Admiral Group plc Results for the Six Months Ended 30 June 2012
30 August 2012
Admiral announces another record half‐year profit and continued growth. Profit before tax at£171.8 million was 7% ahead of H1 2011, while turnover rose 6% to £1.17 billion.
The Board is declaring a record interim dividend payment of 45.1 pence per share.

H1 2012 Highlights•

Group profit before tax up 7% at £171.8 million (H1 2011: £160.6 million)•

Earnings per share up 9% at 47.3 pence (H1 2011: 43.3 pence)•

Interim dividend up 15% at 45.1 pence per share (2011 interim: 39.1 pence)•Group turnover* up 6% at £1.17 billion (H1 2011: £1.10 billion)•

Group vehicle count up 11% to 3.50 million from 3.15 million at 30 June 2011•

6,500 employees receive £1,500 of shares each in the Employee Share Scheme based on
the H1 2012 result*Turnover is defined as total premium written (including co‐insurers’ share) and Other Revenue

Comment from Henry Engelhardt, Chief Executive Officer“Admiral has delivered a further increase in both turnover and profit in the first half of 2012,
and a record dividend for our shareholders. In the UK, following the very significant growth in2010 and 2011, we continue to slow our rate of growth to a more modest level, which we
believe is a sensible response to the increased competition in the market.
“I am particularly proud that Admiral was placed first in the recent Great Place to Work list for
the UK and fourth in Europe, which is gratifying as the awards are based on what our employees
themselves think about working for Admiral. Everyone here works incredibly hard to provide
excellent customer service and make Admiral the success it is, and I’d like to thank all of theteam in the UK, Spain, Italy, USA, France, Canada and India for what they have achieved.
“All in all, I am pleased with our performance in the first half of 2012 and we are on track tomeet our 2012 expectations.”

Comment from Alastair Lyons, Chairman“With a further advance in first half profits we are delighted once again to be able to declare an
increase in our interim dividend, now at 45.1 pence per ordinary share. This represents 95% ofafter‐tax earnings for the first six months of 2012, testament to the strength of Admiral's capital‐
efficient, cash‐generative business model.”Interim dividend
The interim dividend of 45.1 pence per share will be paid on 12 October 2012. The ex‐dividend
date is 12 September 2012 and the record date is 14 September 2012. The dividend consists ofa normal dividend of 21.3 pence per share and a special dividend of 23.8 pence per share.

1Management presentation
Analysts and investors will be able to access the Admiral Group management presentation,
which commences at 9.00am on Thursday 30 August 2012, by dialling +44 203 059 8125.
A copy of the presentation slides and webcast, along with a pdf version of this interim results
announcement will be available at www.admiralgroup.co.uk.

Group financial highlights and key performance indicators

Turnover*Net revenue
Number of vehicles
Loss ratio
Expense ratio
Combined ratio
Profit before tax
Earnings per share
Dividend per share
Return on capital

H1 2010

H1 2011

H1 2012FY 2011£720.5m£296.4m
2.37m
67.8%
21.5%
89.3%
£126.9m
33.7p
32.6p
58%

£1,104.4m£425.1m
3.15m
77.5%
16.7%
94.2%
£160.6m
43.3p
39.1p
63%

£1,169.3m£488.4m
3.50m
78.9%
16.3%
95.2%
£171.8m
47.3p
45.1p
61%

£2,190.3m£870.3m
3.36m
78.9%
16.8%
95.7%
£299.1m
81.9p
75.6p
59%

*Turnover comprises total premiums written and other revenue

Key Group Highlights
Admiral continued to grow in the first half of 2012 ‐ increasing turnover compared with H1 2011
by 6% to £1.17 billion and adding over 140,000 vehicles since the end of 2011. Year‐on‐year
growth of 350,000 (11%) vehicles meant the Group closed 30 June 2012 with over 3.5 million
vehicles.
After favourable conditions during 2010 and the first half of 2011 in the Group’s core UK Car
Insurance market, there has been a marked change in 2012, with premium rates falling andcompetitors seeking to add market share. In this environment it was appropriate to moderate
the rate of growth in the UK, leading to a year‐on‐year increase in vehicles of 7% to just overthree million.
Admiral continues to grow its International Insurance businesses, delivering a combined
increase in premiums of around 50% (to £74 million) and insuring over 60% more vehicles at 30
June 2012 compared with a year earlier. The Group’s four International Insurance businesses
now account for 7% of total turnover and 11% of vehicles.
Group pre‐tax profit increased by 7% to £171.8 million (from £160.6 million). The UK Car
Insurance business result was £183.3 million – 9% higher than H1 2011 (£168.2 million), driven
by higher net premium revenue and an improved combined ratio.
The combined loss of the Group’s International Car Insurance businesses increased to £8.9
million (H1 2011: £3.2 million), reflecting investment in further growth in Italy and a significant
increase in premium and vehicles in the US. This loss represented 5% of the Group result for theperiod.

2

Admiral’s Price Comparison businesses generated pre‐tax profit of £8.1 million – significantly
ahead of the £5.0 million result in H1 2011 – reflecting positive development in the Group’s
international price comparison businesses. Confused.com had a solid first half with a profit of£8.4 million (H1 2011: £8.2 million).
Admiral’s capital efficient and highly profitable business model led to return on capital of 61%(H1 2011: 63%). A key part of the business model is the extensive use of co‐ and reinsurance
across the Group. During the first half of 2012 Admiral announced extensions to its UK
reinsurance arrangements until at least the end of 2014, while its UK co‐insurance agreement
runs to at least the end of 2016.
Earnings per share increased by 9% to 47.3 pence (H1 2011: 43.3 pence) and an interim dividendof 45.1 pence per share has been declared (15% higher than the interim 2011 payment of 39.1
pence) ‐ a payout ratio of 95% (H1 2011: 90%).
At the core of Admiral’s success is its skilled and motivated workforce and the Group invests
significant time and money in four key areas to underpin this: communication; equality; reward
and recognition; and fun. During 2012 the Group has received numerous awards in recognitionof this investment:
•
•
•
•
•
•

Best Large Place to Work in the UK
Fourth Best Workplace in Europe
Third Best Workplace in Spain
Fourth Best Workplace in Canada
Eighth Best Workplace in Italy
Fifteenth Best Workplace in Virginia USA

The Group’s results are presented in three key segments – UK Car Insurance, International Car
Insurance and Price Comparison. Other Group items are summarised in a fourth section.

3

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

H1 2010

H1 2011

H1 2012FY 2011

Turnover*2
Total premiums written*3

639.4
555.8

999.3
881.7

1,030.0922.8

1,966.0
1,728.8

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

117.2
3.2
(81.0)(16.1)

190.0
3.4(151.0)(20.7)

226.8
5.9(179.7)(21.9)

418.6
10.6(335.5)(46.7)

Underwriting profit
Profit commission
Net ancillary income
Instalment income

23.3
36.9
65.5
5.8

21.7
45.3
90.7
10.5

31.1
47.8
90.1
14.3

47.0
61.8
181.5
23.3

UK Car Insurance profit before tax

131.5

168.2

183.3

313.6

*1 GAAP = Generally Accepted Accounting Practice*2 Turnover (a non‐GAAP measure) comprises total premiums written and other revenue*3 Total premiums written (non‐GAAP) includes premium underwritten by co‐insurers
Key performance indicators
H1 2010

H1 2011

H1 2012FY 2011

Reported loss ratio
Reported expense ratio
Reported combined ratio

65.9%
17.0%
82.9%

76.3%
14.1%
90.4%

76.7%
12.2%
88.9%

77.3%
14.0%
91.3%

Written basis expense ratio

14.6%

12.8%

12.6%

13.2%

Claims reserve releases
Vehicles insured at period‐end
Other Revenue per vehicle£17.3m
2.12m
£80

