchange in the level of the Group’s capital surplus under
the new regime.
Other than as stated below, as far as the Company isaware, there are no persons with significant direct orindirect holdings in the Company. Information provided
to the Company pursuant to the Financial Services
Authority’s (FSA) Disclosure and Transparency Rules(DTRs) is published on a Regulatory Information Service
and on the Company’s website.
At 31 January 2013, the Company had received
notifications in accordance with the FSA’s DTRs of
the following notifiable interests, in the voting rights
in the Company’s issued share capital:

Munich Re
Morgan StanleyBlackRock, Inc
Manning & Napier Advisors
Power Corporationof Canada

Number of shares%

27,899,400
18,110,492
13,755,935
11,056,280

10.2%
6.6%
5.0%
4.0%

9,719,702

3.6%

The interests of Directors and Officers and theirconnected persons in the issued share capital of
the Company are given in the Remuneration Report.

Other information

The final dividend is made up of a 21.4 pence normal
element based on the stated dividend policy of
distributing 45% of post-tax profits, and a further special
element of 24.1 pence. The special dividend is calculatedwith reference to distributable reserves after considering
capital that is required to be held a) for regulatory
purposes; b) to fund expansion activities; and c) as
a further prudent buffer against unforeseen events.

Minimum capitalrequirement
Surplus over minimum
requirement

AIGL

£170m

Financial statements

Dividends
The Directors have proposed a final dividend for thefinancial year of 45.5 pence per share. Total dividends
for the year amount to 90.6 pence per share, 20% higher
than the 75.6 pence per share distributed in respectof 2011.

Net assets less goodwill

GovernanceThe key features to note are:
• Total cash plus investments increased by £435 million
or 31% (2011: £474 million, 52%), the lower rate of
growth resulted from lower growth in the UK business;somewhat offset by higher growth internationally.
• The net change in actual cash balances was small,as funds were transferred into investments.

Performance

Change in net
insurance liabilities
Net change in tradereceivables and liabilities
Non-cash income
statement items
Tax and net
interest expense

2010

193.6

Capital Structure, Financial Position
The Group continues to manage its capital to ensurethat all entities within the Group are able to continue as
going concerns and also to ensure that regulated entities
comfortably meet regulatory capital requirements. Excess
capital above these levels within subsidiaries is paid up to
the Group holding company in the form of dividends on aregular basis.

Overview

The main items contributing to the significant operating
cash inflow are as follows:22

Admiral Group plc
Annual Report 2012

Principal Risks and Uncertainties

The table below sets out the principal risks currently faced by the Group, with further
significant risks noted below. The report on Corporate Governance later in the Annual
Report describes the risk management framework in place throughout the Group.
Risk

ImpactMitigating Factors

1. UK Car Insurance – erosion ofcompetitive advantage
Admiral has typically been able to produce
a significant combined ratio advantage
over the UK market as a whole. There is arisk that this advantage and/or the levelof underwriting profit (and associatedprofit commission) generated by Admiral
could erode.

The impact on the business would be aworse UK Car Insurance result and lower
return on capital employed.

A wide range of factors contributeto Admiral’s combined ratio outperformanceof the UK market. These include:• E xperienced and focused senior
management and teams in key businessareas including pricing, claims management,
operations, IT and marketing• A highly data-driven and analytical
approach to business decisions• Continuous appraisal of and investment
in staff, systems and processes• A track record of innovation and an ability
to react quickly to market conditions
and developments• A keen focus on maintaining a low-cost
infrastructure and efficient acquisition costs.

A sustained and uncorrected erosion ofcompetitive advantage could affect theability of the Group to extend its reinsurance
arrangements, which might in turn mean theGroup having to hold more capital.

An example of how this risk might arise
is a failure to successfully adapt to the EU
Gender Directive which came into effectin December 2012.

2. UK & International Car Insurance –claims shocks
The Group is exposed to underwriting
risk through its underwriting of motor
insurance policies.

The impact on the Group would be thatclaims costs could rise significantly above
historic or expected levels, reducing theGroup’s profitability. This might be for anumber of reasons, including:• Legislative changes (for example,
periodic payment orders, Ogden
discount rate changes, the EU
Gender Directive)• Weather-related or man-madecatastrophe events (for example
severe storm or flood)• Very large, non-catastrophe
individual claims• Fraud or other changes inclaimant behaviour• Significant increases in large bodily
injury claims cost inflation.

Many of the potential causes of claims shocks
are outside the control of the Group and thefocus is, therefore, generally on how to prepare
for and react to the occurrence of such events.
For very large claims (catastrophe andotherwise) the Group purchases excess of loss
reinsurance, which mitigates the loss to theselected deductible amount (typically between£5 million and £7 million at the total claim level).
The current economic environment has led
management to have an increased focus on
the identification and prevention of claims
fraud, including material investment insystems and staff.
In the case of legislative changes impacting
existing claims, the Group holds a buffer inbooked reserves to cover significant changes.
To cover other potential claims shocks, theGroup continues to hold an additional buffer
in its reserves in excess of the projected
ultimate outcomes.

3. Geographic and product expansion –risk of failure
The Group has launched eight new
operations outside the UK in the past six
years, and launched a UK Household
insurance product in December 2012.
There is an ongoing risk that one or more of
the operations fail to become a sustainablelong-term business.

The impact on the Group could be higher
than planned losses (and potentially closure
costs) and distraction of key management.
A collective failure of these businesses would
threaten the Group’s objective to diversify its
earnings by expanding in overseas locations.

The Group’s approach to expansion is cautious.
The overseas insurance businesses start small
and are all backed by proportional reinsurance
support which provides substantial mitigation
against start-up losses in the early years.
New price comparison businesses also focus
on modest starts with low set-up costs andrelatively small initial media spend budgets.
This tends to mean that the losses a new
operation can incur are minimised whilst
management assess the likelihood of thebusiness succeeding.
The Directors are mindful of management
stretch and regularly assess the suitability of the
management structure in place for the Group’s
international operations.

Admiral Group plc
Annual Report 201223

Mitigating Factors

The impact on the Group would be lessprofit earned on the car insurance portfolios
and a lower return on capital employed.

Admiral earns other revenue from a portfolio
of products and seeks to minimise reliance on
any single item. This would mitigate the impactof a regulatory change which might affect aparticular product or income stream. Admiralcontinuously assesses the value of the products
it offers, and makes changes to ensure theproducts continue to offer value topolicyholders.

5. UK Price Comparison – effects ofcontinued competition
There is a highly competitive UK market withfour main businesses currently attempting toincrease their market share throughaggressive media activity.

The impact on Confused.com of higher
levels of competition in the price comparison
market, either through the aggressive
activities of existing players or the entry ofsignificant new participants would be tolower profits. However, a more competitivemarket might benefit the car insurance
business through lower acquisition costs.

Admiral is dependent on the four main UK
price comparison websites as an importantsource of new business and growth. The
growth in this distribution channel could
slow, cease or reverse, or Admiral could
lose one or more of the websites as asource of leads.

The impact on the UK Car Insurance
business of losing one or more of thewebsites would be a potentially material
reduction in new business volumes.

The impact on the Group would be the needto raise additional capital to support
underwriting. This could be in the form ofequity or debt. Return on capital would likely
be lower than current levels.

There is a risk that such support will not be
available in the future if the results of either
the UK business or (more realistically) one ormore of the international operations are notsatisfactory to the co- and/or reinsurers.

The management of Confused.com maintain anawareness of the risks of continued competition.
Management analyse the success or otherwiseof all media activity.
Admiral mitigates risks to its reinsurance
arrangements by ensuring that it has a strongly
rated and diverse range of partners. Admiral has
enjoyed a long-term relationship with one of theworld’s strongest reinsurers, Munich Re, which
has supported Admiral since 2000. The Groupalso has strong relationships with a number ofother reinsurers, including Amlin, Hannover Re,
Mapfre Re, New Re, Swiss Re and XL Re(avoiding reliance on a single partner).
In the UK, co- and reinsurance arrangements
have been agreed up to the end of 2014,reflecting confidence in the Admiral UK car
insurance business. Pricing on these deals wasin line with existing arrangements. The longterm co-insurance agreement with Munich
Re will remain in place (at 40% of the business)
until at least the end of 2016.

The impact of the materialisation of a major
credit event on the Group may, dependent
on its nature and severity, require additional
capital to be raised. The Group would alsoneed to ensure that it had sufficient liquid
assets to meet its claims and other liabilities
as they fell due.

The mitigation of these risks is discussed innote 5c of the financial statements.

Other information

The Board also considers the following risks to be significant:• Operational risk – for example, major fraud (considered to be relatively low impact, andmitigated by a wide range of internal controls) and the resilience of IT systems.
• IT Development risk – failure to invest in appropriate technology to support the Group’s future businessdevelopment, mitigated by regular review of the effectiveness of the Group’s IT capability by executive
management and the Board.
• People risk – failure to recruit, develop and retain suitable talent. Further detail on how Admiral interacts
with its employees is set out in the Corporate Responsibility section following.

Financial statements

7. Credit risk
Admiral is primarily exposed to credit risk in
the form of a) default of reinsurer; b) failureof banking or investment counterparty.

The Group’s ownership of Confused.com, which
is one of the leading UK price comparison
websites and operates independently of the UK
car insurance business, helps to mitigate the riskof over-reliance on this distribution channel.
Admiral also contributes materially to therevenues of the other price comparison
businesses and therefore it is not considered
probable that a material source of new businesswould be lost.

Governance

6. C o-insurance and reinsurance
arrangements
Admiral uses proportional co-insurance
and reinsurance across its insurance
businesses to reduce its own capitalneeds (and increase return on the capital
it does hold) and to mitigate the cost andrisk of establishing new operations.

The most immediate risk to ancillary profits
arises from regulatory intervention and mostnotably the referral of UK motor insurance to
the Competition Commission. Whilst there
are a range of possible outcomes from thisstudy, Admiral is supportive of any changes
that are likely to lead to lower claims costs.

Performance

Impact

4. Other revenue – potential diminution
There is a risk that the level of ancillary
profit earned per customer will diminish.
This might be due to regulatory or legal
changes, or customer or market behaviour.

Overview

Risk

24

Admiral Group plc
Annual Report 2012

Corporate
Responsibility
Corporate Responsibility at Admiral encompasses four
key areas:• Employees• Customers• Charity and Community• Environment.
Employees‘If people like what they do, they will doit better.’This simple philosophy runs throughout the Group,in both our UK and overseas offices – and it works!
In order to understand why our approach works sowell, it is useful to understand the key characteristics
of working life at Admiral:i) Communicationiii) Reward and Recognitionii) Equalityiv) FunCommunication at Admiral is open, transparent andtwo-way. Employees are provided with a wide rangeof communication tools to assist in understanding ourgoals and objectives. We work to communicate thesein as many ways as possible. For example, everyone
is invited to participate in online chats with senior
management. This year we have held three online chatsfeaturing our CEO Henry Engelhardt, and one featuring
our COO David Stevens. Other communication tools
include our annual Staff General Meeting (SGM), internal
newsletters, team briefings, suggestion schemes andstaff forums.
We have a really simple approach to Equality. Everyone
should be treated the same. There are no executive
dining rooms, no company cars, no dress code, andeveryone has their own desk.

On call
Our senior managers
experience life in oneof our call centres.

This year, eight of our senior managers visited our
New Business call centre for two weeks of intensive
sales training before taking live telephone calls fromour customers. The team included Henry Engelhardt(CEO) and David Stevens (COO).
None of the managers have worked in our contact
centres previously, but after gaining hands-onexperience on the ‘frontline’ of our business they
have an increased understanding of the needsof our customers and the day-to-day challenges
faced by our staff.
Fundamental to equality, and also important for
Reward and Recognition, is our performance-related
pay structure and share ownership scheme. At Admiral
we like to reward and recognise our employees forboth their own personal achievement, and the overall
performance of the Group.
We reward and recognise our employees for the overall
success of the Group through the share ownership
scheme, a key feature of the remuneration of employees.
Further details of our salary structure and our shareschemes are available in the Remuneration Report on
page 47.

Staff survey results
Survey question

Morale is good within Admiral
Morale is good within my department
I am happy at Admiral
Every effort is made to understand thethoughts and opinions of employees
I am proud to be associated with Admiral
I would recommend Admiral as a goodplace to work
I am more likely to stay at Admiralbecause of the share schemes
Admiral is truly customer-orientated
Admiral treats its customers fairly

2006

2007

2008

2009

2010

2011

2012

76%
87%
92%

89%
82%
87%

90%
90%
90%

93%
86%
91%

89%
84%
88%

90%
85%
89%

93%
87%
91%

74%
91%

73%
91%

86%
94%

87%
96%

88%
95%

88%
95%

91%
96%

90%

90%

94%

95%

94%

95%

96%

69%
90%
86%

71%
88%
84%

71%
90%
87%

79%
90%
88%

78%
86%
86%

79%
87%
86%

79%
90%
88%

Admiral Group plc
Annual Report 2012

The Board firmly believes that share ownership motivates
employees, decreases attrition and makes it easier torecruit successfully. According to our staff survey 79%
of employees say they are more likely to stay with
Admiral because of the share schemes.

The event enabled us to unite our international andUK employees, giving them a chance to get to knoweach other. This is just one way in which we haveencouraged our staff to have fun this year, upholding
the vibrant culture of working life at Admiral.
Governance

So how do we know our approach works? Our staff
tell us. One of the most important tools we use tomeasure employee satisfaction is an anonymous surveythat collects views on what it is like to work for Admiral.
The survey results are analysed by department and eachdepartment manager shares the findings with theirteam, exploring any issues and concerns before
making improvements.

The finalists from each country were invited tocompete against each other at the Wales Millennium
Centre in Cardiff, performing in front of a group ofsenior managers from each of the countries in which
we operate. The event was won by French band,
Lollipop, with second and third places going tosingers Lewis Cook from Cardiff and Niki Lester
from the USA, respectively.

All singing,all-dancing
Admiral’s TalentShow brought our
staff together.

The key results concerning morale, and whether
employees feel that their opinions are important,are provided in the table on the previous page. There
are no specific targets with respect to the survey results
as the Executive team use the data to identify trends
in employee perception, rather than absolute values.

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Sunday Times
100 Best
Companies
to Work For

32nd

42nd

46th

60th

20th

20th

21st

57th

37th

16th

9th

6th

Best Workplacesin the UK

32nd

42nd

7th

16th

17th

8th Top 10

10th

6th

10th

9th

1st

16th

26th

21st

4th

Other information

Name of award

Financial statements

This year we are pleased to announce that more
employees than ever before would recommend Admiral
as a good place to work – 96% of employees answered
positively to this question – the highest number since thesurvey began in 1999. Likewise, the number of employees
who believe that Admiral strives to understand thethoughts and opinions of its employees is higher thanever before, at 91%.

Best Workplacesin Europe

Performance

Fun plays a vital role in helping us to ensure that
our employees enjoy their work, encouraging each andevery individual to produce excellent results. Organised
activities for our staff are often weird, wild and wonderful,
but they are also a great tool for motivation.

This year we organised a new event in the form of an
Admiral Talent Show, a contest open to all of our UK
and overseas employees. The aim was to showcase
the most talented performers from across the Groupin a variety of acts including singing, dancing andcomedy. Auditions were held in our offices in South
Wales as well as in the USA, Canada, France, Italy,
Spain and India. The response was fantastic, and allof the judges were impressed by the standard of
performing talent.

Overview

As of 31 December 2012 an employee who joined us
on 1 January 2005 would have received a total of 2,496
shares, of which 1,821 would now be matured and 1,184
could be sold free of income tax and national insurance.
If none of the matured shares had been sold, these shareswould be worth £21,124 (based on the share price of£11.60 on 31 December 2012).

25

26

Admiral Group plc
Annual Report 2012

Corporate Responsibility continued

As a Group we participate in a number of independently
managed surveys including The Sunday Times 100 Best
Companies to Work For and the Great Place to Work®
Institute’s Best Workplaces in the UK and Best
Workplaces in Europe.
Again this year we have continued to win awards for
employee satisfaction, adding to those we have achieved
previously. Notably, we were named the best large UK
employer by the Great Place to Work® Institute.

Celebrating star
performance
Our Quality Awards
reward those who
provide excellent
customer service.

Customers
Ensuring that we give a great service to our customers
is essential to the future growth of our business, bothin the UK and overseas.
There are many initiatives in place to ensure that
customers are treated fairly, efficiently and withrespect including:• Customer-focused measures programme.
• Treating Customers Fairly (TCF) reporting.
• Comment form analysis.
• Complaints analysis.

The annual Quality Awards celebrate achievementsfrom across the Group in our customer-focusedmeasures programme.

Every department has its own set of customer-focusedmeasures to gauge performance. The measures are
updated each year to challenge departments to makecontinual improvements. The programme is reported
every month in our internal magazine and intranet, andthe best departments are rewarded at our prestigious
Quality Awards.

Our Quality Awards encourage employees toperform well in quality measures throughout the year
in order to increase both their own individual quality
score, and that of their department. This helps toensure that we are compliant with TCF requirements
and that our customers are treated fairly.

We work within the regulatory framework of the Financial
Services Authority (FSA) in the UK. One of the FSA’s
statutory objectives is to help customers get a fair deal.
There is a comprehensive monthly Treating Customers
Fairly (TCF) Management Information pack, pulling
together specific measures that demonstrate we areconsistently treating our customers fairly. Over 150
individual TCF measures have now been adopted.

During 2012 the percentage of Financial Ombudsman
Service complaints found in favour of Admiral was 69%,
whereas the target is >75%. This is an area that has been
below target for a number of years and the details of
the decisions are closely reviewed to help identify
further improvements to Admiral’s products, services
and processes.

A report is produced each month and discussed at the
UK Risk Management Committee (RMC), with process or
behavioural changes agreed where appropriate. Pleaserefer to the Corporate Governance section of this reportfor further details of the Risk Governance framework.
The TCF management information is embedded inour culture. If either a red or amber grade occurs thedepartment manager investigates the issues and provides
information on the reason for the score, along with a plan
to improve the results. The table below displays some of
the key measures from the TCF report.

Awards include, ‘Best Measures Performance’,‘Treating Customers Fairly Winner’ and ‘Best
Complaint Prevention Winner’, amongst others.

We encourage our customers to provide us with feedbackon our services. The main way in which we do this isthrough our Customer Comment Form, which is a key
measure of the TCF report. The Customer Comment
Form enables our customers to rate the service of ourcall centre staff on a scale of one to ten in four key areas
including ‘helpfulness’, ‘efficiency’, ‘communication’ or‘knowledge’, and ‘politeness’.

TCF Measure

2008

2009

2010

2011

2012

TargetComplaints per 1,000 vehicles% Financial Ombudsman Service (FOS) complaints
found in favour of Admiral
Customer Service call answer rate
Claims call answer rate
Customer Services Comment Form score
Claims Service Comment Form score% Customers who would renew following a claim
		

1.1

1.1

1.2

1.3

1.2

< 1.4

78%
95%
92%
9.4
8.8
93%

67%
93%
93%
9.4
8.8
93%

68%
91%
94%
9.3
8.7
92%

66%
94%
96%
9.3
9.0
91%

69%
92%
94%
9.0
9.1
90%

> 75%
> 90%
> 90%
> 9.0
> 8.5
> 85%

Admiral Group plc
Annual Report 201227

The feedback gained from our Customer Comment Formanalysis and SMS feedback allows us to pinpoint areas inneed of improvement, and to identify employees who
could benefit from further training. This enables us tocontinue to provide excellent customer service as thebusiness continues to grow.

No journey too toughOne team completed
a sponsored walkto the top of Pen-y-Fan
mountain – the highest
peak in South Wales.

90-Day Challenge
Since 2008 we have had a close relationship with
the Prince’s Trust, the UK’s leading youth charity
dedicated to helping disadvantaged young people
to enter into work, education or training. We have
won the Prince’s Trust Cymru (Wales) regional
fundraising competition each of the last three years.

We would like to thank all of our staff for theircommitment in supporting the Prince’s Trust, and
we look forward to further supporting the charity
in 2013.

An apple a day;We provide fresh fruit
for all our employees.

Other information

Cake sale
Our Claims
department
held a cake saleto support the
Prince’s Trust.

Financial statements

Through the hard work and generosity of ouremployees we managed to raise just over £50,000
for the Prince’s Trust through our 90-Day Challenge,
bringing the total raised for the charity in 2012 towell over £100,000.

GovernanceThis year, we built upon this achievement byraising even more money! In September our CEO,Henry Engelhardt, set our UK employees an exciting
objective in the form of the 90-Day Challenge. Eachdepartment had to compete against each other toraise the most money within 90 days, through anymeans they could think of. Fundraising activities
included cake sales, sponsored walks, raffles andonline auctions.

Performance

Charity and Community
Admiral plays a positive role in the community throughcharitable giving and sponsorship of local community
partnerships. We promote payroll giving and provide
matched funding for eligible employee initiatives. In
2012, we donated £141,000 to various local and national
charities (2011: £194,000) and £285,000 (2011: £232,000)
to subsidise local events for the public. The amount theGroup donates fluctuates annually due to changes insponsorship initiatives and employee demand formatched funding.

Overview

We are currently trialling a new way of obtaining customer
feedback via SMS text messaging, with a view toincreasing the level of direct feedback that we receive.
Our Claims department are now gathering most of theircustomer feedback via SMS, and we plan to introduce thismethod to other departments in the future.

28

Admiral Group plc
Annual Report 2012

Corporate Responsibility continued

SEAT Young Driver Scheme
We have been dedicated sponsors of the SEAT
Young Driver scheme since its launch in October
2009. This nationwide scheme enables 11 to 17-yearolds to complete driving lessons with fully-qualified
driving instructors long before they can even sit theirtest, using simulated road systems set up on private
ground and featuring obstacles like traffic lights,
junctions and roundabouts.
The objective of the scheme is to help reduce thedeath toll amongst young, inexperienced, drivers.
In 2010, we found that 17 and 18-year-old motorists
are twice as likely to have a road accident as someone
in their 30s, three times as likely as someone in their
40s and six times as likely as someone aged over 50.
However, Swedish research shows that young driver
accident rates can be reduced by learning to drive
over a longer time period and at a younger age(OECD and the European Conference of Ministersof Transport, 2006).
With 20 venues now open and 10 more due to openby March 2013, the Young Driver programme hasdelivered over 75,000 lessons, with plans for a further
75,000 in 2013. The scheme is proven to work; only
9% of Young Driver participants experience a crashwithin the first 6 months of passing their test,compared to the national average of 20%.
We support the Young Driver scheme because it
enables us to play a role in increasing the number ofwell-trained, responsible young drivers on UK roads,
resulting in fewer accidents amongst this traditionallyhigh-risk group. This will help us to provide low-cost
car insurance for young drivers.

Making young
drivers safer
Admiral is a key
sponsor of SEAT’s
Young Driver Scheme.

Environment
We are committed to:• Raising and maintaining employee awareness of,and ensuring that everyone is actively engaged in,activities to reduce our environmental impact.
• Measuring and monitoring key aspects of ourenvironmental performance and regularly reviewing
progress to reduce the amount of resources consumed
per employee.
• Complying with the requirement, expected to beeffective from October 2013, to report annual levelsof greenhouse gas emissions in line with guidance
provided by the Department for Environment,
Food and Rural Affairs (Defra) in partnership with the
Department for Energy and Climate Change (DECC).
The main source of our carbon emissions is theconsumption of electricity and gas in our offices. At
present we lease buildings rather than owning themoutright, which means that we are largely dependent
upon the managing agents of our properties to makechanges which reduce water and energy consumption.
We encourage our employees to recycle wherever
possible, and our Facilities department continue todiscuss ways to reduce our UK energy consumption
with the Carbon Trust.
Full details of our Corporate Responsibility
strategy are available on our corporate website,www.admiralgroup.co.uk, including further examplesof what we do for our employees, our customers,
charity and community and the environment.

