2016 Full Year Results
8th March 2017

AgendaIntroduction

David Stevens, CEOGroup overview

Geraint Jones, CFO

UK InsuranceDavid Stevens, CEO
Cristina Nestares, UK Insurance CEO

Price Comparison

Martin Coriat, Confused.com CEO

International Insurance andDavid Stevens, CEO
Wrap up
Q&A

All

2

2016: Strong growth and solvency position, profits impacted by Ogden
Turnover1

Customers

5.15m

16%

2015: 4.43m

Profit before tax225%

£2.58bn
2015: £2.12bn

Solvency ratio3£284m
2015: £377m

Return on equity
24%

22%

37%

3%

Earnings per share

212%

27%

78.7p

2015: 206%

2015: 107.3p

Full year dividend per share

114.4p2015: 49%

Note: (1) Turnover comprises total premiums written plus other revenue. (2) Profit before tax adjusted to exclude minority interest share. (3) Refer to footnote on
slide 9.

2015: 114.4p

3

Summary of Ogden impacts

Basis

Cost

• Actuarial best estimates and capital position
at 31 December 2016 both on -0.75% Ogden
basis• Estimated ultimate net cost1 of change from
2.5% to -0.75% approximately £150 million• Whole account pre-tax impact2 ofapproximately £330 million

Ogden
Financial statements

Capital and other• Consistent, prudent margin in bookedreserves above increased ultimate loss ratios• Capital position remains very strong with postdividend solvency ratio of 212%

• Reported pre-tax profit in 2016
approximately £105m lower than if Ogden
had remained unchanged• Admiral took pricing action in December;
expect market to react• Balance of impact (c.£85m pre-tax) will bereflected over next 3-5 years• No change to proportional reinsurance / coinsurance terms• Expect price increases for excess of loss coverNote: (1) Estimated net financial impact represents the profit impact after reinsurance and taxation at 20%. This represents the financial impact of a change in the
discount rate applied to all open claims and projected future claims in respect of business written up to December 2016 settling at the new rate. (2) Represents pre-tax
impact before co-insurance and all reinsurance.

4

Results pre- and post-Ogden
Post Ogden
Profit before tax1

£284m

25%

2015: £377m

Earnings per share

Return on equity
24%
5%

37%

27%

78.7p
2015: 107.3p

2015: 49%

Pre Ogden

Profit before tax1

3%

£390m
2015: £377m

Earnings per share

Return on equity49%
2015: 49%2%

109.6p2015: 107.3p

Note: (1) Profit before tax adjusted to exclude minority interest share.

5Strong growth in turnover and customers
Turnover
UK CarInsurance

16%

UK
HouseholdInsurance

46%

International
Insurance

58%

Customers£1,987m

3.65m

2015: £1,708m£76.1m2015: 3.30m

51%

469k

2015: £52.0m

£366m

19%

2015: 310k

28%

2015: £232m

Price
Comparison

11%

864k
2015: 673k

£129m
2015: £108m

6

Analysis of Group Profit

Group Profit Before Tax 1• UK Insurance profit includes UK Car and Household:
£357m

£377m

Pre-Ogden

Post-Ogden

£390m

£284m

• Excluding the impact of the change in Ogden, UK Car
Insurance profit would have remained stable withgrowth in premiums offset by lower reserve releaseson commuted reinsurance.
• UK Household increased profits (to £3m) whilst
growing customer base by >50%

112%

118%

114%
119%

1%

-2%

1%

1%

-6%
-7%

-6%
-10%

-5%
-10%

-7%
-13%

2014

2015

• International Insurance loss reduced to £19m (2015: £22m);
includes another ConTe profit offset by investment in USA andFrance• Improved price comparison result (£3m profit v loss of £7m)
includes a strong result from Confused.com in the UK• Other includes share scheme charges and debt servicing cost2016

Price Comparison

UK Insurance

International Car Insurance

Other Group Items

Note: (1) Profit before tax adjusted to exclude minority interest share.

7

Post dividend solvency position remains strong• Group Solvency Capital Requirements (SCR) basedon Solvency II Standard Formula plus a Capital AddOn (CAO)

Capital Position1£1.07bn• Admiral is developing a partial internal model tocalculate the capital requirement and expects toapply for regulatory permission during 2017£0.14bn£0.93bn£0.44bn• Target solvency coverage range will be confirmed
once partial internal model approved. Still expect
125%-150%

Factors contributing to solvency ratio change+
Eligible Own Funds(Pre dividend)

Final Dividend (H2)

Eligible Own Funds(Post dividend)

Solvency Capital
Requirement• Economic profit ++• PPO adjustment ++Solvency ratios• Volatility adjustment +Solvency ratio (Pre Dividend)

245%

Solvency ratio (Post Dividend)212%–• Final dividend andother changes – –• Ogden basis – –• Yield curve +Note: (1) Estimated (and unaudited) Solvency II capital position at date of this report (8 March 2017). Figures based on volatility adjusted yield curve at 31 December 2016,
regulatory approval received February 2017. Updated Capital Add-On (including deferred tax) remains subject to regulatory approval process.

