Admiral Group plc results for the six months ended 30 June 201617 August 2016
H1 2016 Group Highlights
Group profit before tax*1
Earnings per share
Interim dividend
Return on equity
Group turnover*2
Group customers
UK Car Insurance
Turnover
Customers
International Car Insurance
Turnover
Customers
Solvency ratio (post dividend)

H1 2016£193 million
55.9 pence
62.9 p/share49%£1.26 billion
4.82 million

H1 2015£186 million
54.8 pence
51.0 p/share50%£1.06 billion
4.19 million% change
+4%
+2%
+23%

£993 million
3.52 million£858 million
3.18 million

+16%
+11%

£159 million
757,900
180%£110 million
631,700
206% (FY 2015)

+44%
+20%

+19%
+15%

David Stevens, Chief Executive Officer, commented:“What a great time to take on the stewardship of Admiral. The last six months have shown theenduring, and indeed increasing, strength of the UK business and has seen a step change upwards ingrowth from our developing international businesses.
In the core UK car insurance business, we’ve benefitted from an increasingly rational motor market withevidence of a move towards a less violent cycle. Prices have been rising, and we’ve used thisopportunity to grow our motor book strongly. Meanwhile, the growth of our household book continued
apace, demonstrating our ability to expand successfully beyond our car insurance core in the UK.
Overseas, Elephant launched into two new states and our longer-established European insurance
operations, collectively, moved tantalisingly close to profitability, while also accelerating the rate of
growth and investing more in promoting our brands. All our price comparison businesses, including
Confused, grew rapidly.
I’m very happy to be able to pick up where Henry left off, with yet another Admiral record for both
turnover and profits.”[*1] Profit or loss figures represent Group’s share of profit or loss before tax excluding minority interests. Statutory
profit before tax increased 4% to £189.5 million (H1 2015: £181.7 million)[*2] Turnover is a non-GAAP measure and consists of total premiums written (including co-insurer’s share) and
Other revenue

1Management presentation
Analysts and investors will be able to access the Admiral Group management presentation, which
commences at 9.00am on Wednesday 17 August 2016, by dialling +44 203 059 8125.
A copy of the presentation slides and webcast, along with a PDF version of this interim results
announcement, will be available at www.admiralgroup.co.uk.
Group overview
The first half of 2016 has been a positive period for the Group with strong growth in turnover andcustomer numbers, both to record levels. Pre-tax profit also increased to a new record for a first half.
The Group's main UK Car Insurance business enjoyed favourable market conditions and delivered
particularly positive results, seeing a 16% increase in turnover, a 217,000 increase in customer numbers
and a record H1 result of £222.8 million. UK Household Insurance also recorded continued strong
growth (reaching 382,000 customers), improved key metrics (including expense ratio) and anotherprofitable half year.
Outside the UK, Admiral's International Insurance businesses grew turnover (44%) and customer
numbers (13%) strongly and at faster rates than in recent periods. Encouraging progress was made in
combined ratio terms, and although in aggregate the segment recorded losses of £12.9 million (up from
£11.2 million) mainly as a result of the growth in the US and France, ConTe recorded another profitable
six month period.
And finally in Price Comparison, results were also encouraging: Confused.com in the UK grew revenue
and saw a significant increase in profit to £8.3 million from £4.8 million; the Group's European
operations retained leadership positions in their respective markets; and continued encouraging
progress in developing the panel of insurers and key metrics was made in the US at compare.com.
As a result of the positive performance and first half profit along with a strong solvency position,
Admiral has also declared a record interim dividend of £174.7 million (62.9 pence per share), up from£140.2 million (51.0 pence per share) for H1 2015. The interim dividend includes £33 million (11.9
pence per share) of additional return of capital as a result of the strong solvency ratio.
As noted further into the report, the UK's decision to leave the EU (Brexit) resulted in market volatility
which impacted the solvency ratio (which nonetheless remains strong at 180%, or 196% on a volatility
adjusted basis). Brexit brings some additional risks to the Group which are discussed later in the report.
Business performance, along with further detail on Brexit and dividends is set out in the following
sections.

2

Group key performance indicators

Turnover*1
Net revenue
Number of customers
Loss ratio*2, *3
Expense ratio*2, *3
Combined ratio*2, *3
Profit before tax*4
Earnings per share
Dividend per share
Return on equity
Solvency ratio*5

H1 2014

H1 2015

H1 2016

FY 2015£1,037m
£445m
3.94m
67.1%
18.0%
85.1%
£185m
52.7p
49.4p
54%
–

£1,058m
£448m
4.19m
60.8%
21.9%
82.7%
£186m
54.8p
51.0p
50%
–

£1,261m
£512m
4.82m
59.5%
22.7%
82.2%
£193m
55.9p
62.9p
49%
180%

£2,119m
£905m
4.43m
65.1%
20.5%
85.6%
£377m
107.3p114.4p49%
206%[*1] Turnover is a non-GAAP measure and consists of total premiums written (including co-insurer’s share) and
Other revenue, refer to Note 12a for reconciliation to income statement.
[*2] Loss ratios presented to exclude releases on business that was originally ceded under quota sharereinsurance contracts. Result in H1 2016 including releases from commuted reinsurance contracts would
have been a loss ratio of 54.5% and combined ratio of 77.2%.
[*3] Loss and expense ratios exclude the impact of reinsurer cap accruals, refer to Note 12b and 12c.
[*4] Profit before tax adjusted to exclude minority interests’ share, refer to Note 12d for reconciliation to
statutory profit.
[*5] Solvency ratio is estimated and unaudited and reflects the Solvency II position at the date of this report. H1
2016 solvency ratio on a volatility adjusted basis is 196%.

Earnings per share
Earnings per share increased by 2% to 55.9 pence (H1 2015: 54.8 pence). The increase is lower than theincrease in pre-tax profit due to the higher effective tax rate.
Dividends
The Group’s dividend policy is to pay 65% of post-tax profits as a normal dividend and to pay a further
special dividend comprising earnings not required to be held in the Group for solvency or buffers. The
Group entered into the new Solvency II regime in January with surplus capital and is returning additional
capital to shareholders in a phased manner, up to the first half of 2018. The current expectation is forthe total additional return on capital to be in the region of £100 million - £150 million.
The Directors have declared a total interim dividend of 62.9 pence per share (£174.7 million),comprising three elements,

36.8 pence per share normal dividend;
A special dividend of 14.2 pence per share; andA further additional return of capital of 11.9 pence per share, representing an element of
surplus capital not required for solvency as noted above.

The normal and special elements total 51.0 pence per share, in line with the total interim dividend for2015. The additional special element of 11.9 pence per (£33 million) is the second instalment of theadditional returns of capital referred to above.

3

The total 2016 interim dividend is 23% ahead of the interim 2015 dividend.
The payment date is 7 October 2016, ex-dividend date 8 September 2016 and record date 9 September
2016.
Divisional Performance Highlights
 UK Car Insurance profit increased by 2% to £222.8 million (H1 2015: £219.2 million).
 International Car Insurance losses totalled £12.9 million (H1 2015: £11.2 million).
 Admiral Group’s share of Price Comparison losses totalled £1.1 million (H1 2015: loss of £4.0 million)
reflecting higher profit from Confused.com, offset by continued investment in compare.com.
 The net cost from Other Group Items, including employee share schemes and net debt financing
charges, amounted to a cost of £15.6 million (H1 2015: £17.7 million).
In the six months to 30 June 2016 Admiral continued to grow its share of the UK private motor insurance
market, resulting in a total customer base of 3.52 million (H1 2015: 3.18 million). During this period
Admiral implemented a number of premium increases. The improvement in pre-tax profit was mainly
due to an improved Combined Ratio of 72.0% (H1 2015: 73.1%) and higher reported investment income.
Admiral’s International Car Insurance businesses also continued to grow, achieving an increase inturnover of 44% to £159.2 million (H1 2015: £110.3 million) and insuring 20% more vehicles at 30 June
2016 compared with a year earlier. As a result of this continued strong growth in the first half,development of the businesses produced losses of £12.9 million compared to £11.2 million in the firsthalf of 2015 although the combined ratio improved to 131% at H1 2016 from 137% at H1 2015. The
higher loss was mainly driven by the continuing investment in the Group’s US insurance operation,
Elephant. The overall international insurance loss equated to 7% of the Group’s profit before tax for theperiod (H1 2015: 6%).
Admiral’s Price Comparison businesses made a combined loss of £1.1 million (H1 2015: £4.0 million)
excluding minority interests’ share. This improvement was due to a significantly improved result fromthe Group’s UK Price Comparison business, Confused.com. In International Price Comparison, the Group
continued to invest in compare.com, the Group’s US operation, which reported a loss of £10.1 million(H1 2015: £10.4 million) offsetting the profit from the Group’s European Price Comparison operations.
Investments and CashAnalysis of cash and investments:
30 June 2016£m

31 December 2015£m

30 June 2015
£m

Fixed income and debt securities
Money market funds
Cash deposits
Cash1,483.3
693.4
178.7
295.4

1,428.2
627.7
267.6
265.3

1,324.3
671.0
247.5
216.0

Total

2,650.8

2,588.8

2,458.8

4

Money market funds, fixed income and debt securities continue to comprise the majority of the total;
82% at 30 June 2016 compared with 81% at 30 June 2015.
Investment return and interest income increased by £23.8 million to £33.4 million in H1 2016 (H1 2015:£9.6 million). £14.3 million of the increase is due to movements in accruals relating to quota sharereinsurance arrangements, with the balance due to additional investment income earned on higher
average balances. Refer to page 10 for further detail on the movement of quota share reinsurance
accruals.
The underlying rate of return (excluding the reinsurance accrual) on the Group’s cash and investments
was 1.4% (H1 2015: 1.2%).
Capital Structure and Financial Position
Admiral’s capital-efficient and profitable business model led to a return on equity of 49% (H1 2015:50%). A key feature of the business model is the extensive use of co- and reinsurance across the Group.
The Group’s quota share reinsurance arrangements for the UK car insurance business are in place until
at least the end of 2018. In 2017 and 2018, the Group will reduce its net share of that business from
25% to 22%.
Similar long term arrangements are in place in the Group’s International Insurance operations and UK
Household Insurance business.
The Group continues to manage its capital to ensure that all entities within the Group are able tocontinue as going concerns and that regulated entities comfortably meet regulatory capitalrequirements. Surplus capital within subsidiaries is paid up to the Group holding company in the form of
dividends.
The Group’s regulatory capital from January 2016 is based on the Solvency II Standard Formula, with acapital add-on agreed by the PRA to reflect recognised limitations in the Standard Formula with respect
to Admiral’s business (predominantly in respect of profit commission arrangements in co- andreinsurance agreements and risks arising from Periodic Payment Order (PPO) claims).
The capital add-on to the Standard Formula approved by the PRA in December 2015 will be the subjectof a review in December 2016. The Group plans to submit an application for approval to use an internal
model to calculate capital requirements during 2017.
The majority of the Group’s current capital requirement is derived from its European insurance
operations, Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL).
The estimated (and unaudited) Solvency II position for the Group at the date of this report was asfollows:

5

GroupEligible Own Funds (pre 2016 interim dividend)2016 interim dividend
Eligible Own Funds (post 2016 interim dividend)
Solvency II capital requirement
Surplus over regulatory capital requirement
Solvency ratio*1

£bn
1.02
0.17
0.85
0.47
0.38
180%

[*1] Solvency ratio on a volatility adjusted basis is 196%.

