Admiral Group plc results for the six months ended 30 June 201519 August 2015
H1 2015 Group Results• Group profit before tax*1 increased 1% to £186.1 million (H1 2014: £184.9 million)• Earnings per share up 4% to 54.8 pence (H1 2014: 52.7 pence)• Interim dividend up 3% to 51.0 pence per share (2014 interim: 49.4 pence per share)• Return on equity 50% (H1 2014: 54%)
• Group turnover up 2% to £1,057.5 million (H1 2014: £1,037.1 million)• Group customers up 6% to 4.19 million (H1 2014: 3.94 million)• UK Car Insurance profit up 6% to £219.2 million (H1 2014: £207.7 million) mainly as a result ofhigher reserve releases• International Car Insurance loss reduced to £11.2 million (H1 2014: £15.5 million)• Price comparison loss*1 of £4.0 million (H1 2014: profit of £5.9 million) resulting from increased
investment in compare.com and lower profit from Confused.com• Over 7,700 employees eligible to participate in the Group’s Employee Share Scheme which willaward the maximum £1,800*2 of shares, based on the H1 2015 result• Named 4th Best Large Workplace in the UK by the Great Place to Work Institute[*1] Profit or loss figures represent Group’s share of profit or loss before tax excluding minority interests[*2] Full time equivalent award

Henry Engelhardt, Chief Executive Officer, commented:“A good start to a challenging year. Profits are up, customer numbers are up, earnings per share is up,
the dividend is up ... you might say it was a pretty ‘up’ first half!
“In particular I’d like to point out the profits in our Italian business, ConTe. Not only did it deliver an
accounting profit for the half year, but improved loss ratio projections show that the operation was
profitable in 2012 on a written basis. And the operation is growing, having just gone past the 300,000
customer mark.
“The UK business turned in a very solid result helped by positive claims cost development, with modest
growth accompanying price increases.
“Overall I’d say, it has been a good first half.”
Directorate change
At the end of August Manfred Aldag will retire from the Board having served as a director of thecompany since 2003.
Following receipt of regulatory approval, Owen Clarke will join the Board with effect from 19th August
2015. Owen is currently the Chief Investment Officer of Equistone (formerly Barclays Private Equity‘BPE’): he served as a director of Admiral from 1999 – 2004 when it was a private company having led
BPE’s participation in the MBO of Admiral in 1999.

1

Alastair Lyons, Chairman, commented:“Manfred has made an enormous contribution to Admiral’s success over the many years he has servedon our Board and he will be much missed, both as a colleague and a friend: he takes our best wisheswith him into retirement.
“We are delighted that Owen is now able to rejoin the Board of Admiral: he has an excellent
understanding of our business and a great commercial record, and we look forward to once again
benefiting from his wise counsel.”Management presentation
Analysts and investors will be able to access the Admiral Group management presentation, which
commences at 9.00am on Wednesday 19 August 2015, by dialling +44 203 059 8125.
A copy of the presentation slides and webcast, along with a PDF version of this interim results
announcement, will be available at www.admiralgroup.co.uk.

Group key performance indicators
Turnover*1
Net revenue
Number of customers
Loss ratio*2, *3
Expense ratio*2, *3
Combined ratio*2, *3
Profit before tax*4
Earnings per share
Dividend per share
Return on equity

H1 2013

H1 2014

H1 2015

FY 2014£1,089.1m£454.8m
3.60m
68.8%
18.6%
87.4%
£181.6m
50.1p
48.9p
57%

£1,037.1m£444.6m
3.94m
67.1%
18.0%
85.1%
£184.9m
52.7p
49.4p
54%

£1,057.5m£447.7m
4.19m
60.8%
21.9%
82.7%
£186.1m
54.8p
51.0p
50%

£1,971.0m£884.6m
4.05m
67.8%
18.7%
86.5%
£356.5m
103.0p98.4p52%[*1] Turnover comprises total premiums written and other revenue.
[*2] Loss ratio restated to exclude releases on business that was originally ceded under quota share reinsurance
contracts. Result in H1 2015 including releases from commuted reinsurance contracts would have been aloss ratio of 42.0% and combined ratio of 63.9%. Refer below for details.
[*3] Loss and expense ratios exclude the impact of reinsurer cap accruals, prior period expense ratios restated.
Refer to note 12b and 12c.
[*4] Profit before tax adjusted to exclude minority interests’ share.

2Group Results
Admiral Group’s share of pre-tax profit in the first half of 2015 was £186.1 million, up 1% on H1 2014(£184.9 million). A reconciliation of pre-tax profit is included in Note 12.
Group turnover of £1,057.5 million increased by 2% compared to the first half of 2014 (£1,037.1 million).
This was mainly driven by increased turnover in both the UK and International Car Insurance businesses.
During H1 2015, the Group increased its customer base to 4.19 million with year-on-year growth of over
250,000 customers (6%).
The Group loss ratio improved to 60.8% (H1 2014: 67.1%), primarily due to very positive UK claims
development leading to higher reserve releases. The Group expense ratio increased to 21.9% (H1 2014:
18.0%). The main reason for this increase is that 2014 benefited from a one-off adjustment to expenses
as a result of the change in approach to accounting for UK Car Insurance levies. In addition to this, theexpense ratio is also impacted by a reduction in the UK car insurance average earned premium.
Further details by segment are set out below.
Earnings per share
Earnings per share increased by 4% to 54.8 pence (H1 2014: 52.7 pence). The increase is higher than theincrease in pre-tax profit due to the lower effective tax rate.
Dividends
The Directors have declared an interim dividend for the financial year of 51.0 pence per share, which is
3% higher than the interim payment in 2014. It is equal to 93% of earnings per share.
The dividend is made up of a 25.1 pence normal element, based on the stated dividend policy of
distributing 45% of post-tax profits, and a further special element of 25.9 pence. The special dividend is
calculated with 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.
The payment date is 9 October 2015, ex-dividend date 10 September 2015 and record date 11
September 2015.
Return on capital
Admiral’s capital efficient and highly profitable business model led to return on equity of 50% (H1 2014:
54%).
A key part of the business model is the extensive use of co- and reinsurance across the Group which
provides both loss protection and capital relief. Admiral has UK reinsurance arrangements in place
covering 35% of the UK car insurance business until at least the end of 2016, while the UK agreementwith Munich Re (covering 40%) will run to at least the end of 2018.
Divisional Performance Highlights• UK Car Insurance profit increased by 6% to £219.2 million (H1 2014: £207.7 million).
• International Car Insurance losses totalled £11.2 million (H1 2014: £15.5 million).
• Admiral Group’s share of Price Comparison loss totalled £4.0 million (H1 2014: profit of £5.9 million)
reflecting the investment in compare.com.
• Admiral Group’s share of Other Group Items, including employee share schemes and net debt
financing charges, amounted to a cost of £17.6 million (H1 2014: £12.9 million).

3

Admiral’s strategy in its core UK Car Insurance market is unchanged. The Group aims to grow profitably
its share of the UK private motor insurance market and in the six months to 30 June 2015 Admiralcontinued to grow, resulting in a total customer base of 3.18 million (H1 2014: 3.15 million). During thisperiod Admiral implemented a number of premium increases. The improvement in pre-tax profit was
mainly due to an improvement in the Combined Ratio to 73.1% (H1 2014: 76.8%).
Admiral’s International Car Insurance businesses also continued to grow, delivering an overall increasein turnover of 6% to £110.3 million (H1 2014: £104.3 million) and insuring 14% more vehicles at 30 June2015 compared with a year earlier. During the first half of 2015, the International Car Insurance
businesses made losses of £11.2 million compared to £15.5 million in the first half of 2014. The lower
loss was driven by a number of factors including continued positive results from the Group’s Italian car
insurance operation, ConTe. The overall international insurance loss equated to 6% of the Group’s profit
before tax for the period (H1 2014: 8%).
Admiral’s Price Comparison businesses made a combined loss of £4.0 million (H1 2014: profit of £5.9
million). This was due to both International price comparison, where an investment in compare.com of£10.4 million offset profits from the Group’s European price comparison operations, Rastreator and
LeLynx, and a lower profit from the Group’s UK price comparison business Confused.com.
Employees
At the core of Admiral’s success is a skilled and motivated workforce and the Group invests significant
time and money in four key areas to underpin this: communication; equality; reward and recognition;and fun. During the first half of 2015 the Group received numerous awards in recognition of thisinvestment:
•
•
•
•
•

Fourth Best Large Place to Work in the UK
European Business Awards 2015 - National Champion – UK (Employer of the Year)
Fourth Great Place to Work Best Workplaces in Spain
Ninth Great Place to Work Best Workplaces in Italy
Nova Scotia’s Top Employers 2015

At 30 June 2015 the Group employed over 7,700 members of staff, of which over 5,500 are employed in
the UK.
Investments and CashInvestment Strategy
The Group continues to maintain a low risk investment strategy and continues to invest in the sameasset classes as in previous years. A shift in allocation of funds, which commenced in 2014, hascontinued during 2015 with a greater proportion invested in fixed income and other short dated
securities (and less in money market funds and deposits). This change was made in order to increase
yield without materially increasing risk. As a result of these changes, the proportion of the Group’s cash
and investments held in fixed income and short-dated securities was 54% at 30 June 2015, up from 37%
a year earlier.
The Group performs regular reviews of this strategy to ensure it remains appropriate.

4Cash and investments analysis
30 June 2015
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Other
£m

Total
£m

Fixed income and short-dated
securities
Money market funds
Cash depositsCash1,122.6
568.7
244.5
124.7

87.3
3.0
43.1

28.7

201.7
15.0
19.5

1,324.3
671.0
247.5
216.0

Total

2,060.5

133.4

28.7

236.2

2,458.8

31 December 2014
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Other
£m

Total
£m

Fixed income and short-dated
securities
Money market funds
Cash deposits
Cash
Total

Fixed income and short-dated
securities
Money market funds
Cash deposits
Cash
Total

822.7
808.6
261.0
101.8

96.5
2.1
38.6

49.0

199.1
4.1
66.5

1,021.8
909.2
263.1
255.9

1,994.1

137.2

49.0

269.7

2,450.030 June 2014
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Other
£m

Total
£m

802.8
725.1
259.7
149.0

93.2
2.9
42.0

43.9

42.0
12.8

802.8
860.3
262.6
247.7

1,936.6

138.1

43.9

54.8

2,173.4

Investment return and interest income totalled £9.6 million in H1 2015, up 43% compared to a year
earlier (H1 2014: £6.7 million). The increase was higher due to higher average balances along with theincreased allocation of funds to fixed income and other short dated securities that took place across2014. The increase would have been greater but was partially offset by an adjustment (of £5.1 million)5

relating to notional investment income being accrued on quota share reinsurance funds withheldarrangements. The cumulative accrual at 30 June 2015 was £13.4 million (H1 2014: £1.8 million)
The underlying rate of return (excluding the notional investment income accrual) on the Group’s cash
and investments was 1.2% (H1 2014: 0.8%).

Capital Structure and Financial Position
The Group continues to manage its capital to ensure that all entities within the Group are able tocontinue as going concerns and also to ensure that regulated entities, as well as the Group, 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 a regular basis.
In July 2014, the Group completed the issue of £200 million of 10 year dated subordinated bonds. The
rate of interest is fixed at 5.5% and the maturity date is in July 2024. The bonds qualify as lower tier two
capital under the current regulatory capital regime and are expected to qualify as tier two capital under
Solvency II.
The majority of the Group’s current capital requirement is derived from its European insurance
operations, Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL).
The surplus position at the end of H1 2015 for those companies, along with the overall Group position
was as follows:£m
Net assets less goodwill*1
Minimum capital requirement
Surplus over minimum requirement

AIGL
204
72
132

AICL
82
27
55

Group
584
120
464

[*1] Before accounting for the 2015 Interim Dividend of £140 million. Comprises tangible equity plus the elementof the Group’s debt that is eligible as lower tier two capital under the Insurance Groups Directive (IGD) rules.