8

Proposed 2016 final dividend of 51.5p per share
Final 2016 dividend
Return of
surplus capital

Dividend policy

11.9p• Admiral will pay 65% of post-tax profits as a
51.5p

normal dividend each half-year

51.5p• Admiral expects to continue to distribute allSpecial dividend:
36.5p

earnings not required to be retained forsolvency and buffers• Admiral expects Normal plus Special (before
additional returns of capital) to be in the orderof 90-95% of earnings for foreseeable future

Normal dividend(at 65%): 15.0p
H2 2015

H2 2016• H2 2016 normal plus special dividend = 51.5p per share(in line with 2015)• Final dividend of £144m vs H2 profit after tax of £65m
• Total dividends for 2016 114.4p per share (in line with

Dividend Dates
Ex-dividend date: 11th May 2017
Record date:

12th May 2017

Payment date:

2nd June 2017

2015)

9

Group summary
Strong growth in turnover and customers

Group profit materially impacted by Ogden change, though improvements seen inInternational Insurance and Price Comparison results

Very strong capital position, with 212% post-dividend solvency ratio

Despite reduced H2 profit, proposed final dividend held at 51.5p

10UK car insurance continues to grow
Customers
3.65m
2.97m

3.02m

3.02m

2011

2012

2013

3.15m

3.30m

2.46m
1.86m

2009

2010

2014

Turnover1

2015

2016

Profit before tax£1,987m£1,708m
£105m

£443m
£336m

2015

2016

2015

2016

Note: (1) Turnover is a non-GAAP measure and consists of total premiums written (including co-insurer’s share) and Other Revenue.

11Reserve releases are reduced and prior year development of loss ratios
only marginally positive due to the discount rate change
Admiral releases 3 as % of net earned premium

Projected ultimate loss ratio (Admiral1 vs Market2 )
93%
86%

84%

9%

81%
72%

74%

71%
74%

74%

14%

13%

60%
() shows movement Jun 16 to Dec 16
2010

18%

16%

68% (-1%)

2009

24%

77% (-1%)

2011

60%

9%

60%

2%
2012

Market Loss Ratio (Dec 15)

2013

2014

2015

2009

2010

2011

4%
2012

2013

2014

2015

2016

Admiral Loss Ratio (Dec 16)• Projected ultimate loss ratios reflect Ogden impact• 2016 first projection for ultimate loss ratio of 82% is consistent with 2015 (82%)• Reserves margin remains at the upper end of Admiral’s reserving policy range

Note: (1) Independent actuarial projection of ultimate loss ratio on accident year basis. (2) Analysis of PRA returns as at 31 December 2015. Market excludes Admiral.
Loss ratio: accident year. (3) Reserve releases based on original net share.

12On a pure year basis the market was roughly breakeven in 2016 – preOgden

6%

2012
Market combined ratio1
at Dec 2015

104%

Estimated ultimate
combined ratio2100%

2016 Pre-Ogden
Premium deflation (2012- 2016) 4
5Return on capital3

Increase in CPVY (2012 2016)

28%

Estimated ultimate
combined ratio7

112%

Return on capital3-3%

Increase in CPVY
(2012 vs 2016)6-8%

Damage+10%

Small BI

-4%

Large BI

+8%

Overallchange+6%Note: (1) Prior year combined ratio from PRA returns (excludes Admiral). (2) Assumes some further positive development. (3) ROC calculation assumes add-on/investment
income averages 11% of premium and capital equals 40% of premium. (4) Change in average earned premium 2012 to 2016 (ABI). (5) CPVY = Cost per vehicle year. (6) Claims
inflation based on Institute of Actuaries Third Party Working Party (Sept 2016) and management estimates. (7) Expense ratio estimated to be 29% in 2016 v 30% in 2012.

13

Ogden rate changes are likely to push market profitability well below
zero
Ogden impact on CPVY2+10%2016 Pre-Ogden

2016 Post-Ogden

Estimated ultimate
combined ratio1

112%

Estimated ultimate
combined ratio3

119%

Return on capital-3%

Return on capital-20%-0.75% Ogden
Primary insurer impact
Reinsurer impact

More optimistic• Price rises yet to fully feed into earned premium• Reinsurers take much of the pain initiallyMore pessimistic• Pressures on physical damage costs substantial• Ultimately reinsurers pass on costs

Note: (1) Pre-Ogden estimated ultimate combined ratio is based on -3% return on capital with a 40% capital requirement. (2) CPVY = cost per vehicle year and based on
management estimate. (3) Post-Ogden estimated combined ratio based on a 29% market expense ratio and -19% return on capital.

