Admiral Group plc

Annual Report& Accounts 2017

Annual Report and Accounts 2017

Registered officeTŷ AdmiralDavid Street
Cardiff CF10 2EH
www.admiralgroup.co.uk

Years of Firsts

Introduction

Admiral offers motor andhousehold insurance in the UK and
the Group includes Confused.com,
a leading price comparison website.
Outside the UK, Admiral owns
four insurance and three pricecomparison businesses.
The Group has offices in eight
countries across the world.

1
2

6

3

4
5

8

7
UK
Admiral Car
AdmiralHousehold

GlobalAdmiral Van

Preminen

Admiral Travel
Admiral Loans
Bell

Spain

Diamondelephant.co.uk
Confused.com

FranceGladiator
Admiral Law

L’olivier –assurance auto

BDE Law

LeLynx

1

2

India

Balumba
Qualitas Auto

Italy
ConTe

3

Rastreator

USA

Seguros.es

Elephant Auto

EUIGS

Compare.com

45

CanadaAdmiral6AdmiralSolutions
AdmiralTechnologies

7

MexicoRastreator.mx

8

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Contents

Years ofFirstsThe journey so far…
We launched in 1993 with 0 customers,
1 brand and 57 staff.
Today we have over 5 million customers
worldwide, 17 brands and 9,000 staff.
Over the last 25 years we have continued
to strengthen our UK businesses and growour international operations.

Introduction
0 2 Highlights
Strategic report
04 Chairman’s statement
08 Chief Executive’s statement
10 Q&A with David, Cristina and Geraint
12 How we do it – our business model
13 How we do it – our strategy
14 Chief Financial Officer’s review
16 Group financial review
19 UK Insurance review
24 International Car Insurance review
28 Price Comparison review
31 Other Group items
32 25 years of investing in our future
33	Principal risks and uncertainties
38 Being a responsible businessCorporate Governance
42 Governance overview
43 Board of Directors
46 Governance Report
51 The Audit Committee
56 The Group Risk Committee
60 The Nomination and Governance Committee
62	The Remuneration Committee
64 Remuneration at a glance65	Directors’ Remuneration Policy
73 Annual Report on Remuneration
82 Directors’ Report
Financial statements86	Independent Auditor’s Report94 	Consolidated Income statement95 	Consolidated statement of comprehensive income
96	Consolidated statement of financial position
97 	Consolidated cash flow statement98 	Consolidated statement of changes in equity
99 	Notes to the financial statements
141	Parent Company Financial Statements
144	Notes to Parent Company Financial Statements
151	Consolidated Financial Summary
Additional information
152 Glossary
156 Directors and advisors

Admiral website
went live
making us the first
UK direct insurer withan internet presence.

1993

Admiral is born
Launched on January 2nd
with just one brand, zero
insured vehicles and 57
members of staff.

1995

1997

Bell and Diamondbrands launched
Diamond targetedat Women and Bell targetedat drivers with low noclaims bonus.
Admiral Group plc · Annual Report and Accounts 201701

Introduction: Financial Highlights

Financial Highlights

Group’s share of profit before tax*1 (£million)

Group’s statutory profit before tax (£million)

Earnings per share (pence)£405.4m£403.5m

117.2p

2017

405.4

2016

284.3

2017

403.5

2016

2015

376.8

278.4

2015

2017

117.2

2016
368.7

2015

107.3

Return on equity*1 (%)

Turnover*1 (£billion)

Net revenue (£billion)

55%£2.96bn£1.13bn

2017

55

2016

37

2017

2.96

2016

2015

49

2.58

2015

2.12

Full year dividend per share*3 (pence)

5.73m

114.0p
5.73

2016

5.15

2015

4.43

2017

1.13

2016

1.02

2015

Customers*1 (million)

2017

2017

0.90

114.0

2016

102.5

2015

102.5

“It’s 25 years since the launch of Admiral. 2016 was only the second
year we’d ever reported a year on year fall in profits. So it’s great
to be back in the groove, with a 23rd year of ‘record profits’.”
David Stevens, CBEGroup Chief Executive Officer

elephant.co.uk
launched:
The UK’s first brand tooffer a complete online
solution to car insurance.

1998

Gladiator
launched
Our commercial vehicle
insurance broker.

02

Admiral Group plc · Annual Report and Accounts 2017

2000

2001

Sunday Times
100 Best Companies
to Work For
We made it on to the list
for the first time at 32nd.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Group Highlights

UK Insurance customers*1 4.62 million (2016: 4.12 million)
International car insurance customers*1 1.03 million (2016: 0.86 million)
Group’s share of price comparison profit*1 £7.1 million profit (2016: £2.7 million profit)
Statutory price comparison result £5.4 million profit (2016: £2.9 million loss)
Solvency ratio (post dividend)*2 205% (2016: 212%)
Over 9,600 staff each receive free shares worth a total of £3,600 underthe employee share scheme based on the full year 2017 results*1	Alternative Performance Measures – refer to the Glossary for definition and explanation.
*2	Refer to capital structure and financial position section later in the report for further information.
*3	2016 and 2015 dividends excludes additional return of surplus capital. Full year dividend including
additional return was 114.4 pence for each period.

The Admiral Group IPO
The Admiral Group floated on the
London Stock Exchange with an
initial share price of £2.75.

2002

2004

2005

Confused.com
launched

Admiral MultiCarlaunched

The first insurance
aggregator in the UK.

Allowing customers to have two
or more cars on the same policy.

Admiral Group plc · Annual Report and Accounts 201703Strategic Report: Chairman’s statement

Chairman’s statement“On behalf of the Board, I would like to thank all the 9,600 people at Admiral for
their continued hard work and contribution to a record-breaking set of results
for the Group in 2017.”
In 2018 we celebrate 25 years since thelaunch of the company in January 1993. The
core of the company’s success remains thedistinctive Admiral culture which drives
the way that our people work and serve ourcustomers in the UK, Italy, Spain, France andthe US.

I am delighted and honoured to have takenover the helm as the Chairman of Admiral
at the AGM in April 2017. My predecessor,
Alastair Lyons, who ably steered the ship forover 16 years, has left some large shoes tofill. I would like to thank him for his service
and enabling a smooth transition.
As Chairman of the Group I will focus myefforts on:• Continuing to build on the remarkably
special Admiral culture and in so doing
putting our people and customers at
the heart of what we do• Continuing the history of growth,
profitability and innovation• Investing in the development andgrowth of our people• Ensuring excellent governanceand the highest standards.

2017 Overview
Admiral Group has delivered another record
set of results in 2017: record turnover andprofit, strong return on capital, strong
solvency ratio and record customer numbers.
The Group has continued to grow strongly
with turnover increasing by 15% to £2.96
billion. Customer numbers increased 11% toover 5.7 million.
The Group’s share of pre-tax profit increasedby 43% to £405.4 million. Earnings per shareand return on equity both increased by 49%
to 117.2 pence and 55% respectively. The
Group’s solvency ratio remains very strongat 205%.
In UK Insurance, there was another strong
performance from the Group’s core UK
Motor business where the number of insured
vehicles grew by 8% to 3.96 million. In linewith usual trends, profitability benefited
from significant prior year reserve releases.

Balumba.es
launched
Admiral’s first non-UK
insurance brand, basedin Seville, Spain.

2006

2007

Admiral joins
FTSE 100
Becoming only the 2nd
ever Welsh business tojoin the FTSE 100 index.

04

Admiral Group plc · Annual Report and Accounts 20172016

Introduction

Strategic Report

Whilst we devote time and resources to
exploring new opportunities outside of car
insurance we also recognise that this remains
our core focus. We continue to invest heavily
in improving our core skills as evidenced
by our continuing growth in premiums andprofit. We also have a range of innovations
including car sharing insurance, learner
driver insurance and we remain the largest
telematics provider in the UK.
There is still a backdrop of uncertainty in
our largest business, UK Car, due to thecontinued deliberations over the Ogden rateaffecting large personal injury claims. We
expect to see some conclusions on the way
forward in 2018. In the meantime, we havetaken a prudent approach and reflected thecurrent discount rate in our reserves.
Household Insurance continues to growapace. Turnover is now £107.1 million andproperties insured have increased by 41%
to 0.7 million. Customers buy from us either
using price comparison sites, directly and,increasingly, using our MultiCover offering,building on the success of MultiCar.

Corporate Governance

Financial Statements

Additional Information2017 saw the successful launch of our inhouse underwritten van insurance productand, most recently, the launch of our new
travel insurance product.

As a result of Brexit, we are exploring
establishing an insurance company and an
insurance intermediary business in Spain to
support our European operations.

Most significantly, we have launchedpersonal loans, firstly unsecured, then car
finance as part of our new Admiral Financial
Services business. We expect this to be anincreasingly significant part of our businessin future.

In our Price Comparison (PC) businesses,
Confused.com in the UK continues to face acompetitive and challenging market, whilst
it implements its new Drivers Win strategy;
this is offset by encouraging growth inCompare.com in the US and record profits at
Rastreator and LeLynx, with all PC businessesdelivering an improved customer experience.
Our joint venture Preminen PC business
continues to explore new opportunities
and has recently established operations in
Mexico and is soon to be in Turkey.

We are continuing to invest in our overseas
insurance businesses, bearing fruit with
reduced losses overall (despite the impact ofHurricane Harvey in the US) and another yearof profits in ConTe. Turnover and customer
numbers are continuing to grow materiallyby some 23% and 20% respectively and we
now have £0.5 billion of combined turnoverand over one million customers outside
the UK. We believe we are on the cusp ofdelivering long term profit for the Group.

Rastreator andElephant Auto launched
The Group’s second price comparison
website Rastreator and US car
insurer Elephant Auto.

2008

2009

2010

ConTe.it
launched

LeLynx andL’olivier launched

Our Italian direct
insurance brand,
based in Rome, Italy.

Price comparison
website and car insurance
brands in France.

Admiral Group plc · Annual Report and Accounts 201705

Strategic Report: Chairman's Statement

Chairman’s statement continued

What makes Admiral different?

Dividend

Our successful model which has been
maintained since launch is definitely worth
a further mention. It can be distilled into
the following areas:

The Directors have proposed a final dividendof 58.0 pence per share (2016: 51.5 pence) for
the year to 31 December 2017, representing
a distribution of 97% of our second halfearnings. This included a normal dividend(65% of post-tax profits) of 39.5 pence pershare and a further special dividend of 18.5
pence per share comprising earnings not
required to be held in the Group for solvency
or buffers.

• Highly talented team – David Stevens
leads a strong, capable and experienced
management team which engages thewhole business• Focus – targeted diversification building
on our core skills• Pricing – data analysis lies at the heartof what we do• Prudent reserving – continuing ourconservative approach to claims reserving• Claims management – consistent positive
feedback from customers on the service
they receive• Controlled test and learn – organic growthwith measured expansion steps• Low-cost approach – constantly
challenging ourselves on how we cando things more cost effectively

This will bring the total dividend for the year
to 114.0 pence per share, an overall increaseof 11% (excluding the additional returnof surplus capital in 2016) and the 13th
consecutive year that Admiral has paid
an increased dividend. This represents apayout ratio of 97%.
The business has delivered a Total
Shareholder Return (TSR) of 382% overthe last 9 years (as illustrated in the charton page 79).

• Shareholder returns – we believe in
returning excess capital to shareholders.
Overall we believe that people who like what
they do, do it better.

Qualitas Autoand UK Household
Insurance launched2013

Our fourth price comparison
site, Compare.com launchedin the USA.

Admiral Group plc · Annual Report and Accounts 2017

The Board and I feel that the Board has
a good balance of experience, skills andknowledge to support and challenge themanagement team and it is supported byeffective governance and control systems.
During the year the Board undertook areview of its effectiveness. Further details
are provided in the Governance Report on
pages 46 to 81.
Admiral’s incentive schemes remain
distinctive, as every employee is a shareholder.
They are designed to ensure that decisions
are made by management to support longterm growth, that the right behaviours are
rewarded and that our people’s interests
are aligned with those of shareholders. Our
core belief is that over the long-term, shareappreciation depends on delivering greatoutcomes for our customers. Further details
are provided in the Remuneration Report on
pages 62 to 81.

The Group’s new
headquarters, Tŷ Admiral,
was officially opened bymembers of the Welsh
rugby team.

Compare.com
launched

06

The Board recognises the need for a strong
corporate governance framework andsupporting processes across the Group andbelieves that good governance, with tone
set from the top, is a key factor in delivering
sustainable business performance andcreating value for all the Group’s stakeholders.

Tŷ Admiral opened

Our second car insurance
brand in Spain and household
insurance in the UK underthe Admiral brand.

2012

Corporate governanceand Board changes

2015Introduction

Strategic Report

Penny James stepped down from the Board
effective from 8 September 2017 following achange in her Executive role, and I would liketo thank her for her valuable contribution.
Owen Clarke was announced as taking theRemuneration Committee chair in April,subject to regulatory approval. We are in
the process of seeking additional Board
members, and in February 2018 appointed
Andy Crossley to the Board as a NonExecutive Director and member of the
Audit Committee.

Our role in society
Admiral takes its role in society very seriously
and has an active corporate responsibility
programme (more information in Corporate
Social Responsibility Report on pages 38
to 41. We are proud to be Wales’ only FTSE
100 headquartered company. Our staff play
an active part in the communities in which
we operate.

Corporate Governance

Financial Statements

Thank you
On behalf of the Board I would like to thankeveryone at Admiral for their continued hard
work and contribution to the Group’s resultsin 2017. This coming year is an exciting one
as we hope to continue the Group’s growthtrajectory, building on our fledgling loans
business and other businesses in UK motor,
UK non-motor and overseas insurance andprice comparison businesses.
We have an amazing, distinctive culture
at Admiral that values agility andentrepreneurial drive, rigour and depth ofthought and a collaborative team approachthat puts customers first. We invest in ourpeople and provide exciting opportunities

Additional Information

for them to develop their careers. We areproud to continue to be one of the leading
places to work, not only in the UK but in all
the countries in which we operate, and weredelighted to be recognised for the first timein the ‘Great Place to Work 25 World’s Best
Workplaces 2017’, being placed 23rd. What a
fantastic achievement!

Annette Court
Chairman
27 February 2018

First underwritten Van policy
Confused.com celebrated it’s
15th birthday with a big party!
Personal loans launched
Admiral Group was named the 6th Best
Multinational Workplace in Europe

5 million
customers
globally

2016

2017

David Stevens
takes over as CEO
Henry Engelhardt retires.

Admiral Group plc · Annual Report and Accounts 201707Strategic Report: Chief Executive's Statement

Chief Executive's Statement“The first reason Admiral has been, and remains, good news
for customers is that we operate at a lower cost”
Unusually for a CEO statement, I am notgoing to talk about what a great job the
managers have done for the shareholders,
nor about the company’s performance overthe last twelve months, or indeed, prospects
for the next twelve.
Instead, at a time when the public support
for the free market economy is fraying andmany more people see the world of businessas a zero sum game, where profit can only
be earned at the expense of, rather thanin the service of, customers, I’d like to talkabout the value that Admiral has delivered
for UK motorists over the last 20 years, while
making, and not despite making, good
profits throughout.
The first reason Admiral has been, andremains, good news for customers is that
we operate at a lower cost than almost all
our competitors. When shopping for car
insurance, most motorists are looking for thebest possible price, along with reassurance
that they’ll be looked after well, whenneeded. Admiral’s lower costs mean lower
premiums for our customers.
Over most of the last 20 years our costs
have been lower than our competitors – byat least ten percentage points of premium.
That’s the equivalent of £50 less expense
for a typical policy, and over £200 less for ahigher premium policy. And that’s one of themain reasons Admiral’s brands come top on
the UK’s price comparison sites more often
than any of our competitors.
In the nineties, the industry was dominatedby large, often grossly inefficient, multiproduct, composite insurers with too manylayers and top heavy structures. Most of
those are long gone, under the pressure fromupstarts like Admiral and other, lower-cost,
Admiral-like, operators who have followedin our footsteps. So much the better for thecustomer and an example of the creative
destruction which explains the success ofcompetitive free markets.

08

Cheap, but maybe “nasty” the cynics
might reply.
Far from it.
With “an intention to renew after a claim” scoreof consistently well over 90% (94.5% in 2017
to be precise) we deliver for our customers at
the moment of truth. And you cannot build
four million plus customers in the fiercelycompetitive UK insurance market without
delivering a good customer experience.
Not every time.
We make mistakes.
But we recognise the long-term value of thecompany depends on us making sure ourcustomers, by and large, are not only glad
to join us but also happy to stay with us.
If I’m proud of our outperformance on
expense compared to the bulk of the car
insurance market, I’m doubly proud of our
expense ratio advantage in our relatively new
and rapidly growing home insurance operation– doubly proud because our cost advantage
over the market is not ten percentage points,
but nearer twenty points. Again, this allows us
to be the top most often on price comparisonsites, while also making a profit. Admittedly,
as yet, a small one, but watch this space.
How do we achieve lower costs while
delivering a great product (5 star Defaqto
ratings available across all Admiral’s Motor
products) and (normally) a positive customer
experience, and why don’t most of ourcompetitors manage all three?
Well, it’s not just about the constant pursuitof efficiencies by a loyal and motivated teamof employee shareholders (because all of us
are both). It’s also about another great driverof growth in long-term prosperity in freemarket economies – innovation. Throughout
our life major innovations such as
Confused.com, the first insurance pricecomparison site; MultiCar and now

Admiral Group plc · Annual Report and Accounts 2017

MultiCover; Telematics (200k+ customers,
and rising); 10-month Bonus Accelerator (onefrom the nineties for real insurance anoraks)
have all made our policies more attractive
and more accessible to UK motorists
and householders, and helped keep ouracquisition costs low.
I strongly believe that a market made up
of a large number of companies competing
actively for customers’ attention and loyalty,
combined with appropriate regulatory
oversight, is a recipe for the best possible
outcome for motorists and householders,and I believe that Admiral’s success overthe last 25 years demonstrates why.

David Stevens, CBE
Chief Executive Officer
27 February 2018

P.S. I don’t want to count chickens, but
in a year during which our Italian insurer
broke through 500,000 vehicles on cover,delivered a fourth year of profit in a row andreduced its expense ratio by an amazing six
percentage points, I’m looking forward, in a
few years time, to saving myself an hour or
two by recycling the above CEO Statement,
but just substituting “ConTe” for “Admiral”.

Introduction

Strategic Report

14%

UK Motormarket share

Corporate Governance41%

growth in
UK Household
customers

Financial Statements

4th yearof ConTe
profits

Additional Information

17

consecutive years
Best Companies toWork For Awards

My priorities
Last year I outlined my priorities, which I indicated would be my priorities for a number ofyears to come. Here’s how we are doing…

Priority

Progress in 2017

Ensure Admiral remains one of,
if not, the best car insurers in
the UK

Market leading combined ratio
A leading UK car insurer with almost 4 million cars
Defaqto 5* products for UK customers
Leading telematics provider and new products include
short-term and car sharing insurance

Demonstrate Admiral can bea great car insurer beyond
the UK

Record ConTe profit and 0.5 million customers

Develop sources of growthand profits beyond car
insurance

Household Insurance grown to over 650,000 customers

Improvements in key operating ratios
ConTe voted 2nd In Best Places to Work in Italy

Household profit of £4.1 million
Launched Van and Travel Insurance in UK
Launched Loans in UK

Ensure Admiral stays a greatplace to work

Voted 23rd In Best Places to Work in World
Voted 6th In Best Places to Work in Europe
Voted 2nd in Sunday Times Best
Companies to Work For in UK
Over 9,600 staff received free sharesworth £3,600

but progress continues in 2018…

Admiral Group plc · Annual Report and Accounts 2017

09

QA
&

with David, Cristina and GeraintQ

The International Insurance businesses
have been part of the strategy for anumber of years but have yet to deliver
meaningful profits – does it make sense
to keep them?

ADavid: Our strategy has always been
about building value over the longer term,by developing sustainable profitablebusinesses, rather than delivering shortterm profits. We believe that the combined
European insurance businesses are on thecusp of demonstrating that value. ConTe,
our Italian business delivered another profit
for the year (a record) and collectively ourEuropean insurance businesses practicallybroke even over 2017 despite growing fast.
We continue to invest in Admiral Seguros in
Spain, L’olivier in France and Elephant in the
US because we believe that there are strong
prospects for long-term value creation in all
three markets. The International Insurance
businesses now insure over one million
customers and may ultimately provide
us with an opportunity to offer thosecustomers more than just car insurance.

Q

Q

Admiral has recently launched its
personal lending business. Can you
give us an update and also explain why
you think now is a good time to enter
the market with uncertain economic
times ahead?

Admiral Household continues togrow and appears to be lessaffected by market conditions
than competitors – why?

A
Geraint: It’s still early days for Admiral Loans,though we’re very pleased with the way
things are going so far. We think we have avery strong team, a good system and thesigns so far are really positive.
We of course recognise that an economic
downturn could adversely affect loan credit
losses. Our approach to loan underwriting
is to minimise the possible adverse impact
of such a downturn in our book by focusing
on segments which have historicallydemonstrated better resilience in timesof stress.
Ultimately downturns tend to be followed
by upturns and by building and learning now,
we hope to be in a position to benefit froma subsequent upturn as a competent player
operating at an adequate scale.

A
Cristina: The UK household market is going
through a period of change as more andmore householders realise that they canshop online for their home insurance. We aretaking advantage of that shift in customer
behaviour. We recognise, however, that thehousehold market is very different frommotor insurance, so whilst our growth has
been very strong since launch we continue
to adopt a test and learn approach to ourunderwriting. We started with a relatively
cautious underwriting footprint and have
gradually expanded this as we have grown.
During 2017 we have seen similar claims
experience to the market but our cautious
starting point has allowed us to absorb
this with no significant impact on theHousehold result.

Q
There has been a change of CEO at
your US insurance operation, ElephantAuto – what does that mean for
future strategy?

ADavid: Alberto Schiavon, our new CEO
at Elephant, working alongside Henry
Engelhardt, took advantage of a second
set of eyes to judge what was good about
what we were doing and what could be done
better. The conclusion was that we need tocontinue our drive towards lower loss ratios
and to sharpen our focus on higher retaining
customers throughout our product andprocess design, our pricing and underwriting
rules and our marketing.

10Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information“Our strategy has always been about building value over the
longer term, by developing sustainable profitable businesses”

I have no doubt this approach will be valuable
in helping us through to a sustainable scale
and an ultimately profitable operation.

Q
Can you give us an update on theInternal Model and what this meansfor capital?

A
Geraint: Our team continues to do a greatjob building the model and putting in place
the numerous processes and documents thatare also needed for a successful application.
We’re still on track to make our submission
to the regulator by the end of 2018. At thispoint we’re not anticipating a significant
change in the Group’s capital position underthe model, though of course the outcome
isn’t fully in our hands and so there is stillsome uncertainty over what that future
position looks like.
Once the model is (hopefully) approved (andthat shouldn’t be expected until well into2019), the Board will make an assessment of
the capital position and work out what,
if anything, that means for potential returnsof surplus capital to shareholders.

Q
How do you see the long-term
prospect of motor insurance given
the continuing focus on autonomous
technology and driverless cars?

ADavid: There are widely varying views on
when to expect autonomous technology
but considerably less uncertainty about
the impact; once we are in a world ofautonomous vehicles, the requirement for
motor insurance, as we currently know it,
will change. What future motor insurance
looks like is up for debate. We believe thatthe timescale for autonomous vehicles tobecome a meaningful part of the motor car
parc is decades rather than sooner. Given
the continued growth in developed anddeveloping markets in the interim period, we
believe there continues to be an opportunity
for growth and for some interesting
challenges where manual and autonomousvehicles are on the roads together.
Ultimately, we recognise that as claims
frequency falls as a result of sophisticatedautonomous technology, average motor
insurance premiums will reduce which could
have a significant impact on our revenue
and profits. We expect to see the impact
mitigated by growth in other non-life
insurance products and growth in personal
lending. We will continue to explore otherproducts to offset potentially lower levelsof motor premium in the future.

Q
What was the outcome of this year’s
excess of loss reinsurance renewals
and how was this influenced by Ogden?

A
Cristina: In late December 2016, in
anticipation of a change in the Ogden
discount rate we increased our 2017 excess
of loss reinsurance with no significant priceincrease. During 2017 reinsurers responded
to the change in Ogden by significantly
increasing their prices. For 2018, we
reviewed the level of cover we required andreturned closer to historic levels but at ahigher cost. The temporary competitive
disadvantage we experienced in 2016 has
been reduced and we are back on a levelplaying field.

Q
The UK Motor market is increasinglycompetitive – is Admiral at risk oflosing its competitive edge?

A
Cristina: It is a competitive market and onethat looks significantly different from ten
years ago (or even 25 years ago) when the
primary players were large composite multiline insurers. We are now in an environment
where around 45% of the UK motor market
is in the hands of a small number of focused
direct players, including Admiral. This focus,
inevitably, leads to a superior performanceby these players, but there is still significant
inefficiency in the market as a whole. Whilst
market data has become difficult to access,we believe our underwriting advantage
against the market is still significant and that
we continue to maintain largely the same
margin on expense ratio that we did ten
years ago.
Are others getting better? Yes!
But Admiral is not standing still and waiting
for them to catch up! We continue to look atways in which we can improve and automate
our internal processes to identify further
efficiencies; to explore innovative waysof doing business as consumer behaviours
change; and we continue to look for ways inwhich our detailed understanding of that
customer behaviour can further enhance ourunderwriting strength.

Admiral Group plc · Annual Report and Accounts 201711

Strategic Report: How we do it

How we do it – our business model

GREAT PLACETO WORKEFFICIENTCAPITALEMPLOYMENTSHAREHOLDER
RETURNS

FOCUS ONPROFITABILITY

We go out of our way tomake Admiral a GREAT
place to work and believethat if people like what
they do, they’ll do it
better. We have createdan environment where
Admiral employees lookforward to coming towork and providing great
service to customers.

Sharing risk with co- andreinsurance partners
is an important part ofAdmiral’s business andthese relationships areunderpinned by strong
underwriting results.
Sharing risk allows
Admiral to only provide
capital backing for aminority of its business;this results in a superior
return on capital for
Admiral shareholders
whilst also providing
protection for losses.

We are committed toreturning excess capitalto shareholders. We
believe that keeping
management hungry forcash keeps them focusedon the most important
aspects of the business.
We don’t starve ourbusinesses, but neither
do we allow them theluxury of excess capital.

Admiral continues tofocus on bottom-line
profitability both in
the short, medium andlong-term, and thisperspective guides
the decisions wemake across all of ourbusiness operations.
The Group’s strategy is
to build profitable andsustainable business
operations for the
long-term.

All our growth, at homeand overseas, has beenorganic. We have built
each business from theground up, identifying
and understanding theopportunity, taking
measured steps to test
how well we understandthe challenge ahead
and the effectivenessof our solutions, andthen to learn from thatexperience and fromthe experience of those
who have tried otherstrategies.

Motivated
Employees

Risk
Mitigation

FocusedManagement Team

Sustainable
Operations

Effective
solutions

Satisfied customers

Valued loyal customers

12

Admiral Group plc · Annual Report and Accounts 2017

CONTROLLEDTEST & LEARN

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

How we do it – our strategy

Objectives

2018 Focus

KPI's
UK Insurance profit before tax

Investingin our core

£465.5m +39%

Sustained Competitive
Advantage

Maintain our focus on pricing tounderwrite profitable business.

Maintain strong performanceof our UK Insurance business.

Continue to be an efficient businessby a focus on expenses and costs.

2016

Continued Growth

Continue to take advantage of growth
opportunities in UK motor and household.

UK Motor customers

Focus on customer retention by putting
customers at the front of all that we do.

2017

Grow profitably our UK private
motor and household insurance
operations.

Continued Development
Maximise the value of our corebusiness and lay the foundation
for future growth.

2017

Identify and develop new products forcustomers that add value.
Take advantage of new technologies toimprove our customers' experience.

465.5
335.8

2015

444.2

3.96m +8%

3.96

2016

3.65

2015

3.30

UK Household customers

0.66m +41%
2017

0.66

2016
2015

Objectives

2018 Focus

0.47
0.31

KPI's
Price Comparison Quotes

Price Comparison
Investingin our future

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

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

UK New Products
Develop a competitive advantage
in products beyond insurance.

Build on the different strategies in
the UK, Europe and the US, to match
consumer demands.

22.9m +7%
2017

22.9

2016

21.5

Develop and grow a multi-productstrategy in Europe and beyond.

2015

Pursue our path towards long-termvalue creation in Europe and the US.

0.85m +21%

19.5

European insurance customers

0.85

2017

In the US, continue our drive towards
lower loss ratios.
Develop Admiral Loans and offer UK
customers better products and a better
online buying experience.

0.70

2016
2015

0.53

Elephant Auto customers

0.18m +6%

0.18

2017

0.17

2016
2015

0.14

Admiral Group plc · Annual Report and Accounts 201713

Strategic Report: Chief Financial Officer’s review

Chief Financial Officer’s review“It was pleasing to deliver a record profit with lotsof positives from around the Group”
Results
No last minute change to the Ogden
discount rate made for a somewhatsmoother year-end and it was pleasing todeliver a record profit with lots of positives
from around the Group. Performance of ourvarious businesses is covered in detail in
the Strategic Report and whilst it’s hard tochoose highlights from many potentials,
I’ll try anyway:• A nice, continued improvement in theInternational Insurance result (£22 million
loss in 2015, £19 million in ‘16, £14 millionin ‘17)• A near break-even EU insurance result(plus improvements in some key metrics
whilst growing premiums by almost aquarter in not exactly the easiest of
market conditions)• Breaking through one million customers
outside the UK in September 2017
• Comfortably beating our targets for
Admiral Loans in its first proper year ofoperation• Achieving ‘marketing break-even’ inCompare.com ahead of target• Very positive progress in converting our
Gladiator van insurance broker portfolio
to being underwritten within the Group• And of course, a record UK Insurance
profit of £466 million.
And for balance, a few of the less positive
aspects:• Investment behind the Drivers Win
campaign alongside new productdevelopment cost and a generally fierce
market led to a fall in profits at Confused.
com (£16 million to £10 million)• Despite continued confidence in the longterm prospects of the business, there wasa £25 million write down in the carrying
value of Elephant Auto in the parent
company balance sheet• 2017 saw higher Group overheads andother items (some of which are nonrecurring) at £52.9 million v £36.8 million.
Further detail on these latter points
can be found on pages 30, 146
and 31 respectively.

14

Admiral Group plc · Annual Report and Accounts 2017

Ogden discount rate
Regular readers of our results will be very
familiar with the Ogden topic and I won’t
repeat the full detail here. A year ago weestimated that the change in rate whichcame into effect in March 2017 would cost
the Group around £150 million after tax andreinsurance. Most of the impact has now
been reflected in the income statement
and we still consider the £150 million avalid estimate.
These accounts and our current capital
position assume the minus 0.75% rate
remains effective indefinitely, as we thinkthat’s the prudent thing to do in the absenceof other information.
Sensitivities in terms of balance sheet andcapital to different rates are set out on
page 22.
In the 2016 Annual Report, we disclosed a
profit number (£390 million) that the Groupwould have reported had the Ogden rate
remained unchanged. This year’s Group
profit of £405 million is around 4% higher
than that ‘pre-Ogden’ number, though 2017’s
profit is further adversely impacted by the
Ogden change to the order of £40 million. As
the comparatives become less helpful, we
have not repeated the pre-Ogden number
from 2016 in this report.
The financial statements continue to include
a significant and prudent margin above
the projected ultimate claims outcomes,
although this margin has reduced since
the end of 2016, partly due to increased
confidence over the impact of the change
in Ogden rate to minus 0.75%.

Introduction

Strategic Report

Capital, Dividends, Internal Model
Speaking of capital, not too much haschanged since the end of 2016. Our
solvency ratio remains very strong at over
200%, though has reduced modestly since
the end of 2016, mainly as the result ofgrowth. A ratio of over 200% is still higher
than we’d expect to report in the medium/long-term. However (copy and paste alert),
we continue to believe that’s the prudent
approach as we move towards applying touse our own model to calculate the capitalrequirement (no change to report on the
expected submission date which is late in2018). We’ll continue to provide updates as
we make progress.

Corporate Governance

Financial Statements

Additional Information

Things are more straightforward on the pricecomparison side where we are setting up
new, locally regulated entities in Spain andFrance through which Rastreator and LeLynx
will trade. Again, we expect these moves tobe complete in good time.
The cost of the restructuring work will
not be material to the Group and we don’t
expect there to be material impact on theGroup’s regulatory capital position as a resultof the restructure.
I'm looking forward to continued growth andprogress across the Group in 2018.

BrexitWe have made good progress on preparing
the Group to be able to continue trading inEurope should, as seems highly likely, we lose
the ability to passport our UK regulatory
licenses into those markets.

Geraint Jones
Chief Financial Officer
27 February 2018

In terms of insurance, we have madeapplications to the regulator in Spain for
permission to underwrite all the EU insurance
business (Admiral Seguros, ConTe and L’olivier)from there and expect to have everything up
and running in advance of any hard deadlinethat might eventually become clear.
Spain made sense for us for a number ofreasons, not least the fact that we alreadyhave people and infrastructure in Madrid andSeville and of course an existing relationshipwith the regulator.

Admiral Group plc · Annual Report and Accounts 201715

Strategic Report: Group financial review

Group financial review£1.1bn205%

1 millionNet
revenue

Customers
beyond UK
Insurance

Solvency
Ratio

2017 Group overview
2017

2016

2015

Customer numbers

5.73 million

5.15 million

4.43 million

Turnover£2.96 billion£2.58 billion£2.12 billion

Net revenue£1.1 billion£1.0 billion£0.9 billion

UK Insurance

465.5

337.8

443.7

International Insurance(14.3)(19.4)(22.2)

7.1

2.7

(7.2)

Other

(52.9)(36.8)(37.5)

Group’s share of profit before tax

405.4

284.3

376.8

Group statutory profit before tax (£m)

403.5

278.4

368.7

Analysis of profit (£m)

Price Comparison

Key metrics
Group loss ratio

66.2%

72.0%

65.1%

Group expense ratio

21.7%

22.4%

20.5%

Group combined ratio

87.9%

94.4%

85.6%

Earnings per share

117.2 pence

78.7 pence

107.3 pence

Dividends

114.0 pence

114.4 pence

114.4 pence

Return on capital employed

55%

37%

49%

Solvency ratio

205%

212%

206%

The Group has maintained its track record of strong growth in 2017with turnover up 15% to £2.96 billion (2016: £2.58 billion) and net
revenue 11% higher at £1.1 billion (2016: £1.0 billion). Customer
numbers increased 11% to 5.73 million (2016: 5.15 million). The
Group’s statutory profit before tax was £403.5 million (2016: £278.4
million) whilst its share of pre-tax profit was £405.4 million (2016:£284.3 million).
The Group’s 2017 results reflect higher UK Insurance profits,
an improved Price Comparison result and a lower loss in theInternational Insurance segment, partially offset by higher otherGroup charges and business development costs. The Group’s 2016

16

Admiral Group plc · Annual Report and Accounts 2017

profit before tax was adversely impacted by the change in the UK
discount rate (commonly referred to as the ‘Ogden’ discount rate)used to value personal injury claims. The distorting impact of thison the 2016 profit before tax means that 2016 does not provide ameaningful comparison for the 2017 Group and UK Insurance profit
before tax figures (refer to page 22 for further detail on Ogden).
During 2017, the Group’s UK Insurance business, consisting of UK
Motor and UK Household, delivered strong growth in turnover of 14%
to £2.35 billion (2016: £2.06 billion). Net revenue increased by 9% to£841.0 million (2016: £770.9 million). Customer numbers reached 4.6
million (2016: 4.1 million).

Introduction

Strategic Report

Corporate GovernanceOutside the UK, Admiral’s International Insurance businesses grew
combined turnover by 23% to £449.8 million (2016: £365.9 million)
whilst net revenue increased by 35% to £144.8 million (2016: £107.3
million). Customer numbers were up 20% to 1.03 million (2016: 0.86
million). Encouraging progress was made in combined ratio termswith a 4 point improvement, and in aggregate the segment recorded
reduced losses of £14.3 million (down from £19.4 million, despite theimpact of a significant hurricane on the US result). The Group’s Italian
insurer ConTe recorded a profit for the fourth consecutive year.
Admiral’s Price Comparison businesses made an increased combined
profit (excluding minority interests’ shares) of £7.1 million (2016: £2.7
million). In the UK, the high level of competition in the price comparison
market and investment in the new marketing campaign and productdevelopment by Confused.com resulted in reduced profits of £10.1
million in 2017 (2016: £16.1 million). This lower Confused.com profit wasoffset by a significantly reduced combined loss of £3.0 million (2016:
loss £13.4 million) from the international price comparison businesses,
where a growing profit in the European operations of £4.1 million (2016:£2.8 million) was offset by a significantly smaller loss in Compare.comof £7.1 million (2016: loss £16.2 million).

Earnings per share
Earnings per share were 117.2 pence (2016: 78.7 pence), the near 50%
increase being higher than the increase in pre-tax profit as a result ofa lower effective rate of taxation in 2017.

Dividends
The Group’s dividend policy is to pay 65% of post-tax profits as anormal dividend and to pay a further special dividend comprisingearnings not required to be held in the Group for solvency or buffers.
The continued strength in the Group’s solvency ratio has allowed
the Board to propose a final dividend of 58.0 pence per share(£163 million) as follows:• 39.5 pence per share representing a normal element, based on
the dividend policy of distributing 65% of post-tax profits; and• A special element of 18.5 pence per share.
This final dividend reflects a 13% increase on the final 2016 dividendof 51.5 pence per share. The total dividend for the 2017 financial year
is 114.0 pence per share, which is broadly in line with the 114.4 pence
paid in 2016 and in 2015, both years including an additional returnof surplus capital of 11.9 pence per share. Excluding this additional
return, the total dividend for 2017 is 11% higher than 2016 and 2015.
The payment date is 1 June 2018, ex-dividend date 10 May 2018 andrecord date 11 May 2018.

Return on equity
Admiral’s capital efficient and highly profitable business model
achieved a return on equity of 55% (2016: 37%).
A key part of Admiral’s business model is the extensive use of co- andreinsurance across the Group which provides both loss protection
and capital relief and, when combined with high levels of profitability,
leads to a superior return on equity.

Financial Statements

Additional Information

As noted above, 2016’s result was materially distorted by the impactof the Ogden rate change.

Capital structure and financial position
The Group’s co-insurance and quota share reinsurance arrangements
for the UK Car Insurance business are in place until at least the end of
2019. The Group‘s net retained share of that business is 22%. Munich
Re will underwrite 40% of the business (through co-insurance andquota share reinsurance arrangements) until at least the end of 2020.
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 allentities within the Group are able to continue as going concerns
and that regulated entities comfortably meet regulatory capitalrequirements. Surplus capital within subsidiaries is paid up to theGroup holding company in the form of dividends.
The Group’s regulatory capital is based on the Solvency II Standard
Formula, with a capital add-on to reflect recognised limitations in theStandard Formula with respect to Admiral’s business (predominantly
in respect of profit commission arrangements in co- and reinsurance
agreements and risks arising from claims including Periodic Payment
Order (PPO) claims).
The capital add-on to the Standard Formula for 2018 is subject tothe usual regulatory approval process. The Group plans to submit anapplication for approval to use an internal model to calculate capitalrequirements during 2018.
The majority of the Group’s 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 thisreport was as follows:

Group capital position
Group solvency ratio (unaudited)£bn

Eligible Own Funds (pre 2017 final dividend)

1.25

2017 final dividend

0.16

Eligible Own Funds (post 2017 final dividend)

1.09

Solvency II capital requirement

0.53

Surplus over regulatory capital requirement

0.56

Solvency ratio (post dividend)*2

205%

*1

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

The Group’s capital includes £200 million ten year dated subordinatedbonds. The rate of interest is fixed at 5.5% and the bonds mature in
July 2024. The bonds qualify as tier two capital under the Solvency II
regulatory regime.

Admiral Group plc · Annual Report and Accounts 201717

Strategic Report: UK Insurance review

Group financial review continued

Estimated sensitivities to the current Group solvency ratio arepresented in the table below. These sensitivities cover the two mostmaterial risk types, insurance risk and market risk, and within theserisks cover the most significant elements of the risk profile. Asidefrom the catastrophe events, estimated sensitivities have not beencalibrated to individual return periods.
Solvency ratio sensitivities (unaudited)

relating to the release of an accrual relating to quota share reinsurance
arrangements, which wasn’t repeated in 2017. In addition, there is anegative variance of £8.8 million relating to unrealised gains and losses
on forward exchange contracts, offset by a one-off gain in 2017 relating
to the realised gains on sale of government gilt assets of £5.4 million.
The underlying rate of return for the year (excluding accruals related
to reinsurance contract funds withheld) on the Group’s cash andinvestments was 1.3% (2016: 1.4%).

UK Motor – incurred loss ratio +5%-26%

UK Motor – 1 in 200 catastrophe event-3%

UK Household – 1 in 200 catastrophe event-2%

Interest rate – yield curve down 50 bps-11%

Credit spreads widen 100 bps-4%

Currency – 25% movement in euro and US dollar

-3%

£m

ASHE – long term inflation assumption up 0.5%

-4%

The Group continues to generate significant amounts of cash andits capital-efficient business model enables the distribution of the
majority of post-tax profits as dividends.

Cash flow
2017

2016

Operating cash flow, before
transfers to investments

617.2

525.1

487.2

TaxationTransfers to financial investments(229.4)(18.1)(112.5)The tax charge reported in the Consolidated income statement is£71.9 million (2016: £64.3 million), which equates to 17.8% (2016:
23.1%) of profit before tax. The lower effective rate of taxationcompared to 2016 results from lower losses in the Group’s US
businesses leading to a lower level of unrecognised deferred tax
asset and the reduction in the UK corporation tax rate to 19.0%(from 20.0% from 1 April 2017).

Operating cash flow

387.8

507.0

374.7

Tax payments(55.9)(74.6)(63.8)

Investing cash flows(capital expenditure)(22.7)(31.6)(47.8)

Financing cash flows(309.6)(364.7)(256.3)Foreign currencytranslation impact

0.6

25.2

2.6

Net cash movement

0.2

61.3

9.4

Movement in unrealised
gains on investments

11.2

35.2

(12.6)

Movement in accrued interest

37.0

43.4

29.5

Net increase in cash andfinancial investments

277.8

158.0

138.8

Investments and cash
Investment strategy
Admiral’s investment strategy was unchanged in 2017 and the Group
continued to invest in the same asset classes as previous years.
The main focus of the Group’s strategy is preservation of amounts
invested, with additional priorities including low volatility of returns andhigh levels of liquidity. The Group’s Investment Committee performs
regular reviews of the strategy to ensure it remains appropriate.

2015

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

Cash and investments analysis
£m

2017

2016

2015

Profit after tax

331.6

214.1

291.8

Change in net insurance liabilities

53.2

206.8

148.7

Net change in trade receivables
and liabilities

131.3

25.3

(55.7)

2,588.8

Non-cash income statement
items

29.2

14.6

25.5

Taxation expense

71.9

64.3

76.9

Money market funds, fixed income and debt securities comprise themajority of the total; 85% at 31 December 2017 (2016: 82%).

Operating cash flow, before
transfers to investments

617.2

525.1

487.2

Investment and interest income in 2017 was £41.7 million, a reductionof £11.4 million on 2016 (£53.1 million). There are a number of partially
offsetting variances: 2016 benefitted from £9.2 million of income

Total cash plus investments increased by £277.8 million or 10% (2016:£158.0 million, 6%).

£m

2017

2016

2015

Fixed income and debt securities

1,493.5

1,469.2

1,428.2

Money market funds andother fair value instruments

1,074.3

781.0

627.7

Cash deposits

130.0

170.0

267.6

Cash

326.8

326.6

265.3

Total

3,024.6

2,746.818Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

UK Insurance review“One of the cornerstones of Admiral’s success is of course
our strong underwriting record, which has enabled us toconsistently grow profits over the last 25 years.”
Cristina Nestares

25 years ago, I was…
…studying at a highschool in the US as an
exchange student.

CEO, UK Insurance
The last twelve months has been a year of big
birthdays and a couple of births for Admiral’s
UK Insurance segment. It’s now 25 years
since we sold our first car insurance policy(2 January 1993), and 5 years since we soldour first household policy (18 December2012). Over that time, our customer focused
approach and strategy of providing excellent
service at an affordable price has attracted
more than 4.5 million customers. I’m very
excited that we’ve launched another two
insurance businesses during 2017, with
Admiral Van launching in May and Admiral
Travel in late November. We hope that by
expanding our offering we can provide afuller product set to satisfy our existingcustomers, as well as attracting newcustomers to the Admiral brand.
I opened last year’s review with a brief
reference to the Ogden discount rate, which
had changed a few days before we announced
our 2016 results. Whilst it’s not quite sucha hot topic this time around, it seems like afairly logical place to start this time around
too, as it has continued to influence the UK
Car Insurance business throughout the year.
One of the cornerstones of Admiral’s successis of course our strong underwriting record,
which has enabled us to consistently growprofits over the last 25 years. To protect that
underwriting result in a time of significant
uncertainty, we put up prices considerably
at the start of the year, which impacted ourvolumes in the first couple of months of2017 (having grown by more than 10% overthe course of 2016). Our competitivenessgradually improved over the first half
(despite significant further rate increases) as
other insurers gradually adjusted their prices
after the new Ogden rate was announced.
Confidence then returned to the market
in the second half of the year and we andmany others started to reduce prices, partly
following the announcement that the Ogden
rate would be reviewed (which may lead to apartial reversal of the rate increases required
following the February announcement),

but significantly also due to the marketwide favourable experience on bodily injury(BI) frequency. The frequency of BI claims
registered on the MOJ portal is 12.5% lower
than in 2016, which is consistent with
Admiral’s experience.
Whilst some of that benefit has been offset
by continued inflation on accidental damage
claims, due to the increasing sophisticationof cars and movements in exchange rates,
the net impact of the price rises and claims
frequency reduction means that 2017’s
underwriting year looks like Admiral’s bestyear for a number of years, encouragingly
achieved against a backdrop of a 5% growthin the customer base despite the slow start
to the year. There’s also scope for further
improvement should the Government’s
review of the discount rate result in lower
settlements than those currently reservedon large BI claims.
Whilst we are proud of our track record ofpricing and claims handling, what actually
allows us to grow and generate profits eachyear is that our customers trust us to not
only offer competitive prices, but also toprovide excellent service. That is regularly
supported by a number of customer KPIs wetrack continuously, whether in the form of
direct feedback, retention rates or complaint
figures. As a result it was disappointing that
we made an error in the way we disclosed
prior year premiums on some customer
notices during the second quarter of theyear. However, having recognised the error,
I was very encouraged with the dedicationof our people, from a number of different
departments, to pull together and correct
the issue, and to quickly provide remediation
to our affected customers. Whilst not in theideal circumstances, it was another exampleof the great team spirit and culture that still
exists 25 years on from our launch.

in terms of weather to deliver a strong
underwriting result, whilst at the sametime growing the book by more than 40%
to insure more than 650,000 homes by theend of the year. That was achieved througha combination of strong retention, which
is delivering a growing renewal book, andalso very strong new business performanceboth through the growing price comparison
channel and, very pleasingly, through thedirect channel which further confirms thestrength of the Admiral brand. Cumulative
profits of £7.8 million after only 5 years
without the benefit of a large renewal book
is a very good sign for the future.
Whilst the van and travel markets are
considerably smaller than car and home,
we’re confident that they will follow intheir footsteps and expand Admiral’sfootprint, customer base and profits inthe coming years.

