52%

20%
16%
12%

Admiral Group plc
Annual Report and Accounts 2019

Admiral offers motor, household and travel
insurance. Other businesses in the UK include
comparison website Confused.com, law firm
Admiral Law Limited and Admiral Financial Services
Limited offering personal loans and car finance.
Outside of the UK, Admiral owns four insurance
and six comparison businesses.
Group Highlights
Group’s statutory profit before tax (£m)

Group’s share of profit before tax1 (£m)

Earnings per share1 (pence)£522.6m£526.1m

148.3p£522.6m

2019£476.2m

2018
2017£403.5m

2019£526.1m

2018
2017£479.3m£405.4m

2017

Net revenue (£bn)

Turnover2 (£bn)

52%£1.35bn£3.46bn

52%

2019

2018

56%

2018

2017

55%

2017

£1.35bn£1.26bn£1.13.bn

137.1p2018

Return on equity1 (%)

2019

148.3p2019

117.2p

2019
2018
2017

Customers (million)

Full year dividend per share3 (pence)

Solvency ratio (post dividend)4

6.98m

140.0p

190%

2019

6.98m

2018
2017

6.51m
5.73m

2019

140.0p20182017£3.46bn£3.28bn£2.96bn(2018: 194%)126.0p114.0pDiversity split across the Group

Emissions (tonnes C02e per employee)

Reevoo Score (% customers would buy again)

51% Female, 49% Male

0.36 tonnes

98%(2018: 51% Female, 49% Male)(2018: 0.39 tonnes)(2018: 98%)

1.

Alternative performance measure (APM) – refer to the Glossary for definition and explanation

2.

Alternative performance measure (APM) – refer to Glossary for definition and explanation, and to note 13 for reconciliation to Financial Statements

3.

2018 dividend includes an additional dividend of 11 pence per share relating to the increase in post-tax profits from the change in Ogden discount rate assumption.

4.

Unaudited: refer to capital structure and financial position section on pages 38 to 39 for further information.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

Contents

Our Purpose

Company Overview

Admiral Group's purpose
is to provide:01

Our Purpose

02

Group at a Glance04

What we do

06

Customers

08

People10

Communities

Strategic Report
12

Chair’s Statement

16

Our Business Model

18

Stakeholder Engagement

24

How we do it – Our Strategy

26

Our Strategy in Action

28

Chief Executive’s Statement

30

A Year in Pictures

32

Q&A with David, Cristina, Milena and Geraint

34

Chief Financial Officer’s Review

37Group Financial Review

42

Insurance Review

43

UK Insurance Review

50International Insurance Review

54

Comparison Review

58

Other Group Items

60

Being a Responsible Business

66

Principal Risks and Uncertainties

Corporate Governance74

Introduction from the Chair76

Board of Directors

78

Governance Report88

The Audit Committee

94

The Group Risk Committee

99

The Nomination and Governance Committee

102 The Remuneration Committee
105 Remuneration at a Glance
106 Directors’ Remuneration Policy
114 Annual Report on Remuneration
124 Directors’ Report

Financial Statements
129 Independent Auditor’s Report
140 Consolidated Income Statement
141 Consolidated Statement of Comprehensive Income
142 Consolidated Statement of Financial Position
143 Consolidated Cash Flow Statement
144 Consolidated Statement of Changes in Equity
145 Notes to the Financial Statements
213 Parent Company Financial Statements
216 Notes to the Parent Company Financial Statements
224 Consolidated Financial Summary (unaudited)

Additional Information
225 Glossary

How our purpose adds value
Driven by our purpose, our business model focuses on our uniquecore competencies to create value for our customers, our people,
our shareholders and our wider stakeholder community.
See our business model on pages 16 to 17

www.admiralgroup.co.uk
Admiral Group plc · Annual Report and Accounts 201901

Group at a Glance

Admiral Group is one of the UK’s largest
and most recognised motor insurance
providers, with market leading financial results.
What we do

About Us
Admiral Group is a UK based company, specialisingin motor, home, and travel insurance.
Other businesses in the UK include comparison
website Confused.com, law firm Admiral Law
Limited and Admiral Financial Services Limited
offering personal loans and car finance. Outsideof the UK Admiral owns four insurance and six
comparison businesses.

Staff employed globally

11,000+UK Insurance

Comparison

International Insurance

Loans

Brands
1. UK

2. France

6. Canada

A dmiralL’olivier Assurance

AdmiralBell

LeLynx

Diamond

Homebrella

Elephant.co.uk

3. Italy

Confused.com
Admiral Household
Gladiator
Admiral Law Limited

Customers worldwide

6.98m

Admiral Loans
Admiral Van
Admiral Travel
Veygo

7. India
Admiral Solutions
Admiral Technologies

ConTe

GoSahi.com

4. Spain

8. Turkey

BalumbaTamoniki.com

Qualitas Auto

9. Mexico

Rastreator

Rastreator.mx

Seguros.es

Tamoniki.com

5. USA
Elephant Auto
Apparent

GlobalPreminen

Compare.com

The Investment Case
Read more in our Business Model on page 16 to 17

Excellentcustomer
service

Cost conscious
cultureTest and learn
approach02

Admiral Group plc · Annual Report and Accounts 2019

Efficient claims
management

Risk mitigation: uniquereinsurance and coinsurance partnerships

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

6
5

Where we are based
Admiral Group Headquarters is
located in Cardiff in South Wales,
and we are proud to be5Wales’
only FTSE 100 Company.

8

1

6
9

7

2

4

3

7

1

In 2019 Admiral was ranked 4thBest Workplace in the UK, 7th Best
Multinational Workplace in Europe, and18th Best Workplace in the World in the
Great Place to Work rankings.

2

3
4

Embedded culture
and engaged
employees

Responsible
and sustainable
operations
Experienced
and focusedmanagement

Unique approach
to risk selection
Proven track recordof performance
Admiral Group plc · Annual Report and Accounts 201903

What we doAdmiral Group has five insurance
and seven comparison businesses.
It has nearly 7 million customers andemploys over 11,000 staff globally.
UK Motor Insurance

UK Household
Insurance

Admiral is one of the largest
car and van insurers in the UK.

Admiral has a growing UK
Household Insurance business.

Customers

Customers

4.37m

1.01m

(2018: 4.32m)(2018: 0.87m)

Turnover*1

Turnover*1£2.45bn£171m(2018: £2.42bn)(2018: £146m)

Net Insurance Premium Revenue

Net Insurance Premium Revenue

£453m

£37m

(2018: £453m)(2018: £31m)

UK Motor
review
Read more on page 45

04

Admiral Group plc · Annual Report and Accounts 2019

UK Household
review
Read more on page 49

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

Customers (2018: 6.51m)

Turnover*1 (2018: £3.28bn)

Net Revenue (2018: £1.26bn)

6.98m£3.46bn£1.35bn

International
Insurance

Comparison

Other Group Items

Growing insurance businessesin Spain, Italy, France andthe US.

Confused.com, one of the UK’s
leading comparison websites,
profitable operations in Spainand France, and a developing
business in the US.

Admiral Loans and other costs.

Customers

Customers

Loan Balances

1.42m

24m quotes£455m(2018: 1.22m)(2018: 22m quotes)(2018: £300m)

Turnover*1

Turnover*1

Total interest income on loans£624m(2018: £539m)£172m
Revenue (2018: £151m)£31m(2018: £15m)

Net Insurance Premium Revenue£169m(2018: £142m)

International
Insurance review
Read more on page 50

Comparison
review

Other Group
Items review

Read more on page 54

Read more on page 58*1. Alternative Performance Measure (APM) – refer to Glossary for definition and explanation, and to note 13 for reconciliation.

Admiral Group plc · Annual Report and Accounts 201905

Focusing on ourCustomers“Customers are at the heart of what we do”
We strive to provide dependable and efficient customer service and work hard toensure that customers can get the most suitable products for their needs.

See our Stakeholder Engagement Section on pages 18 to 23

Our Purpose in action

Cristina's Commentaries

National Customer
Service Week

Kudos

Cristina Nestares, our UK Insurance
CEO, shares a customer commentary
every month in which she talks
about customer stories, changes
to processes that have helped
improve the customer experience,and comments that we’ve received.
Cristina also awards the title ofmonthly Customer Champion to oneof our customer facing agents who
have received 10/10 on all questions
asked in SMS feedback.

In October we hosted National
Customer Service Week, to raise
further awareness of the importanceof customer service and to celebrate
the great service that our staff
deliver. We shared several news
articles on our staff Intranet, theresults of our recent customer
surveys, and ongoing customer
initiatives from across the business.
We also shared a series of videos
across the week, which demonstrated
how the customer is valued acrossthe business.

Kudos is a customer experiencemeasurement programme, used acrossall our customer facing contact centres.
The programme focuses on three key
areas which directly impact, or are
influenced by, our customers. These
areas are: average speed of answer,
customer SMS feedback and external
call monitoring by senior management.

Additionally, Cristina’s presentation
at the 2019 Staff General Meeting(SGM) centred on the customer andthe importance of delivering great
service.

06

Admiral Group plc · Annual Report and Accounts 2019

Through external call monitoring,senior managers evaluate customer
calls on a monthly basis and provide
feedback to agents about the service
the customer received. Over 5,000 calls
were monitored by senior managers in
2019, and our average internal feedback
score was a pleasing 80%.

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

SatisfiedCustomers

Continuous
Improvement

External
Recognition

We strive to ensure that our customers
are satisfied with our service. One way
we measure this is through feedback,as demonstrated by the results below.

We are always looking to improve ourservices. In 2019, we saw improvements
to both our average call answer rate
and the average call waiting time in
Customer Services.

In 2019 we were named Best Motor
Insurance Provider at the Personal
Finance Awards for the seventh year ina row. We were also named Best Home
Insurer and Best Big Insurance Company
at the Insurance Choice Awards.

97%

of customers were happy
with their service1(2018: 96%)

96.8%

98%

of customers would
buy again2 (2018: 98%)

average call answer
rate3 (2018: 96.3%)

70 seconds

average waiting time for a Customer
Services call (2018: 74 seconds)

1 Average Reevoo score for 2019. Based on 9,325 responses    2 Average Reevoo score for 2019. Based on 27,211 responses    3 For UK-based Customer Services

Key to our Purpose
Good value
financial products

Excellent andconvenient service

A great place
to work

Good returns forour shareholders

A sustainable businessfor the long term

The Above andBeyond Initiative

Customers Matter Project

Customer Service Awards

We actively encourage our staff toexceed our customers’ expectations.
An example of this can be seen withour ‘Above and Beyond’ initiative
within our New Business department.
Last summer one of our Canadian callhandlers, Mary-Ellen, spoke to a UK
customer who commented how nice itwould be to have some Canadian Kraft
Peanut Butter.

In 2019, we introduced a new
cross-departmental project called
Customers Matter. This project aims
to improve the way we interact withour customers by tracking metrics
such as average speed of answer,
kudos scores, SMS feedback scores,
and complaint percentages. As
part of this project we also asked
our employees to submit selfies
representing their thoughts on themeaning of service, using the hashtag#CustomersMatter.

In November, we held the Admiral
Customer Service Awards for the
first time, a night dedicated to thecelebration of outstanding customer
service throughout the business.
Awards included: ‘Most Customer
Centric Team’, ’Consistently Cares’
award and ‘Best Use of Insight andFeedback’. We welcomed 160 staff
from the Group’s customer-facing
departments to celebrate andreceived over 200 award nominations
across 13 categories.

Mary-Ellen decided to accept themission. Mary-Ellen purchased alarge jar of peanut butter, which was
brought back to the UK by a visiting
trainer and posted to the customer
along with a card thanking them forchoosing to insure with us!

At the event, senior managers sharedinsights from their own careers,
and the night concluded with thecrowning of the winners, marking
another fantastic year of dedicatedservice.

Admiral Group plc · Annual Report and Accounts 201907

Valuing ourPeople“People who like what they do, do it better”

At Admiral, we strive to create an environment where people look forward to coming to work.
We want our employees to feel happy, supported, and willing to give that little bit extra.
We truly believe that our unique culture is integral to our success as a business.
See our Stakeholder Engagement Section on pages 18 to 23

The four pillars of our culture are: Communication, Equality,
Reward & Recognition and Fun

Work/Life Balance

Embracing challenges
and changes

Annual Staff General
Meeting (SGM)

In 2019 the Group was recognised asa ‘Centre of Excellence in Wellbeing’by the Great Place to Work Institute.
We received high scores in areas
including: Fulfilment at work,
interpersonal relationships, worklife balance and mental and physicalhealth and more.

Admiral aims to protect its data byimplementing the necessary measure
to withstand a cyber-attack. In 2019
we provided all employees – including
contractors – with three security
training sessions. The training covereda variety of topics, which included
password complexity, tailgating, risks
of USB devices, data classification,
suspicious emails, and phishing. In
addition to this, we provided further
targeted training for those identified
as high-risk users.

Since 1998, all UK-based employees
are invited to attend the SGM to listen
to lively and engaging presentations
about company performance andforward-looking business plans. Our
senior managers address everyone,
including our offices around theglobe, via a live streaming link.

86% of our employees think that
our Facilities contribute to a goodworking environment.

We are also audited by external
auditors on an annual basis, carry out
regular security risk assessments andwe operate in accordance with the
NIST Cyber Security Framework.

08

Admiral Group plc · Annual Report and Accounts 2019

Our SGM is informative and fun, andextremely important to us in termsof communicating the same message
directly to all employees together.
We find this to be a powerful andeffective way to promote a renewed
sense of pride in Admiral each year.

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

Development

Diversity

Share Scheme

We recognise that our future successrelies on our ability to develop andretain our people. Our Admiral Academy
offers support, learning opportunities,
and career advice to all employees.
We have a team of over 100 learningand development professionals acrossthe Group, with the skills necessary tosupport the needs of our business andour people.

Our Diversity and Inclusion Working
Groups include forums for LGB+,
gender, age, ethnicity, social mobility,and disability to ensure that we recruit,
develop, and retain a diverse group of
employees. We work with organisations
such as Autism Spectrum Connections
Cymru to offer placements for people
with autism within Admiral.

Our share ownership scheme aims toreward and recognise our employees
for their own progress, as well as theoverall performance of the Group.

979

96%

100%

courses hosted by theAdmiral Academy in 2019of our staff believe people
at work are treated fairly
regardless of their race or ethnic origin1

All employees employed at Admiralfor one year or more receive thesame number of shares through ourApproved Free Share Plan (SIP). Somemanagement receive additional sharesthrough the Discretionary Free Share
Scheme (DFSS).
of UK based employees
employed for more than
one year, own shares in Admiral Group2

1	Group-wide results to the 2019 Great Place to Work Survey. Results were based on 8,543 responses. 96% responded positively, 3% responded as neutral and 1% as negative2	More detail surrounding the SIP and the DFSS can be found on page 108

Key to our Purpose
Good value
financial products

Excellent andconvenient service

A great place
to work

Good returns forour shareholders

A sustainable businessfor the long term

‘Ask David’Movers, Shakers
and Legacy Makers

Family Focus: Parent’s
Open Day‘Ask David’ is an initiative available
to all employees via the Admiralintranet, which promotes directcommunication with the Group
CEO. Employees can ask David anyquestions that they might have, andsuggest business improvements. One
request that David received in 2019
was a request for the business tocreate a Multi-faith room in AdmiralGroup House in Swansea; a private
space for persons of any faith (ornone) to spend time in prayer.

At Admiral, we pride ourselves oncelebrating the differences among
our people.

We pride ourselves in providing ourpeople with a happy, supportive, andproductive working environment,
and run a variety of initiatives thatencourage our employees to involve
their families in our company culture.

Similar rooms already existed at Ty
Admiral Cardiff and Admiral GroupHouse in Newport, and David wasquick to instruct our facilities team tocreate a similar space at our Swansea
location. The room was available foruse from August 2019 onwards.

In 2019, our BAME (Black, Asian,
Minority, Ethnic) forum met regularly
to prepare for Black History Month
Wales (BHMW) and to sponsor the2019 BHMW National Youth Awards.
These important awards highlighted
the achievements of young people
from African and African Caribbean
heritage living in Wales, aged
between 13 and 20 years of age.
This year was BHMW’s 12th
anniversary and their theme was‘Movers, Shakers and Legacy Makers’
which we thought was very apt for our
culture.

In 2019, Admiral Seguros opened its
office to parents and close relatives,with the aim to provide them with anunderstanding of a day in the working lifeof their loved one, and to share insights
about our history, business, and culture.
After a tour of the office, visitors wereinvited to spend time with their family
members and learn more about theirroles. Feedback from the open day was
positive and helped our employees better
communicate with their families about
their roles and responsibilities within
the Group.

Admiral Group plc · Annual Report and Accounts 201909

Engaging with our

Communities“Giving back to our communities is an
integral part of Admiral’s culture”

Our employees play a key role in how we engage with our communities, and we continuously support
initiatives suggested by our employees to drive change both inside, and outside of, the business.
See our Stakeholder Engagement Section on pages 18 to 23

Our Purpose in action

Ministry of Giving

Admiral Seguros –Charity support

Pride Cymru

In 2018, Admiral committed £400,000
to fund four charity projects inSouth Wales across 2019 and2020. The charities were chosen
following suggestions put forward by
employees and a vote. One of thosechosen is Llamau, a charity supporting
young people at risk of homelessness.

In Spain, Admiral Seguros collaborated
with Pulseras Rosas (Pink Bracelets),
an association that supports patientsand families throughout cancer
treatment.

This year, as part of our longstanding
partnership with Pride Cymru, wewere headline sponsors of Wales’
largest annual celebration of LGBT+equality and diversity: Pride Cymru’s
Big Weekend.

In 2019, Llamau launched a Learning 4Life programme in Newport and, with
our support, they were able to employ
a full-time tutor to deliver training.
The centre currently welcomes eightlearners each week and provides
support to help improve their basic
skills and to progress throughfurther learning, employment andvolunteering.

10

Admiral Seguros’ support for Pulseras
Rosas ranges from monthly donations
from staff to support for specificprojects such as providing free
psychological therapy for people
affected by cancer and their families.

Admiral Group plc · Annual Report and Accounts 2019

Over 50 employees along with
their partners, family, and friends
participated in the Cardiff parade
accompanied by our Inspire Choir,
which is made up of employees fromoffices across Wales. After the parade,the choir rounded up the weekend
with a performance on the main stage.

Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information

Meaningful
Contributions

Depth ofRelationships

Sustainable
ImpactGiving back to our communities is
an important part of our culture andtranslates into the initiatives we taketo drive positive impacts for thosein need.

With so many of our employees
coming from the communities we
operate in, we feel a strong sense of
responsibility to foster and maintaindeep community relationships
through outreach programmes;
such as developing employability
skills and promoting diversity.

We aim to reduce our emissions asmuch as possible and, where possible, we
procure our electricity from renewablesources. In circumstances where we can’t
source renewable energy, we work hard
to reduce our environmental impact,aligning our environmental policy
with sustainable growth and efficient
resource management.

£400,000+85%

to be donated to four charities
over 2019 and 2020

0.36

of our employees feel good about
the work we do in our communities1

tonnes CO2e per employee(2018: 0.39 tonnes)

1	Group-wide results to the 2019 Great Place to Work Survey

Key to our Purpose
Good value
financial products

Excellent andconvenient service

A great place
to work

Good returns forour shareholders

A sustainable businessfor the long term

Admiral Green Week

Admiral Law –Fundraising for Headway

ConTe Charity

Every year, Admiral’s Green Team
organises a Green Awareness Week
in Ty Admiral, our Cardiff head
office, raising awareness about theways in which employees can act
more sustainably. In 2019, a rangeof local, environmentally-friendly
businesses were invited to Ty Admiral,demonstrating alternative ways inwhich our staff can minimise theirenvironmental impact.

In 2019, Admiral Law’s serious injury
team supported the charity Headway,
a brain injury association set up
to help people with brain injuries.
Through their fundraising efforts
the team contributed to essential
services, that provide assistance topatients and their families.

This year, our ConTe office in Italy raised
funds for two important children’s
shelters: La Casa di Andrea and La
Grande Casa di Peter Pan, which hostchildren from all over the world in needof care. The funds were used to help
restore their facilities so that they canprovide a better environment for thechildren.

These initiatives, along with the wider
awareness campaigns of the Green
Team, are important parts of ourstrategy to support our communities
and the environment.

The serious injury team wererecognised for their efforts by being
awarded ‘Headway Champions for
Cardiff and the South East.’

In 2019, ConTe employees also
dedicated time to various projects
around Rome, such as renovating
stables for horses used in rehabilitation
programmes and restoring a playgroundin Rome’s suburbs.

Admiral Group plc · Annual Report and Accounts 201911

Chair’s Statement“On behalf of the Board I would like to thankeveryone at Admiral for their continued
hard work and contribution to the Group’s
results in 2019.”
2019 marks another year of very strong results for Admiral, and also theannouncement of a change of leadership. It is hard to sum up the amazing
contribution that David has made to the Group over the last 27 years. As
one of the founders he has overseen the business grow from a standing
start to become one of the UK’s largest motor insurers, employing over
11,000 people, serving almost seven million customers and with a market
value today of over £6 billion.
David isn’t going just yet and I don’t want to use up all my accolades until heactually steps down in 12 months’ time. David brings a unique combination ofgreat brainpower, integrity, innovation, caring and humility. As an individual,
his compassion for colleagues and customers alike encapsulates Admiral’s
approach and ethos. Suffice to say, it continues to be a real pleasure to workwith him.
Having been through a comprehensive and robust succession process, theBoard is confident that in Milena we have a natural successor and a leader forthe next generation. We have a wealth of management talent at Admiral andbringing this through has always been a central pillar to Admiral’s management
philosophy as the business evolves alongside its customers. Milena brings
a deep appreciation of the special Admiral culture, entrepreneurial spirit,
commercial track record and people development skills.

12

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Looking back at 2019
I am delighted to report another yearof strong performance in 2019, beating
many records. This is once again due toour people. They make the real differenceat Admiral. Their focus on serving ourcustomers, the distinctive culture andtheir contribution to the communities
in which Admiral operates is what makes
Admiral truly different.
The Group has continued to grow withturnover increasing by 5% to £3.5 billion,
whilst customer numbers are 7% higher
than 2018 at 6.98 million. The Group’s
share of pre-tax profit increased by 10% to£526 million driven by UK Motor Insurance,with strong releases of prior year claims
reserves. Once again we were impacted by
Ogden (the Personal Injury Discount Rate).
Although the final rate was set at -0.25%,
and therefore lower than our expectations,
we were able to deliver significantly
increased profits resulting in an early
trading update to notify the market of
higher than expected profit. Earnings per
share rose by 8% and return on equity was
52%. The Group’s solvency ratio remains
robust at 190% (194% at the end of 2018).

This strong performance was due tocontributions from businesses acrossthe Group. Particularly of note was UK
Insurance (Motor, Household, Travel),
European Insurance and Confused.
com. Our Loans business continues todevelop well and we continue to build
this business with our usual cautious
approach. We have encountered morechallenges in the US, so we still continue
to strengthen fundamentals there.
Focusing on the UK, we maintained adisciplined approach and prioritised
profitability over growth, by increasing
prices as a result of continued claims
inflation. This led to modest growth overthe period. The regulatory environment
in the UK continues to evolve, withwhiplash reform and the FCA market
pricing study being key features of 2019and 2020. Approximately 80% of Admiralcustomers shop around at renewal, so
we are encouraged that the majority
choose to remain with us as an indicatorof our good customer experience andcompetitive pricing.

As a result of our Brexit restructuring,
1 January 2019 marked the start ofoperations for our European insurance
hub in Madrid. The hub allows us tounderwrite and support our growing
European insurance businesses andensures that we are well placed for a
full range of potential circumstances
without disrupting our customers.

Dividend
Our dividend policy remains that we
pay a normal dividend of 65% of post
tax profit and distribute each year theavailable surplus over and above what we
retain to meet regulatory requirements,
the future development of our businessand appropriate buffers. The Directors
have recommended a final dividend of
77 pence per share (2018: 66 pence pershare) for the year to 31 December 2019representing a distribution of 90% of oursecond half earnings.
This will bring the total dividend for theyear to 140 pence per share, an overall
increase of 11%. This represents a pay-out
ratio of 94%. The Group has delivered a
Total Shareholder Return (TSR) of 361%
over the last 10 years (as illustrated in thechart on page 121).

Healthy Heads
We pride ourselves at Admiral Group on having a happy, supportive,
and productive atmosphere, and we run several initiatives to help
our employees stay both physically and mentally healthy.
In 2019 we reviewed our Mental Health Strategy, and appointed
Charlotte Bennett, Chair of Admiral’s Diversity and Inclusion
Forum, as our ‘Healthy Heads Ambassador’.
In 2019 we also improved upon our comprehensive suiteof manager training sessions, to include courses on ‘Stress
Awareness’ and ‘Emotional Resilience.’
All of our people services executives are trained in Mental
Health First Aid and Suicide intervention skills training.
Our Employee Assistance Programme (EAP) also offers
guidance and signposting relating to concerns, whether
financial, relational, legal or other.

Admiral Group plc · Annual Report and Accounts 201913

Chair’s Statement continued

Group Board in 2019
The Board recognises the need for astrong corporate governance frameworkand supporting processes across theGroup and believes that good governance,with the tone set from the top, is a key
factor in delivering sustainable businessperformance and creating value for all
the Group’s stakeholders.
We reviewed our Group strategy in 2019
which remains straightforward and highly
focused on building customer-centric,sustainable businesses for the long term.
We strive to keep doing what we’re doing,
and do it better year after year.
In our UK insurance business, we remain
determined to strengthen our corecompetitive advantages and pursue ourculture of innovation and test and learn
approach. For example, we are continuing
to deploy technology relating to digitaland self-service to improve the customer
experience and overall efficiencies.
We also continue to take what we do welland what we learn to new markets andnew products, both in the UK and abroad.
We are agile enough to adapt to evolving
business environments and encourage
entrepreneurial initiatives to solve
challenges and offer the best outcome
to our customers, people and investors.
One example is the launch of Household
insurance in France.
From a governance perspective, wehave applied the principles of the new
Corporate Governance Code which ensuresthat we will continue to take on board
the views of all of our stakeholders in our
discussions and decision making. As you
would expect, we already have strong links
with our people and in 2019, the Board
revisited and enhanced several areas offocus including our culture, engagement,
diversity, our impact on the environmentand climate change, and how we giveback and participate in the communities
in which we operate through our Ministryof Giving.

To ensure that we further enhance thestrong links between the Board andAdmiral employees, we have set up an
Employee Consultation Group (ECG). This
group, elected by employees, meets on aregular basis and provides a two-way link
between the Board and wider staff. I andother members of the Board have had theprivilege of attending these sessions andI am impressed by the passion and energy
our people have for continuing to shape thebusiness and a real desire to ensure that
we remain a great company to work for.
An example of this is considering ways inwhich we can better use flexible working.
There is further work to do to ensurethat views of our international employees
across the Group are better represented,
so we will be building on this approachover the next 12 months.
Once again Admiral was recognised
as a Great Place to Work in 2019. We
were awarded the Sunday Times Best
Company to Work For in the UK, 7th Best
Multinational Workplace in Europe, 3rdBest Workplace for Women in the UK and18th Best Workplace in the World! Of
course, this doesn’t happen by accident.
We continue to believe that if people
like what they do, they do it better. Our
people feel involved because they havea voice, they are shareholders in ourbusiness, and they genuinely care.
Having our people as shareholders remains
a distinctive element of Admiral’s incentive
schemes. These are designed to ensurethat decisions are made by management tosupport long-term value growth, that theright behaviours are rewarded and that ourpeople’s interests are aligned with those ofshareholders. Our core belief is that overthe long term, share appreciation depends
on delivering great outcomes for ourcustomers. Further details are provided
in the Remuneration Report on pages 102
to 123.

During the year, I had the pleasure ofvisiting our operations in the UK, France,
Italy, Spain and the US where I was able
to engage with a wide variety of people.
It is always wonderful to see the Admiralculture so deeply ingrained in offices
across the globe. This culture was just as
clearly embedded for me at the annual
Staff General Meeting and the annual
management off-site event. In 2019, theBoard also attended a Claims education
session in Newport as part of our ongoing
Board education programme, and we each
had the opportunity to engage with claims
employees and visit a local repairer which
was very insightful in seeing more evidenceof our service in practice.
The Board and I feel that there is agood balance of experience, skills andknowledge to support and challenge themanagement team, and that operations
are supported by effective governanceand control systems. There have been nochanges to the Board composition in 2019
following three new appointments in 2018
but the Board and I expect to appoint anadditional Non-Executive Director witha technology background in early 2020.
We will continue to review all aspects
of diversity to ensure that we are wellprepared to guide the Group throughour next phase of growth.
During the year the Board and each of
its Committees undertook reviews of
their effectiveness. As part of the threeyear cycle we undertook an external
effectiveness review of the Board in 2019,
including consideration of the principlesof the 2018 Corporate Governance Code.
The conclusions provided useful feedback
on its performance. Further details areprovided in the Corporate Governance
Report on pages 74 to 87.
Our focus areas for the Board remain to:• Continue to build on the remarkably
special Admiral culture and in so doing
putting our people, customers and wider
impact on the community at the heartof what we do• Continue the history of growth,
profitability and innovation

14

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information• Invest in the development and growthof our people – we have focused on thequality and development of our senior
management team, added to our talentbase with some external hires, andreviewed our succession pipeline• Ensure excellent governance andthe highest standards

Our role in Society
Admiral takes its role in society very
seriously and has an active approachto Corporate Responsibility (moreinformation in Corporate Social
Responsibility Report on the Admiralwebsite.) We are proud to be Wales’
only FTSE 100 headquartered company

Thank youand employ over 7,000 people in South
Wales. Our people play an active partin the communities in which we operate.
We carefully consider our impact on thecommunity and environment, including
factors such as the green credentials ofour buildings, raising funds for multiple
charities, and considering the impact ofclimate change across the business.

On behalf of the Board I would like to thankeveryone at Admiral for their continued
hard work and contribution to the Group’s
results in 2019. I would also like to thankour shareholders for their support andconfidence. Most of all I would like to thankour customers for placing their businesswith us.

This year we reviewed our responsible
investment policy with regard to our ESG
positioning. We aim to be an economicallystrong and responsible business over thelong term, guided by a clear purpose, tomake a positive and significant impact notjust to our customers and our people but
to the economy and society.

Annette Court
Group Chair
4 March 2020

Listening to the voice of our employees
Ensuring there is a constant flow of communicationin all directions is integral to our culture.
We have always encouraged our
employees to ask questions, provide
feedback and communicate with
our senior managers via initiatives
such as the Friendly Forums,
Employee Surveys, Tea Parties
and Online Chats.
At the start of 2019, we launched
the Employee Consultation Group(ECG). The ECG views employees
as key stakeholders and acts as aplatform for two-way communication
between Admiral Group Board andthe employees of its UK businesses.
Through open debate andinteractions with Group Board andsenior management, employees canbe confident that their views andopinions are discussed at thehighest level.

• Each department elects a colleague asan ECG representative• At each meeting, a Non-Executive
Director of the Admiral Group
Board attends1• Employees submit questions or topics
to their ECG representative in person,or via Atlas (our online portal)• Our Coffee Morning managers (senior
managers), are also regularly invited toattend, as are our Executive Directors• The Employee Consultation Group
meets quarterly• Elected ECG members are invited topresent recommendations at Group
Board meetings

How does it work?

“It’s great to have Directors and employees
from various departments in the same room,
on a regular basis, having healthy and open
debate on different topics.”
Stuart Morgan
Chair of the Employee Consultation Group• ECG representatives remain visible
and accessible to employees, todiscuss topics raised and addressed• The Board can add actions to the ECG
agenda to explore, and vice versa2• The visibility and transparency of
employee opinion is increased andstrengthened

1	Non-Executive Directors (NEDs) participate on a rotational basis to maximise two-way communication and to access the expertise and knowledge of different Board members.
2

In 2019, at least one NED attended three of the five ECG meetings, and at least one senior manager attended every meeting.

Admiral Group plc · Annual Report and Accounts 201915

Our Business Model

We value customers above everything else and strive to design products that
customers want and that represent value for money.
What sets us apart

Our Purpose

Efficient capital employment

Good value financial products

A great place to work

Admiral shares a large proportion of risk with coand reinsurance partners – and these relationships
are generally underpinned by strong underwriting
results. Sharing risk allows Admiral to hold less capital
as it bears less risk, resulting in a superior return on
capital for Admiral shareholders whilst also providing
protection for losses.

Good returns for our shareholders

Focus on sustainable profitability

Excellent and convenient service

Admiral focuses on bottom-line profitability in the
short, medium and long term, and this perspective
guides decisions made across all of our business
operations. The business continues to innovate andimprove key competitive advantages including cost
efficiencies, pricing and claims management.

… whilst building a sustainablebusiness for the long term

What we doControlled test and learn
All our growth, at home and overseas, has beenorganic. We have built each business from the groundup, identifying and understanding the opportunity,
taking measured steps to test how well we understandchallenges and the effectiveness of our solutions, andthen to learn from that experience.

UK Insurance
International Insurance
Comparison
Loans

Unique company culture
5%Comparison

International
Insurance

18 %Other Group Items

UK Insurance

1%76%

We go out of our way to make this a GREAT place towork and believe that if people like what they do,they’ll do it better. We have created an environment
where Admiral employees look forward to coming
to work, can learn and develop, and provide a great
service to customers.

Shareholder returns

Total Turnover£3.46bn

We are committed to returning excess capital toshareholders. We believe that with limited cash,
management remains focused on the most important
aspects of the business. We don’t starve ourbusinesses, but neither do we allow them theluxury of excess capital.

Satisfied and loyal customers
16

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Driven by our purpose, our business model builds on core competencies that set
us apart in order to create value for our customers, our people, our shareholders,and our wider stakeholder community.
How we maximise value/
core competencies

Creating sustainable value in 2019

Risk mitigation –attractive returns
for shareholders

Our People
First Best Big Company to Work for in the UK in 2019,
Sunday Times Best Company Awards
Third Best Workplace for Women in the UK,
Great Places to Work

Customer
centric culture

Our Shareholders
Management, Board and Investor Relations regularly interact
with shareholders through conferences, roadshows and meetings
ROE 52% (2018: 56%)
EPS 148.3p (2018: 137.1p)
DPS 140.0p (2018: 126.0p)

Measured and prudent
approach to success

Our Customers
Good value
products

Best Motor Insurance Provider and Best Insurance Provider:
Customer Service – Personal Finance Awards, 2019
Home Insurance Provider of the Year
Moneyfacts Consumer Awards

Motivated andengaged employees

Our Community£400k+ to fund charities (of employee choice) in South Wales in
2019/2020
Headline sponsor of Pride Cymru 2019
Proactive provider of skills training for young people

Focusedmanagement team

Our Partners
Strategically aligned partnerships with reinsurers
providing consistently good returns

Sustainable
operations

Comprehensive, reliable supplier network

The assessment of the business model also includes anassessment of the projected solvency of the business as partof the capital plan and ORSA assessment, which includes
consideration of the principal risks facing the Group, as wellas consideration of emerging risks such as climate change.

Our Environment
100% UK Energy sourced from green energy sources
0% of recyclable waste sent to landfill (UK)A Responsible Business
Admiral Group plc · Annual Report and Accounts 201917

Stakeholder Engagement
Our commitment to Section 172(1)Section 172(1) Statement
At the start of 2019, we undertook areview to assess and capture how the
Board incorporates the views of key
stakeholders in the decisions made forthe long term success of the Group.
In January 2019, the Group’s lawyers, gave apresentation to remind the Board of their

responsibilities under s172(1) and how
their duty should be fulfilled.
The Board discussed their current approachto corporate governance and engagement
in relation to; the interests of our people,
employees, communities, stakeholders,external partners, and our impact on
the environment. The Board reviewed astakeholder map and agreed that the six

below stakeholder groups were of strategic
importance to the Group’s operations. Key
discussions were held related with the internal
relationship owners within Admiral Group, on
our existing engagement methods, feedback
processes, and the activities and plans forthe year. The Board also considered how
improvements in the effectiveness of ourengagement strategies could be made.

The table below highlights the interests of our key stakeholders, our integrated engagement methods and examplesof actions taken during the year. We also share how we measure our approach to incorporating stakeholders in decision
making, and show how our purpose ultimately benefits our key stakeholders.

OUR
CUSTOMERSOURPEOPLEWhy we engage

Examples of how we engage

Customers are at the heart of ourbusiness operations, and we arecommitted to providing them withgood value financial products, andexcellent and convenient service.

We engage with our customers in a variety of ways, through:We perceive that key material issues
for our customers generally relate
to good value financial products,
excellent customer service, and fairand reasonable treatment.

• New Business and Renewals teams• Our Claims teams• Customer feedback – comment forms, surveys, SMS• Our Complaints teams• Customer focus groups• Direct conversations• Perception studies

The Board recognises the growing
trend in digital and automation
capabilities across the financial
services sector and is taking steps
to prepare the Group for long term
success in a digital world.

• Social media

We believe that a happy workplaceinspires employees to give thatlittle bit extra. We want employee
insights to continue to play a part infacilitating the Admiral Group Board
discussions and decision-making
processes.

Staff are encouraged to engage across multiple channels including website chats andface-to-face. We also engage via:

We perceive that key material issues
for our people generally relate to afriendly and productive workplace
where staff are engaged, and where
their views are heard and considered.
Our priorities consider; open lines
of communication, fair treatment,
opportunities for career progression,
reward and recognition.
We aim to retain our reputation as adesirable and attractive place for ourpeople to work.

18• Our Customer Service teams

Admiral Group plc · Annual Report and Accounts 2019

The Board receives updates on the treatment of existing customers, and on ensuring fairoutcomes throughout the customer journey. Customer and employee feedback is fed into
Board discussions which ultimately shapes strategic decisions, including plans related todigital investment and future diversification.
The Board also received annual feedback on the Conduct Risk framework.

• 1:1 meeting with managers• Employee Consultation Group (ECG) meetings• Staff surveys• Feedback schemes such as ‘Ask David’ and ‘Speak Up’• An open door policy and open plan offices• Participation in Great Places to Work survey• Group’s Share Incentive Plan (SIP)• Group’s Discretionary Free Share Scheme (DFSS)The Board receives updates relating to gender and diversity, and the maintenance of thecorporate culture and values.
The Group CEO and CFO host our Staff SGM (which allows for questions to be raised to theBoard), and also host numerous forums with staff members.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

The Board reviewed how stakeholderinterests are taken into account at Board
meetings and reflected on how ourcorporate governance structure maintains
and protects our reputation for upholding
high standards of business conduct.

A Board agenda planner set out the mattersto be considered by the Board during theyear, and this was subsequently reviewed
and updated at each Board meeting in 2019.
All Board papers during the year wereaccompanied by a separate document
outlining which stakeholders could
be affected or impacted by the paper

presented, along with an explanationof how stakeholder interests wereconsidered prior to raising the matter at
the Board meeting. The accompanying
papers also shared the likely consequenceof any Board decision on each stakeholder
group identified, and how the impact on
stakeholders could be monitored.

Key to our Purpose
Good value
financial products

Excellent andconvenient service

A great place
to work

Good returns forour shareholders

Examples of actions taken in 2019

How we monitor the impactof our actions

Examples of stakeholder
outcomes

We decided to launch a new insurance
product for landlords, as part of the
UK Household book.

• We track and monitor our
NPS score

Excellent customer service, (asdemonstrated by our Reevoo score.)• Ongoing monitoring of customer
satisfaction scores

Increased range of products available(such as Landlord Insurance, new products
from Veygo.)

We invested in staff training anddigital automation, to ultimately
improve the customer experience.
We joined the ABI Vulnerable
Customer Working Group(established 2019.)
In 2019, all customer-facing staff(over 6,000 individuals) were trained
to enhance our identification andsupport of vulnerable customers.

Formal launch of the Employee
Consultation Group, with NEDs
attending on a rotational basis.
In 2019 our staff completed over
200,000 online courses, and 96
employees gained Institute of
Leadership and Management (ILM)
qualifications through the Admiral
Academy.
We undertook a Mental HealthStrategy review and appointed a‘Healthy Heads Ambassador.’ Training
sessions for staff to better understandneurodiversity were introduced too.
In 2019 we created a Workplace
Support Team to provide support for
those with physical disabilities. We alsobegan research to publish a Diversity
and Inclusion Report in 2020.

• Feedback and insight relating to
products and services from all
customer facing teams acrossthe business• Activity levels on the
MyAccount Portal• Call volumes• Ombudsman feedback98%

of our customers are
satisfied with theirservice experience• #1 Best Big Company to Work for
UK in 2019
• #3: Best Workplace for Women in
the UK, Great Places to Work
• ECG outcomes and employee
feedback• Gender targets• Diversity metrics• Number of completed training
courses via the Admiral Academy

PurposeFind out more:

Improved digital and self-service
options, including the revamp of the
MyAccount portal.

Chair’s Statement
page 12All customer facing staff are trained
to support vulnerable customers, andcustomers can be assured thatappropriate measures are in place to treat
all customers fairly.

Our Customers
page 06

The decision to bring our international
comparison platforms together under
one management platform will improve
our customers experience as the Groupbenefits from leveraging technology
and data.

Directors’ report
page 124

Our Business
Model page 16

The ECG met five times in 2019 and several
improvement suggestions relating to ways
of working were put forward, and havesince been addressed and actioned byPeople Services and Facilities.
We have taken positive steps to further
enhance our employee policies relating
to gender, diversity and inclusion.

• Groupwide feedback on our Annual
Culture Paper

In 2019 we expanded our manager
training to include ‘Stress Awareness’ and‘Emotional Resilience,’ to further support
our employees.

• Results relating to the Annual
Culture Matrix Report (a review
of culture related metrics andtolerances)

Our staff are rewarded with fair andcompetitive pay and remuneration
structure, and benefit from various
reward and recognition schemes.

96%

A sustainable businessfor the long term

Find out more:
Directors’ Report
page 124
Our People
page 08
Being a Responsible
Business page 60
Our Business
Model page 16

Employees who think
Admiral is a friendly
place to work

Admiral Group plc · Annual Report and Accounts 201919

Our commitment to Section 172(1) continued

OUR
COMMUNITY

Why we engage

Examples of how we engage

We are Wales’ largest private sector
employer and believe it is our
responsibility to provide employment
opportunities for those in the local
area whilst training and developing
our staff. We are committed topromoting and recognising diversity
both within Admiral, and in thecommunities in which we operate.

Our employees drive our community engagement, because they both nominate and choose
which initiatives we support. We engage in a number of ways, including:A culture of giving and a sense of
responsibility for the community isshared across the whole group.

• Funding projects through our Community Chest Programme

We perceive that key material issues
for our communities generally relate
to; support and ongoing dialogue,
financial and resource-based
contributions, and consistency andintegrity relating to our promises

OUR
SHAREHOLDERSThe Group engages regularly withshareholders through frequent andopen dialogue. Investor engagement
fosters long term strategic
understanding of Admiral’s strategy.
We perceive that key material issues
for our shareholders generally
relate to; financial returns, two-way
communication, viability of long term
success and products and services
that are fit for purpose.
The Board also recognises thegrowing importance of ESG factors
in investment decision making.

• Partnerships with recruitment bodies• Partnerships with educational bodies• Staff volunteering• Charity initiatives• Sponsorship of various community events• Fundraising

We also signed a pledge with Cardiff Commitment to help young people from various social
backgrounds progress in education, employment and training.
The Board receives updates on the key community initiatives of our UK, European and Global
operations and provides direction on how the Group can continue to make long lasting,positive impacts.

Our Investor Relations calendar consists of various activities. Examples of how we engage
directly and indirectly include:• Roadshows• Conferences• Analyst and Investor phone calls• 1:1 meetings• Group meetings• Investor visits to Cardiff• Annual General Meeting• Annual Report• Results announcements and presentations• Staff General Meetings• The Chair and Senior Independent Director also host meetings with shareholders
The Board receive feedback and use it to shape their approach to Corporate Governance,
ensuring that any issues or concerns raised are considered and addressed.

20

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Key to our Purpose
Good value
financial products

Excellent andconvenient service

A great place
to work

Good returns forour shareholders

Examples of actions taken
in 2019

How we monitor the impactof our actions

Examples of stakeholder
outcomes

Our International businesses actively
participated in fundraising activities
for a number of charities.

• Feedback from charities,
recruitment and educational
bodiesWe have a dedicated Ministry of Giving thatwill donate £400k over 2019/2020 to fourcharities chosen by employees.

Over £25,000 was raised and donatedby our UK operations to a charity
dealing with homelessness on thestreets of South Wales.

• Feedback from employees

Admiral Seguros in Spain hosted a‘Parents Open Day’, where parents of
employees were invited to learn more
about our culture and history, whilst
promoting the importance of work/
life balance.

• Community feedback

A range of third parties benefit fromconsistent financial contributions,
volunteering activities and increased
visibility. For example, in Cardiff, wesponsored Pride for the 20th year in a row.

We hosted an exhibition of Welsh
LGBT+ Icons and Allies at our Head
Office in Cardiff.

85%

We also delivered employability
training to over 400 children acrossnine schools in Wales.

• Financial donations contributed• Hours recorded for volunteering
activities• Dialogue with organisations
including Stonewall, Stop Smoking
Wales and NHS Direct• Feedback from the Welsh Assembly
Governmentof our staff feel goodabout the ways inwhich we contributeto communities

Our Community Chest fund had a budgetof £130,000 in 2019 to support staff andtheir families who are involved with local
charities, clubs and organisations.

A sustainable businessfor the long term

PurposeFind out more:
Our Communities
page 10
Being a Responsible
Business page 60
Our Business
Model page 16

Aside from financial contributions, Admiralprovides a wealth of learning, development
and employment opportunities. The senseof support for the community is sharedacross the Group.
Throughout 2019 we held the Gold HealthStandard award, awarded by the Welsh
Assembly Government (after gaining
re-accreditation in 2017).

The Chair and Senior Independent
Director met with large shareholders
at Corporate Governance meetings.

• Broker feedback

Feedback relating to investor
meetings, roadshows and conferenceswere all recorded by the IR team andshared with the Board.

• Feedback from proxy firms

Accessible management and Board
members.

• AGM voting results

Robust share price performance.

300+

Fair treatment of all shareholders.

• Analyst feedback• Shareholder feedback

Number of Investor
Relations activities
undertaken in
12 months

Accurate and timely information for
all shareholders.

The Board considers the long term
consequences of its investment strategies
for its stakeholders and ensures that allof our external asset managers are
signatories to the Principles for
Responsible Investment.

Find out more:
Chair’s Statement
page 12
Being a Responsible
Business page 60
Our Business
Model page 16
Dividend Policy
page 38

Admiral Group plc · Annual Report and Accounts 201921

Our commitment to Section 172(1) continued

OUR EXTERNALPARTNERS

Why we engage

Examples of how we engage

The Group’s relationship with its
reinsurers continues to be an integral
part of the Group’s business modeland plans.

Key parties have internal relationship managers responsible for ongoing dialogue,
for example with co- and reinsurance partners, and strategic partners.

A number of major suppliers arealso deemed to be of strategic
importance to the Group.
We perceive that key material
issues for our external partners
generally relate to; being treatedfairly during the sourcing stage, solid
two-way communication channels,
financial returns and timely financial
payments, strong collaborative
relationships and meeting our cybersecurity requirements.

The Group’s dedicated Regulatory Relationship teams maintain channels of communication
with the FCA and PRA in the UK, and all our international regulated intermediaries and insurers.
We have supervisory teams that have oversight for the Group, who provide ongoing
reviews of key and strategic suppliers, and Group procurement functions and systems.
The Board receives regular updates on;• all proportional risk sharing agreements including co-insurance and reinsurance contracts• all insurance and comparison businesses• Loans business and other Group items• matters relating to partnerships and opportunities• relationships with key partners• procurement efficiencies• regulatory, technological and consumer trends• electric vehicle technology
The Board takes all updates into account when considering the long term consequences of its
strategies and business plan.

OUR
ENVIRONMENT

The Board is mindful that it
is increasingly important todemonstrate responsible businessbehaviour with regards to theenvironment.
We perceive that key material issues
for our environment generally
relates to; the direction of travel andprogress relating to environmental
concerns, awareness of topical issues
and the sharing of best practice,
reducing carbon emissions andthe Group’s overall environmental
footprint, and the creation of asustainable business for the future.

We aim to reduce our environmental footprint and encourage responsible behaviour.
Employee directed activities include;• Regular updates from the ‘Green Team’, an internal working group• Internal promotion of ‘Green Week’• Promoting video and telephone conferencing systems between the international
businesses to reduce travel• Various recycling initiatives across our offices• Installation of scooter parking with charging sockets (Admiral Seguros)• Cycle to work scheme for employees• Monthly meetings of our Climate Change Project GroupAt Board level;• Directors receive updates on our Responsible Investment Policy, and give feedback relating
to investments and topics for consideration.
• Directors are kept up to date with UK, European and Global initiatives on ESG matters.
• The Group Risk Committee and the Board receive updates from our Climate Change ProjectGroup, on which our CFO and CRO both sit.

Principal Decisions

Proposed acquisition (Rastreator/Acierto)
In April the Board considered the proposed
acquisition of Spain’s second largest
price comparison business that, it was
intended, would combine with the Group’s
existing price comparison business in Spain(Rastreator). The Board considered theacquisition in the context of the impact
on the Group’s stakeholders including
Rastreator’s employees, suppliers andpartners in Spain as result of the merger,

22

and also discussed whether the transaction
was in the best commercial interests of theGroup’s shareholders as a whole. The Board
concluded that the long term value creationof Rastreator combining with Acierto wasa transaction from which shareholders andstakeholders would benefit in the long term as
the combined business grew and contributed
more materially to Group profit. However, due
to unforeseen time delays and costs relating

Admiral Group plc · Annual Report and Accounts 2019

to the regulatory approval process, the Board
concluded that it was in the best interests of
the Group not to proceed with the acquisition.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Key to our Purpose
Good value
financial products

Excellent andconvenient service

Good returns forour shareholders

A great place
to work

Examples of actions taken
in 2019

How we monitor the impactof our actions

Examples of stakeholder
outcomes

The CFO provides regular updates on
the activities related to the renewalof the Group’s reinsurance and quota
share contracts, including maintaining
the ongoing strategic relationshipwith Great Lakes co-insurance
partners.

• Successful renewal of risk sharing
agreements and contracts

Insights and new developments areshared between our garage partners andinternal teams relating to how vehicles are
becoming more technically complex andsophisticated.

The Board visited the Group’s garage
network to understand why and how
it has changed, and why it needs toevolve further as repairs become more
complex and sophisticated.

• We track efficiency savings inprocurement activities

Arrangements relating to the global
procurement of the Group’s IT
equipment were agreed over afour-year term.

In June 2019, the Group Board
approved the updated Responsible
Investment Policy.
In 2019 the Climate Change ProjectGroup was established.
We successfully reduced CO2eemissions per employee, andGroup-wide emissions in 2019.
Partnership with envoPAP (to use
carbon neutral paper across all of
our UK offices).

• Feedback from co-insurance andreinsurance partners• Feedback from strategic suppliers
and partners• Compliance and audit activities

The Groups reinsurance andco-insurance partners areintegral to the Group’s
five-year business plan.

• Our facilities department measuresand monitors key aspects of ourenvironmental performance andregularly reviews progress• We track and measure CO2eemissions per employee and at
Group level• Our Cardiff and Newport offices
are rated BREEAM Excellent
for exceeding sustainability
benchmarks above regulatory
requirements• 85% of our staff believe weare working to reduce ourenvironmental footprint• Ensuring our asset managers are
signed up to the PRI guidelines

100%

All our UK
non-recyclable
waste is converted
into energy

The Board monitors announcements anddevelopments by the UK government on
matters of strategic interest – for example
the banning of sales of diesel and petrolcars, and the rising trend of electric vehicle
technology is on the Board agenda for
ongoing discussion.
Our compliance, audit, procurement anddue diligence frameworks outline our
expectations for responsible businessbehaviour and provide insight into ourculture and approach.

A sustainable businessfor the long term

PurposeFind out more:
Being a Responsible
Business page 60
Our Business
Model page 16
Strategy in action
page 26

Ongoing improvements relating torecycling and energy usage.
Increased awareness and understandingof environmentally responsible behaveramong our employees.
Our facilities team are exploring ways inwhich a third party can verify our emissions
in 2020.
In 2019 the Board decided to formalise
our environmental policy.

Find out more:
Directors’ Report
page 124
Being a Responsible
Business page 60
Our Business
Model page 16

The Board reviewed and amended theGroup’s purpose statement in 2019, to
include ‘...whilst building a sustainablebusiness for the long term.’ This reflects
a commitment that the Company’s
operations will consider the impact on thecommunity and the environment, both now
and into the future.

Proposed development of a separate entity
In April the Board received a strategy review
update which included the proposal to develop
a separate entity, to allow for the development
and consideration of potential new productsthat might be beneficial to the Group and its
stakeholders in the future. The Board noted thatthe primary purpose of setting up the proposed
entity was for the benefit of customers by giving
them access to more financial products andservices that were appropriately priced and would

be offered with excellent customer service.
The proposal was also determined to be consistent
with the Group’s goal of product diversification.
In October 2019, the Board approved the proposal
and agreed that setting up the strategic entity todevelop new products would benefit customers
and would create long term value for the Group,
which in turns creates value for customers, staff
and shareholders.

Admiral Group plc · Annual Report and Accounts 201923

How we do it – Our Strategy
The underlying strategy for Admiral remains unchanged and is highly focused on building customer-centric, sustainable businesses
for the long-term. We strive to keep doing what we’re doing, and do it better year after year. The Board and senior management teamundertake a focused annual review of our strategy and our approach, as well as a consideration of potential challenges and risks.

Investing in our Core
Ensure Admiral remains one of, if not, the best insurers in the UK.
Strategic Objective

Sustained Competitive Advantage
Maintain our focus on efficient claims
management and pricing to underwrite profitablebusiness, a cost-conscious culture and greatcustomer service.

Continued Growth and Profitability
Profitably grow our UK private Motor andHousehold insurance operations.

Continued Product Development
Maximise the value of our core business and lay thefoundation for future growth with new products.

Risk
Reference

2019 Progress

1• Market leading combined ratio• Voted Best Motor Insurer for the 7th year in a row, andBest Insurance Provider – Customer Service for the 2nd year
in a row in the Personal Finance Awards 2019
• Continued Defaqto five star rating on UK Insurance products

2• Disciplined, rational approach to growth and prioritisingprofitability• Household Insurance grows to more than one million customers

3• Strengthening foundations in short-term Van Insurance
businesses, resulting in continued growth• Leading telematics provider• Voted Best Home Insurer in the 2019 Insurance Choice Awards• 6% improvement in customer net promotor score (NPS)• MyAccount online servicing further enhanced, increasing thenumber of customers who reach us through digital channels

Investing in our future
Demonstrate that Admiral can be a great insurer beyond the UK and develop sources of growth and profits beyond insurance.

Comparison
Develop websites that allow consumers tocompare a range of general insurance, financial
services and other products.

International Insurance
Develop profitable, growing, sustainable insurance
businesses that mirror the UK model.

New Product Diversification
Develop a competitive advantage in products
in insurance and beyond.

4• Formed Penguin Portals platform combining Comparison
businesses outside the US to allow for greater learning andsynergies

5• Overall, customers grew by 16% across our International
Insurance businesses• Improvements in digital and self-service offering for customers

6• Launch of niche Household Insurance product in France,
named ‘Homebrella'• Growth of Loans business in UK, with lower losses

Ensure Admiral remains a great place to work
At Admiral, we have created an environment where our employees look forward to coming to work and providing great
service to customers. As responsible employers we aim to create an inclusive working environment and to support
our employees wherever possible.

People Driven Workplace
Motivating our people to do things better for ourcustomers and the wider community, leading
to better service and good returns for ourshareholders• Listed in the Sunday Times Best Big Companies to Work For Ranking forthe 20th year in a row• Named 1st in the Sunday Times Best Big Companies to Work For in 2019
• 3rd Best Large Employer for Women in the UK (Great Place toWork) for the 2nd year in a row• Over 200,000 online courses and almost 1,000 classroom sessions
completed by UK employees in 201924

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Principal risks have been considered against each of our strategic
objectives. For more information on Principal Risks and Uncertainties,
please refer to page 66.

2020 Focus• Maintain strong performance of our UK Insurance business• Respond to market conditions through effective pricing and growing
at the right time

KPIs (Financial and non-financial)£597.4m• Continue to be an efficient business with a focus on expenses and costs

UK Insurance profit (Group’s share of
profit before tax)

• Continue to take advantage of growth opportunities in UK Motorand Household

5.38m• MultiCover and MultiCar growth• Focus on customer retention by putting customers at the frontof all that we do• Identify and develop new products for customers that add value• Take advantage of new technologies to improve our customers'
experience, including improved digital and self-service offering

UK Motor and Household
customer numbers

16%

increase in UK Van customers• Continue to maximise and leverage data-based decision making• Continue to develop and grow a multi-product strategy inEurope and beyond• Continue to provide a platform that attracts customers
and improves the customer experience• Continue our path towards long-term value creation in Europe and the US• In the US, continue to focus on attracting customers that stay with
us in the long term, using technology to improve efficiencies andprotecting margins• Further develop Admiral Loans and offer UK customers a better
range of products and an improved online buying experience• Launch of L’olivier Household insurance in France• Build on our strong track record of encouraging diversity across the Company• Continue to develop our people by offering opportunities for training anddevelopment, as well as providing interesting career opportunities• Continue to encourage and respond to employee feedback and improve8%

increase in Comparison Quotes

1.42mInternational Insurance customers

52%

growth in loans balances, with lower lossof £8.4m (2018: loss of £11.8m)#1Best Big Company to Work For(UK) in 2019

• Ensure our people enjoy coming to work

Admiral Group plc · Annual Report and Accounts 201925

Our Strategy in Action
Risks that could impact investing in our core include:• Reserving Risk in the UK andinternational insurance• Erosion of competitive advantage
in UK Motor Insurance• Reliance on the UK Comparison channel• Premium Risk and Catastrophe Risk

• Potential diminution of other revenue• Market Risk

• Reduced availability of co-insurance
and reinsurance arrangements• Failure of geographic and/ or productdiversification• Operational Risk

• Counterparty Risk

• Legal and Regulatory Risk

Investing in our core
Investing in our core for sustained competitive advantage
We constantly look at efficiencies and improvements in order to support our position as a market leader of products andservices. One area of growing significance in 2019 included digital and self-service.
In 2019, we worked hard to increase
the digital contact options available
to our customers and have seen
over a 70% uplift in the percentage
of customers who contact ourcustomer services department
digitally. This includes expanding
our webchat capabilities, and in
2019 we have seen over a 170%
increase in the number of customers
who contact our customer services
department via this channel.

In 2019, we enabled Admiralcustomers to instantly update moreof their policy and payment details
online through the MyAccountportal. This is a continuation of ourjourney into true self-service andwe will continue to offer additional
self-service options in the future.
MyAccount has been used more
and more by customers, with a 60%
uptake in the volume of online selfservice amendments made in 2019.1
1

Source: Management Information

Investing in our core for continued growth
We launched our Household business in the UK in 2012, with the ambition to deliver growth and profits beyond Car Insurance
in the UK. In December 2019, less than seven years later, we were delighted to welcome our one millionth customer on cover!
During this seven-year period,
we also answered more than 4.2
million customer calls, were voted
as the Best Home Insurer in 2019
in the Insurance Choice Awards
and launched a Landlord Insurance
product in 2019. Looking ahead,
we aim to build upon the successesof our MultiCover product andInstaQuote (quick quote) channel.

26

Admiral Group plc · Annual Report and Accounts 2019

In 2008, Henry Engelhardt, thenCEO of Admiral Group, commented
that ‘Our strategy is simple:
continue our profitable growth in
the UK and take what we know and
do it elsewhere.’
Today, we can certainly attributea proportion of our success to our‘test and learn’ culture, further
demonstrated in 2019 with thelaunch of our niche Household
insurance offering in France underthe brand ‘Homebrella.’Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Risks that could impact investing in our future include:• Reserving Risk in the UK and International Insurance• Reliance on the UK Comparison channel• Reduced availability of co-insurance and reinsurance
arrangements• Credit Risk

• Failure of geographic and/ or product diversification• Legal and Regulatory Risk

• Operational Risk

Investing in our future
Comparison Platforms
In 2019, we brought our comparison businesses outside the US together under the management of one organisation named
Penguin Portals2 – creating the largest network of comparison businesses for financial services.
From a strategic perspective,
this will enable us to realise
operational synergies,
particularly with regard to
our use of technology. The
ultimate objective is to provide
transparency on available
products which will help ourcustomers make decisions andimprove their experience.
Penguin Portals has both theadvantage of understanding
the needs and expectations oflocal markets, and access to
global data-insights to identify
shared opportunities for
success across geographicalborders. The Group will also beable to leverage experience
gleaned from the launch ofConfused.com in 2002, the firstcomparison platform in the UK.
2	Penguin Portals network brings
together Confused.com, Rastreator.
com, LeLynx.fr, Rastreator.mx,
Tamoniki.com, GoSahi.com

Building on Economies of Scale
Within our International Insurance operations, 2019 was a year of building on our competitive advantages, collaboratingclosely with each other and improving a range of online functionality features.
ConTe, Admiral Seguros, L’olivier
and Elephant all made strides with
their respective digital offerings
by increasing the range of features
available to customers3.
During the year, all our International
Insurance businesses allowed
customers to purchase polices
online and to download policy
documents without speaking to acustomer service representative.
These developments in functionality
improved the overall satisfaction
scores of our customers in thesemarkets4, and we expect the trend tofurther improve expense efficiencies
in the longer term.

Meanwhile in the UK, our loans
business (AFSL) announced that theywould be running an Open Banking
trial for referred customers. This trial
is helping us understand customer
appetite for sharing their information
through Open Banking and will also
help our credit risk and pricing teamreview new sources of data to see
how predictive of risk it is.
Looking ahead, AFSL aims to continue
developing their risk selection,
product development and expense
control processes. Additionally,
AFSL trains and develops employees
to help improve the customer
experience and take-up rates
for successful applicants.

3	See page 21 of HY19 Results Presentation‘Expanding on the functionality’4	NPS improvement scores (Management information)

Admiral Group plc · Annual Report and Accounts 201927

Chief Executive’s Statement“Consistently happy staff, consistently happy
customers. Reassuringly stable outcomes,that are fundamental to our relentless
forward momentum; a momentum fuelled
by a sustainably healthy culture.”28

The combination of a new decade and an
imminent, if not immediate, change ofleadership at Admiral provides me with avalid excuse to comment across a longer
time period than a typical CEO statement
in an annual report

But I did love “going like a freighttrain”. A freight train – not racy, notglamorous (who needs a glamorous
insurance company); but progressing
ever onwards with a relentless,implacable forward momentum.

Almost a decade ago, my predecessor,
Henry, with his inimitable talent fora colourful phrase to light up a CEO
statement, described the Company asa “snowball going like a freight train –downhill” (2010’s CEO statement). I know
I’m not alone in having enjoyed Henry’s
CEO statements, with his penchantfor colourful, often gastronomic,
analogies. I confess, however, in thisinstance, I might have avoided both“snowball” – with associations of fragility
and transience – and “downhill” – withassociations of, well.. “downhill”; neitherof which entirely reassured on thesustainability of Admiral’s model.

That relentless forward momentum has
seen us grow, year in year out, over the
decade with the number of customers
we serve growing from 1.9 million to 7.0
million overall, and from just over 100k
to 1.4 million beyond the UK, while also
growing our profits from £206 million
to £526 million.

Admiral Group plc · Annual Report and Accounts 2019

Did 2019 itself fit into this narrative ofrelentless momentum?
Very much so. In so many ways.
It was a year which saw profits exceed£500 million for the first time, on the backof substantial reserve releases. We crossed
the million mark in household policyholders
and sold our first household policy beyond
the UK. By year end, we had almost soldour 100,000th loan (and have, at time ofwriting, done so). We believe (hard to proveit) we have become the biggest (non-fleet)
van insurer in the UK, only 2.5 years after
starting to underwrite van insurance.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Group Customers(2018: 6.51m)

Group Turnover1(2018: £3.28bn)

Group Profit Before Tax(2018: £479m)

6.98m£3.46bn£526m

Alongside this rapid progress on many
fronts, some data points were stubbornly
stable. The number of consecutive years
amongst the top performers in the “Best
Places To Work” only nudged up from
19 years to 20.

It is a source of huge satisfaction tome, as I contemplate the end of myperiod of stewardship of Admiral, that
I will leave a wonderful Company in thehands of a wonderful top management
team in Geraint, Cristina, Scott & Elena,very ably supported by great leadersrunning important subsidiaries and key
Group functions. They are collectively
more than capable, of not just sustaining,
but also of evolving, Admiral’s potent
culture. And I am particularly glad that,in Milena, I have a successor who has theintelligence, the values, the track record
and the clarity of vision to take on the roleof Group CEO; to reinterpret the culture,
to maintain its relevance over the next

decade; to reinforce the elements thatremain key to our future success; and,equally importantly, to set aside elementsthat will inevitably slip past theirsell-by date.

The percentage of staff saying they areproud to work for Admiral was stuck ina narrow band in the mid-90’s. As was
the percentage of customers who said
they wanted to renew with Admiralfollowing a claim.
Consistently happy staff, consistently
happy customers.
Reassuringly stable outcomes, that are
fundamental to our relentless forward
momentum; a momentum fuelled by asustainably healthy culture:

Thereby ensuring that Admiral willcontinue to “go like a freight train”
in the years to come.

David Stevens, CBEGroup Chief Executive Officer
4 March 2020

• A culture that, in many different ways,
attracts and retains people, at all levels,
who are simply better at their jobs thanmost of their peers in the industry• A culture that respects and promotes
a set of fundamental skills in risk
selection, claim handling, customer
support and expense control that arecore to success in insurance• A culture that emphasises the longterm over the short term; long-term
prosperity ahead of short-term
financials; a sustainable balance inthe outcomes for staff, customers
and shareholders

1.	Alternative performance measure (APM) – refer toGlossary for definition and explanation, and to note
13 for reconciliation to Financial Statements

Admiral Group plc · Annual Report and Accounts 201929

2019: A Year in Pictures
New European Insurance Hub
JAN

Following Brexit, our new European Insurance Hub (AECS)
began trading in January 2019, providing underwriting
services for our European businesses.

We’re number one!
We were named the Best Big Company to Work For in the UK
at the Sunday Times Best Companies Awards.

FEB

Sponsorship of the Newport Half Marathon
MAR2019 marked Admiral's 6th year sponsoring the Newport Half
Marathon, an event which helps to raise funds for St David's
Hospice care in South Wales.

Admiral Rewards is launched
Admiral Rewards helps our customers pay for their insurance
premiums via cash rewards from thousands of big-name brands.

APR

Festival of Rugby
MAY

In May, Admiral and the Welsh Rugby Union hosted a Festivalof Rugby, a fun filled afternoon of rugby activities for over
200 children.

Our managers go on the phones
Renewals Operations Managers took to the phones to better
understand the complexities that frontline employees face
and to look for ways in which we can improve.

30

Admiral Group plc · Annual Report and Accounts 2019

JUN

Launch of Landlord Insurance
JUL

With a growing demand and a clear market gap, Admiral’sHousehold team developed a brand-new product launched in
July: Landlord Insurance.

Homebrella Insurance launchThis year we expanded our product portfolio in Francewith the roll out of ‘Homebrella’ our niche household
insurance product.

AUG

Admiral sponsors Swansea Bay’s 10K Run
SEP

In September, over 150 employees took part in the Admiral
Swansea Bay 10K run, an event which has become a firm
fixture in the UK's running calendar.

Customer Care Week Celebrations
We celebrated National Customer Service Week in October,highlighting ways in which different departments all
contribute to the service that we provide.

OCT

Admiral's 1st Active Awards
NOV

UK Household Insurance reaches
one million customers

December marked the first ‘Admiral Active Awards’ tocelebrate how staying active can contribute to teamwork,
better physical and better mental health.

DEC

In December our UK Household Insurance team reached
one million customers on cover, a testament to our longterm sustainable approach to growth.

31

Q&A with David, Milena, Geraint and Cristina

with David, Milena, Geraint and Cristina

Our people are shareholders in the business, and are highly
motivated to improve processes, better serve customers,
as well as maintain a culture of cost efficiency.
2019 was another challenging year
for pricing and claims inflation in the
UK Motor market – have we reached theturning point, how has Admiral reacted,
and what are your expectations for
pricing in 2020? [Cristina]

It is thus difficult to say with certainty thatmarket prices are turning, and to what
extent – although early signs do seem toshow a slight increase overall which would not
be surprising given the claims inflation themarket has experienced.

Although there are potential early signsof a turn in the cycle towards market
prices increasing, there are also several
moving pieces that lead to uncertainty.

This was a particularly strong setof results with another record
profit and record dividend – what are
the drivers, and can we expect similar
performance in the future? [Geraint]

Claims inflation experienced in recent
years continued in 2019, particularly fordamage claims and Large Bodily Injury (BI). In
addition, the increase in the cost of excess ofloss reinsurance creates additional pressure
for prices to increase. 2019 also saw clarity
in the Ogden rate, which was announced
slightly less favourably than expected
and was set for up to five years at -0.25%(previously at -0.75%).
Admiral prioritised margin over volume in
2019, and given these market pressures,increased prices throughout the year.
The above-mentioned factors are likely toimpact prices in 2020, however there arealso elements which may influence prices
in the opposite direction. From a regulatory
perspective, the focus is on the customer,
where whiplash claims are likely to result in adecrease in average premiums as the hopedfor savings are passed on to consumers. In
addition, the FCA are conducting a market
pricing study to ensure customers are notpenalised for loyalty and are fairly priced– the outcome of the study is expected in
the first half of 2020, and may put pressure
on some insurers to adjust, and potentiallylower premiums for some or all of theircustomer base.

32

This was a very strong set of results,
mainly driven by exceptional reserve
releases in UK Motor due to better than
expected development of prior years. The
main factor contributing to this result is theincreased Ogden certainty (rate was set at-0.25% in August 2019 for up to five years
after several years of uncertainty) which led
to an increased speed of large bodily injury
settlements in the latter part of 2019.
In addition, we were able to settle a few
unusual large claims in 2019 which resulted
in substantial releases.
Although this was an exceptional year forreserve releases, the strong performance also
reflects a rigorous and prudent approach tounderwriting and reserving. The margin held
within the reserves remains consistent andstrong year-on-year.
I cover the breakdown of the results in moredetail in my CFO commentary on page 34.