14

Supporting and growing our businessHouseholdExpenseratio
Claimshandling

Customer
service
Retention

15

Our focus on expenses results in a strong expense ratio advantage
Admiral 1 and Market 2 expense ratios
30%

31%

30%

29%

31%

32%

31%

28%
24%

13%
17%

15%
17%

17%
14%

2007

2008

2009

2010

15%
13%

13%

2011

2012

Market Expense Ratio

2013

16%

16%

16%

2014

2015

2016

Admiral Expense ratio• Admiral continues to maintain a strong expense ratio advantage• Expense ratio remained flat in 2016 despite acquisition costs to drive growth in active vehicles and system
implementation

Note: (1) Admiral expense ratio is on a written basis. (2) Market excluding Admiral, analysis of PRA returns as at 31 December 2015.

16

Customers stay with us despite rising market premiums

Customer feedback following a claim2

Average motor retention over the year1(indexed to 100 at 2015 market)

95%

104

103
100

2016

Market

94%

2014

2015

93%

99

2015

94%

2013

2016

Admiral• Admiral’s retention is above the market• Retention has increased in 2016 despite rising
prices whilst market retention has decreased• The majority of our customers would like torenew with Admiral based on their claims
experience• Customer satisfaction has improved in the past
few years

Note: (1) Data based on management estimates and Admiral internal data. (2) Percentage of customers who answered ‘Yes’ to ‘Would you renew’ following aninteraction with the Admiral claims department (restated).

17

Better claims management is an important part of ouroutperformance on loss ratio
Projected ultimate loss ratio1

Sources of advantage2

c8-10% advantage

Superior handling of attritional
claimsRisk selection and large BI
handling

2014
Market2015
Admiral• Commitment to detailed first notification of loss, third party capture and early settlement• Long-term relationships with a small network of garages• Strong stance on claims fraud with a number of successful court cases• Increasing use of telematics data at claims stage
Note: (1) Analysis of PRA returns as at 31 December 2015. Market excludes Admiral. Loss ratio: accident year. (2) Data based on management estimates and Admiralinternal data (3) Attritional claims: High frequency, low value claims.

183

UK Household insurance continues to grow
Customers

Profit before tax (£m)
469,000£2.7
310,000

163,000£1.2

44,000

2013

2014

2015

(£0.2)(£0.1)

2013

2014

2016

2015

2016

• More than 50% growth in our customer base while increasing profits• Efficiency gain from our increased size and website development• Expense ratio remains materially lower than the UK market• Improvements on claims frequency and another relatively benign year in terms of weather events

19

How are we growing Household?
Aggregator share of household market sales

Share of Admiral Household new business thatcomes direct

60%

17%
40%

13%

13%

H2 2015

H1 2016

20%

0%
2009

2010

2011

2012

2013

2014

2015

2016

H2 2016• Growth was driven both by a growing price comparison market and more customers being drawn directly to
our household product• Expect distribution to continue developing during 2017 which will enable us to continue growing• Increased share of direct business as a result of efficient direct acquisition and cross sell to our motor book
• Guidewire allows a better customer experience for cross sale

Source: Management estimates.

20

UK insurance summary
Strong performance for motor and household

Strong expense ratio advantage

Customers like to stay with us

Strong claims handling process

Household offers additional growth opportunities

21

A collection of good businesses with different roads to success

Confused.com

Rastreator

LeLynxcompare.com

Established

2002

2009

2010

2013

Strategy

Car saving centric

Multi-product

Financial services

Core insuranceMarketMatureEmerging

Emerging

Nascent

Marketpositioning

Top 4 aggregator

Market leader

Main player

Pioneer• Continued education• Improved key metrics• Improved acquisitioncost• Panel building

2016

•
•
•
•

New positioning
Revenue growthProfit growth
Customer growth• Profit growth• Customer growth• New verticals

22

Confused.com reports strong results in a competitive market
Aggregator Market Sales1

Quotes2

Profit before tax£16.1m11.5m£12.5m

10.7m

2014

2015

2016

2015

2016

2015

2016

Achievements in 2016

• New positioning bringing more differentiation andclarity of purpose• Market growth fuelled top line growth even further• New car saving products to make Confused.com No.1 for
Car Savings• Confused was the fastest growing aggregator following
the launch of the new campaign3

Note: (1) Source: management information. (2) Quote request per product per customer per month. (3 ) Source: Management information.