£4.0m
2.83m
£86

£10.9m3.02m£82£10.3m
2.97m£84

UK Car Insurance Financial Performance
After two years of significant rate increases, the market has become more price competitive in2012. Admiral’s UK business has continued to grow, though the rate of growth in premium andvehicle count has, as planned, moderated in 2012.
In H1, total premium of £923 million was 5% higher than H1 2011, while closing vehicle countwas 7% above a year earlier at 3.02 million. Average premium fell by around 3% in H1, mainly
driven by changes in the portfolio mix. The annualised rate of vehicle growth during H1 wasaround 4%.
There was a modest improvement in the combined ratio, which reduced to 88.9% from 90.4%.
The expense ratio improved to 12.2% from 14.1%, benefitting from a one‐off reduction in levy
costs.
4

The reported loss ratio was slightly higher at 76.7% v 76.3%. The loss ratio included higher
reserve releases (£10.9 million v £4.0 million), which reflected positive development in the
projected outcome of prior year claims costs, especially in relation to the 2011 and 2010 years.
The loss ratio excluding releases is 81.5%, which compares to 78.4% in H1 2011 (and 79.8% in FY2011). Admiral’s accounted loss ratios continue to include a significant margin above projected
best estimates of claims costs.
Other revenue (net of costs) increased by 3% to £104.4 million, equal to £82 per vehicle (before
internal costs) – down from £86 in H1 2011. The reduced revenue per vehicle resulted largely
from changes in arrangements related to legal expenses insurance (refer below).
Other Revenue ‐ analysis of contribution:£m
H1 2010

H1 2011

H1 2012FY 2011

Ancillary contribution
Instalment income

77.6
5.8

107.1
10.5

108.0
14.3

213.9
23.3

Other Revenue
Internal costs

83.4(12.1)

117.6(16.4)

122.3(17.9)

237.2(32.4)Net Other Revenue

71.3

101.2

104.4

204.8

Other Revenue per vehicle

£80

£86

£82

£84

Other Revenue
With effect from 1 April 2012, Admiral no longer earns Other Revenue from the sale of legal
protection policies. In addition, the Group began charging its panel of co and reinsurers avehicle commission. The economic impact of these two changes is not significant. However, atime lag in recognising vehicle commission results in Other Revenue per vehicle in 2012 being
reduced by approximately £6, of which £3.50 is reflected in H1. Admiral’s car insurance policies
will continue to include legal protection as an integral feature and there will be no impact on
customers in the level of cover or cost of policies as a result of this change.
There are a number of products which are core to providing car insurance to customers(including personal injury insurance, breakdown cover and car hire cover). During the second
half of 2012, Admiral will begin to underwrite the majority of these within the Group (after
previously being underwritten by external insurers). The advantages of doing this include
improved products for customers and increased control and flexibility as regards their features
and terms. There is no impact on the income statement in H1 2012, and the full year impact in2012 is expected to be insignificant.
As previously announced, personal injury referral fees will be banned from April 2013 – Admiralcurrently earns revenue of around £7 per vehicle from this source.
Profit from UK Car Insurance increased by 9% to £183.3 million (H1 2011: £168.2 million) –largely a result of the better combined ratio and higher net insurance premium revenue.
The underwriting arrangements are unchanged from those disclosed in the 2011 Annual Report(Admiral retains 25% of the underwriting in 2012).

5

International Car Insurance
Non‐GAAP format income statement£m

H1 2010

H1 2011

H1 2012FY 2011

TurnoverTotal premiums written

37.1
34.0

53.9
49.5

79.7
74.4

122.2
112.5

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

8.1
0.1
(7.8)
(7.1)

11.5
0.1
(11.1)
(6.9)

19.7
0.1
(20.5)(12.6)

27.2
0.2(28.3)(16.2)

Underwriting result
Net ancillary income
Other revenue and charges

(6.7)
2.4
0.2

(6.4)
3.6
(0.4)

(13.3)
4.3
0.1(17.1)
8.0(0.4)

International Car Insurance loss
before tax

(4.1)

(3.2)

(8.9)

(9.5)

H1 2010

H1 2011

H1 2012FY 2011

96%
87%
183%

97%
60%
157%

104%
64%
168%

104%
60%
164%

154,100£40

235,900£37

385,600£27

306,000£32

Key Performance Indicators

Reported loss ratio
Reported expense ratio
Reported combined ratio
Vehicles insured at period‐end
Other Revenue per vehicle

International Car Insurance Financial Performance
The Group has car insurance businesses in four markets outside the UK – in Spain (Admiral
Seguros), Italy (ConTe), the USA (Elephant Auto) and France (L’olivier Assurances). All fourbusinesses continue to grow and make good progress towards the Group’s aim of establishinggrowing, sustainable, profitable businesses outside the UK.
The combined operations insured 385,600 vehicles at 30 June 2012 – 63% higher than a year
earlier (235,900). Turnover from the four businesses was £79.7 million, up almost 50%
compared with H1 2011. Vehicles and turnover from outside the UK now represent 11% and 7%of the Group totals respectively, up from 7% and 5% in H1 2011.
The total International Insurance loss was £8.9 million, up from £3.2 million in H1 2011. The
increase resulted from a higher combined ratio (168% v 157%) on higher net insurance premium
revenue (which increased by 71% to £19.7 million).
The higher combined ratio was the result of two factors: Firstly, the expense ratio of eachbusiness improved compared with H1 2011. However, as newer operations grow to become
more significant contributors to the overall international result, the expense ratios of those
operations drove a higher overall expense ratio of 64% (up from 60%). Secondly, the loss ratio
increased to 104% from 97%, though this was in line with FY 2011.
6

Price Comparison
Non‐GAAP format income statement£m

H1 2010

H1 2011

H1 2012FY 2011

Revenue:
Motor
Other
Total

29.9
8.1
38.0

36.7
8.7
45.4

43.0
10.3
53.3

72.2
18.2
90.4

Operating expenses(30.9)(40.4)(45.2)(79.9)

Operating profit

7.1

5.0

8.1

10.5

8.2
(3.2)

8.4
(0.3)

16.1
(5.6)

Confused.com profit
8.8
International Price Comparison(1.7)(note – all figures include Chiarezza, sold in H1 2012)

UK Price Comparison – Confused.com
The UK market remains highly competitive, with four players continuing to dominate market
share and advertising spend. Confused had a positive half‐year, maintaining market share in its
core car insurance comparison market and increasing total revenue by around 7% to £43.2
million (H1 2011: £40.4 million).
Operating margin remained broadly flat at around 20%, resulting in profit for Confused of £8.4
million – up from £8.2 million in H1 2011.
Revenue from other products was stable at 20% of total revenue.

International Price Comparison
Following the sale of the Italian price comparison operation (Chiarezza) during H1, the Groupnow operates two price comparison websites outside the UK; in Spain (Rastreator) and France(LeLynx).
On a like‐for‐like basis, revenue from these operations more than doubled to £10.0 million in H1
2012 reflecting improved conversion rates. Total quotes generated across all products
increased by 64% to 2.2 million.
The combined result for International Price Comparison was a loss of £0.3 million – notably
improved from a £3.2 million loss in H1 2011. The disposal of Chiarezza had an insignificant
impact on the income statement.