Admiral Group plc
Annual Report 201229

Corporate Governance

GovernanceThis Report is structured in order to demonstrate
to shareholders that the Group has considered andcomplied with each section of the Code: Leadership;
Effectiveness; Accountability and Relations with
Shareholders. Remuneration is dealt with in theseparate Remuneration Report.

PerformanceThis Report sets out the governance frameworkand the approach that it has taken in 2012 to achieve
the standards of good corporate governance forwhich it is accountable to the Group’s shareholders.
It describes how the principles set out in the UK
Corporate Governance Code (the ‘Code’) havebeen applied, and details the extent to which
the Group has complied with the principles andprovisions of the Code during the year under review.

Overview

Introduction from the Chairman
The Board is committed to maintaining the highest
standards of corporate governance. We believe thathaving a sound corporate governance framework enables
effective and efficient decision making and ensures that
there is there is the right balance of skills and experience
to assess and manage the risks in the markets in which
the Group operates. However we also believe that good
governance should be proportionate and that individual
responsibility and accountability should not be lost
within a multi-layered committee structure that distances
senior management from the day-to-day reality ofoperational activity.

Alastair Lyons, CBE
ChairmanFinancial statements

Chairman

Other information

Alastair Lyons, CBE30Admiral Group plc
Annual Report 2012

Corporate Governance continued

The Admiral Board
Alastair Lyons, CBE (59)Non-Executive Chairman,
appointed July 2000
Nomination Committee Chairman
Current appointments
Non-Executive Chairman of Serco Group plc
Non-Executive Chairman of the Towergate Insurance Group
Deputy Chairman of Bovis Homes Group plc
Senior Independent Director at the Phoenix Group
Background and experienceIn his executive career Alastair has been Chief Executive of the National
Provident Institution and of the National & Provincial Building Society,
Managing Director of the Insurance Division of Abbey National plc, andDirector of Corporate Projects at National Westminster Bank plc.

David Stevens, CBE (50)
Chief Operating Officer,
appointed in 1999
Group Risk Committee member
Background and experience
David is a founder Director of Admiral and was recruited in 1991 to set up
the Admiral business. David was part of the management team that led
the MBO in 1999.
Prior to joining Admiral David worked at McKinsey & Co, in the Financial
Interest Group, and Cadbury Schweppes in the UK and the USA.
David has an MBA from INSEAD and he was awarded a CBE in 2010 forservice to business and the community in Wales.

He was also a Non-Executive Director for the Department for Transport
and the Department for Work and Pensions.
A Fellow of the Institute of Chartered Accountants, he was awarded a
CBE in the 2001 Birthday Honours for services to social security.

Henry Engelhardt, CBE (54)
Chief Executive Officer,
appointed in 1999
Background and experience
Henry is a founder Director of Admiral and was recruited by the
Brockbank Group in 1991 to set up the Admiral business.
Henry was part of the management team that led the MBO in 1999.
Prior to joining Admiral, Henry was the original Marketing and SalesManager for Churchill Insurance.

Manfred Aldag, (62)Non-Executive Director,
appointed in 2003
Current appointments
Munich Re Chief Executive Manager responsible for UK and Ireland.
Background and experience
Manfred graduated from University of Essen with a degree in Economics
and Business Management. Since 1981, Manfred has been working forMunich Re.

Henry has an MBA from INSEAD and he was awarded an honorary CBEin 2008 for services to business in Wales.

Kevin Chidwick, (49)
Chief Financial Officer,
appointed in September 2006
Background and experience
Kevin is responsible for finance, compliance and investments, as well as
the subsidiary Elephant Auto.
Kevin joined Admiral in 2005, becoming Finance Director in September
2006. Prior to Admiral Kevin has worked in UK financial services for over
25 years and he has held a number of senior roles in other insuranceorganisations, including being the Finance Director of Engage Mutual
Assurance and Cigna UK.
Kevin is a Fellow of the Chartered Institute of Certified Accountants andhas an MBA from London Business School.

Martin Jackson, (64)
Non-Executive Director,
appointed in August 2004
Group Risk Committee Chairman
Remuneration Committee member
Current appointments
Non-Executive Director of IG Group Holdings plc
Background and experience
Martin was the Chairman of the Admiral Group Audit Committee from
August 2004 until January 2012, when he became Chairman of the newly
formed Group Risk Committee.
Martin was the Group Finance Director of Friends Provident plc between
2001 and 2003 and Friends Provident Life Office between 1999-2001.
Prior to this he was the Group Finance Director at London & Manchester
Group plc from 1992, up to the date of its acquisition by Friends
Provident Life Office.
Martin is a Fellow of the Institute of Chartered Accountants.

Admiral Group plc
Annual Report 2012

Current appointments
Group Chief Executive Officer of Leagas Delaney
Background and experience
Margaret has worked for the international advertising agency Leagas
Delaney for the past 15 years.

Current appointments
Lucy is a management columnist on the Financial Times.
Background and experience
In her 20 years at the Financial Times Lucy has been an oil correspondent,a Lex columnist and Brussels correspondent. Lucy is an author ofvarious books.

Background and experience
Colin was formerly a member of the Executive Committee of Tesco plc
and during his 22 year career at Tesco he held a wide range of positions,
including UK Finance Director and CEO of Tesco Express.
Colin is a Chartered Management Accountant.

Roger Abravanel, (66)
Non-Executive Director,
appointed in March 2012
Remuneration Committee member
Current appointments
Non-Executive Director serving on, amongst others, the Boards of:
Luxottica Group S.p.A; Teva Pharmaceutical Industries Ltd; Banca
Nazionale del Lavoro S.p.A and COFIDE S.p.A.

GovernanceLucy Kellaway, (53)Non-Executive Director,
appointed in September 2006
Nomination Committee member

Current appointments
Non-Executive Director and Chairman of the Remuneration Committeeof Bovis Homes Group plc and Chairman of GO Outdoors Ltd.

Performance

Margaret was awarded an OBE in 2013 in recognition of her services
to the creative industries and her voluntary work for charities.

Colin Holmes, (47)
Non-Executive Director,
appointed in December 2010
Audit Committee Chairman
Nomination Committee member

Overview

Margaret Johnson, OBE (54)Non-Executive Director,
appointed in September 2006
Audit Committee member
Remuneration Committee member

31

Board member of the Italian Institute of Technology.
Chairman of the INSEAD Advisory Group in Italy.
Background and experience
Roger has significant international consulting experience having beenwith McKinsey and Co. from 1972 until his retirement as Director Emeritus
in 2006.

Annette Court, (50)
Non-Executive Director,
appointed in March 2012
Group Risk Committee member
Audit Committee member
Current appointments
Non-Executive Director of Jardine Lloyd Thompson Group plc

Background and experience
John was the Group Managing Director of Misys plc between 1998
and 2004, having been on the Board of the Company since 1989.

Background and experience
Between 2007 and 2010 Annette was CEO of Europe General Insurance
for Zurich Financial Services and a member of the Group Executive
Committee.

Prior to joining Misys, John was Manufacturing Director at JC Bamford
Excavators Ltd.
John was a Non-Executive Director at Chubb plc between 2001
and 2003.

Annette is former CEO of the Direct Line Group, formerly known as
RBS Insurance. In this role Annette was also a member of the RBS Group
Executive Management Committee.
Annette has previously served as a member on the Board of the
Association of British Insurers (ABI).

Other information

Current appointments
Non-Executive Director of Vesuvius plc

Financial statements

John Sussens, (67)
Senior Independent
Non‑Executive Director,
appointed in August 2004
Remuneration Committee
ChairmanGroup Risk Committee member

32

Admiral Group plc
Annual Report 2012

Corporate Governance continued

The UK Corporate Governance Code
The Board complied with the Code in all respects
during 2012 except for Code E.1.1, which requires that
the Senior Independent Director should attend meetings
with a range of shareholders. The Company has acomprehensive programme of meetings and dialogue
with institutional investors and the Chairman makes
himself available for meetings with the largest 10 suchinvestors. The views of investors expressed through this
dialogue are communicated to the Board as a whole ona regular basis through the Investor Relations report.
All Directors can, therefore, develop an understandingof issues or concerns of major shareholders should any beraised. Feedback from shareholders suggests that thesearrangements for communication between the Company
and its shareholders continue to be viewed by them as
effective. The Senior Independent Director is always
available to meet with individual shareholders onrequest to ensure the Board is aware of any shareholder
concerns that cannot be resolved through the routine
mechanisms for investor communications.
The Admiral Group Board
The Board is the principal decision-making forum for theGroup providing entrepreneurial leadership, both directly
and through its committees, and by delegating authority
to the Executive team. The Board is responsible fororganising and directing the affairs of the Group in amanner that is most likely to promote its success forthe benefit of its members as a whole. The Board isaccountable to shareholders for setting and achieving
the Group’s strategic objectives, for the creation anddelivery of strong sustainable financial and operational
performance, for ensuring that in carrying out its duties
the Group’s legal and regulatory obligations are being
met, and for ensuring that it operates within appropriately
established risk parameters. The Group’s UK regulated

entities are responsible to the Financial Services Authority(FSA) for ensuring compliance with the Group’s UK
regulatory obligations and that dealings with the FSA are
handled in a constructive, cooperative and transparent
manner. Similar provisions apply in respect of the Group’s
international businesses with regard to the relevant
regulatory authorities in those overseas jurisdictions
in which the Group also operates.
The Board has adopted a formal schedule of mattersreserved for the Board’s consideration which is monitoredby the Company Secretary and reviewed by the Board onan annual basis. Specific matters reserved to the Board
include the approval of:• The Group’s long term objectives andcorporate strategy;• Operating and capital budgets, financial results,
and any significant changes to accounting practices
or policies;• The Group’s capital structure;• Results and financial reporting;• The system of internal control and risk management;• The Group’s overall risk appetite;• Changes to the structure, size and compositionof the Board, including new appointments;• Succession plans for the Board and senior
management;• Annual review of its own performance and thatof its Board Committees;• Dividend policy and proposals for dividend payments;• Major acquisitions, disposals, and othertransactions outside delegated limits;• Review of the Group’s overall corporate
governance arrangements.

Admiral Group plc
Annual Report 2012

Directors are expected to attend all meetings of theBoard and the Committees on which they serve andto devote sufficient time to the Group to perform theirduties. Where Directors are unable to attend meetings
they receive papers for that meeting giving them theopportunity to raise any issues with the Chairman inadvance of the meeting. The number of scheduled
Board meetings and Committee meetings of which
they are a member attended by each Director during
2012 is provided in the table below.

Overview
Performance

The Board met on seven occasions in 2012 with five of
these meetings being held over two days. The Board
also held a strategy day devoted entirely to analysis
and challenge by the Directors, and particularly the NonExecutive Directors, of the strategic objectives of theGroup’s UK and international businesses. The Chairman
visits each of the Group’s overseas operations every year
and Non-Executive Directors are invited to join either him
or the Chief Executive on one or more of their overseas
visits each year. In addition, the Non-Executive Directors
and the Chairman met during the year without the
Executive Directors being present. In order to increase
their understanding of the operation of the Group
below Board level, the Non-Executive Directors andthe Chairman also attended two dinners with membersof the Group’s senior management team without the
Executive Directors being present.

33

Scheduled Board
meetings

Audit Committee
meetings

Group Risk
Committee
meetings

Nomination
Committee
meetings

Remuneration
Committee
meetings

Total meetings held

7

4

4

1

5

Alastair Lyons (Chairman)

7

Henry Engelhardt (Chief Executive Officer)

7

David Stevens (Chief Operating Officer)

7

Kevin Chidwick (Chief Financial Officer)

7

Roger Abravanell

7

Manfred Aldag

6

Annette Court(ii)

7

4
3
4

7

4

Martin Jackson

7

1

Keith James(v)32Margaret Johnson

74Lucy Kellaway

7

John Sussens

5

Colin Holmes

(iv)

4
1
4

1
5
5

1
2

(i) Roger Abravanel was appointed to the Board with effect from 6 March 2012. Roger became a member of the Remuneration Committee with effect from 26 April 2012.
During the year, Roger attended one of the scheduled Board meetings as an observer before he was formally appointed to the Board.
(ii) Annette Court was appointed to the Board with effect from 21 March 2012. Annette became a member of the Audit and Group Risk Committees on appointment.
During the year, Annette attended two of the scheduled Board meetings, one Group Risk Committee and one Audit Committee meeting as an observer before she
was formally appointed to the Board.
(iii) Colin Holmes stepped down from the Remuneration Committee with effect from 26 April 2012 and became a member of the Nomination Committee.
(iv) Martin Jackson stepped down as Chair of the Audit Committee with effect from 1 January 2012 to become Chair of the Group Risk Committee. He stepped down as amember of the Audit Committee with effect from 26 April 2012.
(v) Keith James stepped down from the Board, Audit and Nomination Committees at the AGM in April 2012.

4

Financial statements(iii)

Governance(i)1Other information

34

Admiral Group plc
Annual Report 2012

Corporate Governance continued

The overall results of the evaluation were consideredby the Chairman and the principal recommendations
presented by him for review and discussion by the
Board in January 2013. The evaluation concluded that
good progress had been achieved in most of the areas
identified for action in the last Board evaluation and thatthe Board and its Committees had continued to work very
effectively in relation to most dimensions. Improvements
have been seen in many of the areas of focus identified
in the evaluation undertaken in 2011. These included
the process of individual Non-Executive Directors
accompanying the Chairman and Chief Executive on
at least one of their overseas visits made during theyear with such visits enabling Non-Executive Directors
to get a more in-depth understanding of the operational
The Company Secretary
All the Directors have access to the advice and services of and strategic challenges faced by the business. The
the Company Secretary. He has responsibility for ensuring importance of effective succession planning andidentifying talented individuals across the Group whothat Board procedures are followed and for advising thehave senior management potential has continued to be
Board, through the Chairman, on governance matters.
a particular area of focus during the year. The Board has
The Company Secretary provides updates to the Board
been mindful that several Non-Executive Directors willon regulatory and corporate governance issues, newshortly reach nine years’ service on the Board.
legislation, and Directors’ duties and obligations. The
appointment and removal of the Company Secretary
In addition, the Chairman has concluded that eachis one of the matters reserved for the Board.
Director contributes effectively and demonstrates
full commitment to his/her duties. As a result of theBoard Effectivenessevaluation undertaken in 2012, the following emerged
The performance and effectiveness of the Board andas areas of particular focus:
its Committees is fundamental to the success of the• Recognising that over the next three to four years there
Group and there is a rigorous evaluation each year to
was likely to be succession of a number of Directors,
assess how well the Board, its Committees, the Directors
the importance was stressed of having a structured
and the Chairman are performing. It is the Group’s policy
succession plan that delivered the competencies andthat every three years an external consultant, who has
experience required amongst Directors, in particular
no connection with the Company, carries out a formal
where Committee Chairs were involved, and ensured
review of the Board’s performance and such an evaluationthat these various moves took place in the right order;
process took place in 2010. The Board will undergo an• Greater utilisation to be made by the Group of theexternal review in 2013 as the Group seeks to further
competencies and experience of Non-Executive
enhance the effectiveness of the Board.
Directors in order that they could be available for
informal input into topics, if helpful, for Executive
The evaluation process in 2012 was led by the Chairman
Directors and other senior managers between
with support from the Company Secretary. The process
Board meetings;
consisted of the completion, by all Directors, of acomprehensive questionnaire evaluating the performance • To alter the process of business review so as to review
each Group business in-depth once a year, combiningof the Board and its Committees. The questionnaire
an assessment of what had been achieved since lastconsidered board processes and their effectiveness,review against what had been planned; how the
Board composition, Board objectives, Board support, andprior year’s actual and planned performance sit incontent of discussion and focus at Board meetings andcomparison with those for earlier years; and to agree
invited Directors to indicate where specific improvements
what might be expected to be achieved over the next
could be made. Completion of the questionnaire by each
12 months, identifying the KPIs against which progress
Director was followed by one-to-one discussions between
would be measured.
each Director and the Chairman where the Board’s roleand structure, process, relationships, and any emerging
In addition to the annual Board Effectiveness Review
issues were discussed.
and in order to provide regular information as to theeffective functioning of the Board and its meeting
processes, following each Board meeting the Directors
provide feedback, via the completion of an online
questionnaire, as to the effectiveness of each Board
meeting including the efficacy of the presentation of
discussion topics and whether time available for the
meeting was used effectively.
Agendas and papers are circulated to the Board in atimely manner in preparation for Board and Committee
meetings. These papers are supplemented by information
specifically requested by the Directors from time to time.
All Board and Committee meetings during the year
were held in an open atmosphere with their Chairmen
encouraging robust and constructive challenge anddebate. All Directors have, therefore, been able to bring
independent judgement to bear on issues such as
strategy, risk management, performance, and resources.
Additional meetings are called when required and there
is contact between meetings, where necessary, toprogress the Group’s business.

Admiral Group plc
Annual Report 2012

Although Colin Holmes holds, with Alastair Lyons, a crossdirectorship in Bovis Homes Group PLC, the Board has
determined that Colin Holmes remains independent incharacter and judgement and that his holding of a crossdirectorship does not affect his ability to present an
objective, rigorous and constructive challenge to theassumptions and viewpoints presented by management
and the Board.

Governance
Financial statements

The Board, having given thorough consideration to thematter, considers seven of the Non-Executive Directors
to be independent and is not aware of any relationships
or circumstances which are likely to affect, or could
appear to affect, the judgement of any of them. It is theview of the Board that the independent Non-Executive
Directors are of sufficient calibre and number that theirviews carry significant weight in the Board’s decision
Board Balance and Independence
making, and that they are free from any relationship
The Board continues to give careful consideration to its
structure and balance in the context of the need to refresh or circumstance that could affect, or appear to affect,
their independent judgement.
Board and committee membership in an orderly mannerso as to maintain the continuity of Board process andIndependent Non-Executive Directors are currently
the strength of personal interaction which underlies theappointed for fixed periods of three years, subject toeffectiveness of the Board as a team. The Board remains
election by shareholders. The initial three-year period
satisfied that it has the appropriate balance of skills,
may be extended for two further three-year periods
experience, independence and knowledge of the Groupsubject to re-election by shareholders. Their lettersto enable it and its Committees to discharge its duties
of appointment may be inspected at the Company’s
and responsibilities effectively, as required by the Code.
registered office or can be obtained on request fromthe Company Secretary.

Performance

The Roles of the Chairman and Chief Executive
The Board has approved a statement that sets out theclear division of responsibilities between the Chairman
and the Chief Executive. The Chairman is primarily
responsible for the leadership and workings of theBoard, setting its agenda, and monitoring its
effectiveness. The Chairman is not involved in the dayto‑day management of the business. Save for mattersreserved for decision by the Board, the Chief Executive,
with the support of the other Executive Directors, is
responsible for proposing the strategy to be adopted by
the Group; running the business in accordance with thestrategy agreed by the Board; and implementing specific
Board decisions relating to the operation of the Group.
The statements of division of responsibilities and mattersreserved for decision by the Board are reviewed annually.

The Board currently comprises twelve Directors, theChairman (who was independent on appointment), three
Executive Directors, seven independent Non-Executive
Directors, and one Non-Executive Director, Manfred
Aldag, who is employed by a significant shareholder
and is not, therefore, considered independent. Thereis no requirement that the significant shareholder has
representation on the Board and, accordingly, Mr. Aldag’s
appointment is subject to the same appointment andremoval process as the other Board Directors. As canbe seen from the Directors’ biographies on page 30,
the Directors have a broad range of skills and experienceand can bring independent judgement to bear on issuesof strategy, performance, resources and standards ofconduct which are integral to the success of the Group.

Overview

The Chief Executive, to whom they report, appraises
annually the performance of the individual Executive
Directors. The Chairman, taking into account the views of
the other Directors, reviews the performance of the Chief
Executive. The performance of the Chairman is reviewed
by the Board led by the Senior Independent Director(‘SID’). Following the latest review, the SID considered
and discussed with the Chairman the comments andfeedback that had been received from the Directors
as part of the Chairman’s evaluation questionnaire.
Following these discussions with the Chairman, theSID was able to confirm that the performance of the
Chairman continues to be effective, and that he continues
to demonstrate appropriate commitment to his role.

35

Other information

36

Admiral Group plc
Annual Report 2012

Corporate Governance continued

Although the Chairman has served in that role sinceJune 2000 the Board remains of the view that he should
continue in office and the Company’s leading institutional
investors have also confirmed their support for the
Board’s express intent. The Chairman, along with all
the Directors, seeks election by shareholders annually.
The Chairman performs a number of other non-executiveroles outside the Group and details of these are includedin the Chairman’s biography. The Board continues to besatisfied that these other commitments are not such as
to interfere with the performance of his duties within
the Group and will not impact on his ability to allocate
sufficient time to discharge effectively his responsibilities
to the Group.
John Sussens has been appointed as the Senior
Independent Non-Executive Director. He is available toshareholders if they have concerns that contact throughthe normal channels of Chairman, Chief Executive,
or Group Chief Financial Officer has failed to resolve
or for which such contact is inappropriate. He is also
responsible for leading the Board’s discussion on the
Chairman’s performance and the appointment of a new
Chairman, when appropriate.
In accordance with the requirement under the Codefor annual election of Directors, all directors will be
submitting themselves for re-election by shareholders
at the forthcoming AGM. The Board is satisfied that all
are properly qualified for their reappointment by virtueof their skills and experience and their contribution to
the Board and its Committees.
The Directors are given access to independent
professional advice at the Group’s expense, should
they deem it necessary, to carry out their responsibilities.
Professional Development
On appointment, Directors take part in a comprehensive
induction programme where they receive financial andoperational information about the Group; details
concerning their responsibilities and duties; as well as
an introduction to the Group’s governance, regulatory
and control environment.

This induction is supplemented by visits to the Group’s
head office in Cardiff, overseas offices, and meetings
with members of the senior management team and theirdepartments. Development and training of Directors is
an ongoing process. Throughout their period in office the
Directors are regularly updated on the Group’s business;legal matters concerning their role and duties; thecompetitive environments in which the Group operates;
and any other significant changes affecting the Groupand the industry of which it is a part. All Board members
are also encouraged to attend relevant training courses
at the Company’s expense.
The Board receives presentations from senior managers
within the Group on a regular basis and Non-Executive
Directors are encouraged to make informal visits
to different parts of the Group to meet withlocal management.
Relations with Shareholders
The Company attaches considerable importance tocommunications with shareholders and engages withthem on a variety of issues. The Investor Relations teamhas day-to-day primary responsibility for managing
communications with institutional shareholders througha combination of briefings to analysts and institutional
shareholders, both at the half-year and full year results.
A number of analysts and investors visited the Group’s
Cardiff office during the year to meet with the Executive
Directors and senior management in order to get abetter understanding of how the Group operates andhow it intends to achieve its strategic and operational
objectives. Senior executives from the Group’s overseas
businesses also visit the UK in order to present to, andmeet with, analysts and investors. Site visits and individual
discussions with the Executive Directors are also arranged
throughout the year with individual shareholders. Regulardialogue with shareholders helps to ensure that theCompany’s strategy is understood and that any issues
are addressed in a constructive way.

Admiral Group plc
Annual Report 2012

The Group maintains a corporate website(www.admiralgroup.co.uk) containing a wide
range of information of interest to institutional
and private investors.