Cristina Nestares
CEO, UK Insurance
27 February 2018

Aside from Car Insurance, our Householdbusiness performed very well once again,
and continues to show significant promise.
We benefitted from another benign year
Admiral Group plc · Annual Report and Accounts 201719

Strategic Report: UK Insurance review

UK Insurance review continued

UK Insurance financial performance
£m

2017

2016

2015

2,354.0

2,063.1

1,760.2

461.4

336.1

442.5

4.1

2.7

1.2

Group’s share of UK Insurance profit

465.5

337.8

443.7

Vehicles insured at year end

3.96m

3.65m

3.30m

Households insured at year end

0.66m

0.47m

0.31m

Total UK Insurance customers

4.62m

4.12m

3.61m

Turnover*1
Motor
Household*1 Alternative Performance Measures – refer to the Glossary for definition and explanation.

The key highlights for the UK Insurance
business in 2017 were:• Generally favourable conditions inmotor and household markets withmotor rates increasing sharply in Q2,
impacted by the change in Ogden,
followed by some price reductions
later in the year
• Improved competitiveness at new
business following the market
response to Ogden and generally
positive customer retention

UK Insurance includes the results of the UK Motor and UK Household Insurance segments.

• Notable reductions in bodily injury
claims frequency

Turnover grew by 14% to £2.35 billion (2016: £2.06 billion) whilst customer numbers increasedby 12% to 4.62 million from 4.12 million, due to growth across both Motor and Household.
UK Insurance profit increased to £465.5 million (2016: £337.8 million).

• Significant releases from booked
motor insurance reserves

UK Motor Insurance financial review
£m

2017

2016

2015

Turnover*1

2,246.9

1,987.0

1,708.2

Total premiums written*1

2,001.5

1,789.3

1,539.7

Net insurance premium revenue

468.4

437.4

386.5

Group’s share of UK Motor Insurance
profit before tax

461.4

335.1

442.5
64.1%

• Another profitable year for UK
Household Insurance, though thetotal remains small in the context ofthe overall result.

*1	Alternative Performance Measures – refer to the endof this report for definition and explanation*2	Motor loss ratio adjusted to exclude impact ofreserve releases on commuted reinsurance contracts.
Reconciliation in note 12b.

Reported car loss ratio

63.8%

73.3%

Reported car expense ratio*1,*3

16.2%

17.5%

16.9%

Reported car combined ratio*1,*4

80.0%

90.8%

81.0%

Claims reserve releases –original net share*1,*5£92.1m£58.3m

£84.6m*4	Reported total combined ratio includes additional
products underwritten by Admiral.

Claims reserve releases –commuted reinsurance*1,*6£73.8m£17.1m

£88.8m*5	Original net share shows reserve releases on the
proportion of the portfolio that Admiral wrote on a net
basis at the start of the underwriting year in question.

Total claims reserve releases£165.9m£75.4m£173.4m

£64

£62

£63

Cars insured at year end

3.84m

3.65m

3.30m

Vans insured at year end

0.12m

–

–

*1,*2

Other Revenue per vehicle (Car)20

Admiral Group plc · Annual Report and Accounts 2017*3	Motor expense ratio is calculated by including claims
handling expenses that are reported within claims
costs in the income statement. Reconciliation in note
12c.

*6	Commuted reinsurance shows releases on the
proportion of the account that was originally ceded
under quota share reinsurance contracts but has
since been commuted and hence reported throughunderwriting and not profit commission.

Introduction

Strategic Report

UK Motor Insurance includes UK Car andUK van results. During May 2017, theGroup ceased operating its commercial
vehicle insurance broker and started
underwriting van insurance directly throughtwo brands, Gladiator and Admiral Van.
Admiral offers van insurance and associatedproducts, typically to small businesses, via
telephone and the internet, including pricecomparison websites.
The UK Motor Insurance business continued
to attract and retain customers in thecompetitive UK market and this, together
with higher average premiums, contributed to
an increase in turnover of 13% to £2.25 billion(2016: £1.99 billion) and vehicles insured
increased by 8% to 3.96 million from 3.65
million. Group’s share of UK Motor Insurance
profit before tax was £461.4 million (2016:£335.1 million).
The strong performance of UK motor in2017 reflects:• Higher premium revenue and a lower
current year loss ratio and therefore
reduced net claims costs• Higher reserve releases on Admiral’soriginal net share (approximately £34
million positive impact) reflecting
improvement in prior year claims reserves• Higher reserve releases on the portionof reserves originally reinsured but sincecommuted (approximately £57 million
positive impact), leading to higher
aggregate net reserve releases acrossoriginal net and commuted shares• Higher profit commission income (£12
million positive impact) resulting fromhigher reserve releases• Lower investment return (£7 million
adverse impact) mainly related to nonrecurring items in 2016 as explained in theInvestments and cash section above• Higher ancillary income (£16 million
positive impact) mainly as a result ofhigher instalment income (impact £22
million) as a result of a change in the coinsurance arrangements with Munich Re.

Corporate Governance

Financial Statements

Additional Information

The UK market saw rate increases during 2017, particularly from Q2 in response to the change
in Ogden discount rate (below), before the market-wide favourable experience on bodily
injury frequency led to price decreases. Admiral increased its rates in December 2016 inadvance of the Ogden change and this impacted competitiveness in the first few months of2017. This improved in Q2 as the market increased prices in response to the Ogden change andAdmiral continued to increase prices during the first six months of 2017 before responding tomarket conditions and reducing prices in the latter part of the year.

Underwriting result and profit commission
The UK Car Insurance combined ratio is shown below:
UK Car Insurance combined ratio

2017

2016

2015

Loss ratio excluding reserve releases from original
net share and commuted reinsurance

85.3%

87.7%

87.7%

Reserve releases – original net share

21.5%

14.4%

23.6%

Loss ratio net of releases – original net share*1

63.8%

73.3%

64.1%

Expense ratio

16.2%

17.5%

16.9%

Combined ratio – original net share*1

80.0%

90.8%

81.0%

*1	Ratios calculated on original net share use the proportion of the portfolio that Admiral wrote on a net basis at the startof the underwriting year in question.

The reported UK Motor combined ratio decreased to 80.0% from 90.8% (both figures exclude
the impact of reserve releases from commuted reinsurance contracts). The main reason forthe decrease is a significantly higher reserve release in the current period, which is mainly aresult of the impact on the 2016 figures of the change in the Ogden rate.
During 2017, projected ultimate claims costs on the most recent accident years havecontinued to develop positively. The projected ultimate loss ratios are based on the new
Ogden discount rate of minus 0.75% and are cautiously calculated for the most recent
accident years but which, nevertheless, have shown improvements in development. The
projections assume no improvement or further deterioration in discount rate that might
result from the ongoing consultation.
Note 5d to the financial statements analyses reserve releases in the period.
The decrease in the current period loss ratio (85.3% v 87.7%) reflects sustained priceincreases more than offsetting general claims inflation. Claims trends include favourable
small bodily injury frequency being only partially offset by higher accidental damage costs,
as the costs of replacing vehicle parts continues to increase.
The projected ultimate Car Insurance loss ratio for Admiral for the 2017 accident year is76%, which is significantly lower than the projection of the 2016 year at the same point in
its development (which was 82%). This reflects the impact of the pricing increases andreduced claims inflation highlighted above.
The reported Car expense ratio decreased to 16.2% from 17.5% mainly reflecting thechange in net retained share in the current year. The written basis expense ratio also
improved to 15.8% from 16.5% for similar reasons.

Admiral Group plc · Annual Report and Accounts 201721

Strategic Report: UK Insurance review

UK Insurance review continued

Change in UK discount rate (‘Ogden’)On 27 February 2017, the UK Government announced the outcome of the review of the discountrate (referred to as the Ogden discount rate) used for calculating the value of lump sum
personal injury compensation. The new rate is minus 0.75% and applies to all unsettled and new
claims from 20 March 2017.
The estimated cost to Admiral, net of tax and reinsurance, of the change is approximately £150
million. Most of the impact has now been reflected in the income statements of 2016 and 2017.
As noted above, the UK Motor Insurance actuarial best estimates reflect the new rate ofminus 0.75%. Although its relative size has reduced since the end of 2016, the financial
statements continue to include a significant and prudent margin above the projected
ultimate claims outcomes.
The Government’s review of the discount rate and the process by which the rate is set continue
and the Group looks forward to reviewing its conclusions when they are reported.

Ogden discount rate sensitivities
The table below shows the sensitivity of profit before tax and solvency ratio to the Ogden
discount rate assumption. The profit impacts presented are the total impact of the changeon the Group’s pre-tax profit on an ultimate basis. It should be noted that not all of the impact
would be recognised immediately.

Increase in Ogden discount rate of 75 basis points (to 0%)
Decrease in Ogden discount rate of 75 basis points (to minus 1.5%)

Impacton Profit
before Tax(£m)*1

Impact on
Solvency
Ratio (%)

85.6

+6%

(142.7)-16%*1	The impacts on profit before tax are stated net of co-insurance and reinsurance and include the impact on net insurance
claims along with the associated profit commission movements that result from the change in the Ogden rate.

UK Car Insurance – co-insurance and reinsurance
Admiral makes significant use of proportional risk sharing agreements, where insurers outside
the Group underwrite a majority of the risk generated, either through co-insurance or quota
share reinsurance contracts. These arrangements include profit commission terms (seebelow) which allow Admiral to retain a significant portion of the profit generated.
The Munich Re Group will underwrite 40% of the UK Motor business until at least 2020. 30% of
this total is on a co-insurance basis, with the remaining 10% under a quota share reinsurance
agreement from 2017 onwards.
The Group also has other quota share reinsurance arrangements confirmed to the end of 2019
covering 38% of the business written. The Group reduced its net underwriting share from25% previously to 22% with effect from 2017.
The nature of the co-insurance proportion underwritten by Munich Re (via Great Lakes) issuch that 30% of all motor premium and claims for the 2017 year accrue directly to Great
Lakes and are not reflected in the Group’s financial statements. Similarly, Great Lakes
reimburses the Group for its proportional share of expenses incurred in acquiring andadministering this business.
The quota share reinsurance arrangements result in all motor premiums and claims that are
ceded to reinsurers being included in the Group’s financial statements, but these figures areadjusted to exclude the reinsurer share, resulting in a net result for the Group.

22

Admiral Group plc · Annual Report and Accounts 2017

The Group also purchases excess of loss
reinsurance to provide protection against
large claims and reviews this cover annually.
For 2017 the Group increased its excess of loss
cover as a result of the anticipated change
in the Ogden discount rate and the potential
impact on large claims. For 2018, the Grouphas reduced this level of cover to be back inline with more recent levels.

Profit commission
Admiral is potentially able to earn material
amounts of profit commission revenue fromco- and reinsurance partners, depending on
the profitability of the insurance businessunderwritten by the partner. Revenue isrecognised in the income statement in linewith the booked loss ratios on Admiral’s
retained underwriting.
In 2017 Admiral recognised UK Car Insurance
profit commission revenue of £64.7
million up from £52.7 million in 2016. The
increase from 2016 arose mainly due to theimprovements in the booked loss ratios onprior years, although both 2017 and 2016
profit commission was impacted by thechange in Ogden (as above).
Note 5c to the financial statements
analyses profit commission income byunderwriting year.

Commutations of quota sharereinsurance
Admiral tends to commute its UK Car
Insurance quota share reinsurance
contracts for an underwriting year 24
months from inception, assuming there issufficient confidence in the profitabilityof the business covered by the reinsurance
contract.
After the commutation is executed,
movements in booked loss ratios result inreserve releases (or strengthening if thebooked loss ratio were to increase) rather
than reduced or increased reinsurance claims
recoveries or profit commission.

Introduction

Strategic Report

Corporate Governance

Financial Statements

In 2017 Admiral recognised reserve releases from commuted reinsurance contracts of£73.8 million (2016: £17.1 million). The increase from 2016 arose mainly due to theimprovements in the booked loss ratios on prior years, although the comparative figure
was adversely affected by the impact (£31 million) of the 2014 underwriting year
commutation which was completed in 2016.

The reported loss ratio improved in 2017 to73.5% from 76.5% due to relatively benign
weather and strong underwriting. During
2017 the business gained scale, improved
retention and increased the proportionof customers buying direct, leading to
an improving expense ratio and one thatsignificantly outperforms the market.

During 2017, a number of reinsurance contracts relating to the 2015 underwriting year
were commuted. At 31 December 2017, reinsurance contracts remain in place for the2015, 2016 and 2017 years.
Refer to note 5d (vi) of the financial statements for analysis of reserve releases on commuted
quota share reinsurance contracts.

UK Car Insurance other revenue
£m

2017

2016

2015

Net other revenue

202.9

188.7

174.6

£64

£62

£63

Other revenue per vehicle*1*1 Other revenue (before internal costs) divided by average active vehicles, rolling 12 month basis.

Net other revenue has increased by 8% mainly due to the increase in instalment income
which represents amounts charged to customers paying for cover in instalments. During
2017 Admiral earned £55.5 million from instalment income, up 66% on the prior year (2016:£33.5 million). The main reason for this increase is a change to the co-insurance arrangements
resulting in all instalment income from 2017 underwriting year onwards being retainedby Admiral. Other factors affecting the increase are increases in average premium andcustomer numbers.
Other revenue was equivalent to £64 per vehicle (gross of costs; 2016: £62). The majority of
the increase reflects increases in instalment income (above) and optional legal cover.

UK Household Insurance financial performance
2017

2016

2015

Turnover

107.1

76.1

52.0

Total premiums written*1

96.5

73.3

50.7

Net insurance premium revenue

23.1

17.0

10.9

*1

UK Household Insurance profit before tax

UK Household Insurance –reinsurance
The Group’s Household business is supported
by long-term proportional reinsurance
arrangements with Munich Re and Swiss Re
covering 70% of the risk. In addition, theGroup has non-proportional reinsurance tocover the risk of catastrophes stemmingfrom weather events.

UK Insurance regulatoryenvironment

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.

£mAdditional Information

4.1

2.7

1.2

Reported household loss ratio

73.5%

76.5%

75.2%

Reported household expense ratio

30.0%

34.1%

33.0%

Reported household combined ratio

103.5%

110.6%

108.3%

Households insured at year end

659,800

468,700

310,400

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

*1 Alternative Performance Measures – refer to the Glossary for definition and explanation

UK Household Insurance was launched in December 2012 under the Admiral brand.
The UK Household Insurance business continued to grow strongly and increased the numberof properties insured by 41% to 659,800 (2016: 468,700). Turnover increased by 41% to £107.1
million (2016: £76.1 million) and profit increased to £4.1 million (2016: £2.7 million). This
reflects the continued substantial growth of the business and also a cautious approach tosetting and releasing claims reserves and hence profit recognition.

Admiral Group plc · Annual Report and Accounts 201723

Strategic Report: International Car Insurance review

International Car Insurance review
25 years ago, I was…
…travelling by car in Canada
and US with my brother.

European insurance
Milena Mondini
CEO, European insurance
A key question for Admiral is ‘can we be a
successful insurer outside the UK?’ My shortanswer is ‘yes’, although results and speed of
growth vary country by country, depending on
the maturity of the business and direct channel
uptake in the local market.
To build a success story as a new direct insurer
in Europe – where price comparison websites(PCWs) are not yet the dominant acquisition
channel – in my opinion, you need to prove two
essential things: first, to grow efficiently and,second, to have better underwriting capabilities
than competitors.
On both these drivers, 2017 has been a truly
great year. We continued growth, 23% in
written premiums, while at the same time
drastically reduced our acquisition cost per

policy. We achieved that despite limited
growth of PCWs and in the absence of premiumincreases in the market. This resulted in adecrease of four points in the expense ratio.
In parallel, we improved our pricing, antifraud
and underwriting skills and experienced reserve
releases on the recent years. We are confident
that we underwrite business with a competitive
loss ratio in all three countries. At the sametime, we increased our reserve buffer in France
and Spain to mirror the same conservative
approach already adopted in Italy and the UK.

All three businesses are growing, have solid
operations and processes, recognized brands,
experienced and talented management and aclearly customer-focused Admiral culture. With
this, I’m confident we will continue to build our
success stories in Europe and I look forward toanother year of growth.

We now have 500,000 vehicles insured in ConTe,
which continues to report profits. L’olivier
and Admiral Seguros are growing rapidly andapproaching a scale that we expect will sustain
profitability in the near future.

25 years ago, I was…
…7 years old, andaround this time of theyear I learnt for the
first time how to ski!

US insurance
Alberto Schiavon
CEO, Elephant Auto
During 2017, Elephant Insurance made good
progress towards becoming a growing,profitable, sustainable company centeredaround our customers. Our key focus wason attracting, servicing and retaining morecustomers with a longer policy lifetime.
Through better risk selection, higher service
levels, and a better customer journey, Elephanthas been able to significantly shift the mix ofour sales distribution in favor of these higher
retaining customers. This is an important step
towards creating the foundation for future
growth, as the effect of those actions willcontinue to pay off in future years.

24

However, 2017 was a year with catastrophic
losses across the US, with a number ofhurricanes hitting the southern coasts. In
particular, Hurricane Harvey impacted our Texas
customers, but Elephant was able to deliver
excellent service to our customers in need.
While hurricane claims did impact our loss ratio,
by approximately 5 points, Elephant was still
able to deliver overall loss ratio improvementson the back of better risk selection and rateincreases that were in line with the market.

Admiral Group plc · Annual Report and Accounts 2017

Our customer interactions also materially
improved throughout the year. Thanks totechnology investments, we were able todeliver a more complete digital journey
and better service levels in our claims andoperational departments.
New initiatives planned for 2018, revolving
around continued improvements tothe customer experience and productoffering, will continue to accelerate ourprogress in attracting higher persistingand profitable customers.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

25 years ago, I was…
…at school!

25 years ago, I was…
…at school and playing tennis
and having fun windsurfing!

25 years ago, I was…
…in high school and had a
Summer trip to learn English
in Cardiff!

Spain

Italy

FranceAdmiral Seguros (Seville)

ConTe (Rome)

L’olivier – assurance auto (Paris)

Sarah Harris
CEO, Admiral Seguros

Costantino Moretti
CEO, ConTe

Pascal Gonzalvez
CEO, L’olivier – assurance auto

In 2017 Admiral Seguros continued our path ofsustainable growth. We increased customers byalmost 20%, with strong technical results.

More growth and profit!

L’olivier – assurance auto had another yearof strong growth, with a more than 40%
increase in turnover and closing the year with
130,000 customers. This was due to a growing
aggregator market and some effective
TV investments that improved our brandawareness. Two years ago, a new regulation
was passed helping French customers toswitch their motor insurance more easily.
Though more an evolution than a revolution,
this change is having a growing impact inmarket fluidity and L’olivier – assurance auto
is benefiting from it.

The Spanish market grew premium by about
3%. Price competition means that insurers are
not passing to customers the full impact ofclaims cost inflation from the new “Baremo”(regulating compensation for bodily injury cases).
In this highly competitive context we continued
to grow market share due to customer journey
improvements in the price comparison channel,
combined with strong growth in direct-tosite digital sales, particularly for the Qualitas
Auto brand. Technical results developed well,with especially positive evolution for the 2016
underwriting year.
In 2018 we don´t expect much change in themarket. We will maintain focus on scaling up thebusiness in a sustainable way.

Despite a challenging market where the averagepremium continued to fall (around 3% year-onyear) and price comparison growth was low, wehave increased our customer base to 500,000(+20% year-on-year) and have maintained astrong focus on profitability, reaching a profit
for the fourth year in a row. The main drivers of
this are: a better customer journey sustained bya stronger brand; a more mature portfolio; andimprovement in the expense ratio.
Loss ratios are developing well and show aconsistent downtrend across 2016 and priorunderwriting years.
The 2017 market combined ratio should bearound 100% while for the direct part of themarket it should already be above 100%, and asa consequence a timid market cycle upturn is
now more likely than one year ago.
In this context, ConTe continues to pursue its‘sustainable growth’ strategy and to maintaina consistent level of investment in technology,
brand and people.

Moderated price increases in the market were
not strong enough to compensate for higher
claims costs and market profitability isn’t likely
to improve much in 2017. The market motor
combined ratio is expected to be around 105%.
L’olivier – assurance auto managed to improve
its technical results thanks to our unique wayof pricing in the French market. Our pricing
competitive advantage should become evenmore significant with a larger book of business,more data and more exposure.
What’s next? L’olivier needs to keep growing
and build scale in order to provide sustainableprofits to Admiral Group. Service quality will
be a key lever to achieve this goal and ourambition is to prove to French customers thata direct insurer can provide service excellence.
Our vision by 2020 is to be in the top three
direct motor insurers in France, providing
a high service quality and using one of themost sophisticated approaches to pricing
and underwriting in the French market.
Lots of new exciting projects are in thepipeline to make our vision a reality!

Admiral Group plc · Annual Report and Accounts 201725

Strategic Report: International Car Insurance review

International Car Insurance review continued
1m£0.45bn

Internationalcustomers

International
TurnoverInternational Car Insurance financial performance
£m

2016

2015

Turnover

449.8

365.9

232.4

Total premiums written*1

401.4

331.3

213.3

Net insurance premium revenue

123.0

91.3

62.3

International Car Insurance result(14.3)(19.4)(22.2)

Reported loss ratio*2

76%

76%

77%

45%

49%

49%

Reported combined ratio

121%

125%

126%

Reported combined ratio, net of other revenue*4

109%

113%

115%

Vehicles insured at period end

1.03m

0.86m

0.67m

Reported expense ratio*2*3*1	Alternative Performance Measures – refer to the end of this report for definition and explanation*2	Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying
performance of the business is transparent.
*3	Combined ratio is calculated on Admiral’s net share of premiums and excludes other revenue. It excludes the impact ofreinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be 2017: 124%; 2016: 133%;
2015: 146%.
*4	Combined ratio, net of other revenue is calculated on Admiral’s net share of premiums and includes other revenue.
Including the impact of reinsurer caps the reported combined ratio, net of other revenue would be 2017: 112%; 2016:
122%; 2015: 136%.

Geographical analysis*1
2017

Spain

Italy

France

US

Total

Vehicles insured at period end (m)

0.22

0.50

0.13

0.18

1.03

Turnover (£m)

61.5

154.6

59.2

174.5

449.8

2016

Spain

Italy

France

US

Total

Vehicles insured at period end (m)

0.19

0.41

0.09

0.17

0.86

Turnover (£m)

49.8

118.2

38.3

159.6

365.9

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

Admiral operates four insurance businesses outside the UK: in Spain (Admiral Seguros), Italy(ConTe), the US (Elephant Auto) and France (L’olivier – assurance auto).
In 2017, Admiral's International Insurance businesses continued to grow strongly. Combined
turnover grew by 23% to £449.8 million (2016: £365.9 million) and customer numbers also
grew by 20% to 1.03 million (2016: 0.86 million). In aggregate the businesses reduced losses to£14.3 million from £19.4 million.

26

Admiral Group plc · Annual Report and Accounts 2017

International
Insurance loss

The key features of the International Car
Insurance results are:

2017
*1

£14.3m• An aggregate loss of £14.3 million(2016: loss of £19.4 million)• A record profit in the Group’s Italianbusiness ConTe, which also grew its
customer base to 0.5 million customers• A significant improvement inElephant Auto’s result, despite theimpact of Hurricane Harvey in Texas(approximately £2.9 million)• An improved combined ratio of 121%
reflecting reduced acquisition costs,
positive back year development andimprovements in pricing• Continued investment in growing all
the operations• An increase in the claims reserves margin
held above actuarial best estimates inFrance and Spain to mirror the sameconservative approach already adopted
in the UK and Italy.
The consolidated result of the European
operations was a combined loss of £1.9
million for the year (2016: loss £3.7 million)
including a strong second half of the year
which saw profits of £3.1 million. The
combined results reflect the profit in Italy
offset by investment in growth in Spain andFrance. The growth in Spain and France also
impacted on the combined ratio net of otherrevenue (excluding the impact of reinsurercaps) which increased to 103% (2016: 101%).
Elephant’s loss for the period was £12.5
million, down from £15.7 million in 2016.
Elephant improved both key operating ratios
despite the continued strong growth andthe impact of the severe weather in Texas.
The combined ratio net of other revenue
improved to 119% from 130%. The impactof the hurricane on the 2017 result wasapproximately £2.9 million.

Introduction

Strategic Report

In 2017, a non-cash impairment charge of£25 million was recognised by the parent
company in respect of its investment inElephant Auto. This followed the regularreview of the carrying value of subsidiarycompanies and coincided with a review ofthe long-term strategy of Elephant by its
management team and subsequent approvalby the Board. During 2017, additional capitalof £16 million was provided to Elephant tocontinue to maintain a strong surplus overregulatory requirements. Elephant remains
loss making at this stage in its development,
which is in line with its long-term plan.
Whilst the long-term plan did support thecarrying value of the subsidiary, impairment
was considered appropriate following theresults of a number of stress tests applied tothe plans.

Corporate Governance

Financial Statements

Additional Information

International Car Insurance
regulatory environment

During 2017 the management team at
Elephant has been strengthened anda number of important operational
improvements have been made. Although
success is not certain, the Board remains
confident in the prospects of the businessand continues to support Elephant in theachievement of its goals. The impairment
charge has no impact on the Group’s profit
for the period or capital position. Further
information is set out on page 146.

Admiral’s European insurance operations are
currently subject to the same regulation
as the UK Car Insurance business, detailsof which are summarised above, butalso comply with local requirements asappropriate. Further information on thepotential impact of Brexit on the European
insurance operations can be found on
page 31.

International Car Insurance
co-insurance and reinsurance
In 2017 Admiral retained 35% (Italy),
30% (France and Spain) and 33% (US) of
the underwriting risk respectively. The
arrangements for 2018 will remain the same.

The Group’s US insurer, Elephant Insurance
Company, is regulated by the Virginia
State Corporation Commission’s Bureau
of Insurance. The Company is required tomaintain capital at levels prescribed by theregulator and holds a surplus above theserequirements at all times.

Admiral Group plc · Annual Report and Accounts 201727

Strategic Report: Price Comparison review

Price Comparison review
25 years ago, I was…
…at school, spending
my days studying, horseriding and working(walking dogs!).

International
Elena BetésEuropean Price Comparison Director
Our original market, the UK, gives us someguidelines for the expected development of
PCWs around the world; first, we expect digital
insurance comparison will grow substantially it is still under-penetrated around the world;and second, there are a limited number ofplayers that will succeed in each country.

We believe our proven capability to organicallyset up successful PCWs for a reasonable
investment with clean exits where needed(Italy and China), allows us to increase our total
addressable market substantially and allows us
to keep growing in the future while the UK faces
a more competitive market.

Admiral has driven organic international
expansion in PCW around the world: Spain(Rastreator.com), France (LeLynx.fr), Italy(Chiarreza.it), US (Compare.com), China (Duobi),
Mexico (Rastreator.mx) and more coming.

Being based in several locations allows us toanticipate customer needs and to promote
innovation. Developing our own platforms
gives us scalability. We believe that our world
requires some disruption to improvecustomer experience.

In all countries, brand development andinvestment is required to attract relevant
traffic, however our core, car insurance,
provides us sufficient margin and potential
to create relevant brands to leverage thediversification.
Strategically, we hope to keep expanding andplay relevant roles in the markets we are in. Big
challenges and big opportunities in a businessmodel with low barriers to entry but highbarriers to lead and succeed.

FranceSpain

Martin Coriat
CEO, LeLynx

Fernando Summers
CEO, Rastreator

In 2017, the French market became more competitive foraggregators - strong competitors and a significant new entrant
helped grow the market. The French economy showed signs ofchange, growth and digitalization with insurance aggregation
seeing double digit market growth.

2017 has been a year of challenge and growth for Rastreator.
A major challenge was to improve price accuracy andconversion in our core business while maintaining growth inall business lines. And we can proudly say we have achieved
both. Conversion is at its historical maximum while we keepon improving revenues, sales and profit. Challenges remain:
improving customer experience, maximising profitability
and growing revenue for other business lines.

As for operational results, LeLynx had a positive year in 2017,with both revenue and profit growing. The business has gonefrom strength to strength; the team has grown while themarket dynamics have become more complex although more
promising. During 2017 we also made operational changes thatwill support future growth. Finally, LeLynx ranked 11th in the
Great Place to Work in France in its first year of participation!
Our 2018 priorities remain similar to 2017: focus on operational
execution, build our brand equity to grow the market andexpand our product range to make the most of media
investment and brand equity.

25 years ago, I was…
…a member of Champion Under 13 French
Junior Rugby league team. I loved thatfeeling of collective victory.
28

Admiral Group plc · Annual Report and Accounts 2017

Focus areas for 2018 are to consolidate our core business,
as we develop our data strategy, and launch our car
buying/selling vertical and mortgage brokerage model.
We will do this by improving customer experience in our
existing verticals.
I am proud of our Rastreator team; strong and committed in
our ambition and attitude.

25 years ago, I was…
…on my first solo summer abroad in
Canterbury, UK, where I stayed with alocal family – a summer that changed
my perspective!

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

25 years ago, I was…
...playing chessfor Yorkshire.

UKLouise O'Shea
CEO, Confused.com
In 2017, Confused.com celebrated 15 years of
establishing insurance comparison in the UK,
creating a growing and profitable industry andmost importantly, saving millions of customers
time and money. Much has changed since weattracted our first customer back in 2002 andas the Group’s most mature price comparison
business we have a lot to be proud of.
The UK price comparison market is developedand extremely competitive, with over 70%
of car insurance new business originatingfrom price comparison. The competitiveenvironment shows no signs of diminishing as
the top four price comparison websites spent inexcess of £110 million on TV advertising alone,
and we have seen increased acquisition costs
across most of our media channels.
2017 has continued to be a period of change
and investment, as we focus on differentiating
the Confused.com brand by establishing ourDrivers Win campaign and further developing
significant projects including our car financeproduct and car buying/selling. We believethese innovative products will reinforce ourposition as the go-to place for all things driver
related. This investment in our strategy has,
however, impacted our 2017 results, reducing
profit to £10.1 million from £16.1 million.
2017 has seen Confused.com focus its attention
on what it does best: saving drivers money
throughout their journey from buying, insuring,running and selling their vehicle. Looking to
2018, we aim to turn that driving frown upside
down by building on this strategy.

25 years ago, I was…
...graduating high school.

US
Andrew Rose
CEO, Compare.com
2017 was a year of challenges for US auto
insurance. Frequency continued to be
problematic with the blame laid at the feet ofmiles driven and distracted driving and a seriesof hurricanes added to the complications forthe industry. Insurers looked to raise prices and they did - differing amounts at different
times in different markets. Our marketing
followed the opportunities, going into andout of states and specific markets, but all thewhile growing.
Compare.com had the wonderful combinationof increasing volumes while at record low
acquisition costs in 2017. This allowed us toachieve marketing break-even early in the year
and continue it for the rest of 2017. We added
a variety of key carriers including nationallyrecognized Travelers and Allstate’s Encompass
brand. Equally important, our existing panel

members expanded through state additions,risk spectrum expansions, and the additionof the homeowners product in nearly half
our states.
All of the above allowed us to continue ournational TV advertising campaign as well as
expand digital marketing into 2/3rd of thestates. While the competitive landscaperemains largely unchanged, we are encouraged
to see our pseudo-competitors raising money
and getting new leadership. We remain ina mode of trying to grow comparison as acategory in the US before we have to directlycompete with other comparison sites.

part of Admiral’s future and hope to be ameaningful contributor in the years to come.
The key is to nudge the US comparison market
ever so slightly out of its nascent state allowing
the market size to make the reward great
for Admiral.
2018 looks to be an exciting year for Compare.
com. We remain confident, but always
cautiously optimistic, about our opportunity
for success.

2017 delivered a much smaller-than-planned
loss but, unlike 2016, it was done with overall
volumes near planned levels. This is key as we
remain ever aware that we are an important

Admiral Group plc · Annual Report and Accounts 201729

Strategic Report: Price Comparison review

Price Comparison review continued£4.1m£10.1mConfused.com
ProfitRastreator and
LeLynx profit

Price Comparison financial performance
£m

2017

2016

2015

Revenue

143.6

129.2

108.1

Profit/(loss) before tax

5.4

(2.9)

(15.5)

Confused.com profit

10.1

16.1

12.5

International price comparison result(4.7)(19.0)(28.0)

5.4(2.9)(15.5)

Group’s share of profit/(loss) before tax*1
Confused.com profit

10.1

16.1

12.5

International price comparison result(3.0)(13.4)(19.7)

7.1

2.7

(7.2)

*1 Alternative Performance Measure – refer to the Glossary for definition and explanation

Admiral operates four price comparison
businesses; in the UK (Confused.com), in
Spain (Rastreator), France (LeLynx) and the
US (Compare.com). Admiral Group owns 75%
of Rastreator and 71% of Compare.com.
Admiral’s Price Comparison businesses havegrown combined revenue by 11% to £143.6
million (2016: £129.2 million) and made a
combined profit (excluding minority interests’shares) of £7.1 million (2016: £2.7 million).
The key features of the Price Comparison
results are:
• A significantly reduced loss of £7.1 million(2016: £16.4 million) at Compare.com in
the US (Admiral Group share). Statutory
loss before tax decreased to £10.0 million
from £22.8 million. The results reflect thecontinued focus on efficient marketing
which delivered growing sales volumes• Confused.com in the UK continued toinvest in its new focus on motor-related
products and services, with increased
marketing costs leading to a reduced
profit of £10.1 million (2016: £16.1 million)

30• The European price comparison businesses
reported a record profit of £4.1 million(2016: £2.7 million) reflecting ongoing,strong performance from Rastreator
which continues to build on its multiproduct strategy and an improved result
from LeLynx.
Confused.com turnover increased
marginally to £87.1 million (2016: £85.7
million). The high level of competition in
the price comparison market and pursuit of
the new strategy of Drivers Win, required
a significant level of investment andcontributed to significantly lower profits
during 2017.
The combined revenue from the European
operations increased by 23% to £44.4 million(2016: £36.2 million), reflecting continued
growth in traffic and quotes provided tocustomers and improved conversion rates.
Both Rastreator and LeLynx continue toenjoy strong brand recognition in theirrespective markets.

Admiral Group plc · Annual Report and Accounts 2017

£7.1m
Compare.com
Loss

In the US, Compare.com exceeded its targetof ‘marketing break-even’ (revenue minus
marketing expenses) in selected states byachieving the goal nationally, and for theyear as a whole. The business delivered
substantial improvements in its main key
performance indicators, including reduced
cost per quote and sale metrics while at thesame time growing quote and sales volumes.
Compare.com’s plans for 2018 and beyond
include continuing to scale marketing
activity while further enhancing conversion
and improving the panel of insurers andcustomer journey. The Group anticipatesthat the Group’s share of Compare.com’s
losses for 2018 will be in the range of$5–$15 million.
Preminen, the Group’s price comparison
venture with Mapfre, continues to explore
price comparison in new markets overseas
and has recently launched a price comparison
operation in Mexico.

Price Comparison
regulatory environment
Confused.com is regulated by the Financial
Conduct Authority (FCA) as an insuranceintermediary and is subject to all relevantintermediation rules, including those on
solvency capital.
The European operations are currently
structured as branches of UK companies,
with the UK insurance intermediarypermission passported into Europe. Further
information on the potential impact of
Brexit on the European price comparison
operations can be found on page 31.
Compare.com is a regulated insurance
agency domiciled in Virginia, US, andlicensed in all other US states.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Other Group items

Other Group items financial performance

Brexit continues to bring risks to the Group,
which include:

£m

2017

2016

2015

UK Commercial Vehicle operating profit

1.1

2.0

1.5

Admiral Loans

(4.4)

–

–

Other interest and investment income

8.4

13.4

6.5

Share scheme charges(35.2)(31.5)(27.0)

Business development costs

(5.2)

(5.2)

(1.8)

Other central overheads

(6.2)

(4.1)

(5.6)

Finance charges(11.4)(11.4)(11.1)

Group’s share of other Group items result(52.9)(36.8)(37.5)The UK commercial vehicle result relates
to the Gladiator broking business which is
migrating its portfolio to being underwritten
within the UK Insurance business of theGroup. Future results from the business are
expected to be insignificant.
During the first half of 2017, the Group
successfully rolled out the first release of
its new technology platform for UK personalloans. The business currently distributes
unsecured personal loans and car financethrough the price comparison channel andalso direct to consumers via the Admiralwebsite. The Group expects the business tomake small losses in its early phase mostly
as a result of high fixed costs relative to thecurrent scale of the business.
Other interest and investment income of£8.4 million (2016: £13.4 million) includes£5.4 million (2016: £Nil) of realised gains
on investments held by the Group parent
company and unrealised losses of £2.3
million (2016: £6.5 million unrealised gains)in respect of forward foreign exchange
contracts.
Share scheme charges relate to the Group’s
two employee share schemes (refer to note
8 to the financial statements). The increasein the charge is due to an increase in thenumber of awards reflecting the increasing
Group headcount. The Group does not
anticipate further significant increases in thevolume of awards.

Business development costs include costs
associated with potential new ventures,
including the launch of Admiral Travel
insurance and investment in Preminen
Ventures, including the launch of a pricecomparison operation in Mexico. Other
central overheads of £6.2 million are£2.1 million higher than 2016 (£4.1 million),as a result of a number of non-recurringcosts relating to ongoing Group projects.

• The potential for market volatility,
particularly in interest and exchange rates• The potential for the uncertainty or the
emerging terms of exit to trigger orexacerbate less favourable economic
conditions in the UK and other countries inwhich Admiral operates (though it is worth
noting that car insurance has tended to beresilient to economic downturns)• Potential changes to the rules relating to
the free movement of people between the
UK and the remaining EU member states.
At present, the Group does not foreseea material adverse impact on day to day
operations (including customers or staff),
nor does it expect the costs associated withany Group restructure to be material in thecontext of the Group.

Finance charges of £11.4 million (2016:£11.4 million) mainly represent intereston the £200 million subordinated notes
issued in July 2014 (refer to note 6 to thefinancial statements).

UK Exit from the European Union(‘Brexit’)
Although uncertainty remains as to theoutcome of the Brexit negotiations between
the UK and the EU, the Group has adopted aprudent approach that will ensure it is well
prepared in the event of a ‘hard’ Brexit which
includes being ready to deal with the likely
loss of passporting rights from the UK and
Gibraltar into the EU.
Applications for new licenses for insurance
and intermediary companies have been madeto the Spanish regulator, with approvals
expected in 2018.
Separately, two new locally licensed
intermediaries will be established throughwhich Rastreator and LeLynx will trade in
Spain and France.

Admiral Group plc · Annual Report and Accounts 201731

Strategic Report: 25 years investing in our future

25 years of investing in our future“The Group has continued to grow strongly with turnover increasing by 15%
to £2.96 billion. Customer numbers increased 11% to over 5.7 million"
UK Insurance
UK Motor | UK Household

UK Insurance

4.62m

£2.4b

£87m

£10.1mUK
Customers

UK
Price
Comparison

UK
TurnoverUK
TurnoverUK Profit

Turnover grew by 14% to £2.4 billion. Customer
numbers increased by 12% to 4.62 million, due
to growth in both Motor and Household. UK
Insurance profit increased to £465.5 million.

UK Price Comparison
New strategy of Drivers Win required asignificant level of investment and contributed
to lower profits in 2017.

Europe

£44m

£4.1m

96%

(£7.1m)increase inbuy clicks

US
Loss

EuropeanTurnoverUS

EuropeanProfitEurope Price Comparison
Record profit reflects continued growth in trafficand quotes provided to customers and improved
conversion rates.

US Price Comparison
Compare.com achieved marketing break-evennationally and delivered substantial improvements
in its main key performance indicators, while
growing quote and sales volumes.

International Car Insurance
EuropeEuropean Car Insurance

0.85m
EuropeanCustomers£275m
EuropeanTurnoverA record profit in the Group’s Italian business
ConTe, which also grew its customer base to 0.5
million customers.
Improved operating ratios.

0.18m
US

32

US
Customers

Admiral Group plc · Annual Report and Accounts 2017

£175m
US Turnover

US Car Insurance
A significant improvement in Elephant Auto’s
result, despite the impact of hurricane Harvey
in Texas.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Principal risks and uncertainties

The Board, with support from the Group Risk Committee and the Group
Risk Department, undertakes a regular and robust assessment of theprincipal risks. These risks have been summarised as those which would
threaten its business model, future performance, liquidity and solvency.
The table below sets out the principal risks which Admiral has identified through its Enterprise Risk Management
Framework (‘ERMF’). The impact of those risks and actions taken to mitigate them are explained below.

Insurance Risk
Reserving risk in the UK and International Insurance
Admiral is exposed to reserving risk through its underwriting of motor and household insurance policies. Claims reserves in the financial
statements may prove inadequate to cover the ultimate cost of claims which are by nature uncertain.
This is a particular risk for motor insurance liabilities, where the amount payable for bodily injury claims (particularly large claims) can change
significantly during the lifetime of the claim as a result of external risks such as changes in Ogden rates and impacts of increased levels of
Periodic Payment Orders (PPO).
ImpactMitigating Factors

Adverse run-off leading tohigher claims costs in thefinancial statements.

Admiral has a conservative reserving policy and continues to hold a material margin
in its financial statement claims reserves above actuarially determined best estimates
to cover adverse developments.

PPO claims are capitalintensive owing to increased
uncertainty of the cost ofsignificant claims over alonger term.

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

Premium risk & Catastrophe risk
The Group is exposed to the risk that claims cost on future business is higher than allowed for in the premiums charged to customers.
The Group is exposed to the risk of increased claims and reduced business volumes following both a UK and European recession.
Admiral is exposed to the risk of high losses due to the occurrence of man-made catastrophes or natural weather events.
ImpactMitigating Factors

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

There are a number of aspects which contribute to Admiral’s strong UK underwriting results, including:•Experienced and focused senior management and teams in key business areas including pricing andclaims management

A large flood or windstorm
could cause extensive
property damage (both motor
and household) to a significant
proportion of the portfolio,
leading to a large total claims
cost in relation to the event.

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

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

Continuous appraisal of and investment in staff, systems and processes.

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

Admiral Group plc · Annual Report and Accounts 201733

Strategic Report: Principle risks and uncertainties

Principal risks and uncertainties continued

Insurance Risk continued
Reduced availability of co-insurance and reinsurance arrangements
Admiral uses proportional co-insurance and reinsurance across its insurance businesses to reduce its own capital needs (and increase
return on the capital it does hold) and to mitigate the cost and risk of establishing new operations.
There is a risk that support will not be available in the future if the results and/or future prospects of either the UK business or(more realistically) one or more of the newer operations are not satisfactory to the co- and/or reinsurers.
ImpactMitigating Factors

A potential need to raise
additional capital or reduce
dividends to support anincreased underwriting share.
This could be in the form ofequity or debt.

Admiral mitigates the risk to its reinsurance arrangements by ensuring that it has a diverse rangeof financially secure partners.
Admiral continues to enjoy a long-term relationship with some of the world’s largest reinsurers.
Admiral also has relationships with a number of other reinsurers.
As well as UK Motor, long-term arrangements are also in place for UK Household and International
businesses.

Return on capital might reducecompared to current levels.

Potential diminution of other revenue
Admiral earns other revenue from a portfolio of products and other sources.
The level of this revenue could diminish due to regulatory or legal changes, customer behaviour or market forces.
ImpactMitigating Factors

Lower profits from insurance
operations and lower returnon capital.

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

Group Risk
Erosion of competitive advantage in UK Car Insurance
Admiral typically maintains a significant combined ratio advantage over the UK market. This advantage and/or the level of underwriting
profit (and associated profit commission) could be eroded.
This risk could be exacerbated by irrational competitor pricing and/or new technologies used within the insurance market. It may arise
from new or existing competitors.
ImpactMitigating Factors

A worse UK Car Insurance resultand lower return on capital
employed.

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

Track record of innovation and ability to react quickly to market conditions and developments

A sustained and uncorrected
erosion of competitive
advantage could affect theability of Admiral to extend
its reinsurance arrangements,
which might in turn require
Admiral to hold more capital.

•

Keen focus on maintaining a low-cost infrastructure and efficient acquisition costs.

34

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Failure of geographic and/or product expansion
Admiral continues to develop the UK Household, non-insurance operations such as Loans and expand its overseas operations.
One or more of the operations could fail to become a sustainable, profitable long-term business.
Product expansion into new areas could lead to unprofitable business and increased regulatory risk.
Growth in business plans exceeds the scale of infrastructure of the operation.
ImpactMitigating Factors

Higher than planned losses(and potentially closure
costs) and distraction of
key management.

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

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

New price comparison businesses have aligned their marketing investment with the extent of
improvement in key performance indicators such as average cost per quote and conversion ratio.
The Group also accepts partial disposals of equity to share start-up losses with partners.
The Directors are mindful of management stretch and regularly assess the suitability of theinfrastructure and management structure in place for Admiral’s new UK and International operations.

Reliance on UK price comparison distribution channel
Admiral is dependent on the four main UK price comparison websites as an important source of new business and growth.
Growth in this distribution channel could slow, cease or reverse, or Admiral could lose one or more of the websites as a source of customers.
ImpactMitigating Factors

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

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

However, a more competitivemarket might benefit the car
insurance business throughlower acquisition costs.

Admiral also contributes materially to the revenues of other price comparison businesses andtherefore it is not considered probable that a material source of new business would be lost.

Admiral Group plc · Annual Report and Accounts 201735

Strategic Report: Principle risks and uncertainties

Principal risks and uncertainties continued

Counterparty Risk

Admiral is primarily exposed to credit risk in the form of a) default of reinsurer; b) failure of banking or investment counterparty.
One or more counterparties suffer significant losses leading to a credit default.
ImpactMitigating Factors

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

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

Admiral would also need toensure that it continues tohave sufficient liquid assets
to meet its claims and otherliabilities as they fell due.

Concentrations of credit risk are managed by investing in liquidity funds which invest in a wide rangeof short duration, high quality securities. Cash balances and deposits are placed only with highly rated
credit institutions. Some long-term investments are held in Government bonds to further mitigate theexposure to credit risk.
Admiral considers counterparty exposure frequently and in significant detail, and has in placeappropriate triggers and limits, to mitigate exposure to individual investment counterparties.

Market Risk

Market risk arises as a result of fluctuations in the value of market prices of investment assets, liabilities, or the income from the Group’s
investment portfolio.
ImpactMitigating Factors

Market volatility (notably very significant
reductions in risk free interest rates) canadversely impact the Group's solvency due toan increased regulatory valuation of claims
liabilities, in particular in relation to longer
dated potential PPO claims.

The Group’s low appetite for market risk results in an investment strategy that focuseson preservation of the amount invested, low volatility of returns and strong liquidity.
The majority of the portfolio is invested in high quality fixed income and other debt
securities, and money market funds in order to achieve these objectives.
The Group’s mitigation for interest rate risk resulting from long duration PPO liabilities
includes a comprehensive level of reinsurance cover and continuing focus on strategies
to ensure that the risks relating to both assets and liabilities are appropriately matched.
The Group has relatively low exposure to net assets currencies other thanpounds sterling.

36

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

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

Information security
Business continuity
Customer outcomes••

Outsourcing
Project risk

ImpactMitigating Factors

The risk of reductions inearnings and/or value, throughfinancial or reputationalloss, from inadequate or
failed internal processes
and systems, or from people
related or external events.

We aim to attract, retain and motivate quality staff to deliver quality customer service and achievebusiness objectives.

In particular:
Potential customer detriment
and/or potential regulatorycensure/enforcement and/or reputational damage as aresult of Admiral’s action.
Risk to Admiral occurs throughthe losses that could occur if
the internal control framework
to manage these businessprocesses fails.
Availability of systems and data
Integrity of data
Confidentiality of data
outcomes

Succession planning is based on targeted recruitment, identifying potential leaders through internal
development, talent management and retention processes.
Internal controls are in place and monitored to mitigate the risk and the control framework isregularly reviewed.
The internal audit function has an agreed cycle of testing of the adequacy and effectiveness of controls.
Regular review of the effectiveness of the Group’s IT capability by Executive management and the Board.
Enhanced project governance and oversight of new systems implementations with external specialist
review and assurance where required.
Admiral continues to invest in its security programme in order to mitigate information security risks
Within IT there is a major incident team which is tasked with maintaining system availability, withbusiness continuity and disaster recovery plans in place.
Data is backed up to allow for its recovery in the event of corruption.
Admiral monitors its outsourced and offshore activities, through ongoing supplier relationship andperformance management, with regular due diligence reviews.
Admiral operates the three lines of defence model for overseeing its products, processes and service.
At each stage of the customer journey customer outcomes are monitored, managed and reported inorder to mitigate customer detriment.
Admiral purchases a range of insurance covers to mitigate the impact of a number of operational risks.