Admiral Group plc · Annual Report and Accounts 2019

The UK Motor expense ratio has
increased in 2019 – what are thedrivers, and are you able to maintainyour competitive advantage for expense
efficiency in the market? [Geraint]
Admiral has always had a very costconscious culture, and that has notchanged. Our employees are shareholders
in the business, and they understand theimportance of maintaining our competitive
advantage which includes expense efficiency.
The main driver for the expense ratio increase
was external levies, particularly the FSCS levy.
In addition, we have invested internally tostrengthen our technology, analytics andcyber capabilities for the future. This also
includes an investment in skilled staff tobetter service our customers and strengthen
our IT capabilities.
As customer needs change with a desire
to do more business online, Admiralcontinues to work on enhancing digital andonline capabilities and the underlying IT
infrastructure. This strategy inevitably leads
to an investment in the early phase, but wehope to reap the rewards in the medium tolong term as more customers use our online
platform. Ultimately our objective is toincrease conversion, offer better customer
experience, and improve efficiencies.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

David
Stevens, CBE

MilenaMondini deFocatiis

David, on the US, do you believe
Elephant has achieved enough in
2019, especially given the loss ratio
deterioration and impairment? [David]
A lot has been achieved in 2019
in Elephant, our US insurer. The
technology we deploy in the US is arguably
the most advanced in the Group, and thetechnology team the most agile. We offer,and our policyholders regularly use, a wider
array of self-service options. We know fromfeedback from distribution partners that ourclick-to-sale ratio is industry leading, on theback of a very effective online and offline
journey. Our customer satisfaction ratings
continue to climb month after month.
However, the financial outcome has beenless satisfactory, partly because of loss
ratio challenges and partly because of acyclical increase in competitor marketing
spend. We have responded to the former
by aggressive pricing action, which has
paused our growth. These factors, along with
Admiral’s instinctive conservatism and theuse of shorter-term projections (five-year
cash flows) have led us to a write down in the
carrying value of the US insurance business.

Milena, you have recently taken
leadership of both the UK and
EU insurance business – what are thepotential synergies? [Milena]
We conducted a Group strategic review
in 2019, which I was very involved in as
the strategy of the UK and European business
is fundamental to the long-term future of
the Group. The outcome of this review was areinforcement of our core competencies as
we continue to strengthen the foundations
in each of these businesses. At the sametime, we continue to focus on the futureboth from the perspective of keeping up
with various trends such as technology andways of working, and product diversification
to drive growth.

Geraint
Jones

Cristina
Nestares

In all of these areas, the potential synergies
for learning and transferring skills are highacross the UK and European businesses, andwe will continue to focus on building ourdigital and online self-service capabilities
as well as take advantage of new productopportunities in a test and learn environment
until we are confident of the relevant
potential.
In addition, I strongly believe that the powerof the team is greater than the individual,
and so the European CEOs and I have worked
together closely and focused on transferring
learning and leveraging operational synergies
over the past few years. This has resulted inseveral initiatives such as the team in ConTe(Italy) sharing their sophisticated fraud
capabilities, and the establishment of a teamthat supports information technology acrossthe European businesses. The UK forms an
extension of this, where key learnings fromour core and most developed business aretransferred to our smaller operations, andvice versa.

There has been an increased
focus on ESG and Sustainability
in the past year or so – what is Admiral
doing to ensure a sustainable businesswith a positive impact on the wider
environment? [David]

This commitment to have a wider positive
impact has continued to be an important partof the business in 2019, and we have taken
several steps forward – for example, with theformalisation of our Employee Consultation
Group to create a platform for employees
to engage with management and Board, thecreation of a Climate Change project working
group to consider the impact of Climate
Change, a formalised Responsible Investment
policy, and continued efforts to engage with
the Community and provide a platform for
employees to give back.
We are very proud to create a working
environment where our people feel
motivated and engaged to come to work –as we believe that people who like what theydo, do it better. From this perspective, being
named as the Best Big Business to Work forin the UK by the Sunday Times in 2019 was areal honour.
Our Corporate Social Responsibility reportcovers further initiatives that we are working
on in more detail – you can find this on our
website.

Admiral has always been committed torunning a business that is sustainable
over the long term. This includes having
a positive impact on all our stakeholders
including our customers, people andshareholders, as well as our partners and thewider community and environment. The Board
remains committed to good governancepractices and has ensured adherence to the
Corporate Governance Code.

Admiral Group plc · Annual Report and Accounts 201933

Chief Financial Officer’s Review“Admiral of course is (and I believe always shouldbe) consistently prudent in setting reserves andnormally expects significant releases, but 2019has been well above average.”Group share pre-tax profit £m
£m

2019

2018

ChangeUK Insurance

597

556

+41

International Insurance

(1)

(1)

–

Comparison

18

9

+9

Admiral Loans

(8)

(12)

+4

Share scheme cost

(53)

(49)

(4)

Other

(27)

(24)

(3)

Profit

526

479

+47

A headline 10% increase in pre-tax profit – to a new record level – is a reallypleasing result, and so I’ll start my review by looking at what’s driving thatvery positive move.
The standout item is the £41 million improvement in UK Insurance profit.
£11 million of that comes from an improved household result (more below).
UK Motor profitability moved ahead by around £30 million to £591 million.
When trying to assess the change, it’s important to remember that the
Ogden Discount Rate (see page 38 for more detail) has distorted both years’
results. Firstly, 2018 was positively impacted (£66 million) when we changed
our assumption of the rate ahead of its announcement from -0.75% to 0%
at year end. When the new rate (-0.25%) was announced (mid-2019), 2019’s
result took a hit of around £33 million to adjust for our slight optimism. Thatmeans that the underlying profit move is bigger than the £47 million in thetable above, though the changes in the Ogden rate during the period makemeaningful comparison difficult. Thankfully we should see some stability in
Ogden in the coming years.
What is clear is that UK Motor profit is materially higher in 2019 than prioryears. That has been driven by unusually high UK Motor reserve releases
that resulted from improved reserve estimates across a number of years.
This in part is due to some ‘unclogging’ of large claims settlements causedby the recent certainty, but also generally much more positive trends on big
claims than we expected. Admiral of course is (and I believe always should be)consistently prudent in setting reserves and normally expects significant
releases, but 2019 has been well above average (29% v 21% over the previous
five years). Profit commission revenue was also well ahead of recent years.

34

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

2019 revenue versus 2018

UK Insurance Profit
Before Tax (2018: £555.6m)

International Insurance Profit/ Comparison Profit
Loss Before Tax (2018: £(1.1)m) Before Tax (2018: £8.8m)£597.4m£(0.9)m

To give an idea of quantum, if the reserve
release for 2019 (defined as reserve
releases on Admiral’s original net share of
the business as a percentage of current
year net premium revenue) was in line withthe average of the prior five years, Group
profit would have been around £430 million
to £450 million.

• The Comparison segment produced a very pleasing (stellar even?) doubling of profit(£18 million v £9 million). Confused.com led the way and more detail on that is below.
Revenue growth was also strong at 14%

It’s also worth noting that the level ofconservatism in the reserves (we usually
think of it in terms of the margin above
best estimate in percentage terms)
is unchanged year-on-year. We were
expecting it to reduce somewhat at 2019
year end, but the scale and nature of thepositive moves on the back years has led us
to continue being as cautious as at the endof 2018 for the time being.
We would expect (though can’t guaranteeof course) significant releases again in 2020,
though possibly not quite of the magnitudeseen in 2019. We might expect the level ofconservatism within the reserves to reduce
if 2020 trends are a bit more usual.
A few other observations from the results:• Within the UK Insurance result above,
our Household business made a profit
of around £8 million. Still relatively
small to the Group (it would be over
twice as big if the cost of quota sharereinsurance was excluded), but a decent£11 million or so improvement on 2018’s
weather-impacted result. The business
continued to grow nicely, with 17% morecustomers insured. We’re hoping forsome improvement in the non-weather
loss ratio in the coming years• In contrast (and a bit disappointingly),
the International Insurance result
remained flat at a £1 million loss in 2019.
This comprised a better European result(£9 million v £7 million) offset by a higher
US loss (£10 million v £8 million). This
four-point-higher-loss-ratio-driven US
result is discussed further opposite,whilst the overall international result
needs to be considered alongside a very
healthy 16% growth in the number ofactive policies at year end£18.0m• Admiral Loans grew its outstanding balances to around £455 million (+52%) whilst
revenue doubled. Importantly, headcount was basically flat, a nice insight into theefficiency of the business. The loss reduced to £8 million in line with expectation andarrears were also in line with plan
• Finally, ‘other’ costs were up around £8 million on last year. The biggest component
as you can see is the Admiral share scheme charge which increased (£49 million to£53 million) as a result of improved vesting assumptions (improved financial results
and strong shareholder return) and the higher share price. We will also pay all our
employees a cash bonus of £500 in recognition of the huge contribution to the Group’s
strong 2019 results (around £6 million)
Further details on the numbers are set out throughout the strategic review section of
the report.

Highlight – Confused.com
Picking a highlight from such a strong set of results was reassuringly tough. Options
included a good turnaround in UK Household profit (plus decent growth, surpassing one
million customers), strong growth and an improved result at L’olivier in France, continued
great progress in Admiral Loans (not forgetting the UK Motor profit). But there’s one
standout for me, so let’s hear a bit more about Confused.com.
The improvement in performance under Louise and team’s leadership over the past two
years has been stark:
2017

2018

2019

2019 v 2017

Revenue£87.1m£95.1m£112.7m+29%

Operating profit£10.1m£14.3m£20.4m+102%

Operating profit %

12%

15%

18%

+50%

A number of factors have contributed to that very nice doubling of profit v 2017 – evenmore focus on profitability and cost efficiency, very notable improvements in marketing,customer experience and product.
From a marketing perspective, brand awareness has significantly improved and, inparticular, spontaneous awareness almost doubled in 2019. No doubt you’ll have enjoyedConfused.com’s sponsorship of the Rugby World Cup on TV whilst desperately hoping fora Welsh win ( ) Marketing efficiency was also improved.
Confused.com’s product offering is better than it was two years back, as is the customer
journey. Results from products beyond car insurance comparison have improved
significantly.
Great work Louise plus Andy, John, Karen, Sam, Steve, Tamsin and the whole Confused.
com team!

Admiral Group plc · Annual Report and Accounts 201935

Chief Financial Officer’s Review continued
Less pleasing – Elephant AutoFor balance and as hinted above, adisappointment in 2019 was the reversal
in the trend of improving financials for
Elephant Auto and associated write
down of the carrying value in the parent
company financial statements.
The last few years have seen some great
progress at Elephant. Some examples
from 2019 include notable improvements
in service levels (leading to a big increase
in Net Promotor Score) and technology(online self-service as one example),launching a second brand and diversifying
distribution channels, amongst others.
But 2019 will probably be mostremembered for a deterioration in loss
ratio (2019 underwriting year is projectedaround 77% v 74% for 2018 at the same
point of development) when we were
expecting the opposite. Much action is
being, and has been, taken (including
underwriting rule changes and significant
rate increases) and improving the loss ratio
will continue to be a (or actually, the) majorarea of focus in 2020. Some additional
conservatism has also been built into thebooked reserves at the end of 2019.

Partly because of the result being worse
than plan, we changed to using shorterterm projections for the carrying value
impairment test. Whilst we remain
confident that Elephant’s result will
improve in the short term, and thebusiness will go onto profitability in the(ideally) not too distant future, this led us
to conclude that further impairment tothe carrying value was required and a £66
million charge was taken in the 2019 parent
company accounts.
I have faith in our team in Richmond to
improve the results in 2020 (no pressure
Alberto!).
Finally, I should also give an update on thestatus of our internal capital model. Our
team has continued its intensive work, withkey tasks during 2019 including remediationof previous findings and having the updated
model retested, by independent internaland external validators. Positively, noneof that work has moved the overall capital
position materially.
In terms of next steps – we expect to moveinto a pre-application phase with the PRA
and Gibraltar regulators in the middle of2020. That process involves an assessmentof our application against the requirements

and can last six months. After that there
would be a further number of months for
us to fix any issues that came out of that
review. Then we’d be in a position to makea formal application, and realistically we’d
now expect that to be in 2021.
In March 2016’s CFO statement I counted
myself very lucky to have worked for
Admiral’s first CEO, Henry Engelhardt, who
was about to retire after a reasonable
25 year shift in charge. The exact same
sentiment applies to my current boss –Admiral’s second CEO and cofounder, David.
We’ll pay fuller tribute when David actually
steps down after the transition, so I’ll justsay that I’m very delighted we’ve beenable to name Milena as David’s successor.
Having sat back-to-back to her for a year
or so (occasionally getting a word in ), I
know she’ll do an amazing job as Admiral’s
third CEO and I’m really looking forward
to working with her and continuing to bepart of Admiral’s leadership team for theforeseeable. Congratulations Milena!

Geraint Jones
Chief Financial Officer
4 March 2020

Climate Change Project GroupIn 2019, a Climate Change-Related
Risks Project was initiated by the
Board, to understand current
and potential future risks arisingfrom climate-related change,
to understand disclosure andreporting requirements (ascompared to current practices),and to ensure that there isappropriate governance aroundmanaging climate-related risks.
The project steering group consistsof senior managers across thebusiness, including our Group
CRO, Group CFO, Head of Investor
Relations and Head of Facilities,
amongst others. Our Group
Strategic Risk Lead drives thesteering committee, ensuring thatthe group meets on a monthly basis,
is updated on regulatory and market
developments, and that the projectprogresses towards incorporating

36

Admiral Group plc · Annual Report and Accounts 2019

climate-related risks into businessas usual risk management. The Chairof our Group Risk Committee is kept
updated on related developments
on an ad hoc basis, and the AdmiralGroup Board are to expect updates
and progress updates as deemedsuitable by the steering group.
During the year, Admiralcompleted three climate change
stress tests for submission to the
PRA as part of the 2019 General
Insurance Stress Test programme.
Looking ahead, we intend tofurther investigate the impacts toclaim costs, and the wider businessand investment performance.
For more information relating to
how the Group views risk relating
to climate change please refer topage 97.

Company Overview

Strategic Report
Corporate Governance
Financial Statements

Group Financial Review

Additional Information“The main driver of the strong growth inGroup profit was a higher UK insurance result.”

2019 Group Overview
£m

2019

2018

2017

3.46

3.28

2.96

Underwriting profit including investment income*1

238.0

211.2

177.7

Profit commission

114.9

93.2

67.0

Net other revenue and expenses

182.3

183.1

170.2

Turnover (£bn)*1, *2

Operating profit

535.2

487.5

414.9

Group Statutory profit before tax

522.6

476.2

403.5

Group’s Share of profit before tax*1

526.1

479.3

405.4

UK Insurance

597.4

555.6

465.5

International Insurance

(0.9)

(1.1)

(14.3)

Comparison

18.0

8.8

7.1

Loans

(8.4)

(11.8)

(4.4)

Other

(80.0)(72.2)(48.5)

Group’s Share of profit before tax*1

526.1

479.3

405.4

64.9%

67.3%

66.2%

Key metrics:
Group loss ratio*1,*2

23.7%

22.9%

21.5%

*1

Group combined ratio

88.6%

90.2%

87.7%

Customer numbers (m)

6.98

6.51

5.73

Earnings per share148.3p137.1p117.2pDividends

Group expense ratio*1,*2

140.0p126.0p114.0pReturn on Equity*1

52%

56%

55%

Solvency Ratio

190%

194%

205%

*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 See note 13 for a reconciliation of Turnover and reported loss and expense ratios to the Financial Statements.

Admiral Group plc · Annual Report and Accounts 201937

Group Financial Review continued
Key highlights of the Group’s
result in 2019 are as follows:

Change in UK discount rate(‘Ogden’)• Continued growth in turnover (£3.46
billion, up 5% on 2018) and customer
numbers (6.98 million, up 7% on 2018)

Following the announcement in mid2019 by the UK Government, the Ogden
discount rate, which is used in setting
personal injury compensation, waschanged to -0.25% from the existing-0.75% rate that had been in place since
February 2017. The change came into
effect on 5 August 2019 and the -0.25%
rate is expected to remain in place for up
to the next five years.

• Group’s share of pre-tax profits of£526.1 million (2018: £479.3 million) andstatutory profit before tax of £522.6
million (2018: £476.2 million)• The main driver of the strong growth inGroup profit was a higher UK Insurance
result, which benefitted from very
positive development in prior years
claims costs and elevated reserve
releases and profit commission, partially
offset by higher central costs• UK Insurance turnover and customers
both increased by 2% and 4%
respectively to £2.63 billion and 5.5
million (2018: £2.58 billion and 5.2
million), as the business continued
to prioritise margin over volume byincreasing rates ahead of the market• UK Household saw strong growth inturnover and customer numbers, with
an improved result of £7.5 million(2018: £3.0 million loss) after morebenign weather experience in 2019 incomparison to 2018
• The European insurance businessesdelivered a higher profit of £8.7
million (2018: £6.4 million), offset by
an increased loss in the US insurance
business (£9.6 million in 2019 v £7.5
million in 2018). The overall international
insurance loss was £0.9 million (2018:£1.1 million loss).
• The Comparison businesses recorded
aggregate profits (excluding minority
interests’ share) of £18.0 million (2018:£8.8 million), with the increase mainly
driven by a very strong profit from
Confused.com of £20.4 million (2018:£14.3 million)

Admiral assumed a 0% rate in setting best
estimate claims reserves at 31 December
2018 and 2018’s pre-tax profit was
positively impacted by £66 million as aresult of the move from minus 0.75%. As
a result of the actual rate being 25 basis
points lower than the assumed 0%, 2019’s
profit before tax is adversely impacted byaround £33 million.

Earnings per share
Earnings per share increased by 8% to148.3 pence (2018: 137.1 pence), withgrowth slightly lower than the pre-tax
profit growth of 10% due to an increase in
the weighted average number of shares.

Dividends
The Group’s dividend policy is to pay 65% of
post tax profits as a normal dividend and to
pay a further special dividend comprisingearnings not required to be held in theGroup for solvency capital requirements
including management internal risk
appetite above the regulatory minimum.
The Board has proposed a final dividend of
77.0 pence per share (approximately £222
million), split as follows:• 56.3 pence per share normal dividend,
based on the dividend policy of
distributing 65% of post tax profits; plus
• A special dividend of 20.7 pence per share
This final dividend is 17% ahead of the 2018
final dividend (66.0 pence per share), with apay-out ratio of 90% for H2 2019. .
The total dividend for the 2019 financial
year is 140.0 pence per share, reflecting
an 11% increase on 2018 and a 94% payout ratio.
The payment is due on 1 June 2020, exdividend date 7 May 2020 and record date
11 May 2020.

38

Admiral Group plc · Annual Report and Accounts 2019

Return on equity
The Group’s return on equity was 52% in2019, lower than the 56% in 2018. Whilst
the Group’s share of post tax profits
grew by 9%, the Group’s share of average
equity grew faster at 19% resulting ina lower overall return. The significant
growth in profits in the second half of2019 contributed to the increase in theGroup’s share of equity.

Capital structure andfinancial position
The Group’s co-insurance and reinsurance
arrangements for the UK Car Insurance
business are in place at least until the endof 2020. The Group’s net retained shareof that business is 22%. Munich Re will
underwrite 40% of the business, throughco-insurance (30%) and reinsurance(10%) arrangements, until at least theend of 2020. Extensions beyond 2020 are
expected to be confirmed during the firsthalf of 2020.
Similar longer-term arrangements are inplace in the Group’s International insurance
operations and the UK Household and Van
businesses.
The Group continues to manage its
capital to ensure that all entities are able
to continue as going concerns and that
regulated entities comfortably meet
regulatory capital requirements. Surplus
capital within subsidiaries is paid up to
the Group holding company in the formof dividends.
The Group’s regulatory capital is basedon the Solvency II Standard Formula, witha capital add-on to reflect recognised
limitations in the Standard Formulawith respect to Admiral’s business(predominantly in respect of profit
commission arrangements in co- andreinsurance agreements and risks arisingfrom claims including Periodic Payment
Order (PPO) claims).
The Group continues to develop its partial
internal model to form the basis of future
capital requirements and expects to enter
the PRA’s pre-application process during2020. Formal application for regulatory
approval to use the model is expected tofollow in 2021. In the interim period before
submission, the current capital add-on
basis will continue to be used to calculate
the regulatory capital requirement.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

The estimated and unaudited regulatory Solvency II position for the Group at the date of this report is as follows:

Group capital position (unaudited)
Group

£bn

Eligible Own Funds (pre 2019 final dividend)

1.42

2019 final dividend

0.22

Eligible Own Funds (post 2019 final dividend)

1.20

Solvency II capital requirement*1

0.63

Surplus over regulatory capital requirement

0.57

Solvency ratio (post dividend)*2

190%*1	Solvency capital requirement includes updated capital add-on which is subject to regulatory approval.
*2 Solvency ratio calculated on a volatility adjusted basis.

The Group’s capital includes £200 million 10 year dated subordinated bonds. The rate of interest is fixed at 5.5% and the bonds maturein July 2024. The bonds qualify as tier two capital under the Solvency II regulatory regime.
Estimated sensitivities to the current Group solvency ratio are presented in the table below. These sensitivities cover the two mostmaterial risk types, insurance risk and market risk, and within these risks cover the most significant elements of the risk profile. Asidefrom the catastrophe events, estimated sensitivities have not been calibrated to individual return periods.

Solvency ratio sensitivities (unaudited)
2019

2018

UK Motor – incurred loss ratio +5%

-23%

-27%

UK Motor – 1 in 200 catastrophe event

-1%

-2%

UK Household – 1 in 200 catastrophe event

-2%

-2%

Interest rate – yield curve down 50 bps

-5%

-12%

Credit spreads widen 100 bps

-8%

-5%

Currency – 25% movement in euro and US dollar

-3%

-3%

ASHE – long-term inflation assumption up 0.5%

-3%

-10%

Loans – 100% worsening in experience

-3%

-1%

The sensitivity to interest rates and long-term ASHE inflation is lower at the end of 2019, compared to the previous year end. This
reflects a reduction in the assumption of the number of open claims that are expected to settle as periodic payment orders.

Taxation
The tax charge reported in the consolidated income statement is £94.2 million (2018: £85.7 million), equating to 18.0% of pre-tax profit(2018: 18.0%).

Investments and cash
Investment strategy
Admiral Group’s underlying investment strategy remains the same – the main focus is on capital preservation, with additional priorities
including low volatility of returns, high levels of liquidity and appropriate matching of asset/liability duration and currency. All objectives
continue to be met. The Group’s Investment Committee performs regular reviews of the strategy to ensure it remains appropriate.
Admiral’s investment approach evolved in two main ways during 2019:• Formal adoption of a responsible investment strategy which focusses on ensuring Environmental, Social and Governance criteria areconsidered within investment decision making• Widening the opportunity set of investments to achieve greater returns without material change in market risk capital allocated toinvestments. Examples included high quality (AAA) asset backed securities, private debt assets and global bond strategies, actively
managed on a total return basis

Admiral Group plc · Annual Report and Accounts 201939

Group Financial Review continued
Cash and investments analysis
£m

2019

2018

2017

Fixed income and debt securities

1,957.8

1,568.6

1,493.5

Money market funds and other fair value instruments

1,160.2

1,301.1

1,074.3

Cash deposits

116.5

100.0

130.0

Cash

281.7

376.8

326.8

Total

3,516.2

3,346.5

3,024.6

Investment and interest income in 2019 was £35.3 million, a decrease of £0.7 million on 2018 (£36.0 million). 2019 investment income
is negatively impacted by an accrual of £12.9 million relating to quota share reinsurance arrangements (2018: nil). Excluding this,investment and interest income in 2019 was £48.2 million, an increase of £12.2 million compared to 2018 due to higher averagebalances and an increase in the average rate of return in 2019, partly due to the changes noted above. Fixed income was increased
by rebalancing other holdings, and new mandates including very high-quality asset backed securities and senior private debt.
The underlying rate of return for the year (excluding accruals related to reinsurance contract funds withheld) on the Group’s cash andinvestments was 1.4% (2018: 1.2%).
The Group continues to generate significant amounts of cash and its capital-efficient business model enables the distribution of the
majority of post tax profits as dividends.

Cash flow
£m

2019

2018

2017

Operating cash flow, before movements in investments

518.1

488.5

617.6

Transfers to financial investments(188.7)(248.8)(229.4)

Operating cash flow

329.4

239.7

388.2

Tax payments(92.8)(55.6)(55.9)

Investing cash flows (capital expenditure)(33.6)(23.9)(22.7)

Financing cash flows(392.4)(346.8)(310.0)Loans funding through special purpose entity

85.9

220.2

–

Net contributions from non-controlling interests

1.6

19.3

–

Foreign currency translation impact

40

6.8

(2.9)

0.6

Net cash movement(95.1)

50.0

0.2

Movement in unrealised gains on investments

34.6(26.6)

11.2

Movement in accrued interest

41.5

49.7

37.0

Net increase in cash and financial investments

169.7

321.9

277.8

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

The main items contributing to the operating cash inflow are as follows:
£m

2019

2018

2017

Profit after tax

428.4

390.5

331.6

Change in net insurance liabilities

50.4

176.6

53.2

Net change in trade receivables and liabilities

27.4

14.9

195.2

Change in loans and advances to customers(168.7)(242.9)(65.2)

Non-cash income statement items

86.4

63.7

30.9

Taxation expense

94.2

85.7

71.9

Operating cash flow, before movements in investments

518.1

488.5

617.6

Net cash and investments have increased by £169.7 million or 5% (2018: £321.9 million, 11%). The main drivers include the Group’s shareof increase in funding for the Admiral Loans business, increased tax payments in 2019 (due to timing) and increased dividend payments.
The Group’s results are presented in the following sections as:• UK Insurance – including UK Motor (Car and Van), Household, Travel• International Insurance – including L’olivier (France), Admiral Seguros (Spain), ConTe (Italy), Elephant (US)• Comparison – including Confused.com (UK), LeLynx (France), Rastreator (Spain), Compare.com (US), Preminen (emerging markets)• Other Group Items – including AFSL (Loans)

Admiral Group plc · Annual Report and Accounts 201941

Insurance Review“Our 2019 strategy review has strengthened our belief thatsustainable growth for Admiral Group will be achieved bybuilding on our competitive advantages and driving productdiversification in all the countries in which we operate.”
Insurance Highlights
Group share of Profit
Before Tax

International Insurance
turnoverInternational Car Insurance –vehicles insured at year end£526.1m£623.6m

1.42m(2018: £479.3m)(2018: £538.7m)(2018: 1.22m)

What an eventful year! I’m sure that 2019will remain particularly memorable forbreaking the half billion profit record. In
the UK, unusually high reserve releases
in UK Motor was the driver, whilst theEuropean operations showed a combined
profit for the second year.

Our 2019 strategy review has
strengthened our belief that sustainablegrowth for Admiral Group will be achievedby building on our competitive advantages
and driving product diversification in all
the countries in which we operate. On
both points, it has been great to witness
stronger collaboration amongst our
insurance businesses across the world
over the past 12 months.

In the UK, we saw our Household team hit
a key milestone of one million customers,
and continued growth in our Van andTravel Insurance businesses. In Europe, we
expanded into the Household Insurance
market with the launch of Homebrella inFrance, a renter focused product, prior to
the launch of a fully-fledged renters andowner proposition in early 2020.

While in the UK, the theme was ‘discipline’
and we slowed growth in a high claims
inflation environment, in Europe, the focus
was ‘growth’ (still with discipline) in orderto reach economies of scale and gather
more data to improve technical results andcustomer outcomes.

Most ongoing business priorities are
similar in the different countries: a better
digital experience for our customers,
excellence in analytics, continuous
improvements in technology and new
product development, all enabled by
new ways of working.
At the same time, we increased focus
on product diversification, with a view
to deploy our core competencies and tobetter serve our customers.

Overall, 2019 was a good year focusing on
what we do best, and what we do next –supported by a strong team and an evenstronger focus to continue to build a longterm business for the future.

Milena Mondini de Focatiis
Group CEO Designate
4 March 2020

Admiral Olympics
To encourage teamwork and collaboration across
our European businesses (along with a little healthy
competition!), the European operations decided tohost the ‘Admiral Olympics’ in 2019.
ConTe, Admiral Seguros, and L'olivier hosted
tournaments across three office-based sports,
namely ping-pong, darts, and table football.
The best three players from each country
were invited to Lille to play a tournament
against their rivals. This was a great
opportunity to build team spirit and spend
time with colleagues in the other operations.
After a few nail-biting rounds, L'olivier
narrowly swept into the lead, claiming victory.
Well done to L’olivier!

42

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements

UK Insurance Review

Additional Information“This year's results are a new high for the business, as verystrong back year developments have resulted in record
releases and our highest ever recorded profits.”

UK Insurance Highlights
Group share of UK Insurance
Profit Before Tax

UK Motor Insurance
Profit Before Tax

UK Household Insurance
Profit Before Tax£597.4m£591.5m£7.5m(2018: £555.6m)(2018: £561.7m)(2018: £3.0m loss)

One of the things I enjoy most about myrole at Admiral is that I get an opportunity
to visit the various sites we have acrossSouth Wales, Canada and India and to
spend time with the people that reallymake this Company. And by that, I mean
the people who sell our policies, talk to
our customers, and most importantly help
them when they need it most – whether
that’s to get insurance for their new car or
dealing with their needs if their home has
been flooded.

This year’s results are a new high forthe business, as very strong back year
developments have resulted in record
releases and our highest ever recorded
profits. Whilst this release is much higher
than we’ve seen in recent years and largely
influenced by increased settlement speeds
due to Ogden certainty, I believe that it also
demonstrates our market-leading ability to
price risks and our effective claims handlingprocesses.

In the last couple of years, this increased
investment has contributed to the slightincrease in our expense ratio (albeit froma very low base, and with additional levies
being the greatest contributor to theexpense ratio increase in 2019). However,these changes leave us well placed to deal
with the challenges and customer demandsof 2020 and beyond. The development ofdigital channels and automating our backoffice processes are also important for theclaims reforms (or Civil Liability Bill) thatcome into force in the second half of 2020,
which should allow us to service claims
under the lower cost regime and pass thesavings to customers whilst maintaining ourcompetitive advantage.

It’s our people’s enthusiasm to come towork that makes Admiral’s culture a little bit
different and makes it a great place to work,
which drives forward our desire to improve
the service and products we offer tocustomers. And ultimately, providing great
service and keeping our customers happy(along with strong, disciplined underwriting
capability, of course) drives and delivers our
results each year.

Moving forward with automation and digital
capabilities is fundamental if we’re toensure that Admiral maintains its positionat the forefront of the insurance market in
the UK, and we’ve made strong strides thisyear that will help us into the future.
An example is the launch of our InstaQuote
Household product. Throughout our history,
we’ve recognised that our customers
want quick, efficient and value-for-money
services, which is exactly what this tool
provides. It’s dramatically reduced thetime taken to get a price, which makes lifeeasier for the customer, and has helped us
to break through the one million customers
mark just seven years after launching! We
also won the Moneyfacts Personal FinanceBest Household Insurer award in 2019!
In addition to improving the Household
customer journey, we’ve also been enhancing
our Motor Insurance journey by opening
more digital communication routes tohelp customers interact with us and makechanges via the web and to register claims
electronically. The traditional channels
are still available, of course, but manyof our customers (both young and old)
favour quicker, more flexible channels ofinteraction, which have the added benefit
of efficiency for us.

Whilst on the topic of regulation andcustomers, we welcome the pricing study
that is being undertaken by the FCA,
particularly in relation to the householdmarket where many customers’ policies
have stagnated at a single provider andincreased in price for many years. When welaunched Confused.com in 2002, we sawthat customers wanted pricing transparency
and the best price, and the comparison
channel has delivered most of our Motorand Household customers ever since. We’retherefore very pleased that changes toencourage customers to shop around (asmost of our Motor and home customers
already do) will provide Admiral withfurther opportunity to grow the Household
customer base towards its second million!
In conclusion, I’d like to thank our people for
their hard work in 2019 and our customers
for their trust in us – as ultimately, we arehere to serve our customers!
Cristina Nestares
CEO, UK Insurance
4 March 2020

Admiral Group plc · Annual Report and Accounts 201943

UK Insurance Review continued
UK Insurance financial performance
£m

2019

2018

2017

Turnover2,635.0

2,575.7

2,354.0

Total premiums written

2,321.7

2,269.8

2,098.0

533.2

523.9

491.6

Underwriting profit including investment income

257.4

227.7

206.2

Profit commission and other income

340.0

327.9

259.3

Group’s share of UK insurance profit before tax*1

597.4

555.6

465.5

*1

Net insurance premium revenue*1*1 Alternative Performance Measures – refer to note 13 at the end of this report for definition and explanation

Split of UK Insurance profit before tax
£m

2019

2018

2017

Motor

591.5

561.7

461.4

7.5

(3.0)

4.1

HouseholdTravelGroup’s share of UK insurance profit before tax

(1.6)

(3.1)

–

597.4

555.6

465.5

Key performance indicators
2019

2018

2017

Vehicles insured at year end

4.37m

4.32m

3.96m

Households insured at year end

1.01m

0.87m

0.66m

Travel policies insured at year end

0.09m

0.05m

–

Total UK Insurance customers*1

5.47m

5.24m

4.62m

*1 Alternative Performance Measures – refer to the end of the report for definition and explanation.

Key highlights for the UK Insurance business for 2019 include:• Modest growth in Motor customers but continued strong growth in Household with Admiral increasing rates ahead of the market
throughout 2019 for Motor and maintaining rates for Household• A 5% increase in UK Motor profit to £591.5 million (2018: £561.7 million) primarily as a result of increased reserve releases due to anincrease in the speed of settlements of large bodily injury claims and increased certainty post the change in the Ogden rate in mid-2019• This is partially offset by an adverse change in the ‘one-off’ Ogden impacts (favourable impact in 2018, adverse impact in 2019).
Refer to the UK Motor section below for further analysis of the underlying growth on key metrics such as loss ratio, reserve releases
and profit commission• Household profit of £7.5 million (2018: £3.0 million loss) as a result of more benign weather experience in 2019
• Travel Insurance product saw a lower loss of £1.6 million (2018: £3.1 million loss)

44

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

UK Motor Insurance financial review£mTurnover*1

Total premiums written

2019

2018

2017

2,455.3

2,423.1

2,246.9

2,158.5

2,132.1

2,001.5

Net insurance premium revenue

452.6

452.5

433.2

*2

Investment income

30.4

32.2

32.6

Net insurance claims(164.7)(189.2)(214.2)

Net insurance expenses(74.7)(72.0)(59.7)

Underwriting profit including investment income

243.6

223.5

191.9

Profit commission

112.2

95.0

64.7

Underwriting profit and profit commission

355.8

318.5

256.6

Net other revenue*4

235.7

243.2

204.8

UK Motor Insurance profit before tax

591.5

561.7

461.4

2019

2018

2017

60.7%

63.5%

64.1%

*1

*3

*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Investment income includes £2.8 million of intra-group interest (2018: £0.7 million; 2017: nil).
*3 Underwriting profit excludes contribution from underwritten ancillaries (included in net other revenue).
*4 Net other revenue includes instalment income and contribution from underwritten ancillaries and is analysed later in the report.

Key performance indicators£m

Reported motor loss ratio*1,*2

Reported motor expense ratio

19.1%

18.4%

16.2%

Reported motor combined ratio

79.8%

81.9%

80.3%

Written basis Motor expense ratio

18.5%

17.5%

15.8%

Reported loss ratio before releases

87.6%

88.1%

85.3%

Claims reserve releases – original net share*1,*4£121.7m£111.4m£92.1mClaims reserve releases – commuted reinsurance*1,*5£121.7m£109.6m£73.8mTotal claims reserve releases£243.4m£221.0m£165.9m*1,*3

Other Revenue per vehicle

£66

£67

£64

Vehicles insured at year end

4.37m

4.32m

3.96m

*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 13b.
*3 Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement. Reconciliation in note 13c.
*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, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but
has since been commuted and hence reported in underwriting profit rather than profit commission.

Admiral Group plc · Annual Report and Accounts 201945

UK Insurance Review continued
Key performance indicators continued
UK Motor profit increased by 5% during 2019 to £591.5 million (2018: £561.7 million) and vehicles insured rose very modestly to 4.37
million (2018: 4.32 million), whilst the reported combined ratio improved to 79.8% (2018: 81.9%). Net insurance premium revenue wasconsistent with the prior period. The results were impacted by a number of factors:• The current period loss ratio was 87.6% (2018: 88.1%). As highlighted below, there are a number of offsetting movements that net
to the overall improvement of 0.5 ppts1:
Reported Motor Loss Ratio

2018
Prior period impact of Ogden change (-0.75% to 0%)
Change in underlying current period loss ratio
Change in underlying claims reserve release

Current Period
Loss Ratio

Releases on
Original Net Share

Reported
Loss Ratio

88.1%-24.6%

63.5%

–

+4.0%

+4.0%

-1.5%

–

-1.5%

–

-8.7%

-8.7%

2019 (excluding Ogden change)

86.6%-29.3%

57.3%

Add Impact of Ogden change (0% to -0.25%)

+1.0%

+2.4%

+3.4%

2019

87.6%

-26.9%

60.7%• The unfavourable Ogden change in 2019 (0% to -0.25%) increased the current period loss ratio by 1.0 ppt. Excluding this impact,
the current period loss ratio is 86.6%, which can be compared to the 2018 ratio of 88.1% (both at Ogden 0%). The underlying
improvement of 1.5 ppts reflects a slightly lower level of margin held above the projected ultimate outcome for the current
accident year, when compared to 2018 at the same point.
• Reserve releases on Admiral’s original net share of business improved the reported loss ratio by 26.9 ppts in 2019. Excluding theadverse Ogden impact increases this to 29.3 ppts which is 4.7 ppts higher than in 2018 (24.6 ppts) and well above historical results.
The underlying increase, after excluding the favourable one-off Ogden impact in 2018 is 8.7 ppts.
• This underlying improvement in the level of reserve release is unusually large and the main driver of the increase in reported profits.
It is the result of a significant level of favourable development in ultimate projections of prior underwriting years which in turn canbe broadly attributed to an increase in the speed of settlements in larger bodily injury claims following the confirmation of the new
Ogden rate.
• Despite the significant level of reserve release (in both projected ultimate and financial statement loss ratios), the margin held
above ultimate outcomes in the financial statement reserves remains both significant and prudent. In both absolute and relative
terms, the aggregate level of margin held across current and prior underwriting years, remains consistent with that held at the endof 2018.
• Reserve releases from commuted reinsurance and profit commission were higher in 2019, as follows:£m

Reserve releases– commuted
reinsurance

Profit commission

Total

2018

109.6

95.0

204.6

Prior period Impact of Ogden change (-0.75% to 0%)

-17.2

-18.4

-35.6

Change in underlying commuted releases

+11.3

–

+11.3

Change in loss on commutation

+27.0

–

+27.0

–

+44.5

+44.5

130.7

121.1

251.8

Change in underlying profit commission
2019 (excluding Ogden change)
Add Impact of Ogden change (0% to -0.25%)
2019

-9.0

-8.9

-17.9

121.7

112.2

233.9

• Releases on reserves originally reinsured but since commuted is higher at £121.7 million (2018: £109.6 million)• There are a number of offsetting underlying movements, including a lower impact of the accounting loss on commutation (2019:£4.9 million; 2018: £31.9 million) and an underlying improvement in the level of commuted releases in line with the favourable
development noted above, offset by an unfavourable net impact of one-off Ogden changes in both years• The trend is similar for profit commission which improved to £112.2 million (2018: £95.0 million). Underlying profit commission
improved by £44.5 million, primarily as a result of the favourable development of prior underwriting years

1

46

Refers to percentage points

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information• Investment income was slightly lower than 2018 at £30.4 million (2018: £32.2 million) with an underlying increase of £11.1 million(due to both an increase in yield and growth in the asset base) more than offset by notional investment income accruals on
reinsurance funds withheld balances of £12.9 million (2018: £nil)• The written and reported basis expense ratios increased in 2019 with a number of factors impacting: non-acquisition costs was themain driver primarily through levies and to a lesser extent, investment in IT and claims as the skills and foundations to build further
competitive advantages in these areas are strengthened• Other revenue (including ancillary products underwritten by Admiral) and instalment income decreased to £235.7 million (2018:£243.2 million) primarily resulting from lower contribution from optional ancillaries
Market prices remained subdued during the year with some evidence of increases in the later months as a result of elevated levels ofclaims inflation. Admiral continued to prioritise margin over growth, and increased prices ahead of the market. As a result, slight new
business growth and good retention contributed to customer numbers (2019: 4.37 million; 2018: 4.32 million) and turnover (2019:£2.46 billion; 2018: £2.42 billion) being both up by 1%.

Claims and reserves
Notable claims trends for Admiral and the market in 2019 were similar to 2018, including a slow-down in the reduction in small injury
claims frequency and continuing inflation in damage claims costs. The first projection of the impact of large bodily injury claims on the2019 loss ratio is consistent with the projection of 2018 at the end of 2018.
The Group continues to reserve conservatively, setting claims reserves in the Financial Statements well above actuarial best estimatesto create a margin held to allow for unforeseen adverse development.
As noted above, the Group experienced continued positive development of claims costs on previous underwriting years as a result of
increased speed of large bodily injury settlements and increased certainty related to the Ogden rate, in addition to a small number of
positive very large claims settlements. These factors led to another significant release of reserves in the Financial Statements in the
period (£121.7 million on Admiral’s original net share, up from £111.4 million). The margin held in reserves is prudent and significant
and remained at a consistent level year-on-year.

UK Car Insurance – co-insurance and reinsurance
Admiral makes significant use of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of therisk generated, either through co-insurance or quota share reinsurance contracts. These arrangements include profit commission
terms (see below) which allow Admiral to retain a significant portion of the profit generated.
Munich Re and its subsidiary entity, Great Lakes will underwrite 40% of the UK Motor business until at least 2020, with future
extension options available to Munich Re until 2022. 30% of this total is on a co-insurance basis, with the remaining 10% under a quota
share reinsurance agreement from 2017 onwards.
The Group also has other quota share reinsurance arrangements confirmed to the end of 2020 covering 38% of the business written
and expects to extend these or similar arrangements beyond 2020 during the first half of 2020.
The nature of the co-insurance proportion underwritten by Munich Re (via Great Lakes) is such that 30% of all motor premium andclaims for the 2019 year accrue directly to Great Lakes and are not reflected in the Group’s Financial Statements. Similarly, Great Lakes
reimburses the Group for its proportional share of expenses incurred in acquiring and administering this business.
The quota share reinsurance arrangements result in all motor premiums and claims that are ceded to reinsurers being included in theGroup’s Financial Statements, but these figures are adjusted to exclude the reinsurer share, resulting in a net result for the Group.
The Group also purchases excess of loss reinsurance to provide protection against large claims and reviews this cover annually. The
level of cover purchased for 2020 reduced slightly compared to 2019 due to significant increases in market prices for cover.

Profit commission
Admiral is potentially able to earn material amounts of profit commission revenue from co- and reinsurance partners, depending on
the profitability of the insurance business underwritten by the partner. Revenue is recognised in the income statement in line with thebooked loss ratios on Admiral’s retained underwriting.
Note 5c to the Financial Statements analyses profit commission income by business, type of contract and by underwriting year.

Admiral Group plc · Annual Report and Accounts 201947

UK Insurance Review continued
Commutations of quota share reinsurance
Admiral tends to commute its UK Car Insurance quota share reinsurance contracts for an underwriting year 24 months after inception,
assuming there is sufficient confidence in the profitability of the business covered by the reinsurance contract.
After the commutation is executed, movements in booked loss ratios result in reserve releases (or strengthening if the booked loss
ratio were to increase) rather than reduced or increased reinsurance claims recoveries or profit commission.
During the first half of 2019, the majority of the 2017 quota share contracts were commuted. At 31 December 2019, quota sharereinsurance contracts remained in place for a small portion of 2017 and the full 2018 and 2019 underwriting years. No further
contracts were commuted in the second half of 2019 (as is usual).
As noted above, in 2019 Admiral recognised reserve releases from commuted reinsurance contracts of £121.7 million (2018:£109.6 million).
Refer to note 5d(v) of the Financial Statements for analysis of reserve releases on commuted quota share reinsurance contracts.

Other Revenue and Instalment Income
UK Motor Insurance Other Revenue – analysis of contribution:
£m

2019

2018

2017

Contribution from additional products & fees

202.1

206.5

187.3

Contribution from additional products underwritten by Admiral*1

13.9

13.6

15.0

Instalment income

83.9

81.4

56.1

Other revenue

299.9

301.5

258.4

Internal costs(64.2)(58.3)(53.6)Net other revenue

235.7

243.2

204.8

Other revenue per vehicle*2

£66

£67

£64

Other revenue per vehicle net of internal costs

£56

£57

£54

*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 12-month basis

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 continue to be:• Profit 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• Fees such as administration and cancellation fees
• Interest charged to customers paying for cover in instalments
Overall contribution (Other revenue net of costs plus instalment income) decreased to £235.7 million (2018: £243.2 million). This is inline with the half year expectation of a small reduction. Whilst there were a number of smaller offsetting changes within the total, themain reasons for the decrease is reduced optional ancillary contribution and fees, which reflects an increase in transactions completed
digitally and changes to the customer journey. This was slightly offset by an increase in instalment income primarily due to the growthin the underlying book and an increase in customers paying by instalments.
Other revenue was equivalent to a decrease to £66 per vehicle (gross of costs; 2018: £67), as a result of the factors mentioned above.
Net Other Revenue (after deducting costs) per vehicle was £56 (2018: £57).

48

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

UK Household Insurance financial performance
£m

2019

2018

2017

171.3

146.0

107.1

Total premiums written

154.9

131.1

96.5

Net insurance premium revenue

37.2

31.2

23.1

Underwriting profit/(loss)

0.7

(6.3)

(0.8)

Profit commission and other income

6.8

3.3

4.9

UK Household insurance profit before tax

7.5

(3.0)

4.1

2019

2018

2017

69.1%

92.3%

73.5%

Turnover

*1
*1

*1,*2

*1 Alternative Performance Measures – refer to the end of this report for definition and explanation*2 Underwriting profit/(loss) excluding contribution from underwritten ancillaries

Key performance indicators
Reported household loss ratio*1

Reported household expense ratio

28.9%

28.1%

30.0%

Reported household combined ratio*1

98.0%

120.4%

103.5%

–

19.1%

–

1,011,900

865,800

659,800*1

Impact of extreme weather and subsidence*1
Households insured at year end*1*1 Alternative Performance Measures – refer to the end of this report for definition and explanation

The number of properties insured increased by 17% to 1.01 million (2018: 0.87 million). Turnover increased by 17% to £171.3 million(2018: £146.0 million). New business market volumes continued to increase, customer retention remained strong, and shopping
increased via the comparison channels.
2019 saw more benign weather than in 2018. A combined ratio of 98% (2018: 120%) resulted in a small net underwriting profit of£0.7 million (2018: underwriting loss of £6.3 million), which was supplemented by net other revenue and profit commission of£6.8 million (2018: £3.3 million).

UK Household Insurance – reinsurance
The Group’s Household business is supported by long-term proportional reinsurance arrangements covering 70% of the risk. In
addition, the Group has non-proportional reinsurance to cover the risk of catastrophes stemming from weather events.

UK Insurance regulatory environment
The UK Insurance business operates predominantly under the regulation of:• the UK Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) which regulate the Group’s UK registeredsubsidiaries including EUI Limited (an insurance intermediary) and Admiral Insurance Company Limited (AICL; an insurer); and• the Financial Services Commission (FSC), which regulates the Group’s Gibraltar-based insurance company (Admiral Insurance(Gibraltar) Limited, AIGL), in that territory.
The Group is required to maintain capital at a level prescribed by the lead regulator for Solvency II purposes, the PRA, and maintains
a surplus above that required level at all times.

Admiral Group plc · Annual Report and Accounts 201949

International Insurance Review“It has been great to witness stronger collaboration
amongst our insurance businesses across the world
over the past 12 months.”
Milena Mondini de Focatiis
Group CEO Designate

Spain
In 2019, Admiral Seguros accelerated its growth despite difficult market
conditions and we finished the year with more than 290,000 customers.

Pascal Gonzalvez
Acting CEO, Admiral Seguros(Sarah Harris is on maternity leave)

We managed to increase our new businesssales by 16% while the comparison
market was shrinking. This was madepossible by the structural changes on
Rastreator where the user experience wassignificantly improved by guaranteeing
the final price to customers, having asignificant impact on conversion. Our
strategy to diversify our acquisition
channels has also been bearing fruit withthe development of a broker channel thatis contributing to the accelerated growth.
It was pleasing to see our overall technicalresults moving in the right direction
despite challenges in the cost of growth.
Loss ratios are improving on prior years as

expected, whilst being slightly higher than
anticipated for the 2019 underwriting year
as a result of new business growth. Thiswas offset by a decrease in our expense
ratio as we improved internal efficiencies.
In 2020, we’re planning to keep exploringalternative acquisition channels. In ourcore business, we’re about to launch
new initiatives to improve loss ratio(e.g. improved anti-fraud capabilities
and innovation in risk selection). We’llalso be accelerating in improving
customer experience through digital
capabilities (self-service) and operational
optimisation (automation).

France2019 was another year of strong performance for L’olivier Assurance.

Pascal Gonzalvez
CEO, L’olivier Assurance

It was a year of fast growth despite
unfavourable market conditions. Our
portfolio increased by 32%, while at thesame time the aggregator market (ourmain acquisition channel) was shrinking.
We're pleased to see our efforts onbrand awareness, direct acquisition, andconversion showing progress and paving
the way for further development in the
coming years.
Not only did we grow fast, but we also
grew stronger. Our portfolio grew while
having some significant operational
improvements. As a consequence, ourcustomers like us more and more! The
benefits of our investments toward aneffortless customer journey started
to materialise with peaks in customer
satisfaction (net promoter score),persistency, and referrals, to name a few.

50

Admiral Group plc · Annual Report and Accounts 2019

On the claims side, loss ratios havedeveloped well for prior years, resulting
in reserve releases. However, the businessexperienced a deterioration in the 2019loss ratio, partly due to the strong growthof new business in 2019.
2020 is the beginning of a new chapter
for L’olivier as we embark on our multiproduct journey and the launch of a
new household insurance product.
After launching our insurtech named
Homebrella (a home insurance product for
renters and expats in France) in 2019, we’ll
also launch a broader household productunder the brand L’olivier in early 2020.
We look forward to continuing to#makeithappen.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Italy
ConTe closed 2019 with a profit for the sixth year in a row, whilst also achieving
significant growth in turnover of 16% year-on-year.

Costantino Moretti
CEO, ConTe

The direct market wasn’t particularly
favourable and we experienced single
digit growth and challenging competition,
especially via comparison panels. Despite
this context, ConTe was able to grow byleveraging on its competitiveness and on
the improvements in the digital journey,particularly focused on mobile.
ConTe is strengthening its competitive
positioning in the Italian Market andcontinuing to invest in the brand which issteadily increasing awareness among Italian
drivers. In 2019 a new advertising campaign
was successfully launched, endorsed by Mr.
Carlo Conti, who is one of the most popular
Italian TV anchors.
Our growth is bringing a significant benefit
towards achieving scale and is driving

an improved expense ratio. Efficiencies
were also gained thanks to investment
in technology: digital, robotics andautomation are delivering the expected
benefits and continue to offer interesting
opportunities for the future.
Other key metrics of the business improved
which demonstrates that ConTe continues
to stay focused on its ‘sustainable growth’
strategy. Although the 2019 loss ratio
deteriorated, favourable prior year
development resulted in strong reserve
releases.
In a perfect Admiral-style, our people andculture continue to make the difference.
We have been recognised for another year
in a row as one of the best large companies
to work for!

USA
Over the last year Elephant has continued with our strategy to focus on customer
retention, to service these customers efficiently by leveraging technology, and to
make Elephant a great insurer for our shareholders, customers and staff.

Alberto Schiavon
CEO, Elephant AutoWhile we undoubtedly made some great
improvements on many fronts, we havealso seen some significant headwinds inour loss experience, slowing down our
speed of progress.
As mentioned at our half year resultspresentation, Elephant saw a higher than
expected claims ratio, deteriorating by four
points compared to 2018. The main driver
was increased claims frequency as wellas general market inflation, in particularin damage claims and medical costs.
As a consequence, we took a defensive
approach towards margins, at the expenseof growth. We responded with numerous
initiatives, including significant rateincreases, especially towards certain lowerperforming segments; and a reduction in
our acquisition spend. With regard to thefirst point, some segments of the book haveseen sharp increases with obvious impact
on sales and cancellations while allowing
us to have better performance on theloss ratio in the coming years. As per thesecond point, we have been more selective
in some distribution channels, favouringsome online advertising and doing less on
traditional media, enabling us to be more
efficient in our spend.

The effect of those efforts is visible in our
top line numbers: while vehicles in force
remained flat year-on-year, our turnovergrew to £233 million (2018: £214 million).
Most of this turnover growth comes froma high performing renewal book, giving
confidence in our long-term strategy.
The lack of policy growth meant that we
couldn’t fully leverage economies of scaleon our platform, and as a result delivered aslightly improved expense ratio.
At the same time, Elephant made somesignificant progress in a number of areas:
we further developed our self-servicing
functionalities, especially in claims
management; we expanded our acquisition
channels to include some agency business;
and we deployed some important newfeatures to our risk selection. We expectthat these will ultimately translate into
further growth, within profitable segments,
at very good incremental costs. Finally, I am
grateful to all Elephant employees for theirhigh level of commitment in delivering sucha high volume of projects, and for building
such a strong foundation for a sustainablelong-term business.

Admiral Group plc · Annual Report and Accounts 201951

International Insurance Review continued
International Car Insurance financial performance
£m

2019

2018

2017

623.6

538.7

449.8

Total premiums written

562.6

484.3

401.4

Net insurance premium revenue

168.6

141.7

123.0

Investment income

1.5

1.3

0.6

Net insurance claims(137.2)(104.0)(94.1)Net insurance expenses(53.0)(55.8)(58.0)

Underwriting result*1(20.1)(16.8)(28.5)Net other revenue

19.2

15.7

14.2

International Car Insurance result

(0.9)

(1.1)

(14.3)

Turnover*1*1

Key performance indicators
Reported Loss ratio*2

77%

76%

76%

Expense ratio*2

37%

40%

45%

114%

116%

121%

Combined ratio, net of Other Revenue

104%

105%

109%

Vehicles insured at period end

1.42m

1.22m

1.03m

Combined ratio*3*4*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent.
*3	Combined ratio is calculated on Admiral’s net share of premiums and excludes Other revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps
the reported combined ratio would be 2019: 113%; 2018: 113%; 2017: 124%.
*4	Combined ratio, net of Other Revenue is calculated on Admiral’s net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the reported
combined ratio, net of Other Revenue would be 2019: 102% 2018: 102%; 2017: 112%.

Geographical analysis*1
Spain

Italy

France

US

Total

Vehicles insured at period end (m)

0.29

0.69

0.23

0.21

1.42

Turnover* (£m)

78.2

204.2

108.1

233.1

623.6

2019

1

2018
Vehicles insured at period end (m)

0.25

0.59

0.17

0.21

1.22

Turnover*1 (£m)

67.6

176.8

80.5

213.8

538.7

*1 Alternative Performance Measures – refer to the end of this report for definition and explanation

Admiral has four insurance businesses outside the UK: in Spain (Admiral Seguros), Italy (ConTe), the US (Elephant Auto) and France(L’olivier Assurance).
The operations continued to grow strongly in 2019, with customer numbers increasing by 16% to 1.42 million (2018: 1.22 million) andcombined turnover rising by 16% to £623.6 million (2018: £538.7 million).

52

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

The key features of the International Car insurance results are:
• An aggregate loss of £0.9 million (2018: £1.1 million loss) reflecting an improvement in performance of the European businesses
offset by a deterioration in the US business;• A record profit in the Group’s Italian business ConTe, which also grew its customer base by 18%;
• A deterioration in Elephant Auto’s result (increased loss from £7.5 million to £9.6 million year-on-year)• A relatively flat combined ratio (net of other revenue) of 104% (2018: 105%) reflecting reduced acquisition costs, pricing
improvements and operational efficiencies as well as positive back year development in Europe offset by a deteriorating loss ratio in
Elephant Auto
• Continued investment and improvements in technology, people and the customer experience across all operations
The combined International expense ratio improved to 37% (2018: 40%) as all businesses grew, and continued to pursue operational
efficiencies, albeit growth was slower in Elephant as prices were increased in response to the loss ratio pressure.
The European insurance operations in Spain, Italy and France insured 1.21 million vehicles at 31 December 2019 – 20% higher than ayear earlier (31 December 2018: 1.01 million). Turnover was up 20% at £390.5 million (2018: £324.9 million). The consolidated result of
the businesses was a profit of £8.7 million (2018: £6.4 million) consisting of continued (and higher) profitability in Italy and lower losses
in France and Spain. The combined ratio net of other revenue (excluding the impact of reinsurer caps) improved to 92% from 98% dueto the improved claims experience and expense ratio.
Elephant insured 212,100 vehicles at the end of 2019, broadly flat year-on-year though higher prices meant turnover was up 9% to£233.1 million (2018: £213.8 million). Elephant’s loss increased for the period to £9.6 million from £7.5 million in 2018, as a result ofadverse claims development.
Elephant responded with enhancements in underwriting and rate increases resulting in a slowdown of growth in the second half of2019. The expense ratio improved slightly through increased operational efficiency, a focus on customer experience improvements,and enhancement of the digital online journey. Elephant continues to see improvements in persistency as a result of the focus on
higher retaining customers. The combined ratio net of other revenue was 118% (115% in 2018).
In 2019, a non-cash impairment charge of £65.9 million was recognised in the Financial Statements of the parent company withrespect to the carrying value of the parent’s investment in Elephant Auto. This follows a change to using shorter-term projections
as a result of the adverse loss ratio experience in 2019. The impairment charge is recognised in the income statement of theparent company (Refer to note 4 of the Parent Company Financial Statements for further details) and has no impact on the Group’s
consolidated profit for the period or the Group’s 2019 regulatory capital position.
Elephant continues to focus on improving fundamentals in 2020 with a focus on loss ratio, expense efficiencies and continued
improvement in the customer experience.

International Car Insurance co-insurance and reinsurance
In 2019 Admiral retained 35% (Italy), 30% (France and Spain) and 33% (USA) of the underwriting risk respectively. The arrangements for2020 will remain the same in Italy, France and Spain. In the USA, 50% of the risk will be retained within the Group.

International Car Insurance regulatory environment
Admiral’s European Insurance operations are now primarily regulated by the Spanish insurance regulator, the DGS. This shift is a resultof restructuring completed ahead of Brexit. More information on Company changes due to Brexit can be found on page 59.
The Group’s US insurer, Elephant Insurance Company, is regulated by the Virginia State Corporation Commission’s Bureau of Insurance.
Both insurers are required to maintain capital at levels prescribed by the regulator and hold a surplus above these requirements at
all times.

Admiral Group plc · Annual Report and Accounts 201953

Comparison Review

Global2019 was a good year for our Comparison businesses. Recognising the benefits of scale
in digital markets, we set up a European corporate structure named Penguin Portals,
that gives us not only the framework to achieve our ambition to lead our key European
markets, but also a working environment to deliver scale beyond these markets. This
also allows our seven comparison platforms to take advantage of operational andtechnological synergies and share expertise.
Elena BetésCEO, Comparison Businesses

Operationally, each Comparison platform
is supported by two technological centresof excellence, Confused.com in Cardiff andAdmiral Technologies in Delhi, allowing fora shared architecture to facilitate further
collaboration and rapid innovation.
Our goal to empower the world to choose
better has not changed. We continue
to focus on service diversification andgeographic expansion, driven by a desire
to innovate the customer experienceleveraging technology and data.
In Europe, we had a strong year, fuelled by
Confused.com and growth at LeLynx andwith all our businesses improving margins.
We successfully diversified our productoffering, took some key verticals in-house,delivered new verticals, reinforced ouruse of data and grew a B2B infrastructurewhilst continuously improving thecustomer experience. I’d especially note

Rastreator’s effort to provide moretransparency to Spanish customers withaccurate prices.
Preminen, our comparison incubator,
continues our path of organic expansion in
emerging markets. In 2019 we welcomed
GoSahi.com in India as the newest memberof our comparison family. Rastreator.mx in
Mexico was awarded the best ecommercestart-up of the year (e-awards), Tamoniki.
com in Turkey is in the process of building
the panel and we will soon be incorporatinga new Penguin into the colony.
In the USA, we downsized the business toadjust to market conditions, allowing forincreased agility whilst we further develop
our customer proposition.
The results are moving in the right
direction and I´m confident that we havea strong foundation to build upon our
successes in 2019 into the future.

UK
It’s been 18 years since Confused.com was formed, and we’re still making history.
In 2019, our revenue exceeded £100 million for the first time.

Louise O’Shea
CEO, Confused.com

54

We achieved this by standing firmly on
the side of our customers and continuing
to differentiate ourselves against thecompetition. Confused.com is the brandthat cuts through the noise and confusion
in order to help people make clear decisions.
Our marketing was more effective, andmore focus was placed on the products
our customers need and want beyond car
insurance. Making better use of our data
has helped our insurance partners deliver
the right product to the right customer
for the right price at the right time. All of
this and the dedication of the Confused.
com team has resulted in our revenue andAdmiral Group plc · Annual Report and Accounts 2019

profit growing by 19% and 43% year-onyear, respectively, and our profit margin
improving to over 18% (2018: 15%).
It wasn’t a year without challenges. The
highly competitive market continues tonecessitate focus on marketing channel
effectiveness and diversification whichin 2019 saw us introduce a successful
B2B offering and drive innovation in thecustomer experience.
In 2020 we’ll continue to make decisions
based on what is best for our customers,
empowering them to choose better.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Comparison Review Highlights
Group share of profit before tax

Total Comparison revenue

Confused.com profit before tax£18.0m£171.6m£20.4m(2018: £8.8m)(2018: £151.0m)(2018: £14.3m)

Spain
At Rastreator, 2019 has been a year of hard work.
We substantially enhanced the customer experience with our Price Accuracy strategy
for insurance, meaningfully improving our net promoter score. More efficient trafficacquisition led to a 13% increase in profit.
Fernando Summers
CEO, Rastreator

The proposed joint venture with Acierto
and Oakley Capital was a focus area
for management in 2019, but due tochallenges in completing the transaction
within a reasonable timeframe related
to the anti-trust process and associatedcosts, the final decision was not toproceed. We delivered modest revenue
growth, mainly due to our mortgage broker
and data businesses.
We are optimistic about our future in thecontext of a large market opportunity.

We will be working on further improving
the customer experience, increasing
customer support through our processes
and we will continue developing our broker
capabilities – not only for finance products
but also for some insurance products.
I would like to thank the fantastic andenthusiastic team who are always hungry
for growth and to improve the experiencefor our customers, for all their support ina challenging year. We are looking forward
to the opportunities we see in 2020 andbeyond.

France2019 was an excellent year full of milestones for LeLynx. We made significant
improvements in our operational structure and business approach, achieved key
product enhancements to better serve our users and signed new important commercial
agreements to improve our offering. As a result, LeLynx finished 2019 with revenue
growth of 19% and also improved profitability.
Itzal Arbide
CEO, LeLynx

While motor Insurance comparison mainly
benefited from a better online user
experience which improved conversion,energy comparison (launched in 2018) saw
great operational improvements and moved
past test and learn phase to become an
integrated product for LeLynx in 2019 inline with our diversification strategy.
Improving the customer experience has
been a focus, from improving user pain
points and providing more information,
to further improving the journey to allow

customers to make the best choice andreceive the best possible service. I am
enthusiastic about the evolution of LeLynx
as we head into 2020 and beyond. We willkeep working on user-centric new projects
to improve our customer experience and tostrengthen our product base.
The French market is large and slowly
evolving and LeLynx is perfectly placed tocapture that opportunity.

Admiral Group plc · Annual Report and Accounts 201955

Comparison Review continued

USA2019 was a somewhat volatile year for Compare.com. Facing stronger headwinds in cost
efficient customer acquisition and scalability in the US auto insurance market, we took
action to reduce the fixed costs of the business to allow a more agile approach.

Allie Feakins
CEO, Compare.com

While we expected to realise some of
the benefits of this decision in 2019,
we were also pleasantly surprised by
performance improvements in the second
half of the year. Insurers are facing thevery same acquisition cost headwinds,
so we made progress expanding ourpanel and improving our own revenue
potential as well.
In 2019, we completed an upgrade to theexperience for our customers, improving
their journey whether they are using our
website to find information or pursuing
our quote journey to view real-time auto
insurance prices. We also continued

to invest in our technology platform
to enable our marketing partners toleverage our insurer panel and to enable
our insurance partners to leverage ourcompetitive intelligence data.
In 2020, we don’t expect the competitiveenvironment to ease up, but our objectives
will shift slightly from 2019 as we change
our marketing approach, messages andcampaigns to explore opportunities forbuilding deeper customer and partner
relationships.
I am optimistic about the future ofCompare.com and look forward to 2020
in my new role as CEO.

Emerging Markets
Preminen had an exciting year of growth and saw the launch of a new comparison
business. In Mexico, Rastreator.mx continues to see positive signs of growth and weare confident in the sustainability of the business.

Pedro Tabernero
CEO, Preminen

All relevant insurers have joined, and thecustomer proposition is well accepted.
Tamoniki.com in Turkey has been trading
for almost one year, mainly focused onbuilding the panel with a slow but positive
evolution.
A new market approach is being tested
in India with the launch of Gosahi.com in
February 2019, a loan comparison portalthat enables users to compare online andget full support during their off-line loan

56

Admiral Group plc · Annual Report and Accounts 2019

application (a complex process in themarket) with the collaboration of relevant
financial brokers.
2020 is expected to be the year of
consolidation for Rastreator.mx, growthfor Tamoniki.com and Gosahi.com and toalso deliver further geographic expansion.
Thanks to the Preminen team for the hard
work – we’re looking forward to an evenbetter 2020!

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Comparison Review Highlights
Comparison financial review
£m

2019

2018

2017

Car insurance comparison

119.4

110.1

108.8

Other

52.2

40.9

34.8

Total revenue

171.6

151.0

143.6

Expenses

Revenue(156.9)(144.4)(138.2)

Profit before tax

14.7

6.6

5.4

Confused.com profit

20.4

14.3

10.1

International comparison result

(5.7)

(7.7)

(4.7)

14.7

6.6

5.4

20.4

14.3

10.1

(2.4)

(5.5)

(3.0)

18.0

8.8

7.1

Group’s share of profit before tax*1
Confused.com profit
International comparison result*1 Alternative Performance Measure – refer to the end of this report for definition and explanation

Admiral has comparison businesses in the UK (Confused.com),
Spain (Rastreator), France (LeLynx) and the US (Compare.com).
In addition, Preminen, the Group’s joint venture holding company
for comparison ventures in new markets, oversees operationsin Mexico (Rastreator.mx), Turkey (Tamoniki.com) and India(GoSahi.com).
Admiral Group owns 75% of Rastreator, 59% of Compare.com
and 50% of Preminen.
In 2019, the Group established a holding company for theEuropean businesses named Penguin Portals, facilitating greatercollaboration and sharing of best practices across the businesses
to support customer growth and new product development.
Combined revenue grew by 14% to £171.6 million (2018: £151.0
million) and the businesses made a combined profit (excluding
minority interests’ shares) of £18.0 million (2018: £8.8 million).
The key features of the Comparison result are:
• In the UK, Confused.com saw market share increases in motor
and home insurance comparison and efficient media spending
leading to significantly increased profit of £20.4 million (2018:£14.3 million)• A loss of £4.3 million (2018: £6.9 million) at Compare.com in the
US (Admiral Group share). Statutory loss before tax was also
lower at £7.2 million (2018: £10.0 million). The results reflect
lower sales volumes due to a reduced marketing spend andlower fixed costs• The continental European comparison businesses reported anincreased profit of £3.5 million (2018: £1.4 million) reflecting
improved customer experience through the digital customer
journey and product diversification, with strong growth at
LeLynx in France• Costs for Penguin Portals, and Preminen (which was previously
recorded under business development costs in ‘Other Group
items’) are included in the Comparison segment result in the‘other’ section

The UK comparison market remains very competitive withincreasing advertising spend across all marketing channels,
however increases in market share across products and a focus on
customer experience resulted in a 19% increase in turnover for
Confused.com to £112.7 million (2018: £95.1 million).
The combined revenue from the European operations increased by
8% to £50.1 million (2018: £46.3 million), reflecting continued growthin traffic and customer quotes in LeLynx, and improved customer
experience and product diversification across both operations.
Compare.com lowered losses to £4.3 million (2018: £6.9 million)
as a result of downsizing to allow for a more agile approach,
together with reduced marketing spend and increased
efficiencies. A non-cash impairment of £2.0 million in the second
half of 2019 (full year impairment total of £27.7 million) was
recognised by the parent company in respect of its investment
in Compare.com. This impairment is in line with the reduction in
Compare.com’s net assets since half year 2019. The impairment
charge is recognised in the income statement of the parent
company and has no impact on the Group’s consolidated profit forthe period or the Group’s 2019 regulatory capital position.
Preminen, the Group’s comparison venture with Mapfre, continues to
explore comparison in new markets overseas. Rastreator.mx in Mexicoand Tamoniki.com in Turkey have focused on panel development
and growth, while GoSahi.com in India was launched in 2019.
Comparison Regulatory environment
Confused.com is regulated by the Financial Conduct Authority(FCA) as an insurance intermediary and is subject to all relevantintermediation rules, including those on solvency capital.
Rastreator and LeLynx are now locally licensed in Spain and France
post the finalisation of Brexit preparations. Further informationon the impact of Brexit on our European operations can be foundon page 59.
Compare.com is a regulated insurance agency domiciled in
Virginia, US, and licensed in all other US states.

Admiral Group plc · Annual Report and Accounts 201957

Other Group Items
Other Group items financial review
£m

2019

2018

2017

Share scheme charges(52.7)(49.0)(35.2)

Admiral Loans loss before tax(8.4)(11.8)(4.4)

Other interest and investment return

6.0

2.9

8.4

Business development costs

(2.1)

(4.3)

(5.2)

Other central overheads(20.0)(10.5)(5.1)

Finance charges(11.2)(11.3)(11.4)

Other Group items(88.4)(84.0)(52.9)

Share scheme charges relate to the Group’s two employee share schemes (refer to note 9 to the Financial Statements). Charges
increased by £3.7 million in 2019, to £52.7 million reflecting the improved vesting outcomes resulting from the increased level of profit
in 2019 and a higher share price.
Other interest and investment income increased to £6.0 million in 2019 (2018: £2.9 million). 2019 includes a lower level of unrealised
losses relating to forward foreign exchange contracts compared to 2018 (2019: £0.1 million, 2018: £2.3 million). The higher number in2019 was also driven by increased investment return due to the increased cash holding in the parent company.
Business development costs include costs associated with potential new ventures. The costs associated with Preminen have now been
included in the Comparison section, contributing to the decrease in business development costs in 2019.
Other central overheads of £20.0 million continue to reflect the cost of a number of significant group projects. In addition, a £6 million
cost relating to a one-off cash bonus of £500 per employee, is included in 2019 (2018: £nil).
Finance charges of £11.2 million (2018: £11.3 million) represent interest on the £200 million subordinated notes issued in July 2014(refer to note 6 to the Financial Statements).

Loans
We can look back at 2019 with pride at what we delivered but knowing there
is still much more to do with an exciting outlook for the coming years.

Scott Cargill
CEO, Admiral Financial Services Limited

58

In just over two years Admiral Loans has
built up a prime loan book totalling £455
million and is now a relevant participant
in what is a large market in the UK. The
progress in 2019 was particularly pleasing,with customer growth of over 70% –importantly, still within risk appetite. We
improved our economics as we started
to benefit from economies of scale. Our
customers and employee scores werestrong. And the loss of £8 million was in linewith expectation.

Admiral Group plc · Annual Report and Accounts 2019

Turning to 2020, we expect to benefit froma continued market shift to comparisonand credit score marketplaces which now
account for over 20% of personal loans
distributed in the UK. I would therefore
expect to see continued growth in ourloan balances towards the £700-900
million range in the next two years that we
identified at the 2019 half year results.
We remain acutely aware of and responsive
to the macro-economic backdrop in the
UK and anticipate continued investment
in our people, technology, product andrisk selection capabilities. I’d like to thankall our staff in Admiral Loans for thetremendous progress we made last year.