Financial statements
Other information

Conflicts of Interest
In compliance with the requirements of the Companies
Act 2006 regarding Directors’ duties in relation toconflicts of interest, the Group’s Articles of Association
allow the Board to authorise potential conflicts of interest
that may arise and to impose such limits as it thinks fit.
The Company has put in place procedures to deal withconflicts of interest. These procedures include each
Board member completing, annually, a conflict of interest
questionnaire that sets out any situation in which they, or
their connected persons have, or could have, a direct
or indirect interest that could conflict with the interestsof the Company. Any current directorships that they,or their connected persons hold, any advisory roles ortrusteeships held, together with any companies in which
they hold more than 1% of the issued share capital arealso disclosed. These procedures were reviewed by the
Board in January 2013 and it was concluded that they
had operated effectively in 2012.

GovernanceAll shareholders are invited to attend the Company’s
Annual General Meeting (AGM). The Chairmen of the
Audit, Remuneration, Nomination and Group Risk
Committees attend the AGM along with the other
Directors and are available to answer shareholders’questions on the activities of the Committees they
chair. Shareholders are also invited to ask questions
during the meeting and have an opportunity to meetwith Directors after the formal business of the meetinghas been concluded. Details of proxy voting by
shareholders, including votes withheld, are madeavailable on request and are placed on the Company’s
website following the meeting.

All Committees are chaired by an independent Director,
except the Nomination Committee which is chaired by
the Chairman of the Board, and comprise a majority of
independent Directors. Appointments to the Committees
are made on the recommendation of the Nomination
Committee and are for a period of up to three years,
which may be extended for two further three year periods,
provided the Director remains independent. The
Committees are constituted with written terms ofreference that are reviewed annually to ensure that theyremain appropriate and reflect any changes in goodpractice and governance. These terms of reference
are available on request from the Company Secretaryand can also be found on the Company’s website:www.admiralgroup.co.uk. Directors are fully informedof all Committee matters by the Committee Chairmen
reporting on the proceedings of their Committee atthe subsequent Board meeting. Copies of Committee
minutes are also distributed to the Board. Committees
are authorised to obtain outside legal or otherindependent professional advice if they consider it
necessary. The Chairman of each Committee attends
the Annual General Meeting to respond to any
shareholder questions that might be raised on theCommittee’s activities.

PerformanceThis is supplemented by feedback to the Board on
meetings between management and investors. External
analysts’ reports are circulated to all Directors. In
addition, the Investor Relations team produces a quarterly
Investor Relations Report that is circulated to the Board.
The Report contains an analysis of share priceperformance; a summary of analyst reports received
during the month and of meetings that have been heldwith investors and analysts; together with details of any
significant changes to the shareholders’ register.

Board Committees
The Board has delegated authority to a number ofpermanent Committees to deal with matters in accordancewith written terms of reference. The principal Committeesof the Board – Audit, Remuneration, Risk and Nomination– all comply fully with the requirements of the Code.

Overview

In addition the Chairman had individual meetings during
the year with major shareholders, and reported to theBoard on issues raised with him.

37

38

Admiral Group plc
Annual Report 2012

Corporate Governance continued

The Audit Committee
The membership at the end of the year was: Colin
Holmes (Chair), Margaret Johnson and Annette Court.
The Company Secretary acts as Secretary to theCommittee. The Committee usually meets four times
per year and has an agenda linked to events in the
Company’s financial calendar.
The Board considers that the members of theCommittee have the appropriate competence
and experience to carry out their duties and further
considers that Colin Holmes (Committee Chair),as a Chartered Management Accountant, has theappropriate recent and relevant financial experience
having previously been the UK Finance Director for
Tesco plc, and until 2010 a member of its Group
Executive Committee.
The Committee is kept up to date with changes to
Accounting Standards and relevant developments
in financial reporting, company law, and the various
regulatory frameworks through presentations fromthe Group’s external auditors, Deputy Chief Financial
Officer, and Company Secretary. In addition members
are provided with information on seminars andconferences provided by external bodies. The Termsof Reference of the Audit Committee include all thematters required under the Code.
Other individuals such as the Chief Financial Officer,
Chief Operating Officer, Chief Executive, Chairman of
the Board, the heads of Risk, Compliance, and Internal
Audit and representatives of different parts of theGroup may be invited to attend all or part of any
meeting as and when appropriate. The external
auditors were invited to attend all of the Committee’s
meetings held in 2012, excepting when their own
performance was to be reviewed.

Colin Holmes
Chairman of the
Audit Committee

The Audit Committee’s primary responsibilities are:
• To monitor the integrity of the Group’s financial
statements and any formal announcement relating
to the Group’s financial performance, reviewing
any significant financial reporting judgements
which they contain;• To keep under review the effectiveness of theCompany’s internal financial controls, internal
control and risk management systems;• To review the Group’s procedures for handlingallegations from whistleblowers and for
detecting fraud;• To monitor and assess the role and effectivenessof the Group’s internal audit functions in the context
of the Group’s overall internal control and risk
management systems;• To consider and make recommendations to the Board,
to be put to shareholders for their approval at theAGM, in relation to the appointment, re-appointment
and removal of the Group’s external auditor;• To review the external auditor’s independence andobjectivity and the effectiveness of the audit process;and• To review the policy on the engagement of theexternal auditor to provide non-audit services,considering the relevant regulatory guidance
regarding the provision of non-audit services by
the external auditor.
Summary of Key Activities During 2012
During the year the Committee reviewed the following:• The Annual Report and interim results;• Reports from the internal audit departments within
the Group on the effectiveness of the Group’s risk
management and internal control procedures,details of key audit findings, and actions taken bymanagement to manage and reduce the impact of
the risks identified;• Reports from the external auditors on the principal
findings from their review of the Company’s systems
and controls, and on their key issues and conclusions
on the half and full year reporting;• Reports from the Chair of the Group Risk Committee
on the principal risks faced by the Group and thework undertaken by the Committee to ensure risk
is appropriately managed;• Presentations from independent actuaries to assist
the Committee in concluding on the adequacy of theGroup’s reserves;• Reports from the external auditors on their proposed
audit scope, fees, audit, and auditor independence;• Performance and effectiveness of the internal
audit department;• All reports from internal audit including management
responses to the conclusions set out in the reports;• The effectiveness of the Group’s arrangements
for handling allegations from whistleblowers
and procedures for detecting fraud;• The Committee also had presentations anddiscussions on a range of important issues including
the approach to reserving within the Group, a review
of large claims and a review of the control environment
in the Group’s Italian business;• Its own terms of reference; and• Its own effectiveness.

Admiral Group plc
Annual Report 2012

The Head of Internal Audit in the UK attends all
Audit Committee meetings and provides a range ofpresentations and papers to the Committee, throughwhich the Committee monitors the effectiveness of theGroup’s internal controls. Members of the Committee
also receive all issued audit reports, enabling themto challenge the reports’ content and related
recommendations. The overseas internal auditors
attend Committee meetings periodically. The Committee
approves the internal audit programmes at the start ofeach calendar year whilst the effectiveness and workloadof the internal audit functions, and the adequacy ofavailable resources are monitored throughout the year.

Financial statements

As part of the Committee’s detailed annual review
of its performance and processes, each Committee
member completed a comprehensive online
questionnaire designed to provide objective
assessment of the Committee’s performance,
including its effectiveness in monitoring internaland external audit. The Committee discussed theresults of the review and it was concluded that theCommittee and the audit process were effective andthat the Committee had full access to all the information
it required; that the Committee had appropriate termsof reference; and that it had achieved its remit.

Governance

The Audit Committee has unrestricted access to theGroup’s documents and information, as well as to its
employees and external professional advisers.

Performance

The Committee undertakes an annual review to assess
the independence and objectivity of the external auditors
and the effectiveness of the audit process, taking into
consideration relevant professional and regulatory
requirements, the progress achieved against the agreed
audit plan, and the competence with which the auditors
handled the key accounting and audit judgements.
Following this review the Committee concluded that theauditor, KPMG, remained independent and provided a
service that was robust and fit for purpose. There are nocontractual obligations that restrict the Group’s choice of
external auditor. It was agreed that a decision on whether
to re-tender the external audit should be made at least
every five years. The last such tender was carried out in2006. In view of the high quality of service received by
the Group; the fresh perspective provided by the recent
rotation of the audit engagement partner in 2011; andthe continued competitiveness of their audit fee, theCommittee recommended that a re-tender process
should not be undertaken in 2012 but that the relationshipwith and effectiveness of KPMG should be kept underreview. A resolution for the reappointment of KPMG as
auditors will, therefore, be proposed at the forthcoming
AGM. The Company is mindful of the September 2012
Corporate Governance Code, which applies to its nextreporting period and includes a provision to put theexternal audit out to tender at least every ten years.

In accordance with agreed parameters, the overseas
operations in Spain and Italy have their own locally based
internal auditors, who report to their respective country
heads. All reports are evaluated by the Head of Internal
Audit to ensure the quality and effectiveness of thereported findings. In addition, the UK internal audit
department carries out high level governance reviewsof all foreign operations, assessing the internal control
frameworks and system of risk management.

Overview

During the year the Committee reviewed its policy
on non-audit services that sets out the procedure forapproval, by the Committee, of expenditure with theGroup’s auditors of over £30,000, including the process
where it is necessary for approval of such work to begiven outside of the normal Committee meeting
timetable. Such circumstances will require the approvalof the Audit Committee Chair who will consider andapprove such fees on behalf of the Committee. Suchapproval of fees in excess of £30,000 will then be notified
by the Committee Chair to the next Committee meeting
following approval. The Group’s auditors, KPMG Audit
plc, provide some non-audit services, the majority ofwhich comprise compliance services related to various
taxation issues within the Group, and which are notconsidered by the Committee to compromise their
independence as auditors. The level of non-audit fees
is reviewed at each Committee meeting and details
are included in note 6 to the financial statements.

39

Other information

40

Admiral Group plc
Annual Report 2012

Corporate Governance continued

The Group Risk Committee
Membership at the end of the year was: Martin Jackson(Chair); John Sussens, David Stevens and Annette Court.
The Company Secretary acts as Secretary to theCommittee. The Committee met four times during
the year.
The duties and responsibilities of the Committee areset out in Terms of Reference that were approved by
the Board in January 2013. The responsibilities of theCommittee can be summarised as:• Agreeing the Group’s risk management framework,
including the Risk Management Committees thatare established within each of the Group’s
operational entities;• Monitoring the Group’s prudential risk exposure,which includes ensuring that the Group’s capital
resources and liquidity profile are appropriate toits needs whilst meeting minimum regulatory
requirements;• Ensuring the adequacy and effectiveness of theGroup’s systems and controls for the preventionof financial crime including prevention of bribery
and adequacy of anti-money laundering systems
and controls;• Monitoring the adequacy and effectivenessof the Group’s Compliance functions;• Reviewing the Group’s progress towards achieving
Solvency II compliance;• Considering and recommending to the Board
for approval the Group’s risk appetite, including
any changes to the appetite for each material typeof risk faced by the Group; and• Overseeing and challenging the design andexecution of the Group’s stress and scenario testing.

Martin Jackson
Chairman of the Group
Risk Committee

Summary of Key Activities in 2012
During the year the Committee:• Reviewed the Group’s risk appetite and profile ofmaterial risks;• Considered the adequacy of risk mitigation measuresand contingency plans;• Reviewed the Group’s risk strategy in the context
of the Group’s agreed strategic objectives;• Monitored the Group’s progress towards
implementation of Solvency II;• Approved the design and reviewed the results ofthe stress and scenario testing programme;• Received an external presentation on Enterprise-wide
Risk Management benchmarking;• Reviewed in-depth analysis of a number of the Group’s
most significant risk areas, including insurance risk in
the UK car insurance operation;• Reviewed management information on conduct
risk within the Group;• Reviewed its own terms of reference;• Reviewed its own effectiveness and sought toidentify potential improvements that could be madeto the Committee’s oversight of risk management in
the Group.
The work of the Committee is supported by moredetailed work undertaken by Risk Management
Committees in each of the Group’s operational entities.
Membership of each of these Committees includes
the Managing Director of the operation. In the UK,
membership of the Risk Management Committee
includes the Group Chief Executive and the Chief
Operating Officer. At each meeting, the Risk
Management Committees consider significant
movements in the operation’s risk profile, any risks thathave arisen and any emerging risks. Risk Management
Committees also assess and monitor any regulatory
issues, ensuring that their resolution and the action
taken are appropriately recorded. In the UK, the Risk
Management Committee received regular information
on Conduct Risk, such as complaint handling reports andTCF (Treating Customers Fairly) management information.
The Committee Chairman reports formally to the Boardon its proceedings after each meeting on all matterswithin its duties and responsibilities, as set out inpreviously circulated minutes to the Board. The
Committee Chairman also reports on the activitiesof the Committee in a formal written report that is
submitted to and discussed by the Board every
six months.

Admiral Group plc
Annual Report 201241

The Nomination Committee

During the year, the Committee kept under review thesize of the Board and the balance of its composition
particularly in the context of the continuing need toassess the balance of skills, knowledge, independence,
diversity and experience on the Board and theimpending retirement, over the next five years, of anumber of current Non-Executive Directors who areapproaching nine years’ service.

The Group remains strongly supportive of the principleof boardroom diversity, of which gender is an important,but not the only aspect. What is important is diversityof thought, experience, and approach and each new
appointment must complement what already exists at
the Board table. Accordingly, appointments will always
be made on merit against objective criteria, including
diversity, and not just to achieve an externallyprescribed number.
The Group already has strong female representation inboth management and at Board level. On our Executive
Committees women comprise 33% of that for the UK
and 41% for our International operations. In addition,of the total employees across the Group in the UK, 49%
are women. Given women already constitute 25% of
our plc Board the Group has already met the target set
for 2015 by Lord Davies in his report: Women on Boards.
The Group remains committed to providing equal
opportunities, eliminating discrimination andencouraging diversity amongst its workforce bothin the UK and overseas.

Other information

Remuneration Committee
Full details of the membership, responsibilities andactivities of the Remuneration Committee can be foundin the Directors’ Remuneration Report set out on pages
47 to 56.

Financial statements

Alastair Lyons, CBE
Chairman of theNomination Committee

The Committee remains satisfied that succession plansfor Directors and senior management are in place toensure the continued ability of the Group to implement
strategy and compete effectively in the markets in which
it operates.

Governance

Non-Executive Directors Roger Abravanel and Annette
Court joined the Board in March 2012, following aformal, rigorous and transparent recruitment process led
by external consultants, instructed by the Committee,
who identified and shortlisted potential candidates.
Following this process, and separate interviews with
Committee and Board members, the Committee
unanimously recommended to the Board that Roger
and Annette should be appointed to the Board.

At this meeting the emerging talent across the Groupwas discussed in detail with the Executive team
identifying key individuals within the organisation who
had impressed in their current roles and who had thepotential to contribute to the business by working on
projects in other areas of the Group. Such exposure
would also assist with their development in order that,at the appropriate time, they might be in a position to
succeed to senior management positions.

Performance

The Committee leads the process for making
appointments to the Board or where the appointee
is likely to become a Board member. The Committee
ensures there is a formal, rigorous and transparent
procedure for the appointment of new Directors to
the Board through a full evaluation of the skills,
knowledge and experience required of Directors.
The Committee also ensures plans are in place fororderly succession for appointments to the Board,and reviews the succession plans for other senior
management positions. Responsibility for making
senior management appointments rests with theChief Executive.

The Board, at their meeting in December 2012,
considered the Group’s current Succession Plan
which considered the senior roles within the Groupand identified whether there was emergency shortterm cover in place in the event that the individual left
the organisation, and whether there was a permanent
replacement available within the organisation, or whether
the position would need to be filled externally. It also
identified where there were individuals who, with further
experience and guidance, would be capable of moving
into particular senior management roles.

Overview

The membership at the year-end was Alastair Lyons(Chairman), Colin Holmes and Lucy Kellaway. The
Company Secretary acts as Secretary to the Committee.
The Committee invites the Chief Executive to attend
meetings when it deems appropriate. The Committee
met on one occasion during 2012.

42

Admiral Group plc
Annual Report 2012

Corporate Governance continued

Internal Control and Risk Management
The Board is ultimately responsible for the Group’ssystem of internal control and, through the Audit
Committee has reviewed the effectiveness of thesesystems. The systems of internal control over business,
operational, financial, and compliance risks are designed
to manage rather than eliminate the risk of failure toachieve business objectives and can only provide
reasonable and not absolute assurance againstmaterial misstatement or loss.

The Risk Department defines and prescribes the financial
and operational risk assessment processes for thebusiness; maintains the risk registers, undertakes regularreviews of these risks in conjunction with line management
and records any actual losses or near misses that occur asa consequence of the realisation of risk. The Head of the
Risk Department has responsibility for ensuring thatmanagers are aware of their risk management obligations,providing them with support and advice, and ensuringthat the risk management strategy is properly
communicated. Reports are produced showing themost significant risks identified and the controls in place.
The Board is of the view that there is an ongoing process
Internal Audit uses the risk registers to plan and inform
for identifying, evaluating and managing the Group’s
their programme of audits around the most significant
internal controls; that it has been in place for the year
risks to the Group to ensure that the prescribed controls
ended 31 December 2012; and that, up to the date of
approval of the Annual Report and Accounts, it is regularly are in place and are operating effectively.
reviewed by the Board and accords with the internal
The GRC, UK RMC and other UK and overseas
control guidance for Directors provided in the Code.
committees receive reports setting out key performanceand risk indicators and consider possible control issues
A key element of the control system is that the Board
brought to their attention by early warning mechanisms
meets regularly with a formal schedule of mattersthat are embedded within the operational units. The UK
reserved to it for decision and has put in place an
RMC, the Group’s other UK and overseas committeesorganisational structure with clearly defined lines ofand the Audit Committee also receive regular reports
responsibility. As described above, in order to ensurefrom the relevant Internal Audit functions, which include
these responsibilities are properly discharged, therecommendations for improvement of the control and
Board has delegated the task of supervision of risk
operational environment. Twice a year the Chairman ofmanagement and internal control to the Group Risk
the Group Risk Committee provides a comprehensive
Committee (GRC).
report to the Board on the Group’s risk appetite, risk
strategy and risk management policy with focus on a
There are several key elements to the risk management
consideration of the principal assessed exposures andenvironment throughout the Group. These include thesetting of risk management strategy, risk appetite and risk the effectiveness of the mitigation strategies adopted.
policy by the GRC; enforcement of that policy by the Chief In addition, the Board receives reports from the Chairmanof the Audit Committee as to its activities, together with
Executive; delivery of the policy by the Risk Management
copies of the minutes of the UK RMC and the GRC andCommittee and the Group’s other UK and overseas
Audit Committees.
entities by the application of the Group’s systems ofinternal control and risk management; and the overall
assurance provided by internal audit to the Audit
Committee that the systems operate effectively. The
Board recognises that the day-to-day responsibility for
implementing these policies must lie with the Senior
Management whose operational decisions must take into
account risk and how this can be controlled effectively.
The GRC will report on its activities to the Audit
Committee in support of the overall assurance
provided by the Audit Committee that the Group’s risk
management and compliance systems operate effectively.

Admiral Group plc
Annual Report 201243

The Audit Committee’s ability to provide the appropriate
assurance to the Board depends on the provisionof periodic and independent confirmation, primarily
by Internal Audit, that the controls established bymanagement are operating effectively and whereappropriate provides a high-level challenge to thesteps being taken by the GRC to implement the risk
management strategy. The Internal Audit functions
undertake regular reviews of internal control systems
and business processes, identifying control weaknesses
and making recommendations to management on
improvements where necessary.

Overview

In March 2013 the Board carried out the annual reviewof the effectiveness of the Group’s system of internal
controls for the 2012 year, also taking account of events
since 31 December 2012, by considering documentationfrom the Audit Committee including the Internal Audit
Annual Report prepared by the Group’s Head ofInternal Audit.

Performance

Going Concern
The financial statements have been prepared on agoing concern basis. In considering the appropriatenessof this assumption, the Board has reviewed the Group’s
projections for the next twelve months, including cash
flow forecasts and regulatory capital surpluses. The
Group has no debt.

Governance

The Board confirms that there were no significant issues
arising during the year under review. However, the Board
continues to review the adequacy of the risk management
and control framework. As the Group’s operations grow,the Board looks for opportunities to make improvements
and add appropriate resources when necessary.

As a result of this review the Directors have satisfied
themselves that it is appropriate to prepare the financial
statements on a going concern basis.
Financial statements
Other information

44

Admiral Group plc
Annual Report 2012

Directors’ Report

The Directors present their Annual Report and theaudited financial statements for the year ended
31 December 2012.
Business Review
The Company is the holding Company for the AdmiralGroup of companies. The Group’s principal activity
continues to be the selling and administration of private
motor insurance and related products.
The information that fulfils the requirements of theBusiness review, as required by Section 417 of theCompanies Act 2006, and which should be treated as
forming part of this report by reference are included in
the following sections of the annual report:• Chairman’s statement• Chief Executive’s statement• Business review.
Group Results and Dividends
The profit for the year, after tax but before dividends,
amounted to £258.4 million (2011: £221.3 million).
The Directors declared and paid dividends of£219.3 million during 2012 (2011: £198.8 million) –refer to note 10b for further details.
The Directors have declared a final dividend of£124.5 million (45.5 pence per share), payable on
24 May 2013.
Share capital
Refer to the Business Review for the disclosureof substantial shareholdings in accordance with
Chapter 5 of the Transparency and Disclosure rules.
Financial Instruments
The objectives and policies for managing risks inrelation to financial instruments held by the Groupare set out in note 5c to the financial statements.
Directors and their Interests
The present Directors of the Company are shown on
pages 30 and 31 of this report, whilst Directors’ interestsin the share capital of the Company are set out in the
Remuneration Report on pages 48 to 56.

Charitable and Political Donations
During the year the Group donated £141,000(2011: £194,000) to various local and national charities.
The amount the Group donates fluctuates annually due tochanges in sponsorship initiatives and employee demand
for matched funding. The Group has never made political
donations. Refer to the Business Review for further details.
Employee Policies
Detailed information on the Group’s employment
practices is set out in the Business Review. The Grouppurchases appropriate liability insurance for all staff
and Directors.
Creditor Payment Policy
It is the policy of the Group to pay all purchase invoicesby their due date, and appropriate quality measures arein place to monitor and encourage this. At the end of theyear outstanding invoices represented 16 days purchases(2011: 14 days). The Group is a signatary to the prompt
payment code.
Contractual Arrangements
The Group considers its coinsurance and reinsurance
contracts, as described in the Business Review section
on page 11 to be essential to the running of the Group’sbusiness. No other contractual arrangements are
considered to be essential.
Additional Information for Shareholders
Where not provided previously in this Directors’ Report,
the following provides the additional information required
for shareholders as a result of the implementation of the
Takeovers Directive into UK law.
At 31 December 2012, the Company’s issued share capitalcomprised a single class of shares referred to as ordinary
shares. Details of the share capital and shares issued
during the year can be found in note 10d.
On a poll, every member present in person or by proxy
and entitled to vote shall have one vote for every ordinary
share held. The notice of the general meeting specifies
deadlines for exercising voting rights either by proxynotice or present in person or by proxy in relation toresolutions to be passed at general meeting. All proxyvotes are counted and the numbers for, against or
withheld in relation to each resolution are announced
at the Annual General Meeting and published on the
Company’s website after the meeting.

Admiral Group plc
Annual Report 2012

The Company has not purchased any of its own shares
during the period.

Articles of Association
The Articles may only be amended by special resolutionof the shareholders.

