Admiral Group plc Results for the Year to 31 December 2007
4 March 2008

Admiral Reports Record Profits and Strong Growth
Admiral Group plc (“Admiral” or “the Group”) today announces a record annual result with a profitof £182.1 million for the year to December 2007, an increase of 24% over the previous year.
Turnover, comprising total premiums written, gross other income and investment income, rose
16% to £824.9 million.

2007 Highlights
Profit before tax up 24% at £182.1 million (2006: £147.3 million)
Total final dividend of 23.2p comprising normal dividend of 11.6p; special dividendof 11.6p per share
Total 2007 dividend of 43.8p (£115 million) up 22% on 2006
Turnover* up 16% at £824.9 million
Net revenue up 17% at £364 million
Revenue from products and services not underwritten by the Group up 34% at£176.9 million
Year-end vehicle count up 16% to 1.5m from 1.3m at 31 December 2006
Confused.com gave 13 million quotes (up 42%) and made a profit of £36.7 million(2006: £23.1 million)
All employee Share Scheme - over 2,200 staff are to receive around 310,000 freeshares based on the H2 2007 results. This means that staff will have received thefull allocation of £3,000 worth of free shares for 2007*

Turnover is defined as total premiums written (including co-insurers’ share), otherrevenue and net investment return. It is reconciled in the financial review below.

Comment from Henry Engelhardt, Group Chief Executive“2007 was a good year for the Admiral Group. We continue to grow our UK business and invest
in our overseas ventures. We had a bumper year in absolute terms and we made great strides
towards the creation of an even better future.
“In the UK, our car insurance business grew substantially whilst maintaining its combined ratio
advantage over the market. The UK business also achieved record ancillary income, growing
consistently in line with the growth in the policy base.
“Confused has continued to perform very well, considering the influx of aggregator sites.
Confused’s market share has declined during 2007, but this has been in a growing market and its
quote volumes have held up well. As we’ve previously said, we will spend money to defend thismarket-leading position, but realistically, 2008 will be a much tougher year within which to grow.
“Balumba in Spain and AdmiralDirekt.de in Germany are building our future and our operation
launching in Italy this year will further help grow the Admiral Group.”

Comment from Alastair Lyons, Group Chairman“After a year in which the Group made significant progress in implementing its agreed strategy weare very pleased to be able to propose a total final dividend of 23.2p per share, comprising anormal dividend of 11.6p and a special of 11.6p, the latter following our principle of returningavailable surpluses to shareholders. Our total dividends for the year at 43.8p per share meanthat we will have distributed £115 million to shareholders, up 22% on 2006.
“A highlight of 2007 was admission in December to the FTSE 100, an achievement of which
everyone at Admiral can justifiably be proud in slightly over three years since flotation. Over thisperiod, taking dividends and share appreciation together we achieved a 335% total return forshareholders.”
Final dividend
Subject to approval at the Company’s AGM, the final dividend of 23.2p per share will be paid on 7
May 2008. The ex-dividend date is 9 April 2008, the record date 11 April 2008.
Chairman’s statement
I ended my statement last year by saying that our strategy remained clear and straightforward –to continue to grow our share of the UK direct private motor market, maximising the value derived
from each customer relationship, whilst also identifying profitable opportunities, in particular our
expansion overseas, to exploit the knowledge, skills and resources attaching to our corebusiness. As Henry Engelhardt sets out in detail in his statement, 2007 was a year in which theGroup made significant progress in that strategic direction.
In the UK, despite market conditions remaining challenging, Admiral increased both underwriting
and ancillary profits whilst substantially growing the number of vehicles insured. At the end of theyear our brands covered 1.49 million vehicles, 16% up on December 2006. The 13% increaseachieved in profit derived from ancillary products and services is testament to the success wecontinue to derive from our focus on maximising the value of each customer relationship.
An upward trend in pricing does now seem to have become established with a general increaseof 4% over the year as a whole. Whilst only sufficient to offset general claims inflation, this breaks
a 5 year pattern of flat or even slightly falling rates. Against this backdrop we were happy to takeback 5% of the underwriting risk when it came available at the end of last year, increasing the
proportion of gross premiums underwritten by Admiral in 2008 from 22½% to 27½%.
We have made significant progress during 2007 with our international strategy. Balumba.es, theon-line Spanish motor insurer that we launched in October 2006, ended 2007 with 47,000
customers – a great achievement in little over a year from a standing start. We followed this withthe launch in October 2007 of AdmiralDirekt.de, our new on-line German motor insurer based in
Cologne, and we announced at the time of our half-year results that we were well advanced withplans to launch into Italy during 2008. Our teams in each country have built on the learning of
their colleagues who launched before them and I would take this opportunity to give them credit
for their enthusiasm, resilience, and consequent achievements. Staying with the international
theme I should also mention the establishment of our new customer service centre in Halifax,
Canada where we now employ directly over 100 staff helping to share the load of our long
opening hours with our teams in the UK.
During the year we announced that we had entered discussions with potential private equity
investors regarding the sale of a minority interest in our price comparison business,
Confused.com. Having, however, understood in detail the implications of such an investment for
the flexibility of Confused’s ongoing management, the Board determined that taking such a stepwould materially constrain our ability to maximise Confused’s contribution to the Group in themedium to long term. We, therefore, determined that it was in our shareholders’ best interests toterminate the discussions and retain a 100% interest in Confused. We will continue our strategy
of maintaining Confused’s strong market position in car insurance price comparison anddeveloping its potential to extend into price comparison within other product areas. 2007 wasanother very successful year for Confused, profits growing by 59% to £37million. As we have said
previously, there is growing competition in this sector and we will continue to work hard to defend
our leadership position in this rapidly expanding market.
In a strongly competitive market we are pleased to be able to announce a 24% increase in Group
pre-tax profits to £182million off an 11% growth in total written premiums. Taking into account theincreased solvency capital required by the higher underwriting retained in 2008, this allows us tolift our dividends for the year by 22% to 43.8p per share (23.2p final: 20.6p interim).
We have maintained our approach of considering dividends in two parts. The first element, being
the normal dividend, is based on a 45% pay-out ratio. The second element - the special dividend- derives from our principle of returning to shareholders available surpluses, calculated as theGroup’s net assets less its required solvency; cover against any specific expansion plans, beingat this year-end £5m in respect of overseas; and a prudent margin - currently £25m - against
contingencies. Special dividends since flotation in September 2004 amount to £146.6m, thisbeing in addition to £149.5m normal dividends over the same period.
A highlight of 2007 was our admission in December to the FTSE 100, an achievement of which
the executive team can be justifiably proud in slightly over three years since flotation. Over thisperiod, taking dividends and share appreciation together, we achieved a 335% total return forshareholders.
Alignment of the interests of our staff and our shareholders is one of our core principles. Our Free
Share Schemes are designed to strengthen that alignment over time. We are delighted thatstrong out-performance against our plan during 2007 resulted in eligible employees once again
realising the maximum award of £3,000 free shares under our Approved Scheme. The 2007
financial year marked the end of the first 3-year period for the Discretionary Free Share Scheme.
A 54.8% outperformance of growth in earnings per share over and above the risk-free return
qualified the scheme to vest the maximum share entitlement under the individual awards.
Following the 2007 awards there are now 1,645 employees participating in the Discretionary Free
Share Scheme, itself consistent with our philosophy of achievement through teamwork.
As at the end of the year we employed 2,500 staff, 90% of whom live and work in South Wales.
This makes Admiral a significant part of the local community and we encourage our staff to be
associated with the local projects that are important to both them and their families. During 2007
we provided financial support to 110 such projects. In addition Admiral sponsored a number ofhigh profile local events within South Wales – the Admiral Cardiff Big Weekend and the Swansea
Waterfront Winterland, of both of which, Admiral was the main sponsor in 2007, together attracted
over 365,000 visitors. More details of which will be found in the report on corporate responsibility.
This report also describes the steps we take to minimise the impact of our operations on theenvironment.
May I end by thanking everyone who has contributed so much to achieve the successes that I
have been able to outline above – first and foremost our staff who make Admiral the Company it
is: our executive management team whose quality of leadership justifies our being placed for 8
consecutive years amongst The Sunday Times Top 100 Companies to Work For in the UK: andour non-executive directors for their commitment and wise counsel.

Chief Executive’s statement
2007 was a good year for the Admiral Group.
I should quit right there!
But I won’t. Why was it a good year? Well, the Group made more money than ever before. A lot
more. We made more money by serving more customers than ever before, which resulted in alarger turnover than ever before. All these new records were set within the context of achallenging, highly competitive environment.
But those items don’t tell the whole story. As compelling as they may be, they only account forpart of the reason why I think the year was successful. For me, the reason it was such a goodyear is that we did all the good things already mentioned while simultaneously making large
investments of time and money in our future. These investments could easily have retarded our2007 trading performance. But they didn’t. We had a bumper year in absolute terms AND wemade great strides towards the creation of an even better future.
The list of achievements:•

Profit before tax up 24% to £182m;•

Number of customers up 16% to 1.5m;•

Net revenue up 17% to £364m;•

Turnover* up 16% to £825m;•

Confused record pre-tax profit of £37m on 13m quotes;•

Combined ratio improved to 85% from 87%;•

Top 10 in the FT Best Companies To Work For; 57th in The Sunday Times Best
Companies To Work For in the UK;•

Invested in Balumba in Spain where we ended the year with 47,000 customers and£16.6m turnover;•

Invested in AdmiralDirekt.de, our new operation in Germany that launched on October 16
and had 9,000 customers on January 1, 2008;•

Began investing in an operation in Italy which is planned to launch in 2008.