In July 2014, the Group completed the issue of £200 million of ten year dated subordinated bonds. The
rate of interest is fixed at 5.5% and the bonds mature in July 2024. The bonds qualify as lower tier two
capital under the Solvency II regulatory regime and are included in the Own Funds figures in the table
above.
Significant downwards movements in risk free interest rates during 2016 (especially post the EU
referendum result in June) led to an increase in the regulatory valuation of the UK car insurance
business claims liabilities and a consequent reduction in the value of the Group’s Own Funds. This
amounted to a downwards movement of approximately 20% in solvency ratio terms following the EU
referendum result. The Directors are satisfied that the Group’s solvency position as noted above
includes a strong level of buffer above capital requirements.
An application has been made to the PRA and the Gibraltar FSC for the use of a volatility adjusted yield
curve in discounting claims liabilities. If approved, the impact of the volatility adjustment would be an
improvement in the solvency ratio reported above to 196%.
Estimated sensitivities to the current Group solvency ratio (excluding the volatility adjustment) of 180%
are presented in the table below. These sensitivities cover the two most material risk types, insurance
risk and market risk, and within these risks cover the most significant elements of the risk profile. Asidefrom the catastrophe events, estimated sensitivities have not been calibrated to individual return
periods.
UK Motor – incurred loss ratio +5%
UK Motor – 1 in 200 catastrophe event
UK Household – 1 in 200 catastrophe event
Interest rate – yield curve down 50 bps
Credit spreads widen 100 bps
Currency – 25% movement in euro and US dollar
ASHE – long term inflation assumption up 0.5%

-26%
-1%
-2%
-26%
-4%
-2%
-20%

Taxation
The tax charge reported in the income statement is £36.2 million (H1 2015: £33.4 million) which equates
to 19.1% (H1 2015: 18.4%) of profit before tax. The higher effective rate of tax compared to the prioryear results from the impact of losses in the Group’s US operations, partially offset by a reduction in therate of UK corporation tax. The average rate of UK corporation tax in 2016 is 20.0% (2015: 20.25%).

6

UK Exit from the European Union (‘Brexit’)
On 23 June 2016, the UK voted in a referendum to leave the EU. At the date of this report, the timetable
for and details of the implementation of this decision remain unclear.
Market volatility that resulted from Brexit (notably very significant reductions in risk free interest rates)
has adversely impacted the Group's solvency position at the end of the first half. This is due to anincreased regulatory valuation of claims liabilities, in particular in relation to longer dated potential PPO
claims, and hence reduced capital.
As discussed above, the solvency ratio remains very strong at 180% (196% on a volatility adjusted basis)
after the interim dividend is accounted for. The Directors are satisfied this represents a very satisfactory
level of surplus above regulatory requirements and buffers.
Brexit also brings additional risks including:• potential further market volatility, particularly in interest and exchange rates• the potential for the uncertainty or the emerging terms of exit regarding Brexit to trigger orexacerbate less favourable economic conditions in the UK and other countries in which Admiraloperates (though it is worth noting that car insurance has tended to be resilient to economic
downturns)• potential changes to or withdrawal of the right of UK financial services firms to trade in Europe
without the need for locally regulated entities ('passporting')• potential changes to the rules relating to the free movement of people between the UK and EU
member states
The Group will closely monitor developments over the coming months and years and will takeappropriate steps to deal with the outcomes. At the current time the Group does not foresee a material
adverse impact on day to day operations (including customers or staff), whilst recognising that otherissues may emerge over time.
The Group’s results are presented in three key segments – UK Car Insurance, International Car
Insurance and Price Comparison. Other Group items are summarised in a fourth section.

7

UK Car Insurance
Non-GAAP*1 format income statement£m
H1 2014

H1 2015

H1 2016

FY 2015

Turnover*2
Total premiums written*3

849.8
776.0

857.9
779.0

993.2
899.7

1,708.2
1,539.7

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

197.9
6.0
(92.6)(21.7)

188.9
6.3(69.3)(26.2)

210.7
24.5(108.9)(30.1)

386.5
26.1(161.3)(52.1)

Underwriting profit
Profit commission

89.6
35.8

99.7
44.2

96.2
41.7

199.2
85.2

Underwriting profit plus profit
commission

125.4

143.9

137.9

284.4

Net other income
Instalment income

71.2
11.1

63.3
12.0

69.6
15.3

131.9
26.7

UK Car Insurance profit before tax

207.7

219.2

222.8

443.0

[*1] GAAP = Generally Accepted Accounting Practice[*2] Turnover is a non-GAAP measure and consists of total premiums written (including co-insurer’s share) and
Other revenue. Refer to Note 12a for a reconciliation to financial statement line items[*3] Total premiums written is a non-GAAP measure and includes premium underwritten by co-insurers

Split of underwriting profit£m

H1 2014

H1 2015

H1 2016

FY 2015Motor
Additional products

80.0
9.6

91.5
8.2

85.5
10.7

183.2
16.0

Underwriting profit

89.6

99.7

96.2

199.2

8

Segment key performance indicators
H1 2014

H1 2015

H1 2016

FY 2015

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

66.0%
14.2%
80.2%

58.2%
17.4%
75.6%

56.9%
18.1%
75.0%

64.1%
16.9%
81.0%

Written basis motor expense ratio
Reported total combined ratio*3

15.2%
76.8%

16.2%
73.1%

17.0%
72.0%

16.3%
78.2%

£35.4m£50.0m£55.9m

£84.6m£37.7m£73.1m£42.6m
£92.6m£12.8m£68.7m

£88.8m£173.4m

3.15m
£67

3.18m
£64

3.52m
£64

3.30m
£63

Claims reserve releases – original
net share*4
Claims reserve releases –commuted reinsurance*5
Total claims reserve releases
Vehicles insured at period-end
Other Revenue per vehicle[*1] Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts.
Reconciliation in Note 12b.
[*2] Motor expense ratio is calculated by including claims handling expenses that are reported within claims costsin the Income Statement. Reconciliation in Note 12c.
[*3] Reported total combined ratio includes additional products underwritten by Admiral.
[*4] Original net share shows reserve releases excluding the commuted share.
[*5] Commuted reinsurance shows releases on the proportion of the account that was originally ceded underquota share reinsurance contracts but has since been commuted and hence reported through theunderwriting result and not profit commission.

UK Car Insurance Financial Performance
Admiral delivered strong growth in turnover and customers in its UK Car Insurance business in H1, taking
advantage of favourable market conditions with increasing prices and shopping activity. Profit was also
higher in H1 2016 (£222.8 million v £219.2 million) with a number of factors contributing to the change:






Higher net insurance premium revenue (£210.7 million v £188.9 million) resulting from the growthin the portfolio over the past year
An improved combined ratio (72.0% v 73.1%) with positive back year claims development slightly
offset by a higher expense ratio as a result of strong growth in new business
Higher contribution from Other Revenue sources (£84.9 million v £75.3 million) resulting fromgrowth in the portfolio
Higher investment return (£24.5 million v £6.3 million) as explained in the Investments and Cashsection above
Lower reserve releases on the portion of the business originally ceded under quota sharereinsurance contracts (£12.8 million v £42.6 million) as explained further below

Admiral continued to increase its prices in the first half and saw average premiums written increase byaround 3%.

9As a result of a larger book and increasing prices, UK turnover of £993.2 million was 16% higher (H1
2015: £857.9 million) and total premiums written increased by 15% to £899.7 million (H1 2015: £779.0
million).
Claims reserving
Admiral’s reserving policy (both within the claims function and in the financial statements) is initially toreserve conservatively, above internal and independent projections of ultimate loss ratios. This isdesigned to create a margin held in reserves to allow for unforeseen adverse development in open
claims and typically results in Admiral making above industry average reserve releases. Admiral’sbooked claims reserves continue to include a significant margin above projected best estimates ofultimate claims costs.
The reported motor loss ratio improved to 56.9% from 58.2% mainly due to higher reserve releases of£55.9 million (H1 2015: £50.0 million), excluding reserve releases from commuted reinsurance
contracts. These higher releases were due to positive claims cost development in the first half of 2016,
which led to significant improvements in projected ultimate claims costs on business earned to the endof June 2016 (in particular for the 2012 to 2013 underwriting years). Notwithstanding these higher
reserve releases, Admiral continues to hold a material margin in reserves against the level of uncertainty
in the ultimate costs of claims. This margin, expressed as a percentage of the actuarial best estimate,
was marginally lower at 30 June 2016 compared to the end of 2015. If claims continue to develop as
expected, there is scope for further reserve releases in the future.
Commutations of quota share reinsurance
Admiral tends to commute its UK Car Insurance quota share reinsurance contracts for an underwriting
year 24 months from inception, assuming there is sufficient confidence in the profitability of thebusiness covered by the reinsurance contract.
After the commutation is executed, movements in booked loss ratios result in reserve releases (orstrengthening if the booked loss ratio were to increase) rather than reduced or increased reinsurance
claims recoveries or profit commission.
During H1 2016, reinsurance contracts covering the 2014 underwriting year were commuted. Whilst
there is a satisfactory level of confidence in the ultimate outcome of that year, Admiral’s prudent
approach to booking loss ratios, which tend to improve over time from an initial cautious level to theultimate outcome, has meant that the 2014 year is booked at a loss making combined ratio level.
As a result of the commutation, no reinsurance recovery is accounted for on the 2014 year and the net
claims incurred for the 2014 year have increased by £31.8 million, with Admiral taking a larger net shareof the year.
Note that the ultimate projection of the 2014 year continues to show a profitable outcome.
A further impact of the 2014 year commutation is a release of an accrual held for notional investment
income relating to the funds-withheld nature of the contract. As noted on page 5, movements in thenotional investment income accruals resulted in an increase in investment income of £14.3 million
compared to the first half of 2015.
10