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information£m

Total interest income

2019

2018

2017

30.8

15.0

1.6

Interest expense

(9.1)

(4.3)

(0.4)

Net interest income

21.7

10.7

1.2

Other fee income

1.9

0.4

–

Total income

23.6

11.2

1.2

Expenses(32.0)(22.9)(5.6)

Admiral Loans result(8.4)(11.8)(4.4)*1*1 Includes £2.8 million intra-group interest expense (2018: £0.7 million; 2017: £nil)

Background
Admiral Loans launched in 2017 and provides unsecured
personal loans and car finance products primarily throughthe comparison channel.
Loan balances increased during the year to £455 million (2018:£300 million), with just over 5% of the book being used for
car loans and over 15% being to existing Admiral insurance
customers. The 12-month default experience remained inline with 2018 at around 2% during 2019 and the business has
continued to invest in its operational capabilities and technology.
Admiral Loans is funded through a combination of internal andexternal funding. The external portion funds approximately 60%of the current balance through securitisation. The risk and rewardof the securitised loans is considered to remain with Admiral.

ResultAdmiral Loans recorded a pre-tax loss of £8.4 million in2019 (decreased from £11.8 million in 2018). The lower loss
predominantly reflects the increased interest income in the
period, offset to an extent by increased provisions against theloan book due to its growing size.

UK Exit from the European Union (‘Brexit’)
Admiral adopted a prudent approach to Brexit and set up
new entities in Europe under which the European operations
have traded since 1 January 2019. All of the Group’s European
insurance business is now underwritten by a regulated entity
in Spain, Admiral Europe Compania Seguros (AECS). The Group’s
European comparison businesses Rastreator and LeLynx
have successfully been merged into comparison companies
established in Spain (Comparaseguros Corredia de Seguros)
and France (LeLynx SAS) respectively.
Brexit continues to bring risks to the Group including:• The potential for market volatility, and the potential forthe uncertainty or the emerging terms of exit to trigger orexacerbate less favourable economic conditions in the UK
and other countries in which Admiral operates (though it isworth noting that car insurance has tended to be resilient toeconomic downturns; and Admiral Loans has adopted a cautious
approach to volumes and credit quality in advance of Brexit);• As part of the Own Risk and Solvency Assessment (“ORSA”)
process, the Group has performed a stress testing exercise for
its assessment of the stressed macroeconomic conditions on the

UK and EU insurance and financial service businesses that may
result from Brexit, including the potential increase in claims costs
following a spike in inflation. This includes negative movement
in interest rates, currency, investment yields and inflation which
could be experienced post Brexit. Given the results of the stresstesting the Group is comfortable that it is able to manage thepotential outcomes of such scenarios should they occur;• Potential changes to the rules relating to the free movementof people between the UK and the remaining EU member
states. The Group has followed external advice on planning forthe small number of EU citizens working within the UK and UK
citizens working in the EU, for the Group;• Potential for impact on the import of car parts with potential
impact on claims costs. A working group is in place to manage
and review this risk, with commercial negotiations ongoing to
mitigate risks arising from a “no deal” Brexit;• Potential operational impacts for the provision of Green Cards
for UK customers to continue driving in the EU. Procedures
have been established to manage the operational impacts andensure suitable communication to customers.
At present, the Group does not foresee a material adverse impact
on day-to-day operations (including customers or employees).
Whilst the Group is comfortable that it is able to manage potential
outcomes following the review of the stress testing noted above,it recognises the uncertainties that exist post Brexit and thepotential for adverse impacts to the Group’s capital position andfuture dividend payments. Sensitivities to the Group’s regulatory
solvency ratio are presented earlier in this report, including a
number of specific market risk sensitivities. The cost of therestructuring activity was not material to the Group.

Coronavirus (COVID-19)
Admiral is closely monitoring government updates in relation
to the coronavirus during recent months and is considering any
potential impacts on the business.
The response to date has focused on the wellbeing of staff in theGroup’s offices and also in ensuring that appropriate plans are inplace to ensure that Admiral’s operations can continue to service
customers.
Ongoing stress testing work, overseen by the Group Risk
Committee, is focused on operational resilience plans andpotential financial impacts. As the situation develops Admiral
will implement appropriate business continuity plans to mitigate
potential impacts.

Admiral Group plc · Annual Report and Accounts 201959

Being a Responsible Business“We strive to have a positive,
long lasting impact on ourcustomers, our community,
our people and ourenvironment.”

Read more on page 61

6.98 million
customers globally

Read more on page 62

Admiral Community
Chest fund allocated£130,000
in 2019
Read more on page 64

0.36

tonnesCO2e per employee(2018: 0.39 tonnes)

Read more on page 63

100%

Read more on page 62

1stof our External AssetManagers are signatories
to the PRI1Best Big Company toWork for in the UK at
the Sunday Times Best
Companies award in 2019
Read more on page 63

Full year dividend for2019 confirmed at

140.0pper share

160Admiral Group plc · Annual Report and Accounts 2019T he United Nations-supported
Principles for Responsible Investment

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information“We believe economic
success and being a
responsible businesswork hand in handwith each other.”David Stevens, CBEGroup Chief Executive Officer

Our Approach
At Admiral we pride ourselves on being different. We adopt
a fair and principle-based responsible approach across ourbusiness to create positive impacts for our stakeholders andthe wider community.

Putting the customer at the heartof what we do
We strive to provide exceptional service and aneffortless experience for our customers. From ourfront-line employees to our senior managers, all levels of
the business act with customer satisfaction in mind, as
reflected by initiatives such as Kudos and The Above &Beyond Initiative3.
As technology has evolved, we have adapted to provide
new and effective methods for us to stay connectedwith our customers. For example, this year we launched
our revamped MyAccount Portal, which enables
customers to quote for, and accept, policy changes
online and in real-time.

97%

customers were happy with
their service in 2019

By considering the needs of, and feedback from, our immediatestakeholders and the wider communities in which we operate,
we strive to continually enhance our approach to being a
responsible business.
In 2019 we initiated a Climate Change Risk Project with a steeringcommittee meeting monthly to understand the current andpotential future risks and impact on the business. We also
published our first Diversity and Inclusion report and madestrides in reducing waste and energy consumption. From an
investment perspective, we also formalised our Responsible
Investment Policy, which includes ensuring that all of our external
asset managers are signatories to the PRI and that we consider
sustainability factors when making our investment decisions.
Operationally, 2019 was a year of continued investment to sustain
our competitive advantage and improve the customer journey.
Across our international operations we continued upon our path
towards long-term value creation by replicating the sustainable
insurance business model that we have refined in the UK.
Strategically, we continued to improve our understanding ofever evolving customer expectations and to build upon our
digital and automation capabilities. We also considered the movetowards electric vehicles and the impact on the industry and our
supply chain.
The following section seeks to provide colour on some activities
that we undertake, as a responsible business that considers key
stakeholders; Our Customers, our People, our Communities, ourShareholders, our External Partners and our Environment.2

Here, there and Alistair
In 2019 Alistair Hargreaves, UK Insurance Chief
Operating Officer, started an initiative to visit different
departments within our claims function each month
to listen to calls, and discover cases with excellent
outcomes for both the customer and the business.
Alistair then shares his learnings with the rest of thebusiness through our internal intranet.

Focus Areas• Continue to improve upon the products and services
that we offer to customers• Continue to improve customer experience throughleveraging technology and data
• Continue to improve our Net Promoter Score (NPS)2	For more information please refer to our 2019
Corporate Social Responsibility (CSR) report3• Continue to improve our digital and automation
capabilities

Refer to page 06 in Our Customer section

Admiral Group plc · Annual Report and Accounts 201961

Being a Responsible Business continued

People who like what they do,
do it better!

Driving positive and meaningful
impact in our communities

We ensure that we have a talent development pipeline
with skills and knowledge to maintain the long-term
success of our business. We also strive to offer our
employees an inclusive environment where our people
feel happy, supported and motivated within their roles.
We maintain the Group’s unique culture with the help of
Admiral’s four pillars:

Our community engagement builds on long-standing
financial support programmes such as the Admiral
Community Chest scheme. In 2019, over 350 initiatives
submitted by employees received either grants ormatched funding, totalling £130,000. Our People
Services department also signed a pledge with Cardiff
Commitment to help young people from various social
backgrounds to develop their employability skills,
demonstrating that both departments and individuals areencouraged to engage in active community outreach.

• Communication: Effective and transparent
communication is at the heart of our culture and is
promoted across all levels of the organisation

Various initiatives across the Group promote diversity
and inclusion, such as our headline sponsorship ofPride Cymru over the summer. Importantly, as a global
business with growing international operations, ourcommunity impact now increasingly stretches acrossdifferent parts of the globe.

• Reward and Recognition: All our people receive thesame number of shares 4 through our Approved Free
Share Plan (SIP). Managers additionally receive sharesthrough a DFSS bonus, linked to company performance• Equality: Promoting a sense of fairness and equality in
Admiral and representing people of all genders, sexual
orientation, ethnicities and abilities

85%• Fun: We celebrate as many events and occasions as
possible to build strong relationships and boost moraleof our employees feel good about
the ways in which we contributeto communities5

90%of our employees believethat People care about
each other here5

Training and Development
We offer bespoke training to our people at all levelsof the business. From comprehensive induction
periods, online courses, talent development plans andsponsorship for professional qualifications, we have arange of initiatives in place so that our people have theskills and knowledge they need to develop professionallyand succeed in their roles.

Festival of Sport

Focus Areas

Focus Areas• Our Group Board aims to maintain a minimum of 33%
of its members as women and aims to achieve thisratio in subsidiary boards• Complete our Ministry of Giving commitment togive £400,000 to fund four charity projects in South
Wales over 2019 and 2020

• We commit to increase female representation atexecutive level to 40% by 2023

• Continue to engage with our community throughcharity and employment initiatives• Continue to train and develop our people• Continue to empower our people to give back to our
local communities through initiatives such as optional
charity breaks6, Community Chest and volunteering
opportunities

In 2019, over 200 Admiral employees volunteered at
the Festival of Sport in Margam Park (Wales) wherechildren with disabilities get involved in sports,
activities and games.

• Continue to be a great place to work

For more information please refer to page 07 of our2019 Corporate Social Responsibility (CSR) report

62

Admiral Group plc · Annual Report and Accounts 20194	Shares are given to our people who have been employed for one
year or more; prorated for part-time employees
5Great Place to Work Survey 20196	Our people are entitled to up to one-month unpaid leave tocarry out charity work every three years

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

We recognise the importance of openly andactively engaging with our shareholders
In 2019 we undertook over 300 Investor activities,
including roadshows across London, New York, Boston andToronto, and frequent conferences and investor meetingsin Cardiff. In addition, The Chair, Senior Independent
Director, Group CEO and Group CFO also hosted face toface meetings with some of our largest shareholders.
In 2019 members of our senior leadership team and ourBoard, met with several of our largest shareholders to
discuss a range of topics relating to the Company and its
performance in an open and honest fashion. The insightsthat such discussions provide reinforce the importanceof two-way communication as a key element of our
stakeholder engagement programme.

Building and maintaining strong, longterm relationships with our external
network of partners and suppliers
Our key external stakeholders include (but are notlimited to); Co- and Reinsurance Partners, Regulators,
Government/Welsh Assembly, the FCA, the PRA, tradebodies, distribution partners, tax authorities, procurement
partners, garage networks, suppliers and advisers. The
Group seeks only to engage with suppliers and partners
that meet our high standards and adhere to our bestpractice policies7. By working closely with strategic
partners, we can further demonstrate our commitment
to be a market leader of products and services.

52% 148.3p 140.0p
ROE

EPS

DPS

Global procurement agreement withexternal IT hardware provider

All of our people who have been fully employed for one
year receive the same number of shares (pro-rated forpart time employees) through our Approved Free SharePlan (SIP). Some management additionally receive sharesthrough the DFSS scheme.

In 2019, Admiral entered into a three-year global
agreement with our external IT hardware provider. The
global sourcing arrangement means that we have improved
our agreement with the IT provider and increased theircoverage across the Group, so that all businesses andbrands of the Admiral Group will now have access to thesame hardware equipment. The pricing agreement is basedon consolidated volumes and will contribute to several
internal efficiencies and cost savings.

Focus Areas

Focus Areas• The Investor Relations team, senior management andGroup Board will continue to hold regular meetingsand engage with our investors• Continue to actively engage with our co- andreinsurance partners

All our employees are shareholders• Continue to treat all shareholders fairly by providing
accurate and timely information• We will continue our dividend policy to pay 65% of
post tax profits as a normal dividend• Continue to actively engage with our garage
network partners• Track efficiency savings through procurement
activities

7	To find out more about our third party and supplier policies
refer to our CSR report

Admiral Group plc · Annual Report and Accounts 2019

63

Being a Responsible Business continued

Playing an active role in building
a sustainable future for all
As a global business, we have taken steps to explore thegrowing impact of climate change and to mitigate our
impact on the environment. As an insurance and financial
services provider our environmental footprint mainly
stems from our office operations and business travel. We
continuously work to minimise our footprint and raiseawareness through our Green Teams, who are alignedwith our vision for sustainable growth and our focus on
profitability, as outlined by our Group business model andstrategy on pages 16 and 17 of this report.

3,720

Tonnes CO2e

Total carbon emissions(2018: 3,925 Tonnes CO2e)

Climate Change ProjectIn 2019, Admiral established a Climate Change working
group, with the aim of understanding the risks climatechange could mean for the business and broader trends
likely to impact us in the future8. For more information
read our case study on page 36.

Focus Areas• Externally verify our CO2e emissions in 2020
• Set Group-wide emission reduction targets in 2020
• Continue to explore best practice developments andto mitigate our impact on the environment• Continue to improve recycling and energy usage• Further develop our Group Environmental policy

8	For more information on the Climate Change
working group refer to page 97

64

Admiral Group plc · Annual Report and Accounts 2019

Achieving our commitments
The Admiral Group Board constantly considers
the Group’s key stakeholders and engagement
methods, and reflects on how best to integrate our
stakeholders' interests at the heart of our decision
making.
Our approach to being a responsible business remains
grounded in our founding principles. We maintain ourembedded ‘test and learn’ approach across the entire
business, driving sustainable, long-term growth whilst
also ensuring the daily needs of the business and our
stakeholders are always considered, and the impact ofour decisions closely monitored.

• Voted Best Motor Insurer andBest Insurance Provider in the2019 Personal Finance Awards• Voted Best Home Insurer in the2019 Insurance Choice Awards• Number one in the Sunday Times
Best Big Companies to Work For ranking• Number seven in the Great Place to WorkBest Workplaces in Europe ranking• Recognised as a Centre of Excellence in
Wellbeing by the Great Place to Work Institute• Headline sponsor of Pride Cymru’s
2019 Big Weekend• Our Cardiff office has achieved a BREEAM
ranking of ‘Excellent’Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

We have four main Board Committees:• Remuneration Committee• Nomination Committee• Audit Committee• Group Risk Committee
We are signatory to the following initiatives:• Inclusive Behaviours in Insurance Pledge• 30% Club
• Women in Finance Charter• Race in Work Charter• Social Mobility Pledge
We also have several ESG-related
policies in place including:Anti-bribery and Corruption Policy• We prohibit any inducement which results ina personal gain and is intended to influence
action which may not be solely in the interestsof the Group.
Modern Slavery Policy• Admiral Group, and all its subsidiaries and branches,is opposed to the exploitation of people in any
way and has a zero-tolerance approach to modern
slavery.
Whistleblowing Policy• We ensure our employees feel comfortable raising
any concerns, provide guidance on ways to reportissues and assure employees that all concerns aredealt with seriously.
Responsible Investment Policy• Admiral has fully integrated a Responsible
Investment Policy which is applicable to all
investments.
Procurement Policy• We provide policy and framework guidelines for
all Admiral Group procurement activity in order tomaintain the highest standards of integrity.

Board Diversity Policy• The Group Board aims to maintain a minimum of
33% of its members as women and aims to achieve
this ratio in subsidiary boards as well.
Equality, Diversity and Dignity and Work Policy• We are committed to ensure any type of unfair
discrimination including harassment, victimisation,
favouritism and bullying is not accepted.
Sexual Harassment Policy• Admiral does not tolerate any form of sexual
harassment in the workplace or at work related
events and is committed to treating all complaints
and incidents seriously.
For more information relating to these policies,
please see our corporate website.

ESG – Our Focus
Admiral continues to consider its stakeholders toensure it builds a long-term sustainable businessfor the future in terms of Environmental, Social andGovernance (ESG) factors. We have incorporated
our response to ESG considerations throughout our
Annual Report and Corporate Social Responsibility(CSR) Report and are engaging in active dialogue withvarious ESG indices and the Carbon Disclosure Project(CDP) to establish if there are any areas where we canbetter communicate what we are doing.

Non-Financial Reporting Statement
Stakeholders can find information as required
under the regulations on reporting non-financial
information in the following sections:• Being a Responsible Business• Directors’ Report• Principal Risks and Uncertainties

Environmental Policy• As part of our vision for sustainable growth andour focus on profitability, we continuously work tobetter measure, record and reduce our Greenhouse
Gas emissions.

For an overview of these policies,
please see our corporate website.

Admiral Group plc · Annual Report and Accounts 201965

Principal Risks and Uncertainties

The Board, with support from the Group Risk Committee and
the Group Risk function, undertakes a regular and robust
assessment of the principal and emerging risks facing theGroup. These risks have been summarised as those which
would threaten its business model, future performance,liquidity and solvency.
The table below sets out the principal risks which Admiral has identified throughits Enterprise Risk Management Framework (‘ERMF’). The impact of those risks
and actions taken to mitigate them are explained below.
This section also includes a description of Admiral’s approach to identify,
manage and govern emerging risks.
Principal risks (A–K)
Princip

Principal risks have been considered against eachof our strategic objectives.
Risks that could impact investing in our core include:
Insurance Risk:
A

B

C

D

Reserving Riskin the UK andinternational
insurance

Group Risk:
E

Premium Risk andCatastrophe Risk

F

Reducedavailability of
co-insurance
and reinsurance
arrangements

G

Failure ofgeographic
and/or productdiversification
Erosion ofcompetitive
advantage in UK
Motor Insurance
Reliance on the
UK Comparison
channelI

Legal and
Regulatory Risk

K

Operational Risk

Investing in our core
Continued Growth and Profitability

3

Continued Product Development

Investing in our future

66

4Comparison

5International Insurance

6

New Product Diversification

Market RiskJ

For more information refer to pages 24 to 27

Sustained Competitive Advantage

K

A

B

C

D

Credit Risk

Operational Risk:

Linking risks to our strategic drivers

2

J

Insurance
Risk

Market Risk:

Potential
diminutionof other revenue

1

Operational
Risk

Credit Risk:
H

a l R i s ks

Admiral Group plc · Annual Report and Accounts 2019Market Risk

Group Risk
E

I

Credit Risk
H

F

GCompany Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Insurance Risk
A

Reserving Risk in the UK and international insurance

Risk: Admiral is exposed to reserving risk through its underwriting of motor and household insurance policies. Claims reserves in the
Financial Statements may prove inadequate to cover the ultimate cost of claims which are by nature uncertain.
This is a particular risk for motor insurance liabilities, where the amount payable for bodily injury claims (particularly large claims) canchange significantly during the lifetime of the claim as a result of external risks such as changes in Ogden rates and impacts of increased
levels of Periodical Payment Orders. The update to the Ogden discount rate in 2019 reduces the likelihood of a further change in 2020.
Possible impact on our strategy:

1

2

5

ImpactMitigating Factors

Adverse run-off leading to higher claims
costs in the Financial Statements.

The Group continues to reserve conservatively, setting claims reserves in the Financial
Statements well above actuarial best estimates to create a margin held to allow for
unforeseen adverse development.

PPO claims are capital intensive owing
to increased uncertainty of the cost ofsignificant claims over a longer term.

Best estimate reserves are estimated both internally and externally by independent actuaries.
For very large claims Admiral purchases excess of loss reinsurance, which mitigates a
portion of the loss.
Regular reviews of both settled and potential PPO cases are undertaken by the Claims
and Actuarial teams, with independent Actuarial analysis provided as part of theexternal reserving process.
Admiral’s investment strategy is the result of a structured, disciplined and transparent
investment process which considers settled and potential future PPOs.

B

Premium Risk and Catastrophe Risk

Risk: The Group is exposed to the risk that inappropriate premiums are charged for its insurance products leading to either
insufficient premiums to cover claims cost or uncompetitive rates leading to reduced business volumes.
The risk of increased claim costs and reduced business volumes could be driven by potential economic, environmental, regulatory or
political change such as the UK’s withdrawal from the European Union.
Admiral is exposed to the risk of higher losses than anticipated due to the occurrence of man-made catastrophes or natural weather
events, potentially increased in frequency and severity due to climate change.
Possible impact on our strategy:

1

2

3

ImpactMitigating Factors

Higher claims costs and loss ratios,
resulting in reduced profits orunderwriting losses.

There are a number of aspects which contribute to Admiral’s strong UK underwriting
results, including:A large flood or windstorm causing
extensive property damage (bothmotor and household) to a significant
proportion of the portfolio, could leadto a larger than anticipated total claims
cost.

•

Experienced and focused senior management and teams in key business areas
including pricing and claims management;•

Highly data-driven and analytical approach to regular monitoring of claims andunderwriting performance;•

Capability to identify and resolve underperformance promptly through changes to
key performance drivers, particularly pricing•

Continuous appraisal of and investment in staff, systems and processes; and•Admiral monitors the impact arising from Climate Change risks, covering both
physical and transitional risks, that are captured as Emerging Risks.

Admiral purchases excess of loss reinsurance, designed to mitigate the impact of verylarge individual or catastrophe event claims.

Admiral Group plc · Annual Report and Accounts 201967

Principal Risks and Uncertainties continued

Insurance Risk continued
C

Reduced availability of co-insurance and reinsurance arrangements

Risk: Admiral uses proportional co-insurance and reinsurance across its insurance businesses to reduce its own capital needs (andincrease return on the capital it does hold) and to mitigate the cost and risk of establishing new operations.
There is a risk that support will not be available or at an uneconomical price in the future if the results and/or future prospects ofeither the UK business or (more realistically) one or more of the newer operations are not satisfactory to the co- and/or reinsurers.
Possible impact on our strategy:

1

2

3

Impact5

6

Mitigating Factors

A potential need to raise additional capital Admiral mitigates the risk to its reinsurance arrangements by ensuring that it has ato support an increased underwriting
diverse range of financially secure partners.
share. This could be in the form of equity Admiral continues to enjoy a long-term relationship with a number of different
or debt.
reinsurers some of which are amongst the world’s largest.
Return on capital might reduce compared These long-term arrangements are in place throughout the UK and International
to current levels.
businesses.

D

Potential diminution of other revenue

Risk: Admiral earns other revenue from a portfolio of products and services in addition to the core insurance products.
The level of this revenue could diminish due to regulatory or legal changes, customer behaviour, strategic reasons or market forces.
Possible impact on our strategy:

1

2

3

ImpactMitigating Factors

Lower profits from business operations
and lower return on capital.

Admiral continuously assesses the value to its 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 rangeof products. This would mitigate the impact of regulatory or market changes or changes
in consumer behaviour which might affect a particular product or income stream.

68

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Group Risk
E

Erosion of competitive advantage in UK Motor Insurance

Risk: Admiral typically maintains a significant combined ratio advantage over the UK market. This advantage and/or the level ofunderwriting profit (and associated profit commission) could be eroded.
This risk could be exacerbated by irrational competitor pricing and/or new technologies used within the insurance market. It may arise
from new or existing competitors.
Possible impact on our strategy:

1

2

3

ImpactMitigating Factors

A worse UK Motor Insurance result andlower return on capital employed.

Admiral’s focus remains on the wide range of factors that contribute to Admiral’s
combined ratio outperformance of the UK Motor market. Some are set out earlier in theStrategic Report, but in addition:

A sustained and uncorrected erosionof competitive advantage could affectthe ability of Admiral to maintain its
reinsurance arrangements, which mightin turn require Admiral to hold more
capital.

F•

Track record of innovation and ability to react quickly to market conditions anddevelopments; and•Keen focus on maintaining a low-cost infrastructure and efficient acquisition costs.

Failure of geographic and/or product expansion

Risk: As per the Group’s diversification strategy, Admiral continues to develop the UK Household, non-insurance operations such as
Loans and expand its overseas operations.
One or more of the operations could fail to become a sustainable, profitable long-term business.
Product expansion into new areas could lead to unprofitable business and increased regulatory risk.
Growth in developing businesses could exceed the scale of infrastructure of the operation.
Possible impact on our strategy:

3

4

5

6

ImpactMitigating Factors

Higher than planned losses (andpotentially closure costs) and distractionof key management.

Admiral’s approach to expansion and product development remains conservative,
applying the ‘test and learn’ philosophy that has proven successful for previous
operations. International insurance businesses have generally executed cautious launch
strategies and are all backed by proportional reinsurance support which provides
substantial mitigation against start-up losses in the early years.

A collective failure of these businesses
would threaten Admiral’s objective todiversify its earnings by expanding into
new markets and products.

New comparison businesses have aligned their marketing investment with the extent
of improvement in key performance indicators such as average cost per quote andconversion ratio. The Group also seeks to establish strategic partnerships for developing
new businesses to share start-up losses with partners.
The Directors are mindful of management stretch and regularly assess the suitabilityof the infrastructure and management structure in place for Admiral’s new UK andinternational operations.

Admiral Group plc · Annual Report and Accounts 201969

Principal Risks and Uncertainties continued

Group Risks continued
G

Reliance on UK Comparison distribution channel

Risk: Admiral is dependent on the four main UK comparison websites as an important source of new business and growth.
Growth in this distribution channel could slow, cease or reverse, or Admiral could lose one or more of the websites as a source ofcustomers.
Possible impact on our strategy:

1

2

3

4

ImpactMitigating Factors

A potentially material reduction in UK
Motor Insurance new business volumes.

Admiral also contributes materially to the revenues of other comparison businesses andhas a strong brand presence and therefore it is not considered probable that a material
source of new business would be lost.

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

Admiral continues to grow its multicover and multicar products, with a direct offering to
new and existing customers.

Credit Risk
H

Credit Risk

Risk: Admiral is primarily exposed to credit risk in the form of a) default of reinsurer; b) failure of banking or investment counterparty.
One or more counterparties could suffer significant losses leading to a credit default.
AFSL exposes the Group to credit risk in relation to customer defaults on its lending business.
Possible impact on our strategy:

70

2

6

ImpactMitigating Factors

Additional capital may need to be raised
as a result of a major credit event,dependent on its nature and severity.

Admiral only conducts business with reinsurers of appropriate financial strength. In
addition, major reinsurance contracts are operated on a funds-withheld basis, which
substantially reduces credit risk, as Admiral holds the cash received as collateral.

Admiral would also need to ensure that it
continues to have sufficient liquid assets
to meet its claims and other liabilities as
they fell due.

Concentrations of credit risk are managed by investing in liquidity funds which invest ina wide range of short duration, high quality securities. Cash balances and deposits areplaced only with highly rated credit institutions. Some long- term investments are held
in Government bonds to further mitigate the exposure to credit risk.

Increased defaults would lead to a
growth in bad debt provisioning which
could impact future profitably andlending capabilities.

Admiral considers counterparty exposure frequently and in significant detail, and hasin place appropriate triggers and limits, to mitigate exposure to individual investment
counterparties.
Admiral continuously monitors the credit quality of our counterparties within
Board approved limits, adjusting its credit rules and pricing accordingly. Continuous
monitoring of the credit quality of our counterparties within approved set limits.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Market Risk
I

Market Risk

Risk: Market risk arises as a result of fluctuations in the value of market prices of investment assets, liabilities, or the income from ourinvestment portfolio.
Possible impact on our strategy:2

ImpactMitigating Factors

Market volatility (notably verysignificant reductions in risk freeinterest rates) can adversely impact theGroup's solvency due to an increased
regulatory valuation of claims liabilities,
in particular in relation to longer dated
potential PPO claims.

The investment strategy focuses on preservation of the amount invested, low volatilityof returns and strong liquidity. The majority of the portfolio is invested in high quality
fixed income and other debt securities, and money market funds and other similar funds
in order to achieve these objectives.
The Group’s mitigation for interest rate risk resulting from long duration PPO liabilities
includes a comprehensive level of reinsurance cover and continuing focus on investment
strategies. This includes consideration of hedging options for these liabilities, withhedging arrangements recently implemented for settled PPOs. The creation of the
Spanish insurance company AECS has not materially altered the exposure to net assets
and liabilities in currencies other than pounds sterling which remain relatively low for
the Group.

Operational Risk
J

Legal and Regulatory Risk

Risk: Legal and Regulatory risk may arise where Admiral fail to comply with legal or regulatory requirements and/or changes in an
accurate, timely manner, such as the introduction of IFRS 17 and the FCA review in General Insurance Pricing Practices.
As Admiral operates globally, it is exposed to a number of differing legal jurisdictions and regulators.
Possible impact on our strategy:

1

2

3

4

5

6

ImpactMitigating Factors

Exposure to regulatory intervention,
censure and/or enforcement action
through fines and other sanctions.

Regular review of the Group’s compliance with current and proposed requirements andinteraction with regulators by Executive Management and the Board.
Assurance is gained through external reviews and benchmarking exercises ensuring
Admiral is compliant with legal and regulatory requirements.
Enhanced project governance is a key control in managing regulatory change.

Admiral Group plc · Annual Report and Accounts 201971

Principal Risks and Uncertainties continued

Operational Risk continued
K

Operational Risk

Risk: Operational Risk arises within all areas of the business.
The principal categories of operational risk for Admiral are:• Conduct Risk•

IT Systems•

Information Security/Cyber Risk•

Business Continuity• Processes•

Project Risk•

People•Outsourcing

Possible impact on our strategy:

1

2

3

4

5

6

ImpactMitigating Factors

Potential customer detriment and/or potential regulatory censure/
enforcement and/or reputational
damage as a result of Admiral’saction.

At each stage of the customer journey, customer outcomes are monitored, managed andreported in order to mitigate customer detriment.

Admiral being unable to service its
customers or making poor businessdecisions due to lack of system
availability, data integrity and data
confidentiality.

Admiral continues to invest in its Security Programme in order to mitigate Information
Security risks, including evolving Cyber risk.
Within IT there is a major incident team which is tasked with maintaining system availability,with business continuity and disaster recovery plans in place which are regularly tested.
Data is backed up to allow for its recovery in the event of corruption
There are regular reviews of the effectiveness of the Group’s IT capability by Executive
Management and the Board.

The risk of reductions in earnings
and/or value, through financial or
reputational loss, from inadequate
or failed internal and outsourced
projects, processes and systems,
or from people related or external
events.

Admiral operates the three lines of defence model for overseeing its products, processes and service.

Risk to Admiral occurs throughthe losses that could materialise
if the internal control framework
managing these business processes
fails.

Succession planning is based on targeted recruitment, identifying potential leaders throughinternal development, talent management and retention processes.

Internal controls are in place and monitored to mitigate risks and the control framework isregularly reviewed.
The internal audit function has an agreed cycle of testing of the adequacy and effectivenessof controls.
We aim to attract, retain and motivate quality staff to deliver quality customer service andachieve business objectives.

Enhanced project governance and oversight of new systems implementations with external
specialist review and assurance where required.
Admiral monitors its outsourced and offshore activities, through ongoing supplier
relationship and performance management, with regular due diligence reviews.
Admiral purchases a range of insurance covers to mitigate the impact of a number of operational risks.

72

Admiral Group plc · Annual Report and Accounts 2019

Company Overview

Strategic Report
Corporate Governance
Financial Statements
Additional Information

Emerging Risks
Risk: Admiral Group monitors emerging risks which are defined as
issues that are perceived to be potentially significant, but which
may not be fully foreseen, assessed or allowed for in strategicand operation business decisions. By their very nature, emerging
risks are many and varied. They arise from changing political,
social, economic, environmental and technological landscapes,
impacted by changing legal and regulatory considerations,and are characterised by a complex interaction between thesedrivers. The timescale of their impact is unknown, but frequently
is for longer than standard business planning cycles. They are
considered to have potentially significant impact to the Group,with a high degree of uncertainty around the likelihood of
occurrence, severity and/or timescales.
The management of emerging risks is a key element of Admiral’s
strategic risk management. Admiral has developed a framework
for monitoring Emerging Risks, based on the guidelines of theInternational Risk Governance Council and the CRO Forum

Emerging Risks Initiative. The framework documents the
management practices and procedures in managing emerging
risks: identifying and assessing risks thorough analysis and thequantification of the potential impact to Admiral, as well as
the precautionary deployment of management actions andmitigating controls.
Emerging Risks are represented graphically, capturing anassessment of their impact and date of crystallization ranging
from less than one year to greater than five years, while also
categorising them into the following four broad segments:(a) legal and regulatory, such as IFRS 17; (b) socio-political andeconomic, such as Brexit; (c) environmental, such as physical andtransition climate change risks; and (d) technology, capturing
advances in vehicle technology.
Reporting on such emerging risks and opportunities is provided
to the GRC and relevant Boards and is incorporated into theGroup ORSA Report.

David Stevens CBEGroup Chief Executive Officer
4 March 2020

Admiral Group plc · Annual Report and Accounts 201973

Corporate GovernanceIntroduction from the Chair“On behalf of the Board, I am pleased to present theGroup’s Governance Report for the financial year ended
31 December 2019.”
Dear Shareholder,
Governance has been a key area of focus for the
Board, given the changes to the corporate governancelandscape brought about by the introduction in July
2018 of the revised UK Corporate Governance Codewhich applies to the Group with effect from 1 January
2019. In order to ensure that the Board was fully
prepared for the changes set out in the revised Code,a project was initiated, led by the Company Secretary,which included scheduling presentations, updates andtraining for the Board throughout the year to ensurethat the Group’s governance framework and standardsof good corporate governance were aligned with therequirements set out in the Code.
During the year, the Board and the Nomination and
Governance Committee led a comprehensive andtransparent selection process for a new CEO. Following
suitable candidate interviews and presentations,
Milena Mondini de Focatiis was selected as thepreferred CEO candidate. Further details of theselection process are set out later in this report on
page 84.
The Board reviewed and agreed the Group’s purpose,
which sets out the Group’s values and strategy, toensure that it was aligned with the Group’s culture andsupported the Group’s long-term sustainable strategy.
A number of sessions were held during the year atwhich the Board spent time reflecting on the Group’s
unique culture and reviewed the measures that had
been put in place to make sure it was appropriately
monitored so that it remained aligned with theGroup’s purpose and values. The Board considered how
the Group’s purpose and values had been embedded in
the Group’s policies and procedures and were satisfied
that management had taken the appropriate steps
to communicate values and expected behaviours
widely and clearly across the Group and that reward
structures provided appropriate incentives thatencourage desired behaviours and responsible risktaking. The Group’s purpose is set out on page 01.

74

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

During the year the Board focused onenhancing communication with its staff
to ensure that the mechanisms in placefor engagement with them remained
appropriate. In this context, the Board
engaged with the employees through the
Employee Consultation Group (ECG) which
was launched successfully, comprising
elected staff representatives from acrossthe Group with one of the Non-Executive
Directors attending, on rotation, threeof the five ECG meetings held during theyear. Going forward, it is intended that a
Non-Executive Director will attend each
ECG meeting. Non-Executive Directors
were able to see how effectively the
ECG was functioning as a forum for staff
consultation, gathering staff opinion andfostering a safe environment to raise
matters of interest and generate ideas.
In addition, attendance at ECG meetings
also gave the Non-Executive Directors
an opportunity to feed back on specificagenda items that were discussed at theBoard. Representatives from the ECG
regularly attended Board meetings to
update the Board on the matters andissues discussed at ECG meetings and toparticipate in relevant matters consideredby the Board. Further information on theoperation of the ECG can be found in the
Directors’ Report on page 124 and in thes172 statement in the Strategic Report at
pages 18 and 19.

The Board also reflected on theimportance of its key stakeholder groups
and had a Board session in April at which all
the Group’s stakeholders were consideredand engagement with them discussed
to ensure that the views of stakeholders
were properly considered in decisions
made by the Board in compliance withs172(1) that the Directors should takestakeholder concerns into account intheir decision making.
The customer remains central to ourculture and we strive to ensure fairoutcomes for all of the Group’s customers
and empower front-line staff to meet theneeds of individual customers. The Board
had a session in March on the treatmentof existing customers, and in April oncustomer outcomes. Both sessions gave
the Board valuable insight into how theneeds of customers were evolving and how
the development of customer experienceand oversight was being monitored toensure that our customer centric culture
is maintained.
Succession planning and diversity remain
key areas of focus for the Board and theNomination and Governance Committee
as we seek to ensure that the composition
and balance of the Board is reviewed andrefreshed where necessary; that continuity
is maintained, and that Directors withthe appropriate skills and experienceand from a diverse range of backgrounds

join the Board to bring fresh perspective
and challenge to the Group’s strategy
in the markets in which it operates. The
Board continues to focus on promoting
diversity of gender and social and ethnic
background to enhance diversity acrossits employees and executive pipeline.
During the year, an externally facilitatedevaluation of the Board’s performance was
led by independent external consultant,
Ian White, to ensure that the Board
continued to operate effectively and that
it was acting on the recommendations
from its previous reviews. A summary of
the outcomes of the Board’s discussion
and consideration of the results of theevaluation are set out in more detail at
page 82 of this report.
The Board reviewed its objectives in
December to ensure that they remained
appropriate and that the Board’s time
could be allocated to those areas that will
be most important to the Group in the
coming year. The objectives will be kept
under regular review to ensure that theyremain appropriate for the challenges andissues that will need to be addressed as thebusiness continues to evolve and develop.

Annette Court
Group Chair
4 March 2020

Admiral Group plc · Annual Report and Accounts 201975

Board of Directors

A diverse Board with a breadthof skills and experience.

Annette Court

David Stevens, CBE

Geraint Jones

Mike Brierley

Karen Green

Chair

Chief Executive Officer

Chief Financial Officer

Non-Executive Director

Non-Executive Director

Trustee of the Waterloo
Foundation–

Chair of Admiral Financial
Services Limited1

Non-Executive Director of
Phoenix Group Holdings plc

Current Appointments
Non-Executive Directorof Sage Group plc

Council Member, Lloyd’s ofLondonVice President, InsuranceInstitute of London

Background and experience
CEO of Europe General
Insurance for Zurich Financial
Services and a member of theGroup Executive Committee
from 2007-2010. Former CEO
of Direct Line Group (formerly
RBS Insurance) and memberof the RBS Group Executive
Management Committee.
Previously a member on the
Board of the Association of
British Insurers (ABI).

David is a founder Director of
Admiral and helped to set up
the Admiral business in 1991.
Prior to joining AdmiralDavid worked at McKinsey& Company, in the Financial
Interest Group, and Cadbury
Schweppes in the UK and theUSA. David has an MBA fromINSEAD and he was awarded
a CBE in 2010 for services tobusiness and the community
in Wales.

Geraint joined Admiral in
2002 and held several seniorfinance positions including
Head of Finance, before being
promoted to Deputy Chief
Financial Officer in January
2012 and Chief Financial
Officer in August 2014. Geraint
is responsible for finance,
investments and investor
relations.
A Fellow of the Institute ofChartered Accountants in
England and Wales, Geraint
spent the early part of his
career as an external auditor
at Ernst & Young and KPMG.

Mike was CFO of Metro Bank
PLC between 2009 and 2018,
helping lead the business fromstart-up to listing on the FTSE.
He spent seven years at Capital
One Europe in various roles
including CFO Europe, CFO UK
and Chief Risk Officer Europe.
He has also served as CFO for
Royal Trust Bank, Financial
Controller at Industrial Bank ofJapan, London Branch, Director
Business Risk at Barclaycard
and was Co-founder and CFO of
Gentra Limited. Mike is a Fellowof the Institute of Chartered
Accountants in England andWales. In 2019 Mike wasappointed Chair of AdmiralGroup subsidiary, Admiral
Financial Services Limited(AFSL).

Karen Green is the former
CEO of Aspen UK, comprising
the principal UK insurance
and reinsurance companiesof Aspen Insurance Holdings.
Other senior Aspen positions
included Group Headof Strategy, Corporate
Development, Office of
the Group CEO and she wasa member of the Group
Executive Committee for 12
years. Prior to that, she held
various corporate finance, M&A
and private equity roles at GE
Capital Europe and Stonepoint
Capital having started hercareer in investment banking
at Baring Brothers andSchroders.

Appointed in 2018

Appointed in 2018

Appointed
Appointed to the Board in 2012,
appointed to Chair in 2017

176

Appointed to the Board in 1999,
appointed to CEO in 2016

Admiral Group subsidiary entity

Admiral Group plc · Annual Report and Accounts 2019

Appointed in 2014

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Committee Membership
Audit Committee member

Remuneration Committee member

Committee ChairGroup Risk Committee member

Nomination and Governance Committee member

Senior Independent Director

Justine Roberts, CBE

Owen Clarke

Jean Park

Manning Rountree

Andy Crossley

Non-Executive Director

Non-Executive Director

Non-Executive Director

Non-Executive Director

Non-Executive Director

CEO & Founder, Mumsnet.com& Gransnet.com

Chairman of Equistone Partners
Europe, ‘Equistone’ (formerly
Barclays Private Equity, ‘BPE’)

Non-Executive Director of
Murray Income Trust plc

Chief Executive Officer andDirector of White Mountains
Insurance Group, Ltd

Non-Executive Director andChair of Audit Committee at
Vitality Health Ltd and Vitality
Life Ltd

Non-Executive Director of
The Open Data InstituteJustine founded Mumsnet in2000 and is responsible forcreation, strategic direction
and overall leadership. In
May 2011, Justine founded
Gransnet, a sister site to
Mumsnet, for the over-50s.
Before that Justine was afreelance football and cricket
journalist for the Times andDaily Telegraph, after working
for Deutsche Bank, managing
the South African equity
operation in the US.

Owen was Chief Investment
Officer of Equistone from2011 to 2017. He previously led
several management buy-outs
for BPE in the insurance andconsumer finance sectors,
including BPE’s participationin the Management Buy Out of
Admiral and was a Director of
Admiral from 1999 to 2004. He
also led BPE’s own buy out from
Barclays to form Equistone
in 2011.

Non-Executive Director of
the National House Building
CouncilJean was Group Chief Risk
Officer at the Phoenix Group
from 2009 until June 2013,
during which time she held
responsibility for the Group’s
relationship with the regulator
and founded the Board Risk
Committee. Previously,
she was Risk Management
Director of the Insurance andInvestments division of Lloyds
TSB and, before that, Headof Compliance and Audit at
Scottish Widows.

Director of Build America
Mutual Assurance Company

Manning joined White
Mountains in 2004 and is theformer President of White
Mountains Advisors and White
Mountains Capital. Prior tojoining White Mountains,
Manning spent two years
with Putnam Investments andthree years with McKinsey &Company.

Andy was Chief Financial
Officer at Domestic & General
Group from 2014 to 2017. Hespent 14 years at Prudential plc
from 2000 as Director, Group
Finance; Group Chief Risk
Officer; and CFO and Deputy
Chief Executive Officer ofPrudential UK. He previously
held senior manager roles at
Legal & General Group plc,
where he was Group Financial
Controller, and Lloyds Bank plc.
Andy is a Fellow of the Instituteof Chartered Accountants in
England and Wales.

Appointed in 2015

Appointed in 2018

Jean is a Member of theInstitute of Chartered
Accountants of Scotland.

Appointed in 2016

Appointed in 2015

Appointed in 2014

Chair of EUI Limited1

Admiral Group plc · Annual Report and Accounts 201977

Governance ReportCompliance with the UK Corporate Governance CodeThe UK Corporate Governance Code 2018 (the Code) was applicable for the Group during the year under review, and the Group applied
the principles and complied with the provisions of the Code except for parts of provisions 36 and 41 that relate to the introduction of apost employment shareholding policy and engagement with the workforce to explain alignment of Executive remuneration with wider
Company pay policy, respectively.
Employees are not specifically consulted on Executive remuneration, however all employees are encouraged to participate in Admiral’sannual staff survey, which provides valuable insight to the Board on a range of topics, including compensation. Relevant feedback isshared with the Group Remuneration Committee. In addition, the Employee Consultation Group provides a regular forum for employeequeries to be discussed with senior management, by way of elected representatives. The Chair of the Group Remuneration Committee
joins the Employee Consultation Group meetings annually. The Group will be seeking shareholder support for a revised Remuneration
Policy at the 2021 AGM and as part of the review process in 2020, the Committee anticipates adopting a post employment
shareholding policy.
Set out in the following pages is an explanation of how we have applied the principles and related provisions of the Codeduring the year.

Our Responsible Investment Policy
In 2019 Admiral fully integrated a Responsible Investment Policy related to ourinvestment portfolio.
The purpose of the Policy is to consider Environmental,
Social and Governance (ESG) factors and risks, and to achieve
more sustainable long term returns. In particular, thePolicy requires ESG considerations to be integrated in eachstep of investment decision-making and Admiral has set
requirements for the asset managers it employs.

78

Admiral Group plc · Annual Report and Accounts 2019

These requirements include being signatories to the UN
Principles of Responsible Investing, having an integrated ESG
analysis to inform decision making, and having ESG reportingin place. Admiral will also monitor the ESG-risks carefully andfor the impact investments, monitor versus the social impact
target. Through time, monitoring and analysis of underlying
securities may lead to disinvestment, and the Policy may
evolve as opportunities arise and responsible investment
practices develop.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Board Leadership and Company Purpose
The Board is responsible for promoting the long term, sustainable success of the Group and its shareholders and is the principal
decision-making forum for the Group, providing entrepreneurial leadership, both directly and through its Committees, and delegating
authority to the Executive team. The Board has determined the Group’s purpose which represents its values and strategy and issatisfied that it is aligned with the culture of the Group.
The Board is responsible for organising and directing the affairs of the Group in a manner that generates and preserves value over thelong term. Through the strong governance framework that it has in place the Board is able to deliver on its strategy of providing strong
sustainable financial and operational performance. The Board is also accountable for ensuring that in carrying out its duties the Group’s
legal and regulatory obligations are being met; and for ensuring that it operates within appropriately established risk parameters.
The Group’s UK regulated entities are accountable to the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority(PRA) for ensuring compliance with the Group’s UK regulatory obligations and that dealings with the FCA and PRA are handled in aconstructive, co-operative and transparent manner. Similar provisions apply in respect of the Group’s international businesses withregard to the relevant regulatory authorities in those overseas jurisdictions in which the Group also operates.
The Board has adopted a formal schedule of matters reserved for the Board’s consideration. This is monitored by the Company
Secretary and reviewed by the Board on an annual basis. Specific matters reserved to the Board include the approval of:• The Group’s long-term objectives and corporate strategy• Operating and capital budgets, financial results, and any significant changes to accounting practices or policies• The Group’s capital structure• Results and financial reporting• The system of internal control and risk management• The Group’s overall risk appetite• Changes to the structure, size and composition of the Board, including new appointments• Succession plans for the Board and senior management• Dividend policy and proposals for dividend payments• Major acquisitions, disposals, and other transactions outside delegated limits• The annual review of its own performance and that of its Board Committees• Annual review of the Group’s Board policies• The review of the Group’s overall corporate governance arrangements
Board activity during 2019
The Board met on eight occasions in 2019 with all these meetings being held over one or two days and one of the meetings being aseparate strategy meeting held offsite.

Admiral Group plc · Annual Report and Accounts 201979Governance Report continued
Principal areas of focus for the Board during 2019
GovernanceOperational Performance• Standing agenda item at each Board for an update from theCompany Secretary on the project that had been initiatedto ensure that the requirements of the UK Corporate
Governance Code were fully met;

• Updates on cyber security and the measures in place acrossthe Group• Update from the Group’s lawyers, Clifford Chance, on
Directors’ responsibilities under the Companies Act ands172 in particular;• Presentation from the Group’s US insurance andComparison business• Considered the results of the external Board Effectiveness
Review;• Presentation from the Group’s Loans business• Succession planning and Group talent management update;• Reviewed and approved revised Matters Reserved for the
Board;• Update session on the implementation of Senior Managers& Certification Regime (SM&CR)
Stakeholders• Updates from the Chair of the Employee Consultation Groupin January, April, August and December with representatives
from the ECG attending the Board in August and December;• Update on culture and people;• Updates on gender and diversity at the meetings in Januaryand June;• In March, an update on Group talent management;• Board session in March on the impact of climate change
and its importance for the Group;• Presentation on customer outcomes and considerationof a stakeholder map that identified the Group’s mainstakeholders and engagement processes and mechanismsthat were in place;• Presentation on distribution partners.
Strategy• Strategy review update in January and June;• Comparison update• Consideration and approval of the Group’s 5 Year Plan
On the agenda for 2020
• Continued focus on maintaining the Group’s culture toensure the Group remains a great place to work for its
employees;• Monitor the evolution and development of the Employee
Consultation Group (ECG) that was operational in 2019 toensure that the views of the staff are fully considered by
the Board and that there is appropriate interaction between
the Board and the members of the ECG to ensure that theviews of staff on matters raised at the ECG are properly
considered by the Board in decisions that are made by it;• Ensuring that gender and diversity are appropriately
considered and that there is a diverse pipeline of talentavailable for succession planning for senior roles;• Ongoing review of the agreed objectives of the Board toensure that they are appropriately covered in the Board
timetable for the year;• Continue to keep under review the Group’s technology anddigital capabilities to ensure they are appropriate as theGroup looks to explore opportunities beyond car insurance;• Understand more deeply our competitors’ capabilities in theimportant markets in which we operate and gain a deeper
understanding of our customers across the Group and what
insights this brings;• Group Strategy Review at the Group strategy session in
October which also considered product diversification andmotor evolution.

• Ensure that there is continued Board oversight of theGroup’s Environmental Social and Governance (ESG)
responsibilities with particular focus on the impact ofclimate change;

Regulatory Updates• Continue to devote Board time to consideration of the viewsof the Group’s key stakeholders in implementing the Group’s
strategy and ensure there is regular engagement throughappropriate channels.

• Internal Model Application Process (IMAP) Updates• Own Risk and Solvency Assessment Report (ORSA) review• FCA attended the October Board

80• Presentation from the Group’s European Insurance
businesses

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

At each scheduled meeting the Board receives updates fromthe Chief Executive Officer and Chief Financial Officer as to thefinancial and operational performance of the Group and any
specific developments in the areas of the business for which
they are directly responsible and of which the Board should beaware. In addition, there is an update provided at each Boardon the matters discussed and considered at each of the Group’s
principal subsidiary Board meetings. An annual schedule ofagenda items is reviewed and updated at each meeting to ensurethat items are considered at the appropriate point in the financial
and regulatory cycle. Meetings are structured so as to allow forconsideration and debate of all matters. The Group CEO Designate
and the CEO of UK Insurance (respectively Milena Mondini deFocatiis and Cristina Nestares) together with the Chief Risk
Officer (James Armstrong) are invited to attend every Board
meeting and regular Board dinners. This has proved an effectivemeans of ensuring that senior managers below Board level have
exposure to and gain experience of the operation of the Board.
In addition to the regular consideration of financial and operating
performance and risk management and compliance, the Board
received presentations on a variety of topics including updates
from the management teams of each of the Group’s businesses
and regular reviews of Solvency II related activities such as
progress of the Internal Model Application Process (IMAP).
In addition to her visits to the Group’s UK operations, the Chair
has sought to visit each of the Group’s overseas operations thisyear and Non-Executive Directors are invited to join either her or
the Chief Executive Officer on one or more of their overseas visitseach year. The Non-Executive Directors and the Chair met during
the year without the Executive Directors being present. NonExecutive Directors also attended briefing sessions in Cardiff
and Newport on different aspects of the Group’s UK business. In
order to increase their understanding of the depth and breadthof management across the Group below Board level, the NonExecutive Directors and the Chair also attended a dinner withmembers of the Group’s senior management team without the
Executive Directors being present. When management teams
present to the Board on their operations, they are also invited tojoin the Board for dinner which gives the opportunity for informalinteraction between Directors and management.

Meetings and attendanceDirectors are expected to attend all meetings of the Board andthe Committees on which they serve and to devote sufficient
time to the Group to perform their duties. Where Directors areunable to attend meetings they receive papers for that meeting
giving them the opportunity to raise any issues with the Chairin advance of the meeting. The number of scheduled Board
meetings and Committee meetings, of which they are a member,attended by each Director during 2019 is provided in the tablebelow. In addition to the seven scheduled Board meetings held
during the year, there was an additional Board meeting held in
June 2019 that was called at short notice and was attended by all
Board members. Similarly, the ten Audit Committee meetings, set
out in the table below, includes three additional Audit Committee
meetings that were called at short notice.

Board meetings

Audit Committee
meetings

Group Risk
Committee
meetings

Nominationsand GovernanceCommittee
meetings

Remuneration
Committee
meetings

Total meetings held

8

10

8

7

8

Annette Court (Chair)

8

8

7

David Stevens (Chief Executive Officer)

8

Geraint Jones (Chief Financial Officer)

8

Owen Clarke

810

Karen Green

8

10

Jean Park88

Manning Rountree

8

7

Justine Roberts

8

Andrew Crossley

8

10Michael Brierley

8

10

7

8
8

6

7

Justine Roberts was unable to attend the Remuneration Committee meeting on 20 February as she was overseas and, due to technicaldifficulties, was not able to dial in to the meeting as anticipated. Due to a prior commitment, Justine was also unable to attend theNomination and Governance Committee on 19 November which was an additional meeting that was called at short notice.
Due to a prior commitment, Manning Rountree was unable to attend an additional Risk Committee meeting that was called at short
notice as part of the Internal Model Approval Process (IMAP).

Admiral Group plc · Annual Report and Accounts 201981

Governance Report continued
Agendas and papers are circulated to the Board electronicallyin a timely and secure manner in preparation for Board andCommittee meetings. The Board agenda is structured by the
Chair in consultation with the Company Secretary and Chief
Executive Officer. Routine Board papers are supplemented byinformation specifically requested by the Directors from time
to time. All Board and Committee meetings during the year were
held in an open atmosphere conducive to robust and constructive
challenge and debate. All Directors have, therefore, been able tobring independent judgement to bear on issues such as strategy,
risk management, performance, and resources. Additional
meetings are called when required and there is contact between
meetings, where necessary, to progress the Group’s business.
All the Directors have access to the advice and services of theCompany Secretary. He has responsibility for ensuring that Board
procedures are followed and for advising the Board, through the
Chair, on governance matters. The Company Secretary provides
updates to the Board on regulatory and corporate governanceissues, new legislation, and Directors’ duties and obligations. The
appointment and removal of the Company Secretary is one of thematters reserved for the Board.
During the year, the Board received assurance from managementthat it had effectively embedded the Group’s purpose within
operational processes and policies and the alignment of value
to rewards and incentives. This is achieved through a frameworkof embedding that considers Group policies, procedures andprocesses to determine how the Group purpose is delivered, howoutcomes are monitored and reported, and performance reviewed
by the Board. The Board was also satisfied that the incentives,
rewards and promotion were aligned with the Group’s values.

Culture: Monitoring and Assessment
It is critical that our culture evolves and adapts as the businessenvironment we operate in changes but it is also critical thatthose parts of our culture which have given us a competitive
advantage and been a driver of success in the past are
maintained. The culture of providing our customers with great
products and services whilst caring for our employees and otherkey stakeholders in the business is key to what we do. Our culture
is embedded and reinforced by The Four Pillars (Communication;
Reward and Recognition; Fun and Equality) which are built into thefabric of our training, communication and the way we do business.
We recognise the need to ensure that our employees are highly
skilled and motivated and have a recognition culture where our
employees can thrive, be innovative and contribute to the future
success of the Group.
In January, the Board received an update on culture and people
which considered the Group’s culture and how it related to theGroup’s purpose, values and culture, the approach to investing inand rewarding employees and how culture was monitored acrossthe Group. The Board reviewed the variety of initiatives thathave been introduced to support the Group’s culture including:a compensation and promotion structure based on meritocracy,

82

Admiral Group plc · Annual Report and Accounts 2019

star lunches where staff are recognised for their performanceand are invited to attend a lunch with a senior manager, GroupTop 10 competition in which all departments compete in a highly
contested Group wide competition to present to a panel of senior
managers on a different subject each year in order to be awarded
the best department, Annual Manager Awards, local reward andrecognition programmes and High five feedback programmes
where employees can submit feedback on colleagues acrossdepartments who have given great service.
In addition to staff participation in regularly monthly staff
surveys together with an annual employee engagement survey– Best Companies and Great Places to work survey, there are
a number of the mechanisms that the Group uses to monitor
culture including regular culture audits conducted by Internal
Audit that include survey results, policies and processes; “Meetthe Manager” meetings; “Ask David” scheme and regular online
manager chats. All are felt to be valuable methods of capturing
the mood of employees and to gauge the health of our culture.
The Board continues to keep under review the monitoring of Group
culture to ensure that it is aligned with the Group’s purpose, values
and strategy as the business continues to evolve and develop. In
October, the Board approved a culture scorecard matrix to provide
a benchmark to monitor culture across the Group, to ensure
it is aligned with our purpose and values; and provide greater
Board insight through formal reporting of both areas of strengthand potential areas of development. The scorecard matrix is
produced quarterly and reported through the Group’s Conduct Risk
Framework and shared with the Board for challenge and review.
The scores are supported by comments made by staff relating to
specific survey questions to provide further insight. Tolerances are
set at a level to ensure we continue to work hard to maintain our
great culture and challenge us to improve.

Board Evaluation
Having last carried out an external Board evaluation in 2016,
and in accordance with the Code requirement that FTSE 350
companies should carry out an externally facilitated evaluationof the Board at least every 3 years, this year the Board
evaluation process was led by Ian White. Ian is an independent
external consultant with experience of evaluating and making
recommendations to enhance Board effectiveness of a number oflisted and other companies. Other than being a customer of oneof the Group’s subsidiaries, Ian has no connection with the Groupor any of the Board Directors.
The focus of the independent evaluation was on the dynamics
of the Board and Committees to assess their effectiveness
and, where applicable, to make some practical suggestions forenhancements. Matters considered included: the dynamics,
behaviour and culture including relationships around the Board
table; the Board’s decision making and strategic approach; theprocess for Board Succession; together with individual feedback
to the Chair and Committee Chairs on their particular roles.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

The evaluation process comprised the completion of an online
questionnaire that was sent to all Board members and regular
Board attendees. The questionnaire considered:• Board composition together with the utilisation of theexperience and expertise of Board members;• Board dynamics and the interaction between the Chair, NonExecutive Directors and management;• Leadership and succession planning including the oversight of theGroup’s processes for managing, developing and retaining talent;• Understanding by the Board of the prevailing culture within
the Group;• Quality, timeliness of delivery and presentation of Board papers
and Board support;• Time management and operational performance of Board
and Committee meetings;• Risk management and the effectiveness of the Board inconsidering the Group’s risk management framework andinternal controls;• The effectiveness of the Board’s strategic and operationaloversight;• Priorities for change that would enhance Board performance.
The results of the questionnaire were then discussed in one
to one interviews with Ian and Board members and regular
Board attendees. Any particular areas of focus that came outof the results of the questionnaire were discussed together
with an assessment of progress since the previous reviews andany material matters identified in the individual questionnaire
results. Ian also met a selection of employees to ask about theirviews on the Board.
As part of the evaluation process, Ian also had access tothe papers for and attended, as an observer, one Group
Board meeting and one meeting of each of the Group Audit,
Remuneration, Nomination and Governance, and Risk Committees
in order to assess, at first hand, the dynamics and effectivenessof each meeting.
Ian presented the results of the review to the Board in
December 2019 and the Board discussed the specificrecommendations that had been proposed to enhance theBoard’s effectiveness. The Board agreed that good progress had
been made in implementing the recommendations identified in
the internal evaluation carried out in 2018, particularly aroundunderstanding the views and requirements of the Group’s
stakeholders; improvements in the quality of Board papers;
and increased Board focus on customer insight and experienceand technological issues facing the Company.

Key recommendations identified in the 2019 review to enhance
the Board’s effectiveness included:• increased focus on the need to enhance the Board’s expertisein technology;• ensuring that there continued to be appropriate challenge
from the Board on the matters discussed and consideration
given to ways this could be enhanced;• increasing the number of scheduled NED only sessions toensure that there was appropriate opportunity for the NEDs
to discuss matters affecting the Group without management
present;• continued focus on using Board and Committee time more
effectively through making sure that Board papers andmeeting agendas are drafted appropriately to allow for
effective consideration of the matters to be discussed;• further enhancement to the use of Board paper templates
and existing guidelines for the production of Board papers toensure that the Board’s time was used effectively;• existing induction plans for new Board Directors should
be tailored to ensure they are appropriate for the level ofexperience of the new Board members;• the number of Board education and training sessions should be
regularly reviewed to ensure that the needs of the Boardin certain areas was being addressed.
Overall the results of the review concluded that the Board
continues to operate effectively. The dynamics of the Board areof a collegiate Board with a good balance of experience, whowork well together and are keen to promote the success of theCompany. The Board operates as an open and transparent forum
for discussion and debate. Everyone has an opportunity to beheard and is encouraged to participate, which contributes to a
positive and supportive culture. In addition, the Board has a goodunderstanding of the matters it must focus on and is in touchwith its major stakeholders.
The performance of the Chief Financial Officer is appraisedannually by the Chief Executive Officer, to whom he reports.
The Chair, taking into account the views of the other Directors,
reviews the performance of the Chief Executive Officer.
The performance of the Chair is reviewed by the Board led by the
Senior Independent Director (“SID”). Following the latest review,the SID considered and discussed with the Chair the comments
and feedback that had been received from the Directors aspart of the Chair’s evaluation questionnaire and was able toconfirm that the performance of the Chair is effective and thatshe demonstrates appropriate commitment to her role. As the
Chair will reach her nine year tenure as a Non-Executive Director
on the Group Board in March 2021, the Board considered theposition of the Chair remaining in post for a period beyond thenine year term. To facilitate effective succession planning andthe continued development of a diverse Board and given theperformance of the Chair, it is intended, that subject to annual
approval by shareholders, she will remain as Chair for up to three
years beyond March 2021, with the expectation that she would
serve two years.

Admiral Group plc · Annual Report and Accounts 201983

Governance Report continued
Division of Responsibilities
The Chair is primarily responsible for leading the Board, setting
its agenda, promoting a culture of openness and debate andmonitoring its effectiveness. The Chair is supported by the Senior
Independent Director, who acts as a sounding board and serves as
an intermediary for the other Directors. Neither are involved in
the day-to-day management of the Group.
Save for the matters reserved for the Board, the Chief Executive
Officer (with the support of the Executive Directors and the

The Board has approved a statement that sets out the clear
division of responsibilities between the Chair, Chief Executive
Officer and Senior Independent Director. This and mattersreserved for decision by the Board are reviewed annually.

The Chair

Senior Independent Director

The Chief Executive Officer• Runs the Board and sets its agenda,
with an emphasis on strategic issues.

• Supports the Chair in the delivery of
their objectives.

• Runs the Group’s business anddelivers its commercial objectives.

• Ensures the Board has effective
decision-making processes and applies
sufficient challenge to proposals.

• Acts as a sounding board for the
Chair and serves as an intermediaryfor the other Directors.

• Ensures the Board has an appropriatebalance of skills, knowledge,
experience and diversity.

• Available to shareholders if they haveconcerns that cannot be resolved
through the normal channels.

• Proposes and develops the Group’s
strategy, in close consultation with
the Group’s senior management,
the Chair and the Board.

• Leads the induction anddevelopment plans for new andexisting Board members.

• Works with the Chair and other
Directors/shareholders to resolve
significant issues where necessary.

• Ensures operational policies andpractices drive appropriate behaviour,in line with the Group’s culture.

• Communicates with major
shareholders and ensures theBoard understands their views.

• Leads the annual performance
evaluation of the Chair.

• Leads the communication
programme with key stakeholders,
including staff.

• Ensures the Board receives accurate,
timely and clear information.
• Leads the annual Board evaluation.

Board Succession
CEO Succession
In line with the Group’s succession and development planning
processes, the CEO succession process has been conducted overthe last few years driven by the Nominations and GovernanceCommittee and Group Board. This included evaluationand development of internal candidates and a thoroughbenchmarking of potential candidates using external evaluators.
A specialist Executive Search firm, Russell Reynolds Associates(RRA) was appointed to conduct a full external market search,working to a role specification approved by the Board, to identify
potential external candidates and evaluate internal candidates.
Following candidate interviews and presentations, Milena
Mondini de Focatiis was selected as the preferred CEO candidate,subject to regulatory approval.
The Board are satisfied that a transparent, robust andcomprehensive succession and selection process has been
followed. The Board is confident that, in Milena, the Group
has a natural successor and a leader for the next generation.
Milena brings a deep appreciation of the special Group culture,
entrepreneurial spirit, commercial track record and people
development skills.

84

senior executives) is responsible for proposing the strategy to
be adopted by the Group, running the business in accordancewith the strategy agreed by the Board and implementing
Board decisions.

Admiral Group plc · Annual Report and Accounts 2019

• Implements the decisions of theBoard and its Committees.

• Ensures management provides theBoard with appropriate informationand necessary resources.

Milena joined Admiral in 2007 and was appointed Group CEO
Designate in July 2019. She has been a member of the leadershipteam throughout her time at Admiral, has extensive experience of
the Group’s operations and has attended and actively contributed
at Board meetings as an observer since 2011. Her previous roles
include being CEO of ConTe.it, Admiral’s Italian insurance business
which she founded in 2008.

Board composition, balance and independence
Careful consideration continues to be given to the independence,composition and balance of the Board. As a result, the Group
continues to monitor the need to refresh Board and Committee
membership in an orderly manner so as to maintain the continuityof Board process and the strength of personal interaction
which underlies the effectiveness of the Board as a team. The
Board remains satisfied that it has the appropriate balance ofskills, experience, independence and knowledge of the Groupto enable it and its Committees to discharge their duties andresponsibilities effectively, as required by the Code. In addition,
the Directors are aware of their legal duties to act in a way they
consider, in good faith, will be most likely to promote the successof the Company for its shareholders, as well as considering theinterests of other stakeholders.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

The table below details the length of service of the Chair and each of the Non-Executive Directors and illustrates the balance ofexperience and fresh perspectives.

Director

Date of appointment

Current length of service as a
Non-Executive Director at 31 December 2019

Annette Court

21 March 2012

7 years 9 months

Jean Park

17 January 2014

5 years 11 months

Manning Rountree

16 June 2015

4 years 6 months

Owen Clarke

19 August 2015

4 years 4 months

Justine Roberts

17 June 2016

3 years 6 months

Andy Crossley

27 February 2018

1 year 10 months

Mike Brierley

5 October 2018

1 year 3 months

Karen Green

14 December 2018

1 yearThe Board currently comprises ten Directors, the Chair (who was
independent on appointment), two Executive Directors, and sevenindependent Non-Executive Directors. As can be seen from the
Directors’ biographies on pages 76 to 77, the Directors have abroad range of skills and experience and can bring independentjudgement to bear on issues of strategy, performance, risk
management, resources and standards of conduct which areintegral to the success of the Group.
Appointments to the Board are the responsibility of the Board
as a whole, acting on the advice and recommendations of theNomination and Governance Committee. The Nomination
and Governance Committee seeks to balance the retirement
and recruitment of Non-Executive Directors ahead of theirreplacement so as to avoid dislocation of Board process by losing
experience and skills. The Board is mindful of the need to promote
diversity in appointments to the Group Board and across theGroup. Appointments are made on merit and against objective
criteria, having due regard to the benefits of diversity, including
gender, with a view to ensuring the Board has the appropriate mixof personality, skills, and experience. Further information on theprocess used in relation to appointments and the approach tosuccession planning and how both support the development of adiverse pipeline are set out in the report of the Nomination and
Governance Committee at page 99.
Manning Rountree is the Chief Executive Officer for White
Mountains Insurance Group Limited (White Mountains) and acts asBoard Observer for White Mountains on the Board of the Group’s
US price comparison subsidiary, in which White Mountains has
a minority shareholding. Given the relatively small size of White
Mountains’ shareholding in an overseas Group subsidiary company,
the Board has determined that Manning Rountree remains
independent in character and judgement and that his attendanceat Inspop USA LLC Board meetings does not affect his ability topresent an objective, rigorous and constructive challenge to theassumptions and viewpoints presented by management and theBoard. A process for managing any potential conflicts has been
agreed by the Board such that Manning Rountree will recuse
himself from any Group Board discussions where a potential
conflict of interest with his role with White Mountains has
been identified.

The Board, having given thorough consideration to the matter,
considers the seven Non-Executive Directors to be independentand is not aware of any relationships or circumstances, other than
the above, which are likely to affect, or could appear to affect,
the judgement of any of them. It is the view of the Board thatthe independent Non-Executive Directors have sufficient time
available to perform their duties and are of sufficient calibre andnumber that their views carry significant weight in the Board’s
decision making.
Independent Non-Executive Directors are currently appointed for
fixed periods of three years, subject to election by shareholders.
The initial three-year period may be extended for two further
three-year periods subject to re-election by shareholders. Theirletters of appointment may be inspected at the Company’s
registered office or can be obtained on request from theCompany Secretary.
Owen Clarke was the Senior Independent Non-Executive Director(SID) for the year under review. The Board is satisfied that Owen
has the requisite knowledge and experience gained throughhis Board position, his Chairmanship of the Remuneration
Committee, his membership of the Audit and Nomination and
Governance Committees. In addition, Owen has financial services
experience, gained through his appointment as Chairman, andformerly Chief Investment Officer of Equistone Partners Europe.
Owen is available to shareholders if they have concerns that
contact through the normal channels of Chair, Chief Executive
Officer, or Chief Financial Officer have failed to resolve or forwhich such contact is inappropriate. As Chair of the Remuneration
Committee, Owen is also available to discuss remuneration
matters with shareholders. He is also responsible for leading
the Board’s discussion on the Chair’s performance and theappointment of a new Chair, as and when appropriate.
As set out in the Group’s Articles of Association, all Directors
will retire and offer themselves for re-election at each AGM, inaccordance with the UK Corporate Governance Code and theCompany’s current practice. Therefore, all Directors will be
submitting themselves for re-election by shareholders at theforthcoming AGM. The Board is satisfied that all are properly
qualified for their reappointment by virtue of their skills andexperience and their contribution to the Board and its Committees.
The Directors are given access to independent professional
advice at the Group’s expense, should they deem it necessary
to carry out their responsibilities.

Admiral Group plc · Annual Report and Accounts 201985

Governance Report continued
Professional development
On appointment, Directors take part in a comprehensive
induction programme whereby they receive financial andoperational information about the Group; details concerning
their responsibilities and duties; as well as an introduction to
the Group’s governance, regulatory and control environment.
This induction is supplemented by visits to the Group’s head
office in Cardiff and certain overseas offices, and meetings withmembers of the senior management team and their departments.
Development and training of Directors is an ongoing process.
Throughout their period in office the Directors are regularly
updated on the Group’s business; legal matters concerning theirrole and duties; the competitive environments in which the Group
operates; and any other significant changes affecting the Groupand the industry of which it is a part.
The Board receives presentations from senior managers within
the Group on a regular basis and Non-Executive Directors areencouraged to make informal visits to different parts of theGroup to meet with local management.