* Turnover is defined and reconciled in the financial review below
Only in a few years time, when Spain, Germany, Italy, etc. are running at full throttle, will we reallyappreciate how good 2007 was. Here’s a closer look at our results and the UK car insurance
market.

UK CAR INSURANCE: SLOTH-LIKE
The UK car insurance market cycle is turning with sloth-like speed. Have you ever seen a sloth
up close? Their muscle control is quite incredible. You try moving that slowly! (See
http://animals.nationalgeographic.com/animals/mammals/three-toed-sloth.html) Sloths are an
appropriate metaphor for the UK car insurance market today. The market is moving. But
slooooowwwwllllyyyy.

It is just possible that in 2007, on a written basis, premium inflation for the market will haveoutpaced claims inflation for the first time since 2000. But, when all the results are tallied, I thinkthat this move will be modest, and, as an earned basis lags rate movements, it won’t fully flow
through to the market’s results until 2008.
We put 4% on our rates during the year against a claims inflation factor above 3%.
So the market is moving, keeping up with claims inflation, but will we see a definitive
improvement in results? It looks like the market has found the corner and is, well, considering
turning. But it hasn’t quite turned yet. It is somewhat reminiscent of what happened in 1997-9899 (showing my age). In 1997 the market moved up, maybe a bit faster than claims costs but in1998 the market failed to follow through on those increases, leading to a combined ratio in excess
of 120%. Only in 1999 did the market start to move in earnest. 1997 – 98 was something of a
false dawn, which we might see again in the 2007-08 years.
According to Deloitte, the UK market average pure year combined ratio for 2006 (latest data
available) was 113%, again confirming the UK’s status as one of (if not the) most competitive car
insurance markets in the world; a market where companies are willing to subsidise consumers.
This is the true power of a free market. For those that think regulation is the key to lower prices,
just look at the UK. Strange as it might seem, collectively UK Insurers seem happy to subsidise
consumers, not once in a while, but for years on end.
As we are fond of saying: Admiral’s different. We actually are not keen to subsidise consumers.
We’re very happy to offer a precise rate for every risk and give a great service to every customer,
but we believe we should do these things without making a loss ourselves. The sustainable way
to offer consumers lower rates is to operate more efficiently than the competition.
This philosophy manifests itself in our advantage over the market in both claims ratio and loss
ratio in the UK. Our UK loss ratio for the year was 66.7% and our expense ratio was 16.7% for a
combined ratio of 83.4%. On a comparable basis, Deloitte predicts that the market loss ratio will
be 79% and the expense ratio will be 28%, resulting in a combined ratio, including releases, of107%.
In addition to a combined ratio more than 20 points better than the market average, we also grew
the business. Our UK turnover increased by 14% (£708m to £808m) and the number of vehicles
we insure rose 13% (1.28m to 1.44m).
Our conservative reserving philosophy meant we released £29.5m from prior years into thisyear’s profit. We build claims reserves because history tells us that this is an area that changes
quite quickly. It has not been unusual to see changes in the claims environment result in
additional costs to all your open claims, some of which are four or more years old. So there is amethod to our madness, we reserve in case the world changes and then release if it does not.
From what I know at the moment, I do not see any reason to believe that this pattern will notcontinue.
The biggest development in the market in 2007 has been the rapid growth of price comparison
websites as a leading channel of distribution in the industry. With the growth in the number of
price comparison sites during the year and with more sites planned to launch in 2008, I can only
see this growth trend accelerating.
The important point of this change in distribution is that small insurers can get exposure to
consumers equal to that of big insurers. Previously smaller insurers wouldn’t have the muscle toget equal exposure. The big insurers, who could spend a lot of money advertising and/or be on
lots of broker sites, could dominate the market by the very fact that they were always visible toconsumers. Now small insurers, without spending a penny of marketing money, can get equaltime. For car insurance this is revolutionary stuff.

This means that the market is pinned to the lowest quote for any given risk. That is, a single firm
could undercut the entire market or, for any given risk, one firm could undercut the rest. Eitherway, this chain is going to move only as quickly as the slowest link.
Typically the UK cycle is around seven years (1985 cyclical worst point, to 1991 worst point, to1998 worst point). On an earned basis it looks like 2007 or 2008 will be the worst point in thiscycle, which is 9 or 10 years on from the previous worst point of 1998. Think sloths. And if the2007 rate rises prove to be a false dawn, think slow-moving sloths!

CHANGING DISTRIBUTION: THE GROWTH OF PRICE COMPARISON
However, when one bemoans the effect of price comparison sites on the market keep in mind
that the leader in car insurance price comparison is our own Confused.com.
Confused had it rather cosy for a number of years, amassing a market share of some 65%. But
we predicted back in March 2006 that this market would be a competition magnet and we’ve only
been surprised at how long it took for the competition to materialise. But materialise it has!
At last count there were more than half a dozen price comparison sites actively touting forbusiness. Not surprisingly, consumers have been seduced by the ease in which they can now
get countless quotes. Overall ad spend in the market, which had been on the decline in 2006
began to rise again in 2007 and continues to rise, setting new records along the way. Pricecomparison sites accounted for approximately 35% of the car insurance tv and press spend in2007. However, this figure grew throughout the year and in January 2008 it was 67%.
Advertising as a stand-alone car insurance brand to generate direct quotes has become awfully
expensive, as it is almost impossible for a single brand to better the proposition of multiple quotes
put forward by price comparison sites.
Given the development of the price comparison sector, it is not surprising that Confused’s market
share declined during 2007. However, this decline has been into a growing market and as aresult its quote and sale volumes have held up rather well. We accept that some erosion of shareis unavoidable in the short term but, as we’ve said previously, we will spend money to defend ourmarket-leading position.

BEYOND THE UK: SPAIN, GERMANY AND ITALY2007 was a dramatic year in the development of the Group’s business beyond the UK. Balumbain Spain, which launched at the end of October 2006, grew quickly. A year after Balumba’s start,
AdmiralDirekt.de successfully launched in Germany and during the year we began
implementation of our plan to launch in Italy during 2008.
Balumba in Spain ended the year with 47,000 policyholders and a turnover of £16.6m. It posted
a loss of just £0.7m in its first full year of trading. Balumba’s combined ratio totalled 232%, with aloss ratio of 141% and an expense ratio of 91%. The ratio of expenses to premium written during
the year was 51%, a very credible figure. Balumba’s result was helped by contribution fromancillary products.
As you can imagine, there is still a lot of work to do on Balumba, particularly in the pricing andclaims areas, although high loss ratios are not unusual in a Company’s first year of trading. The
key question surrounding Balumba beginning the year was: could it market to consumers
efficiently? It appears that the answer to that question is a resounding ‘yes’ as we gave over
396,000 quotes in the year.
The launch in Germany, some 50 weeks after the launch in Spain, was very satisfying. Most of
the German market renews its car insurance on January 1. In addition, consumers have to givetheir insurers one month notice if they are planning to switch. So the window for attracting new
business is about 8 weeks long, from early October through early December. It was imperativethat we launch the operation in October to get some experience in the ‘season’.
Once again, the key test was marketing. And, once again, we were pleased by the results.
AdmiralDirekt.de made 9,000 sales with income of £1.7m, all with a policy start date of January 1,
2008. Lo and behold, the first claim occurred the morning of January 2, 2008, when one of ourcustomers hit a boar at 5:30 a.m. I suspect this will be a first claim not soon forgotten!
Project Chianti, otherwise known as The Italian Job, is moving forward at pace with an anticipatedlaunch later in 2008. The operation will be based in Rome.

GLADIATOR GROWS AND WE BEGIN TO TAKE CALLS IN CANADA
Other notable accomplishments during the year include the growth in customer numbers of
Gladiator Commercial and the creation of a call centre in Halifax, Nova Scotia primarily to handle
evening calls from the UK.
Gladiator is our commercial vehicle intermediary and it turned in a profit before tax of £2m.
However, Gladiator increased its customer base significantly during the year and now boasts over
62,000 customers up from 43,000 last year (+44%), which bodes well for the future
A combination of a strong service ethic and a four-hour time difference led us to open a callcentre in eastern Canada. We now have almost 100 agents on the phones, taking over from the
UK in the early evening (mid-afternoon there).

ALMOST THE END OF THIS REPORT
I’m proud to say that it was another very good year for return on capital. This is the benefit of ourmodel, where we have reinsurers put up the capital pro-rata for their share of the underwriting,but we get profit commissions from them when we make profits and we keep the revenue fromeverything else we do, like Confused, for ourselves. Although we do sacrifice some profit to get
this reinsurance support it gives us a layer of protection against losses and serves to make us
capital efficient. A good measure of this is our return on capital, which in 2007 was 58% (2006:57%). Another important indicator is our return on income – 57% in 2007, up from 53% in 2006.
Finally, the best possible tribute to our staff: the first lot of free shares distributed since our 2004
float will vest in 2008. We want all our staff to feel like they own part of the Company and thebest way to do that is to give them part of the Company to own. We are very pleased that those
who qualified in 2005 and earned free shares will take control of those shares later this year. Our
staff give a lot of themselves to the organisation and it is great to share the fruits of our communal
efforts with every person in the Company.
Last point of note, at the end of 2007 we joined the FTSE 100. We are the only Welsh Company
in this elite club. In fact, we are only the second Welsh Company in history to be in the 100, thefirst one having been a member for 9 months back in 1992-93. (I hope that by the time you readthis we’re still a member!) Our rapid rise into the FTSE 100 is a tribute to all the staff across our
six sites in five countries who are building a great business by working hard every day to givecustomers great service.
This is a very exciting time for the Admiral Group and we’re looking forward to another great year
in 2008.
Henry Engelhardt

Financial review
Key financial highlights
Group profit before tax again grew strongly in 2007 – moving up 24% to £182.1m from £147.3m
last year. Earnings per share grew 22% to 48.6p from 39.8p.
2007
£000