23

Confused.com – more potential car savings beyond car insurance
Car finance aggregator with unique features:• ‘Real’ APR comparison• Comparison between different products (HP, PCP, unsecured)• Brings transparency to an opaque market for consumers‘Drivers win at Confused.com’ offers opportunity beyond car insurance:• A driver win is a small driving victory like saving money on your car insurance or making the perfect parallel park. It
is what we offer to customers when they save time and money on Confused.com• Engaging with customers more frequently around car savings• Offering a unique suite of products for drivers and car saving
24

European price comparison: flourishing and expanding
Quotes1

Turnover

8.7m

€44m
7.9m
€39m

2015

2016

2015

2016

• Key players in local price comparison markets

OverallSpain(Rastreator)
France(LeLynx)• Strong car insurance verticals but growing other products• Strong brands in local markets• Market leader and continues to educate both insurers and customers to PCW benefits• New entrants could help to grow the market but make the market more competitive for PCW• Significant progress on other insurance products in 2016
• 3 core verticals and growing• Ambitious plan to leverage assets such as brand, customer base and technicalcapabilities to grow further

Note: (1) Quote request per product per customer per month.

25

compare.com – another year of progress
Progress (2016 vs 2015)

Key Metrics

Still more to be done

Acquisition costs

Panel

Loss before tax ($m)
Cost per quote

Cost per buy click1(Group share)
2015

51%

95%

Brands live

Rates returned

61%

2016

71%
(22.3m)(32.9m)Focus on key states•

Reduced our total marketing investment in H2 2016 to prove themodel in key states•

Encouraging results in key states supports increased marketinginvestments in further states in 2017•

Forecast for 2017 is $15-25 million loss (Group share)

Note: (1) Cost per buy click represents variable marketing costs divided by buy clicks.

26

Price comparison summary

Different strategies for different markets

Growth, growth, growth

Opportunities in all markets

27

International insurance – growing rapidly but still investing
Turnover (m) and Customers (k)
483

533

Admiral loss

Whole account loss

(Local currency)

Percentage of turnover

696
€253m

€174m

€190m

2014
2014

2015

2015

2016

2014

2015

(5%)

(4%)

2014

2015

2016
(€5m)

2016
0.0%

(€10m)
168(€13m)

140
$216m
109
$145m
$109m
2014
2014

2015

2015

2016

2016

2016

($16m)(27%)($23m)($21m)

(22%)

(34%)

Note: (1) Represents Admiral’s share after co-insurance and reinsurance.

28

European insurance turnover and customers

Turnover (€)

Customers

ConTe
35%

€144.8m

32%415k

2015: €107.2m

2015: 315k

Admiral Seguros
15%€61.0m17%

189k

2015: €53.2m

2015: 161k

L’olivier61%€46.9m2015: €29.2m

61%

92k
2015: 57k

29

Key priority – grow share in price comparison
ConTe

Growth in brand awareness(indexed to 100 in 2015)
137
100

2015

2016

Qualitas Auto1 click through rate from 2nd
and 3rd place (indexed to 100)

Qualitas Auto1

125

100

122
100

2015

L’olivier – assurance auto

2016

197

Jan 16

Apr 16

Jul 16

Oct 16

Dec 16

100

2015

2016

Sources: Mpanel (L’olivier), Nextplora (ConTe) and Nicequest (Qualitas Autos). Note: (1) Qualitas Auto is Admiral Seguros’s leading brand in Spain.

30

Elephant is focused on reducing loss ratios
Rate changes in 2016 by state1

Elephant loss ratios (accident year basis)2

Proportion of Elephant’s premium

32%

51%

14%

83.5%

16.3%

-3.0%

80.5%

0.8%

13.4%

-7.1%

6.2%

5.5%

4.9%

82.7%
75.6%

2.8%
1.6%

Virginia

Texas
Top 10 insurers

MarylandElephant

2015
Loss ratio excluding hail related catastrophes

Note: (1) Source: Management analysis of public rate change information. (2) Loss ratio on an accident year basis and re-stated to exclude the impact of exceptional
weather events.

2016
Hail related losses

31International insurance summary
Growing operations in all countries

Stronger brand awareness in Europe

Best Places To Work Best Workplaces –Italy 2nd (for the 2nd year running)

Delivering lower loss ratios in the US

32

A Chairman’s guiding hand…
Admiral in 2000

Admiral in 2016

Customers

0.5 million

5.2 million

UK private
motor market
share

3%

13%

Employees

1,266 in South Wales

Almost 9,000 in 8
countries

Turnover£0.26 billion£2.58 billion

Pre-tax profit£24 million£284 million

Alastair in 2000

Alastair in 201633

...passes the baton to Annette Court•

Appointed to the Admiral Group Board in 2012•

Significant insurance experience••

Former CEO of Direct Line Group (formerly RBS Insurance)•

Former CEO of Europe General Insurance (Zurich Financial
Services)•

Previously on the Board of the Association of British Insurers (ABI)•

Non-Executive Director of Jardine Lloyd Thompson Group plc

Experience outside insurance includes Non-Executive Directorships of
Foxtons plc and Workshare34

Questions?