Financial statements

Power of the Directors
The Directors are responsible for managing the businessof the Company and may exercise all powers of theCompany subject to the provisions of relevant statutes,
to any directions given by special resolution and to theCompany’s Memorandum and Articles. The Articles forexample, contain specific provisions and restrictions
Power to Issue Shares
At the last Annual General Meeting, held on 26 April 2012, concerning the Company’s power to borrow money.
Powers relating to the issuing of new shares are also
authority was given to the Directors to allot unissued
included in the Articles and such authorities are renewed
relevant securities in the Company up to a maximum of£89,535, equivalent to one third of the issued share capital by shareholders at the Annual General Meeting each year.
as at 21 March 2012. This authority expires on the date ofAnnual General Meeting
the Annual General Meeting to be held on 25 April 2013
It is proposed that the next AGM be held at Cardiff Cityand the Directors will seek to renew this authority for theHall, Cathays Park, Cardiff CF10 3ND on Thursday 25 Aprilfollowing year.
2013 at 2.00pm, notice of which will be sent toshareholders with the Annual Report.
A further special resolution passed at that meeting
granted authority to the Directors to allot equity
securities in the Company (up to a maximum of 5% of theissued share capital of the Company) for cash, without
regard to the pre-emption provisions of the Companies
Act 2006. This authority also expires on the date of theAnnual General Meeting to be held on 25 April 2013 andthe Directors will seek to renew this authority for thefollowing year.

Governance

There are a number of agreements that alter or terminate
upon a change of control of the Company following a
takeover bid, such as commercial contracts. None isconsidered to be significant in terms of their impact on
the business of the Group as a whole except for the longterm co-insurance agreement in place with Great Lakes
Reinsurance (UK) Plc. Details relating to this agreement
are contained in the Business review.

However, in accordance with the requirement under
the UK Corporate Governance Code for annual electionof Directors all Directors will submit themselves forre‑election at the Group’s Annual General Meetingon 25 April 2013.

Performance

There are no agreements between the Company andits Directors or employees providing for compensation
for loss of office or employment (whether throughresignation, purported redundancy or otherwise)that occurs because of a takeover bid.

Appointments of Directors
The Company’s Articles of Association (‘the Articles’)give the Directors power to appoint and replace
Directors. Under the terms of reference of the Nomination
Committee, any appointment must be recommended by
the Nomination Committee for approval by the Board of
Directors. The Articles also require Directors to retire andsubmit themselves for election at the first Annual General
Meeting following appointment and all Directors whoheld office at the time of the two preceding Annual
General Meetings, to submit themselves for re-election.

Overview

There are no restrictions on the transfer of ordinary
shares in the Company other than:• certain restrictions may from time to time be imposedby laws and regulations (for example, insider tradinglaws); and• pursuant to the Listing Rules of the Financial Services
Authority whereby certain employees of the Company
require the approval of the Company to deal in the
Company’s securities.

45

Other information

46

Admiral Group plc
Annual Report 2012

Directors’ Report continued

Directors’ Responsibilities
The Directors are responsible for preparing the Annual
Report and the Group and Parent Company financial
statements, in accordance with applicable law andregulations.

Under applicable law and regulations, the Directors
are also responsible for preparing a Directors’ report,
Directors’ Remuneration report and Corporate
Governance statement that comply with that law
and those regulations.

Company law requires the Directors to prepare Groupand Parent Company financial statements for eachfinancial year. Under that law they are required to prepare
the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as
adopted by the EU and applicable law and have elected
to prepare the Parent Company financial statements inaccordance with UK Accounting Standards and applicablelaw (UK Generally Accepted Accounting Practice).

The Directors are responsible for the maintenanceand integrity of the corporate and financial information
included on the Company’s website. Legislation in the
UK governing the preparation and dissemination offinancial statements may differ from legislation inother jurisdictions.

Under company law the Directors must not approve
the financial statements unless they are satisfied thatthey give a true and fair view of the state of affairs of
the Group and Parent Company and of their profit orloss for that period.
In preparing each of the Group and Parent Company
financial statements, the Directors are required to:• select suitable accounting policies and then apply
them consistently;• make judgements and estimates that are reasonable
and prudent;• for the Group financial statements, state whether
they have been prepared in accordance with IFRS
as adopted by the EU;• for the Parent Company financial statements, state
whether applicable UK Accounting Standards havebeen followed, subject to any material departures
disclosed and explained in the Parent Company
financial statements; and• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and the Parent Company will continue
in business.
The Directors are responsible for keeping properaccounting records that disclose with reasonableaccuracy at any time the financial position of the
Parent Company and enable them to ensure that its
financial statements comply with the Companies Act
2006. They have general responsibility for taking such
steps as are reasonably open to them to safeguard theassets of the Group and to prevent and detect fraud
and other irregularities.

Responsibility Statement
The Directors confirm that to the best of their knowledge:• The financial statements, prepared in accordancewith the applicable set of accounting standards, givea true and fair view of the assets, liabilities and financial
position and profit or loss of the Company and theundertakings included in the consolidation taken
as a whole; and• The Directors’ report includes a fair view of thedevelopment and performance of the business andthe position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties that they face.
Disclosure of Information to Auditors
The Directors who held office at the date of approvalof this Directors’ report confirm that, so far as they areeach aware, there is no relevant audit information ofwhich the Company’s auditor is unaware; and each
Director has taken all the steps that he ought to havetaken as a Director to make himself aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
Auditor
The Company’s auditor, KPMG Audit Plc, has indicatedwillingness to continue in office and resolutions toreappoint it and to authorise the Directors to fix
its remuneration will be proposed at the Annual
General Meeting.
By order of the Board,
Mark Waters
Company Secretary
5 March 2013

Kevin Chidwick
Chief Financial Officer
5 March 2013

Admiral Group plc
Annual Report 2012

47

A Statement to Shareholders
from the Chairman of theRemuneration Committee

2012 has been another strong year for the Group
despite a challenging external environment. The Group
increased profits in the year by 15% to £344.6 million
with a return on capital employed of 60% which
supported total dividends for the financial year of
90.6 pence per share, and represents a distributionof 95% of our earnings. The Group’s strategy remains
to continue to maximise our position in the UK while
taking what we know and do well, which is internet
and telephone delivery of car insurance and pricecomparison, to our overseas insurance and pricecomparison businesses.

John Sussens
Chairman of the Remuneration Committee
5 March 2013

Performance

The UK Government Department of Business Innovation& Skills (BIS) is currently proposing changes to thestructure and contents of Directors’ Remuneration
Reports (DRRs). The Committee has decided to adopt
a number of these proposed changes early; therefore
after this brief introduction, the Report is divided into
three sections:• A Policy Report which will detail Admiral’s
remuneration policies and links to Group strategy;• An Implementation Report, which will focus on the
remuneration arrangements and outcomes for theyear under review; and• A third section containing information required thisyear under the existing regulations.

GovernanceThis Report covers the reporting period from 1 January
2012 to 31 December 2012 and provides details of theactivities of the Committee and remuneration policyof the Company.

During the year ended 31 December 2012, theCommittee met on five separate occasions. The key
matters considered included:• Reviewing salary and fee proposals for the Executive
Directors, the Chairman and Senior Management;• Reviewing the appropriateness of the performance
conditions for both the Discretionary Free Share
Scheme (DFSS) and Free Share Incentive Plan
(SIP) awards;• Reviewing the Company’s performance against theperformance conditions applicable to the DFSS andSIP awards and where appropriate authorising thevesting of awards;• Reviewing and authorising the grant of awards underboth DFSS and SIP plans;• Reviewing the Committee’s terms of reference andrecommending amendments to the Board
for approval; and• Reviewing the efficiency of DFSS awards foroverseas businesses.

Overview

Dear Shareholder,I am pleased to introduce the Directors’ Remuneration
report (the ‘Report’) for the year ended 31 December
2012, which has been prepared by the Remuneration
Committee (the ‘Committee’) and approved by
the Board.

Financial statements
Other information

John Sussens
Chairman of theRemuneration Committee

48

Admiral Group plc
Annual Report 2012

Directors’ Remuneration Report
Policy ReportCompliance Statement
This Remuneration report has been prepared according
to the requirements of the Companies Act 2006 (the Act),
the Listing Rules of the UK Listing Authority and under
Regulation 11 of and Schedule 8 to the Large andMedium Sized Companies and Groups (Accounts andReports) Regulations 2008 (the Regulations). In addition,
the Board has applied the principles of good corporate
governance set out in the UK Corporate Governance
Code (the ‘Governance Code’), and has considered theguidelines issued by its leading shareholders and bodies
such as the Association of British Insurers and the
National Association of Pension Funds.

The Committee reviews the framework and remuneration
packages of the Executive Directors and the most senior
managers and recognises the need to ensure that the
remuneration policy is firmly linked to the Group’s
strategy including its risk management approach. In
setting the policy and making remuneration decisions,the Committee takes into account pay and conditions
elsewhere in the Group. The main principles underlying
the remuneration policy are:• C ompetitive – the Group aims to combine salaries
with attractive performance-related incentives,
which provide the potential for competitive total
reward packages for the achievement of superior
performance. Base salaries reflect the role, job
In accordance with Section 439 of the Companies Act,size and responsibility together with individual
an advisory resolution to approve this report will be
performance and effectiveness. Prevailing market
proposed at the Annual General Meeting (‘AGM’) of theand economic conditions and developments in
Company to be held on 25 April 2013. The detail in thisgovernance are also considered, as are generalreport sets out how the remuneration principles havesalary levels throughout the organisation. In
been applied in 2012.
considering total remuneration for the Executive
Directors, the Committee is aware of remuneration
Key Principles of Admiral Remuneration Arrangements
in companies of a similar size in the Financial
The Group is committed to the primary objective ofServices sector.
maximising shareholder value over time and ensuring that
• Performance-linked – a significant part of thethere is a strong link between performance and reward.
Executive Directors’ (excluding the founding Directors)
This is reflected in the Group’s stated remunerationand senior managers’ reward remains shareholderpolicy of paying competitive, performance-linked andaligned given that it is determined by the Group’s
shareholder-aligned remuneration packages comprisingearnings growth vs. LIBOR (see Policy Table opposite).
basic salaries coupled with participation in performance• Transparent – all aspects of the remuneration
based share schemes to generate competitive total
structure are clear to employees and openly
reward packages for superior performance. The Board
communicated.
is satisfied that the adoption of this policy continues tomeet the objectives of attracting and retaining executivesof the highest quality across the Group.

Admiral Group plc
Annual Report 201249

Purpose and linkto strategy

Operation

Opportunity andperformance metrics

Base salary
To attract and retain talent by settingbase salaries at levels appropriate forthe business

Salaries are reviewed annually

Henry Engelhardt: £381,425 (increase of 4.5%
from 1 July 2012)

The Group operates a Personal Pension Plan,a Defined Contribution scheme
This is available to all employees following
completion of their probationary period

Kevin Chidwick: £438,900 (increase of 4.5%
from 1 October 2012)
David Stevens: £360,535 (increase of 4.5%
from 1 September 2012)
The Group matches employee contributions
up to a maximum of 6% of base salary withmaximum employer contribution of £9,000

Performance

PensionTo provide retirement benefits

Salary levels/increases take account of:• Scope and responsibility of the position;• Individual performance and effectiveness,and experience of the individual in the role;• Market pay levels;• Average increase awarded acrossthe Group

Overview

Remuneration Policy Table
This section of our report describes the key components of the remuneration arrangements for Executive Directors
and Non-Executive Directors for 2013 and beyond. No changes to the structure of remuneration are proposed for 2013.

Henry Engelhardt and David Stevens havedeclined to be included in the plan

Other benefits
To provide market-competitive benefits

Includes:• Death in service scheme;• Private medical cover;• Permanent health insurance

Discretionary Free Share
Scheme (DFSS)
To motivate and reward longer-term
performance, grow market share profitably,
reduce staff attrition, and further strengthen
the alignment of the interests ofshareholders and staff

Kevin Chidwick participates in the DFSS (theother Executive Directors have declined toparticipate given their significant
shareholdings). Grants are made at thediscretion of the Committee

Maximum opportunity: £1,000,000 or 600% ofbase salary if lower

Awards, generally made as a specific numberof shares, vest after three years subject toperformance and continued employment

Awards vest by reference to growth in theGroup’s EPS in excess of a risk-free return,defined as average three-month LIBOR, over athree-year period (10% of shares vest for matching
LIBOR; full vesting for outperforming LIBOR by
10% p.a.; straight-line vesting in between)

Henry Engelhardt: £547
Kevin Chidwick: £512
David Stevens: £512

All benefits are non-pensionable

GovernanceAward size for 2012: 52,250 shares, with a valueon the date of award of £560,643

The Committee feels EPS vs. LIBOR is a strong
indicator of long-term shareholder return
Linked to Admiral dividend

Approved Free Share Incentive
Plan (SIP)All UK staff participate in the SIP (except
Henry Engelhardt and David Stevens who
have declined to participate). Grants are
made twice a year based on the resultsof each half-year

Maximum opportunity: £3,000 per annum

Executive shareholding policy
To support shareholder alignment

Executive Directors have agreed to (acquireand) retain a beneficial shareholding equal
to at least 100% of base salary, which can bebuilt up over a period of five years from thedate of appointment

100% of base salaryFees
To remunerate Non-Executive Directors

The Chairman fee is determined by theCommittee after consultation with
the Executive Directors. The Chairman, aswith the founding Directors, holds asignificant shareholding in the Group andthis is reflected in the size of his fee, which ismaterially below that of Chairmen oforganisations of similar size and complexity.
The non-executive directors’ fees are
determined by the Chairman together with
the Executive Directors.

Non-Executive Chairman: £218,000
Non-Executive Director base fee: £50,000
Senior independent Director: £5,000

Fees take into account the timecommitment, responsibilities, and theskills and experience required
Kevin Chidwick expenses forrelocation to USA

Kevin Chidwick was reimbursed for expenses
incurred in his relocation to the USA in
January 2012

Committee Chairman:• Audit: £20,000• Risk: £20,000• Remuneration: £5,000• Nomination: £5,000
Committee member:• Audit: £12,000• Risk: £12,000£260,000

Other information

Bonus is calculated to be equivalent todividends that would have been payable
during the year on DFSS shares awarded
but not vested

Financial statements

DFSS bonus
To further align incentive structures withshareholder interests through the deliveryof dividend equivalents

50

Admiral Group plc
Annual Report 2012

Directors’ Remuneration Report continued

Note:
Approximately 1,800 employees from across the Group, as well as Kevin Chidwick, participate in the DFSS. The
Committee recommends for approval by the Board awards to the CFO and other employees under the DFSS. For
the CFO, all share awards are subject to the above performance criterion. For staff below Group Board level awards
will be split. 50% of the award will be subject to the above performance criterion, and the other 50% will have no
performance criteria attached other than the requirement that the recipient remains an employee of the Groupat the date of vesting. Award sizes vary by organisational level. All holders of DFSS awards receive the DFSS bonus.
Remuneration Arrangements for Founding Directors
Two of the three Executive Directors (Henry Engelhardt and David Stevens) are founding Directors. They andthe Committee continue to hold the view that the significant shareholdings held by them provide a sufficientalignment of their interest in the performance of the Group with the interests of other shareholders. In light of this,their remuneration packages consist only of a below market rate salary and benefits such as private medical cover,permanent health insurance and death in service cover. The Group does not contribute to any pension arrangementson behalf of these Executive Directors, and they have not participated, nor is it intended that they participate, in any
Group share schemes.
Details of Directors’ Service Contracts
The following table summarises the notice periods relating to the service contracts of the Executive Directors serving
at March 2013.
Notice –Director(months)

Notice –Company(months)

Henry Engelhardt

12

12Kevin Chidwick

1212David Stevens

12

12

There is no provision in the Executive Directors’ contracts for compensation to be payable on early termination of theircontract over and above the notice period element.
The Company has entered into letters of appointment with its Non-Executive Directors. Summary details of terms andnotice periods are included below.
Term

Commencement date

Notice period

Alastair Lyons

3 years

1 July 2010

Three months’ written notice

Roger Abravanel

3 years

6 March 2012

One month’s written notice

Manfred Aldag

Indefiniten/a erminable on one month’s notice from eitherT
party – automatically terminates should hecease employment with Munich Re

Annette Court

3 years

21 March 2012

One month’s written noticeColin Holmes

3 years

3 December 2010

One month’s written notice

Martin Jackson

1 year

1 December 2012

One month’s written notice

Margaret Johnson

3 years

4 September 2012

One month’s written notice

Lucy Kellaway
John Sussens

3 years

4 September 2012

One month’s written notice

1 years

1 December 2012

One month’s written notice

Given the short notice periods applicable, mitigation issues are unlikely to arise.
Termination Payments
The Company’s policy is to limit severance payments on termination to pre-established contractual arrangements.
In the event that the employment of an Executive Director is terminated, any compensation payable will be determinedin accordance with the terms of the service contract between the Company and the employee, as well as the rulesof any incentive plans.
Under normal circumstances, good leavers are entitled to receive termination payments in lieu of notice based onbase salary and compensation for loss of benefits. The notice period for all Executive Directors is one year.
In the event an Executive leaves for reasons of death, injury, disability, redundancy, retirement, or any other reason
which the Remuneration Committee in its absolute discretion permits, any outstanding long-term incentive awards
will be pro-rated for time and performance and will vest after the end of the performance period. Upon a changeof control of the Company, awards will be pro-rated for time and vest immediately based on the extent to which
the Committee determines that the performance conditions have been met or are likely to be met.

Admiral Group plc
Annual Report 2012

51

Overview

For all other leavers, outstanding awards will lapse. The Committee retains discretion to alter these provisions (aspermitted by the relevant Plan Rules) on a case-by-case basis following a review of circumstances and to ensure
fairness for both shareholders and participants.
Pay-for-Performance: Scenario Analysis
The following chart shows the potential split between the different elements of the Executive Directors’ total
remuneration under two different performance scenarios: ‘Zero vesting’, and ‘Maximum vesting’. The Company
is unable to provide a ‘target’ scenario as it does not operate an annual performance-related bonus scheme withthreshold targets and maximum payment levels.
CEO

CFO

COO
1,132

Performance

DFSS bonus(11%)
DFSS (50%)
571
20%
1%

382

382

Pension &Benefits <1%
Salary (>99%)

<1%
>99%
Zero vesting79%
Zero vesting

Maximum vesting362

Pension &Benefits (<1%)

362
<1%

Pension &Benefits (<1%)
Salary(>99%)>99%

Salary (39%)

Zero vesting

Maximum vesting

Maximum vesting

The charts above exclude the effect of any Company share price appreciation. For this reason, were the CFO’s DFSS
shares vest in full, his actual total remuneration may exceed the £ value shown in the chart above.
Component

PensionBenefits
DFSS
DFSS bonus‘Zero vesting’‘Maximum vesting’Annual base salary for 2013
£9,000 annual contribution for CFO;no contribution for CEO or COO
Taxable value of annual benefits provided
0% vesting
Based on DFSS bonus paid in 2012

Annual base salary for 2013
£9,000 annual contribution for CFO;no contribution for CEO or COO
Taxable value of annual benefits provided
100% vesting
Based on DFSS bonus paid in 2012

GovernanceBase salaryDistribution Statement
The table below shows the percentage change in profit after tax, dividends, and total employee compensation spend
from the financial year ended 31 December 2011 to the financial year ended 31 December 2012.

300

300

240

240

240

60

120
60

2012

2011

2012

60

0
2011

120

0
2011

2012

Considerations of Conditions Elsewhere in the GroupIn making remuneration decisions, the Committee also considers the pay and employment conditions elsewherein the Group.
The increase to the CEO, CFO and COO’s base salary for 2012 of 4.5%, is in line with the average increase acrossthe Group of 4.5%.

Other information

0180£184m (+18%)

120

180

£157m

180

£246m (+21%)

300

£203m

Total staff costs£258m (+17%)

Dividends£221m

Profit after tax

Financial statements

Percentage Change from Financial Year ended 2011 to 2012

52

Admiral Group plc
Annual Report 2012

Directors’ Remuneration Report continued

Implementation Report
Remuneration Committee Membership in 2012
The Board sets the Group’s remuneration policy and,through the authority delegated to it by the Board, theCommittee is responsible for making recommendations
to the Board on the structure and implementation of the
remuneration policy across the Group with consideration
to the prevailing economic climate within the economies
in which the Group operates. Its remit includes
recommending the remuneration of the Chairman,
the Executive Directors and the Company Secretary;
reviewing the remuneration of senior management;
and reviewing the composition of and awards madeunder the performance-related incentive schemes.
At the end of 2012 the Committee consisted of Martin
Jackson, Margaret Johnson, and Roger Abravanel
under the Chairmanship of John Sussens, the Senior
Independent Director. Colin Holmes stepped downfrom the Committee in March 2012 and Roger Abravanel
joined the Committee with effect from that date. The
Committee met five times during the year.
The Chairman and CEO are invited to meetings where
the Committee considers it appropriate to obtain theiradvice on Group strategy and performance and Senior
Executive pay strategy. The members of the Committee
do not have any personal financial interests (other thanshareholdings), or any conflicts, that relate to the businessof the Committee. During the year under review, theCommittee was aware of the cross-directorships held byColin Holmes and Alastair Lyons, who are both Directorsof Bovis Homes Group plc. Although not applicable given
Director

1. Base salary

2. Benefits

Henry Engelhardt
Kevin Chidwick
David Stevens£373,212£424,725£350,175

£547
£512
£512

Director

Alastair Lyons
Roger Abravanel
Manfred Aldag
Annette Court
Colin Holmes
Martin Jackson
Keith James
Margaret Johnson
Lucy Kellaway
John Sussens

Colin Holmes is no longer a member of the Committee,
the Committee had satisfied itself as to the independenceof Colin Holmes. However, he had chosen to take nopart in decisions on the Chairman’s remuneration.
The Committee members do not have any day-to-day
involvement in the running of the Group.
Adviser to the Committee
During the year, in order to enable the Committee
to reach informed decisions on executive remuneration,
advice on market data and trends was obtained
from independent consultants, Kepler Associates.
Kepler reports directly to the Committee Chairman
and is a signatory to the Code of Conduct for
Remuneration Consultants (which can be found atwww.remunerationconsultantsgroup.com). Kepler does
not provide any other services to the Group. The fees
paid to Kepler in respect of work carried out in 2012(based on time and materials) totalled £4,500.
In addition, the Committee received advice on
the structure of the Group’s share schemes fromPricewaterhouseCoopers LLP (PwC). The fees paid
to PwC totalled £15,360. The Company Secretary also
circulates market survey results as appropriate.
Total Actual Remuneration
To aid transparency for our shareholders, the table below
sets out the total actual remuneration received by each
Executive Director for the year to 31 December 2012, inline with the BIS single total figure definition.

3. Pension

4. DFSSand SIPn/an/a£9,000 £535,846
n/an/a

5. DFSSbonus

6. Relocation

Total
remunerationn/an/a£122,612 £260,000
n/an/a£373,759£1,352,695£350,687

1. FeeTotal
remuneration£218,400£50,000£6,000£74,000£70,000£70,000£38,167£62,000£50,000£72,000£218,400£50,000£6,000£74,000£70,000£70,000£38,167£62,000£50,000£72,000

The figures have been calculated as follows:
1. Base salary/fee: amount earned for the year.
2. Benefits: the taxable value of annual benefits received in the year.
3. Pension: the value of the Company’s contribution during the year.
4.	DFSS: the value at vesting of shares vesting on performance over the three-year period ending 31 December 2012. Given that vesting occurs in April, after theRemuneration Report is finalised, the DFSS element of the single figure is based upon the average share price in the last three months of the calendar year in question.
5. DFSS bonus: the value at grant of bonus equivalent to dividends that would have been payable during the year on DFSS shares awarded but not yet vested.
6.	Kevin Chidwick was paid £260,000 in January 2012 to reimburse him for expenses incurred in relation to his relocation to the USA after taking on CEO, responsibility
for the Group’s US Insurer Elephant Auto.