During 2015, the Group’s capital requirement is assessed under the ICAS regime in the UK with
Individual Capital Guidance (ICG) applied by the Prudential Regulatory Authority (PRA) as appropriate.
The Group’s surplus position after accounting for the 2015 interim dividend is in excess of £300m and is
at a similar level to the position at 31 December 2014. The Group expects to hold a significant surplus
throughout the remainder of 2015.
Solvency II
The Group continues to make good progress towards full compliance with the requirements of theSolvency II regime in advance of it taking effect in January 2016 and expects to be fully compliant fromthat date.
Admiral is developing an internal economic capital model which will be used to calculate regulatory
capital requirements following approvals from the Group's regulators in the UK and Gibraltar. Suchapproval is not likely to be sought or granted before 2017.
The Group's regulatory capital from January 2016 will, therefore, be based on the Solvency II Standard
Formula, with a capital add-on agreed by the PRA to reflect recognised limitations in the Standard
Formula with regards to Admiral Group's business (predominantly in respect of profit commission
arrangements in co- and reinsurance agreements and risks arising from actual and potential Periodic
Payment Order (PPO) claims).
6

The level of capital add-on and resulting Group capital requirement from January 2016 is expected to be
confirmed by the PRA in the final quarter of 2015.
Taxation
The tax charge reported in the income statement is £33.4 million (H1 2014: £38.9 million) which equates
to 18.4% (H1 2014: 21.2%) of profit before tax. The lower effective rate of taxation compared to 2014
results from both a reduction in the rate of UK corporation tax in 2015 and also deferred tax movements
relating to losses incurred in the Group’s US businesses. The average rate of UK corporation tax in 2015is 20.25% (2014: 21.5%).
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.

UK Car Insurance
Non-GAAP*1 format income statement£m

H1 2013

H1 2014

H1 2015

FY 2014

Turnover*2
Total premiums written*3

924.5
851.7

849.8
776.0

857.9
779.0

1,602.7
1,453.1

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

214.6
5.6
(125.2)(26.3)

197.9
6.0(92.6)(21.7)

188.9
6.3(69.3)(26.2)

394.3
11.5(198.3)(44.6)

Underwriting profit
Profit commission

68.7
40.4

89.6
35.8

99.7
44.2

162.9
71.8

Underwriting profit plus profit
commission

109.1

125.4

143.9

234.7

Net other income
Instalment income

71.2
12.4

71.2
11.1

63.3
12.0

140.7
22.6

UK Car Insurance profit before tax

192.7

207.7

219.2

398.0

[*1] GAAP = Generally Accepted Accounting Practice[*2] Turnover (a non-GAAP measure) comprises Total Premiums Written and Other Revenue. Refer to Note 12 fora reconciliation to financial statement line items[*3] Total premiums written (non-GAAP) includes premium underwritten by co-insurers

7Split of underwriting profit£m

H1 2013

H1 2014

H1 2015

FY 2014

Motor
Additional products

65.0
3.7

80.0
9.6

91.5
8.2

144.2
18.7

Underwriting profit

68.7

89.6

99.7

162.9

H1 2013

H1 2014

H1 2015

FY 2014

Reported motor loss ratio*1
Reported motor expense ratio*2
Reported motor combined ratio

67.2%
15.0%
82.2%

66.0%
14.2%
80.2%

58.2%
17.4%
75.6%

68.6%
14.4%
83.0%

Written basis motor expense ratio
Reported total combined ratio*3

13.7%
81.1%

15.2%
76.8%

16.2%
73.1%

16.0%
79.5%

Key performance indicators

Claims reserve releases – original
net share*4
Claims reserve releases –commuted reinsurance*5
Total claims reserve releases£29.7m£35.4m£50.0m£66.8m£22.5m£52.2m£37.7m£73.1m£42.6m
£92.6m£70.6m£137.4m

Vehicles insured at period-end
Other Revenue per vehicle

3.02m
£73

3.15m
£67

3.18m
£64

3.15m
£67

[*1] Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts.
Reconciliation in Note 12b.
[*2] Motor expense ratio is calculated by including claims handling expenses that are reported within claims costsin the Income Statement. Reconciliation in Note 12c.
[*3] Reported total combined ratio includes additional products underwritten by Admiral.
[*4] Original net share shows reserve releases on the proportion of the portfolio that Admiral wrote on a net basis
at the start of the underwriting year in question.
[*5] Commuted reinsurance shows releases on the proportion of the account that was originally ceded underquota share reinsurance contracts but has since been commuted and hence reported through theunderwriting result and not profit commission.

8

UK Car Insurance Financial Performance
The first half of 2015 saw indications of small price increases in the UK Car Insurance market, following
three successive years of premium rate reductions.
Admiral’s response to the competitive environment experienced in recent years was to prioritise margin
protection rather than focus on material market share growth. This focus has been maintained in thefirst six months of 2015 with a modest increase in vehicle numbers to 3.18 million (H1 2014: 3.15
million).
Profit from UK Car Insurance increased by 6% to £219.2 million (H1 2014: £207.7 million). Profit fromunderwriting and profit commission increased by 15% to £143.9 million (H1 2014: £125.4 million) driven
by an improved combined ratio. Profit from Other Revenue decreased by 9% to £75.3 million (H1 2014:£82.3 million) due to a number of factors, referred to below.
UK turnover of £857.9 million increased by 1% (H1 2014: £849.8 million) whilst total premiums written
remained broadly stable at £779.0 million (H1 2014: £776.0 million). Premium increases implemented
during 2014 offset earlier lower premiums, thereby resulting in the level of written premiums remaining
stable. During the first half of 2015 Admiral continued to implement rate increases but portfolio shifts(in particular in favour of renewal business over new business) reduced average written premium by 3%
to £481 (H1 2014: £495).
There was an improvement in the reported motor combined ratio, which reduced to 75.6% from 80.2%(both figures exclude the impact of reserve releases from commuted reinsurance contracts – referbelow). The combined ratio improvement was largely due to higher reserve release that resulted frompositive claims development.
The reported motor loss ratio decreased to 58.2% from 66.0% due to higher reserve releases of £50.0
million (H1 2014: £35.4 million). These figures exclude reserve releases from commuted reinsurance
contracts which total £42.6 million (H1 2014: £37.7 million).
These higher releases were due to positive claims cost development in the first half of 2015, which led
to very significant improvements in projected ultimate claims costs on business earned to the end of2014 (and in particular for the 2011 to 2013 underwriting years). Despite the higher reserve releases,
Admiral continues to hold a material margin in reserves due to the level of uncertainty in the ultimate
costs of claims. This margin expressed as a percentage of actuarial best estimate was slightly higher at
30 June 2015 compared to the end of 2014. If claims develop as expected, there is likely to be scope forcontinued reserve releases in the future.
Excluding reserve releases, the motor loss ratio increased to 86.8% (H1 2014: 85.3%). The higher ratio
reflects a larger margin over the actuarial best estimate for business earned in the current six month
period compared to the prior period.
The earned motor expense ratio increased to 17.4% from 14.2% due to 2014 benefitting from a one-off
adjustment to levy costs (excluding this adjustment the earned motor expense ratio for H1 2014 would
have been 16.0%) and lower average premiums. The latter point was also the main reason the written
basis expense ratio increased to 16.2% from 15.2%.

9

The most recent projection of the ultimate combined ratio for Admiral for the 2014 accident year is93%, compared to 79% for 2013 (the increase was largely due to falling premium rates between 2013
and 2014). The reported combined ratio for the UK market for 2014, excluding reserve releases, was
111%.
Profit Commission
Admiral is potentially able to earn material amounts of profit commission revenue from co- andreinsurance partners, depending on the profitability of the business. Revenue is recognised in theincome statement in line with the booked loss ratios on Admiral’s retained underwriting.
In H1 2015 Admiral recognised profit commission revenue of £44.2 million, up from £35.8 million in H1
2014. The increase came as a result of material improvements in the loss ratios.
When a quota share reinsurance contract is commuted (typically after two or three years from the startof an underwriting year), further improvement or deterioration in claims costs are reported within net
claims. If the contracts were not commuted, the movement would be reported in profit commission.
If releases, from business that was originally ceded under quota share reinsurance contracts that havesince been commuted, are added to profit commission, the total for H1 2015 rises to £86.8 million
compared to £73.5 million in H1 2014, an increase of 18%.
Other Revenue
Admiral generates Other Revenue from a portfolio of insurance products that complement the core car
insurance product, and also fees generated over the life of the policy.
The most material contributors to net Other Revenue are:
• Revenue earned from motor policy upgrade products underwritten by Admiral, including
breakdown, car hire and personal injury covers• Revenue from other insurance products, not underwritten by Admiral• Vehicle commission earned from Admiral’s panel of co- and reinsurance partners• Fees such as administration fees and referral income• Interest charged to customers paying for cover in instalments
Contribution from Other Revenue decreased by 9% to £75.3 million (H1 2014: £82.3 million). The
reduction was due to a number of impacts, most notably a change to reinsurer vehicle commissions (thechange reallocates revenue to profit commission, albeit with a time lag in recognition of approximately ayear) and higher loss ratios on add-on products underwritten by the Group (as a result of enhancements
to product features to benefit customers).
Other revenue per vehicle was £64, a decrease of 4% (H1 2014: £67). Net of costs, Other Revenue pervehicle was £55 (H1 2014: £58).

10

UK Car Insurance Other Revenue - analysis of contribution:£m
H1 2013
H1 2014
Contribution from additional
products and fees
Contribution from additional
products underwritten by
Admiral*1
Instalment income

H1 2015

FY 2014

86.2

89.6

84.6

177.8

3.7
12.4

9.6
11.1

8.2
12.0

18.7
22.6

Other Revenue
Internal costs

102.3(15.0)

110.3(18.4)

104.8(21.3)

219.1(37.1)Net Other Revenue

87.3

91.9

83.5

182.0

Other Revenue per vehicle*2
Other Revenue per vehicle net ofinternal costs

£73

£67

£64

£67

£62

£58

£55

£58

[*1] Included in underwriting profit in income statement but re-allocated to Other Revenue for purpose of KPIs.
[*2] Other Revenue (before internal costs) divided by average active vehicles, rolling twelve month basis.

Instalment Income
Instalment income is interest charged to customers paying for cover in instalments. During the first halfof 2015 Admiral earned £12.0 million, up £0.9 million on the prior period (H1 2014: £11.1 million) frominstalment income. Instalment charges are calculated as a percentage of premium.
Additional products underwritten by Admiral
There are a number of products that are core to providing car insurance to customers (including
personal injury insurance, breakdown cover and car hire cover). Contribution from these products
underwritten by Admiral during the first half of 2015 was £8.2 million (H1 2014: £9.6 million) and this isincluded in underwriting profit in the income statement, but reallocated to Other Revenue for the
purpose of management key performance indicators.