7

Other Group Items£m
Gladiator operating profit
Group net interest income
Share scheme charges
Expansion costs
Other central overhead••

H1 2010

H1 2011

H1 2012FY 2011

1.5
0.3
(7.5)
(0.9)
(1.0)

1.2
1.6
(10.8)
(0.4)
(1.0)

1.3
0.9
(9.9)
(0.8)
(2.2)

2.8
2.9
(18.6)(0.8)(1.8)

Other central overheads include Group Directors’ fees and other Group central costs
Expansion costs of £0.8 million in H1 2012 primarily relate to the ongoing developmentof a UK Household insurance product, expected to launch around the end of 2012

Investments and CashInvestment Strategy
There has been no change in the Group’s cautious investment strategy. Funds continue to beheld either in money market funds, term deposits or as cash at bank. The Group’s Investment
Committee continues to perform regular reviews of this strategy to ensure it remains
appropriate.
The key focus of the Group’s investment strategy is capital preservation, with an additional
priority being a focus on low volatility of investment return.
Cash and investments analysis
30 June 2012
International
UK CarCar
Price
Insurance
Insurance Comparison£m£m£m
Money market funds
Long‐term deposits
Cash
Total

Other
£m

Total
£m

906.5
361.9
148.0

48.5
4.5
68.4

‐
‐
24.6

5.2
18.9
36.1

960.2
385.3
277.1

1,416.4

121.4

24.6

60.2

1,622.6

8

31 December 2011
International
UK CarCar
Price
Insurance
Insurance Comparison£m£m£m
Money market funds
Long‐term deposits
Cash
Total

Other
£m

Total
£m

761.1
290.7
117.8

66.0
6.3
38.9

‐
‐
8.8

35.0
‐
59.1

862.1
297.0
224.6

1,169.6

111.2

8.8

94.1

1,383.7

30 June 2011
International
UK CarCar
Price
Insurance
Insurance Comparison
£m
£m
£m

Other
£m

Total
£m

Money market funds
Long‐term deposits
Cash

548.0
289.7
128.0

‐
‐
12.7

31.8
3.6
58.3

‐
10.0
82.4

579.8
303.3
281.4

Total

965.7

12.7

93.7

92.4

1,164.5

Money market funds comprise the majority of the total – 59% at 30 June 2012, up from 50% a
year earlier. Exposure to Spanish and Italian counterparties amounts to only around 2% of thetotal balance (there is no exposure to counterparties in Ireland, Portugal or Greece).
Investment return and interest income totalled £6.9 million in H1 2012, up from £5.1 million in
H1 2011, with a rate of return of around 1% ‐ in line with last year.

Other financial items
Taxation
The tax charge reported in the income statement is £43.6 million (H1 2011: £44.1 million), which
equates to 25.4% (H1 2011: 27.5%) of profit before tax. The lower effective rate of taxation
results from the reductions in UK corporation tax in 2011 and 2012.
Earnings per share
Basic earnings per share rose by 9% to 47.3 pence from 43.3 pence in H1 2011. The change isbroadly in line with pre‐ and post‐tax profit growth (the difference being largely related to thelower effective rate of corporation tax in H1 2012).

9

Dividends
The proposed dividend is 45.1 pence per share, which is 15% higher than the interim payment in2011. It is equal to 95% of earnings per share.
The dividend is made up of a 21.3 pence normal element based on the stated dividend policy of
distributing 45% of post tax profits, and a further special element of 23.8 pence. The special
dividend is calculated with reference to distributable reserves after considering capital that isrequired to be held a) for regulatory purposes; b) to fund expansion activities; and c) as a further
prudent buffer against unforeseen events.
The payment date is 12 October, ex‐dividend date 12 September and record date 14 September.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group are set out in note 22 to this half‐yearlyfinancial report.

10

Condensed consolidated income statementNote

6 months ended
30 June30 June
2012
2011
£m
£m

Year ended
31 December
2011£mInsurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue

3
3

560.5
(314.0)
246.5

425.2
(223.7)
201.5

959.7
(513.9)445.8

Other revenue
Profit commission
Investment and interest income

4
5
6

187.2
47.8
6.9

173.2
45.3
5.1

349.0
61.8
13.7

Net revenue

488.4

425.1

870.3

Insurance claims and claims handling expenses
Insurance claims and claims handlingexpenses recovered from reinsurers
Net insurance claims(456.7)(340.0)(785.9)256.5(200.2)177.9(162.1)422.1(363.8)(106.5)(9.9)(316.6)(91.6)(10.8)(264.5)(188.8)(18.6)(571.2)

171.8

160.6

299.1

(43.6)(44.1)(77.8)

128.2

116.5

221.3

128.1
0.1
128.2

116.5
‐
116.5

221.2
0.1
221.3

Operating expenses
Share scheme charges
Total expenses

7
20

Profit before tax
Taxation expense

8

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

Earnings per share:
Basic

9

47.3p

43.3p

81.9p

Diluted

9

47.2p

43.2p

81.7p

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

10
10

98.0
36.5p

94.5
35.5p

198.8
74.6p

11

Condensed consolidated statement of comprehensive income
6 months ended
30 June30 June
2012
2011
£m
£m

Year ended
31 December
2011£mProfit for the period

128.2

116.5

221.3

Other comprehensive income
Exchange differences on translationof foreign operations

(1.1)

2.6

(1.0)

Other comprehensive income for theperiod, net of income tax

(1.1)

2.6

(1.0)

Total comprehensive income for the period

127.1

119.1

220.3

127.0
0.1
127.1

119.1
‐
119.1

220.2
0.1
220.3

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

12Condensed consolidated statement of financial position

Note

30 June2012£m

As at:
30 June2011£m

31 December
2011
£m

11
12
14
13
17
15
16

16.4
88.9
723.6
1,793.6
10.0
65.7
277.1

14.1
84.2
479.7
1,319.3
11.7
75.5
281.4

17.6
87.5
639.8
1,583.0
10.3
52.1
224.6

2,975.3

2,265.9

2,614.9

0.3
13.1
2.1
419.6

0.3
13.1
6.8
371.1

0.3
13.1
3.2
377.3

435.1

391.3

393.9

5.2

0.4

0.5

440.3

391.7

394.4

1,586.4
910.0
38.6

1,083.9
747.6
42.7

1,333.7
856.6
30.2

Total liabilities

2,535.0

1,874.2

2,220.5

Total equity and total liabilities

2,975.3

2,265.9

2,614.9

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

EQUITY
Share capital
Share premium account
Other reserves
Retained earnings

20

Total equity attributable to equity holders of
the parent
Non‐controlling interests
Total equity

LIABILITIESInsurance contracts
Trade and other payables
Current tax liabilities

14
18

13

Condensed consolidated cash flow statement
6 months ended
30 June 201230 June 2011£m£m

Year ended
31 December
2011
£m

128.2

116.5

221.3

3.4
1.8
2.6
0.1
10.7
252.7
(83.8)

2.7
1.6
(1.6)
2.2
14.8
277.3
(122.7)

6.1
3.3
(1.9)
0.9
23.6
527.1
(282.8)(39.7)(124.1)(88.4)

53.5
43.6

186.6
44.1

292.1
77.8

373.1

397.4

779.1

Net cash flow into investments
Cash flows from operating activities, net of
movements in investments(189.0)(218.3)(493.9)

184.1

179.1

285.2

Taxation payments(33.4)(47.4)(95.3)Net cash flow from operating activities

150.7

131.7

189.9

Cash flows from investing activities:
Purchases of property, plant and equipment
and software
Proceeds from investing activities

(3.7)
‐

(5.1)
‐

(16.8)
3.9

Net cash used in investing activities

(3.7)

(5.1)

(12.9)Cash flows from financing activities:
Minority interest capital contribution
Capital element of new finance leases
Repayment of finance lease liabilities
Equity dividends paid

4.6‐‐
(98.0)‐‐‐(94.5)‐
1.0(0.3)(198.8)Net cash used in financing activities(93.4)(94.5)(198.1)