53

Admiral Group plc
Annual Report 2012700

2,000,000

Overview

Comparison of Overall Performance and Pay
The graph below illustrates CEO and CFO total remuneration vs. TSR performance since 31 December 2004.
600
1,500,000

500
400

1,000,000

300
200

500,000

100
0
2004

2005

2006

2007

2008

2009

2010

2011
2012
Year ending 31 December

Left axis: TSR (£100 invested on 31 December 2004).
Right axis: CFO total actual remuneration (£000 p.a.).
Right axis: CEO total actual remuneration (£000 p.a.).

Performance0

Base salary
The Committee approved the following base salaries for the Executive Directors in 2012:
Director

Henry Engelhardt
Kevin Chidwick
David Stevens

2011 salary2012 salary% change

Effective date

£365,000£420,000£345,000£381,425£438,900£360,525

4.5%
4.5%
4.5%

1 July 2012
1 October 2012
1 September 2012
GovernancePensions
The Company operates a Group Personal Pension Plan, where employee contributions are matched up to a maximum
6% of base salary with maximum employer contribution of £9,000. This is available to all employees following
completion of their probationary period.
Kevin Chidwick is included in the plan and is subject to the maximum employer contribution limit of £9,000. The
Company contributed £9,000 in 2012. Henry Engelhardt and David Stevens have declined to be included in the plan.

Awards made up to 2012 vest based on growth in EPS in excess of a risk-free return, defined as average three-month
LIBOR, over a three-year period. 10% of shares vest for matching LIBOR, full vesting occurs for outperforming LIBOR
by 10% p.a., with straight-line vesting in between. No vesting occurs for EPS growth below LIBOR.
Discretionary Free Share Scheme

Face value of awards granted in 2012

CEO: n/a
CFO: 52,250 shares on 11 October 2012 witha value at the date of award of £560,643
COO: n/a
3 years from 1 January 2012
Growth in EPS vs. LIBOR
Growth in line with LIBOR over 3 years
Growth of 10% p.a. in excess of LIBOR over 3 years

Performance period
Performance conditions
Threshold (10% vests)
Maximum (100% vests)

Other information

Type of award

Financial statements

Discretionary Free Share Scheme (DFSS)Awards made during the year
Kevin Chidwick and many members of the management team participate in this plan. Awards are generally madeas over a specific number of shares, and vest after a three-year performance period with vesting determined by
performance targets and employment conditions. Of the Group’s current Executive Directors, only Kevin Chidwick
participates in this scheme, as Henry Engelhardt and David Stevens have declined to be included given theirsignificant shareholdings.

54

Admiral Group plc
Annual Report 2012

Directors’ Remuneration Report continued

Additional Information
Awards Vesting during the Year and in 2013
The awards vesting during the year and in 2013 are subject to the same performance conditions as described above.
The table below details the Company’s EPS performance vs. LIBOR and vesting outcomes over the performance periods.
Performance period

1 Jan 2009 – 31 Dec 2011
1 Jan 2010 – 31 Dec 2012
1
2

Vesting date

Admiral EPS index

LIBOR index

Outperformance

April 2012
April 2013

149 points
161 points

103 points
102 points

46 points
59 points% vesting Value for CFO (£000)

100%
100%

£530,7101£533,3912

Calculated based on number of shares vesting in April 2012 (45,009) multiplied by the share price at the vesting date (£11.79).
Calculated based on the number of shares vesting in April (and December) 2013 (48,010) multiplied by the average share price over the final three months of 2012 (£11.11).

DFSS bonus
The Group pays a bonus to all holders of DFSS shares. The bonus equates to the dividend payable on an equivalent
number of the ordinary shares of the Group. The Committee continues to feel that having a Group-wide bonus
equivalent to the dividend flow received by investors further aligns the incentive structure with shareholders.
In 2012, Kevin Chidwick received a DFSS bonus of £122,612 (2011: £106,692).
Free Share Incentive Plan (SIP)The SIP is available to all UK staff (Henry Engelhardt and David Stevens have declined to be included in the plan).
The maximum annual award under the SIP is £3,000 per employee. Shares awarded under the SIP are forfeited if
the employee leaves within three years of the award. Awards are made twice a year, based on the results of eachhalf-year. Overseas staff receive an award under the Discretionary Free Share Scheme equivalent to the SIP award
made to UK employees.
Dilution
The Company has controls in place to ensure that shares awarded under the schemes operated by the Company
within any rolling ten year period do not exceed 10% of the number of ordinary shares in the capital of the Company
in issue at the time of each award.
Total Shareholdings of Directors
Executive Directors have agreed to (acquire and) retain a beneficial shareholding equal to at least 100% of base salary,which can be built up over a period of five years from the date of appointment.
As at March 2013, the Directors have the following shareholdings:
Shares held

Henry Engelhardt
Kevin Chidwick
David Stevens
Alastair Lyons
Roger Abravanel
Manfred Aldag
Annette Court
Colin Holmes
Martin Jackson
Margaret Johnson
John Sussens

BeneficiallyOwnedoutright

Subject toperformance
conditions

37,005,472
83,926
10,631,950
492,152–
1,919–
40,000––80,000–150,260
–
–
–
–
–
–
–
–
–

55

Admiral Group plc
Annual Report 2012

Votes

Overview

Shareholder context
The table below shows the advisory vote on the 2012 Remuneration Report at the April 2012 AGM relating to thefinancial year 2011.
For

AgainstAbstentions

97.67%

1.88%

0.45%

This section contains information that will be required for the 2012 DRR under current regulations, but which will nolonger be required for the 2013 Directors’ Remuneration Report.
Directors’ Remuneration – Audited
Remuneration for the year ended 31 December 2012 was as follows:
Benefits

2012
Total

2011
Total

£424,725£373,212£350,175£122,612––£269,512£547£512£816,849£373,759£350,687£517,000£358,000£336,000£218,400£50,000£6,000£74,000£70,000£70,000£38,167£62,000£50,000£72,000£1,858,679

–
–
–
–
–
–
–
–
–
–
£122,612

–
–
–
–
–
–
–
–
–
–
£270,571£218,400£50,000£6,000£74,000£70,000£70,000£38,167£62,000£50,000£72,000£2,251,862£210,000–£6,000–£64,000£70,000£104,000£62,000£50,000£64,000£1,841,000

Governance

Bonuses

Performance

Executive Directors
Kevin Chidwick*1
Henry Engelhardt
David Stevens
Chairman and Non-Executive Directors
Alastair Lyons
Roger Abravanel
Manfred Aldag
Annette Court
Colin Holmes
Martin Jackson
Keith James*2
Margaret Johnson
Lucy Kellaway
John Sussens
TotalsBase salaryand fees*1	Kevin Chidwick received bonuses of £122,612 in lieu of dividends on shares awarded (but not yet vested) under the Group’s DFSS bonus plan (consistent with all DFSS
scheme participants). He also received £260,000 in January 2012 to reimburse him for expenses incurred in relation to his relocation to the USA.
*2	Keith James stepped down from the Board at the AGM in April 2012. His fees include £7,500 for chairing the Board of Admiral Insurance Company Limited, £15,000 for
chairing the Board of Inspop.com Limited and £15,000 for chairing the Group’s International Price Comparison Board.

Financial statements
Other information

56

Admiral Group plc
Annual Report 2012

Directors’ Remuneration Report continued

Awards to Kevin Chidwick under the DFSS and SIP:

Type

DFSS
DFSS
DFSS
DFSS
DFSS
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP

At startof yearAwardedduring year

Vested/maturedduring year

At endof yearPrice ataward (£)

45,00945,0103,000
50,000
–
171
140
121
100
90
110
–
–

–
–
–
–
52,250
–
–
–
–
–
–
128
126

45,009
–
–
–
–
171
140
–
–
–
–
–
–

–
45,0103,000
50,00052,250
–
–
121
100
90
110
128
126

£8.89
£13.29£15.51£16.39£10.73£8.74£10.67£12.36£14.90£16.78£13.52£11.80£11.82

Value ataward date(£)

Value at31/12/12
or maturity
(£)

Final
vesting/maturitydate

Date ofaward£400,130 £530,710 13/04/2009 13/04/2012£598,182 £522,116 30/04/2010 30/04/2013£46,530 £34,800 15/12/2010 15/12/2013£819,500 £580,000 15/04/2011 15/04/2014£560,643 £606,100 11/10/2012 11/10/2015£1,494£2,679 06/03/2009 06/03/2012£1,494£2,479 28/08/2009 28/08/2012£1,495£1,404 05/03/2010 05/03/2013£1,490£1,160 27/08/2010 27/08/2013£1,510£1,044 08/03/2011 08/03/2014£1,487£1,276 05/09/2011 05/09/2014£1,510£1,485 16/03/2012 16/03/2015£1,489
£1,462 03/09/2012 03/09/2015

The closing price of Admiral shares on 31 December 2012 was £11.60 per share.
*	100% of the DFSS award made in April 2009 vested during 2012. The earnings per share index for the performance period (2009 to 2011 years, inclusive) was 149 points,
compared to the LIBOR index for the same period of 108 (outperformance of 41 points). 10% of the award is achieved for meeting LIBOR, with a further 2.5% for eachpoint of outperformance (up to a maximum of 100%).

Total Shareholder Return (TSR)
The following graph sets out a comparison of Total Shareholder Return for Admiral Group plc shares with that of the
FTSE 100 Index, of which the Company is a constituent. The graph measures the period from 31 December 2007 up
to 31 December 2012. TSR is defined as the percentage change over the period, assuming reinvestment of income.
The Directors consider this to be the most appropriate index against which the Company should be compared.
200

150

100

50

0
2007

2008

2009

2010

2011

2012

AdmiralFTSE 100
Source: Datastream

Other Directorships
Executive directors are permitted to, although none currently do, accept appointments as Non-Executive Directors ofcompanies with prior approval of the Chairman. Approval will only be given where the appointment does not present
a conflict of interest with the Group’s activities and the wider exposure gained will be beneficial to the developmentof the individual. Where fees are payable in respect of such appointments, these would be passed to the Company.

Admiral Group plc
Annual Report 201257

Independent auditor’s report tothe members of Admiral Group plc

Scope of the audit of the financial statements
A description of the scope of an audit of financial
statements is provided on the Financial Reporting
Council’s website at www.frc.org.uk/auditscopeukprivate

Under the Listing Rules we are required to review:• the Directors’ statement, set out on page 46 in relation
to going concern;• the part of the Corporate Governance Statement on
pages 32 to 37 relating to the Company’s compliancewith the nine provisions of the UK Corporate
Governance Code specified for our review; and• certain elements of the report to shareholders by
the Board on Directors’ remuneration.

5 March 2013

Other information

Salim Tharani(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiff Bay
Cardiff
CF10 4AX

Financial statements

Opinion on financial statements
In our opinion:• the financial statements give a true and fair view ofthe state of the Group’s and of the Parent Company’s
affairs as at 31 December 2012 and of the Group’s
profit for the year then ended;• the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the EU;• the Parent Company financial statements have been
properly prepared in accordance with UK Generally
Accepted Accounting Practice;• the financial statements have been prepared inaccordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.

Under the Companies Act 2006 we are required to report
to you if, in our opinion:• adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit
have not been received from branches not visited byus; or• the Parent Company financial statements and the partof the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records andreturns; or• certain disclosures of Directors’ remuneration
specified by law are not made; or• we have not received all the information andexplanations we require for our audit; or• a Corporate Governance Statement has not been
prepared by the Company.

Governance

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 46, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit, and express an opinion on,
the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.

Matters on which we are required to reportby exception
We have nothing to report in respect of the following:

PerformanceThis report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to themin an auditor’s report and for no other purpose. To thefullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company
and the Company’s members, as a body, for our audit
work, for this report, or for the opinions we have formed.

Opinion on other matters prescribed by theCompanies Act 2006
In our opinion:• the part of the Directors’ Remuneration Report to beaudited has been properly prepared in accordancewith the Companies Act 2006;• the information given in the Directors’ Report for
the financial year for which the financial statements
are prepared is consistent with the financial
statements; and• the information given in the Corporate GovernanceStatement set out on pages 29 to 43 with respect
to internal control and risk management systems
in relation to financial reporting processes andabout share capital structures is consistent withthe financial statements.

Overview

We have audited the financial statements of AdmiralGroup plc for the year ended 31 December 2012 set out
on pages 58 to 93. The financial reporting framework thathas been applied in the preparation of the Group financial
statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU.
The financial reporting framework that has been appliedin the preparation of the Parent Company financial
statements is applicable law and UK AccountingStandards (UK Generally Accepted Accounting Practice).

58

Admiral Group plc
Annual Report 2012

Consolidated Income Statement

Year ended

Note

Insurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue
Other revenue
Profit commission
Investment and interest income
Net revenue
Insurance claims and claims handling expenses
Insurance claims and claims handling expenses recoverable from reinsurers
Net insurance claims
Operating expenses
Share scheme charges
Total expenses
Profit before tax
Taxation expense
Profit after tax

4
6
4
5

7
7
8

31 December
2012£m

31 December
2011£m

1,156.5(657.6)
498.9
361.1
108.4
15.9
984.3
(929.1)524.6(404.5)(214.6)(20.6)(639.7)344.6(86.2)
258.4

959.7(513.9)
445.8
349.0
61.8
13.7
870.3
(785.9)422.1(363.8)(188.8)(18.6)(571.2)299.1(77.8)
221.3

258.4
–

221.2
0.1

258.4

221.3

Profit after tax attributable to:Equity holders of the parent
Non-controlling interests
Earnings per share:
Basic
Diluted

10
10

95.1p
94.9p

81.9p
81.7p

Dividends declared and paid (total)
Dividends declared and paid (per share)

10
10

219.3
81.6p

198.8
74.6p

59

Admiral Group plc
Annual Report 2012

Consolidated Statement ofComprehensive Income

Profit for the period
Other comprehensive income
Exchange differences on translation of foreign operations

31 December
2011
£m

258.4

221.3
(1.0)
(1.0)

Total comprehensive income for the period

255.7

220.3

Total comprehensive income for the period attributable to:Equity holders of the parent
Non-controlling interests

255.9
(0.2)

220.2
0.1

255.7

220.3

Performance

(2.7)
(2.7)

Other comprehensive income for the period, net of income tax

Overview

Year ended
31 December
2012£mGovernance
Financial statements
Other information

60

Admiral Group plc
Annual Report 2012

Consolidated Statementof Financial Position
As at
31 December
2012£m

31 December
2011
£m

9
9
8
4
5, 9
5
5

16.5
92.5
15.2
803.0
55.3
2,005.1
216.6
3,204.2

17.6
87.5
10.3
639.8
52.1
1,583.0224.6
2,614.9

10

0.3
13.1
0.7
443.0

0.3
13.1
3.2
377.3

Total equity attributable to equity holders of the parent
Non-controlling interests

457.1
3.6

393.9
0.5

Total equity

460.7

394.4

1,696.9
1,006.5
40.1

1,333.7
856.6
30.2

Total liabilities

2,743.5

2,220.5

Total equity and total liabilities

3,204.2

2,614.9

Note

ASSETS
Property and equipment
Intangible assets
Deferred income tax
Reinsurance assets
Trade and other receivables
Financial assets
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium account
Other reserves
Retained earnings

LIABILITIESInsurance contracts
Trade and other payables
Current tax liabilities

45, 9

These financial statements were approved by the Board of Directors on 5 March 2013 and were signed on its behalf by:

Kevin Chidwick
Director
Admiral Group plc
Company Number: 03849958

Admiral Group plc
Annual Report 201261

Consolidated Cash Flow Statement

221.3

6.6
4.1
(0.6)
0.6
23.7
363.2
(163.2)
13.1
149.9
86.2
742.0
(441.9)300.1(79.7)
220.4

6.1
3.3
(1.9)
0.9
23.6
527.1
(282.8)(88.4)
292.1
77.8
779.1
(493.9)285.2(95.3)
189.9

Cash flows from investing activities:
Proceeds from investing activities
Purchases of property, equipment and software
Net cash used in investing activities–(10.9)(10.9)

3.9(16.8)(12.9)Cash flows from financing activities:
Non controlling interest capital contribution
Capital element of new finance leases
Repayment of finance lease liabilities
Equity dividends paid
Net cash used in financing activities

4.6
–
(0.1)
(219.3)(214.8)

–
1.0
(0.3)
(198.8)(198.1)

(5.3)
224.6
(2.7)
216.6

(21.1)
246.7
(1.0)
224.6

Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of period

7

10

5

Governance

258.4

Profit after tax
Adjustments for non-cash items:– Depreciation– Amortisation of software– Change in unrealised gains on investments– Other gains and losses– Share scheme charge
Change in gross insurance contract liabilities
Change in reinsurance assets
Change in trade and other receivables, including from policyholders
Change in trade and other payables, including tax and social security
Taxation expense
Cash flows from operating activities, before movements in investments
Net cash flow into investments
Cash flows from operating activities, net of movements in investments
Taxation payments
Net cash flow from operating activities

Performance

31 December
2011£mOverview

31 December
2012
£m

Note

Financial statements
Other information

62

Admiral Group plc
Annual Report 2012

Consolidated Statementof Changes in Equity

At 1 January 2011
Profit for the period
Other comprehensive income
Currency translation differences
Total comprehensive income for the period
Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax charge on share scheme credit
Total transactions with equity-holders
As at 31 December 2011
At 1 January 2012
Profit for the period
Other comprehensive income
Currency translation differences
Total comprehensive income for the period
Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on share scheme credit
Transactions with non-controlling interests
Total transactions with equity-holders
As at 31 December 2012

Share
capital£mSharepremium
account£m

Foreignexchangereserve£m

Retained
profit andloss£mNoncontrollinginterests£m

Total equity
£m

0.3
–

13.1
–

4.2
–

332.7
221.2

0.4
0.1

350.7
221.3

–
–

–
–

(1.0)
(1.0)

–
221.2

–
0.1

(1.0)
220.3

–
–
–
–
0.3

–
–
–
–
13.1

–
–
–
–
3.2

(198.8)23.6(1.4)(176.6)
377.3

–
–
–
–
0.5

(198.8)23.6(1.4)(176.6)
394.4

0.3
–

13.1
–

3.2
–

377.3
258.4

0.5
–

394.4
258.4

–
–

–
–

(2.5)
(2.5)

–
258.4

(0.2)
(0.2)

(2.7)
255.7

–
–
–
–
–
0.3

–
–
–
–
–
13.1

–
–
–
–
–
0.7

(219.3)
23.7
1.5
1.4
(192.7)
443.0

–
–
–
3.3
3.3
3.6

(219.3)
23.7
1.5
4.7
(189.4)460.7

Admiral Group plc
Annual Report 2012

63

Notes to the
Financial Statements

The accounting policies set out in the notes to the financial
statements have, unless otherwise stated, been appliedconsistently to all periods presented in these Groupfinancial statements.

Adoption of new and revised standards
The Group has applied all adopted IFRS andinterpretations endorsed by the EU at 31 December 2012, The financial statements are prepared on the historicalincluding all amendments to extant standards that are not cost basis, except for the revaluation of financial assets
effective until later accounting periods.
classified as at fair value through profit or loss.

None of these standards, amendments to standards
or interpretations of current standards above will havea material impact on the Group’s financial statements
in future periods.

Basis of preparation
The accounts have been prepared on a going concern
basis. In considering the appropriateness of thisassumption, the Board have reviewed the Group’s
projections for the next twelve months and beyond,including cash flow forecasts and regulatory capitalsurpluses. The Group has no debt.

Other information

The Directors have a reasonable expectation thatthe company has adequate resources to continue
in operational existence for the foreseeable future.
Thus they continue to adopt the going concern basis
in preparing the annual financial statements.

The preparation of financial statements in conformity withadopted IFRS requires management to make judgements,
estimates and assumptions that affect the application ofpolicies and reported amounts of assets and liabilities,
income and expenses. The estimates and associatedassumptions are based on historical experience andvarious other factors that are believed to be reasonable
under the circumstances, the results of which form thebasis of making the judgements about carrying valuesof assets and liabilities that are not readily apparent
from other sources. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the year inwhich the estimate is reviewed if this revision affects onlythat year, or in the year of the revision and future years if
the revision affects both current and future years. To theextent that a change in an accounting estimate gives
rise to changes in assets and liabilities, it is recognisedby adjusting the carrying amount of the related asset or
liability in the period of the change.

Financial statements

In addition, none of the standards or interpretations
adopted for the first time in the year have had a material
impact on the consolidated financial results or positionof the Group for the year ended 31 December 2012.

Subsidiaries are entities controlled by the Group.
Control exists when the Group has the power, directly or
indirectly, to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that
control commences until the date that control ceases.

Governance

There are a number of standards, amendments tostandards and interpretations that were issued by
31 December 2012 but have either yet to be endorsedby the EU, or were endorsed shortly after the year end.
These are as follows:• IFRS 9 Financial Instruments• Government Loans (Amendments to IFRS 1)• Improvements to IFRSs 2009-2011• Transition guidance (Amendments to IFRS 10, IFRS 11
and IFRS 12)• Investment entities (Amendments to IFRS 10, IFRS 12
and IAS 27).

Performance

The consolidated financial statements have been
prepared and approved by the Directors in accordancewith International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU). The Company
has elected to prepare its Parent Company financial
statements in accordance with UK Generally Accepted
Accounting Practice (GAAP).

Further information regarding the company’s businessactivities, together with the factors likely to affect its
future development, performance and position, is set
out in the Business Review on pages 11 to 21 Further
information regarding the financial position of thecompany, its cash flows, liquidity position and borrowing
facilities are described in the Business Review on pages 20
to 21. In addition notes 5 and 10 to the financial statements
include the company’s objectives, policies and processes
for managing its capital; its financial risk management
objectives; details of its financial instruments; and its
exposures to credit risk and liquidity risk.

Overview
Overview

1. General information and basis of preparation
General information
Admiral Group plc is a Company incorporated inEngland and Wales. Its registered office is at Capital
Tower, Greyfriars Road, Cardiff CF10 3AZ and its sharesare listed on the London Stock Exchange.

64

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

2. Critical accounting judgements and estimates
Judgements:
In applying the Group’s accounting policies as describedin the notes to the financial statements, management
has primarily applied judgement in the classification of theGroup’s contracts with reinsurers as reinsurance contracts.
A contract is required to transfer significant insurance riskin order to be classified as such. Management reviews
all terms and conditions of each such contract, andif necessary obtains the opinion of an independent
expert at the negotiation stage in order to be able
to make this judgement.
Estimation techniques used in calculation ofclaims provisions:
Estimation techniques are used in the calculation of
the provisions for claims outstanding, which represent
a projection of the ultimate cost of settling claims thathave occurred prior to the balance sheet date andremain unsettled at the balance sheet date.
The key area where these techniques are used relates
to the ultimate cost of reported claims. A secondary
area relates to the emergence of claims that occurredprior to the balance sheet date, but had not beenreported at that date.
The estimates of the ultimate cost of reported claims are
based on the setting of claim provisions on a case-bycase basis, for all but the simplest of claims.
The sum of these provisions are compared with projected
ultimate costs using a variety of different projection
techniques (including incurred and paid chain ladder andan average cost of claim approach) to allow an actuarialassessment of their likely accuracy. They include
allowance for unreported claims.