2006
£000

Underwriting profit
Profit commissions
Ancillary and other net income
Confused.com profit
Share scheme, pre-launch and other charges

37,502
20,44893,36336,727(5,942)28,351
19,926
79,262
23,080(3,277)

Profit before tax

182,098

147,342

Group underwriting profits grew significantly in 2007 (by around one third) – this despite a very
slowly turning pricing environment in the UK motor market and the inclusion of a first full year’s
result for Balumba.es (the Group’s Spanish motor insurer).
In UK motor, the Group reduced its share of the underwriting to 22.5% (from 25.0%) in a year
when this cycle possibly hit its worst point. The number of customers grew significantly once
again:
2007
000s

2006
000s

UK year end private vehicle countSpanish private vehicles
Gladiator Commercial vehicles

1,382
47
62

1,240
2
43

Total vehicle count

1,491

1,285

Within the overall increase of 16%, UK vehicles insured grew by 11½%, and Gladiator grew by
47%. Balumba increased its customer base to end the year at 47,000 (having ended 2006, twomonths after launch, with around 2,200).
October 2007 saw the successful launch of AdmiralDirekt.de – the Group’s German car insurer,
based in Cologne. In the relatively short period before the end of the year, AdmiralDirekt sold
9,000 policies, generating around £1.7m in premium and ancillary income. Cover for these risks
started 1 January 2008.
A more detailed split of Group profit, including geographical analysis follows below.
element is discussed in the following notes.

Each

2007
EUROPE

TOTAL

£000

£000

UK
GROUP
£000

39,976
20,448(2,474)-37,502
20,448

UK
GROUP
£000

2006
EUROPE

TOTAL

£000

£000

28,541
19,926(190)-

28,351
19,926

Underwriting profit
Profit commissions
Ancillary and other net
incomeConfused.com profit
Share scheme, prelaunch and other charges

91,51736,727

1,846-

93,36336,727

79,18623,08076-

79,262
23,080(4,534)(1,408)(5,942)(2,782)(495)(3,277)

Profit before tax

184,134(2,036)

182,098

147,951(609)

147,342Europe figures include the results of Balumba in Spain, and set up and pre-launch costs relating
to AdmiralDirekt (Germany) and the Italian business.
Turnover, comprising total premiums written (including premium underwritten by co-insurers),
gross other income and net investment return (as a measure of the combined size of the Group’sbusinesses) continued to grow strongly:
UK
GROUP
£000

2007
EUROPE

TOTAL
£000

£000

UK
GROUP
£000

2006
EUROPE
£000

TOTAL
£000

Total premiums written
Other revenue
Net investment return

617,023
174,641
16,662

14,2282,237
133

631,251
176,878
16,795566,048
131,536
9,925

560
85
-

566,608
131,6219,925

Turnover808,326

16,598824,924

707,509645

708,154

A reconciliation of turnover to figures appearing in the income statement is shown at the end of
this review.
Overall growth of 16% was made up of an 11% increase in total premium, a 34% rise in otherrevenue (predominantly ancillary income and Confused.com revenue) and a 69% increase ininvestment return after a disappointing investment year in 2006. Net revenue in the income
statement increased by 17% to £364m.
Balumba (providing all the European figures above) contributed 2% of total turnover.

Underwriting
Underwriting arrangements
During 2007 the Group retained 22.5% (2006: 25%) of UK motor underwriting on a net basis.
60% of the total is underwritten by Great Lakes Reinsurance (UK) Plc (a UK subsidiary of MunichRe) under a long-term co-insurance arrangement. The remaining 17.5% is ceded to two
reinsurers – Swiss Re, 10.0% and Partner Re, 7.5%.
The nature of the co-insurance arrangement is such that 60% of all motor premium and claims forthe 2007 year accrues directly to Great Lakes and does not appear in the Group’s income
statement. Similarly, Great Lakes reimburses the Group for its proportional share of expenses.
The Group also retains 35% of the risks generated by Balumba in Spain and AdmiralDirekt inGermany, with 65% being reinsured.

In 2008, the share of the UK motor underwriting retained increases to 27.5% as Great Lakes’share declines by the 5% set out in the revised co-insurance arrangement.
Underwriting results
Total premiums increased by around 11% to £631m from £567m – Balumba accounted foraround £14m of this total (having written less than £1m in 2006). The total number of vehicles
insured (excluding Gladiator) rose by around 15% to 1.43m from 1.24m. Balumba grew its
customer count from around 2,000 to 47,000 at the end of the year.
Vehicle growth exceeded premium growth due in part to lower average premiums in Spain andalso in the UK due to mix effects. As noted above, German motor risks sold in the latter part of2007 do not incept until 2008 and are not included in the premium or results.
Premium rate rises of around 4% have been implemented in the UK and data suggests similar
increases have been seen across the market.
Net insurance premium revenue fell marginally to £142m - due to the decrease in the proportionof UK premium retained.
The overall loss ratio improved to 68% - four points down from the 72% reported in 2006. The
UK motor ratio improved significantly to 67% from 72%. Balumba’s reported loss ratio in its firstfull year of trading is 141%.
Positive development of prior year reserves continued, and the 2007 result includes releases ofalmost £30m (up from £21m last year) – improving the loss ratio by around 21 percentage points.
The pure year loss ratio (including Balumba) declined to 88% from 86% in 2006.
The UK expense ratio was 16.7%, up 1 percentage point on the previous year, primarily as aresult of lower average premiums resulting from changes in the mix of the portfolio. When theBalumba figures are included, the Group expense ratio totals 17.7%.
The expense ratio is reconciled to the figures included in the income statement in note 9 below,
whilst the underwriting result is reconciled later in this review.
As a consequence, the Group’s combined ratio improved by two points to 85% (87% in 2006).
Taken together with the increase in premiums, this resulted in a 32% rise in underwriting profits,
to £37.5m from £28.4m.
Part VII transfer
During November 2007, the Group completed the transfer of the remaining liabilities of Syndicate
2004 (through which the Group underwrote UK private motor insurance from 2000 to 2002) into
one of its active insurers - Admiral Insurance Company Limited. Whilst the transfer has a numberof advantages in terms of simplifying Group structure and administrative requirements, thetransfer has not had a material financial impact on the results in 2007.

Profit commission
The Group earns profit commission through its co-insurance and reinsurance arrangements. The
amount receivable is dependent on the volume and profitability of the insurance business,measured by reference to loss and expense ratios.
Around £20.4m was recognised in 2007, which is £0.5m higher than 2006, although as reported
last year, the 2006 total included £2.0m relating to earlier year contracts (£0.5m in 2007).

The reinsurance contracts entered into with Munich Re in Spain and Germany also have profit
commission clauses, though these require the underwriting results to move into cumulative
profitability before any commission will be earned.

Ancillary and other net income
2007
EUROPE

TOTAL

£000

£000

UK
GROUP
£000

75,836
7,745
5,936
2,000

1,767
32
47
-

77,603
7,777
5,983
2,000

91,517

1,846

93,363

UK
GROUP
£000

Ancillary profit
Interest income
Instalment income
Gladiator Commercial profit

2006
EUROPE

TOTAL

£000

£000

66,946
4,539
5,676
2,025

76
-

67,022
4,539
5,676
2,025

79,18676

79,262

Ancillary profit & instalment income
This is primarily made up of commissions and fees earned on sales of insurance products andservices complementing the motor policy, but which are underwritten by external parties. It
continues to be a major component of Group profit.
Net ancillary contribution increased by 16% in 2007 to £78m from £67m, broadly in line with thegrowth in vehicles insured. Gross UK ancillary income per average active vehicle was £69 forboth years, with no notable change in the component elements. Balumba has also beensuccessful in selling ancillary products, with income per policy sold of around £45.

Gladiator Commercial
Gladiator made a contribution to profit of £2m in 2007, consistent with 2006. In a highly
competitive market, Gladiator grew market share by increasing its customer base by 44% to62,000. This was partly as a result of new distribution through price comparison sites, and partly
the result of improved conversion from a larger and more comprehensive panel.
Gladiator offered 230,000 quotes in 2007, up 68% on last year. Increased investment in new
business growth meant that Gladiator’s net margin reduced to 27% from 34% in 2006.

Confused.com

Confused.com profit

2007
£000

2006
£000

36,72723,080Confused enjoyed another year of significant growth in 2007. Increased media activity (alongwith the return of large numbers of previous visitors to the site) led to an increase in the total
number of insurance quotes provided by Confused of 43%, to 13.0m from 9.1m in 2006.
Revenue increased by 81% to £69.2m from £38.5m.
Operating profit rose 59% to £36.7m from £23.1m in 2006.

Confused also increased its share of the home and travel insurance markets by improving market
coverage and panel depth, and revenue growth has also been achieved in a number of othergeneral insurance areas including van and motorbike insurance. Home insurance quotes
increased by almost 80% to 0.9m from 0.5m, whilst Confused also gave 0.5m travel insurance
quotes (up substantially from just over 0.1m last year).
As noted in the Chief Executive’s statement, Confused faced a significant increase in the level ofcompetition in the motor insurance price comparison market during 2007. In spite of this,Confused maintained its position as market leader. Advertising spend by the main competitors inthis market has grown substantially over the past year and continues to grow into 2008.