Excluding reserve releases, the reported motor loss ratio improved to 85.8% (H1 2015: 86.8%). The
improvement in ratio reflects more favourable loss ratio assumptions for business earned in the current
six month period compared to the prior period, given the achieved price increases.
The most recent projection of the ultimate combined ratio for the 2015 accident year is 94% up from
90% for 2014, with the increase largely attributable to lower average earned premium in 2015
compared to 2014. The market combined ratio for 2015, excluding prior year reserve releases is 115%.
The earned motor expense ratio increased modestly to 18.1% from 17.4% mainly reflecting the increasein acquisition costs resulting from the strong growth in new business. The written basis expense ratio
also increased to 17.0% from 16.2%.
Profit Commission
Admiral is potentially able to earn material amounts of profit commission revenue from co- andreinsurance partners, depending on the profitability of the business. Revenue is recognised in theincome statement in line with the booked loss ratios on Admiral’s retained underwriting.
In H1 2016 Admiral recognised profit commission revenue of £41.7 million, a decrease of 6% from £44.2
million in H1 2015. The decrease arose from the higher loss ratio on the 2014 underwriting year
compared to previous underwriting years at the same stage of development.
As noted above, when a quota share reinsurance contract is commuted (typically after two years fromthe start of an underwriting year), further improvement or deterioration in claims costs are reported
within net claims. If the contracts were not commuted, the movement would be reported in profit
commission.
If releases, from business that was originally ceded under quota share reinsurance contracts that havesince been commuted, are added to profit commission, the total for H1 2016 rises to £54.5 million
compared to £86.8 million in H1 2015, a decrease of 37%. The decrease mainly arises as a result of the2014 underwriting year commutation which is discussed above.
Other Revenue
Admiral generates Other Revenue from a portfolio of insurance products that complement the core car
insurance product, and also fees generated over the life of the policy.
The most material contributors to net Other Revenue are:

Revenue earned from motor policy upgrade products underwritten by Admiral, including
breakdown, car hire and personal injury covers
Revenue from other insurance products, not underwritten by Admiral
Fees such as administration fees and referral income
Interest charged to customers paying for cover in instalments

Contribution from Other Revenue increased by 13% to £84.9 million (H1 2015: £75.3 million). Whilst
there were a number of smaller offsetting changes within the total, the main reason for the increase is
the growth in the portfolio over the period.

11Other Revenue per vehicle remained stable at £64 (H1 2015: £64). Net of costs, Other Revenue pervehicle was £56 (H1 2015: £55).
UK Car Insurance Other Revenue - analysis of contribution:£m

H1 2014

H1 2015

H1 2016

FY 2015

89.6

84.6

90.7

173.7

9.6
11.1

8.2
12.0

10.7
15.3

16.0
26.7

Other Revenue
Internal costs

110.3(18.4)

104.8(21.3)

116.7(21.1)

216.4(41.8)Net Other Revenue

91.9

83.5

95.6

174.6

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

£67

£64

£64

£63

£58

£55

£56

£54

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

Instalment Income
Instalment income reflects amounts charged to customers paying for cover in instalments. During thefirst half of 2016 Admiral earned £15.3 million, up £3.3 million on the prior period (H1 2015: £12.0
million) from instalment income. The increase is due to rising average premiums and customer growth.
Additional products underwritten by Admiral
Besides car insurance, there are a number of other products underwritten by Admiral that are core toproviding motor insurance to customers (personal injury insurance, breakdown cover and car hire
cover). Contribution from these products during the first half of 2016 was £10.7 million (H1 2015: £8.2
million). This is included in underwriting profit in the income statement, but reallocated to Other
Revenue for the purpose of management key performance indicators.

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

H1 2014

H1 2015

H1 2016

FY 2015

TurnoverTotal premiums written

104.3
94.1

110.3
101.0

159.2
142.9

232.4
213.3

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

27.8
0.1
(27.6)(18.9)

29.7–(25.4)(18.9)

39.4
0.2(32.7)(24.6)

62.3–(50.9)(40.1)

Underwriting result
Net other income(18.6)
3.1(14.6)
3.4(17.7)
4.8(28.7)
6.5

International Car Insurance loss
before tax(15.5)(11.2)(12.9)(22.2)

H1 2014

H1 2015

H1 2016

FY 2015

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

92%
47%
139%

82%
55%
137%

80%
51%
131%

77%
49%
126%

Adjusted combined ratio, net of
Other Revenue*3

128%

126%

118%

115%

Vehicles insured at period-end

555,600

631,700

757,900

673,000

Key Performance Indicators[*1] Adjusted reported loss ratio and adjusted reported expense ratio have been adjusted to remove the impactof reinsurer caps so the underlying performance of the business is transparent.
[*2] Adjusted reported combined ratio is calculated on Admiral’s net share of premiums and excludes Other
Revenue. It has been adjusted to remove the impact of reinsurer caps. Including the impact of reinsurer caps
the reported combined ratio would be H1 2014: 167%; H1 2015: 149%; H1 2016: 145%; FY 2015: 146%.
[*3] Reported combined ratio, net of Other Revenue is calculated on Admiral’s net share of premiums andincludes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of Other
Revenue would be H1 2014: 156%; H1 2015: 138%; HY 2016: 133%; FY 2015: 136%.

13

Geographical Analysis
H1 2016
Customers insured
Turnover (£m)*1

Spain
169,850
22.9

Italy
362,250
54.7

France75,40017.1

USA150,400
64.5

Total
757,900
159.2

Spain
160,700
38.6

Italy
315,300
77.9

France56,80021.2

USA140,200
94.7

Total
673,000
232.4

Spain
168,75020.0

Italy
298,000
38.9

France43,4509.8

USA121,500
41.6

Total
631,700
110.3

FY 2015
Customers insured
Turnover (£m)*1
H1 2015
Customers insured
Turnover (£m)*1[*1] Turnover includes total premium written and income generated by the sale of additional products andservices and fees

International Car Insurance Financial Performance
The Group has car insurance businesses in four markets outside the UK – in Spain (Admiral Seguros),
Italy (ConTe), the USA (Elephant Auto) and France (L’olivier - assurance auto). The operations werelaunched between 2006 and 2010. As the businesses develop, it is expected that they will make losses
until appropriate scale has been achieved (generally expected to occur 6-10 years after launch, though
this timescale will vary subject to market conditions amongst other things).
The combined operations insured 757,900 vehicles at 30 June 2016 – 20% higher than a year earlier (H1
2015: 631,700). Turnover was £159.2 million, up 44% compared to H1 2015. Customers and turnoverfrom outside the UK represent 16% and 13% of the Group totals respectively, up from 15% and 10% in
H1 2015.
The total International Insurance loss for the period was £12.9 million, an increase on £11.2 million in H1
2015, mainly due to the ongoing investment in growing the US and French operations. The loss ratio
improved to 80% (H1 2015: 82%), and the expense ratio also improved to 51% (H1 2015: 55%). The
combined ratio therefore decreased to 131% (H1 2015: 137%).
The European operations in Spain, Italy and France insured 607,500 vehicles at 30 June 2016 – 19%
higher than a year earlier (H1 2015: 510,200). Turnover was up 38% at £94.7 million (H1 2015: £68.7
million). The consolidated result of Admiral’s European insurance operations was a loss of £2.1 million
compared to £3.2 million in H1 2015, with a small profit in ConTe offset by losses in Spain and France.
The combined ratio improved to 114% from 115% primarily due to an improvement in claims
performance.
Admiral Seguros (Spain) was launched in 2006 and is the oldest of Admiral’s international operations. It
trades under the Balumba and Qualitas Auto brands. During 2015 Admiral Seguros focused on cost
control rather than growth, to achieve break-even (on an underwriting year basis) and as a result
customer numbers reduced slightly in the second half of 2015. In contrast, during the first six months of14

2016 Admiral Seguros focused on growth to take advantage of a growing Spanish market and at 30 June
2016 the business insured 169,850 customers, 1% higher than a year earlier and 6% higher than 31
December 2015.
The Group’s largest international operation is ConTe in Italy with over 360,000 vehicles insured at theend of June 2016, 22% higher than a year earlier. During the first half of 2016, ConTe achieved anothersmall profit as a result of positive development in the projected ultimate outcomes of mostunderwriting years allowing further reserve releases in H1 2016. Despite this, ConTe continues to hold aprudent margin in its claims reserves above actuarial best estimate.
Admiral’s youngest and smallest international insurance business is L’olivier - assurance auto, launchedin 2010 in France. L’olivier insured 75,400 vehicles at the end of June 2016, up 74% on a year earlier.
In the USA, Admiral underwrites motor insurance in six states (Virginia, Maryland, Illinois, Texas, Indiana
and Tennessee) through its Elephant Auto business, which launched in 2009. At the end of June 2016,
Elephant insured over 150,000 vehicles, up 24% year-on-year. Turnover was £64.5 million, up 55%
compared to H1 2015. Elephant’s result for the period was a loss of £10.8 million, compared to £8.0
million in H1 2015, reflecting ongoing investment in the business. Elephant Auto’s adjusted combined
ratio net of Other Revenue improved to 143% (H1 2015: 159%).
Price Comparison
Non-GAAP format income statement£m
Revenue:
Car insurance price comparison
Other
Total

H1 2014

H1 2015

H1 2016

FY 2015

43.2
13.9
57.1

42.6
12.6
55.2

48.6
15.4
64.0

82.3
25.8
108.1

Operating expenses(53.1)(63.8)(68.8)(123.6)

Operating profit/(loss)

4.0

(8.6)

(4.8)

(15.5)

Confused.com profit
International price comparison
result

9.1

4.8

8.3

12.5

(5.1)
4.0

(13.4)(8.6)(13.1)(4.8)(28.0)(15.5)

9.1

4.8

8.3

12.5

(3.2)
5.9

(8.8)
(4.0)

(9.4)
(1.1)

(19.7)(7.2)