11International Car Insurance
Non-GAAP format income statement£m

H1 2013

H1 2014

H1 2015

FY 2014

TurnoverTotal premiums written

95.5
85.5

104.3
94.1

110.3
101.0

206.2
185.4

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

26.4(23.3)(16.9)

27.8
0.1(27.6)(18.9)

29.7(25.4)(18.9)

58.1
0.2(50.5)(34.0)

Underwriting result
Net other income
Other revenue and charges(13.8)
2.9
0.1(18.6)
3.0
0.1(14.6)
3.2
0.2(26.2)
6.3-

International Car Insurance loss
before tax(10.8)(15.5)(11.2)(19.9)

H1 2013

H1 2014

H1 2015

FY 2014

Adjusted loss ratio*1
Adjusted expense ratio*1
Adjusted combined ratio*2

88%
49%
137%

92%
47%
139%

82%
55%
137%

77%
50%
127%

Adjusted combined ratio, net of
Other Revenue*3

126%

128%

126%

116%

Vehicles insured at period-end

481,400

555,600

631,700

592,600

Key Performance Indicators[*1] Adjusted reported loss ratio and adjusted reported expense ratio have been adjusted to remove the impactof reinsurer caps so the underlying performance of the business is transparent.
[*2] Adjusted 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 H1 2013: 152%; H1 2014: 167%; H1 2015: 149%; FY 2014: 145%.
[*3] Reported combined ratio, net of Other Revenue is calculated on Admiral’s net share of premiums andincludes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of Other
Revenue would be H1 2013: 141%; H1 2014: 156%; H1 2015: 138%; FY 2014: 134%.

12

Geographical Analysis
H1 2015
Customers insured
Turnover (£m)*1

Spain
168,75020.0

Italy
298,000
38.9

France43,4509.8

USA121,500
41.6

Total
631,700
110.3

Spain
164,400
43.8

Italy
285,100
81.9

France34,20014.2

USA108,900
66.3

Total
592,600
206.2

Spain
151,300
21.5

Italy
278,550
43.0

France31,0007.1

USA94,75032.7

Total
555,600
104.3

FY 2014
Customers insured
Turnover (£m)*1
H1 2014
Customers insured
Turnover (£m)*1[*1] Turnover includes total premium written and income generated by the sale of additional products andservices and fees

International Car Insurance Financial Performance
The Group has car insurance businesses in four markets outside the UK – in Spain (Admiral Seguros),
Italy (ConTe), the USA (Elephant Auto) and France (L’olivier assurance auto). The operations werelaunched between 2006 and 2010 and are at different stages in their development.
Each operation continues to progress towards the Group’s strategic aim of establishing growing,
sustainable, profitable car insurance businesses outside the UK. As these operations develop, it isexpected that they will make losses until appropriate scale has been achieved (generally expected tooccur 6-10 years after launch, though subject to market conditions).
The combined operations insured 631,700 vehicles at 30 June 2015 – 14% higher than a year earlier (H1
2014: 555,600). Turnover was £110.3 million, up 6% compared to H1 2014. Customers and turnoverfrom outside the UK represent 15% and 10% of the Group totals respectively, up from 14% and 10% in
H1 2014.
The total International Insurance loss for the period was £11.2 million, down from £15.5 million in H1
2014, mainly due to the impact of the profit generated by ConTe in the first half of 2015 compared witha loss for H1 2014. The loss ratio decreased to 82% (H1 2014: 92%), whilst the expense ratio increased
to 55% (H1 2014: 47%). The combined ratio therefore decreased to 137% (H1 2014: 139%).
Admiral Seguros (Spain) was launched in 2006 and is the oldest of Admiral’s international operations. It
trades via the Balumba and Qualitas Auto brands. The business insured 168,750 customers at 30 June
2015, 12% higher than a year earlier.
The Group’s largest international operation is ConTe in Italy with nearly 300,000 vehicles insured at theend of June 2015 (7% higher than a year earlier). In 2014, ConTe enjoyed positive development ofprojected ultimate claims on its back years and was able to record its first small profit on the back ofstrong reserve releases. During the first half of 2015, ConTe continued to see positive development in
the projected ultimate outcomes of most underwriting years allowing further reserve releases in H1

13

2015. ConTe holds a prudent margin in its claims reserves above actuarial best estimate. The margin
remained consistent with FY 2014.
Admiral’s youngest and smallest international insurance business is L’olivier assurance auto, launched in2010 in France. L’olivier insured 43,450 vehicles at the end of June 2015, up 40% on a year earlier andnearly 30% since the end of 2014. L’olivier was established with a different start-up business model toAdmiral’s other international operations, with certain functions outsourced in order to keep expenses
low in the initial phases of development, but during 2014 these functions were brought in-house. 2015
has seen material growth in customer numbers following this restructure.
The consolidated result of Admiral’s insurance operations in Spain, Italy and France was a loss of £3.2
million compared to £9.5 million in H1 2014. The combined ratio improved to 115% from 123%
primarily due to an improvement in claims performance.
In the USA, Admiral underwrites motor insurance in four states (Virginia, Maryland, Illinois and Texas)
through its Elephant Auto business, which launched in 2009. At the end of June 2015, Elephant insured
over 121,000 vehicles, up over 28% year-on-year. Elephant’s result for the period was a loss of £8.0
million, compared to £6.1 million in H1 2014. The written combined ratio for Elephant is stable at 143%
(H1 2014: 141%).

Price Comparison
Non-GAAP format income statement£m
Revenue:
Motor
Other
Total

H1 2013

H1 2014

H1 2015

FY 2014

45.3
12.2
57.5

43.2
13.9
57.1

42.6
12.6
55.2

81.0
26.5
107.5

Operating expenses(47.6)(53.1)(63.8)(110.3)Operating profit/(loss)

9.9

4.0

(8.6)

(2.8)

Confused.com profit
International Price Comparison
result

10.2

9.1

4.8

15.8

(0.3)
9.9

(5.1)
4.0

(13.4)(8.6)(18.6)
(2.8)

10.2

9.1

4.8

15.8

(0.2)
10.0

(3.2)
5.9

(8.8)
(4.0)

(12.2)
3.6

Group share of operating
profit/(loss):*1
Confused.com profit
International Price Comparison
result*1[*1] Represents the Group’s share of Price Comparison profit/ (loss) and excludes the impact of Minority Interests.

14

UK Price Comparison – Confused.com
Confused.com faced continuing challenging market conditions and saw revenue reduce by 12% to £38.9
million (H1 2014: £44.4 million). Profit also fell to £4.8 million (H1 2014: £9.1 million). The results werealso impacted by limited overall growth in the price comparison market and investment in the current
marketing campaign.
Revenue from other products decreased to 24% of total revenue. Confused.com’s operating margin
reduced to 12% (H1 2014: 20%).

International Price Comparison
The Group operates three price comparison businesses outside the UK; in Spain (Rastreator), France(LeLynx) and USA (compare.com).
The combined revenue from the European operations in H1 2015 increased by 16% to £12.3 million (H1
2014: £10.6 million) and 30% more quotes were provided to users of the websites. Combined revenue
in local currency increased by 30% reflecting increased quote volumes and improved conversion rates.
Both Rastreator and LeLynx have market-leading positions and strong brand recognition in theirrespective markets. The Group’s share of the combined result for Rastreator and LeLynx was a profit of£1.6 million (H1 2014: £1.9 million) with the decrease mainly due to exchange rate fluctuations.
Admiral Group owns 75% of Rastreator, with the remaining 25% owned by Mapfre.
Following the launch in March 2013 of compare.com, our US comparison operation, the Group has
continued to invest in the operation. During H1 2015 Admiral’s share of compare.com’s loss was £10.4
million before tax (H1 2014: £5.1 million). Due to the ongoing investment in compare.com, the Group’s
share of compare.com’s losses for 2015 will be in the range of £20 million and £30 million.
The Group’s share of the combined result for International Price Comparison was therefore a loss of£8.8 million (H1 2014: loss of £3.2 million) – the profit from Rastreator and LeLynx offset by investment
in compare.com.

Other Group Items£m

H1 2013UK Household Insurance result
UK Commercial Vehicle operating profit
Other interest and investment income
Share scheme charges
Business development costs
Other central overheads and charges
Finance charges

(0.2)
1.4
1.1
(10.5)
(0.6)
(1.6)
-

H1 2014

H1 2015

FY 2014

0.5
1.5
0.6
(12.5)
(0.2)
(2.8)
-

0.6
1.0
3.3
(11.9)
(0.5)
(4.7)
(5.5)

(0.1)
2.2
3.7
(21.2)
(0.7)
(3.9)
(4.6)

UK Household Insurance
The Group’s UK Household Insurance business was launched in December 2012. The product isunderwritten within the Group and common with other businesses it is supported by proportional
reinsurance covering 70% of the underwriting risk.

15

UK Commercial Vehicle
The Group operates a commercial vehicle insurance broker (Gladiator) offering van insurance andassociated products, typically to small businesses. Gladiator has been impacted by a very competitiveenvironment and as a result operating profit has reduced to £1.0 million (H1 2014: £1.5 million), though
the number of customers increased by 4% to 143,000 (H1 2014: 137,000).
Other central overheads and charges
Other central overheads include Group Directors’ remuneration and other Group central costs. The
increase in costs in the period is due to a number of one-off charges.
Finance charges
Finance charges of £5.5 million (H1 2014: £Nil) represent interest on the £200 million subordinated loan
notes issued in July 2014.
Proposed change of Auditor
In August 2015, the Board approved the proposed appointment of Deloitte as auditor to the Company
and its subsidiaries. Deloitte will replace KPMG with effect from the 2016 financial year. The
appointment is subject to approval by shareholders at the next Annual General Meeting in April 2016
and follows a tender process carried out by the Audit Committee during the first half of 2015. Further
details of the process will be provided in the 2015 Annual Report.

16

Condensed consolidated income statement
6 months ended:
30 June 2015
30 June 2014
Note:

£m

£m

Year ended:
31 December
2014
£m

544.2
(312.5)231.7

1,099.7(634.8)464.9

Insurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue

5

549.6
(320.7)
228.9

Other revenue
Profit commission
Investment and interest income

7
5
6

165.0
44.2
9.6

170.4
35.8
6.7

332.5
71.8
15.4

Net revenue

447.7

444.6

884.6

Insurance claims and claims handling expenses
Insurance claims and claims handling expenses
recoverable from reinsurers
Net insurance claims(352.3)(390.4)(794.5)250.9(101.4)265.9(124.5)535.4(259.1)3, 8(279.0)(239.9)(501.8)

3, 8

119.9

103.1

231.6

(159.1)(136.8)(270.2)

Total expenses(260.5)(261.3)(529.3)Operating profit

187.2

183.3

355.3

Operating expenses and share scheme charges
Operating expenses and share scheme charges
recoverable from co- and reinsurers
Net operating expenses and share scheme
charges

Finance costs
Profit before tax

6

(5.5)
181.7

183.3

(4.6)
350.7

Taxation expense

9(33.4)(38.9)(69.1)

148.3

144.4

281.6

152.9
(4.6)

145.7
(1.3)

285.2
(3.6)

148.3

144.4

281.6

Profit after tax
Profit after tax attributable to:Equity holders of the parent
Non-controlling interests

Earnings per share:
Basic

11

54.8p

52.7p

103.0p

Diluted

11

54.7p

52.7p

102.8pDividends declared and paid (total)
Dividends declared and paid (per share)

11
11

134.4
49.0p

138.3
50.6p

273.5
100.0p17

Condensed consolidated statement of comprehensive income
6 months ended:
30 June 2015 30 June 2014

Profit for the period£m£mYear ended:
31 December
2014
£m

148.3

144.4

281.6

Other comprehensive income
Items that are or may be reclassified to profit or loss
Movements in fair value reserve
Exchange differences on translation of foreign
operations