Whistleblowing
The Board has in place arrangements by which members of staff
can raise concerns in confidence and if necessary, anonymously.
During the year, the Board reviewed and approved the Group’s
Whistleblowing Policy and were satisfied that the arrangements
in place were proportionate for independent investigation of
the matters raised and supported an ethical business culture
where employees felt safe raising concerns. In addition, the Board
received regular updates from the Chair of the Audit Committee(the Group’s regulatory Whistleblowing Champion) in respect ofreports arising from matters that had been raised by employees
under the Policy.

Stakeholder engagement1
During the year, the Board has focused on ensuring that there iseffective engagement with its stakeholders. Detailed informationis set out in the Strategic Report as to how the Board hasdischarged its duties under s172(1), particularly as regards
how the Group has sought to engage with its employees.
Communication and interaction with shareholders remain very
important and engagement with them occurs on a regular basis.
Open and frequent dialogue with investors enables them tounderstand fully the Group’s strategy, objectives and governance.
The Investor Relations team has day-to-day primary responsibility
for managing communications with institutional shareholders
through a combination of briefings to analysts and institutional
shareholders, both at the half-year and full-year results and onother occasions such as roadshows and conferences. A numberof analysts and investors visited the Group’s Cardiff officeduring the year to meet with the Executive Directors and senior
management in order to get a better understanding of how
the Group operates and how it intends to achieve its strategic1	For more information please refer topages 18 to 23 of the Strategic Report

86

Admiral Group plc · Annual Report and Accounts 2019and operational objectives. Senior executives from the Group’s
overseas businesses also visit the UK in order to present to,
and meet with, analysts and investors. Site visits and individual
discussions with the Executive Directors are also arranged
throughout the year with individual shareholders.
In addition, the Chair and Senior Independent Director had
individual meetings during the year with major shareholders tounderstand their views on governance and performance against
strategy and reported to the Board on any significant issues
raised with them.
This is supplemented by feedback to the Board on meetings
between management and investors. The Investor Relations
team also regularly produces a report on their activities in
the previous quarter which is circulated to the Board for theirconsideration. The Report contains an analysis of share priceperformance; a summary of analyst reports received during themonth and of meetings that have been held with investors andanalysts; together with details of any significant changes to theshareholders’ register.
The Senior Independent Director has specific responsibility to
be available to investors who have any issues or concerns, and incases where contact with the Chair, Chief Executive Officer andChief Financial Officer has either failed to resolve their concerns,
or where such contact is inappropriate. No such concerns havebeen raised in the year under review.
All shareholders are invited to attend the Company’s Annual
General Meeting (AGM). The Chairs of the Audit, Remuneration,
Nomination and Governance and Group Risk Committees
attend the AGM along with the other Directors and are available
to answer shareholders’ questions on the activities of theCommittees they chair. Shareholders are also invited to ask
questions during the meeting and have an opportunity to meetwith Directors after the formal business of the meeting has beenconcluded. Details of proxy voting by shareholders, including
votes withheld, are made available on request and are placed on
the Company’s website following the meeting.
The Group maintains a corporate website (www.admiralgroup.
co.uk) containing a wide range of information of interest to
institutional and private investors. The major shareholders of
the Company are listed in the Directors Report on page 126.

Engagement with other stakeholders
The regular channels of communication with both the FCA andPRA that existed throughout the year were supplemented by the
FCA and PRA being invited to attend Board meetings in 2019. The
FCA attended the Board in October 2019 which gave the Boardan opportunity to hear directly the views of the regulator andto understand, and challenge them on, the rationale for theirdecisions to the extent that they impact the Group.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Group conflicts of interest
In compliance with the requirements of the Companies Act 2006
regarding Directors’ duties in relation to conflicts of interest, theGroup’s Articles of Association allow the Board to authorise potential
conflicts of interest that may arise and to impose such limits as it
thinks fit. The Group has put in place a Conflicts of Interest Policy todeal with conflicts of interest and this was reviewed and approvedby the Board in December 2019. The Policy sets out the process
and procedure by which the Board manages potential conflicts ofinterest that may arise at Board level and within Board Committees,
and within the Group’s Subsidiary Boards. Following this review, theBoard concluded that the process continued to operate effectively.
In addition, each Board member is asked to complete, annually, aconflicts of interest questionnaire that sets out any situation inwhich they, or their connected persons have, or could have, a direct
or indirect interest that could conflict with the interests of theCompany. Any current directorships that they, or their connected
persons hold, any advisory roles or trusteeships held, together withany companies in which they hold more than 1% of the issued sharecapital are also disclosed.

Board Committees
The Board has delegated authority to a number of permanentCommittees to deal with matters in accordance with written
Terms of Reference. The principal Committees of the Board –Audit, Remuneration, Group Risk and Nomination and Governanceall comply fully with the requirements of the Code.
All Committees are chaired by an independent Non-Executive
Director, except the Nomination and Governance Committee
which is chaired by the Chair of the Board and comprise a majority
of independent Non-Executive Directors. Appointments to theCommittees are made on the recommendation of the Nomination
and Governance Committee and are for a period of up to three
years, which may be extended for two further three-year periods,
provided the Director remains independent. The Committees areconstituted with written Terms of Reference that are reviewed
annually to ensure that they remain appropriate and reflect
any changes in good practice and governance. These Termsof Reference are available on request from the Company
Secretary and can also be found on the Company’s website:www.admiralgroup.co.uk.
Directors are fully informed of all Committee matters by
the Committee Chairs reporting on the proceedings oftheir Committee at the subsequent Board meeting. Copiesof Committee minutes are also distributed to the Board.
Committees are authorised to obtain outside legal or otherindependent professional advice if they consider it necessary. The
Chair of each Committee attends the Annual General Meeting to
respond to any shareholder questions that might be raised on theCommittee’s activities. An evaluation of the performance of eachCommittee against the duties set out in each terms of referenceis carried out annually.

Admiral Group plc · Annual Report and Accounts 201987

The Audit Committee

The Audit Committee
Meeting our responsibilities
throughout the year“This has been my first full year as Chair of the Group Audit
amout
pleasedto report
set outanin thisreport“Committee,
I am pleasedand
to Isetin thisupdateonan
theupdateonthemainactivities
oftheCommittee
in2019.”
main activities of the Audit Committee in 2018.”
Karen Green Chair of the Audit Committee
Karen Green Chair of the Audit Committee

Dear Shareholder,
Committee members
Karen Green (Chair)
Mike Brierley
Andy Crossley

Meetings

10
Attendance information
can be found in the tableon page 81

This has been my first full year as Chair of the Group Audit Committee, and I am pleased to set
out in this report an update on the main activities of the Committee in 2019. I would also liketo take this opportunity on behalf of the Committee to thank Owen Clarke, who stepped downfrom the Committee at the end of December 2019, having been a member for four years, for
his input and contribution. Owen Clarke remained a member of the Committee following his
appointment as the Senior Independent Director in December 2018 to provide continuity given
the appointment of three new Committee members between February and December 2018.
Providing support to the Board in its oversight of financial reporting and the control
environment across the Group has remained a key area of focus of the Committee during
the year. The setting of insurance claims reserves to ensure consistency with the Group’s
agreed reserving methodology is a key accounting judgement in the Group’s Financial
Statements (as set out in note 3 to the Financial Statements), and the Committee continues
to place considerable focus on this area and also monitors the Group’s reserving process. The
Committee challenged the key reserving assumptions and judgements, movements, emerging
trends and analysis of uncertainties underlying the analysis of outstanding claims proposedby management alongside that of the Group’s external actuarial advisers and external auditor,
Deloitte. The Committee reviewed the announcement by the UK Government that witheffect from 5 August 2019, the Ogden discount rate, which is used in setting personal injury
compensation, would be changed to minus 0.25% from the existing minus 0.75% rate that had
been in place since February 2017, and challenged management’s assessment of the impact of
the new discount rate on the cost of claims.
The Committee continued to spend time considering the valuation of the parent company’s
investment in its subsidiaries and the results of management’s impairment testing, in particular
the appropriateness of the underlying assumptions and forecasts used, and the stresses applied
to the forecasts. Impairment testing considerations in relation to the Group’s US businesses,
Compare.com and Elephant, received particular attention during the year as the Committee
reviewed management’s recommendation to impair the carrying value of the Group’s investmentin these businesses.
The Committee undertook a comprehensive evaluation of the performance of the external
auditor and concluded that Deloitte continued to work effectively as external auditor. The
Committee spent time considering the audit fee proposed for 2019 and discussed with
Deloitte the rationale for the year-on-year increase. The Committee also reviewed the position
in relation to its external audit services contract and considered the timing of tendering forthe external audit.

88

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Although the introduction of the new
insurance accounting standard, IFRS 17
Insurance Contracts has, at the time ofwriting, been deferred to January 2022,
the Committee has continued to focus
on management’s preparedness for its
introduction and, the implications for theGroup to ensure these are well understood.
In this context the Committee received
several updates on the introduction of
IFRS 17. The Committee also had a separate
education session, recapping on theimplementation of IFRS 9 and considered
the Group’s financial assets, includingloans, within its scope. In addition, theCommittee held an education session,
which included a “deep dive” on insurance
claims reserving, with presentations
from the Group’s Actuarial Reserving andClaims Management teams on the Group’s
case reserving process and methodology
and from the Group’s external actuarial
experts to provide further insight into
their reserving review methodology andprocess. The Committee also reviewed
management’s proposals to transition tousing Admiral’s internal actuarial estimatesfor UK Motor Insurance claims reserving in
2020. In addition, the Committee received
an update on the Group Finance function
and the key systems involved in thefinancial reporting processes.
The Committee considered and reviewed
the Group’s whistleblowing policy andreceived updates on the use of the policy
and the instances of whistleblowing that
had been raised across the Group during
the year. The Group’s whistleblowing
policy was recommended to the Board
for approval and, after discussion andreview, the Board concluded that thecurrent whistleblowing arrangements
were an appropriate means by which
staff could raise concerns in confidence
and anonymously.

In addition, the Committee continued
to monitor the appropriateness of theGroup’s system of risk management
and internal control and reviewed theGroup’s Minimum Control Standards’
Framework to ensure that these continued
to develop in line with the business andthat a consistent approach to the control
frameworks was deployed across theGroup. The Committee maintained a close
focus on the UK insurance business andalso reviewed overseas subsidiaries and theGroup’s loans business.
The Committee also considered a letterfrom the Financial Reporting Council(FRC) relating to certain aspects of theGroup’s Annual Report and Accounts 2018.
The Committee reviewed and agreed
the comprehensive response proposedby management, with input from theexternal auditor, to the questions raisedby the FRC. As a result, a small number ofenhancements have been made to theaccounting disclosures in the Financial
Statements.
The Committee also continued to keep
under review the proposed changes tothe external audit market following the
publications of the CMA, Kingman andBrydon reviews.
I hope you find the above summary, andthe more detailed report, both useful andinformative.

Karen Green
Chair of the Audit Committee
4 March 2020

Admiral Group plc · Annual Report and Accounts 201989

The Audit Committee continued
Membership
Membership of the Committee at theend of the year was: Karen Green (Chair),Andy Crossley and Mike Brierley. As
referenced above, Owen Clarke stepped
down as a member of the Committeewith effect from 31 December 2019, andI would like to thank him for his input andcontribution. Two of the Committee’s
members are Fellows of the Institute ofChartered Accountants in England andWales. Given the insurance and financial
services experience of the members of theCommittee, the Board considers that they
have a broad range of skills, experience andknowledge of the insurance sector, which
represents the principal market in which
the Group operates, and also the areaof consumer lending in which the Group
has a small but emerging business, suchthat they are able to effectively analyse,
challenge and debate the issues that fallwithin the Committee’s remit. The Board
is satisfied that the Committee as a whole
has competence relevant to the sectors
in which the Group operates and further
considers that a number of its members
have recent and relevant financial
experience. The Company Secretaryacts as Secretary to the Committee. The
Committee meets at least six times per
year and has an agenda linked to events in
the Company’s financial calendar and otherimportant issues that arise throughout theyear, which fall for consideration by theCommittee under its remit.
The Committee is kept up to date withchanges to Accounting Standards andrelevant developments in financial
reporting, company law, and thevarious regulatory frameworks throughpresentations from the Group’s external
auditor, Chief Financial Officer andCompany Secretary. In addition, members
attend relevant seminars and conferences
provided by external bodies. The Termsof Reference of the Audit Committee
include all the matters required under the
Code and are reviewed annually by theCommittee.

Other individuals such as the Chair of
the Board, Chief Executive Officer, Chief
Financial Officer, Chief Risk Officer, Chief
Actuary, Heads of Compliance and Internal
Audit, and representatives of different
parts of the Group may be invited toattend all or part of any meeting as andwhen appropriate. The Chair of the Audit
Committee meets privately with theHead of Internal Audit on a regular basis
and the Committee also held a private
meeting with the Head of Internal Audit.
The external auditor was invited to attend
all of the Committee’s meetings held in
2019, excepting those agenda items when
its own performance/appointment was
to be reviewed. In addition, two private
meetings were held between members of
the Committee and the auditor. The Chairand other Committee members also held
several private meetings with the auditor
during the year.
The Audit Committee’s primary
responsibilities are to:• Monitor the integrity of the Group’s
Financial Statements and any formal
announcement relating to the Group’s
financial performance, reviewing
any significant financial reporting
judgements which they contain;• Keep under review the effectivenessof the Company’s internal financial
controls, internal control and risk
management systems;• Review the Group’s proceduresfor handling allegations from
whistleblowers and for detecting fraud;• Monitor and assess the role andeffectiveness of the Group’s Internal
Audit functions in the context of theGroup’s overall internal control and risk
management systems;• Consider and make recommendations to
the Board, to be put to shareholders fortheir approval at the AGM, in relation to
the appointment, reappointment andremoval of the Group’s external auditor;• Review the external auditor’s
independence and objectivity and theeffectiveness of the audit process;• Review the policy on the engagementof the external auditor to provide nonaudit services, considering the relevant
regulatory guidance regarding theprovision of non-audit services by theexternal auditor.

90

Admiral Group plc · Annual Report and Accounts 2019

Summary of key activities
during 2019
The agenda for the meetings taking
place during the year are agreed by theCommittee Chair and detail the mattersto be discussed and considered at eachmeeting. There were seven scheduled
Committee meetings held during the year(with two of these meetings focused onreserving matters in conjunction withthe half year and full year reporting). In
addition, there were three additional
meetings that were called to address
particular issues that had arisen during theyear. The agendas are updated regularly toallow for new items to be included.
During the year the Committee
reviewed the following:• The Annual Report and interim results,
including key accounting judgements
and disclosures;• The Group Solvency and Financial
Condition Report;• Reports from the Internal Audit
departments within the Group on
the effectiveness of the Group’s risk
management and internal control
procedures, approval of the 2020 Audit
Plan including resourcing levels, detailsof key audit findings, and actions taken
by management to manage and reducethe impact of the risks identified;• Performance and effectiveness of theInternal Audit department;• A summary of the key findings from allreports from Internal Audit including
management responses to theconclusions set out in the reports;• Reports from the external auditor
including the management letter
highlighting system and control
recommendations, key accounting andaudit issues and conclusions on the halfyear and full year reporting;• A Report from the Chair of the Group
Risk Committee on the principal
risks faced by the Group and thework undertaken by the Group
Risk Committee to ensure risk isappropriately managed;• Presentations from the Group’s
external actuarial experts to assist
the Committee in concluding on theadequacy of the Group’s reserves;

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information• Reports on the risk transfer analysis
underpinning the Group’s use ofreinsurance in its business model;• Reports from Deloitte, the external
auditor, on their proposed audit scope,plan and findings;• Proposed external audit fee and thedrivers of the year-on-year increase;• Confirmation of the external auditor’s
independence;• The effectiveness of the Group’s
Whistleblowing Policy which sets
out the arrangements for raising andhandling allegations from whistle
blowers and receiving regular reports on
instances of whistleblowing that havebeen raised;• Reports on the controls in place,including any breaches or incidents,
in respect of the Group’s overseas
subsidiaries and in relation to cybersecurity;• Updates from the European Headof Internal Audit and subsequently
from the Chair of the European Audit
Committee (of the Group’s subsidiary
Admiral Europe Compañía de Seguros,
S.A., which underwrites the Group’s
European insurance businesses) on theactivities of that committee;• The Committee also had presentations
and discussions on a range of important
issues including: the impact of theforthcoming IFRS 17 accountingchanges, an accounting update on theGroup’s loans business focused on therequirements and implementation of
IFRS 9, an update on the implementationof Group Minimum Control Standards’
framework and Solvency II Technical
Provisions and other Solvency IIreporting;• A separate Committee “deep dive”
session on reserving by the Group’s
claims management and actuarial
reserving teams and external actuary;• Letter and response from management
to the Financial Reporting Council (FRC)
letter on the 2018 Annual Report &Accounts dated 16 October 2019;• Its own Terms of Reference;• Its own effectiveness;• Meetings held with the external auditors
and also with the Head of Internal Audit
without management being present.

Significant issues considered by
the Committee
After discussion with both management
and the external auditor, the Audit
Committee determined that the key risksof misstatement of the Group’s Financial
Statements related to valuation of
insurance claims reserves and thevaluation of the projected excess of loss
reinsurance recoveries.
These significant issues were discussedwith management during the year andwith the external auditor at the time
the Committee reviewed and agreed theexternal auditor’s Group audit plan; whenthe external auditor reviewed the interim
Financial Statements in August 2019 andalso at the conclusion of the external auditof these full year Financial Statements.

Valuation of insurance
claims reserves
The Committee continued to spend
significant time reviewing and challenging
the approach and methodology adopted
by management in setting reserves
for insurance liabilities in the Financial
Statements to ensure that it remained
consistent with the Group’s statedreserving approach to set claims reserves
at a prudent level. In this context, theCommittee challenged managementon the important judgements andassumptions used in estimating
outstanding claims. Further informationis set out in more detail in the criticalaccounting judgements section of Note 1.
The Committee held separate meetings
with the Group’s UK external actuaries,
at which there was challenge and debate
on the best estimates developed by theexternal actuaries. At these meetings
management provided further informationon the reserving levels proposed and werechallenged by the Committee as to theiradequacy and level of inherent prudence.
The Committee monitored the uncertainty
around the changes to the Ogden discountrate, which is used in setting personal
injury compensation, and reviewed
the impact on the Group’s Financial
Statements of the new discount rate ofminus 0.25% that was announced in July
2019 and was applicable from 5 August
2019. The Committee compared this to theprevious rate of minus 0.75% that had been
applicable since February 2017 and theassumed rate of 0%, which was adopted
in the Group’s 2018 year end Financial
Statements and challenged management’s
assessment of the impact of the new
discount rate on the cost of claims.
Whilst acknowledging that the setting ofreserves for claims which will settle in the
future is a complex and judgemental areaand having had the opportunity at the
separate meetings referred to above toconsider and question the recommended
best estimates, the Committee is satisfied
that an appropriate process has been
followed and that there has been sufficient
scrutiny, challenge and debate to giveconfidence that the reserving levels set
provide an appropriate margin above best
estimates, noting the consistent level ofprudence that remains within the reserves.
The Committee also received an updatefrom the auditor regarding their challengethat they had applied to management’s
qualitative and quantitative justifications
for the margin held over actuarial best
estimate reserves through review ofmanagement’s accounting judgement
papers. Based on their review of theseprocedures the auditor was satisfied thatthe booked reserves remain appropriate
and were consistent with the Group’s
prudent accounting policy.

Valuation of the projected excess
of loss reinsurance recoveries
The Committee considered the changes
made by the Group’s independentactuarial experts to the methodology thatthey used for modelling excess of loss
reinsurance recoveries during the first halfof 2019, that were carried out as part of
the regular enhancements to the reserving
methodologies used in projecting boththe large bodily injury claims in the grossanalysis and the excess of loss recoveriesarising from these projected claims. In
this context the Committee challenged
the external actuary on the judgemental
actuarial methodology they had applied
to their analysis of projected excess ofloss reinsurance recoveries on large bodily
injury claims.

Admiral Group plc · Annual Report and Accounts 201991

The Audit Committee continued
The auditor, through its own actuarial
specialist, obtained assurance over theobjectivity and competence of the Group’s
external actuary and had challenged theappropriateness and implementationof the methodology to ensure thatconsistency in approach to excess of loss
reinsurance recoveries within the best
estimate reserves was appropriate.

Impairment testing on the Group’s
investment in subsidiaries
The Committee reviewed and challenged theresults of management’s impairment testingof the Group’s investment in subsidiaries,
performed where indicators of impairment
were present. A total impairment chargeof £93.6 million has been recognised inrelation to the Group’s investments in its
US comparison business, Compare.com(£27.7 million) and its US insurance
business, Elephant Auto (£65.9 million).
The impairment in Compare.com reflected
the reduction of the previous carrying
amount (£32.8 million) of the Group’s
investment to its recoverable amount(£5.1 million), being its fair value lesscosts to sell and equivalent to Group’s
share of net assets of the business at 31
December 2019. In performing its review,
the Committee challenged the cash-flows
supporting value in use calculations andthe use of net asset value as fair value lesscosts to sell.
The impairment in Elephant Auto of £65.9
million reflected the reduction of theprevious carrying amount (£105.8 million)
to its recoverable amount, being value
in use. The Committee reviewed andchallenged the cash-flows supporting thevalue in use calculations, including theunderlying financial forecasts and key
assumptions supporting the cash-flows
such as forecast loss and expense ratios.
Key assumptions within the cash-flows
were challenged, including the discountrate, tax rate and terminal value of thebusiness. The Committee also heard fromits auditor on the results of its audit tests
performed on management’s projections.
The Committee was comfortable thatmanagement performed a thorough androbust process in line with the relevant
accounting standard.
Further information is set out in thecritical accounting judgements sectionof Note 1 to the parent company financial
statements.

92

Misstatements
No material unadjusted audit differenceswere reported by the external auditor.
The Committee confirms that it issatisfied that the auditor has fulfilled
its responsibilities with diligence andappropriate professional scepticism.
After reviewing the presentations andreports from management and consulting
where necessary with the auditor, theCommittee is satisfied that the Financial
Statements appropriately address thecritical judgements and key sources of
estimation uncertainty (both in respect tothe amounts reported and the disclosures).
The Committee is also satisfied thatthe significant assumptions used for
determining the value of assets and liabilities
have been appropriately scrutinised,challenged and are sufficiently robust.

Non-audit fees
The Committee reviewed and approved its
policy on non-audit services in February
2019 and was satisfied that it was alignedwith current regulatory guidance.
Under the policy, the Group’s statutory
auditor would only be engaged to carryout non-audit services in exceptional
circumstances or where there was aregulatory request and where agreed by
the Committee.
Unless required by law, or regulation any
non-audit services will: a) be subject toprior approval from the Committee and b)in aggregate, shall not cost more than 70%of the average statutory audit fee for the
past three financial years. In considering
whether to approve such non-audit
services, the Committee shall ensure that:• There is no direct effect, or in theview of an objective, reasonable andinformed third party, would have an
inconsequential effect, on the audit
services on the Group’s Financial
Statements;• The estimation of the effect on the
Financial Statements is comprehensively
documented and explained in a report to
the Committee;• The non-audit services provided comply
with the principle of independence; and• The audit firm must not place significant
reliance on the output of the non-audit
services for the audit work.

Admiral Group plc · Annual Report and Accounts 2019

The Committee will continue to monitor
regulatory developments in this area,
noting the introduction of a revised EthicalStandard effective from 15 March 2020,
to ensure that its policy on non-audit fees
adheres to current guidance and bestpractice.

Effectiveness of the external
audit process
The Committee undertakes an annual
review to assess the independence andobjectivity of the external auditor and theeffectiveness of the audit process, taking
into consideration relevant professionaland regulatory requirements, the progressachieved against the agreed audit plan,and the competence with which theauditor handled the key accounting andaudit judgements. As part of its review,
the Committee considered, inter alia,
the following: the output of an online
questionnaire completed by all Committee
members and relevant members of
the Group’s Finance and Internal Audit
functions; the findings of the FRC EQA
published in July 2019 and the external
auditor’s firm wide transparency report, an
updated version of which was published in
2019. Following this review, the Committee
concluded that the auditor, Deloitte LLP,
remained independent and provided a
service that was robust and fit for purpose.
Mark McQueen has been Deloitte’s senior
statutory audit partner for the Groupsince Deloitte were appointed the Group’s
external auditors in April 2016.

Audit fee
During 2019, the Committee reviewed andapproved the audit fee proposal for the2019 year end Group audit. The agreed fee
for the audit and other assurance related
services for 2019 is £1.3 million (2018:£0.9 million), with the increase reflectingchanges to the scope of the audit,
resulting from growth in and changes to
the Group’s businesses.
The Committee approved the fee increase
having discussed with the auditor therationale for the costs proposed and any
potential inefficiencies within the audit
process.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Audit TenderInternal Audit

The Group last completed an audit tenderin 2015 for the 2016 year end when,
following the completion of a transparent
and independent audit tender process,Deloitte LLP were recommended toshareholders as the Group’s auditor at theAGM in April 2016 and a resolution passed
to that effect.

The Group Head of Internal Audit attended
all scheduled Audit Committee meetingsand provided a range of presentations
and papers to the Committee, throughwhich the Committee monitors theeffectiveness of the Group’s internal
controls. The Committee reviewed
and approved the Group Internal Audit
Terms of Reference which set out therole; objectives; reporting lines andaccountability; authority; independence;and objectivity of the Internal Audit
function. The role and competence of each
Internal Audit function across the Group
was also assessed and considered by theCommittee. The Group Head of Internal
Audit continues to have responsibility toensure the quality of the Internal Audit
activities in the Group’s overseas locations.

In last year’s Annual Report and Accounts
the Committee reported that they
had reviewed the arrangements withthe current external auditor and had
considered whether it was appropriate toinitiate a tender process in order that thecurrent arrangements could be reviewed
against those offered by other audit firms
in the market.
The Committee considered the resultsof various reviews and consultations
on the audit services market as well asother factors relating to a potential
tender process and concluded that it wasappropriate to continue with the planned
tender timetable.
As such, a recommendation from theCommittee was put to the Board for atender process to be initiated in Q2 2020
for an appointment (or reappointment) to
be made with effect from 2021, coinciding
with the rotation of the current audit
partner. As the Committee has primary
responsibility for conducting the tender
process and making recommendations to
the Board, regarding the appointment,
reappointment and removal of theexternal auditor, it will lead the proposed
tender process. The Committee intends
to engage with the Group’s major
shareholders to get their views on thefirms that will be invited to participate in
the tender and the timetable that has been
agreed for the tender process.
The Committee confirms it is in compliancewith the provisions of the Statutory Audit
Services for Large Companies Market
Investigation Order 2014.

During the year, the Committee
considered and approved the appointmentof a new Group Head of Internal Audit.
Following a thorough search process,supported by an external search firm, aninternal candidate was appointed pending
the requisite regulatory approvals.

internal control frameworks and systemof risk management. The overseas internal
auditors attend Committee meetings
periodically and the Committee received
an update from the internal auditor of theGroup’s insurance business in Italy on theactivities of the audit function and theaudit reports and recommendations that
had been issued.

Committee effectiveness review
As part of the Committee’s detailed annual
review of its performance and processes,
each Committee member completed acomprehensive questionnaire designed
to provide objective assessment of theCommittee’s performance, including its
effectiveness in monitoring internal andexternal audit. The Committee discussed
the results of the review at the meetingin December and concluded that, overall,the Committee and the audit process wereeffective; that the Committee had fullaccess to all the information it required;that the Committee had appropriate
Terms of Reference; and that it was
adequately discharging its responsibilities.

Members of the Committee also receive
all issued audit reports, enabling themto challenge the reports’ content andrelated recommendations. The Committee
approves the Internal Audit programmes
at the start of each calendar year whilst
the effectiveness and workload of theInternal Audit functions and the adequacyof available resources are monitored
throughout the year.
In accordance with agreed parameters,
the overseas operations in Spain, Italy,
France and the US have their own locally
based internal auditors, who report totheir respective country heads. All reports
are evaluated by the Group Head ofInternal Audit to ensure the quality andeffectiveness of the reported findings. In
addition, the UK Internal Audit department
carries out high level governance reviewsof all foreign operations, assessing theAdmiral Group plc · Annual Report and Accounts 201993

The Group Risk Committee

The Group Risk CommitteeStatement from Jean Park,
Chair of the Group Risk Committee“Chairof the Group
Risk Committee,
I amimplementation
pleased“ATsheCommittee
oversaw
the successfuloftopresent
theCommittee’sreportfor2019.”
the Group conduct risk framework with positive results.”
Jean Park Chair of the Group Risk Committee
Jean Park Chair of the Group Risk Committee

Dear Shareholder,
During the year the Committee reviewed the Board’s risk
strategy and risk appetite across the Group. This included
updates on the UK Insurance business as well as developments
within the other businesses as a key part of the Group’s
Enterprise Risk Management Framework (‘ERMF’). The
developments focused on the establishment of the European
insurance entity, Admiral Europe Compañía de Seguros S.A.
(AECS) and the growth of Admiral Financial Services Limited(AFSL). A further refresh of the suite of Key Risk Indicatorswith associated triggers and limits was completed, reflecting
the updates to the Group risk appetite.
Against the background of political uncertainty in 2019,
the Committee received confirmation of the successful
completion of the AECS related portfolio transfer atthe beginning of the year, mitigating the potential risks
associated with a “no deal” Brexit for the Group’s customers
in Europe. 2019 started with the trading of that businessand Spanish based Intermediary, Admiral Intermediary
Services (AIS). Throughout the year, the Committee also
received updates on the progress of the initial governanceand management actions of AECS. In the UK, the Committee
received regular updates on preparations for Brexit in thelead up to anticipated departures from the EU in October
2019 and January 2020. Given Admiral’s consistently prudent
approach to Brexit, the Committee considered the potential
requirements for a “no deal” outcome and associatedoperational management decisions.
A significant amount of time has been spent overseeing thedevelopment of the Admiral Internal Model (“AIM”) which
is used to capture and quantify all material risks within theGroup and calculate the solvency capital requirement. Muchof 2019 has been focused on the enhancement of the model
following feedback from previous independent validation
cycles. The current cycle of validation is being supported by
Ernst & Young (EY) for the first time.
The Group continues to maintain a regulatory capital add-on
to cover risks not captured within the Standard Formula. The
Committee has also reviewed the Group’s proposed dividendlevel, capital plan and capital buffer in line with the capital
94

Admiral Group plc · Annual Report and Accounts 2019

policy. The review considered several sensitivities, stress tests
and scenarios including assessing the uncertainty around futurechanges to the Ogden discount rate. The Group continues
to make use of Undertaking Specific Parameters (USPs) for
Admiral Insurance (Gibraltar) Limited (AIGL) and the Volatility
Adjustment (VA) across its UK insurance entities.
The Committee challenged and reviewed the setting of,and outputs from the regular stress and scenario testing
and reverse stress testing, with a greater emphasis on theprincipal risks and uncertainties facing the Group as well as
the on-going legal, regulatory and political uncertainty. The
output was incorporated into the Own Risk and Solvency
Assessment (‘ORSA’) report for 2019, which the Committee
also reviewed prior to Board approval.
The Group’s project governance framework has enabled
the Committee to have oversight of the material projects
and change programmes within the Group. The Committee
oversaw key developments to these projects, with regular
updates provided throughout the year. Detailed projectreviews were facilitated as required by the Committee, inparticular, those related to cyber security and the use of
Cloud based technology.
The on-going focus on monitoring and reporting customer
outcome risks was enhanced through the continued
embedding of the Group conduct risk framework. The Group
minimum standards were enhanced to reflect the continued
growth of non-UK insurance businesses.
The Committee also continues to focus on key operationalrisks that affect the Group. The governance of the risk event
process continues to improve, providing greater assurance
to the Committee regarding the management of major risk
events. The Committee has continued to spend time reviewing
material risk events reported during the year.

Jean Park
Chair of the Group Risk Committee
4 March 2020

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Composition of theGroup Risk Committee
Membership at the end of the year was:Jean Park (Chair), Annette Court, andManning Rountree with Mark Waters
acting as Secretary to the Committee.
The Committee held five scheduled
meetings during the year with a further
three meetings dedicated to the Internal
Model process.

Duties and Responsibilitiesof the Group Risk Committee
The duties and responsibilities of theCommittee are set out in Terms ofReference that were reviewed andapproved by the Board.
The responsibilities of the Committee are:• Overseeing the development,
implementation and maintenance of
the Group’s overall Risk Management
Framework and ensuring that it is in linewith emerging regulatory, corporate
governance and best practice guidelines.
• Monitoring the Group’s prudential risk
exposure, which includes ensuringthat the Group’s capital resources
and liquidity profile are appropriate
to its needs whilst meeting minimum
regulatory requirements, including
overseeing and challenging the designand execution of the Group’s stress andscenario testing.
• Monitoring the Group’s current andfuture conduct risk exposure.
• Ensuring the adequacy and effectivenessof the Group’s systems and controls forthe prevention of financial crime, dataprotection systems and controls.
• Monitoring the adequacy andeffectiveness of the Group’s Compliancefunctions.
• Reviewing the Group’s compliance with
Solvency II.
• Reviewing compliance with Group policies.
• Considering and recommending to
the Board for approval the Group’s risk
appetite, including any changes to theappetite for each material type of risk
faced by the Group.
• Approving the annual plans for theGroup Risk and Compliance functions
which include reviewing regulatory
developments and regular meetings
with the PRA and FCA.
• Reviewing the ORSA report each yearwith recommendations being provided
to the Group Board for approval.

• Reviewing and approving the Solvency
II Actuarial Function Reports on
Reinsurance and Underwriting each year.
• Reviewing and approving the
remuneration report from the Chief Risk
Officer (CRO) prior to Remuneration
Committee sign off.
The Committee Chair reports formallyto the Board on its proceedings after
each meeting on all matters within its
duties and responsibilities, as set out inpreviously circulated minutes to the Board.
The Committee Chair also reports on theactivities of the Committee in a formal
written report that is submitted to anddiscussed by the Board annually.
The work of the Committee is supported
by more detailed work undertaken by
executive Risk Management Committees
in each of the Group’s operational entities.
At each meeting, the Risk Management
Committees consider significant
movements in the operation’s risk profile,
any risks that have arisen and any emerging
risks. Risk Management Committees also
assess and monitor any regulatory issues,ensuring that their resolution and theaction taken are appropriately recorded.
The Risk Management Committees receive
regular information on Conduct Risk, suchas complaint handling reports and otherrelated management information. The
Group Risk Management function reviews
and collates information from across theGroup for consideration by the Group Risk
Committee (GRC).

Summary of key activities in 2019
During the year the Committee:• Reviewed the Group’s updated risk
strategy, risk appetite and associatedtriggers and limits in the context of theGroup’s agreed strategic objectives.
• Received regular monitoring reports oncustomer outcome risk and reviewed
updates to the Group MinimumStandards and Policy Framework.
• Reviewed the Group’s proposed dividendlevel, capital plan and capital buffer inline with the capital policy.
• Reviewed the Group’s regulatory capital
add-on application as part of Solvency II
capital requirements.
• Through stress and scenario testing andreverse stress testing, considered indepth analysis of a number of the Group’s
most significant risk areas.

• Recommended to the Board approvalof the 2019 ORSA Report prior to
submission to the regulator andapproved the ORSA policy.
• Dedicated a significant amount of time
to developing the Admiral Internal Model,
receiving regular updates on the progressof the IMAP project and providing
challenge to key project work streams,
in particular the model validation.
• Received regular risk monitoring reportson performance of Key Risk Indicators
within the overall risk management
framework.
• Received updates on the impact of
a number of notifiable risk events
throughout 2019.
• Received regular updates in relation to
key programmes of work including IT
Strategy, IT Security, GDPR and Brexit
as part of the Group’s enhanced project
governance framework.

Internal Control and Risk
Management Statement
The system of risk management andinternal control over insurance, operational,
market, credit and group risks is designed
to manage rather than eliminate the riskof failure to achieve business objectives
and breaches of risk appetites and can
only provide reasonable and not absoluteassurance against material misstatement
or loss. The Board is ultimately responsible
for the Group’s system of risk management
and internal control and, through the Audit
Committee, has reviewed the effectivenessof this system.
The Board is of the view that there is an
ongoing process for identifying, evaluating
and managing the Group’s risks and internal
controls; that it has been in place for theyear ended 31 December 2019; and that, up
to the date of approval of the Annual Reportand Accounts, it is regularly reviewed by the
Board and accords with the internal control
guidance for Directors provided in the 2018
UK Corporate Governance Code.
The Board confirms that it has performed arobust assessment of the Group’s principal
and emerging risks. These risks, alongwith explanations of how they are being
managed and mitigated, are included in
the Strategic Report on pages 66 to 73.
The Board is responsible for determining
the nature and extent of the principal risks
it is willing to take in achieving its strategic
objectives. This assessment supports theBoard in monitoring the integrity of theGroup’s reported Financial Statements.

• Considered the adequacy of risk
mitigation measures and contingency
plans including a review of the Group’s
reinsurance provisions.
Admiral Group plc · Annual Report and Accounts 201995

The Group Risk Committee continued
The Group operates a ‘three lines of defence’ approach to Risk and Internal Control.

Second Line of Defence
First Line of Defence
The Board recognises that the dayto-day responsibility for implementing
policies for risk identification, assessmentand management lies with the senior
management, whose operational decisions
must take into account risk and how thiscan be controlled effectively.

The Board meets at least seven times ayear to discuss the direction of the Groupand provide oversight of the Group’s risk
management and internal control systems.
The Board has delegated the development,
implementation and maintenance of
the Group’s overall risk management
framework to the GRC. The GRC reports
on its activities to the Board and the
Audit Committee, supporting theoverall assurance provided by the Audit
Committee that the Group’s internal
control, risk management and compliancesystems continue to operate effectively.
The Board has delegated to the Audit
Committee the review of the adequacy andeffectiveness of the Company’s internalfinancial controls, internal control andrisk management systems.
The subsidiary boards, GRC, UK andoverseas Risk Management Committees
receive reports setting out key
performance and risk indicators andconsider possible control issues brought
to their attention by early warning
mechanisms that are embedded within
the operational units. They, together
with the Audit Committee, also receive
regular reports from the Internal Audit
function, which include recommendations
for improvement of the control andoperational environment.

96

The ‘second line of defence’ is led by the Chief
Risk Officer and comprises the Corporate Governancefunctions and Committees that are in place to provide
oversight of the effective operation of the internal
control framework. The Corporate Governance functions
facilitate the Group Policy Framework and Group MinimumStandards covering risk management and controls for allmaterial risks to the Group. The functions perform secondline reviews, including of the capital modelling and businessplanning processes to support the Board’s assessmentof the Group’s on-going viability. Regular reviews of
all risks are undertaken in conjunction with senior
management, with the results of these reviews
recorded in risk registers and reported
to the appropriate governanceCommittees and Boards.

An annual assessment of the completenessof the risk management reviews andtesting of internal controls is supported by
the production of an Integrated Assurance
Map, summarising the reviews performed
and assurance provided by all three lines ofdefence, in relation to the key risks facing
the Group. The Integrated Assurance Map
is reported to the GRC at least annually.
The Chair of the GRC provides a written
report to the Group Board of the activities
carried out by the Committee on an annual
basis. In addition, the Group Board receives
reports from the Chair of the Group Audit
Committee as to its activities, together
with copies of the minutes from subsidiary
Board meetings and the Group Risk andAudit Committees.
The Group Audit Committee’s ability toprovide assurance to the Group Board
depends on the provision of periodic andindependent confirmation, primarily
by Internal Audit, that the controls
established by management are operating
effectively and where necessary provides
a high-level challenge to the steps being
taken by the GRC to implement the risk
management strategy.

Admiral Group plc · Annual Report and Accounts 2019

Third Line of Defence
The ‘third line of defence’ comprises theindependent assurance provided by theGroup Audit Committee and the Group Internal
Audit function. Internal Audit undertakes a
programme of risk-based audits covering all
aspects of both the first and second lines ofdefence. The findings from these audits arereported to all three lines, i.e. Management,
the executive and oversight Committees,
and the Group Audit Committee.

Viability
In accordance with Provision 31 of the2018 UK Corporate Governance Code, theDirectors have assessed the prospect of
the Company over a longer period than
the 12 months required by the ‘Going
Concern’ statement. The Board reviews
five-year financial projections twice a year,
three-year solvency projections at least
three times a year and approves a one-year
financial budget for the forthcoming 12months on an annual basis.
Every year, the Group undertakes an ‘Own
Risk and Solvency Assessment’ (ORSA),
which sets out a detailed consideration of
the principal risks and uncertainties facing
the Group over a three-year time horizonand considers current and projected levelsof solvency and liquidity over the period.
The ORSA is the main source of evidence
used by the Board to assess viability. Given
the additional uncertainty inherent inprojecting beyond a three-year period, theassessment of viability has been performed
over a three-year period.
The principal risks and uncertainties facedby the Group are set out on pages 66 to
73 and note 6i to the Financial Statements
sets out the Group’s objectives, policies andprocedures for managing financial assets
and liabilities.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Quantitative and qualitative assessmentsof risks are performed as part of the ORSA
process. The quantitative assessment
considers how the regulatory capitalrequirements, economic capital needs, own
funds and solvency position of the Groupis projected to change over the three-year
horizon, with a requirement to maintain asolvency ratio above the approved capitalrisk appetite buffer throughout the
projection. The assessment also includes
a series of sensitivity, stress and scenario
tests and reverse stress tests which assess
the Group’s principal risks and uncertainties,
identifying and quantifying the operational,
financial and solvency impacts of thesestresses alongside potential mitigating
factors and management actions. The
results of the stress tests also form part ofthe process to set the Group’s capital risk
appetite, which ensures that a buffer is held
on top of the Group’s regulatory capitalrequirement to protect its regulatory
capital position against potential shocks
and stresses.
Key strategic decisions including thesetting of dividend payments, consider
the solvency impact against the Board
approved capital risk appetite of 130%,
which is a key criterion for the Board inassessing viability. Refer to the Strategic
Report for information on sensitivities tothe reported 2019 solvency ratio position.
In order to mitigate the implications ofa number of possible Brexit scenarios,
the Group restructured the European
Insurance and price comparison
businesses, with the establishment of new
insurance and intermediary companies
in Spain. This ensures that the Group cancontinue servicing its European customers
after the UK withdraws from the European
Union. The governance of the new Spanish
companies is now running effectively.
In the UK, procedures have been
established to monitor and manage
potential supply chain changes andcommunications to customers.
Based on the results of this analysis, theDirectors have a reasonable expectationthat the Group will be able to continue inoperation and meet its liabilities as theyfall due, for the next three years.

Climate Change

Strategy

In 2019 the Group set up a Climate
Change-Related Risks Project (discussed
elsewhere in the Annual Report) in orderto: (1) understand current and potential
future risks and opportunities arising fromclimate-related change; (2) understanddisclosure and reporting requirements;and (3) determine how to incorporate
climate-related risks into BAU risk
management. Climate change-related risks
can broadly be categorised as physicalrisks, such as increasingly severe weather
events which arise from changes in the
climate, and transition risks which willarise from any move towards a low carbon
economy. Admiral is following Task Forceon Climate-related Financial Disclosures(TCFD) recommendations in identifying,
managing, reporting and disclosing climatechange-related risks.

With varying degrees of impact, climatechange will affect many of Admiral’s PR&U.
While the effects of physical risks andtransition risks will be felt by different partsof the business, and over different timeframes, taken together the largest impacts
are expected to be in non-life premium(pricing) risk, reinsurance risk, and strategicrisk. Other risks and opportunities have been
considered, and their impacts assessed.

Governance
The Group Board has ultimate oversight ofclimate-related issues. Climate changerelated risks and disclosures are reviewed
and discussed at several Committees andwithin the Board, including the GRC, theGroup Audit Committee, and at subsidiary
Boards and subsidiary Risk Management
Committees.
The GRC retains primary oversight
responsibility for climate change-relatedrisks and opportunities, which are reported
within the consolidated risk report (CRR).
It has delegated authority from the Boardfor overseeing risk management activities.
It advises the Board on Admiral’s Principal
Risks and Uncertainties (PR&U), as well as on
emerging risks, and reviews the Company’s
management of these risks. It is anticipatedthat climate change-related risk will remain
an emerging risk for the foreseeable
future. Emerging risks are monitored andupdated (as required) on a monthly basis. If
deemed material enough, the impact fromclimate change-related risk will be includedin Admiral’s PR&U, which are updated
on a biannual basis, and captured by theEnterprise Risk Management Framework.
A similar process will be followed at
subsidiary level, for those subsidiaries
deemed to be exposed. The day-to-day
responsibility for managing and reportingon climate change-related risk sits with theGroup Risk team with overall responsibility
held by the Group CRO.

Physical risks will impact many lines ofbusiness, including motor, household
and travel. Transition risks, however, may
have the bigger impact in the short-tomedium term due to potential changes ingovernment policy and consumer behaviour,
especially in scenarios limiting post industrial
temperature rises to 1.5 or 2 degrees (i.e.
aligned with the 2016 Paris Agreement).
Some climate change-related transition risks
were holistically captured in Admiral’s Group
Strategy Review exercise, completed in 2019,and follow-on projects are ongoing to ensurethat climate change is considered in setting
the strategic direction of the Group.
Risk management, metrics and targets
The TCFD proposes a framework forunderstanding climate change-relatedrisks, which Admiral Group follows.
Risk management follows an internallydeveloped framework for emerging
risks. Risk identification incorporates
both internal and external viewpoints:
external sources are scanned for all
possible risks posed by climate change,
which are then narrowed and refinedusing internal expertise and knowledge ofthe Group’s business model and strategy.
Risks are then assessed using both
qualitative analysis, to prioritise risks, andquantitative analysis, to understand theirimpact on the business.

Admiral Group plc · Annual Report and Accounts 201997

The Group Risk Committee continued

Committee members

Meetings

Jean Park (Chair)
Annette Court
Manning Rountree
Mark Waters (Secretary)8

Attendance information
can be found in the tableon page 81

Summary of Key Activities in 2019
During the year the Committee:

Received regular monitoring reports oncustomer outcome risk and reviewed
updates to the Group MinimumStandards and Policy Framework.

Reviewed the Group’s updated risk
strategy, risk appetite and associatedtriggers and limits in the context of theGroup’s agreed strategic objectives.

Considered the adequacy of risk
mitigation measures and contingency
plans including a review of theGroup’s reinsurance provisions.

Through stress and scenario testing
and reverse stress testing, considered
in-depth analysis of a number of theGroup’s most significant risk areas.

Recommended to the Board approvalof the 2019 ORSA Report prior to
submission to the regulator andapproved the ORSA policy.

Received regular updates in relation to key
programmes of work including IT Strategy, IT
Security, GDPR and Brexit as part of the Group’s
enhanced project governance framework.

98

Admiral Group plc · Annual Report and Accounts 2019

Reviewed the Group’s
proposed dividend level,
capital plan and capital buffer
in line with the capital policy.

Reviewed the Group’s
regulatory capital add-on
application as part of Solvency
II capital requirements.

Dedicated a significant amount of time to developing theAdmiral Internal Model, receiving regular updates on the
progress of the IMAP project and providing challenge to key
project work streams, in particular the model validation.

Received updates on
the impact of a numberof notifiable risk events
throughout 2019.

Received regular risk monitoring
reports on performance of Key Risk
Indicators within the overall risk
management framework.

Company Overview
Strategic Report

Corporate Governance
Financial Statements

The Nomination and Governance Committee

Additional Information

The Nomination and GovernanceCommittee
Statement from Annette Court, Chair of theNomination and Governance Committee“The Committee focused its time on ensuring that the Group’s policy
on diversity and inclusion, gender balance of the Group’s senior
management and their direct reports and the approach to succession
planning were appropriately considered during the year.”
Annette Court Chair of the Nomination and Governance Committee

Dear Shareholder,
Committee members
Annette Court (Chair)
Justine Roberts
Owen Clarke

Meetings

7
Attendance information
can be found in the tableon page 81

Given the role played by the Committee in the selection process for a new CEO, succession
planning has inevitably been a key focus of the Committee and occupied most of theCommittee’s time during the year as the composition and experience of the Board at a Groupand subsidiary level was regularly reviewed. The Committee also reviewed the leadershipneeds of the organisation and the pipeline of talent within the organisation.
The Committee continued to monitor the implementation of the recommendations containedin the external review of the Group’s governance arrangements that was carried out in 2018.
A further external governance review was also initiated during the year which focused on
assessing the effectiveness of the implementation of the recommendations from the previous
external governance review carried out in 2018. The Committee received regular updates
from management on the progress of the review and, at the meeting in August, received an
update from the senior members of the external team that were carrying out the review.
The Committee also considered the results of the review and approved the plan proposed bymanagement to implement the recommendations designed to strengthen the Group’s existing
governance arrangements.
Mindful of the changes introduced under the revised Corporate Governance Code that wasapplicable for the year under review, the Committee focused its time on ensuring that theGroup’s policy on diversity and inclusion, gender balance of the Group’s senior management andtheir direct reports and the approach to succession planning were appropriately considered by
the Committee during the year.
In line with the requirements of Solvency II, the Senior Insurance Manager Regime, and inaccordance with the Group’s Fit and Proper Policy, I also carried out the process of assessment
for Group Non-Executive Directors, the Chairs of the Group’s material subsidiaries and the CEO toensure they meet the requirements in terms of qualifications, capability, honesty and integrity.

Annette Court
Chair of the Nomination and Governance Committee
4 March 2020

Admiral Group plc · Annual Report and Accounts 201999

The Nomination and Governance Committee continued
Membership

Board Appointments

The membership of the Committee atthe year end was Annette Court (Chair),Owen Clarke and Justine Roberts. The
Company Secretary acts as Secretary to
the Committee. The Committee invites theChief Executive Officer and/or the Chief
Financial Officer to attend meetings when
it deems appropriate. The Committee
met formally on seven occasions in 2019.
In addition, members of the Committee
corresponded and met informally on anumber of occasions to consider and meetwith individuals that the Committee had
identified as possible candidates to join
the Board.

The Committee leads the process formaking appointments to the Board orwhere the appointee is likely to becomea Board member. The policy on Board
appointments involves the Committee
developing an appropriate specificationthat identifies the required skills andexperience for the role and, in most
instances, engaging external recruitment
consultants, to lead the recruitment
process and identify suitable candidates.
Interviews of the shortlisted candidates
are held with the Chair and members of
the Committee. After consideration by theCommittee, a recommendation is madeto the Board to appoint the preferredcandidate. The Committee is satisfied that
this constitutes a formal, rigorous andtransparent process for the appointmentof new Directors to the Group Board andits subsidiaries embracing a full evaluationof the skills, knowledge and experience
required of Directors.

Board Composition
The Committee reviewed the results of theexternal Board evaluation that was carriedout this year by external consultant,
Ian White. The Committee was satisfied
that the evaluation was conducted in
a comprehensive and diligent mannerwith Ian having face to face contact with
all Board members and regular Board
attendees. Ian discussed the results of theevaluation questionnaires that had been
completed and considered any particularcomments raised by Board members andattendees. At its meeting in January, theCommittee considered the results of theevaluation relating to the composition of
the Board. The Committee considered thespecific recommendations which included
that the Board should continue to keep
diversity under regular review and should
focus on introducing more innovative
approaches to recruitment. In addition,in terms of skills, there was a recognition
that technology was a key area that theBoard should focus on and the Committee
has initiated an external search for a new
Board member with expertise in this area
and who can enhance the breadth of skills
and diversity currently represented acrossthe Board.
The Committee also reviewed a skills matrix
that identified the skills of current Board
members that were already represented
and to identify areas such as technology
where enhancements to the compositionof the Board in these areas were needed.
The time commitments required of NonExecutive Directors were also considered by
the Committee and the conclusion reachedthat each Director was able to devote
sufficient time and commitment to theperformance of their duties.

100

Succession planning and talentmanagement
The Committee ensures plans are in placefor orderly succession for appointments
to the Board and reviews the succession
plans for other senior management
positions. Responsibility for making senior
management appointments rests with theChief Executive Officer.
Talent management continues to bea key area of focus and the Board, at
its meeting in March 2019, consideredtalent management within the Group anddiscussed the initiatives that were being
put in place to progress the developmentof an internal “talent list” to ensure thathighly talented individuals across theGroup are properly recognised and areencouraged to progress. Identifying
talented and high-potential staff
below existing manager level, allows
for a more tailored approach to meettheir development needs, which ensurethat their potential is recognised andmaximised. In addition, our existing
training and development opportunities
have been enhanced to include more
tailored programmes and the introductionof a more comprehensive mentoring
programme. A wide-ranging project isalso underway to redesign our end-to-end
performance management process, which
will underpin many of these initiatives to
identify and maximise talent across alllevels of the business.

Admiral Group plc · Annual Report and Accounts 2019

There have also been several NED only
sessions during which the Group’s internaltalent management capabilities have been
discussed and considered. The Committee
remains satisfied that succession plans for
Directors and senior management are inplace to ensure the continued ability of theGroup to implement strategy and compete
effectively in the markets in which it
operates.

Gender and Diversity
The Committee reviewed the genderbalance of those in senior management
and their direct reports and considered
the initiatives that have been proposed tofocus on improving gender balance. In thiscontext, the Group continues to focus on
meeting the Hampton Alexander Review
target of 33% women’s representation
across executive committees below
Board level and direct reports to thosecommittees and despite the fact that thepercentage of women in this combinedgroup has marginally fallen, the Group
still remains close (32%) to meeting thetarget. This is shown in more detail in thegender diversity table on page 125. The
Group has already exceeded the target set
by both Lord Davies in his report: Womenon Boards, and the Hampton Alexander
Review (that builds on the Davies Review)which encourages FTSE 350 companies toachieve at least 33% women on Boards by2020 as women already constitute 40% of
our plc Board.
In April, the Committee reviewed theGroup’s Board Diversity and Inclusion Policy
and discussed the appropriateness of themeasurable targets to increase diversity
and inclusion across the Group. The Policy
sets out the approach to Board diversity
for Boards within the Admiral Group andsupports the principle of boardroom
diversity and inclusion and the promotionof diverse board composition. Measuresthat are covered under the Policy include:
having one member of the senior executive
team who is responsible and accountablefor gender diversity and inclusion; settinginternal targets for gender diversity insenior management; publishing progressannually against these targets in reportson the Group’s website; and linking thepay of the CEO to the progress madeagainst these internal targets on gender
diversity. The Committee seeks to ensurethat a clear recruitment strategy for Board
appointments is in place and is aligned tothis Policy.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

In addition, in April the Committee
received an update on the activities of
the Group’s Diversity Forum that meetsregularly with the purpose of exploring
ways to further improve diversity andinclusion across the Group. The Diversity
Forum is made up of six workstreams
focusing on: gender, ethnicity, disability,
LGBT+, age and social mobility. A numberof initiatives have been introduced foreach workstream such as reviewing andoverhauling relevant policies including
improvements made to the parental
leave and maternity policies and greaterawareness of the consideration of flexible
working in certain positions. In addition,
initiatives have been introduced to consult
and engage with staff who are members ofminority groups to understand how they
feel and what would make a difference
to them in the workplace. A review of
our literature, websites and social media
was also carried out to ensure that, as an
employer, we portray an image to potential
new joiners that supports our diverse andinclusive culture.
The Board continues to monitor therequirements of the Parker Review’sreport on ethnic diversity in the context
of the composition of its Group andsubsidiary Boards, the initiatives that are

being implemented to increase diversityand discussed how measures to develop
a diverse pipeline of talent as regards
Board appointments could be developed
and monitored.
However, the Group remains strongly
supportive of the principle of boardroom
diversity, of which gender and ethnicity
are important, but not the only, aspects.
What is important is diversity of thought,
experience and approach and eachnew appointment must complement
what already exists at the Board table.
Accordingly, appointments will always be
made on merit against objective criteria,
including diversity and gender, and not justto achieve an externally prescribed number.
The Group also continued to focus onachieving the goals of the Women in
Finance Charter, which the Group signed
up to in 2018. The Charter is a government
initiative that encourages participating
firms in the financial services sector
to support the progression of women
into senior roles by focusing on theexecutive pipeline and the mid-tier levelof management. The Group remains
committed to meeting the target of 40%
women in the Senior Executive team by
December 2023 and to improving on thecurrent position of 32%.

In 2018 the Chair and CEO also signed up
to the 30% Club, which aims to develop adiverse pool of talent for all businesses
through the efforts of its Chair and CEO
members who are committed to better
gender balance at all levels of theirorganisations with a minimum target of
30% women at senior management levelby 2020.
The Group remains committed toproviding equal opportunities, eliminating
discrimination, and encouraging diversity
amongst its employees both in the UK andoverseas. A breakdown of the gender of
Directors and senior employees at the endof the financial year together with detailsof the Group’s Equality, Diversity andDignity at Work Policy are set out in the
Directors’ Report on page 125.
The Group’s Gender Pay Gap is alreadymaterially lower than the UK average andthe industry average for the financial
services sector, however, the Groupremains committed to reducing it further
through a number of initiatives that are
being introduced to address the current
imbalance of men and women at differinglevels of the business.

Neurodiversity training
Admiral is proud to be a diverse workplace and is always looking at the ways in which
we support our staff members to help them succeed.
In 2019 Admiral Academy introduced training around dyslexia and other areas of neurodiversity. The training aims
to increase awareness, challenge perceptions, and highlight examples of support or adjustments that may benefit
individuals in the workplace.
In the second half of 2019, Admiral Academy trained 159 management employees including trainers, coaches, and operations
managers. An additional 126 employees in non-management positions were trained on a condensed course enabling a safe
space for individuals to ask questions about their own experiences or that of family, children, or partners. The Academy hasreceived positive feedback, and this training will be delivered to more staff members in 2020.

Admiral Group plc · Annual Report and Accounts 2019101

The Remuneration Committee

The Remuneration CommitteeStatement to Shareholders from the
Chairman of the Remuneration Committee“Admiral has a simple remuneration structure which
reinforces our unique culture and creates strongalignment with our shareholders”
Owen Clarke Chairman of the Remuneration Committee

Dear Shareholder,
Committee members
Owen Clarke (Chair)
Jean Park
Justine Roberts

Meetings

8
Attendance information
can be found in the tableon page 81

I am pleased to introduce the Directors’
Remuneration Report for the year ended 31
December 2019, which has been preparedby the Remuneration Committee (the‘Committee’) and approved by the Board.
I would also like to thank our shareholders forapproving our Annual Report on Remuneration
at the April 2019 AGM which was approved by
99.8% of our shareholders.

Recap of remuneration
structure at Admiral
Admiral has a simple remuneration structure
which reinforces our unique culture and createsstrong alignment with our shareholders:• Base salaries are targeted at the lower
end of our peer group, and Executives
are encouraged to build up significant
shareholdings in the Group to maximise
shareholder alignment.
• Pensions for the Executive Directors are fullyaligned with that offered to the workforce,
set at a maximum level of 6% of base salary
subject to an overall maximum employer
contribution of £15,000.
• Our main incentive plans are the Share
Incentive Plan (‘SIP’), which encourages
wide share ownership across our employees,
and the Discretionary Free Share Scheme(‘DFSS’). DFSS primarily incentivises Earnings
per Share growth, Return on Equity andTotal Shareholder Return vs. the FTSE 350(excluding investment companies) over athree-year period. For the CFO, vesting is
also dependent on performance against
a scorecard of risk and customer-based

102

Admiral Group plc · Annual Report and Accounts 2019

measures. In some business units the Groupwide performance measures are replaced bybusiness unit measures.
• Shareholder alignment is further reinforcedby granting DFSS awards as a fixed numberof shares, ensuring the value at grant
is directly aligned with the shareholder
experience. The Committee reviews award
sizes annually, taking into account factors
such as the shareholder dilution impact of
all employee share schemes and share pricemovement since the last award, in particular,
whether a material share price increase
has resulted from general market, or otherexternal, factors.
• We pay a bonus (the ‘DFSS Bonus’) that isequivalent to the actual dividends paid out
to shareholders calculated on the number ofunvested DFSS awards held. It is important
to note that this is in place of, not additional
to, a conventional cash bonus scheme. Thisapproach is aligned to Admiral’s culture byprioritising collective, longer term successafter short term, individual performanceand also provides a direct link to shareholder
pay-outs. The DFSS bonus payable to the
CFO for the 2019 performance year onwards
will be subject to a +/- 20% adjustment
based on performance against a scorecardof risk and customer-measures.
• Our CFO’s remuneration package includes
an annual award of ‘salary shares’, released
over a 5-year period; similar to the DFSS
structure, this award is based on a fixed
number of shares, with Committee
discretion to reduce the number in the eventof material increases in share price throughexternal factors.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

The Committee recognises that some
aspects of the structure of pay at
Admiral are unusual compared to thetypical practice at other large UK-listedcompanies, but we believe that thestructure contributes to our culture offocusing on collective success, and isaligned with our philosophy around theefficient use of capital and distributionof surplus profits, all of which aligns toshareholder interests. The remuneration
structure also reflects individual andbusiness unit performance throughthe allocation of DFSS awards and, forcertain senior managers, the applicationof adjustments to their vesting and
DFSS bonus.

Admiral’s business performance2019 has again been a positive year for theAdmiral Group. Earnings per share in theyear were 148.3 pence (2018: 137.1 pence)and return on equity was 52% (2018: 56%).
Total dividends for the financial year(including the proposed final dividend of
77.0 pence per share) will be 140.0 pence
per share (2018: 126.0 pence per share).

Decisions made by the
Remuneration Committee in2019 on Executive Director
compensation
Taking into account the approved
remuneration structure and Admiral’sbusiness performance, the Committee
made the following decisions during 2019:• Based on performance to 31 December
2019, 88.8% of the DFSS award granted
in 2017 will vest. The EPS condition
was achieved, vesting at 100% of thiselement and the ROE condition waspartially achieved, vesting at 97.9% of
this element. The TSR condition vested
at 68.4% of this element. This meansthat 44,400 of the 50,000 DFSS sharesawarded to Geraint Jones, will vest on
26 September 2020. The Committee
reviewed this vesting outcome andconcluded that it was appropriate.

• Geraint Jones also received a DFSS bonusof £201,600. This bonus is equivalent
to dividends that would have been
paid during the year on all outstanding
DFSS and salary shares awarded but not
yet vested plus a +/- 20% adjustment
for performance against a set of risk
and customer measures. The 2019
performance year was the first year
in which the DFSS bonus for the CFO
was adjusted (within a +/- 20% range)
for performance against a scorecardof risk and customer measures which
include four different categories ofmeasures covering assessment against
conduct risk management information(‘CRMI’) metrics, customer feedback,governance outcomes and internal
stakeholder feedback. In addition, thepayment of the DFSS Bonus was subject
to an overall adjustment to take into
account any risk events which wereconsidered to have a material customer,
regulatory or financial impact. The fulldetails of the DFSS Bonus calculations
are on page 117.
• Geraint Jones received an award of 5,000
salary shares, equivalent to £108,050,
in two tranches of 2,500 shares on
18 March 2019 and 30 August 2019.
This compares with an award of 5,000
salary shares equivalent to £98,225,
in 2018. The Committee intends thatthe number of salary shares granted toGeraint Jones each year is fixed at 5,000,
unless the Committee believes that a
reduction should be made to take into
account exceptional factors impacting
the share price. In 2019, the Committee
determined that no such reduction was
required. In line with Policy, these shares
will vest after three years subject tocontinued employment. An additional
two-year holding period will apply andmalus and clawback provisions will apply
during the vesting and holding periods.
Further details on these shares can befound on page 115.

• The Committee anticipates that
Geraint Jones will continue to receive
5,000 salary shares during 2020, in two
equal tranches. The Committee has
reviewed the size of the award and has
concluded that no change should bemade to reflect any exceptional factors
impacting the share price. The valueof the 5,000 salary shares granted toGeraint Jones will be disclosed in next
year’s Annual Report.
• In September 2019, Geraint Jones
was also granted an award under the
DFSS of 45,000 shares, equivalent to£945,000 or 376% of his cash salary.
This compares with an award of 50,000
shares, equivalent to £1,020,000 in 2018.
Whilst the general intention is to keep
the number of DFSS shares granted
to individual participants the sameeach year, during 2019 the Committee
reviewed the aggregate quantum of
DFSS awards offered to all employees
and concluded that a 10% reductionin the number of shares awarded tomost participants was appropriate tohelp ensure dilution to shareholders
from the employee share schemes ismanaged effectively. This award willvest on three-year EPS growth vs.
LIBOR, TSR vs. FTSE 350 (excluding
investment companies), ROE and theaverage outcomes of the scorecard
risk and customer measures used toassess DFSS bonus adjustments over the
performance period. David Stevens again
declined an award of DFSS shares given
his significant shareholding. Further
details on the CFO’s award can be foundon page 117. Geraint Jones will receive a
DFSS award in 2020 which will be in linewith the approved Policy. Further details
can be found on page 119.
• David Stevens’s salary will be increasedby 2.5% to £426,449 effective from 1
September 2020 and the cash elementof Geraint Jones’s salary was also
increased by 2.7% to £258,000, effectivefrom 1 January 2020. These increases are
below the average increase across theGroup for 2019.

Admiral Group plc · Annual Report and Accounts 2019103

The Remuneration Committee continued
Remuneration for the wider
workforce and the CEO pay ratio
During the year, the Committee also
reviewed the remuneration arrangements
and structure offered to the wider
workforce and used this as an input in its
decisions on Executive compensation.
Overall the Committee found that the
remuneration offered to the wider
workforce was consistent with thatoffered to the Executive Directors andsenior management and supported theunique culture of the Company including
focus on collective success. The approachto salary reviews is consistent throughout
the organisation as is the employer
pension contribution which is up to 6% ofsalary (up to a £15,000 cap) for all Admiralemployees based in the UK including the
CEO and CFO. Further details can be foundon page 120.
For the second year, Admiral has
disclosed a CEO pay ratio comparing
the remuneration of the CEO and thatof the UK employee population. As our
CEO receives only fixed pay and does notparticipate in the DFSS, the usefulnessof this ratio (required by legislation to
be disclosed) is limited. We therefore
also disclose a CFO pay ratio, as Geraint
Jones’s pay structure is more consistent
with that of the wider workforce. The
Committee references these pay ratios
when considering the Executive Directors’
pay outcomes, and is satisfied that current
ratios are reasonable taking into accountthe size of the business.

Other activities

2020 Remuneration Policy Review

During the year ended 31 December 2019,
additional to its regular activities, theCommittee also:

The current Remuneration Policy wasapproved by shareholders at the 2018
AGM, effective for a maximum of 3 years.
Consequently, the Committee will beseeking shareholder support for a revised
Remuneration Policy at the 2021 AGM.
During 2020, the Committee will review
the existing Remuneration Policy with aview to consulting major shareholders at
the end of the year to discuss proposedchanges. This review will take into accountalignment of Admiral’s strategic priorities
as well as best practice including newprovisions of the UK Corporate GovernanceCode. The Committee already complies
with most of the provisions adopted by the
new code including malus and clawback
provisions, and pension contributionsaligned to the workforce. Employees are
not specifically consulted on Executive
remuneration, however all employees
are invited to participate in Admiral’sannual staff survey, which provides
valuable insight to the Board on a range of
topics including compensation. Relevant
feedback is shared with the Committee.
The Committee anticipates adoption ofa post employment shareholding policy,
as required by the Code, as part of the2020 review.

• Reviewed the DFSS vesting and bonus
arrangements for Executive Directors,
senior management and relevant staff(Material Risk Takers) covered under
Solvency II• Reviewed workforce remuneration,
including alignment of the Group’s
current remuneration structure with
the Living Wage
• Reviewed Admiral’s Gender Pay
reporting statistics• Reviewed risk events and their impact
on variable pay• Undertook an evaluation of theCommittee’s performance during theyearReviewed the Committee’s termsof reference• Approved the Group’s Malus andClawback Framework• Reviewed external remuneration
trends and market conditions• Reviewed the customer and risk
measures introduced for adjustmentof variable pay

The Annual Report on Remuneration(subject to an advisory vote) will be put
to our shareholders at the AGM in 2020.
We do hope that you vote in favour of
the report. I am available to discuss our
Remuneration Policy and Annual Report
on Remuneration with shareholders.

Owen Clarke
Chairman of the Remuneration Committee
4 March 2020

104

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements

Remuneration at a glance

Additional Information“I would like to thank our shareholders for approving our
Annual Report on Remuneration at the April 2019 AGM
which was approved by 99.8% of our shareholders.”
How did we perform during 2019?
Earnings per share (pence)

Return on equity (%)

Full year dividend per share (pence)(2018: 137.1p)(2018: 56%)(2018: 126.0p)

148.3p52%140.0p10 year TSR performance: Admiral vs. FTSE100 and FTSE350 indices
Growth in the value of a hypothetical £100 holding over ten years to 31 December 2019
£400

£300

£200

£100

£0
Dec 09Dec 10AdmiralDec 11

Dec 12

FTSE 350

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

Dec 18Dec 19FTSE 100What did our Executive Directors earn in 2019?

• Salary for CFO includes 5,000 ‘salary shares’• Pension, benefits and SIP includes 2019 pension
contribution of £3,970 and £14,976 for the CEO
and CFO respectively

£935k
£4k
£202k
£19k
£409k

£359k
CEO

CFO

SalaryPension, benefits and SIP
DFSS bonus
DFSS shares• DFSS bonus of £201,600 for the CFO, including an
adjustment for performance against the scorecardof risk and customer measures.
• DFSS value for the CFO relates to 88.8% of his 2017
DFSS award vesting

Admiral Group plc · Annual Report and Accounts 2019105

Directors’ Remuneration Policy

The Group is committed to the primary objective of maximising
shareholder value over time in a way that also promotes effective
risk management and excellent customer outcomes, and ensuringthat there is a strong link between performance and reward.
Compliance Statement
This Remuneration Report has been
prepared according to the requirementsof the Companies Act 2006 (the Act),
Regulation 11 and Schedule 8 of the Large
and Medium-Sized Companies and Groups(Accounts and Reports) (Amendment)
Regulations 2018 and other relevant
requirements of the FCA Listing Rules.
In addition, the Board has adopted theprinciples of good corporate governanceset out in the UK Corporate Governance
Code (the Code) and the guidelines issued
by its leading shareholders and bodies suchas ISS, the Investment Association, and thePensions and Lifetime Savings Association.
Unless otherwise stated, information
contained within this Remuneration
Report is unaudited.
The following Remuneration Policy wasapproved, and therefore came into effect,
at the April 2018 AGM. There have been
only minor changes to the description of
the Remuneration Policy since the 2019
AGM. These include clarification that DFSS
awards and salary share awards are granted
on a fixed share basis, clarification that thevalue of these awards will remain within
the maximum opportunity detailed in the
Policy, and rationale for the applicationof risk and customer measures to DFSS
awards from 2019 onwards.