International operations
Balumba has completed its first full year of trading and has progressed well. Management arepleased with the development of the business, which has grown ahead of plan and is well
positioned to continue to grow market share and move towards profitability. The European
figures above show Balumba made a loss of around £0.7m in the year (the net effect of theunderwriting loss, offset by ancillary profits).
AdmiralDirekt launched successfully in Cologne, Germany during October, just under one year
after Balumba. The German market brings new challenges, not least the large proportion of
motor policies that incept 1 January. AdmiralDirekt sold around 9,000 policies in its short periodof trading, managing to commence operating in time to target the January renewals. The
business will continue to develop its infrastructure over the coming months, building towards thenext peak period in Q4 2008.
The Group’s Italian motor insurer is expected to launch later in the year. The business, based inRome, is making made good progress towards launch in all the key areas (management team,premises, IT system, pricing and marketing).

Earnings per share (EPS)
Earnings per share rose 22% to 48.6p from 39.8p in 2006. The difference in the increase
compared to pre-tax profit growth (which was 23.5%) is due to the issue of new share capital in
the year to the trustees of the Group’s share schemes.

Taxation
The taxation charge reported in the income statement is £54.7m (2006: £43.6m) representing
30.0% of pre-tax profit (2006: 29.6%).
Refer to note 13 to the financial statements for further detail on taxation.

Investments and cash
The Group invests its insurance funds in three AAA-rated sterling liquidity funds which have
performed very consistently in 2007. Against a background of extreme volatility in other asset
classes during the year, the three funds delivered a net return of 5.6%, with the variance between
the highest and lowest fund’s performance in the year being just 0.1%.
The funds target a 7-day LIBID return with capital security and low volatility and they continue toachieve this.
Of the total Group cash and investments of £491m at the end of the year (2006: £449m), £336m(2006: £258m) was held in these money market funds.
Total investment return and interest income was £24.6m up substantially from the £14.5m earned
last year. This increase is due in part to the higher level of cash and investments held, but moreto the increase in investment return rates.

Dividends
The Directors propose a final dividend for 2007 of 23.2p per share, which is made up of 11.6p per
share normal element, plus 11.6p per share special distribution based on the Group’s resourcesat the end of the year.
The total distribution for 2007 will be 43.8p per share – up 21% on the 36.1p declared in 2006.

Reconciliation of turnover
2007
£000

2006
£000

Insurance premium revenue
Change in gross unearned premiumprovision

233,075

188,288

27,8268,090

Group premiums written

260,901

196,378

Add: co-insurer’s share of premium
written370,350

370,230

Total premiums written
Other revenue
Net investment return631,251
176,878
16,795566,608
131,6219,925

Turnover824,924

708,154

2007
£000

2006
£000

Net insurance premium revenue
Net insurance claims
Net expenses related to insurance
contracts
Investment return (see note 8)

142,236(99,795)

144,955(107,145)(21,734)
16,795(19,384)
9,925

Underwriting profit

37,50228,351

2007
£000

2006
£000

Net insurance claims
Deduct: claims handling costs

99,795(3,471)

107,145(3,538)Adjusted net insurance claims
Net premium revenue
Loss ratio

96,324142,236
67.7%

103,607
144,955
71.5%

2007
£000

2006
£000

Profit before tax

182,098

147,342

Income:Net insurance premium revenue
Other revenue

142,236
176,878

144,955
131,621319,114276,576

57%

53%

Reconciliation of underwriting profit

Reconciliation of loss ratios reported

Reconciliation of alternative operating ratios

Return on income

Consolidated income statement (audited)

Note:
Insurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue
Other revenue
Profit commission
Investment and interest income

5233,075(90,839)
142,236

188,288(43,333)
144,9556
7
8

176,878
20,44824,572

131,621
19,926
14,464364,134

310,966(172,611)(136,472)

72,816(99,795)

29,327(107,145)(78,986)(2,971)(181,752)(54,528)(933)(162,606)

182,382

148,360

Net revenue
Insurance claims and claims handlingexpensesInsurance claims and claims handlingexpenses recovered from reinsurers
Net insurance claims
Expenses
Share scheme charges
Total expenses

Year ended:
31 December 31 December
2007
2006
£000
£000

9
9, 25

Operating profit
Finance charges

12

(284)

(1,018)

Profit before tax

10

182,098

147,342

Taxation expense

13(54,682)(43,620)

127,416

103,722

Profit after tax attributable to equity
holders of the Company

Earnings per share:
Basic

15

48.6p

39.8p

Diluted

15

48.6p

39.8p

Dividends declared (total)
Dividends declared (per share)14
14116,01644.6p

70,10427.0p

Consolidated balance sheet (audited)

Note

31 December
2007
£000

As at:
31 December
2006
£000

16
17
18
19
24
20, 1821, 18

7,708
69,063481,848
131,668
1,629
22,633
155,773

7,448
66,757395,938
74,68916,931
191,242

870,322753,005263
13,145
223,828396

261
13,145
205,682(33)

237,632

219,055

363,060
239,593
30,037294,425981
215,137
23,407

Total liabilities

632,690533,950

Total equity and total liabilities

870,322753,005

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

EQUITY
Share capital
Share premium account
Retained earnings
Other reserves

25
26
26
26

Total equity attributable to equity holdersof the Company

LIABILITIESInsurance contracts
Deferred income tax
Trade and other payables
Current tax liabilities

19
24
22, 18

Consolidated statement of recognised income and expense (audited)

31 December
2007
£000

As at:
31 December
2006
£000

Exchange differences on translation offoreign operations

429

(50)

Net income / (expense) recognised
directly in equity

429

(50)

Profit for the period

127,416

103,722

Total recognised income and expense forthe period

127,845

103,672

Consolidated cash flow statement (audited)
31
December
2007
£000

31
December
2006£000

127,416

103,7223,227
725(1,123)
5,560

2,489
446
(624)
2,667

6
68,635(56,979)

151
40,295(20,523)(14,772)(23,150)

25,506284
54,68233,652
1,018
43,620213,167

183,763

Net cash flow into investments held at fair value
Cash flows from operating activities, net of movements ininvestments(76,849)(1,073)

136,318

182,690

Interest payments
Taxation payments(284)(49,477)(1,018)(40,931)

Net cash flow from operating activities

86,557140,741

Purchases of property, plant and equipment and software(5,390)(6,046)

Net cash used in investing activities(5,390)(6,046)

Repayments of borrowings
Capital element of new finance leases
Repayment of finance lease liabilities
Equity dividends paid

457
(1,506)(116,016)(22,000)
1,519(2,970)(70,104)

Net cash used in financing activities(117,065)(93,555)

Net (increase) / decrease in cash and cash
equivalents(35,898)

41,140Cash and cash equivalents at 1 January
Effects of changes in foreign exchange rates

191,242429

150,152(50)

155,773

191,242

Note

Profit after tax
Adjustments for non-cash items:- Depreciation- Amortisation of software- Unrealised gains on investments- Share scheme charge
Loss on disposal of property, plant and equipment andsoftware
Change in gross insurance contract liabilities
Change in reinsurance assets
Change in trade and other receivables, including frompolicyholders
Change in trade and other payables, including tax andsocial security
Interest expense
Taxation expense

25

Cash flows from operating activities, before
movements in investments

Cash flows from investing activities:

Cash flows from financing activities:

Cash and cash equivalents at end of period

21Notes to the financial statements
1.

General information and basis of preparation

Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at
Capital Tower, Greyfriars Road, Cardiff CF10 3AZ and its shares are listed on the London Stock
Exchange.
The financial statements comprise the results and balances of the Company and its subsidiaries(together referred to as the Group) for the year ended 31 December 2007 and comparative
figures for the year ended 31 December 2006. The financial statements of the Company’s
subsidiaries are consolidated in the Group financial statements. The Company controls 100% of
the voting share capital of all its subsidiaries. The Parent Company financial statements present
information about the Company as a separate entity and not about its Group. In accordance with
International Accounting Standard (IAS) 24, transactions or balances between Group companies
that have been eliminated on consolidation are not reported as related party transactions.
The consolidated financial statements have been prepared and approved by the Directors inaccordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU). The Company has elected to prepare its Parent Company financial statements inaccordance with UK Generally Accepted Accounting Practice (GAAP).
The Group has applied all adopted IFRS and interpretations endorsed by the EU at 31 December
2007, including all amendments to extant standards that are not effective until later accounting
periods, except for those listed below:•

IFRS 8 (Operating Segments); and•IFRIC 11 (IFRS 2: Group and Treasury Share Transactions’)

IFRS 8 becomes effective for the period commencing 1 January 2009, whilst IFRIC 11 will
become effective for the period commencing 1 January 2008. The application of either the
standard or the interpretation would not have had a material impact on these financial statements.
There are a number of standards, amendments to standards and interpretations that were issued
by 31 December 2007 but have yet to be endorsed by the EU. Of these, only the amendment to
IAS 1 (Presentation of financial statements: a revised presentation) is expected to have any
impact on the Group’s financial statements. This amendment introduces a number of changes tothe primary financial statements, but does not change the recognition, measurement or disclosureof transactions or events that are required by other IFRS.
The following IFRS have been adopted and applied by the Group for the first time in thesefinancial statements:•

IFRS 7 (Financial instruments: Disclosure); and•Amendment to IAS 1 (Capital disclosures)

The accounting policies set out below have, unless otherwise stated, been applied consistently toall periods presented in these Group financial statements.
The financial statements are prepared on the historical cost basis, except for the revaluation offinancial assets classified as at fair value through profit or loss.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power,
directly or indirectly, to govern the financial and operating policies of an entity so as to obtainbenefits from its activities. In assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The financial statements of subsidiaries areincluded in the consolidated financial statements from the date that control commences until thedate that control ceases.
The preparation of financial statements in conformity with adopted IFRS requires management tomake judgements, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associatedassumptions are based on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis of making thejudgements about carrying values of assets and liabilities that are not readily apparent from othersources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the year in which the estimate is reviewed if this revisionaffects only that year, or in the year of the revision and future years if the revision affects bothcurrent and future years.
2.