(8.8)

(1.8)

10.9

(1.3)

(2.3)

3.0

Other comprehensive income for theperiod, net of income tax(10.1)

(4.1)

13.9

Total comprehensive income for the period

138.2

140.3

295.5

142.8
(4.6)

141.8
(1.5)

298.6
(3.1)

138.2

140.3

295.5

Total comprehensive income for the period attributable
to:Equity holders of the parent
Non-controlling interests18

Condensed consolidated statement of financial position
30 June 2015

As at:
30 June 2014

Note:

£m

£m

31 December
2014
£m

10
10
9
5
6, 10
6
6

32.3
119.3
29.5
720.5
499.3
2,242.8
216.0

28.4
98.6
19.8
697.6
498.4
1,925.7
247.7

32.3
107.2
22.9
829.8
435.3
2,194.1
255.9

3,859.7

3,516.2

3,877.5

0.3
13.1
2.1
1.0
574.2

0.3
13.1
(1.8)
(2.3)
527.0

0.3
13.1
10.9
2.3
540.6

590.7

536.3

567.2

8.9

10.8

13.7

599.6

547.1

580.9

2,148.3
203.8
876.2
31.8

2,010.0
925.6
33.5

2,097.4
203.8
965.8
29.6

Total liabilities

3,260.1

2,969.1

3,296.6

Total equity and total liabilities

3,859.7

3,516.2

3,877.5

ASSETS
Property and equipment
Intangible assets
Deferred income tax
Reinsurance assets
Insurance and other receivables
Financial investments
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium accountFair value reserve
Foreign exchange reserve
Retained profit and loss

11

Total equity attributable to equity holders of
the parent

Non-controlling interests
Total equity
LIABILITIESInsurance contracts
Subordinated liabilities
Trade and other payables
Current tax liabilities

5
6
6, 10

19

Condensed consolidated cash flow statement
6 months ended:
30 June 2015
30 June 2014£m£m

Year ended:
31 December
2014
£m

148.3

144.4

281.6

3.9
2.6
0.3
12.9
(3.0)
5.5
50.9
109.3

3.2
2.0
3.2
14.2
108.7
123.6

7.1
4.6
(0.2)
23.2
(2.6)
4.6
196.1
(8.6)

(64.2)(55.2)

14.7(88.5)
33.4
211.4(88.5)
38.9
294.5(49.4)
69.1
540.2

Net cash flow into investments
Cash flows from operating activities, net of movements
in investments(57.5)
153.9(33.8)
260.7(286.3)
253.9

Taxation payments
Net cash flow from operating activities(35.6)
118.3(40.1)
220.6(77.0)
176.9(18.9)
3.1(15.8)(24.6)(24.6)(50.6)
3.1(47.5)

(0.2)
(5.5)
(1.0)
(134.4)(141.1)

4.0
1.0
(0.6)
(138.3)(133.9)

8.5
200.0
(0.8)
1.4
(273.5)(64.4)Net (decrease)/ increase in cash and cash equivalents(38.6)

62.1

65.0

Cash and cash equivalents at 1 January
Effects of changes in foreign exchange rates

255.9
(1.3)

187.9
(2.3)

187.9
3.0

216.0

247.7

255.9

Note:
Profit after tax
Adjustments for non-cash items:- Depreciation- Amortisation of software- Change in unrealised gains on investments- Other gains and losses- Share scheme charges- Investment income on gilts- Finance costs
Change in gross insurance contract liabilities
Change in reinsurance assets
Change in trade and other receivables, including frompolicyholders
Change in trade and other payables, including tax andsocial security
Taxation expense
Cash flows from operating activities, before
movements in investments

10
10

8
6

9

Cash flows from investing activities:
Purchases of property, equipment and software
Interest and investment income received
Net cash used in investing activities

10

Cash flows from financing activities:
Non-controlling interest capital contribution
Proceeds on issue of subordinated liabilities
Transactions costs on issue of subordinated liabilities
Finance costs paid
Capital element of new finance lease liabilities
Repayment of finance lease liabilities
Equity dividends paid
Net cash used in financing activities

Cash and cash equivalents at end of period

11

6

20

Consolidated statement of changes in equity

Share
capital£m

Attributable to the owners of the company
Share
Fair
Foreign Retained
premium
value exchange
profitaccount reserve
reserveand loss
Total
£m
£m
£m
£m
£m

NCI*1
£m

Total
equity£m

At 1 January 2014

0.3

13.1

-

(0.2)

502.6

515.8

8.3

524.1

Profit for the period

-

-

-

-

145.7

145.7

(1.3)

144.4

Other comprehensive income
Movements in fair value reserve
Currency translation differences

-

-

(1.8)
-

(2.1)

-

(1.8)
(2.1)

(0.2)

(1.8)
(2.3)

Total comprehensive income forthe period

-

-

(1.8)

(2.1)

145.7

141.8

(1.5)

140.3

-

-

-

-

(138.3)14.2(138.3)14.2-(138.3)
14.2

-

-

-

-

2.8
-

2.8
-

4.0

2.8
4.0

-

-

-

-

(121.3)(121.3)

4.0(117.3)As at 30 June 2014

0.3

13.1

(1.8)

(2.3)

527.0

536.3

10.8

547.1

At 1 January 2014

0.3

13.1

-

(0.2)

502.6

515.8

8.3

524.1

Profit for the period

-

-

-

-

285.2

285.2

(3.6)

281.6

Other comprehensive income
Movements in fair value reserve
Currency translation differences

-

-

10.9
-

2.5

-

10.9
2.5

0.5

10.9
3.0

Total comprehensive income forthe period

-

-

10.9

2.5

285.2

298.6

(3.1)

295.5

-

-

-

-

(273.5)23.2(273.5)23.2-(273.5)
23.2

-

-

-

-

3.1
-

3.1
-

8.5

3.1
8.5

-

-

-

-

(247.2)(247.2)8.5(238.7)

0.3

13.1

10.9

2.3

540.6

567.2

13.7

580.9

Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs
Total transactions with equityholders

Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs
Total transactions with equityholders
As at 31 December 201421

Sharecapital£m

Attributable to the owners of the company
Share
Fair
Foreign Retained
premium
value exchange
profitaccount reserve
reserveand loss
Total
£m
£m
£m
£m
£m

NCI*1
£m

Total
equity£m

At 1 January 2015

0.3

13.1

10.9

2.3

540.6

567.2

13.7

580.9

Profit for the period

-

-

-

-

152.9

152.9

(4.6)

148.3

Other comprehensive income
Movements in fair value reserve
Currency translation differences

-

-

(8.8)
-

(1.3)

-

(8.8)
(1.3)

-

(8.8)
(1.3)

Total comprehensive income forthe period

-

-

(8.8)

(1.3)

152.9

142.8

(4.6)

138.2

-

-

-

-

(134.4)12.9(134.4)12.9-(134.4)
12.9

-

-

-

-

2.2
-

2.2
-

(0.2)

2.2
(0.2)

-

-

-

-

(119.3)(119.3)(0.2)(119.5)

0.3

13.1

2.1

1.0

574.2

590.7

8.9

599.6

Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs
Total transactions with equityholders
As at 30 June 2015[*1] Non-controlling interests

22Notes to the financial statements
1.

General information

Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at Tŷ Admiral,
David Street, Cardiff CF10 2EH and its shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results and balances of the Company and its
subsidiaries (the Group) for the six-month period ended 30 June 2015 and the comparative periods forthe six-months ended 30 June 2014 and the year ended 31 December 2014. This condensed set offinancial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU.
As required by the FCA’s Disclosure and Transparency Rules, the condensed set of financial statements
has been prepared applying the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements for the year ended 31
December 2014.
The financial statements of the Company’s subsidiaries are consolidated in the Group financial
statements. In accordance with IAS 24, transactions or balances between Group companies that havebeen eliminated on consolidation are not reported as related party transactions.
The comparative figures for the financial year ended 31 December 2014 are not the Company's
statutory accounts for that financial year. Those accounts have been reported on by the Company's
auditors and delivered to the registrar of companies. The report of the auditors was:i.
unqualified;ii.
did not include a reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report; andiii.
did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
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.
Further information is given in the Basis of preparation below.

2.

Basis of preparation

The condensed set of interim financial statements have been prepared applying the accounting policies
and presentation that were applied in the preparation of the Company’s published consolidated
financial statements for the year ended 31 December 2014. A number of other IFRS and interpretations
have been endorsed by the EU in the period to 30 June 2015 and although they have been adopted by
the Group, none of them has had a material impact on the Group’s financial statements.
Under Provision C.1.3 of the 2014 UK Corporate Governance Code, the Board is required to report onwhether the business is a going concern. In considering this requirement, the Directors have taken into
account the following:•

The Group’s projections for the next 12 months and beyond, in particular the profit and cash
flows forecasts, and economic capital surpluses.

23

•

The Group’s additional sources of liquidity including the £200 million raised in the bondplacement in 2014 and a revolving credit facility.

•

The risks included on the Group’s risk register that could impact on the Group’s liquidity andsolvency over the next 12 months.

•

The risks on the Group’s risk register that could be a threat to the Group’s business model andcapital adequacy.

The Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the Strategic Report within the Group’s 2014 Annual Report.
Note 14 to this report also includes the Group’s principal risks and uncertainties.
Following consideration of the issues above, the Directors have reasonable expectation that the Group
has adequate resources to continue in operating for the foreseeable future and that it is therefore
appropriate to adopt the Going Concern basis in preparing the financial statements.

3.

Critical accounting judgements and estimates

The Group’s 2014 Annual Report provides full details of significant judgements and estimates used in
the application of the Group’s accounting policies. There have been no significant changes to thesejudgements and estimates during the period.
Estimation techniques used in calculation of claims provisions and profit commission:
Estimation techniques are used in the calculation of the provisions for claims outstanding, which
represent a projection of the ultimate cost of settling claims that have occurred prior to the balance
sheet date and remain 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 occurred prior to the balance sheet date, but
had not been reported at that date.
The estimates of the ultimate cost of reported claims are based on the setting of claim provisions on acase-by-case 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 and an average cost of claim approach)to allow an actuarial assessment of their potential outcome. They include allowance for unreported
claims.
The most significant sensitivity in the use of the projection techniques arises from any future stepchange in claims costs, which would cause future claim cost inflation to deviate from historic trends.
This is most likely to arise from a change in the regulatory or judicial regime that leads to an increase inawards or legal costs for bodily injury claims that is significantly above or below the historical trend.
The Group’s independent actuarial advisors project best estimate claims reserves using a variety ofrecognised actuarial techniques. The Group’s reserving policy requires management to reserve within a24

range of potential outcomes above the projected best estimate outcome, to allow for unforeseen
adverse claims development.
For further detail on objectives, policies and procedures for managing insurance risk, refer to note 5 of
the financial statements in the Group’s 2014 Annual Report.
Future changes in claims reserves also impact profit commission income, as the measurement of thisincome is dependent on the loss ratio booked in the financial statements, and cash receivable isdependent on actuarial projections of ultimate loss ratios.

4.