Appendix

Dividend history
Cumulative dividends since
flotation:
Normal:Special:
Total:£1.14 billion£1.24 billion£2.38 billion
11.9p

50.7p

51.8p

2005

2006

2007

2008

2009

Normal dividend

2010

2011

Special dividend

2012

2013

2014

2015

2016

Additional return dividend37

Group Key Performance Indicators1
KPI
Group Financial
Turnover £mCustomers m
Group pre-tax profit1 £mEarnings per share
Dividend per share

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

808
1.5
182.1
48.6p
43.8p

910
1.7
202.5
54.9p
52.5p

1,077
2.1
215.8
59.0p
57.5p

1,585
2.7
265.5
72.3p
68.1p

2,190
3.4
299.1
81.9p
75.6p

2,215
3.6
344.6
95.1p
90.6p

2,030
3.7
370.7
104.6p
99.5p

1,971
4.1
356.5
103.0p
98.4p

2,119
4.4
376.8
107.3p114.4p

2,576
5.2
284.3
78.7p
141.4p

1,382
617
83.4%
142.2

1,587
690
81.0%
179.9

1,862
805
84.9%
206.9
77

2,459
1,238
83.5%
275.8
84

2,966
1,729
91.9%
313.6
84

3,019
1,749
90.0%
372.8
79

3,065
1,562
81.0%
393.7
67

3,316
1,482
80.0%
397.9
67

3,612
1,590
79.0%
444.2
63

4,116
1,863
88.4%
338.5
62

International Car Insurance
Vehicles covered
Total premiums £mReported2 combined ratio

46,90014.2
232%73,70026
198%

121,000
43
204%

195,000
71
173%

306,000112.5
164%436,000148.5
177%515,300168.3
140%592,600
185.4
127%673,000213.3
126%864,200
331.3
125%International car insurance
result £m( 0.7)( 4.1)( 9.5)( 8.0)( 9.5)( 24.5)( 22.1)( 19.9)( 22.2)(19.4)

Price Comparison
Total revenue £mOperating profit /(loss) 1 £m

69.2
36.7

66.1
25.6

80.6
24.9

75.7
11.7

90.4
10.5

103.5
18

112.7
20.4

107.5
3.6

108.1
( 7.2)

129.2
2.7

UK Insurance
Customers (000)Total premiums £mReported combined ratio
UK insurance pre-tax profit £mOther revenue per vehicle £Note: (1) Profit before tax adjusted to exclude minority interest share. (2) Reported combined ratio is calculated on Admiral’s net share of premiums and excludes Other
Revenue. It has been adjusted to remove the impact of reinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be 2014: 145%; 2015:
146%; 2016: 133%.

38

Statutory summary income statement1
UK Insurance
2014
2015
2016

International Car
Insurance
2014
2015
2016

Price Comparison
2014
2015
2016

2014

Other
2015

2016

Admiral Group
2014
2015
2016

107.5

25.3

18.1

17.6

1,971.0 2,118.8 2,575.8

Turnover

1,632.0 1,760.2 2,063.1

206.2

232.4

365.9

108.1

129.2

Total premiums written

1,481.5 1,590.4 1,862.6

185.4

213.3

331.3

8.7

1.5

0.0

1,675.6 1,805.2 2,193.9
1,102.1 1,196.5 1,477.7
457.2
491.3 594.6

Gross premiums written
Net premiums written

916.9
387.9

995.6 1,162.9
418.1
488.4

176.5
61.5

199.3
72.1

314.8
106.2

8.7
7.8

1.6
1.1

0.0
0.0

Net earned premium

399.0

397.4

454.4

58.1

62.3

91.3

7.8

5.1

0.1

464.9

464.8

545.8

Investment income

11.5

26.1

39.3

0.2

0.0

0.4

2.2

5.3

12.4

13.9

31.4

52.1

Net insurance claims( 201.7) ( 169.5) (317.9)(50.5)(50.9)(75.5)( 6.9)( 5.5)( 0.1)

Insurance related expenses( 47.1)( 55.7)(66.6)(34.0)(40.1)(46.2)( 1.7)

0.0

0.0(82.8)(95.8) (112.8)

Underwriting result

161.7

198.3

109.2

(26.2)(28.7)(30.0)

1.4

4.9

12.4

136.9

174.5

Profit commission
Gross ancillary revenue
Ancillary costs
Instalment income
Gladiator contribution
Price comparison revenue
Price comparison expenses
Interest income
Other (mainly share scheme)
Interest payable

71.8
178.7
( 37.1)
22.8

85.4
175.0
( 41.8)
27.3

54.3
188.5
( 47.9)
34.4

0.0
6.9
(0.8)
0.2

0.0
7.5
( 1.2)
0.2

0.0
10.6
( 2.0)
2.0

0.0
0.0
0.0
0.0
3.0

0.0
0.0
0.0
0.1
1.9

0.0
0.0
0.0
0.0
2.0

1.5
(25.8)(4.6)