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

15

UK Price Comparison – Confused.com
The UK price comparison market remains fiercely competitive, but favourable market conditions (rising
prices and more shopping activity) in the first half saw more visitors to Confused.com’s website andconsequently higher quote volumes. This in turn led to higher revenue (£44.0 million v £38.9 million)
and increased profitability (£8.3 million v £4.8 million). Revenue from other products remained stable at
24% of total revenue (H1 2015: 24%). Confused.com’s operating margin improved to 19% (H1 2015:
12%).
International Price Comparison
The Group operates three price comparison businesses outside the UK; in Spain (Rastreator), France(LeLynx) and USA (compare.com).
The combined revenue from the European operations in H1 2016 increased by 16% to £16.7 million (H1
2015: £14.4 million) reflecting an increase of 9% in quote volumes and improved conversion rates. Both
Rastreator and LeLynx have market-leading positions and strong brand recognition in their respective
markets. The Group’s share of the combined result for Rastreator and LeLynx was a profit of £0.7 million(H1 2015: £1.6 million) with the decrease mainly due to the continuing development of multi productofferings and the brands in both countries.
Admiral Group owns 75% of Rastreator, with the remaining 25% owned by Mapfre.
The Group continues to invest in compare.com, its US comparison operation. During H1 2016 Admiral’sshare of compare.com’s loss was £10.1 million before tax, broadly in line with the prior period (£10.4
million). With sustained investment in compare.com, the Group’s share of compare.com’s losses for the2016 full year is expected to be in the range of $30 to $35 million.
The Group’s share of the combined result for International Price Comparison was, therefore, a loss of£9.4 million (H1 2015: loss of £8.8 million) – the profit from European price comparison offset byinvestment in compare.com.
Other Group Items£m
UK Household Insurance result
UK Commercial Vehicle operating profit
Other interest and investment income
Share scheme charges
Business development costs
Other central overheads and charges
Finance charges

H1 2014

H1 2015

H1 2016

FY 2015

0.5
1.5
0.6
(12.5)
(0.2)
(2.8)
–

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

1.2
0.8
8.7
(14.7)
(2.2)
(3.8)
(5.6)

1.2
1.5
6.5
(27.2)(1.9)(5.6)(11.1)

UK Household Insurance
UK Household Insurance was launched in December 2012 under the Admiral brand. The product isunderwritten within the Group and in common with other businesses it is supported by proportional
reinsurance covering 70% of the risk (shared between Munich Re, 40%, and Swiss Re, 30%).

16

The business enjoyed another period of strong growth with policy numbers increasing by more than
60% to over 380,000 (H1 2015: 239,000). Profit from Household doubled from a year earlier to £1.2
million (H1 2015: £0.6 million) and its expense ratio is already materially lower than the UK market ratio.
UK Commercial Vehicle
The Group operates a Commercial Vehicle insurance broker (Gladiator) offering van insurance andassociated products, typically to small businesses. Distribution is via telephone and the internet(including price comparison websites).
Gladiator has been impacted by operational changes which, together with a very competitiveenvironment, have resulted in a reduced operating profit of £0.8 million (H1 2015: £1.0 million),
although customer numbers increased by 13% to 161,000 at the end of June 2016 (H1 2015: 143,000).
Other interest and investment income
Other interest and investment income includes £5.5 million (H1 2015: £nil) of unrealised gains on
forward foreign exchange contracts which have been impacted in H1 2016 by downward movements inthe value of sterling following the UK’s decision to leave the European Union. These gains have thepotential to reverse over time as the contracts expire.
Share scheme charges
These costs relate to the Group’s two employee share schemes, further detail on which is set out in thenotes to the financial statements. The increase in the charge is due to an increase in the number ofawards across the Group resulting from headcount growth and the higher share price.
Finance charges
Finance charges primarily reflect interest on the £200 million subordinated loan notes issued in July
2014 of £5.5 million (H1 2015: £5.5 million). Refer to note 6 to the financial statements for further
details.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of the principal risks facing Admiral, including those which
would threaten its business model, future performance, liquidity and solvency. The result of thisassessment is that the principal risks and uncertainties are consistent with those reported in the Group's
2015 Annual Report and Accounts, pages 34-37.
Admiral notes that emerging risks have arisen as a result of the UK's decision to leave the EU and thepotential decisions that will be made in negotiating the exit.
Further detail on Brexit is included on page 7.

Disclaimer on forward-looking statements
Certain statements made in this announcement are forward-looking statements. Such statements are
based on current expectations and assumptions and are subject to a number of known and unknown
risks and uncertainties that may cause actual events or results to differ materially from any expected
future events or results expressed or implied in these forward-looking statements.

17Persons receiving this announcement should not place undue reliance on forward-looking statements.
Unless otherwise required by applicable law, regulation or accounting standard, the Group does notundertake to update or revise any forward-looking statements, whether as a result of new information,
future developments or otherwise.

18

Condensed consolidated income statement (unaudited)
6 months ended:
30 June 2016
30 June 2015
Note:

£m

£m

Year ended:
31 December
2015
£m

549.6
(320.7)228.9

1,130.2(663.2)467.0

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

5

635.8
(376.1)
259.7

Other revenue
Profit commission
Investment and interest income

7
5
6

176.2
42.2
33.4

165.0
44.2
9.6

319.8
85.4
32.6

Net revenue

511.5

447.7

904.8

Insurance claims and claims handling expenses
Insurance claims and claims handling expenses
recoverable from reinsurers
Net insurance claims(400.0)(352.3)(769.1)251.6(148.4)250.9(101.4)542.6(226.5)8(316.9)(279.0)(548.0)

8

148.9

119.9

249.5

(168.0)(159.1)(298.5)

Total expenses(316.4)(260.5)(525.0)Operating profit

195.1

187.2

379.8

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

Finance costs
Profit before tax

6

(5.6)
189.5

(5.5)
181.7

(11.1)
368.7

Taxation expense9(36.2)(33.4)(76.9)

153.3

148.3

291.8

157.4
(4.1)

152.9
(4.6)

300.0
(8.2)

153.3

148.3

291.8

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

Earnings per share:
Basic

11

55.9p

54.8p

107.3p

Diluted

11

55.8p

54.7p

107.1pDividends declared and paid (total)
Dividends declared and paid (per share)

11
11

175.4
63.4p

134.4
49.0p

274.6
100.0p19

Condensed consolidated statement of comprehensive income (unaudited)
6 months ended:
30 June 2016 30 June 2015£m£m

Year ended:
31 December
2015
£m

153.3

148.3

291.8

20.9

(8.8)

(12.6)

12.1

(1.3)

2.6

Other comprehensive income for the period, net ofincome tax

33.0(10.1)(10.0)

Total comprehensive income for the period

186.3

138.2

281.8

189.2
(2.9)

142.8
(4.6)

289.5
(7.7)

186.3

138.2

281.8

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

Total comprehensive income for the period attributable
to:Equity holders of the parent
Non-controlling interests20

Condensed consolidated statement of financial position (unaudited)
30 June 2016

As at:
30 June 2015

Note:

£m

£m

31 December
2015
£m

10
10
9
5
6, 10
6
6

33.9
156.2
25.4
914.1
697.4
2,355.4
295.4

32.3
119.3
29.5
720.5
499.3
2,242.8
216.0

34.9
142.3
20.6
878.7
537.1
2,323.5
265.3

4,477.8

3,859.7

4,202.4

0.3
13.1
19.2
15.3
600.6

0.3
13.1
2.1
1.0
574.2

0.3
13.1
(1.7)
4.4
599.6

Total equity attributable to equity holders of
the parent

648.5

590.7

615.7

Non-controlling interests

14.1

8.9

17.2

Total equity

662.6

599.6

632.9

2,484.2
223.9
1,070.8
36.3

2,148.3
203.8
876.2
31.8

2,295.0
223.9
1,015.0
35.6

Total liabilities

3,815.2

3,260.1

3,569.5

Total equity and total liabilities

4,477.8

3,859.7

4,202.4

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

11

LIABILITIESInsurance contracts
Subordinated and other financial liabilities
Trade and other payables
Current tax liabilities

5
6
6, 10

21

Condensed consolidated cash flow statement (unaudited)
6 months ended:*1
30 June 2016
Restated
30 June 2015£m£m

Year ended:*1
Restated
31 December
2015
£m

153.3

148.3

291.8

5.2
5.5
1.2
14.2
(33.4)
5.6
36.2
189.2
(35.4)(164.7)

3.9
2.6
(2.4)
12.9
(9.6)
5.5
33.4
50.9
109.3
(64.2)

8.2
6.1
3.2
29.5
(32.6)
11.1
76.9
197.6
(48.9)(103.5)

56.8
233.7

(88.5)
202.1

47.8
487.2

Purchases of financial instruments
Proceeds on disposal/ maturity of financial instruments
Interest and investment income received
Cash flows from operating activities, net of
movements in investments(142.7)
157.0
5.6
253.6

(359.8)
309.9
4.8
157.0

(542.0)
420.9
8.6
374.7

Taxation payments
Taxation receipts
Net cash flow from operating activities(36.6)
1.1
218.1(35.6)—
121.4(63.8)—
310.9(17.3)(17.3)(18.9)(18.9)(47.8)(47.8)

(0.2)
—
(5.5)
(1.7)
(175.4)(182.8)

(0.2)
—
(5.5)
(1.0)
(134.4)(141.1)

10.7
20.0(11.0)(1.4)(274.6)(256.3)

Net increase / (decrease) in cash and cash equivalents

18.0(38.6)

6.8

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

265.3
12.1

255.9
(1.3)

255.9
2.6

295.4

216.0

265.3

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

10
10

6
6
9

Cash flows from investing activities:
Purchases of property, equipment and software
Net cash used in investing activities
Cash flows from financing activities:
Non-controlling interest capital contribution
Proceeds on issue of financial liabilities
Finance costs paid
Repayment of finance lease liabilities
Equity dividends paid
Net cash used in financing activities

Cash and cash equivalents at end of period116[*1] Refer to note 2 for details.