Operating segments

The Group has four reportable segments, as described below. These segments represent the principal
split of business 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 revenue from additional products and fees fromunderwriting car insurance in the UK. The Directors consider the results of these activities to bereportable as one segment as the activities carried out in generating the revenue are not independentof each other and are performed as one business. This mirrors the approach taken in management
reporting.
International Car Insurance
The segment consists of the underwriting of car insurance and the generation of revenue fromadditional products and fees, from underwriting car insurance outside of the UK. It specifically covers
the Group operations Admiral Seguros in Spain, ConTe in Italy, L’olivier assurance auto in France andElephant Auto in the USA. None of these operations are reportable on an individual basis, based on thethreshold requirements in IFRS 8.
Price Comparison
The segment relates to the Group’s price comparison websites; Confused.com in the UK, Rastreator in
Spain, LeLynx in France and compare.com in the USA. Each of the Price Comparison businesses areoperating in individual geographical segments but are grouped into one reporting segment as
Rastreator, LeLynx and compare.com do not individually meet the threshold requirements in IFRS 8.
Other
The ‘Other’ segment is designed to be comprised of all other operating segments that do not meet thethreshold requirements for individual reporting. It includes UK household insurance, the Group’scommercial van insurance broker, Gladiator, and commercial van insurance.
Taxes are not allocated across the segments and, as with the corporate activities, are included in thereconciliation to the Consolidated Income Statement and Consolidated Statement of Financial Position.

25

Segment income, results and other information

An analysis of the Group’s revenue and results for the period ended 30 June 2015, by reportablesegment are shown below. The accounting policies of the reportable segments are consistent with thosepresented in the notes to the 2014 Group financial statements.
30 June 2015
Segment
total
£m
£m

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison£mEliminations
Other
£m

Turnover*1

857.9

110.3

55.2

34.1

-

1,057.5

Net insurance
premium revenue

188.9

31.8

-

8.2

-

228.9

Other revenue andprofit commission

140.8

4.0

55.2

9.2

-

209.2

Investment andinterest income

6.3

-

-

-

-

6.3

Net revenue

336.0

35.8

55.2

17.4

-

444.4

Net insurance claims(69.3)(25.6)

-

(6.5)

-

(101.4)

Expenses(47.5)(21.4)(63.8)(9.3)-(142.0)

Segment profit /(loss) before tax

219.2(11.2)

(8.6)

1.6

-

201.0

Other central revenue and expenses, including share scheme charges
Interest and investment income
Finance costs(17.1)
3.3(5.5)

Consolidated profit before tax

181.7

Taxation expense(33.4)

Consolidated profit after tax

148.3[*1] Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers share) and
Other revenue. Refer to note 12 for further information.

26

Revenue and results for the corresponding reportable segments for the period ended 30 June 2014 areshown below.

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

30 June 2014
Eliminations
Segment
total
£m
£m

Turnover*1

849.8

104.3

57.1

25.9

-

1,037.1

Net insurance
premium revenue

197.9

27.8

-

6.0

-

231.7

Other revenue andprofit commission

136.5

3.5

57.1

9.1

-

206.2

Investment andinterest income

6.0

0.1

-

-

-

6.1

Net revenue

340.4

31.4

57.1

15.1

-

444.0

Net insurance claims(92.6)(27.6)

-

(4.3)

-

(124.5)

Expenses(40.1)(19.3)(53.1)(8.7)-(121.2)

Segment profit /(loss) before tax

207.7(15.5)

4.0

2.1

-

198.3

Other central revenue and expenses, including share scheme charges
Interest income
Finance costs(15.6)
0.6-

Consolidated profit before tax

183.3

Taxation expense(38.9)

Consolidated profit after tax

144.4

27

Revenue and results for the corresponding reportable segments for the year ended 31 December 2014
are shown below.

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

31 December 2014
Eliminations
Segment
total
£m
£m

1,602.7

206.2

107.5

54.6

-

1,971.0

Net insurance
premium revenue

394.3

58.1

-

12.5

-

464.9

Other revenue andprofit commission

272.2

7.1

107.5

17.5

-

404.3

Investment andinterest income

11.5

0.2

-

-

-

11.7

Net revenue

678.0

65.4

107.5

30.0

-

880.9

Net insurance claims(198.3)(50.5)-(10.3)-(259.1)

Expenses(81.7)(34.8)(110.3)(17.6)-(244.4)

Segment profit /(loss) before tax

398.0(19.9)

(2.8)

2.1

-

377.4

Turnover*1

Other central revenue and expenses, including share scheme charges
Interest and investment income
Finance costs(25.8)
3.7(4.6)

Consolidated profit before tax

350.7

Taxation expense(69.1)

Consolidated profit after tax

281.6

28

Segment revenues
The UK and International Car Insurance reportable segments derive all insurance premium income fromexternal policyholders. Revenue within these segments is not derived from an individual policyholderthat represents 10% or more of the Group’s total revenue.
The total of Price Comparison revenues from transactions with other reportable segments is £7.2 million(H1 2014: £5.7 million, FY 2014: £9.5 million). These amounts have not been eliminated on consolidation
as the Directors consider that not doing so results in a better overall presentation of the financial
statements. The impact on the financial statements in the current and prior 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
insurance companies relating to vehicle commission totalling £5.2 million (H1 2014: £7.0 million, FY
2014: £13.3 million) have been eliminated (from the insurance expenses and Other revenue lines in theincome statement) on the basis that the non-elimination would have materially distorted thepresentation of key performance indicators.
Revenues from external customers for products and services is consistent with the split of reportablesegment revenues as shown above.
Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country relating to
car insurance are shown within the International Car Insurance reportable segment shown above. The
revenue and results of the three International Price Comparison businesses; Rastreator, LeLynx andcompare.com are not yet material enough to be presented as a separate segment.

29

5.
5a.

Premium, Claims and Profit Commissions
Net insurance premium revenue
30
June
2015
£m

30
June
2014
£m

31
December2014£mTotal motor insurance premiums before co-insurance

904.9

886.9

1,675.6

Group gross premiums written after co-insurance
Outwards reinsurance premiums

597.9(351.2)577.6(336.0)1,102.1(644.9)Net insurance premiums written

246.7

241.6

457.2

Change in gross unearned premium provision
Change in reinsurers’ share of unearned premium provision(48.3)
30.5(33.4)
23.5

(2.4)
10.1

Net insurance premium revenue

228.9

231.7

464.9

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 shortterm in duration, lasting for 10 or 12 months.

5b.

Profit commission
30
June
2015
£m

30
June
2014
£m

31
December2014£mUnderwriting year:
2010 & prior
2011
2012
2013

2.9
12.1
19.0
10.2

6.4
20.9
8.5
-

19.1
27.8
24.9
-

Total profit commission

44.2

35.8

71.8

30

5c.

Reinsurance assets and insurance contract liabilities(i)

Analysis of recognised amounts:
30
June
2015
£m

30
June
2014
£m

31
December
2014£m

1,603.9544.4
2,148.3

1,478.4531.6
2,010.0

1,596.0
501.4
2,097.4

403.5
317.0
720.5

392.2
305.4
697.6

538.2
291.6
829.8

Net:
Claims outstanding*1
Unearned premium provision

1,200.4
227.4

1,086.2
226.2

1,057.8
209.8

Total insurance liabilities – net

1,427.8

1,312.4

1,267.6

Gross:
Claims outstanding
Unearned premium provision
Total gross insurance liabilities
Recoverable from reinsurers:
Claims outstanding
Unearned premium provision
Total reinsurers’ share of insurance liabilities[*1] Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24-36 months
following the start of the underwriting year. After commutation, claims outstanding from these contracts areincluded in Admiral’s net claims outstanding balance. Refer to Note (iii) below.

(ii)

Analysis of net claims reserve releases:

The following table analyses the impact of movements in prior year claims provisions, in terms of their
net value, and their impact on the reported loss ratio. This data is presented on an underwriting year
basis.
30
June
2015
£m

30
June
2014
£m

31
December2014£mUnderwriting year:
2010 & prior
2011
2012
2013
2014

4.7
22.4
35.3
23.5
6.7

11.3
38.2
19.9
3.7
-

28.1
51.4
50.2
7.7
-

Total net release (UK Car Insurance)
Total net release (International Car Insurance)

92.6
2.8

73.1
-

137.4
6.3

Total net release

95.4

73.1

143.7

Net releases on Admiral’s net share
Releases on commuted quota share reinsurance
contracts

50.0

35.4

66.8

42.6

37.7

70.6

Total net release (UK Car Insurance) as above

92.6

73.1

137.4

31

Releases on commuted quota share contracts are analysed by underwriting year as follows:
30
June
2015
£m

30
June
2014
£m

31
December2014£mUnderwriting year:
2010 & prior
2011
2012
2013

2.4
12.1
20.6
7.5

5.4
20.7
11.6
-

13.6
27.9
29.1
-

Total releases on commuted quota share reinsurance
contracts

42.6

37.7

70.6

30
June
2015
£m

30
June
2014
£m

31
December
2014£m

Net claims reserve at start of period

1,057.8

863.0

863.0

Net claims incurred (excluding releases)
Net reserve releases
Movement in net claims provision due to commutation
Net claims paid and other movements

192.1(95.4)
233.8(187.9)192.8(73.1)
280.7(177.2)392.9(143.7)280.7(335.1)

Net claims reserve at end of period*1

1,200.4

1,086.2

1,057.8

Profit commission is analysed in note 5b.
(iii)

Reconciliation of movement in net claims provision:[*1] The increase in net claims reserve from £1,057.8 million at 31 December 2014 to £1,200.4 million is primarily
due to the impact of commutations of reinsurance contracts in the UK Car Insurance business.

(iv)

Reconciliation of movement in net unearned premium provision:
30
June
2015
£m

30
June
2014
£m

31
December
2014£m

Net unearned premium provision at start of period

209.8

217.1

217.1

Written in the period
Earned in the period

246.7(229.1)241.6(232.5)457.2(464.5)Net unearned premium provision at end of period

227.4

226.2

209.8

32

6.
6a.

Investments
Investment and interest income
30
June
2015
£m

30
June
2014
£m

31
December
2014£m

Investment return on money market funds
Interest income on available for sale debt securities
Interest income on term deposits with credit
institutions
Interest income on held to maturity gilt assets

1.9
7.3
2.2

2.9
2.3
2.7

5.4
9.4
5.2

3.0

-

2.6

Net investment return

14.4

7.9

22.6

Unwind of discount on gilts
Notional accrual for reinsurers’ share of investment
return

(0.4)
(5.1)

(1.8)

(0.4)
(8.3)

8.9

6.1

13.9

Interest receivable on cash and cash equivalents

0.7

0.6

1.5

Total investment and interest income

9.6

6.7

15.4

30
June
2015
£m

30
June
2014
£m

31
December
2014£mInterest payable

5.5

-

4.6

Total finance costs

5.5

-

4.6

Investment income:

6b.

Finance costs

33

6c.

Financial assets and liabilities

The Group’s financial instruments can be analysed as follows:
30
June
2015
£m

30
June
2014
£m

31
December
2014
£m

671.0

860.3

909.2

Investments classified as available for sale:
Available for sale debt securities

1,122.6

802.8

822.7

Investments classified as held to maturity:
Term deposits with credit institutions
UK government gilts

247.5
201.7

262.6
-

263.1
199.1

2,242.8

1,925.7

2,194.1

Insurance and other receivables:
Amounts owed by policyholders
Trade and other receivables

398.3
101.0

407.2
91.2

353.3
82.0

Cash and cash equivalents

216.0

247.7

255.9

2,958.1

2,671.8

2,885.3

30
June
2015
£m

30
June
2014
£m

31
December
2014£mFinancial liabilities:
Subordinated notes
Trade and other payables

203.8
876.2

925.6

203.8
965.8

Total financial liabilities

1,080.0

925.6

1,169.6

Investments held at fair value through profit and loss:
Money market funds

Total financial investments

Total financial assets

All investments held at fair value at the end of the period are invested in AAA-rated money market
liquidity funds.
The measurement of these investments is based on active quoted market values (level 1).
Available for sale debt securities include holdings in fixed income and other debt securities, and are heldat fair value with interest income recognised in the income statement and unrealised movements in fairvalue taken through other comprehensive income.
Investments classified as held to maturity are comprised of term deposits and UK government gilts, andare held in the Condensed Consolidated Statement of Financial Position at amortised cost.