Net increase / (decrease) in cash and cash
equivalents

53.6

32.1

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

224.6
(1.1)

246.7
2.6

246.7
(1.0)

277.1

281.4

224.6

Profit after tax
Adjustments for non‐cash items:‐ Depreciation‐ Amortisation of software‐ Change in unrealised gains/(losses) on investments‐ Other gains and losses‐ Share scheme charge
Change in gross insurance contract liabilities
Change in reinsurance assets
Change in trade and other receivables,
including from policyholders
Change in trade and other payables, including
tax and social security
Taxation expense
Cash flows from operating activities, before
movements in investments

Cash and cash equivalents at end of period

16

14

Condensed consolidated statement of changes in equity
Share
capital£mSharepremium
account£m

Foreignexchangereserve£m

Retained
profit andloss£mMinority
interest£m

Total
equity£m

At 1 January 2011

0.3

13.1

4.2

332.7

0.4

350.7

Profit for the period

‐

‐

‐

116.5

‐

116.5

Other comprehensive income
Currency translation differences

‐

‐

2.6

‐

‐

2.6

Total comprehensive income for theperiod

‐

‐

2.6

116.5

‐

119.1

Transactions with equity‐holders
Dividends
Share scheme credit
Deferred tax credit on share scheme
charge

‐
‐

‐
‐

‐
‐

(94.5)
14.8‐‐(94.5)
14.8

‐

‐

‐

1.6

‐

1.6

Total transactions with equity‐holders

‐

‐

‐

(78.1)‐(78.1)

As at 30 June 2011

0.3

13.1

6.8

371.1

0.4

391.7

At 1 January 2011

0.3

13.1

4.2

332.7

0.4

350.7

Profit for the period

‐

‐

‐

221.2

0.1

221.3

Other comprehensive income
Currency translation differences

‐

‐

(1.0)

‐

‐

(1.0)

Total comprehensive income forthe period

‐

‐

(1.0)

221.2

0.1

220.3

Transactions with equity‐holders
Dividends
Share scheme credit
Deferred tax charge on share scheme
charge

‐
‐

‐
‐

‐
‐

(198.8)23.6‐‐(198.8)
23.6

‐

‐

‐

(1.4)

‐

(1.4)

Total transactions with equity‐holders

‐

‐

‐

(176.6)‐(176.6)

0.3

13.1

3.2

377.3

0.5

394.4

As at 31 December 201115

Condensed consolidated statement of changes in equity (continued)
Sharecapital£mSharepremium
account£m

Foreignexchangereserve£m

Retained
profit andloss£mMinority
interest£m

Total
equity£m

At 1 January 2012

0.3

13.1

3.2

377.3

0.5

394.4

Profit for the period

‐

‐

‐

128.1

0.1

128.2

Other comprehensive income
Currency translation differences

‐

‐

(1.1)

‐

‐

(1.1)

Total comprehensive income for theperiod

‐

‐

(1.1)

128.1

0.1

127.1

Transactions with equity‐holders
Dividends
Share scheme credit
Deferred tax credit on share scheme
chargeMinority interest capital contribution

‐
‐

‐
‐

‐
‐

(98.0)
10.7‐‐(98.0)
10.7

‐
‐

‐
‐

‐
‐

1.5
‐

‐
4.6

1.5
4.6

Total transactions with equity‐holders

‐

‐

‐

(85.8)

4.6(81.2)

0.3

13.1

2.1

419.6

5.2

440.3

As at 30 June 201216

Notes to the condensed interim financial statements
1.

General information and basis of preparation

Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at
Capital Tower, Greyfriars Road, Cardiff CF10 3AZ and its shares are listed on the London Stock
Exchange.
The condensed interim financial statements comprise the results and balances of the Company
and its subsidiaries (the Group) for the six‐month period ended 30 June 2012 and thecomparative periods for the 6‐month period ended 30 June 2011 and the year ended 31
December 2011. This condensed set of financial statements has been prepared in accordancewith IAS 34 Interim Financial Reporting as adopted by the EU. As required by the Disclosure andTransparency Rules of the Financial Services Authority, the condensed set of financial
statements has been prepared applying the accounting policies and presentation that wereapplied in the preparation of the company's published consolidated financial statements for theyear ended 31 December 2011.
The financial statements of the Company’s subsidiaries are consolidated in the Group financial
statements. In accordance with IAS 24, transactions or balances between Group companies thathave been eliminated on consolidation are not reported as related party transactions.
The comparative figures for the financial year ended 31 December 2011 are not the company's
statutory accounts for that financial year. Those accounts have been reported on by thecompany's auditors and delivered to the registrar of companies. The report of the auditors was(i) unqualified, (ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report, and (iii) did not contain astatement under section 498 (2) or (3) of the Companies Act 2006.
The accounts have been prepared on a going concern basis. In considering the appropriatenessof this assumption, the Board have reviewed the Group's projections for the next twelve months
and beyond, including cash flow forecasts and regulatory capital surpluses. The Group has no
debt.

Accounting policies
The condensed set of interim financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of the company’s publishedconsolidated financial statements for the year ended 31 December 2011. A number of other
IFRS and interpretations have been endorsed by the EU in the period to 30 June 2012 andalthough they have been adopted by the Group, none of them has had a material impact on theGroup’s financial statements.

17

Critical accounting judgements and estimates
The Group’s 2011 Annual Report provides full details of significant judgements and estimatesused in the application of the Group’s accounting policies. There have been no significant
changes to these judgements and estimates during the period.

Estimation techniques used in calculation of claims provisions
Estimation techniques are used in the calculation of the provisions for claims outstanding, which
represents a projection of the ultimate cost of settling claims that have occurred prior to thebalance sheet date and remain unsettled at the balance sheet date.
The key area where these techniques are used relates to the ultimate cost of reported claims. A
secondary area relates to the emergence of claims that occurred prior to the balance sheet date,but had not been reported at that date.
The estimates of the ultimate cost of reported claims are based on the setting of claim
provisions on a case‐by‐case basis, for all but the simplest of claims.
The sum of these provisions are compared with projected ultimate costs using a variety ofdifferent projection techniques (including incurred and paid chain ladder and an average cost ofclaim approach) to allow an actuarial assessment of their likely accuracy. They include
allowance for unreported claims.
The most significant sensitivity in the use of the projection techniques arises from any future
step change in claims costs, which would cause future claim cost inflation to deviate from
historic trends. This is most likely to arise either from significant deviations in claims inflationcompared to expectation, or from a change in the regulatory or judicial regime that leads to anincrease in awards or legal costs for bodily injury claims that is significantly above or below thehistorical trend.
The claims provisions are subject to independent review by the Group’s actuarial advisors.
Management’s reserving policy is to reserve at a level above best estimate projections to allow
for unforeseen adverse claims development. Future changes in claims reserves also impact
profit commission income, as the recognition of this income is dependant on the loss ratio
booked in the financial statements, and cash receivable is dependant on actuarial projections ofultimate loss ratios.
Refer to note 14 for an analysis on the changes in estimates of claims provisions for eachunderwriting year.

18

2.

Operating segments

The Group has four reportable segments, as described below. These segments represent the
principal split of business that is regularly reported to the Group’s Board of Directors, which isconsidered to be the Group’s chief operating decision maker in line with IFRS 8, Operating
Segments.

UK Car Insurance
The segment consists of the underwriting of car insurance and the generation of other revenue
in the UK. The Directors consider the results of these activities to be reportable as one segment
as the activities carried out in generating the income are not independent of each other and are
performed as one business. This mirrors the approach taken in management reporting.