1.2(34.8)(11.1)

1.0(41.8)( 11.4)

71.8
85.4
54.3
185.6
182.5 199.1( 37.9) ( 43.0) (49.9)
23.0
27.6
36.4
3.0
1.9
2.0
107.3
108.1 129.2(110.3) (123.6) (132.1)
1.5
1.2
1.0
(25.8) (34.8) (41.8)(4.6) (11.1) (11.4)

Profit/(loss) before tax

397.9( 24.5)( 37.8)( 37.8)

350.7

107.5
108.1 129.2(110.3) (123.6) (132.1)

444.2

338.5

0.0

0.0

( 19.9)( 22.2)(19.4)( 2.8)( 15.5)( 2.9)(259.1) (225.9) (393.5)

368.7

Note: (1) Statutory financial information not adjusted to exclude minority interests’ share

39

91.6

278.4

Balance Sheet
Dec-14£m

Dec-15£m

Dec-16£m

ASSETS
Property, plant and equipment
Intangible assets
Reinsurance contracts
Financial assets
Deferred income tax
Insurance and other receivables
Cash and cash equivalents

32.3
107.2
829.8
2,194.1
22.9
435.3
255.9

34.9
142.3
878.7
2,323.5
20.6
537.1
265.3

32.0
162.3
1,126.4
2,420.2
8.4
784.9
326.6

Total assets

3,877.5

4,202.4

4,860.8

EQUITY
Share capital
Share premium
Retained earnings
Other reserves
Total Equity (shareholders)
Non-controlling interests

0.3
13.1
540.6
13.2
567.2
13.7

0.3
13.1
599.6
2.7
615.7
17.2

0.3
13.1
505.7
51.8
570.9
10.8

Total equity

580.9

632.9

581.7

LIABILITIESInsurance contracts
Subordinated liabilities
Trade and other payables
Corporation tax liabilities

2,097.4
203.8
965.8
29.6

2,295.0
223.9
1,015.0
35.6

2,749.5
224.0
1,292.2
13.4

Total liabilities

3,296.6

3,569.5

4,279.1

Total liabilities and equity

3,877.5

4,202.4

4,860.8

40

Group Profit Before Tax reconciliation
Reconciliation from statutory to adjusted profit before tax• Admiral has five operations with sharedownership: Rastreator (Admiral share ofownership 75.0%); compare.com (71.1%);
Admiral Law and BDE Law (90.0%);
Preminen (50.0%)£6m• Profit or losses in period accruing tominority parties reduce or increase theresults respectively
£284m

£278m

• compare.com is 29% owned by third
parties. Total loss was £22.8 million,
therefore £6.6 million is added back toGroup Profit Before Tax• The impact of other minority interest is not
significant

Profit before tax (statutory)

Minority interests share of
profitProfit before tax (adjusted)

41

Investments update
Investment analysis
Dec ‘15: £2,589m

Investment income
Dec ‘16: £2,747m

Cash
DepositGilts
Fixed income
MM funds• 2015 and 2016 interest and investment
income is distorted by differences inaccounting for income on quota sharefunds withheld• 2016 also includes £6.5m foreignexchange gain
• Underlying net income increased by
18% to £26m due to higher rate of
return on larger balances

Net investment income1 (£m)
£42m

AAA
£20m

AA
A

£22m £22m

£26m

£11m

BBB
2014

2015
Reported

2016
Underlying

Note: (1) Investment income net of interest cost on bond. Income figures include interest on gilts purchased with bond issue proceeds.

42

UK Car Insurance: Admiral vs Market Ultimate Loss Ratio,
Expense Ratio and Combined Ratio
Projected ultimate loss ratio: Admiral vs Market

Expense ratio: Admiral vs Market

93%
29%
86%

84%

28%

30%

31%

32%

31%

15%

16%

16%

2013

2014

24%

81%
72%

74%

71%
74%

74%

77% (-1%)
17%

68% (-1%)() shows movement
Jun 16 to Dec 16

60%

60%

60%

2009

2011

2012

2013

2010

1

Market Loss Ratio (Dec 15)

2014

Admiral Loss Ratio (Dec 16)
122%

2009

2015
2

14%

13%

13%

2010

2011

2012

Market Expense Ratio3

2015
4

Admiral Expense ratio

Ultimate combined ratio: Admiral vs Market
113%

110%
100%

104%

115%

102%

91%

90%

93%

2014

2015

82%

2009

2010

73%

73%

75%

2011

2012

2013

Market Combined Ratio

Admiral Combined Ratio

Note: (1) Analysis of PRA returns as at 31 December 2015. Market excludes Admiral. Loss ratio: accident year. (2) Independent actuarial projection of ultimate loss ratio on
accident year basis. (3) Analysis of PRA returns as at 31 December 2015. These numbers include UKI (due to unusually high or low expense ratios, UKI numbers may be
distorted). (4) Admiral expense ratio is on a written basis.