34

Term deposits are held with well rated institutions and as such the fair value of these investments is
considered to approximate to the carrying value as impairment of the capital is not expected. There isno quoted market for these holdings and as such a level 2 valuation is used. The carrying value of term
deposits is £247.5 million (H1 2014: £262.6 million, FY 2014: £263.1 million).
The fair value of the holding of UK government gilts at 30 June 2015 is £209.7m (level one valuation) (H1
2014: £nil, FY 2014: £216.2m). The fair value of subordinated notes (level one valuation) at 30 June2015 is £198.8m (H1 2014: £nil, FY 2014: £211.2m).
Insurance and other receivables are also valued at amortised cost in the Condensed consolidated
statement of financial position. This carrying value is a reasonable approximation of fair value.

6d.

Cash and cash equivalents
30
June
2015
£m

30
June
2014
£m

31
December
2014£mCash at bank and in hand

216.0

247.7

255.9

Total cash and cash equivalents

216.0

247.7

255.9

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.

7.
7a.

Other Revenue
Contribution from additional products and fees and other revenue
30
June
2015
£m

30
June
2014
£m

31
December
2014£m

Contribution from additional products and fees
Price Comparison revenue
Other revenue

89.0
55.2
20.8

93.6
57.1
19.7

185.6
107.5
39.4

Total other revenue

165.0

170.4

332.5

35

8.
8a.

Expenses
Operating expenses and share scheme charges
Gross

£m

Recoverablefrom co- andreinsurers£m

30 June 2015
Net£m

Acquisition of insurance contracts
Administration and other marketing costs(insurance contracts)

44.5(27.3)

17.2

117.3

(85.1)

32.2

Insurance contract expenses

161.8(112.4)49.4

Administration and other marketing costs(Other)Share scheme charges

97.8
19.4

(7.5)

97.8
11.9

Total expenses and share scheme charges

279.0(119.9)

159.1

Gross

£m

Recoverablefrom co- andreinsurers£mAcquisition of insurance contracts
Administration and other marketing costs(insurance contracts)

45.6(27.1)

18.5

92.5(68.3)

24.2

Insurance contract expenses

138.1(95.4)

42.7

Administration and other marketing costs(Other)Share scheme charges

81.6
20.2

(7.7)

81.6
12.5

Total expenses and share scheme charges

239.9(103.1)136.8

30 June 2014
Net

£m

36

Gross£m

31 December 2014
Recoverable
Net
from co- andreinsurers£m£m

Acquisition of insurance contracts
Administration and other marketing costs(insurance contracts)

91.9(56.7)

35.2

209.5

(162.0)47.5

Insurance contract expenses

301.4(218.7)

82.7

Administration and other marketing costs(Other)Share scheme charges

166.3
34.1

(12.9)

166.3
21.2

Total expenses and share scheme charges

501.8(231.6)

270.2

The £32.2 million (H1 2014: £24.2 million, FY 2014: £47.5 million) administration and marketing costs
allocated to insurance contracts is principally made up of salary costs.

Analysis of other administration and other marketing costs
30
June
2015
£m

30
June
2014
£m

31
December
2014£m

Expenses relating to additional products and fees
Price Comparison operating expenses
Other expenses

21.9
63.8
12.1

18.8
53.1
9.7

37.9
110.3
18.1

Total

97.8

81.6

166.3

Refer to note 12 for a reconciliation between insurance contract expenses and the reported expense
ratio.

8b.

Staff share schemes

Analysis of share scheme costs (per income statement):
30
June
2015
£m

30
June
2014
£m

31
December2014£mShare Incentive Plan (SIP) charge
Discretionary Free Share Scheme (DFSS) charge

4.7
7.2

4.5
8.0

8.6
12.6

Total share scheme charges

11.9

12.5

21.2

The share scheme charges reported above are net of the co- and reinsurers share of the cost andtherefore differ from the gross charge reported in the gross credit to reserves reported in the37

consolidated statement of changes in equity (H1 2015: £12.9 million, H1 2014: £14.2 million, FY 2014:£23.2 million).
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 inthe ‘change in trade and other payables’ line.

9.
9a.

Taxation
Taxation
30
June
2015
£m

30
June
2014
£m

31
December
2014
£m

37.9

36.4

72.2

-

-

(0.4)

37.9

36.4

71.8

(4.5)

2.5

(1.8)

-

-

(0.9)

33.4

38.9

69.1

30
June
2015
£m

30
June
2014
£m

31
December
2014£mProfit before taxation

181.7

183.3

350.7

Corporation tax thereon at 20.25% (2014: 21.50%)
Expenses and provisions not deductible for tax purposes
Adjustments relating to prior periods
Impact of different overseas tax rates
Unrecognised deferred tax
Other differences

36.8
(6.0)
2.4
0.2

39.4
(3.3)
2.8

75.4
(0.9)
(1.3)
(11.2)
7.1-

Tax charge for the period as above

33.4

38.9

69.1

UK Corporation tax
Current charge at 20.25% (2014: 21.5%)(Over) provision relating to prior periods – corporation
tax
Current tax charge
Deferred tax
Current period deferred taxation movement(Over) provision relating to prior periods – deferred
tax
Total tax charge per income statement

Factors affecting the total tax charge are:

38

9b.

Deferred income tax (asset)

Analysis of deferred tax (asset)

Taxtreatment of
share
schemes£mCapitalallowances

CarriedforwardlossesOther
differences

Total

£m

£m

£m

£m

(4.1)

(3.3)

(7.8)

(1.8)

(17.0)

Balance brought forward at 1 January 2014
Tax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other difference

2.7

-

-

-

2.7

(2.8)
-

0.4
-

(2.8)
-

(0.3)

(2.8)
0.4
(2.8)
(0.3)

Balance carried forward 30 June 2014

(4.2)

(2.9)

(10.6)(2.1)(19.8)

Balance brought forward at 1 January 2014

(4.1)

(3.3)

(7.8)

(1.8)

(17.0)

Tax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other difference

2.4

-

-

-

2.4

(3.1)
-

(1.3)
-

(5.6)
-

1.7

(3.1)
(1.3)
(5.6)
1.7

Balance carried forward 31 December 2014

(4.8)

(4.6)

(13.4)(0.1)(22.9)

Tax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other difference

(0.7)

-

-

-

(0.7)

(2.2)
-

1.3
-

(4.0)
-

(1.0)

(2.2)
1.3
(4.0)
(1.0)

Balance carried forward 30 June 2015

(7.7)

(3.3)

(17.4)(1.1)(29.5)The UK corporation tax rate reduced from 21% to 20% on 1 April 2015. The average effective rate of tax
for 2015 is 20.25% (2014: 21.5%). Deferred tax has therefore been calculated at 20% where thetemporary difference is expected to reverse after this date.
The deferred tax asset relating to carried forward losses of £17.4 million (H1 2014: £10.6 million, FY
2014: £13.4 million) relates to losses incurred in the Group’s US businesses Elephant Auto andcompare.com and is calculated at the local US rate of tax (35%).
Elephant Auto (asset recognised: £7.6 million; remaining unused losses: £30 million) – the asset is
expected to be recovered over the next seven years. The recognised asset has been limited to theamount supported by forecast cash flows over the next seven years. Whilst profits are expected to be39

available after 2022, the Group considers these longer term forecasts to be more uncertain and has
therefore not recognised an asset that would only be supported by profits beyond the seven year
period.
compare.com (asset recognised: £9.8 million; remaining unused losses: £15 million) – the asset is
expected to be recovered over the next five years. The recognised asset has been limited to the amountsupported by forecast cash flows over the next five years after the application of appropriate stress andscenario tests to both revenue and profits. The forecasts and underlying assumptions have beenreviewed and approved by the Board.
The Group considers full recovery of the assets to be probable in both cases.
At 30 June 2015 the Group had unused tax losses amounting to £45 million (H1 2014: £nil, FY 2014: £33
million), relating to these businesses, for which no deferred tax asset has been recognised.

40

10.
10a.

Other assets and other liabilities
Property and equipment
Improvements
to short
leaseholdbuildings£mComputerequipment£m

Officeequipment£m

Furniture andfittings
£m

Total
£m

Cost
At 1 January 2014
Additions
Disposals
At 30 June 2014

8.5
14.4
(0.3)
22.6

32.8
3.2
36.0

13.0
0.9
13.9

5.3
0.7
6.0

59.6
19.2
(0.3)
78.5

Depreciation
At 1 January 2014
Charge for the year
Disposals
At 30 June 2014

6.3
0.4
(0.3)
6.4

26.1
2.1
28.2

10.4
0.4
10.8

4.4
0.3
4.7

47.2
3.2
(0.3)
50.1

Net book amountAt 30 June 2014

16.2

7.8

3.1

1.3

28.4

Cost
At 1 January 2014
Additions
Disposals
At 31 December 2014

8.5
16.9
(0.5)
24.9

32.8
6.8
(0.1)
39.5

13.0
1.0
14.0

5.3
2.5
7.8

59.6
27.2
(0.6)
86.2

Depreciation
At 1 January 2014
Charge for the year
Disposals
At 31 December 2014

6.3
1.7
(0.4)
7.6

26.1
3.6
29.7

10.4
1.2
11.6

4.4
0.6
5.0

47.2
7.1
(0.4)
53.9

Net book amountAt 31 December 2014

17.3

9.8

2.4

2.8

32.3

Cost
At 1 January 2015
Additions
Disposals
At 30 June 2015

24.9
0.3
25.2

39.5
3.8
(0.5)
42.8

14.0
0.2
14.2

7.8
7.8

86.2
4.3
(0.5)
90.0

Depreciation
At 1 January 2015
Charge for the year
Disposals
At 30 June 2015

7.6
1.1
8.7

29.7
2.1
(0.1)
31.7

11.6
0.3
11.9

5.0
0.4
5.4

53.9
3.9
(0.1)
57.7

Net book amountAt 30 June 2015

16.5

11.1

2.3

2.4

32.3

41

10b.

Intangible assets
Goodwill

Software

Total

£m

Deferredacquisition
costs
£m

£m

£m

Carrying amount:
At 1 January 2014
Additions
Amortisation charge
Disposals

62.3
-

19.2
37.1
(34.7)
-

11.3
5.4
(2.0)
-

92.8
42.5
(36.7)-At 30 June 2014

62.3

21.6

14.7

98.6

At 1 January 2014
Additions*1
Amortisation charge
Disposals

62.3
-

19.2
38.3
(42.7)
-

11.3
23.4
(4.6)
-

92.8
61.7
(47.3)-At 31 December 2014

62.3

14.8

30.1

107.2

Additions*1
Amortisation charge
Disposals-

28.1(27.9)
-

14.6
(2.6)
(0.1)

42.7
(30.5)
(0.1)

62.3

15.0

42.0

119.3

At 30 June 2015

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. The amortisation ofthis 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 and therefore no impairment losses have been recognised. Refer to the accounting
policy for goodwill in the 2014 financial statements for further information.
[*1] The increase in additions since H1 2015 relates to the internal development of software.