Key Principles of Admiral
Remuneration Arrangements
The Group is committed to the primaryobjective of maximising shareholder value
over time in a way that also promotes
effective risk management and excellent
customer outcomes, and ensuring that
there is a strong link between performanceand reward. This is reflected in the Group’s
stated Remuneration Policy of paying
competitive, performance-linked andshareholder-aligned total remuneration
packages comprising basic salaries coupledwith participation in performance-based
share schemes to generate competitive
total reward packages for superior
performance. The Board is satisfied thatthe adoption of this Policy continues tomeet the objectives of attracting andretaining Executives of the highest quality
across the Group.
The Committee reviews the remuneration
framework and packages of the Executive
Directors and the most senior managers
and recognises the need to ensure that
the Remuneration Policy is firmly linked
to the Group’s strategy, including its risk
management approach. In setting the
Policy and making remuneration decisions,the Committee takes into account pay
and conditions elsewhere in the Group.
The main principles underlying theRemuneration Policy are:• Competitive total package – the Groupaims to deliver total remuneration
packages that are market-competitive,
taking into account the role, job size,
responsibility, and the individual’s
performance and effectiveness.
Prevailing market and economic
conditions and developments ingovernance are also considered, as
are general salary levels throughout
the organisation;

106

Admiral Group plc · Annual Report and Accounts 2019

• Significantly share-based – our basesalaries are targeted towards thelower end of market, but are combinedwith meaningful annual share awards
that vest on long term performanceto ensure strong alignment withshareholders and the long terminterests of the Group. Executives arealso encouraged to build up significant
shareholdings in the Group to maximise
shareholder alignment;• Long term perspective – a significant
part of senior Executives’ remuneration
is based on the achievement of
stretching performance targets that
support the delivery of the Group’s
strategy and shareholder value. The
extended performance and vestinghorizons promote a long term
perspective that is appropriate to theinsurance sector;• Effective risk management – incentives
are designed to ensure they do not
encourage excessive risk-taking. They
are aligned with the delivery of positive
customer outcomes and reinforce theGroup’s risk policy;• Open and honest culture – the Group
has a strong culture of focusing
on collective success, whilst stillrecognising individual contribution to
the Group’s performance, and this isreflected in our remuneration structure
across the business; and• Transparency to stakeholders – theremuneration structure is designed tobe simple and easy to understand, andall aspects are clear to employees andopenly communicated to employees,
shareholders, and regulators.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Remuneration Policy table
This table describes the key components of the remuneration arrangements for Executive Directors.
Purpose and link to strategy

Operation

Opportunity and performance metrics

Salaries are reviewed annually or following a significant
change in responsibilities.

Any salary increases are applied in line with theoutcome of the review.

Salary levels/increases take account of:In respect of existing Executive Directors, it isanticipated that increases in cash salary, or in
the number of salary shares, will normally be inline with the increase for the general employee
population over the term of this Policy. Moresignificant increases may be awarded in certain
circumstances including, but not limited to:where there has been a significant increasein role size or complexity, to apply salary
progression for a newly appointed Executive
Director, or where the Executive Director’s salaryhas fallen significantly behind market.

Base Salary
To attract and retain
talent by settingbase salaries at levels
appropriate for thebusiness.

•

Scope and responsibility of the position.

•

Individual performance and effectiveness, andexperience of the individual in the role.

•

Average increase awarded across the Group.

The CFO receives an annual award of ‘salary shares’ in
addition to his cash salary. The salary share award vests
after three years subject to continued employment,
and an additional two-year holding period applies,
during which time shares may not be sold, save to meetincome tax, NI or other regulatory obligations. Malus andclawback provisions apply during the vesting and holding
periods. The salary share award is not included in basesalary when calculating the CFO’s pension benefit.

The salary shares are granted as a fixed numberof shares. The number granted is reviewed andmay be adjusted by the Committee if there has
been a significant change in share price.
Where increases are awarded in excess ofthat for the general employee population, theCommittee will provide the rationale in therelevant year’s Annual Report on Remuneration.

PensionTo provide retirement
benefits.

The Group operates a Personal Pension Plan, a DefinedContribution Scheme.
This is available to all employees following completionof their probationary period.

In the UK, the Group matches employee
contributions up to a maximum of 6% of basesalary subject to an overall maximum employer
contribution of £15,000, or provides theequivalent value in cash. Base salary is the only
element of remuneration that is pensionable.

Other Benefits
To provide competitive
benefits.

Includes (but not limited to):Benefits may vary by role.

•

Death in service scheme.

•

Private medical cover.

•

Permanent health insurance.

•

Relocation, at the Committee’s discretion.

None of the existing Executive Directors
received total taxable benefits exceeding 5%of base salary during the most recent financial
year, and it is not anticipated that the cost of
benefits provided will exceed this level over
the term of this Policy.

All benefits are non-pensionable.

The Committee retains the discretion
to approve a higher cost in exceptional
circumstances (e.g. relocation), or incircumstances driven by factors outside theCompany’s control (e.g. material increases inhealthcare insurance premiums).

Admiral Group plc · Annual Report and Accounts 2019107

Directors’ Remuneration Policy continued

Purpose and link to strategy

Operation

Opportunity and performance metrics

Discretionary Free Share Scheme (DFSS)
To motivate andreward longer term
performance, aid longterm retention of key
Executive talent, use
capital efficiently, growprofits sustainably andfurther strengthen
the alignment of theinterests of shareholders
and staff.

Executive Directors may be granted awards annuallyat the discretion of the Committee. David Stevens has
declined to participate given his significant shareholding.
Awards may be in the form of nil or nominal priced
options or conditional shares. Awards vest after aminimum of three years subject to Group performanceand continued employment.
For DFSS awards made in 2018 and subsequent years, a
two-year holding period applies to vested awards, during
which time Executive Directors may not sell the vested
awards except to cover tax liabilities.
Awards are subject to malus and clawback provisions,i.e. forfeiture or reduction of unvested awards andrecovery of vested awards. Events which may lead tothe application of malus and clawback are set out in theGroup’s Malus and Clawback Framework and include
material financial misstatement, responsibility for
conduct which results in significant losses, material
failure of risk management and misconduct.
The Remuneration Committee has discretion to adjust
the formulaic vesting outcome to ensure the final
outcome is a fair and true reflection of underlying
business performance.

Maximum opportunity: £2,000,000. For awards
above £1,000,000 a maximum of 600% of basesalary (excluding any salary shares) applies.
Threshold performance will result in vestingof up to 25% of the maximum award.
DFSS shares are granted as a fixed numberof shares (subject to the quantum limits ofthe plan, as described above). The number
granted is reviewed and may be adjusted by
the Committee, for example, if there has
been a significant change in share price.
Vesting of DFSS awards is subject to theGroup’s performance over a three-year
performance period. The performancemeasures may include EPS, ROE and relative
TSR, or other measures selected by theCommittee, as appropriate. Measures will
typically be weighted equally unless theCommittee determines otherwise to reflect
strategic priorities. Details of the measures,
weightings and performance targets
used for specific DFSS grants are includedin the relevant year’s Annual Report on
Remuneration.

DFSS Bonus
To further align incentive
structures withshareholder interests
through the deliveryof dividend equivalentbonuses.

To incentivise shareholder value creation, in particularin the form of dividends, management participate ina bonus scheme which directly links their awards todividends paid to shareholders. Bonus is calculated to beequivalent to dividends that would have been payable
during the year on all outstanding DFSS shares awarded
but not vested, including salary shares for the CFO.

Maximum opportunity: sum equal to thedividends payable during the year on awarded
but unvested DFSS shares, subject also to apossible 20% increase based on performanceagainst a set of customer and risk measures.
No bonus is payable unless dividends arepayable on Admiral shares.

The DFSS bonus is subject to a +/- 20% adjustment
based on performance against a set of risk and customer
measures. The measures will be set each year for all
significant areas of the business with specified targets
to determine the amount of any DFSS bonus adjustment.
Many of these measures will be directly related tocustomer outcomes. Whilst the bonus may be adjusted
upwards or downwards by up to 20% in any given year, it
is not anticipated that the adjustment will increase
the Executive Directors’ remuneration on average overthe long term.
The DFSS bonus is subject to malus and clawback
provisions, i.e. forfeiture or reduction of unvested
awards and recovery of vested awards. Events which maylead to the application of malus and clawback are set
out in the Group’s Malus and Clawback Framework andinclude material financial misstatement, responsibility
for conduct which results in significant losses, material
failure of risk management and misconduct.
Approved Free Share Incentive Plan (SIP)
To encourage shareownership across all
employees using HMRC
approved schemes.

All eligible UK employees participate in the SIP (except
David Stevens, who has declined to participate). Grants
are made twice a year based on the results of each halfyear and vest after three years subject to continued
employment.

The SIP is an all-employee scheme andExecutive Directors participate on the sameterms as other employees. The acquisitionof shares is therefore not subject to thesatisfaction of a performance target.
Maximum opportunity is in line with
HMRC limits.

108

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Purpose and link to strategy

Operation

Opportunity and performance metrics

Guideline to be met within five years of the later ofthe introduction of the guidelines and an Executive
Director’s appointment.

300% of base salary (base salary
excludes any salary shares).

Shareholding Requirement
To align interests of
Executive Directors
with shareholders.

The Committee is satisfied that the above Remuneration Policy is in the best interests of shareholders and does not promote
excessive risk-taking. The Committee retains discretion to make changes required to satisfy legal or regulatory requirements andother non-significant changes to the Remuneration Policy without reverting to shareholders.

Notes to the Remuneration Policy table
Payments from Existing Awards
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the Remuneration
Policy. This includes all outstanding awards under the previous 2015 Remuneration Policy, or any awards made prior to appointment to
the Board. Details of any such payments will be set out in the Annual Report on Remuneration as they arise.
Selection of Performance Measures
Vesting under the DFSS is linked to financial metrics including EPS vs. LIBOR1, ROE, and relative TSR. EPS vs. LIBOR has been selected
as a performance measure as the Committee feels it is a strong indicator of both long-term shareholder return and the underlying
financial performance of the business. It is transparent and visible and provides good line-of-sight to Executives. ROE has been
selected as the Committee believes that a returns metric reinforces the focus on capital efficiency and delivery of strong returns forour shareholders, thereby further strengthening the alignment of incentives with Admiral’s strategy. Relative TSR vs. the FTSE 350(excluding investment companies) has been selected to reflect value creation for Admiral’s shareholders as compared with the generalmarket. For 2019 awards onwards, vesting of DFSS awards is also linked to non-financial customer and risk measures. The Committee
believes that the additional emphasis on risk and customer reinforces Admiral’s focus on risk management and our customers, whilst
also more clearly demonstrating alignment of Group remuneration practices with the requirements of Solvency II.
The specific performance measures and their respective weightings in respect of each DFSS award may vary to reflect the strategic
priorities at the time of the award.
Performance targets are set taking into account broker forecasts for Admiral and its insurance peers, the Company’s strategic
priorities and the economic environment in which the Company operates. The Committee believes that the performance targets set
are stretching and motivational, and that maximum outcomes are available only for outstanding performance.
Remuneration Policy for Other Employees
The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to the role size, experience
required, individual performance and pay levels in comparable companies.
In general, the Remuneration Policy which applies to other senior Executives is consistent with that for Executive Directors.
Remuneration is typically linked to Company and individual performance in a way that reinforces shareholder value creation.
Around 3,300 employees from across the Group, as well as the CFO, participate in the DFSS. The Committee recommends for approvalby the Board DFSS awards for those Executives within its remit and on an aggregate basis for all other participants in the DFSS. For the
CFO, all DFSS share awards are subject to performance conditions. For other senior managers and employees at lower organisational
levels, a proportion of awards (ranging from half to two-thirds) is subject to performance, with performance conditions either in linewith those described above, or set based on key performance drivers of the individual’s relevant business unit, and the remainder has
no performance conditions attached other than the requirement that the recipient remains an employee of the Group at the dateof vesting. Award sizes vary by organisational level and an assessment of both financial and non-financial individual and business unit
performance.
All holders of DFSS awards receive the DFSS bonus with the bonus for a number of senior managers, being adjusted for performanceagainst a scorecard of risk and customer measures.
The Company operates a personal pension scheme which is available to all employees once they have completed their probationary
period. For all employees including the Executive Directors, the Company matches the contribution up to a maximum of 6% of salary
up to an overall maximum of £15,000.
All UK employees who have served a minimum tenure at Admiral are eligible to participate in the SIP on the same terms. Most overseas
employees receive an equivalent award to the UK SIP awards and these awards have no performance measures attached.
1	Or equivalent measure

Admiral Group plc · Annual Report and Accounts 2019109

Directors’ Remuneration Policy continued
Remuneration Arrangements for David Stevens (Founding Director)
David Stevens is a founding Director, and he and the Committee continue to hold the view that his significant shareholding provides
sufficient alignment of his interest in the performance of the Group with the interests of other shareholders. In light of this, David
Stevens’ remuneration package consists only of a cash salary, benefits such as private medical cover, permanent health insurance anddeath in service cover, and matching pension contributions from the Company under the Group’s Personal Pension Plan. David Stevens
has not participated, nor is it intended that he participates, in any Group share schemes.

Service Contracts and Leaver/Change of Control Provisions
The Company’s Policy is to limit termination payments on termination to pre-established contractual arrangements. In the event thatthe employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of
the service contract between the Company and the employee, as well as the rules of any incentive plans. Under normal circumstances,
Executive Directors are entitled to receive termination payments in lieu of notice based on base salary and compensation for lossof benefits. The Company has the ability to pay such sums in instalments, requiring the Executive Director to mitigate loss over the
relevant period. The notice period for all Executive Directors is one year.
Executive Director

Date of appointment

David Stevens

22 October 1999

Geraint Jones

13 August 2014

There is no provision in the Executive Directors’ contracts for compensation to be payable on early termination of their contract over andabove the notice period element. The Executive Directors’ service contracts are available to view at the Company’s registered office.
When considering termination payments, the Committee reviews all potential incentive outcomes to ensure they are fair to bothshareholders and participants. The table below summarises how the awards under the DFSS and DFSS bonus scheme are typicallytreated in specific circumstances, with the final treatment remaining subject to the Committee’s discretion:
Plan

Scenario

Treatment of awards

Timing of vesting

DFSS

Resignation.

Awards lapse.

n/aDeath, injury or disability,
redundancy, retirement or any
other reasons the Committee
may determine.

Any unvested award will be pro-rated for time withreference to the proportion of the vesting period
remaining at termination, and performance, unless theCommittee determines otherwise.

Normal vesting date.

Change of control.

Any unvested award will be pro-rated for time withreference to the proportion of the vesting period
remaining at change of control, and extent to which
the Committee determines that the performance
conditions have been met or are likely to be met atthe point of change of control, unless the Committee
determines otherwise.

Immediately.

DFSS bonus

Plan

Salary shares(CFO only)

110

Resignation.

n/a

n/a

Death, injury or disability,
redundancy, retirement or any
other reasons the Committee
may determine.

Not payable after the event.

n/aChange of control.

Not payable after the event.

n/aScenario

Treatment of awards

Timing of vesting

Resignation.

Awards lapse.

n/aDeath, injury or disability,
redundancy, retirement or any
other reasons the Committee
may determine.

Any unvested award will be pro-rated for time withreference to the proportion of the vesting period
remaining at termination, unless the Committee
determines otherwise.

Normal vesting date,with Committee
discretion toaccelerate.

Change of control.

Any unvested award will be pro-rated fortime with reference to the proportion of
the vesting period remaining at change of control, atthe point of change of control, unless the Committee
determines otherwise.

Immediately.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

For all leavers (with the exception of in the event of termination for cause), in respect of vested DFSS and vested salary shareawards that are still subject to a holding period, awards will normally be released in full at the end of the holding period, though theCommittee has discretion to determine otherwise, taking into account the circumstances at the time.

Non-Executive Directors
The Company has entered into letters of appointment with its Non-Executive Directors (NEDs). Summary details of terms and notice
periods are included below.

NED

Term

Initial date of
appointment

Commencement of
current contract

Notice period

Annette Court

3 years

21 March 201226 April 2017

Three months

Mike Brierley

3 years

5 October 2018

5 October 2018

One monthOwen Clarke

3 years

19 August 201519 August 2018

One month

Andy Crossley

3 years

27 February 201827 February 2018

One month

Karen Green

3 years

14 December 201814 December 2018

One month

Jean Park

3 years

17 January 201417 January 2020

One month

Justine Roberts

3 years

17 June 201617 June 2019

One month

Manning Rountree

3 years

16 June 201516 June 2018

One month

The NEDs are not eligible to participate in the DFSS or DFSS bonus scheme and do not receive any pension contributions.
Details of the Policy on NED fees are set out in the table below:
Purpose and link to strategy

Operation

Opportunity and performance metrics

To attract and retain NEDsof the highest calibre withexperience relevant to theCompany.

Fees are reviewed annually.

Fee levels are set by reference to NED
fees at companies of a similar size andcomplexity. It is anticipated that NED
fee increases will normally be in line with
the increase for the general employee
population over the term of this Policy.

The Group Chairman fee is determined by the Committee
after consultation with the Executive Directors. The NED
fees are determined by the Group Chairman together with
the Executive Directors.
Additional fees are payable for acting as Senior Independent
Director or as Chair or member of a Board Committee asappropriate, and may be payable as appropriate in relation
to other additional responsibilities (e.g. attending meetings
overseas).
Fees are paid in a mix of cash and Company shares for theCompany Chair, and in cash for other Non-Executive Directors.
The Board retains discretion to vary the mix or determine thatfees are paid entirely in cash or Company shares.

In the event that there is a material
misalignment with the market or achange in the complexity, responsibility
or time commitment required to fulfil
a NED role, the Board has discretion to
make an appropriate adjustment to thefee level.
The maximum aggregate annual fee for
NEDs is capped at the limit provided for in
the Company’s Articles of Association.

Admiral Group plc · Annual Report and Accounts 2019111

Directors’ Remuneration Policy continued
Pay-for-Performance: Scenario Analysis
The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential
split between the different elements of pay under four different performance scenarios: ‘Minimum’, ‘On-target’, ‘Maximum’ and‘Maximum with share price growth’.
As described above, Admiral’s DFSS bonus is directly aligned with dividends received by our shareholders, with a final adjustment forrisk. Whilst the CFO’s final DFSS bonus outcome may be adjusted upwards or downwards for risk by up to 20% in any given year, it isanticipated that the average adjustment over the long term will be close to 0%. The figures shown in the chart below for the CFO’s
DFSS bonus therefore include the value of the actual DFSS bonus paid in 2019 as an illustration of the value he might receive. Under
all scenarios, potential reward opportunities are based on the Remuneration Policy, applied to salaries as at 1 January 2020.
Fixed Remuneration£2,500DFSS bonus
DFSS

£000

£2,00069%£1,50062%£1,000
25%

£500

£0

10%

35%

26%

13%

65%

49%

25%

Minimum

On-target

Maximum

21%

CFO: Geraint Jones

Maximum+50% share pricegrowth

100%

100%

100%

100%

Minimum

On-target

Maximum

Maximum+50% share pricegrowthCEO: David Stevens

The value of DFSS awards is calculated based on the average share price in the last three months of 2019 (£21.05) and the number of
DFSS shares awarded in 2019 (45,000 shares) and salary shares expected to be awarded in 2020 (5,000 shares).

112

Component‘Minimum’

Base salary•

Annual cash salary and salary shares (CFO only) for 2020

Pension•£15,000 annual contribution for CFO and CEO

Benefits•

Taxable value of annual benefits provided

DFSS

•

0% vesting

DFSS bonus•

Based on DFSS bonus paid in 2020 (for 2019 performance)

Admiral Group plc · Annual Report and Accounts 2019

‘On-target’•

20% average vesting‘Maximum’•

100% vesting‘Maximum withshare price growth’•Same as otherscenarios but with
50% share priceappreciation onsalary shares•

100% vesting plus
50% share priceappreciation

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Approach to Remuneration Relating to New Executive Director Appointments
External Appointments
In the case of appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration
as set out in the Policy Table. The Committee’s policy is to set the remuneration package for a new Executive Director in accordancewith the approved Remuneration Policy at the time of the appointment.
In determining the appropriate remuneration for a new Executive Director, the Committee will consider all relevant factors to ensurethat arrangements are in the best interests of the Company and its shareholders. Where an individual is appointed on an initial basesalary that is below market, any shortfall may be managed with phased increases over a period of time, subject to the individual’s
performance and development in the role. This may result in above-average salary increases during this period.
The Committee may also make an award in respect of a new Executive Director appointment to ‘buy out’ incentive arrangements
forfeited on leaving a previous employer. In doing so, the Committee will consider relevant factors including any performance
conditions attached to the forfeited awards and the likelihood of those conditions being met to ensure that the value of the buyout award is no greater than the fair value of the awards it replaces. The Committee may also avail itself of Listing Rule 9.4.2 R if
appropriate in respect of buy-out incentive arrangements.
Internal Appointments
Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the Policy
for external appointees, as detailed above. Where an individual has contractual commitments made prior to their promotion to theBoard, the Company will continue to honour these arrangements. Incentive opportunities for below-Board employees are typicallyno higher than for Executive Directors, but measures may vary if necessary.

Other Directorships
Executive Directors are permitted to accept appointments as Non-Executive Directors of companies with prior approval of the Group
Chairman. Approval will be given only where the appointment does not present a conflict of interest with the Group’s activities, andwhere the wider exposure gained will be beneficial to the development of the individual.

Considerations of Conditions Elsewhere in the GroupThe Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive
Directors.

Considerations of Shareholder Views
When determining remuneration, the Committee takes into account best practice guidelines issued by institutional shareholder
bodies. The Committee is open to feedback from shareholders on the Remuneration Policy and will continue to monitor trends
and developments in corporate governance and market practice to ensure the remuneration structure for our Executive Directors
remains appropriate.

Considerations of Regulatory Requirements
The Committee regularly reviews the Remuneration Policy and structure in the context of Solvency II remuneration guidance.
The Chief Risk Officer periodically attends Committee meetings as part of this process and provides support to the Committee inunderstanding any risk-related implications of remuneration decisions. Whilst the Remuneration Policy includes several features
which help ensure compliance with current regulatory guidance, the Committee reserves the discretion to adjust the Remuneration
Policy, and its execution, to take into account any developments in such regulatory guidance.

Admiral Group plc · Annual Report and Accounts 2019113

Annual Report on Remuneration

This section of the report provides detailsof how Admiral’s Remuneration Policy
was implemented in 2019 and how the
Remuneration Committee intends toimplement the Remuneration Policy in 2020.
Remuneration Committee Membership in 2019
The Board sets the Group’s Remuneration Policy and, through the authority delegated to it by the Board, the Committee is responsible
for making recommendations to the Board on the structure and implementation of the Remuneration Policy across the Group withconsideration to the prevailing economic climate within the economies in which the Group operates. Its remit includes recommending
the remuneration of the Group Board Chairman, the Executive Directors and the Company Secretary; approving the remuneration ofsenior management; and reviewing the composition of and awards made under the performance-related incentive schemes.
At the end of 2019 the Committee consisted of Owen Clarke, Jean Park and Justine Roberts. The Committee met seven times during
the year.
The Group Chairman, CEO, CFO and CRO are invited to meetings where the Committee considers it appropriate to obtain their advice
on Group strategy and performance and Senior Executive pay strategy. The members of the Committee do not have any personal
financial interests (other than shareholdings), or any conflicts, that relate to the business of the Committee. The Committee members
do not have any day-to-day involvement in the running of the Group.

Adviser to the Committee
During the year, in order to enable the Committee to reach informed decisions on Executive remuneration, advice on market
data and trends was obtained from independent consultants, Mercer Kepler. Mercer Kepler reports directly to the Committee
Chairman, and is a signatory to and abides by the Code of Conduct for Remuneration Consultants (which can be found at www.
remunerationconsultantsgroup.com). Other than advice on remuneration, no other services were provided by Mercer Kepler to theCompany. The fees paid to Mercer Kepler in respect of work carried out in 2019 (based on time and materials) totalled £113,598
excluding expenses and VAT.
The Committee undertakes due diligence periodically to ensure that Mercer Kepler remains independent of the Company and thatthe advice provided is impartial and objective. The Committee is satisfied that the advice provided by Mercer Kepler is independent.
The Company Secretary also circulates market survey results as appropriate.
In line with good governance practice, the Committee will be reviewing suppliers by conducting a tender for remuneration advice
services in 2020.

Summary of Shareholder Voting at the 2019 AGM
The table below shows the results of the binding vote on the Remuneration Policy at the 2018 AGM and the advisory vote on the 2018
Annual Report on Remuneration at the 2019 AGM.

Remuneration Policy(2018 AGM)
2018 Annual Report on Remuneration(2019 AGM)

114

Total number of votes% of votes cast
Total number of votes% of votes cast

Admiral Group plc · Annual Report and Accounts 2019For

AgainstTotal votes cast

Abstentions

214,282,051

2,306,994

216,589,045

136,24298.93%

1.07%

231,253,416

452,145

231,705,561

2,122,374

99.80%

0.20%

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Total Single Figure of Remuneration for Executive Directors (audited)
The table below sets out the total single figure remuneration received by each Executive Director for the years ended 31 December
2019 and 31 December 2018.
1. Basesalary2. Benefits

3. Pension

Total
fixed pay

4. SIP

5. DFSS

6. DFSS
bonus

Total
variable pay

Total
remuneration

2019£359,175£471£14,976£374,622£3,609£934,620£201,600£1,139,829£1,514,451

2018£343,225£488£14,700£358,413£3,600£919,800£180,000£1,103,400£1,461,813

2019£409,283£471£3,970£413,724

n/a

n/a

n/a

n/a

£413,724

2018£399,301£488£3,873£403,662

n/a

n/a

n/a

n/a

£403,662

Executive Director

Geraint JonesDavid Stevens*1*1 David Stevens does not participate in any incentive plan given his significant shareholdings.

The figures have been calculated as follows:
1.	Base salary/fee: amount earned for the year. For Geraint Jones, this also includes 2,500 salary shares awarded on each of 18 March
2019 and 30 August 2019 with a value of £54,375 and £53,675 which have been valued using closing share price at date of grant of£21.75 and £21.47 respectively. The 2018 values include the 2,500 salary shares granted on each of 9 March 2018 and 24 August
2018. These have been valued using closing share price at date of grant of £18.70 and £20.59 respectively. David Stevens received
a salary increase of 2.5% on 1 September 2019 which increased his annual salary to £416,048.
2.

Benefits: the taxable value of annual benefits received in the year.

3.

Pension: the value of the Company’s contribution during the year.

4.

SIP: the face value at grant.

5.	DFSS: the value at vesting of shares vesting on performance over the three-year periods ending 31 December 2019 and 31
December 2018. For the 2019 figures, given that vesting occurs after the 2019 Directors’ Remuneration Report is finalised, thefigures are based on the average share price in the last three months of 2019 (£21.05). The 2018 figures have been trued up
based on the actual share price on vest (£21.00). For 2019, a favourable movement of £130,980 is included in the DFSS value,
attributable to an increase in the share price over the vesting period. For 2018, £9,198 of the DFSS value is attributable to shareprice appreciation over the vesting period.
6.	DFSS bonus: the bonus equivalent to dividends that were paid during the year on all outstanding DFSS shares awarded but not yet
vested. The bonus is paid in two tranches annually. From the 2019 performance year the bonus is subject to a +/- 20% multiplierbased on a scorecard of customer and risk measures. Due to these timings and this being the first year of implementation of themultiplier, the multiplier was only applied to the October 2019 payment which the Committee approved based on the outcomes ofthe scorecard of risk and customer measures over the first half of 2019. The Committee also approved an adjustment to the bonus
expected to be paid in May 2020 based on the outcome of the scorecard of risk and customer measures over the second half of 2019.
Due to an administration error, the actual application of the adjustment to the October 2019 award was not executed; this error will
be rectified through the value of the adjustment (£8,593) being made to Geraint Jones’s DFSS bonus paid in June 2020.

Admiral Group plc · Annual Report and Accounts 2019115

Annual Report on Remuneration continued
Total Single Figure of Remuneration for Non-Executive Directors (audited)
The table below sets out the total single figure remuneration received by each NED for the year ended 31 December 2019 and 31
December 2018.
Total fees
2019
Director

Annette Court

2018

Fees

Taxable benefits

Fees

Taxable benefits£318,249£1,177£319,438£1,025Owen Clarke2£104,125–£88,100–

Karen Green£81,500£265£33,171–

Jean Park£106,500£1,026£101,500£737

Justine Roberts£70,500£284£60,500£134

Manning Rountree£73,100£729£73,100

£370

1

3

4

Andy Crossley

5,7Michael Brierley6,7
Colin Holmes£113,100£1,281£92,522£481£113,100£1,262£47,125

£697

n/a

n/a

£91,525£702

8

1.	The 2019 fee for Annette Court is £315,187 (a cash fee of £220,631 and a share fee of £94,556). The 2019 fee above includes a payment of £3,062 in respect of Annette
Court’s annual fee for 2018 which was paid for in 2019. The 2018 fee included an amount of £15,000 that related to 2017.
2.	Owen Clarke became the Senior Independent Director on 31 December 2019. His fee for undertaking this role is £11,025 which was paid on top of his base fee andCommittee fees.
3.	Karen Green was appointed to the Board on 14 December 2018 and became the Chair of the Audit Committee. Her fee for 2018 includes fees paid for Board andCommittee attendance from June 2018 prior to her formal appointment.
4.	Jean Park’s fees for 2018 and 2019 include additional fees relating to her position as Chair of the Group Risk Committee and is in recognition of the increased timecommitment required of her as a consequence of Solvency II regulations and the Internal Model Application Process.
5.

Andy Crossley was appointed to the Board on 27 February 2018.

6.

Michael Brierley was appointed to the Board on 5 October 2018 and his fee includes fees paid for Board and Committee attendance prior to his formal appointment.

7.	The fees for Andy Crossley and Michael Brierley include additional fees in relation to their positions as Chairman of the EUI Limited and Admiral Financial Services Limited
Board of Directors respectively
8.

Colin Holmes retired from the Board with effect from 14 December 2018.

Incentive Outcomes for Financial Year to 31 December 2019 (audited)
DFSS Awards Vesting on Performance to 31 December 2019
On 26 September 2017, Geraint Jones was granted an award under the DFSS of 50,000 shares with a value at the date of award of£905,000 (based on a grant date share price of £18.10), equivalent to 369% of salary at date of grant.
Vesting of the award was based 100% on the achievement of performance conditions, being EPS growth vs. LIBOR, TSR vs. FTSE
350 (excluding investment companies), and ROE, weighted equally and all measured over the three-year period 1 January 2017 to
31 December 2019. Over this period, the returns to our shareholders were strong, with TSR in the top of the second quartile versus
FTSE350 companies and with ROE of 54%. The combination of these shareholder returns and EPS growth contributed to a vestinglevel of 88.8%.
The Committee reviewed this vesting outcome and concluded that it was appropriate.
The table below details the Company’s performance against targets and the resulting vesting outcome.
Performance range
Performance measure

EPS growth vs. LIBOR(weighted 33%)

ThresholdGrowth in linewith LIBOR

Vesting schedule

Growth of 36 points 10% for achieving threshold(equivalent to 10% with straight line relationshipp.a.) in excess of
to 100% for maximum
LIBOR
performance

Actual outturn

Vesting outcome(% of maximum)

86.6 points
in excess of
LIBOR

100%

TSR vs. FTSE 350 (excluding
investment companies) (33%)

MedianUpper quartile

25% for median, with straightline relationship to 100% for
upper quartile

64th
percentile

68.4%

Return on Equity (ROE) (33%)

25%

55%

25% for achieving thresholdwith straight line relationshipto 100% for maximum
performance

54.2%

97.9%

Total vesting

116

Maximum

Admiral Group plc · Annual Report and Accounts 201988.8%

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Based on performance, the total amount that will vest to Geraint Jones in September 2020 will therefore be 88.8% of his award(i.e. 44,400 shares), subject to his continued employment on the vesting date.
Vested DFSS awards are subject to clawback provisions. Events which may lead to the application of clawback are set out in the Group’s
Malus and Clawback Framework and include material financial misstatement, responsibility for conduct which results in significant
losses, material failure of risk management and misconduct.

DFSS Bonus in Respect of 2019
In line with the Remuneration Policy, the Group paid a bonus to all holders of DFSS shares in 2019, which was equivalent to the dividend
payable on all outstanding DFSS shares awarded but not yet vested. The 2019 Bonus for the CFO also includes a +/- 20% adjustment
to the DFSS Bonus based on performance of a set of risk and customer metrics, which for 2019 was grouped into four categories
measured over two six-month periods as follows:
Category

What was considered

Weighting

Conduct Risk Management 11 different metrics covering claim settlement times, complaint volumes, complaint
Information (CRMI) metrics handling times, and % of fair customer outcomes identified through monitoring.

25%

Customer feedback

SMS customer scores.

25%

Governance outcomes

Metrics covering: risk event escalation, staff attrition, % of activity plans completed
for Risk, Audit and Compliance, audit report outcomes and support of initiatives.

25%

Internal stakeholder
feedback

Internal stakeholder feedback on Geraint Jones’s performance relating to risk
and customer outcomes.

25%

For the first three categories, quantitative data was assessed for various measures of performance relevant to the category and an
overall outcome is determined for that category. For the stakeholder feedback element of the scorecard, input was obtained from anumber of individuals within Admiral based on their assessment of the CFO’s performance to determine the outcome of this element.
Precise details of the measures used in the scorecard are not disclosed as the Committee considers them to be commercially sensitive.
The overall outcome was assessed to be a 108.8% multiplier to the DFSS Bonus paid for H1 2019 and a 113.3% multiplier to the DFSS
Bonus paid for H2 2019 (to be paid in 2020).
In addition, Geraint Jones’s DFSS bonus is subject to a further risk adjustment (negative only) to take into account risk events which areconsidered to have a material customer, regulatory or financial impact.
These outcomes reflect broadly on target performance across most of the categories set out above and a strong performance inH2 2019 on CRMI metrics, where the majority of the monthly assessments were deemed to be good with a small amount of ones for
improvement.
The overall DFSS Bonus paid to Geraint Jones for 2019 was £201,600 (2018: £180,000).
David Stevens did not receive a DFSS bonus as he does not participate in the DFSS.
DFSS bonus payments are subject to malus and clawback provisions.

Scheme Interests Granted in 2019 (audited)
DFSS
In September 2019, Geraint Jones was granted an award under the DFSS of 45,000 shares (a reduction from 50,000 in 2018) with a value
at the date of award of £945,000 (based on share price of £21.00, equivalent to 376% of base salary). Whilst the general intention for
the DFSS is to keep the number of DFSS shares granted to individual participants the same each year, the Committee reviewed during
2019 the aggregate quantum of DFSS awards offered to all employees and concluded that a 10% reduction in the number of shares
was appropriate to help ensure dilution to shareholders from the employee share schemes is managed effectively.
The three-year period over which performance will be measured is 1 January 2019 to 31 December 2021. The award is eligible to veston the third anniversary of the date of grant (i.e. September 2022), subject to performance and to continued employment. Vested
awards will be subject to an additional two-year post vest holding period. David Stevens again declined to be included given his
significant shareholding.

Admiral Group plc · Annual Report and Accounts 2019117

Annual Report on Remuneration continued
The award will vest on three-year EPS growth vs. LIBOR†, TSR vs. FTSE 350 (excluding investment companies), ROE and a scorecard ofrisk and customer measures. The performance conditions are summarised in the table below.
Performance range
Performance measure

WeightingThresholdMaximum

Vesting

EPS growth vs. LIBOR

26.67%

Growth in line with LIBOR

Growth of 36 points(equivalent to 10%p.a.) in excess of
LIBOR

10% for achieving threshold withstraight line relationship to 100%for maximum performance

TSR vs. FTSE 350(excluding investmentcompanies)

26.67%MedianUpper quartile

25% for median, with straight line
relationship to 100% for upper
quartile

Return on Equity (ROE)

26.67%

25%55%

25% for achieving threshold withstraight line relationship to 100%for maximum performance

Scorecard of risk andcustomer measures

20%

Vesting of between 0% and 100% of this element is based on the aggregate outcomesof the scorecard of risk and customer measures, used to determine the DFSS Bonus adjustments,
over the 3-year performance period. Further details of the aggregation of the scorecard of risk
and customer measures will be provided upon vesting

DFSS awards are subject to malus and clawback provisions, i.e. forfeiture or reduction of unvested awards and recovery of vested
awards. Events which may lead to the application of malus or clawback are set out in the Group’s Malus and Clawback Frameworkand include material financial misstatement, responsibility for conduct which results in significant losses, material failure of risk
management, business failure and misconduct.
SIP
In March and August 2019, Geraint Jones was granted awards under the SIP of 84 shares with a face value of £1,827, and 83 shareswith a face value of £1,782 respectively. The shares will vest on 18 March 2022 and 30 August 2022 respectively subject to continued
employment only. David Stevens again declined to be included given his significant shareholding.

Exit Payments (audited)
No exit payments were made to an Executive Director during the year.

Payments to Past Directors (audited)
No payments were made to a past Director during the year.

Implementation of Remuneration Policy for 2020
Executive Directors
Salary, Pension and Benefits
Salaries for the Executive Directors in 2020 will be determined in line with the proposed Remuneration Policy, subject to shareholder
approval. David Stevens’ salary will be increased by 2.5%, effective 1 September 2020. The CFO’s cash salary was increased by 2.7%
effective 1 January 2020 to £258,000, and he will continue to be granted an award of 5,000 salary shares, unchanged from 2018and 2019. These will be granted in two tranches of 2,500. The salary share award will vest after three years subject to continued
employment. An additional two-year holding period will apply, during which time shares may not be sold, save to meet income tax,
NI or other regulatory obligations. Malus and clawback provisions will apply during the vesting and holding periods. The salary shareaward is not included in base salary when calculating the CFO’s pension benefit.
The Executive Directors will continue to participate in the Group Personal Pension Plan, where employee contributions are matched up
to a maximum 6% of base salary with a cap on the maximum employer contribution of £15,000 p.a. The Company will offer individuals a
choice between pension contributions and cash in lieu. Both Executive Directors will continue to receive benefits in line with the Policy.

†

118

Or equivalent measure

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

DFSS
As in prior years, the Committee intends to make an award under the DFSS to Geraint Jones in September 2020. In advance of each
DFSS cycle, the Committee reviews the appropriateness of the performance measures and corresponding targets. The Committee
will determine the award size for the 2020 DFSS award closer to the award date (expected to be in September 2020). In determining
whether the award size should differ from the number of shares offered under the 2019 award (45,000), the Committee will review
if any large share price changes over the year is due to external factors out of management control. This will be disclosed in the2020 Annual Report on Remuneration. It is currently anticipated that the vesting of 2020 DFSS award for the CFO will continue to beassessed across the three-year performance period depending 80% on three-year EPS growth vs. LIBOR†, TSR vs. FTSE 350 (excluding
investment companies) and ROE, and 20% on customer and risk measures. As per award size, the Committee will determine theperformance conditions and targets to be attached to the 2020 DFSS award closer to the award date, and will disclose them in the2020 Annual Report on Remuneration.
DFSS bonus
As in prior years, Geraint Jones will be eligible to receive a DFSS bonus in 2020. The bonus is calculated to be equivalent to dividends
that would have been payable during the year on all outstanding DFSS shares and any salary shares awarded but not vested. The DFSS
bonus will include a +/- 20% adjustment based on performance against a scorecard of customer and risk measures. The details of themeasures and any adjustment applied will be provided in the 2020 Annual Report on Remuneration.
Chair and Non-Executive Directors
Fees for the Board Chair and other Non-Executive Directors were reviewed in January 2020 having been last reviewed in 2018.
Increases were made, effective 1 January 2020, to the Chair fee and the Remuneration Committee Chair fee to reflect the increased
time commitment of these roles.

Chair
NED base fee

2020 fee (p.a.)2019 fee (p.a.)£326,2181£315,187£65,000£60,500

Additional fee for chairing:•

Audit Committee£21,000£21,000•

Group Risk Committee£41,000

2£41,0002•

Remuneration Committee£19,000£15,000•

Nomination and Governance Committee£10,000£10,000

Additional fee for membership of:•

Audit Committee£12,600£12,600•

Group Risk Committee£12,600£12,600•

Remuneration Committee£10,000£5,000•Nomination and Governance Committee

Additional fee for being Senior Independent Director£5,000£5,000£13,500£11,025

1.	The 2020 fee for the Board Chairman increased by 3.5% from £315,187 to £326,218 and comprises a cash fee of £228,353 and a share fee of £97,865 with which the Chair isrequired under a Share Agreement entered into with the Group to use the net proceeds in two equal instalments to purchase Group shares after the Group’s Full Year Resultsand Half Year Results are announced each year. The Board Chair does not receive any additional fees (e.g. for Committee membership) as these are included in the overall
Chair fee.
2.	The fee payable for 2019 and 2020 to Jean Park includes an additional fee of £20,000 per annum in recognition of the continued increased time commitment required as aconsequence of the Solvency II regulations and Internal Model Application Process.

†Or equivalent measure

Admiral Group plc · Annual Report and Accounts 2019119Annual Report on Remuneration continued
Percentage Change in CEO Remuneration
The table below shows the percentage change in CEO remuneration from 2018 to 2019 compared to the average percentage change
in remuneration for all other employees. The analysis is based on a consistent set of employees, i.e. the same individuals appear in the2018 and 2019 populations. As the CEO does not participate in the DFSS bonus scheme, to provide a meaningful comparison we havealso included data for the CFO who receives DFSS awards.

CEO

SalaryTaxable benefits
DFSS bonus

Other
employees

CFO

2019

2018

% change

2019

2018

% change% change£409,283£399,301+2%£359,175£343,225

+5%

+6%2

£471

£488

-3%

£471

£488

-3%

-3%

–

–

£201,600£180,000

+12%

-2%

1

1.	DFSS bonus change represents the change in dividends paid plus any adjustment for performance against a scorecard of risk and customer measures for 2019 bonus for the
CFO and other senior managers, which is the driver of the level of bonus payable to holders of unvested DFSS shares.
2.	The employee salary change figure of 6% reflected increases, particularly in respect of employee basic pay, that were made to recognise movements in the Minimum Wageand adjustments to reflect local market pressures.

CEO and CFO pay ratio
The table below sets out the pay ratios for the CEO and CFO for the periods ended 31 December 2018 and 31 December 2019.
CEO Pay Ratio
Year

MethodLower quartile

MedianUpper quartile

2019

Option A

17:1

15:1

10:1

2018

Option A

18:1

15:1

11:1

MethodLower quartile

MedianUpper quartile

2019

Option A

62:1

54:1

38:1

2018

Option A

62:1

54:1

38:1

CFO Pay Ratio
Year

The lower quartile, median and upper quartile employees were determined using calculation methodology A which involved
calculating the actual full-time equivalent remuneration for all UK employees for 2019. From this analysis, three employees were thenidentified as representing the 25th, 50th and 75th percentile of the UK employee population. Admiral chose this method as it is thepreferred approach of the government and that of investor bodies and Admiral had the systems in place to undertake this method.
It is also consistent with the approach used to calculate the ratios (on a voluntary basis) for 2018.
The Committee has considered the pay data for the three employees identified and believes that it fairly reflects pay at the relevant
quartiles amongst our UK workforce. The three individuals identified were full time employees during the year. None received an
exceptional incentive award which would otherwise inflate their pay figures. No adjustments or assumptions were made by theCommittee with the total remuneration of these employees calculated in accordance with the methodology used to calculate thesingle figure of the CEO and CFO. It should be noted that the lower quartile and median employees were not in receipt of DFSS bonus
and/or DFSS vesting in the year.
The employee pay levels for 2019 are detailed below:

SalaryTotal Remuneration

1

CEO

CFO

P25 (lower quartile)P50 (median)

P75 (upper quartile)£409,283£359,175£18,450£22,990£25,350£413,724£1,514,480£24,319£27,980£40,371

1.	The single figure of remuneration for the CEO and CFO includes actual salary and pension costs paid during 2019, in line with The Companies (Miscellaneous Reporting)regulations 2018. For other employees, salary and pension costs are included on an FTE basis, in line with the legislation. While the basis of calculation differs between CEO/CFO and other employees, management considers this a fair comparison of remuneration.

The pay ratios for 2019 vs. 2018 have remained consistent. As the CEO declines to participate in the share schemes, movements in his
remuneration and hence the CEO pay ratio are relatively modest. A significant proportion of the CFO’s remuneration is dependent on
the Company’s performance and therefore it may vary more materially, resulting in movements in the CFO pay ratio from year to year.
However, the reward policies and structures applying to the CFO are broadly aligned with those of the wider workforce and therefore
consistent performance is likely to lead to a broadly consistent CFO pay ratio, as evident in 2019.

120

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Relative Importance of Spend on Pay
The table below shows the percentage change in dividends and total employee remuneration spend from the financial year ended
31 December 2018 to the financial year ended 31 December 2019.
2019
£m

2018
£m

% change

Distribution to shareholders

401

357

+12%

Employee remuneration

419

382

+10%

The Directors are proposing a final dividend for the year ended 31 December 2019 of 77.0 pence per share bringing the total dividendfor 2019 to 140.0 pence per share (2018: 126.0 pence per share).

Pay for Performance
The following graph sets out a comparison of Total Shareholder Return (TSR) for Admiral Group plc shares with that of the FTSE 100
and FTSE 350 indices, of which the Company is a constituent, over the ten-year period to 31 December 2019. The Directors consider
these to be the most appropriate indices against which the Company should be compared. TSR is defined as the percentage changeover the period, assuming reinvestment of income.

10-Year TSR Performance: Admiral vs. FTSE 100 and FTSE 350 indices
Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2019
£400
£350
£300
£250
£200
£150
£100
£50
£0
Dec 09Dec 10AdmiralCEO
Incumbent
CEO single figureof remuneration
DFSS vesting outcome(% of maximum)

CFO
Incumbent
CFO single figureof remuneration
DFSS vesting outcome(% of maximum)

Dec 11

Dec 12

FTSE 350

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

Dec 18Dec 19FTSE 100

2010

2011

2012

2013

2014

2015

2017

2018

2019

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt1

David
Stevens2

David
StevensDavid
StevensDavid
Stevens£343,106£358,199£373,759£387,546£393,260£397,688£148,776£246,023£395,019£403,662£413,724

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

2010

2011

2012

2013

2015

2016

2017

2018

2019

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

Geraint
Jones3

Geraint
Jones

Geraint
Jones

Geraint
Jones

Geraint
Jones

Geraint
Jones£1,269,535£1,048,130£1,431,218£1,444,443£1,204,164£363,551£539,704£599,139£1,184,445£1,461,8134£1,514,451

100%

100%

100%

100%

70%

85%

69%

50%
and 0%

74.2%

87.6%

88.8%5

2014

2016

1.

Henry Engelhardt stepped down from the Board on 13 May 2016. His 2016 remuneration includes salary and benefits in respect of his service as CEO.

2.

David Stevens was appointed as the CEO on 13 May 2016. His 2016 remuneration includes salary, pension and benefits in respect of his service as CEO.

3.	Geraint Jones was appointed to the Board as CFO on 13 August 2014. His 2014 remuneration includes salary, pension and benefits in respect of his service as CFO, his full year
DFSS and his full year DFSS bonus.
4.

This figure has been trued up since the 2018 report for the value of the 2016 DFSS based on the actual share price on vest (£21.00).

5.

88.8% of Geraint Jones’ 2017 DFSS award will vest in September 2020 subject to his continued employment on the vesting date.

There are no annual bonus outcomes to report in the table as the Admiral DFSS Bonus is not structured as a traditional annual bonus
scheme and consequently a vesting outcome (as a percentage of max) is meaningless.
Admiral Group plc · Annual Report and Accounts 2019121

Annual Report on Remuneration continued
Dilution
The Company currently uses newly-issued shares to fund the DFSS, SIP and salary shares. The Company has controls in place to ensurethat shares awarded under the incentive schemes operated by the Company within any rolling ten-year period do not exceed 10%of the number of ordinary shares in the capital of the Company in issue at the time of each award. It is currently anticipated that a
combination of attrition and actual vesting will result in dilution of less than 10%. As required by the rules of our share schemes, theCompany will in any event ensure that the actual dilution level does not exceed 10% in any rolling ten-year period by funding of any
vested (and future) share scheme awards as appropriate with market-purchased shares.

Interests held by Directors (audited)
The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors are required to acquire andretain a beneficial shareholding in the Company equal to at least 300% of base salary (excluding salary shares, where applicable), which
can be built up over a period of five years from the later of the introduction of the guidelines and the individual’s date of appointment.
All Executive Directors currently hold shares in excess of the guideline.
As at 31 December 2019, the Directors held the following interests:
Shares held
Beneficiallyowned outright

Subject tocontinued
employment only

Subject toperformance
conditions

Shareholding
requirement(% of salary)

Current
shareholding(% of salary)

Requirement met?

Geraint Jones

78,5091

54,4002

95,000

300%

>300%

Yes

David Stevens

8,877,950

n/a

n/a

300%

>300%

Yes

Annette Court

8,760

Owen Clarke

142,852

Director

Jean Park

4,000

Justine Roberts–

Manning Rountree–

Andy Crossley

1,079

Mike Brierley

2,321

Karen Green–1.

Total includes SIP shares both matured and awarded.

2.	Total reflects shares from the 2017 DFSS award (performance test has been applied, and award is due to vest in September 2020) and salary shares awarded in2018 and 2019.

There have been no changes to Directors’ shareholdings since 31 December 2019.
None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of
the Group.

122

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Current CFO Geraint Jones’ Interests in Shares under the DFSS and SIP and salary share awards (audited)Type

At startof yearAwardedduring year

Vested/maturedduring year

At end ofyear

Price ataward (£)

Value at award
date (£)

Value at 31
Dec 2019 or
maturity (£)

Date of Award

Final vesting/maturity date

DFSS

50,000–43,800–£20.79£1,039,500£919,8001

26/09/2016

26/09/2019

DFSS

50,000––50,000£18.10£905,000£1,154,500

26/09/2017

26/09/2020

DFSS

50,000––50,000£20.40£1,020,000£1,154,500

26/09/2018

26/09/2021

DFSS

–

45,000–45,000£21.00£945,000£1,039,050

26/09/2019

26/09/2022

Salary Shares

–

2,500

–

2,500

£18.70£46,750£57,725

09/03/2018

09/03/2021

Salary Shares

–

2,500

–

2,500

£20.59£51,475£57,725

24/08/2018

24/08/2021

Salary Shares

–

2,500

–

2,500

£21.75£54,375£57,725

18/03/2019

18/03/2022

Salary Shares

–

2,500

–

2,500

£21.47£53,675£57,725

30/08/2019

30/08/2022

SIP

92

–

92

–

£19.47£1,791£1,932

11/03/2016

11/03/2019

SIP

87

–

87

–

£20.51£1,784£1,88002/09/2016

02/09/2019

SIP

95

–

–

95

£19.08£1,813£2,194

17/03/2017

17/03/2020

SIP

85

–

–

85

£21.08£1,792£1,96318/08/2017

18/08/2020

SIP

96

–

–

96

£18.70£1,795£2,217

09/03/2018

09/03/2021

SIP

87

–

–

87

£20.59£1,791£2,00924/08/2018

24/08/2021

SIP

–

84

–

84

£21.75£1,827£1,94018/03/2019

18/03/2022

SIP

–

83

–

83

£21.47£1,782£1,91630/08/2019

30/08/2022

1.

The value at maturity relates only to shares vested.

The closing price of Admiral shares on 31 December 2019 was £23.09 per share.

By order of the Board,

Owen Clarke
Chairman of the Remuneration Committee
4 March 2020

Admiral Group plc · Annual Report and Accounts 2019123

Directors’ Report

The Directors present their Annual Report and the audited
Financial Statements for the year ended 31 December 2019.

Section

See
Page

Employee polices

124

Customers

06

Business Model

16

Stakeholder Engagement

18

Our People

08

Being a responsible business60

Remuneration report

102

Strategic report

12

Corporate Governance report74

Statutory disclosures
Group results and dividends
The profit for the year, after tax but before
dividends, amounted to £428.4 million(2018: £390.5 million).
The Directors declared and paid dividendsof £367.8 million during 2019 (2018 £332.7
million) – refer to note 12b for further
details.
The Directors have proposed a final
dividend of £221.5 million (77.0 pence pershare). Subject to shareholders’ approvalat the 2020 Annual General Meeting (AGM),
the final dividend will be paid on 1 June
2020 to shareholders on the register at theclose of business on 11 May 2020.
Employee policies
Detailed information on the Group’s
employment practices is set out in theStrategic Report and on the corporatewebsite. The Group purchases appropriate
liability insurance for all staff andDirectors.
Engagement with employees
The Board recognises the importance ofengaging with its workforce and does sothrough a combination of informal andformal channels. In order to ensure that
there is an effective means by which theviews of the workforce can be heard, theBoard has sought to enhance and formalise124

its existing employee engagement
arrangements with the establishment of
an Employee Consultation Group (ECG).
Membership of the ECG comprises electedstaff representatives and the remit of
the ECG is to act as a forum for staff
consultation, gathering staff opinion andfostering a safe environment to raise
matters of interest and generate ideas.
There were five ECG meetings during theyear with a range of topics discussed.
The three meetings from June were eachattended by a different Non-Executive
Director who reported back to the Boardon the matters discussed and the actions
that had been agreed at the meeting. It
is intended that there will continue tobe a different Non-Executive Director
attending each ECG meeting, on rotation.
Having different Non-Executive Directors
attending each meeting gives all ofthem an opportunity to engage with theworkforce directly and to hear first-handthe issues and matters that are affecting
employees.
In addition, representatives from the
ECG, together with the Chair of the ECG,
regularly attend Board meetings tohighlight matters discussed and any areasof concern. Through this interaction,
the Board has been able to have regard
to the views of employees when making
decisions such as measures introduced
to safeguard the Group’s culture such asincreased flexible working opportunities
for employees. Further work is ongoingto ensure that existing work forums
for employees of the Group’s overseas
businesses are aligned with the operationof the ECG.
The Board has determined that theoperation of the ECG is an effective meansof engaging with employees in order tounderstand the matters that concern
them and are able to have regard to thespecific interests of employees in thedecisions that are made at Board level. The
Board will ensure that the ECG continues
to develop and evolve as an effective
employee engagement forum and that
regular interaction with the Board ismaintained.

Admiral Group plc · Annual Report and Accounts 2019

Communication
There are a wide range of communication
tools used by the Group to communicate
matters that concern employees whichassists in the understanding of businessgoals and objectives and economic
and financial factors affecting theperformance of the Group including;through the staff portal (Atlas), internal
newsletters, videos, team briefings,
suggestion schemes, staff forums, updates
on the staff share scheme and the annual
Staff General Meeting (SGM).
In the 2019 annual staff survey, 83%
of staff were happy with the amountof information they receive about theCompany (2018: 84%).
The transparency of our communication
philosophy extends to senior managers
and Directors, who sit amongst their teams
which encourages a dialogue between
staff of all levels of seniority across allareas of our business. Furthermore, ourChief Executive Officer (CEO) operates an‘open door’ policy so if any member of ourstaff wants to ask him a question, they canemail him directly through our ‘Ask David’
intranet initiative. Our senior managers
and Directors also participate in regularonline chats with staff.
For information on how the Directors
have engaged with employees during thefinancial year and how Directors have
had regard to employee interests during
the financial year when making strategic
decisions, please refer to the Strategic
Report on page 15.
The Group encourages involvement in
the performance of the business throughthe participation by the majority of
the Group’s employees in the Group’s
Share Incentive Plan (SIP) under which
they are given shares in the Company.
This share ownership gives employees agood understanding of the financial andeconomic factors that could affect theCompany’s performance.

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Engagement with customers,
suppliers and others
During the year, the Board has continued
to focus on, and take into account in thedecisions that it makes, the relationships
with its customers, employees, suppliers,
business partners, the wider communityand other stakeholders. The Board
recognises that there are a wide range ofbusiness relationships that are importantto the long-term success of the business.
Further information on Board engagementwith the Group’s stakeholders can be foundin the s172 statement in the Strategic
Report on page 18.
The customer remains central to theGroup’s culture and the Board consideredcustomer outcomes at a presentation
it received in April, which focused on
the customer centric measures andmonitoring that is already in place toensure that customers are treated fairly
and that their needs are met. As a result of
the presentation the Board had a greater
understanding of the need to invest in
tools and initiatives that would enable
customer service agents to have the ability
to continue to provide excellent service forcustomers. In addition, the Board asked fora further update, which was provided to
the Board in August. The update extended
to cover the Group’s pricing practices
framework which was set up to produce
fair outcomes for its customers, enabled
the Board to understand the outcomes oncustomers of our pricing practices.
In addition, the Board also considered
the channels to its distribution partners
brought about by improvements intechnology and disrupters entering theinsurance market. During the year, theBoard also visited one of the garages that
forms part of the Group’s garage repair
network to see at first-hand how theGroup’s strategy for the future in this area
was being implemented. The Board agreed
that the visit had been extremely valuable
in increasing their understanding of thispart of the claims process and agreed thatfurther such visits should be organised in
the future.
The relationship with the Group’s
reinsurance and co-insurance partners
are integral to the long term strategy
decisions made by the Board, particularly
as regards to the discussion and approvalof the Group’s five year business planand the established reinsurance and coinsurance arrangements that the Grouphas in place which are a key part of theGroup’s business model.

Diversity, ethics and human rights
Admiral Group respects and values
the individuality and diversity of every
employee. The Group’s Equality, Diversity
and Dignity at Work policy ensures thatevery employee is treated equally andfairly and that all employees are awareof their obligations. The Group is fullycommitted to the health and safety
and the human rights of its employees
regardless of their background. In addition,
the Group maintains a number of employee
codes of conduct regarding appropriate
ethical standards in the workplace.
The Group’s principles of respect forhuman rights, diversity, health and safety
and workplace ethical standards not
only apply to staff directly employed by
Admiral, but also to staff employed by theGroup’s outsourced partner in Bangalore,
India. To meet this commitment, AdmiralGroup maintains regular contact with
its outsourcer’s management team andthe Group’s senior managers visit theoutsourcer on a regular basis, whilst
the Group also provides training anddevelopment to ensure that the teamuphold these principles. In addition, AdmiralGroup has appointed a manager based
permanently at the outsourced operation,
who is responsible for ensuring that theGroup’s principles are adhered to by theoutsourced partner, and that the wellbeingof outsourced staff is monitored.
Admiral has signed up to the Women in
Finance Charter and was named the 3rdplace in the Great Place to Work for Womenin 2019. Our Diversity Forum promotes
gender equality in the workplace and has
been instrumental in driving improvementsin the Group’s parental leave policy. 2019
also marked the 20th year of Company
sponsorship for Cardiff Pride and saw
the launch of a social network for LGBT
employees. The Company also celebrated
LGBT History Month in February 2019
hosting an exhibition of Welsh LGBT+ Icons
and Allies at the Cardiff office. February
2019 also saw the launch of training
sessions for managers to raise awareness ofgender identity.

any individual employee, Board member,
agent or other person or body on theGroup’s behalf. The Group’s Anti Bribery
Policy is reviewed and approved by the
Board on an annual basis to ensure thatthe arrangements in place to prevent
bribery are operating effectively and that
the Policy supports the development of aculture where business is conducted fairly,
honestly and openly.
All staff receive compulsory anti-bribery
training when they join the Group andrefresher training is provided on anannual basis. In addition, the Group hasvarious forums that allow employees tocommunicate directly with managers on an
informal, and, if necessary, an anonymousbasis, that helps to create an environment
where staff feel comfortable raising
matters that are of concern to them.
Gender diversity
The table below provides a breakdownof the gender of Company Directors andemployees at the end of the financial year:

Company
Directors1

Male

Female6

4Other senior
managers2

29

15

All employees

5,498

5,748

Notes
1	Company Directors consists of the Board of
Directors, as detailed on pages 76 to 77.
2	Other senior managers is as defined in the
Companies Act 2006 (Strategic Report andDirectors’ Report) and includes persons responsible
for planning, directing or controlling the activitiesof the Company, or a strategically significant partof the Company, other than Company Directors.
Any other Directors of undertakings included in
the consolidated accounts that are not consideredstrategically significant have not been included.

Further information on the Group’s
approach to diversity is also set out in the
Nomination and Governance Committee
section on page 100.

Anti-Bribery
The Group’s Anti Bribery policy strictly
prohibits the solicitation or theacceptance of any bribe, whether cash
or inducement, to or from any personor Company, wherever they are situated
and whether they are a public official or
body or private person or Company, byAdmiral Group plc · Annual Report and Accounts 2019125

Directors’ Report continued
Disabled employees

Greenhouse gas emissions

Admiral Group gives full and fairconsideration to applications for
employment made by those withdisabilities, having regard to their
particular aptitudes and abilities. AdmiralGroup’s UK businesses are Disability
Confident Employers. This means they arerecognised as going the extra mile to makesure disabled people get a fair chance.

The annual level of greenhouse gas
emissions, resulting from activities forwhich the Group is responsible, was 3,720
CO2e (2018: 3,926 CO2e), equivalent to 0.36
tonnes (2018: 0.39 tonnes) per employee*1.
In accordance with GHG Protocol Scope 2
guidance released 20 Jan 2015, Admiral is
exempt from reporting greenhouse gas
emissions from electricity supply to thethree largest UK offices which meets the
GHG Protocol Corporate Standard. Note
that, L’olivier in France and Elephant in theUSA, have been unable to provide data for2019 and are excluded from the results inthis and future reports until they are able
to do so. LeLynx in France is also excluded
but is immaterial to the overall view due toits size.

The Group will support any employee who
is disabled or has a life threatening illness
and help them to contribute to the Group
as long as their health allows.
Managers in the Group are sensitive tohealth concerns and special needs and will
not knowingly allow any employee witha disabling or life threatening illness to
suffer from discrimination at work. The
Group provides staff with access to the
EAP Care First confidential helpline which
offers advice and support on a range ofhealth issues.
Admiral has a Disability Forum to help
promote inclusivity in the Group for thosewith a disability. In 2019 the Company
was awarded Level 2 status of the
Disability Confident Award. In June 2019
we created a Workplace Support Team toprovide support for those with physicaldisabilities, neurodiversity and short-term
mental health problems. Training sessions
were also introduced for staff in 2019
to help better understand those withneurodiversity.
Contractual arrangements
The Group considers its co-insurance andreinsurance contracts, as described in theStrategic Report, to be essential to therunning of the Group’s business. A numberof these arrangements include featuresthat allow for reinsurers to recoverlosses incurred under certain scenarios
considered remote by the Group Board.
No other contractual arrangements are
considered to be essential.
Financial instruments
The objectives and policies for managing
risks in relation to financial instruments
held by the Group are set out in note 6 to
the Financial Statements.
Directors and their interests
The present Directors of the Company are
shown on pages 76 to 77 of this Report,
whilst Directors’ interests in the sharecapital of the Company are set out in the
Remuneration Report on pages 102 to 123.

The data has been prepared with reference
to the WRI/WBCSD Greenhouse Gas
Protocol: A Corporate Accounting andReporting Standard (Revised Edition)and in accordance with the guidancefor corporate reporting issued by the
Department for Environment, Food andRural Affairs (DEFRA).
There are no material exclusions from thisdata. Exclusions included figures for air
conditioning from all sites because theinformation was not available from the
managing agents of the Group’s multiple
office locations.
Detailed information on the Group’s
environmental performance and themethodology for the measurement ofgreenhouse gas emissions is available on
the corporate website, www.admiralgroup.
co.uk.

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. The
Strategic Report also includes the Group’s
principal risks and uncertainties. In
addition, the governance report includes
the Directors’ statement on the viability of
the Group over a three year period.
Following consideration of the above, theDirectors have reasonable expectationthat the Group has adequate resources tocontinue in operation for the foreseeable
future, a period of not less than 12 months
from the date of this report, and that it istherefore appropriate to adopt the going
concern basis in preparing the Financial
Statements.

Share Capital, AGM andrelated matters
Major Shareholders
Other than as stated below, as far as theCompany is aware, there are no persons
with significant direct or indirect holdingsin the Company. Information provided to
the Company pursuant to the Financial
Conduct Authority’s (FCA) Disclosure andTransparency Rules (DTRs) is published on a
Regulatory Information Service and on the
Company’s website.
At 31 January 2020, the Company hadreceived notifications in accordance with
the FCA’s DTRs of the following notifiableinterests in the voting rights in the
Company’s issued share capital:

Going concern
Under Provision 30 of the 2018 UK
Corporate Governance Code, the Board isrequired to report on whether the businessis a going concern. In considering thisrequirement, the Directors have taken into
account the following:• The Group’s projections for the next
12 months and beyond, in particular
the profit forecasts, regulatory capitalsurpluses and levels and sources ofliquidity.
• The risks included on the Group’s
risk register that could impact on
the Group’s financial position andperformance, levels of liquidity andsolvency over the next 12 months.

*1	Average employee number excludes employees from offices for which data could not be collected126• The risks on the Group’s risk registerthat could be a threat to the Group’sbusiness model and capital adequacy.

Admiral Group plc · Annual Report and Accounts 2019

Munich Re

Numberof shares%

30,099,400

10.2

Henry Engelhardt &Diane Briere de l’Isle

28,105,472

9.6BlackRock Inc

15,663,084

5.5

N.M. Rothschild & Sons Ltd.

13,068,697

4.5

Moondance Foundation

11,400,000

3.9

Orbis Group

8,212,592

2.8

The Vanguard Group, Inc

7,981,615

2.7

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

Company Overview
Strategic Report

Corporate Governance
Financial Statements
Additional Information

Additional information for shareholders
Where not provided previously in thisDirectors’ Report, the following provides
the additional information required
for shareholders as a result of theimplementation of the Takeovers
Directive into UK law.
At 31 December 2019, the Company’s
issued share capital comprised a single
class of shares referred to as ordinary
shares. Details of the share capital andshares issued during the year can befound in note 12d.
The rights and obligations attached to theCompany’s ordinary shares are set out in
the Articles of Association of the Company,
copies of which can be obtained from
Companies House.
On a poll, every member present in personor by proxy and entitled to vote shall haveone vote for every ordinary share held. The
notice of the general meeting specifies
deadlines for exercising voting rights
either by proxy notice or present in personor by proxy in relation to resolutions to bepassed at general meeting. All proxy votes
are counted and the numbers for, against
or withheld in relation to each resolution
are announced at the Annual General
Meeting and published on the Company’s
website after the meeting.
There are no restrictions on the transfer ofordinary shares in the Company other than:• Certain restrictions may from time totime be imposed by laws and regulations(for example, insider trading laws).
• Pursuant to the Listing Rules of the
FCA whereby certain employees of
the Company require the approval of
the Company to deal in the Company’s
securities.
The Company has not purchased any of its
own shares during the period.
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss ofoffice or employment (whether throughresignation, purported redundancy orotherwise) that occurs because of atakeover bid.
There are a number of agreements thatalter or terminate upon a change of controlof the Company following a takeoverbid, such as commercial contracts. None
are considered to be significant in termsof their impact on the business of theGroup as a whole except for the long-termco-insurance agreement in place with
Great Lakes Insurance SE. Details relating
to this agreement are contained in theStrategic Report

Corporate Governance Code and theCompany’s current practice. Therefore, all
Directors will be submitting themselves
for re-election by shareholders at theforthcoming AGM.

Power to issue shares

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

At the last Annual General Meeting,held on 25 April 2019, authority was
given to the Directors to allot unissued
relevant securities in the Company up toa maximum of £96,834, equivalent to one
third of the issued share capital as at 18
March 2019. This authority expires on thedate of the Annual General Meeting to beheld on 30 April 2020 and the Directors
will seek to renew this authority for thefollowing year.
A further special resolution passed atthat meeting granted authority to the
Directors to allot equity securities in the
Company (up to a maximum of 5% of theissued share capital of the Company) for
cash, without regard to the pre-emption
provisions of the Companies Act 2006. Thisauthority also expires on the date of theAnnual General Meeting to be held on 30
April 2020 and the Directors will seek torenew this authority for the following year.
In line with the new principles publishedby the Pre-Emption Group in March 2015,
and their template resolutions publishedin May 2016, allowing a company theability to seek authority over a further
5% of the issued ordinary share capitalon a non-pre-emptive basis subject tocertain conditions, it is the intention of theCompany, at the AGM on 30 April 2020, toseek this additional authority by special
resolution and will confirm in the Noticeof AGM that such additional shares are
only issued in connection with a specified
acquisition or capital investment.
Appointments of Directors
The Company’s Articles of Association(the Articles) give the Directors power toappoint and replace Directors. Under theTerms of Reference of the Nomination and
Governance Committee, any appointment
must be recommended by the Nomination
and Governance Committee for approvalby the Board of Directors. At the Group’s
AGM on 26 April 2018, new Articles of
Association were approved by shareholders
which provide that all Directors will retire
and offer themselves for re-election ateach AGM, in accordance with the UK

Articles of Association

Power of the Directors
The Directors are responsible for managing
the business of the Company and may
exercise all powers of the Company
subject to the provisions of relevant
statutes, to any directions given by
special resolution and to the Company’s
Memorandum and Articles. The Articles,
for example, contain specific provisions
and restrictions concerning the Company’s
power to borrow money. Powers relating
to the issuing of new shares and buybackof shares are also included in the Articles
and such authorities are renewed byshareholders at the Annual General
Meeting each year.
Directors’ indemnities and insurance
Directors and Officers insurance coveris in place for all Directors to provide
cover against certain acts or omissions
on behalf of the Company. A Deed Poll of
Indemnity was executed in October 2015,
indemnifying each of the Directors, andCompany Secretary, in relation to certain
losses and liabilities that they might incurin the course of acting as Directors of
the Company. The Deed Poll of Indemnity
is categorised as qualifying third party
indemnity provisions as defined by Section
234 of the Companies Act 2006 andremains in force for all past and present
Directors of the Company.
The Board is of the view that it is in thebest interests of the Group to attract
and retain the services of the most able
and experienced Directors by offering
competitive terms of engagement,
including the granting of such indemnities.
Neither the Deed Poll of Indemnity
nor insurance cover would provide any
coverage in the event that a Director
is proved to have acted fraudulently or
dishonestly.
Annual General Meeting (AGM)
It is proposed that the next AGM be held at
City Hall, Cardiff on Thursday 30 April 2020
at 2.00pm, notice of which will be sent toshareholders with the Annual Report.

Admiral Group plc · Annual Report and Accounts 2019127

Directors’ Report continued
Reporting, accountability
and audit
UK Corporate Governance Code
Admiral is subject to the UK Corporate
Governance Code (the Code), published by
the Financial Reporting Council (FRC) in July
2018 and available on their website, www.
frc.org.uk. The Company’s Annual Reportand Accounts, taken as a whole, addresses
the requirements of the 2018 Code.
The UK Corporate Governance Code2018 (the Code) was applicable for theGroup during the year under review, and
the Group has applied the principles andcomplied with the provisions of the Codeexcept with regard to non-compliancewith the provisions as set out in the
Corporate Governance Report on page 78.
The Directors confirm that the Annual
Report and Accounts, taken as a whole,is fair, balanced and understandable andprovides the information necessary forshareholders to assess the Company’s
position and performance, business modeland strategy.
The Board is ultimately responsible for
the Group’s system of risk management
and internal control and, throughthe Audit Committee, has reviewed
the effectiveness of the Group’s
internal control and risk management
arrangements relating to the financial
reporting process and the principal risksfacing the business. The Board is satisfied
that the Group’s internal control and risk
management framework is prudent andeffective and that, through the Audit
Committee and Group Risk Management
Committee, risk can be assessed, managed
and assurance given that all material
controls are reviewed and monitored.
Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report and the Group andparent company financial statementsin accordance with applicable law andregulations.
Company law requires the Directors
to prepare Group and parent company
financial statements for each financial
year. Under that law they are required toprepare the Group Financial Statements inaccordance with IFRSs as adopted by the
EU and applicable law and have elected
to prepare the parent company financial
statements in accordance with UK
Accounting Standards, including FRS 101
Reduced Disclosure Framework.
128

Under company law the Directors must not
approve the Financial Statements unlessthey are satisfied that they give a trueand fair view of the state of affairs of theGroup and parent company and of theirprofit or loss for that period. In preparing
each of the Group and parent company
financial statements, the Directors are
required to:• select suitable accounting policies
and then apply them consistently;• make judgements and estimates thatare reasonable and prudent;• for the Group Financial Statements,
state whether they have been preparedin accordance with IFRSs as adopted by
the EU;• for the parent company financial
statements, state whether applicable
UK Accounting Standards, including FRS
101 Reduced Disclosure Framework,
have been followed, subject to any
material departures disclosed andexplained in the parent company
financial statements.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclosewith reasonable accuracy at any time thefinancial position of the parent company
and enable them to ensure that its
Financial Statements comply with theCompanies Act 2006. They have general
responsibility for taking such steps as arereasonably open to them to safeguard theassets of the Group and to prevent anddetect fraud and other irregularities.
Under applicable law and regulations,the Directors are also responsible forpreparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statementthat complies with that law and thoseregulations.
The Directors are responsible for the
maintenance and integrity of thecorporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of Financial
Statements may differ from legislationin other jurisdictions.