International Car Insurance
The segment consists of the underwriting of car insurance and the generation of other revenue
outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in
Italy, Elephant Auto in the USA and L’olivier Assurances in France. None of these operations arereportable on an individual basis, based on the threshold requirements in IFRS 8.

Price Comparison
The segment relates to the Group’s price comparison websites Confused.com in the UK,
Rastreator in Spain and LeLynx in France. Each of the Price Comparison businesses areoperating in individual geographical segments but are grouped into one reporting segment as
LeLynx and Rastreator do not individually meet the threshold requirements in IFRS 8.
The results of the Group’s Italian price comparison business, Chiarezza, which was sold during
the period, are included in this segment up to the date of disposal.

Other
The ‘Other’ segment is designed to be comprised of all other operating segments that do notmeet the threshold requirements for individual reporting. Currently there is only one suchsegment, the Gladiator commercial van insurance broking operation, and so it is the results andbalances of this operation that comprise the ‘Other’ segment.
Taxes are not allocated across the segments and, as with the corporate activities, are included in
the reconciliation to the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Financial Position.

19

Segment income, results and other information
An analysis of the Group’s revenue and results for the period ended 30 June 2012, by reportablesegment are shown below. The accounting policies of the reportable segments are consistent
with those presented in note 3 in the 2011 Group financial statements.
30 June 2012
UK CarInsurance£mInternational
Car
Insurance£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total£m

1,030.0

79.7

53.3

6.3

‐

1,169.3

Net insurance
premium revenue

226.8

19.7

‐

‐

‐

246.5

Other revenue andprofit commission

170.1

5.3

53.3

6.3

‐

235.0

Investment andinterest income

5.9

0.1

‐

‐

‐

6.0

Net revenue

402.8

25.1

53.3

6.3

‐

487.5

Net insurance claims(179.7)(20.5)‐‐‐(200.2)

Expenses(39.8)(13.5)(45.2)(5.0)‐(103.5)

Segment profit /(loss) before tax

183.3

(8.9)

8.1

1.3

‐

183.8

Turnover*

Other central revenue and expenses, including share scheme charges
Interest income(12.9)
0.9

Consolidated profit before tax
Taxation expense

171.8(43.6)

Consolidated profit after tax

128.2

Reportable segment
assets2,682.9

Unallocated assets and liabilities
Consolidated assets

241.8

35.3

71.9

(66.6)

2,965.3
10.0
2,975.3*Turnover is a non‐GAAP measure and consists of total premiums written (including co‐insurers share)
and other revenue.

20

Revenue and results for the corresponding reportable segments for the period ended 30 June
2011 are shown below.
30 June 2011
UK CarInsurance£mInternational
Car
Insurance£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total£mTurnover*

999.3

53.9

45.4

5.8

‐

1,104.4

Net insurance
premium revenue

190.0

11.5

‐

‐

‐

201.5

Other revenue andprofit commission

162.9

4.4

45.4

5.8

‐

218.5

Investment andinterest income

3.4

0.1

‐

‐

‐

3.5

Net revenue

356.3

16.0

45.4

5.8

‐

423.5

Net insurance claims(151.0)(11.1)‐‐‐(162.1)

Expenses(37.1)(8.1)(40.4)(4.6)‐(90.2)

Segment profit /(loss) before tax

168.2

(3.2)

5.0

1.2

‐

171.2

Other central revenue and expenses, including share scheme charges
Interest income(12.2)
1.6

Consolidated profit before tax
Taxation expense

160.6(44.1)

Consolidated profit after tax

116.5

Reportable segment
assets2,045.3

Unallocated assets and liabilities
Consolidated assets

151.9

20.4

15.0

(66.8)

2,165.8
100.1
2,265.921

Revenue and results for the corresponding reportable segments for the year ended 31
December 2011 are shown below.
31 December 2011
UK CarInsurance£mInternational
Car
Insurance£m

Price
Comparison
£m

Other
£m

Eliminations£m

Segment
total£m

1,966.0

122.2

90.4

11.7

‐

2,190.3

Net insurance
premium revenue

418.6

27.2

‐

‐

‐

445.8

Other revenue andprofit commission

299.0

9.7

90.4

11.7

‐

410.8

Investment andinterest income

10.6

0.2

‐

‐

‐

10.8

Net revenue

728.2

37.1

90.4

11.7

‐

867.4

Net insurance claims(335.5)(28.3)‐‐‐(363.8)

Expenses(79.1)(18.3)(79.9)(8.9)‐(186.2)

Segment profit /(loss) before tax

313.6

(9.5)

10.5

2.8

‐

317.4

Turnover*

Other central revenue and expenses, including share scheme charges
Interest income(21.2)
2.9

Consolidated profit before tax
Taxation expense

299.1(77.8)

Consolidated profit after tax

221.3

Reportable segment
assets2,362.1

Unallocated assets and liabilities
Consolidated assets

197.7

10.8

14.1

(69.9)

2,514.8
100.1
2,614.922

Segment revenues
The UK and International Car Insurance reportable segments derive all insurance premiumincome from external policyholders. Revenue within these segments is not derived from anindividual 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£6.9 million (H1 2011: £8.5million, FY 2011: £16.1 million). These amounts have not been
eliminated as the Directors consider that not doing so results in a better overall presentation of
the financial statements. The impact on the half‐yearly financial report is not material. There
are no other transactions between reportable segments.

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 above. The
revenue and results of the International Price Comparison businesses, Rastreator and LeLynx are
not yet material enough to be presented as a separate segment.

3.

Net insurance premium revenue
30
June
2012
£m

30
June
2011
£m

31
December
2011£mTotal motor insurance premiums before co‐insurance

997.2

931.2

1,841.3

Group gross premiums written after co‐insurance
Outwards reinsurance premiums

614.1(360.6)568.0(312.7)

1,128.4(622.0)Net insurance premiums written

253.5

255.3

506.4

Change in gross unearned premium provision
Change in reinsurers’ share of unearned premium provision(53.6)
46.6(142.8)89.0(168.7)108.1

Net insurance premium revenue

246.5

201.5

445.8

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

23

4.

Other revenue
30
June
2012
£m

30
June
2011
£m

31
December
2011£mAncillary contribution
Price Comparison revenue
Other revenue

113.1
53.3
20.8

111.3
45.4
16.5

223.3
90.4
35.3

Total other revenue

187.2

173.2

349.0

Ancillary contribution is primarily made up of commissions and fees earned on sales of
insurance products and services complementing the car insurance policy.

5.

Profit commission
30
June
2012
£m

30
June
2011
£m

31
December2011£mUnderwriting year:
2009 & prior
2010
2011
2012

(0.6)
8.2
39.5
0.7

0.4
41.6
3.3
‐

2.3
46.8
12.7
‐

Total profit commission

47.8

45.3

61.8

30
June
2012
£m

30
June
2011
£m

31
December
2011£m

Net investment return
Interest receivable

6.0
0.9

3.5
1.6

10.8
2.9

Total investment and interest income

6.9

5.1

13.7

6.

Investment and interest income

24

7.

ExpensesInsurance
contracts£m

Acquisition of insurance
contracts
Administration andmarketing costs

Other

30 June 2011
Total

£m

£m

£m

£m

Insurance
contracts
£m

25.5

‐

25.5

14.3

‐

14.3

9.0

72.0

81.0

13.3

64.0

77.3

34.5

72.0

106.5

27.6

64.0

91.6

‐

9.9

9.9

‐

10.8

10.8

34.5

81.9

116.4

27.6

74.8

102.4

Share scheme charges
Total expenses

30 June 2012
Other
Total

Insurance
contracts£m

31 December 2011
Other
Total
£m

£m

Acquisition of insurance contracts

36.2

‐

36.2

Administration and marketing costs

26.7

125.9

152.6

62.9

125.9

188.8

‐

18.6

18.6

62.9

144.5

207.4

Share scheme charges
Total expenses

The £9.0 million (H1 2011: £13.3 million FY 2011: £26.7 million) administration and marketingcosts allocated to insurance contracts is principally made up of salary costs.