10c.

Insurance and other receivables
30
June
2015
£m

30
June
2014
£m

31
December
2014£mInsurance receivables- amounts owed by policyholders
Trade receivables
Prepayments and accrued income

398.3
89.1
11.9

407.2
87.2
4.0

353.3
78.4
3.6

Total insurance and other receivables

499.3

498.4

435.3

42

10d.

Trade and other payables
30
June
2015
£m

30
June
2014
£m

31
December2014£mTrade 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

22.8
632.9
0.4
25.7
117.2
77.2

18.0
687.8
0.4
26.9
127.1
65.4

24.6
756.5
1.4
20.9
82.2
80.2

Total trade and other payables

876.2

925.6

965.8

Of amounts owed to co-insurers and reinsurers, £475.6 million (H1 2014: £513.1 million, FY 2014:£585.7 million) is held under funds withheld arrangements.

10e.

Contingent liabilities

The Group is, from time to time, engaged in legal matters or disputes (including, but not limited to,employment, regulatory matters and data protection) which might result in an outflow of benefits fromthe Group. Where the Group is able to reliably estimate probable losses, provision is made. The Group
has not disclosed estimates of the potential financial effect of contingent liabilities arising from matterswhere the impact is highly unlikely to be material, or where it is not practicable to do so, or, in cases
where it is practicable, where disclosure could prejudice conduct of the matters.
In particular, the Group’s US insurance operation is subject to legal action in relation to alleged breachof consumer protection legislation. At the balance sheet date, the outcome and duration of the legal
action is highly uncertain and it is not possible to make a reliable estimate of the outcome.

11.
11a.

Share capital
Dividends

Dividends were declared and paid as follows.
30
June
2015
£m

30
June
2014
£m

31
December
2014£mMarch 2014 (50.6p per share, paid May 2014)
August 2014 (49.4p per share, paid October 2014)
March 2015 (49.0p per share, paid May 2015)

134.4

138.3
-

138.3
135.2
-

Total dividends

134.4

138.3

273.5

The dividend declared in March 2014 represented the final dividend paid in respect of the 2013 financial
year (August 2014 - interim dividend for 2014). The dividend declared in March 2015 was the final
dividend paid in respect of the 2014 financial year.

43

An interim dividend of 51.0 pence per share (£140 million) has been declared in respect of the 2015
financial year.

11b.

Earnings per share
30
June
2015
£m

30
June
2014
£m

31
December
2014
£m

152.9

145.7

285.2

Weighted average number of shares – basic
Unadjusted earnings per share – basic

278,930,161
54.8p

276,328,882
52.7p

276,885,828
103.0p

Weighted average number of shares – diluted
Unadjusted earnings per share – diluted

279,399,12754.7p

276,749,298
52.7p

277,334,765
102.8pProfit for the period after taxation attributable toequity share-holders (£m)

The difference between the basic and diluted number of shares at the end the period (being 468,966;
H1 2014: 420,416, FY 2014: 448,937) relates to awards committed, but not yet issued under the Group’s
share schemes.

11c.

Share capital
30
June
2015
£m

30
June
2014
£m

31
December
2014
£m

0.5

0.5

0.5

0.3

0.3
-

0.3
-

0.3

0.3

0.3

Authorised:
500,000,000 ordinary shares of 0.1p
Issued, called up and fully paid:
276,474,064 ordinary shares of 0.1p
278,689,742 ordinary shares of 0.1p
279,108,163 ordinary shares of 0.1p

During the first half of 2015 418,421 (H1 2014: 332,632) new ordinary shares of 0.1p were issued to thetrusts administering the Group’s share schemes.
418,421 (H1 2014: 332,632) of these were issued to the Admiral Group Share Incentive Plan Trust forthe purposes of this share scheme to give a closing number at H1 2015 of 7,650,815 (H1 2014:
6,816,716). These shares are entitled to receive dividends.
No shares (H1 2014: nil) were issued to the Admiral Group Employee Benefit Trust for the purposes of
the Discretionary Free Share Scheme to give a closing number at H1 2015 of 12,861,948 (H1 2014:44

11,061,948). The Trustees have waived the right to dividend payments, other than to the extent of
0.001p per share, unless and to the extent otherwise directed by the Company from time to time.
The number of shares in issue at flotation was 258,595,400.

11d.

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 these levels 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 tobe 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.
Refer to the business review for further information about the Group’s capital structure and financial
position.

11e.

Related party transactions

Details relating to the remuneration and shareholdings of key management personnel are set out in the
Directors’ Remuneration Report within the Group’s 2014 Annual Report. 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 Executive Directors of Admiral Group plc are key management personnel.
Aggregate compensation for the Executive Directors is disclosed in the Directors’ Remuneration Reportin the 2014 Annual Report.

45

12.

Reconciliations

The following tables reconcile significant KPIs and non-GAAP measures included in the financial review
above to items included in the financial statements.

12a. Reconciliation of turnover to reported total premiums written and Other revenue as
per the financial statements
30
June
2015
£m

30
June
2014
£m

31
December
2014
£m

904.9
165.0

886.9
170.4

1,675.6
332.5

UK vehicle commission*1
Other*2

1,069.9(17.7)
5.3

1,057.3(26.9)
6.7

2,008.1(50.8)
13.7

Turnover as per note 4 of financial statements

1,057.5

1,037.1

1,971.0

Total Premiums Written before co-insurance
arrangements per note 5a of financial statements
Other revenue per note 7a of financial statements[*1] During 2012 Admiral ceased earning other revenue from the sale of legal protection policies. At the same
point, the Group began charging its panel of co- and reinsurers a vehicle commission. The substance of thesechanges meant that the total premiums written increased by the amount of revenue that was previously
earned from the sale of legal protection policies. The vehicle commission included within Other revenue istherefore eliminated from the Turnover measure to avoid double-counting.
[*2] Other reconciling items represent co-insurer and reinsurer shares of Other revenue in the Group’s
International Car Insurance businesses.

46

12b. Reconciliation of claims incurred to reported Group loss ratio, excluding releases oncommuted reinsurance
30 June 2015
UK
Group
motor
£m
£m

30 June 2014
UK
Group
motor
£m
£m

31 December 2014
UK
Group
motor
£m
£m

Net insurance claims

64.0

101.4

88.3

124.5

188.9

259.1

Net claims handling expenses
Reinsurer cap impact
Reserve releases on commuted
reinsurance
Other adjustment*1
Adjusted net claims

(4.8)
-

(4.8)
(1.1)

(4.8)
-

(4.8)
(2.0)

(8.9)
-

(8.9)
(5.8)

42.6
101.8

42.6
(0.1)
138.0

37.7
121.2

37.7
155.4

70.6
250.6

70.6
315.0

174.9
-

228.9
(2.1)

183.5
-

231.7
-

365.1
-

464.9
-

174.9
58.2%

226.8
60.8%

183.5
66.0%

231.7
67.1%

365.1
68.6%

464.9
67.8%

Net insurance premium revenue
Other adjustment*1
Adjusted net insurance premium
revenue
Reported loss ratio[*1] Other adjustments relate to additional products underwritten in the Group’s international car insurance
businesses. The contribution from these products is reported as ancillary income and as such the amounts
are excluded for the purpose of calculation of loss and expense ratios. No equivalent adjustments have been
made to prior period ratios as the equivalent adjustments are insignificant.

12c.
ratio

Reconciliation of expenses related to insurance contracts to reported Group expense

30 June 2015
UK
Group
motor
£m
£m

30 June 2014
UK
Group
motor
£m
£m

31 December 2014
UK
Group
motor
£m
£m

Net insurance expenses

25.7

49.4

21.2

42.7

43.5

82.7

Net claims handling expenses
Reinsurer cap impacts
Other adjustment*1

4.8
30.5

4.8
(2.6)
(2.0)
49.6

4.8
26.0

4.8
(5.8)
41.7

8.9

8.9

52.4

(4.7)
86.9

174.9
-

228.9
(2.1)

183.5
-

231.7
-

365.1
-

464.9
-

174.9
17.4%

226.8
21.9%

183.5
14.2%

231.7
18.0%

365.1
14.4%

464.9
18.7%

Adjusted net expenses
Net insurance premium revenue
Other adjustment*1
Adjusted net insurance premium
revenue
Reported expense ratio47[*1] Other adjustments relate to additional products underwritten in the Group’s international car insurance
businesses. The contribution from these products is reported as ancillary income and as such the amounts
are excluded for the purpose of calculation of loss and expense ratios. No equivalent adjustments have been
made to prior period ratios as the equivalent adjustments are insignificant.

12d.

Reconciliation of reported profit before tax to adjusted profit before tax
30
June
2015
£m

30
June
2014
£m

31
December2014£mReported profit before tax per the condensed
consolidated income statement
Minority interest share of profit before tax

181.7
4.4

183.3
1.6

350.7
5.8

Adjusted profit before tax

186.1

184.9

356.5

13.

Statutory information

The financial information set out above does not constitute the company's statutory accounts. Statutory
accounts for 2014 have been delivered to the registrar of companies, and those for 2015 will bedelivered in due course. The auditors have reported on those accounts; their reports were (i)unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by wayof emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or(3) of the Companies Act 2006.

48

14.

Principal risks and uncertainties

The table below sets out the principal risks Admiral has identified through its Enterprise Risk
Management Framework (ERMF) as having the potential for a material adverse affect on Admiral’s
profitability and solvency. The report on Corporate Governance in the Group’s 2014 Annual Report
describes the risk management framework in place throughout the Group.
Insurance Risk
Risk
Reserving risk in UK andInternational Insurance
Admiral is exposed toreserving risk through its
underwriting of motor andhousehold insurance
policies. Claims reserves in
the financial statements
may prove inadequate tocover the ultimate cost of
earned claims which are by
nature uncertain.

ImpactAdverse run-off
leading to higher
claims costs in thefinancial statements.
Also, resultant lossof profit commission
from proportional
co-insurance andreinsurance
arrangements.

Mitigating Factors
Admiral has a conservative reserving policy
and continues to hold a material margin in
its financial statement claims reserves above
actuarially determined best estimates.
Best estimate reserves are estimated bothinternally and externally by an independentactuary.
Many of the potential causes of claims
shocks are outside the control of Admiral(for example legislative changes or changes
in the Ogden discount rate) and the focus is,therefore, on how to prepare for and react
to the occurrence of such events.
Admiral holds a margin in booked reservesto cover significant legislative changes
impacting earned claims. Furthermore,
Admiral continues to hold an additional
margin in its reserves in excess of the
projected ultimate outcomes to cover otherpotential claim shocks.
The Group continues to make material
investments in staff and systems to work on
the identification and prevention of claims
fraud.
For very large claims Admiral purchases
excess of loss reinsurance, which mitigates
the loss to the selected deductible amount.

49

Periodical Payment Orders(PPOs) are increasingly
used to settle large bodily
injury claims.
PPOs provide for a regular
payment over an extended
time to the claimant,rather than a single lumpsum payment.

Underwriting risk in UK
and International
Insurance
The Group is exposed to
the risk that claims costs
on business written andearned in the future ishigher than expected.
This might arise due tovery large or catastrophic
man-made or natural
individual or multiple
claims.

Increased
uncertainty of thecost of significant
claims over a longer
term. A requirement
to match investment
returns to meetthese payments overan extended term.

Higher claims costs
and loss ratios,
reducing profitabilityor resulting inunderwriting losses.
Also, resultant lossof profit commission
from proportional
co-insurance andreinsurance
arrangements.