Admiral Group plc · Annual Report and Accounts 2019

Responsibility statement
The Directors confirm that to the best of
their knowledge:• the Financial Statements, preparedin accordance with the applicable setof accounting standards, give a trueand fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken asa whole; and• the Strategic Report includes afair review of the development
and performance of the businessand the position of the issuer andthe undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
Disclosure of information to auditor
The Directors who held office at thedate of approval of this Directors’ Reportconfirm that, so far as they are each aware,
there is no relevant audit information ofwhich the Company’s auditor is unaware;and each Director has taken all the steps
that they ought to have taken as a Director
to make themselves aware of any relevant
audit information and to establish that
the Company’s auditor is aware of that
information.
Auditor
The Company’s auditor, Deloitte LLP,
has indicated willingness to continue in
office and resolutions to reappoint it
and to authorise the Directors to fix its
remuneration will be proposed at theAnnual General Meeting.
By Order of the Board,

Mark Waters
Company Secretary
4 March 2020

Geraint Jones
Chief Financial Officer
4 March 2020

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Independent Auditor’s Reportto the Members of Admiral Group plc

Report on the audit of the Financial Statements
OpinionIn our opinion:• the Financial Statements of Admiral Group plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair viewof the state of the Group’s and of the parent company’s affairs as at 31 December 2019 and of the Group’s profit for the year
then ended;• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union;• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group Financial Statements, Article 4 of the IAS Regulation.
We have audited the Financial Statements which comprise:• the Consolidated and Parent Company Income Statements;• the Consolidated and Parent Company Statements of Comprehensive Income;• the Consolidated and Parent Company Statements of Financial Position;• the Consolidated Cash Flow Statement;• the Consolidated and Parent Company Statements of Changes in Equity;• the related notes 1 to 13 to the Group Financial Statements, excluding the capital adequacy disclosures in note 12e calculated inaccordance with the Solvency II regime which are marked as unaudited; and• the related notes 1 to 12 to the Parent Company Financial Statements.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements
section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our auditof the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm
that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Admiral Group plc · Annual Report and Accounts 2019129

Independent Auditor’s Report continued
to the Members of Admiral Group plc

Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:• Valuation of gross insurance claims reserves;• Valuation of projected excess of loss reinsurance recoveries; and• Valuation of investment in subsidiaries (Admiral Group plc parent company only).
Within this report, any new key audit matters are identified with ↑ and any key audit matters which are the same as
the prior year identified with →.
Materiality

The materiality that we used for the Group Financial Statements was £26.1 million which was determined withreference to profit before tax.

Scoping

We identified eight reporting components which we determined should be subjected to audits for group reporting
purposes this year.
Specific audit procedures were completed in respect of two further components which, although not financiallysignificant, did present some specific audit risks which needed to be addressed.
The components within the scope of our audit procedures account for 97% of the Group’s profits and losses before
tax, 95% of revenue and 94% of the Group’s net assets.

Significant
changes in our
approach

The main changes in component scoping since 2018 relate to the Brexit restructuring of the Group, whereby theEuropean insurance business is now underwritten through the Group’s Spanish incorporated underwriter Admiral
Europe Compañía de Seguros (“AECS”) which forms a significant component of the Group.
Following the transfer of European insurance business, the Italian and Spanish divisions of the Group’s underwriting
entities, Admiral Insurance (Gibraltar) Limited (“AIGL”) and Admiral Insurance Company Limited (“AICL”), weredissolved meaning that these no longer form significant components of the Group for the 2019 audit.
During 2019, we have identified an additional key audit matter pertaining to the valuation of projected excess
of loss reinsurance recoveries related to the UK Car Insurance business underwritten by the Group following anenhancement to the methodology applied in calculating such recoveries during the current period.
We have also removed one key audit matter from the 2018 audit, being the recognition of profit commission income.
This is because the profit commission calculation is mechanical in nature and has not been subject to change during
either the current or prior period. Moreover, there have been no changes to the underlying profit commissionagreements or any one-off adjustments which would result in additional complexity during the current period.
Furthermore, we have identified an additional key audit matter in respect of the audit of the parent company
financial statements related to the valuation of its investment in the Group’s US insurance subsidiary, ElephantInsurance Company LLC (“Elephant”). We have determined this to be a key audit matter for the current period as
Elephant’s trading losses were larger than forecast in the year-ended 31 December 2019, which gave rise to anindication of impairment.

130

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in note 2 to the Financial Statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and theiridentification of any material uncertainties to the Group’s and company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the Financial Statements.

We confirm that wehave nothing material
to report, add or draw
attention to in respectof these matters.

We considered as part of our risk assessment the nature of the Group, its business model and related risks
including where relevant the impact of Brexit, the requirements of the applicable financial reporting
framework and the system of internal control. We evaluated the directors’ assessment of the Group’s
ability to continue as a going concern, including challenging the underlying data and key assumptions used
to make the assessment, and evaluated the directors’ plans for future actions in relation to their going
concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to thatstatement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with ourknowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with theknowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of thedirectors’ assessment of the Group’s and the company’s ability to continue as a going concern, we are required
to state whether we have anything material to add or draw attention to in relation to:

We confirm that wehave nothing material
to report, add or draw
attention to in respectof these matters.

• The disclosures on pages 66 to 73 that describe the principal risks, procedures to identify emerging risks,
and an explanation of how these are being managed or mitigated;• the directors' confirmation on page 66 that they have carried out a robust assessment of the principal
and emerging risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity; or• the directors’ explanation on pages 96 to 97 as to how they have assessed the prospects of the Group, overwhat period they have done so and why they consider that period to be appropriate, and their statement
as to whether they have a reasonable expectation that the Group will be able to continue in operation andmeet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the Group requiredby Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due tofraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
We have identified one new key audit matter in the 2019 audit pertaining to the valuation of projected excess of loss reinsurance
recoveries related to the UK Car Insurance business underwritten by the Group following an enhancement to the methodology appliedin calculating such recoveries during the current period.
We have removed one key audit matter from the 2018 audit, being the recognition of profit commission income. This is because theprofit commission calculation is mechanical in nature and has not been subject to change during either the current or prior period.
Moreover, there have been no changes to the underlying profit commission agreements or any one-off adjustments which would
result in additional complexity during the current period.
Furthermore, we have identified an additional key audit matter in respect of the audit of the parent company financial statements
related to the valuation of its investment in the Group’s US insurance subsidiary, Elephant Insurance Company LLC (“Elephant”). We
have determined this to be a key audit matter for the current period as Elephant’s trading losses were larger than forecast in the yearended 31 December 2019, which gave rise to an indication of impairment.

Admiral Group plc · Annual Report and Accounts 2019131

Independent Auditor’s Report continued
to the Members of Admiral Group plc

Valuation of gross insurance claims reserves    Key audit matterdescription

The Group’s gross insurance claims reserves total £2,899 million as at 31 December 2019 (2018 year-end: £2,740
million). The judgements which are made by management in determining the valuation of claims reserves are by far
the most significant, in terms of their impact on the Group’s financial position. Setting these claims reserves is an
inherently subjective exercise and small changes in underlying assumptions such as average frequency or average
severity may have a material impact on the overall year-end result reported. We therefore consider that this accountbalance contains potential fraud risks.
Specifically, our significant areas of focus are management’s selection of the frequency and severity assumptions
for large bodily injury claims arising in the UK Car Insurance business. These particular claims result in higher
individual claims reserves and are more judgemental, in terms of the development of the ultimate losses, due to thelonger-term nature of the Group’s exposure (compared to property damage claims).
In line with the Group's accounting policy, management adds a margin to the actuarial best estimate to arriveat the booked gross claims reserves. This margin reflects the inherent uncertainty in estimating the ultimate
losses on claims, over and above that which can be projected actuarially as a best estimate based on underlying
claims development data. This is a significant area of management judgement and, therefore, a focus of our audit.
Specifically, the consistency of the level of prudence within the margin for the UK Car Insurance reserves is our key
area of focus.
Refer to page 91 in the Audit Committee report where this is included as a significant issue and note 3 and note 5d in
the Financial Statements which refer to this matter.

How the scopeof our audit
responded to the
key audit matter

We have assessed the design and implementation and tested the operating effectiveness of relevant controls
relating to the key actuarial assumptions identified and the setting of the reserve margin. These controls include
those concerning the oversight and challenge of management’s external actuarial expert by management and the
Audit Committee.
We inspected the reports from management’s external expert actuary and involved our own Deloitte actuarial
specialists to support our challenge of management’s assumptions, including the frequency and severity
assumptions for large bodily injury claims. We performed procedures to assess the objectivity and competence ofmanagement’s expert.
We benchmarked management’s frequency assumptions against available industry working party data andconsidered the comparison in the context of the risk profile of Admiral’s portfolio and the year-on-year changes inthese assumptions.
We undertook a graphical analysis of incurred development patterns to assess and challenge management’s severity
assumptions. We benchmarked the average cost per claim assumptions against available third party industry data inthe context of this incurred development analysis.
We challenged management’s qualitative and quantitative justifications for the margin held over the actuarial best
estimate reserves through review of management’s accounting judgement papers and testing the internal controls
governing the claims distribution model. We analysed the consistency of prudence within the booked margin
against previous reporting periods in the context of the underlying uncertainty in incurred claims development andchallenged management’s support for the booked position.

Key observations

132

Based on the procedures described above, we consider that the booked reserves remain appropriate and in line with
the Group’s prudent accounting policy.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Valuation of projected excess of loss reinsurance recoveries    Key audit matterdescription

The projected excess of loss reinsurance recoveries on large bodily injury claims, related to the UK Car Insurance
business underwritten by the Group, are inherently uncertain and their calculation is reliant upon the judgemental
actuarial methodology applied in their projection. The total reinsurers’ share of claims outstanding in the Group’s
Financial Statements is £1,354 million as at 31 December 2019 (2018 year-end: £1,220 million).
The value of the excess of loss reinsurance recoveries depends on the number of claims that ultimately settle above
the reinsurance retention and the placements in each layer which vary between individual underwriting years. Smallchanges in the frequency assumptions for excess of loss reinsurance recoveries can have a material impact on the
final booked reserves and consequently represent a significant area of judgement and complexity.
Management’s external expert actuary enhanced their methodology for calculating excess of loss reinsurance
recoveries during the first-half of 2019, as part of regular enhancements in the reserving methodologies used inprojecting both the large bodily injury claims in the gross analysis and the excess of loss recoveries arising on theseprojected claims.
The methodologies which are applied in determining the valuation of the excess of loss reinsurance recoveries are
significant in terms of their impact on the Group’s financial performance and therefore represent a key audit matterfor the Group. Projecting such recoveries is an inherently subjective exercise and changes in methodologies may
have a material impact on the reported year-end result for the Group.
Refer to page 91 in the Audit Committee report where this is included as a significant issue and note 3 and note 5d in
the Financial Statements which refer to this matter.

How the scopeof our audit
responded to the
key audit matter

We have assessed the design and implementation and tested the operating effectiveness of relevant controls
relating to the projection of the excess of loss reinsurance recoveries. These controls include those concerning theoversight and challenge of management’s external expert actuary by management and the Audit Committee.
We inspected the reports from management’s external expert actuary and involved our own Deloitte actuarial
specialists to support our challenge of management’s assumptions and methodologies applied in projecting theexcess of loss reinsurance recoveries. We performed procedures to assess the objectivity and competence ofmanagement’s expert. Furthermore, with the involvement of our actuarial specialists, we performed additional
diagnostics and reviewed the results to assess whether the methodology had been implemented as described.
We compared management’s frequency assumptions for excess of loss reinsurance recoveries against the frequency
assumptions for large bodily injury claims to assess the consistency in the underlying assumptions applied to derive
the gross and net insurance claims reserves.

Key observations

Based on the procedures described above, we consider that the methodology used to project the excess of loss
reinsurance recoveries within the net best estimate reserves is appropriate.

Admiral Group plc · Annual Report and Accounts 2019133

Independent Auditor’s Report continued
to the Members of Admiral Group plc

In addition to the key audit matters for the Group audit, above, we have identified a further key audit matter for the parent company
only audit of Admiral Group plc, being the valuation of the parent company’s investment in its subsidiary Elephant Insurance Company
LLC, as set out in the table below. This key audit matter does not affect the consolidated Group Financial Statements.
Valuation of investment in subsidiaries (Admiral Group plc parent company only)     Key audit matterdescription

Admiral Group plc, the Group’s parent entity, holds its investment in the US insurance subsidiary, Elephant Insurance
Company LLC (“Elephant”), at cost less impairment. The pre-impairment value of this investment was £106 million(2018: £106 million).
Elephant’s trading losses were larger than forecast in the year-ended 31 December 2019, which gave rise to anindication of impairment.
An impairment should be recognised when the carrying value of an investment exceeds the recoverable amount,which is, itself, the higher of the value in use and the fair value less costs to sell. The value in use is determined using
a discounted cash flow calculation, which involves significant management judgement.
The most significant judgement is in projecting the cash flow forecasts for future years. Management’s forecasts
include profitable growth; for this reason, this is the focus of our audit challenge. The driver of this profit growth isincreasing premiums, while decreasing the loss ratio (an industry measure of profitability, being claims divided bypremiums in a given period).
There is significant uncertainty around the future performance of the business and, therefore, it is possible that
there may be further impairments in the future, or that the impairment may be reversed, based on how the businessperforms.
Refer to page 92 in the Audit Committee report where this is included as a significant issue and note 1.5 and note 4
in the parent company financial statements which refer to this matter. The impairment charge recognised for 2019
totalled £66 million (2018: £nil) and consequently the carrying value of the investment in Elephant totals £40 million(2018: £106 million).

How the scopeof our audit
responded to the
key audit matter

We have assessed the design and implementation of relevant controls relating to the impairment analysis
performed by management. These controls include those concerning the oversight and challenge of managementby the Audit Committee.
We inspected the calculations and agreed that the cash flows used were based on the latest five-year plan approvedby the Group board.
In order to challenge the cash flow forecasts, we made enquiries with the senior management of Elephant, as wellas with Group senior management, regarding the business plans, and vouched their assertions to corroborating
evidence, including evidence of initiatives in place to increase efficiency and reduce claims leakage.
We enquired of and challenged management on the business plans of Elephant, to assess whether they are
consistent with the assumptions used in estimating future cash flows.
We also sought independent audit evidence relating to the future of the US motor insurance market, utilisingmarket research papers published by the Deloitte member firm in the US, and put this to management as part ofour challenge, where this was contrary to their assertions.
Finally, we considered whether events or transactions that occurred after the year-end but before the reporting
date affect the conclusions reached on the carrying values of the assets and associated disclosures.

Key observations

134

Based on the procedures described above, we consider that the impairment booked and the carrying value of theinvestment in Elephant is appropriate.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Our application of materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

Materiality

Group Financial Statements

Parent company Financial Statements£26.1 million (2018: £20.7 million)£3.0 million (2018: £1.8 million)

Basis for determining 5% of profit before tax (2018: 5% of profit before tax,
adjusted for the movement due to the change in themateriality
Ogden rate assumption).

3% of two-year average of net assets (2018: 3% of
net assets).

Rationale for thebenchmark applied

The parent company primarily exists as the holding
company which carries investments in groupsubsidiaries and is the issuer of listed securities. We
consider that net assets is the critical benchmark forthe company. The measure uses a two-year averageof net assets which we consider appropriate given
the inherent volatility associated with the timing ofdividend payments.

We consider profit before tax to be the criticalbenchmark of the performance of the Group andconsider this benchmark to be suitable having comparedto other benchmarks: our materiality equates to 1% ofgross earned premium and 3% of equity (2018: 1% ofgross earned premium and 3% of equity).
In the prior period we adjusted our materiality basis to
exclude the impact of the Ogden discount rate change
in order to remove year on year volatility. Following
the announcement of the new Ogden discount rate inJuly 2019 we are satisfied that no such adjustment isrequired for the 2019 audit.

We have adjusted the basis for the determination ofmateriality in the current period to use an average
net asset measure in order to remove the volatility
associated with the timing of dividend payments fromthe parent company.

When determining materiality for the parent company,
we also considered the appropriateness of thismateriality for the consolidation of this set of Financial
Statements to the Group’s results.

Group materiality£26.1 million
PBT £522.6 million

Component materiality range£18.6 million to £1.7 million
Audit Committee reporting
threshold £1.0 million

PBTGroup materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected andundetected misstatements exceed the materiality for the Financial Statements as a whole. Group performance materiality was set at
70% of Group materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered factors including:• our risk assessment, including our assessment of the Group’s overall control environment and that we consider it appropriate to rely
on controls over a number of business processes; and• our past experience of the audit, which has indicated a low number of uncorrected misstatements identified in prior periods.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.0 million (2018:£1.0 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reportto the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.

Admiral Group plc · Annual Report and Accounts 2019135

Independent Auditor’s Report continued
to the Members of Admiral Group plc

An overview of the scope of our audit
The eight financially significant components of the Group which were identified in our audit planning are Admiral Insurance (Gibraltar)
Limited, Admiral Insurance Company Limited, EUI Limited, Inspop.com Limited, Admiral Financial Services Limited, Admiral Europe
Compañía de Seguros, Elephant Insurance Company LLC and the Admiral Group plc parent entity itself.
In 2018, we identified six of these as significant reporting components and nine in totality. The changes in component scoping
since 2018 are in classifying the Group’s overseas underwriting entities in Spain and US, Admiral Europe Compañía de Seguros andElephant Insurance Company LLC respectively, as significant components of the Group due to the increase in their size relative to theconsolidated group. The Italian divisions of Admiral Insurance (Gibraltar) Limited and Admiral Insurance Company Limited, as well as the
Spanish division of Admiral Insurance Company Limited no longer form significant components of the Group following the transfer ofEuropean policies to Admiral Europe Compañía de Seguros effective from 1 January 2019.
Each of these significant components was subjected to a full-scope audit for Group reporting purposes, completed to individualcomponent materiality levels which ranged from £1.7 million to £18.6 million (2018: £0.3 million to £14.1 million) dependent upon therelative significance of each individual component.
Additionally, we have completed specific audit procedures, designed to address specific audit risks, for two (2018: eight) further
components.
We engaged local component auditors, being Deloitte member firms in the US and Spain, to perform the audit work in theserespective territories on our behalf. We directed and supervised the work of the component auditors, including through visits to theoperations in Rome, Madrid, Seville and Richmond and remote communication and review of their work.
For the remaining components, which were not subject to audit or specified audit procedures, we performed analysis at an aggregatedGroup level to re-assess our evaluation that there were no significant risks of material misstatement presented by any of thesecomponents. The components within the scope of our audit procedures account for 97% of the Group’s profits and losses before tax,
95% of revenue and 94% of the Group’s net assets (2018: 96% of profits and losses before tax, 95% of revenue and 94% of net assets).

93%
2%
5%

96%
1%
3%

Revenue

Full audit scope

92%
2%
6%

Profit before tax

Specified audit procedures

Net assets

Review at Group level

Profit before tax coverage is stated in absolute terms – i.e. based on contribution to Group profit less Group loss.

136

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the Financial Statements and our auditor’s report thereon.
Our opinion on the Financial Statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

We have nothing
to report inrespect of thesematters.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the Financial Statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the Financial Statements or a material misstatement of the otherinformation. If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of
the other information include where we conclude that:• Fair, balanced and understandable – the statement given by the directors that they consider the annual report
and Financial Statements taken as a whole is fair, balanced and understandable and provides the informationnecessary for shareholders to assess the Group’s position and performance, business model and strategy, ismaterially inconsistent with our knowledge obtained in the audit;• Audit Committee reporting – the section describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee; or• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine isnecessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the Group's and the parent company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis ofaccounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is ahigh level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.

Admiral Group plc · Annual Report and Accounts 2019137

Independent Auditor’s Report continued
to the Members of Admiral Group plc

Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, and then design
and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate toprovide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, our procedures included the following:• enquiring of management, internal audit, and the Audit Committee, including obtaining and reviewing supporting documentation,
concerning the Group's policies and procedures relating to:– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non‑compliance;– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;– the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;• discussing among the engagement team including significant component audit teams and involving relevant internal specialists,
including actuarial, tax and IT specialists regarding how and where fraud might occur in the Financial Statements and any potential
indicators of fraud. As part of this discussion, we identified potential for fraud in the following areas:– valuation of gross insurance claims reserves for UK Car Insurance;– valuation of projected excess of loss reinsurance recoveries for UK Car Insurance; and– valuation of investment in subsidiaries (Admiral Group plc parent company only).
• obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws andregulations that had a direct effect on the Financial Statements or that had a fundamental effect on the operations of theGroup. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, and relevant tax
legislation. In addition, compliance with terms of the Group’s regulatory capital requirements were fundamental to the assessmentof the Group’s ability to continue as a going concern.
Audit response to risks identified
As a result of performing the above, we identified the valuation of gross insurance claims reserves and valuation of projected excess ofloss reinsurance recoveries as key audit matters. The key audit matters section of our report explains the matters in more detail andalso describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws andregulations discussed above;• enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondencewith HMRC, the Financial Conduct Authority and the Prudential Regulation Authority; and• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and otheradjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; andevaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members includinginternal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.

138

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with theCompanies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:• the information given in the strategic report and the directors’ report for the financial year for which the Financial Statements areprepared is consistent with the Financial Statements; and• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the parent company and their environment obtained in thecourse of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:•

we have not received all the information and explanations we require for our audit; or•adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or•the parent company financial statements are not in agreement with the accounting records and returns.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the directors’ remuneration report to be audited is not inagreement with the accounting records and returns.

We have nothing toreport in respect ofthese matters.

We have nothing toreport in respect ofthese matters.

Other matters
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by shareholders’ approval at the Annual General Meetingon 28 April 2016 to audit the Financial Statements for the year ending 31 December 2016 and subsequent financial periods. The periodof total uninterrupted engagement including previous renewals and reappointments of the firm is four years, covering the years
ending 31 December 2016 to 31 December 2019.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with
ISAs (UK).
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state tothem in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions wehave formed.

Mark McQueen (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
4 March 2020

Admiral Group plc · Annual Report and Accounts 2019139

Consolidated Income Statement
For the year ended 31 December 2019Year ended

Note

31 December
2019£m

31 December
2018£mInsurance premium revenue

2,198.4

2,079.6

Insurance premium ceded to reinsurers(1,489.0)(1,407.8)

Net insurance premium revenue

5

709.4

671.8

Other revenue

8

469.9

449.2

Profit commission

5

114.9

93.2

Interest income

7

30.8

15.0

Interest expense

7

(6.3)

(3.6)

24.5

11.4

6

35.3

36.0

1,354.0

1,261.6

5(1,568.1)(1,513.8)

1,208.8

1,163.7

Net interest income from loans
Investment return
Net revenue
Insurance claims and claims handling expenses
Insurance claims and claims handling expenses recoverable from reinsurers
Net insurance claims

5(359.3)(350.1)

Operating expenses and share scheme charges

9(900.7)(842.8)Operating expenses and share scheme charges recoverable from co- and reinsurers

9

441.2

418.8

Net operating expenses and share scheme charges(459.5)(424.0)Total expenses(818.8)(774.1)

Operating profit

535.2

487.5

Finance costs

6(14.6)(11.3)

Finance costs recoverable from co- and reinsurers

6

2.0

–

(12.6)(11.3)

522.6

476.2

(94.2)(85.7)

428.4

390.5

Equity holders of the parent

432.4

395.1

Non-controlling interests (NCI)

(4.0)

(4.6)

428.4

390.5

Net finance costs
Profit before tax
Taxation expense

10

Profit after tax
Profit after tax attributable to:Earnings per share

140

Basic

12

148.3p137.1p

Diluted12148.0p136.8pDividends declared and paid (total)

12

367.8

332.7

Dividends declared and paid (per share)

12

129.0p118.0pAdmiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019Year ended

Profit for the period

31 December
2019£m

31 December
2018
£m

428.4

390.5

Other comprehensive income
Items that are or may be reclassified to profit or loss
Movements in fair value reserve

34.6(24.0)

Deferred tax charge in relation to movement in fair value reserve

(1.5)

0.7

Exchange differences on translation of foreign operations

(8.9)

2.2

Movement in hedging reserve

(0.9)

(0.3)

Other comprehensive income for the period, net of income tax

23.3(21.4)

Total comprehensive income for the period

451.7

369.1

456.1

373.7

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

(4.4)

(4.6)

451.7

369.1

Admiral Group plc · Annual Report and Accounts 2019141

Consolidated Statement of Financial Position
As at 31 December 2019

As at

Note

31 December
2019£m

31 December
2018£mProperty and equipment

11

154.4

28.1

Intangible assets

11

160.3

162.0

ASSETS

Deferred income tax

10

–

0.2

Reinsurance assets

5

2,071.7

1,883.5

Insurance and other receivables

6

1,227.7

1,082.0

Loans and advances to customers

7

455.1

300.2

Financial investments

63,234.5

2,969.7

Cash and cash equivalents

6

Total assets

281.7

376.8

7,585.4

6,802.5

EQUITY
Share capital

12

Share premium account
Other reserves

12

0.3

0.3

13.1

13.1

55.1

31.4

Retained earnings

840.9

713.5

Total equity attributable to equity holders of the parent

909.4

758.3

9.2

12.8

918.6

771.1

3,975.0

3,736.4

Non-controlling interests
Total equity
LIABILITIESInsurance contract liabilities
Subordinated and other financial liabilities

5
6

530.1

444.2

6, 11

1,975.9

1,801.5

Lease liabilities

6

137.1

–

Deferred income tax

10

0.4

–

Current tax liabilities

10

48.3

49.3

Total liabilities

6,666.8

6,031.4

Total equity and total liabilities

7,585.4

6,802.5

Trade and other payables

The accompanying notes form part of these Financial Statements.
These Financial Statements were approved by the Board of Directors on 4 March 2020 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc

142

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Consolidated Cash Flow Statement
For the year ended 31 December 2019Year ended

Note

Profit after tax

31 December
2019£m

31 December
2018
£m

428.4

390.5

23.8

12.0

Adjustments for non-cash items:– Depreciation of property, plant and equipment and right-of-use assets

11– Amortisation and impairment of intangible assets

11

18.7

15.5

– Movement in provision for loans and advances to customers

7

13.8

8.9

– Share scheme charges

9

53.4

49.8

(0.6)

(1.4)

6

(35.3)(36.0)

12.6

14.9– Taxation expense

10

94.2

85.7

Change in gross insurance contract liabilities

5

238.6

422.5

– Accrued interest income from loans and advances to customers– Investment return– Finance costs, including unwinding of discounts on lease liabilities

Change in reinsurance assets

5(188.2)(245.9)6, 11(147.0)(145.0)Change in gross loans and advances to customers

7(168.7)(242.9)Change in trade and other payables, including tax and social security

11

Change in insurance and other receivables

Cash flows from operating activities, before movements in investments
Purchases of financial instruments
Proceeds on disposal/maturity of financial instruments
Interest and investment income received

6

Cash flows from operating activities, net of movements in investments

174.4

159.9

518.1

488.5

(2,048.2)(1,830.2)

1,847.9

1,573.4

11.6

8.0

329.4

239.7

Taxation payments(92.8)(55.6)Net cash flow from operating activities

236.6

184.1

(33.6)(23.9)(33.6)(23.9)Cash flows from investing activities:
Purchases of property, equipment and software

11

Net cash used in investing activities
Cash flows from financing activities:
Non-controlling interest capital contribution

1.6

19.3

Proceeds on issue of loan backed securities

136.2

168.3

(Repayment)/proceeds from other financial liabilities(50.3)

51.9

Finance costs paid, including interest expense paid on funding for loans(14.0)(14.1)

Repayment of lease liabilities(10.6)–(367.8)(332.7)

Equity dividends paid

12

Net cash used in financing activities(304.9)(107.3)

Net (decrease) / increase in cash and cash equivalents(101.9)52.9

Cash and cash equivalents at 1 January

376.8

326.8

Effects of changes in foreign exchange rates
Cash and cash equivalents at end of period

6

6.8

(2.9)

281.7

376.8

Admiral Group plc · Annual Report and Accounts 2019143

Consolidated Statement of Changes in Equity
For the year ended 31 December 2019

Attributable to the owners of the Company
Sharecapital£m

At 1 January 2018

Sharepremium Fair value
account
reserve£m£mForeign
Hedging exchange
reserve
reserve£m£m

Retained
profitand loss£m

Noncontrolling
Totalinterests
£m
£m

Total
equity
£m

0.3

13.1

36.4

–

16.0

580.3

646.1

9.7

655.8

–

–

0.4

–

–

(0.4)

–

–

–

0.3

13.1

36.8

–

16.0

579.9

646.1

9.7

655.8

–

–

–

–

–

395.1

395.1

(4.6) 390.5

Movements in fair value reserve––(24.0)–––(24.0)–(24.0)

Deferred tax charge in relation to
movement in fair value reserve

–

–

0.7

–

–

–

0.7

–

0.7

Initial application of IFRS 9
Adjusted balance at 1 January 2018
Profit/(loss) for the period
Other comprehensive income

Movement in hedging reserve

–

–

–

(0.3)

–

–

(0.3)

–

(0.3)

Currency translation differences

–

–

–

–

2.2

–

2.2

–

2.2

Total comprehensive income for the period––(23.3)

(0.3)

2.2

395.1

373.7

(4.6) 369.1

Dividends

–

–

–

–

–

(332.7)(332.7)(0.4) (333.1)

Share scheme credit

–

–

–

–

–

56.7

56.7

–

56.7

Deferred tax credit on share scheme credit

–

–

–

–

–

3.3

3.3

–

3.3

8.1

19.3

Transactions with equity holders

Changes in ownership interests without achange in control

–

–

–

–

–

11.2

11.2

Total transactions with equity holders

–

–

–

–

–

(261.5)(261.5)7.7 (253.8)

As at 31 December 2018

0.3

13.1

13.5

(0.3)

18.2

713.5

758.3

12.8

771.1

Balance at 1 January 2019

0.3

13.1

13.5

(0.3)

18.2

713.5

758.3

12.8

771.1

Profit/(loss) for the period

–

–

–

–

–

432.4

432.4

(4.0) 428.4

–

–

34.6

–

–

–

34.6

–

34.6

Other comprehensive income
Movements in fair value reserve
Deferred tax charge in relation to
movement in fair value reserve

–

–

(1.5)

–

–

–

(1.5)

–

(1.5)

Movement in hedging reserve

–

–

–

(0.9)

–

–

(0.9)

–

(0.9)

Currency translation differences

–

–

–

–

(8.5)

–

(8.5)

(0.4)

(8.9)

Total comprehensive income for the period

–

–

33.1

(0.9)

(8.5)

432.4

456.1

(4.4) 451.7

–

–

–

–

–

(367.8)(367.8)– (367.8)

Transactions with equity holders
Dividends
Share scheme credit

–

–

–

–

–

58.8

58.8

–

58.8

Deferred tax credit on share scheme credit

–

–

–

–

–

3.2

3.2

–

3.2

Contributions by NCIs

–

–

–

–

–

–

–

2.2

2.2

Changes in ownership interests
without a change in control

–

–

–

–

–

0.8

0.8

(1.4)

(0.6)

Total transactions with equity holders

–

–

–

–

–

(305.0)(305.0)0.8 (304.2)

0.3

13.1

46.6

(1.2)

9.7

840.9

909.4

9.2

As at 31 December 2019

144

Admiral Group plc · Annual Report and Accounts 2019918.6

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Notes to the Financial Statements
For the year ended 31 December 2019

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 consolidated Financial Statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU). The Company has elected to prepare its Parent Company Financial
Statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).

2. Basis of preparation
The accounts have been prepared on a going concern basis. In considering this requirement, the Directors have taken into account thefollowing:• The Group’s projections for the next 12 months and beyond, in particular the profit forecasts, regulatory capital surpluses and levels
and sources of liquidity.
• The risks included on the Group’s risk register that could impact on the Group’s financial performance, levels of liquidity andsolvency over the next 12 months. This includes consideration of the principal risks and uncertainties and how these are managed
and mitigated, as disclosed on pages 66 to 73 of the Annual Report.
• The risks on the Group’s risk register that could be a threat to the Group’s business model and capital 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. The Strategic Report also includes the Group’s principal risks and uncertainties. In addition, the Governancereport includes the Directors’ statement on the viability of the Group over a three year period.
Following consideration of the above, the Directors have a reasonable expectation that the Group has adequate resources tocontinue in operation for the foreseeable future, a period not less than 12 months from the date of this report, and that it is therefore
appropriate to adopt the going concern basis in preparing the Financial Statements.
Further information regarding the Company’s business activities, together with the factors likely to affect its future development,
performance and position, is set out in the Strategic Report. Further information regarding the financial position of the Company,
its cash flows, liquidity position and borrowing facilities are also described in the Strategic Report. In addition, notes 6 and 12 to the
Financial Statements include the Company’s objectives, policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
The accounting policies set out in the notes to the Financial Statements have, unless otherwise stated, been applied consistently to all
periods presented in these Group Financial Statements.
The Financial Statements are prepared on the historical cost basis, except for the revaluation of financial assets classified as fairvalue through profit or loss or as fair value through other comprehensive income. The Group and Company Financial Statements arepresented in pounds sterling, rounded to the nearest £0.1 million.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control,
the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which
control is transferred to the acquirer. The Financial Statements of subsidiaries are included in the consolidated Financial Statementsfrom the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a
subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
The Group has securitised certain loans and advances to customers by the transfer of the loans to a special purpose entity (“SPE”)
controlled by the Group. The securitisation enables a subsequent issuance of debt by the SPE to investors who gain the security of theunderlying assets as collateral. The SPE is fully consolidated into the Group Financial Statements under IFRS 10, as the Group controls
the entity in line with the above definition.
The preparation of Financial Statements in conformity with adopted IFRS requires management to make judgements, estimates andassumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimatesand associated assumptions are based on historical experience and various other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources.

Admiral Group plc · Annual Report and Accounts 2019145

Notes to the Financial Statements continued
For the year ended 31 December 2019

2. Basis of preparation continued
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is reviewed. To the extent that a change in an accounting estimate gives rise to changes in assets andliabilities, it is recognised by adjusting the carrying amount of the related asset or liability in the period of the change.
Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations during the year, which have been issued and endorsed by the EU:• IFRS 16 “Leases”;• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7);• Annual Improvements to IFRS Standards 2015 – 2017 Cycle;• Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures.
Other than the impact of IFRS 16 and the Amendments to IFRS 9 and IFRS 7 in respect of interest rate benchmark reform, further
detail of which is provided below, the application of these amendments has not had a material impact on the Group’s results, financial
position and cashflows.
IFRS 16
During the year the Group has adopted IFRS 16 Leases with a date of initial application of 1 January 2019.
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-ofuse assets representing its right to use the underlying assets and lease liabilities representing its obligations to make lease payments.
As permitted by the transitional provisions of IFRS 16 the Group has elected to use the modified retrospective approach, and as suchhas not restated prior year comparatives (which are presented, as previously reported, under IAS 17 and related interpretations).
The adjustments arising from transition are recognised in the opening balance sheet on 1 January 2019 and are set out below alongwith details of the changes in accounting policies relating to IFRS 16 as applied in the period.
a)Definition of a lease and practical expedients applied

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining
Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definitionof a lease, which under IFRS 16 is where a contract conveys a right to control the use of an identified asset for a period of time inexchange for consideration.
The Group has also used the following practical expedients permitted by the standard:• the use of a single discount rate for a portfolio of leases with reasonably similar characteristics;• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease;• the exclusion of initial direct costs for the measurement of the right-of-use assets at the date of initial application.
b)

Impact of transition

On adoption of IFRS 16, the Group recognised additional right-of-use assets, and additional lease liabilities in relation to leases whichwere previously classified as ‘operating leases’ under IAS 17 Leases. The liabilities were measured at the present value of the remaining
lease payments, discounted using the Group’s incremental borrowing rate as of 1 January 2019. The weighted average incremental
borrowing rate (discount rate) applied is 2.4%.

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Additional Information

A reconciliation of the Group’s lease liabilities to the operating lease commitment at 31 December 2018 as disclosed in the Group’s
consolidated Financial Statements is shown below.
2019£mOperating lease commitments disclosed as at 31 December 2018

185.9

Impact of extension options exercised before the date of initial application*

12.7

1

Impact of changes in relation to IFRS 16 treatment*(24.0)

Adjusted operating lease commitments under IFRS 16

174.6

1

Impact of discount at the date of initial application(25.4)

Lease liability recognised at 1 January 2019

149.2

Current

10.5

Non-current

138.7*1	Following a review of lease extension options and variable lease payments during the IFRS 16 transition process, the operating lease commitments disclosed as at
31 December 2018 have been amended to reflect the impact of a different treatment of inflation and VAT within lease agreements, and lease extensions that had occurred
before the transition date but were not previously disclosed.

The associated right-of-use assets have been measured retrospectively, at an amount equal to the lease liability, adjusted by the amountof any prepaid or accrued payments relating to that lease recognised in the statement of financial position as at 31 December 2018. There
were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
All right-of-use assets relate to property leases held by the Group.
The following adjustment was recognised on the date of initial application:
1 January 2019£m

ROU Lease Assets

136.7

Trade and other payables – invoice accrual

1.1

Trade and other payables – rent free accrual

11.4

Lease Liability(149.2)For the Group’s accounting policy in relation to right-of-use assets and lease liabilities, see notes 6 and 11.

Admiral Group plc · Annual Report and Accounts 2019147

Notes to the Financial Statements continued
For the year ended 31 December 2019

2. Basis of preparation continued
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
In September 2019, the IASB issued Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7. These amendments
modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of
uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as aresult of the on‑going interest rate benchmark reforms.
The amendments are relevant to the Group given that it hedges and applies hedge accounting to its benchmark interest rate exposure.
The application of the amendments impact the Group’s accounting in the following way:
• The Group has floating rate debt, linked to GBP LIBOR, which it hedges using interest rate swaps. The amendments permit
continuation of hedge accounting even though there is uncertainty about the timing and amount of the hedged cash flows dueto the interest rate benchmark reforms.
• The Group will retain the cumulative gain or loss in the cash flow hedge reserve for designated cash flow hedges that are subject tobenchmark interest rate reforms even though there is uncertainty arising from the interest rate benchmark reform with respect tothe timing and amount of the cash flows of the hedged items. Should the Group consider the hedged future cash flows are no longer
expected to occur due to reasons other than interest rate benchmark reforms, the cumulative gain or loss will be immediately
reclassified to profit or loss.
The Group has chosen to early apply the amendments to IFRS 9 for the reporting period ending 31 December 2019, which aremandatory for annual reporting periods beginning on or after 1 January 2020. Adopting these amendments allows the Group tocontinue hedge accounting during the period of uncertainty arising from interest rate benchmark reforms.
See note 6i for further details.
Standards endorsed but not yet effective
As at 31 December 2019, the following amendments to standards had been endorsed by the EU but are not yet effective:• Amendments to IAS 1 and IAS 8: “Definition of Material”;• Amendments to references to the Conceptual Framework in IFRS Standards.
No significant impact is expected as a result of adopting the above amendments.
Standards yet to be endorsed by the EU
There are a number of standards, amendments to standards and interpretations that were issued by 31 December 2019 but have
either yet to be endorsed by the EU, or were endorsed shortly after the year end. The following IFRSs have been issued but have notbeen applied by the Group in these Financial Statements:• IFRS 17 Insurance Contracts;• Amendments to IFRS 3 “Business Combinations”.
IFRS 17 – Insurance contracts
IFRS 17 Insurance Contracts was issued in May 2017, with a revised endorsement draft incorporating a number of proposed
amendments issued in June 2019. The standard will replace IFRS 4, establishing new principles for the recognition, measurement,
presentation and disclosure of Insurance contracts within the scope of the standard. The proposed IASB effective date in the revised
exposure draft is 1 January 2022, requiring a transition balance sheet at 1 January 2021.
The Group continues to assess the impact of IFRS 17 on its results and financial position, taking into account the proposals in therevised exposure draft, along with any impacts of the other standards and amendments which have yet to be endorsed.

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Financial Statements
Additional Information

3. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group’s accounting policies as described in the notes to the Financial Statements, the directors are required to makejudgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimatesand assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimatesand associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if therevision affects both current and future periods.
Critical accounting judgements
The following are the critical judgements, apart from those involving estimations (which are presented separately below), that thedirectors have made in the process of applying the Group’s accounting policies and that have the most significant effect on theamounts recognised in Financial Statements.
• Classification of the Group’s contracts with reinsurers as reinsurance contracts:
A contract is required to transfer significant insurance risk in order to be classified as such. Management reviews all terms andconditions of each such insurance and reinsurance contract in order to be able to make this judgement. In particular, all reinsurance
contracts (both excess of loss and quota share contracts) held by the Group have been assessed and it has been concluded that allcontracts transfer significant insurance risk and have therefore been classified and accounted for as reinsurance contracts withinthese Financial Statements.
• Consolidation of the Group’s special purpose entity (“SPE”)
During 2018 the Group set up an SPE in relation to the Admiral Loans business, whereby the Group securitises certain loans by thetransfer of the loans to the SPE. The securitisation enables a subsequent issue of debt by the SPE to investors who gain the security of
the underlying assets as collateral.
The accounting treatment of the SPE has been assessed and it has been concluded that it should be fully consolidated into the Group’s
Financial Statements under IFRS 10. This is due to the fact that despite not having legal ownership, the Group has control of the SPE,
being exposed to the returns and having the ability to affect those returns through its power over the SPE.
The SPE has therefore been fully consolidated into the Group’s Financial Statements.
There are two further significant accounting estimates within the Financial Statements that also require management to apply
judgement:• Calculation of insurance claims provisions and reinsurance assets:
The Group’s reserving policy requires management to set provisions for outstanding claims for the purpose of the Financial
Statements, above the projected best estimate outcome to allow for unforeseen adverse claims development. In the application ofthis policy, Management applies judgement in:–– calculating the best estimate of the gross ultimate total cost of settling claims that have been incurred prior to the balance
sheet date;–– calculating the best estimate of the non-proportional excess of loss reinsurance recoveries relating to outstanding claims; and–– determining where, above the projected best estimate outcomes of gross outstanding claims and reinsurance recoveries, theinsurance claims provisions should sit in line with the Group’s reserving methodology.

Admiral Group plc · Annual Report and Accounts 2019149

Notes to the Financial Statements continued
For the year ended 31 December 2019

3. Critical accounting judgements and key sources of estimation uncertainty continued
Refer to the section on estimation techniques below, and the analysis of Insurance risk in note 5 to the Financial Statements forfurther detail on the development of the Group’s reserving methodology applied during the period and the calculation of the
projected best estimate outcome.
• Calculation of expected credit loss provision
The Group is required to calculate an expected credit loss (‘ECL’) allowance in respect of the carrying value of the Admiral Loans bookin line with the requirements of IFRS 9. Due to the increase in the size of the loan book the calculation of the ECL is deemed to be a
critical accounting judgement and includes key sources of estimation uncertainty. Management applies judgement in:–– Determining the appropriate modelling solution for measuring the ECL;–– Calibrating and selecting appropriate assumptions;–– Setting the criteria for what constitutes a significant increase in credit risk; and–– Identification of key scenarios to include and determining the credit loss in these instances.
Refer to the section on estimation techniques below, and the analysis in note 7 to the Financial Statements for further detail on theGroup’s ECL methodology applied in the period.
Key sources of estimation uncertainty• Calculation of insurance claims provisions and reinsurance assets:
Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of theultimate estimated total cost of settling claims that have been incurred prior to the balance sheet date and remain unsettled at thebalance sheet date, along with a margin to allow for unforeseen adverse claims development.
The primary areas of estimation uncertainty are as follows:
Calculation of gross best estimate claims provisions
The key area where estimation techniques are used is in the ultimate projected cost of reported claims, which includes the emergenceof claims that occurred prior to the balance sheet date, but had not been reported at that date.
Independent actuarial advisors project the best estimate claims reserves using a variety of different recognised actuarial projection
techniques (for example incurred and paid chain ladders, and initial expected assumptions) to allow an actuarial assessment of theirpotential outcome. This includes an allowance for unreported claims.
Claims are segmented into groups with similar characteristics and which are expected to develop and behave similarly, for example
bodily injury (attritional and large) and damage claims, with specific projection methods selected for each head of damage. Key
sources of estimation uncertainty arise from both the selection of the projection methods and the assumptions made in setting claims
provisions through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends.
Allowance is made for changes or uncertainties which may result future claim cost inflation to deviate from historic trends. These
uncertainties include:• Changes in frequency of bodily injury claims;–– The effect of inflation on the average cost of bodily injury and damage claims;–– The likelihood of bodily injury claims settling as Periodic Payment Orders;–– Changes in the regulatory or legal environment that lead to changes in awards for bodily injury claims and associated legal costs;
and–– Changes to underlying process and methodologies employed in setting case reserve estimates.
Implicit assumptions in the actuarial projections include average cost per claim and average claim numbers by accident year, future
rates of claims inflation and loss ratios by accident year and underwriting year. These metrics are reviewed and challenged as part ofthe process for making allowance for the uncertainties noted.

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Financial Statements
Additional Information

Calculation of excess of loss reinsurance recoveries
The Group uses excess of loss reinsurance in order to mitigate the impact of large claims. The reinsurance is non-proportional andrecoveries are made on individual claims above the relevant thresholds.
As for the underlying gross claims, independent actuarial advisors project the best estimate excess of loss reinsurance recoveries
using a variety of actuarial projection techniques that focus on both the ultimate frequency of reported recoveries and the average
size of the recovery.
Key sources of estimation uncertainty arise from both the selection of the projection methods and the assumptions made in calculating
the recoveries through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends.
The most significant element of the estimation relates to large bodily injury claims. The key assumption in the calculation of excess
of loss recoveries relates to the numbers of large claims in the Group’s core UK Motor insurance business that will attract recoveries,
where the high retention means that a small number of additional large claims would potentially result in a material increase in theexcess of loss recoveries.
Calculation of the margin held for adverse development
A wide range of factors inform management’s recommendation in setting the margin held above actuarial best estimates, which is
subject to approval from the Group’s Reserving and Audit Committees, including:–– Reserve KPIs such as the level of margin as a percentage of the ultimate reserve;–– Results of stress testing of key assumptions underpinning key actuarial assumptions within best estimate reserves;–– A review of a number of individual and aggregated reserve scenarios which may result in future adverse variance to the ultimate
best estimate reserve; and–– Qualitative assessment of the level of uncertainty and volatility within the reserves and the change in that assessment compared
to previous periods.
In addition, for the Group’s core UK Car Insurance business, the Group’s internal reserve risk distribution is used to determine theapproximate confidence level of the recommended booked reserve position which enables comparison of the reserve strength toprevious periods and demonstration of the compliance with IFRS 4.
For further detail on objectives, policies and procedures for managing insurance risk, refer to note 5 of the Financial Statements.
Future changes in claims reserves also impact profit commission income, as the measurement of this income is dependent on the loss
ratio booked in the Financial Statements, and cash receivable is dependent on actuarial projections of ultimate loss ratios.
• Calculation of expected credit loss provision
The key areas of estimation uncertainty are in the calculation of the Probability of Default (PD) in the base scenario for stage 1 and 2
assets, and the determination, impact assessment and weighting of the forward-looking scenarios.
Note 7 provides detail of the methodology the group has used in the period.
• Recognition of deferred tax assets relating to unused tax losses
Management is required to determine the probability of an entity generating future taxable profits against which to utilise
accumulated losses in determining the recognition and measurement of deferred tax assets. In making this estimation, management
makes an assessment of the reliability of approved business plan projections using both qualitative and quantitative factors including
the age and status of the business, the Group’s previous experience in similar markets, historic performance against business plans
and the application of a number of stress and sensitivity tests to the projections.

Admiral Group plc · Annual Report and Accounts 2019151

Notes to the Financial Statements continued
For the year ended 31 December 2019

4. Group consolidation and operating segments
4a. Accounting policies(i) Group consolidation
The consolidated Financial Statements comprise the results and balances of the Company and all entities controlled by the Company,
being its subsidiaries and SPE (together referred to as the Group), for the year ended 31 December 2019 and comparative figures forthe year ended 31 December 2018. The Financial Statements of the Company’s subsidiaries and its SPE are consolidated in the Group
Financial Statements.
The Company controls 100% of the voting share capital of all its principal subsidiaries, except Admiral Law Limited, BDE Law Limited(indirect holding), Inspop USA LLC, comparenow.com Insurance Agency LLC (indirect holding), Rastreator.com Limited, Rastreator
Comparador Correduria De Seguros S.L.U (indirect holding), Preminen Price Comparison Holdings Limited and the indirect holdings in
Preminen Dragon Price Comparison Limited, Preminen Mexico Sociedad Anonima de Capital Variable, Preminen Online Fiyat Karşılaştırma
Hizmetleri Anonim Şirketi, Preminen Sigorta Brokerlik Anonim Şirketi and Preminen Price Comparison India Private Limited.
The SPE is fully consolidated into the Group Financial Statements under IFRS 10, whereby the Group has control over the SPE.
The Parent Company Financial Statements present information about the Company as a separate entity and not about its Group.
In accordance with IAS 24, transactions or balances between Group companies that have been eliminated on consolidation are notreported as related party transactions in the consolidated Financial Statements.
(ii) Foreign currency translation
Items included in the financial records of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated Financial Statements are presented in pounds
sterling, the Group’s presentational currency, rounded to the nearest £0.1 million.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of thetransactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Non-monetary items measured at cost are translated at their historic rate and non-monetary items held at fair value are translatedusing the foreign exchange rate on the date that the fair value was established.
The Financial Statements of foreign operations whose functional currency is not pounds sterling are translated into the Group
presentation currency (sterling) as follows:• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.
• Income and expenses for each income statement are translated at average monthly exchange rates (unless this average is nota reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income andexpenses are translated at the date of the transaction).
• All resulting exchange differences are recognised in other comprehensive income and in a separate component of equity except tothe extent that the translation differences are attributable to non-controlling interests.
On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular operation is recognised in
the income statement.

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Additional Information

4b. Segment reporting
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 Insurance
The segment consists of the underwriting of car insurance, van insurance, household insurance, travel insurance and other productsthat supplement these insurance policies within the UK. It also includes the generation of revenue from additional products and feesfrom underwriting insurance in the UK. The Directors consider the results of these activities to be reportable as one segment as theactivities carried out in generating the revenue are not independent of each other and are performed as one business. This mirrors theapproach taken in management reporting.
International Insurance
The segment consists of the underwriting of car and home insurance and the generation of revenue from additional products and feesfrom underwriting car and home insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain,
ConTe in Italy, L’olivier-Assurance in France and Elephant Auto in the US. None of these operations are reportable on an individual basis,
based on the threshold requirements in IFRS 8.
Comparison
The segment relates to the Group’s comparison businesses: Confused.com in the UK, Rastreator in Spain, LeLynx in France andCompare.com in the US. From 2019, the segment also includes the Preminen entities, which has a head office in Spain and operationsin Turkey, Mexico and India (all of which were previously reported in the ‘Other’ segment), and Penguin Portals, the new intermediateholding company of Confused.com, LeLynx and Rastreator.
Each of the comparison businesses are operating in individual geographical segments but are grouped into one reporting segment, as
none of the operating segments individually meet the reporting segment threshold requirements of IFRS 8.
Other
The ‘Other’ segment is designed to be comprised of all other operating segments that do not meet the threshold requirements forindividual reporting. It includes the Admiral Loans business and the Group’s commercial van insurance broker, Gladiator.
Taxes are not allocated across the segments and, as with the corporate activities, are included in the reconciliation to the consolidated
income statement and consolidated statement of financial position.

Admiral Group plc · Annual Report and Accounts 2019153

Notes to the Financial Statements continued
For the year ended 31 December 2019

4. Group consolidation and operating segments continued
An analysis of the Group’s revenue and results for the year ended 31 December 2019, by reportable segment, is shown below.
The accounting policies of the reportable segments are materially consistent with those presented in the notes to the Financial
Statements for the Group.
Year ended 31 December 2019

Turnover*1

UK
Insurance£mInternational
Insurance£mComparison
£m

Other
£m

Eliminations*2
£m

Total
£m

2,635.0

623.6

171.6

33.3

(19.4)

3,444.1

Net insurance premium revenue

533.2

176.2

–

–

–

709.4

Other Revenue and profit commission

407.6

22.5

171.6

24.2

(16.6)

609.3

Investment return

30.4

1.5

–

–

(2.8)

29.1

Net revenue

971.2

200.2

171.6

24.2

(19.4)

1,347.8

Net insurance claims(215.8)(143.5)–––(359.3)

Expenses(157.5)(57.6)(156.9)(31.5)

19.4(384.1)

Segment profit/(loss) before tax

597.9

(0.9)

14.7

(7.3)

–

604.4

Other central revenue and expenses, including sharescheme charges(76.6)

Investment and interest income
Finance costs*

6.2(11.4)

3

Consolidated profit before tax*4

522.6

Taxation expense(94.2)

Consolidated profit after tax

428.4

Other segment items:– Intangible and tangible asset additions

51.7

34.5

1.4

0.8

–

88.4

– Depreciation and amortisation

57.4

33.1

2.3

1.2

–

94.0

*1	Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers’ share) and Other
revenue. Refer to the glossary and note 13 for further information.
*2	Eliminations are in respect of the intra-group trading between the Group’s comparison and UK and International insurance entities and intra-group interest.
*3	£1.2 million of IFRS 16 interest expense (being the Group’s net share of IFRS 16 interest expense) included within Finance Costs in the Income Statement has beenreallocated to individual segments within expenses, in line with management segmental reporting.
*4	Profit before tax above of £522.6 million is presented on a statutory basis, being 100% of the result for each entity. This increases to Group’s share of profit before tax of£526.1 million. See note 13f for a reconciliation of the UK Insurance, International Insurance and Comparison turnover and profit before tax to the Strategic Report.

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Additional Information

Revenue and results for the corresponding reportable segments for the year ended 31 December 2018 are shown below.
Year ended 31 December 2018
UK
Insurance£mInternational
Insurance£mComparison£mOther*4£m

Eliminations*2
£m

Total
£m

2,575.7

538.7

151.0

17.5

(19.3)

3,263.6

Net insurance premium revenue

523.9

147.9

–

–

–

671.8

Other Revenue and profit commission

389.5

18.6

151.0

13.3

(18.6)

553.8

Investment return

32.3

1.3

–

–

(0.7)

32.9

Net revenue

945.7

167.8

151.0

13.3

(19.3)

1,258.5

Net insurance claims(242.5)(107.6)–––(350.1)

Expenses(146.5)(61.3)(144.4)(26.9)

19.3(359.8)Segment profit/(loss) before tax

556.7

(1.1)

6.6

(13.6)–

548.6

Turnover*1

Other central revenue and expenses, including sharescheme charges(64.2)

Investment and interest income

3.1

Finance costs(11.3)

Consolidated profit before tax*3

476.2

Taxation expense(85.7)

Consolidated profit after tax

390.5

Other segment items:– Intangible and tangible asset additions

43.0

29.8

2.0

2.2

–

77.0

– Depreciation and amortisation

49.7

26.4

1.1

0.8

–

78.0

*1	Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers’ share) and Other
revenue. Refer to the glossary and note 13 for further information.
*2 Eliminations are in respect of the intra-group trading between the Group’s comparison and UK and International insurance entities.
*3	Profit before tax above of £476.2 million is presented on a statutory basis, being 100% of the result for each entity. This increases to Group’s share of profit before tax of£479.3 million. See note 13f for a reconciliation of the UK Insurance, International Insurance and Comparison turnover and profit before tax to the Strategic Report.
*4	“Other” in 2018 includes £2.5 million of expansion costs associated with the Preminen entities (included within “Other central revenue and expenses, including share scheme
charges”). In 2019, the results of the Preminen operations have been included in the Comparison segment, as those operations have started to generate revenue in the
period. The prior year segmental analysis has not been restated due to the amounts being immaterial.

Segment revenues
The UK and International Insurance reportable segments derive all insurance premium income from external policyholders. Revenue
within these segments is not derived from an individual policyholder that represents 10% or more of the Group’s total revenue.
The total of Comparison revenues from transactions with other reportable segments is £19.4 million (2018: £19.3 million) which has
been eliminated on consolidation. There are no other transactions between reportable segments.
Revenues from external customers for products and services are consistent with the split of reportable segment revenues.

Admiral Group plc · Annual Report and Accounts 2019155

Notes to the Financial Statements continued
For the year ended 31 December 2019

4. Group consolidation and operating segments continued
Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International
Insurance reportable segment shown on the previous pages. The revenue and results of the international Comparison businesses,
Rastreator, LeLynx, Compare.com and the Preminen entities are not yet material enough to be presented as a separate segment.
Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December 2019 are as follows:
As at 31 December 2019

Reportable segment assets

UK
Insurance£mInternational
Insurance£mComparison
£m

Other
£m

Eliminations
£m

Total
£m

6,282.1

966.7

98.7

610.7

(727.3)7,230.9

Reportable segment liabilities

5,232.7

824.4

49.9

942.1

(635.2)

6,413.9

Reportable segment net assets

1,049.4

142.3

48.8

(331.4)(92.1)

817.0

Unallocated assets and liabilities

101.6

Consolidated net assets

918.6

Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation tax balances.
These assets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format.
There is an asymmetrical allocation of assets and income to the reportable segments, in that the interest earned on cash and cash
equivalent assets deployed in the UK Insurance, Comparison and International Insurance segments is not allocated in arriving atsegment profits. This is consistent with regular reporting to the Board of Directors.
Eliminations represent inter-segment funding, balances included in insurance and other receivables and deemed loan receivables inrespect of securitised loan receivables.
The segment assets and liabilities at 31 December 2018 are as follows:
As at 31 December 2018
UK
Insurance£mInternational
Insurance£mComparison£mReportable segment assets

5,760.5

831.0

Reportable segment liabilities

4,870.3

702.1

Reportable segment net assets

890.2

128.9

Unallocated assets and liabilities
Consolidated net assets

156

Admiral Group plc · Annual Report and Accounts 2019

Other
£m

Eliminations
£m

Total
£m

89.2

414.9

(552.9)6,542.7

35.0

623.4

(452.8)5,778.0

54.2(208.5)(100.1)

764.7
6.4
771.1

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

5. Premium, claims and profit commissions
5a. Accounting policies(i) Revenue – premiums
Premiums relating to insurance contracts are recognised as revenue, net of expected cancellations and insurance premium tax,
proportionally over the period of cover. Premiums with an inception date after the end of the period are held in the statement offinancial position as deferred revenue. Outstanding collections from policyholders related to unexpired risk are recognised withinpolicyholder receivables. A corresponding unearned premium provision is recognised (see note 5a(iii)).
(ii) Revenue – profit commission
Under some of the co-insurance and reinsurance contracts under which motor premiums are shared or ceded, profit commission may
be earned on a particular year of account, which is usually subject to performance criteria such as loss ratios and expense ratios. The
commission is dependent on the ultimate outcome of any year, with revenue being recognised when loss and expense ratios used in
the preparation of the Financial Statements move below a contractual threshold.
Profit commission receivable from reinsurance contracts is accounted for in line with IFRS 4, whereas profit commission receivablefrom co-insurance contracts is in line with IFRS 15. Further detail of the policy under IFRS 15 is set out in note 8.
(iii) Insurance contracts and reinsurance assets
Premiums
The proportion of premium receivable on in-force policies relating to unexpired risks is reported in insurance contract liabilities andreinsurance assets as the unearned premium provision – gross and reinsurers’ share respectively.
ClaimsClaims and claims handling expenses are charged as incurred, based on the estimated direct and indirect costs of settling all liabilities
arising on events occurring up to the balance sheet date.
The provision for claims outstanding comprises provisions for the estimated cost of settling all claims incurred but unpaid at thebalance sheet date, whether reported or not. Anticipated reinsurance recoveries are disclosed separately as assets.
Whilst the Directors consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basisof the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may
result in significant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in prior years are reflected in the income statement for the period in which
the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.
Provision for unexpired risks is made where necessary for the estimated amount required over and above unearned premiums (net ofdeferred acquisition costs) to meet future claims and related expenses.

Admiral Group plc · Annual Report and Accounts 2019157

Notes to the Financial Statements continued
For the year ended 31 December 2019

5. Premium, claims and profit commissions continued
Co-insurance
The Group has entered into certain co-insurance contracts under which insurance risks are shared on a proportional basis, withthe co-insurer taking a specific percentage of premium written and being responsible for the same proportion of each claim. The
co-insurer therefore takes direct insurance risk from the policyholder and is subsequently directly responsible to the claimant for
its proportion of the claim. As the contractual liability is several and not joint, neither the premiums nor claims relating to the coinsurance are included in the income statement. Under the terms of these agreements the co-insurers reimburse the Group for thesame proportionate share of the costs of acquiring and administering the business.
Reinsurance assets
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on the insurance contracts
issued by the Group are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there issignificant insurance risk transfer between the insured and the insurer.
Reinsurance assets are comprised of balances due from reinsurance companies for ceded insurance liabilities. Amounts recoverablefrom reinsurers are estimated in a consistent manner with the outstanding claims provisions or settled claims associated with thereinsured policies and in accordance with the relevant reinsurance contract.
The Group assesses its reinsurance assets for impairment on a regular basis, and in detail every six months. If there is objective
evidence that the asset is impaired, then the carrying value will be written down to its recoverable amount.
On the commutation of reinsurance contracts, the reinsurer is discharged from all obligations relating to the contract. Reinsurance
assets and liabilities relating to the commuted contracts are settled in the period in which the commutation agreement is signed.
5b. Net insurance premium revenue
31 December
2019£m

31 December
2018£mTotal insurance premiums written before co-insurance*1

2,884.4

2,754.1

Group gross premiums written after co-insurance

2,273.7

2,166.7

Outwards reinsurance premiums(1,541.4)(1,464.3)

Net insurance premiums written

732.3

702.4

Change in gross unearned premium provision(75.3)(87.1)

Change in reinsurers’ share of unearned premium provision

52.4

56.5

Net insurance premium revenue

709.4

671.8

*1 Alternative Performance Measures – refer to the end of the report for definition and explanation, and to note 13a for reconciliation to Group gross premiums written.

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

158

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

5c. Profit commission
31 December
2019£m

31 December
2018£m2014 and prior

23.8

61.1

2015

24.5

11.0

2016

27.5

22.9

2017

36.4

–

112.2

95.0

Underwriting year (UK Motor only)

Total UK Motor profit commission*1

Total UK Household and International profit commission*1

Total profit commission

2.7

(1.8)

114.9

93.2

*1	Of the total UK motor profit commission recognised of £112.2 million, £95.4 million relates to co-insurance arrangements and £16.8 million to reinsurance arrangements.
The UK Household and International profit commission relates solely to reinsurance arrangements.

No profit commission has yet been recognised on the 2018 – 2019 underwriting years as the combined ratios calculated from thefinancial statement loss ratios on these years sit above the threshold for profit commission recognition.
5d. Reinsurance assets and insurance contract liabilities(i) Objectives, policies and procedures for the management of insurance risk
The Group’s primary business is the issuance of insurance contracts that transfer risk from policyholders to the Group and its coinsurance partners.
Insurance risk involves uncertainty over the occurrence, amount or timing of claims arising on insurance contracts issued. It is primarily
comprised of Reserve risk; the risk that the value of insurance liabilities established is insufficient to cover the ultimate cost of claims
incurred at the balance sheet date, and premium risk; the risk that the claims experience on business written but not earned is higher
than allowed for in the premiums charged to policyholders.
The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 6, it has delegated thedetailed oversight of risk management to the Group Risk Committee.
The Group also has a Reserving Committee which comprises senior managers within the finance, claims, pricing and actuarial
functions. The Reserving Committee primarily recommends the approach for UK Car Insurance reserving but also reviews the systems
and controls in place to support accurate reserving and material reserving issues such as Periodic Payment Order (PPO) and claims
inflation, which represent the key uncertainties in the amount or timing of claims settlements.
The Board implements certain policies in order to mitigate and control the level of insurance risk accepted by the Group. These
include pricing policies and claims management and administration processes, in addition to reserving policies and co- and reinsurance
arrangements as detailed below.

Admiral Group plc · Annual Report and Accounts 2019159

Notes to the Financial Statements continued
For the year ended 31 December 2019

5. Premium, claims and profit commissions continued
Reserve risk
Reserving risk is mitigated through a series of processes and controls. The key processes are as follows:• Regular management and internal actuarial review of individual and aggregate case claim reserves, including regular reporting ofmanagement information and exception reporting of significant movements;• Regular management and internal actuarial review of large claims, including claims settled or potentially settled by PPOs for which
the uncertainty is increased by factors such as the lifetime of the claimant and movements in the indexation for the cost of futurecare of the claimant;• Bi-annual external actuarial review of best estimate claims reserves using a variety of recognised actuarial techniques;• Internal actuarial analysis of reserve uncertainty through qualitative analysis, scenario testing and a range of stochastic
reserving techniques;• Ad-hoc external reviews of reserving related processes and assumptions;• Use of a reserving methodology which informs management’s reserving decisions for the purposes of the Group’s Financial
Statements. As described in note 3, critical accounting judgements and estimates, the methodology determines that reserves
should be set above projected best estimate outcomes to allow for unforeseen adverse claims development.
As noted above, the Group shares a significant amount of the insurance business generated with external underwriters. As well as
these proportional arrangements, excess of loss reinsurance programmes are also purchased to protect the Group against very large
individual claims and catastrophe losses.
Claims reserving
As previously disclosed, Admiral’s reserving policy (both within the claims function and in the Financial Statements) is initially toreserve conservatively, above internal and independent projections of actuarial best estimates. This is designed to create a margin
held in reserves to allow for unforeseen adverse development in open claims and typically results in Admiral making above industry
average reserve releases. Admiral’s booked claims reserves continue to include a significant margin above projected best estimates ofultimate claims costs.
As at 31 December 2019, the level of relative reserve margin is consistent with that at 31 December 2018, albeit remaining prudent
when measured against the internal reserve risk distribution and other market benchmarks.
As profit commission income is recognised in the income statement in line with loss ratios accounted for on Admiral’s own claims
reserves, the reserving policy also results in profit commission income being deferred and recognised over time.
Premium risk
As noted above, the Group defines premium risk as the risk that claims cost on business written but not yet earned is higher thanallowed for in the premiums charged to policyholders. This also includes catastrophe risk; the risk of incurring significant losses as aresult of the occurrence of man-made catastrophe or natural weather events.
Key processes and controls operating to mitigate premium risk are as follows:• Experienced and focused senior management and teams in relevant business areas including pricing and claims management;• A data-driven and analytical approach to regular monitoring of claims and underwriting performance; and• Capability to identify and resolve underperformance promptly through changes to key performance drivers, in particular pricing.
In addition, as mentioned above, excess of loss reinsurance programmes are also purchased to protect the Group against very large
individual claims and catastrophe losses.
Other elements of insurance risk include reinsurance risk; the risk of placement of ineffective reinsurance arrangements, or the
economic risk of reduced availability of co-insurance and reinsurance arrangements in future periods.
The Group mitigates these risks by ensuring that it has a diverse range of financially secure reinsurance partners, including along‑term relationship with Munich Re and a number of other very large reinsurers.

160

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Concentration of insurance risk
The Directors do not believe there are significant concentrations of insurance risk. This is because, although the Group has historically
written only one significant line of UK insurance business, the risks are spread across a large number of people and a wide regional
base. The International Insurance, UK Household, UK Travel and UK Van businesses further contribute to the diversification of theGroup’s insurance risk.
(ii) Sensitivity of recognised amounts to changes in assumptions
Ogden discount rate
During 2019, following the announcement by the UK Government, the Ogden discount rate which is used in setting personal injury
compensation, was changed to minus 0.25% from the existing minus 0.75% rate that had been in place since February 2017. Thechange came into effect on 5 August 2019 and the minus 0.25% rate is likely to remain in place for up to five years.
The minus 0.25% rate is 25 basis points lower than the assumed rate of 0% that was used in setting best estimate claims reserves at
31 December 2018. Given the stated timeframes for the update of the rate, sensitivities to the Ogden discount rate assumption are
not presented.
Underwriting year loss ratios – UK Car Insurance
The following table sets out the impact on equity and post-tax profit or loss at 31 December 2019 that would result from a 1%, 3%
and 5% deterioration and improvement in the UK Car insurance loss ratios used for each underwriting year for which material amounts
remain outstanding.
Underwriting year
2016

2017

2018

2019

Booked loss ratio

73%

75%

81%

92%

Impact of 1% deterioration in booked loss ratio (£m)

(14.2)(15.9)

(3.8)

(2.0)

Impact of 3% deterioration in booked loss ratio (£m)

(42.4)(47.6)(11.3)(5.9)

Impact of 5% deterioration in booked loss ratio (£m)

(69.6)(72.6)(18.9)(9.8)

Impact of 1% improvement in booked loss ratio (£m)

14.2

15.3

9.5

2.0

Impact of 3% improvement in booked loss ratio (£m)

42.6

46.3

33.7

5.9

Impact of 5% improvement in booked loss ratio (£m)

71.0

77.6

61.7

9.8

As above, the impact is stated net of reinsurance and includes the change in net insurance claims along with the associated profit
commission movements that result from changes in loss ratios. The figures are stated net of tax at the current rate.

Admiral Group plc · Annual Report and Accounts 2019161

Notes to the Financial Statements continued
For the year ended 31 December 2019

5. Premium, claims and profit commissions continued(iii) Analysis of recognised amounts
31 December
2019£m

31 December
2018£mClaims outstanding*1

2,899.4

2,740.5

Unearned premium provision

1,075.6

995.9

Total gross insurance liabilities

3,975.0

3,736.4

1,354.2

1,220.1

Gross

Recoverable from reinsurers
Claims outstanding
Unearned premium provision

717.5

663.4

2,071.7

1,883.5

1,545.2

1,520.4

Unearned premium provision

358.1

332.5

Total insurance liabilities – net

1,903.3

1,852.9

Total reinsurers’ share of insurance liabilities
Net
Claims outstanding*2*1	Gross claims outstanding at 31 December 2019 is presented before the deduction of salvage and subrogation recoveries totalling £71.7 million (2018: £56.4 million).
*2	Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24-36 months following the start of the underwriting year. Aftercommutation, claims outstanding from these contracts are included in Admiral’s net claims outstanding balance. Refer to note (v) below.