22Consolidated statement of changes in equity (unaudited)Sharecapital£m

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

NCI
£m

Total
equity£m*1

At 1 January 2015

0.3

13.1

10.9

2.3

540.6

567.2

13.7

580.9

Profit for the period
Other comprehensive income
Movements in fair value reserve
Currency translation differences

—

—

—

—

152.9

152.9

(4.6)

148.3

—
—

—
—

(8.8)
—

—
(1.3)

—
—

(8.8)
(1.3)

—
—

(8.8)
(1.3)

—

—

(8.8)

(1.3)

152.9

142.8

(4.6)

138.2

—
—

—
—

—
—

—
—

(134.4)12.9(134.4)12.9——(134.4)
12.9

—
—

—
—

—
—

—
—

2.2
—

2.2
—

—
(0.2)

2.2
(0.2)

Total transactions with equityholders

—

—

—

—

(119.3)(119.3)(0.2)(119.5)As at 30 June 2015

0.3

13.1

2.1

1.0

574.2

590.7

8.9

599.6

At 1 January 2015

0.3

13.1

10.9

2.3

540.6

567.2

13.7

580.9

Profit for the period
Other comprehensive income
Movements in fair value reserve
Currency translation differences

—

—

—

—

300.0

300.0

(8.2)

291.8

—
—

—
—

(12.6)
—

—
2.1

—
—

(12.6)
2.1—
0.5(12.6)
2.6——(12.6)

2.1

300.0

289.5

(7.7)

281.8

—
—

—
—

—
—

—
—

(274.6)29.5(274.6)29.5——(274.6)
29.5

—
—

—
—

—
—

—
—

4.7
(0.1)

4.7
(0.1)

—
10.7

4.7
10.6

—

—

—

—

(0.5)

(0.5)

0.5

—

Total transactions with equityholders

—

—

—

—

(241.0)(241.0)11.2(229.8)As at 31 December 2015

0.3

13.1

(1.7)

4.4

599.6

615.7

17.2

632.9

Total comprehensive income forthe period
Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs

Total comprehensive income forthe period
Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs
Changes in ownership interests
without a change in control

23

Sharecapital£m

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

NCI
£m

Total
equity£m*1

At 1 January 2016

0.3

13.1

(1.7)

4.4

599.6

615.7

17.2

632.9

Profit for the period

—

—

—

—

157.4

157.4

(4.1)

153.3

Other comprehensive income
Movements in fair value reserve
Currency translation differences

—
—

—
—

20.9
—

—
10.9

—
—

20.9
10.9

—
1.2

20.9
12.1

Total comprehensive income forthe period

—

—

20.9

10.9

157.4

189.2

(2.9)

186.3

—
—

—
—

—
—

—
—

(175.4)14.2(175.4)14.2——(175.4)
14.2

—
—

—
—

—
—

—
—

4.8
—

4.8
—

—
(0.2)

4.8
(0.2)

Total transactions with equityholders

—

—

—

—

(156.4)(156.4)(0.2)(156.6)As at 30 June 2016

0.3

13.1

19.2

15.3

600.6

648.5

14.1

662.6

Transactions with equity-holders
Dividends
Share scheme credit
Deferred tax credit on sharescheme credit
Contributions by NCIs[*1]

Non-controlling interests

24Notes to the financial statements (unaudited)
1.

General information

Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at Tŷ Admiral,
David Street, Cardiff CF10 2EH and its shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results and balances of the Company and its
subsidiaries (the Group) for the six-month period ended 30 June 2016 and the comparative periods forthe six-months ended 30 June 2015 and the year ended 31 December 2015. This condensed set offinancial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU.
As required by the FCA’s Disclosure and Transparency Rules, the condensed set of financial statements
has been prepared applying the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements for the year ended 31
December 2015.
The financial statements of the Company’s subsidiaries are consolidated in the Group financial
statements. In accordance with IAS 24, transactions or balances between Group companies that havebeen eliminated on consolidation are not reported as related party transactions.
The comparative figures for the financial year ended 31 December 2015 are not the Company's
statutory accounts for that financial year. Those accounts have been reported on by the Company's
auditors and delivered to the registrar of companies. The report of the auditors was:i.

unqualified;ii.

did not include a reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report; andiii.

did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The accounts have been prepared on a going concern basis. In considering the appropriateness of thisassumption, the Board have reviewed the Group’s projections for the next twelve months and beyond.
Further information is given in the Basis of preparation below.

2.

Basis of preparation

The condensed set of interim financial statements have been prepared applying the accounting policies
and presentation that were applied in the preparation of the Company’s published consolidated
financial statements for the year ended 31 December 2015. A number of other IFRS and interpretations
have been endorsed by the EU in the period to 30 June 2016 and although they have been adopted by
the Group, none of them has had a material impact on the Group’s financial statements.
The accounts have been prepared on a going concern basis. In considering this requirement, theDirectors have taken into account the following:

25





The Group’s projections for the next 12 months and beyond, in particular the profit forecasts,
regulatory capital surpluses and levels and sources of liquidity.
The risks included on the Group’s risk register that could impact on the Group’s financial
performance, levels of liquidity and solvency over the next 12 months.
The risks on the Group’s risk register that could be a threat to the Group’s business model andcapital adequacy.

The Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the Strategic Report in the 2015 Annual Report. Updates to theGroup’s principal risks and uncertainties since the 2015 year end are included in the business review
preceding these financial statements. In addition, the Governance report in the 2015 Annual Report
includes the Directors’ statement on the viability of the Group over a three year period.
Following consideration of the above, the Directors have reasonable expectation that the Group has
adequate resources to continue in operation for the foreseeable future, a period not less than 12
months from the date of this report, and that it is therefore appropriate to adopt the going concern
basis in preparing the financial statements.
The accounting policies set out in the notes to the financial statements have, unless otherwise stated,been applied consistently to all periods presented in these Group financial statements.
The financial statements are prepared on the historical cost basis, except for the revaluation of financial
assets classified as fair value through profit or loss or as ‘available for sale’. The Group and Company
financial statements are presented in pounds sterling, rounded to the nearest £0.1 million.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. In assessing control, the Group takes into consideration
potential voting rights that are currently exercisable. The acquisition date is the date on which control istransferred to the acquirer. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases. Losses
applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests
even if doing so causes the non-controlling interests to have a deficit balance.
The preparation of financial statements requires management to make judgements, estimates andassumptions that affect the application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form thebasis of making the judgements about carrying values of assets and liabilities that are not readily
apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is reviewed if this revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods. To the extent that a change in an accounting estimate gives rise to changes in assets and26

liabilities, it is recognised by adjusting the carrying amount of the related asset or liability in the periodof the change.
Re-presentation of Comparative Information
Comparative amounts within the Condensed consolidated cash flow statement relating to investments
have been re-presented. Net cash flows into investments have been analysed into purchases offinancial instruments and proceeds from financial instruments. Additionally, investment return andinterest income on financial investments are now captured within the adjustments to profit after tax for
non-cash items. There is no impact on total cash and cash equivalents or on net cash flow fromoperating activities for any period.

3.

Critical accounting judgements and estimates

The Group’s 2015 Annual Report provides full details of significant judgements and estimates used in
the application of the Group’s accounting policies. There have been no significant changes to thesejudgements and estimates during the period.
Judgements
In applying the Group’s accounting policies, management has primarily applied judgement in thefollowing three areas:Calculation of insurance claims reserves:
The Group’s reserving policy requires management to set insurance claims reserves for the purposeof the financial statements, within a range of potential outcomes above the projected best estimate
outcome, to allow for unforeseen adverse claims development. Management applies judgement indetermining where, within this range of potential outcomes, the insurance claims reserves shouldsit.



Classification of the Group’s contracts with reinsurers as reinsurance contracts:
A contract is required to transfer significant insurance risk in order to be classified as such.
Management reviews all terms and conditions of each such contract, and if necessary obtains theopinion of an independent expert at the negotiation stage in order to be able to make thisjudgement.



Recognition of deferred tax assets relating to unused tax losses:
Management applies judgement in determining the probability of future taxable profits of an entity
against which to utilise accumulated losses in determining the recognition of deferred tax assets. In
applying this judgement, management makes an assessment of the reliability of approved businessplan projections using both qualitative and quantitative factors including the age and status of thebusiness, the Group’s previous experience in similar markets, historic performance against businessplans and the application of a number of stress and sensitivity tests to the projections.

27

Estimation techniques used in calculation of claims provisions and profit commission:
Estimation techniques are used in the calculation of the provisions for claims outstanding, which
represent a projection of the ultimate cost of settling claims that have occurred prior to the balance
sheet date and remain unsettled at the balance sheet date.
The key area where these techniques are used relates to the ultimate cost of reported claims. A
secondary area relates to the emergence of claims that occurred prior to the balance sheet date, but
had not been reported at that date.
The estimates of the ultimate cost of reported claims are based on the setting of claim provisions on acase-by-case basis, for all but the simplest of claims.
The sum of these provisions is compared with projected ultimate costs using a variety of different
projection techniques (including incurred and paid chain ladder and an average cost of claim approach)to allow an actuarial assessment of their potential outcome. They include allowance for unreported
claims.
The most significant sensitivity in the use of the projection techniques arises from any future stepchange in claims costs, which would cause future claim cost inflation to deviate from historic trends.
This is most likely to arise from a change in the regulatory or judicial regime that leads to an increase inawards or legal costs for bodily injury claims that is significantly above or below the historical trend.
The Group’s independent actuarial advisors project best estimate claims reserves using a variety ofrecognised actuarial techniques.
As noted above, the Group’s reserving policy requires management to reserve within a range ofpotential outcomes above the projected best estimate outcome, to allow for unforeseen adverse claims
development.
Future changes in claims reserves also impact profit commission income, as the measurement of thisincome is dependent on the loss ratio booked in the financial statements, and cash receivable isdependent on actuarial projections of ultimate loss ratios.

28

4.

Operating segments

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

29

Segment income, results and other information

An analysis of the Group’s revenue and results for the period ended 30 June 2016, by reportablesegment are shown below. The accounting policies of the reportable segments are consistent with thosepresented in the notes to the 2015 Group financial statements.

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

30 June 2016
Segment
total
£m
£m

993.2

159.2

64.0

44.3

(9.8)

1,250.9

Net insurance
premium revenue

210.7

41.3

—

7.7

—

259.7

Other revenue andprofit commission

147.7

5.6

64.0

10.9

(9.8)

218.4

Investment andinterest income

24.5

0.2

—

—

—

24.7

Net revenue

382.9

47.1

64.0

18.6

(9.8)

502.8

Net insurance
claims(108.9)(33.7)

—

(5.8)

—

(148.4)

Expenses(51.2)(26.3)(68.8)(10.8)

9.8(147.3)

Segment profit /(loss) before tax

222.8(12.9)

(4.8)

2.0

—

207.1

Turnover*1*2

Eliminations

Other central revenue and expenses, including share scheme charges
Interest and investment income
Finance costs(20.7)
8.7(5.6)

Consolidated profit before tax

189.5

Taxation expense(36.2)

Consolidated profit after tax

153.3[*1] Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers share) and
Other revenue. Refer to note 12 for further information.
[*2] Eliminations are in respect of the intra-group trading between the Group’s price comparison and UK andInternational car insurance entities. No elimination was made in H1 2015 on the grounds of materiality.

30

Revenue and results for the corresponding reportable segments for the period ended 30 June 2015 areshown below.