Critical accounting judgements and estimates

Judgements:
In applying the Group’s accounting policies as described in note 3, management has primarily
applied judgement in the classification of the Groups contracts with reinsurers as quota sharereinsurance contracts. A contract is required to transfer significant insurance risk in order to beclassified as such. Management reviews all terms and conditions of the contract, and if necessary
obtains the opinion of an independent expert at the negotiation stage in order to be able to makethese judgements.
Estimation techniques used in calculation of claims provisions:
Estimation techniques are used in the calculation of the provisions for claims outstanding, which
represents a projection of the ultimate cost of settling claims that have occurred prior to thebalance sheet date and remain unsettled at the balance sheet date.
The key area where these techniques are used relates to the ultimate cost of reported claims. A
secondary area relates to the emergence of claims that occurred prior to the balance sheet date,but had not been reported at that date.
The estimates of the ultimate cost of reported claims are based on the setting of claim provisions
on a case-by-case basis, for all but the simplest of claims.
The sum of these provisions are compared with projected ultimate costs using a variety ofdifferent projection techniques (including incurred and paid chain ladder and an average cost ofclaim approach) to allow an actuarial assessment of their likely accuracy. They include allowance
for unreported claims.
The most significant sensitivity in the use of the projection techniques arises from any future stepchange in claims costs, which would cause future claim cost inflation to deviate from historic
trends. This is most likely to arise from a change in the regulatory or judicial regime that leads toan increase in awards or legal costs for bodily injury claims that is significantly above or below thehistorical trend.
The claims provisions are subject to independent review by the Group’s actuarial advisors.
3.

Significant accounting policiesa)Revenue recognition

Premiums, ancillary income and profit commission:
Premiums relating to insurance contracts are recognised as revenue proportionally over theperiod of cover.
Income earned on the sale of ancillary products and income from policies paid by instalments iscredited to the income statement over the period matching the Group’s obligations to provide
services. Where the Group has no remaining contractual obligations, the income is recognised
immediately. An allowance is made for expected cancellations where the customer may beentitled to a refund of ancillary amounts charged.
Under some of the co-insurance and reinsurance contracts under which motor premiums areshared or ceded, profit commission may be earned on a particular year of account, which isusually subject to performance criteria such as loss ratios and expense ratios. The commission isdependent on the ultimate outcome of any year, with income being recognised based on loss andexpense ratios used in the preparation of the financial statements.
Income is allocated to profit commission in the income statement when the right to considerationis achieved, and is capable of reliable measurement.
Revenue from Gladiator Commercial and Confused.com:
Commission from these activities is credited to income on the sale of the underlying insurance
policy.
Investment income:Investment income from financial assets comprises interest income and net gains (both realised
and unrealised) on financial assets classified as fair value through profit and loss.
b)

Segment reporting

The Group’s primary format for segment reporting is business segments. There is no secondary
segment. A business segment is defined as a group of assets and operations engaged inproviding products and services that are subject to risks and returns that are different from otherbusiness segments.
For the Group, the risks and returns of its insurance broking activities, namely Gladiator
Commercial and Confused.com, are clearly distinguishable from its motor insurance segment.
This is reflected in the Group’s management and organisation structure and internal financial
reporting systems.
Management classify the private motor insurance underwriting and private motor insurance
ancillary income results as one business segment (private motor insurance). This is because
although the results are distinguishable between underwriting and non-underwriting, the activities
carried out in generating the income are not independent of each other and are carried on as one
business. This mirrors the approach in management reporting.
c)Foreign currency translation

Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (‘the functional
currency’). The consolidated financial statements are presented in thousands of pounds sterling,which is the Group’s presentation currency.

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions, and from the translation at year end exchange rates ofmonetary assets and liabilities denominated in foreign currencies are recognised in the income
statement.
Translation differences on non-monetary items, such as equities held at fair value through profit
or loss, are reported as part of the fair value gain or loss. Translation differences on nonmonetary items are included in the fair value reserve in equity.
Translation of financial statements of foreign branches
The financial statements of foreign branches whose functional currency is not pounds sterling aretranslated into the Group presentation currency (sterling) as follows:

d)

(i)

Assets and liabilities for each balance sheet presented are translated at the closing
rate at the date of that balance sheet;(ii)

Income and expenses for each income statement are translated at averageexchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which caseincome and expenses are translated at the date of the transaction); and(iii)

All resulting exchange differences are recognised as a separate component of equity.
Insurance contracts and reinsurance assets

Premium:
The proportion of premium receivable on in-force policies relating to unexpired risks is reported ininsurance contract liabilities and reinsurance assets as the unearned premium provision – grossand reinsurers’ share respectively.
Claims:Claims and claims handling expenses are charged as incurred, based on the estimated direct andindirect costs of settling all liabilities arising on events occurring up to the balance sheet date.
The provision for claims outstanding comprises provisions for the estimated cost of settling all
claims incurred but unpaid at the balance sheet date, whether reported or not. Anticipatedreinsurance recoveries are disclosed separately as assets.
Whilst the Directors consider that the gross provisions for claims and the related reinsurance
recoveries are fairly stated on the basis of the information currently available to them, the ultimate
liability will vary as a result 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 theincome statement for the period in which the adjustments are made and disclosed separately ifmaterial. 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 to meet future claims and related expenses.

Co-insurance:
The Group has entered into certain co-insurance contracts under which insurance risks areshared on a proportional basis, with the co-insurer taking a specific percentage of each premium
written and being responsible for the same proportion of each claim. As the contractual liability isseveral and not joint, neither the premiums nor claims relating to the co-insurance are included in
the income statement. Under the terms of these agreements the co-insurers reimburse theGroup for the same proportionate share of the costs of acquiring the business.
Reinsurance assets:
Contracts entered into by the Group with reinsurers under which the Group is compensated forlosses on the insurance contracts issued by the Group are classified as reinsurance contracts. A
contract is only accounted for as an insurance or reinsurance contract where there is significant
insurance risk transfer between the insured and the insurer.
The benefits to which the Group is entitled under these contracts are held as reinsurance assets.
The Group assesses its reinsurance assets for impairment on a regular basis, and in detail every
six months. If there is objective evidence that the asset is impaired, then the carrying value will
be written down to its recoverable amount.
e)Intangible assets

Goodwill:
All business combinations are accounted for using the purchase method. Goodwill has beenrecognised in acquisitions of subsidiaries, and represents the difference between the cost of theacquisition and the fair value of the net identifiable assets acquired.
The classification and accounting treatment of acquisitions occurring before 1 January 2004 havenot 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 of acquisitions prior to 1 January 2004, goodwill is included at the transition date on thebasis of its deemed cost, which represents the amount recorded under UK GAAP, which wastested for impairment at the transition date. On transition, amortisation of goodwill has ceased as
required by IFRS 3.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash
generating units (CGU’s) according to business segment and is reviewed annually for
impairment.
The Goodwill held on the balance sheet at 31 December 2007 is allocated solely to the private
motor insurance segment.
Impairment of goodwill:
The annual impairment review involves comparing the carrying amount to the estimatedrecoverable amount (by allocating the goodwill to CGU’s) and recognising an impairment loss if
the recoverable amount is lower. Impairment losses are recognised through the income
statement and are not subsequently reversed.
The recoverable amount is the greater of the net realisable value and the value in use of the
CGU.

The value in use calculations use cash flow projections based on financial budgets approved bymanagement covering a three year period. Cash flows beyond this period are considered, but
not included in the calculation. The discount rate applied to the cashflow projections in the value
in use calculations is 10.3%, based on the Group’s weighted average cost of capital.
The key assumptions used in the value in use calculations are those regarding growth rates andexpected changes in pricing and expenses incurred during the period. Management estimates
growth rates and changes in pricing based on past practices and expected future changes in themarket.
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
corresponds to the unearned premiums provision at the balance sheet date. This balance is held
as an intangible asset. It is amortised over the term of the contract as premium is earned.
Software:Purchased software is recognised as an intangible asset and amortised over its expected usefullife (generally between two and four years). The carrying value is reviewed every six months forevidence of impairment, with the value being written down if any impairment exists. Impairment
may be reversed if conditions subsequently improve.
f)

Property, plant and equipment and depreciation

All property, plant 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:
Motor vehicles
Fixtures, fittings and equipment
Computer equipment
Improvements to short leasehold properties-

4 years
4 years
2 to 4 years
4 years

Impairment of property, plant and equipment
In the case of property plant 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 net realisable value and the asset’s value in use. Impairment losses arerecognised through the income statement.
g)Leased assets

The rental costs relating to assets held under operating leases are charged to the income
statement on a straight-line basis over the life of the lease.
Leases under the terms of which the Group assumes substantially all of the risks and rewards ofownership are classed as finance leases. Assets acquired under finance leases are included inproperty, plant and equipment at fair value on acquisition and are depreciated in the samemanner as equivalent owned assets. Finance lease and hire purchase obligations are included in
creditors, and the finance costs are spread over the periods of the agreements based on the net
amount outstanding.

h)Financial assets – investments and receivables

Financial assets are classified according to the purpose for which they were acquired. The
Group's investments in money market liquidity funds are designated as financial assets at fairvalue through profit or loss (FVTPL) at inception.
This designation is permitted under IAS 39, as the investments in money market funds aremanaged as a group of assets and internal performance evaluation of this group is conducted ona fair value basis.
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised
through the income statement.
Receivables are stated at their historic cost (discounted if material) unless they are impaired.
Impairment losses are recognised through the income statement.

i)Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and othershort-term deposits with original maturities of three months or less.
j)

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets.

k)