The maturity profile of gross insurance liabilities at the end of 2019 is as follows:

Claims outstanding< 1 year£m

1–3 years£m> 3 years
£m

813.7

497.0

1,588.7

Unearned premium provision

1,075.6––

Total gross insurance liabilities

1,889.3

497.0

1,588.7< 1 year£m

1–3 years£m> 3 years
£m

739.9

383.7

1,616.9

The maturity profile of gross insurance liabilities at the end of 2018 was as follows:

Claims outstanding

162

Unearned premium provision

995.9

–

–

Total gross insurance liabilities

1,735.8383.7

1,616.9

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information(iv) Analysis of claims incurred
The following tables illustrate the development of gross and net UK Insurance and International Insurance claims incurred for the pastten financial periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first table shows
actual gross claims incurred and the second shows actual net claims incurred. Figures are presented on an underwriting year basis.
Financial year ended 31 December

Total
Analysis of claims incurred(gross amounts)

2010
£m

2011
£m

2012
£m

2013
£m

2014
£m

2015
£m

2016
£m

(360.3) (250.1)

4.2

41.7

28.0

10.6

4.1

– (444.3) (329.7)

43.4

51.4

47.9

(0.9)

2017
£m

2018
£m

2019
£m

4.3

6.4

16.5

26.9

21.0

0.5

£m

Underwriting year (UK insurance)2010 and prior2011(583.8)2012–– (463.7) (334.7)

49.8

69.2

8.6

59.9

30.3

8.5

(572.1)

2013

–

–

– (431.1) (325.5)

53.6

44.4

34.2

35.2

8.2

(581.0)

2014

–

–

–

– (438.2) (347.1)

25.6

17.1

52.0

15.7

(674.9)

2015

–

–

–

–

– (428.4) (411.2)

21.7

53.3

58.0

(706.6)

2016

–

–

–

–

–

–

(529.4) (463.7)

82.1

54.8

(856.2)

2017

–

–

–

–

–

–

– (691.8)(615.0)123.1(1,183.7)(546.9) (1,365.7)

2018

–

–

–

–

–

–

–

–

(818.8)

2019

–

–

–

–

–

–

–

–

–

UK insurance gross claims incurred(360.3) (694.4) (789.2) (680.7) (634.5) (594.2) (858.8) (991.4)(812.4)(812.4)(1,153.5) (1,074.0)

Underwriting year (International insurance)2010 and prior(31.8)(29.9)(11.5)

(0.1)

5.1

1.3

0.6

0.6

1.5

0.5

2011

–

(35.7)(42.7)

1.2

5.7

1.7

4.0

1.2

1.3

1.1

2012

–

–

(58.0)(53.7)

0.7

4.0

6.0

2.6

2.0

1.5

(94.9)

2013

–

–

–

(68.2)(57.8)

4.2

7.7

3.3

5.8

1.3

(103.7)(65.5)

4.4

5.8

5.5

2.0

(133.0)(92.6) (101.6)

7.7

3.1

0.1

(183.3)11.7

6.9(245.6)(62.2)

2014

–

–

–

–

(85.2)

2015

–

–

–

–

–

2016

–

–

–

–

–

–

(138.9) (125.3)

2017

–

–

–

–

–

–

– (174.1)(147.3)16.5(304.9)

2018

–

–

–

–

–

–

–

–

(204.9)(165.7)(370.6)

2019

–

–

–

–

–

–

–

–

–

(293.8)(293.8)(65.6) (112.2) (120.8) (131.5) (146.9) (217.8) (278.2)(321.3)(429.6)(1.1)–(37.9)(64.5)

International insurance
gross claims incurred(31.8)

Other gross claims incurred

(7.6)

–

(1.7)

(2.2)

(7.1)

(5.4)

(0.1)

(3.6)

Claims handling costs(17.0)(25.9)(26.0)(22.9)(21.4)(22.6)(27.1)(35.5)

Total gross claims incurred(416.7) (785.9) (929.1) (826.6) (794.5) (769.1) (1,103.8)(1,308.7)(1,513.8) (1,568.1)

Admiral Group plc · Annual Report and Accounts 2019163

Notes to the Financial Statements continued
For the year ended 31 December 2019

5. Premium, claims and profit commissions continued
Financial year ended 31 December
Analysis of claims incurred(net amounts)

2010
£m

2011
£m

2012
£m

2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

2018
£m

2019
£m

(184.1) (119.9)

2.8

41.7

28.0

10.6

14.0

11.4

3.6

15.5

– (203.7) (151.1)

39.7

51.4

47.0

8.4

26.2

16.3

1.7

Total
£m

Underwriting year (UK insurance)2010 and prior2011(164.1)2012–– (196.0) (139.3)

49.8

69.2

19.4

59.1

30.6

4.9

(102.3)

2013

–

–

– (184.4) (135.0)

38.4

49.3

36.4

34.7

4.4

(156.2)

2014

–

–

–

– (187.0) (144.1)(16.4)

25.3

38.4

17.2

(266.6)

2015

–

–

–

–

– (182.1) (162.0)

2016

–

–

–

–

–

(2.6)

42.6

48.2

(255.9)– (219.4)(180.7)

48.1

50.7

(301.3)

2017

–

–

–

–

–

–

–

(214.3)(182.9)77.8(319.4)

2018

–

–

–

–

–

–

–

–

(261.0)(165.2)(426.2)

2019

–

–

–

–

–

–

–

–

–

(258.1)(258.1)(184.1) (323.6) (344.3) (242.3) (192.8) (161.0) (306.7)(239.2)(229.6)(202.9)

0.3

0.7

0.3

UK insurance net claims incurred

Underwriting year (International insurance)2010 and prior(13.4)

(5.7)

(0.1)

2.5

0.6

0.2

2011

–

(14.9)(18.7)

0.4

2.9

0.8

2.0

0.6

0.6

0.4

(25.9)

2012––(24.2)(22.8)

(0.8)

2.0

2.2

1.3

1.0

0.7

(40.6)

2013

–

–

–

(26.6)(23.5)

1.7

4.8

0.9

3.0

0.7

(39.0)

2014

–

–

–

–

(31.6)(23.3)

1.8

1.8

2.2

0.8

(48.3)

2015

–

–

–

–

–

(33.4)(39.6)

5.1

1.3

1.3

(65.3)

2016

–

–

–

–

–

–

(47.9)(43.5)

6.3

2.4(82.7)

2017

–

–

–

–

–

–

–

(60.7)(51.5)

5.5(106.7)

2018

–

–

–

–

–

–

–

–

(71.2)(58.4)(129.6)

2019

–

–

–

–

–

–

–

–

–

(89.6)(89.6)(12.8)(28.3)(48.6)(49.1)(50.5)(51.6) (76.5)(94.2)(107.6)(135.9)International insurance
net claims incurred
Other net claims incurred

(3.1)

0.0

(0.8)

(2.1)

(6.9)

(5.4)

(0.2)

(2.6)

(1.1)

–

Claims handling costs(8.5)(11.9)(10.8)

(9.5)

(8.9)

(9.4)

(11.2)(11.1)(11.8)(20.5)(208.5) (363.8) (404.5) (303.0) (259.1) (227.4) (394.6)(347.1)(350.1)(359.3)

Total net claims incurred

164(12.8)

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

The table below shows the development of UK Car Insurance loss ratios for the past six financial periods, presented on an underwriting
year basis.
Financial year ended 31 December
UK Car Insurance loss ratio development

2014

2015

2016

2017

2018

2019

92%

89%

84%

81%

76%

74%

Underwriting year (UK Car only)
2014
2015

87%

87%

83%

77%

72%

2016

–

88%

84%

77%

73%

2017

–

–

87%

83%

75%

2018

–

–

–

92%

81%

2019

–

–

–

–

92%

(v) Analysis of claims reserve releases
The following table analyses the impact of movements in prior year claims provisions on a gross and net basis. Figures are presented
on an underwriting year basis.
Financial year ended 31 December
Gross

2014
£m

2015
£m

2016
£m

2017
£m

2018
£m

2019
£m

43.9

Underwriting year (UK Motor insurance)
148.1

197.7

133.8

158.3

123.6

2015

2014 and prior

–

–

1.9

32.0

50.9

47.3

2016

–

–

–

23.7

70.6

50.6
110.6

2017

–

–

–

–

25.4

2018

–

–

–

–

–

83.2

148.1

197.7

135.7

214.0

270.5

335.6

Total gross release (UK Motor Insurance)
Total gross release (UK Household Insurance)

–

–

–

1.6

4.6

8.3

Total gross release (International Insurance)

12.6

14.0

21.0

23.2

35.2

39.1

Total gross release

160.7

211.7

156.7

238.8

310.3

383.0

Net

2014
£m

2015
£m

2016
£m

2017
£m

2018
£m

2019
£m

137.4

173.4

74.6

158.3

123.4

43.9

Financial year ended 31 December

Underwriting year (UK Motor Insurance)
2014 and prior
2015

–

–

0.8

(2.4)

42.5

47.3

2016

–

–

–

10.0

47.1

50.6

2017

–

–

–

–

8.0

75.8

2018
Total net release (UK Motor Insurance)

–

–

–

–

–

25.8

137.4

173.4

75.4

165.9

221.0

243.4

Total net release (UK Household Insurance)

–

–

–

0.5

1.4

2.5

Total net release (International Insurance)

6.3

6.5

9.9

9.5

13.5

14.4

143.7

179.9

85.3

175.9

235.9

260.3

66.8

84.6

58.3

92.1

111.4

121.7

Total net release
Analysis of net releases on UK Motor Insurance:– Net releases on Admiral net share (motor)– Releases on commuted quota share reinsurance contracts

70.6

88.8

17.1

73.8

109.6

121.7

Total net release as above

137.4

173.4

75.4

165.9

221.0

243.4

Admiral Group plc · Annual Report and Accounts 2019165

Notes to the Financial Statements continued
For the year ended 31 December 2019

5. Premium, claims and profit commissions continued
Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24 or 36 months following the startof the underwriting year. After commutation, any changes in claims costs on the commuted proportion of the business are reflected
within claims costs and are separately analysed here. Releases on commuted quota share contracts are analysed by underwriting year
as follows:
Financial year ended 31 December
2015
£m

2016
£m

2017
£m

2018
£m

2019
£m

88.8

17.1

89.6

70.6

23.0

2015

–

–

(15.8)

21.3

27.7

2016

–

–

–

17.7

29.5

2017

–

–

–

–

41.5

88.8

17.1

73.8

109.6

121.7

Underwriting year
2014 and priorTotal releases on commuted quota share reinsurance contracts
Profit commission is analysed in note 5c.
(vi) Reconciliation of movement in claims provision

31 December 2019
Gross
£m

Reinsurance
£m

Net
£m

Claims provision at start of period

2,740.5(1,220.1)

1,520.4

Claims incurred (excluding releases)

1,886.6(1,287.6)

599.0

Reserve releases(383.0)122.7(260.3)

–

257.1

257.1

Claims paid and other movements(1,344.7)

773.7(571.0)Claims provision at end of period

2,899.4(1,354.2)

1,545.2

Movement in claims provision due to commutation

31 December 2018
Gross
£m

Net
£m

Claims provision at start of period

2,403.2(1,028.8)

1,374.4

Claims incurred (excluding releases)

1,786.2(1,212.0)

574.2

Reserve releases(310.3)74.4(235.9)Movement in claims provision due to commutation

166

Reinsurance
£m

–

310.4

310.4

Claims paid and other movements(1,138.6)

635.9(502.7)

Claims provision at end of period

2,740.5(1,220.1)

1,520.4

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information(vii) Reconciliation of movement in net unearned premium provision
31 December 2019
Gross
£m

Reinsurance
£m

Net
£m

995.9

(663.4)

332.5

Written in the period

2,273.7(1,541.4)

732.3

Earned in the period(2,194.0)

1,487.3(706.7)

Unearned premium provision at end of period

1,075.6(717.5)

358.1

Unearned premium provision at start of period

31 December 2018
Gross
£m

Reinsurance
£m

Net
£m

910.7

(608.8)

301.9

Written in the period

2,166.7(1,464.3)

702.4

Earned in the period(2,081.5)

1,409.7(671.8)995.9(663.4)

332.5

Unearned premium provision at start of period

Unearned premium provision at end of period

6. Investment Income and costs
6a. Accounting policies(i) Financial assets
Classification and measurement
The classification and subsequent measurement of the financial asset under IFRS 9 depends on:(a) the Group’s business model for managing the financial assets; and(b) the contractual cash flow characteristics of the financial asset.
Based on these factors, the financial asset is classified into one of the following categories:• Amortised cost – assets which are held in order to collect contractual cash flows, and the contractual terms of the financial asset
give rise to cash flows which are solely payments of principal and interest on the principal amount outstanding (SPPI), where theasset is not designated as FVTPL.
For the Group, these include deposits with credit institutions, cash and cash equivalents, insurance receivables, trade and otherreceivables and loans and advances to customers.
The interest income generated from these assets is included in ‘Investment return’ with the exception of loans and advances tocustomer, where the interest receivable is recognised in ‘Interest income’.
Impairment is recognised on these assets using the expected credit loss model.
• Fair value through other comprehensive income (FVOCI) – assets which are held both to collect contractual cash flows and to sell theasset, where the contractual terms of the financial asset give rise to cash flows which are solely payments of principal and intereston the principal amount outstanding (SPPI), where the asset is not designated as FVTPL.
For the Group, these assets include government gilts and debt securities.
In addition, IFRS 9 allows an irrevocable election at initial recognition to designate equity investments at FVOCI that otherwise would
be held at FVTPL, provided these are not held for trading. The Group has made this election for certain equity investments.
Movements in the carrying amount are taken through OCI, with the exception of recognition of impairment gains or losses, interest
revenue and foreign exchange gains or losses which are recognised in profit or loss.
• Fair value through profit or loss (FVTPL) – assets which do not meet the criteria for amortised cost or FVOCI, or which are designatedas FVTPL.

Admiral Group plc · Annual Report and Accounts 2019167

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
For the Group these assets include investment liquidity funds investing in short duration assets and derivative financial instruments.
A gain or loss on a debt instrument measured at FVTPL which is not part of a hedging relationship is recognised in profit or loss andpresented within ‘Investment return’ in the period in which it arises.
Impairment
The expected credit loss model is used to calculate any impairment to be recognised for all assets measured at amortised cost, as
well as financial investments measured at FVOCI. The general approach, which utilises the three-stage model, is used for Loans andadvances to customers (see note 7) whilst impairment for the remaining assets is measured using the simplified approach.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers theasset and all the attached substantial risks and rewards relating to the asset to a third party.
(ii) Financial Liabilities
Classification and subsequent measurement
Subsequent measurement of financial liabilities is at amortised cost using the effective interest method. Movements in the amortised
cost are recognised through the income statement.
Derecognition
A financial liability is derecognised when the obligation under that liability is discharged, cancelled or expires.
(iii) Investment return and finance costs
Investment return from financial assets comprises distributions as well as net realised and unrealised gains on financial assets
classified as FVTPL, interest income and net realised gains, net of impairment losses, from financial assets classified as FVOCI, andinterest income on holdings in deposits with credit institutions (held at amortised cost).
Finance costs from financial liabilities comprise interest expense on subordinated notes, loan backed securities, credit facilities andlease liabilities, calculated using the effective interest rate method. The effective interest rate method calculates the amortised
cost of a financial asset or liability (or a group of financial assets or liabilities) and allocates the interest income or expense over the
expected life of the asset or liability.

168

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

6b. Investment return
31 December
2019£m

31 December
2018
£m

11.4

6.3

Investment return
On assets classified as FVTPL

34.5

27.9

*1

1.6

3.0

Unrealised losses on forward contracts

(0.1)

(2.3)

Notional accrual for reinsurers’ share of investment return(12.9)–On assets classified as FVOCI*1,*3

On assets classified as amortised cost
Net unrealised losses

Interest receivable on cash and cash equivalents*1

0.8

1.1

Total investment and interest income*2

35.3

36.0

31 December
2019£m

31 December
2018
£m

11.4

11.3

Interest payable on lease liabilities

3.2–

Interest recoverable from co- and reinsurers

(2.0)

–

Total finance costs

12.6

11.3

*1 Interest received during the year was £11.6 million (2018: £8.0 million).
*2 Total investment return excludes £2.8 million of intra-group interest (2018: £0.7 million).
*3 Realised gains/losses on sales of debt securities classified as FVOCI are immaterial.

6c. Finance costs

Interest payable on subordinated loan notes*1*1 Interest paid during the year was £14.0 million (2018: £11.0 million).

Finance costs represent interest payable on the £200.0 million (2018: £200.0 million) subordinated notes and other financial liabilities.
Interest payable on lease liabilities represents the unwinding of the discount on lease liabilities under IFRS 16 and does not result in acash payment. Further detail on the transition to IFRS 16 is included in note 2.

Admiral Group plc · Annual Report and Accounts 2019169

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
6d. Financial assets and liabilities
The Group’s financial assets and liabilities can be analysed as follows:
31 December
2019£m

31 December
2018£m

1,160.2

1,301.1

Debt securities

1,776.3

1,389.9

Government gilts

174.0

170.9

1,950.3

1,560.8

Financial investments measured at FVTPL
Money market and other similar funds
Financial investments classified as FVOCI

Equity investments (designated FVOCI)

7.5

7.8

1,957.8

1,568.6

116.5

100.0

3,234.5

2,969.7

Insurance receivables

948.9

842.3

Trade and other receivables

278.8

239.7

Insurance and other receivables

1,227.7

1,082.0

Loans and advances to customers (note 7)

455.1

300.2

Cash and cash equivalents

281.7

376.8

5,199.0

4,728.7

Subordinated notes

204.2

204.1

Loan backed securities

304.5

168.3

Other borrowings

20.0

71.5

Derivative financial instruments

1.4

0.3

530.1

444.2

1,975.9

1,801.5

137.1–

2,643.1

2,245.7

Financial assets measured at amortised cost
Deposits with credit institutions
Total financial investments
Other financial assets measured at amortised cost

Total financial assets
Financial liabilities

Subordinated and other financial liabilities
Trade and other payables*1

Lease liabilities*2
Total financial liabilities*1	Trade and other payables total balance of £1,975.9 million (2018: £1,801.5 million) above includes £1,472.1 million (2018: £1,349.6 million) in relation to tax and social
security, deferred income and reinsurer balances that are outside the scope of IFRS 9.
*2	Lease liabilities of £149.2 million were recognised on transition on 1 January 2019. The movement to the balance presented of £137.1 million reflects cash payments in the
period offset by the lease interest expense recognised in the income statement.

170

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

The maturity profile of financial assets and liabilities under the scope of IFRS 4 and IFRS 9 at 31 December 2019 is as follows:

On demand£m< 1 year£m

Between1 and 2 years£m> 2 years£m

Money market funds andderivative financial instruments–

1,145.1

1.0

14.0

Deposits with credit institutions

–

96.5

20.0

–

Debt securities

–

462.6

196.6

1,117.1

Government gilts

–

–

–

174.0

Total financial investments–

1,704.2217.6

1,305.1

Trade and other receivables

–

278.8

–

–

Loans and advances to customers

–

128.6

134.2

192.3

Financial investments

Cash and cash equivalents

281.7

–

–

–

Total financial assets

281.7

2,111.6

351.8

1,497.4

Financial liabilities
Subordinated notes

–

11.0

11.0

233.0

Loan backed securities

–

102.3

90.9

125.7

–

20.3

–

–

Other borrowings
Trade and other payables
Total financial liabilities*1–

1,725.1–––

1,858.7

101.9

358.7

*1	Of the £1,725.1 million held within trade and other payables, £1,442.1 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4
hence are included in the above maturity profile.

Admiral Group plc · Annual Report and Accounts 2019171

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
The maturity profile of financial assets and liabilities under the scope of IFRS 4 and IFRS 9 at 31 December 2018 was as follows:
Between1 and 2 years£m> 2 years£m

1,296.9

2.1

2.1

60.0

40.0

–

295.3

210.7

883.9

On demand£m< 1 year£m

Money market funds andderivative financial instruments–

Deposits with credit institutions–

Debt securities–

Financial investments

Government gilts

–

–

–

170.9

Total financial investments–

1652.2252.8

1,056.9

Trade and other receivables

–

239.7

–

–

Loans and advances to customers

–

102.1

91.2

106.9

Cash and cash equivalents

376.8

–

–

–

Total financial assets

376.8

1,994.0344.0

1,163.8

Subordinated notes

–

4.9

–

199.2

Loan backed securities

–

60.2

53.0

55.1

Other borrowings

–

71.8

–

–

Trade and other payables–

1,801.5––

Total financial liabilities–

1,938.4

53.0

254.3

Financial liabilities*1	Of the £1,801.5 million held within trade and other payables, £1,275.9 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4
hence are included in the above maturity profile.

6e. Financial Investments
FVTPL
£m

FVOCI
£m

Amortised Cost
£m

Total
£m

AAA- AA

414.5

861.0

68.7

1,344.2

A

441.2

733.6

308.5

1,483.3

BBB

28.5

304.3

20.2

353.0

Sub BBB

13.3

–

0.1

13.4

262.7

58.9

0.7

322.3

1,160.2

1,957.8

398.2

3,516.2

Not rated*1

Total financial investments*1	The majority (£234.4 million) of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. These specific exposures
are repurchase agreements. The remaining unrated exposure is a mixture of private debt (£77.2 million) and other holdings (£10.7 million).

172

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Classification and Measurement
At initial recognition, the Group measures financial investments at fair value plus or minus, in the case of financial instruments notmeasured at fair value through profit and loss, directly attributable transaction costs. Transaction costs of financial instruments
measured at fair value through profit and loss are expensed to the profit and loss when incurred.
Money market funds and derivative financial instruments are measured at FVTPL. The regulatory capital within the Group is used toinvest in these instruments in addition to any surplus funds which may be held. Buying and selling activity occurs depending on timingof different cashflows.
Debt securities are measured at FVOCI and as such fall under the scope of the ECL model. These assets are held to match policyholder
liabilities or interest on debt liabilities. If sold before maturity, gains or losses on these assets impact the Income Statement.
Private Equity investments have been designated as being reported through FVOCI due to these being long term, strategic
investments. Dividends are recognised in the Income Statement whilst a change in fair values will be reflected in OCI. Given theimmaterial amount (£7.5 million) of these investments, detailed levelling disclosures have not been provided.
Impairment
All financial investments held at FVOCI and at amortised cost have been assessed for impairment using the expected credit loss model
under IFRS 9. The assessment has been made based on the credit ratings of the entities and externally available credit loss ratios.
The fair value of the gilts and debt securities is calculated with reference to quoted market valuations and as such take into accountfuture expected credit losses. As a result, no impairment provision is required against the book value. The calculated impairment loss
within the fair value is recognised through the Income Statement whilst fair value movements are recognised in OCI. Deposits are heldwith well rated institutions and are held at book value, with impairment calculated in a similar manner to debt securities.
All assets that are purchased, which require a calculation of impairment, are considered of investment grade or above (i.e. BBB rated
or higher), as defined by an external credit rating agency or an assessment from Admiral’s external asset managers. The credit ratingof all assets is regularly monitored. As at the year-end reporting date, the vast majority of financial assets are of investment grade
and considered low risk under IFRS 9. These therefore remain within stage 1 and a 12 month expected loss is used to calculate theimpairment provision required.
Any assets downgraded below BBB are considered by the Group to have significantly increased in credit risk since inception, andtherefore enter stage 2 under IFRS 9.
The impairment provision at 31 December 2019 is £0.9 million (£0.5 million at 31 December 2018). Given there is no material change in thecredit quality or type of financial assets in the year and the movement in provision is immaterial, no further disclosure has been made.
Fair value measurement
IFRS 13 requires assets and liabilities that are held at fair value to be classified according to a hierarchy which reflects the observabilityof significant market inputs, based on three levels.
The table below shows how the financial assets held at fair value have been measured using the fair value hierarchy:
31 December 2019

Level One (quoted prices in active markets)
Level Two (use of observable inputs)
Level Three (use of significant unobservable inputs)*

1

Total

31 December 2018

FVTPL
£m

FVOCI
£m

FVTPL
£m

FVOCI
£m

1,160.2

1,950.3

1,301.1

1,560.8

–

–

–

–

–

7.5

–

7.8

1,160.2

1,957.8

1,301.1

1,568.6*1 No further information is provided due to the immateriality of the balance.

Deposits are held with well rated institutions; as such the approximate fair value is the book value of the investments as impairment of
the capital is not expected.

Admiral Group plc · Annual Report and Accounts 2019173

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
6f. Cash and cash equivalents
31 December
2019£m

31 December
2018
£m

281.7

376.0

–

0.8

281.7

376.8

Cash at bank and in hand*1
Short-term deposits
Total cash and cash equivalents*1 £4.4 million of cash is ring-fenced via a bank guarantee. See note 11f for further details.

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term deposits with original
maturities of three months or less. All cash and cash equivalents are measured at amortised cost.
An assessment has been completed for impairment purposes. The credit rating of all assets is regularly monitored. As at the year-end
reporting date all financial assets are of investment grade or above (i.e. BBB rated or higher) and considered low risk under IFRS 9.
These therefore remain within stage 1 and a 12 month expected loss is used to calculate the impairment provision required. Given the
short-term duration and low risk of these assets, no impairment provision has been recognised.
For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity.
6g. Other Assets
Insurance and other receivables
31 December
2019£m

31 December
2018£mInsurance receivables*1

948.9

842.3

Trade and other receivables

262.8

227.0

Prepayments and accrued income

16.0

12.7

1,227.7

1,082.0

Total insurance and other receivables*1 Insurance receivables at 31 December 2019 include £71.7 million in respect of salvage and subrogation recoveries (2018: £59.3 million).

Insurance receivables
Insurance receivables are measured at amortised cost. Given the short-term duration of these assets no impairment provision has
been recognised.
Trade and other receivables
Classification. Trade and other receivables are measured at amortised cost, being made up of multiple types of receivable balances.
Impairment. Where a provision is required for these receivables, it is calculated in line with the simplified method for trade receivables
per IFRS 9, whereby lifetime expected credit losses are recognised irrelevant of the credit risk. In this case, the provision is based on a
combination of:(i)		

aged debtor analysis;(ii)

historic experience of write-offs for each receivable;(iii)

any specific indicators of credit deterioration observed; and(iv)

management judgement.

As at 31 December 2019 and 31 December 2018, the level of provision is immaterial.
The amortised cost carrying amount of receivables is a reasonable approximation of fair value.

174

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Contract balances
The following table provides information about receivables and contract assets from contracts with customers. Both balances areincluded in Trade and other receivables.
31 December
2019£m

31 December
2018£m

Receivables

40.3

32.5

Contract assets

24.8

23.4

The contract asset relates to the Group’s right to consideration for work undertaken in the law companies on behalf of clients which is
ongoing or where the final fee has not yet been billed. The contract asset is transferred to trade receivables once the fee has been billed.
Significant changes in the contract asset balance during the period are as follows:
Contract asset balance£m

At 1 January 201923.4

Revenue recognised

34.8

Transferred to trade receivables(31.8)

Write-offs(1.6)

At 31 December 201924.8

The amount of revenue recognised in 2019 from performance obligations satisfied (or partially satisfied) in previous periods is £nil(2018: £nil).
6h. Financial liabilities
Subordinated notes
Financial liabilities are inclusive of £200.0 million subordinated notes issued on 25 July 2014 at a fixed rate of 5.5% with a redemption
date of 25 July 2024.
The notes are unsecured subordinated obligations of the Group and rank pari passu without any preference among themselves. In theevent of a winding-up or bankruptcy, they are to be repaid only after the claims of all other creditors have been met.
There have been no defaults on any of the notes during the year. The Group has the option to defer interest payments on the notes
but to date has not exercised this right.
The fair value of subordinated notes (level one valuation) at 31 December 2019 is £225.1 million (2018: £211.3 million).
Other borrowings
The Group holds a credit facility of £20.0 million which expires in September 2020. £20.0 million was drawn under this agreement as at
31 December 2019. The group also hold a revolving credit facility of £200.0 million which expires in December 2020. As at 31 December
2019, £nil was drawn down on this facility (2018: £71.5 million). Amounts drawn under their respective agreements are shown within
other borrowings in the table above.
Loan backed securities
During 2018 an asset backed senior loan note facility of £300.0 million was established in relation to the Admiral Loans business, which
increased to £400.0 million during 2019 (see note 3 for details of the accounting treatment of this SPE). As at the year end, £304.5
million (2018: £168.3 million) of this facility had been utilised.

Admiral Group plc · Annual Report and Accounts 2019175

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
Lease liabilities
The Group leases various properties, with rental contracts typically for fixed periods of five to 25 years, although these may haveextension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Under IAS 17, all Group leases were classified as operating leases. Operating lease payments, including the effects of any lease
incentives, were recognised in the income statement on a straight-line basis over the lease term.
Under IFRS 16, from 1 January 2019, for each lease a right-of-use asset and corresponding lease liability are recognised at the date at
which the leased asset becomes available for use by the Group.
The lease liability is initially measured at the present value of remaining lease payments, which include the following:• fixed payments (including in-substance fixed payments), less any lease incentives receivable;• variable lease payments that are based on an index or a rate; and• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s
incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an assetof a similar value in a similar economic environment, with similar terms and conditions. Generally, the Group uses its incremental
borrowing rate as the discount rate.
Subsequently, lease payments are allocated to the lease liability, split between repayments of principal and interest. A finance cost is
charged to the profit and loss so as to produce a constant period rate of interest on the remaining balance of the lease liability.
6i. Objectives, policies and procedures for managing financial assets and liabilities
The Group’s activities expose it primarily to financial risks of credit risk, interest rate risk, liquidity risk and foreign exchange risk. The
Board of Directors has delegated the task of supervising risk management and internal control to the Group Risk Committee. There isalso an Investment Committee that makes recommendations to the Group and subsidiary Boards on investment strategy.
There are several key elements to the risk management environment throughout the Group. These are detailed in full in the Corporate
Governance Statement. Specific considerations for the risks arising from financial assets and liabilities are detailed below.
Credit risk
The Group defines credit risk as the risk of loss if another party fails to perform its obligations. The key areas of exposure to credit
risk for the Group result through its reinsurance programme, investments, bank deposits, loans and advances to customers andpolicyholder receivables.
The Directors consider credit quality and counterparty exposure frequently and in significant detail. The Directors consider that thepolicies and procedures in place to manage credit exposure continue to be appropriate for the Group’s risk appetite and, during 2019and historically, no material credit losses have been experienced by the Group.
The impact on equity of a 100 basis point increase in credit spreads at the relevant valuation date, is as follows:

Equity31 December
2019£m

31 December
2018
£m

54.8

42.3

Financial Investments and cash
Credit and counterparty risk is managed by the Group by investing in high quality money market funds and setting suitableparameters for asset managers to adhere to when purchasing debt securities. Cash balances and deposits are placed only with highly
rated credit institutions. The detailed holdings are reviewed regularly by the Investment Committee.
Invested Assets
As noted above, the Group primarily invests in the following asset types:• Investment funds and cash plus liquidity funds, which in turn invest in a mixture of short-dated fixed and variable rate securities,
such as cash deposits, certificates of deposits, floating rate notes and other commercial paper;
176

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Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information• Deposits with well rated institutions are short in duration (one to five years). These are classified as held at amortised cost.
Therefore neither the carrying value of the asset, nor the interest return will be impacted by fluctuations in interest rates;• Debt securities are held within two segregated mandates. The guidelines of the investments retain a similar credit quality of theinvestment funds (all holdings are investment grade). The duration of the securities is relatively short (c. three years) and similar tothe duration of the on book claims liabilities (the average duration is three years); and• UK Government bonds which are classified as FVOCI.
Reinsurance assets
To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions), the Group only
conducts business with companies of appropriate financial strength ratings. In addition, many reinsurance contracts are operated on afunds withheld basis, which substantially reduces credit risk, as the Group withholds the cash received from policyholders as collateral.
Loans and advances to customers
The risk appetite for the lending business is set with respect to anticipated loan losses over a 12-month period. Management
has defined an amber and a red loan loss limit, representing points at which action is required. These limits have been defined bymanagement to reflect the business maturity, the business ambitions and the economic climate. Risk appetite is assessed at least
annually, while the limits are continuously monitored.
Insurance assets
A further principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by
instalment payers. The impact of this is mitigated by the large customer base and low average level of balance recoverable. Thereis also mitigation by the operation of numerous high- and low-level controls in this area, including payment on policy acceptance as
opposed to inception and automated cancellation procedures for policies in default.
The amount of bad debt expense relating to policyholder debt charged to the income statement in 2019 and 2018 is insignificant.
Trade and other receivables
Trade receivables and other debtors are also subject to credit risk, although this is mitigated by a review of the credit worthiness of all
counterparties prior to them being accepted.
Other assets
All other assets are assessed as low credit risk under IFRS 9, with no significant amounts past due or impaired.
The Group’s credit risk exposure to assets with external ratings is as follows:

Rating31 December
2019£m

31 December
2018£mFinancial institutions – Credit institutions

AAA

245.1

164.3

Financial institutions – Credit institutions

AA

925.2

942.1

Financial institutions – Credit institutions

A

1,483.2

1,501.3

Financial institutions – Credit institutions

BBB and below

688.7

567.9

UK Government gilts

AA

174.0

170.9

Reinsurers

AA

688.9

458.5

Reinsurers

A

160.6

303.6

Reinsurers

BBB

1.7

–

The Group’s maximum exposure to credit risk at 31 December 2019 is £4,913.3 million (2018: £4,507.4 million), being the carrying valueof financial investments and cash, the carrying value of loans and advances to customers and the excess of reinsurance assets overamounts owed to reinsurers under funds withheld arrangements. The Group does not use credit derivatives or similar instruments tomitigate exposure.
£13.8 million (2018: £9.2 million) was charged to the income statement in respect of movement on the ECL of loans and advances tocustomers. Further details are provided in note 7b.
There were no further significant financial assets that were past due at the close of either 2019 or 2018.
Admiral Group plc · Annual Report and Accounts 2019177

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
Interest rate risk
The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely impact on thecapital values of financial assets and liabilities.
The impact on equity of a 50 basis point increase in interest rates at the relevant valuation date, is as follows:

Equity31 December
2019£m

31 December
2018
£m

35.4

29.9

Loans and advances to customers
The Group’s loan portfolio is made up of fixed rate loans which are funded at a floating variable rate. The Group has an interest rate
swap arrangement, the risk management objective of which is to eliminate the majority of the interest rate risk from the loans
portfolio. This relates to the difference between the fixed rate on loans written and the floating variable rate on funding.
Hedge accounting
Hedge accounting is applied when the criteria specified in IFRS 9 (including amendments, as set out above) are met. In line with IFRS 9,
the gain or loss on the hedged position as at the balance sheet date is recognised through Other Comprehensive Income.
This results in a hedging reserve at 31 December 2019 (and at 31 December 2018) in relation to the interest rate swap.
The Group is exposed to GBP LIBOR within its hedge accounting relationships, with the hedged item including issued GBP LIBOR
floating rate debt as disclosed below. In addition, the Group has a number of financial assets and liabilities with interest rates linked to
GBP LIBOR that are not included in hedge accounting relationships. Similarly, there are exposures to non-GBP interest rates.
The Group is closely monitoring the market and the output from the various industry working groups managing the transition to new
benchmark interest rates.
In response to the announcements, the Group has set up an Interbank Offered Rate (IBOR) transition project which includes input
from a number of areas of the business including risk management, investments, legal, accounting and systems. The project is under
the governance of the Investment Committee, and ultimately the Chief Financial Officer who is a member of the Board. The aim of
the programme is to understand where IBOR exposures are within the business and prepare and deliver on an action plan to enable asmooth transition to alternative benchmark rates. The Group intends to have its transition and fall-back plans in place by the end of2020.
For the Group’s loan backed securities and related interest rate swaps (which are bilateral agreements) the Group has started
discussions with respective counterparties to amend the reference benchmark interest rate which will change to SONIA. The Groupaims to finalise this amendment in the second half of 2020.
For the Group’s RCF and other debt linked to GBP LIBOR and reinsurance funds withheld balances, the Group will begin a dialogue in2020 to propose amendments to the fall-back provisions to move from GBP LIBOR to SONIA.
Below are details of the hedging instruments and hedged items in scope of the IFRS 9 amendments due to benchmark interest rate
reform, by hedge type. The terms of the hedged items listed match those of the corresponding hedging instruments.
Hedge type

Instrument type

Maturing in

NominalHedged item

Cash flowhedge

Pay sterling fixed, receive 1-month GBP LIBOR
interest rate swap

2023

£146.3m

Portfolio cash flow hedges of interest
rate risk on GBP LIBOR

Cash flowhedge

Pay sterling fixed, receive 1-month GBP LIBOR
interest rate swap

2024

£274.7m

Portfolio cash flow hedges of interest
rate risk on GBP LIBORThe Group will continue to apply the amendments to IFRS 9 until the uncertainty arising from the interest rate benchmark reforms
with respect to the timing and the amount of the underlying cash flows that the Group is exposed to ends.
Due to the immateriality of the transaction and balance, no further disclosure is made.

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Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Financial liabilities
The Group also holds a financial liability in the form of £200.0 million of subordinated notes with a ten-year maturity and fixed rate
coupon of 5.5%. This liability is valued at amortised cost and therefore neither the carrying value of the deposits, nor the interest
payable, will be impacted by fluctuations in interest rates.
Liquidity risk
Liquidity risk is defined as the risk that the Group does not have sufficient, available financial resources to enable it to meet its
obligations as they fall due, or can only secure them at excessive cost.
The Group is strongly cash-generative due to the large proportion of revenue arising from non-underwriting activity. Further, as
noted above, a significant portion of insurance funds are invested in investment funds with same day liquidity, meaning that a large
proportion of the Group cash and investments is immediately available.
A breakdown of the Group’s other borrowings, trade payables and other payables is shown in note 11.
The subordinated notes have a maturity date of July 2024, whereas all trade and other payables will mature within three to six monthsof the balance sheet date (refer to the maturity profile at the start of this note for further detail).
In practice, the Group’s Directors expect actual cash flows to be consistent with this maturity profile except for amounts owed
to co‑insurers and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £1,442.1 million (2018: £1,275.9 million),£1,129.6 million (2018: £1,022.7 million) is held under funds withheld arrangements and therefore not expected to be settled within
12 months.
A maturity analysis for insurance contract liabilities is included in note 5. The maturity profile for financial assets is included at thestart of this note.
The Group’s Directors believe that the cash flows arising from these assets will be consistent with this profile. Liquidity risk is not,therefore, considered to be significant.

Admiral Group plc · Annual Report and Accounts 2019179

Notes to the Financial Statements continued
For the year ended 31 December 2019

6. Investment Income and costs continued
Foreign exchange risk
Foreign exchange risk arises from unfavourable movements in foreign exchange rates that could adversely impact the valuation ofoverseas assets and liabilities.
The Group is exposed to foreign exchange risk through its operations overseas. Although the relative size of the international
operations means that the risks are relatively small, increasingly volatile foreign exchange rates could result in larger potential gains
or losses. Assets held to fund insurance liabilities are held in the currency of the liabilities; however, surplus assets held as regulatory
capital in foreign currencies remain exposed.
The Group’s exposure to net assets and profits in currencies other than the reporting currency is immaterial other than for US dollars
and Euros. The Group’s exposure to net assets held in US dollars at the balance sheet date was £40.9 million (2018: £60.7 million); theexposure to net assets held in Euros was £111.8 million (2018: £69.3 million).
The loss before tax derived from business carried out in the US was £18.5 million (2018: £19.2 million). If the Sterling rates with US
dollars had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by £1.8 million (2018:£1.8 million).
The profit before tax derived from business carried out in Euros was €11.9 million (2018: profit before tax of €5.4 million). If theSterling rates with Euros had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by£1.0 million (2018: £0.4 million).

7. Loans and Advances to Customers
7a. Accounting policies
Loans and advances to customers relate to the Admiral Loans business, consisting of unsecured personal loans and car finance products.
Classification
Loans and advances to customers are measured at amortised cost. This is because assets are held in order to collect contractual cash
flows and the contractual terms of the financial asset demand cash inflows which are solely payments of principal and interest on theprincipal amount outstanding.
Interest income and expense
Interest income received in relation to loans and advances to customers is calculated using the effective interest method which
allocates interest, and direct and incremental fees and costs over the expected lives of the assets and liabilities. There has been nochange in recognition of interest income from the comparative period.
Interest expense is calculated following the specific process relating to each source of funding, which is not linked to individual accounts.
Finance leases
Included within loans and advances to customers are personal contract purchase (PCP) and hire purchase (HP) arrangements which
are classified as finance leases under IFRS 16. A receivable equal to the net investment in the lease has been recognised. The net
investment is equal to the gross investment in the lease discounted at the rate implicit in the lease. The impairment requirementsof IAS 36 have been applied to the finance leases held.
Lease interest income is recognised within interest income in the income statement over the term of the lease using the effective
interest method.
7b. Loans and advances to customers

180

31 December
2019£m

31 December
2018£mLoans and advances to customers – gross carrying amount

479.1

310.4

Loans and advances to customers – provision(24.0)(10.2)

Total loans and advances to customers

455.1

300.2

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Loans and advances to customers are comprised of the following:
31 December
2019£m

31 December
2018£mUnsecured personal loans

445.8

294.2

Finance leases

33.3

16.2

Total loans and advances to customers, gross

479.1

310.4

Fair value measurement
The amortised cost of loans and advances to customers on a portfolio basis is considered a reasonable approximation of fair value.
Expected credit losses
The expected credit loss model is a three-stage model based on forward looking information regarding changes in the credit quality
since origination. Credit risk is measured using a probability of default, exposure at default and loss given default defined as follows:• Probability of Default (PD): The likelihood of an account defaulting; calibrated through analysis of historic customer behaviour.
Where customers have already met the definition of default this is 100%. For customers that are not in default the PD is determinedthrough analysis of historic data at a credit grade level.
• Exposure at Default (EAD): The amount of balance at the time of default. For loans that are in arrears the EAD is taken as the current
balance, for up to date loans the contractual outstanding balance in each future month is used.
• Loss Given Default (LGD): The amount of the asset not recovered following a borrower’s default, determined through analysis ofhistoric recovery performance.
The PD is applied to the EAD to calculate the expected loss. Where customers are up-to-date the EAD is effectively the sum of the
future month-end balances, as such the PD is converted from an annual rate to a monthly rate before applying it to the EAD. The LGD isthen applied to this loss to calculate the total expected loss including recoveries. A forward-looking provision is also calculated, as set
out later in this note.
Loan assets are segmented into three stages of credit impairment:• Stage 1 – no significant increase in credit risk of the financial asset since inception;• Stage 2 – significant increase in credit risk of the financial asset since inception; and• Stage 3 – financial asset is credit impaired.
For assets in stage 1, the allowance is calculated as the expected credit losses from events within 12 months after the reporting date.
For assets in stages 2 and 3, the allowance is calculated as the expected credit loss from events in the remaining lifetime of each asset.
Significant increase in credit risk (Stage 2)
As explained above, stage 1 assets have an ECL allowing for losses in the next twelve months, stage 2 or 3 assets have an ECL allowing
for losses over the remaining lifetime of the contract. An asset moves to stage 2 when its credit risk has increased significantly sinceinitial recognition. IFRS 9 does not prescribe a definition of significant increase in credit risk (SICR) but does include a rebuttablepresumption that this does occur for loan assets which are 30 days past due (which the Group does not rebut).
The Group has deemed a SICR to have occurred where:• the loan is 1 to 3 loan payments in arrears; or• the loan has been in arrears with Admiral Loans in the last six months; or• the customer has a significant level of unsecured debt relative to the point of inception.

Admiral Group plc · Annual Report and Accounts 2019181

Notes to the Financial Statements continued
For the year ended 31 December 2019

7. Loans and Advances to Customers continued
Credit Impaired (Stage 3)
The Group does not rebut the presumption within IFRS 9 that default has occurred when an exposure is greater than 90 days past due,
which is consistent with a customer being 4 or more payments in arrears. In addition, a loan is deemed to be credit impaired where:• there is an Individual Voluntary Arrangement (IVA) agreement confirmed or proposed; or• customer has started or progressed bankruptcy action; or• a repayment plan is in place; or• customer is deceased.
Write off policy
Loans are written off where there is no reasonable expectation of recovery. The Group’s policy is to write off balances to theirestimated net realisable value. Write offs are actioned on a case by case basis taking into account the operational position and thecollections strategy. Given the immaturity of the loans business, and considerations surrounding potential debt sales in the future, theGroup has to date operationally written off only a small proportion of the book.
Forward-looking information
Under IFRS 9 the provision must reflect an unbiased and probability-weighted amount that is determined by evaluating a range ofpossible outcomes. The means by which the Group has determined this is to run scenario analyses.
Economic scenarios are considered, including an upturn, a downturn and a severe downturn. A 50% weighting is applied to the basescenario and the remaining 50% distributed across the scenarios as shown below:• 25% Upturn• 20% Downturn• 5% Severe Downturn
The key economic driver of the losses from the scenarios is the likelihood of a customer entering hardship through unemployment.
Several customer demographics including age, income and debt levels are considered with a sensitivity to the specific scenarios
considered. For each individual customer, the sensitivities from each demographic are combined to determine an overall sensitivity.
Management judgement has been used to define the weighting and severity of the different scenarios based on available data
without undue cost or effort. The outcome from the scenarios have been contrasted to loss rates stemming from loans written overthe last decade, including those from the most recent economic downturn (2007-2009).
Sensitivities to key areas of estimation uncertainty
The key areas of estimation uncertainty identified, as per note 3 to the Financial Statements, are in the PD and the forward
looking scenarios.
Stage 1 assets represent 95% of the total loan assets; a 0.1% increase in the stage 1 PD, i.e. from 1.8% to 1.9%, would result in a £0.5
million (2%) increase in ECL.
The upturn scenario would reduce the ECL allowance by £1.2 million (-5.4%), the downturn would create an increase of £2.5 million(11.7%) and severe downturn by £30.0 million (138.0%).

182

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Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Amounts arising from ECL: loans and advances to customers
The Group is exposed to credit risk from the Admiral Loans business which has expanded during 2019.
The following table sets out information about the credit quality of the loans and advances to customers measured at amortised cost.
Credit grades are used to segment customers by apparent credit risk at the time of acquisition. Higher grades are the lowest credit
risk with each subsequent grade increasing in expected credit risk. The Group does not have any purchased or originated creditimpaired (POCI) assets. These tables are inclusive of the finance lease assets which are held by the Group, further analysis of thesebalances can be found in note 7c.
All probability of defaults figures included in this paragraph allow for forward-looking information, i.e. the PDs are a weighted average
from the economic scenarios considered. The average PD for stage 1 assets is 1.8% (2018: 1.8%) reflecting the expectation of defaults
within 12 months of the reporting date. The average PD for assets in stage 2 is 58.7% (2018: 5.2%) reflecting expected losses over theremaining life of the assets. The PD for assets in stage 3 is 100.0% (2018: 100.0%) as these assets are deemed to have defaulted.

Stage 112- month ECL£mStage 2Lifetime ECL£mStage 3
Lifetime ECL£m

31 December
2019
Total
£m

31 December
2018
Total
£m

Higher

333.5

3.6

–

337.1

139.5

Medium

112.1

2.6

–

114.7

117.7

Lower

10.6

0.3

–

10.9

48.6

–

–

16.4

16.4

4.6

Credit Grade*2

Credit Impaired
Gross carrying amount

456.2

6.5

16.4

479.1

310.4

Expected credit loss allowance

(5.6)

(3.4)

(14.4)(23.4)(9.9)

Other loss allowance*

(0.6)

–

–

(0.6)

(0.3)

450.0

3.1

2.0

455.1

300.2

1

Carrying amount*1 Other loss allowance covers losses due to a reduction in current or future vehicle value or costs associated with recovery and sale of vehicles.
*2 Credit grade is the internal credit banding given to a customer at origination. This is based on external credit rating information.

The following tables reconcile the opening and closing gross carrying amount and expected credit loss allowance.
Stage 112- month ECL£mStage 2Lifetime ECL£mStage 3
Lifetime ECL
£m

Total
£m

296.9

8.9

4.6

310.4

Transfers from Stage 1 to Stage 2

(4.5)

4.5

–

–

Transfers from Stage 1 to Stage 3

(8.2)

–

8.2

–

Transfers from Stage 2 to Stage 1

2.4

(2.4)

–

–

Transfers from Stage 2 to Stage 3

–

(2.7)

2.7

–

Gross carrying amount as at 1 January 2019
Transfers

Transfers from Stage 3 to Stage 1

–

–

–

–

Transfers from Stage 3 to Stage 2

–

–

–

–

Principal redemption payments(124.9)

(4.5)

(1.3)

(130.7)

New financial assets originated or purchased

294.5

2.7

2.2

299.4

Gross carrying amount as at 31 December 2019

456.2

6.5

16.4

479.1

Admiral Group plc · Annual Report and Accounts 2019183

Notes to the Financial Statements continued
For the year ended 31 December 2019

7. Loans and Advances to Customers continued
Stage 112- month ECL£mStage 2Lifetime ECL£mStage 3
Lifetime ECL
£m

Total

4.4

1.4

4.1

9.9

Transfers from Stage 1 to Stage 2

(0.1)

0.2

–

0.1

Transfers from Stage 1 to Stage 3

(0.3)

–

0.5

0.2

Transfers from Stage 2 to Stage 1

0.1

(0.2)

–

(0.1)

Transfers from Stage 3 to Stage 1

–

–

–

–
6.9

Expected credit loss allowance as at 1 January 2019
Movements with a profit and loss impact
Transfers

Changes in PDs/ LGDs/ EADs

(1.8)

0.8

7.9

New financial assets originated or purchased

3.3

1.2

1.9

6.4

Total net profit and loss charge in the period

1.2

2.0

10.3

13.5

Expected credit loss allowance as at 31 December 2019

5.6

3.4

14.4

23.4

Transfers from Stage 2 to Stage 3

–

(1.0)

1.0

–

Transfers from Stage 3 to Stage 2

–

–

–

–

–

–

(0.5)

(0.5)

Other movements with no profit and loss impact
Transfers

Write-offs

7c. Finance lease receivables
Loans and advances to customers include the following finance leases. The group is the lessor for leases of cars.
31 December
2019£m

31 December
2018£mGross investment in finance leases, receivable
Less than 1 year

8.1

4.9

Between 1 to 5 years

28.9

10.9

More than 5 years

–

–

37.0

15.8

Unearned finance income

(4.2)

(1.9)

Net investment in lease receivables

32.8

13.9

Less impairment allowance

(0.4)

(0.2)

32.4

13.7

Net investment in finance leases, receivable
Less than 1 year

6.2

4.1

Between 1 to 5 years

26.6

9.8

More than 5 years

–

–

32.8

13.9

The net investment in finance leases shown above is net of the unguaranteed residual value of £0.5 million (2018: £0.3 million).

184

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

7d. Interest Income

Loans and advances to customers

31 December
2019£m

31 December
2018
£m

30.8

15.0

30.8

15.0

Interest receivable on loans and advances to customers is recognised in the Income Statement using the effective interest method,which calculates the amortised cost of the financial asset and allocates the interest income over the expected product life.

7e. Interest expense
31 December
2019£m

31 December
2018
£m

5.6

1.7

Interest payable on other credit facilities

0.7

1.9

Total interest expense*1

6.3

3.6

Interest payable on loan backed securities*1 Interest paid in total during the year was £6.3 million (2018: £3.1 million)

Interest expense represents the interest payable on funding for the Admiral Loans business, in the form of credit facilities of £220.0
million (2018: £200.0 million) of which £20.0 million was drawn down at 31 December 2019 (2018: £71.5 million) and loan backed
securities through an SPE of £400.0 million (2018: £300.0 million) of which £304.5 million was drawn down at 31 December 2019(2018: £168.3 million).

8. Other Revenue
8a. Accounting policy(i) Contribution from additional products and fees and Other Revenue
Revenue is credited to the income statement over the period matching the Group’s obligations to provide services. Where the Group
has no remaining obligations, the revenue is recognised immediately. An allowance is made for expected cancellations where thecustomer may be entitled to a refund of amounts charged.
Commission from the provision of insurance intermediary services is credited to revenue on the sale of the underlying insurance policy.
There has been no change in revenue recognition from the comparative period.

Admiral Group plc · Annual Report and Accounts 2019185

Notes to the Financial Statements continued
For the year ended 31 December 2019

8. Other Revenue continued(ii) Nature of goods and services
The following is a description of the principle activities within the scope of IFRS 15 from which the Group generates its other revenue.
Products and services

Nature, timing of satisfaction of performance obligations and significant payment terms

Comparison

The performance obligation is the provision of insurance intermediary services, at which point theperformance obligation is met. Revenue is therefore recognised at a point in time.

Fee and commission
revenue: Commission onunderlying products

The performance obligation is the provision of insurance intermediary services, at which point theperformance obligation is met. Revenue is therefore recognised at a point in time. Payment of thecommission is due within 30 days of the period close.

Fee and commission
revenue: Administration
fees

The performance obligation is the change requested being made to the underlying policy, at which point
the performance obligation is met.

Revenue fromlaw firm

The performance obligation is the pursuit of the compensation from the other side’s insurer on behalf ofthe customer. Once the case is settled the performance obligation is fully satisfied. Revenue is therefore
recognised over time using the expected value method. This method values revenue by multiplying
hours incurred on open cases by a 12-month realisable rate. The realisable rate is a probability weighted
transaction price based on settled cases. The expected value method therefore results in revenue
recognised being constrained to that where there is a high probability of no significant reversal.

Revenue is therefore recognised at a point in time and is collected immediately or in line with direct debit
instalments.

Revenue is recognised over time because as the Group has an enforceable right to payment for performancecompleted to date and the work performed to date has no alternative use to the GroupA contract asset is recognised equal to the work performed up to the balance sheet date but not yet billed.
Refer to note 6g for further detail of this balance.
Payment is due within 28 days of invoice.
Profit commission fromco-insurers

The Group’s profit commission revenue falling within the scope of IFRS 15, ‘Revenue from Contracts with
Customers’ relates to a contractual arrangement between the Group’s insurance intermediary EUI Limited,
and a third party (external to the Group) co-insurer (Great Lakes) underwriting a share of the UK Car
Insurance business generated by EUI Limited.
The variable consideration, being the profit commission recognised in respect of each underwriting year
at the end of each reporting period, is recognised at a point in time, and calculated based on a number ofdetailed inputs, the most material of which are as follows:•

Premiums, defined as gross premiums ceded including any instalment income, less reinsurance
premium (for excess of loss reinsurance);•

Insurance expenses incurred; and•Claims ratio (more typically referred to as a loss ratio).

Whilst the premiums and insurance expenses related to an underwriting year are typically fixed at theconclusion of each underwriting year and are not subject to judgement, the claims ratio is calculated fromthe underwriting year loss ratios that result from the setting of claims reserves in the Financial Statements
meaning it is subject to inherent uncertainty. As stated in note 5d, Admiral’s reserving policy is initiallyto reserve conservatively, above internal and independent projections of actuarial best estimates. This isdesigned to create a margin held in reserves to allow for unforeseen adverse development in open claims.
Admiral’s financial statement loss ratios, used in the calculation of profit commission income, continue
to include a significant margin above projected best estimates of ultimate claims costs. It is this margin
for uncertainty, included in the financial statement loss ratios, which creates the constraint over therecognition of the variable consideration, as using the booked loss ratio rather than the actuarial best
estimate constrains the profit commission income to a level where there is a high probability of no
significant reversal of the revenue recognised.
The key methods, inputs and assumptions used to estimate the variable consideration of profit commission
are therefore in line with those used for the calculation of claims liabilities, as set out in note 3 to the Annual
Report, with further detail also included in note 5. There are no further critical accounting estimates orjudgements in relation to the recognition of profit commission.

186

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Instalment income on insurance premium paid via instalments is recognised under IFRS 9 using the effective interest rate, and as suchis not within the scope of IFRS 15. Profit commission from reinsurers is within the scope of IFRS 4, and not within the scope of IFRS 15
due to the nature of the income.
Refer to the Strategic Report for further detail on the sources of revenue.
8b. Disaggregation of revenue
In the following tables, other revenue is disaggregated by major products/service lines and timing of revenue recognition. The total
revenue disclosed in the table of £584.8 million (2018: £542.4 million) represents total other revenue and profit commission and isdisaggregated into the segments included in note 4.
Year ended 31 December 2019
UK Insurance£mInternational
Car Insurance£mComparison
£m

Other
£m

Total
£m

–

–

152.2

–

152.2

Instalment income

85.3

2.9

–

–

88.2

Major products/service line
Comparison*1
Fee and commission revenue

162.0

18.7

–

1.9

182.6

Revenue from law firm

32.9

–

–

–

32.9

Other

13.4

–

–

0.6

14.0

Total other revenue

293.6

21.6

152.2

2.5

469.9

Profit commission

114.0

0.9

–

–

114.9

Total other revenue and profit commission

407.6

22.5

152.2

2.5

584.8

Point in time

267.8

18.7

152.2

2.5

441.2

Over time

35.9

–

–

–

35.9

Revenue outside the scope of IFRS 15

103.9

3.8

–

–

107.7

407.6

22.5

152.2

2.5

584.8

Timing of revenue recognition

Admiral Group plc · Annual Report and Accounts 2019187

Notes to the Financial Statements continued
For the year ended 31 December 2019

8. Other Revenue continued
Year ended 31 December 2018
UK Insurance£mInternational
Car Insurance£mComparison
£m

Other
£m

Total
£m

–

–

131.7

–

131.7

Instalment income

82.6

2.7

–

–

85.3

Major products/service line
Comparison*1
Fee and commission revenue

172.4

15.9

–

1.9

190.2

Revenue from law firms

30.5

–

–

–

30.5

Other

10.8

–

–

0.7

11.5

Total other revenue

296.3

18.6

131.7

2.6

449.2

Profit commission

93.2

–

–

–

93.2

Total other revenue and profit commission

389.5

18.6

131.7

2.6

542.4

Point in time

275.3

15.9

131.7

2.6

425.5

Over time

33.4

–

–

–

33.4

Timing of revenue recognition

Revenue outside the scope of IFRS 15

80.8

2.7

–

–

83.5

389.5

18.6

131.7

2.6

542.4

*1 Comparison revenue excludes £19.4 million (2018: £19.3 million) of income from other Group companies.

Instalment income is recognised applying the effective interest rate over the term of the policy, and is outside the scope of IFRS 15.
Profit commission from reinsurers is recognised under IFRS 4, and is discussed further in note 5 to the Financial Statements.

9. Expenses
9a. Accounting policies(i) Acquisition costs and operating expenses
Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over the period in which thosepremiums are earned. All other operating expenses are charged to the income statement in the period that they are incurred.
(ii) Employee benefits
As detailed in the Remuneration Committee Report, the key elements of employee remuneration are:
• Base salaries and pension contributions;• Share based incentive plans;• A discretionary bonus, the ‘DFSS Bonus’, rather than an annual cash bonus, that is directly linked to the number of DFSS awards held
and actual dividends paid out to shareholders.
Within note 9b, the charges for base salaries and pension contributions (and the related social security costs) are recognised withininsurance contract expenses or administration and other marketing costs, based on the role of the employee.
Charges for the share based incentive plans (and related social security costs) and discretionary bonus are included within Share
Scheme Charges. These charges are not shown as part of the result for each reportable segment, or within the expense ratio, due
to them being materially comprised of an accounting charge in line with IFRS 2 Share based payments which does not result in a cash
payment to employees but instead results in a dilution of shares.
The rules of the share schemes ensure that the actual dilution level does not exceed 10% in any rolling ten-year period, by funding ofany vested (and future) DFSS and SIP awards as appropriate with market-purchased shares. This corresponds to approximately a 1%
dilution of share capital each year.

188

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Base salaries and pension contributions
Base salaries and the related employer social security costs are charged to the income statement in the period that they are incurred.
The Group contributes to defined contribution personal pension plans for its employees. The contributions payable to these schemes
are charged in the accounting period to which they relate.
Share based incentive plans and related social security costs
The Group operates a number of equity and cash settled compensation schemes for its employees, the main ones being:• a Share Incentive Plan (‘SIP’), which is in place for all UK employees encouraging wide share ownership across our employees; and• the Discretionary Free Share Scheme (‘DFSS’). DFSS shares are typically awarded to managers, and for the majority of employees
50% of the DFSS shares awarded are subject to three performance conditions being Earnings per Share growth, Return on Equity
and Total Shareholder Return vs. the FTSE 350 (excluding investment companies) over a three-year period.
For both schemes, employees must remain in employment three years after the award date (i.e. at the vesting date), otherwise theshares are forfeited.
The majority of these schemes are classed as equity settled under IFRS 2, due to the employees receiving shares (rather than cash) as
consideration for the services provided.
For equity settled schemes, the charge, which reflects the fair value of the employee services received in exchange for the grantof the free shares, is recognised as an expense, with a corresponding increase in equity, as shown in the Consolidated Statement of
Changes in Equity (2019: £58.8 million; 2018: £56.7 million).
For the cash settled schemes, the expense recognised for the fair value of services received results in a corresponding increasein liabilities.
The key drivers and assumptions used to calculate the charge for the schemes over the three year vesting period are:• the number of shares awarded, which is set at the start of each scheme. Details of the number of shares awarded for each scheme
where shares remain unvested is set out in note 9f(ii)• the fair value of the shares
For the SIP, the fair value of the shares awarded is the share price at the award date. Awards under the SIP are entitled to receive
dividends, and hence no adjustment is made to this fair value.
For the DFSS equity settled awards, awards are not eligible for dividends, although a discretionary bonus is currently paid equivalent
to the dividend that would have been paid on the shareholding, hence the fair value of the shares is revised downwards to takeaccount of these expected dividends.
For the DFSS cash settled awards, the fair value is based on the share price at the vesting date. The closing share price at the end ofeach reporting period is used as an approximation for the closing price at the end of the vesting period.
• attrition rates, which impact the ultimate number of shares that vest;• in the case of the DFSS, the vesting rates based on the performance conditions, which also impact the ultimate number of sharesthat vest.
The number of shares that have ultimately vested compared to those originally awarded is set out in note 9f(iii).
At each balance sheet date, the Group revises its assumptions on the number of shares which will ultimately vest based on the latest
forecast information for attrition rates and, for the DFSS, the extent to which the performance conditions are met.
The financial impact as a result of any change in the assumptions is recognised through the Income Statement. Any significant
changes in assumptions may therefore result in an increased/decreased charge in an accounting period as a result of this true-up of
the expected cumulative charge required.

Admiral Group plc · Annual Report and Accounts 2019189

Notes to the Financial Statements continued
For the year ended 31 December 2019

9. Expenses continued
Social security costs on share based incentive plans
Social security costs are incurred by the Group in respect of the share based incentive plans, with the expense recognised over thevesting period for each share scheme. For the SIP, these costs are paid when the employees sell the shares after vesting (typically 3-5
years after the grant date). For the DFSS, the costs are paid immediately upon vesting.
The total social security costs are calculated based on the following:• The taxable value of the shares, being:– For the SIP, the lower of the share price at award date and the share price at the balance sheet date;– For the DFSS, the share price at the balance sheet date.
• the number of shares expected to vest for each scheme, driven by the number of shares awarded, attrition rates and, for the DFSS,the vesting rate based on performance conditions;• the appropriate social security rate.
These assumptions are updated at the end of each reporting period. The financial impact as a result of any change in the assumptions
is recognised through the Income Statement. Any significant changes in assumptions may therefore result in an increased/decreased
charge in an accounting period as a result of this true-up of the expected cumulative charge required.
Discretionary bonus on shares allocated but unvested
The cost of the DFSS bonus is recognised and paid in each period equivalent to the dividends on shares allocated to employees thatare still entitled to vest, but have not yet vested. The cost shown also includes the social security costs on the discretionary bonus. No
accrual is made for future discretionary bonus payments due to there being no contractual obligation for such a bonus at the balance
sheet date.
9b. Operating expenses and share scheme charges
31 December 2019

Gross
£m

Recoverablefrom co- andreinsurers
£m

Net
£m

Acquisition of insurance contracts

138.0(104.9)33.1

Administration and other marketing costs (insurance contracts)

398.8(307.2)

91.6

Insurance contract expenses

536.8(412.1)

124.7

Administration and other marketing costs (other)

281.4

–

281.4

Share scheme charges

82.5(29.1)

53.4

Total expenses and share scheme charges

900.7(441.2)459.5

31 December 2018

Gross
£m

Recoverablefrom co- andreinsurers
£m

Net
£m

Acquisition of insurance contracts*1

135.1(103.8)31.3

Administration and other marketing costs (insurance contracts)

381.6(287.9)93.7

Insurance contract expenses

516.7(391.7)125.0

Administration and other marketing costs (other)

249.2

–

249.2

Share scheme charges

76.9(27.1)

49.8

Total expenses and share scheme charges

842.8(418.8)424.0*1 Acquisition of insurance contracts expense excludes £19.4 million (2018: £19.3 million) of aggregator fees from other Group companies.

190

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

The £91.6 million (2018: £93.7 million) administration and marketing costs allocated to insurance contracts is principally made up ofsalary costs.
Analysis of other administration and other marketing costs:
31 December
2019£m

31 December
2018£mExpenses relating to additional products and fees

70.1

63.4

Comparison operating expenses

156.8

144.4

Loans expenses (including movement on ECL provision)

31.9

22.9

Other expenses

22.6

18.5

Total

281.4

249.2

Refer to note 13 for a reconciliation between insurance contract expenses and the reported expense ratio.
9c. Staff costs and other expenses
31 December 201931 December 2018

Total
£m

Net
£m

Total
£m

Net
£m

Salaries

292.2

109.2

268.8

95.7

Social security charges

30.5

12.8

27.2

10.3

Pension costs

13.5

4.8

9.0

3.2

Share scheme charges (see note 9f)

82.5

53.4

76.9

49.8

Total staff expenses

418.7

180.2

381.9

159.0

Depreciation charge:– Owned assets

11.9

4.1

12.0

3.7

– ROU assets

11.9

4.6

–

–

17.4

5.9

15.5

4.6

–

52.8

–

50.5

– Fees payable for the audit of the Company’s annual
accounts

0.1

–

–

–

– Fees payable for the audit of the Company’s subsidiaryaccounts

0.9

0.8

0.5

0.3

– Fees payable for audit related assurance services
pursuant to legislation or regulation

0.4

–

0.4

–

Amortisation charge:– Software– Deferred acquisition costs
Auditor’s remuneration (including VAT):£32,380 (2018: £1,800) was payable to the auditor for other services in the year.
Total and net expenses are before and after co- and reinsurance arrangements respectively.
Refer to the Corporate Governance Report for details of the Audit Committee’s policy on fees paid to the Company’s auditor for nonaudit services. Audit fees are 66% (2018: 53%) of total fees and 31% (2018: 47%) of total fees are for non-audit services, which areclassed as audit related assurance services under the FRC rules on non-audit services.
The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement.

Admiral Group plc · Annual Report and Accounts 2019191

Notes to the Financial Statements continued
For the year ended 31 December 2019

9. Expenses continued
9d. Staff numbers (including Directors)
Average for the year
2019
Number2018
Number

7,319

6,845

Direct customer contact staff
Support staff

3,510

3,354

Total

10,82910,19931 December
2019£m

31 December
2018£mDirectors’ emoluments

1.7

1.6

Amounts receivable under SIP and DFSS share schemes

1.2

1.1

Company contributions to money purchase pension plans

–

–

2.9

2.7

2019
Number2018
Number1

1

9e. Directors’ remuneration(i) Directors’ remuneration

Total(ii) Number of Directors

Retirement benefits are accruing to the following number of Directors under:– Money purchase schemes
9f. Staff share schemes
Analysis of share scheme costs:
31 December 2019
SIP charge (i)Total charge

Net
£m

Gross
£m

Net
£m

Gross
£m

Net
£m

IFRS 2 charge for equity settled share schemes

17.3

11.9

41.5

26.5

58.8

38.4

IFRS 2 charge for cash settled share schemes

–

–

1.9

1.0

1.9

1.0

Total IFRS 2 charge

17.3

11.9

43.4

27.5

60.7

39.4

Social security costs on IFRS 2 charge

1.6

1.2

7.1

4.8

8.7

6.0

Discretionary bonus on shares allocated but
unvested
Total share scheme charges

192

DFSS charge (ii)

Gross
£m

Admiral Group plc · Annual Report and Accounts 2019

–

–

13.1

8.0

13.1

8.0

18.9

13.1

63.6

40.3

82.5

53.4

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

31 December 2018
SIP charge (i)IFRS 2 charge for equity settled share schemes
IFRS 2 charge for cash settled share schemes

DFSS charge (ii)

Total charge

Gross
£m

Net
£m

Gross
£m

Net
£m

Gross
£m

Net
£m

16.4

11.2

40.3

25.8

56.7

37.0

–

–

0.6

0.3

0.6

0.3

Total IFRS 2 charge

16.4

11.2

40.9

26.1

57.3

37.3

Social security costs

1.7

1.1

5.9

3.9

7.6

5.0

–

–

12.0

7.5

12.0

7.5

18.1

12.3

58.8

37.5

76.9

49.8

Discretionary bonus on shares allocated but
unvested
Total share scheme charges

Net share scheme charges are presented after allocations to co-insurers (in the UK and Italy) and reinsurers (in the International
Insurance businesses). The proportion of net to gross share scheme charges would be expected to be consistent in each period, atapproximately 65%.
Financial year ended 31 December

2016 and
prior
£m

2017
£m

2018
£m

2019
£m

Total
cumulative
charge to
date
£m

2014

9.7

2.1

–

–

11.8

2015

8.6

3.0

2.0

–

13.6

Analysis of gross cost

Year of share scheme – SIP

2016

6.2

2.2

5.4

2.1

15.9

2017*1

2.2

1.1

5.5

5.5

14.3

2018

–

–

3.5

6.1

9.6
3.6

*1

2019

*1

–

Gross IFRS 2 costs – SIP

–

–

3.6

8.4

16.4

17.3

Year of share scheme – DFSS
2014

11.8

3.7

–

–

15.5

2015

9.6

9.4

7.0

–

26.0

2016

5.8

12.8

17.0

9.8

45.4

2017

*2

–

3.6

13.0

14.5

31.1

2018*2

–

–

3.9

15.6

19.5

2019*2

–

–

–

3.5

3.5

Gross IFRS 2 costs – DFSS

29.5

40.9

43.4

Total IFRS 2 costs

37.9

57.3

60.7

*1	Awards are made in March and September of each year, and vest over 36 months from award date. On the 2017 scheme, an average of 5 months’ charge remains outstanding,on the 2018 scheme an average of 17 months’ charge remains outstanding, and on the 2019 schemes an average of 29 months’ charge remains outstanding.
*2	The main award is made in September of each year, with smaller awards made at other points through the year. The shares vest over 36 months from award date.
On the 2017 main DFSS, 9 months’ charge remains outstanding; on the 2018 main DFSS 21 months’ charge remains outstanding, and on the 2019 main DFSS, 33 months’
charge remains outstanding.