3. Group consolidation and operating segments
3a Accounting policies(i) Group consolidation
The consolidated financial statements comprise theresults and balances of the Company and its subsidiaries(together referred to as the Group) for the year ended
31 December 2012 and comparative figures for the year
ended 31 December 2011. The financial statements of theCompany’s subsidiaries are consolidated in the Groupfinancial statements. The Company controls 100% of thevoting share capital of all its principal subsidiaries, except
Rastreator.com Limited and Inspop USA LLC. The Parent
Company financial statements present information about
the Company as a separate entity and not about its Group.
In accordance with International Accounting Standard (IAS)
24, transactions or balances between Group companies
that have been eliminated on consolidation are notreported as related party transactions in the consolidated
financial statements.
(ii) Foreign currency translation:
Items included in the financial statements of each of
the Group’s entities are measured using the currencyof the primary economic environment in which the entity
operates (‘the functional currency’). The consolidated
financial statements are presented in millions of pounds
sterling, which is the Group’s presentation currency.
Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains andlosses resulting from the settlement of such transactions,and from the translation at year end exchange rates ofmonetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.

Translation differences on non-monetary items, suchas equities held at fair value through profit or loss, are
The most significant sensitivity in the use of the projection reported as part of the fair value gain or loss.
techniques arises from any future step change in claims
The financial statements of foreign operations whose
costs, which would cause future claim cost inflation tofunctional currency is not pounds sterling are translated
deviate from historic trends. This is most likely to arise
into the Group presentation currency (sterling) as follows:from a change in the regulatory or judicial regime that
• Assets and liabilities for each balance sheet presented
leads to an increase in awards or legal costs for bodily
are translated at the closing rate at the date of thatinjury claims that is significantly above or below thebalance sheet;historical trend.
• Income and expenses for each income statement
are translated at average exchange rates (unless thisThe claims reserves are subject to independent review
average is not a reasonable approximation of theby the Group’s actuarial advisors. Management’s
cumulative effect of the rates prevailing on thereserving policy is to reserve at a level above besttransaction dates, in which case income and expenses
estimate assumptions to allow for unforeseen adverse
are translated at the date of the transaction); andclaims development. For further detail on objectives,• All resulting exchange differences are recognised
policies and procedures for managing insurance risk,
in other comprehensive income and in a separate
refer to note 4 of the financial statements.
component of equity.
Future changes in claims reserves also impact profit
On disposal of a foreign operation, the cumulative
commission income, as the recognition of this income
amount recognised in equity relating to that particular
is dependent on the loss ratio booked in the financial
operation is recognised in the income statement.
statements, and cash receivable is dependent on
actuarial projections of ultimate loss ratios.

65

Admiral Group plc
Annual Report 2012

Overview
Overview

3b Segment reporting
The Group has four reportable segments, as described below. These segments represent the principal split ofbusiness that is regularly reported to the Group’s Board of Directors, which is considered to be the Group’s chief
operating decision maker in line with IFRS 8, Operating Segments.
UK Car Insurance:
The segment consists of the underwriting of car insurance and other products that supplement the car insurance
policy. It also includes the generation of ancillary income from underwriting car insurance in the UK. The Directors
consider the results of these activities to be reportable as one segment as the activities carried out in generating
the income are not independent of each other and are performed as one business. This mirrors the approach taken
in management reporting.

Performance

International Car Insurance:
The segment consists of the underwriting of car insurance and the generation of ancillary income from underwriting
car insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in Italy,
L’olivier Assurances in France and Elephant Auto in the USA. None of these operations are reportable on an individual
basis, based on the threshold requirements in IFRS 8.
Price Comparison:
The segment relates to the Group’s price comparison websites Confused in the UK, Rastreator in Spain and LeLynx
in France. The Group’s price comparison operation in Italy, Chiarezza was sold in 2012. Each of the Price Comparison
businesses are operating in individual geographical segments but are grouped into one reporting segment as
LeLynx and Rastreator do not individually meet the threshold requirements in IFRS 8.

The Group launched a UK Household insurance product at the end of 2012. There are no transactions relating tohousehold insurance within any of the segments reported below.

Governance

Other:The ‘other’ segment is designed to be comprised of all other operating segments that do not meet the thresholdrequirements for individual reporting. Currently there is only one such segment, the Gladiator commercial van
insurance broking operation, and so it is the results and balances of this operation comprises the ‘other’ segment.

Taxes are not allocated across the segments and, as with the corporate activities, are included in the reconciliation
to the Consolidated Income Statement and Consolidated Statement of Financial Position.
An analysis of the Group’s revenue and results for the year ended 31 December 2012, by reportable segment are
shown below. The accounting policies of the reportable segments are consistent with those presented in the notes
to the financial statements for the Group.

Turnover*
Net insurance premium revenue
Other revenue and profit commission
Investment and interest income
Net revenue
Net insurance claims
Expenses
Segment profit/(loss) before tax

International
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total£m

1,936.2
455.6
342.7
13.9
812.2
(355.1)(84.3)
372.8

162.9
43.3
10.8
0.1
54.2
(49.4)(29.3)(24.5)

103.5
–
103.5
–
103.5
–
(85.5)
18.0

12.5
–
12.5
–
12.5
–
(10.0)
2.5

–
–
–
–
–
–
–
–

2,215.1
498.9
469.5
14.0
982.4
(404.5)(209.1)368.8(26.1)
1.9

Consolidated profit before tax

344.6

Taxation expense(86.2)

Consolidated profit after tax

258.4

Other segment items:
Capital expenditure
Depreciation and Amortisation

6.1
28.8

3.1
26.2

0.9
1.0

*Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers share) and other revenue.

0.1
0.3

–
–

10.2
56.3

Other information

Other central revenue and expenses, including share scheme charges
Interest income

Financial statements

31 December 2012
UK CarInsurance£m66

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

Revenue and results for the corresponding reportable segments for the year ended 31 December 2011 areshown below.
				

Turnover*
Net insurance premium revenue
Other revenue and profit commission
Investment and interest income
Net revenue
Net insurance claims
Expenses
Segment profit/(loss) before tax

31 December 2011

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations£m

1,966.0
418.6
299.0
10.6
728.2
(335.5)(79.1)
313.6

122.2
27.2
9.7
0.2
37.1
(28.3)(18.3)
(9.5)

90.4
–
90.4
–
90.4
–
(79.9)
10.5

11.7
–
11.7
–
11.7
–
(8.9)
2.8

–
–
–
–
–
–
–
–

Other central revenue and expenses, including share scheme charges
Interest income

Segment
total£m2,190.3
445.8
410.8
10.8
867.4
(363.8)(186.2)317.4(21.2)
2.9

Consolidated profit before tax

299.1

Taxation expense(77.8)

Consolidated profit after tax

221.3

Other segment items:
Capital expenditure
Depreciation and amortisation

12.4
37.8

2.9
11.8

1.1
1.2

0.4
0.3

–
–

16.8
51.1

*Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers share) and other revenue.

Segment revenues
The UK and International Car Insurance reportable segments derive all insurance premium income from external
policyholders. Revenue within these segments is not derived from an individual policyholder that represents 10%
or more of the Group’s total revenue.
The total of Price Comparison revenues from transactions with other reportable segments is £13.0m (2011: £14.9m).
These amounts have not been eliminated on consolidation as the Directors consider that not doing so results in abetter overall presentation of the financial statements. The impact on the financial statements in the current andprior period is not material. There are no other transactions between reportable segments.
Within the UK Car Insurance segment, transactions between the Group’s intermediary and the Group’s insurancecompanies relating to vehicle commission totalling £7.0m have not been eliminated (from the insurance expenses andother revenue lines in the income statement) in order to ensure consistency between the financial statements and key
performance indicators quoted in the business review. There is no profit impact of the non-elimination.
Revenues from external customers for products and services is consistent with the split of reportable segment
revenues as shown above.
Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country are shown within theInternational Car Insurance reportable segment shown above. The revenue and results of the two International Price
Comparison businesses, Rastreator and LeLynx are not yet material enough to be presented as a separate segment.

Admiral Group plc
Annual Report 2012

67

				
International
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total
£m

11.6
77.6
717.1
98.7
1833.2125.0
2,863.2
1,543.0961.8
2,504.8
358.4

2.8
13.8
85.9
(20.6)
97.3
50.2
229.4
153.9
31.9
185.8
43.6

1.7
1.0
–
9.1
–
25.4
37.2
–
6.5
6.5
30.7

0.4
0.1
–
9.5
–
5.6
15.6
–
6.3
6.3
9.3

–
–
–
(41.4)––(41.4)–––(41.4)

16.5
92.5
803.0
55.3
1,930.5
206.2
3,104.0
1,696.9
1,006.5
2,703.4
400.6

Unallocated assets and liabilities

60.1

Consolidated net assets

460.7

Performance

Property and equipment
Intangible assets
Reinsurance assets
Trade and other receivables
Financial assets
Cash and cash equivalents
Reportable segment assets
Insurance contract liabilities
Trade and other payables
Reportable segment liabilities
Reportable segment net assets

31 December 2012

UK CarInsurance£m

Overview
Overview

Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December 2012 are as follows.

Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation
tax balances. These assets and liabilities are not regularly reviewed by the Board of Directors in the reportablesegment format.

Eliminations represent inter-segment funding and balances included in trade and other receivables.

Governance

There is an asymmetrical allocation of assets and income to the reportable segments, in that the interest earned on
cash and cash equivalent assets deployed in the UK Car Insurance, Price Comparison and International Car Insurance
segments is not allocated in arriving at segment profits. This is consistent with regular management reporting.

The segment assets and liabilities at 31 December 2011 are as follows.
				International
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total
£m

12.1
78.4
570.3
118.7
1,464.8
117.8
2,362.1
1,215.4
816.1
2,031.5
330.6

3.1
8.5
69.5
(5.5)
83.2
38.9
197.7
118.3
28.3
146.5
51.2

1.8
0.5
–
(0.2)
–
8.8
10.8
–
6.6
6.6
4.2

0.6
0.1
–
9.0
–
4.4
14.1
–
5.6
5.6
8.5

–
–
–
(69.9)––(69.9)–––(69.9)

17.6
87.5
639.8
52.1
1,548.0
169.9
2,514.8
1,333.7856.6
2,190.2
324.6

Unallocated assets and liabilities

69.8

Consolidated net assets

394.4

Financial statements

Property and equipment
Intangible assets
Reinsurance assets
Trade and other receivables
Financial assets
Cash and cash equivalents
Reportable segment assets
Insurance contract liabilities
Trade and other payables
Reportable segment liabilities
Reportable segment net assets

31 December 2011

UK CarInsurance£m

Other information

68

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

4. Premium, Claims and Profit Commissions
4a Accounting policies(i) Revenue recognition – premiums:
Premiums relating to insurance contracts are recognised
as revenue proportionally over the period of cover.
Premiums with an inception date after the end of
the period are held in the statement of financial
position as deferred revenue. Outstanding
collections from policyholders are recognised
within policyholder receivables.

Adjustments to the amounts of claims provisions
established in prior years are reflected in the income
statement for the period in which the adjustments are
made and disclosed separately if material. The methods
used, and the estimates made, are reviewed regularly.

(ii) Revenue recognition – profit commission:
Under some of the co-insurance and reinsurance
contracts under which motor premiums are shared orceded, profit commission may be earned on a particular
year of account, which is usually subject to performance
criteria such as loss ratios and expense ratios. The
commission is dependent on the ultimate outcome ofany year, with revenue being recognised when loss andexpense ratios used in the preparation of the financial
statements, move below an agreed threshold.

• Co-insurance
The Group has entered into certain co-insurance
contracts under which insurance risks are shared ona proportional basis, with the co-insurer taking a
specific percentage of premium written and being
responsible for the same proportion of each claim.
As the contractual liability is several and not joint,neither the premiums nor claims relating to theco‑insurance are included in the income statement.
Under the terms of these agreements the co-insurers
reimburse the Group for the same proportionate
share of the costs of acquiring and administering
the business.

(iii) Insurance contracts and reinsurance assets:• Premiums
The proportion of premium receivable on in-force
policies relating to unexpired risks is reported ininsurance contract liabilities and reinsurance assets
as the unearned premium provision – gross andreinsurers’ share respectively.
• Claims
Claims and claims handling expenses are charged
as incurred, based on the estimated direct andindirect costs of settling all liabilities arising on
events occurring up to the balance sheet date.
The provision for claims outstanding comprises provisions
for the estimated cost of settling all claims incurred but
unpaid at the balance sheet date, whether reported ornot. Anticipated reinsurance recoveries are disclosed
separately as assets.
Whilst the Directors consider that the gross provisions
for claims and the related reinsurance recoveries are fairly
stated on the basis of the information currently available
to them, the ultimate liability will vary as a result ofsubsequent information and events and may result insignificant adjustments to the amounts provided.

Provision for unexpired risks is made where necessary forthe estimated amount required over and above unearned
premiums (net of deferred acquisition costs) to meet
future claims and related expenses.

• Reinsurance assets
Contracts entered into by the Group with reinsurers
under which the Group is compensated for losseson the insurance contracts issued by the Group areclassified as reinsurance contracts. A contract is only
accounted for as a reinsurance contract where there issignificant insurance risk transfer between the insured
and the insurer.
The benefits to which the Group is entitled underthese contracts are held as reinsurance assets.
The Group assesses its reinsurance assets for
impairment on a regular basis, and in detail every
six months. If there is objective evidence that theasset is impaired, then the carrying value will be
written down to its recoverable amount.

69

Admiral Group plc
Annual Report 2012

Total motor insurance premiums written before co-insuranceGroup gross premiums written after co-insurance
Outwards reinsurance premiums
Net insurance premiums written
Change in gross unearned premium provision
Change in reinsurers’ share of unearned premium provision
Net insurance premium revenue

31 December
2012£m

31 December
2011£m

1,897.2
1,167.2(679.1)488.1(10.7)
21.5
498.9

1,841.3
1,128.4(622.0)506.4(168.7)
108.1
445.8

4c Profit commission
31 December
2011
£m

(2.3)
9.4
98.1
3.2
108.4

2.3
46.8
12.7
–
61.8

4d Reinsurance assets and insurance contract liabilities(i) Objectives, policies and procedures for the management of insurance risk:
The Group is involved in issuing motor insurance contracts that transfer risk from policyholders to the Group andits underwriting partners.

Governance

Underwriting year:
2009 and prior
2010
2011
2012
Total profit commission

31 December
2012£mPerformance

The Group’s share of the car insurance business was underwritten by Admiral Insurance (Gibraltar) Limited, Admiral
Insurance Company Limited and Elephant Insurance Company. All contracts are short-term in duration, lasting for
10 or 12 months.

Overview
Overview

4b Net insurance premium revenue

Insurance risk primarily involves uncertainty over the occurrence, amount or timing of claims arising on insurance
contracts issued.

The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 5,
it has delegated the task of supervising risk management to the Group Risk Committee.
The Board implements certain policies in order to mitigate and control the level of insurance risk acceptedby the Group. These include underwriting partnership arrangements, pricing policies and claims management
and administration policies.

Financial statements

The key reserving risk is that the frequency and/or value of the claims arising exceeds expectation and the valueof insurance liabilities established.

Other information

70

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

A number of the key elements of these policies and procedures are detailed below:• Co-insurance and reinsurance:
As noted in the business review, the Group cedes a significant amount of the motor insurance business generated
to external underwriters. In 2012, 40% of the UK risk was shared under a co-insurance contract, under which theprimary risk is borne by the co-insurer. A further 35% of the UK risk was ceded under quota share reinsurance
contracts. Co-insurance and reinsurance contracts are also used in the International car insurance businesses.
Further detail can be found in the business review on page 13 and 17.
 s well as these proportional arrangements, an excess of loss reinsurance programme is also purchased to protect
A
the Group against very large individual claims and catastrophe losses.
• Data driven pricing:
The Group’s underwriting philosophy is focused on a sophisticated data-driven approach to pricing and underwriting
and on exploiting the competitive advantages direct insurers enjoy over traditional insurers through:– Collating and analysing more comprehensive data from customers;– Tight control over the pricing guidelines in order to target profitable business sectors; and– Fast and flexible responsiveness to data analysis and market trends.
The Group is committed to establishing premium rates that appropriately price the underwriting risk and exposure.
Rates are set utilising a larger than average number of underwriting criteria.
The Directors believe that there is a strong link between the increase in depth of data that the Group has been able
to collate over time and the lower than average historic reported loss ratios enjoyed by the Group.
• Effective claims management:
The Group adopts various claims management strategies designed to ensure that claims are paid at an appropriate
level and to minimise the expenses associated with claims management. These include:–	An effective, computerised workflow system (which along with the appropriate level of resources employed helps
reduce the scope for error and avoids significant backlogs);–	Use of an outbound telephone team to contact third parties aiming to minimise the potential claims costs and toensure that more third parties utilise the Group approved repairers; and– Use of sophisticated and innovative methods to check for fraudulent claims.
Concentration of insurance risk:
The Directors do not believe there are significant concentrations of insurance risk. This is because, although the Grouphas historically written only one line of insurance business, the risks are spread across a large number of people and awide regional base.

Admiral Group plc
Annual Report 2012

71

Overview
Overview(ii) Sensitivity of recognised amounts to changes in assumptions:
The following table sets out the impact on equity and profit or loss at 31 December 2012 that would result from a 1 percent movement in the UK loss ratios used for each underwriting year for which material amounts remain outstanding.
Underwriting year

Booked loss ratio
Impact of 1% change (£m)

2009

2010

2011

2012

77%
5.3

75%
8.3

76%
12.0

84%
6.0

The impact is stated net of reinsurance and includes the change in net insurance claims along with the associatedprofit commission movements that result from changes in loss ratios. The figures are stated net of tax at thecurrent rate.

31 December
2011£mGross:
Claims outstanding
Unearned premium provision
Total gross insurance liabilities

1,147.7
549.2
1,696.9

781.1
552.6
1,333.7

Recoverable from reinsurers:
Claims outstanding
Unearned premium provision
Total reinsurers’ share of insurance liabilities

487.3
315.7
803.0

334.2
305.6
639.8

Net:
Claims outstanding
Unearned premium provision
Total insurance liabilities – net

660.4
233.5
893.3

446.9
247.0
693.9

< 1 Year£m

1 – 3 years£m> 3 years
£m

344.1
549.2
893.3

391.7
–
391.7

411.9
–
411.9

< 1 Year£m

1 – 3 years£m> 3 years
£m

234.3
552.6
786.9

266.6
–
266.6

280.2
–
280.2

Governance

31 December
2012£mPerformance(iii) Analysis of recognised amounts:

The maturity profile of gross insurance liabilities at the end of 2012 is as follows:

The maturity profile of gross insurance liabilities at the end of 2011 was as follows:

Claims outstanding
Unearned premium provision
Total gross insurance liabilities

Financial statements

Claims outstanding
Unearned premium provision
Total gross insurance liabilities

Other information

72

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued(iv) Analysis of UK claims incurred:
The following tables illustrate the development of net UK Car Insurance claims incurred for the past four financial
periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first tableshows actual net claims incurred, and the second shows the development of UK loss ratios. Figures are shown netof reinsurance and are on an underwriting year basis.
Financial year ended 31 December
2009

2010

2011

2012

Total

£m

£m

£m

£m

£m

Underwriting year (UK only):2009 and earlier
2010
2011
2012

(132.4)–––(53.9)(130.2)––8.7(128.6)(203.7)
–

(5.5)
8.4
(151.1)(191.3)(250.3)(354.8)(191.3)UK net claims incurred (excluding claims handling costs)
International net claims incurred(132.4)(13.6)(184.1)(15.9)(323.6)(28.3)(339.5)(54.2)

Analysis of claims incurred (Net amounts):

Claims handling costs and other amounts
Total net claims incurred

(5.7)

(8.5)

(11.9)(10.8)(151.7)(208.5)(363.8)(404.5)

Financial year ended 31 December

UK loss ratio development:

Underwriting year (UK only):
2007
2008
2009
2010

2009
£m

2010
£m

2011
£m

2012
£m

72%
79%
84%

70%
74%
75%
78%

69%
72%
77%
77%

69%
73%
77%
75%

82%

76%
84%

2011
2012

(v) Analysis of net claims provision releases (UK business only):
The following table analyses the impact of movements in prior year claims provisions, in terms of their net value, andtheir impact on the reported loss ratio. This data is presented on an underwriting year basis.
Financial year ended 31 December
2009
£m

2010
£m

2011
£m

2012
£m

Underwriting year:
2009 and prior
2010
2011
Total net release

31.3
–
–
31.3

23.5
–
–
23.5

8.7
1.6
–
10.3

(5.5)
8.4
14.7
17.6

Net releases on Admiral net share1
Releases on commuted quota share reinsurance contracts1
Total net release as above

31.3
–
31.3

23.1
0.4
23.5

7.8
2.5
10.3

16.3
1.3
17.6

1	Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24 or 36 months following the start of the underwriting year.
After commutation, any changes in claims costs on the commuted proportion of the business are reflected within claims costs and are separately analysed here.

73

Admiral Group plc
Annual Report 2012

Net claims provision at start of period
Net claims incurred
Movement in net claims provision due to commutation
Net claims paid
Net claims provision at end of period

31
December
2012
£m

31
December
2011
£m

446.9
393.7
102.2
(282.4)
660.4

269.0
351.9
44.0
(218.0)446.9

31December
2012
£m

31
December
2011
£m

247.0
488.1
(501.6)
233.5

180.6
506.4
(440.0)247.0

Overview
Overview(vi) Reconciliation of movement in net claims provision:(vii) Reconciliation of movement in net unearned premium provision:(ii) Financial assets – investments and receivables:• Initial recognition
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans
and receivables or held to maturity investments. At initial recognition assets are recognised at fair value andclassified according to the purpose for which they were acquired.

Governance

5. Investments
5a Accounting policies(i) Investment income:Investment income from financial assets comprises interest income and net gains (both realised and unrealised)on financial assets classified as fair value through profit and loss and interest income on held to maturity deposits.

Performance

Net unearned premium provision at start of period
Written in the period
Earned in the period
Net unearned premium provision at end of period

The Group’s investments in money market liquidity funds are designated as financial assets at fair value throughprofit or loss (FVTPL) at inception.
This designation is permitted under IAS 39, as the investments in money market funds are managed as a groupof assets and internal performance evaluation of this group is conducted on a fair value basis.

• Subsequent measurement
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised through theincome statement.
Deposits with fixed maturities, classified as held to maturity investments are measured at amortised cost using
the effective interest method. Movements in the amortised cost are recognised through the income statement,
as are any impairment losses.

Other information

Loans and receivables are stated at their amortised cost less impairment using the effective interest method.
Impairment losses are recognised through the income statement.

Financial statements

The Group’s deposits with credit institutions are classified as held to maturity investments, which is consistent
with the intention for which they were purchased.

74

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued• Impairment of financial assets
The Group assesses at each balance sheet date whether any financial assets or groups of financial assets heldat amortised cost, are impaired. Financial assets are impaired where there is evidence that one or more eventsoccurring after the initial recognition of the asset, may lead to a reduction in the estimated future cash flows
arising from the asset.
Objective evidence of impairment may include default on cash flows due from the asset and reported financial
difficulty of the issuer or counterparty.
• Derecognition of financial assets
A financial asset is derecognised when the rights to receive cash flows from that asset have expired or when theGroup transfers the asset and all the attaching substantial risks and rewards relating to the asset, to a third party.
(iii) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term deposits
with original maturities of three months or less. All cash and cash equivalents are measured at amortised cost.
5b Investment and interest income

Net investment return
Interest receivable
Total investment and interest income

31 December
2012£m

31 December
2011
£m

14.0
1.9
15.9

10.8
2.9
13.7

31 December
2012£m

31 December
2011£m1,025.4
375.8
200.4
403.5
2,005.1
55.3
216.6

862.1
297.0
–
423.9
1,583.0
52.1
224.6

2,277.0

1,859.7

1,006.5

856.6

Interest received during the year was £1.9m (2011: £2.9m).
5c Financial assets and liabilities
The Group’s financial instruments can be analysed as follows:

Financial assets:
Investments held at fair value
Held to maturity deposits with credit institutions
Held to maturity short dated debt securities
Receivables – amounts owed by policyholders
Total financial assets per consolidated statement of financial position
Trade and other receivables
Cash and cash equivalents
Financial liabilities:
Trade and other payables

All investments held at fair value are invested in AAA-rated money market liquidity funds. These funds target a shortterm cash return with capital security and low volatility and continue to achieve these goals.
The approximate fair value of held to maturity deposits plus short dated debt securities is £562.8m (2011: £280.8m)
based on a calculation to discount expected cashflows arising at the Group’s weighted average cost of capital(WACC). The amortised cost carrying amount of receivables is a reasonable approximation of fair value.