Loans and borrowings

Interest bearing loans and borrowings are recognised initially at fair value less attributabletransaction costs. Subsequent to initial recognition, interest bearing loans and borrowings arestated at amortised cost with any difference between cost and redemption value being recognisedin the income statement over the life of the borrowings on an effective interest basis.

l)

Employee benefits

Pensions:
The Group contributes to a number of defined contribution personal pension plans for its
employees. The contributions payable to these schemes are charged in the accounting period towhich they relate.
Employee share schemes:
The Group operates a number of equity settled compensation schemes for its employees. For
schemes commencing 1 January 2004 and after, the fair value of the employee services received
in exchange for the grant of free shares under the schemes is recognised as an expense, with acorresponding increase in equity.
The total charge expensed over the vesting period is determined by reference to the fair value ofthe free shares granted as determined at the grant date (excluding the impact of non-market
vesting conditions). Non-market conditions such as profitability targets as well as staff attrition
rates are included in assumptions over the number of free shares to vest under the applicable
scheme.
At each balance sheet date, the Group revises its assumptions on the number of shares to be
granted with the impact of any change in the assumptions recognised through income.
Refer to note 25 for further details on share schemes.

m)Taxation

Income tax on the profit or loss for the periods presented comprises current and deferred tax.
Current tax:
Current tax is the expected tax payable on the taxable income for the period, using tax rates thathave been enacted or substantively enacted by the balance sheet date, and includes any
adjustment to tax payable in respect of previous periods.
Deferred tax:
Deferred tax is provided in full using the balance sheet liability method, providing for temporary
differences arising between the carrying amount of assets and liabilities for accounting purposes,
and the amounts used for taxation purposes. It is calculated at the tax rates that are expected toapply in the period when the liability is settled or the asset is realised.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised.
The principal temporary differences arise from depreciation of property and equipment, sharescheme charges and the tax treatment of Lloyd’s profits. The resulting deferred tax is charged or
credited in the income statement, except in relation to share scheme charges where the amountof tax benefit credited to the income statement is limited to an equivalent credit calculated on theaccounting charge. Any excess is recognised directly in equity.

o)Government grants

Government grants are recognised in the financial statements in the period where it becomesreasonably certain that the conditions attaching to the grant will be met, and that the grant will bereceived.
Grants relating to assets are deducted from the carrying amount of the asset. The grant istherefore recognised as income over the life of the depreciable asset by way of a reduced
depreciation charge.
Grants relating to income are shown as a deduction in the reported expense.

4.

Segment reporting

Revenue and results for the year ended 31 December 2007, split by business segment are
shown below. Consolidation adjustments represent the elimination of inter–segment trading,specifically interest charged on inter-company loans.
As noted above, the Directors consider there to be two business segments. These are private
motor insurance and insurance broking (Confused.com and Gladiator Commercial). No
geographical business split has been presented as the results of the Group’s European
operations are not material to the 2007 figures.

31 December 2007
Privatemotor
insurance£000

Insurance
broking£000

Consolidation
adjustment
£000

Group
£000

Net revenue

286,451

77,683-364,134

Profit after tax

99,644

27,772-

127,416

3,011
9,174

216
-

-

3,227
9,174

Other segment items:
Depreciation
Amortisation

The segment assets and liabilities at 31 December 2007 and capital expenditure for the year are
as follows. Consolidation adjustments represent the elimination of inter-company balances.
31 December 2007
Privatemotor
insurance£000

Insurance
broking£000

Consolidation
adjustment
£000

Group
£000

Total assets excluding deferred tax
balances

842,742

27,722(1,771)

868,693

Total liabilities excluding current
and deferred tax balances

597,647

6,778(1,771)

602,654

11,480
3,099

394

-

11,4803,493

Capital expenditure:
Intangible assets
Plant, property and equipment

Revenue and results for the corresponding business segments for the year ended 31 December
2006 are reported below.
31 December 2006
Privatemotor Insurance Consolidation
insuranceGroupbroking
adjustment
£000
£000
£000
£000
Net revenue

266,168

45,069(271)

310,966

Profit after tax

85,69918,023-

103,722

2,366
6,508

123
-

-

2,489
6,508

Other segment items :Depreciation
Amortisation

The segment assets and liabilities at 31 December 2006 and capital expenditure for the year are
as follows.
31 December 2006
Privatemotor Insurance Consolidation
insurance
broking
adjustment
Group
£000
£000
£000
£000
Total assets

736,160

18,780(1,935)753,005

Total liabilities excluding current
and deferred tax balances

506,426

5,071(1,935)509,562

6,764
5,088

364

-

6,764
5,452

Capital expenditure:
Intangible assets
Plant, property and equipment

5.

Net insurance premium revenue
31
December
2007
£000

31
December
2006£000

Total motor insurance premiums before co-insurance

631,251566,608

Group gross premiums written after co-insurance
Outwards reinsurance premiums

260,901(119,049)

196,378(57,731)

Net insurance premiums written

141,852

138,647

Change in gross unearned premium provision
Change in reinsurers’ share of unearned premiumprovision(27,826)(8,090)28,21014,398Net insurance premium revenue

142,236

144,955

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

6.

Other revenue
31
December
2007
£000

31
December
2006£000

Ancillary revenue
Revenue from Confused.com
Instalment income earned
Revenue from Gladiator Commercial

94,216
69,1595,983
7,520

81,52738,517
5,676
5,901

Total other revenue

176,878

131,621

Ancillary revenue primarily constitutes commission from sales of insurance products thatcomplement the motor policy, but which are underwritten by external parties.

7.

Profit commission
31
December
2007
£000

31
December
2006£000

20,44819,92631
December
2007
£000

31
December
2006£000

Net investment return
Interest receivable

16,795
7,777

9,925
4,539

Total investment and interest income

24,572

14,464

Total profit commission

8.

9.

Investment and interest income

Expenses and share scheme charges

Insurance
contracts£000

31 December 2007
Other
Total
£000

£000

Insurance
contracts£000

31 December 2006
Other
Total
£000

£000

Acquisition of
insurance contracts
Administration andother marketing costs

8,420

-

8,420

7,375

-

7,375

13,31457,25270,566

12,00935,14447,153

Expenses

21,73457,252

78,986

19,38435,14454,528

-

2,971

2,971

-

933

933

21,73460,223

81,957

19,38436,07755,461

Share scheme
charges
Total expenses andshare scheme
chargesAnalysis of other administration and other marketing costs:
31
December
2007
£000

31
December
2006£000

Ancillary sales expenses
Confused.com operating expenses
Gladiator Commercial operating expenses
Central overheads

16,61332,4325,520
2,687

14,505
15,437
3,876
1,326

Total

57,25235,144The £13,314,000 (2006: £12,009,000) administration and marketing costs allocated to insurance
contracts is principally made up of salary costs.
The gross amount of expenses, before recoveries from co-insurers and reinsurers is£167,773,000 (2006: £122,343,000). This amount can be reconciled to the total expenses andshare scheme charges above of £81,957,000 (2006: £55,461,000) as follows:31
December
2007
£000

31
December
2006£000

Gross expenses
Co-insurer share of expenses

167,773(66,430)

122,343(59,075)

Expenses, net of co-insurer share

101,343

63,268Adjustment for deferral of acquisition costs(3,687)(1,044)

Expenses, net of co-insurer share (earned basis)

97,65662,224

Reinsurer share of expenses (earned basis)(15,699)(6,763)

Total expenses and share scheme charges

81,95755,461

Reconciliation of expenses related to insurance contracts to reported expense ratio:
31
December
2007
£000

31
December
2006£000

Insurance contract expenses from above
Add: claims handling expenses

21,734
3,471

19,384
3,538

Adjusted expenses

25,20522,922

Net insurance premium revenue
Reported expense ratio

142,23617.7%

144,955
15.8%

10.

Staff costs and other expenses

Included in profit, before co-insurance arrangements are the following:
31
December
2007
£000

31
December
2006£000

Salaries
Social security charges
Pension costs
Share scheme charges (see note 25)

45,022
6,231
588
5,560

36,083
3,337
517
2,667

Total staff expenses

57,40142,604

2,127
1,100

1,009
1,480

725
8,449

446
6,062

3,018

3,292

25

19

169
85
6
171

154
60
151
-

Tax services
Other services

85
-

45
15

Total as above

85

60

Depreciation charge:- Owned assets- Leased assets
Amortisation charge:- Software- Deferred acquisition costs
Operating lease rentals:- Buildings
Auditor’s remuneration:- Fees payable for the audit of the Company’s
annual accounts- Fees payable for the audit of the Company’s
subsidiary accounts- Fees payable for other services
Loss on disposal of property, plant and equipment
Net foreign exchange gains

Analysis of fees paid to the auditor for otherservices:

The amortisation of software and deferred acquisition cost assets is charged to expenses in theincome statement.

11.

Staff numbers (including Directors)
Average for the year
2007
2006
NumberNumberDirect customer contact staff
Support staff

1,839
525

1,593
404

Total

2,364

1,997

12.

Finance charges
31
December
2007
£000

31
December
2006£000

Term loan interest
Finance lease interest
Letter of credit charges
Other interest payable

243
41
-

166
481
221
150

Total finance charges

284

1,018

31
December
2007
£000

31
December
2006£000

56,194(87)
56,10745,430(648)
44,782(1,422)(1,249)(3)

87

54,682

43,62013.