Admiral Group plc · Annual Report and Accounts 2019193

Notes to the Financial Statements continued
For the year ended 31 December 2019

9. Expenses continued(i) The Approved Share Incentive Plan (the SIP)
Eligible UK based employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The
maximum award for each year is £3,600 per employee and the maximum number of shares that can vest relating to the 2019 schemes
is 1,113,496 (2018 schemes: 1,192,302; 2017 schemes: 1,067,291).
The awards are made at the discretion of the remuneration committee, taking into account the Group’s performance.
(ii) The Discretionary Free Share Scheme (the DFSS)
Under the DFSS, details of which are contained in the remuneration policy section of the Directors’ Remuneration Report, individuals
receive an award of free shares at no charge.
The maximum number of shares that can vest relating to the 2019 schemes is 2,637,196 (2018 scheme: 3,373,948; 2017 schemes:
3,205,449).
The vesting percentage for the 2016 DFSS scheme which vested during 2019 was 93.8% (2015 DFSS scheme: 87.1%).
(iii) Number of free share awards committed at 31 December 2019Awardsoutstanding*1

SIP 20172

1,067,291

SIP 2018

1,192,302*2

SIP 2019*2
DFSS 2017

1,113,496
3,205,449*3*3

3,373,948

DFSS 2019*3

2,637,196

Total awards committed

12,589,682

DFSS 2018*1 Being the maximum number of awards committed before accounting for expected staff attrition and vesting conditions.
*2 Shares are awarded in March and September of each year, and vest three years later.
*3 The main award is made in September of each year, with smaller awards made at other points through the year.

(iv) Number of free share awards vesting during the year ended 31 December 2019
During the year ended 31 December 2019, awards under the SIP H116 and H216 schemes and the DFSS 2016 schemes vested. The total
number of awards vesting for each scheme is as follows.
Original awards

Awards vested

SIP 2016 schemes

1,025,662

797,311DFSS 2016 schemes

3,253,250

2,643,980

The difference between the original and vested awards reflects employee attrition (SIP schemes) and both employee attrition and thevesting outcomes based on performance conditions noted above (DFSS schemes).
The weighted average fair value of the shares granted in the year was £18.96 (2018: £17.65).
The weighted average market share price at the date of exercise for shares exercised during the year was £21.06 (2018: £20.05).

194

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

10. Taxation
10a. Accounting policy
Income tax on the profit or loss for the periods presented comprises current and deferred tax.
(i) Current tax
Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively
enacted by the balance sheet date, and includes any adjustment to tax payable in respect of previous periods.
Current tax related to items recognised in other Comprehensive Income is also recognised in other Comprehensive Income and not in
the Income Statement.
(ii) Deferred tax
Deferred tax is provided in full using the balance sheet liability method, providing for temporary differences arising between the
carrying amount of assets and liabilities for accounting purposes and the amounts used for taxation purposes.
Deferred tax is calculated at the tax rates that have been enacted or substantively enacted by the balance sheet date and that are
expected to apply in the period when the liability is settled or the asset is realised.
The principal temporary differences arise from carried forward losses, depreciation of property and equipment and share scheme
charges. The resulting deferred tax is charged or credited in the Income Statement, except in relation to share scheme charges where
the amount of tax benefit credited to the Income Statement is limited to an equivalent credit calculated on the accounting charge.
Any excess is recognised directly in equity.
Deferred tax assets relating to carried forward losses are recognised only to the extent that it is probable that future taxable profits
will be available against which the assets can be utilised. The probability of the availability of future taxable profits is determined by a
combination of the classification of the status of the businesses holding cumulative tax losses and the business plan profit projections
for that business, subject to appropriate stress testing.
10b. Taxation
31 December
2019£m

31 December
2018£mCurrent tax
Corporation tax on profits for the year

91.3

81.4

Under provision relating to prior periods

0.5

0.2

Current tax charge

91.8

81.6

Current period deferred taxation movement

2.8

3.8

(Over)/under provision relating to prior periods

(0.4)

0.3

Total tax charge per Consolidated Income Statement

94.2

85.7

Deferred tax

Admiral Group plc · Annual Report and Accounts 2019195

Notes to the Financial Statements continued
For the year ended 31 December 2019

10. Taxation continued
Factors affecting the total tax charge are:
31 December
2019£m

31 December
2018£mProfit before tax

522.6

476.2

Corporation tax thereon at effective UK corporation tax rate of 19.0% (2018: 19.0%)

99.3

90.5

Expenses and provisions not deductible for tax purposes

1.8

0.7

Non-taxable income

(4.9)

(6.0)

Impact of change in UK tax rate on deferred tax balances

0.3

0.5

Adjustments relating to prior periods

0.1

0.6

Impact of different overseas tax rates

(8.8)

(8.2)

Unrecognised deferred tax

6.4

7.6

Total tax charge for the period as above

94.2

85.7

The outstanding corporation tax payable as at 31 December 2019 was £48.3 million (2018: £49.3 million).
10c. Deferred income tax asset/(liability)
Analysis of deferred tax asset/(liability):Taxtreatmentof shareCapitalschemes allowances£m£m

Carriedforwardlosses£m

Fair value
Other
reserve differences£m£m

Balance brought forward at 1 January 2018

6.1

(4.5)

2.9

(4.6)

0.4

0.3

Tax treatment of share scheme charges throughincome or expense

(2.2)

–

–

–

–

(2.2)

Tax treatment of share scheme charges through reserves

3.3

–

–

–

–

3.3

Capital allowances

–

0.9

–

–

–

0.9

Carried forward losses

–

–

(2.9)

–

–

(2.9)

Movement in fair value reserve

–

–

–

0.7

–

0.7

Other difference

–

–

–

–

0.1

0.1

Balance carried forward at 31 December 2018

7.2

(3.6)

–

(3.9)

0.5

0.2

Tax treatment of share scheme charges throughincome or expense

(4.6)

–

–

–

–

(4.6)

Tax treatment of share scheme charges through reserves

3.3

–

–

–

–

3.3

Capital allowances

–

1.5

–

–

–

1.5

Carried forward losses

–

–

–

–

–

–

Movement in fair value reserve

–

–

–

(1.5)

–

(1.5)

Other difference

–

–

–

–

0.7

0.7

5.9

(2.1)

–

(5.4)

1.2

(0.4)

Balance carried forward at 31 December 2019
Positive amounts presented above relate to a deferred tax asset position.

The average effective rate of tax for 2019 is 19.0% (2018: 19.0%). A further reduction to the main rate of corporation tax to 17%(effective from 1 April 2020) was enacted on 15 September 2016 but is expected to be reversed. This would reduce the Group’s
future current tax charge accordingly.

196

Total
£m

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

The deferred tax asset in relation to carried forward losses remains at £nil at the year end (2018: £nil) due to uncertainty over theavailability of future taxable profits against which to offset any deferred tax asset (see note 3 for details of how future taxable profits
are estimated).
At 31 December 2019, the Group had unused tax losses amounting to £231.3 million (2018: £217.5 million), relating primarily to theGroup’s US businesses Elephant Auto and Compare.com, for which no deferred tax asset has been recognised. The earliest expiry date
for any of these tax losses is 2029. The total aggregated unrecognised deferred tax liabilities on temporary differences associatedwith subsidiaries is £nil (2018: £nil).

11. Other assets and other liabilities
11a. Accounting policy(i) Property and equipment, and depreciation
All property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method
to write off the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows:
Improvements to short leasehold buildings–
Computer equipment			
–Office equipment				–Furniture and fittings			
–Motor vehicles				–Right-of-use assets				–four to ten years
two to four years
four years
four years
four years
two – 20 years, aligned to lease agreement

In line with the adoption of IFRS 16, and as set out further in notes 2 and 6h to the Financial Statements, a right-of-use asset has been
established in relation the Group’s lease arrangements.
The right-of-use asset is measured at cost, which comprises the following:• the amount of the initial measurement of lease liability (see notes 2 and 6h to the Financial Statements);• any lease payments made at or before the commencement date less any lease incentives received;• any initial direct costs; and• restoration costs.
The right-of-use asset is subsequently depreciated over the shorter of the lease term and the asset’s useful life on a straight-line basis.
The Group does not have any significant leases which qualify for the short-term leases or leases of low-value assets exemption.
(ii) Impairment of property and equipment
In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any
indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated and compared to the carrying
value. The carrying value is the higher of the fair value of the asset, less costs to sell and the asset’s value in use. Impairment losses arerecognised through the Income Statement.
(iii) Intangible assets
Goodwill
All business combinations are accounted for using the acquisition method. Goodwill has been recognised in acquisitions of subsidiaries,
and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not been reconsidered in preparing
the Group’s opening IFRS balance sheet at 1 January 2004 due to the exemption available in IFRS 1 (first time adoption). In respect ofacquisitions prior to 1 January 2004, goodwill is included at the transition date on the basis of its deemed cost, which represents theamount recorded under UK GAAP, which was tested for impairment at the transition date. On transition, amortisation of goodwill hasceased as required by IAS 38.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) according tobusiness segment and is reviewed annually for impairment.
The goodwill held on the balance sheet at 31 December 2019 and 2018 is allocated solely to the UK Insurance segment.

Admiral Group plc · Annual Report and Accounts 2019197

Notes to the Financial Statements continued
For the year ended 31 December 201911. Other assets and other liabilities continued
Impairment of goodwill
The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the
goodwill to CGUs) and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised throughthe income statement and are not subsequently reversed.
The recoverable amount is the greater of the fair value of the asset less costs to sell and the value in use of the CGU.
The value in use calculations use cash flow projections based on financial budgets approved by management covering a three year
period. Cash flows beyond this period are considered, but not included in the calculation.
The key assumptions used in the value in use calculations are those regarding growth rates and expected changes in pricing andexpenses incurred during the period. Management estimates growth rates and changes in pricing based on past practices andexpected future changes in the market.
The headroom above the goodwill carrying value is very significant, and there is no foreseeable event that would eliminate this margin.
Deferred acquisition costs
Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs
represent the proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date.
This balance is held as an intangible asset. It is amortised over the term of the contract as premium is earned.
SoftwarePurchased software is recognised as an intangible asset and amortised over its expected useful life (generally the licence term).
Internally generated software is recognised as an intangible asset, with directly attributable costs incurred in the development stage
capitalised. The internally generated software assets are amortised over the expected useful life of the systems and amortisationcommences when the software is available for use.
The carrying value of software is reviewed every six months for evidence of impairment, with the value being written down if any
impairment exists. Impairment may be reversed if conditions subsequently improve.
(iv) Provisions, contingent liabilities and contingent assets
Provisions are recognised when a legal or constructive obligation arises as a result of an event that occurred before the balance sheet
date, when a cash outflow relating to this obligation is probable and when the amount can be estimated reliably.
Where a material obligation exists, but the likelihood of a cash outflow or the amount is uncertain, or where there is a possible
obligation arising from a past event that is contingent on a future event, a contingent liability is disclosed.
Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or
non-occurrence of future events. Where it is probable that a cash inflow will arise from a contingent asset, this is disclosed.

198

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Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

11b. Property and equipment
Improvements
to short
leaseholdbuildings£mComputerequipment£m

Officeequipment£m

At 1 January 2018

28.7

57.2

Additions

3.1

Disposals
Transfers
Foreign exchange movement
At 31 December 2018

Furniture andfittings£m

ROU
asset –
leaseholdbuildings
£m

Total
£m

19.7

9.8

–

115.4

4.9

1.9

0.1

–

10.0

(0.7)

(0.1)

(0.2)

(0.2)

–

(1.2)

(1.2)

–

–

–

–

(1.2)

(0.1)

0.1

–

0.1

–

0.1

29.8

62.1

21.4

9.8

–

123.1

14.9

45.9

15.2

8.1

–

84.1

Cost

Depreciation
At 1 January 2018
Charge for the year

2.8

6.5

1.9

0.8

–

12.0

Disposals

(0.7)

(0.1)

(0.1)

(0.1)

–

(1.0)

Foreign exchange movement

(0.2)

–

–

0.1

–

(0.1)

At 31 December 2018

16.8

52.3

17.0

8.9

–

95.0

13.8

11.3

4.5

1.7

–

31.3

13.0

9.8

4.4

0.9

–

28.1

29.8

62.1

21.4

9.8

–

123.1

–

–

–

–

136.7

136.7

4.2

9.7

1.8

0.9

–

16.6

Disposals

–

(0.2)

(0.6)

(0.2)

–

(1.0)

Transfers

(0.4)

0.1

–

0.3

–

–

Foreign exchange and othermovements*1

(0.2)

(0.3)

(0.2)

(0.2)

(2.3)

(3.2)

At 31 December 2019

33.4

71.4

22.4

10.6

134.4

272.2

16.8

52.3

17.0

8.9

–

95.0

–

–

–

–

–

–

3.2

6.7

1.5

0.5

11.9

23.8

–

(0.1)

–

(0.2)

–

(0.3)

Foreign exchange movement

(0.2)

(0.2)

(0.1)

(0.1)

(0.1)

(0.7)

At 31 December 2019

19.8

58.7

18.4

9.1

11.8

117.8

13.6

12.7

4.0

1.5

122.6

154.4

Net book amountAt 1 January 2018
Net book amountAt 31 December 2018
Cost
At 1 January 2019
Initial application of IFRS 16
Additions

Depreciation
At 1 January 2019
Initial application of IFRS 16
Charge for the year
Disposals

Net book amountAt 31 December 2019*1	Within foreign exchange and other movements for the ROU asset, £0.6 million relates to remeasurements of the ROU asset due to amendments to the payment terms of theleasing arrangement.

Admiral Group plc · Annual Report and Accounts 2019199

Notes to the Financial Statements continued
For the year ended 31 December 201911. Other assets and other liabilities continued
11c. Intangible Assets

At 1 January 2018

Goodwill£mDeferredacquisition
costs*2£m

Software*1
£m

Total
£m

62.3

20.6

76.5

159.4

Additions

–

53.1

13.9

67.0

Amortisation charge–(50.5)(15.5)(66.0)

Disposals

–

–

–

–

Transfers

–

–

1.2

1.2

Foreign exchange movement

–

0.2

0.2

0.4

At 31 December 2018

62.3

23.4

76.3

162.0

Additions

–

54.8

17.0

71.8

Amortisation charge–(52.8)(17.4)(70.2)

Disposals

–

–

(0.3)

(0.3)

Impairment

–

–

(1.2)

(1.2)

Transfers

–

–

–

–

Foreign exchange movement

–

(0.6)

(1.2)

(1.8)

62.3

24.8

73.2

160.3

At 31 December 2019
*1 Software additions relating to internal development are immaterial in both 2019 and 2018.

*2	The gross deferred acquisition costs balance at the end of 2019 is £74.6 million (2018: £71.6 million; 2017: £65.5 million), with gross additions in the year of £163.1 million(2018: £159.6 million); gross amortisation of £158.5 million (2018: £154.7 million) and foreign exchange movements of -£1.6 million (2018: +£1.2 million).

Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services Limited) in November 1999.
As described in the accounting policies, the amortisation of this asset ceased on transition to IFRS on 1 January 2004. All annual
impairment reviews since the transition date have indicated that the estimated recoverable value of the asset is greater thanthe carrying amount and therefore no impairment losses have been recognised. Refer to the accounting policy for goodwill forfurther information.
11d. Trade and other payables
31 December
2019£m

31 December
2018£mTrade payables

37.5

37.9

Amounts owed to co-insurers

220.8

153.2

Amounts owed to reinsurers

1,221.3

1,122.7

Other taxation and social security liabilities

79.6

60.4

Other payables

188.1

196.0

Accruals and deferred income (see below)

228.6

231.3

1,975.9

1,801.5

Total trade and other payables

Of amounts owed to co-insurers and reinsurers (recognised under IFRS 4), £1,129.6 million (2018: £1,022.7 million) is held under funds
withheld arrangements.

200

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Analysis of accruals and deferred income:
31 December
2019£m

31 December
2018£mPremium received in advance of policy inception

131.7

127.2

Accrued expenses

57.4

64.8

Deferred income

39.5

39.3

Total accruals and deferred income as above

228.6

231.3

11e. Leases
Information presented in this note is in accordance with IFRS 16. Comparative information presented for the year ended 31 December
2018 is in accordance with IAS 17.
Admiral Group plc hold various property under leasing arrangements that are now recognised as right-of-use assets and leaseliabilities. A reconciliation to the prior year operating lease commitment can be found in note 2b. A maturity analysis of lease liabilities
based on contractual undiscounted cashflows is set out below:
31 December
2019£m

31 December
2018£mMaturity analysis – contractual undiscounted cash flows
Within one year

12.9

14.8

Between two to five years

47.9

54.3

Over five years

102.0

116.8

Total

162.8

185.9

Amounts recognised in the Statement of Financial Position are as follows:
31 December
2019£mLease liabilities
Current

9.7

Non-current

127.4

Total

137.1

Amounts recognised in the Income Statement are as follows:
31 December
2019£mInterest payable on lease liabilities under IFRS 16

3.2Interest recoverable from co- and reinsurers

(2.0)

Total

1.2

The Group has no significant financial commitments other than those accounted for as right-of-use assets and lease liabilities under
IFRS 16.

Admiral Group plc · Annual Report and Accounts 2019201

Notes to the Financial Statements continued
For the year ended 31 December 201911. Other assets and other liabilities continued
11f. Contingent liabilities
The Groups’ legal entities operate in numerous tax jurisdictions and on a regular basis are subject to review and enquiry by the relevant
tax authority.
Rastreator Comparador Correduria Seguros (“Rastreator Comparador”), the Group’s Spanish Comparison business, has recently
undergone a tax audit in respect of the 2013 and 2014 financial years. As a result of the audit, the Spanish Tax Authority has denied
the VAT exemption relating to insurance intermediary services which Rastreator Comparador has applied. Rastreator Comparador
is appealing this decision via the Spanish Courts and is confident in defending its position which is, in its view, in line with the EU
Directive and is also consistent with the way similar supplies are treated throughout Europe.
The potential liability for the financial years currently subject to audit is approximately €5 million, and, as identified in note 6, a bankguarantee has been provided to the Spanish Tax Authority for this amount. If the exemption is also disallowed in respect of later
years, the liability could increase to €19 million.
The Group is also in early stage discussions on various corporate tax matters with tax authorities in the UK and Italy.
No provision has been made in these Financial Statements in relation to the matters noted above.

12. Share capital
The Group’s capital includes share capital and the share premium account, other reserves which are comprised of the fair value reserveand foreign exchange reserve, and retained earnings.
12a. Accounting policies(i) Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.
(ii) Dividends
Dividends are recorded in the period in which they are declared and paid.
(iii) Earnings per share
Basic Earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company, AdmiralGroup plc by the weighted average number of ordinary shares during the period.
Diluted Earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company by theweighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
12b. Dividends
Dividends were proposed, approved and paid as follows:
31 December
2019£m

31 December
2018£m

Proposed March 2018 (58.0 pence per share, approved April 2018, paid June 2018)

–

163.3

Declared August 2018 (60.0 pence per share, paid October 2018)

–

169.4

Proposed March 2019 (66.0 pence per share, approved April 2019, paid June 2019)

188.0

–

Declared August 2019 (63.0 pence per share, paid October 2019)

179.8

–

Total dividends

367.8

332.7

The dividends proposed in March (approved in April) represent the final dividends paid in respect of the 2017 and 2018 financial years.
The dividends declared in August are interim distributions in respect of 2018 and 2019.
A final dividend of 77.0 pence per share (£221.5 million) has been proposed in respect of the 2019 financial year. Refer to the
Chair’s Statement and Strategic Report for further detail.

202

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

12c. Earnings per share
31 December
2019£mProfit for the financial year after taxation attributable to equity shareholders
Weighted average number of shares – basic
Unadjusted earnings per share – basic
Weighted average number of shares – diluted
Unadjusted earnings per share – diluted

31 December
2018
£m

432.4

395.1

291,513,714

288,197,247

148.3p137.1p292,094,797

288,845,845

148.0p136.8pThe difference between the basic and diluted number of shares at the end of 2019 (being 581,083; 2018: 648,598) relates to awardscommitted, but not yet issued under the Group’s share schemes. Refer to note 9 for further detail.
12d. Share capital
31 December
2019£m

31 December
2018
£m

0.5

0.5

293,686,329 ordinary shares of 0.1 pence

0.3–

290,502,737 ordinary shares of 0.1 pence

–

0.3

0.3

0.3

Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid

During 2019, 3,183,592 (2018: 3,288,475) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s
share schemes.
883,592 (2018: 988,475) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme togive a closing number at 31 December 2019 of 11,628,981 (2018: 10,745,389). Of the shares issued, 4,389,821 remain in the Trust at 31
December 2019 (2018: 4,311,425). These shares are entitled to receive dividends.
2,300,000 (2018: 2,300,000) shares were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary
Free Share Scheme resulting in cumulative shares issued to the Trust of 23,461,948 (2018: 21,161,948). Of the shares issued 5,823,675
remain in the Trust at 31 December 2019 (2018: 6,170,927) to be used for future vesting, the remaining issued shares having vested.
The balance of awards made to employees under the Discretionary Free Share Scheme that have not either vested or lapsed is
8,691,542 (2018: 9,218,956).
The Trustees have waived the right to dividend payments, other than to the extent of 0.001 pence per share, unless and to the extent
otherwise directed by the Company from time to time.
There is one class of share with no unusual restrictions.

Admiral Group plc · Annual Report and Accounts 2019203

Notes to the Financial Statements continued
For the year ended 31 December 201912. Share capital continued
12e. Objectives, policies and procedures for managing capital
The Group’s capital management policy defines the Board oversight, risk appetite and tier structure of the Group’s capital in addition
to management actions that may be taken in respect of capital, such as dividend payments.
The Group aims to operate a capital-efficient business model by transferring a significant proportion of underwriting risk toco‑insurance and reinsurance partners. This in turn reduces the amount of capital the Group needs to retain to operate and grow,and allows the Group to distribute the majority of its earnings as dividends.
The Board has determined that it will hold capital as follows:• Sufficient Solvency II Own Funds to meet all of the Group’s Solvency II capital requirements (over a 1 year and ultimate time horizon).
• An additional contingency to cover unforeseen events and losses that could realistically arise. This risk appetite buffer is assessed
via stress testing performed on an annual basis and is calibrated in relation to the one-year regulatory SCR.
The Group’s current risk appetite buffer is 30% above the regulatory SCR. This forms the lower bound of the longer-term solvency
target operating range of 130% to 150%.
The Group’s dividend policy is to:• Pay a normal dividend equal to 65% of post-tax profits for the period;• Pay a special dividend calculated with reference to distributable reserves and surplus capital held above the risk appetite buffer.
This policy gives the Directors flexibility in managing the Group’s capital.
As noted above, the Group’s regulatory capital position is calculated under the Solvency II Framework. The Solvency Capital
Requirement is based on the Solvency II Standard Formula, with a capital-add-on to reflect limitations in the Standard Formula withrespect to Admiral’s risk profile (predominately in respect of profit commission arrangements in co-and reinsurance agreements andrisks relating to Periodic Payment Order (PPO) claims).
Solvency Ratio (unaudited)
At the date of this report (4 March 2020), the Group’s regulatory solvency ratio, calculated using a capital add-on that has not been
subject to regulatory approval, is 190% (2018: 194%). This includes the recognition of the 2019 final dividend of 77.0 pence per share(2018: 66.0 pence per share).
The Group’s 2019 Solvency and Financial Condition Report (SFCR) will, when published, disclose a solvency ratio that is calculated at
the balance sheet date rather than annual report date, using the capital add-on that was most recently subject to regulatory approval.
The estimated and unaudited SFCR solvency ratio is 172%, with the reconciliation between this ratio and the 190% noted above being
as follows:
31 December
2019£m

31 December
2018£mSolvency Ratio reported in the Annual Report

190%

194%

Change in valuation date

(10%)

(10%)

Other (including impact of updated, unapproved capital add-on)

(8%)

(14%)

172%

170%

Regulatory Solvency Ratio (unaudited)

Solvency Ratio to be reported in the SFCR
Subsidiaries

The Group manages the capital of its subsidiaries to ensure that all entities within the Group are able to continue as going concerns
and also to ensure that regulated entities meet regulatory requirements with an appropriate risk appetite buffer. Excess capital above
these levels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis.

204

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

12f. Group related undertakings
The Parent Company’s subsidiaries are as follows:
Class ofshares held%
Ownership

Principal
Activity

Ordinary95

Legal company

Ordinary

95 (indirect)

Legal company

Ordinary

100

Insurance Intermediary

Penguin Portals Limited

Ordinary

100 Internet-based Comparison Site

Inspop.com Limited

Ordinary

100 Internet-based Comparison Site

Rastreator.com Limited

Ordinary

75 Internet-based Comparison Site

EUI Limited

Ordinary

100

Insurance Intermediary

Admiral Insurance Company Limited

Ordinary

100

Insurance company

Admiral Life Limited

Ordinary

100

Dormant*

Admiral Syndicate Limited

Ordinary

100

Dormant*

Admiral Syndicate Management Limited

Ordinary

100

Dormant*

Bell Direct Limited

Ordinary

100

Dormant*

Confused.com Limited

Ordinary

100

Dormant*

Diamond Motor Insurance Services Limited

Ordinary

100

Dormant*

Elephant Insurance Services Limited

Ordinary

100

Dormant*

Admiral Financial Services Limited

Ordinary

100

Financial services company

Subsidiary

Incorporated in England and Wales
Registered office: Floors 3 & 4 No. 3 Capital Quarter, Cardiff, CF10 4BZ
Admiral Law Limited
Registered office: Admiral House, Queensway, Newport, NP20 4AG
BDE Law Limited
Registered office: Ellipse Ground Floor, Padley Road, Swansea, SA1 8AN
Able Insurance Services Limited
Registered office: Greyfriars House, Greyfriars Road, Cardiff, CF10 3AL

Registered office: Tŷ Admiral, David Street, Cardiff, CF10 2EH

Preminen Price Comparison Holdings Limited

Ordinary

50 Internet-based Comparison Site

Preminen Dragon Price Comparison Limited

Ordinary

50 (indirect) Internet-based Comparison Site

Incorporated in Gibraltar
Registered office: 1st Floor, 24 College Lane, Gibraltar, GX11 1AA
Admiral Insurance (Gibraltar) Limited

Ordinary

100

Insurance company

Incorporated in Spain
Registered office: Calle Sanchez Pacheco 85 28002 Madrid
Rastreator Comparador Correduria De Seguros S.L.U.

Ordinary

Admiral Europe Compañía de Seguros, S.A.

Ordinary

75 (indirect) Internet-based Comparison Site
100

Insurance company

Ordinary

100

Insurance Intermediary

Ordinary

100 Internet-based Comparison Site

Registered office: Calle Albert Einstein, 10 41092 Sevilla
Admiral Intermediary Services S.A.
Incorporated in France
Registered office: 34 quai de la loire, 75019, Paris
LeLynx SAS

Admiral Group plc · Annual Report and Accounts 2019205

Notes to the Financial Statements continued
For the year ended 31 December 201912. Share capital continued
12f. Group related undertakings continued
Class ofshares held%
Ownership

Elephant Insurance Company LLC

Ordinary

100

Insurance company

Elephant Insurance Services LLC

Ordinary

100

Insurance intermediary

Grove General Agency Inc

Ordinary

100

Insurance intermediary

Platinum General Agency Inc

Ordinary

100

Insurance intermediary

Subsidiary

Principal
Activity

Incorporated in the United States of America
Registered office: Deep Run 1; Suite 400, 9950 Mayland Drive, Henrico,
VA 23233

Registered office: 140 East Shore Drive, Suite 300, Glen Allen, VA 23059
Compare.com Insurance Agency LLC

Ordinary 59.25 (indirect) Internet-based Comparison Site

Inspop USA LLC

Ordinary

59.25 Internet-based Comparison Site

Incorporated in Mexico
Registered office: Varsovia, 36, 5th floor, office 501, Colonia Juárez,Cuauhtemoc, Ciudad de Mexico
Preminen Mexico Sociedad Anonima de Capital Variable

51.25 (indirect) Internet-based Comparison Site

Incorporated in Turkey
Registered office: Esentepe MAH. Harman1 SK. Harmanci Giz Plaza 5
1 Sisli/ Istanbul
Preminen Online Fiyat Karşılaştırma Hizmetleri Anonim Şirketi

50 (indirect) Internet-based Comparison Site

Preminen Sigorta Brokerlik Anonim Şirketi

50 (indirect) Internet-based Comparison Site

Incorporated in India
Registered office: F-2902, Ireo Grand Arch, Sector 58, Gurugram,
HARYANA, Gurgaon, Haryana, India, 122011
Preminen Price Comparison India Private Limited

50 (indirect) Internet-based Comparison Site

Subsidiaries by virtue of control
The related undertakings below are subsidiaries in accordance with IFRS
10, as Admiral can exercise dominant influence or control over them:
Registered office: Level 37, 25 Canada Square, Canary Wharf, London,
England, E14 5LQ
Seren One Limitedn/a0

Special purpose entity

Associates
Incorporated in China
Registered office: Room 1806, 15th Floor, Block 16, No. 39 East 3rd Ring
Middle Road, Chaoyang District, BeijingLong Yu Science and Technology (Beijing) Co., Ltd

20.25 (indirect) Internet-based Comparison Site

Incorporated in Bahrain
Registered office: 4th Floor, Office 42, LMC Building 852, Road 3618, Block
436, Al Seef District, PO Box 60138, Manama, Bahrain
Preminen MENA Price Comparison*

15 (indirect) Internet-based Comparison Site

Exempt from audit under S479A of Companies Act 2006

For further information on how the Group conducts its business across the UK, Europe and the US, refer to the Strategic Report.

206

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Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

12g. Related party transactions
The Board considers that only the Executive and Non-Executive Directors of Admiral Group plc are key management personnel.
A summary of the remuneration of key management personnel is as follows, with further detail relating to the remuneration andshareholdings of key management personnel are set out in the Directors’ Remuneration Report.
Key management personnel received short-term employee benefits in the year of £1,957,868 (2018: £1,835,302), post-employment
benefits of £18,946 (2018: £18,573) and share based payments of £938,258 (2018: £923,400). Key management personnel are able toobtain discounted motor insurance at the same rates as all other Group staff, typically at a reduction of 15%.
12h. Post balance sheet events
No events have occurred since the reporting date that materially impact these Financial Statements.

13. Reconciliations
The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report toitems included in the Financial Statements.
13a. Reconciliation of turnover to reported gross premiums written and Other Revenue as per the Financial Statements

Gross premiums written after co-insurance per note 5b of Financial Statements

31 December
2019£m

31 December
2018£m2,273.7

2,166.7

Premiums underwritten through co-insurance arrangements

610.7

587.4

Total premiums written before co-insurance arrangements

2,884.4

2,754.1

Other Revenue

469.9

449.2

Admiral Loans interest income and other fee income

30.8

15.4

3,385.1

3,218.7

Other*1

Turnover as per note 4b of Financial Statements
Intra-group income elimination*2
Total turnover

59.0

44.9

3,444.1

3,263.6

19.4

19.3

3,463.5

3,282.9*1 Other reconciling items represent co-insurer and reinsurer shares of Other Revenue in the Group’s Insurance businesses outside of UK Car Insurance.
*2 Intra-group income elimination relates to comparison income earned in the Group from other Group companies.

Admiral Group plc · Annual Report and Accounts 2019207

Notes to the Financial Statements continued
For the year ended 31 December 2019

13. Reconciliations continued
13b. Reconciliation of claims incurred to reported loss ratios, excluding releases on commuted reinsurance

December 2019

UK
Motor
£m

UK
Home
£m

UK
Other
£m

UK
Total
£m

Int.
Ins
£m

Int.
Other
£m

Int.
Total
£m

Group
£m

Net insurance claims (note 5)

164.7

26.8

24.3

215.8

137.2

6.3

143.5

359.3

Deduct claims handling costs(11.8)(1.1)–(12.9)

(7.6)

–

(7.6)

(20.5)

Prior year release/strengthening – net
original share

121.7

2.5

–

124.2

14.4

–

14.4

138.6

Prior year release/strengthening –commuted share

121.7

–

–

121.7

–

–

–

121.7

Impact of reinsurer caps

–

–

–

–

(0.1)

–

(0.1)

(0.1)

Impact of weather events

–

–

–

–

–

–

–

–

Impact of subsidence

208

–

–

–

–

–

–

–

–

Attritional current period claims

396.3

28.2

24.3

448.8

143.9

6.3

150.2

599.0

Net insurance premium revenue

452.6

37.2

43.4

533.2

168.6

7.6

176.2

709.4

Loss ratio – current period attritional

87.6%

75.8%

–

84.2%

85.3%

–

–

84.4%

Loss ratio – current period
weather events

–

–

–

–

–

–

–

–

Loss ratio – current period
subsidence events

–

–

–

–

–

–

–

–

Loss ratio – prior year release/strengthening (net original share)(26.9%)(6.7%)–(23.3%)(8.5%)––(19.5%)

Loss ratio – reported

60.7%

69.1%

–

60.9%

76.8%

–

–

64.9%

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

December 2018

UK
Motor
£m

UK
Home
£m

UK
Other
£m

UK
Total
£m

Int.
Ins
£m

Int.
Other
£m

Int.
Total
£m

Group
£m

Net insurance claims (note 5)

189.2

29.3

24.0

242.5

104.1

3.5

107.6

350.1

Deduct claims handling costs(11.3)(0.5)–(11.8)–––(11.8)

Prior year release/strengthening –net original share

111.4

1.4

–

112.8

13.5

–

13.5

126.3

Prior year release/strengthening –commuted share

109.6

–

–

109.6

–

–

–

109.6

Impact of reinsurer caps

–

–

–

–

4.5

–

4.5

4.5

Impact of weather events

–

(3.5)

–

(3.5)

–

–

–

(3.5)

Impact of subsidence

–

(2.5)

–

(2.5)

–

–

–

(2.5)

Attritional current period claims

398.9

24.2

24.0

447.1

122.1

3.5

125.6

572.7

Net insurance premium revenue

452.5

31.2

40.2

523.9

141.7

6.2

147.9

671.8

Loss ratio – current period attritional

88.1%

77.6%

–

85.3%

86.1%

–

–

85.2%

Loss ratio – current period weather
events

–

11.2%

–

0.7%

–

–

–

0.5%

Loss ratio – current period subsidence
events

–

7.9%

–

0.5%

–

–

–

0.4%

Loss ratio – prior year release/strengthening (net original share)(24.6%)(4.4%)–(21.5%)(9.5%)––(18.8%)

Loss ratio – reported*

63.5%

92.3%

–

65.0%

76.6%

–

–

67.3%

*1 The group reported loss ratio has been represented at FY 2019 to include the impact of weather events

Admiral Group plc · Annual Report and Accounts 2019209

Notes to the Financial Statements continued
For the year ended 31 December 2019

13. Reconciliations continued
13c. Reconciliation of expenses related to insurance contracts to reported expense ratios
UK
Motor
£m

UK
Home
£m

UK
Other
£m

Net insurance expenses (note 9)

63.4

9.3

Claims handling costs

11.8

1.1

10.8

0.4

December 2019

Intra-group expenses elimination

*1

UK
Total
£m

Int.
Ins.
£m

Int.
Other
£m

Int.
Total
£m

Group
£m

4.9

77.6

45.8

1.3

47.1

124.7

–

12.9

7.6

–

7.6

20.5

1.1

12.3

7.1

–

7.1

19.4

Impact of reinsurer caps

–

–

–

–

2.9

–

2.9

2.9

Net IFRS 16 finance costs

0.5

–

–

0.5

0.1

–

0.1

0.6

Adjusted net insurance expenses

86.5

10.8

6.0

103.3

63.5

1.3

64.8

168.1

Net insurance premium revenue

452.6

37.2

43.4

533.2

168.6

7.6

176.2

709.4

Expense ratio – reported

19.1%

28.9%

–

19.4%

37.6%

–

–

23.7%

December 2018

UK
Motor
£m

UK
Home
£m

UK
Other
£m

UK
Total
£m

Int.
Ins.
£m

Int.
Other
£m

Int.
Total
£m

Group
£m

Net insurance expenses (note 9)

59.7

7.4

5.6

72.7

49.7

2.6

52.3

125.0

Claims handling costs

11.3

0.5

–

11.8

–

–

–

11.8

12.3

0.8

–

13.1

6.2

–

6.2

19.3

Impact of reinsurer caps

–

–

–

–

0.2

–

0.2

0.2

Other adjustment*2

–

–

–

–

–

(2.6)

(2.6)

(2.6)

83.3

8.7

5.6

97.6

56.1

–

56.1

153.7

Intra-group expenses elimination*1

Adjusted net insurance expenses
Net insurance premium revenue

452.5

31.2

40.2

523.9

141.7

6.2

147.9

671.8

Expense ratio – reported

18.4%

28.1%

–

–

39.6%

–

–

22.9%

*1 The intra-group expenses elimination amount relates to aggregator fees charged by the Group’s comparison entities to other Group companies.
*2	Other adjustments relate to additional products underwritten in the Group’s International Insurance businesses. The contribution from these products is reported asancillary income and as such the amounts are excluded for the purpose of calculations of expense ratios.

13d. Reconciliation of statutory profit before tax to Group’s share of profit before tax

Reported profit before tax per the Consolidated Income Statement
Non-controlling interest share of profit before tax
Group’s share of profit before tax

210

Admiral Group plc · Annual Report and Accounts 201931 December
2019£m

31 December
2018
£m

522.6

476.2

3.5

3.1

526.1

479.3

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

13e. Reconciliation of share scheme charges in Strategic Report to Consolidated Income Statement and Consolidated Statement of
Changes in Equity
31 December
2019£m

31 December
2018£m

Net share scheme charges included in Group’s share of profit before tax

52.7

49.0

Non-controlling interest share of net share scheme charges

0.7

0.8

Net share scheme charges included in Group profit before tax

53.4

49.8

13f. Reconciliation of note 4 to Strategic Report(i) UK Insurance
Motor
£m

Household£m

Travel
£m

Total
£m

2,455.3

171.3

8.4

2,635.0

591.5

7.5

(1.6)

597.4

0.5

–

–

0.5

Statutory profit/(loss) before tax

592.0

7.5

(1.6)

597.9

2018

Motor
£m

Household£m

Travel
£m

Total
£m

2,423.1

146.0

6.6

2,575.7

561.7

(3.0)

(3.1)

555.6

1.1

–

–

1.1

562.8

(3.0)

(3.1)

556.7

2019

TurnoverUK Insurance profit before tax – Strategic reportNon-controlling interest share of PBT

TurnoverUK Insurance profit before tax – Strategic reportNon-controlling interest share of PBTStatutory profit/(loss) before tax(ii) International Insurance
2019

Spain
£m

Italy
£m

France
£m

US
£m

Total
£m

Turnover

78.2

204.2

108.1

233.1

623.6

(9.6)

(0.9)

Profit/(loss) before tax – Strategic Report and Statutory

8.7

2018

Spain
£m

Italy
£m

France
£m

US
£m

Total
£m

Turnover

67.6

176.8

80.5

213.8

538.7

(7.5)

(1.1)

Profit/(loss) before tax – Strategic Report and Statutory

6.4

Admiral Group plc · Annual Report and Accounts 2019211

Notes to the Financial Statements continued
For the year ended 31 December 2019

13. Reconciliations continued(iii) Comparison
Confused£m

European
£m

Other
£m

Total
£m

Turnover

112.7

50.1

Group’s share of profit before tax – Strategic Report

20.4

3.5

7.3

1.5

171.6

(4.3)

(1.6)

18.0

–

1.0

(2.9)

(1.4)

(3.3)

20.4

4.5

(7.2)

(3.0)

14.7

Confused£m

European£mCompare
£m

Total
£m

Turnover

95.1

46.3

9.6

151.0

Group’s share of profit before tax – Strategic Report

14.3

1.4

(6.9)

8.8

2019

Non-controlling interest share of profit/(loss)
before tax
Statutory profit/(loss) before tax

2018

Non-controlling interest share of profit/(loss) before tax
Statutory profit/(loss) before tax

212

Admiral Group plc · Annual Report and Accounts 2019

Compare
£m

–

0.9

(3.1)

(2.2)

14.3

2.3

(10.0)

6.6

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Parent Company Financial Statements

Parent Company Income Statement
Year ended

Administrative expenses

Note

31 December
2019£m

31 December
2018
£m

2

(17.6)(13.0)(17.6)(13.0)

402.3

260.8

Operating loss
Investment and other interest income

3Interest income at effective interest rate

3

4.1

4.1

Impairment expense4(93.6)(32.9)

Interest payable

5(11.3)(11.3)

283.9

207.7

3.9

3.7

287.8

211.4

Profit before tax
Taxation credit
Profit after tax

6

Parent Company Statement of Comprehensive Income
Year ended
31 December
2019£m

31 December
2018
£m

287.8

211.4

Movements in fair value reserve

4.2

(2.0)

Deferred tax in relation to movement in fair value reserve

(0.8)

0.4

Other comprehensive income for the period, net of income tax

3.4

(1.6)

291.2

209.8

Profit for the period
Other comprehensive income
Items that are or may be reclassified to profit or loss

Total comprehensive income for the period

Admiral Group plc · Annual Report and Accounts 2019213

Parent Company Financial Statements continued

Parent Company Statement of Financial Position
As at

Note

31 December
2019£m

31 December
2018
£m

4

301.4

292.3

0.6

1.2

ASSETS
Investments in group undertakings
Intangible assets
Financial investments

5

324.2

176.3

Corporation tax asset

6

4.0

3.7

Trade and other receivables

7

184.7

128.6

Cash and cash equivalents

5

Total assets

30.3

83.3

845.2

685.4

0.3

0.3

13.1

13.1

EQUITY
Share capital

9

Share premium account

19.9

16.5

Retained earnings

Fair value reserve

9

8.9

30.2

Total equity

42.2

60.1

LIABILITIES
Subordinated and other financial liabilities

5

224.2

275.6

Deferred tax

6

4.4

3.6

Trade and other payables

8

574.4

346.1

Total liabilities

803.0

625.3

Total equity and total liabilities

845.2

685.4

The accompanying notes form part of these Financial Statements.
These Financial Statements were approved by the Board of Directors on 4 March 2020 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc

Company Number: 03849958

214

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

Parent Company Statement of Changes in Equity
Share
capital£mSharepremium
account
£m

Fair
Value
Reserve£m

Retainedearnings£m

Total
equity£m

At 1 January 2018

0.3

13.1

18.1

94.6

126.1

Profit for the period

–

–

–

211.4

211.4

Movements in fair value reserve

–

–

(2.0)

–

(2.0)

Deferred tax charge in relation to movements in fairvalue reserve

–

–

0.4

–

0.4

Total comprehensive income/(expense) for the period

–

–

(1.6)

211.4

209.8

Dividends–––(332.7)(332.7)

Issues of share capital

–

–

–

–

–

Share scheme credit

–

–

–

56.7

56.7

Deferred tax on share scheme credit

–

–

–

0.2

0.2

Other comprehensive income

Transactions with equity holders

Total transactions with equity holders

–

–

–

(275.8)(275.8)As at 31 December 2018

0.3

13.1

16.5

30.2

60.1

At 1 January 2019

0.3

13.1

16.5

30.2

60.1

Profit for the period

–

–

–

287.8

287.8

Movements in fair value reserve

–

–

4.2

–

4.2

Deferred tax charge in relation to movements in fairvalue reserve

–

–

(0.8)

–

(0.8)

Total comprehensive income for the period

–

–

3.4

287.8

291.2

Dividends–––(367.8)(367.8)Issues of share capital

–

–

–

–

–

Share scheme credit

–

–

–

58.5

58.5

Deferred tax on share scheme credit

–

–

–

0.2

0.2

Total transactions with equity holders

–

–

–

(309.1)(309.1)

0.3

13.1

19.9

8.9

42.2

Other comprehensive income

Transactions with equity holders

As at 31 December 2019

Admiral Group plc · Annual Report and Accounts 2019215

Notes to the Parent Company Financial Statements
For the year ended 31 December 2019

1. Accounting policies
1.1 Basis of preparation• These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework(FRS 101). The Financial Statements are prepared on the historical cost basis except for the revaluation of financial assets classified
as fair value through the profit or loss or fair value through other comprehensive income.
In preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements ofInternational Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order
to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
1.2 Changes to accounting policies
There were no significant changes to accounting policies in the period.
1.3 Disclosure exemptions applied under FRS 101
The Company has taken advantage of the following disclosure exemptions under FRS 101:
• FRS 101.8 (d): the requirement of IFRS 7 Financial Instruments: Disclosure to make disclosures about financial instruments• FRS 101.8 (f): the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in
respect of:– paragraph 118(3) of IAS 38 Intangible Assets• FRS 101.8 (g): the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of
Financial Statements to produce a cash flow statement, a third balance sheet and to make an explicit and unreserved statement ofcompliance with IFRSs• FRS 101.8 (h): the requirements of IAS 7 Statements of Cash Flows to produce a cash flow statement• FRS 101.8 (i): the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors toinclude a list of new IFRSs that have been issued but that have yet to be applied• FRS 101.8 (k): the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which is a party to transaction is wholly owned by such a member.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
Financial Statements.
1.4 Going concern
The Financial Statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, theBoard have reviewed the Company's projections for the next twelve months and beyond, including cash flow forecasts and regulatory
capital surpluses.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for theforeseeable future. Thus they continue to adopt the going concern basis in preparing the annual Financial Statements.
1.5 Key source of estimation uncertainty
In applying the Company’s accounting policies as described below, management consider there to be a key source of estimation
uncertainty within the impairment testing of the Company’s investments in group undertakings. Management recognises theestimation involved in determining whether the carrying value of the investment may be supported by the recoverable amountcalculation based on the ‘value in use’ of the asset (the net present value of future cash-flows arising from the asset).
In calculating the net present value of future cash-flows, Management has made assumptions over the timing and amount ofunderlying profit projections of the relevant undertakings, long term growth rates in those projections and the discount rate applied
to these projections that is appropriate to reflect the market’s view of the risk of the relevant investment. Sensitivity of theseassumptions is also considered in calculating the net present value and suitably incorporated in Management’s valuations. Sensitivityof the key estimates can be found within note 4.
1.6 Shares in Group undertakings
Shares in Group undertakings are valued at cost less any provision for impairment in value.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to thecompany’s investments in subsidiaries. When necessary, the entire carrying amount of the investment is tested for impairment in
216

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Informationaccordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair valueless costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Anyreversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment
subsequently increases. See note 4 to these Financial Statements for further detail.
1.7 Employee share schemes
The Company operates a number of share schemes for employees of the Group’s subsidiaries. For equity settled schemes, the fairvalue of the employee services received in exchange for the grant of free shares under the schemes is recognised as an increase inequity in the Company. A corresponding intercompany charge is made to the subsidiaries whose employees receive the free shares.
1.8 Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that they are regarded as recoverable. They are regarded as recoverable to theextent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be sufficient taxable profits
from which the future reversal of the underlying timing differences can be deducted.
1.9 Financial assets and liabilities
Under IFRS 9, classification and subsequent measurement of financial assets depend on:• The Company’s business model for managing the asset; and• The cashflow characteristics of the asset.
Based on these factors, the Company classifies its financial assets into one of the three categories below:• Amortised cost: assets held for collection of contractual cash-flows where the cash flows represent solely payments of principal
and interest, that are not designated as FVTPL.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash-flows andselling the assets, where the assets’ cash flows represent solely payments of principal and interest, and that are not designatedat FVTPL.
• Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI, or which are designatedas FVTPL at initial recognition.
In line with the above:• Gilts are measured at FVOCI. Unrealised changes in the fair value of these assets are recognised in Other Comprehensive Income (OCI).
• Investments measured at FVTPL are primarily money market funds. Interest income is recognised in the Income Statement.
Cash and cash equivalents include cash in hand and deposits held at call with banks. All cash and cash equivalents are measured atamortised cost.
The Company’s financial liabilities comprise of subordinated notes which are held at amortised cost using the effective
interest method.

2. Administrative expenses
Included within administrative expenses are recharges of £3.1 million (2018: £2.5 million) relating to employees within the Group who
perform services on behalf of the Company. No staff are directly employed by the Company.

3. Investment and interest income

Dividend income from subsidiary undertakings
Interest income
Total investment and interest income

31 December
2019£m

31 December
2018
£m

401.0

260.0

5.4

4.9

406.4

264.9

Of the interest income of £5.4 million (2018: £4.9 million), £4.1 million (2018: £4.1 million) was recognised under the effective interest
rate method.
Admiral Group plc · Annual Report and Accounts 2019217

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2019

4. Investments in Group undertakings£m

Investments in subsidiary undertakings:
At 1 January 2018

301.0

Additions24.2

Impairment(32.9)At 31 December 2018

292.3

Additions

102.7

Impairment(93.6)At 31 December 2019

301.4

A full list of the Company’s subsidiaries is disclosed in note 12 of the consolidated Financial Statements.
The additions to investments in the period of £102.7 million relate to the following:• transfer of Admiral Europe Compañia De Seguros, S.A. (‘AECS’) (£88.9 million additional investment) from an indirect shareholding
through Admiral Insurance Company Limited (‘AICL’), to a direct shareholding held by Admiral Group plc (‘AGp’);• Further investment in Admiral Financial Services Limited (‘AFSL’) (£11.0 million);• Further investment in Admiral Law (£0.6 million); and• Further investment in Preminen Price Comparison Holdings Limited (£2.2 million).
An annual impairment review is performed over the carrying value of the investments in subsidiary undertakings, which involves
comparing the carrying amount to the estimated recoverable amount. The recoverable amount is the greater of the fair value ofthe asset less costs to sell, and the value in use of the subsidiary, calculated using cash flow projections based on financial budgets
approved by the Group Board.
Elephant Auto
In 2019 a non-cash impairment loss of £65.9 million has been recognised by the parent company in respect of its investment in theGroup’s US insurance business Elephant Auto. The impairment charge is presented within the “Impairment losses” line of the Parent
Company Income Statement and reduces the value of the investment to its recoverable amount, being its value in use, of £39.9 million.
The impairment charge arises following adverse claim development experienced in 2019, which has led to performance being behindboth prior year and plan, as discussed in further detail in the Strategic Report.
As a result of the adverse performance against plan no longer supporting the use of management’s forecasts beyond five years, theperiod of management forecasts used for the impairment review has been reduced from the next ten to the next five years to 2024.
A long term growth rate of 2.5% has been applied after 2024, and limited to 30 years. This reduction in management forecast period
drives a significant reduction in the calculated value in use of the subsidiary.
In addition, the calculated value in use is based on a version of management’s forecast that is more cautious than the base case
forecast against which the performance of the business is measured and reported internally.
The value in use calculation has been performed using a pre-tax discount rate of 11.7%, calculated using a Capital Asset Pricing Model(CAPM) calculation (using a risk free return plus an appropriate risk premium), given that an asset specific rate is not available fromthe market.
The key assumptions used in the underlying forecast are the projected loss ratios, expense ratios, acquisition and retention rates
of customers, and ancillary sales. During 2019 management has put in place a number of actions to address the adverse claims
experience which are expected to result in improvements to loss ratios and the underlying performance of the business going forward.

218

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

The table below details the impact of a 1% change in the discount rate and terminal growth rate, and a 5% decrease in the year 5
projected profit (and thereby terminal value) on the recoverable amount.
Sensitivity: Impact on recoverable amount of a:

Elephant

1% decrease in terminal growth rate£m

1% increase in pre-tax discount rate£m

5% decrease in year 5 profit
£m

(4.9)

(5.3)

(0.5)

As noted above, a more cautious view of Management’s forecast has been used in the valuation as it is recognised that the
improvements arising from the actions taken will be evidenced through 2020 and 2021. If the projected loss ratio improvement does
not materialise, a further impairment charge may be required in 2020 or in subsequent years.
Compare.com
In 2019 a non-cash impairment loss of £27.7 million has been recognised by the parent company in respect of its investment in theGroup’s US comparison business Compare.com. The impairment charge is presented within the “Impairment losses” line of the Parent
Company Income Statement and reduces the value of the investment to its recoverable amount, being its fair value less costs to sell(equivalent to the Group’s share of net asset value), of £5.1 million.
The impairment charge reflects challenging market conditions for comparison in the US and the decision taken in the first half of 2019
to downsize to a smaller team and more agile approach in order to adapt to those conditions.
Compare.com remains loss making at this stage in its development.
The carrying value is based on fair value less costs to sell, for which the Group’s share of net assets has been used as a reasonableapproximation following a review of the carrying value of those assets compared to fair value, using tier 3 of the fair value hierarchy..
Given the size of the remaining carrying value, no sensitivities are provided on the grounds of materiality.
The Board continues to support Compare.com in the achievement of its goals. However, given the challenging and still nascent
US comparison market conditions there remains considerable uncertainty over the timing and level of the future profitability ofthe business.

Admiral Group plc · Annual Report and Accounts 2019219

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2019

5. Financial assets and liabilities
The Company’s financial instruments can be analysed as follows:
31 December
2019£m

31 December
2018
£m

174.0

170.8

174.0

170.8

150.2

5.5

150.2

5.5

324.2

176.3

184.7

128.6

Investments classified as FVOCIGilts (level 1 of the IFRS 13 hierarchy)
Investments classified as FVTPL
Money market and other similar funds (level 1 of the IFRS 13 hierarchy)

Total financial investments
Financial assets held at amortised cost
Trade and other receivables (Note 7)
Cash and cash equivalents

30.3

83.3

Total financial assets

539.2

388.2

204.2

204.1

Financial liabilities
Subordinated notes
Other borrowings

20.0

71.5

Trade and other payables (Note 8)

574.4

346.1

Total financial liabilities

798.6

621.7

The amortised cost carrying amount of deposits and receivables is a reasonable approximation of fair value. The table below compares
the carrying value of subordinated notes (as per the Statement of Financial Position) with the fair value of the subordinated notes
using a level one valuation:
31 December 201931 December 2018

Carrying
amount
£m

Fair
value
£m

Carrying
amount
£m

Fair
value
£m

204.2

225.1

204.1

211.3

Financial liabilities
Subordinated notes

The subordinated notes were issued on 25 July 2014 at a fixed rate of 5.5%, with a redemption date of 25 July 2024.
Interest payable of £11.3 million (2018: £11.3 million) was recognised in relation to the subordinated loan notes.

220

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

6. Taxation
6a. Taxation credit
31 December
2019£m

31 December
2018£mCorporation tax credit on profits for the year

(3.9)

(3.7)

Change in provision relating to prior periods

–

–

(3.9)

(3.7)

Current period deferred taxation movement––

Change in provision relating to prior periods

–

–

(3.9)

(3.7)

31 December
2019£m

31 December
2018£mProfit before tax

283.9

207.7

Corporation tax thereon at effective UK corporation tax rate of 19% (2018: 19%)

53.9

39.5

Current tax

Current tax credit
Deferred tax

Total tax credit per income statement
Factors affecting the total tax credit are:Expenses and provisions not deductible for tax purposes

18.4

6.2

Non-taxable income(76.2)(49.4)

Total tax credit for the period as above

(3.9)

(3.7)

At the year end, the corporation tax asset was £4.0 million (2018: £3.7 million).
6b. Deferred income tax liability
Analysis of deferred tax liability:Taxtreatmentof shareschemes£mCapitalallowances£m

Carriedforwardlosses£m

Fair value
reserve£m

Otherdifferences
£m

Total
£m

(0.1)

–

–

4.2

–

4.1

Tax treatment of share scheme charges
through income or expense

–

–

–

–

–

–

Tax treatment of share scheme charges
through reserves

(0.1)

–

–

–

–

(0.1)

–

–

–

(0.4)

–

(0.4)

Balance brought forward at 1 January 2018

Movement in fair value reserve

(0.2)

–

–

3.8

–

3.6

Tax treatment of share scheme charges
through income or expense

Balance carried forward at 31 December 2018

–

–

–

–

–

–

Tax treatment of share scheme charges
through reserves

–

–

–

–

–

–

Movement in fair value reserve

–

–

–

0.8

–

0.8

(0.2)

–

–

4.6

–

4.4

Balance carried forward at 31 December 2019

The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The average effective rate of tax for 2019 is 19% (2018: 19%). A
further reduction to the main rate of corporation tax to 17% (effective from 1 April 2020) was substantially enacted on 15 September
2016, but is expected to reverse. This would reduce the Company’s future current tax charge accordingly.
The deferred tax liability at 31 December 2019 has been calculated based on the rate at which each timing difference is most likely
to reverse.
Admiral Group plc · Annual Report and Accounts 2019221

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2019

7. Trade and other receivables
31 December
2019£m

31 December
2018
£m

1.0

0.6

Amounts owed by subsidiary undertakings

183.7

128.0

Total trade and other receivables

184.7

128.6

Trade and other receivables

Held within amounts owed by subsidiary undertakings is £183.7 million (2018: £127.1 million) which relate to loans with formal
agreements in place between the parent and the subsidiary. The estimated credit losses of these loans has been considered and any
expected credit loss is considered to be immaterial due to the assessment of credit risk being low due to the positive net value of
assets of the subsidiaries and future trading projections.
Of the above amount, £149.3 million is due in greater than one year (2018: £123.1 million).

8. Trade and other payables
31 December
2019£mTrade and other payables

31 December
2018
£m

6.1

1.6

Amounts owed to subsidiary undertakings

568.3

344.5

Total trade and other payables

574.4

346.1

9. Share capital and reserves
Capital within the Company is comprised of share capital and the share premium account, the fair value reserve (which reflects
movements in the fair value of assets classified as FVOCI) and retained earnings.
9a. Share capital
31 December
2019£m

31 December
2018
£m

0.5

0.5

0.3

0.3

0.3

0.3

Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid
293,686,329 (2018:290,502,737) ordinary shares of 0.1 pence

222

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance

Financial Statements
Additional Information

9b. Dividends
Dividends were proposed, approved and paid as follows:
31 December
2019£m

31 December
2018£m

Proposed March 2018 (58.0 pence per share, approved April 2018, paid June 2018)

–

163.3

Declared August 2018 (60.0 pence per share, paid October 2018)

–

169.4

Proposed March 2019 (66.0 pence per share, approved April 2019, paid June 2019)

188.0

–

Declared August 2019 (63.0 pence per share, paid October 2019)

179.8

–

Total dividends

367.8

332.7

The dividends proposed in March (approved in April) represent the final dividends paid in respect of the 2017 and 2018 financial years.
The dividends declared in August are interim distributions in respect of 2018 and 2019.
A final dividend of 77.0 pence per share (£221.5 million) has been proposed in respect of the 2019 financial year. Refer to the Chair’s
Statement and Strategic Report for further detail.

10. Guarantees
During 2018, a Special Purpose Entity (SPE) was set up in order to secure additional funding for the Admiral Loans business. The
Company acts as guarantor for certain operational performance conditions of its subsidiary, AFSL, as seller and servicer for the SPE,and indemnifies AFSL in respect of any amount that would have been payable by AFSL for non-compliance with such performance
conditions.

11. Post balance sheet events
No events have occurred since the reporting date that materially impact these Financial Statements.

12. Continued application of Financial Reporting Standard (FRS) 101 – Reduced Disclosure Framework
Following the first time application of FRS 101 Reduced Disclosure Framework in 2015, the Board considers that it is in the bestinterests of the Group for Admiral Group plc to continue to apply the FRS 101 Reduced Disclosure Framework in future periods.
A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in Admiral Group plc may serve objections
to the use of the disclosure exemptions on Admiral Group plc, in writing, to its registered office (Tŷ Admiral, David Street, Cardiff,
CF10 2EH) no later than 30 June 2020.

Admiral Group plc · Annual Report and Accounts 2019223

Consolidated financial summary (unaudited)

Basis of preparation
The figures below are as stated in the Group Financial Statements preceding this financial summary and issued previously. Only
selected lines from the Income Statement and Statement of Financial Position have been included.
Income Statement

Total premiums

2019
£m

2018
£m

2017
£m

2016
£m

2015
£m

2,938.6

2,766.4

2,499.4

2,193.9

1,805.2

Net insurance premium revenue

709.4

671.8

619.1

548.8

467.0

Other Revenue

494.4

460.6

401.1

360.6

319.8

Profit commission

114.9

93.2

67.0

54.3

85.4

Investment and interest income

35.3

36.0

41.7

53.1

32.6

Net revenue

1,354.0

1,261.6

1,128.9

1,016.8

904.8

Net insurance claims(359.3)(350.1)(347.1)(394.6)(226.5)Net expenses(459.5)(424.0)(366.9)(332.4)(298.5)

Operating profit

535.2

487.5

414.9

289.8

379.8

Net finance costs(12.6)(11.3)(11.4)(11.4)(11.1)

Profit before tax

522.6

476.2

403.5

278.4

368.7

2019
£m

2018
£m

2017
£m

2016
£m

2015
£m

Property and equipment

154.4

28.1

31.3

32.0

34.9

Intangible assets

160.3

162.0

159.4

162.3

142.3

Statement of Financial Position

Deferred income tax

–

0.2

0.3

8.4

20.6

Reinsurance assets

2,071.7

1,883.5

1,637.6

1,126.4

878.7

Insurance and other receivables

1,227.7

1,082.0

939.7

784.9

537.1

Loans and advances to customers
Financial investments
Cash and cash equivalents
Total assets
EquityInsurance contracts
Subordinated and other financial liabilities
Trade and other payables
Lease liabilities

300.2

66.2

–

–

2,969.7

2,697.8

2,420.2

2,323.5

281.7

376.8

326.8

326.6

265.3

7,585.4

6,802.5

5,859.1

4,860.8

4,202.4

918.6

771.1

655.8

581.7

632.9

3,975.0

3,736.4

3,313.9

2,749.5

2,295.0

530.1

444.2

224.0

224.0

223.9

1,975.9

1,801.5

1,641.6

1,292.2

1,015.0

137.1

–

–

–

–

Deferred income tax

0.4

–

–

–

–

Current tax liabilities

48.3

49.3

23.8

13.4

35.6

7,585.4

6,802.5

5,859.1

4,860.8

4,202.4

Total equity and total liabilities

224

455.1
3,234.5

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance
Financial Statements

Additional Information

Glossary

Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative Performance Measures (APMs); measures that are not required orcommonly reported under International Financial Reporting Standards, the Generally Accepted Accounting Principles (GAAP) underwhich the Group prepares its Financial Statements.
These APMs are used by the Group, alongside GAAP measures, for both internal performance analysis and to help shareholders andother users of the Annual Report and Financial Statements to better understand the Group’s performance in the period in comparison
to previous periods and the Group’s competitors.
The table below defines and explains the primary APMs used in this report. Financial APMs are usually derived from financial statement
items and are calculated using consistent accounting policies to those applied in the Financial Statements, unless otherwise stated.
Non-financial KPIs incorporate information that cannot be derived from the Financial Statements but provide further insight into theperformance and financial position of the Group.
APMs may not necessarily be defined in a consistent manner to similar APMs used by the Group’s competitors. They should beconsidered as a supplement rather than a substitute for GAAP measures.
TurnoverTurnover is defined as total premiums written (as below), other revenue and income from Admiral Loans. It
is reconciled to financial statement line items in note 13a to the Financial Statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in
2004. It reflects the total value of the revenue generated by the Group and analysis of this measure overtime provides a clear indication of the size and growth of the Group.
The measure was developed as a result of the Group’s business model. The core UK Car insurance businesshas historically shared a significant proportion of the risks with Munich Re, a third party reinsurance Group,
through a co-insurance arrangement, with the arrangement subsequently being replicated in some of theGroup’s International insurance operations. Premiums and claims accruing to the external co-insurer are
not reflected in the Group’s Income Statement and therefore presentation of this metric enables users of
the Annual Report to see the scale of the Group’s insurance operations in a way not possible from taking theIncome Statement in isolation.

Total Premiums Written

Total premiums written are the total forecast premiums, net of forecast cancellations written in theunderwriting year within the Group, including co-insurance. It is reconciled to financial statement line items
in note 13a to the Financial Statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in
2004. It reflects the total premiums written by the Group’s insurance intermediaries and analysis of thismeasure over time provides a clear indication of the growth in premiums, irrespective of how co-insurance
agreements have changed over time.
The reasons for presenting this measure are consistent with that for the Turnover APM noted above.

Group’s Share ofProfit before Tax

Group’s share of profit before tax represents profit before tax, excluding the impact of non-controllinginterests. It is reconciled to statutory profit before tax in note 13d to the Financial Statements.
This measure is useful in presenting the limit of the Group’s exposure to the expenditure incurred instarting up new businesses and demonstrates the ‘test-and-learn’ strategy employed by the Group to
expansion into new territories.

Underwriting Result(Profit or Loss)

For each insurance business an underwriting result is presented showing the segment result prior to theinclusion of profit commission, other income contribution and instalment income. It demonstrates theinsurance result, i.e. premium revenue and investment income on insurance assets less claims incurred andinsurance expenses.

Admiral Group plc · Annual Report and Accounts 2019

225

Glossary continued

Loss Ratio

Reported loss ratios are expressed as a percentage of claims incurred divided by net earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculationin order to more clearly present the underlying performance of the Group and operating segments within
the Group. The calculations of these are presented within note 13b to the Financial Statements andexplanation is as follows.
UK reported motor loss ratio: Within the UK insurance segment the Group separately presents motor ratios,
i.e. excluding the underwriting of other products that supplement the car insurance policy. The motor ratio
is adjusted to i) exclude the impact of reserve releases on commuted reinsurance contracts and ii) exclude
claims handling costs that are reported within claims costs in the Income Statement.
International insurance loss ratio: As for the UK Motor loss ratio, the International insurance loss ratiospresented exclude the underwriting of other products that supplement the car insurance policy. The motor
ratio is adjusted to exclude the claims element of the impact of reinsurer caps as inclusion of the impact of
the capping of reinsurer claims costs would distort the underlying performance of the business.
Group loss ratios: Group loss ratios are reported on a consistent basis as the UK and International ratios
noted above. Adjustments are made to i) exclude the impact of reserve releases on commuted reinsurance
contracts, ii) exclude claims handling costs that are reported within claims costs in the Income Statement
and iii) exclude the claims element of the impact of International reinsurer caps.

Expense Ratio

Reported expense ratios are expressed as a percentage of net operating expenses divided by net
earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculation inorder to more clearly present the underlying performance of the Group and operating segments within theGroup. The calculations of these are presented within note 13c to the Financial Statements and explanation
is as follows.
UK reported motor expense ratio: Within the UK insurance segment the Group separately presents motor
ratios, i.e. excluding the underwriting of other products that supplement the car insurance policy. The
motor ratio is adjusted to i) include claims handling costs that are reported within claims costs in the
Income Statement and ii) include intra-group aggregator fees charged by the UK comparison business to
the UK insurance business.
International insurance expense ratio: As for the UK Motor loss ratio, the International insurance expense
ratios presented exclude the underwriting of other products that supplement the car insurance policy. The
motor ratio is adjusted to i) exclude the expense element of the impact of reinsurer caps as inclusion of the
impact of the capping of reinsurer expenses would distort the underlying performance of the business andii) include intra-group aggregator fees charged by the overseas comparison businesses to the International
insurance businesses.
Group expense ratios: Group expense ratios are reported on a consistent basis as the UK and Internationalratios noted above. Adjustments are made to i) include claims handling costs that are reported withinclaims costs in the Income Statement, ii) include intra-group aggregator fees charged by the Group’s
comparison businesses to the Group’s insurance businesses and iii) exclude the expense element of the
impact of International reinsurer caps.

Combined Ratio

Reported combined ratios are the sum of the loss and expense ratios as defined above. Explanation of thesefigures is noted above and reconciliation of the calculations are provided in notes 13b and 13c.

Return on Equity

Return on equity is calculated as profit after tax for the period attributable to equity holders of the Groupdivided by the average total equity attributable to equity holders of the Group in the year. This average isdetermined by dividing the opening and closing positions for the year by two.
The relevant figures for this calculation can be found within the Consolidated Statement of Changes in Equity.

Group Customers

Group customer numbers reflect the total number of cars, households and vans on cover at the end of theyear, across the Group.
This measure has been presented by the Group in every Annual Report since it became a listed Group in
2004. It reflects the size of the Group’s customer base and analysis of this measure over time provides aclear indication of the growth. It is also a useful indicator of the growing significance to the Group of thedifferent lines of business and geographic regions.

Effective Tax Rate

226

Effective tax rate is defined as the approximate tax rate derived from dividing the Group’s profit before
tax by the tax charge going through the Income Statement. It is a measure historically presented by theGroup and enables users to see how the tax cost incurred by the Group compares over time and to current
corporation tax rates.

Admiral Group plc · Annual Report and Accounts 2019

Company Overview
Strategic Report
Corporate Governance
Financial Statements

Additional Information

Additional Terminology
There are many other terms used in this report that are specific to the Group or the markets in which it operates. These are defined
as follows:
Accident year

The year in which an accident occurs, also referred to as the earned basis.

Actuarial best estimate

The probability-weighted average of all future claims and cost scenarios calculated using historical data,
actuarial methods and judgement.

ASHE‘Annual Survey of Hours and Earnings’ – a statistical index that is typically used for calculation inflation ofannual payment amounts under Periodic Payment Order (PPO) claims settlements.

Claims reserves

A monetary amount set aside for the future payment of incurred claims that have not yet been settled, thus
representing a balance sheet liability.

Co-insurance

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

Commutation

An agreement between a ceding insurer and the reinsurer that provides for the valuation, payment, andcomplete discharge of all obligations between the parties under a particular reinsurance contract.
The Group typically commutes UK Car insurance quota share contracts after 24 months from the start of anunderwriting year where it makes economic sense to do so. Although an individual underwriting year may
be profitable, the margin held in the financial statement claims reserves may mean that an accounting loss
on commutation must be recognised at the point of commutation of the reinsurance contracts. This loss oncommutation unwinds in future periods as the financial statement loss ratios develop to ultimate.

Insurance market cycle

The tendency for the insurance market to swing between highs and lows of profitability over time, with thepotential to influence premium rates (also known as the “underwriting cycle”).

Net claims

The cost of claims incurred in the period, less any claims costs recovered under reinsurance contracts. It
includes both claims payments and movements in claims reserves.

Net insurance premium
revenue

Also referred to as net earned premium. The element of premium, less reinsurance premium, earned in the
period.

Ogden discount rate

The discount rate used in calculation of personal injury claims settlements. The rate is set by the Lord
Chancellor.

Periodic Payment Order(PPO)

A compensation award as part of a claims settlement that involves making a series of annual payments to aclaimant over their remaining life to cover the costs of the care they will require.

Premium

A series of payments are made by the policyholder, typically monthly or annually, for part of or all of theduration of the contract. Written premium refers to the total amount the policyholder has contracted for,whereas earned premium refers to the recognition of this premium over the life of the contract.

Profit commission

A clause found in some co-insurance and reinsurance agreements that provides for profit sharing.

Reinsurance

Contractual arrangements whereby the Group transfers part or all of the insurance risk accepted to anotherinsurer. This can be on a quota share basis (a percentage share of premiums, claims and expenses) or an
excess of loss basis (full reinsurance for claims over an agreed value).

Admiral Group plc · Annual Report and Accounts 2019

227

Glossary continued

Additional Terminology continued

228

Securitisation

A process by which a group of assets, usually loans, is aggregated into a pool, which is used to back theissuance of new securities. A company transfer assets to a special purpose entity (SPE) which then issues
securities backed by the assets.

Special Purpose
Entity (SPE)An entity that is created to accomplish a narrow and well-defined objective. There are specific restrictions orlimitations around ongoing activities. The Group uses an SPE set up under a securitisation programme.

Ultimate loss ratio

A projected actuarial best estimate loss ratio for a particular accident year or underwriting year.

Underwriting year

The year in which the policy was incepted.

Underwriting year basis

Also referred to as the written basis. Claims incurred are allocated to the calendar year in which the policy
was underwritten. Underwriting year basis results are calculated on the whole account (including coinsurance and reinsurance shares) and include all premiums, claims, expenses incurred and other revenue (forexample instalment income and commission income relating to the sale of products that are ancillary to themain insurance policy) relating to policies incepting in the relevant underwriting year.

Written/Earned basis

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

Admiral Group plc · Annual Report and Accounts 2019Registered OfficeTŷ AdmiralDavid Street
Cardiff
CF10 2EH
www.admiralgroup.co.uk