43

UK Car Insurance: Ultimate Loss Ratio development by accident
year
82%

82%
77%
74%

74%
69%
66%
64%
60% 60%

AY 2011

71% 71%
66%

71%

68%
63%
60%

61%
60%

AY 2012FY 2011

AY 2013
FY 201277%

FY 2013

FY 2014

AY 2014
FY 2015

AY 2015

FY 201644

UK Car Insurance: Booked Loss Ratio development by
underwriting year
UK car insurance booked loss ratio (%)
Development by financial year (colour-coded)
Split by underwriting year (x axis)

92%
82%
76%
72%
67%
62%
61%

85%

84%

84%

82%
76%

78%
73%

89%

Sensitivity of booked loss ratio

88%87% 87%

Underwriting
year

2013

2014

2015

2016

Booked loss
ratio

70%

84%

87%

88%

PAT impactof 1%
improvement

£11m

£7m

£3m

£2m

• The impact of a 1% improvement can also
increase as the combined ratio drops andAdmiral receives a higher share of the available
profit.

70%

66%
64%

• The impact includes the change in net
insurance claims along with the associatedprofit commission movements that result fromchanges in loss ratios. The figures are stated
net of tax at the current rate.
2011

2012
2011

2013
2012

2013

2014
2014

2015
2015

2016

2016

• The impact is not linear due to the nature of
the profit commission arrangements eg. theimpact of a 5% move cannot be calculated bymultiplying the 1% impact by five.

Note: underwriting year basis, therefore direct comparison to ultimate loss ratios on accident year basis is inappropriate.

45

Reinsurance arrangements
Household

Motor

35%

AdmiralMunich Re

35%

38%

Admiral

Other

Quota share

38%

70%
40%

40%

40%

40%

25%

25%

22%

22%

2015

2016

2017

2018

30%

2016 and 2017

• Fully placed reinsurance arrangements until theend of 2018

• Similar long term quota share contracts to UK
motor• Similar contract terms and conditions• Admiral retains 30%• Reduction of underwriting share from 25% to 22%
with effect from 2017
• Munich Re continues to underwrite 40% of the UK
business until at least the end of 2020
46

Solvency ratio sensitivity analysis
The sensitivities below have been selected to show a range of impacts on the reported base case solvency ratio. They
cover the two main material risk types - insurance risk and market risk. Within each risk type the sensitivities
performed cover the underlying drivers of the risk profile. The sensitivities have not been calibrated to individual
return periods.
Base

212%

Scenario 1

209%

Scenario 2

Scenarios

203%

Scenario 3

211%

Scenario 4

210%

Scenario 5

1.

Currency – 25% movement in € and $2.

ASHE – long term ASHE +0.5%

3.

UK Motor – CAT 1 in 200 event

4.

UK Household – CAT 1 in 200 event

5.

UK Motor – incurred loss ratio +5% (2014 & 2015 u/w
years)

6.

UK Motor – incurred loss ratio +1% (2014 & 2015 u/w
years)

7.

Interest rate – negative yield curve -50 bps

8.

Interest rate – positive yield curve +50 bps

9.

Credit – spread +100 bps

182%

Scenario 6

203%

Scenario 7

200%

Scenario 8

221%

Scenario 9

208%

0%

50%

100%

150%

200%

250%

Note: Estimated (and unaudited) Solvency II capital position at date of this report (8 March 2017). Figures based on volatility adjusted yield curve at 31 December 2016,
regulatory approval received February 2017. Updated Capital Add-On (including deferred tax) remains subject to regulatory approval process.

47

Estimated Ogden impact net of reinsurance and tax
Estimated Ogden impact1 at minus 0.75%(net of reinsurance and tax)
350

300
£142m

250

200
£38m

£330m
150

100
£150m
50

0
Gross impact

Reinsurers shareTax

Net impact

Note: (1) Estimated net financial impact represents the profit impact after reinsurance and taxation at 20%. This represents the financial impact of a change in the discountrate applied to all open claims and projected future claims in respect of business written up to the date of the change settling at the new rate.