Legal and regulatory risk
Failure to comply with legal or regulatory requirements and/or changes.
Unexpected regulatory changes are introduced.
ImpactMitigating Factors

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

Mitigated by regular review of the Group’s compliance with current and proposed
requirements (including the General Data Protection Regulation) and interaction
with regulators by Executive management and the Board.
There is investment in resources to prepare for a Partial Internal Model application.
The project will have regular progress updates with the Board and Regulators.

The Strategic Report was approved by the Board of Directors and signed on its behalf by:

David Stevens, CBE
Chief Executive Officer
27 February 2018

Admiral Group plc · Annual Report and Accounts 201737

Strategic Report: Being a responsible business

Being a responsible business“We are continuously looking forways to improve the impact wehave as a business”

David Stevens, CBE
Chief Executive Officer

As we continue to grow we must ensurethat we do our utmost to continue to be a
responsible business. At its core insurance
serves a real social purpose, protecting people
from the adverse impact of potentially lifechanging events. That is why we continue
to base our business model around building
sustainable operations for the long-term.
In addition to providing protection for ourcustomers we also aim to contribute positively
to the wider communities in which we operate
and minimize our impacts on the environment.

This year Admiral celebrates its 25th Birthday
and we aren’t resting on our laurels, we arecontinuously looking for ways to improve theimpact we have as a business, whether thatis the formation of the Ministry of Giving tofacilitate giving back to the local community,
the employee assistance programme toaid our employees through difficult times
or the Admiral Green month to encourage
people to think more about their impact on
the environment.

Our approach
We take a materiality approach to our corporate social responsibility reporting,where we identify the areas that have the most impact on our stakeholders.
This allows us to report effectively on the topics that matter most.
Our business is centred on four
significant stakeholders; our customers,
our people, our communities, andour environment. It is these four
stakeholders who drive the corefocus of our corporate social
responsibility strategy.
If you are interested in finding out more
about our impact as a business then our
Corporate Social Responsibility Report
can be found on our website.

Customers

PeopleCommunities

Environment

38

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Our Customers

Our Communities

Our Environment"We put our customers at thecentre of everything we do”“We also encourage our staff
to get their hands dirty andhelp local causes”“This year we held our first
Admiral Green Month, reachingout to staff to make Admirala greener place to work.”

Simply put, without our customers wewouldn't have a business, so we put ourcustomers at the centre of everything
we do.

We play a positive role in our communities
through charitable giving and sponsorshipof local community partnerships. As an
employer, we promote payroll giving andprovide matched funding for eligible staff
initiatives. In 2017 Admiral Group donated£140,000 to local and national charities.

Our Environmental Policy is alignedwith our policy of sustainable growth as
outlined in the Group business model.

We are so passionate about making
the customer experience a great
one that Cristina Nestares, our CEO
of UK Insurance, produces a monthly
commentary on all things 'customer'.
This looks at fantastic customer stories,changes to processes that have helped
improve the customer experience andincludes great customer comments.
This is shared across the whole Groupto inspire and motivate.
During the year we have restructured
our customer quality departments
to form a new customer assurance
team that delivers not only effective
complaints handling but also includes
a prevention team who deal withauditing, monitoring and training
our customer facing staff to improvecustomer experience.
Our customers share a lot of
personal data with us and we have a
responsibility to keep this safe. We
do this by training all our staff on our
Data Handling Process and Data Policy,
and ensure that every member of staff
receives training on cyber security.

95%

of customers would
renew following
a claimDonations to good causes£140,000(2016: £110,000)
This year we have established the Admiral
Ministry of Giving in the UK with the aimof complementing the way that our staff
already give back to the community. Overa two year period the Ministry will givesignificant donations to a small number of
local charities across South Wales, chosen
by our staff, totalling £400,000.
Our involvement in our communities
doesn’t just consist of monetary
donations, we also encourage our staff
to get their hands dirty and help local
causes. This year we saw a team from UK
customer services helping a DIY SOS big
build, a team from UK claims volunteering
at an animal shelter and countless
marathons ran.

84%

of staff say they feel
good about the ways
we contribute to thecommunity

We are committed to:• Raising and maintaining employee
awareness of, and ensuring that
all of our people are actively
engaged in, activities to reduce ourenvironmental impact• Measuring and monitoring key
aspects of our environmental
performance and regularly reviewing
progress to reduce the amount of
resources consumed per employee.
This year we held our first Admiral
Green Month. This month was all about
reaching out to staff to make Admirala greener place to work, and minimise
the impact we have on the environment.
Highlights of the month included atalk from our partners Size of Wales,
who seek to protect the rainforestand 1,500 employees signing ourenvironmental commitment.
GHG gas emissions

3,642 CO2e(2016: 3,764 CO2e)

86%of staff agree that weare working to reduce
our environmental
impactAdmiral Group plc · Annual Report and Accounts 201739

Strategic Report: Being a responsible business

Being a responsible business continued
Our People"I feel like a proud father when I think about all the amazing things that our staff do for each other,for customers and for our local community. They are an inspiration to me and I know they inspire
each other and people in their communities." – Ceri Assiratti, Head of People Services

94%

of staff think Admiralis a friendly place
to work

SafetyCommunication

We pride ourselves on the relaxed, funand most importantly safe atmosphere at
Admiral and we have a number of initiatives
in place to ensure all our staff feel safe
coming to work. Recently we introduced
a Company-wide Employee Assistance
Programme (EAP) to provide proactive
assistance to all UK employees on a range
of issues from eldercare to face-to-facecounselling. In addition, we have an extensive
whistle blowing policy to prevent fraud,
theft or ethically questionable practices.
This is explained fully to staff via thecompany intranet.

Communication is at the forefront of what
we do and we strive for open and honest
communication at all levels of the business.
This focus has a range of scales from annual
Staff General Meetings where the senior
managers address all staff to talk about thecompany’s performance and business plan,
to friendly forums where small numbersof individuals from different departments
will get together to discuss a range of
topics. In addition there are several digitalcommunications channels, ranging from amonthly Group-wide online chats to an 'Ask
David' website where anyone in the company
can submit a question for CEO David Stevens.

Going the extra mile
We encourage our staff to use their initiative andgo the extra mile for the customer, below is oneof the many notable examples from 2017:
One of our policyholders was involved in an accident
and required an urgent settlement to allow her toget back and forth to chemotherapy treatment. The
customer didn’t have a hire car ancillary, however, wethought outside the box and hired the customer a carfor a week to allow her time to purchase a new car.
On the day of the claim, the customer was too ill
to get her belongings out of the car and a family
member was going to help her. We kept the policy
active and didn’t instruct salvage until the car was
emptied. This took the pressure off the customer andallowed her time to remove her belongings in a timeframe that suited her.
The claim was reported to us at 10:40am and wassettled and paid by 12:30pm – less than two hours.

40

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

The fun we had last year
All teams in Admiral have regular awaydays to build team spirit and inspire andencourage people to enjoy coming towork. All departments have a budget perhead for fun money, which can be put
towards afternoons out. Examples ofafternoons out taken by teams in the last
12 months include; circus skills at NoFit
State Circus, pizza making, completing a
muddy assault course, duck herding andmany more.

Equality
We believe that all employees have the rightto be treated equally, with dignity, integrity
and respect. This year we have updated
our Equal Opportunities Policy with thesupport of The Advisory, Conciliation andArbitration Service (ACAS) to create a morecomprehensive policy based on Diversity
and Inclusion. A new Diversity and Inclusion
training programme was also rolled out for all
staff to reflect this new revised policy.
People Services executives make our Equal
Opportunities and Discrimination Policy clear
to all members of staff during induction,and it is also available in our Big Book, which
outlines company policy for all staff.

Diversity
We are very proud of our diversity at
Admiral and anti-discrimination issomething we take very seriously. We
provide a supportive working environment
for all of our employees. All of our People
Services executives receive training indiversity and equal opportunities; thisincludes our confidential advice and support
officers. Recently we have set up a diversity
working group who focus on promoting
diversity across genders, ethnicities anddisabilities. Promotions and opportunities
are made on a merit basis and are open to
everyone in the organisation with the rightskills regardless of age, disability, gender,
racial or ethnic origin, religion or beliefs orsexual orientation.

We fully support the aims of the Modern
Slavery Act and seek to ensure slavery andhuman trafficking does not feature in ourbusiness or supply chain, more information
about our commitment to preventing
modern slavery can be found in our Modern
Slavery Statement on our corporate website.

Gender pay gap
We are confident men and women are
paid equally for performing the samerole, but we acknowledge that there isa difference in proportion of men andwomen at differing levels of the Group. We
encourage women to advance professionallyand offer opportunities to do this fromfunding support for training to mentorshipprogrammes. We endeavour to make it easierfor both men and women to reconcile theirwork lives with their family lives.
Further information on our gender pay gap
can be found in our Gender Pay Gap Reporton our website www.admiralgroup.co.uk
Median Gender pay gap 2017

5.1%

Rewards
We try to inspire staff to go above andbeyond in their everyday roles, and rewards
and recognition are a key part of that.
One way we recognise our employees’
achievements is with different prestigious
internal awards throughout the year.
We also encourage everyday recognition,
through departmental schemes such as
the hi-five scheme. Our customers share a
lot of personal data with us and we have a
responsibility to keep this safe. We do thisby training all our staff on our Data Handling
Process and Data Policy, and ensure thatevery member of staff receives training on
cyber security.
Since 2005 employees at Admiral have been
awarded shares in the Group’s two SharePlans. The first is the All Employee Approved
Share Incentive Plan (SIP). In the SIP every
member of staff receives the same numberof shares regardless of seniority – the Group
awards up to £3,600 worth of shares to eachstaff member every year.
The second scheme that the Group runs is
the Discretionary Free Share Scheme (DFSS).
The DFSS was also set up in 2005 when theGroup floated to complement the SIP and toenable the Board of directors to reward staff
with further shares in the Group.
DFSS shares are awarded to managers andsenior roles within the UK and overseas fromthe CFO to Senior Customer Representatives(SCR). The amount awarded depends upon
the employees position and also upon thenumber of shares available to the scheme.

Admiral Group plc · Annual Report and Accounts 201741

Corporate Governance: Governance overview

Governance overview

Dear Shareholder,
On behalf of the Board I am pleased topresent the Corporate Governance Reportfor the financial year ended 31 December
2017. The focus of the Board continues to beon maintaining high standards of corporate
governance which it achieves by ensuring
the appropriateness and effectivenessof the Group’s management and control
framework. This Report sets out theAdmiral framework of governance and theapproach the Board has taken during 2017to promote the standards of good corporate
governance that are rightly expected byour shareholders.
We believe that having a sound corporate
governance framework enables effective
and efficient decision making and promotes
the right balance of skills and experience
to assess and manage the risks in themarkets in which the Group operates. An
external review of the Group’s governancearrangements was carried out during
the year and the completed report wasconsidered by the Board at the January 2018
Board meeting. The recommendations,contained in the report, to strengthen theGroup’s existing governance arrangements
so they remain fit for purpose in the future
will be an area of focus for the Board in 2018as new entities are established and board
constituents change.

Andy Crossley joined the Board as a NonExecutive Director and member ofthe Audit Committee in February 2018.
Andy has broad financial services andinsurance experience having served mostrecently on the Board of Domestic andGeneral. The process of succession planningis ongoing as the composition and balanceof the Board is reviewed to ensure that
continuity is maintained, and appropriate
skills and experience are added.
As the Board undertook an externallyfacilitated evaluation last year, the processof evaluating the Board’s performance
this year consisted of each Board member
completing a questionnaire detailing specificareas of focus for the Board including
succession planning and Board composition,
the priorities for change, the impact ofprevious evaluations, and Board expertise tomeet future challenges. The results of thecompleted questionnaires then formed thebasis for discussion when the results of theevaluation and areas for development werediscussed and considered by the Board at
the meeting in January 2018. A summary of
the outcomes of the Board’s discussion andconsideration of the results of the evaluation
are set out in more detail at page 48 of
this report.

Changes to the composition of the Board in2017 have meant that succession planninghas continued to be a key area of focus.
I succeeded Alastair Lyons as Chairman in
April 2017 after he retired from the Board
at the AGM in April 2017 after serving for 16
years. Due to a change in her executive role,
Non-Executive Director and member of the
Audit Committee, Penny James, also stepped
down from the Board in September 2017.

42

Admiral Group plc · Annual Report and Accounts 2017

This Corporate Governance Report isstructured in order to demonstrate toshareholders how the Board has sought
during the year to comply with each sectionof the Code - Leadership; Effectiveness;
Accountability; and Relations with
Shareholders. Remuneration is dealt within the separate Remuneration Report.

Annette Court
Chairman
27 February 2018

Introduction

Strategic Report

Corporate Governance

Board of Directors

Financial Statements

Additional Information

AC

Audit Committee member

GRC

Group Risk Committee member

Committee Chair

NGC

Nomination and GovernanceCommittee member

Senior Independent Director

RC

Remuneration Committee member

Annette Court (55)
ChairmanGeraint Jones (41)
Chief Financial Officer

GRC

Background and experience: Geraint’s
responsibilities include finance, actuarial,
investments and investor relations. He joined
Admiral in 2002 and held a number of seniorfinance positions including Head of Finance,
before being promoted to Deputy Chief
Financial Officer in January 2012 and Chief
Financial Officer in August 2014.

RC

NGC

Current Appointments: Non-Executive Directorof Jardine Lloyd Thompson Group plc.
Background and experience: Between 2007
and 2010 Annette was CEO of Europe General
Insurance for Zurich Financial Services and amember of the Group Executive Committee.

25 years ago…
…as Admiral’smarketing manager,
with two dozen hungry
salesmen to feed, I
was worrying whether
Admiral’s first ad, a half
page in the Western
Mail, would set thephones on fire (Itdidn’t, but fortunately
others did).

Annette is former CEO of the Direct Line Group(formerly known as RBS Insurance). In this role
Annette was also a member of the RBS Group
Executive Management Committee.
Annette has previously served as a member
on the Board of the Association of British
Insurers (ABI).
Appointed in 2012
	(originally appointed to the Board
in 2012, subsequently appointed
as Chairman in 2017)

A Fellow of the Institute of Chartered
Accountants in England and Wales, Geraint
spent the early part of his career as an external
auditor at Ernst & Young and KPMG.
Appointed in 2014

David Stevens, CBE (56)
Chief Executive Officer
GRC

25 years ago, I was…
…working as anaccount manager
at IBM.

Current Appointments:
Trustee of the Waterloo Foundation
Background and experience: David is a founderDirector of Admiral and was recruited in 1991 to
set up the Admiral business.
Prior to joining Admiral David worked at
McKinsey & Company, in the Financial Interest
Group, and Cadbury Schweppes in the UK and
the USA.

25 years ago…
…aside from being
in lower sixth I was
playing guitar in apunk/heavy metal
band. We were
dreaming of big
things, though sadly
it wasn’t to be.

David has an MBA from INSEAD and he wasawarded a CBE in 2010 for services to businessand the community in Wales.
	Originally appointed to the Board in 1999,
subsequently appointed as CEO in 2016
Admiral Group plc · Annual Report and Accounts 201743

Corporate Governance: Board of Directors

Board of Directors continued

Justine Roberts, CBE (50)
Non-Executive Director
RC

Current Appointments:
CEO & Founder, Mumsnet.com & Gransnet.com
Advisory board member of Britain Thinks andPortland Communications.

25 years ago, I was…
…watching my now
grown up son take his
first steps.

Background and experience: Justine founded
Mumsnet in 2000 and is responsible forcreation, strategic direction and overallmanagement. In May 2011, Justine founded
Gransnet, a sister site to Mumsnet, for the over50s. Before that Justine was a freelance footballand cricket journalist for the Times and Daily
Telegraph, after working for Deutsche Bank,
managing the South African equity operationin US.

25 years ago, I was…
…eagerly awaiting theimminent arrival of our
first child.

Appointed in 2016

Colin Holmes (52)Senior Independent Director
AC

NGC

Current Appointments:
Chair of the British Heart Foundation Retail
Committee
Member of the Chartered Institute ofManagement Accountants Advisory Panel
Background and experience: Previous roles
include Chairman of GoOutdoors and NonExecutive Director at Bovis Homes Group plc.
Until 2010 Colin was a member of the Executive
Committee of Tesco plc and during a 22 year
career at Tesco held a wide range of positions,
including UK Finance Director and CEO of
Tesco Express. He is a Fellow of the Chartered
Institute of Management Accountants.
Appointed in 2010

44

Owen Clarke (54)Non-Executive Director

Admiral Group plc · Annual Report and Accounts 2017AC

25 years ago, I was…
…a Global Economistat S. G. Warburg.

RC

NGC

Current Appointments:
Chief Investment Officer of Equistone Partners
Europe (formerly Barclays Private Equity, ‘BPE’)
Background and experience: Previous Directorof Admiral (1999-2004). Led BPE’s participationin the Management Buy Out.
Appointed in 2015

Introduction

Strategic Report

Corporate Governance

Financial Statements

AC

Audit Committee member

GRC

Group Risk Committee member

Committee Chair

NGC

Nomination and GovernanceCommittee member

Senior Independent Director

Jean Park (63)Non-Executive Director
GRC

Additional Information

RC

Remuneration Committee member

Andy Crossley (61)Non-Executive Director

RC

ACCurrent Appointments:
Non-Executive Director of Murray Income
Trust plc

Current Appointments:
Non-Executive Director of Vitality Health & Life

Non-Executive Director of the National House
Building Council
Background and experience: Jean was Group
Chief Risk Officer at the Phoenix Group from2009 until June 2013, during which time sheheld responsibility for the Group’s relationshipwith the regulator and founded the Board
Risk Committee. Previously, she was Risk
Management Director of the Insurance andInvestments division of Lloyds TSB and,before that, Head of Compliance and Auditat Scottish Widows.

Background and experience: Andy has 31 years’
experience within the financial services sector,
most recently as Chief Financial Officer at
Domestic & General Group from 2014 to 2017.
He spent 14 years at Prudential Plc from 2000
as Director, Group Finance; Group Chief Risk
Officer; and CFO and Deputy Chief Executiveof Prudential UK. He previously held senior
manager roles at Legal & General Group Plc,
where he was Group Financial Controller, and
Lloyds Bank Plc. Andy is a Fellow of the Instituteof Chartered Accountants.

25 years ago, I was…
…doing my junior year
abroad in Venice, Italy.

Appointed in 2018

Jean is a Member of the Institute of Chartered
Accountants of Scotland.
Appointed in 2014

Manning Rountree (45)Non-Executive Director

25 years ago, I was…
…working for Scottish
Life (a life insurer andasset manager, nowpart of Royal London)as Assistant General
Manager Finance.

25 years ago, I was…
…the Finance Directorof the Agricultural
Mortgage Corporation,
which provided
mortgages to farmers.

GRC

Current Appointments:
Chief Executive Officer and Director of White
Mountains Insurance Group, Ltd.
Director of Build America Mutual
Assurance Company.
Background and experience: Manning joined
White Mountains in 2004 and is the former
President of White Mountains Advisors andWhite Mountains Capital.
Prior to joining White Mountains, Manningspent two years with Putnam Investments andthree years with McKinsey & Company.
Appointed in 2015

Admiral Group plc · Annual Report and Accounts 201745

Corporate Governance: Governance Report

Governance ReportCompliance with the UK Corporate Governance CodeDuring the year under review and up to the date of this report, the Group complied with all the provisions of the UK Corporate
Governance Code 2016 (the Code) other than the exception noted below.
• Provision C.3.1 – (regarding having at least three independent Non-Executive Directors serving on the Audit Committee) PennyJames, who served as an independent Non-Executive member of the Audit Committee, stepped down as a Non-Executive Director on
8 September 2017 following a change in her Executive role. From this date up to the appointment of Andy Crossley as an independent
Non-Executive member of the Board and Audit Committee on 27 February 2018 the Audit Committee only had two independent
Non-Executive members and did not meet the Code requirements to have at least three independent Non-Executive members. The
Group fully complied with this requirement apart from this period from 8 September 2017 to 27 February 2018 and held three meetings
during the period, two of which Andy Crossley attended.

Leadership
The Role of the Board
The Board is the principal decisionmaking forum for the Group providing
entrepreneurial leadership, both directly
and through its Committees, and delegating
authority to the Executive team. The
Board is responsible for organising anddirecting the affairs of the Group in amanner that is most likely to promote its
success for the benefit of its members
as a whole. The Board is accountable toshareholders for setting and achieving
the Group’s strategic objectives; for thecreation and delivery of strong sustainablefinancial and operational performance; forensuring that in carrying out its duties theGroup’s legal and regulatory obligations
are being met; and for ensuring that it
operates within appropriately establishedrisk parameters. The Group’s UK regulated
entities are responsible to the Financial
Conduct Authority (FCA) and the Prudential
Regulatory Authority (PRA) for ensuring
compliance with the Group’s UK regulatory
obligations and that dealings with the FCA
and PRA are handled in a constructive, cooperative and transparent manner. Similar
provisions apply in respect of the Group’s
international businesses with regard to therelevant regulatory authorities in thoseoverseas jurisdictions in which the Groupalso operates.

46

The Board has adopted a formal scheduleof matters reserved for the Board’s
consideration. This is monitored by theCompany Secretary and reviewed by the
Board on an annual basis. Specific mattersreserved to the Board include the approval of:• The Group’s long-term objectives andcorporate strategy• Operating and capital budgets, financial
results, and any significant changes toaccounting practices or policies• The Group’s capital structure• Results and financial reporting• The system of internal control and risk
management• The Group’s overall risk appetite• Changes to the structure, size andcomposition of the Board, including new
appointments• Succession plans for the Board and senior
management• Dividend policy and proposals for dividend
payments• Major acquisitions, disposals, and othertransactions outside delegated limits• The annual review of its own performanceand that of its Board Committees• Annual review of the Group’s Board policies• The review of the Group’s overall corporate
governance arrangements

Admiral Group plc · Annual Report and Accounts 2017

Board Activity During 2017
The Board met on seven occasions in 2017with all these meetings being held overtwo days and one of the meetings being aseparate strategy meeting held off-site. In
addition to the seven scheduled meetings,
there were five additional unscheduled
telephone meetings that were called atshort notice. The majority of these meetings
were called in relation to considerationof the change to the Ogden discount rateannounced in February 2017 and the impact
this would have on the Group.
At each scheduled meeting the Board
receives updates from the Chief Executive
and Chief Financial Officer as to the financial
and operational performance of the Groupand any specific developments in the areasof the business for which they are directly
responsible and of which the Board should beaware. Items that are considered on an annual
basis are included in an annual schedule ofrolling agenda items to ensure that they are
considered at the appropriate point in thefinancial and regulatory cycle. Meetings are
structured so as to allow for consideration anddebate of all matters. The Head of the Group’s
European insurance businesses and the CEOof UK Motor (respectively Milena Mondini andCristina Nestares) together with the Chief
Risk Officer (James Armstrong) are invited
to attend every Board meeting and regular
Board dinners. This has proved an effectivemeans of ensuring that senior managers
below Board level have exposure to and gain
experience of the operation of the Board.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

In addition to the regular consideration of financial and operating performance and risk management and compliance, the Board received
presentations on a variety of topics including updates from the management teams of each of the Group’s businesses and regular reviews ofSolvency II related activities such as progress of the Internal Model Application Process (IMAP).
In addition to her visits to the Group’s UK operations, the Chairman has sought to visit each of the Group’s overseas operations this year and
Non-Executive Directors are invited to join either her or the Chief Executive on one or more of their overseas visits each year. In addition, theNon-Executive Directors and the Chairman met during the year without the Executive Directors being present. Non-Executive Directors also
attended briefing sessions in Cardiff on different aspects of the Group’s UK business. In order to increase their understanding of the depth
and breadth of management across the Group below Board level, the Non-Executive Directors and the Chairman also attended a dinner withmembers of the Group’s senior management team without the Executive Directors being present. When management teams present to theBoard on their operations they are invited to join the Board for dinner which gives the opportunity for informal interaction between directors
and management.

Meetings and AttendanceDirectors are expected to attend all meetings of the Board and the Committees on which they serve and to devote sufficient time to
the Group to perform their duties. Where Directors are unable to attend meetings they receive papers for that meeting giving them theopportunity to raise any issues with the Chairman in advance of the meeting. The number of scheduled Board meetings and Committee
meetings, of which they are a member, attended by each Director during 2017 is provided in the table below.

Total meetings held

Scheduled
Board meetings

Audit
Committee
meetings

Group Risk
Committee
meetings

Nomination
Committee
meetings

Remuneration
Committee
meetings

7

7

5

7

5

Alastair Lyons (Chairman)1

3/3

Annette Court (Chairman)

7

David Stevens (Chief Executive Officer)

7

Geraint Jones (Chief Financial Officer)

7

Owen Clarke

7

2

2/2
3/3

5

5/5

4/54

6/7

2/2

5/5

4

Colin Holmes

7

7

6/7

Penny James3

5/5

6/6

5/5

Jean Park7

5

Manning Rountree

7

4

Justine Roberts5

7

5
3/3

*1 Alastair Lyons stepped down from the Board with effect from 26 April 2017.
*2 Annette Court was appointed Chairman of the Board with effect from 26 April 2017 and stepped down form the Audit Committee from that date.
*3 Penny James stepped down from the Board with effect from 8 September 2017.
*4 Annette Court did not attend the Remuneration Committee meeting at which her remuneration as Group Chairman was discussed.
*5 Justine Roberts joined the Remuneration Committee on 26 April 2017.

Agendas and papers are circulated to the Board electronically in a timely and secure manner in preparation for Board and Committee
meetings. The Board agenda is structured by the Chairman in consultation with the Company Secretary and Chief Executive. Routine Board
papers are supplemented by information specifically requested by the directors from time to time. All Board and Committee meetings during
the year were held in an open atmosphere conducive to robust and constructive challenge and debate. All Directors have, therefore, been able
to bring independent judgement to bear on issues such as strategy, risk management, performance, and resources. Additional meetings arecalled when required and there is contact between meetings, where necessary, to progress the Group’s business.

Admiral Group plc · Annual Report and Accounts 201747

Corporate Governance: Governance Report

Governance Report continued

The Company Secretary
All the Directors have access to the advice
and services of the Company Secretary. He
has responsibility for ensuring that Board
procedures are followed and for advising theBoard, through the Chairman, on governancematters. The Company Secretary provides
updates to the Board on regulatory andcorporate governance issues, new legislation,
and Directors’ duties and obligations. The
appointment and removal of the Company
Secretary is one of the matters reserved for
the Board.

Board effectiveness
Following the external Board evaluationthat was carried out last year, this yearsought to focus on the recommendations
coming out of that evaluation together
with a review of the Board’s effectivenessand particular areas of focus. The Board
evaluation, consisted of the Chairman,
supported by the Company Secretary,compiling a comprehensive questionnairethat was circulated by the Company
Secretary for completion by all Directors
and Board attendees.
The questionnaire considered:• Time management of Board meetings• Board composition and dynamics• The effectiveness of the Board inconsidering the Group’s risk management
framework and internal controls• The Board’s strategic and operationaloversight• Succession planning including theoversight of the Group’s processes forManaging, developing and retaining talent;• Management of group subsidiaries• Content of discussion and focus at Board
meetings• Priorities for change that would improve
Board performance.
The results of the review were discussed
by the Board in January 2018. Overall thereview found that the Board continued towork effectively and that each Director
demonstrates full commitment to his/her duties and contributes in an open andtransparent way, enabling a detailed levelof debate and discussion around material48

matters affecting the Group. The review also
identified good awareness by the Board of
the governance and regulatory environment
in which the Group operates and the mainrisks impacting the Group and how theyshould be managed and mitigated.
Following last year’s feedback, the Board
has spent more time on considering
succession plans and senior management
evaluation and development. A numberof recommendations were identified in
the review as areas for the Board to give
particular focus in 2018 in order to enhance
the Board’s effectiveness. These included:
greater understanding of the views ofcustomers of today and tomorrow; major
investors and focus on the technologicalissues facing the Group, particularlyaround cyber security; consideration of thecomposition of the Board in the context of
there being appropriate Board experience as
the Group looks to explore opportunities inother product and geographical areas; Board
dynamics and improving the content andquality of information provided to the Board
so that the Board could focus more easily on
the key areas for discussion and decision; andBoard oversight of company processes for
managing, developing and retaining talent
was highlighted as an important area thatwould need continued Board focus in the
coming year.
The Chief Executive, to whom he reports,
appraises annually the performance of
the Chief Financial Officer. The Chairman,
taking into account the views of the other
Directors, reviews the performance of
the Chief Executive. The performance of
the Chairman is reviewed by the Board
led by the Senior Independent Director(“SID”). Following the latest review, the SID
considered and discussed with the Chairman
the comments and feedback that had been
received from the Directors as part of the
Chairman’s evaluation questionnaire, andwas able to confirm that the performanceof the Chairman is effective and that she
demonstrates appropriate commitment to
her role.

Admiral Group plc · Annual Report and Accounts 2017

The roles of the Chairman
and Chief Executive
The Board has approved a statementthat sets out the clear division of
responsibilities between the Chairman
and the Chief Executive. The Chairman is
primarily responsible for the leadershipand workings of the Board, setting its
agenda, and monitoring its effectiveness.
The Chairman is not involved in the day-today management of the business. Save formatters reserved for decision by the Board,
the Chief Executive, with the support ofthe other Executive Director and the senior
executives, is responsible for proposing thestrategy to be adopted by the Group; runningthe business in accordance with the strategy
agreed by the Board; and implementing
specific Board decisions relating to theoperation of the Group. The statementsof division of responsibilities and mattersreserved for decision by the Board arereviewed annually.

Board balance and independence
In the context of recent and forthcoming
Board changes, careful consideration
continues to be given to the composition
and balance of the Board. As a result theGroup continues to monitor the need torefresh Board and Committee membershipin an orderly manner so as to maintain thecontinuity of Board process and the strengthof personal interaction which underlies theeffectiveness of the Board as a team. As aresult of recent appointments, the Board
remains satisfied that it has the appropriatebalance of skills, experience, independence
and knowledge of the Group to enable it andits Committees to discharge their duties andresponsibilities effectively, as required by
the Code.
The Board currently comprises nine
Directors, the Chairman (who was
independent on appointment), two Executive
Directors, and six independent NonExecutive Directors. As can be seen fromthe Directors’ biographies on pages 43 to
45, the Directors have a broad range of skills
and experience and can bring independentjudgement to bear on issues of strategy,
performance, risk management, resources
and standards of conduct which are integral
to the success of the Group.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

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

Date of Appointment

Current length of service as a Non-Executive Director at 31 December 2017

Colin Holmes

3 December 2010

7 years 1 month

Annette Court

21 March 2012

5 years 9 months

Jean Park

17 January 2014

3 years 11 months

Manning Rountree

16 June 2015

2 years 6 months

Owen Clarke

19 August 2015

2 years 4 months

Justine Roberts

17 June 2016

1 years 6 months

Andy Crossley

27 February 2018

Appointments to the Board are theresponsibility of the Board as a whole, acting
on the advice and recommendations of theNomination and Governance Committee.
The Nomination and Governance Committee
seeks to balance the retirement andrecruitment of Non-Executive Directors
ahead of their replacement so as to avoid
dislocation of Board process by losing
experience and skills. Appointments are
made on merit and against objective
criteria, having due regard to the benefitsof diversity, including gender, with a viewto ensuring the Board has the appropriate
mix of personality, skills, and experience.
Following a formal, rigorous and transparent
process led by the Nomination and
Governance Committee, the Board waspleased to appoint Andy Crossley as anindependent Non-Executive Director witheffect from 27 February 2018. Andy will be
subject to election by shareholders at theforthcoming AGM.
Manning Rountree is the Chief Executive
Officer for White Mountains InsuranceGroup Limited (White Mountains) and acts
as Board Observer for White Mountains on
the Board of the Group’s US price comparison
subsidiary, in which White Mountains has aminority shareholding. Given the relatively
small size of White Mountains’ shareholding
in an overseas Group subsidiary company,
the Board has determined that Manning
Rountree remains independent in characterand judgement and that his attendance at
Inspop USA LLC Board meetings does notaffect his ability to present an objective,
rigorous and constructive challenge to theassumptions and viewpoints presented bymanagement and the Board. A process for
managing any potential conflicts has been
agreed by the Board such that Manning
Rountree will recuse himself from any
Group Board discussions where a potential
conflict of interest with his role with White
Mountains has been identified.
The Board, having given thoroughconsideration to the matter, considers the six
Non-Executive Directors to be independentand is not aware of any relationships orcircumstances, other than the above, which
are likely to affect, or could appear to affect,
the judgement of any of them. It is the viewof the Board that the independent NonExecutive Directors are of sufficient calibre
and number that their views carry significant
weight in the Board’s decision making.
Independent Non-Executive Directors
are currently appointed for fixed periodsof three years, subject to election byshareholders. The initial three-year period
may be extended for two further threeyear periods subject to re-election byshareholders. Their letters of appointment
may be inspected at the Company’s
registered office or can be obtained onrequest from the Company Secretary.

channels of Chairman, Chief Executive, orChief Financial Officer have failed to resolve
or for which such contact is inappropriate.
He is also responsible for leading the Board’s
discussion on the Chairman’s performanceand the appointment of a new Chairman, as
and when appropriate.
In accordance with the requirement under
the Code for annual election of Directors,
all Directors will be submitting themselves
for re-election by shareholders at theforthcoming AGM. The Board is satisfied
that all are properly qualified for theirreappointment by virtue of their skills andexperience and their contribution to theBoard and its Committees.
The Directors are given access toindependent professional advice at theGroup’s expense, should they deem itnecessary to carry out their responsibilities.

Professional development

Colin Holmes is the Senior Independent NonExecutive Director (SID). He has the requisiteknowledge and experience gained throughhis Board position, his Chairmanship of the
Audit Committee, and his appointments
to the Boards of other companies. He
is available to shareholders if they haveconcerns that contact through the normal

On appointment, Directors take part in
a comprehensive induction programme
whereby they receive financial andoperational information about the Group;
details concerning their responsibilities
and duties; as well as an introduction to
the Group’s governance, regulatory andcontrol environment.
This induction is supplemented by visits to
the Group’s head office in Cardiff and certain
overseas offices, and meetings with membersof the senior management team and theirdepartments. Development and training of
Directors is an ongoing process. Throughout
their period in office the Directors are

Admiral Group plc · Annual Report and Accounts 201749

Corporate Governance: Governance Report

Governance Report continued

regularly updated on the Group’s business;legal matters concerning their role and duties;
the competitive environments in which theGroup operates; and any other significant
changes affecting the Group and the industryof which it is a part.
The Board receives presentations fromsenior managers within the Group on aregular basis and Non-Executive Directors
are encouraged to make informal visits todifferent parts of the Group to meet withlocal management.

Engagement with shareholders
The Company attaches considerable
importance to communications withshareholders and engages with them
regularly. Open and frequent dialogue withinvestors enables them to understandfully the Group’s strategy, objectives andgovernance. The Investor Relations teamhas day-to-day primary responsibility
for managing communications withinstitutional shareholders through a
combination of briefings to analysts andinstitutional shareholders, both at thehalf-year and full-year results. A numberof analysts and investors visited theGroup’s Cardiff office during the year tomeet with the Executive Directors andsenior management in order to get abetter understanding of how the Group
operates and how it intends to achieve
its strategic and operational objectives.
Senior executives from the Group’s overseas
businesses also visit the UK in orderto present to, and meet with, analysts
and investors. Site visits and individual
discussions with the Executive Directors
are also arranged throughout the yearwith individual shareholders.
In addition the Chairman had individual
meetings during the year with major
shareholders and reported to the Board
on issues raised with her.
This is supplemented by feedback to theBoard on meetings between management
and investors. In addition, the Investor
Relations team produces a quarterly
Investor Relations Report that is circulated
to the Board for their consideration.
The Report contains an analysis of shareprice performance; a summary of analyst

50

reports received during the month andof meetings that have been held withinvestors and analysts; together withdetails of any significant changes to theshareholders’ register.
The Senior Independent Director has specificresponsibility to be available to investors
who have any issues or concerns, and in cases
where contact with the Chairman, Chief
Executive Officer and Chief Financial Officer
has either failed to resolve their concerns,
or where such contact is inappropriate. No
such concerns have been raised in the year
under review.
All shareholders are invited to attend theCompany’s Annual General Meeting (AGM).
The Chairs of the Audit, Remuneration,
Nomination and Governance and Group Risk
Committees attend the AGM along with theother Directors and are available to answer
shareholders’ questions on the activities of
the Committees they chair. Shareholders
are also invited to ask questions during themeeting and have an opportunity to meetwith Directors after the formal business ofthe meeting has been concluded. Details of
proxy voting by shareholders, including votes
withheld, are made available on request
and are placed on the Company’s website
following the meeting.
The Group maintains a corporate website(www.admiralgroup.co.uk) containing awide range of information of interest to
institutional and private investors. The major
shareholders of the Company are listed on
page 83.

Conflicts of interest
In compliance with the requirements of theCompanies Act 2006 regarding Directors’
duties in relation to conflicts of interest,
the Group’s Articles of Association allow the
Board to authorise potential conflicts ofinterest that may arise and to impose such
limits as it thinks fit. The Company has put
in place a Conflicts of Interest Policy to deal
with conflicts of interest. These procedures
include each Board member completing,annually, a conflicts of interest questionnairethat sets out any situation in which they,or their connected persons have, or could
have, a direct or indirect interest that could
conflict with the interests of the Company.

Admiral Group plc · Annual Report and Accounts 2017

Any current directorships that they, or theirconnected persons hold, any advisory roles
or trusteeships held, together with any
companies in which they hold more than 1%of the issued share capital are also disclosed.
These procedures were reviewed by the
Board in April 2017 and it was concluded thatthey continued to operate effectively.

Board Committees
The Board has delegated authority to anumber of permanent Committees todeal with matters in accordance withwritten Terms of Reference. The principal
Committees of the Board are: Audit,
Remuneration, Group Risk and Nomination
and Governance. Subject to the exceptions
listed above, all comply fully with therequirements of the Code.
All Committees are chaired by anindependent Non-Executive Director
except, the Nomination and GovernanceCommittee which is chaired by the Chairmanof the Board, and comprise a majority of
independent Non-Executive Directors.
Appointments to the Committees are madeon the recommendation of the Nomination
and Governance Committee and are for aperiod of up to three years, which may be
extended for two further three year periods,
provided the Director remains independent.
The Committees are constituted withwritten Terms of Reference that are
reviewed annually to ensure that they remain
appropriate and reflect any changes in goodpractice and governance. These Terms ofReference are available on request from theCompany Secretary and can also be found on
the Company’s website: www.admiralgroup.
co.uk. Directors are fully informed of all
Committee matters by the Committee
Chairmen reporting on the proceedings oftheir Committee at the subsequent Board
meeting. Copies of Committee minutes arealso distributed to the Board. Committees
are authorised to obtain outside legal orother independent professional advice ifthey consider it necessary. The Chairman ofeach Committee attends the Annual General
Meeting to respond to any shareholder
questions that might be raised on theCommittee’s activities.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

The Audit CommitteeStatement to Shareholders from the Chairman of the Audit Committee"I’m pleased to provide an update on the main activities
of Admiral’s Audit Committee in 2017."
Dear Shareholder,
During the year, the key areas of focus of theCommittee have been to provide support
to the Board in its oversight of financial
reporting and the control environment
across the Group. The setting of insurance
claims reserves continues to be a key
accounting judgement in the Group’s
financial statements, and the Committee
placed considerable focus on this subject.
The proposal from management to enhance
the Group’s reserving methodology wasconsidered by the Committee to ensurethat it was consistent with the Group’s
stated reserving approach and appropriate
in the context of the Group setting claims
reserves at a prudent level. The analysis ofoutstanding claims by management wasreviewed alongside that of the Group’s
independent actuaries and external auditor.
The impact of last year’s change in the
Ogden discount rate continued to be tracked
by the Committee, along with the potential
impact of legislative changes to the way inwhich the rate is set in the future.

Last year was Deloitte’s first as the Group’s
auditor and therefore the Committee
undertook an evaluation of theirperformance. The conclusion was that
Deloitte was working effectively as external
auditor, although a number of actions wereagreed to help deliver all of the potential
benefits. The audit fee for 2017 also had
focus from the Committee with details of
the year-on-year increase given later inthis report.
The Internal Audit team underwent an
external quality assessment which resulted
in a strong endorsement of the internal
audit function. A number of helpfulrecommendations were made which havebeen accepted by the Head of Internal Audit.
During the year the group published its firstGroup Solvency and Financial Condition
Report and the Committee spent time on
this, along with other Solvency II issues, toensure robust processes and controls existed
for its production.
In addition, the Committee continued tomonitor the appropriateness of the Group’ssystem of risk management and internal
control. The Committee maintained a close
focus on the UK motor business but also
reviewed overseas subsidiaries and the newly
established UK loans business.
I hope you find the above summary, andthe more detailed report, both usefuland informative.

Colin Holmes
Chairman of the Audit Committee
27 February 2018

Admiral Group plc · Annual Report and Accounts 201751

Corporate Governance: The Audit Committee

The Audit Committee continued

Summary of key activities during 2017
The agendas for the meetings taking place during the year are agreed by the Committee
Chairman and detail the matters to be discussed and considered at each meeting.
The agendas are updated regularly to allow for new items to be included.

Reports from the external auditor on theprincipal findings from their review of theGroup’s systems and controls, and on their key
accounting and audit issues and conclusions on
the half and full year reporting

A continued review of the Group’s
Reserving methodology so as toensure an appropriately prudent
claims reserve is booked

The Annual Reportand interim results, including key
accounting judgements
and disclosures

Updates on the impact of the Ogden
rate and the potential legislativechanges to the method of setting therate in the future

The Group’s Solvency
and Financial
Condition report

Review of Deloitte firstyear as external auditor

Presentations fromindependent actuaries toassist the Committee inconcluding on the adequacyof the Group’s reserves

During the year the Committee reviewed the following:

Performance and effectivenessof the Internal Audit department
including an external quality
assessment led by KPMG

52

Admiral Group plc · Annual Report and Accounts 2017

Reports on the controls inplace in respect of overseas
subsidiaries and cyber security

All reports from Internal
Audit including management
responses to the conclusions
set out in the reports

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Membership

Confirmation of the external
auditor’s independence

Reports from the Internal Audit
departments within the Group on
the effectiveness of the Group’s risk
management and internal control
procedures, approval of the audit plans,details of key audit findings, and actions
taken by management to manage andreduce the impact of the risks identified

Reports from the Chair of
the Group Risk Committee
on the principal risks facedby the Group and thework undertaken by theCommittee to ensure risk
is appropriately managed

Its own effectivenessProposed external audit fee
and the drivers of the year on
year increase

Reports from theDeloitte, the external
auditor, on their proposed
audit scope, plan andfindings

The effectiveness of theGroup’s Whistleblowing
Policy which sets out thearrangements for raising andhandling allegations from
whistle blowers

The Committee also had presentations anddiscussions on a range of important issues
including: Forthcoming IFRS accounting changes ,controls in overseas subsidiaries, Group MinimumStandards and Solvency II Technical Provision andother Solvency II preparatory phase reporting
requirements

Membership of the Committee at the endof the year was: Colin Holmes (Chair), andOwen Clarke. As stated earlier in this report,
Penny James stepped down from the Board
in 8 September 2017 following a change
in her Executive role. For the period from
September 2017 to 27 February 2018 theCommittee did not have three Independent
Non-Executive members as required under
the Code. Andy Crossley has now joined
the Board as a Non-Executive Director andmember of the Audit Committee. Given
Andy’s insurance and financial services
experience, the Board considers that
Committee members have a broad rangeof skills, experience and knowledge of theinsurance sector such that they are able toeffectively analyse, challenge and debate
the issues that fall within the Committee’s
remit and are satisfied that the Committee
as a whole has competence relevant tothe sector in which the company operates.
The Board further considers that Colin
Holmes (Committee Chair), as a CharteredManagement Accountant, has appropriate
recent and relevant financial experience
having previously been the UK FinanceDirector for Tesco plc.
The Company Secretary acts as Secretary to
the Committee. The Committee meets atleast four times per year and has an agenda
linked to events in the Company’s financial
calendar and other important issues thatarise throughout the year which fall for
consideration by the Committee under
its remit.
The Committee is kept up to date withchanges to Accounting Standards andrelevant developments in financial reporting,company law, and the various regulatory
frameworks through presentations fromthe Group’s external auditor, Chief Financial
Officer and Company Secretary. In addition,members attend relevant seminars
and conferences provided by externalbodies. The Terms of Reference of the
Audit Committee include all the mattersrequired under the Code.

Its own Terms of Reference

Admiral Group plc · Annual Report and Accounts 201753

Corporate Governance: The Audit Committee

The Audit Committee continued

Other individuals such as the Chairman of
the Board, Chief Executive Officer, Chief
Financial Officer, the Chief Risk Officer,
Heads of Compliance and Internal Audit, andrepresentatives of different parts of theGroup may be invited to attend all or partof any meeting as and when appropriate.
The Chair of the Audit Committee meets
privately with the Head of Internal Audit
on a regular basis. The external auditor was
invited to attend all of the Committee’s
meetings held in 2017, excepting those
agenda items when its own performance/
appointment was to be reviewed andprovision of non-audit services discussed.
In addition, a number of private meetings
were held between members of theCommittee and the auditor.
The Audit Committee’s primary
responsibilities are to:• Monitor the integrity of the Group’s
financial statements and any formal
announcement relating to the Group’s
financial performance, reviewing any
significant financial reporting judgements
which they contain• Keep under review the effectiveness of
the Company’s internal financial controls,internal control and risk management
systems• Review the Group’s procedures forhandling allegations from whistleblowers
and for detecting fraud• Monitor and assess the role andeffectiveness of the Group’s Internal
Audit functions in the context of theGroup’s overall internal control and risk
management systems• Consider and make recommendations to
the Board, to be put to shareholders fortheir approval at the AGM, in relation to
the appointment, reappointment andremoval of the Group’s external auditor• Review the external auditor’s
independence and objectivity and theeffectiveness of the audit process• Review the policy on the engagement of
the external auditor to provide nonaudit services, considering the relevant
regulatory guidance regarding theprovision of non-audit services by theexternal auditor.

54

Significant Issues consideredby the Committee
After discussion with both management
and the external auditor, the Audit
Committee determined that the key risksof misstatement of the Group’s financial
statements related to insurance liabilities
and profit commissions.
These issues were discussed withmanagement during the year and with theauditor at the time the Committee reviewed
and agreed the auditor’s Group audit plan;
when the auditor reviewed the interim
financial statements in August 2017 and also
at the conclusion of the audit of these fullyear financial statements.