75

Admiral Group plc
Annual Report 2012

Financial assets:
Investments held at fair value
Held to maturity deposits with credit institutions
Held to maturity short dated debt securities
Receivables – amounts owed by policyholders
Total financial assets
Trade and other receivables
Cash and cash equivalents< 1 Year£m

Between 1
and 2 years£m> 2 Years£m

1,025.4–––
1,025.4
–
216.6

–
213.8
200.4
403.5
817.7
55.3
–

–
162.0
–
–
162.0
–
–

–
–
–
–
–
–
–

1,242.0

873.0

162.0

–

–

1,006.5––

On demand£m< 1 Year£m

Between 1
and 2 years£m> 2 Years
£m

862.1
–
–
862.1
–
224.6

–
175.3
423.9
599.2
52.1
–

–
79.2
–
79.2
–
–

–
42.5
–
42.5
–
–

1,086.7

651.3

79.2

42.5

–

856.6

–

–

Performance

Financial liabilities:
Trade and other payables

On demand£m

Overview
Overview

The maturity profile of financial assets and liabilities at 31 December 2012 is as follows:

The maturity profile of financial assets and liabilities at 31 December 2011 was as follows:

Financial liabilities:
Trade and other payables

There are several key elements to the risk management environment throughout the Group. These are detailed infull in the Corporate Governance statement. Specific considerations for the risks arising from financial assets andliabilities are detailed below.
• Credit risk
The Group defines credit risk as the risk of loss if another party fails to perform its obligations. The key areas of
exposure to credit risk for the Group result through its reinsurance programme, investments, bank deposits andpolicyholder receivables.

There are no specific concentrations of credit risk with respect to investment counterparties due to the structureof the liquidity funds which invest in a wide range of very short duration, high quality securities. Cash balances anddeposits are placed only with highly rated credit institutions. The detailed holdings are reviewed regularly by theInvestment Committee.

Other information

Economic and financial market conditions have led the Directors to consider counterparty exposure more frequently
and in significant detail. The Directors consider that the policies and procedures in place to manage credit exposure
continue to be appropriate for the Group’s risk appetite, and during 2012 and historically no material credit losses
have been experienced by the Group.

Financial statements

Objectives, policies and procedures for managing financial assets and liabilities
The Group’s activities expose it primarily to financial risks of credit risk, interest rate risk, liquidity risk and foreignexchange risk. The Board of Directors has delegated the task of supervising risk management and internal control
to the Risk Committee. There is also an Investment Committee that makes recommendations to the Board on theGroup’s investment strategy.

Governance

Financial assets:
Investments held at fair value
Held to maturity deposits with credit institutions
Receivables – amounts owed by policyholders
Total financial assets
Trade and other receivables
Cash and cash equivalents

76

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions),
the Group only conducts business with companies of appropriate financial strength. In addition, most reinsurance
contracts are operated on a funds withheld basis, which substantially reduces credit risk, as the Group holds the
cash received as collateral.
The other principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential
for default by instalment payers. The impact of this is mitigated by the large customer base and low average levelof balance recoverable. There is also mitigation by the operation of numerous high- and low- level controls in this area,
including payment on policy acceptance as opposed to inception and automated cancellation procedures for policies
in default.
The Group’s maximum exposure to credit risk at 31 December 2012 is £2,221.7m (2011: £1,807.6m) being the carrying
value of financial assets and cash. The Group does not use credit derivatives or similar instruments to mitigate
exposure. The amount of bad debt expense relating to policyholder debt charged to the income statement in2011 and 2012 is insignificant.
There were no significant financial assets that were past due at the close of either 2012 or 2011.
The Group’s credit risk exposure to assets with external ratings is as follows:

Financial institutions – Money market funds
Financial institutions – Credit institutions
Financial institutions – Credit institutions
Financial institutions – Credit institutions
Financial institutions – Credit institutions
Reinsurers
Reinsurers
Reinsurers

Rating31 December
2012£m

31 December
2011
£m

AAA
AAA
AA
A
BBB
AA
A
BBB

1,025.4
60.1
169.2
506.4
57.1
117.8
196.3
6.5

862.1
–
178.2
98.0
20.8
–
88.3
–

• Interest rate risk
The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely
impact on the capital values of financial assets and liabilities. This relates primarily to investments held at fair value.
As noted above, the Group invests in money market liquidity funds, which in turn invest in a mixture of very short
dated fixed and variable rate securities, such as cash deposits, certificates of deposits, floating rate notes and othercommercial paper.
The funds are not permitted to have an average maturity greater than 60 days and hence are not subject to large
movements in yield and value resulting from changes in market interest rates (as longer duration fixed income
portfolios can experience). Returns are likely to closely track the LIBID benchmark and hence while the Group’s
investment return will vary according to market interest rates, the capital value of these investment funds will not
be impacted by rate movements. The interest rate risk arising is therefore considered to be minimal.
During the year the Group has placed funds into two segregated mandates. The guidelines of the investments
retain the credit quality of the money market liquidity funds, whilst holding the securities on a hold to maturity
basis. As the duration of the securities is short there is no material interest rate risk relating to these investments.
The Group also holds a number of fixed rate, longer-term deposits with strongly rated credit institutions. These areclassified as held to maturity and valued at amortised cost. Therefore neither the capital value of the deposits, or theinterest return will be impacted by fluctuations in interest rates.
No sensitivity analysis to interest rates has been presented on the grounds of materiality.

77

Admiral Group plc
Annual Report 2012

Overview
Overview• Liquidity risk
Liquidity risk is defined as the risk that the Group does not have sufficient, available, financial resources to enable it
to meet its obligations as they fall due, or can only secure them at excessive cost.
The Group is strongly cash-generative due to the large proportion of revenue arising from non-underwriting activity.
Further, as noted above, a significant portion of insurance funds are invested in money market liquidity funds withsame day liquidity, meaning that a large proportion of the Group cash and investments are immediately available.
A breakdown of the Group’s financial liabilities – trade and other payables is shown in note 9. In terms of the maturity
profile of these liabilities, all amounts will mature within 3 – 6 months of the balance sheet date. (Refer to the maturity
profile at the start of this note for further detail.)

A maturity analysis for insurance contract liabilities is included in note 4.

Performance

In practice, the Group’s Directors expect actual cash flows to be consistent with this maturity profile except for
amounts owed to co-insurers and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £723.5m(2011: £579.4m), £609.6m (2011: £432.9m) is held under funds withheld arrangements and therefore not expected
to be settled within 12 months.

The maturity profile for financial assets is included at the start of this note. The Group’s Directors believe that the
cash flows arising from these assets will be consistent with this profile.
Liquidity risk is not, therefore considered to be significant.

The Group is exposed to foreign exchange risk through its expanding operations overseas. Although the relative
size of the European and International operations means that the risks are relatively small, increasingly volatile foreignexchange rates could result in larger potential gains or losses. Assets held to fund insurance liabilities are held in thecurrency of the liabilities, however surplus assets held as regulatory capital in foreign currencies remain exposed.

Governance• Foreign exchange risks
Foreign exchange risks arise from unfavourable movements in foreign exchange rates that could adversely impact
the valuation of overseas assets.

The Group’s exposures to net assets held in euros and dollars at the balance sheet date were £13.3m and£46.7m respectively.

5d Cash and cash equivalents

Cash at bank and in hand
Total cash and cash equivalents

31 December
2012£m

31 December
2011
£m

216.6
216.6

224.6
224.6

Financial statements

Fair value
For cash at bank and cash deposits, the fair value approximates to the book value due to their short maturity.
For assets held at fair value through profit and loss, their value equates to level 1 (quoted prices in active markets)of the fair value hierarchy.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term deposits withoriginal maturities of three months or less.

Commission from price comparison activities and earned by Gladiator is credited to revenue on the sale of theunderlying insurance policy.

Other information

6. Other Revenue
6a Accounting policy(i) Ancillary and other revenue:
Ancillary and other revenue includes revenue earned on the sale of ancillary products, administration and othercharges paid by the policyholder, referral fees, revenue from policies paid by instalments and vehicle commission
charges paid by co- and reinsurers. Revenue is credited to the income statement over the period matching theGroup’s obligations to provide services. Where the Group has no remaining contractual obligations, the revenue isrecognised immediately. An allowance is made for expected cancellations where the customer may be entitled to arefund of ancillary amounts charged.

78

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

6b Ancillary and other revenue

Ancillary revenue
Price comparison revenue
Other revenue
Total other revenue

31 December
2012£m

31 December
2011
£m

215.7
103.5
41.9
361.1

223.3
90.4
35.3
349.0

Refer to the Business review for further detail on the sources of revenue.
7. Expenses
7a Accounting policies(i) Acquisition costs, reinsurer vehicle commission and operating expenses:
Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over he period
in which those premiums are earned. Vehicle commissions relating to new and renewal business is also recognisedover the period in which those premiums are earned. All other operating expenses are charged to the income
statement in the period that they are incurred.
Insurance contract expenses, which comprise of the acquisition costs, vehicle commissions and operating expenses
referred to above are included in the income statement net of recoveries from co-insurers and reinsurers.
(ii) Employee benefits:
Pensions
The Group contributes to defined contribution personal pension plans for its employees. The contributions payable
to these schemes are charged in the accounting period to which they relate.
Employee share schemes
The Group operates a number of equity settled compensation schemes for its employees. For schemes commencing
1 January 2004 and after, the fair value of the employee services received in exchange for the grant of free shares
under the schemes is recognised as an expense, with a corresponding increase in equity.
The total charge expensed over the vesting period is determined by reference to the fair value of the free shares
granted as determined at the grant date (excluding the impact of non-market vesting conditions). Non-market
conditions such as profitability targets as well as staff attrition rates are included in assumptions over the numberof free shares to vest under the applicable scheme.
At each balance sheet date, the Group revises its assumptions on the number of shares to be granted with the impactof any change in the assumptions recognised through income.
Refer to note 7e for further details on share schemes.
7b Operating expenses and share scheme charges
31 December 2012

Acquisition of insurance contracts
Administration and other marketing costs
Expenses
Share scheme charges
Total expenses and share scheme charges

Insurance
contracts
£m

Other
£m

50.6
26.7
77.3
–
77.3

–
137.3
137.3
20.6
157.9

31 December 2011
Total
£m

Insurance
contracts
£m

Other
£m

Total
£m

50.6
164.0
214.6
20.6
235.2

36.2
26.7
62.9
–
62.9

–
125.9
125.9
18.6
144.5

36.2
152.6
188.8
18.6
207.4

Admiral Group plc
Annual Report 2012

79

Ancillary sales expenses
Price comparison operating expenses
Other expenses
Total

31 December
2012£m

31 December
2011
£m

35.9
85.5
15.9
137.3

33.8
79.9
12.2
125.9

Overview
Overview

Analysis of other administration and other marketing costs:

The £26.7m (2011: £26.7m) administration and marketing costs allocated to insurance contracts is principally made up
of salary costs.

Insurance contract expenses from above
Add: claims handling expenses
Adjusted expenses
Net insurance premium revenue
Reported expense ratio

31 December
2012£m

31 December
2011
£m

77.3
10.8
88.1
498.9
17.7%

62.9
11.9
74.8
445.8
16.8%

31 December
2012£m

31 December
2011
£m

137.1
13.8
1.0
32.5
184.4

114.5
10.3
1.3
30.8
156.9

5.4
1.2

5.4
0.7

4.1
48.0

3.3
41.8

10.5

7.9

–
0.3
0.3
–

–
0.2
0.3
0.8

0.1
0.2
–
0.3

0.1
0.2
–
0.3

Performance

Reconciliation of expenses related to insurance contracts to reported Group expense ratio:

7c Staff costs and other expenses
Included in gross expenses, before co-insurance arrangements, are the following:

Refer to the corporate governance report for details of the Audit Committee’s policy on fees paid to the Company’s
auditor for non-audit services. The ratio of non-audit fees to audit fees in 2012 was 124% (2011: 119%).
The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement.

Other information

Analysis of fees paid to the auditor for other services:
Tax compliance services
Tax advisory services
Other services
Total as above

Financial statements

Depreciation charge:– Owned assets– Leased assets
Amortisation charge:– Software– Deferred acquisition costs
Operating lease rentals:– Buildings
Auditor’s remuneration (including VAT):– Fees payable for the audit of the Company’s annual accounts– Fees payable for the audit of the Company’s subsidiary accounts– Fees payable for other services
Net foreign exchange losses

Governance

Salaries
Social security charges
Pension costs
Share scheme charges (see note 7e)Total staff expenses

80

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

7d Staff numbers (including Directors)
Average for the year
2012
Number

2011
Number

4,991
1,231
6,222

4,264
1,060
5,324

31 December
2012£m

31 December
2011£m

SIP charge (note i)
DFSS charge (note ii)

6.6
14.0

6.0
12.6

Total share scheme charges

20.6

18.6

Direct customer contact staff
Support staff
Total
7e Staff share schemes
Analysis of share scheme costs (per income statement):

The share scheme charges reported above are net of the co-insurer’s share of the cost and therefore differ from thegross charge reported in note 7c (2012: £32.5m, 2011: £30.8m) and the gross credit to reserves reported in the
consolidated statement of changes in equity (2012: £23.7m, 2011: £23.6m).
The consolidated cash flow statement also shows the gross charge in the reconciliation between ‘profit after tax’and ‘cash flows from operating activities’. The co-insurance share of the charge is included in the ‘change in tradeand other payables’ line.
(i) The Approved Share Incentive Plan (the SIP)
Eligible employees qualify for awards under the SIP based upon the performance of the Group in each half-year
period. The current maximum award for each year is £3,000 per employee.
The awards are made with reference to the Group’s performance against prior year profit before tax. Employees mustremain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
The fair value of shares awarded is either the share price at the date of award, or is estimated at the latest share priceavailable when drawing up the financial statements for awards not yet made (and later adjusted to reflect the actual
share price on the award date). Awards under the SIP are entitled to receive dividends, and hence no adjustment has
been made to this fair value.
(ii) The Discretionary Free Share Scheme (the DFSS)
Under the DFSS, details of which are contained in the remuneration policy section of the remuneration report,
individuals receive an award of free shares at no charge. Staff must remain in employment until the vesting datein order to receive shares. The maximum number of shares that can vest relating to the 2012 scheme is 2,149,566(2011 scheme: 1,791,234).
Individual awards are calculated based on the growth in the Company’s earnings per share (EPS) relative to a risk
free return (RFR), for which LIBOR has been selected as a benchmark. This performance is measured over the same
three‑year period.

Admiral Group plc
Annual Report 201281

The range of awards is as follows:• If the growth in EPS is less than the RFR, no awards vest
• EPS growth is equal to RFR – 10% of maximum award vests• To achieve the maximum award, EPS growth has to be 36 points higher than RFR over the three year period.

Overview
Overview

For the 2011 and 2010 schemes, 50% of the shares awarded at the start of the three year vesting period are subject
to these performance conditions.

Between 10% and 100% of the maximum awards, a linear relationship exists.

Number of free share awards committed at 31 December 2012:
Vesting
date

SIP H209 scheme
SIP H110 scheme
SIP H210 scheme
SIP H111 scheme
SIP H211 scheme
SIP H112 scheme
DFSS 2010 scheme 1st award
DFSS 2010 scheme 2nd award
DFSS 2011 scheme 1st award
DFSS 2011 scheme 2nd award
DFSS 2012 scheme 1st award
DFSS 2012 scheme 2nd award

377,641
352,100
346,590
489,170598,528
619,164
1,542,453
121,051
1,634,732
157,312
181,668
1,967,898

March 2013
August 2013
March 2014
September 2014
March 2015
September 2015
April 2013
August 2013
April 2014
September 2014
March 2015
October 2015

Total awards committed

8,388,307

GovernanceAwardsoutstanding(*1)

PerformanceAwards under the DFSS are not eligible for dividends (although a discretionary bonus is currently paid equivalent to
the dividend that would have been paid on the respective shareholding) and hence the fair value of free shares to beawarded under this scheme has been revised downwards to take account of these distributions. The unadjusted fairvalue is based on the share price at the date on which awards were made (as stated in the Remuneration report).

*1 – being the maximum number of awards expected to be made before accounting for expected staff attrition.

Number of free share awards vesting during the year ended 31 December 2012:
OriginalAwardsSIP H208 scheme
SIP H109 scheme
DFSS 2009 scheme, 1st award
DFSS 2009 scheme, 2nd award

Awardsvested477,432 396,549
396,200 340,060
1,313,865 1,166,379
127,020
81,855

Financial statements

During the year ended 31 December 2012, awards under the SIP H208 and H109 schemes and the DFSS 2009 scheme
vested. The total number of awards vesting for each scheme is as follows.

Other information

82

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

8. Taxation
8a Accounting policy
Income tax on the profit or loss for the periods presented comprises current and deferred tax.
(i) Current tax:
Current tax is the expected tax payable on the taxable income for the period, using tax rates that have beenenacted or substantively enacted by the balance sheet date, and includes any adjustment to tax payable inrespect of previous periods.
Current tax related to items recognised in other comprehensive income is also recognised in other comprehensive
income and not in the income statement.
(ii) Deferred tax:
Deferred tax is provided in full using the balance sheet liability method, providing for temporary differences arising
between the carrying amount of assets and liabilities for accounting purposes, and the amounts used for taxation
purposes. It is calculated at the tax rates that have been enacted or substantially enacted by the balance sheet date,or that are expected to apply in the period when the liability is settled or the asset is realised.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised.
The principal temporary differences arise from depreciation of property and equipment and share scheme charges.
The resulting deferred tax is charged or credited in the income statement, except in relation to share scheme charges
where the amount of tax benefit credited to the income statement is limited to an equivalent credit calculated on theaccounting charge. Any excess is recognised directly in equity.
8b Taxation
31 December
2012£m

31 December
2011£mCurrent tax
Corporation tax on profits for the year
Under/(over) provision relating to prior periods
Current tax charge

88.4
1.2
89.6

80.3
(3.2)
77.1

Deferred tax
Current period deferred taxation movement(Over)/under provision relating to prior periods – deferred tax
Total tax charge per income statement

(2.8)
(0.6)
86.2

(0.8)
1.5
77.8

31 December
2012£m

31 December
2011
£m

344.6
84.4
1.4
0.7
(0.4)
0.1
86.2

299.1
79.3
0.1
0.5
(1.7)
(0.4)
77.8

Factors affecting the total tax charge are:Profit before tax
Corporation tax thereon at effective UK corporation tax rate of 24.5% (2011: 26.5%)
Expenses and provisions not deductible for tax purposes
Difference in tax rates
Adjustments relating to prior periods
Other differences
Total tax charge for the period as above

83

Admiral Group plc
Annual Report 2012

Brought forward at start of period
Movement in period
Carried forward at end of period

31 December
2012£m

31 December
2011£m(10.3)(4.9)(15.2)(12.4)
2.1(10.3)

31 December
2012£m

31 December
2011
£m

(3.8)
(1.9)
(5.7)
(3.8)
(15.2)

(3.6)
(1.5)
(2.6)
(2.6)
(10.3)

Overview
Overview

8c Deferred income tax (asset)

The net balance provided at the end of the year is made up as follows:
Analysis of net deferred tax (asset):
PerformanceTax treatment of share scheme charges
Capital allowances
Carried forward losses
Other differences
Deferred tax (asset) at end of period

The UK corporation tax rate reduced from 26% to 24% on 1 April 2012. The average effective rate of tax for 2012 is 24.5%(2011: 26.5%). It will fall to 23% in April 2013, and is expected to fall to 22% in April 2014 although this change has not yet
been substantively enacted. Deferred tax has therefore been calculated at 23% where the temporary difference is
expected to reverse after this date.
Governance

The amount of deferred tax (expense)/income recognised in the income statement for each of the temporary
differences reported above is:Amounts credited/(charged) to income or expense:

Tax treatment of share scheme charges
Capital allowances
Carried forward losses
Other difference
Net deferred tax credited/(charged) to income

31 December
2012£m

31 December
2011
£m

(1.3)
0.4
3.1
1.2
3.4

(1.9)
0.2
1.3
(0.3)
(0.7)
Financial statements

The difference between the total movement in the deferred tax balance above and the amount charged to income
relates to deferred tax on share scheme charges that has been credited directly to equity.

Other information

84

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

9. Other assets and other liabilities
9a Accounting policy(i) Property and equipment, and depreciation
All property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using thestraight-line method to write off the cost less residual values of the assets over their useful economic lives. These
useful economic lives are as follows:
Motor vehicles
Fixtures, fittings and equipment
Computer equipment
Improvements to short leasehold properties

–
–
–
–

4 years
4 years
2 to 4 years
4 years(ii) Impairment of property and equipment:
In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether
there are any indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated andcompared to the carrying value. The carrying value is the higher of the fair value of the asset, less costs to sell and theasset’s value in use. Impairment losses are recognised through the income statement.
(iii) Leased assets:
The rental costs relating to assets held under operating leases are charged to the income statement on a straight-line
basis over the life of the lease.
Leases under the terms of which the Group assumes substantially all of the risks and rewards of ownership areclassed as finance leases. Assets acquired under finance leases are included in property and equipment at fair valueon acquisition and are depreciated in the same manner as equivalent owned assets. Finance lease and hire purchaseobligations are included in creditors, and the finance costs are spread over the periods of the agreements based on
the net amount outstanding.
(iv) Intangible assets:
Goodwill
All business combinations are accounted for using the purchase method. Goodwill has been recognised inacquisitions of subsidiaries, and represents the difference between the cost of the acquisition and the fair valueof the net identifiable assets acquired.
The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not beenreconsidered in preparing the Group’s opening IFRS balance sheet at 1 January 2004 due to the exemption available
in IFRS 1 (First time adoption). In respect of acquisitions prior to 1 January 2004, goodwill is included at the transition
date on the basis of its deemed cost, which represents the amount recorded under UK GAAP, which was tested for
impairment at the transition date. On transition, amortisation of goodwill has ceased as required by IAS 38.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units(CGU’s) according to business segment and is reviewed annually for impairment.
The Goodwill held on the balance sheet at 31 December 2012 is allocated solely to the UK car insurance segment.
Impairment of goodwill
The annual impairment review involves comparing the carrying amount to the estimated recoverable amount(by allocating the goodwill to CGUs) and recognising an impairment loss if the recoverable amount is lower.
Impairment losses are recognised through the income statement and are not subsequently reversed.
The recoverable amount is the greater of the fair value of the asset less costs to sell and the value in use of the CGU.
The value in use calculations use cash flow projections based on financial budgets approved by management coveringa three year period. Cash flows beyond this period are considered, but not included in the calculation. The discountrate applied to the cash flow projections in the value in use calculations is 9.0% (2011: 11.3%), based on the Group’s
weighted average cost of capital, which is in line with the market (source: Bloomberg).