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

30 June 2015
Eliminations
Segment
total
£m
£m

857.9

110.3

55.2

34.1

—

1,057.5

Net insurance
premium revenue

188.9

31.8

—

8.2

—

228.9

Other revenue andprofit commission

140.8

4.0

55.2

9.2

—

209.2

Investment andinterest income

6.3

—

—

—

—

6.3

Net revenue

336.0

35.8

55.2

17.4

—

444.4

Net insurance
claims(69.3)(25.6)

—

(6.5)

—

(101.4)

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

Segment profit /(loss) before tax

219.2(11.2)

(8.6)

1.6

—

201.0

Turnover*1*2

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

Consolidated profit before tax

181.7

Taxation expense(33.4)

Consolidated profit after tax

148.3

31

Revenue and results for the corresponding reportable segments for the year ended 31 December 2015
are shown below.
31 December 2015*2
Eliminations
Segment
total
£m
£m

UK CarInsurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

1,708.2

232.4

108.1

70.1

(14.2)

2,104.6

Net insurance
premium revenue

386.5

64.5

—

16.0

—

467.0

Other revenue andprofit commission

285.6

7.7

108.1

18.0

(14.2)

405.2

Investment andinterest income

26.1

—

—

—

—

26.1

Net revenue

698.2

72.2

108.1

34.0

(14.2)

898.3

Net insurance
claims(161.3)(51.6)—(13.6)—(226.5)

Expenses(93.9)(42.8)(123.6)(17.7)

14.2(263.8)Segment profit /(loss) before tax

443.0(22.2)(15.5)

2.7

—

408.0

Turnover*1

Other central revenue and expenses, including share scheme charges
Interest and investment income
Finance costs(34.7)
6.5(11.1)

Consolidated profit before tax

368.7

Taxation expense(76.9)

Consolidated profit after tax

291.8

32

Segment revenues
The UK and International Car Insurance reportable segments derive all insurance premium income fromexternal policyholders. Revenue within these segments is not derived from an individual policyholderthat represents 10% or more of the Group’s total revenue.
The total of Price Comparison revenues from transactions with other reportable segments is £9.8 million(FY 2015: £14.2 million) which has been eliminated on consolidation. In H1 2015 the total of pricecomparison revenues from transactions with other reportable segments was £7.2 million and was not
eliminated on the grounds of materiality. There are no other transactions between reportablesegments.
Revenues from external customers for products and services is consistent with the split of reportablesegment revenues as shown above.
Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country relating to
car insurance are shown within the International Car Insurance reportable segment shown above. The
revenue and results of the three International Price Comparison businesses; Rastreator, LeLynx andcompare.com are not yet material enough to be presented as a separate segment.

33

5.

Premium, Claims and Profit Commissions

5a.

Net insurance premium revenue
30
June
2016
£m

30
June
2015
£m

31
December2015£mTotal insurance premiums before co-insurance

1,076.5

904.9

1,805.2

Group gross premiums written after co-insurance
Outwards reinsurance premiums

717.8(425.2)597.9(351.2)

1,199.9(709.8)Net insurance premiums written

292.6

246.7

490.1

Change in gross unearned premium provision
Change in reinsurers’ share of unearned premium provision(82.3)
49.4(48.3)
30.5(69.7)
46.6

Net insurance premium revenue

259.7

228.9

467.0

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

5b.

Profit commission
30
June
2016
£m

30
June
2015
£m

31
December2015£mUnderwriting year:
2010 & prior
2011
2012
2013
2014
2015

1.4
3.7
14.8
21.8
—
0.5

2.9
12.1
19.0
10.2
—
—

5.3
26.1
36.9
16.9
—
0.2

Total profit commission

42.2

44.2

85.4

34

5c.

Reinsurance assets and insurance contract liabilities(i)

Analysis of recognised amounts:
30
June
2016
£m

30
June
2015
£m

31
December2015£m1,819.9664.3
2,484.2

1,603.9544.4
2,148.3

1,725.0570.0
2,295.0

523.9
390.2
914.1

403.5
317.0
720.5

544.8
333.9
878.7

Net:
*2
Claims outstanding
Unearned premium provision

1,296.0274.1

1,200.4
227.4

1,180.2
236.1

Total insurance liabilities – net

1,570.1

1,427.8

1,416.3

Gross:*1Claims outstanding
Unearned premium provision
Total gross insurance liabilities
Recoverable from reinsurers:
Claims outstanding
Unearned premium provision
Total reinsurers’ share of insurance liabilities[*1] Gross claims outstanding at 30 June 2016 is presented before the deduction of salvage and subrogation
recoveries totalling £30.4 million (H1 2015: £nil, FY 2015: £28.4 million).
[*2] Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24-36 months
following the start of the underwriting year. After commutation, claims outstanding from these contracts areincluded in Admiral’s net claims outstanding balance. Refer to Note (iii) below.

(ii)

Analysis of gross and net claims reserve releases:

The following table analyses the impact of movements in prior year claims provisions on a gross and net
basis. This data is presented on an underwriting year basis.
30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

7.3
27.5
42.4
47.0
9.2

27.1
35.3
38.3
16.0
—

59.3
69.0
53.4
16.0
—

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

133.4
9.2

116.7
5.9

197.7
14.0

Total gross release

142.6

122.6

211.7

Gross
Underwriting year:
2011 & prior
2012
2013
2014
2015

35

Net
Underwriting year:
2011 & prior
2012
2013
2014
2015

30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

7.3
27.5
42.4
(12.3)
3.8

27.1
35.3
23.5
6.7
—

59.3
69.0
38.4
6.7
—

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

68.7
4.4

92.6
2.8

173.4
6.5

Total net release

73.1

95.4

179.9

Releases on Admiral’s original net share
Releases on commuted quota share reinsurance
contracts

55.9

50.0

84.6

12.8

42.6

88.8

Total net release (UK Car Insurance) as above

68.7

92.6

173.4

Releases on commuted quota share contracts are analysed by underwriting year as follows:

Underwriting year:
2011 & prior
2012
2013
2014
Total releases on commuted quota share reinsurance
contracts

30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

3.9
16.0
24.7
(31.8)

14.5
20.6
7.5
—

32.2
40.3
16.3
—

12.8

42.6

88.8

Profit commission is analysed in note 5b.
Included within releases on commuted quota share contracts are accruals for additional reserves arisingfrom the commutation of 2014 year UK motor quota share contracts. Refer to the business review
earlier in this report for further detail.
31 December:

30 JuneUK loss ratio development

2011

2012

2013

2014

2015

2016

Underwriting year (UK motor only)
2011
2012
2013
2014
2015

82%
—
—
—
—

76%
84%
—
—
—

72%
78%
85%
—
—

67%
73%
82%
92%
—

62%
66%
76%
89%
87%

61%
64%
71%
83%
85%

36

(iii)

Reconciliation of movement in claims provision:

Gross
£m

Reinsurance£m

30 June 2016
Net
£m

Claims provision at 1 January 2016

1,725.0(544.8)

1,180.2

Claims incurred (excluding releases)
Reserve releases
Movement in claims provision due to commutation
Claims paid and other movements

603.2(142.6)—(365.7)(387.3)
69.5
186.2
152.5

215.9
(73.1)
186.2(213.2)Claims provision at 30 June 2016

1,819.9(523.9)1,296.0

Gross£m

Reinsurance£m

30 June 2015
Net
£m

Claims provision at 1 January 2015

1,596.0(538.2)

1,057.8

Claims incurred (excluding releases)
Reserve releases
Movement in claims provision due to commutation
Claims paid and other movements

462.3(122.6)—(331.8)(270.2)
27.2
233.8
143.9

192.1
(95.4)
233.8(187.9)Claims provision at 30 June 2015

1,603.9(403.5)1,200.4

Gross£m

31 December 2015
Reinsurance
Net
£m
£m

Claims provision at 1 January 2015

1,596.0(538.2)

1,057.8

Claims incurred (excluding releases)
Reserve releases
Movement in claims provision due to commutation
Claims paid and other movements

963.4(211.7)—(622.7)(566.3)
31.8
233.8
294.1

397.1
(179.9)233.8(328.6)Claims provision at 31 December 2015

1,725.0(544.8)

1,180.2

37

(iv)Reconciliation of movement in net unearned premium provision:
30
June
2016
£m

30
June
2015
£m

31
December2015£m

Net unearned premium provision at start of period

236.1

209.8

209.8

Written in the period
Earned in the period

292.6(254.6)246.7(229.1)490.1(463.8)Net unearned premium provision at end of period

274.1

227.4

236.1

30
June
2016
£m

30
June
2015
£m

31
December2015£m

Investment return on assets classified as FVTPL
Unrealised gains on forward contracts
Interest income on available for sale debt securities
Interest income on term deposits with credit
institutions
Interest income on held to maturity gilt assets

1.6
5.5
11.5

1.9
—
7.3

2.2
—
19.2

2.5
3.0

2.2
3.0

4.7
6.1

Net investment return

24.1

14.4

32.2

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

(0.4)

(0.4)

(0.8)

9.2
32.9

(5.1)
8.9

—
31.4

Interest receivable on cash and cash equivalents

0.5

0.7

1.2

Total investment and interest income

33.4

9.6

32.6

30
June
2016
£m

30
June
2015
£m

31
December
2015£mInterest payable

5.6

5.5

11.1

Total finance costs

5.6

5.5

11.1

6.
6a.

Investments
Investment and interest income

Investment income:

6b.

Finance costs

38

6c.

Financial assets and liabilities

The Group’s financial instruments can be analysed as follows:
30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

693.4

671.0

627.7

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

1,285.5

1,122.6

1,230.0

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

178.7
197.8

247.5
201.7

267.6
198.2

2,355.4

2,242.8

2,323.5

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

551.6
145.8

398.3
101.0

437.0
100.1

Cash and cash equivalents

295.4

216.0

265.3

3,348.2

2,958.1

3,125.9

30
June
2016
£m

30
June
2015
£m

31
December2015£mFinancial liabilities:
Subordinated notes
Other borrowings
Trade and other payables

203.9
20.0
1,070.8

203.8
—
876.2

203.9
20.0
1,015.0

Total financial liabilities

1,294.7

1,080.0

1,238.9

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

Total financial investments

Total financial assets

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

39Term deposits are held with well rated institutions and as such the fair value of these investments is
considered to approximate to the carrying value as impairment of the capital is not expected. There isno quoted market for these holdings and as such a level two valuation is used. The carrying value ofterm deposits is £178.7 million (H1 2015: £247.5 million, FY 2015: £267.6 million).
The fair value of the holding of UK government gilts at 30 June 2016 is £233.2 million (level one
valuation) (H1 2015: £209.7 million, FY 2015: £211.7 million). The fair value of subordinated notes (level
one valuation) at 30 June 2016 is £199.0 million (H1 2015: £198.8 million, FY 2015: £202.4 million).
Insurance and other receivables are also valued at amortised cost in the Condensed consolidated
statement of financial position. This carrying value is a reasonable approximation of fair value.