48

International Car Insurance market statistics(2016)(2016)(2015)(2015)

Gross Written
Premium£9.2bn£14bn£128bn£12bn

Direct insurer
share ofmarket

22%

4%

26%

11%

of total market

of total market

of total market

of total market

Vehicles

23m

35m

220m

44m

Combined Ratio

98%

104%

105%

94%-96%49

UK Car Insurance – whiplash regulatory reforms update
Consultation Paper ‘Reforming the soft tissue (whiplash) injury claims process’
The Government provided more detail on whiplash reforms in a Consultation published in November 2016. In February 2017 they gave moreclarification around those reforms and announced the legislative process. The proposed date of implementation is October 2018.
The reform has three main elements:•

One fixed sum tariff as below. There can be an uplift of up to 20% on the tariff where there are exceptional circumstances (to be determinedby the Courts.
Injury duration

2015 Average payment1

Judicial College Guideline

New tariff amounts

0–3 months£1,750A few hundred pounds to £2,050£225

4–6 months£2,150£2,050 to £3,630£450

7–9 months£2,600£2,050 to £3,630£765

10–12 months£3,100£2,050 to £3,630£1,190

13–15 months£3,500£3,630 to £6,600£1,820

16–18 months£3,950£3,630 to £6,600£2,660

19–24 months£4,500£3,630 to £6,600£3,725•

Small Claims Track to rise to £5,000 from the current limit of £1,000. This will apply to RTA related injuries only. It will increase to £2,000 for all
non-RTA injuries.

•

Pre-medical offers for RTA whiplash injuries will be banned through legislation. There will be no exceptions and the regulator will police it.

Note: (1) For pain, suffering and loss of amenity (‘PSLA’) (uplifted to take account of JCG uplift.) Source: JCG (13th edition) published September 2015 .

50

Key definitions
Term

Definition

Accident YearThe year in which an accident takes place. It is also referred to as the earned basis or the calendar year basis.
Claims incurred are allocated to the calendar year in which the accident took place.

Underwriting YearThe year in which the policy was incepted. It is also referred to as the written basis.
Claims incurred are allocated to the calendar year in which the policy was written.

Written / Earned Basis

A policy can be written in one calendar year but earned over a subsequent calendar year.

Loss Ratio

The ratio can be calculated on an accident year or underwriting year basis.
Expressed as a percentage, of (i) claims incurred divided by (ii) net premiums.

Ultimate Loss Ratio

The ratio can be calculated on an accident year or underwriting year basis.
It is the projected ratio for a particular accident or underwriting year.
It is an estimate (calculated using actuarial analysis) of where the loss ratio ends when all claims are settled.

Reported / Booked /First-Picked
Loss Ratio

The ratio can be reported on an accident year or underwriting year basis.
This is the ratio reported in the financial statements for a particular accident or underwriting year.
It is used to calculate underwriting profit and profit commissions.

Expense Ratio

The ratio can be calculated on an earned or written basis.
Expressed as a percentage, of (i) net operating expenses, either divided by (ii) written or earned premiums, net of reinsurance.

Combined Ratio

The sum of the loss ratio and expense ratio.

Co-insurance

An arrangement in which two or more insurance companies agree to underwrite insurance business on a specified portfolio in specified proportions.
Each co-insurer is directly liable to the policyholder for their proportional share.

Reinsurance

An arrangement in which a reinsurance company agrees to indemnify another insurance company, against all or a portion of the insurance risks
underwritten by the ceding company under one or more policies.
Reinsurance does not legally discharge the primary insurer from its liability with respect to its obligations to the insured.

XOL Reinsurance

An arrangement in which a reinsurance company agrees to indemnify another insurance company for claims above a certain level. For example if XOL
reinsurance level is in excess of £5m, for any individual claim that is in excess of £5m the reinsurance company covers all the costs above £5m.

Total / Gross / Net
Premiums Written

Total = total premiums written including coinsurance
Gross = total premiums written including reinsurance but excluding coinsurance
Net = total premiums written excluding reinsurance and coinsurance51

Admiral brands

52

Disclaimer

The information contained in this document has not been independently verified and no representation or warranty,
express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness orcorrectness of the information or opinions contained herein. None of the company, advisers or representatives shallhave any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of thisdocument or its contents or otherwise arising in connection with this document. Unless otherwise stated, all financial
information contained herein is stated in accordance with generally accepted accounting principles in the UK at thedate hereof.
The forward-looking information contained herein has been prepared on the basis of a number of assumptions which
may prove to be incorrect, and accordingly, actual results may vary.
This document is being distributed only to, and is directed at (a) persons who have professional experience in mattersrelating to investments, being investment professionals as defined in article 19(5) of the Financial Services And
Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") or (b) high net worth entities fallingwithin article 49(2)(a) to (d) of the Order, and other persons to whom it may be lawfully be communicated under theOrder (all such persons together being referred to as "Relevant Persons"). Any person who is not a Relevant Person
should not act or rely on this document or any of its contents. Any investment or investment activity to which thisdocument relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.
The financial information set out in the presentation does not constitute the Company's statutory accounts inaccordance with section 423 Companies Act 2006 for the year ended 31 December 2016. The statutory accounts forthe year ended 31 December 2016 will be finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Registrar of Companies following the Company’s Annual
General Meeting.

53