Taxation

UK Corporation tax
Current charge at 30%
Over provision relating to prior periods – corporation tax
Current tax charge
Deferred tax
Current period deferred taxation movement(Over) / Underprovision relating to prior periods – deferred
tax
Total tax charge per income statement

Factors affecting the tax charge are:31
December
2007
£000

31
December
2006£000

Profit before taxation

182,098

147,342

Corporation tax thereon at 30%
Adjustments in respect of prior year insurance technicalprovisions
Expenses and provisions not deductible for tax purposes
Other differences
Adjustments relating to prior periods

54,62944,203

178
(36)
(89)

17
114
(153)
(561)

Tax charge for the period as above

54,682

43,62031
December
2007
£000

31
December
2006£000

March 2006 (14.9p per share, paid May 2006)
September 2006 (12.1p per share, paid October 2006)
March 2007 (24.0p per share, paid May 2007)
September 2007 (20.6p per share, paid October 2007)

62,41253,604

38,66731,437-

Total dividends

116,016

70,104

14.

Dividends

Dividends were declared and paid as follows.

The dividends declared in March represent the final dividends paid in respect of the 2006 and2005 financial years. Dividends declared in September are interim distributions in respect of2007 and 2006.
A final dividend of 23.2p per share has been proposed in respect of the 2007 financial year.
Refer to the Chairman’s statement and financial review for further detail.
15.

Earnings per share
31
December
2007

31
December
2006

127,416

103,722Weighted average number of shares – basic
Unadjusted earnings per share – basic

261,981,843
48.6p

260,632,740
39.8p

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

262,291,843
48.6p

260,906,740
39.8p

Profit for the financial year after taxation (£000s)

The difference between the basic and diluted number of shares at the end of 2007 (being
310,000) relates to awards committed, but not yet issued under the Group’s share schemes.
Refer to note 25 for further detail.

16.

Property, plant and equipment
Improvements
to short
leaseholdbuildings£000

Computerequipment

Officeequipment

Furnitureand fittingsMotorvehicles

Total

£000

£000

£000

£000

£000

Cost
At 1 January 2006
Additions
Disposals

680
1,655
(2)

9,534
1,672
(15)

2,623
1,684
(138)

1,372
441
(1)

12
-

14,221
5,452(156)

At 31 December 2006

2,333

11,191

4,169

1,812

12

19,517

Depreciation
At 1 January 2006
Charge for the year
Disposals

428
220
-

5,603
1,750
(5)

2,320
396
-

1,230
120
-

4
3
-

9,585
2,489
(5)

At 31 December 2006

648

7,348

2,716

1,350

7

12,069Net book amountAt 1 January 2006

252

3,931

303

142

8

4,636

Net book amountAt 31 December 2006

1,685

3,843

1,453

462

5

7,448

Cost
At 1 January 2007
Additions
Disposals

2,333
413
-

11,191
2,129
(6)

4,169
781
-

1,812
170
(3)

12
-

19,5173,493(9)At 31 December 2007

2,746

13,314

4,950

1,979

12

23,001

Depreciation
At 1 January 2007
Charge for the year
Disposals

648
577
-

7,348
1,858
(2)

2,716
611
-

1,350
178
(1)

7
3
-

12,0693,227(3)

At 31 December 2007

1,225

9,204

3,327

1,527

10

15,293

Net book amountAt 31 December 2007

1,521

4,110

1,623

452

2

7,708

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

Computer equipment

31
December
2007
£000

31
December
2006
£000

2,149

2,996

17.

Intangible assets
Goodwill

Software

Total

£000

Deferredacquisition
costs
£000

£000

£000

At 1 January 2006
Additions
Amortisation charge

62,354
-

3,328
6,179
(6,062)

808
596
(446)

66,4906,775(6,508)At 31 December 2006

62,354

3,445

958

66,757-9,584(8,449)

1,896
(725)

11,480(9,174)62,354

4,580

2,129

69,06331
December
2007
£000

31
December
2006£000

Investments held at fair value
Receivables – amounts owed by policyholders

335,608
146,240

257,634
138,304

Total financial assets per consolidated balance sheet

481,848395,938

Trade and other receivables
Cash and cash equivalent

22,633
155,773

16,931
191,242660,254604,111

239,593

215,137

Carrying amount:

Additions
Amortisation charge
At 31 December 2007

18.

Financial instruments

The Group’s financial instruments can be analysed as follows:

Financial assets:

Financial liabilities:
Trade and other payables

All receivables from policyholders are due within 12 months of the balance sheet date.
All investments held at fair value are invested in money market liquidity funds.

19.

Reinsurance assets and insurance contract liabilities

A)

Sensitivity of recognised amounts to changes in assumptions:

The following table sets out the impact on equity at 31 December 2007 that would result from a 1
per cent change in the loss ratios used for each underwriting year for which material amounts
remain outstanding.

2003

UNDERWRITING YEAR
2004
2005
2006

2007

TOTAL

Loss ratio

56.0%

62.5%

74.0%

86.0%

89.0%

Impact of 1% change(£000s)

1,214

1,552

2,017

1,822

529

7,134

The impact is stated net of reinsurance and includes the change in net insurance claims alongwith the associated profit commission movements that result from changes in loss ratios. The
figures are stated net of tax at the current rate.

B)

Analysis of recognised amounts:
31
December
2007
£000

31
December
2006£000

Claims outstanding
Unearned premium provision242,576
120,484

202,42192,004

Total gross insurance liabilities

363,060

294,425

Claims outstanding
Unearned premium provision

76,05555,61347,71026,979Total reinsurers’ share of insurance liabilities

131,668

74,689Claims outstanding
Unearned premium provision

166,52164,871

154,71165,025

Total insurance liabilities – net

231,392

219,736

Gross:

Recoverable from reinsurers:

Net:

C)

Analysis of re-estimation of claims provisions:

The following tables set out the cumulative impact, to 31 December 2007, of the retrospective reestimation of claims provisions initially established at the end of the financial years stated.
Figures are shown gross and net of reinsurance. These tables present data on an accident year
basis.
Gross amounts:

2003
£000

Financial year ended 31 December
2004
2005
2006
£000
£000
£000

2007
£000

Gross claims provision as originally estimated115,169

142,968

170,216

202,421242,576

Provision re-estimated as of:
One year later
Two years later
Three years later
Four years later
Five years later

111,599
105,748
100,880
97,850-137,075
127,613
119,625-

162,205
149,317-

192,283--

As re-estimated at 31 December 2007

97,850

119,625

149,317

192,283-

Gross cumulative overprovision(17,319)(23,343)(20,899)(10,138)-

Financial year ended 31 December
2004
2005
2006
£000
£000
£000

2007
£000

Net amounts:

2003
£000

Net claims provision as originally estimated75,54998,120128,631

154,711

166,521

Provision re-estimated as of:
One year later
Two years later
Three years later
Four years later
Five years later

72,57967,726
63,954
61,620-93,91087,76182,004-122,423
111,964-

146,435--

As re-estimated at 31 December 2007

61,62082,004

111,964

146,435-

Net cumulative overprovision(13,929)(16,116)(16,667)(8,276)-

D)

Analysis of net claims provision releases:

The following table analyses the impact of movements in prior year claims provisions, in terms of
their net value, and their impact on the reported loss ratio. This data is presented on anunderwriting year basis.

2003
£000

Financial year ended 31 December
2004
2005
2006
£000
£000
£000

2007
£000

Underwriting year:
2000
2001
2002
2003
2004
2005
2006

5,176
7,938
2,975
-

1,480
2,967
3,229
1,513
-

370
5,043
5,166
4,622
2,076
-

1,110
1,879
2,260
5,084
7,948
2,623
-

740
1,483
1,292
3,235
7,589
12,545
2,588

Total net release

16,0899,189

17,277

20,90429,472

Net premium revenue
Release as % of net premium revenue

79,327
20.3%

107,501
8.5%

139,45412.4%

144,955
14.4%

142,236
20.7%

E)

Reconciliation of movement in net claims provision:
31
December
2007
£000

31
December
2006£000

Net claims provision at start of period

154,711

128,631

Net claims incurred
Net claims paid

96,324(84,514)103,607(77,527)

Net claims provision at end of period

166,521

154,711F)

Reconciliation of movement in net unearned premium provision:

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

31
December
2007
£000

31
December
2006£000

65,02571,333

141,851(142,005)

138,647(144,955)

64,87165,025

20.

Trade and other receivables
31
December
2007
£000

31
December
2006£000

Trade receivables
Prepayments and accrued income

20,747
1,886

14,982
1,949

Total trade and other receivables

22,633

16,93131
December
2007
£000

31
December
2006£000

Cash at bank and in hand
Cash on short term deposit

150,902
4,871

164,989
26,253

Total cash and cash equivalents

155,773

191,242

21.

Cash and cash equivalents

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

22.

Trade and other payables
31
December
2007
£000

31
December
2006£000

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

5,960
134,659345
4
8,557
15,54574,523

4,601
124,238
1,337
61
4,742
13,70866,450Total trade and other payables

239,593

215,137

31
December
2007
£000

31
December
2006£000

Premium receivable in advance of policy inception
Accrued expenses
Deferred income

38,477
26,948
9,098

31,77225,456
9,222

Total accruals and deferred income as above

74,52366,450Analysis of accruals and deferred income:23.

Obligations under finance leases

Analysis of finance lease liabilities:

Minimum
lease
payments£000
Less than one year
Between one and fiveyears
More than five years

At 31 December 2007
Interest
Principal

£000

£000

Minimum
lease
payments
£000

360

15

345

4
-

-

364

15

At 31 December 2006
Interest
Principal

£000

£000

1,383

46

1,337

4
-

63
-

2
-

61
-

349

1,446

48

1,398

The average term of leases outstanding is two years. All leases are on a fixed repayment basis
and no arrangements have been entered into for contingent rental payments.
The fair value of the Group’s lease obligations approximates to their carrying amount.

24.