Valuation of Insurance
Claims Reserves
Given the important judgements involvedin estimating outstanding claims theCommittee continued to spend significant
time reviewing and challenging the approachand methodology adopted by management
in setting reserves for insurance liabilities
in the financial statements. The Committee
noted the proposals of management tocontinue to enhance the methodology
applied and were supportive of theseplans. The Committee spent time withmanagement during the year to understandthe rationale behind the enhanced
methodology that was being proposed andprocess by which it would be reflected in
the financial statements reserves at the fulland half year. The Committee was satisfied
that the methodology was consistent with
the Group’s stated reserving approach andappropriate in the context of the Groupsetting claims reserves at a prudent level.
The Committee held separate meetings withthe external actuaries at which there waschallenge and debate on the best estimatesdeveloped by the external actuaries. At thesemeetings management provided further
information on the reserving levels proposed
and were challenged by the Committee as totheir adequacy and level of inherent prudence.
Given the material impact of changes to the
Ogden rate, the Committee has continued
to monitor developments in this area toensure that it was well prepared to manage
any impact on its reserves. The Committee
is satisfied that in accounting for reserves

Admiral Group plc · Annual Report and Accounts 2017using the current discount rate, the value
contained in the balance sheet for future
claims remains appropriate and prudent.
Whilst acknowledging that the setting ofreserves to cover future claims is a complex
and judgemental area and having had theopportunity at the separate meetings
referred to above to consider and question therecommended best estimates, the Committee
is satisfied that an appropriate process has
been followed and that there has been scrutiny,
challenge and debate to give confidence thatthe reserving levels set provide an appropriate
margin above best estimates, though note thecontinued high level of prudence that remains
within the reserves.
The Committee also received an update fromthe auditor regarding the procedures they
had used to test management’s methodology
in setting best estimates and considered theauditor’s assertion that they had challenged
the reserving approach taken by management
and were satisfied with management’s
assumptions and that the Group’s approachto setting reserves was in compliance withcurrent accounting standards.

Profit commission
The Committee considered the impact on
profit commission income of future changes
in claims reserves as the recognition ofthis income is dependent on the loss ratio
booked in the financial statements andcash receivable is dependent on actuarial
projections of ultimate loss ratios. The
Committee remained satisfied that profit
commission was correctly accounted for by
the Group and was in accordance with thecontractual arrangements that were in place.
The Audit Committee considered the auditor’s
overall findings on this area which indicatedthat the profit commission recognised wasconsidered appropriate in the context of thefinancial statements as a whole.

Misstatements
No material unadjusted audit differenceswere reported by the external auditor. The
Committee confirms that it is satisfied thatthe auditor has fulfilled its responsibilities
with diligence and professional scepticism.
After reviewing the presentations andreports from management and consulting
where necessary with the auditor, theIntroduction

Strategic Report

Committee is satisfied that the financial
statements appropriately address thecritical judgements and key estimates (bothin respect to the amounts reported and thedisclosures). The Committee is also satisfied
that the significant assumptions used for
determining the value of assets and liabilities
have been appropriately scrutinised,challenged and are sufficiently robust.

Non-Audit fees
The Committee reviewed and approved its
policy on non-audit services in April 2017,
and were satisfied that it was aligned withcurrent regulatory guidance. Under thepolicy, the Group’s statutory auditor would
only be engaged to carry out non-audit workin exceptional circumstances or where there
was a regulatory or tax authority request andwhere agreed by the Committee.
Unless required by law, regulatory or tax
authority and non-audit services will: a) be
subject to prior approval from the Committee
and b) in aggregate, shall not cost more than
70% of the average statutory audit fee forthe past three financial years. In considering
whether to approve such non-audit services,
the Committee shall ensure that:• There is no direct effect, or in the viewof an objective, reasonable and informed
third party, would have an inconsequential
effect, on the audit services on the Group’s
financial statements• The estimation of the effect on thefinancial statements is comprehensively
documented and explained in a report to
the Committee• The non-audit services provided comply
with the principle of independence• The audit firm must not place significant
reliance on the output of the non-audit
services for the audit work.
The Committee will continue to monitor
regulatory developments in this area toensure that its policy on non-audit fees
adheres to current guidance.

Effectiveness of the External
Audit Process
The Committee undertakes an annual review
to assess the independence and objectivity ofthe external auditor and the effectiveness of
the audit process, taking into consideration
relevant professional and regulatory
requirements, the progress achieved against

Corporate Governance

Financial Statements

the agreed audit plan, and the competencewith which the auditor handled the key
accounting and audit judgments. Following
this review the Committee concluded that theauditor, Deloitte LLP, remained independentand provided a service that was robust and fit
for purpose.

Audit fee
During 2017, the Committee reviewed andapproved the audit fee proposal for the 2017
year-end Group audit. The agreed fee for theaudit and other assurance related services
for 2017 is £490,000, an increase on the fee
initially agreed for 2016 of £420,000. The
main reasons for the increase were:• Additional costs incurred during thecourse of the 2016 audit which arerecurring in 2017, primarily reflecting
areas where an increased level ofsubstantive audit testing was employedthan had been initially planned;• An increased audit scope in areas of
the Group outside of UK Car Insurance,
reflecting the increased growth,complexity and materiality of thesebusinesses to the Group as a whole; and• The impact of changes to the regulatoryenvironment, including the introduction of
EU rules in relation to Public Interest Entities
and the update to Auditing Standards.
The Committee approved the fee increase
having provided robust challenge tothe auditor on the elimination of firstyear transition costs and any potential
inefficiencies within the audit process.

Internal Audit
The Group Head of Internal Audit attends
all Audit Committee meetings and provides
a range of presentations and papers to theCommittee, through which the Committeemonitors the effectiveness of the Group’s
internal controls. The Committee reviewed
and approved the Group Internal Audit
Terms of Reference which set out therole; objectives; reporting lines andaccountability; authority; independence;and objectivity of the Internal Audit
function. The role and competence of each
Internal Audit function across the Group
was also assessed and considered by theCommittee. As agreed last year, the Group
Head of Internal Audit continues to have
responsibility to ensure the quality of theInternal Audit activities in the Group’s

Additional Information

overseas locations. In the year underreview an external quality assessment ofInternal Audit was carried out, results ofwhich were considered and discussed by
the Committee at the meeting in August
2017. The Committee had noted that thereview indicated that there was a strong
endorsement of the Internal Audit function
but noted that there were some suggested
recommendations to further enhance theefficiency and effectiveness of the Internal
Audit function that should be consideredfurther. The recommendations are in theprocess of being implemented.
Members of the Committee also receive
all issued audit reports, enabling them tochallenge the reports’ content and related
recommendations. The Committee approves
the Internal Audit programmes at the start ofeach calendar year whilst the effectivenessand workload of the Internal Audit functions
and the adequacy of available resources aremonitored throughout the year.
In accordance with agreed parameters, theoverseas operations in Spain, Italy and the
US have their own locally based internal
auditors, who report to their respective
country heads. All reports are evaluated by
the Group Head of Internal Audit to ensure
the quality and effectiveness of the reported
findings. In addition, the UK Internal
Audit department carries out high levelgovernance reviews of all foreign operations,assessing the internal control frameworks
and system of risk management. The
overseas internal auditors attend Committee
meetings periodically.

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

Admiral Group plc · Annual Report and Accounts 201755

Corporate Governance: The Group Risk Committee

The Group Risk CommitteeStatement to Shareholders from the Chairman of the Group Risk Committee“The Committee continues to focus on key operationalrisks that affect the Group.”
Dear Shareholder,The year began with focus on the Ogden
rate change. The Committee spent timereviewing the impact on solvency ratio as
well as the customer and pricing impacts.
There were also a number of updates
on the future Ogden developments andconsideration was given to numerous
scenarios as part of the annual stress andscenario testing process.
A significant amount of time has also been
dedicated to developing the Group’s Partial
Internal Model for Solvency II. Whilst thecommittee considered and approved therecommendation of a change in scope of themodel good progress has been made on the
IMAP programme. In the interim period theGroup continues to maintain a regulatory
capital add-on to cover risks not captured
within the standard formula. The Committee
has also reviewed the Group’s proposed
dividend level, capital plan and capital
buffer in line with the capital policy. The
Group continues to make use of Undertaking
Specific Parameters (USPs) and the Volatility
Adjustment (VA) across a number of its
entities, where appropriate.
During the year the Committee reviewed theBoard’s risk strategy and risk appetite acrossthe Group. This included further updates in
the UK business as well as the international
businesses, established as a key part of
the Group’s Enterprise Risk Management
Framework (‘ERMF’). A further refresh to thesuite of Key Risk Indicators with associatedtriggers and limits was completed. These
updates have improved the effectiveness of
the Committee by placing greater focus on
the main risks affecting the business.
The Committee continues to focus on key
operational risks that affect the Group.
The risk event process for identifying,reporting and remediating events hasdeveloped further and the Committee
has spent time reviewing any major risk
events reported during the year (including
consideration of the work required to
remediate the issues arising from the workon the prior year renewal notification).
In addition, the full programme of work,
agreed last year, to reduce cyber risk has
been progressed. This programme will
also support the data protection workas the Group seeks to comply with theupcoming GDPR requirements.
The Committee challenged andreviewed the setting of and outputs
from the regular stress and scenario
testing and reverse stress testing.
The output was incorporated into the
Own Risk and Solvency Assessment(‘ORSA’) report for 2017, which theCommittee also reviewed.

56

Admiral Group plc · Annual Report and Accounts 2017

Good progress has also been madeon enhancing the project governanceframework and the Committee looks forward
to seeing the increased reporting to support
some of the material projects ongoing acrossthe Group.
The focus on monitoring and reporting
customer outcome risks continued during
the year and included reports showing
progress against the Group minimum
compliance standards, which builds on
the levels of compliance resources andmonitoring that all Group firms must apply
to their respective regulatory obligations.
In terms of new products and businesses theCommittee oversaw the development of
the new Loans business and the successful
regulatory application for the new company.
The Committee also oversaw the launch of
the new travel insurance product which will
be embedded within the existing reporting
templates to support future oversight.
Finally, the Committee has devoted time to
the work on Brexit to help set up appropriate
EU based entities to enable the smoothtransition of European business written
within the Group. This work will no doubt
continue throughout the next 12 months
and regular reporting will be provided at key
milestones on the project lifecycle.
I look forward to continuing the good work
this year.

Jean Park
Chair of the Group Risk Committee
27 February 2018

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Summary of key activities in 2017

Reviewed the Group’s
proposed dividendlevel, capital plan andcapital buffer in linewith the capital policy

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

Received regular monitoring
reports on customer outcome
risk and complaint handling andreviewed updates to the Group
minimum compliance standards
and Policy Framework

Reviewed a numberof new productpropositions
including Travel

Reviewed the USP
and VA applications
submitted to theregulators

Reviewed the Group’s
regulatory capital addon application as partof Solvency II capitalrequirements

During the year the Committee:

Through stress and scenario
testing and reverse stress testing,considered in-depth analysis of
a number of the Group’s mostsignificant risk areas, including thedefault of a re-insurer

Received regular risk
monitoring reports on
performance of Key Risk
Indicators within theoverall risk management
framework

Considered the adequacyof risk mitigation
measures and contingency
plans including a reviewof the Group’s reinsurance
provisions

Received updates on theimpact of a number ofrisk events throughout
2017 including Ogden,
Last Year’s Premium, thetriggering of article 50
and Hurricane Harvey

Recommended to theBoard approval of the2017 ORSA Report prior
to submission to theregulator and approved
the ORSA policy

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

Admiral Group plc · Annual Report and Accounts 201757

Corporate Governance: The Group Risk Committee

The Group Risk Committee continued

Composition of theGroup Risk Committee
Membership at the end of the year
was: Annette Court, Jean Park (Chair),Manning Rountree and David Stevens. The
Company Secretary acts as Secretary to
the Committee.
The Committee met five times during the year.

Duties and responsibilities of
the Group Risk Committee
The duties and responsibilities of theCommittee are set out in Terms of Reference
that were reviewed during the year andapproved by the Board in December 2017.
The responsibilities of the Committee canbe summarised as:• Oversee the development,
implementation and maintenance of
the Group’s overall Risk Management
Framework and ensure that it is in linewith emerging regulatory, corporate
governance and best practice guidelines• Monitoring the Group’s prudential risk
exposure, which includes ensuring that
the Group’s capital resources and liquidity
profile are appropriate to its needs
whilst meeting minimum regulatory
requirements, including overseeing andchallenging the design and execution of
the Group’s stress and scenario testing• Monitoring the Group’s current andfuture conduct risk exposure• Ensuring the adequacy and effectivenessof the Group’s systems and controls forthe prevention of financial crime, dataprotection systems and controls• Monitoring the adequacy andeffectiveness of the Group’s
Compliance functions• Reviewing the Group’s progress towards
achieving Solvency II compliance• Reviewing compliance with Group
policies, including the established
Reserving Policy and process• Considering, and recommending to
the Board for approval, the Group’s risk
appetite, including any changes to theappetite for each material type of risk
faced by the Group58• Approving the annual plans for theGroup Risk and Compliance functions
which include reviewing regulatory
developments and regular meetings with
the PRA and FCA• Review the ORSA report each year withrecommendations being provided to theGroup Board for approval• Review and approve the Solvency II
actuarial function reports on reinsurance
and underwriting each year
• Review and approve the remuneration
report from the Chief Risk Officer prior to
Remuneration Committee sign off.
The Committee Chairperson reports
formally to the Board on its proceedings
after each meeting on all matters within
its duties and responsibilities, as set out inpreviously circulated minutes to the Board.
The Committee Chairperson also reports on
the activities of the Committee in a formal
written report that is submitted to anddiscussed by the Board every six months.
The work of the Committee is supported
by more detailed work undertaken by
executive Risk Management Committees
in each of the Group’s operational entities.
At each meeting, the Risk Management
Committees consider significant movementsin the operation’s risk profile, any risks thathave arisen and any emerging risks. Risk
Management Committees also assess andmonitor any regulatory issues, ensuringthat their resolution and the action taken
are appropriately recorded. In the UK, theRisk Management Committee receives
regular information on conduct risk, such ascomplaint handling reports and other related
management information. The Group Risk
Management function reviews and collates
information from across the group for
consideration by the Committee.

Internal Control and Risk
Management Statement
The Board is ultimately responsible for theGroup’s system of risk management andinternal control including that relating tofinancial reporting processes and, throughthe Audit Committee, has reviewed theeffectiveness of this system. The system ofrisk management and internal control over

Admiral Group plc · Annual Report and Accounts 2017

insurance, operational, market, credit andgroup risks is designed to manage rather
than eliminate the risk of failure to achievebusiness objectives and breaches of risk
appetites and can only provide reasonable
and not absolute assurance against material
misstatement or loss.
The Board is of the view that there is an
ongoing process for identifying, evaluating
and managing the Group’s risks and internal
controls; that it has been in place for theyear ended 31 December 2017; and that, up
to the date of approval of the Annual Reportand Accounts, it is regularly reviewed by the
Board and accords with the internal control
guidance for Directors provided in the UK
Corporate Governance Code.
The Board confirms that it has performed arobust assessment of the Group’s principal
risks. These risks, along with explanations of
how they are being managed and mitigated,
are included in the strategic report on
page 33.
The Board is responsible for determining
the nature and extent of the principal risks
it is willing to take in achieving its strategic
objectives. The Board meets at least seventimes a year to discuss the direction of
the company and provide oversight of theGroup’s risk management and internal control
systems. The role and responsibilities of theBoard are documented within their Terms ofReference and these are reviewed annually.
A key element of the control system isthat the Board meets regularly with aformal schedule of matters reserved toit for decision and has put in place anorganisational structure with clearly definedlines of responsibility. As described above,in order to ensure these responsibilities
are properly discharged, the Board hasdelegated to the Audit Committee tokeep under review the adequacy andeffectiveness of the Company’s internalfinancial controls, internal control and risk
management systems.
The Board has delegated the development,
implementation and maintenance of theGroup’s overall risk management framework
to the Group Risk Committee (“GRC”). The
GRC reports on its activities to the Board

Introduction

Strategic Report

and the Audit Committee, supporting theoverall assurance provided by the Audit
Committee that the Group’s internal control,risk management and compliance systems
continue to operate effectively.
The Group has a ‘three lines of defence’approach to internal control, including thosecontrols that relate to the financial reporting
process. The Board recognises that theday-to-day responsibility for implementing
policies lies with the senior management,the ‘first line of defence’, whose operational
decisions must take into account risk andhow this can be controlled effectively.
The ‘second line of defence’ describes theCommittees and functions that are in place
to provide an oversight of the effective
operation of the internal control framework.
The Group Risk department and thecompliance functions are part of the secondline of defence.
The Group Risk department defines andprescribes the insurance, operational,
market, credit and group risk assessment
processes for the business. It performs
second line reviews, including of thereserving, capital modelling and businessplanning processes, and undertakes regularreviews of all risks in conjunction withmanagement, with the results of thesereviews recorded in risk registers collated
centrally on the Group risk management
system. Furthermore, Group Risk records any
actual losses or near misses that occur as aconsequence of the crystallisation of risk andanalyses the sufficiency of the action taken
to avoid reoccurrence. The Chief Risk Officer
has responsibility for ensuring that managers
are aware of their risk management
obligations, providing them with support andadvice, and ensuring that risk management
strategies are properly communicated.
Reports are produced showing the mostsignificant risks identified and the controls
in place. Internal Audit uses the risk registers
to plan and inform their programme of audits
around the most significant risks to theGroup to ensure that the prescribed controls
are in place and are operating effectively.

Corporate Governance

Financial Statements

Viability

There is compliance resource assigned toeach operation who review and report on
the first line of defence’s compliance withdesignated control activities. The Group
compliance function consolidates thesereviews and provides reports to the Group
Risk Committee.
The ‘third line of defence’ describes theindependent assurance provided by the
Audit Committee and the Group Internal
Audit function that reports to that
Committee. Internal Audit undertakes a
programme of risk based audits covering all
aspects of both the first and second lines ofdefence. The findings from these audits arereported to all three lines, i.e. management,
the executive and oversight Committees,
and the Audit Committee.
The Group and subsidiary Risk Committees,
receive reports setting out key performanceand risk indicators and consider possible
control issues brought to their attention
by early warning mechanisms that areembedded within the operational units.
They, together with the Audit Committee,
also receive regular reports from theInternal Audit function, which include
recommendations for improvement of thecontrol and operational environment. The
Chair of the Group Risk Committee provides
a comprehensive written report to theBoard of the activities carried out by theCommittee on an annual basis. In addition,
the Board receives reports from the Chairof the Audit Committee as to its activities,
together with copies of the minutes of the
GRC and Audit Committee.
The Audit Committee’s ability to provide
the appropriate assurance to the Board
depends on the provision of periodic andindependent confirmation, primarily
by Internal Audit, that the controls
established by management are operating
effectively and where necessary provides
a high-level challenge to the steps being
taken by the GRC to implement the risk
management strategy.

Additional Information

In accordance with provision C.2.2 of the2016 UK Corporate Governance Code, theDirectors have assessed the prospect of
the Company over a longer period than the
12 months required by the ‘Going Concern’
provision. The Board conducted this review fora period of three years to December 2020. This
assessment has been made taking into accountthe current financial position of the Group, theGroup’s business plans, the Group’s ‘Own Risk
and Solvency Assessment’ (ORSA) process, andthe principal risks and uncertainties faced by
the Group, which are disclosed on pages 39 to
44 of the strategic report.
The ORSA is performed in line with Solvency
II regulations and requires the Groupto demonstrate that it has a detailed
understanding of the risks facing thebusiness over a three-year time horizon.
In addition to this the Group Risk
Committee and the Group Board review
regular updates to the Group’s capital andsolvency projections.
Quantitative and qualitative assessmentsof risks are performed as part of the ORSA
process. The quantitative assessment (inline with the Group’s capital and solvency
projections) considers how the regulatory
capital requirements, economic capitalneeds, own funds and the solvency positionof the Company is projected to change over
the three year time horizon. It also includes
a series of stress tests, linked to the Group’s
principal risks and reports the impact ofthese stresses alongside any mitigating
factors that reduce the impact.
The results of the stress tests form partof the process to set the Group’s capitalrisk appetite, which ensures that a buffer
on top of the Group’s regulatory capitalrequirement is held to protect its capital
position against shocks and stresses. Referto the Strategic report for information on
sensitivities to the reported 2017 solvency
ratio position.
Based on the results of this analysis, theDirectors have a reasonable expectationthat the Company will be able to continue inoperation and meet its liabilities as they falldue over this three year period.

Admiral Group plc · Annual Report and Accounts 201759

Corporate Governance: The Nomination Committee

The Nomination and Governance CommitteeStatement from Annette Court, Chairman of the Nomination and Governance Committee“As Chairman of the Nomination and GovernanceCommittee, I am pleased to report on the activitiesof the Committee during the year.”
Dear Shareholder,
In October 2017, the Committee expanded
its remit to include reviewing thegovernance arrangements for the Groupand its principal and material regulated
entities to ensure they remain appropriate
by reference to best practice in corporate
governance. In addition, the Committee
has taken on responsibility for review andapproval of appointments to these regulated
entities to ensure that the overall balance ofskills, knowledge, experience and diversity
on the relevant Board remains appropriate.

In addition, the Committee now also has
responsibility for addressing any conflict ofinterest issues in respect of appointments tothese Boards and will advise the Group Boardon whether the conflict should be authorised
and whether any conditions should be applied
to the authorisation.
An external review of the Group’s governancearrangements was carried out during
the year and the completed report wasconsidered by the Board at the January 2018
Board meeting. The recommendations,contained in the report, to strengthen theGroup’s existing governance arrangements
so they remain fit for purpose in the future
will be an area of focus for the Committee
in 2018 as new entities are established andBoard constituents change.
Succession planning has again been a key
area of focus for the Committee during theyear. Non-Executive Director, Penny James
left the Board in September 2017 due tochange in her Executive role and the focus
had been both on finding a replacement
for Penny as well implementing the Group’s
strategy of progressively refreshing theskills on the Board. In this context and in
keeping with its remit to review regularly
the composition and experience of theBoard, the Committee led the process of
Non-Executive Board appointments during
the year. The Committee carried out arobust recruitment process resulting in theappointment of Andy Crossley on 27 February
2018, further enhancing the range of skills,
breadth of experience and diversity aroundthe Board table.

60

Admiral Group plc · Annual Report and Accounts 2017

The Committee continued the developmentof a structured succession plan that would
ensure appropriate action was taken well inadvance of dates by which Non-Executive
Directors approach their ninth year ofservice in order to achieve their replacement,
if appropriate, with individuals of theappropriate skills, experience and fit to theBoard. External recruitment consultants havebeen engaged to lead the search for further
Non-Executive appointments, particularly
those with marketing and digital expertise.
In accordance with the requirements ofSolvency II and the Senior Insurance Manager
Regime, the Committee also reviewed andapproved the Group’s Fit and Proper Policy
which sets out the process of assessment forevery person who performs a key function toensure that they meet the requirements interms of qualifications, capability, honesty
and integrity.

Annette Court
Chairman of the Nomination and GovernanceCommittee
27 February 2018

Introduction

Strategic Report

Membership
The membership of the Committee at theyear end was: Annette Court (Chairman),Colin Holmes and Owen Clarke. The
Company Secretary acts as Secretary to
the Committee. The Committee invites theChief Executive and/or the Chief Financial
Officer to attend meetings when it deems
appropriate. The Committee met formallyon seven occasions in 2017. In addition,members of the Committee corresponded
and met informally on a number of occasions
to consider and meet with individuals that
the Committee had identified as possible
candidates to join the Board.

Board composition and changes
The Committee leads the process formaking appointments to the Board or where
the appointee is likely to become a Board
member. The Committee ensures there isa formal, rigorous and transparent process
for the appointment of new Directors to
the Board embracing a full evaluation of theskills, knowledge and experience requiredof Directors. The Committee also ensuresplans are in place for orderly succession
for appointments to the Board and reviews
the succession plans for other senior
management positions. Responsibility formaking senior management appointments
rests with the Chief Executive.
The Group has in place a policy of recruiting
well ahead of impending retirements inorder to ensure continuity of knowledge and
Board dynamics. In 2017 the Board initiateda search for a new Non-Executive Director.
The Committee developed an appropriate
specification for the new Non-Executive
Director and identified the required skills
and experience. Following this process, theCommittee identified Andy Crossley as bestplaced to fill the role identified.
Andy has 31 years’ experience within thefinancial services sector, most recently
as Chief Financial Officer at Domestic &General Group from 2014 to 2017.

Corporate Governance

Financial Statements

He spent 14 years at Prudential Plc from 2000
as Director, Group Finance; Group Chief Risk
Officer; and CFO and Deputy Chief Executiveof Prudential UK. He previously held senior
manager roles at Legal & General Group Plc,
where he was Group Financial Controller,
and Lloyds Bank Plc. Andy is a Fellow of theInstitute of Chartered Accountants.
Given Andy’s background, experience andcompetence and the external referencesthat were obtained, the Committee did notconsider it either necessary or appropriate
to undertake a full search led by an external
recruitment consultancy.
Each Committee member met separately
with Andy and agreed that he would
bring invaluable experience to the Board.
The Board approved the Committee’s
recommendations and following regulatory
approval Andy was formally appointed to theBoard with effect from 27 February 2018.

Succession planning and talentmanagement
Talent management continues to be a key
area of focus and the Board, at its meetingin June 2017, considered talent management
within the Group and identified where
there were individuals who, with further
experience and guidance, might be capableof moving into particular senior management
roles. The Committee remains satisfied thatsuccession plans for Directors and senior
management are in place to ensure thecontinued ability of the Group to implement
strategy and compete effectively in themarkets in which it operates.

Additional Information

Hampton Alexander Review target of 33%
women’s representation across executive
committees below Board level and direct
reports to those committees, as shown by
the gender diversity table on page 82. In
addition, the Committee will review, during
2018, the Parker Review’s final report on
ethnic diversity and will focus on its “Beyond
One by ‘21” recommendation. As part of theirreview, the Committee will focus on how theGroup should develop a process to identify,
develop and promote ethnic diversity suchthat a pipeline of suitable candidates isavailable for consideration for future Boardand senior manager positions. However, theGroup remains strongly supportive of theprinciple of boardroom diversity, of which
gender and ethnicity are important, but
not the only, aspects. What is importantis diversity of thought, experience andapproach and each new appointment mustcomplement what already exists at theBoard table. Accordingly, appointments will
always be made on merit against objective
criteria, including diversity, and not just toachieve an externally prescribed number.
The Group remains committed toproviding equal opportunities, eliminating
discrimination, and encouraging diversity
amongst its workforce both in the UK andoverseas. A breakdown of the gender ofCompany Directors and senior employees atthe end of the financial year together withdetails of the Group’s Equality, Diversity
and Dignity at Work Policy are set out in the
Directors’ Report on pages 82 to 85.

Gender and diversity
Given women constitute 33% of our plc
Board, the Group has already met the target
set by both Lord Davies in his report. Womenon Boards’, and the Hampton Alexander
Review (that builds on the Davies Review)which encourages FTSE 350 companies toachieve at least 33% women on Boards by
2020. The Group also already meets theAdmiral Group plc · Annual Report and Accounts 201761

Corporate Governance: The Remuneration Committee

The Remuneration Committee

A Statement to Shareholders from the Chairman of the Remuneration Committee“This year we will be asking shareholders to approve a
new Remuneration Policy for Executive Directors at the2018 Annual General Meeting.”
Dear Shareholder,I am pleased to introduce the Directors’
Remuneration Report for the year ended 31
December 2017, which has been preparedby the Remuneration Committee (theCommittee) and approved by the Board.
This is the first report I have prepared since
being proposed as new Committee Chairman,
to replace Annette Court. I am currently
undertaking the role of asking Chairman,
whilst my permanent appointment remains
subject to regulatory approval.
2017 has been another strong year for theAdmiral Group, Earnings per Share in theyear were 117.2 pence (2016: 78.7 pence) and
Return on Equity was 55% (2016: 37%). Total
dividends for the financial year (including the
proposed final dividend of 58.0 pence pershare) will be 114.0 pence per share.

Proposed changes toRemuneration Policy
This year we will be asking shareholders
to approve a new Remuneration Policy for
Executive Directors at the 2018 Annual
General Meeting. By way of background,
Admiral has a remuneration structure, which
we believe reinforces our culture and createsstrong alignment with our shareholders. Basesalaries are targeted at the lower end of ourpeer group, and executives are encouraged
to build up significant shareholdings in theGroup to maximise shareholder alignment.
Our main incentive plan is the Discretionary
Free Share Scheme (‘DFSS’), which incentivises
Earnings per Share growth, Return on Equity
and Total Shareholder Return vs. the FTSE
350 (excluding investment companies) over athree-year period. We do not pay annual cash
bonuses and instead have in place a simple
bonus structure that is directly linked to
the number of DFSS awards held and actual
dividends paid out to shareholders. This
structure contributes to a culture of focusing
on collective, rather than individual, success,and is aligned with our philosophy around theefficient use of capital and distribution of
surplus profits.
The Remuneration Policy was last reviewed
in 2014, and approved by shareholders at
the 2015 AGM. The 2014 review took into
account the changes to the business inboth size and geography since the previous
review in 2004, and prevailing trends in FTSE
incentive design and pay levels, particularlyin the context of the Group maintaining basesalary levels for most senior management
positions at the lower end of our peer group.
It is against a similar backdrop that theCommittee revisited the Remuneration Policy
in 2017. The Committee continues to support
the view that share ownership amongst
staff is important, as it drives outstanding
performance, promotes long-term success,reinforces a long-term focus on the customer,
encourages appropriate risk management,
and maintains shareholder alignment.

62

Admiral Group plc · Annual Report and Accounts 2017

The Committee also agreed that the current
suite of incentives remains effective inincentivising key performance categories forthe business. However, a closer review of the
CFO’s remuneration package showed that hissalary is significantly behind market, and his
remuneration is out of line with other senior
Admiral executives in terms of pay mix andstructure. The Committee also concluded
that a couple of areas in our previous
Remuneration Policy should be updated
to align with evolving best practice andregulatory requirements. To address thesepoints, the Committee is proposing a numberof changes to the Policy:• CFO ‘salary’ shares: To bring the CFO’ssalary closer to market in a way that isfair to the individual and aligned withshareholder interests, we propose
supplementing his current cash salaryof £245,000 with an annual award of‘salary’ shares. For 2018, the CFO’s cash
salary will remain unchanged and anaward of 5,000 salary shares (equivalent
to circa £95,000) is proposed, bringing
total salary to £340,000. The salary shareaward will vest after three years subject
to continued employment. An additional
two-year holding period will apply, during
which time shares may not be sold, save tomeet income tax, NI or other regulatory
obligations. Malus and clawback provisions
will apply during the vesting and holding
periods. The salary share award is notincluded in base salary when calculating
the CFO’s pension benefit, DFSS award
opportunity or achieved against theshareholding guideline.
• DFSS post-vesting holding period:
Extension of the overall DFSS time horizon
with the introduction of a mandatory
two-year holding period on vested awards,
effective from awards made in 2018
• Remuneration Committee discretionto adjust DFSS outcome: Committee
discretion to adjust the formulaic vestingoutcome to ensure the final outcome isa fair and true reflection of underlying
business performanceIntroduction

Strategic Report• Risk adjustment to DFSS bonus: DFSS bonus
to include a ±20% adjustment based on
performance against a set of risk metrics,
effective from awards made in 2018
• Shareholding guideline: Increase to theguideline from 200% to 300% of base salary.
The Committee believes that structuring
the CFO’s salary increase as an award of
shares, rather than cash, is better alignedwith shareholders, is consistent with ourphilosophy of low cash awards balanced by
the award of shares, and more effectively
supports the CFO’s retention. The proposedchange will bring the CFO’s package closer tomarket (though it will remain in the bottom
quartile). It also reflects a move towards
improving internal consistency between the
CFO’s remuneration structure and that of thebroader Admiral executive team below the
Board, for whom a proportion of their shareawards are subject to continued employment
but not subject to the DFSS vesting criteria.
The Board undertakes a regular androbust assessment of the principal risks
to the business, and is keen to ensurethat the Group’s Remuneration Policy andpractices promote sound and effective
risk management and excellent customer
outcomes. It is in this context that theCommittee proposes making a change to
the DFSS bonus made to Executive Directors
and other senior staff to include a ±20%
adjustment based on risk performance. A
scorecard of risk performance measures
will be set by the Committee each year for
all significant areas of the business withspecified targets to determine the amount of
any DFSS bonus adjustment. It is anticipatedthat many of these measures will be directly
related to customer outcomes to reinforce
the Group’s focus on delivering a greatcustomer experience. Whilst the bonus may
be adjusted upwards or downwards by up to
20% in any given year, it is not anticipatedthat the adjustment will increase the CFO’s
remuneration on average over the longterm. The Committee believes that thischange will help to reinforce our focus onrisk management and our customers, whilst
also more clearly demonstrating alignmentof Group remuneration practices with therequirements of Solvency II.
One of the two Executive Directors, the CEODavid Stevens, is a founding Director andreceives remuneration that comprises only

Corporate Governance

Financial Statements

salary and modest benefits. The Committee
continues to hold the view that this isappropriate, as his significant shareholding
provides a sufficient alignment of his
interest with those of other shareholders.
The Committee also reviewed the Company’s
fixed pay arrangements during 2017. It is
proposed that the pension provision of 6%
of salary should remain unchanged, but thatthe internal cap on pension will increase from
£9,000 to £15,000 p.a. and the Company willoffer individuals a choice between pension
contributions and cash in lieu. No otherchanges to Remuneration Policy in respect of
fixed pay are proposed.
During the early part of 2018, we consulted
with our largest shareholders on the
proposed revisions to the Remuneration
Policy. Feedback has been positive and wehope to receive your support for the revised
Policy at the upcoming AGM. Subject toshareholder approval, the proposed Policy
will take effect from the date of the AGM,
being 26 April 2018. The first DFSS award
under the revised Policy will be made in
September 2018.

Remuneration in 2017
In addition to consideration of the proposed
Policy changes set out above and oversightof the associated shareholder consultation,
the activities of the Committee during theyear ended 31 December 2017 included:• Reviewing the salary arrangements andfee proposals for the Executive Directors,
the former and current Chairman andsenior management• Reviewing the appropriateness of theperformance conditions for the DFSS andFree Share Incentive Plan (SIP) awards• Reviewing the Company’s performanceagainst the performance conditions
applicable to the DFSS and SIP awards andwhere appropriate authorising the vestingof awards• Considering the appropriate performance
conditions to attach to the DFSS awards for
the Group’s European insurance operations• Considering the appropriate application ofwithholding provisions• Reviewing and authorising the grant ofawards under both the DFSS and SIP

Additional Information• Reviewing the Committee’s Termsof Reference and recommending
amendments to the Board for approval• Considering and approval of the Group’s
Material Risk Takers in accordancewith the requirements of Solvency II
regime and reviewed the Solvency II
Remuneration Policy• Considering the Group’s regulatory
Remuneration Policy Statement• Reviewed the impact of the Living Wage on
the Group’s current remuneration structure• Considering and approval of the Group’s
Expense Policy• Considered the terms of engagement with
the Group’s Remuneration Consultants;• Reviewing the Gender Pay reporting
requirements• Evaluating the performance of theCommittee.
In September 2017, Geraint Jones was
granted an award under the DFSS of 50,000
shares, equivalent to £905,000 or 369% ofsalary. Consistent with the approach for
2016, the award will vest on three-year EPS
growth vs. LIBOR, TSR vs. FTSE 350 (excluding
investment companies), and ROE, weighted
equally. David Stevens again declined to be
included given his significant shareholding.
Based on performance to 31 December 2017,74.3% of the DFSS award made in 2015 willvest. The EPS condition was partially achieved,
vesting at 41.0% of this element; and the ROE
condition was also partially achieved, vestingat 81.9% of the element. The TSR condition
vested at 100% of the element.
Resolutions to approve the proposed
Remuneration Policy (subject to abinding vote) and the Annual Report on
Remuneration (subject to an advisory vote)will be put to our shareholders at the AGM in
April 2018. I am available to meet and discuss
our Remuneration Policy with shareholders.

Owen Clarke
Acting Chairman of the Remuneration
Committee
27 February 2018

Admiral Group plc · Annual Report and Accounts 201763

Corporate Governance: Remuneration at a Glance

Remuneration at a glance

How did we perform in the year?
Financial performance

117.2p55%

114.0p

Earnings per Share

Return on Equity

Total Dividend

9 Year TSR Performance: Admiral vs. FTSE 100 and FTSE 350 indices
Growth in the value of a hypothetical £100 holding over the nine years to 31 December 2017.
£500
£400
£300
£200

Admiral£100

FTSE 100
FTSE 350£0
Dec 08

Dec 09Dec 10Dec 11

Dec 12

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

How was our performance reflected in our pay?
1. Base salary

2. Benefits

3. Pension

4. SIP

5. DFSS

6. DFSS bonus

Total
remuneration

2017£245,000£604£8,996£3,600£701,392£153,525£1,113,117

2016£210,000£330£9,000£3,600£202,400£174,209£599,539

2017£390,824£404£3,791

n/a

n/a

n/a

£395,019

2016£381,923£330£3,705

n/a

n/a

n/a

£385,958

Executive Director

Geraint JonesDavid Stevens1

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

The key changes to the previous Policy:
Annual award of 5,000 salaryshares to the CFO, vesting after
three years subject to continued
employment, with additional twoyear holding period

Increase to the shareholding
guideline from 200% to 300%of base salary64

Admiral Group plc · Annual Report and Accounts 2017

Extension of the overall
DFSS time horizon with theintroduction of a mandatory
two-year holding period onvested awards, effective fromawards made in 2018

Adjustment to the DFSS bonus to be
based on risk performance

No change to pension
provision of 6% of salary
subject to an internal cap, but
increase to cap from £9,000
to £15,000 p.a., and choice
between pension contribution
and cash in lieu

Remuneration Committee
discretion to adjust formulaic
DFSS outcome to ensurealignment between pay andperformanceIntroduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Directors’ Remuneration Policy

Compliance Statement
This Remuneration Report has been preparedaccording to the requirements of theCompanies Act 2006 (the Act), Regulation
11 and Schedule 8 of the Large and MediumSized Companies and Groups (Accounts
and Reports) (Amendment) Regulations
2013 and other relevant requirementsof the FCA Listing Rules. In addition, theBoard has applied the principles of good
corporate governance set out in the UK
Corporate Governance Code (the Code) andhas considered the guidelines issued by its
leading shareholders and bodies such as
ISS, the Investment Association, and thePensions and Lifetime Savings Association.
Unless otherwise stated, information
contained within this Remuneration Reportis unaudited.
The Remuneration Committee is seeking
shareholder approval for an updated
Remuneration Policy at the 2018 AGM.
The key changes to the previous Policy are
as follows:• Annual award of 5,000 salary shares to the
CFO, vesting after three years subject tocontinued employment, with additional
two-year holding period• Extension of the overall DFSS time horizon
with the introduction of a mandatory
two-year holding period on vested awards,
effective from awards made in 2018
• Remuneration Committee discretion toadjust formulaic DFSS outcome to ensurealignment between pay and performance• Adjustment to the DFSS bonus to be basedon risk performance• Increase to the shareholding guidelinefrom 200% to 300% of base salary• No change to pension provision of 6%
of salary subject to an internal cap, but
increase to cap from £9,000 to £15,000
p.a., and choice between pension
contribution and cash in lieu.
Subject to shareholder approval, the new
Remuneration Policy will formally come into
effect from the date of the 2018 AGM.

Key principles of Admiral
remuneration arrangements
The Group is committed to the primaryobjective of maximising shareholder value
over time in a way that also promotes
effective risk management and excellent
customer outcome and ensuring that there
is a strong link between performance andreward. This is reflected in the Group’s
stated Remuneration Policy of paying
competitive, performance-linked andshareholder-aligned total remuneration
packages comprising basic salaries coupledwith participation in performance-based
share schemes to generate competitive total
reward packages for superior performance.
The Board is satisfied that the adoption ofthis Policy continues to meet the objectivesof attracting and retaining executives of thehighest quality across the Group.
The Committee reviews the framework andremuneration packages of the Executive
Directors and the most senior managers
and recognises the need to ensure that
the Remuneration Policy is firmly linked
to the Group’s strategy, including its risk
management approach. In setting the
Policy and making remuneration decisions,the Committee takes into account pay andconditions elsewhere in the Group. The mainprinciples underlying the Remuneration
Policy are:Executives are also encouraged to build up
significant shareholdings in the Group to
maximise shareholder alignment• Long-term perspective – a significant
part of senior executives’ remuneration isbased on the achievement of stretching
performance targets that support
the delivery of the Group’s strategy
and shareholder value. The extended
performance and vesting horizons
promote a long-term perspective that is
appropriate to the insurance sector• Effective risk management – incentives
are designed to ensure they do not
encourage excessive risk-taking. They
are aligned with the delivery of positive
customer outcomes and reinforce theGroup’s risk policy• Open and honest culture – the Group has
a strong culture of focussing on collective
success, whilst still recognising individual
contribution to the Group’s performance,
and this is reflected in our remuneration
structure across the business• Transparency to stakeholders – theremuneration structure is designed tobe simple and easy to understand, andall aspects are clear to employees andopenly communicated to employees,
shareholders, and regulators.

• Competitive total package – the Groupaims to deliver total remuneration
packages that are market-competitive,
taking into account the role, job size,
responsibility, and the individual’s
performance and effectiveness. Prevailingmarket and economic conditions anddevelopments in governance are also
considered, as are general salary levels
throughout the organisation• Significantly share-based – our basesalaries are targeted towards the lower
end of market, but are combined withmeaningful annual share awards thatvest on long-term performance to ensure
strong alignment with shareholders andthe long-term interests of the Group.

Admiral Group plc · Annual Report and Accounts 201765

Corporate Governance: Directors’ Remuneration Policy

Directors’ Remuneration Policy continued

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

Operation

Opportunity and performance metrics

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

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

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

Base Salary
To attract and retain talent
by setting base salaries atlevels appropriate for thebusiness.

•

Scope and responsibility of the position•

Individual performance and effectiveness, and experienceof the individual in the role•

Average increase awarded across the Group.

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

Where increases are awarded in excess ofthat for the general employee population, theCommittee will provide the rationale in therelevant year’s Annual Report on Remuneration.

PensionTo provide retirement
benefits.

The Group operates a Personal Pension Plan,a Defined Contribution Scheme.
This is available to all employees following
completion of their probationary period.

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

Other Benefits
To provide competitive
benefits.

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

•

Death in service scheme•

Private medical cover•

Permanent health insurance•

Relocation, at the Committee’s discretion

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

All benefits are non-pensionable.

66

Admiral Group plc · Annual Report and Accounts 2017

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

Introduction

Purpose and link to strategy

Strategic Report

Corporate Governance

Financial Statements

Operation

Additional Information

Opportunity and performance metrics

Discretionary Free Share Scheme (DFSS)
To motivate and reward
longer term performance, aid
long-term retention of key
executive talent, use capitalefficiently, grow profits
sustainably and further
strengthen the alignment of
the interests of shareholders
and staff.

Executive Directors may be granted awards annually at thediscretion of the Committee. David Stevens has declined toparticipate given his significant shareholding.
Awards may be in the form of nil or nominal priced options orconditional shares. Awards vest after a minimum of three years
subject to Group performance and continued employment.
For DFSS awards made in 2018 and subsequent years, a twoyear holding period applies to vested awards, during whichtime Executive Directors may not sell the vested awards
except to cover tax liabilities.
Awards are subject to malus and clawback provisions, i.e.
forfeiture or reduction of unvested awards and recovery ofvested awards in exceptional circumstances (such as material
misstatement or gross misconduct).
The Remuneration Committee has discretion to adjust theformulaic vesting outcome to ensure the final outcome is afair and true reflection of underlying business performance.

Maximum opportunity: £2,000,000. For awards
above £1,000,000 a maximum of 600% of basesalary (excluding any salary shares) applies.
Threshold performance will result in vesting of
up to 25% of the maximum award.
Vesting of DFSS awards is subject to the Group’s
performance over a three-year performance
period. The performance measures may include
EPS, ROE and relative TSR or other measuresselected by the Committee, as appropriate.
Measures will typically be weighted equallyunless the Committee determines otherwise
to reflect strategic priorities. Details of themeasures, weightings and performancetargets used for specific DFSS grants areincluded in the relevant year’s Annual Report on
Remuneration.

DFSS Bonus
To further align incentive
structures with shareholderinterests through thedelivery of dividend
equivalent bonuses.

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

Maximum opportunity: sum equal to thedividends payable during the year onawarded but unvested DFSS shares, subject
also to a possible 20% enhancement basedon the Committee’s assessment of the risk
metrics scorecard.

No bonus is payable unless dividends are
The DFSS bonus is subject to a ±20% adjustment based on
payable on Admiral shares.
performance against a set of risk metrics. The metrics will
be set each year for all significant areas of the business withspecified targets to determine the amount of any DFSS bonus
adjustment. It is anticipated that many of these measures will
be directly related to customer outcomes. Whilst the bonus may
be adjusted upwards or downwards by up to 20% in any given
year, it is not anticipated that the adjustment will increase the
CFO’s remuneration on average over the long term.
The DFSS bonus is subject to malus and clawback provisions,i.e. forfeiture or reduction of unvested awards and recovery ofvested awards in exceptional circumstances (such as material
misstatement or gross misconduct).
Approved Free Share Incentive Plan (SIP)
To encourage shareownership across all
employees using HMRC
approved schemes.

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

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

Admiral Group plc · Annual Report and Accounts 201767

Corporate Governance: Directors’ Remuneration Policy

Directors’ Remuneration Policy continued

Remuneration Policy table continued
Purpose and link to strategy

Operation

Opportunity and performance metrics

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

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

Shareholding Requirement
To align interests of
Executive Directors withshareholders.

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

Notes to the Remuneration Policy table
Payments from existing awards
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the Remuneration
Policy. This includes all outstanding awards under the previous 2015 Remuneration Policy, or any awards made prior to appointment to theBoard. Details of any such payments will be set out in the Annual Report on Remuneration as they arise.

Selection of performance measures
Vesting under the DFSS is currently linked to EPS vs. LIBOR, ROE, and relative TSR. EPS vs. LIBOR has been selected as a performance measure
as the Committee feels it is a strong indicator of both long-term shareholder return and the underlying financial performance of the business.
It is transparent and visible and provides good line-of-sight to executives. ROE has been selected as the Committee believes that a returns
metric reinforces the focus on capital efficiency and delivery of strong returns for our shareholders, thereby further strengthening thealignment of incentives with Admiral’s strategy. The third DFSS measure is relative TSR vs. the FTSE 350 (excluding investment companies).
This has been selected to reflect value creation for Admiral’s shareholders as compared with the general market. The specific performancemeasures and their respective weightings in respect of each DFSS award may vary to reflect the strategic priorities at the time of the award.
Performance targets are set to be stretching and achievable, taking into account broker forecasts, the Company’s strategic priorities and theeconomic environment in which the Company operates. The financial targets are set taking into account a range of reference points including
the Group’s strategic plan and broker forecasts for both Admiral and its insurance peers. The Committee believes that the performancetargets set are stretching and motivational, and that maximum outcomes are available only for outstanding performance.

Remuneration policy for other employees
The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to the role size, experience required,individual performance and pay levels in comparable companies.
In general, the Remuneration Policy which applies to other senior executives is consistent with that for Executive Directors. Remuneration istypically linked to Company and individual performance in a way that reinforces shareholder value creation.
Approximately 2,300 employees from across the Group, as well as the CFO, participate in the DFSS. The Committee recommends for approvalby the Board DFFS awards for those Executives within its remit and on an aggregate basis for all other participants in the DFSS. For the CFO,
all DFSS share awards are subject to performance conditions. For other senior managers and employees at lower organisational levels, a
proportion of awards (ranging from 50% to two-thirds) is subject to performance, and the remainder has no performance conditions attachedother than the requirement that the recipient remains an employee of the Group at the date of vesting. Award sizes vary by organisational
level and an assessment of individual performance and non-financial business unit performance. All holders of DFSS awards receive the DFSS
bonus. Overseas employees receive an equivalent award to the UK SIP awards under the DFSS. These awards have no performance measuresattached.
All employees are eligible to participate in the SIP on the same terms.