Analysis of other administration and marketing costs:
30
June
2012
£m

30
June
2011
£m

31
December
2011£mAncillary sales expenses
Price Comparison operating expenses
Other expenses

18.7
45.2
8.1

17.0
40.4
6.6

33.8
79.9
12.2

Total

72.0

64.0

125.9

25

Reconciliation of expenses related to insurance contracts to reported expense ratio:
30
June
2012
£m

30
June
2011
£m

31
December
2011£mInsurance contract expenses from above
Add: claims handling expenses

34.5
5.8

27.6
6.1

62.9
11.9

Adjusted expenses

40.3

33.7

74.8

246.5
16.3%

201.5
16.7%

445.8
16.8%

30
June
2012
£m

30
June
2011
£m

31
December
2011
£m

41.8

41.8

80.3

‐

‐

(3.2)

41.8

41.8

77.1

1.8

2.3

(0.8)

‐

‐

1.5

43.6

44.1

77.8

30
June
2012
£m

30
June
2011
£m

31
December
2011£mProfit before taxation

171.8

160.6

299.1

Corporation tax thereon at 24.5% (2011: 26.5%)
Expenses and provisions not deductible for tax purposes
Difference in tax rates
Adjustments relating to prior periods
Other differences

42.1
‐
‐
‐
1.5

42.5
‐
‐
‐
1.6

79.3
0.1
0.5
(1.7)
(0.4)

Tax charge for the period as above

43.6

44.1

77.8

Net insurance premium revenue
Reported expense ratio

8.

Taxation

UK Corporation tax
Current charge at 24.5% (2011: 26.5%)(Over) provision relating to prior periods – corporation
tax
Current tax charge
Deferred tax
Current period deferred taxation movement
Under provision relating to prior periods – deferred
tax
Total tax charge per income statement

Factors affecting the tax charge are:26

The UK corporation tax rate was reduced from 26% to 24% on 1 April 2012. The current
corporation tax rate used for the 6 months to 30 June 2012 is the average effective rate for 2012of 24.5% (2011: 26.5%). Deferred tax balances have been measured at 24% (H1 2011: 26%, FY
2011: 26%).

9.

Earnings per share
30
June
2012
£m

30
June
2011
£m

31
December
2011
£m

128.1

116.5

221.2

Weighted average number of shares – basic
Earnings per share – basic

271,088,885
47.3p

269,171,508
43.3p

269,903,301
81.9p

Weighted average number of shares – diluted
Earnings per share – diluted

271,740,638
47.2p

269,584,934
43.2p

270,782,526
81.7p

Profit for the period after taxation (equity holders)

The difference between the basic and diluted number of shares at the end of the period (being
651,753, H1 2011: 413,426, FY 2011: 879,225) relates to awards committed but not yet issued
under the Group’s share schemes.

10.

Dividends

Dividends were declared and paid as follows:
30
June
2012
£m

30
June
2011
£m

31
December
2011£mMarch 2011 (35.5p per share, paid May 2011)
August 2011 (39.1p per share, paid October 2011)
March 2012 (36.5p per share, paid June 2012)

‐
‐
98.0

94.5
‐
‐

94.5
104.3
‐

Total dividends

98.0

94.5

198.8

The dividend declared in March 2011 represented the final dividend paid in respect of the 2010
financial year (August 2011 ‐ interim payment for 2011). The dividend declared in March 2012
was the final dividend paid in respect of the 2011 financial year.
An interim dividend of 45.1 pence per share (£122.5 million) has been declared in respect of the2012 financial year.

27

11.

Property, plant and equipment
Improvements
to short
leaseholdbuildings

Computerequipment

Officeequipment

Furnitureand fittings

Total

£m

£m

£m

£m

£m

Cost:
At 1 January 2011
Additions
Disposals
At 30 June 2011

5.2
0.3
‐
5.5

24.1
1.5
(0.2)
25.4

8.5
1.1
‐
9.6

3.4
0.5
‐
3.9

41.2
3.4
(0.2)
44.4

Depreciation
At 1 January 2011
Charge for the year
Disposals
At 30 June 2011

3.5
0.3
‐
3.8

15.5
1.7
‐
17.2

6.0
0.5
‐
6.5

2.6
0.2
‐
2.8

27.6
2.7
‐
30.3

Net book amountAt 30 June 2011

1.7

8.2

3.1

1.1

14.1

Cost
At 1 January 2011
Additions
Disposals
At 31 December 2011

5.2
1.5
‐
6.7

24.1
4.5
(0.3)
28.3

8.5
2.9
‐
11.4

3.4
1.5
‐
4.9

41.2
10.4
(0.3)
51.3

Depreciation
At 1 January 2011
Charge for the year
Disposals
At 31 December 2011

3.5
0.9
‐
4.4

15.5
3.5
‐
19.0

6.0
1.2
‐
7.2

2.6
0.5
‐
3.1

27.6
6.1
‐
33.7

Net book amountAt 31 December 2011

2.3

9.3

4.2

1.8

17.6

Cost
At 1 January 2012
Additions
At 30 June 2012

6.7
0.4
7.1

28.3
1.0
29.3

11.4
0.8
12.2

4.9
‐
4.9

51.3
2.2
53.5

Depreciation
At 1 January 2012
Charge for the year
At 30 June 2012

4.4
0.5
4.9

19.0
1.8
20.8

7.2
0.8
8.0

3.1
0.3
3.4

33.7
3.4
37.1

Net book amountAt 30 June 2012

2.2

8.5

4.2

1.5

16.4

28

The net book value of assets held under finance leases is as follows:
30
June
2012
£m

30
June
2011
£m

31
December
2011
£m

0.9

0.5

2.8

Software

Total

£m

Deferredacquisition
costs
£m

£m

£m

Carrying amount:
At 1 January 2011
Additions
Amortisation charge

62.3
‐
‐

14.9
19.5
(18.3)

5.7
1.7
(1.6)

82.9
21.2
(19.9)At 30 June 2011

62.3

16.1

5.8

84.2

At 1 January 2011

62.3

14.9

5.7

82.9

Additions
Amortisation charge

‐
‐

43.3
(41.8)

6.4
(3.3)

49.7
(45.1)At 31 December 2011

62.3

16.4

8.8

87.5

Additions
Amortisation charge
Disposals

‐
‐
‐

22.0
(20.2)
‐

1.7
(1.8)
(0.3)

23.7
(22.0)
(0.3)

62.3

18.2

8.4

88.9

Computer equipment

12.

Intangible assets
Goodwill

At 30 June 2012

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 within the 2011 annual report, 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 estimatedrecoverable value of the asset is greater than the carrying amount and therefore no impairment
losses have been recognised. No evidence has arisen during the 6 month period to 30 June 2012
to suggest that an interim impairment review is required.

29

13.

Financial instruments

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

Investments held at fair value
Held to maturity deposits with credit institutions
Receivables – amounts owed by policyholders
Total financial assets
Trade and other receivables
Cash and cash equivalents

30
June
2012
£m

30
June
2011
£m

31
December
2011
£m

960.2
385.3
448.1

579.8
303.3
436.2

862.1
297.0
423.9

1,793.6

1,319.3

1,583.0

65.7
277.1

75.5
281.4

52.1
224.6

2,136.4

1,676.2

1,859.7

910.0

747.6

856.6

Financial liabilities:
Trade and other payables

All receivables from policyholders are due within 12 months of the balance sheet date.
All investments held at fair value are invested in AAA‐rated money market liquidity funds. These
funds target a short‐term cash return with capital security and low volatility and continue toachieve these goals.