85

Admiral Group plc
Annual Report 2012

Overview
Overview

The key assumptions used in the value in use calculations are those regarding growth rates and expected changes inpricing and expenses incurred during the period. Management estimates growth rates and changes in pricing basedon past practices and expected future changes in the market.
The headroom above the goodwill carrying value is very significant, and there is no foreseeable event that would
eliminate this margin.
Deferred acquisition costs:
Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferredacquisition costs represent the proportion of acquisition costs incurred that corresponds to the unearned premiums
provision at the balance sheet date. This balance is held as an intangible asset. It is amortised over the term of thecontract as premium is earned.

Performance

Software:Purchased software is recognised as an intangible asset and amortised over its expected useful life (generally
between two and four years). The carrying value is reviewed every six months for evidence of impairment, with thevalue being written down if any impairment exists. Impairment may be reversed if conditions subsequently improve.
9b Property and equipment

Furniture andfittings
£m

Total
£m

Cost
At 1 January 2011
Additions
Disposals
At 31 December 2011

5.2
1.5
–
6.7

24.1
4.5
(0.3)
28.3

8.5
2.9
–
11.4

3.4
1.5
–
4.9

41.2
10.4
(0.3)
51.3

Depreciation
At 1 January 2011
Charge for the year
Disposals
At 31 December 2011

3.5
0.9
–
4.4

15.5
3.5
–
19.0

6.0
1.2
–
7.2

2.6
0.5
–
3.1

27.6
6.1
–
33.7

Net book amountAt 1 January 2011

1.7

8.6

2.5

0.8

13.6

Net book amountAt 31 December 2011

2.3

9.3

4.2

1.8

17.6

Cost
At 1 January 2012
Additions
Disposals
At 31 December 2012

6.7
0.6
–
7.3

28.3
3.4
(0.1)
31.6

11.4
1.5
–
12.9

4.9
0.1
–
5.0

51.3
5.6
(0.1)
56.8

Depreciation
At 1 January 2012
Charge for the year
Disposals
At 31 December 2012

4.4
0.9
–
5.3

19.0
3.6
–
22.6

7.2
1.5
–
8.7

3.1
0.6
–
3.7

33.7
6.6
–
40.3

Net book amountAt 31 December 2012

2.0

9.0

4.2

1.3

16.5

Other information

Officeequipment£mFinancial statements

Computerequipment£m

GovernanceImprovements
to short
leaseholdbuildings£m86Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

The net book value of assets held under finance leases is as follows:

Computer equipment

31 December
2012£m

31 December
2011
£m

3.0

2.8

Software
£m

Total
£m

9c Intangible assets
Deferred
Goodwill acquisition costs£m£m

At 1 January 2011
Additions
Amortisation charge
Disposals
At 31 December 2011
Additions
Amortisation charge
Disposals
At 31 December 2012

62.3
–
–
–
62.3
–
–
–
62.3

14.9
43.3
(41.8)–
16.4
51.9(48.0)
–
20.3

5.7
6.4
(3.3)
–
8.8
5.5
(4.1)
(0.3)
9.9

82.9
49.7
(45.1)–
87.5
57.4(52.1)(0.3)
92.5

Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services Limited) in
November 1999. It is allocated solely to the UK Car Insurance segment. As described in the accounting policies, theamortisation of this asset ceased on transition to IFRS on 1 January 2004. All annual impairment reviews since thetransition date have indicated that the estimated recoverable value of the asset is greater than the carrying amount andtherefore no impairment losses have been recognised. Refer to the accounting policy for goodwill for further information.
9d Trade and other receivables

Trade receivables
Prepayments and accrued income
Total trade and other receivables

31 December
2012£m

31 December
2011
£m

54.8
0.5
55.3

51.1
1.0
52.1

31 December
2012£m

31 December
2011
£m

13.0
723.5
0.8
22.9
71.5
174.8
1,006.5

12.1
579.4
0.9
21.9
51.0
191.3
856.6

9e Trade and other payables

Trade payables
Amounts owed to co-insurers and reinsurers
Finance leases due within 12 months
Other taxation and social security liabilities
Other payables
Accruals and deferred income (see below)
Total trade and other payables

Of amounts owed to co-insurers and reinsurers, £609.6m (2011: £432.9m) is held under funds withheld arrangements.
Analysis of accruals and deferred income:Premium receivable in advance of policy inception
Accrued expenses
Deferred income
Total accruals and deferred income as above

31 December
2012£m

31 December
2011
£m

115.4
41.4
18.0
174.8

110.1
55.8
25.4
191.3

87

Admiral Group plc
Annual Report 2012

At 31 December 2012

Less than one year
Between one and five years
More than five years

Minimum
lease
payments£m

Interest
£m

0.8
–
–
0.8

Overview
Overview

9f Obligations under finance leases
Analysis of finance lease liabilities:
At 31 December 2011

Principal£m

Minimum
lease
payments£m

Interest£mPrincipal
£m

–
–
–

0.8
–
–

0.9
–
–

–
–
–

0.9
–
–

–

0.8

0.9

–

0.9

9g Financial commitments
The Group was committed to total minimum obligations under operating leases on land and buildings as follows:

Operating leases expiring

Within one year
Within two to five years
Over five years
Total commitments

31 December
2012£m

31 December
2011
£m

0.2
12.3
15.5
28.0

–
12.0
20.3
32.3

In addition, the Group had entered into contracts at the end of 2012 in relation to the lease and fit-out of new premisesin Cardiff and Newport, which are currently under construction and due for completion in 2014. There were noequivalent contracts in place at the end of 2011.

GovernanceOperating lease payments represent rentals payable by the Group for its office properties.

Performance

The fair value of the Group’s lease obligations approximates to their carrying amount.

10. Share capital
10a Accounting policies(i) Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.
(ii) Dividends
Dividends are recorded in the period in which they are declared and paid.

March 2011 (35.5p per share, paid May 2011)
August 2011 (39.1p per share, paid October 2011)
March 2012 (36.5p per share, paid June 2012)
August 2012 (45.1p per share, paid October 2012)
Total dividends

31 December
2012£m

31 December
2011
£m

–
–
98.0
121.3
219.3

94.5
104.3
–
–
198.8

A final dividend of 45.5p per share (£124.5m) has been proposed in respect of the 2012 financial year. Refer to the
Chairman’s statement and business review for further detail.

Other information

The dividends declared in March represent the final dividends paid in respect of the 2010 and 2011 financial years.
The dividends declared in August are interim distributions in respect of 2011 and 2012.

Financial statements

10b Dividends
Dividends were declared and paid as follows.

88

Admiral Group plc
Annual Report 2012

Notes to the Financial Statements continued

10c Earnings per share

Profit for the financial year after taxation attributable toequity shareholders (£m)
Weighted average number of shares – basic
Unadjusted earnings per share – basic
Weighted average number of shares – diluted			
Unadjusted earnings per share – diluted

31 December
2012£m

31 December
2011
£m

258.4
271,714,535
95.1p
272,403,242
94.9p

221.2
269,903,301
81.9p
270,782,526
81.7p

The difference between the basic and diluted number of shares at the end of 2012 (being 688,707; 2011: 879,225)
relates to awards committed, but not yet issued under the Group’s share schemes. Refer to note 7 for further detail.
10d Share capital
31 December
2012£m

31 December
2011£mAuthorised:
500,000,000 ordinary shares of 0.1p

0.5

0.5

Issued, called up and fully paid:
273,523,594 ordinary shares of 0.1p
270,726,075 ordinary shares of 0.1p

0.3
–

–
0.3

0.3

0.3

During 2012, 2,797,519 (2011: 2,217,350) new ordinary shares of 0.1p were issued to the trusts administering the Group’s
share schemes.
1,177,519 (2011: 717,350) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of thisshare scheme. These shares are entitled to receive dividends.
1,620,000 (2011: 1,500,000) were issued to the Admiral Group Employee Benefit Trust for the purposes of theDiscretionary Free Share Scheme. The Trustees have waived the right to dividend payments, other than to theextent of 0.001p per share, unless and to the extent otherwise directed by the Company from time to time.
10e Objectives, policies and procedures for managing capital
The Group manages its capital to ensure that all entities within the Group are able to continue as going concerns
and also to ensure that regulated entities comfortably meet regulatory requirements. Excess capital above theselevels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis.
The Group’s dividend policy is to make distributions after taking into account capital that is required to be held a)for regulatory purposes; b) to fund expansion activities; and c) as a further prudent buffer against unforeseen events.
This policy gives the Directors flexibility in managing the Group’s capital.
Capital continues to be held in equity form, with no debt.

89

Admiral Group plc
Annual Report 2012

Ordinary

100

England and Wales

Ordinary

100

Admiral Insurance Company Limited England and Wales
Admiral Insurance (Gibraltar) Limited Gibraltar
Able Insurance Services Limited
England and Wales
Inspop.com Limited
England and Wales

Ordinary
Ordinary
Ordinary
Ordinary

100
100
100
100

Elephant Insurance Company
Elephant Insurance Services, LLC
Rastreator.com Limited

Ordinary
Ordinary
Ordinary

100
100
75

Inspop Technologies Private Limited India

Ordinary

100

Inspop.com (France) Limited

England and Wales

Ordinary

100

Inspop.com (Italy) Limited

England and Wales

Ordinary

100

Admiral Syndicate Limited
Admiral Syndicate Management
LimitedAdmiral Life Limited
Bell Direct Limited
Confused.com Limited
Diamond Motor Insurance Services
LimitedElephant Insurance Services Limited
Inspop USA LLC

England and Wales
England and Wales

Ordinary
Ordinary

100
100

England and Wales
England and Wales
England and Wales
England and Wales

Ordinary
Ordinary
Ordinary
Ordinary

100
100
100
100

England and Wales
United States of America

Ordinary
Ordinary

100
78.76%

United States of America

Ordinary

England and Wales
England and Wales

Ordinary
Ordinary

78.76%(Indirect)
100
100

EUI (France) Limited

Comparenow.com Insurance
Agency LLC
Tooley Shelf Company 1 Limited
Tooley Shelf Company 2 Limited

United States of America
United States of America
England and Wales

Principal activity

General insuranceintermediary
General insuranceintermediary
Insurance Company
Insurance Company
Intermediary
Internet insuranceintermediary
Insurance Company
Insurance intermediary
Internet insuranceintermediary
Internet technology
supplier
Internet insuranceintermediary
Internet insuranceintermediary
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Internet insuranceintermediary
Internet insuranceintermediary
Dormant
Dormant

Financial statements

England and Wales

EUI Limited

Governance%
Ownership

Country of incorporation

For further information on how the Group conducts its business across UK, Europe and the USA, refer to thebusiness review.
10g Related party transactions(i) Mapfre:
In 2012, the Group participated in transactions with Mapfre S.A. during the normal course of its Car Insurance andPrice Comparison operations. Mapfre is a related party of Admiral Group due to its 25% minority interest in Groupsubsidiary Rastreator.com Limited. Details of the transactions with Mapfre and balances outstanding as at 31
December in respect of price comparison business are given in the table below.
31 December
2012£m

31 December
2011
£m

0.7
0.2

0.7
0.1

(ii) Other:
Details relating to the remuneration and shareholdings of key management personnel are set out in the remuneration
report (audited section). Key management personnel are able to obtain discounted motor insurance at the same rates
as all other Group staff, typically at a reduction of 15%.
The Board considers that only the Board of Directors of Admiral Group plc are key management personnel.

Other information

Total transactions in the course of price comparison business with Rastreator.com
Balances outstanding at 31 December

Performance

Class ofshares held

Subsidiary

Overview
Overview

10f Group subsidiary companies
The Parent Company’s subsidiaries are as follows:90

Admiral Group plc
Annual Report 2012

Parent Company Financial Statements

Parent Company balance sheet
Year ended

Note

Fixed assets – investments
Shares in group undertakings
Other investments

5

31 December
2012£m

31 December
2011
£m

192.3
74.6

142.5
35.0

Current assets
Amounts owed from subsidiary undertakings

3.1–

Cash at bank and in hand

10.4

54.7

13.5

54.7

(63.5)(63.8)Net current liabilities
Total assets less current liabilities(63.5)(50.0)
216.9(63.8)(9.1)
168.4

Net assets

216.9

168.4

0.3
13.1
–
203.5

0.3
13.1
–
155.0

216.9

168.4

Creditors – falling due within one year
Other creditors

Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account67
8

These financial statements were approved by the Board of Directors on 5 March 2013 and were signed on its
behalf by:

Kevin Chidwick
Director
Admiral Group plc
Company Number: 03849958

Admiral Group plc
Annual Report 201291

Notes to the Parent Company Financial
Statements
Overview
Overview

Parent Company accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material
in relation to the financial statements:
1. Basis of preparation
The accounts have been prepared on a going concern basis. In considering the appropriateness of this assumption,
the Board have reviewed the Company’s projections for the next twelve months and beyond, including cash flow
forecasts and regulatory capital surpluses. The Company has no debt.
As a result of this review the Directors have satisfied themselves that it is appropriate to prepare these financial
statements on a going concern basis.

The Admiral Group plc Company financial statements have been prepared in accordance with applicable accounting
standards, under the historical cost convention and in accordance with the provisions of Section 396 to theCompanies Act 2006.

Performance

The adoption of new accounting standards during the year has not had a material impact on either the current year
or comparative figures.

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is notpresented. Under FRS 1 (Cash flow statements) the Company is exempt from having to present a cash flow statementon the grounds that its cash flows are included in the Group’s published consolidated financial statements.
The Parent Company audit fee is not disclosed in these accounts as it is disclosed in the Consolidated financial
statements for Admiral Group plc, which precede them at note 7.

2. Investments
Shares in Group undertakings are valued at cost less any provision for impairment in value.

Governance

Refer to note 10 of the Consolidated financial statements for disclosure of related party transactions.

3. Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because oftiming differences between the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that they are regarded as recoverable. They are regarded as
recoverable to the extent that, on the basis of all available evidence, it can be regarded as more likely than notthat there will be sufficient taxable profits from which the future reversal of the underlying timing differences canbe deducted.

Refer to note 7 of the consolidated financial statements for further details on share schemes.

Financial statements

4. Employee share schemes:
The Group operates a number of equity settled compensation schemes for its employees. For schemes commencing
1 January 2004 and after, the fair value of the employee services received in exchange for the grant of free shares
under the schemes is recognised as an expense in the parent Company’s subsidiaries, with a corresponding increasein equity in the parent Company.

Other information

92

Admiral Group plc
Annual Report 2012

Notes to the Parent Company Financial Statements continued

5. Shares in Group undertakings£m

Investments in subsidiary undertakings:
At 1 January 2011
Additions
At 31 December 2011
Additions
At 31 December 2012

125.0
17.5
142.5
49.8
192.3

A full list of the Company’s subsidiaries is disclosed in note 10 of the Group financial statements.
6. Other creditors – due within one year
31 December
2012£m

31 December
2011
£m

0.4
63.1
–

0.1
49.3
14.4

63.5

63.8

Share capital
£m

Share
premium
account£m

Retained
profit andloss£mTotal equity
£m

0.3
–
–
–
–
0.3
–
–
–
–
0.3

13.1
–
–
–
–
13.1
–
–
–
–
13.1

132.6
197.6
(198.8)
–
23.6
155.0
244.1
(219.3)
–
23.7
203.5

146.0
197.6
(198.8)
–
23.6
168.4
244.1
(219.3)
–
23.7
216.9

Trade payables and other liabilities
Corporation tax payable
Amounts owed to subsidiaries

7. Reconciliation of movements in shareholders’ funds
Company figures

At 1 January 2011
Retained profit for the period
Dividends
Issues of share capital
Share scheme charges
As at 31 December 2011
Retained profit for the period
Dividends
Issues of share capital
Share scheme charges
As at 31 December 2012

8. Share capital
Full details of the Company’s share capital are included in the consolidated financial statements above.

93

Admiral Group plc
Annual Report 2012

Consolidated Financial Summary

Overview
Overview

Basis of preparation:
The figures below are as stated in the Group financial statements preceding this financial summary and issued
previously. Only selected lines from the income statement and balance sheet have been included.
Income statement
2011
£m

2010
£m

2009
£m

2008
£m

1,897.2
498.9
361.1
108.4
15.9

1,841.3
445.8
349.0
61.8
13.7

1,308.6
288.1
276.2
67.0
9.5

847.7
211.9
232.6
54.2
8.8

716.3
169.8
193.9
34.7
24.4

984.3
(404.5)(235.2)
344.6

870.3
(363.8)(207.4)
299.1

640.8
(208.5)(166.8)
265.5

507.5
(151.7)(140.0)
215.8

422.8
(114.6)(105.7)
202.5

2012
£m

2011
£m

2010
£m

2009
£m

2008
£m

Property and equipment
Intangible assets
Deferred income tax
Reinsurance assets
Trade and other receivables
Financial assets
Cash and cash equivalents
Assets held for sale
Total assets

16.5
92.5
15.2
803.0
55.3
2,005.1
216.6–
3,204.2

17.6
87.5
10.3
639.8
52.1
1,583.0224.6–
2,614.9

13.6
82.9
12.4
357.0
47.9
1,004.7
246.7
1.5
1,766.7

12.1
77.0
–
212.9
32.7
630.9
211.8
–
1,177.4

11.0
75.7
–
170.6
25.5
586.9
144.3
–
1,014.0

EquityInsurance contracts
Deferred income tax
Trade and other payables
Current tax liabilities
Total liabilities

460.7
1,696.9–
1,006.5
40.1
3,204.2

394.4
1,333.7
–
856.6
30.2
2,614.9

350.7
806.6
–
561.0
48.4
1,766.7

300.8
532.9
5.7
306.8
31.2
1,177.4

275.6
439.6
10.3
270.0
18.5
1,014.0

Total premiums
Net insurance premium revenue
Other revenue
Profit commission
Investment and interest income
Net revenue
Net insurance claims
Total expenses
Operating profit

Performance

2012
£m

Balance sheet

Governance
Financial statements
Other information

94

Admiral Group plc
Annual Report 2012

Directors and Advisers

Directors
Alastair Lyons, CBE(Non-Executive Director)
Henry Engelhardt, CBE(Chief Executive Officer)
Kevin Chidwick(Chief Financial Officer)
David Stevens, CBE(Chief Operating Officer)
Roger Abravanel(Non-Executive Director)
Manfred Aldag(Non-Executive Director)
Annette Court(Non-Executive Director)
Colin Holmes(Non-Executive Director)
Martin Jackson(Non-Executive Director)
Keith James, OBE (retired 26 April 2012)(Non-Executive Director)
Margaret Johnson, OBE(Non-Executive Director)
Lucy Kellaway(Non-Executive Director)
John Sussens(Senior Independent Non-Executive Director)
Company Secretary
Mark Waters
Capital Tower
Greyfriars Road
Cardiff
CF10 3AZ
Auditor
KPMG Audit plc
3 Assembly Square
Britannia Quay
Cardiff
CF10 4AX
Actuarial advisor
Ernst & Young
1 More Place
LondonSE1 2AF

Bankers
Lloyds TSB Bank plc
City Office
Bailey Drive
Gillingham Business ParkKent
ME8 0LS
Joint Corporate Brokers
Bank of America Merrill Lynch
2 King Edward Street
LondonEC1A 1HQUBS Investment Bank
1 Finsbury Avenue
LondonEC2M 2AN
Registrar
Capita IRG plc
The Registry
34 Beckenham Road
BeckenhamKent
BR3 4TU
Solicitor
Norton Rose
3 More London Riverside
LondonSE1 2AQ

Further Information

Corporate website
The Group’s corporate website is atwww.admiralgroup.co.uk. A range of information
about the Admiral Group is presented, including theGroup’s history; financial reports and press releases;
corporate responsibility and governance.

Admiral Group businesses

The website also includes contact details for investor
relations and any other information.

elephantwww.elephant.co.uk

Financial calendar
Final 2012 dividend
1 May 2013 – Ex dividend date
3 May 2013 – Record date
24 May 2013 – Payment date

Diamondwww.diamond.co.uk

Interim Management Statement
25 April 2013

Price Comparison:
Confused.com
www.confused.com

The Group does not produce printed copies of interim
results for shareholders unless requested.
The interim results will be available on thecorporate website from 29 August 2013.
Head office
Capital Tower
Greyfriars Road
Cardiff
CF10 3AZ

Bell
www.bell.co.uk

Annual Report 2012

Interim results
29 August 2013

Admiral Group plc

Annual General Meeting
25 April 2013UK
Car Insurance:
Admiralwww.admiral.com

Confused.com

Van Insurance:
Gladiator
www.gladiator.co.uk
Spain
Car Insurance:
Balumbawww.balumba.es
Car Insurance:
Qualitas Auto brand
www.qualitasauto.com
Price Comparison:
Rastreator
www.rastreator.com
Italy
Car Insurance:
ConTe
www.conte.it
USA
Car Insurance:
Elephant Autowww.elephant.com

WinnerBest Large UK Workplace 2012

Price Comparison:
Comparenow
www.comparenow.com

4th
Best European Workplace 2012

FranceCar Insurance:
L’olivier Assurances
www.lolivier.fr

This report is printed on Lumi Silk that is
manufactured from 100% post-consumer
ECF (Elemental Chlorine Free) recycled pulp
and meets the highest environmental standards.
Designed and produced by Carnegie Orr+44 (0)20 7610 6140 www.carnegieorr.co.uk

Price Comparison:
LeLynxwww.lelynx.fr

6thBest UK Companies to WorkFor 2012

Registered Number: 03849958.
Admiral Group plc, Capital Tower,
Greyfriars Road, Cardiff CF10 3AZ
www.admiralgroup.co.uk

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Further Information

Corporate website
The Group’s corporate website is atwww.admiralgroup.co.uk. A range of information
about the Admiral Group is presented, including theGroup’s history; financial reports and press releases;
corporate responsibility and governance.

Admiral Group businesses

The website also includes contact details for investor
relations and any other information.

elephantwww.elephant.co.uk

Financial calendar
Final 2012 dividend
1 May 2013 – Ex dividend date
3 May 2013 – Record date
24 May 2013 – Payment date

Diamondwww.diamond.co.uk

Interim Management Statement
25 April 2013

Price Comparison:
Confused.com
www.confused.com

The Group does not produce printed copies of interim
results for shareholders unless requested.
The interim results will be available on thecorporate website from 29 August 2013.
Head office
Capital Tower
Greyfriars Road
Cardiff
CF10 3AZ

Bell
www.bell.co.uk

Annual Report 2012

Interim results
29 August 2013

Admiral Group plc

Annual General Meeting
25 April 2013UK
Car Insurance:
Admiralwww.admiral.com

Confused.com

Van Insurance:
Gladiator
www.gladiator.co.uk
Spain
Car Insurance:
Balumbawww.balumba.es
Car Insurance:
Qualitas Auto brand
www.qualitasauto.com
Price Comparison:
Rastreator
www.rastreator.com
Italy
Car Insurance:
ConTe
www.conte.it
USA
Car Insurance:
Elephant Autowww.elephant.com

WinnerBest Large UK Workplace 2012

Price Comparison:
Comparenow
www.comparenow.com

4th
Best European Workplace 2012

FranceCar Insurance:
L’olivier Assurances
www.lolivier.fr

This report is printed on Lumi Silk that is
manufactured from 100% post-consumer
ECF (Elemental Chlorine Free) recycled pulp
and meets the highest environmental standards.
Designed and produced by Carnegie Orr+44 (0)20 7610 6140 www.carnegieorr.co.uk

Price Comparison:
LeLynxwww.lelynx.fr

6thBest UK Companies to WorkFor 2012

Registered Number: 03849958.
Admiral Group plc, Capital Tower,
Greyfriars Road, Cardiff CF10 3AZ
www.admiralgroup.co.uk

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