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

68

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

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

Date of appointment

David Stevens

22 October 1999

Geraint Jones

13 August 2014

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

DFSS

DFSS bonus

Salary shares(CFO only)

Scenario

Treatment of awards

Timing of vesting

Resignation

Awards lapse.

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

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

Normal vesting date.

Change of control

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

Resignation

n/a

n/a

Death, injury or disability,
Not payable after the event.
redundancy, retirement or any
other reasons the Committee may
determinen/aChange of control

Not payable after the event.

n/aResignation

Awards lapse

n/a.

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

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

Normal vesting date, with
Committee discretion toaccelerate.

Change of control

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

Admiral Group plc · Annual Report and Accounts 201769

Corporate Governance: Directors’ Remuneration Policy

Directors’ Remuneration Policy continued

Service contracts and leaver/change of control provisions continued
For all leavers (with the exception of termination for cause). In respect of vested DFSS and vested salary share awards that are still subject toa holding period, awards will normally be released in full at the end of the holding period, though the Committee has discretion to determine
otherwise, taking into account the circumstances at the time.

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

Term

Commencement date

Notice period

Annette Court

3 years

21 March 2015

Three months

Owen Clarke

3 years

19 August 2015

One monthColin Holmes

3 years

3 December 2016

One month

Jean Park

3 years

17 January 2014

One month

Justine Roberts

3 years

17 June 2016

One month

Manning Rountree

3 years

16 June 2015

One month

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

Operation

Opportunity and performance metrics

To attract and retain NEDsof the highest calibre withexperience relevant to
the Company

Fees are reviewed annually.

Fee levels are set by reference to NED fees atcompanies of a similar size and complexity.
It is anticipated that NED fee increases will
normally be in line with the increase for thegeneral employee population over the termof this Policy.

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

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

Pay-for-performance: scenario analysis
The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split
between the different elements of pay under three different performance scenarios: ‘Minimum’, ‘On-target’ and ‘Maximum’.
As described above, Admiral’s DFSS bonus is directly aligned with dividends received by our shareholders. Whilst the final bonus outcome may
be adjusted upwards or downwards for risk by up to 20% in any given year, it is anticipated that the average adjustment over the long term will
be close to 0%. The figures shown in the chart below for the CFO’s DFSS bonus include the value of the actual DFSS bonus paid in 2017 as anillustration of the value he might receive. Under all scenarios, potential reward opportunities are based on the proposed Remuneration Policy
and expected awards for 2018, applied to salaries as at 1 January 2018.

70

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

1,400

Corporate Governance

Financial Statements

Additional Information

65%

Fixed RemDFSS bonus
DFSS

1,200
1,000

800
27%

600
30%

22%

11%

400
200

£0

70%

51%

24%

Minimum

On-target

Maximum

100%

100%

100%

Minimum

On-target

Maximum

CFO: Geraint Jones

CEO: David Stevens

The value of DFSS awards is calculated based on the average share price in the last three months of 2017 (£18.88) and the number of DFSS
shares awarded in 2017 (50,000 shares) and salary shares expected to be awarded in 2018 (5,000 shares, subject to shareholder approval).
The charts above exclude the effect of any Company share price movement. For this reason, were the CFO’s DFSS shares to vest in full, his
actual total remuneration may exceed the £ value shown in the chart above.
Component‘Minimum’

Base salary•

Annual cash salary and salary shares (CFO only) for 2018

‘On-target’Pension•£15,000 annual contribution for CFO and CEO

Benefits•

Taxable value of annual benefits provided

DFSS

•

0% vesting

DFSS bonus•

Based on DFSS bonus paid in 2017•

‘Maximum’

20% average vesting•

100% vesting

Admiral Group plc · Annual Report and Accounts 201771

Corporate Governance: Directors’ Remuneration Policy

Directors’ Remuneration Policy continued

Approach to Remuneration relating to new Executive Director appointments
External appointments
In the case of appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration as
set out in the Policy Table. The Committee’s policy is to set the remuneration package for a new Executive Director in accordance with theapproved Remuneration Policy at the time of the appointment.
In determining the appropriate remuneration for a new Executive Director, the Committee will consider all relevant factors to ensure that
arrangements are in the best interests of the Company and its shareholders. Where an individual is appointed on an initial base salary thatis below market, any shortfall may be managed with phased increases over a period of time, subject to the individual’s performance anddevelopment in the role. This may result in above-average salary increases during this period.
The Committee may also make an award in respect of a new Executive Director appointment to ‘buy out’ incentive arrangements forfeitedon leaving a previous employer. In doing so, the Committee will consider relevant factors including any performance conditions attachedto the forfeited awards and the likelihood of those conditions being met to ensure that the value of the buy-out award is no greater than
the fair value of the awards it replaces. The Committee may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out
incentive arrangements.

Internal appointments
Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the Policy forexternal appointees, as detailed above. Where an individual has contractual commitments made prior to their promotion to the Board, theCompany will continue to honour these arrangements. Incentive opportunities for below-Board employees are typically no higher than for
Executive Directors, but measures may vary if necessary.

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

Considerations of conditions elsewhere in the GroupThe Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive
Directors. Whilst the Committee does not currently consult specifically with employees on the Remuneration Policy for Executive Directors,
it consults with and receives updates on employee pay arrangements from the Head of People Services and takes this into consideration whenreviewing executive remuneration.

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

Considerations of regulatory requirements
The Committee regularly reviews the Remuneration Policy and structure in the context of Solvency II remuneration guidance. The Chief Risk
Officer periodically attends Committee meetings as part of this process and provides support to the Committee in understanding any riskrelated implications of remuneration decisions. Whilst the Remuneration Policy includes several features which help ensure compliance withcurrent regulatory guidance, the Committee reserves the discretion to adjust the Remuneration Policy, and its execution, to take into accountany developments in such regulatory guidance.

72

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Annual Report on Remuneration

This section of the report provides details of how Admiral’s 2015 Remuneration Policy was implemented in 2017 and how the Remuneration
Committee intends to implement the proposed Remuneration Policy in 2018.

Remuneration Committee membership in 2017
The Board sets the Group’s Remuneration Policy and, through the authority delegated to it by the Board, the Committee is responsible formaking recommendations to the Board on the structure and implementation of the Remuneration Policy across the Group with consideration
to the prevailing economic climate within the economies in which the Group operates. Its remit includes recommending the remunerationof the Group Board Chairman, the Executive Directors and the Company Secretary; reviewing the remuneration of senior management; andreviewing the composition of and awards made under the performance-related incentive schemes.
At the end of 2017 the Committee consisted of Owen Clarke, Jean Park, Justine Roberts and Annette Court. Owen Clarke joined theRemuneration Committee with effect from 28 April 2016 and was proposed as the Chairman of the Committee on 26 April 2017. Owen Clarke
is currently the Acting Chairman of the Committee as his appointment remains subject to regulatory approval. Justine Roberts joined theCommittee with effect from 26 April 2017. Annette Court was the Chair of the Committee until the date of the 2017 AGM (26 April 2017)
when she was appointed as Non-Executive Chair of Admiral and remains a member of the Committee pending the conclusion of Owen Clarke’s
regulatory application process. The Committee met seven times during the year.
The Group Chairman, CEO, CFO and Chief Risk Officer are invited to meetings where the Committee considers it appropriate to obtain theiradvice on Group strategy and performance and Senior Executive pay strategy. The members of the Committee do not have any personal
financial interests (other than shareholdings), or any conflicts, that relate to the business of the Committee. The Committee members do nothave any day-to-day involvement in the running of the Group.

Advisor to the Committee
During the year, in order to enable the Committee to reach informed decisions on Executive remuneration, advice on market data and trends
was obtained from independent consultants, Mercer Kepler. Mercer Kepler reports directly to the Committee Chairman, and is a signatory to
and abides by the Code of Conduct for Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com). Other
than advice on remuneration, no other services were provided by Mercer Kepler (or any other part of the MMC group of companies) to theCompany. The fees paid to Mercer Kepler in respect of work carried out in 2017 (based on time and materials) totalled £48,430, excluding
expenses and VAT.
The Committee undertakes due diligence periodically to ensure that Mercer Kepler remains independent of the Company and that the advice
provided is impartial and objective. The Committee is satisfied that the advice provided by Mercer Kepler is independent.
The Company Secretary also circulates market survey results as appropriate.

Summary of shareholder voting at the 2017 AGM
The table below shows the result of the advisory vote on the 2016 Annual Report on Remuneration at the 2017 AGM.

2016 Annual Report on Remuneration

Total number of votes% of votes castFor

AgainstTotal votes cast

Abstentions

173,833,258

9,309,064

183,142,322

10,552

94.9%

5.1%

Admiral Group plc · Annual Report and Accounts 201773

Corporate Governance: Annual Report on Remuneration

Annual Report on Remuneration continued

Total single figure of remuneration for Executive Directors (audited)
The table below sets out the total single figure remuneration received by each Executive Director for the year ended 31 December 2017 andthe prior year.

1. Base salary

2. Benefits

3. Pension

4. SIP

5. DFSS

6. DFSS bonus

Total
remuneration

2017£245,000£604£8,996£3,600£701,392£153,525£1,113,117

2016£210,000£330£9,000£3,600£202,400£174,209£599,539

2017£390,824£404£3,791

n/a

n/a

n/a

£395,019

2016£381,923£330£3,705

n/a

n/a

n/a

£385,958

Executive Director

Geraint JonesDavid Stevens

1.

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

The figures have been calculated as follows:
1. Base salary/fee: amount earned for the year.
2. Benefits: the taxable value of annual benefits received in the year.
3. Pension: the value of the Company’s contribution during the year.
4. SIP: the face value at grant.
5. DFSS: the value at vesting of shares vesting on performance over the three-year periods ending 31 December 2017 and 31 December 2016.
For the 2017 figures, given that vesting occurs after the 2017 Directors’ Remuneration Report is finalised, the figures are based on the
average share price in the last three months of 2017 (£18.88). The 2016 figures have been trued up based on the actual share price on vest(£20.24).
6. DFSS bonus: the bonus equivalent to dividends that were paid during the year on all outstanding DFSS shares awarded but not yet vested.

Total single figure of remuneration for Non-Executive Directors (audited)
The table below sets out the total single figure remuneration received by each NED for the year ended 31 December 2017 and the prior year.
Total fees
Director

2017

2016

1

£115,656£238,612

Annette Court2£217,121£93,450

Owen Clarke

3£77,438£70,350

Colin Holmes£89,250£89,250

Penny James 4£48,575£70,350£113,750£78,750£59,229£29,583£70,350£70,350

Alastair Lyons

Jean Park

5

Justine Roberts

6

Manning Rountree
1.

Alastair Lyons retired from the Board with effect from 26 April 2017.

2.

Annette Court was appointed Chairman of the Board with effect from 26 April 2017.

3.

Owen Clarke was appointed Chair of the Remuneration Committee with effect from 26 April 2017

4.

Penny James retired from the Board with effect from 8 September 20175.	Jean Park’s fees for 2017 include additional fees in relation to the years ended 31 December 2016 and 2017 relating to her position as Chair of the Group Risk Committee and inrecognition of the increased time commitment required of her as a consequence of Solvency II regulations and the Internal Model Application Process.
6.

74

Justine Roberts was appointed to the Board on 17 June 2016.

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Incentive outcomes for financial year to 31 December 2017 (audited)
DFSS awards vesting on performance to 31 December 2017
On 29 September 2015, Geraint Jones was granted an award under the DFSS of 50,000 shares with a value at the date of award of £743,500(based on a grant date share price of £14.87), equivalent to 372% of salary.
Vesting of the award was based 100% on the achievement of performance conditions, being EPS growth vs. LIBOR, TSR vs. FTSE 350(excluding investment companies), and ROE, weighted equally and all measured over the three-year period 1 January 2015 to 31 December 2017.
Over this period, the returns to our shareholders were strong, with TSR in the top quartile of FTSE350 companies and with ROE of over 47%.
The combination of these shareholder returns and EPS growth comfortably in excess of the threshold performance set for these awards
contributed to a vesting level of 74.3%. The table below details the Company’s performance against targets and the resulting vesting outcome.
Performance range
Performance measureThreshold

EPS growth vs. LIBOR(weighted 33%)

Growth in linewith LIBORTSR vs. FTSE 350(excluding investmentcompanies) (33%)

MedianUpper quartile

Return on Equity(ROE) (33%)

25%

55%

Total vesting

Maximum

Vesting schedule

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

Actual outturn

Vesting outcome(% of maximum)

12.4% points. inexcess of LIBOR

41.0%

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

77th percentile

100%

25% for achieving thresholdwith straight line relationship to100% for maximum performance

47.7%

81.9%

74.3%

Based on performance, the total amount that will vest to Geraint Jones in September 2018 will therefore be 74.3% of his award (i.e. 37,150
shares), subject to his continued employment on the vesting date.
Vested DFSS awards are subject to clawback provisions in exceptional circumstances, such as material misstatement or gross misconduct.

DFSS bonus in respect of 2017
In line with the Remuneration Policy, the Group paid a bonus to all holders of DFSS shares in 2017, which was equivalent to the dividend payable
on all outstanding DFSS shares awarded but not yet vested. The Committee continues to believe that having a bonus equivalent to thedividend flow received by investors further aligns the incentive structure with shareholders.
In 2017, Geraint Jones received a DFSS bonus of £153,525 (2016: £174,209). David Stevens did not receive a DFSS bonus as he does notparticipate in the DFSS.
DFSS bonus payments are subject to clawback provisions in exceptional circumstances, such as material misstatement or gross misconduct.

Admiral Group plc · Annual Report and Accounts 201775

Corporate Governance: Annual Report on Remuneration

Annual Report on Remuneration continued

Scheme Interests Granted in 2017 (audited)
DFSS
In September 2017, Geraint Jones was granted an award under the DFSS of 50,000 shares with a value at the date of award of £905,000 (basedon share price of £18.10), equivalent to 369% of salary. The three-year period over which performance will be measured is 1 January 2017 to
31 December 2019. The award is eligible to vest in its entirety on the third anniversary of the date of grant (i.e. September 2020), subject toperformance and to continued employment. David Stevens again declined to be included given his significant shareholding.
The award will vest dependent on three-year EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted
equally. The performance conditions are summarised in the table below.
Performance range
Performance measureThresholdMaximum

Vesting

EPS growth vs. LIBOR

Growth in line with
LIBOR

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

10% for achieving threshold with straight line
relationship to 100% for maximum performance

TSR vs. FTSE 350 (excluding
investment companies)

MedianUpper quartile

25% for median, with straight line relationshipto 100% for upper quartile

Return on Equity (ROE)

25%

55%

25% for achieving threshold with straight line
relationship to 100% for maximum performance

DFSS awards are subject to clawback and malus provisions, i.e. forfeiture or reduction of unvested awards and recovery of vested awards in
exceptional circumstances (such as material misstatement or gross misconduct).

SIP
In March and August 2017, Geraint Jones was granted awards under the SIP of 95 shares in March 2017, with a face value of £1,902, and85 shares in September 2017, with a face value of £1,792. The shares will vest on 11 March 2019 and 2 September 2019 respectively subject
to continued employment only. David Stevens again declined to be included given his significant shareholding.

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

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

Implementation of Remuneration Policy for 2018
Executive Directors
Salary, pension and benefits
Salaries for the Executive Directors in 2018 will be determined in line with the proposed Remuneration Policy, subject to shareholder approval.
The Committee approved the following base salaries for the Executive Directors for 2018:
Director

Latest salary2017 salary% change

Effective date

Geraint Jones£340,0001£245,000

38.8%

1 January 2018

David Stevens£396,000£388,236

2%

1 September 2017

1.

76

Comprising £245,000 in cash and circa £95,000 in shares, subject to shareholder approval.

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

For 2018, the CFO’s cash salary will remain unchanged at £245,000 and an award of 5,000 salary shares is proposed, bringing total salary to circa£340,000. The salary share award will vest after three years subject to continued employment. An additional two-year holding period will apply,
during which time shares may not be sold, save to meet income tax, NI or other regulatory obligations. Malus and clawback provisions will apply
during the vesting and holding periods. The salary share award is not included in base salary when calculating the CFO’s pension benefit.
The Committee believes that structuring the CFO’s salary increase as an award of shares, rather than cash, is better aligned with shareholders,is consistent with our philosophy of low cash awards balanced by the award of shares, and more effectively supports the CFO’s retention. The
proposed change will bring the CFO’s package closer to market (though it will remain in the bottom quartile). It also reflects a move towards
improving internal consistency between the CFO’s remuneration structure and that of the broader Admiral executive team below Board, forwhom a proportion of their share awards are subject to continued employment but not subject to the DFSS vesting criteria.
Geraint Jones will continue to participate in the Group Personal Pension Plan, where employee contributions are matched up to a maximum
6% of base salary with internal cap on the maximum employer contribution. Effective from 2018 and subject to shareholder approval, whilst
pension provision will remain 6% of base salary, the cap will be increased from £9,000 to £15,000 p.a. and the Company will offer individuals a
choice between pension contributions and cash in lieu. David Stevens will also continue to participate in the plan, on the same basis as Geraint.
Both Executive Directors will continue to receive benefits in line with the Policy.

DFSS
As in prior years, the Committee intends to make an award under the DFSS to Geraint Jones in September 2018. In advance of each DFSS cycle,
the Committee reviews the appropriateness of the performance measures and corresponding targets. The Committee will determine theaward size and performance conditions to be attached to the 2018 DFSS award closer to the award date (expected to be in September 2018),
and will disclose them in the 2018 Annual Report on Remuneration.

DFSS bonus
As in prior years, Geraint Jones will be eligible to receive a DFSS bonus in 2018. The bonus is calculated to be equivalent to dividends that would
have been payable during the year on all outstanding DFSS shares and any salary shares awarded but not vested. Effective from 2018, the DFSS
bonus will include a ±20% adjustment based on performance against a set of risk metrics. The details of the risk metric and any adjustment
applied will be provided in the 2018 Annual Report on Remuneration.

Admiral Group plc · Annual Report and Accounts 201777

Corporate Governance: Annual Report on Remuneration

Annual Report on Remuneration continued

Implementation of Remuneration Policy for 2018 continued
Chairman and Non-Executive Directors
Fees for the Board Chairman and other Non-Executive Directors were last reviewed in January 2018, and increases effective from 1 January
2018 are as follows:

Chairman2018 fee (p.a.)Previous fee (p.a.)£307,5001£300,0002£60,500£57,750

NED base fee
Additional fee for chairing:•

Audit Committee£21,000£21,000•

Group Risk Committee£41,000

3£41,000•

Remuneration Committee£15,000£10,500•

Nomination Committee£5,250£5,250Additional fee for membership of:•

Audit Committee£12,600£12,600•

Group Risk Committee£12,600£12,600£11,025£10,500

Additional fee for being Senior Independent Director

1.	The 2018 fee for the Board Chairman increased by 2.5% from £300,000 to £307,500 and comprises a cash fee of £215,250 and a share fee of £92,250 with which the Chairman isrequired under a Share Agreement entered into with the Group to use the net proceeds in two equal instalments to purchase Group shares after the Group’s Full Year Results and Half
Year Results are announced each year.
2.

Annette Court was appointed as Board Chairman on 26 April 2017 on an annual fee of £300,000. The annual fee payable to the previous Chairman, Alastair Lyons, was £244,577.

3.	The fee payable to Jean Park, Chair of the Group Risk Committee, includes an additional fee of £20,000 per annum with effect from 1 January 2017 until 31 December 2018 inrecognition of the increased time commitment required of her as a consequence of the Solvency II regulations and Internal Model Application Process.

Percentage change in CEO remuneration
The table below shows the percentage change in CEO remuneration from 2016 compared to the average percentage change in remuneration
for all other employees. The analysis is based on a consistent set of employees, i.e. the same individuals appear in the 2016 and 2017
populations. As the CEO does not participate in the DFSS bonus scheme, to provide a meaningful comparison we have also included data for
the CFO who receives DFSS awards.
CEO

SalaryTaxable benefits
DFSS bonus2

Other
employees

CFO

2017

2016

% change

2017

2016

% change% change£390,824

1£392,1060%£245,000£210,000

+17%

+4%

£404

£330

+22%

£604

£330

+83%

+22%

-

–

–

£153,525£174,209

-12%

-15%

1.

Based on the sum of remuneration paid to Henry Engelhardt up to and including 13 May 2016 and to David Stevens from 13 May 2016.

2.

DFSS bonus change represents the change in dividends paid, which is the driver of the level of bonus payable to holders of unvested DFSS shares.

Relative importance of spend on pay
The table below shows the percentage change in dividends and total employee remuneration spend from the financial year ended 31
December 2016 to the financial year ended 31 December 2017.
2017
£m

2016
£m

%
changeDistribution to shareholders

£320

318

+1%

Employee remuneration

£324

280

+15%

The Directors are proposing a final dividend for the year ended 31 December 2017 of 58 pence per share bringing the total dividend for 2017
to 114.0 pence per share (2016: 114.4 pence per share).

78

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Pay for performance
The following graph sets out a comparison of TSR for Admiral Group plc shares with that of the FTSE 100 and FTSE 350 indices, of which theCompany is a constituent, over the nine-year period to 31 December 2017. The Directors consider these to be the most appropriate indicesagainst which the Company should be compared. TSR is defined as the percentage change over the period, assuming reinvestment of income.

9 Year TSR Performance: Admiral vs. FTSE 100 and FTSE 350 indices
Growth in the value of a hypothetical £100 holding over the nine years to 31 December 2017.
£500
£400
£300
£200

AdmiralFTSE 100£100

FTSE 350£0
Dec 08CEO

Dec 09Dec 10Dec 11

Dec 12

Dec 13

Dec 14

Dec 15

Dec 16

2009

2010

2011

2012

2013

2014

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt

Henry
Engelhardt£328,027£343,106£358,199£373,759£387,546£393,260£397,688

n/a

n/a

n/a

n/a

n/a

n/a

n/a

2009

2010

2011

2012

2013

Incumbent

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

Kevin
Chidwick

CFO single figureof remuneration£632,312£1,269,535£1,048,130

98%

100%

100%

Incumbent
CEO single figureof remuneration
DFSS vesting outcome(% of maximum)

CFO

DFSS vesting outcome(% of maximum)

Dec 17

2015

2016

2014

2017
David
Stevens2

David
Stevens£148,776£246,023£395,019

n/a

n/a

n/a

2015

2016

2017

Henry
Henry
Engelhardt Engelhardt1

Kevin
Chidwick3

Geraint
Jones4

Geraint
Jones

Geraint
Jones

Geraint
Jones£1,431,218 £1,444,4435 £1,204,1645£363,551£539,704£599,539 6£1,113,117

69% 50% and 0%

74.3%7

100%

100%

70%

85%

1.

Henry Engelhard stepped down from the Board on 13 May 2016. His 2016 remuneration includes salary and benefits in respect of his service as CEO.

2.

David Stevens was appointed as the CEO on 13 May 2016. His 2016 remuneration includes salary, pension and benefits in respect of his service as CEO.

3.	Kevin Chidwick left the Board on 13 August 2014 to focus on his new role as CEO of Elephant Auto. His 2014 remuneration includes salary, pension and benefits in respect of his service
as CFO, his full year DFSS and his full year DFSS bonus.
4.	Geraint Jones was appointed to the Board as CFO on 13 August 2014. His 2014 remuneration includes salary, pension and benefits in respect of his service as CFO, his full year DFSS andhis full year DFSS bonus.
5.

These figures include reimbursement of £177,104 and £165,000 in 2014 and 2013, respectively, for expenses incurred in respect of the previous CFO’s relocation.

6.

This figure has been trued up since the 2016 report for the value of the 2014 DFSS based on the actual share price on vest (£20.24).

7.

74.3% of Geraint Jones’ 2015 DFSS award will vest in September 2018 subject to his continued employment on the vesting date.

There are no annual bonus outcomes to report in the table as the Admiral DFSS bonus is not structured as a traditional annual bonus scheme
and consequently a vesting outcome (as a percentage of max) is meaningless.

Admiral Group plc · Annual Report and Accounts 201779

Corporate Governance: Annual Report on Remuneration

Annual Report on Remuneration continued

Dilution
The Company currently uses newly issued shares to fund the DFSS and SIP. The Company has controls in place to ensure that shares awarded
under the incentive schemes operated by the Company within any rolling ten-year period do not exceed 10% of the number of ordinary sharesin the capital of the Company in issue at the time of each award. As at the end of 2017, the ten-year rolling dilution level was 9.45% on a grossbasis and 8.51% on a net basis, after taking account of future attrition and performance vesting in the DFSS. The Company would consider
using a mixture of newly issued shares and market purchase shares to fund the DFSS in the future.

Interests held by Directors (audited)
The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors are required to acquire and retain abeneficial shareholding in the Company equal to at least 300% of base salary, excluding salary shares where applicable, which can be built up
over a period of five years from the later of the introduction of the guidelines and the individual’s date of appointment. The guideline waspreviously set at 200% of base salary, but was increased to 300% from 2018 for additional shareholder alignment. All Executive Directors
currently hold shares in excess of the guideline.
As at 31 December 2017, the Directors held the following interests:
Shares held

Beneficiallyowned outright

Subject tocontinued
employment
only

Subject toperformance
conditions

Shareholding
requirement(% of salary)

Current
shareholding(% of salary)

Requirement
met?

Geraint Jones

56,5071

37,1502

100,000

300%

>300%

Yes

David Stevens

9,287,950

n/a

n/a

300%

>300%

Yes

Director

Annette Court

3,475

Owen Clarke

142,852

Colin Holmes

23,500Jean Park

4,000

Justine Roberts–

Manning Rountree–

1.

Total includes SIP shares both matured and awarded.

2.

Total reflects shares from the 2015 DFSS award (performance test has been applied, and award is due to vest in September 2018).

There have been no changes to Directors’ shareholdings since 31 December 2017.
None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of the Group.

80

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Current CFO Geraint Jones’ Interests in Shares under the DFSS and SIP (audited)
Vested/ matured
during year

At endof yearPrice ataward (£)

Value ataward date (£)

Value at
31 Dec 2017or maturity (£)

Date of award

Final vesting/maturity dateType

At startAwardedof year during year

DFSS

20,000–10,000–£13.74£274,800£202,4001,2

15/04/2014

15/04/2017

DFSS

35,000–––£12.27£429,520–

3

22/09/2014

22/09/2017

DFSS

50,000––50,000£14.87£743,500£1,001,000

29/09/2015

29/09/2018

DFSS

50,000––50,000£20.79£1,039,500£1,001,000

26/09/2016

26/09/2019

DFSS

–

50,000–50,000£18.10£905,000£1,001,000

26/09/2017

26/09/2020

SIP

100

–

100

–

£15.06£1,506£1,907

14/03/2014

14/03/2017

SIP

114

–

114

–

£13.06£1,489£2,15505/09/2014

05/09/2017

SIP

101

–

–

101

£14.88£1,503£2,022

13/03/2015

13/03/2018

SIP

118

–

–

118

£15.21£1,795£2,362

24/08/2015

24/08/2018

SIP

92

–

–

92

£19.47£1,791£1,841

11/03/2016

11/03/2019

SIP

87

–

–

87

£20.51£1,784£1,741

02/09/2016

02/09/2019

SIP

–

95

–

95

£19.08£1,813£1,902

17/03/2017

17/03/2020

SIP

–

85

–

85

£21.08£1,792£1,702

18/08/2017

18/08/2020

1.

Value at maturity.

2.	The vesting percentage for performance related awards made in 2014 was 0%. The award made to Geraint Jones in April 2014 was 50% performance related and 50% non-performance
related and therefore the blended vesting percentage was 50%. This resulted in the lapsing of 10,000 shares. The value at maturity relates only to shares vested.
3.	The vesting percentage for performance related awards made in 2014 was 0%. The award made to Geraint Jones in September 2014 was 100% performance related vesting percentage
was 0%. This resulted in the lapsing of 35,000 shares.

The closing price of Admiral shares on 31 December 2017 was £20.02 per share.
By order of the Board,

Owen Clarke
Acting Chairman of the Remuneration Committee
27 February 2018

Admiral Group plc · Annual Report and Accounts 201781

Corporate Governance: Directors’ Report

Directors’ Report

The Directors present their Annual Report
and the audited financial statements for theyear ended 31 December 2017.

Statutory disclosures
Group results and dividends
The profit for the year, after tax but before
dividends, amounted to £331.6 million(2016: £214.1 million).
The Directors declared and paid dividendsof £300.3 million during 2017 (2016:£349.8 million) – refer to note 11b forfurther details.
The Directors have proposed a final dividendof £163 million (58 pence per share) payable
on 1 June 2018.

Employee policies
Detailed information on the Group’s
employment practices is set out in theStrategic Report and on the corporatewebsite. The Group purchases appropriate
liability insurance for all staff and Directors.

permanently at the outsourced operation,
who is responsible for ensuring that theGroup’s principles are adhered to by theoutsourced partner, and that the wellbeingof outsourced staff is monitored.

Anti-bribery
The Group’s Anti-bribery Policy strictly
prohibits the solicitation or the acceptanceof any bribe, whether cash or inducement,
to or from any person or company, wherever
they are situated and whether they are apublic official or body or private person orcompany, by any individual employee, Board
member, agent or other person or body on
the Group’s behalf.

Gender diversity
The table below provides a breakdown of thegender of Company Directors and employees
at the end of the financial year:

Company Directors*1

Diversity, ethics and human rights

Other senior managers

Admiral Group respects and values
the individuality and diversity of every
employee. The Group’s Equality, Diversity
and Dignity at Work Policy ensures thatevery employee is treated equally and fairly
and that all employees are aware of their
obligations. The Group is fully committed
to the health and safety and the humanrights of its employees regardless of theirbackground. In addition, the Group maintains
a number of employee codes of conduct
regarding appropriate ethical standards inthe workplace.

All employees

The Group’s principles of respect for humanrights, diversity, health and safety andworkplace ethical standards not only apply tostaff directly employed by Admiral, but also
to staff employed by the Group’s outsourced
partner in Bangalore, India. To meet thiscommitment, Admiral Group maintains
regular contact with its outsourcer’s
management team and the Group’s senior
managers visit the outsourcer on a regularbasis, whilst the Group also provides training
and development to ensure that the teamuphold these principles. In addition, AdmiralGroup has appointed a manager based

82

*2

Male

Female

5

3

38

17

4,715

4,981

Notes
*1	Company Directors consists of the Board of Directors,
as detailed on pages 43 to 45.
*2	Other senior managers is as defined in the Companies
Act 2006 (Strategic Report and Directors’ Report) andincludes persons responsible for planning, directing
or controlling the activities of the Company, or a
strategically significant part of the Company, otherthan Company Directors. Any other Directors ofundertakings included in the consolidated accounts
that are not considered strategically significant havenot been included.

Disabled employees
Admiral Group gives full and fairconsideration to applications for
employment made by those with disabilities,
having regard to their particular aptitudes
and abilities. Admiral Group’s UK businesses
are Disability Confident Employers. Thismeans they are recognised as going theextra mile to make sure disabled people
get a fair chance.
The Group will support any employee who isdisabled or has a life threatening illness andhelp them to contribute to the Group as longas their health allows.

Admiral Group plc · Annual Report and Accounts 2017Managers in the Group are sensitive tohealth concerns and special needs and will
not knowingly allow any employee witha disabling or life threatening illness to
suffer from discrimination at work. The
Group provides staff with access to the
EAP Care First confidential helpline which
offers advice and support on a range ofhealth issues.

Communication
There are a wide range of communication
tools used by the Group to communicate
to employees which assists in theunderstanding of business goals andobjectives including; the staff portal (Atlas),internal newsletters, videos, team briefings,
suggestion schemes, staff forums, updates
on the staff share scheme and the annual
Staff General Meeting (SGM). In the 2017
annual staff survey, 83% of staff were happy
with the amount of information they receive
about the company (2016: 84%).
The transparency of our communication
philosophy extends to senior managers
and Directors, who sit amongst their teams
which encourages a dialogue between staff
of all levels of seniority across all areas of ourbusiness. Furthermore, our Chief Executive
Officer (CEO) operates an ‘open door’ policy
so if any member of our staff wants to ask
him a question, they can email him directly
through our ‘Ask David’ intranet initiative.
Our senior managers and Directors also
participate in regular online chats with staff.

Contractual arrangements
The Group considers its co-insurance andreinsurance contracts, as described in theStrategic Report, to be essential to therunning of the Group’s business. No othercontractual arrangements are considered
to be essential.

Financial instruments
The objectives and policies for managing
risks in relation to financial instruments heldby the Group are set out in note 6 to thefinancial statements.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Directors and their interests

Going Concern

The present Directors of the Company are
shown on pages 43 to 45 of this Report, whilst
Directors’ interests in the share capital of theCompany are set out in the Remuneration
Report on pages 62 to 81.

Under Provision C.1.3 of the 2016 UK
Corporate Governance Code, the Board isrequired to report on whether the businessis a going concern. In considering thisrequirement, the Directors have taken into
account the following:Greenhouse gas emissions
The annual level of greenhouse gas emissions,
resulting from activities for which the Groupis responsible, in 2017 was 3,642 CO2e (2016:
3,764 CO2e), equivalent to 0.42 tonnes (2016:
0.45 tonnes) per employee*1. In accordancewith GHG Protocol Scope 2 guidance released
20 January 2015, Admiral is exempt from
reporting greenhouse gas emissions fromelectricity supply to the three largest UK
offices which meets the GHG Protocol
Corporate Standard. Note that 2016 has been
restated to exclude one of the US offices forcomparability as the data is not available for2017 reporting.
The data has been prepared with reference
to the WRI/WBCSD Greenhouse Gas Protocol:
A Corporate Accounting and ReportingStandard (Revised Edition) and in accordancewith the guidance for corporate reporting
issued by the Department for Environment,
Food and Rural Affairs (DEFRA).
There are no material exclusions from thisdata. Exclusions included figures for air
conditioning from all sites because theinformation was not available from the
managing agents of the Group’s multiple
office locations.
Detailed information on the Group’s
environmental performance and themethodology for the measurement ofgreenhouse gas emissions is available on thecorporate website, www.admiralgroup.co.uk.

Additional Information

Share capital, AGM andrelated matters
Major shareholders• The Group’s projections for the next 12months and beyond, in particular the profit
forecasts, regulatory capital surpluses andlevels and sources of liquidity• The risks included on the Group’s risk
register that could impact on the Group’s
financial position and performance, levelsof 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 businessmodel and capital adequacy.
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position are
set out in the Strategic Report. The Strategic
Report also includes the Group’s principal
risks and uncertainties. In addition, thegovernance report includes the Directors’
statement on the viability of the Group overa three-year period.
Following consideration of the above, theDirectors have reasonable expectation that
the Group has adequate resources to continue
in operation for the foreseeable future, aperiod of not less than 12 months from thedate of this report, and that it is therefore
appropriate to adopt the going concern basis
in preparing the financial statements.

Other than as stated below, as far as theCompany is aware, there are no persons
with significant direct or indirect holdingsin the Company. Information provided to
the Company pursuant to the Financial
Conduct Authority’s (FCA) Disclosure andTransparency Rules (DTRs) is published on a
Regulatory Information Service and on the
Company’s website.
At 31 January 2018, the Company hadreceived notifications in accordance with
the FCA’s DTRs of the following notifiableinterests in the voting rights in the
Company’s issued share capital:
Number ofshares%Henry Engelhardt &Diane Briere de l’Isle

30,505,472 10.6%

Munich Re

29,491,339 10.3%

BlackRock Inc

13,817,182

4.8%

Moondance Foundation 11,200,000

3.9%

Fidelity Management& Research Company

11,004,699

3.8%

Power Corporationof Canada

9,722,787

3.4%

N.M. Rothschild& Sons Ltd.

9,648,210

3.4%

The interests of Directors and Officers andtheir connected persons in the issued sharecapital of the Company are given in the
Remuneration Report.

*1	Average employee number excludes employees fromoffices for which data could not be collected.

Admiral Group plc · Annual Report and Accounts 201783

Corporate Governance: Directors’ Report

Directors’ Report Continued

Additional information forshareholders
Where not provided previously in thisDirectors’ Report, the following provides
the additional information required
for shareholders as a result of theimplementation of the Takeovers Directive
into UK law.
At 31 December 2017, the Company’s issued
share capital comprised a single class ofshares referred to as ordinary shares. Detailsof the share capital and shares issued during
the year can be found in note 11d.
On a poll, every member present in person orby proxy and entitled to vote shall have one
vote for every ordinary share held. The noticeof the general meeting specifies deadlines
for exercising voting rights either by proxynotice or present in person or by proxy
in relation to resolutions to be passed at
general meeting. All proxy votes are counted
and the numbers for, against or withheld in
relation to each resolution are announced at
the Annual General Meeting and published on
the Company’s website after the meeting.
There are no restrictions on the transfer ofordinary shares in the Company other than:• Certain restrictions may from time to time
be imposed by laws and regulations (forexample, insider trading laws).
• Pursuant to the Listing Rules of the
FCA whereby certain employees of
the Company require the approvalof the Company to deal in the
Company’s securities.
The Company has not purchased any of its
own shares during the period.
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of officeor employment (whether through resignation,
purported redundancy or otherwise) that
occurs because of a takeover bid.
There are a number of agreements that alteror terminate upon a change of control of theCompany following a takeover bid, such ascommercial contracts. None are considered
to be significant in terms of their impact on84

the business of the Group as a whole except
for the long term co-insurance agreement inplace with Great Lakes Insurance SE. Details
relating to this agreement are contained in
the Strategic Report.

themselves for election at the first Annual
General Meeting following appointment andall Directors who held office at the time of
the two preceding Annual General Meetings
to submit themselves for re-election.

Power to issue shares

However, in accordance with therequirement under the UK Corporate
Governance Code (the Code) for annual
election of Directors, all Directors will submit
themselves for re-election at the Group’s
Annual General Meeting on 26 April 2018.

At the last Annual General Meeting, heldon 26 April 2017, authority was given to
the Directors to allot unissued relevant
securities in the Company up to a maximumof £93,836, equivalent to one third of theissued share capital as at 20 March 2017. Thisauthority expires on the date of the Annual
General Meeting to be held on 26 April 2018
and the Directors will seek to renew thisauthority for the following year.
A further special resolution passed at thatmeeting granted authority to the Directors
to allot equity securities in the Company(up to a maximum of 5% of the issued sharecapital of the Company) for cash, without
regard to the pre-emption provisions of theCompanies Act 2006. This authority also
expires on the date of the Annual General
Meeting to be held on 26 April 2018 and the
Directors will seek to renew this authority forthe following year.
In line with the new principles published by
the Pre-Emption Group in March 2015, andtheir template resolutions published in May
2016, allowing a company the ability to seek
authority over a further 5% of the issued
ordinary share capital on a non-pre-emptivebasis subject to certain conditions, it is theintention of the Company, at the AGM on 26
April 2018, to seek this additional authority
by special resolution and will confirm in the
Notice of AGM that such additional shares
are only issued in connection with a specified
acquisition or capital investment.

Appointments of Directors
The Company’s Articles of Association(the Articles) give the Directors power toappoint and replace Directors. Under theTerms of Reference of the Nomination and
Governance Committee, any appointment
must be recommended by the Nomination
and Governance Committee for approvalby the Board of Directors. The Articles
also require Directors to retire and submit

Admiral Group plc · Annual Report and Accounts 2017

Articles of Association
The Articles may only be amended by special
resolution of the shareholders.

Power of the Directors
The Directors are responsible for managing
the business of the Company and may
exercise all powers of the Company subject
to the provisions of relevant statutes, to any
directions given by special resolution and to
the Company’s Memorandum and Articles.
The Articles, for example, contain specificprovisions and restrictions concerning theCompany’s power to borrow money. Powers
relating to the issuing of new shares are also
included in the Articles and such authorities
are renewed by shareholders at the Annual
General Meeting each year.

Directors’ indemnities and insurance
Directors and Officers insurance cover isin place for all Directors to provide coveragainst certain acts or omissions on behalfof the Company. A Deed Poll of Indemnity
was executed in October 2015, indemnifying
each of the Directors, and Company
Secretary, in relation to certain losses andliabilities that they might incur in the courseof acting as Directors of the Company. The
Deed Poll of Indemnity is categorised as
qualifying third party indemnity provisions
as defined by section 234 of the Companies
Act 2006 and remains in force for all past andpresent Directors of the Company.
The Board is of the view that it is in thebest interests of the Group to attract
and retain the services of the most able
and experienced Directors by offering
competitive terms of engagement,
including the granting of such indemnities.

Introduction

Strategic Report

Neither the Deed Poll of Indemnity nor
insurance cover would provide any coveragein the event that a Director is proved tohave acted fraudulently or dishonestly.

Annual General Meeting (AGM)
It is proposed that the next AGM be held at
City Hall, Cardiff on Thursday 26 April 2018at 2.00pm, notice of which will be sent toshareholders with the Annual Report.

Reporting, accountability
and audit
UK Corporate Governance Code
Admiral is subject to the UK Corporate
Governance Code (the Code), published by
the Financial Reporting Council (FRC) in April
2016 and available on their website, www.
frc.org.uk. The Company’s Annual Report andAccounts, taken as a whole, addresses therequirements of the 2016 Code.
During the year to 31 December 2017, theCompany has in all respects complied withthe provisions of the 2016 Code except
with regard to non-compliance with theprovisions as set out in the corporate
governance report at page 46.
The Directors confirm that the Annual
Report and Accounts, taken as a whole, is fair,balanced and understandable and provides
the information necessary for shareholders
to assess the Company’s position andperformance, business model and strategy.

Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report and the Group and parent
company financial statements in accordancewith applicable law and regulations.
Company law requires the directors to
prepare Group and parent company financial
statements for each financial year. Under that
law they are required to prepare the Groupfinancial statements in accordance with IFRSs
as adopted by the EU and applicable law andhave elected to prepare the parent company
financial statements in accordance with UK
Accounting Standards, including FRS 101
Reduced Disclosure Framework.

Corporate Governance

Financial Statements

Under company law the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fairview of the state of affairs of the Group andParent Company and of their profit or loss forthat period. In preparing each of the Groupand Parent Company financial statements,
the directors are required to:• select suitable accounting policies andthen apply them consistently• make judgements and estimates thatare reasonable and prudent• for the Group financial statements,
state whether they have been preparedin accordance with IFRSs as adopted by
the EU• for the Parent Company financial
statements, state whether applicable
UK Accounting Standards, including FRS
101 Reduced Disclosure Framework, havebeen followed, subject to any material
departures disclosed and explained in theparent company financial statements.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclosewith reasonable accuracy at any time thefinancial position of the parent company
and enable them to ensure that its financial
statements comply with the Companies Act
2006. They have general responsibility fortaking such steps as are reasonably open
to them to safeguard the assets of theGroup and to prevent and detect fraud andother irregularities.
Under applicable law and regulations,the directors are also responsible forpreparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement thatcomplies with that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on thecompany’s website. Legislation in the UK
governing the preparation and disseminationof financial statements may differ fromlegislation in other jurisdictions.

Additional Information

Responsibility statement
The Directors confirm that to the best of
their knowledge:• the financial statements, prepared inaccordance with the applicable set ofaccounting standards, give a true and fairview of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and• the Strategic Report includes a fair reviewof the development and performance ofthe business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.

Disclosure of information to auditor
The Directors who held office at the date of
approval of this Directors’ Report confirm
that, so far as they are each aware, there
is no relevant audit information of which
the Company’s auditor is unaware; andeach Director has taken all the steps thatthey ought to have taken as a Director to
make themselves aware of any relevant
audit information and to establishthat the Company’s auditor is awareof that information.

Auditor
The Company’s auditor, Deloitte LLP,
has indicated a willingness to continue
in office and resolutions to reappoint it
and to authorise the Directors to fix its
remuneration will be proposed at the Annual
General Meeting.
By Order of the Board,

Mark Waters

Geraint Jones

Company Secretary

Chief Financial Officer

27 February 201827 February 2018

Admiral Group plc · Annual Report and Accounts 201785

Financial Statements: Independent Auditor’s Report

Independent Auditor’s Reportto the Members of Admiral Group Plc

Report on the audit of the financial statements
OpinionIn our opinion:•

the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017and of the group’s profit for the year then ended;•

the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;•

the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and•the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the groupfinancial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Admiral Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) which comprise:•

the Consolidated and Parent Company Income Statements;•

the Consolidated and Parent Company Statements of Comprehensive Income;•the Consolidated and Parent Company Statements of Financial Position;•

the Consolidated Cash Flow Statement;•

the Consolidated and Parent Company Statements of Changes in Equity;•

the related notes 1 to 12 to the group financial statements; and•the related notes 1 to 9 to the Parent Company financial statements.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and IFRSs
as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”(United Kingdom Generally Accepted Accounting Practice).

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities underthose standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of thefinancial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s EthicalStandard were not provided to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

86

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Summary of our audit approach
Key audit matters

The key audit matters that we identified in the current year were:•

Valuation of gross insurance claims reserves; and•Revenue recognition – profit commission income

The key audit matters identified are the same as the prior year.
Materiality

The materiality that we used in the current year was £20m which was determined on the basis of 5% of profit before tax.

Scoping

We identified seven reporting components which we determined should be subjected to audits for group reporting
purposes this year (2016: five reporting components were subjected to full scope audits).
Further specific audit procedures were completed in respect of two further components which, although not financiallysignificant, did present some specific audit risks which needed to be addressed.
The components within the scope of our audit procedures account for 93% of the group’s profits and losses before tax(2016: 94%), 91% of revenue (2016: 87%) and 91% of the group’s net assets (2016: 95%).

Significant changes
in our approach

The main change in component scoping since 2016 is to subject the group’s two underwriting divisions in Italy to fullscope audits. Whilst these divisions are not considered significant to the group as a whole in 2017, they do represent asignificant portion of the group’s European underwriting activity and therefore we have determined that treating themin this way is the most appropriate approach.

Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in note 2 to the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and theiridentification of any material uncertainties to the group’s and company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements.

We confirm that we havenothing material to report,
add or draw attention to in
respect of these matters.

We are required to state whether we have anything material to add or draw attention to in relation to thatstatement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with ourknowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with theknowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
the directors’ assessment of the group’s and the company’s ability to continue as a going concern, we are
required to state whether we have anything material to add or draw attention to in relation to:•

the disclosures on pages 33 to 37 that describe the principal risks and explain how they are being
managed or mitigated;•the directors' confirmation on page 33 that they have carried out a robust assessment of the principal
risks facing the group, including those that would threaten its business model, future performance,
solvency or liquidity; or•the directors’ explanation on page 59 as to how they have assessed the prospects of the group, over what
period they have done so and why they consider that period to be appropriate, and their statement as towhether they have a reasonable expectation that the group will be able to continue in operation and meetits liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.

We confirm that we havenothing material to report,
add or draw attention to in
respect of these matters.

We are also required to report whether the directors’ statement relating to the prospects of the grouprequired by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.

Admiral Group plc · Annual Report and Accounts 201787

Financial Statements: Independent Auditor’s Report

Independent Auditor’s Report continued
to the Members of Admiral Group Plc

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements ofthe current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; anddirecting the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, andwe do not provide a separate opinion on these matters. The key audit matters identified this year are in line with those identified in the2016 audit.
Valuation of gross insurance claims reserves
Key audit matterdescription

The group’s gross insurance claims reserves total £2,403m (2016 year-end: £2,031m). The judgements which are made bymanagement in determining the total valuation of incurred claims reserves, including those claims which are incurred
but not reported (“IBNR”) are by far the most significant, in terms of their impact on the group’s financial position.
Setting these claims reserves is an inherently subjective exercise and small changes in underlying assumptions such as
average frequency or average severity may have a material impact on the overall year end result reported. We therefore
consider that this account balance contains potential fraud risks.
Specifically, our significant areas of focus are management’s assumptions underpinning the modelled frequency andseverity of large bodily injury claims arising in the UK Car Insurance business. These particular claims result in higher
individual claims reserves and are more judgemental, in terms of the development of the ultimate losses, due to thelonger-term nature of the group’s exposure (compared to property damage claims).
In line with the group's accounting policy, management adds a margin to the actuarial best estimate to arrive at thebooked gross claims reserves. This margin reflects the inherent uncertainty in estimating the ultimate losses onclaims, over and above that which can be projected actuarially based on underlying claims development data. This is asignificant area of management judgement and, therefore, a focus of our audit. Specifically, the margin in the UK Car
Insurance reserves, related to large bodily injury claims, is our key area of focus in respect of the margins included.
Refer to page 54 in the audit committee report where this is included as a significant issue and note 5d and note 3 in
the financial statements which refer to this matter.