14.

Reinsurance assets and insurance contract liabilities

A)

Analysis of recognised amounts:
30
June
2012
£m

30
June
2011
£m

31
December
2011£m

Claims outstanding
Unearned premium provision

969.1
617.3

567.4
516.5

781.1
552.6

Total gross insurance liabilities

1,586.4

1,083.9

1,333.7

Claims outstanding
Unearned premium provision

366.5
357.1

201.7
278.0

334.2
305.6

Total reinsurers’ share of insurance liabilities

723.6

479.7

639.8

Net:
Claims outstanding
Unearned premium provision

602.6
260.2

365.7
238.5

446.9
247.0

Total insurance liabilities – net

862.8

604.2

693.9

Gross:

Recoverable from reinsurers:

30

B)

Analysis of net claims reserve releases:

The following table analyses the impact of movements in prior year UK claims provisions, interms of their net value. The data is presented on an underwriting year basis.
30
June
2012
£m

30
June
2011
£m

31
December2011£m2009 & prior
2010
2011

‐
5.5
5.4

1.7
2.3
‐

8.7
1.6
‐

Total net reserve release

10.9

4.0

10.3

Net releases on Admiral net share1
Releases on commuted quota share reinsurance
contracts1
Total net release as above

9.0

4.4

7.8

1.9
10.9

(0.4)
4.0

2.5
10.3

Underwriting year:

1

Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance
business 24 or 36 months following the start of the underwriting year. Aftercommutation, any changes in claims costs on the commuted proportion of the business
are reflected within claims costs and are separately analysed here.

Profit commission is analysed in note 5.

C)

Reconciliation of movement in net claims reserve:
30
June
2012
£m

30
June
2011
£m

31
December
2011£m

Net claims reserve at start of period

446.9

269.0

269.0

Net claims incurred
Net claims paid

194.4
(38.7)

156.1(59.4)

351.9(174.0)Net claims reserve at end of period

602.6

365.7

446.9

31

D)

Reconciliation of movement in net unearned premium provision:
30
June
2012
£m

30
June
2011
£m

31
December
2011£m

Net unearned premium provision at start of period

247.0

180.6

180.6

Written in the period
Earned in the period

253.5(240.3)255.3(197.4)506.4(440.0)Net unearned premium provision at end of period

260.2

238.5

247.0

30
June
2012
£m

30
June
2011
£m

31
December2011£mTrade receivables
Prepayments and accrued income

64.9
0.8

70.2
5.3

51.1
1.0

Total trade and other receivables

65.7

75.5

52.1

30
June
2012
£m

30
June
2011
£m

31
December
2011£mCash at bank and in hand

277.1

281.4

224.6

Total cash and cash equivalents

277.1

281.4

224.6

15.

16.

Trade and other receivables

Cash and cash equivalents

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

32

17.

Deferred tax
30
June
2012
£m

30
June
2011
£m

31
December
2011£m(Asset) brought forward at start of period
Movement in period(10.3)
0.3(12.4)
0.7(12.4)
2.1(Asset) carried forward at end of period(10.0)(11.7)(10.3)

30
June
2012
£m

30
June
2011
£m

31
December2011£m

Tax treatment of share scheme charges
Capital allowances
Carried forward losses
Other differences

(2.5)
(1.4)
(3.7)
(2.4)

(5.5)
(1.3)
(3.6)
(1.3)

(3.6)
(1.5)
(2.6)
(2.6)

Deferred tax (asset) at end of period(10.0)(11.7)(10.3)The net balance provided at the end of the period is analysed as follows:

The UK corporation tax rate was reduced from 26% to 24% on 1 April 2012. Deferred tax
balances at 30 June 2012 have therefore been measured at 24% (H1 2011: 26%, FY 2011: 25%).
The amount of deferred tax (expense) / income recognised in the income statement for each of
the temporary differences reported above is:Amounts (charged) / credited to income or expense

30
June
2012
£m

30
June
2011
£m

31
December2011£m

Tax treatment of share scheme charges
Capital allowances
Carried forward losses
Other differences

(2.6)
(0.1)
1.1
(0.2)

(3.0)
‐
2.3
(1.6)

(1.9)
0.2
1.3
(0.3)

Net deferred tax (charged) to income

(1.8)

(2.3)

(0.7)

The difference between the total movement in the deferred tax balance above and the amountcharged to income relates to deferred tax on share scheme charges that has been credited
directly to equity.

33

18.

Trade and other payables
30
June
2012
£m

30
June
2011
£m

31
December2011£mTrade payables
Amounts owed to co‐insurers and reinsurers
Finance leases due within 12 months
Finance leases due after 12 months
Other taxation and social security liabilities
Other payables
Accruals and deferred income (see below)

9.7
613.6
0.7
0.2
27.5
67.9
190.4

10.8
460.2
‐
0.2
25.9
81.0
169.5

12.1
579.4
0.9
‐
21.9
51.0
191.3

Total trade and other payables

910.0

747.6

856.6

30
June
2012
£m

30
June
2011
£m

31
December2011£mPremium receivable in advance of policy inception
Accrued expenses
Deferred income

123.9
61.8
4.7

105.2
53.5
10.8

110.1
55.8
25.4

Total accruals and deferred income as above

190.4

169.5

191.3

Analysis of accruals and deferred income:19.

Obligations under finance leases

Analysis of finance leaseliabilities:

Less than one year
Between one and fiveyears

Minimum
lease
payments£m

At 30 June 2012
Interest
Principal£m£m

Minimum
lease
payments
£m

0.7

‐

0.7

0.2

‐

0.9

‐

£m

£m

‐

‐

‐

0.2

0.2

‐

0.2

0.9

0.2

‐

0.2

Minimum
lease
payments£m
Less than one year
Between one and five years

At 30 June 2011
Interest
Principal

At 31 December 2011
Interest
Principal

£m

£m

0.9
‐

‐
‐

0.9
‐

0.9

‐

0.9

34

All leases are on a fixed repayment basis and no arrangements have been entered into forcontingent rental payments.
The fair value of the Group’s lease obligations approximates to their carrying amount.

20.

Share capital
30
June
2012
£m

30
June
2011
£m

31
December
2011
£m

0.5

0.5

0.5

‐
‐
0.3

0.3
‐
‐

‐
0.3
‐

0.3

0.3

0.3

Authorised:
500,000,000 ordinary shares of 0.1p
Issued, called up and fully paid:
268,267,222 ordinary shares of 0.1p
270,789,075 ordinary shares of 0.1p
271,318,837 ordinary shares of 0.1p

During the first half of 2012, 529,762 (H1 2011: 1,781,235) new ordinary shares of 0.1p were
issued to the trusts administering the Group’s share schemes.
All of these (H1 2011: 281,235) were issued to the Admiral Group Share Incentive Plan (SIP)
Trust for the purposes of this share scheme. These shares are entitled to receive dividends.
No new shares (H1 2011: 1,500,000) were issued to the Admiral Group Employee Benefit Trustfor the purposes of the Discretionary Free Share Scheme. The Trustees have waived the right todividend payments, other than to the extent of 0.001p per share, unless and to the extent
otherwise directed by the Company from time to time. Rights to dividends have now been
waived on a total of 3,000,000 (H1 2011: 3,914,948) ordinary shares in issue.