Deferred income tax (asset) / liability
31
December
2007
£000

31
December
2006£000

Brought forward at start of period
Movement in period

981(2,610)3,550(2,569)Carried forward at end of period(1,629)981

31
December
2007
£000

31
December
2006£000

Tax treatment of Lloyd’s SyndicatesTax treatment of share scheme charges
Capital allowances
Other differences541(2,091)
126
(205)

1,936
(853)
149
(251)

Deferred tax (asset) / liability at end of period(1,629)981

The net balance provided at the end of the year is made up as follows:
Analysis of net deferred tax (asset) / liability:

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

31
December
2007
£000

31
December
2006£000

Tax treatment of Lloyd’s SyndicatesTax treatment of share scheme charges
Capital allowances
Other differences

1,395
53
23
(46)

1,880
(239)
(541)
62

Net deferred tax credited to income

1,425

1,162

The closing deferred tax balance reflects the change in UK corporation tax rate from 30% to 28%
which becomes effective on 1 April 2008. The change in rate does not have a significant impact
on the value of the asset.
25.

Share capital
31
December
2007
£000

31
December
2006
£000

500

500

263
-

261

263

261

Authorised:
500,000,000 ordinary shares of 0.1p
Issued, called up and fully paid:
262,721,426 ordinary shares of 0.1p
261,186,599 ordinary shares of 0.1p

During 2007, 1,534,827 new ordinary shares of 0.1p were issued to the trusts administering theGroup’s share schemes.
570,827 of these were issued to the Admiral Group Share Incentive Plan Trust for the purposesof this share scheme. These shares are entitled to receive dividends.
964,000 were issued to the Admiral Group Employee Benefit Trust for the purposes of theDiscretionary free share scheme. The Trustees have waived the right to dividend payments,
other than to the extent of 0.001p per share, unless and to the extent otherwise directed by theCompany from time to time.

Staff share schemes:
Analysis of share scheme costs (per income statement):
31
December
2007
£000

31
December
2006£000

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

1,268
1,703

495
438

Total share scheme charges

2,971

933

The share scheme charges reported above are net of the co-insurance share and therefore differ
from the gross charge reported in note 10 (2007: £5,560,000, 2006: £2,667,000) and the grosscredit to reserves reported in note 26.
The consolidated cashflow statement also shows the gross charge in the reconciliation between‘profit after tax’ and ‘cashflows from operating activities’. The co-insurance share of the charge isincluded in the ‘change in trade and other payables’ line.
(i) The Approved Share Incentive Plan (the SIP)
Eligible employees qualify for awards under the SIP based upon the performance of the Group ineach half-year against budget. The current maximum award for each half-year amounts to
600,000 shares (or a maximum annual award of £3,000 per employee if smaller).
The awards are made with reference to the Group’s performance against its budget. Employees
must remain in employment for the holding period (three years from the date of award), otherwise
the shares will be forfeited.
The fair value of shares awarded is either the share price at the date of award, or is estimated at
the latest share price available when drawing up the financial statements for awards not yet made(and later adjusted to reflect the actual share price on the award date). Awards under the SIP are
entitled to receive dividends, and hence no adjustment has been made to this fair value.
(ii) The Discretionary Free Share Scheme (the DFSS)
Under the scheme, details of which are contained in the remuneration report, individuals receive
an award of free shares at no charge. A total of 1,645 employees received awards under thisscheme during 2007. Staff must remain in employment until the vesting date in order to receive
the shares. The maximum number of shares that can vest relating to the 2007 scheme is964,000.
Individual awards are calculated based on the growth in the Company’s earnings per share (EPS)
relative to a risk free return (RFR), for which LIBOR has been selected as a benchmark. This
performance is measured over the same three-year period.
The range of awards is as follows:•

If the growth in EPS is less than the RFR, no awards vest•

EPS growth is equal to RFR – 10% of maximum award vests•

To achieve the maximum award, EPS growth has to be 36 points higher than RFR over
the three year period

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

Awards under the DFSS are not eligible for dividends and hence the fair value of free shares tobe awarded under this scheme has been revised downwards to take account of these
distributions. The unadjusted fair value is based on the share price at the date on which awards
were made (as stated in the remuneration report).

Number of free share awards committed at 31 December 2007:

SIP H105 scheme
SIP H205 scheme
SIP H106 scheme
SIP H206 scheme
SIP H107 scheme
SIP H207 scheme
DFSS 2005 scheme
st
DFSS 2006 scheme, 1 award
DFSS 2006 scheme, 2nd award
DFSS 2007 scheme
Total awards committedAwardsoutstanding(*1)

Vesting
date

581,565
330,306
316,328
224,808
346,019
310,000
685,000
604,187
77,248964,000

September 2008
March 2009
September 2009
April 2010
September 2010
April 2011
June 2008
April 2009
September 2009
June 2010

4,439,461*1 – being the maximum number of awards expected to be made before accounting for expectedstaff attrition. Of the 4,439,461 share awards outstanding above, 4,129,461 have been issued tothe trusts administering the schemes, and are included in the issued share capital figures above.

26.

Analysis of movements in capital and reserves
Sharecapital

As at 1 January 2006
Retained profit for the period
Dividends
Issues of share capital
Currency translation differences
Share scheme charges
Deferred tax credit on sharescheme charges
As at 31 December 2006
Retained profit for the period
Dividends
Issues of share capital
Currency translation differences
Share scheme charges
Deferred tax credit on sharescheme charges
As at 31 December 2007

Capitalredemption
reserve£000

Foreignexchangereserve£000

Retained
profit and
loss
£000

Total
equity£000

Sharepremium
account£000

260

13,14517-

167,990

181,412

1
-

-

-

(50)
-

103,722(70,104)
2,667

103,722(70,104)
1
(50)
2,667

-

-

-

-

1,407

1,407

261

13,14517(50)

205,682

219,055

2
-

-

-

429
-

127,416(116,016)
5,560

127,416(116,016)
2
429
5,560

-

-

-

-

1,186

1,186

263

13,14517379

223,828

237,632£000

The capital redemption reserve arose in 2002 on the redemption of shares previously in issue at
below par.
The foreign exchange reserve represents the net gains or losses on translation of the Group’s net
investment in foreign operations.
27.

Financial commitments

The Group was committed to total minimum obligations under operating leases on land andbuildings as follows:31
31
December
DecemberOperating leases expiring:
2007
2006
£000
£000
Within one years
Within two to five years
Over five years

2,139
27,35733,425

Total commitments

29,49633,425

Operating lease payments represent rentals payable by the Group for its office properties.
In addition, the Group had contracted to spend the following on property, plant and equipment at
the end of each period:
31
31
December
December
2007
2006
£000
£000
Expenditure contracted to
28.

489

1,539

Related party transactions

There were no related party transactions occurring during 2007 that require disclosure. Details
relating to the remuneration and shareholdings of key management personnel are set out in the
remuneration report, which will be included in the statutory accounts referred to below. No key
management personnel sit outside of the Board of Directors. Key management personnel areable to obtain discounted motor insurance at the same rates as all other Group staff, typically at a
reduction of 15%.
29.

Non-statutory accounts

The financial information set out above does not constitute the Company’s statutory accounts forthe years ended 31 December 2007 or 2006. Statutory accounts for 2006 have been delivered to
the registrar of companies and those for 2007 will be delivered following the Company’s Annual
General Meeting. The auditors have reported on those accounts; their reports were unqualified
and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

30.

Annual Report

The Company’s annual report and accounts for the year ended 31 December 2007 is expected to
be posted to shareholders by 7 April 2008. Copies of both this announcement and the annual
report and accounts will be available to the public at the Company’s registered office at Capital
Tower, Greyfriars Road, Cardiff CF10 3AZ and through the Company’s website atwww.admiralgroup.co.uk.

Consolidated financial summary
Basis of preparation:
The 2007, 2006, 2005 and 2004 figures below are as stated in the financial statements preceding
this financial summary and issued previously. Only selected lines from the income statement andbalance sheet have been included.
Figures for 2003 have not been restated under IFRS, although have been reclassified into theformats used in these financial statements.
Income statement
IFRS

Total motor premiums
Net insurance premium
revenue
Other revenue
Profit commission
Investment and interest
income

2007
£m
631.3

2006
£m
566.6

2005
£m
533.6

2004
£m
470.4

UK
GAAP
2003
£m
371.6

142.2
176.9
20.5

145.0
131.6
19.9

139.5
93.4
14.7

107.5
69.5
21.7

79.3
50.8
1.4

24.6

14.5

15.5

11.9

6.8

Net revenue

364.2

311.0

263.1

210.6

138.3

Net insurance claims
Total expenses(99.8)(82.0)(107.1)(55.5)(100.5)(40.9)(74.3)(28.9)(43.5)(34.4)

Operating profit

182.4

148.4

121.7

107.4

60.4

Balance sheet
IFRS

Property, plant andequipment
Intangible assets
Financial assets
Reinsurance assets
Deferred income tax
Trade and other receivables
Cash and cash equivalents
Total assets
EquityInsurance contracts
Financial liabilities
Provisions for otherliabilities and charges
Deferred income tax
Trade and other payables
Current tax liabilities
Total liabilities

2007
£m

2006
£m

2005
£m

2004
£m

UK
GAAP
2003
£m

7.7
69.1
481.8
131.7
1.6
22.6
155.8
870.3

7.5
66.8
395.9
74.7
16.9
191.2
753.0

4.6
66.5
378.7
54.2
9.4
150.2
663.6

3.3
66.5
300.7
66.1
16.7
119.3
572.6

5.8
62.4
241.6
56.7
12.5
70.1
449.1

237.6
363.1
-

219.1
294.4
-

181.4
254.1
22.0

144.6
216.1
33.1

108.1
174.8
35.4

239.6
30.0
870.3

1.0
215.1
23.4
753.0

3.6
182.9
19.6
663.6

4.8
164.3
9.7
572.6

11.7
6.4
104.0
8.7
449.1