How the scope of ouraudit responded to
the key audit matter

We have assessed the design and implementation and tested the operating effectiveness of key controls relating to
the key actuarial assumptions identified above and the setting of the reserve margin. This included testing controls
concerning management and Audit Committee challenge of the external actuarial expert’s work and the appropriate
governance oversight in respect of the key assumptions and margins determined.
We reviewed the reports from management’s external expert actuary and involved our own Deloitte actuarial experts
to support our challenge of management’s key assumptions. We benchmarked assumptions relating to the severity andfrequency of large bodily injury claims against available industry data and to peers where possible and appropriate. We
also completed procedures to specifically assess the competence and objectivity of management’s expert in their role.
We challenged management's qualitative and quantitative justifications for the margin held over the actuarial best
estimate through review of the accounting judgement papers produced, including involvement of Deloitte actuarial
experts. Further, we analysed its consistency with previous reporting periods and challenged management's justification
for the booked margin in relation to the uncertainty in the ultimate claims reserves.
Where there was a movement in the perceived level of prudence in the booked reserves, or a change in methodology,
we assessed this against the applicable accounting standard (IFRS 4: Insurance Contracts). Where there was a change inmethodology, we assessed this against IFRS 4 and IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors).

Key observations

88

Based on our procedures above, we consider the booked reserves remain appropriate and in line with the Group’s
prudent accounting policy.

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Revenue recognition – profit commission income
Key audit matterdescription

The auditing standards prescribe that a risk of fraud in revenue recognition should be presumed for all trading groups
and companies. We therefore performed an assessment of the group’s classes of revenue transactions to identify theareas where there was a potential for fraud through possible manipulation of this balance.
In our view, the profit commission income earned by the group, which, on a consolidated basis, consists of amounts
due from the group’s co-insurer of £64.7m (2016: £54.3m), represents a revenue class for which there is an incentive to
fraudulently overstate the amounts recorded. Accordingly, we have determined that the accuracy of profit commission
income due from the group’s co-insurance arrangement includes elements which constitute a significant risk of material
misstatement for the group financial statements and therefore identified this as a key audit matter.
The risk is particularly acute where there have been changes to the terms of the profit commission arrangements or otherone-off adjustments which therefore mean that the calculation to be performed is not uniform across all underwriting
years – i.e. where the same underwriting result within two different periods could give rise to different levels of profit
commissions for each because of variances in the applicable contracted terms. The accuracy of the calculation in respectof these changes is the specific risk area which we determined represents a significant risk of misstatement.
Refer to page 54 in the audit committee report where this is included as a significant issue, and note 5c and note 3 in
the financial statements which refer to this matter.

How the scope of ouraudit responded to
the key audit matter

We tested and were able to rely upon the key controls associated with changes in the calculation; which are controls
designed to ensure that the inputs to the calculation are accurate and the review by management which is performed tocheck that the requisite changes have been reflected in the detailed calculation.
Our substantive response constituted inspection of the applicable co-insurance contracts to evaluate the form andcontent of management’s calculation and a substantive analytical review. We developed an independent expectation of
the commission income to recognise, based upon our understanding of the contracts and using the loss ratios audited aspart of our insurance reserves testing, compared that to the output of management’s calculation and then investigatedany differences.

Key observations

Based on our procedures above, we considered the profit commission to be appropriately calculated.

Admiral Group plc · Annual Report and Accounts 201789

Financial Statements: Independent Auditor’s Report

Independent Auditor’s Report continued
to the Members of Admiral Group Plc

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions ofa reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and inevaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality

Group financial statements

Parent company financial statements£20m (2016: £14m)£3.8m (2016: £3.1m)

Basis for determining 5% of profit before tax (2016: 5%)
materiality

3% of net assets (2016: 3%)

Rationale for thebenchmark applied

The parent company primarily exists as the holding
company which carries investments in group subsidiaries
and is the issuer of listed securities. We consider that net
assets is the critical benchmark for the company.

We consider profit before tax to be the criticalbenchmark of the performance of the group and consider
this benchmark to be suitable having compared to otherbenchmarks: our materiality equates to 1% of grossearned premium and 2% of equity (2016: 1% of grossearned premium and 2% of equity).

Group Materiality £20m

Component materiality range £0.76–£9.5m
Audit Committee reporting threshold £1m
PBT –£404m
Group materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 70% of groupmateriality for the 2017 audit (2016: 70%).
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1m (2016: £700k) for thegroup and £189k (2016: £155k) for the parent company, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentationof the financial statements.		

90

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

An overview of the scope of our audit
The financially significant components of the group which were identified in our audit planning are the UK branches of Admiral Insurance(Gibraltar) Limited, Admiral Insurance Company Limited, EUI Limited and Inspop.com Limited, and the Admiral Group plc parent entity itself.
In 2016, we also identified five significant reporting components. Each of these components was subjected to a full-scope audit for groupreporting purposes, completed to individual component materiality levels which ranged from £1.1m to £12.4m (2016: £660,000 to £11.8m),
dependent upon the relative significance of each individual component.
The two further group components which were subject to full scope audit engagements this year were the Italian branches of Admiral
Insurance Company Limited and Admiral Insurance (Gibraltar) Limited, each audited to a component materiality of £1.6m. Combined, they
contribute the majority of the European insurance segment’s results and represent 7% of the group’s gross earned premium and 7% of thegross insurance reserves reported. The change in scope since 2016 represents the growing significance of the Italian business to the group’s
global underwriting activities.
Additionally, we have completed specific audit procedures, designed to address specific audit risks, for Elephant Insurance Company, asubsidiary company incorporated in the USA, and the Spanish branch of Admiral Insurance Company Limited.
Inspop USA LLC was included in the scope of our specified audit procedures in 2016 but not for the 2017 audit, as we determined that thesubsidiary no longer presents any specific audit risks to the group financial statements. Conversely, the Spanish branch of Admiral Insurance
Company Limited was brought into the scope of these specified procedures for the first time in 2017, due to the specific audit risks which thebranch presents to the underwriting subsidiary. This change in scope also reflects the growing contribution of the group’s insurance activities
in Spain.
We engaged local component auditors, being Deloitte member firms in the USA, Italy and Spain, to perform the audit work and specified audit
procedures in these respective territories on our behalf. We directed and supervised the work of the component auditors, including throughvisits to the components and component auditors in Rome, Seville and Richmond and remote communication and review of their work.
For the remaining components, which were not subject to audit or specified audit procedures, we performed analysis at an aggregated grouplevel to re-assess our evaluation that there were no significant risks of material misstatement presented by any of these components. The
components within the scope of our audit procedures account for 93% of the group’s profits and losses before tax, 92% of revenue and 92%of the group’s net assets (2016: 94% of profits and losses before tax, 87% of revenue and 95% of net assets).

Revenue

Full audit scope
Specified audit procedures
Review at group level

Profit before tax

83%
9%
8%

Full audit scope
Specified audit procedures
Review at group level

Net assets

89%
4%
7%

Full audit scope
Specified audit procedures
Review at group level

88%
4%
8%

Profit before tax coverage is stated in absolute terms – i.e. based on contribution to group profit less group loss

Admiral Group plc · Annual Report and Accounts 201791

Financial Statements: Independent Auditor’s Report

Independent Auditor’s Report continued
to the Members of Admiral Group Plc

Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.

We have nothing toreport in respect ofthese matters

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doingso, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, weare required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of theother information include where we conclude that:•

Fair, balanced and understandable – the statement given by the directors that they consider the annual report andfinancial statements taken as a whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the group’s position and performance, business model and strategy, is materiallyinconsistent with our knowledge obtained in the audit; or•Audit committee reporting – the section describing the work of the audit committee does not appropriately address
matters communicated by us to the audit committee; or•Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement
required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Codecontaining provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate Governance Code.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as agoing concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’sreport and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than thecompany and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

92

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:•

the information given in the strategic report and the directors’ report for the financial year for which the financial statements areprepared is consistent with the financial statements; and•the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and of the parent company and their environment obtained in the course of theaudit, we have not identified any material misstatements in the strategic report or the directors’ report.

Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:

We have nothing to report inrespect of these matters.

•

we have not received all the information and explanations we require for our audit; or•adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or•the parent company financial statements are not in agreement with the accounting records and returns.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the directors’ remuneration report to be audited is not inagreement with the accounting records and returns.

We have nothing to report inrespect of these matters.

Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by shareholders’ approval at the Annual General Meetingon 28 April 2016 to audit the financial statements for the year ending 31 December 2016 and subsequent financial periods. The periodof total uninterrupted engagement including previous renewals and reappointments of the firm is 2 years, covering the years ending
31 December 2016 to 31 December 2017.

Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).

Mark McQueen ACA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
27 February 2018

Admiral Group plc · Annual Report and Accounts 201793

Financial Statements: Consolidated income statement

Consolidated income statement
For the year ended 31 December 2017

Year ended
31 December 2017£m

31 December 2016£m

Insurance premium revenue

1,729.9

1,353.6

Insurance premium ceded to reinsurers(1,110.8)(804.8)Note

Net insurance premium revenue

5

619.1

548.8

Other revenue

7

401.1

360.6

Profit commission

5

67.0

54.3

Investment and interest income

6

41.7

53.1

Net revenue

1,128.9

1,016.8

Insurance claims and claims handling expenses(1,308.8)(1,103.8)

Insurance claims and claims handling expenses recoverable from reinsurers

961.7

709.2

Net insurance claims(347.1)(394.6)

Operating expenses and share scheme charges

8(753.5)(648.8)Operating expenses and share scheme charges recoverable from co- and reinsurers

8

386.6

316.4

Net operating expenses and share scheme charges(366.9)(332.4)

Total expenses(714.0)(727.0)

414.9

289.8

(11.4)(11.4)

403.5

278.4

Operating profit
Finance costs

6

Profit before tax
Taxation expense9(71.9)(64.3)

331.6

214.1

Equity holders of the parent

334.2

222.2

Non-controlling interests (NCI)

(2.6)

(8.1)

331.6

214.1

Profit after tax
Profit after tax attributable to:Earnings per share
Basic

11

117.2p

78.7p

Diluted11

117.0p

78.5p

Dividends declared and paid (total)

11

300.3

349.8

Dividends declared and paid (per share)

11

107.5p126.3p94

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Consolidated statement of comprehensive income
For the year ended 31 December 2017

Year ended
31 December 2017£m

31 December 2016
£m

331.6

214.1

Movements in fair value reserve

12.4

30.3

Deferred tax charge in relation to movement in fair value reserve

(4.1)

(0.5)

Exchange differences on translation of foreign operations

(8.0)

21.2

Other comprehensive income for the period, net of income tax

0.3

51.0

331.9

265.1

334.8

271.3

Profit for the period
Other comprehensive income
Items that are or may be reclassified to profit or loss

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

(2.9)

(6.2)

331.9

265.1

Admiral Group plc · Annual Report and Accounts 201795

Financial Statements: Consolidated statement of financial position

Consolidated statement of financial position
As at 31 December 2017

As at
Note

31 December 2017£m

31 December 2016£m

Property and equipment

10

31.3

32.0

Intangible assets

10

159.4

162.3

Deferred income tax

9

0.3

8.4

Reinsurance assets

5

1,637.6

1,126.4

Insurance and other receivables

6, 10

939.7

782.6

Loans and advances to customers

6, 10

66.2

2.3

Financial investments

62,697.8

2,420.2

Cash and cash equivalents

6

326.8

326.6

5,859.1

4,860.8

ASSETS

Total assets
EQUITY

0.3

0.3

Share premium accountShare capital

11

13.1

13.1

Other reserves

52.4

51.8

Retained earnings

580.3

505.7

Total equity attributable to equity holders of the parent

646.1

570.9

9.7

10.8

655.8

581.7

3,313.9

2,749.5

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

5
6

224.0

224.0

6, 10

1,641.6

1,292.2

23.8

13.4

Total liabilities

5,203.3

4,279.1

Total equity and total liabilities

5,859.1

4,860.8

The accompanying notes form part of these financial statements.
These financial statements were approved by the Board of Directors on 27 February 2018 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc

Company Number: 03849958

96

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Consolidated cash flow statement
For the year ended 31 December 2017

Year ended
Note

Profit after tax

31 December 2017£m

31 December 2016
£m

331.6

214.1

Adjustments for non-cash items:– Depreciation

10.1

10.5

– Amortisation of software

13.8

12.6

– Share scheme charges

8

35.6

33.2

– Investment and interest income

6(41.7)(53.1)– Finance costs

6

11.4

11.4

– Taxation expense

9

71.9

64.3

Change in gross insurance contract liabilities

564.4

454.5

Change in reinsurance assets(511.2)(247.7)

Change in insurance and other receivables(154.3)(252.3)

Change in loans and advances to customers(63.9)(2.3)

Change in trade and other payables, including tax and social security

349.5

279.9

Cash flows from operating activities, before movements in investments

617.2

525.1

Purchases of financial instruments(549.2)(646.6)

Proceeds on disposal/ maturity of financial instruments

311.8

616.9

Interest and investment income received

8.0

11.6

Cash flows from operating activities, net of movements in investments

387.8

507.0

Taxation payments(55.9)(76.4)

Taxation receipts

–

1.8

331.9

432.4

Purchases of property, equipment and software(22.7)(31.6)Net cash used in investing activities(22.7)(31.6)

1.8(0.2)(11.2)(11.3)

0.1(3.4)(300.3)(349.8)(309.6)(364.7)

(0.4)

36.1

326.6

265.3

Net cash flow from operating activities
Cash flows from investing activities:

Cash flows from financing activities:
Non-controlling interest capital contribution
Finance costs paid
Repayment of finance lease liabilities
Equity dividends paid

11

Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of period

6

0.6

25.2

326.8

326.6

Admiral Group plc · Annual Report and Accounts 201797

Financial Statements: Consolidated statement of changes in equity

Consolidated statement of changes in equity
For the year ended 31 December 2017

Attributable to the owners of the Company
Sharecapital£mSharepremium
account£m

Fair value
reserve£m

Foreignexchangereserve
£m

0.3

13.1

(1.7)

4.4

–

–

–

–

Movements in fair value reserve

–

–

30.3

–

Deferred tax charge in relation to
movement in fair value reserve

–

–

(0.5)

–

At 1 January 2016
Profit/(loss) for the period

Total
£m

Noncontrollinginterests£m

Total
equity
£m

599.6

615.7

17.2

632.9

222.2

222.2

(8.1)

214.1

–

30.3

–

30.3

–

(0.5)

–

(0.5)

Retained
profitand loss£m

Other comprehensive income

Currency translation differences

–

–

–

19.3

–

19.3

1.9

21.2

Total comprehensive income for the period

–

–

29.8

19.3

222.2

271.3

(6.2)

265.1

Transactions with equity holders
Dividends

–

–

–

–

(349.8)(349.8)–(349.8)

Share scheme credit

–

–

–

–

33.2

33.2

–

33.2

Deferred tax credit on share scheme credit

–

–

–

–

0.5

0.5

–

0.5

Contributions by NCIs

–

–

–

–

–

–

(0.2)

(0.2)

Changes in ownership interests
without a change in control

–

–

–

–

–

–

–

–

Total transactions with equity holders

–

–

–

–

(316.1)(316.1)(0.2)(316.3)As at 31 December 2016

0.3

13.1

28.1

23.7

505.7

570.9

10.8

581.7

At 1 January 2017

0.3

13.1

28.1

23.7

505.7

570.9

10.8

581.7

–

–

–

–

334.2

334.2

(2.6)

331.6

Movements in fair value reserve

–

–

12.4

–

–

12.4

–

12.4

Deferred tax charge in relation to
movement in fair value reserve

–

–

(4.1)

–

–

(4.1)

–

(4.1)

Currency translation differences

–

–

–

(7.7)

–

(7.7)

(0.3)

(8.0)

Total comprehensive income for the period

–

–

8.3

(7.7)

334.2

334.8

(2.9)

331.9

Dividends

–

–

–

–

(300.3)(300.3)–(300.3)

Share scheme credit

–

–

–

–

37.9

37.9

–

37.9

Profit/(loss) for the period
Other comprehensive income

Transactions with equity holders

Deferred tax credit on share scheme credit

–

–

–

–

2.8

2.8

–

2.8

Contributions by NCIs

–

–

–

–

–

–

1.8

1.8

Changes in ownership interests
without a change in control

–

–

–

–

–

–

–

–

Total transactions with equity holders

–

–

–

–

(259.6)(259.6)1.8(257.8)

0.3

13.1

36.4

16.0

580.3

646.1

9.7

655.8

As at 31 December 201798

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Notes to the financial statements
For the year ended 31 December 2017

1. General information

IFRS 15 – Revenue from Contracts with Customers

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.

IFRS 15 was issued during 2014, with clarifications to the standard
endorsed on 31 October 2017, and will be effective for Admiralon 1 January 2018. The standard introduces a simple, five stepprinciples-based model to be applied to the accounting of allcontracts with customers. Revenue from insurance contracts andfinancial instruments is outside the scope of IFRS 15.

The consolidated financial statements have been prepared andapproved by the Directors in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU).
The Company has elected to prepare its Parent Company financial
statements in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101).

Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations
during the year, which have been issued and endorsed by the EU:•

Amendments to IAS 7 (Disclosure Initiative) and IAS 12(Recognition of Deferred Tax Assets for Unrealised Losses).

The application of these amendments has not had a material
impact on the Group’s results, financial position and cash flows.
As at 31 December 2017, the following standards had been endorsedby the EU but are not yet effective:•

IFRS 9 Financial Instruments (effective date 1 January 2018),
along with Amendments to IFRS 4 Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts;•

IFRS 15 Revenue from Contracts with Customers (effective
date 1 January 2018);•

IFRS 16 Leases (effective date 1 January 2019).

IFRS 9 – Financial Instruments

During 2017, the Group performed an assessment of the impact of thestandard on its revenue streams, quantifying this impact on its results,financial position and cash-flows. The primary area of focus of thiswork was the other revenue generated by a portfolio of products that
supplement the core car and household insurance policies and revenue
generated by the Group’s price comparison businesses, where the newstandard could potentially result in a delay in revenue recognition.
Management’s assessment, based on the work performed, is that theimplementation of the standard is not expected to have a material
impact on the Group’s financial statements, with the majority ofmaterial revenue classes not being impacted.
The Group is planning on using the modified retrospective approachon transition, which will result in a cumulative adjustment to retained
earnings as at 1 January 2018. The impact on the Consolidated income
statement in future periods is expected to be immaterial.

IFRS 16 – Leases
IFRS 16 Leases was issued in early 2016 and is effective from 1 January
2019. The standard specifies how firms will recognise, measure,present and disclose leases. It presents a single lessee accounting
model and requires that assets and liabilities to be recognised in theConsolidated statement of financial position, other than in the cases
where leases are of low value or of a short-term nature of 12 months
or less.

In 2014, the IASB issued the final version of IFRS 9. The standard
has an effective date of 1 January 2018 although earlier applicationis permitted. The standard affects a number of areas within
the accounts including the classification and measurement offinancial instruments, and a requirement to use the expected loss
impairment model.

The Group expects to apply the modified retrospective approach
to transition that is permitted under IFRS 16. Impact assessments
performed to date conclude that:In 2017 the Group conducted an assessment of the impact of IFRS 9
and based on current information expects no significant impact on
its balance sheet and equity, with the significant classes of financial
assets being accounted for using the same measurement andvaluation techniques as those currently used.

–	No significant adjustment to IFRS equity is expected at thetransition date of 1 January 2019.

There is an impact of applying the expected loss model for the firsttime, with the application of IFRS 9 resulting in earlier impairment
charges and the potential for increased volatility. This impact has
been assessed and is currently immaterial, at less than £0.5 million
as at 31 December 2017.

–	Property leases represent the most significant class of lease heldby the Group that will be impacted by the new standard.

–	The presentation of the Consolidated statement of financial
position is expected to be significantly impacted, with material
lease liabilities and ‘Right of Use’ assets being included for the
first time.
The profile of lease related expense recognised in the Consolidated
income statement is not expected to change materially.

The Group plans to adopt IFRS 9 as of 1 January 2018, in line with its
effective date.

Admiral Group plc · Annual Report and Accounts 201799

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

1. General information continued
Standards yet to be endorsed by the EU
There are a number of standards, amendments to standards andinterpretations that were issued by 31 December 2017 but have
either yet to be endorsed by the EU, or were endorsed shortly after
the year end. The following IFRSs have been issued but have not been
applied by the Group in these financial statements:•

IFRS 17 Insurance Contracts•

IFRIC 22 Foreign Currency Transactions and Advance Considerations•

IFRIC 23 Uncertainty over Income Tax Treatments•

Annual improvements to IFRS standard 2014–2016 cycle•

Amendments to IFRS 2 Classification and Measurement of
Share-based payment transactions.

IFRS 17 – Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017. The standard
will replace IFRS 4, establishing new principles for the recognition,measurement, presentation and disclosure of Insurance contracts
within the scope of the standard. The standard will apply to reporting
periods beginning on or after 1 January 2021.
The Group is currently assessing the impact of IFRS 17 on its results
and financial position, along with any impacts of the other standards
and amendments which have yet to be endorsed.

2. Basis of preparation
The accounts have been prepared on a going concern basis. In
considering this requirement, the Directors have taken into accountthe following:•

The Group’s projections for the next 12 months and beyond, inparticular the profit forecasts, regulatory capital surpluses andlevels and sources of liquidity.

•

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

•

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

The Group’s business activities, together with the factors likely toaffect its future development, performance and position are set
out in the Strategic Report. The Strategic Report also includes theGroup’s principal risks and uncertainties. In addition, the Governancereport includes the Directors’ statement on the viability of the Groupover 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 thefinancial statements.

100

Admiral Group plc · Annual Report and Accounts 2017

Further information regarding the Company’s business activities,
together with the factors likely to affect its future development,
performance and position, is set out in the Strategic Report. Further
information regarding the financial position of the Company, its cash
flows, liquidity position and borrowing facilities are also describedin the Strategic Report. In addition, notes 6 and 11 to the financial
statements include the Company’s objectives, policies and processes
for managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to credit risk
and liquidity risk.
The accounting policies set out in the notes to the financial
statements have, unless otherwise stated, been applied consistently
to all periods presented in these Group financial statements.
The financial statements are prepared on the historical cost basis,
except for the revaluation of financial assets classified as 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 affectthose returns through its power over the entity. In assessing control,
the Group takes into consideration potential voting rights that are
currently exercisable. The acquisition date is the date on which
control is transferred to the acquirer. The financial statements ofsubsidiaries are included in the consolidated financial statementsfrom the date that control commences until the date that control
ceases. Losses applicable to the non-controlling interests in a
subsidiary are allocated to the non-controlling interests even if doing
so causes the non-controlling interests to have a deficit balance.
The preparation of financial statements in conformity with adopted
IFRS requires management to make judgements, estimates andassumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimatesand associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making thejudgements about carrying values of assets and liabilities that are notreadily apparent from other sources.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognisedin the year in which the estimate is reviewed. To the extent that achange in an accounting estimate gives rise to changes in assets andliabilities, it is recognised by adjusting the carrying amount of therelated asset or liability in the period of the change.

Introduction

Strategic Report

Corporate Governance3. Critical accounting judgements and estimates
Judgements
In applying the Group’s accounting policies as described in the notes
to the financial statements, management has primarily appliedjudgement in the following area:•

Classification of the Group’s contracts with reinsurers as
reinsurance contracts:

A contract is required to transfer significant insurance risk in order tobe classified as such. Management reviews all terms and conditionsof each such contract, and if necessary obtains the opinion of an
independent expert at the negotiation stage in order to be able to
make this judgement. All reinsurance contracts (both excess of loss
and quota share contracts) held by the Group have been assessed
and it has been concluded that all contracts transfer significant
insurance risk and have therefore been classified and accounted foras reinsurance contracts within these financial statements.
In addition there are two further significant accounting estimates
within the financial statements that also require management toapply judgement:•

Calculation of insurance claims reserves:

The Group’s reserving methodology requires management to
set insurance claims reserves for the purpose of the financial
statements, above the projected best estimate outcome, to allow
for unforeseen adverse claims development. Management applies
judgement in determining where, above the projected best estimate
outcome, the insurance claims reserves should sit in line with theGroup's reserving methodology. Refer to the section on estimation
techniques below. Above the projected best estimate outcome theinsurance claims reserves should sit, in line with the Group’s reserving
methodology. Refer to the section on estimation techniques below,
and the analysis of Insurance risk in note 5 to the financial statements
for further detail on the development of the Group’s reserving
methodology applied during the period and the calculation of the
projected best estimate outcome.
•

Recognition of deferred tax assets relating to unused tax losses:

Management applies judgement in determining the probabilityof 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 anassessment of the reliability of approved business plan projections
using both qualitative and quantitative factors including theage and status of the business, the Group’s previous experiencein similar markets, historic performance against business plans
and the application of a number of stress and sensitivity tests tothe projections.

Financial Statements

Additional Information

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 emergenceof claims that occurred prior to the balance sheet date, but had notbeen reported at that date.
The estimates of the ultimate cost of reported claims are based on
the setting of claim provisions on a case-by-case basis, for all but thesimplest 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 step change 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 theregulatory or judicial regime that leads to an increase in awards
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 of recognised actuarial techniques.
The Group’s reserving policy requires management to reserve above
the projected best estimate outcome, to allow for unforeseen
adverse claims development. The Group’s reserving methodology
which determines the basis for setting this reserve estimate has beendeveloped and enhanced in the period in line with new informationthat has become available in relation to both the projected best
estimate reserve and the reserve uncertainty through the Group’s
development of its internal capital model.
For further detail on objectives, policies and procedures for
managing insurance risk, refer to note 5 of the financial statements.
Future changes in claims reserves also impact profit commission
income, as the measurement of this income is dependent on theloss ratio booked in the financial statements, and cash receivable isdependent on actuarial projections of ultimate loss ratios.

Admiral Group plc · Annual Report and Accounts 2017101

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

4. Group consolidation and operating segments
4a. Accounting policies(i) Group consolidation
The consolidated financial statements comprise the results andbalances of the Company and its subsidiaries (together referred toas the Group) for the year ended 31 December 2017 and comparative
figures for the year ended 31 December 2016. The financial statementsof the Company’s subsidiaries are consolidated in the Group financial
statements. The Company controls 100% of the voting share capitalof all its principal subsidiaries, except Admiral Law Limited, BDE Law
Limited, Inspop USA LLC, the indirect holding in comparenow.com
Insurance Agency LLC, Rastreator.com Limited, the indirect holding in
Comparaseguros Correduría de Seguros, S.L., Sociedad Unipersonal,
Preminen Price Comparison Holdings Limited and the indirect holdingin Preminen Dragon Price Comparison Limited.
The Parent Company financial statements present information
about the Company as a separate entity and not about its Group.
In accordance with IAS 24, transactions or balances between
Group companies that have been eliminated on consolidation are
not reported as related party transactions in the consolidated
financial statements.

(ii) Foreign currency translation
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in pounds
sterling, rounded to the nearest £0.1 million, which is the Group’s
presentation currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of thetransactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated inforeign currencies are recognised in the income statement.
Non-monetary items measured at cost are translated at their historicrate and non-monetary items held at fair value are translated using theforeign exchange rate on the date that the fair value was established.
The financial statements of foreign operations whose functional
currency is not pounds sterling are translated into the Group
presentation currency (sterling) as follows:•

Assets and liabilities for each balance sheet presented aretranslated at the closing rate at the date of that balance sheet.

•

Income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonableapproximation of the cumulative effect of the rates prevailingon the transaction dates, in which case income and expenses aretranslated at the date of the transaction).

•

All resulting exchange differences are recognised in othercomprehensive income and in a separate component of equity
except to the extent that the translation differences are
attributable to non-controlling interests.

102

Admiral Group plc · Annual Report and Accounts 2017

On disposal of a foreign operation, the cumulative amountrecognised in equity relating to that particular operation isrecognised in the income statement.

4b. Segment reporting
The Group has four reportable segments, as described below. Thesesegments represent the principal split of business that is regularly
reported to the Group’s Board of Directors, which is considered tobe the Group’s chief operating decision maker in line with IFRS 8
Operating Segments.
During the period, the Group launched a UK Van Insurance productthat is included within the UK Insurance segment. The resultsfrom the Group’s commercial van broker Gladiator continue to bepresented within the ‘Other’ segment.

UK Insurance
The segment consists of the underwriting of car insurance, vaninsurance, household insurance and other products that supplement
these insurance policies within the UK. It also includes the generationof revenue from additional products and fees from underwriting
insurance in the UK. The Directors consider the results of these
activities to be reportable as one segment as the activities carriedout in generating the revenue are not independent of each other andare performed as one business. This mirrors the approach taken in
management reporting.

International Car Insurance
The segment consists of the underwriting of car insurance andthe generation of revenue from additional products and fees fromunderwriting 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 and Elephant Auto in the US. None ofthese 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 businesses:
Confused.com in the UK, Rastreator in Spain, LeLynx in France andCompare.com in the US. 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 otheroperating segments that do not meet the threshold requirements forindividual reporting. It includes the Group’s commercial van insurance
broker, Gladiator.
Taxes are not allocated across the segments and, as with thecorporate activities, are included in the reconciliation to theConsolidated income statement and Consolidated statement offinancial position.
An analysis of the Group’s revenue and results for the year ended
31 December 2017, by reportable segment, is shown below. The
accounting policies of the reportable segments are consistent
with those presented in the notes to the financial statements for
the Group.

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Year ended 31 December 2017
UK
Insurance£mInternational
Car Insurance
£m

Price
Comparison£m2,354.0

449.8

143.6

Net insurance premium revenue

491.6

127.5

–

–

–

619.1

Other revenue and profit commission

316.8

16.7

143.6

10.8

(19.8)

468.1

Turnover*1

Total
£m

Other Eliminations*2
£m
£m

10.8

(19.8)

2,938.4

Investment and interest income

32.6

0.6

–

–

–

33.2

Net revenue

841.0

144.8

143.6

10.8

(19.8)

1,120.4

Net insurance claims(250.1)(97.0)–––(347.1)

Expenses(124.3)(62.1)(138.2)

(8.4)

19.8

(313.2)

Segment profit/(loss) before tax

466.6(14.3)

5.4

2.4

–

460.1

Other central revenue and expenses,
including share scheme charges(53.7)

Investment and interest income

8.5

Finance costs(11.4)

Consolidated profit before tax

403.5

Taxation expense(71.9)

Consolidated profit after tax

331.6

Other segment items:– Intangible and tangible asset additions

37.3

30.5

0.9

–

–

68.7

– Depreciation and amortisation

44.4

26.8

1.0

0.1

–

72.3

*1	Turnover is an Alternative Performance Measure and consists of total premiums written (including co-insurers’ share) and other revenue. Refer to the glossary and note 12 for further
information.
*2	Eliminations are in respect of the intra-group trading between the Group’s Price Comparison and UK and International Insurance entities.

Revenue and results for the corresponding reportable segments for the year ended 31 December 2016 are shown below.
Year ended 31 December 2016

Turnover*2

UK
Insurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations*3
£m

Total
£m

2,063.1

365.9

129.2

17.6

(20.8)

2,555.0

Net insurance premium revenue

454.4

94.3

–

0.1

–

548.8
414.9

Other Revenue and profit commission

277.2

12.6

129.2

16.7

(20.8)

Investment and interest income

39.3

0.4

–

–

–

39.7

Net revenue

770.9

107.3

129.2

16.8

(20.8)

1,003.4

Net insurance claims(317.9)(76.5)

–

(0.2)

–

(394.6)

Expenses(114.5)(50.2)(132.1)(14.7)

20.8(290.7)

Segment profit/(loss) before tax

338.5(19.4)

(2.9)

1.9

–

318.1

Other central revenue and expenses,
including share scheme charges(41.7)

Investment and interest income

13.4

Finance costs(11.4)

Consolidated profit before tax

278.4

Taxation expense(64.3)

Consolidated profit after tax

214.1

Other segment items:– Intangible and tangible asset additions

46.2

28.9

0.4

4.2

–

79.7

– Depreciation and amortisation

39.0

22.2

1.3

3.8

–

66.3

*1	Turnover is an Alternative Performance Measure and consists of total premiums written (including co-insurers’ share) and other revenue. Refer to the glossary and note 12 for further
information.
*2

Eliminations are in respect of the intra-group trading between the Group’s Price Comparison and UK and International Insurance entities.

Admiral Group plc · Annual Report and Accounts 2017103

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

4. Group consolidation and operating segments continued
4b. Segment reporting continued
Segment revenues
The UK and International Car Insurance reportable segments derive all insurance premium income from external policyholders. Revenue withinthese segments is not derived from an individual policyholder that represents 10% or more of the Group’s total revenue.
The total of Price Comparison revenues from transactions with other reportable segments is £19.8 million (2016: £20.8 million) which has
been eliminated on consolidation. There are no other transactions between reportable segments.
Revenues from external customers for products and services are consistent with the split of reportable segment revenues as shown on
page 103.

Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International Car
Insurance reportable segment shown on the previous pages. The revenue and results of the three international Price Comparison businesses,
Rastreator, LeLynx and Compare.com are not yet material enough to be presented as a separate segment.

Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December 2017 are as follows:
As at 31 December 2017

Property and equipment

UK
Insurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations
£m

Total
£m

24.8

5.2

1.3

–

–

31.3

Intangible assets

68.9

25.4

1.5

63.6

–

159.4

Reinsurance assets

1,364.3

273.1

–

0.2

–

1,637.6

Insurance and other receivables

1,092.8

155.5

26.4

(184.2)(84.6)

1,005.9

Financial investments

2,411.5

50.1

3.8

–

–

2,465.4

Cash and cash equivalents

169.1

103.1

27.2

20.6

–

320.0

Reportable segment assets

5,131.4

612.4

60.2

(99.8)(84.6)

5,619.6

Insurance contract liabilities

2,883.4

430.2

–

0.3

–

3,313.9

Trade and other payables

1,495.5

128.0

12.8

5.3

–

1,641.6

Reportable segment liabilities

4,378.9

558.2

12.8

5.6

–

4,955.5

Reportable segment net assets

752.5

54.2

47.4

(105.4)(84.6)

664.1

Unallocated assets and liabilities
Consolidated net assets

(8.3)
655.8

Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation tax balances. Theseassets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format.
There is an asymmetrical allocation of assets and income to the reportable segments, in that the interest earned on cash and cash equivalent
assets deployed in the UK Insurance, Price Comparison and International Car Insurance segments is not allocated in arriving at segment
profits. This is consistent with regular reporting to the Board of Directors.
Eliminations represent inter-segment funding and balances included in insurance and other receivables.

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Corporate Governance

Financial Statements

Additional Information

The segment assets and liabilities at 31 December 2016 are as follows:
As at 31 December 2016
UK
Insurance£mInternational
Car Insurance
£m

Price
Comparison
£m

Other
£m

Eliminations
£m

Total
£m

Property and equipment

26.8

4.0

1.2

–

–

32.0

Intangible assets

73.8

23.0

1.8

63.7

–

162.3

Reinsurance assets

881.4

244.7

–

0.3

–

1,126.4

Insurance and other receivables

890.3

132.8

14.8

(185.6)(67.4)

784.9

Financial investments

2,145.0

45.6

12.2

–

–

2,202.8

Cash and cash equivalents

178.0

100.6

33.0

8.0

–

319.6

Reportable segment assets

4,195.3

550.7

63.0

(113.6)(67.4)

4,628.0

Insurance contract liabilities

2,359.9

385.4

–

4.2

–

2,749.5

Trade and other payables

1,147.7

122.1

11.3

11.1

–

1,292.2

Reportable segment liabilities

3,507.6

507.5

11.3

15.3

–

4,041.7

Reportable segment net assets

687.7

43.2

51.7

(128.9)(67.4)

586.3

Unallocated assets and liabilities
Consolidated net assets

(4.6)
581.7

5. Premium, claims and profit commissions
5a. Accounting policies(i) Revenue – premiums
Premiums relating to insurance contracts are recognised as revenue, net of insurance premium tax, proportionally over the period of cover.
Premiums with an inception date after the end of the period are held in the statement of financial position as deferred revenue. Outstanding
collections from policyholders are recognised within policyholder receivables.

(ii) Revenue – profit commission
Under some of the co-insurance and reinsurance contracts under which motor premiums are shared or ceded, profit commission may beearned on a particular year of account, which is usually subject to performance criteria such as loss ratios and expense ratios. The commission
is dependent on the ultimate outcome of any year, with revenue being recognised when loss and expense ratios used in the preparation of thefinancial statements move below a contractual threshold. Profit commission receivable from reinsurance contracts is accounted for in linewith IFRS 4, whereas profit commission receivable from co-insurance contracts is in line with IAS 18.

Admiral Group plc · Annual Report and Accounts 2017105

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

5. Premium, claims and profit commissions continued
5a. Accounting policies continued(iii) Insurance contracts and reinsurance assets
Premiums
The proportion of premium receivable on in-force policies relating to unexpired risks is reported in insurance contract liabilities andreinsurance assets as the unearned premium provision – gross and reinsurers’ share respectively.
ClaimsClaims and claims handling expenses are charged as incurred, based on the estimated direct and indirect costs of settling all liabilities arisingon events occurring up to the balance sheet date.
The provision for claims outstanding comprises provisions for the estimated cost of settling all claims incurred but unpaid at the balance
sheet date, whether reported or not. Anticipated reinsurance recoveries are disclosed separately as assets.
Whilst the Directors consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basis of theinformation currently available to them, the ultimate liability will vary as a result of subsequent information and events and may result insignificant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in prior years are reflected in the income statement for the period in which theadjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.
Provision for unexpired risks is made where necessary for the estimated amount required over and above unearned premiums (net of deferredacquisition costs) to meet future claims and related expenses.
Co-insurance
The Group has entered into certain co-insurance contracts under which insurance risks are shared on a proportional basis, with the co-insurer
taking a specific percentage of premium written and being responsible for the same proportion of each claim. The co-insurer therefore
takes direct insurance risk from the policyholder and is subsequently directly responsible to the claimant for its proportion of the claim.
As the contractual liability is several and not joint, neither the premiums nor claims relating to the co-insurance are included in the income
statement. Under the terms of these agreements the co-insurers reimburse the Group for the same proportionate share of the costs ofacquiring and administering the business.
Reinsurance assets
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on the insurance contracts issued by theGroup are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there is significant insurance
risk transfer between the insured and the insurer.
Reinsurance assets are comprised of balances due from reinsurance companies for ceded insurance liabilities. Amounts recoverable fromreinsurers are estimated in a consistent manner with the outstanding claims provisions or settled claims associated with the reinsured policies
and in accordance with the relevant reinsurance contract.
The Group assesses its reinsurance assets for impairment on a regular basis, and in detail every six months. If there is objective evidence thatthe asset is impaired, then the carrying value will be written down to its recoverable amount.
On the commutation of reinsurance contracts, the reinsurer is discharged from all obligations relating to the contract. Reinsurance assets andliabilities relating to the commuted contracts are settled in the period in which the commutation agreement is signed.

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Corporate Governance

Financial Statements

Additional Information

5b. Net insurance premium revenue
31 December 2017£m

31 December 2016£m

Total insurance premiums written before co-insurance

2,499.4

2,193.9

Group gross premiums written after co-insurance

1,927.7

1,482.0

Outwards reinsurance premiums(1,299.7)(883.6)

Net insurance premiums written

628.0

598.4

Change in gross unearned premium provision(197.8)(128.4)

Change in reinsurers’ share of unearned premium provision

188.9

78.8

Net insurance premium revenue

619.1

548.8

The Group’s share of its insurance business was underwritten by Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company Limited andElephant Insurance Company. All contracts are short term in duration, lasting for 10 or 12 months.

5c. Profit commission
31 December 2017£m

31 December 2016£m2012 and prior

50.0

26.3

2013

14.7

26.4

–

–

Total UK Car profit commission

64.7

52.7

Total UK Household profit commission*1

2.3

1.6

Total profit commission

67.0

54.3

Underwriting year (UK Car only)

2014–2017*1*1

Profit commission for the UK Car business relates solely to co-insurance arrangements and profit commission for the UK Household business relates solely to reinsurance arrangements.

No profit commission has yet been recognised on the 2014 – 2017 underwriting years as the combined ratios calculated from the financial
statement loss ratios on these years sit above the threshold for profit commission recognition.

5d. Reinsurance assets and insurance contract liabilities(i) Objectives, policies and procedures for the management of insurance risk
The Group’s primary business is the issuance of insurance contracts that transfer risk from policyholders to the Group and its coinsurance partners.
Insurance risk involves uncertainty over the occurrence, amount or timing of claims arising on insurance contracts issued. It is primarily
comprised of Reserve risk; the risk that the value of insurance liabilities established is insufficient to cover the ultimate cost of claims
incurred at the balance sheet date, and Premium risk; the risk that the claims experience on business written but not earned is higher thanallowed for in the premiums charged to policyholders.
The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 6, it has delegated the detailed
oversight of risk management to the Group Risk Committee.
The Group also has a Reserving Committee which comprises senior managers within the finance, claims, pricing and actuarial functions. The
Reserving Committee primarily recommends the approach for UK Car Insurance reserving but also reviews the systems and controls in place
to support accurate reserving and material reserving issues such as Periodic Payment Order (PPO) and claims inflation, which represent the
key uncertainties in the amount or timing of claims settlements.
The Board implements certain policies in order to mitigate and control the level of insurance risk accepted by the Group. These
include pricing policies and claims management and administration processes, in addition to reserving policies and co- and reinsurance
arrangements as detailed below.

Admiral Group plc · Annual Report and Accounts 2017107

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
Reserve Risk
Reserving risk is mitigated through a series of processes and controls. The key processes are as follows:•

Regular management and internal actuarial review of individual and aggregate case claim reserves, including regular reporting ofmanagement information and exception reporting of significant movements•

Regular management and internal actuarial review of large claims, including claims settled or potentially settled by PPOs for which theuncertainty is increased by factors such as the lifetime of the claimant and movements in the indexation for the cost of future care of theclaimant;•

Bi-annual external actuarial review of best estimate claims reserves using a variety of recognised actuarial techniques•

Internal actuarial analysis of reserve uncertainty through qualitative analysis, scenario testing and a range of stochastic reserving techniques•

Ad hoc external reviews of reserving related processes and assumptions•

Use of a reserving methodology which informs management’s reserving decisions for the purposes of the Group’s financial statements.
As described in note 3, critical accounting judgements and estimates, the methodology determines that reserves should be set within arange above projected best estimate outcomes to allow for unforeseen adverse claims development.

As noted above, the Group shares a significant amount of the motor insurance business generated with external underwriters. As well as these
proportional arrangements, an excess of loss reinsurance programme is also purchased to protect the Group against very large individual
claims and catastrophe losses.
Claims reserving
As previously disclosed, Admiral’s reserving policy (both within the claims function and in the financial statements) is initially to reserve
conservatively, above internal and independent projections of actuarial best estimates. This is designed to create a margin held in reserves
to allow for unforeseen adverse development in open claims and typically results in Admiral making above industry average reserve releases.
Admiral’s booked claims reserves continue to include a significant margin above projected best estimates of ultimate claims costs.
Admiral continues to develop and enhance its methodology in setting the margin held above actuarial best estimates. A wide range of factors
inform management’s recommendation which is subject to approval from the Group’s Reserving and Audit Committees, including:•Reserve KPIs such as the level of margin as a percentage of the ultimate reserve•

Results of stress testing of key assumptions underpinning key actuarial assumptions within best estimate reserves•

A review of a number of individual and aggregated reserve scenarios which may result in future adverse variance to the ultimate best
estimate reserve•

Qualitative assessment of the level of uncertainty and volatility within the reserves and the change in that assessment compared toprevious periods.

In addition, the internal reserve risk distribution is used to determine the approximate confidence level of the recommended booked reserve
position which enables comparison of the reserve strength to previous periods and demonstration of the compliance with IFRS 4.
As at 31 December 2017, the level of reserve margin is lower than at 31 December 2016, although remains very prudent when measured
against the internal reserve risk distribution and other market benchmarks. The reduction in the level of reserve margin since 2016 is partly
due to the increased level of confidence over the impact of the Ogden rate change to -0.75%.
As profit commission income is recognised in the income statement in line with loss ratios accounted for on Admiral’s own claims reserves, thereserving policy also results in profit commission income being deferred and recognised over time.
Premium Risk
As noted above, the Group defines Premium risk as the risk that claims cost on business written but not yet earned is higher than allowed
for in the premiums charged to policyholders. This also includes catastrophe risk; the risk of incurring significant losses as a result of theoccurrence of man-made catastrophe or natural weather events.
Key processes and controls operating to mitigate premium risk are as follows:•

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

A data-driven and analytical approach to regular monitoring of claims and underwriting performance•

Capability to identify and resolve underperformance promptly through changes to key performance drivers, in particular pricing.

108

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Introduction

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Corporate Governance

Financial Statements

Additional Information

In addition, as mentioned above, an excess of loss reinsurance programme is also purchased to protect the Group against very large individual
claims and catastrophe losses.
Other elements of insurance risk include reinsurance risk; the risk of placement of ineffective reinsurance arrangements, or the economic riskof reduced availability of co-insurance and reinsurance arrangements in future periods.
The Group mitigates these risks by ensuring that it has a diverse range of financially secure reinsurance partners, including a long-term
relationship with Munich Re and a number of other high profile reinsurers.
Concentration of insurance risk
The Directors do not believe there are significant concentrations of insurance risk. This is because, although the Group has historically
written only one significant line of UK insurance business, the risks are spread across a large number of people and a wide regional base.
The introduction of the international car insurance businesses in recent years and the launch of UK household business in 2012 will further
contribute to the diversification of the Group’s insurance risk as these businesses grow.

(ii) Sensitivity of recognised amounts to changes in assumptions
Ogden discount rate
As noted above, the gross and reinsurers share of insurance liabilities in these financial statements are prepared on the basis of an Ogden
discount rate of minus 0.75%. On 7 September 2017, the Lord Chancellor announced draft legislation to change the way in which the Ogden
discount rate is set, with initial indications being that the new discount rate could be set between 0% and 1%.
The sensitivity of a change in this assumption by 75 basis points (both an increase and decrease) is shown in the table below. The impact ispresented is the total impact of the change on the Group’s pre-tax profit on an ultimate basis. It should be noted that not all of the ultimate
impact would necessarily be recognised immediately.

Impact of increase in assumed Ogden discount rate of 75 basis points (to 0%)
Impact of decrease in assumed Ogden discount rate of 75 basis points (to minus 1.5%)

2017
Net
£m

2016
Net
£m

85.6

68.7

(142.7)(102.1)

The impacts are stated net of co-insurance reinsurance and include the impact on net insurance claims along with the associated profit
commission movements that result from the change in the Ogden rate.
Underwriting year loss ratios – UK Car Insurance
In addition to the sensitivity above, the following table sets out the impact on equity and post-tax profit or loss at 31 December 2017 thatwould result from a 1% movement (both increase and decrease) in the UK Car Insurance loss ratios used for each underwriting year for whichmaterial amounts remain outstanding.
Underwriting year
2014

2015

2016

2017

Booked loss ratio

81%

83%

84%

87%

Impact of 1% change (£m)

6.9

5.8

3.5

1.8

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

Admiral Group plc · Annual Report and Accounts 2017109

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued(iv) Analysis of recognised amounts
31 December 2017£m

31 December 2016£m

2,403.2

2,030.8

Unearned premium provision

910.7

718.7

Total gross insurance liabilities

3,313.9

2,749.5

1,028.8

701.6

Gross
Claims outstanding*1

Recoverable from reinsurers
Claims outstanding
Unearned premium provision
Total reinsurers’ share of insurance liabilities

608.8

424.8

1,637.6

1,126.4

Net
Claims outstanding

1,374.4

1,329.2

Unearned premium provision

301.9

293.9

Total insurance liabilities – net

1,676.3

1,623.1*1

Gross claims outstanding at 31 December 2017 is presented before the deduction of salvage and subrogation recoveries totalling £42.7 million (2016: £37.7m).