6d.

Cash and cash equivalents
30
June
2016
£m

30
June
2015
£m

31
December2015£mCash at bank and in hand

295.4

216.0

265.3

Total cash and cash equivalents

295.4

216.0

265.3

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

7.

Other Revenue

7a.

Contribution from additional products and fees and other revenue
30
June
2016
£m

30
June
2015
£m

31
December
2015£mContribution from additional products and fees*1
Price Comparison revenue
Other revenue

96.8
54.2
25.2

89.0
55.2
20.8

182.4
93.9
43.5

Total other revenue

176.2

165.0

319.8

[*1] Price comparison revenue excludes £9.8 million (H1 2015: £nil, FY 2015: £14.2 million) of income from otherGroup companies.

40

8.

Expenses

8a.

Operating expenses and share scheme charges
Gross

*1

£m

Recoverablefrom co- andreinsurers£m

30 June 2016
Net£m

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

44.1(34.2)

9.9

144.3(105.6)

38.7

Insurance contract expenses

188.4(139.8)48.6

Administration and other marketing costs(Other)Share scheme charges

104.7
23.8

—
(9.1)

104.7
14.7

Total expenses and share scheme charges

316.9(148.9)

168.0

Gross

£m

Recoverablefrom co- andreinsurers£m

30 June 2015
Net£m

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

44.5(27.3)

17.2

117.3

(85.1)

32.2

Insurance contract expenses

161.8(112.4)49.4

Administration and other marketing costs(Other)Share scheme charges

97.8
19.4

—
(7.5)

97.8
11.9

Total expenses and share scheme charges

279.0(119.9)159.1

41

Gross£m*1

31 December 2015
Recoverable
Net
from co- andreinsurers£m£m

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

77.5(57.8)

19.7

238.5

(175.1)

63.4

Insurance contract expenses

316.0(232.9)83.1

Administration and other marketing costs(Other)Share scheme charges

188.2
43.8

—
(16.6)

188.2
27.2

Total expenses and share scheme charges

548.0(249.5)298.5[*1] Acquisition of insurance contracts expense excludes £9.8 million (H1 2015: £nil, FY 2015: £14.2 million) ofprice comparison fees from other Group companies.

The £38.7 million (H1 2015: £32.2 million, FY 2015: £63.4 million) administration and marketing costs
allocated to insurance contracts is principally made up of salary costs.
Analysis of other administration and other marketing costs
30
June
2016
£m

30
June
2015
£m

31
December
2015£m

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

22.3
68.8
13.6

21.9
63.8
12.1

43.0
123.6
21.6

Total

104.7

97.8

188.2

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

8b.

Staff share schemes

Analysis of share scheme costs (per income statement):
30
June
2016
£m

30
June
2015
£m

31
December2015£mShare Incentive Plan (SIP) charge
Discretionary Free Share Scheme (DFSS) charge

5.1
9.6

4.7
7.2

8.7
18.5

Total share scheme charges

14.7

11.9

27.2

42

The share scheme charges reported above are net of the co- and reinsurers share of the cost andtherefore differ from the gross charge reported in the gross credit to reserves reported in the
consolidated statement of changes in equity (H1 2016: £14.2 million, H1 2015: £12.9 million, FY 2015:£29.5 million).
The consolidated cash flow statement also shows the gross charge in the reconciliation between ‘profit
after tax’ and ‘cash flows from operating activities’. The co-insurance share of the charge is included inthe ‘change in trade and other payables’ line.

9.

Taxation

9a.

Taxation
30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

36.5

37.9

70.9

—

—

(1.0)

36.5

37.9

69.9

(0.3)

(4.5)

7.5

—

—

(0.5)

36.2

33.4

76.9

30
June
2016
£m

30
June
2015
£m

31
December
2015£mProfit before taxation

189.5

181.7

368.7

Corporation tax thereon at 20% (2015: 20.25%)
Expenses and provisions not deductible for tax purposes
Non-taxable income
Impact of change in UK tax rate on deferred tax balances
Adjustments relating to prior periods
Impact of different overseas tax rates
Unrecognised deferred tax
Other differences

37.9
—
(4.5)
—
—
(5.5)
8.8
(0.5)

36.8
—
—
—
—
(6.0)
2.4
0.2

74.7
1.4
(4.8)
0.3
(1.5)
(12.9)
19.7

Tax charge for the period as above

36.2

33.4

76.9

UK Corporation tax
Current charge at 20% (2015: 20.25%)(Over) provision relating to prior periods – corporation
tax
Current tax charge
Deferred tax
Current period deferred taxation movement(Over) provision relating to prior periods – deferred
tax
Total tax charge per income statement

Factors affecting the total tax charge are:

—

43

9b.

Deferred income tax (asset)

Analysis of deferred tax (asset)

Taxtreatment of
share
schemes£mCapitalallowances

CarriedforwardlossesOther
differences

Total

£m

£m

£m

£m

(4.8)

(4.6)

(13.4)(0.1)(22.9)

(0.7)

—

—

—

(0.7)

(2.2)
—
—
—

—
1.3
—
—

—
—
(4.0)
—

—
—
—
(1.0)

(2.2)
1.3
(4.0)
(1.0)

Balance carried forward 30 June 2015

(7.7)

(3.3)

(17.4)(1.1)(29.5)

Balance brought forward at 1 January 2015

(4.8)

(4.6)

(13.4)(0.1)(22.9)

Balance brought forward at 1 January 2015
Tax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other differenceTax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other difference

2.4

—

—

—

2.4

(4.7)
—
—
—

—
1.9
—
—

—
—
3.5
—

—
—
—
(0.8)

(4.7)
1.9
3.5
(0.8)

Balance carried forward 31 December 2015

(7.1)

(2.7)

(9.9)

(0.9)

(20.6)

(0.5)

—

—

—

(0.5)

(4.8)
—
—
—

—
0.5
—
—

—
—
—
—

—
—
—
—

(4.8)
0.5
—
—

(12.4)

(2.2)

(9.9)

(0.9)

(25.4)

Tax treatment of share scheme charges throughincome or expense
Tax treatment of share scheme charges throughreserves
Capital allowances
Carried forward losses
Other difference
Balance carried forward 30 June 2016

The UK corporation tax rate reduced from 21% to 20% on 1 April 2015. The average effective rate of tax
for 2016 is 20.0% (2015: 20.25%). Further reductions to the main rate of corporation tax to 19%(effective from 1 April 2017) and 18% (effective from 1 April 2020) were substantively enacted on 26
October 2015. This will reduce the Group’s future current tax charge accordingly. The deferred tax asset
at 30 June 2016 has been calculated based on the rate at which each timing difference is most likely toreverse.

44

The deferred tax asset relating to carried forward losses of £9.9 million relates to losses incurred in theGroup’s US price comparison business compare.com, and is calculated at the local US rate of tax (35%).
The recognised asset has been limited to the amount supported by forecast cash flows over the next five
years. The forecasts and underlying assumptions have been reviewed and approved by the Board. In
addition, the forecasts have been stressed for both revenue and profit reductions and the asset remains
recoverable under the stressed scenarios.
At 30 June 2016 the Group had unused tax losses amounting to £114.6 million (H1 2015: £45.4 million,
FY 2015: £89.6 million), relating to the Group’s US businesses Elephant Auto and compare.com, forwhich no deferred tax asset has been recognised.

45

10.
10a.

Other assets and other liabilities
Property and equipment
Leaseholdimprovements£mComputerequipment£m

Officeequipment£m

Furniture andfittings
£m

Total
£m

Cost
At 1 January 2015
Additions
Disposals
At 30 June 2015

24.9
0.3
—
25.2

39.5
3.8
(0.5)
42.8

14.0
0.2
—
14.2

7.8
—
—
7.8

86.2
4.3
(0.5)
90.0

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

7.6
1.1
—
8.7

29.7
2.1
(0.1)
31.7

11.6
0.3
—
11.9

5.0
0.4
—
5.4

53.9
3.9
(0.1)
57.7

Net book amountAt 30 June 2015

16.5

11.1

2.3

2.4

32.3

Cost
At 1 January 2015
Additions
Disposals
At 31 December 2015

24.9
0.8
—
25.7

39.5
8.8
(0.5)
47.8

14.0
1.2
—
15.2

7.8
0.4
—
8.2

86.2
11.2
(0.5)
96.9

Depreciation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015

7.6
2.4
—
10.0

29.7
3.8
(0.1)
33.4

11.6
1.0
—
12.6

5.0
1.0
—
6.0

53.9
8.2
(0.1)
62.0

Net book amountAt 31 December 2015

15.7

14.4

2.6

2.2

34.9

Cost
At 1 January 2016
Additions
Disposals
Foreign exchange movement
At 30 June 2016

25.7
0.5
—
0.4
26.6

47.8
2.6
—
0.5
50.9

15.2
0.3
(0.2)
0.6
15.9

8.2
0.4
—
0.2
8.8

96.9
3.8
(0.2)
1.7
102.2

Depreciation
At 1 January 2016
Charge for the year
Disposals
Foreign exchange movement
At 30 June 2016

10.0
0.8
—
0.2
11.0

33.4
3.6
—
0.4
37.4

12.6
0.5
(0.1)
0.5
13.5

6.0
0.3
—
0.1
6.4

62.0
5.2
(0.1)
1.2
68.3

Net book amountAt 30 June 2016

15.6

13.5

2.4

2.4

33.9

46

10b.

Intangible assets
Goodwill

Software

Total

£m

Deferredacquisition
*1
costs
£m

£m

£m

Carrying amount:
At 1 January 2015
Additions
Amortisation charge
Disposals

62.3
—
—
—

14.8
17.1
(16.9)
—

30.1
14.6
(2.6)
(0.1)

107.2
31.7
(19.5)(0.1)

At 30 June 2015

62.3

15.0

42.0

119.3

At 1 January 2015
Additions
Amortisation charge
Disposals

62.3
—
—
—

14.8
35.8
(34.0)
—

30.1
39.5
(6.1)
(0.1)

107.2
75.3
(40.1)(0.1)

At 31 December 2015

62.3

16.6

63.4

142.3

—
—
—
—

23.2
(19.7)
—
0.9

14.1
(5.5)
(0.1)
1.0

37.3
(25.2)
(0.1)
1.9

62.3

21.0

72.9

156.2

Additions
Amortisation charge
Disposals
Foreign exchange movement
At 30 June 2016[*1]

Deferred acquisition costs additions and amortisation charges from prior periods have been re-presented
to reflect appropriate net of reinsurance movements in each period. There are no changes to the carriedforward or brought forward deferred acquisition costs balance for any period.

Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services
Limited) in November 1999. It is allocated solely to the UK Car Insurance segment. The amortisation ofthis asset ceased on transition to IFRS on 1 January 2004. All annual impairment reviews since thetransition date have indicated that the estimated recoverable value of the asset is greater than the
carrying amount and therefore no impairment losses have been recognised. Refer to the accounting
policy for goodwill in the 2015 financial statements for further information.

10c.

Insurance and other receivables
30
June
2016
£m

30
June
2015
£m

31
December2015£mInsurance receivables
Trade receivables
Prepayments and accrued income

551.6
141.4
4.4

398.3
89.1
11.9

437.0
92.1
8.0

Total insurance and other receivables

697.4

499.3

537.1

*1

47

[*1] Insurance receivables at 30 June 2016 includes £30.4 million in respect of salvage and subrogation recoveries(H1 2015: £nil, FY 2015: £28.4 million).

10d.

Trade and other payables

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

30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

23.9
746.0
1.8
43.1
130.5
125.5

22.8
632.9
0.4
25.7
117.2
77.2

35.1
764.7
2.8
28.3
88.5
95.6

1,070.8

876.2

1,015.0

Of amounts owed to co-insurers and reinsurers, £500.2 million (H1 2015: £475.6 million, FY 2015:£554.3 million) is held under funds withheld arrangements.

11.

Share capital

11a.

Dividends

Dividends were declared and paid as follows.
30
June
2016
£m

30
June
2015
£m

31
December
2015£mMarch 2015 (49.0 pence per share, paid May 2015)
August 2015 (51.0 pence per share, paid October 2015)
March 2016 (63.4 pence per share, paid May 2016)

—
—
175.4

134.4
—
—

134.4
140.2
—

Total dividends

175.4

134.4

274.6

The dividend declared in March 2015 represented the final dividend paid in respect of the 2014 financial
year (August 2015 - interim dividend for 2015). The dividend declared in March 2016 was the final
dividend paid in respect of the 2015 financial year.
An interim dividend of 62.9 pence per share (£174.7 million) has been declared in respect of the 2016
financial year.

48

11b.

Earnings per share
30
June
2016

30
June
2015

31
December
2015

157.4

152.9

300.0

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

281,806,787
55.9p

278,930,161
54.8p

279,627,738
107.3p

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

282,194,592
55.8p

279,399,12754.7p

280,018,741
107.1pProfit for the period after taxation attributable toequity share-holders (£m)

The difference between the basic and diluted number of shares at the end the period (being 387,805;
H1 2015: 468,966, FY 2015: 391,003) relates to awards committed, but not yet issued under the Group’s
share schemes.

11c.

Share capital
30
June
2016
£m

30
June
2015
£m

31
December
2015
£m

0.5

0.5

0.5

—
—
0.3

0.3
—
—

—
0.3
—

0.3

0.3

0.3

Authorised:
500,000,000 ordinary shares of 0.1p
Issued, called up and fully paid:
279,108,163 ordinary shares of 0.1p
281,587,953 ordinary shares of 0.1p
281,967,266 ordinary shares of 0.1p

During the first half of 2016 379,313 (H1 2015: 418,421) new ordinary shares of 0.1p were issued to thetrusts administering the Group’s share schemes.
379,313 (H1 2015: 418,421) of these were issued to the Admiral Group Share Incentive Plan Trust forthe purposes of this share scheme to give a closing number at H1 2016 of 8,559,918 (H1 2015:
7,650,815). These shares are entitled to receive dividends.
No shares (H1 2015: nil) were issued to the Admiral Group Employee Benefit Trust for the purposes of
the Discretionary Free Share Scheme to give a closing number at H1 2016 of 14,811,948 (H1 2015:
12,861,948). The Trustees have waived the right to dividend payments, other than to the extent of
0.001p per share, unless and to the extent otherwise directed by the Company from time to time.
The number of shares in issue at flotation was 258,595,400.

49

11d.

Objectives, policies and procedures for managing capital

The Group manages its capital to ensure that all entities within the Group are able to continue as going
concerns and also to ensure that regulated entities comfortably meet regulatory requirements. Excess
capital above these levels within subsidiaries is paid up to the Group holding company in the form of
dividends on a regular basis.
The Group’s dividend policy is to make distributions after taking into account capital that is required tobe held a) for regulatory purposes; b) to fund expansion activities; and c) as a further prudent buffer
against unforeseen events. This policy gives the Directors flexibility in managing the Group’s capital.
Refer to the business review for further information about the Group’s capital structure and financial
position.

11e.

Related party transactions

Details relating to the remuneration and shareholdings of key management personnel are set out in the
Directors’ Remuneration Report within the Group’s 2015 Annual Report. Key management personnel
are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a
reduction of 15%.
The Board considers that Executive and Non-Executive Directors of Admiral Group plc are key
management personnel. Aggregate compensation for the Executive and Non-Executive Directors isdisclosed in the Directors’ Remuneration Report in the 2015 Annual Report.

50

12.

Reconciliations

The following tables reconcile significant KPIs and alternative performance measures included in thefinancial review above to items included in the financial statements.

12a. Reconciliation of turnover to reported total premiums written and Other revenue as
per the financial statements
30
June
2016
£m

30
June
2015
£m

31
December
2015£m

1,076.5
176.2

904.9
165.0

1,805.2
319.8

1,252.7(12.5)
10.7

1,069.9(17.7)
5.3

2,125.0(31.8)
11.4

Turnover as per note 4 of financial statements
Intra-group income elimination*3

1,250.9
9.8

1,057.5—

2,104.6
14.2

Total turnover

1,260.7

1,057.5

2,118.8

Total Premiums Written before co-insurance
arrangements per note 5a of financial statements
Other revenue per note 7a of financial statements

UK vehicle commission
*2
Other

*1

[*1] During 2012 Admiral ceased earning other revenue from the sale of legal protection policies. At the same
point, the Group began charging its panel of co- and reinsurers a vehicle commission. The substance of thesechanges meant that the total premiums written increased by the amount of revenue that was previously
earned from the sale of legal protection policies. The vehicle commission included within Other revenue istherefore eliminated from the Turnover measure to avoid double-counting.
[*2] Other reconciling items represent co-insurer and reinsurer shares of Other revenue in the Group’s
International Car Insurance businesses.
[*3] Intra-group income elimination relates to price comparison income earned in the Group from other Group
companies. This income was not eliminated in H1 2015 on the grounds of materiality.

51

12b. Reconciliation of claims incurred to reported Group loss ratio, excluding releases oncommuted reinsurance
30 June 2016
UK
Group
motor
£m
£m

30 June 2015
UK
Group
motor
£m
£m

31 December 2015
UK
Group
motor
£m
£m

Net insurance claims

102.4

148.4

64.0

101.4

150.5

226.5

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

(5.5)
—

(5.6)
(1.3)

(4.8)
—

(4.8)
(1.1)

(9.4)
—

(9.4)
(2.9)

12.8
—
109.7

12.8
(1.0)
153.3

42.6
—
101.8

42.6
(0.1)
138.0

88.8
—
229.9

88.8
(0.6)
302.4

192.9
—

259.7
(1.9)

174.9
—

228.9
(2.1)

358.6
—

467.0
(2.2)

192.9
56.9%

257.8
59.5%

174.9
58.2%

226.8
60.8%

358.6
64.1%

464.8
65.1%

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

12c.
ratio

Reconciliation of expenses related to insurance contracts to reported Group expense

30 June 2016
UK
Group
motor
£m
£m

30 June 2015
UK
Group
motor
£m
£m

31 December 2015
UK
Group
motor
£m
£m

Net insurance expenses

22.6

48.6

25.7

49.4

41.5

83.1

Net claims handling expenses
Reinsurer cap impacts*1
Intra-group expenses elimination*2
Other adjustment

5.5
—
6.9
—
35.0

5.6
(4.5)
9.8
(0.9)
58.6

4.8
—
—
—
30.5

4.8
(2.6)
—
(2.0)
49.6

9.4
—
9.5
—

9.4
(9.8)
14.2
(1.6)

60.4

95.3

192.9
—

259.7
(1.9)

174.9
—

228.9
(2.1)

358.6
—

467.0
(2.2)

192.9
18.1%

257.8
22.7%

174.9
17.4%

226.8
21.9%

358.6
16.9%

464.8
20.5%

Adjusted net expenses
Net insurance premium revenue*2
Other adjustment
Adjusted net insurance premium
revenue
Reported expense ratio52[*1] The intra-group expenses elimination amount relates to aggregator fees charged by the Group’s pricecomparison entities to other Group companies. These expenses were not eliminated in H1 2015 on the
grounds of materiality.
[*2] Other adjustments relate to additional products underwritten in the Group’s international car insurance
businesses. The contribution from these products is reported as ancillary income and as such the amounts
are excluded for the purpose of calculation of loss and expense ratios. No equivalent adjustments have been
made to prior period ratios as the equivalent adjustments are insignificant.

12d.

Reconciliation of reported profit before tax to adjusted profit before tax
30
June
2016
£m

30
June
2015
£m

31
December2015£mReported profit before tax per the condensed
consolidated income statement
Non-controlling interest share of profit before tax

189.5
3.8

181.7
4.4

368.7
8.1

Adjusted profit before tax

193.3

186.1

376.8

13.

Statutory information

The financial information set out above does not constitute the company's statutory accounts. Statutory
accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will bedelivered in due course. The auditors have reported on those accounts; their reports were (i)unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by wayof emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or(3) of the Companies Act 2006.

53

Responsibility statement of the directors in respect of the half-yearly financial report
We confirm that to the best of our knowledge:the condensed set of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU;

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

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

By order of the Board,

Geraint Jones
Chief Financial Officer
16 August 2016

54

INDEPENDENT REVIEW REPORT TO ADMIRAL GROUP PLC (the company)
We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months ended 30 June 2016 which comprises the condensed
consolidated income statement, condensed consolidated statement of comprehensive income,condensed consolidated statement of financial position, condensed consolidated cash flow statement,
condensed consolidated statement of changes in equity and related notes 1 to 13. We have read theother information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set offinancial statements.
This report is made solely to the company in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Auditing Practices Board. Our work has been
undertaken so that we might state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our review work, for this report,
or for the conclusions we have formed.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure
and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with
IFRSs as adopted by the European Union. The condensed set of financial statements included in thishalf-yearly financial report has been prepared in accordance with International Accounting Standard 34“Interim Financial Reporting” as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and
Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the
Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim
financial information consists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially lessin scope than an audit conducted in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

55

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is
not prepared, in all material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s
Financial Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
16 August 2016

56