Admiral’s investment portfolio is the resultof a structured, disciplined and transparent
investment process which considers the
future cashflow implications of PPOs.
There are regular reviews of both PPO cases
and those claims that could potentially settle
as PPOs.
Admiral has a conservative reserving policy
and continues to hold a material margin in
its financial statement claims reserves above
actuarially determined best estimates.
There are a number of aspects which
contribute to Admiral’s strong UK
underwriting results, including:• Experienced and focused senior
management and teams in key businessareas including pricing and claims
management;• Highly data-driven and analytical approachto regular monitoring of claims andunderwriting performance;• Capability to identify and resolve
underperformance promptly throughchanges to key performance drivers,
particularly pricing; and• Continuous appraisal of and investment instaff, systems and processes.
Admiral purchases excess of loss
reinsurance, designed to mitigate the impactof very large individual or catastrophe event
claims.
The Group continues to work to establish
similar capability and expertise in its newer
UK and international businesses.

50

Reduced availability of coinsurance and reinsurance
arrangements
Admiral uses proportional
co-insurance andreinsurance across its
insurance businesses toreduce its own capitalneeds (and increase returnon the capital it does hold)and to mitigate the costand risk of establishing
new operations.

A potential need toraise additional
capital to support
underwriting. This
could be in the formof equity or debt.
Return on equity
might reducecompared to current
levels.

Admiral typically maintains
a significant combined
ratio advantage over the
UK market.
This advantage and/or thelevel of underwriting profit(and associated profit
commission) could beeroded.
This risk could be
exacerbated by irrational
competitor pricing.

Admiral also has relationships with a numberof other reinsurers, including Amlin Re,
Hannover Re, Mapfre Re, New Re and Swiss
Re.
In the UK, reinsurance arrangements havebeen agreed until at least the end of 2016,reflecting confidence in the Admiral UK Car
Insurance business. The long-term coinsurance agreement with Munich Re(covering 40% of the UK Car Insurance
business) will remain in place until at least
the end of 2018.

There is a risk that support
will not be available in the
future if the results and/or
future prospects of either
the UK business or (morerealistically) one or moreof the newer operations
are not satisfactory to theco- and/or reinsurers.
Strategic Risk
Risk
Erosion of competitive
advantage in UK Car
Insurance

Admiral mitigates the risk to its reinsurance
arrangements by ensuring that it has adiverse range of financially secure partners.
Admiral has enjoyed a long-term relationshipwith one of the world’s largest reinsurers,
Munich Re, which has supported Admiralsince 2000.

Long-term arrangements are also in place forinternational and household businesses.

ImpactA worse UK Car
Insurance result andlower return on
equity.
A sustained anduncorrected erosionof competitive
advantage could
affect the ability ofAdmiral to extend its
reinsurance
arrangements, whichmight in turn require
Admiral to holdmore capital.

Mitigating Factors
Admiral’s focus remains on the wide range
of factors that contribute to Admiral’s
combined ratio outperformance of the UK
market. Some are set out on pages 49 and50, but in addition:• Track record of innovation and ability toreact quickly to market conditions anddevelopments; and• Keen focus on maintaining a low-cost
infrastructure and efficient acquisition
costs.

51

Failure of geographic
and/or product expansion
Admiral continues todevelop and support the
UK household andoverseas operations.
One or more of theoperations could fail tobecome a sustainable,
profitable long-termbusiness.
Product expansion into
new areas could lead tounprofitable business andincreased regulatory risk.

Higher than planned
losses (andpotentially closure
costs) anddistraction of key
management.
A collective failure ofthese businesses
would threaten
Admiral’s objective
to diversify its
earnings by
expanding into newmarkets andproducts.

Admiral’s approach to expansion andproduct development remains conservative,
applying the ‘test and learn’ philosophy thathas proven successful for previous
operations. International insurance
businesses have executed cautious launch
strategies and are all backed by proportional
reinsurance support which provides
substantial mitigation against start-up losses
in the early years.
New price comparison businesses havealigned their marketing investment with theextent of improvement in key performanceindicators such as average cost per quoteand conversion ratio. The Group also accepts
partial disposals of equity to share start-up
losses with partners.
The Directors are mindful of management
stretch and regularly assess the suitability ofthe management structure in place for
Admiral’s new UK and international
operations.
The UK Household Insurance business isbacked by proportional reinsurance support
which provides mitigation against start-up
losses and excess of loss reinsurance which
mitigates potential losses from catastrophe
events.

Group Risk
Risk
Potential diminution ofother revenue
Admiral earns otherrevenue from a portfolio of
products and othersources.
The level of this revenue
could diminish due toregulatory or legal
changes, customer
behaviour or market
forces.

ImpactLower profits frominsurance operations
and lower return on
equity.

Mitigating Factors
Admiral continuously assesses the value toits customer of the products it offers, andmakes changes to ensure the products
continue to meet customer needs and offer
good value.
Admiral seeks to minimise reliance on any
single source by earning revenue from a
range of products. This would mitigate theimpact of a regulatory change which might
affect a particular product or income stream.

52

Competition in UK Price
Comparison
Admiral is dependent on
the four main UK pricecomparison websites as animportant source of new
business and growth.
Growth in this distribution
channel could slow, ceaseor reverse, or Admiral
could lose one or more of
the websites as a source ofcustomers.

A potentiallymaterial reduction in
UK Car Insurance
new businessvolumes.

Admiral’s ownership of Confused.com (oneof the leading UK price comparison websites
which operates independently of the UK Car
Insurance business) helps to mitigate the riskof over-reliance on this distribution channel.

The impact on
Confused.com ofhigher levels ofcompetition in theprice comparison
market, either
through theaggressive activities
of existing players or
the entry ofsignificant newparticipants would
be to lower profits.

Admiral also contributes materially to therevenues of other price comparison
businesses and therefore it is not considered
probable that a material source of new
business would be lost.
The management of Confused.com maintaina very keen awareness of the risks ofcontinued competition.

However, a morecompetitive market
might benefit the car
insurance businessthrough lower
acquisition costs.

53

Credit Risk
Risk
Credit risk of significant
counterparties
Admiral is primarily
exposed to credit risk in
the form of a) default ofreinsurer; b) failure ofbanking or investment
counterparty.
One or morecounterparties suffer
significant losses leading toa credit default.

ImpactAdditional capital
may need to beraised as a result of amajor credit event,dependent on its
nature and severity.

Mitigating Factors
Admiral only conducts business withreinsurers of appropriate financial strength.
In addition, most reinsurance contracts areoperated on a funds withheld basis, which
substantially reduces credit risk, as Admiral
holds the cash received as collateral.

Admiral would alsoneed to ensure thatit had sufficientliquid assets to meetits claims and otherliabilities as they felldue.

With respect to investment counterparties,
there are no specific concentrations of credit
risk due to the structure of the liquidity
funds which invest in a wide range of shortduration, high quality securities. Cashbalances and deposits are placed only withhighly rated credit institutions. Some longterm investments are held in Government
bonds to further mitigate the exposure tocredit risk.
Admiral considers counterparty exposure
frequently and in significant detail, and hasin place appropriate triggers and limits, tomitigate exposure to individual investment
counterparties.

Conduct Risk
Risk
Failure of products,
processes or service tomeet customer andregulator expectations andfailure to address
customer complaints
promptly or appropriately.

ImpactPotential customer
detriment and/or
potential regulatorycensure/enforcement and/or
reputational
damage as a result of
Admiral’s action.

Mitigating Factors
Admiral operates the three lines of defence
model for overseeing its products, processes
and service. At each stage of the customer
journey customer outcomes are monitored,
managed and reported in order to mitigate
customer detriment.
Further detail on how Admiral interacts with
its customers is set out on page 17 of the2014 Annual Report and in the Corporate
Social Responsibility (CSR) Report available
online.

54

Operational Risk
Risk
People risk
Failure to recruit, develop
and retain suitable talent.
In addition, the risk of
project failure. Morespecifically, projects
relating to system
upgrades and Solvency II.

IT risk
Failure to invest in, or
successfully implement
appropriate technology(particularly Guidewire
implementation in the UK)
to support the Group’s
future businessdevelopment.
Cyber Risk
Financial loss, disruption ordamage to the reputationof the Group from adeliberate attack on its IT
systems.

ImpactUnable tosuccessfully carry out
Admiral Groupstrategy and achievegoals.
Failure of projects
would most likely
result in additionalcosts for the Group.

Unable to support
the required growthand development
essential for futurebusiness success,maintaining
competitor
advantage anddeveloping theGroup’s businessmodel.
Unable to operate
the business for anindeterminate
period, depending
upon the severity of
the attack. Potential
for data breaches orloss of intellectual
property.

Mitigating Factors
Strong Company culture underpinned bycommunication, equality, reward,
recognition and fun.
• Objectives & personal development
plans• Understanding gained through staff
surveys and team meetings• Succession and graduate plans• Sponsorship programme designed togive staff benefits and develop pride inbrand(s)• Employee share ownership scheme.
Further detail on how Admiral interacts with
its employees is set out of page 18 of the2014 Annual Report and in the CSR Reportavailable online.
Regular review of the effectiveness of theGroups IT capability by Executive
Management and the Board.
Strong project governance and oversight of
new systems implementations with external
specialist review and assurance whererequired.

Physical and IT Security are in place toprevent unauthorised access to data.
All staff receive mandatory training around
IT Security and Data Protection.
Compliance to Data Security policies ismonitored.

Data breaches may
result in significant
reputational damage
as well as regulator
sanctions55

Regulatory Risk
Risk
Failure to comply withregulatory requirements
and/or changes. In
particular, the risk of noncompliance with Solvency
II requirements ahead of
1st January 2016.

ImpactExposure to
regulatoryintervention
and/or censure
and/or enforcement
action through finesand other tools
available to theregulator.

Mitigating Factors
Mitigated by regular review of the Group’s
compliance with current and proposed
requirements and interaction withregulators by Executive Management andthe Board.
There has been a significant investment inresources in preparation for Solvency II
implementation and the ongoing
requirements. The project has regularcommunication with both the Board and theRegulators on progress against the agreed
project plan.

56

Responsibility statement of the directors in respect of the half-yearly financial report
We confirm that to the best of our knowledge:•

the condensed set of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU;•

the interim management report includes a fair review of the information required by:a)DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important
events that have occurred during the first six months of the financial year and theirimpact on the condensed set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year; andb)

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions
that have taken place in the first six months of the current financial year and that havematerially affected the financial position or performance of the entity during that
period; and any changes in the related party transactions described in the last annual
report that could do so.

By order of the Board,

Geraint Jones
Chief Financial Officer
18 August 2015

57

INDEPENDENT REVIEW REPORT TO ADMIRAL GROUP PLC

Introduction
We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months ended 30 June 2015 which comprises the Condensed
consolidated income statement, the Condensed consolidated statement of comprehensive income, theCondensed consolidated statement of financial position, the Condensed consolidated statement of cash
flows, the Condensed consolidated statement of changes in equity and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with the information in thecondensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist thecompany in meeting the requirements of the Disclosure and Transparency Rules (“the DTR”) of the UK’s
Financial Conduct Authority (“the UK FCA”). Our review has been undertaken so that we might state to
the company those matters we are required to state to it in this report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility to anyone other than thecompany for our review work, for this report, or for the conclusions we have reached.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the
UK FCA.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the
EU. The condensed set of financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and
Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the
Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an audit opinion.

58

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is
not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FCA.

Salim Tharani
for and on behalf of KPMG LLP
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiff
CF10 4AX
18 August 201559