The maturity profile of gross insurance liabilities at the end of 2017 is as follows:

Claims outstanding< 1 year£m

1–3 years£m> 3 years
£m

847.7

697.9

857.7

Unearned premium provision

910.7

–

–

Total gross insurance liabilities

1,758.4

697.9

857.7

< 1 year£m

1–3 years£m> 3 years£m

The maturity profile of gross insurance liabilities at the end of 2016 was as follows:

Claims outstanding

754.4

700.1

576.3

Unearned premium provision

718.7

–

–

Total gross insurance liabilities

1,473.1

700.1

576.3

110

Admiral Group plc · Annual Report and Accounts 2017

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Financial Statements

Additional Information(v) Analysis of claims incurred
The following tables illustrate the development of gross and net UK Insurance and International Insurance claims incurred for the past ten
financial periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first table shows actual grossclaims incurred and the second shows actual net claims incurred. Figures are presented on an underwriting year basis.
Financial year ended 31 December
Analysis of claims incurred(gross amounts)

2008
£m

2009
£m

2010
£m

2011
£m

2012
£m

2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

Total
£m

Underwriting year
(UK insurance)
2008 and prior2009(179.6)(62.5)

21.8

13.1

(2.0)

(1.2)

1.2

(2.9)

(3.2)

(2.3)

–

(176.8)(121.7)

(6.0)

(3.6)

6.2

7.3

0.0

3.2

0.9

(290.5)

2010

–

–

(260.4)(257.2)

9.8

36.7

19.5

13.5

4.1

5.7

(428.3)

2011

–

–

–

(444.3)(329.7)

43.3

51.4

47.9

(0.9)

26.8

(605.5)

2012

–

–

–

–

(463.7)(334.7)

49.8

69.2

8.6

59.9

(610.9)

2013

–

–

–

–

–

(431.1)(325.5)

53.6

44.4

34.2

(624.4)

2014

–

–

–

–

–

–

(438.2)(347.1)

25.6

17.1

(742.6)

2015

–

–

–

–

–

–

–

(428.4)(411.2)21.7(817.9)

2016

–

–

–

–

–

–

–

–

(529.4)(463.7)(993.1)

2017

–

–

–

–

–

–

–

–

–

(691.8)(691.8)(179.6)(239.3)(360.3)(694.4)(789.2)(680.8)(634.5)(594.2)(858.8)(991.5)(23.5)(12.4)

(0.3)

(0.7)

(0.5)

(0.3)

0.2

0.1

0.1

0.0

UK insurance grossclaims incurred
Underwriting year
(International insurance)
2008 and prior2009–(10.8)(13.9)

(3.1)

(3.9)

0.1

1.4

0.2

0.0

0.2

(29.8)

2010––(17.6)(26.1)

(7.1)

0.1

3.5

1.0

0.5

0.4

(45.3)

2011

–

–

–

(35.7)(42.7)

1.2

5.7

1.7

4.0

1.2

(64.6)

2012

–

–

–

–

(58.0)(53.7)

0.7

4.0

6.0

2.6

(98.4)

2013

–

–

–

–

–

(68.2)(57.8)

4.2

7.7

3.3

(110.8)

2014

–

–

–

–

–

–

(85.2)(65.5)

4.4

5.8(140.5)

2015

–

–

–

–

–

–

–

(92.6)(101.6)

7.7(186.5)

2016

–

–

–

–

–

–

–

–

(138.9)(125.3)(264.2)

2017(174.1)

–

–

–

–

–

–

–

–

–

(174.1)

International insurance
gross claims incurred(23.5)(23.2)(31.8)(65.6)(112.2)(120.8)(131.5)(146.9)(217.8)(278.2)Other gross claims incurred(2.9)(10.5)

(7.6)

0.0

(1.7)

(2.2)

(7.1)

(5.4)

(0.1)

(3.6)

(27.1)(35.5)

Claims handling costs
Total gross claims incurred(7.8)(10.1)(17.0)(25.9)(26.0)(22.9)(21.4)(22.6)(213.8)(283.1)(416.7)(785.9)(929.1)(826.7)(794.5)(769.1) (1,103.8) (1,308.8)

Admiral Group plc · Annual Report and Accounts 2017111

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
Financial year ended 31 December
Analysis of claims incurred(net amounts)

2008
£m

2009
£m

2010
£m

2011
£m

2012
£m

2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

Total
£m

(100.4)(35.5)

13.1

13.5

(2.0)

(1.2)

1.2

(2.9)

0.4

5.0

2009

–

(96.9)(67.0)

(4.8)

(3.6)

6.2

7.3

0.0

4.8

0.4

(153.6)

2010

–

–

(130.2)(128.6)

8.4

36.7

19.5

13.5

8.8

6.0

(165.9)

2011

–

–

–

(203.7)(151.1)

39.7

51.4

47.9

8.4

26.2

(181.2)

2012

–

–

–

–

(196.0)(139.3)

49.8

69.2

19.4

59.1

(137.8)

2013

–

–

–

–

–

(184.4)(135.0)

38.4

49.3

36.4

(195.3)

2014

–

–

–

–

–

–

(187.0)(144.1)(16.4)

25.3(322.2)

Underwriting year
(UK insurance)
2008 and prior

2015

–

–

–

–

–

–

–

(182.1)(162.0)(2.6)(346.7)

2016

–

–

–

–

–

–

–

–

(219.4)(180.7)(400.1)

2017

–

–

–

–

–

–

–

–

–

(214.3)(214.3)(100.4)(132.4)(184.1)(323.6)(344.3)(242.3)(192.8)(160.1)(306.7)(239.2)UK insurance net
claims incurred
Underwriting year
(International insurance)

(8.2)

(4.8)

(0.1)

(0.3)

(0.2)

(0.1)

0.1

0.0

0.0

0.0

2009

2008 and prior

–

(4.4)

(5.6)

(1.6)

(2.0)

0.0

0.7

0.1

0.0

0.1

2010

–

–

(7.1)

(11.5)

(3.5)

0.0

1.7

0.5

0.2

0.2

(19.5)

2011

–

–

–

(14.9)(18.7)

0.4

2.9

0.8

2.0

0.6

(26.9)

2012

–

–

–

–

(24.2)(22.8)

(0.8)

2.0

2.2

1.3

(42.3)

2013

–

–

–

–

–

(26.6)(23.5)

1.7

4.8

0.9

(42.7)(12.7)

2014

–

–

–

–

–

–

(31.6)(23.3)

1.8

1.8(51.3)

2015

–

–

–

–

–

–

–

(33.4)(39.6)

5.1(67.9)

2016

–

–

–

–

–

–

–

–

(47.9)(43.5)(91.4)

2017

–

–

–

–

–

–

–

–

–

(60.7)(60.7)

International insurance net
claims incurred

(8.2)

(9.2)

(12.8)(28.3)(48.6)(49.1)(50.5)(51.6)(76.5)(94.2)

Other net claims incurred

(1.3)

(4.4)

(3.1)

0.0

(0.8)

(2.1)

(6.9)

(5.4)

(0.2)

(2.6)

Claims handling costs

(4.7)

(5.7)

(8.5)

(11.9)(10.8)

(9.5)

(8.9)

(9.4)

(11.2)(11.1)(114.6)(151.7)(208.5)(363.8)(404.5)(303.0)(259.1)(226.5)(394.6)(347.1)

Total net claims incurred

112

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Introduction

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Corporate Governance

Financial Statements

Additional Information

The table below shows the development of UK Car Insurance loss ratios for the past five financial periods, presented on an underwriting
year basis.
Financial year ended 31 December
UK Car Insurance loss ratio development

2013

2014

2015

2016

2017

85%

82%

76%

70%

66%

Underwriting year (UK car only)
2013
2014

–

92%

89%

84%

81%

2015

–

–

87%

87%

83%

2016

–

–

–

88%

84%

2017

–

–

–

–

87%

(vi) Analysis of claims reserve releases
The following table analyses the impact of movements in prior year claims provisions on a gross and net basis. Figures are presented on anunderwriting year basis.
Financial year ended 31 December
Gross

2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

132.8

Underwriting year (UK insurance)
2013 and prior

115.8

148.1

181.7

91.0

2014

–

–

16.0

42.8

25.5

2015

–

–

–

1.9

32.5

2016

–

–

–

–

24.8

115.8

148.1

197.7

135.7

215.6

–

12.6

14.0

21.0

23.2

Total gross release

115.8

160.7

211.7

156.7

238.8

Net

2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

94.2

137.4

166.7

91.0

132.8

2014

–

–

6.7

(16.4)

25.5

2015

–

–

–

0.8

(2.3)

2016

–

–

–

–

10.4

94.2

137.4

173.4

75.4

166.4

–

6.3

6.5

9.9

9.5

94.2

143.7

179.9

85.3

175.9

– Net releases on Admiral net share

53.3

66.8

84.6

58.3

92.6

– Releases on commuted quota share reinsurance contracts

40.9

70.6

88.8

17.1

73.8

Total net release as above

94.2

137.4

173.4

75.4

166.4

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

Financial year ended 31 December

Underwriting year (UK Insurance)
2013 and priorTotal net release (UK Insurance)
Total net release (International Insurance)
Total net release
Analysis of net releases on UK Insurance:

Admiral Group plc · Annual Report and Accounts 2017113

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24 or 36 months following the start of theunderwriting year. After commutation, any changes in claims costs on the commuted proportion of the business are reflected within claims
costs and are separately analysed here. Releases on commuted quota share contracts are analysed by underwriting year as follows:
Financial year ended 31 December
2013
£m

2014
£m

2015
£m

2016
£m

2017
£m

Underwriting year
2012 and prior

40.9

70.6

72.5

22.6

53.7

2013

–

–

16.3

28.8

21.0

2014

–

–

–

(34.3)

14.9

2015
Total releases on commuted quota share reinsurance contracts

–

–

–

–

(15.8)

40.9

70.6

88.8

17.1

73.8

Included within releases on commuted quota share contracts are accruals for additional reserves arising from the commutation of 2015
year UK motor quota share contracts. Any future positive developments of this loss ratio would lead to the reversal of the amounts accrued.
Refer to the business review earlier in this report for further detail.
Profit commission is analysed in note 5c.

(vii) Reconciliation of movement in claims provision
31 December 2017
Gross
£m

Reinsurance
£m

Net
£m

Claims provision at start of period

2,030.8(701.6)

1,329.2

Claims incurred (excluding releases)

1,512.1(1,000.2)

511.9

Reserve releases(238.8)62.9(175.9)

–

109.1

109.1

Claims paid and other movements

Movement in claims provision due to commutation(900.9)501.0(399.9)Claims provision at end of period

2,403.2(1,028.8)

1,374.4

31 December 2016
Gross
£m

Reinsurance
£m

Net
£m

Claims provision at start of period

1,725.0(544.8)

1,180.2

Claims incurred (excluding releases)

1,233.4(764.8)

468.6

Reserve releases(156.7)71.4(85.3)

–

186.2

186.2

Movement in claims provision due to commutation
Claims paid and other movements(770.9)350.4(420.5)

Claims provision at end of period

2,030.8(701.6)

1,329.2

114

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Introduction

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Corporate Governance

Financial Statements

Additional Information(viii) Reconciliation of movement in net unearned premium provision
31 December 2017
Gross
£m

Reinsurance
£m

Net
£m

718.7

(424.8)293.9

Written in the period

1,927.7(1,299.7)

628.0

Earned in the period(1,735.7)

1,115.7(620.0)910.7(608.8)301.9

Unearned premium provision at start of period

Unearned premium provision at end of period

31 December 2016
Gross
£m

Reinsurance
£m

Net
£m

570.0

(333.9)236.1

Written in the period

1,482.0(883.6)

598.4

Earned in the period(1,333.3)

792.7(540.6)718.7(424.8)293.9

Unearned premium provision at start of period

Unearned premium provision at end of period

6. Investments
6a. Accounting policies(i) Investment income and finance costs
Investment income from financial assets comprises distributions as well as net realised and unrealised gains on financial assets classified as‘fair value through profit or loss’ (FVTPL), interest income and net realised gains from assets classified as ‘available for sale’ (AFS), and interest
income on holdings in deposits and gilts.
Finance costs from financial liabilities comprise interest expense on subordinated notes, calculated on the effective interest rate method.
The effective interest rate method calculates the amortised cost of a financial asset or liability (or group of financial assets or financial
liabilities) and allocates the interest income or expense over the expected life of the asset or liability.

(ii) Financial assets – investments and receivables
Initial recognition
Financial assets within the scope of IAS 39 are classified as financial assets at FVTPL, AFS assets, loans and receivables or held tomaturity investments.
At initial recognition assets are recognised at fair value and classified according to the purpose for which they were acquired.
The Group’s investments in investment funds are designated as FVTPL at inception.
This designation is permitted under IAS 39, as the investments in money market funds are managed as a group of assets and internal
performance evaluation of this group is conducted on a fair value basis.
The Group’s holdings in Fixed Income and Asset Backed Securities are classified as AFS investments, which is consistent with the intention forwhich they were purchased.
Government gilts are also classified as AFS investments, in line with IAS 39, due to a reclassification in the period following the disposal of a
portion of the holding.
Deposits held with credit institutions are classified as loans and receivables, in line with the nature of these deposits, with 2016 comparatives
restated to reflect this more appropriate classification of these assets.
Transaction costs associated with the purchase of all financial assets are expensed within the income statement as incurred.

Admiral Group plc · Annual Report and Accounts 2017115

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

6. Investments continued
6a. Accounting policies continued
Subsequent measurement
Financial assets at FVTPL are stated at fair value, with any resultant realised or unrealised gain or loss recognised through the income statement.
Investments classified as available for sale are stated at fair value. Unrealised changes in the fair value of these assets are recognised in Other
Comprehensive Income (OCI). Interest income is recognised within profit or loss using the effective interest rate method.
Loans and receivables are stated at their amortised cost less impairment using the effective interest method. Impairment losses are recognised
through the income statement.
Impairment of financial assets
The Group assesses at each balance sheet date whether any financial assets or groups of financial assets held at fair value or amortised cost
are impaired. Financial assets are impaired where there is evidence that one or more events occurring after the initial recognition of the asset,
may lead to a reduction in the estimated future cash flows arising from the asset.
Objective evidence of impairment may include default on cash flows due from the asset and reported financial difficulty of the issuer orcounterparty.
Identified impairments of financial assets are recognised in the income statement, except in the case of assets classified as AFS where
unrealised gains have been recognised through OCI. In this instance, impairments of the asset are first set against the unrealised gain in OCI
with any excess being recognised in the income statement.
De-recognition of financial assets
A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers the asset andall the attached substantial risks and rewards relating to the asset to a third party.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term deposits with original maturities ofthree months or less. All cash and cash equivalents are measured at amortised cost.

(iii) Financial liabilities
Initial recognition
The Group’s financial liabilities comprise subordinated notes and other financial liabilities initially recognised at fair value received, net oftransaction costs incurred.
Subsequent measurement
Subsequent measurement is at amortised cost using the effective interest method. Movements in the amortised cost are recognised throughthe income statement.
De-recognition of financial liabilities
A financial liability is derecognised when the obligation under that liability is discharged, cancelled or expires.

(iv) Fair value measurement of assets held at amortised cost
The fair value of gilts and subordinated notes held at amortised cost is calculated with reference to quoted market valuations. See note 6d for
a comparison of fair value and carrying value at the statement of financial position date.
The Group’s deposits are held with well rated institutions; as such the fair value approximates to the book value of the investment based on
the interest rates of the instruments, credit risk movements and durations of the assets. The amortised cost carrying amount of receivables isa reasonable approximation of fair value.

116

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Corporate Governance

Financial Statements

Additional Information

6b. Investment and interest income
31 December 2017£m

31 December 2016£m

Investment return on assets classified as FVTPL

1.9

2.9

(Losses)/gains on forward contracts

(2.3)

6.5

Interest income on AFS debt securities

27.9

23.4

Interest income on deposits with credit institutions*1

3.4

4.7

Interest income on government gilt assets

4.6

5.4

Investment income*1

Realised gains on sale of gilt assets
Release of accrual for reinsurers’ share of investment returns

5.4

–

40.9

42.9

–

9.2

40.9

52.1

Interest receivable on cash and cash equivalents*1

0.8

1.0

Total investment and interest income

41.7

53.1

31 December 2017£m

31 December 2016£m

Interest payable*1

11.4

11.4

Total finance costs

11.4

11.4

*1

Interest received during the year was £8.0 million (2016: £11.6 million)

6c. Finance costs*1

Interest paid during the year was £11.1million (2016: £11.3 million)

Finance costs represent interest payable on the £200 million (2016: £200 million) subordinated notes and other financial liabilities.

Admiral Group plc · Annual Report and Accounts 2017117

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

6. Investments continued
6d. Financial assets and liabilities
The Group’s financial instruments can be analysed as follows:

31 December 2017£m

Restated*1
31 December 2016£m

1,071.9

776.3

Investments held at fair value through profit or loss
Investment funds
Derivative financial instruments

2.4

4.7

1,074.3

781.0

Available for sale debt securities

1,319.7

1,271.8

Available for sale government gilts

173.8

–

1,493.5

1,271.8

–

197.4

–

197.4

130.0

170.0

130.0

170.0

2,697.8

2,420.2

Insurance receivables

737.6

606.6

Trade and other receivables

202.1

176.0

Investments classified as available for sale

Investments classified as held to maturity
Government gilts

Loans and receivables
Deposits with credit institutions*1

Total financial investments
Insurance and financial assets

Loans and advances to customers

66.2

2.3

Cash and cash equivalents

326.8

326.6

4,030.5

3,531.7

Subordinated notes

204.0

204.0

Other borrowings

20.0

20.0

Trade and other payables

1,641.6

1,292.2

Total financial liabilities

1,865.6

1,516.2

Total financial assets
Financial liabilities*1	2016 comparatives have been restated to present deposits held with credit institutions as loans and receivables, as this is considered to be a more appropriate classification ofthese assets.

Financial liabilities are inclusive of £200 million subordinated notes issued on 25 July 2014 at a fixed rate of 5.5% with a redemption date of
25 July 2024.
The notes are unsecured subordinated obligations of the Group and rank pari passu without any preference among themselves. In the event ofa winding-up or bankruptcy, they are to be repaid only after the claims of all other creditors have been met.
There have been no defaults on any of the notes during the year. The Group has the option to defer interest payments on the notes but to date
has not exercised this right. The aggregate fair value of subordinated dated notes at the balance sheet date is disclosed in the table below.
The Group holds two revolving credit facilities of £100 million each. As at 31 December 2017, £20 million (2016: £20 million) was drawn underthese agreements as shown within other borrowings in the table above.

118

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Financial Statements

Additional Information

Fair value measurement
The measurement of investments at the end of the period, for the majority of investments held at fair value and those classified as available
for sale, is based on active quoted market values (level one). An immaterial amount of investments held at fair value are measured at level
three of the fair value hierarchy. No further information is provided due to the immateriality of the balance at 31 December 2017.
Deposits are held with well rated institutions; as such the approximate fair value is the book value of the investment as impairment of thecapital is not expected. There is no quoted market for these holdings and as such a level two valuation is used. The book value of deposits is£130.0 million (2016: £170.0 million).
The amortised cost carrying amount of receivables is a reasonable approximation of fair value.
The fair value of subordinated notes (level one valuation) at 31 December 2017 is £229.2 million (2016: £212.9 million).
The maturity profile of financial assets and liabilities at 31 December 2017 is as follows:

On demand£m< 1 year£m

Between1 and 2 years£m> 2 years£m–

1,074.3––

Financial investments
Investments held at fair value
Deposits with credit institutions

–

30.0

70.0

30.0

Available for sale debt securities

–

341.2

199.5

779.0

Available for sale government gilts

–

1.0

–

172.8

Total financial investments–

1,446.5

269.5

981.8

Insurance receivables

–

671.4

–

–

Trade and other receivables

–

268.3

–

–

Loans and advances to customers

17.0

16.9

15.0

17.3

Cash and cash equivalents

326.8

–

–

–

Total financial assets

343.8

2,403.1

284.5

999.1

Subordinated notes

–

4.8

–

199.2

Other borrowings

–

20.0

–

–

Financial liabilities

Trade and other payables–

1,641.6––

Total financial liabilities–

1,666.4–

199.2

Admiral Group plc · Annual Report and Accounts 2017119

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

6. Investments continued
6d. Financial assets and liabilities continued
The maturity profile of financial assets and liabilities at 31 December 2016 was as follows:

On demand£m< 1 year£m

Between1 and 2 years£m> 2 years
£m

776.3

4.7

–

–

Financial investments
Investments held at fair value
Term deposits with credit institutions
Available for sale debt securities
Gilts
Total financial investments

–

60.0

40.0

70.0

2.5

324.4

224.4

720.5

–

0.9

–

196.5

778.8

390.0

264.4

987.0

Insurance receivables

–

606.6

–

–

Trade and other receivables

–

178.3

–

–

Cash and cash equivalents
Total financial assets

326.6

–

–

–

1,105.4

1,174.9

264.4

987.0

Financial liabilities
Subordinated notes

–

4.8

–

199.2

Other borrowings

–

20.0

–

–

Trade and other payables–

1,292.2––

Total financial liabilities–

1,317.0–

199.2

Objectives, policies and procedures for managing financial assets and liabilities
The Group’s activities expose it primarily to financial risks of credit risk, interest rate risk, liquidity risk and foreign exchange risk. The Boardof Directors has delegated the task of supervising risk management and internal control to the Group Risk Committee. There is also an
Investment Committee that makes recommendations to the Board on the Group’s investment strategy.
There are several key elements to the risk management environment throughout the Group. These are detailed in full in the Corporate
Governance Statement. Specific considerations for the risks arising from financial assets and liabilities are detailed below.

Credit risk
The Group defines credit risk as the risk of loss if another party fails to perform its obligations. The key areas of exposure to credit risk for theGroup result through its reinsurance programme, investments, bank deposits and policyholder receivables.
The Directors consider counterparty exposure frequently and in significant detail. The Directors consider that the policies and procedures inplace to manage credit exposure continue to be appropriate for the Group’s risk appetite and, during 2017 and historically, no material credit
losses have been experienced by the Group.
There are no specific concentrations of credit risk with respect to investment counterparties due to the structure of the liquidity funds andthe parameters set for managing the Fixed Income Mandates. Both forms of investment hold a wide range of very short duration, high quality
securities. Cash balances and deposits are placed only with highly rated credit institutions. The detailed holdings are reviewed regularly by theInvestment Committee.
To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions), the Group only
conducts business with companies of appropriate financial strength ratings. In addition, many reinsurance contracts are operated on a funds
withheld basis, which substantially reduces credit risk, as the Group withholds the cash received as collateral.

120

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Introduction

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Financial Statements

Additional Information

The other principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by instalment
payers. The impact of this is mitigated by the large customer base and low average level of balance recoverable. There is also mitigation by
the operation of numerous high- and low-level controls in this area, including payment on policy acceptance as opposed to inception andautomated cancellation procedures for policies in default.
The Group’s maximum exposure to credit risk at 31 December 2017 is £3,723.8 million (2016: £3,263.0 million), being the carrying value offinancial investments and cash, and the excess of reinsurance assets over amounts owed to reinsurers under funds withheld arrangements.
The Group does not use credit derivatives or similar instruments to mitigate exposure. The amount of bad debt expense relating topolicyholder debt charged to the income statement in 2017 and 2016 is insignificant. £1.0m was charged to the income statement in respectof loans and advances to customers.
There were no significant financial assets that were past due at the close of either 2017 or 2016.
The Group’s credit risk exposure to assets with external ratings is as follows:

Rating31 December 2017£m

31 December 2016£m

Financial institutions – Credit institutions

AAA

210.7

269.3

Financial institutions – Credit institutions

AA

650.3

733.8

Financial institutions – Credit institutions

A

1,737.0

1,305.6

Financial institutions – Credit institutions

BBB and below

249.7

236.0

UK Government gilts

AA

173.8

197.4

Reinsurers

AA

355.7

295.6

Reinsurers

A

256.4

141.6

Interest rate risk
The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely impact on the capitalvalues of financial assets and liabilities.
As noted above, the Group invests the following asset types:•

Money market liquidity funds and cash plus liquidity funds, which in turn invest in a mixture of short dated fixed and variable ratesecurities, such as cash deposits, certificates of deposits, floating rate notes and other commercial paper.

•

Deposits with well rated institutions are short in duration (one to five years). These are classified as loans and receivables and valued atamortised cost. Therefore neither the carrying value of the asset, nor the interest return will be impacted by fluctuations in interest rates.

•

Available for sale debt securities. These securities are held within two segregated mandates. The guidelines of the investments retain
a similar credit quality of the investment funds (all holdings are investment grade). The duration of the securities is relatively short andsimilar to the duration of the on book claims liabilities (the average duration is three years).

•

UK Government gilts. These are classified as available for sale due to a sale of a portion of the assets in 2017.

The Group also holds a financial liability in the form of £200 million of subordinated notes with a ten year maturity and fixed rate couponof 5.5%. This liability is valued at amortised cost and therefore neither the carrying value of the deposits, nor the interest payable, will be
impacted by fluctuations in interest rates.
No sensitivity analysis to interest rates has been presented on the grounds of materiality.

Admiral Group plc · Annual Report and Accounts 2017121

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

6. Investments continued
6d. Financial assets and liabilities continued
Liquidity risk
Liquidity risk is defined as the risk that the Group does not have sufficient, available financial resources to enable it to meet its obligations as
they fall due, or can only secure them at excessive cost.
The Group is strongly cash-generative due to the large proportion of revenue arising from non-underwriting activity. Further, as noted above,a significant portion of insurance funds are invested in money market liquidity funds with same day liquidity, meaning that a large proportionof the Group cash and investments is immediately available.
A breakdown of the Group’s other financial liabilities, trade payables and other payables is shown in note 10.
The subordinated notes have a ten year maturity whereas all trade and other payables will mature within three to six months of the balance
sheet date. (Refer to the maturity profile at the start of this note for further detail.)
In practice, the Group’s Directors expect actual cash flows to be consistent with this maturity profile except for amounts owed to co-insurers
and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £1,157.5 million (2016: £938.0 million), £938.4 million (2016: £610.1
million) is held under funds withheld arrangements and therefore not expected to be settled within 12 months.
A maturity analysis for insurance contract liabilities is included in note 5. The maturity profile for financial assets is included at the start ofthis note.
The Group’s Directors believe that the cash flows arising from these assets will be consistent with this profile. Liquidity risk is not, therefore,
considered to be significant.
Foreign exchange risk
Foreign exchange risk arises from unfavourable movements in foreign exchange rates that could adversely impact the valuation of overseas
assets and liabilities.
The Group is exposed to foreign exchange risk through its operations overseas. Although the relative size of the international operations
means that the risks are relatively small, increasingly volatile foreign exchange rates could result in larger potential gains or losses. Assets held
to fund insurance liabilities are held in the currency of the liabilities; however, surplus assets held as regulatory capital in foreign currencies
remain exposed.
The Group’s exposure to net assets and profits in currencies other than the reporting currency is immaterial other than for US dollars.
The Group’s exposure to net assets held in dollars at the balance sheet date was £55.1million (2016: £70.5 million).
The loss before tax derived from business carried out in the US was £23.4 million (2016: £39.1 million). If the Sterling rates with US dollars
had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by £2.2 million (2016: £3.6 million).
Fair value
For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity. For assets
held at fair value through profit and loss and AFS their value equates to level one (quoted prices in active markets) of the fair value hierarchy.
For subordinated notes, the fair value is calculated with reference to the quoted market valuation. This is compared to carrying value earlier inthis note.

6e. Cash and cash equivalents

Cash at bank and in hand
Short-term deposits
Total cash and cash equivalents

31 December 2017£m

31 December 2016
£m

325.3

326.4

1.5

0.2

326.8

326.6

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

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Additional Information

7. Other Revenue
7a. Accounting policy(i) Contribution from additional products and fees and other revenue
Contribution from additional products and fees and other revenue includes revenue earned on the sale of products supplementing the core
motor, van and household insurance policies, administration and other charges paid by the policyholder, referral fees, revenue from policies
paid by instalments and vehicle commission charges paid by co- and reinsurers. Revenue is credited to the income statement over the period
matching the Group’s obligations to provide services. Where the Group has no remaining contractual obligations, the revenue is recognised
immediately. An allowance is made for expected cancellations where the customer may be entitled to a refund of amounts charged.
Commission from price comparison activities and broking commission earned by Gladiator is credited to revenue on the sale of the underlying
insurance policy.

7b. Contribution from additional products and fees and other revenue
31 December 2017£m

31 December 2016£m

Contribution from additional products and fees

207.3

198.9

Instalment income

59.2

36.4

123.8

108.4

Price comparison revenue*1

Interest on loans and advances to customers

1.2

0.1

Other revenue

9.6

16.8

401.1

360.6

Total other revenue*1

Price comparison revenue excludes £19.8 million (2016: £20.8 million) of income from other Group companies.

Refer to the Strategic Report for further detail on the sources of revenue.

8. Expenses
8a. Accounting policies(i) Acquisition costs and operating expenses
Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over the period in which thosepremiums are earned. All other operating expenses are charged to the income statement in the period that they are incurred.

(ii) Employee benefits
Pensions
The Group contributes to defined contribution personal pension plans for its employees. The contributions payable to these schemes arecharged in the accounting period to which they relate.
Employee share schemes
The Group operates a number of equity and cash settled compensation schemes for its employees. The fair value of the employee services
received in exchange for the grant of free shares under the equity settled schemes is recognised as an expense, with a corresponding
increase in equity. For cash settled schemes, the fair value of services received are also recognised as an expense, with a corresponding
increase in liability.
For equity settled schemes, the total charge expensed over the vesting period is determined by reference to the fair value of the free shares
granted as determined at the grant date (excluding the impact of non-market vesting conditions). Non-market conditions such as profitability
targets as well as staff attrition rates are included in assumptions over the number of free shares to vest under the applicable scheme.
For cash settled schemes, the total charge expensed over the vesting period is determined by reference to the closing Admiral Group shareprice at the end of the period. Prior to the vesting of each scheme, the closing share price at the end of the reporting period is used as an
approximation for the closing share price at the end of the vesting period. As with equity settled schemes, non-market vesting conditions also
impact on the total charge expensed over the vesting period.
At each balance sheet date, the Group revises its assumptions on the number of shares to be granted with the impact of any change in theassumptions recognised through income.
Refer to note 8f for further details on share schemes.

Admiral Group plc · Annual Report and Accounts 2017123

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

8. Expenses continued
8a. Accounting policies continued(iii) Leases
Operating leases
Leases which do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are classified as
operating leases. The Group has entered into a number of non-cancellable operating lease arrangements for properties and other assets. The
leases have varying terms, escalation values and renewal rights.
Operating lease payments, including the effects of any lease incentives, are recognised as an expense in the income statement on a straightline basis over the lease term. Contingent rentals are recognised as an expense in the period in which they are incurred.

8b. Operating expenses and share scheme charges
31 December 2017
Gross
£m

Recoverable fromco- and reinsurers
£m

Net
£m

Acquisition of insurance contracts*1

122.0(93.3)

28.7

Administration and other marketing costs (insurance contracts)

353.5(274.5)79.0

Insurance contract expenses

475.5(367.8)

107.7

Administration and other marketing costs (other)

223.6

–

223.6

Share scheme charges

54.4(18.8)

35.6

Total expenses and share scheme charges

753.5(386.6)366.9

31 December 2016
Gross
£m

Recoverable fromco- and reinsurers
£m

Net
£m

98.0

(75.4)

22.6

Administration and other marketing costs (insurance contracts)

293.9(222.6)

71.3

Insurance contract expenses

391.9(298.0)93.9

Administration and other marketing costs (other)

206.6

–

206.6

Acquisition of insurance contracts*1

Share scheme charges

50.3(18.4)

31.9

Total expenses and share scheme charges

648.8(316.4)332.4*1

Acquisition of insurance contracts expense excludes £19.8 million (2016: £20.8 million) of aggregator fees from other Group companies.

The £79.0 million (2016: £71.3 million) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.
Analysis of other administration and other marketing costs:
31 December 2017£m

31 December 2016£m

Expenses relating to additional products and fees

58.9

49.9

Price comparison operating expenses

138.2

132.1

Other expenses

26.5

24.6

Total

223.6

206.6

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

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Additional Information

8c. Staff costs and other expenses
31 December 201731 December 2016

Total
£m

Net
£m

Total
£m

Net
£m

Salaries

239.2

85.3

203.7

79.4

Social security charges

22.9

8.7

18.8

7.6

Pension costs

7.0

2.3

6.8

2.3

Share scheme charges (see note 8f)

54.4

35.6

50.3

31.9

Total staff expenses

323.5

131.9

279.6

121.2

– Owned assets

10.1

3.0

8.6

3.3

– Leased assets

–

–

1.9

0.5

13.8

4.0

12.6

4.1

–

48.4

–

43.2

–

–

13.0

4.5

13.3

4.2

Depreciation charge:

Amortisation charge:– Software– Deferred acquisition costs
Operating lease rentals:– Buildings
Auditor’s remuneration (including VAT):– Fees payable for the audit of the Company’s annual accounts––– Fees payable for the audit of the Company’s subsidiary accounts

0.3

0.3

0.2

0.2

– Fees payable for audit related assurance services pursuant to legislation
or regulation

0.2

–

0.2

0.1

£nil (2016: £nil) was payable to the auditor for other services in the year.
Total and net expenses are before and after co- and reinsurance arrangements respectively.
Refer to the Corporate Governance Report for details of the Audit Committee’s policy on fees paid to the Company’s auditor for non-audit
services. The ratio of non-audit fees to audit fees in 2017 was 54% (2016: 82%).
The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement.

8d. Staff numbers (including Directors)
Average for the year
2017
Number

2016
NumberDirect customer contact staff

6,179

5,993

Support staff

3,157

2,605

Total

9,336

8,598

Admiral Group plc · Annual Report and Accounts 2017125

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

8. Expenses continued
8e. Directors’ remuneration(i) Directors’ remuneration
31 December 2017£m

31 December 2016£m

Directors’ emoluments

1.4

1.6

Amounts receivable under SIP and DFSS share schemes

0.9

0.4

Company contributions to money purchase pension plans

–

–

2.3

2.0

2017
Number

2016
Number2

2

31 December 2017£m

31 December 2016
£m

Total

(ii) Number of Directors

Retirement benefits are accruing to the following number of Directors under:– Money purchase schemes

8f. Staff share schemes
Analysis of share scheme costs (per the Consolidated Income Statement):

SIP charge (i)

6.7

9.9

DFSS charge (ii)

28.9

22.0

Total share scheme charges

35.6

31.9

The share scheme charges reported above are net of the co- and reinsurers share of the cost and therefore differ from the gross charge
reported in note 8c (2017: £54.4 million; 2016: £50.3 million) and the gross credit to reserves reported in the Consolidated statement ofchanges in equity (2017: £37.9 million; 2016: £33.2 million).
The Consolidated cash flow statement also shows the gross charge in the reconciliation between ‘profit after tax’ and ‘cash flows fromoperating activities’. The co-insurance share of the charge is included in the change in trade and other payables line.

(i) The Approved Share Incentive Plan (the SIP)
Eligible employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The maximum award
for each year is £3,600 per employee. The awards are made with reference to the Group’s performance against prior year profit before tax.
Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
The fair value of shares awarded is the share price at the date of award. Awards under the SIP are entitled to receive dividends, and, hence, noadjustment has been made to this fair value.

(ii) The Discretionary Free Share Scheme (the DFSS)
Under the DFSS, details of which are contained in the remuneration policy section of the Directors’ Remuneration Report, individuals receive
an award of free shares at no charge. Staff must remain in employment until the vesting date in order to receive shares. The maximum numberof shares that can vest relating to the 2017 scheme is 3,205,433 (2016 scheme: 3,247,136).
The amount of 2017 award that actually vests is based on the growth in the Company’s earnings per share (EPS) relative to a risk free return(RFR), for which LIBOR has been selected as a benchmark. This performance is measured over the three year period the award applies to. For
the 2017 scheme, 50% of the shares awarded at the start of the three year vesting period are subject to these performance conditions.

126

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Financial Statements

Additional Information

The range of awards is as follows:•

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

•

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

•

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

Between 10% and 100% of the maximum awards, a linear relationship exists.
For awards in 2016 and onwards there are now three performance conditions which the 50% not guaranteed to vest are subject to. These arethree-year EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted equally.
Performance range
Performance measureThresholdMaximum

EPS growth vs. LIBOR

Growth in line with LIBOR

Growth of 10% p.a. in excess of LIBORMedianUpper Quartile

25%

55%

TSR vs. FTSE 350 (excluding investment companies)
ROE

Awards under the DFSS are not eligible for dividends (although a discretionary bonus is currently paid equivalent to the dividend that would
have been paid on the respective shareholding) and hence the fair value of free shares to be awarded under this scheme has been revised
downwards to take account of these distributions.
Number of free share awards committed at 31 December 2017
Awards outstanding*1

Vesting date

SIP H214 scheme

536,613

March 2018

SIP H115 scheme

636,612

August 2018

SIP H215 scheme

523,877

March 2019

SIP H116 scheme

501,785

September 2019

SIP H216 scheme

560,476

March 2020

SIP H117 scheme

506,815

August 2020

DFSS 2015 scheme 1st award

190,275

March 2018

DFSS 2015 scheme 2nd award

2,828,913

September 2018

DFSS 2016 scheme 1st award

199,346

March 2019

DFSS 2016 scheme 2nd award

3,053,904

September 2019

DFSS 2017 scheme 1st award

238,024

March 2020

DFSS 2017 scheme 2nd award

2,882,243

September 2020

Total awards committed

12,658,883*1 Being the maximum number of awards expected to vest before accounting for expected staff attrition.

During the year ended 31 December 2017, awards under the SIP H213 and H114 schemes and the DFSS 2014 scheme vested. The total numberof awards vesting for each scheme is as follows.
Number of free share awards vesting during the year ended 31 December 2017
Original awards

Awards vested

SIP H213 scheme

514,500

393,100

SIP H114 scheme

575,016450,642DFSS 2014 scheme 1st award

203,292

125,394

DFSS 2014 scheme 2nd award

2,481,806

1,504,972

The weighted average market share price at the date of exercise for shares exercised during the year was £18.51 (2016: £20.09).

Admiral Group plc · Annual Report and Accounts 2017127

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

9. Taxation
9a. Accounting policy
Income tax on the profit or loss for the periods presented comprises current and deferred tax.

(i) Current tax
Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted
by the balance sheet date, and includes any adjustment to tax payable in respect of previous periods.
Current tax related to items recognised in other comprehensive income is also recognised in other comprehensive income and not in theincome statement.

(ii) Deferred tax
Deferred tax is provided in full using the balance sheet liability method, providing for temporary differences arising between the carrying
amount of assets and liabilities for accounting purposes and the amounts used for taxation purposes. It is calculated at the tax rates that havebeen enacted or substantially enacted by the balance sheet date and that are expected to apply in the period when the liability is settled or
the asset is realised.
The principal temporary differences arise from carried forward losses, depreciation of property and equipment and share scheme charges.
The resulting deferred tax is charged or credited in the income statement, except in relation to share scheme charges where the amount oftax benefit credited to the income statement is limited to an equivalent credit calculated on the accounting charge. Any excess is recognised
directly in equity.
Deferred tax assets relating to carried forward losses are recognised only to the extent that it is probable that future taxable profits will beavailable against which the assets can be utilised. The probability of the availability of future taxable profits is determined by a combinationof the classification of the status of the businesses holding cumulative tax losses and the business plan profit projections for that business,
subject to appropriate stress testing.

9b. Taxation
31 December 2017£m

31 December 2016£m

Current tax
Corporation tax on profits for the year

68.8

53.2

(Over) provision relating to prior periods

(3.7)

(1.0)

Current tax charge

65.1

52.2

Deferred tax
Current period deferred taxation movement

3.1

7.2

Under provision relating to prior periods

3.7

4.9

Total tax charge per consolidated income statement

71.9

64.3

31 December 2017£m

31 December 2016£m

Profit before tax

403.5

278.4

Corporation tax thereon at effective UK corporation tax rate of 19.25% (2016: 20.00%)

77.7

55.7

Expenses and provisions not deductible for tax purposes

0.9

0.8

Factors affecting the total tax charge are:Non-taxable income

(5.7)

(7.2)

Impact of change in UK tax rate on deferred tax balances

0.3–

Adjustments relating to prior periods

(0.8)

3.2

Impact of different overseas tax rates

(5.7)

(7.0)

Unrecognised deferred tax

5.2

18.9

–

(0.1)

71.9

64.3

Other differences
Total tax charge for the period as above

128

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Financial Statements

Additional Information

9c. Deferred income tax asset
Analysis of deferred tax asset
Tax treatmentof shareschemes£mCapitalallowances£m

Carriedforwardlosses£m

Balance brought forward at 1 January 2016

7.1

2.7

9.9

–

0.9

20.6

Tax treatment of share scheme charges through income or expense

(1.9)

–

–

–

–

(1.9)

Tax treatment of share scheme charges through reserves

0.5

–

–

–

–

0.5

Capital allowances

–

(5.1)

–

–

–

(5.1)

Carried forward losses

–

–

(5.0)

–

–

(5.0)

Other difference

–

–

–

(0.5)

(0.2)

(0.7)

Balance carried forward at 31 December 2016

5.7

(2.4)

4.9

(0.5)

0.7

8.4

Tax treatment of share scheme charges through income or expense

(2.4)

–

–

–

–

(2.4)

Tax treatment of share scheme charges through reserves

Fair value
Other
reserve differences
£m
£m

Total
£m

2.8

–

–

–

–

2.8

Capital allowances

–

(2.1)

–

–

–

(2.1)

Carried forward losses

–

–

(2.0)

–

–

(2.0)

Movement in fair value reserve

–

–

–

(4.1)

–

(4.1)

Other difference

–

–

–

–

(0.3)

(0.3)

6.1

(4.5)

2.9

(4.6)

0.4

0.3

Balance carried forward at 31 December 2017
Positive amounts presented above relate to a deferred tax asset position.

The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The average effective rate of tax for 2017 is 19.25% (2016: 20.00%). A
further reduction to the main rate of corporation tax to 17% (effective from 1 April 2020) was enacted on 15 September 2016. This will reduce
the Group’s future current tax charge accordingly.
The deferred tax asset at 31 December 2017 has been calculated based on the rate at which each timing difference is most likely to reverse.
The deferred tax asset relating to carried forward losses of £13.9 million relates to losses incurred in the Group’s US price comparison businessCompare.com, and is calculated at the local US rate of tax of 21% (2016: 35%). The recognised asset has been limited to the amount supported byforecast 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 31 December 2017 the Group had unused tax losses amounting to £166.1 million (2016: £142.7 million), relating to the Group’s US businesses
Elephant Auto and Compare.com, for which no deferred tax asset has been recognised.

Admiral Group plc · Annual Report and Accounts 2017129

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

10. Other assets and other liabilities
10a. Accounting policy(i) Property and equipment, and depreciation
All property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight line method to write
off the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows:
Improvements to short leasehold buildings–
Computer equipment			
–Office equipment				–Furniture and fittings			
–Motor vehicles				–four to ten years
two to four years
four years
four years
four years(ii) Impairment of property and equipment
In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any
indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated and compared to the carrying value.
The carrying value is the higher of the fair value of the asset less costs to sell, and the asset’s value in use. Impairment losses are recognised
through the income statement.

(iii) Leased assets
The rental costs relating to assets held under operating leases are charged to the income statement on a straight line basis over the life of
the lease.
Leases under the terms of which the Group assumes substantially all of the risks and rewards of ownership are classed as finance leases. Assets
acquired under finance leases are included in property and equipment at fair value on acquisition and are depreciated in the same manneras equivalent owned assets. Finance lease and hire purchase obligations are included in creditors and the finance costs are spread over theperiods of the agreements based on the net amount outstanding.

(iv) Intangible assets
Goodwill
All business combinations are accounted for using the acquisition method. Goodwill has been recognised in acquisitions of subsidiaries, andrepresents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not been reconsidered in preparing
the Group’s opening IFRS balance sheet at 1 January 2004 due to the exemption available in IFRS 1 (First time adoption). In respect ofacquisitions prior to 1 January 2004, goodwill is included at the transition date on the basis of its deemed cost, which represents theamount recorded under UK GAAP, which was tested for impairment at the transition date. On transition, amortisation of goodwill hasceased as required by IAS 38.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) according to businesssegment and is reviewed annually for impairment.
The goodwill held on the balance sheet at 31 December 2017 is allocated solely to the UK Car Insurance segment.

130

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Financial Statements

Additional Information

Impairment of goodwill
The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the goodwill to
CGUs) and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the income statement
and are not subsequently reversed.
The recoverable amount is the greater of the fair value of the asset less costs to sell and the value in use of the CGU.
The value in use calculations use cash flow projections based on financial budgets approved by management covering a three year period.
Cash flows beyond this period are considered, but not included in the calculation.
The key assumptions used in the value in use calculations are those regarding growth rates and expected changes in pricing and expenses
incurred during the period. Management estimates growth rates and changes in pricing based on past practices and expected future changes
in the market.
The headroom above the goodwill carrying value is very significant, and there is no foreseeable event that would eliminate this margin.
Deferred acquisition costs
Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs
represent the proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date. Thisbalance is held as an intangible asset. It is amortised over the term of the contract as premium is earned.
SoftwarePurchased software is recognised as an intangible asset and amortised over its expected useful life (generally the licence term). Internallygenerated software is recognised as an intangible asset, with directly attributable costs incurred in the development stage capitalised. Theinternally generated software assets are amortised over the expected useful life of the systems and amortisation commences when thesoftware is available for use.
The carrying value of software is reviewed every six months for evidence of impairment, with the value being written down if any impairment
exists. Impairment may be reversed if conditions subsequently improve.

(iv) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when a legal or constructive obligation arises as a result of an event that occurred before the balance sheet date,when a cash-outflow relating to this obligation is probable and when the amount can be estimated reliably.
Where an obligation exists, but the likelihood of a cash out-flow or the amount is uncertain, or where there is a possible obligation arising froma past event that is contingent on a future event, a contingent liability is disclosed.
Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or nonoccurrence of future events. Where it is probable that a cash-inflow will arise from a contingent asset, this is disclosed.

Admiral Group plc · Annual Report and Accounts 2017131

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

10. Other assets and other liabilities continued
10b. Property and equipment
Improvements
to short
leaseholdbuildings£mComputerequipment£m

Officeequipment£m

Furniture andfittings
£m

Total
£m

At 1 January 2016

25.7

47.8

15.2

8.2

96.9

Additions

1.3

3.4

1.1

0.8

6.6

Disposals

–

–

(0.2)

–

(0.2)

Foreign exchange movement

0.6

0.9

0.9

0.4

2.8

At 31 December 2016

27.6

52.1

17.0

9.4

106.1

At 1 January 2016

10.0

33.4

12.6

6.0

62.0

Charge for the year

2.0

6.5

1.0

1.0

10.5

–

–

(0.1)

–

(0.1)

Foreign exchange movement

0.4

0.6

0.6

0.1

1.7

At 31 December 2016

12.4

40.5

14.1

7.1

74.1

15.7

14.4

2.6

2.2

34.9

15.2

11.6

2.9

2.3

32.0

Cost

Depreciation

Disposals

Net book amountAt 1 January 2016
Net book amountAt 31 December 2016
Cost
At 1 January 2017

27.6

52.1

17.0

9.4

106.1

Additions

1.1

5.4

2.6

0.6

9.7

Disposals

–

(0.1)

–

(0.1)

(0.2)

Foreign exchange movement

–

(0.2)

0.1

(0.1)

(0.2)

28.7

57.2

19.7

9.8

115.4

At 1 January 2017

12.4

40.5

14.1

7.1

74.1

Charge for the year

2.5

5.6

1.0

1.0

10.1

–

(0.1)

–

–

(0.1)

At 31 December 2017
Depreciation

Disposals
Foreign exchange movement
At 31 December 2017

–

(0.1)

0.1

–

–

14.9

45.9

15.2

8.1

84.1

13.8

11.3

4.5

1.7

31.3

Net book amountAt 31 December 2017
The net book value of assets held under finance leases is as follows:

Computer equipment

132

Admiral Group plc · Annual Report and Accounts 201731 December 2017£m

31 December 2016
£m

–

4.4

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

10c. Intangible Assets
Goodwill£mDeferredacquisition costs£mSoftware*1
£m

Total
£m

62.3

16.6

63.4

142.3

At 1 January 2016
Additions

–

48.5

24.6

73.1

Amortisation charge–(43.2)(12.6)(55.8)

Disposals

–

–

(0.3)

(0.3)

Foreign exchange movement
At 31 December 2016

–

1.5

1.5

3.0

62.3

23.4

76.6

162.3

Additions

–

46.0

13.0

59.0

Amortisation charge–(48.4)(13.8)(62.2)

Disposals

–

–

–

–

Foreign exchange movement
At 31 December 2017
*1

–

(0.4)

0.7

0.3

62.3

20.6

76.5

159.4

Software additions include £6.1 million relating to internal development (2016: £21.1 million)

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. As described in the accounting policies, the amortisation of this asset ceased on transition
to IFRS on 1 January 2004. All annual impairment reviews since the transition date have indicated that the estimated recoverable value ofthe asset is greater than the carrying amount and therefore no impairment losses have been recognised. Refer to the accounting policy for
goodwill for further information.

10d. Insurance and other receivables
31 December 2017£m

31 December 2016£m

Insurance receivables*1

737.6

606.6

Trade receivables

193.7

170.1

8.4

5.9

939.7

782.6

31 December 2017£m

31 December 2016£m

Loans and advances to customers

66.2

2.3

Total loans and advances to customers

66.2

2.3

Prepayments and accrued income
Total insurance and other receivables*1

Insurance receivables at 31 December 2017 includes £42.7 million in respect of salvage and subrogation recoveries (2016: £37.7 million).

10e. Loans and advances to customers

Loans and advances to customers relate to the Admiral loans business.

Admiral Group plc · Annual Report and Accounts 2017133

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

10. Other assets and other liabilities continued
10f. Trade and other payables
31 December 2017£m

31 December 2016£m

Trade payables

39.8

35.6

Amounts owed to co-insurers

130.7

247.5

Amounts owed to reinsurers

1,026.8

690.5

Finance leases due within 12 months–

0.1

Other taxation and social security liabilities

62.0

40.1

Other payables

140.9

112.4

Accruals and deferred income (see below)

241.4

166.0

1,641.6

1,292.2

Total trade and other payables

Of amounts owed to co-insurers and reinsurers, £938.4million (2016: £610.1 million) is held under funds withheld arrangements.
Analysis of accruals and deferred income:
31 December 2017£m

31 December 2016£m

Premium receivable in advance of policy inception

150.3

92.4

Accrued expenses

48.8

53.1

Deferred income

42.3

20.5

Total accruals and deferred income as above

241.4

166.0

10g. Obligations under finance leases
Analysis of finance lease liabilities:
At 31 December 2017
Minimum lease
payments£m

Interest£mLess than one year–

Between one and five years
More than five years

At 31 December 2016
Principal£m

Minimum lease
payments£m

Interest£mPrincipal
£m

–

–

0.1

–

0.1

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

0.1

–

0.1

The fair value of the Group’s lease obligations approximates to their carrying amount.

10h. Financial commitments
The Group was committed to total minimum obligations under operating leases on land and buildings as follows:
31 December 2017£m

31 December 2016£m

Within one year

12.1

12.0

Within two to five years

40.8

42.1

Over five years

113.7

119.3

Total commitments

166.6

173.4

Minimum payments due on operating leases

Operating lease payments represent rentals payable by the Group for its office properties.

134

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Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

11. Share capital
The Group’s capital includes share capital and the share premium account, other reserves which are comprised of the fair value reserveand foreign exchange reserve, and retained earnings.

11a. Accounting policies(i) Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.

(ii) Dividends
Dividends are recorded in the period in which they are declared and paid.

11b. Dividends
Dividends were declared and paid as follows:

March 2016 (63.4 pence per share, paid June 2016)
August 2016 (62.9 pence per share, paid October 2016)31 December 2017£m

31 December 2016
£m

–

175.4

–

174.4

March 2017 (51.5 pence per share, paid June 2017)

143.7

–

August 2017 (56.0 pence per share, paid October 2017)

156.6

–

Total dividends

300.3

349.8

The dividends declared in March represent the final dividends paid in respect of the 2015 and 2016 financial years. The dividends declared inAugust are interim distributions in respect of 2016 and 2017.
A final dividend of 58.0 pence per share (£163million) has been proposed in respect of the 2017 financial year. Refer to the Chairman’s
Statement and Strategic Report for further detail.

11c. Earnings per share
31 December 2017£m

Profit for the financial year after taxation attributable to equity shareholders
Weighted average number of shares – basic
Unadjusted earnings per share – basic
Weighted average number of shares – diluted
Unadjusted earnings per share – diluted

31 December 2016
£m

334.2

222.2

285,164,396

282,419,324

117.2p78.7p285,751,149

283,033,681

117.0p

78.5p

The difference between the basic and diluted number of shares at the end of 2017 (being 586,753; 2016: 614,357) relates to awardscommitted, but not yet issued under the Group’s share schemes. Refer to note 8 for further detail.

Admiral Group plc · Annual Report and Accounts 2017135

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 201711. Share capital continued
11d. Share capital
31 December 2017£m

31 December 2016
£m

0.5

0.5

Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid
287,214,262 ordinary shares of 0.1 pence

0.3–

284,352,270 ordinary shares of 0.1 pence

–

0.3

0.3

0.3

During 2017 2,861,992 (2016: 2,764,317) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s share schemes.
811,992 (2016: 764,317) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme to give aclosing number at 31 December 2017 of 9,756,914 (31 December 2016: 8,944,922). These shares are entitled to receive dividends.
2,050,000 (2016: 2,000,000) shares were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share
Scheme to give a closing number at 31 December 2017 of 18,861,948 (31 December 2016: 16,811,948). The Trustees have waived the right todividend payments, other than to the extent of 0.001 pence per share, unless and to the extent otherwise directed by the Company from time
to time.
The number of shares in issue at flotation was 258,595,400. There is one class of share with no unusual restrictions.

11e. 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 meet regulatory requirements with an appropriate margin. 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 to be held a) for regulatory purposes;b) to fund expansion activities; and c) as a further buffer against unforeseen events. This policy gives the Directors flexibility in managing theGroup’s capital.
The Group’s regulatory capital requirements are discussed in the Group Financial Review within the Strategic Report.

136

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Corporate Governance

Financial Statements

Additional Information

11f. Group related undertakings
The Parent Company’s subsidiaries are as follows:
Class ofshares held

% Ownership

Principal activity

Ordinary90

Legal company

Ordinary90

Legal company

Ordinary

100

Insurance Intermediary

Inspop.com (France) Limited

Ordinary

100

Insurance Intermediary

Inspop.com Limited

Ordinary

100

Insurance Intermediary

Rastreator.com Limited

Ordinary75

Insurance Intermediary

EUI Limited

Ordinary

100

Insurance Intermediary

Admiral Insurance Company Limited

Ordinary

100

Insurance company

Admiral Life Limited

Ordinary

100

Dormant*

Admiral Syndicate Limited

Ordinary

100

Dormant*

Admiral Syndicate Management Limited

Ordinary

100

Dormant*

Bell Direct Limited

Ordinary

100

Dormant*

Confused.com Limited

Ordinary

100

Dormant*

Diamond Motor Insurance Services Limited

Ordinary

100

Dormant*

Elephant Insurance Services Limited

Ordinary

100

Dormant*

Admiral Financial Services Limited

Ordinary

100

Financial services company

EUI (France) Limited

Ordinary

100

Insurance Intermediary

Preminen Price Comparison Holdings Limited

Ordinary

50

Insurance Intermediary

Preminen Dragon Price Comparison Limited

Ordinary

50 (indirect)

Insurance Intermediary

Ordinary

100

Insurance company

Ordinary

100

Internet technology supplier

Subsidiary

Incorporated in England and Wales
Registered office: 9th Floor Brunel House, Fitzalan Road, Cardiff, CF24 0EB
Admiral Law Limited
Registered office: Admiral House, Queensway, Newport, NP20 4AG
BDE Law Limited
Registered office: Ellipse Ground Floor, Padley Road, Swansea, SA1 8AN
Able Insurance Services Limited
Registered office: Greyfriars House, Greyfriars Road, Cardiff, CF10 3AL

Registered office: Tŷ Admiral, David Street, Cardiff, CF10 2EH

Incorporated in Gibraltar
Registered office: 1st Floor, 24 College Lane, Gibraltar, GX11 1AA
Admiral Insurance (Gibraltar) Limited
Incorporated in India
Registered office: 514 JMD Regent Square, Mehrauli Gurgaon Road,
Gurgaon, 122001, India
Inspop Technologies Private Limited*

Exempt from audit under S479A of Companies Act 2006

Admiral Group plc · Annual Report and Accounts 2017137

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 201711. Share capital continued
11f. Group related undertakings continued
Class ofshares held

% Ownership

Principal activity

Comparaseguros Correduría de Seguros, S.L., Sociedad Unipersonal

Ordinary

75 (indirect)

Insurance Intermediary

Admiral Europe Compañía de Seguros, S.A.

Ordinary

100

Insurance company

Ordinary

100

Insurance Intermediary

Elephant Insurance Company

Ordinary

100

Insurance company

Elephant Insurance Services LLC

Ordinary

100

Insurance Intermediary

Grove General Agency Inc

Ordinary

100

Insurance Intermediarycompare.com Insurance Agency LLC

Ordinary

71.1 (indirect) Insurance Intermediary

Inspop USA LLC

Ordinary

71.1

Ordinary

51.25 (indirect) Insurance intermediary

Subsidiary

Incorporated in Spain
Registered office: Paseo Castellana 163 4 Izq, 28046 Madrid

Registered office: Calle Albert Einstein, 10 41092 Sevilla
Admiral Intermediary Services S.A.
Incorporated in the United States of America
Registered office: Deep Run 1; Suite 400, 9950 Mayland Drive, Henrico, VA 23233

Registered office: 140 East Shore Drive, Suite 300, Glen Allen, VA 23059
Insurance Intermediary

Incorporated in Mexico
Registered office: Varsovia, 36, 5th floor, office 501, Colonia Juárez,Cuauhtemoc, Ciudad de Mexico
Preminen Mexico Sociedad Anonima de Capital Variable
Incorporated in Turkey
Registered address: Esentepe MAH. Harman1 SK. Harmanci Giz Plaza 5 1 Sisli/ Istanbul
Preminen Online Fiyat Karşılaştırma Hizmetleri Anonim Şirketi

Ordinary

50 (indirect)

Insurance intermediary

For further information on how the Group conducts its business across the UK, Europe and the US, refer to the Strategic Report.

11g. Related party transactions
Details relating to the remuneration and shareholdings of key management personnel are set out in the Directors’ Remuneration Report.
Key management personnel are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a reductionof 15%.
The Board considers that only the Executive Directors of Admiral Group plc are key management personnel. Aggregate compensation for the
Executive Directors is disclosed in the Directors’ Remuneration Report on pages 62 to 81.

138

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Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

12. Reconciliations
The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report to items
included in the financial statements.

12a. Reconciliation of turnover to reported gross premiums written and other revenue as per the financial statements
31 December 2017£m

31 December 2016£m

1,927.7

1,482.0

Gross premiums written after co-insurance per note 5b of financial statements
Premiums underwritten through co-insurance arrangements

571.7

711.9

Total premiums written before co-insurance arrangements

2,499.4

2,193.9

401.1

360.6

2,900.5

2,554.5(1.0)(20.9)

Other revenue per note 7b of financial statements
UK vehicle commission*1
Other

*2

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

38.9

21.4

2,938.4

2,555.0

19.8

20.8

2,958.2

2,575.8*1	During 2012 Admiral ceased earning other revenue from the sale of non-optional legal protection policies. At the same point, the Group began charging its panel of co- and reinsurers
a vehicle commission. The substance of these changes meant that the total premiums written increased by the amount of revenue that was previously earned from the sale of nonoptional legal protection policies. The vehicle commission included within other revenue is therefore 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 Insurance business outside of UK Car Insurance.

*3

Intra-group income elimination relates to price comparison income earned in the Group from other Group companies.

12b. Reconciliation of claims incurred to reported loss ratios, excluding releases on commuted reinsurance
31 December 201731 December 2016

UK Motor£mInternational
Car
£m

Group
£m

UK Motor£mInternational
Car
£m

Group
£m

Net insurance claims

210.5

97.0

347.1

290.1

76.5

394.6

Net claims handling expenses(10.5)–(11.1)(11.0)–(11.2)

–

(0.1)

(0.1)

–

(6.4)

(6.4)

73.8

–

73.8

17.1

–

17.1

Reinsurer cap impact
Reserve releases on commuted reinsurance
*1

–

(2.9)

(2.9)

–

(1.0)

(1.0)

Adjusted net claims

273.8

94.0

406.8

296.2

69.1

393.1

Net insurance premium revenue

429.1

127.5

619.1

404.3

94.3

548.8

Other adjustment

–

(4.5)

(4.5)

–

(3.0)

(3.0)

Adjusted net insurance premium revenue

429.1

123.0

614.6

404.3

91.3

545.8

Reported loss ratio

63.8%

76.4%

66.2%

73.3%

75.7%

72.0%

Other adjustment*1*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.

Admiral Group plc · Annual Report and Accounts 2017139

Financial Statements: Notes to the Financial Statements

Notes to the Financial Statements continued
For the year ended 31 December 2017

12. Reconciliations continued
12c. Reconciliation of expenses related to insurance contracts to reported expense ratios
31 December 201731 December 2016

UK Motor£mInternational
Car
£m

Group
£m

UK Motor£mInternational
Car
£m

Group
£m

Net insurance expenses

46.4

52.4

107.7

46.2

41.1

94.0

Net claims handling expenses

10.5

–

11.1

11.0

–

11.2

Reinsurer cap impact
Intra-group expenses elimination*1
Other adjustment*2

–

(3.7)

(3.7)

–

(1.5)

(1.5)

12.5

7.3

19.8

13.7

7.1

20.8

–

(1.6)

(1.6)

–

(2.0)

(2.0)

Adjusted net expenses

69.4

54.4

133.3

70.9

44.7

122.5

Net insurance premium revenue

429.1

127.5

619.1

404.3

94.3

548.8

–

(4.5)

(4.5)

–

(3.0)

(3.0)

Other adjustment*1
Adjusted net insurance premium revenue

429.1

123.0

614.6

404.3

91.3

545.8

Reported expense ratio

16.2%

44.2%

21.7%

17.5%

49.0%

22.4%

*1

The intra-group expenses elimination amount relates to aggregator fees charged by the Group’s price comparison entities to other Group companies.

*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.

12d. Reconciliation of statutory profit before tax to Group’s share of profit before tax

Reported profit before tax per the Consolidated income statement
Non-controlling interest share of profit before tax
Group’s share of profit before tax
Approximate impact of reduction in UK Ogden discount rate in 2016
Group’s share of profit before tax (Pre Ogden)

140

Admiral Group plc · Annual Report and Accounts 201731 December 2017£m

31 December 2016
£m

403.5

278.4

1.9

5.9

405.4

284.3

–

105.4

405.4

389.7

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Parent Company Financial Statements

Parent Company Income Statement
Year ended

Administrative expenses

Note

31 December 2017£m

31 December 2016
£m

2

(8.4)

(4.9)

(8.4)

(4.9)

Operating loss
Investment and interest income

3

310.5

164.4

Impairment expense

4(25.0)–

Interest payable

5(11.3)(11.4)

265.8

148.1

1.7

2.0

267.5

150.1

Profit before tax
Taxation credit
Profit after tax

6

Parent Company Statement of Comprehensive Income
Year ended

Profit for the period

31 December 2017£m

31 December 2016
£m

267.5

150.1

–

–

22.3

–

Other comprehensive income
Items that are or may be reclassified to profit or loss
Movements in fair value reserve
Deferred tax in relation to movement in fair value reserve

(4.2)

–

Other comprehensive income for the period, net of income tax

18.1

–

Total comprehensive income for the period

285.6

150.1

Admiral Group plc · Annual Report and Accounts 2017141

Financial Statements: Parent Company Financial Statements

Parent Company Financial Statements continued

Parent Company Statement of Financial Position
As at
Note

31 December 2017£m

31 December 2016
£m

4

301.0

308.3

1.2

1.2

5

232.4

217.4

1.6

2.1

ASSETS
Investments in group undertakings
Intangible assets
Financial investments
Corporation tax asset
Trade and other receivables
Cash and cash equivalents

5

Total assets

0.6

0.2

6.8

6.9

543.6

536.1

0.3

0.3

13.1

13.1

EQUITY
Share capital

8

Share premium accountFair value reserve

18.1

–

Retained earnings

94.6

89.5

Total equity

126.1

102.9

LIABILITIES
Subordinated and other financial liabilities

5

224.0

224.0

Deferred tax

6

4.1

–

Trade and other payables

7

189.4

209.2

Total liabilities

417.5

433.2

Total equity and total liabilities

543.6

536.1

The accompanying notes form part of these financial statements.
These financial statements were approved by the Board of Directors on 27 February 2018 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958

142

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Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Parent Company Statement of Changes in Equity
Share
capital£mSharepremium
account
£m

Fair
value
reserve£m

Retained
profitand loss£m

Total
equity£m

At 1 January 2016

0.3

13.1

–

255.9

269.3

Profit for the period

–

–

–

150.1

150.1

Other comprehensive income

–

–

–

–

–

Total comprehensive income for the period

–

–

–

150.1

150.1

Dividends–––(349.8)(349.8)Issues of share capital

–

–

–

–

–

Share scheme charges

–

–

–

33.2

33.2

Deferred tax on share scheme credit

–

–

–

0.1

0.1

Total transactions with equity holders

–

–

–

(316.5)(316.5)As at 31 December 2016

0.3

13.1

–

89.5

102.9

At 1 January 2017

0.3

13.1

–

89.5

102.9

Profit for the period

–

–

–

267.5

267.5

Movements in fair value reserve

–

–

22.3

–

22.3

Deferred tax charge in relation to movements in fair value reserve

–

–

(4.2)

–

(4.2)

Total comprehensive income for the period

–

–

18.1

267.5

285.6

Dividends–––(300.3)(300.3)Issues of share capital

–

–

–

–

–

Share scheme credit

–

–

–

37.9

37.9

Deferred tax on share scheme credit

–

–

–

–

–

Total transactions with equity holders––(262.4)(262.4)

0.3

13.1

94.6

126.1

Transactions with equity holders

Other comprehensive income

Transactions with equity holders

As at 31 December 2017

18.1

Admiral Group plc · Annual Report and Accounts 2017143

Financial Statements: Notes to the Parent Company Financial Statements

Notes to the Parent Company Financial Statements
For the year ended 31 December 2017

1. Accounting policies
1.1 Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
The amendments to FRS 101 (2015/16 Cycle) issued in June 2016 and effective immediately have been applied. The financial statements areprepared on the historical cost basis except for the revaluation of financial assets classified as fair value through the profit or loss.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International
Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with
Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

1.2 Disclosure exemptions applied under FRS 101
The Company has taken advantage of the following disclosure exemptions under FRS 101:•

FRS 101.8 (d): the requirement of IFRS 7 Financial Instruments: Disclosure to make disclosures about financial instruments•

FRS 101.8 (e): the disclosure requirements of IFRS13 Fair Value Measurement•

FRS 101.8 (f): the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in
respect of:-paragraph 118(3) of IAS 38 Intangible Assets•

FRS 101.8 (g): the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of
Financial Statements to produce a cash flow statement, a third balance sheet and to make an explicit and unreserved statement ofcompliance with IFRSs•

FRS 101.8 (h): the requirements of IAS 7 Statements of Cash Flows to produce a cash flow statement•

FRS 101.8 (i): the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors toinclude a list of new IFRSs that have been issued but that have yet to be applied•

FRS 101.8 (k): the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two
or more members of a group, provided that any subsidiary which is a party to transaction is wholly owned by such a member

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in thesefinancial statements.

1.3 Going concern
The financial statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board havereviewed the Company's projections for the next twelve months and beyond, including cash flow forecasts and regulatory capital surpluses.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for theforeseeable future. Thus they continue to adopt the going concern basis in preparing the annual financial statements.

1.4 Critical accounting judgements and estimates
In applying the Group’s accounting policies as described below management has primarily applied judgement in the impairment testing of
the Company’s investment in group undertakings. Management has applied judgement in determining whether the carrying value of theinvestment, or asset may be supported by the recoverable amount calculation based on the ‘value in use’ of the asset (the net present value of
future cash-flows arising from the asset).
In calculating the net present value of future cash-flows, management has made assumptions over the timing and amount of underlying profit
projections of the relevant undertakings, long term growth rates in those projections and the discount rate applied to these projections thatis appropriate to reflect the market’s view of the risk of the relevant investment.

144

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Corporate Governance

Financial Statements

Additional Information

1.5 Shares in Group Undertakings
Shares in Group undertakings are valued at cost less any provision for impairment in value.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Company’s
investments in subsidiaries. When necessary, the entire carrying amount of the investment is tested for impairment in accordance with IAS 36
Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its
carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss isrecognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

1.6 Employee share schemes
The Company operates a number of share schemes for its employees. For equity settled schemes commencing 1 January 2004 and after, thefair value of the employee services received in exchange for the grant of free shares under the schemes is recognised as an increase in equity
in the Company.

1.7 Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that they are regarded as recoverable. They are regarded as recoverable to the extent that,on the basis of all available evidence, it can be regarded as more likely than not that there will be sufficient taxable profits from which the
future reversal of the underlying timing differences can be deducted.

1.8 Financial assets and liabilities
All material investments held at fair value at the end of the period are invested in AAA-rated money market liquidity funds. The measurementof these investments is based on active quoted market values (level 1).
Government gilts are classified as AFS investments, in line with IAS 39 due to a reclassification in the period following the disposal of a portionof the holding.
Deposits held with credit institutions are classified as loans and receivables, in line with the nature of these deposits, with the 2016
comparative restated to reflect this more appropriate classification of these assets.
Cash and cash equivalents include cash in hand and deposits held at call with banks. All cash and cash equivalents are measured atamortised cost.
The Company’s financial liabilities comprise subordinated notes which are held at amortised cost using the effective interest method and acredit facility held at amortised cost.

2. Administrative expenses
Included within administrative expenses are re-charges of £1.6 million (2016: £1.4 million) relating to employees within the Group who perform
services on behalf of the Company. No staff are directly employed by the Company.

3. Investment and interest income
31 December
2017£m

31 December
2016£mDividend income from subsidiary undertakings

300.0

158.0

Interest income

10.5

6.3

Total investment and interest income

310.5

164.4

Admiral Group plc · Annual Report and Accounts 2017145

Financial Statements: Notes to the Parent Company Financial Statements

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2017

4. Investments in Group undertakings£m

Investments in subsidiary undertakings:
At 1 January 2016

293.5

Additions

14.8

At 31 December 2016

308.3

Additions

17.7

Impairment(25.0)At 31 December 2017

301.0

A full list of the Company’s subsidiaries is disclosed in note 11 of the consolidated financial statements.
All investments in group undertakings are considered level 3 in the fair value hierarchy of IFRS 13.
An annual impairment review is performed over the carrying value of the investments in subsidiary undertakings, which involves comparing
the carrying amount to the estimated recoverable amount. The recoverable amount is the greater of the fair value of the asset less costs tosell, and the value in use of the subsidiary, calculated using cash flow projections based on financial budgets approved by management.
In 2017 a non-cash impairment loss of £25 million has been recognised by the Parent Company in respect of its investment in the Group’s US
insurance business Elephant Auto. The impairment charge is presented within the “Impairment losses” line of the Parent Company Income
Statement and reduces the value of the investment to its recoverable amount, being its value in use, of £100 million.
The impairment charge coincided with a review of the long-term strategy of Elephant by its management team and subsequent approval by
the Board. During 2017, additional capital of £16 million was provided to Elephant to continue to maintain a strong surplus over regulatory
requirements. Elephant remains loss making at this stage in its development, which is in line with its long-term plan. Whilst the long-termplan did support the carrying value of the subsidiary, impairment was considered appropriate following the results of a number of stress tests
applied to the plans.
The cash flows supporting the value in use are based on financial forecasts prepared for a 10 year period, this being justified by the historicalaccuracy of the forecasting process along with the strategy of long-term profitable growth. Beyond the 10 year forecast period, a long-term
growth rate of 2.5% has been used.
The key assumptions used in the underlying forecasts are those regarding acquisition and retention rates of customers, ancillary sales, loss
and expense ratios. The estimates are based on past practice and the experience of management, the long-term strategy as approved by the
Board and reflect expected future changes in the market.
A pre-tax discount rate of 11% has been used, calculated using a Capital Asset Pricing Model (CAPM) calculation (using a risk free return plus
an appropriate risk premium), given that an asset specific rate is not available from the market.
During 2017 the management team at Elephant has been strengthened and a number of important operational improvements have beenmade. Although success is not certain, the Board remains confident in the prospects of the business and continues to support Elephant in theachievement of its goals. The impairment charge has no impact on the Group’s profit for the period or capital position.

146

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Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

5. Financial assets and liabilities
The Company’s financial instruments can be analysed as follows:
31 December 2017£m

31 December 2016
£m

38.6

–

38.6

–

–

197.4

–

197.4

173.8

–

173.8

–

20.0

20.0

20.0

20.0

Total financial investments

232.4

217.4

Trade and other receivables

0.6

0.2

Cash and cash equivalents

6.8

6.9

239.8

224.5

204.0

204.0

Investments held at fair value through profit or loss
Investment funds
Investments classified as held to maturity
Government gilts
Investments classified as available for sale
Government gilts
Loans and receivables
Deposits with credit institutions

Total financial assets
Financial liabilities
Subordinated notes
Other borrowings

20.0

20.0

Trade and other payables

189.4

209.2

Total financial liabilities

413.4

433.2

The amortised cost carrying amount of deposits and receivables is a reasonable approximation of fair value. The fair value of subordinatednotes (level one valuation) together with their carrying value shown in the Statement of Financial Position as follows:
31 December 201731 December 2016

Carrying amount£m

Fair value£m

Carrying amount£m

Fair value
£m

204.0

229.2

204.0

212.9

Financial liabilities
Subordinated notes

Interest payable of £11.3 million (2016: £11.4 million) was recognised in relation to the subordinated loan notes.

Admiral Group plc · Annual Report and Accounts 2017147

Financial Statements: Notes to the Parent Company Financial Statements

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2017

6. Taxation
6a. Taxation credit
31 December 2017£m

31 December 2016
£m

(1.6)

(2.0)

–

–

(1.6)

(2.0)

(0.1)

–

Current tax
Corporation tax credit on profits for the year
(Over) provision relating to prior periods
Current tax credit
Deferred tax
Current period deferred taxation movement
Under provision relating to prior periods
Total tax credit per Consolidated Income Statement

–

–

(1.7)

(2.0)

31 December 2017£m

31 December 2016£m

Factors affecting the total tax credit are:Profit before tax

265.8

148.1

Corporation tax thereon at effective UK corporation tax rate of 19.25% (2016: 20.00%)

51.2

29.6

Expenses and provisions not deductible for tax purposes

4.9–

Non-taxable income(57.8)(31.6)

Total tax credit for the period as above

(1.7)

(2.0)

148

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

6b. Deferred income tax liability
Taxtreatmentof shareschemes£mCapitalallowances£m

Carriedforwardlosses£m

Balance brought forward at 1 January 2016

–

–

–

–

–

–

Tax treatment of share scheme charges through income or expense

–

–

–

–

–

–

Fair value
Other
reserve differences
£m
£m

Total
£m

Tax treatment of share scheme charges through reserves

–

–

–

–

–

–

Balance carried forward at 31 December 2016

–

–

–

–

–

–

(0.1)

–

–

–

–

(0.1)

Tax treatment of share scheme charges through reserves

–

–

–

–

–

Movement in fair value reserve

–

–

–

4.2

–

4.2

(0.1)

–

–

4.2

–

4.1

Tax treatment of share scheme charges through income or expense

Balance carried forward at 31 December 2017

The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The average effective rate of tax for 2017 is 19.25% (2016: 20.00%).
A further reduction to the main rate of corporation tax to 17% (effective from 1 April 2020) was enacted on 15 September 2016. This will
reduce the Company’s future current tax charge accordingly.
The deferred tax liability at 31 December 2017 has been calculated based on the rate at which each timing difference is most likely to reverse.

7. Trade and other payables

Trade and other payables

31 December 2017£m

31 December 2016
£m

0.6

0.2

Amounts owed to subsidiary undertakings

188.8

209.0

Total trade and other payables

189.4

209.2

8. Share capital and reserves
Capital within the Company is comprised of share capital and the share premium account, the fair value reserve (which reflects movements inthe fair value of assets classified as available for sale, as reclassified in the period) and retained earnings.

8a. Share capital
31 December 2017£m

31 December 2016
£m

0.5

0.5

Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid
287,214,262 ordinary shares of 0.1 pence

0.3–

284,352,270 ordinary shares of 0.1 pence

–

0.3

0.3

0.3

Admiral Group plc · Annual Report and Accounts 2017149

Financial Statements: Notes to the Parent Company Financial Statements

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2017

8. Share capital and reserves continued
8b. Dividends
Dividends were declared and paid as follows:

March 2016 (63.4 pence per share, paid June 2016)
August 2016 (62.9 pence per share, paid October 2016)31 December 2017£m

31 December 2016
£m

–

175.4

–

174.4

March 2017 (51.5 pence per share, paid June 2017)

143.7

–

August 2017 (56.0 pence per share, paid October 2017)

156.6

–

Total dividends

300.3

349.8

The dividends declared in March represent the final dividends paid in respect of the 2015 and 2016 financial years. The dividends declared inAugust are interim distributions in respect of 2016 and 2017.
A final dividend of 58.0 pence per share (£163 million) has been proposed in respect of the 2017 financial year. Refer to the Chairman’s
Statement and Strategic Report for further detail.

9. Continued application of Financial Reporting Standard (FRS) 101 – Reduced Disclosure Framework
Following the first time application of FRS 101 Reduced Disclosure Framework in 2015, the Board considers that it is in the best interestsof the Group for Admiral Group plc to continue to apply the FRS 101 Reduced Disclosure Framework in future periods. A shareholder orshareholders holding in aggregate 5% or more of the total allotted shares in Admiral Group plc may serve objections to the use of thedisclosure exemptions on Admiral Group plc, in writing, to its registered office (Tŷ Admiral, David Street, Cardiff CF10 2EH) no later than
30 June 2018.

150

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Consolidated financial summary

Basis of preparation
The figures below are as stated in the Group financial statements preceding this financial summary and issued previously. Only selected lines
from the income statement and balance sheet have been included.

Income statement

Total premiums

2017
£m

2016
£m

2015
£m

2014
£m

2013
£m

2,499.4

2,193.9

1,805.2

1,675.6

1,737.6

Net insurance premium revenue

619.1

548.8

467.0

464.9

483.0

Other revenue

401.1

360.6

319.8

332.5

327.8

Profit commission

67.0

54.3

85.4

71.8

99.3

Investment and interest income
Net revenue

41.7

53.1

32.6

15.4

14.3

1,128.9

1,016.8

904.8

884.6

924.4

Net insurance claims(347.1)(394.6)(226.5)(259.1)(303.0)Net expenses(366.9)(332.4)(298.5)(270.2)(251.2)

Operating profit

414.9

289.8

379.8

355.3

370.2

Finance costs(11.4)(11.4)(11.1)(4.6)–

Profit before tax

403.5

278.4

368.7

350.7

370.2

2017
£m

2016
£m

2015
£m

2014
£m

2013
£m

Property and equipment

31.3

32.0

34.9

32.3

12.4

Intangible assets

159.4

162.3

142.3

107.2

92.8

0.3

8.4

20.6

22.9

17.0

Reinsurance assets

1,637.6

1,126.4

878.7

829.8

821.2

Insurance and other receivables

1,005.9

784.9

537.1

435.3

445.6

Financial investments

2,697.8

2,420.2

2,323.5

2,194.1

1,896.9

Balance sheet

Deferred income tax

Cash and cash equivalents
Total assets
EquityInsurance contracts
Subordinated and other financial liabilities
Trade and other payables
Current tax liabilities
Total equity and total liabilities

326.8

326.6

265.3

255.9

187.9

5,859.1

4,860.8

4,202.4

3,877.5

3,473.8

655.8

581.7

632.9

580.9

524.1

3,313.9

2,749.5

2,295.0

2,097.4

1,901.3

224.0

224.0

223.9

203.8

–

1,641.6

1,292.2

1,015.0965.8

1,013.7

23.8

13.4

35.6

29.6

34.7

5,859.1

4,860.8

4,202.4

3,877.5

3,473.8

Admiral Group plc · Annual Report and Accounts 2017151

Additional Information: Glossary

Glossary

Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative Performance Measures (APMs); measures that are not required or commonly
reported under International Financial Reporting Standards, the Generally Accepted Accounting Principles (GAAP) under which the Groupprepares its financial statements.
These APMs are used by the Group, alongside GAAP measures, for both internal performance analysis and to help shareholders and other usersof the Annual Report and financial statements to better understand the Group’s performance in the period in comparison to previous periods
and the Group’s competitors.
The table below defines and explains the primary APMs used in this report. Financial APMs are usually derived from financial statement items
and are calculated using consistent accounting policies to those applied in the financial statements, unless otherwise stated. Non financial
KPIs incorporate information that cannot be derived from the financial statements but provide further insight into the performance andfinancial position of the Group.
APMs may not necessarily be defined in a consistent manner to similar APMs used by the Group’s competitors. They should be considered as asupplement rather than a substitute for GAAP measures.
TurnoverTurnover is defined as total premiums written (as below) and other revenue. It is reconciled to financial statement line
items in note 12a to the financial statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It reflects
the size of the revenue generated by the Group and analysis of this measure over time provides a clear indication of thesize and growth of the Group.
The measure was developed as a result of the Group’s business model. The core UK Car insurance business has historicallyshared a significant proportion of the risks with Munich Re, a third party insurance Group, through a co-insurance
arrangement, with the arrangement subsequently being replicated in some of the Group’s international insurance
operations. Premiums and claims accruing to the external co-insurer are not reflected in the Group’s income statement
and therefore presentation of this metric enables users of the Annual Report to see the scale of the Group’s insurance
operations in a way not possible from taking the income statement in isolation.

Total Premiums
WrittenTotal premiums written are the premiums written within the Group, including co-insurance. It is reconciled to financial
statement line items in note 12a to the financial statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It reflects
the total premiums written by the Group’s insurance intermediaries and analysis of this measure over time provides aclear indication of the growth in premiums, irrespective of how co-insurance agreements have changed over time.
The reasons for presenting this measure are consistent with that for the Turnover APM noted above.

Group’s share ofProfit before Tax

Group’s share of profit before tax represents profit before tax, excluding the impact of Non-controlling Interests. It isreconciled to statutory profit before tax in note 12d to the financial statements.
This measure is useful in presenting the limit of the Group’s exposure to the expenditure incurred in starting up new
businesses and demonstrates the ‘test-and-learn’ strategy employed by the Group to expansion into new territories.
In 2016, Group’s share of Profit before Tax is presented on a ‘Pre Ogden’ and a ‘Post Ogden basis. ‘Pre Ogden’ represents
the Group’s share of estimated profit before tax before the impact of the reduction in the UK Ogden discount rate
confirmed by the Lord Chancellor in February 2017.

Underwriting result(profit or loss)

152

For each insurance business an underwriting result is presented showing the segment result prior to the inclusion of
profit commission, other income contribution and instalment income. It demonstrates the insurance result, i.e. premium
revenue and investment income less claims incurred and insurance expenses.

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Loss Ratio

Strategic Report

Corporate Governance

Financial Statements

Additional Information

Reported loss ratios are expressed as a percentage of claims incurred divided by net earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculation in orderto more clearly present the underlying performance of the Group and operating segments within the Group. The
calculations of these are presented within note 12b to the accounts and explanation is as follows.
UK reported motor loss ratio: Within the UK insurance segment the Group separately presents motor ratios, i.e. excluding
the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted to i) exclude theimpact of reserve releases on commuted reinsurance contracts and ii) exclude claims handling costs that are reported
within claims costs in the income statement.
International insurance loss ratio: As for the UK motor loss ratio, the international insurance loss ratios presented exclude
the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted to exclude theclaims element of the impact of reinsurer caps as inclusion of the impact of the capping of reinsurer claims costs would
distort the underlying performance of the business.
Group loss ratios: Group loss ratios are reported on a consistent basis as the UK and international ratios noted above.
Adjustments are made to i) exclude the impact of reserve releases on commuted reinsurance contracts, ii) exclude claims
handling costs that are reported within claims costs in the income statement and iii) exclude the claims element of the
impact of international reinsurer caps.

Expense Ratio

Reported expense ratios are expressed as a percentage of net operating expenses divided by net earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculation in orderto more clearly present the underlying performance of the Group and operating segments within the Group. The
calculations of these are presented within note 12c to the accounts and explanation is as follows.
UK reported motor expense ratio: Within the UK insurance segment the Group separately presents motor ratios, i.e.
excluding the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted to i)
include claims handling costs that are reported within claims costs in the income statement and ii) include intra-groupaggregator fees charged by the UK price comparison business to the UK insurance business.
International insurance expense ratio: As for the UK motor loss ratio, the international insurance expense ratiospresented exclude the underwriting of other products that supplement the car insurance policy. The motor ratio isadjusted to i) exclude the expense element of the impact of reinsurer caps as inclusion of the impact of the capping ofreinsurer expenses would distort the underlying performance of the business and ii) include intra-group aggregator fees
charged by the overseas price comparison businesses to the international insurance businesses.
Group expense ratios: Group expense ratios are reported on a consistent basis as the UK and international ratios noted
above. Adjustments are made to i) include claims handling costs that are reported within claims costs in the income
statement, ii) include intra-group aggregator fees charged by the Group’s price comparison businesses to the Group’s
insurance businesses and iii) exclude the expense element of the impact of international reinsurer caps.

Combined Ratio

Reported combined ratios are the sum of the loss and expense ratios as defined above. Explanation of these figures isnoted above and reconciliation of the calculations are provided in notes 12b and 12c.

Return on Equity

Return on equity is calculated as profit after tax for the period attributable to equity holders of the Group divided by theaverage total equity attributable to equity holders of the Group in the year. This average is determined by dividing the
opening and closing positions for the year by two.
The relevant figures for this calculation can be found within the Consolidated statement of changes in equity.

Group Customers

Group customer numbers are the total number of cars, households and vans on cover at the end of the year, acrossthe Group.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It reflects
the size of the Group’s customer base and analysis of this measure over time provides a clear indication of the growth.
It is also a useful indicator of the growing significance to the Group of the different lines of business and geographic
regions.

Effective Tax Rate

Effective tax rate is defined as the approximate tax rate derived from dividing the Group’s profit before tax by the tax
charge going through the income statement. It is a measure historically presented by the Group and enables users to see
how the tax cost incurred by the Group compares over time and to current corporation tax rates.

Admiral Group plc · Annual Report and Accounts 2017

153

Additional Information: Glossary

Glossary continued
For the year ended 31 December 2017

Additional terminology
There are many other terms used in this report that are specific to the Group or the markets in which it operates. These are defined as follows:
Accident year

The year in which an accident occurs, also referred to as the earned basis.

Actuarial best estimate

The probability-weighted average of all future claims and cost scenarios calculated using historical data, actuarial
methods and judgement.

ASHE‘Annual Survey of Hours and Earnings’ – a statistical index that is typically used for the calculation of inflation in theannual payment amounts under Periodic Payment Order (PPO) claims settlements.

Claims reserves

A monetary amount set aside for the future payment of incurred claims that have not yet been settled, thus
representing a balance sheet liability.

Co-insurance

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

Commutation

An agreement between a ceding insurer and the reinsurer that provides for the valuation, payment, and complete
discharge of all obligations between the parties under a particular reinsurance contract.

Insurance market cycle

The tendency for the insurance market to swing between highs and lows of profitability over time, with the potential
to influence premium rates (also known as the “underwriting cycle”).

Net claims

The cost of claims incurred in the period, less any claims costs recovered under reinsurance contracts. It includes
both claims payments and movements in claims reserves.

Net insurance
premium revenue

Also referred to as net earned premium. The element of premium, less reinsurance premium, earned in the period.

Ogden discount rate

The discount rate used in calculation of personal injury claims settlements. The rate is set by the Lord Chancellor,the most recent rate of minus 0.75% being announced on 27 February 2017.

Periodic Payment
Order (PPO)

A compensation award as part of a claims settlement that involves making a series of annual payments to a claimant
over their remaining life to cover the costs of the care they will require.

Premium

A series of payments are made by the policyholder, typically monthly or annually, for part of or all of the durationof the contract. Written premium refers to the total amount the policyholder has contracted for, whereas earned
premium refers to the recognition of this premium over the life of the contract.

Profit commission

A clause found in some reinsurance and coinsurance agreements that provides for profit sharing.

Reinsurance

Contractual arrangements whereby the Group transfers part or all of the insurance risk accepted to another insurer.
This can be on a quota share basis (a percentage share of premiums, claims and expenses) or an excess of loss basis(full reinsurance for claims over an agreed value).

Ultimate loss ratio

A projected actuarial best estimate loss ratio for a particular accident year or underwriting year

Underwriting year

The year in which the policy was incepted.

Underwriting
year basis

Also referred to as the written basis. Claims incurred are allocated to the calendar year in which the policy was
underwritten. Underwriting year basis results relate to the relevant underwriting year, are calculated on the wholeaccount (including co-insurance and reinsurance shares) and include all premiums, claims, expenses incurred andother revenue (for example instalment income and commission income relating to the sale of products that are
ancillary to the main insurance policy) relating to policies incepting in the relevant underwriting year.

Written/Earned basis

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

154

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate Governance

Financial Statements

Additional Information

2016 Financial Highlights

As referred to on page 2 of this report, the Group’s 2016 annual report disclosed financial highlights including and excluding theimpact of the change in Ogden discount rate as follows:•

Group’s share of profit before tax (Pre Ogden) of £389.7 million (2015: £376.8 million)•

Group’s share of profit before tax (Post Ogden) of £284.3 million (2015: £376.8 million)•

Group statutory profit before tax of £278.4 million (2015: £368.7 million)•

Earnings per share (Pre Ogden) of 109.6 pence (2015: 107.3 pence)•

Earnings per share (Post Ogden) of 78.7 pence (2015: 107.3 pence)•

Final dividend of 51.5 pence per share, bringing full year dividend to 114.4 pence per share (2015: 114.4 pence)•

Return on equity of 37% (2015: 49%)•

Group turnover of £2.58 billion (2015: £2.12 billion)•

Group net revenue of £1.0 billion (2015: £0.9 billion)•

Group customers of 5.15 million (2015: 4.43 million)•

UK insurance customers of 4.12 million (2015: 3.61 million)•

International car insurance customers of 864,200 (2015: 673,000)•

Group’s share of price comparison profit before tax of £2.7 million (2015: loss of £7.2 million)•

Statutory price comparison result of £2.9 million loss (2015: loss of £15.5 million)•

Solvency ratio (post dividend) of 212% (2015: 206%)•

Almost 9,000 staff eligible to receive free shares worth a total of £3,600 each in the employee share scheme based on thefull year 2016 results

Admiral Group plc · Annual Report and Accounts 2017

155

Additional Information: Directors and advisors

Directors and advisors

Directors

Company Secretary

Annette Court

Mark Waters

ChairmanTŷ AdmiralDavid Street
Cardiff CF10 2EHDavid Stevens, CBE
Chief Executive Officer

Geraint Jones
Chief Financial Officer

Auditor
Deloitte LLP

Owen Clarke

2 New Street Square
London EC4A 3BZ

Non-Executive Director

Actuarial advisor

Andy Crossley

Lane Clark & Peacock LLP

Non-Executive Director

95 Wigmore Street
London W1U 1DQ

Colin Holmes
Non-Executive Director

Jean Park
Non-Executive Director

Justine Roberts, CBE
Non-Executive Director

Manning Rountree
Non-Executive Director

Bankers
Lloyds Bank plc
City Office
Bailey Drive
Gillingham Business Park
Kent ME8 0LS

Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Joint corporate brokers
Bank of America Merrill Lynch
2 King Edward Street
London EC1A 1HQ

UBS Investment Bank
5 Broadgate
London EC2M 2QS

Solicitors
Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ

156

Admiral Group plc · Annual Report and Accounts 2017

Introduction

Strategic Report

Corporate website
The Group’s corporate website is atwww.admiralgroup.co.uk. A range of
information about the Admiral Group ispresented, including the Group’s history,financial reports and press releases,
corporate responsibility and governance.
The website also includes the contact
details for investor relations.

Financial calendar
Final 2016 dividend
10 May 2018 – Ex dividend date
11 May 2018 – Record date
1 June 2018 – Payment date

Annual General Meeting
26 April 2018

Interim results
15 August 2018
The Group does not produce printed
copies of interim results for shareholders
unless requested.
The interim results will be available on thecorporate website from 15 August 2018.

Corporate Governance

Financial Statements

Additional Information

Admiral Group businessesUK
Car Insurance
Admiral www.admiral.com
elephant.co.uk www.elephant.co.uk
Diamond www.diamond.co.uk
Bell www.bell.co.uk
Price Comparison
Confused.com www.confused.com
Household Insurance
Admiral household insurance www.admiral.com/home-insurance
Van Insurance
Gladiator www.gladiator.co.uk
Admiral Van www.admiral.com/van-insurance
Legal services companies
Admiral Law www.admirallaw.co.uk
BDE Law www.diamondlaw.co.uk
Loans
Admiral Loans www.admiral.co.uk/loans
Travel Insurance
Admiral Travel www.admiral.com/travel-insurance

Registered office

Short-term Insurance
Veygo www.veygo.com

Tŷ AdmiralDavid Street
Cardiff CF10 2EHSpain
Car Insurance
Balumba www.balumba.es
Qualitas Auto www.qualitasauto.com
Price Comparison
Rastreator www.rastreator.com
Seguros.es www.seguros.es

Italy
Car Insurance
ConTe www.conte.it

USA
Car Insurance
Elephant Auto www.elephant.com
Price Comparison
compare.com www.compare.com

FranceCar Insurance
L'olivier - assurance auto www.lolivier.fr
Price Comparison
LeLynx www.lelynx.fr

Admiral Group plc · Annual Report and Accounts 2017

157

Admiral Group plc

Annual Report& Accounts 2017

Annual Report and Accounts 2017

Registered officeTŷ AdmiralDavid Street
Cardiff CF10 2EH
www.admiralgroup.co.uk

Years of Firsts