Staff share schemes:
Analysis of share scheme costs (per income statement):
30
June
2012
£m

30
June
2011
£m

31
December
2011£m

SIP charge
DFSS charge

3.6
6.3

3.1
7.7

6.0
12.6

Total share scheme charges

9.9

10.8

18.6

The share scheme charges reported above are net of the co‐insurance share and therefore differ
from the gross credit to reserves reported in the statement of changes in equity (£10.7 million;
H1 2011: £14.8 million, FY 2011: £23.6 million).
The consolidated cashflow statement also shows the gross charge in the reconciliation between‘profit after tax’ and ‘cashflows from operating activities’. The co‐insurance share of the charge
is included in the ‘change in trade and other payables’ line.
35

Number of free share awards committed at 30 June 2012:
Awards outstanding*

Vesting
date

396,200
377,641
352,100
346,590
489,060
598,528

September 2012
March 2013
August 2013
March 2013
September 2014
March 2014

DFSS 2009 scheme – 2nd AwardDFSS 2010 scheme – 1st AwardDFSS 2010 scheme – 2nd AwardDFSS 2011 scheme – 1st AwardDFSS 2011 scheme – 2nd AwardDFSS 2012 scheme – 1st Award

127,020
1,542,453
121,051
1,634,032
157,312
181,668

August 2012
April 2013
August 2013
April 2014
September 2014
April 2015

Total awards committed

6,323,655

SIP H1 09 scheme
SIP H2 09 scheme
SIP H1 10 scheme
SIP H2 10 scheme
SIP H1 11 scheme
SIP H2 11 scheme* – being the maximum number of awards expected to be made before accounting for expectedstaff attrition.
During the six months ended 30 June 2012, awards under the SIP H2 08 scheme and the DFSS
2009 (1st award) scheme vested. The total number of awards vesting for each scheme is asfollows:

Number of free share awards vesting during the six months ended 30 June 2012:

SIP H2 08 scheme
DFSS 2009 scheme 1st award

21.

OriginalAwardsAwardsvested477,432
1,313,865

397,917
1,166,379

Related party transactionsa) Mapfre

In 2012, the Group participated in transactions with Mapfre S.A., during the course of its Price
Comparison operations. Mapfre is a related party of Admiral Group due to its 25% minority
interest in Group subsidiary Rastreator.com Limited. Details of total transactions with Mapfre
and balances outstanding are given in the table below:

Total transactions
Balances outstanding

30
June
2012

30
June
2011

31
December
2011

£m

£m

£m

0.5
0.1

0.2
0.1

0.7
0.1

36

b) Other
Details relating to the remuneration and shareholdings of key management personnel were set
out in the remuneration report of the 2011 Annual Report. Key management personnel are able
to obtain discounted motor insurance at the same rates as all other Group staff, typically at a
reduction of 15%.
The Board considers that only the Board of Directors of Admiral Group plc are key management
personnel.

22.

Principal risks and uncertainties

The Directors consider that the principal risks and uncertainties facing the Group are consistent
with those disclosed in the Group’s 2011 Annual Report (pages 25 and 26). Those are:Risk
1. UK Car Insurance –erosion of competitive
advantage

Description and impact
There is a risk that Admiral’s combined
ratio advantage over the market
and/or the level of underwriting profit
generated by Admiral could erode.
Admiral has been able to increase
its market share significantly overrecent years and (to varying degrees)is dependent on the four main UK
price comparison websites as animportant source of new business andgrowth.
The growth in this distribution channel
could slow, cease or reverse, orAdmiral could lose one or more of thewebsites as a source of leads.
The impact on the business would be aless profitable UK Car Insurance resultand lower return on capital employed.

2. UK & International
Car Insurance– claims shocks

There is a risk that claims costs could
rise significantly above historic or
expected levels for a wide variety ofreasons.

Mitigation
The Directors remain confident thatthe key strengths of the business
which contribute to theoutperformance (including targetedpricing and claims handling on the loss
ratio side; lower cost infrastructure,efficient acquisition costs and cost
control on the expense ratio side) aresustainable.
There are regular reviews of theinteractions between vehicle growth,
pricing and claims experience. Claims
and other senior management
continue to pay close attention to thekey indicators of adverse
developments in large bodily injury
claims.
The Group’s ownership ofConfused.com, which is one of theleading UK price comparison websites
and operates independently of the UK
car insurance business, helps tomitigate the risk of over‐reliance on
this distribution channel. Admiral also
contributes materially to the revenuesof the other price comparison
businesses and therefore it is notconsidered probable that a material
source of new business would be lost.
There is a wide range of mitigating
factors, including:• Holding an appropriate andsignificant buffer above best
estimate outcomes in claims
reserves;
37

Risk

Description and impact

Mitigation• For very large claims (catastropheand otherwise) the Group purchases
excess of loss reinsurance;• A focus on the management ofclaims fraud.

3. International
expansion –risk of failure

There is an ongoing risk that one ormore of the Group’s new international
operations fails to become asustainable long‐term business.

The Group’s approach to expansion is
cautious. International insurance
businesses start small and are all
backed by proportional reinsurance
support.

The impact on the Group could behigher than planned losses (andpotentially closure costs) anddistraction of key management.

New price comparison businesses also
focus on modest starts with low set‐up
costs and relatively small initial media
spend budgets.
The Directors are mindful ofmanagement stretch and monitor thisrisk on a regular basis though at
present the Board is confident there isa suitable management structure inplace for the Group’s international
operations.
The Directors are not prepared to let
unprofitable businesses continue togenerate losses where there is limited
foreseeable chance of success.

4. Other Revenue –potential diminution

There is a risk that the level of Other
Revenue earned will diminish.
The impact on the Group would belower profit and lower return on
capital.
The most immediate risk to ancillary
profits arises from the OFT market
study in motor insurance. Whilst
there are a range of possible
outcomes from this study, Admiralwelcomes any changes that are likely
to lead to lower claims costs.

5. UK Price
Comparison – effectsof continued
competition

Confused.com operates in a highly
competitive UK market with four main
businesses currently attempting toincrease their market share throughaggressive media activity.

Admiral earns Other Revenue from a
portfolio of products and seeks tominimise reliance on any single
income stream.
Admiral continuously assesses thevalue of the ancillary products it
offers, and makes changes to ensure
the products offer value topolicyholders.
The Group’s risk management
framework leads to potential risks toancillaries being identified andmonitored, providing management
time to respond appropriately to any
such regulatory changes and minimise
financial impacts where possible.
Confused management continually
analyse the success or otherwise of all
media activity.

38

Risk

Description and impact

Mitigation
The Directors believe Confused is afundamentally strong business and iswell positioned to maintain its positionin the UK price comparison market.

6. Co‐insurance andreinsurance
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) andto mitigate the cost and risk ofestablishing new operations.

Admiral mitigates risks to its
reinsurance arrangements by ensuringthat it has a strongly rated and diverse
range of partners. Admiral has
enjoyed a long‐term relationship with
one of the world’s strongest
reinsurers, Munich Re, which has
supported Admiral since 2000.

There is a risk that such support will
not be available in the future if theresults of either the UK business or(more realistically) one or more of theinternational operations are notsatisfactory to the co‐ and/or
reinsurers.
The impact on the Group would be theneed to raise additional capital tosupport underwriting. This could be in
the form of equity or debt. Return on
capital would potentially be lower
than current levels.
7. Credit risk

Admiral is exposed to credit risk
primarily in the form of a) default ofreinsurer; and b) failure of banking orinvestment counterparty.

The Group also has strong
relationships with a number of otherreinsurers ‐ avoiding reliance on asingle partner.
In the UK, co‐ and reinsurance
arrangements have been agreed up to
the end of 2014, reflecting confidence
in the Admiral UK Car Insurance
business. The long‐term co‐insurance
agreement with Munich Re will remainin place (at 40% of the business) until
at least the end of 2016.
The Directors consider counterparty
exposure frequently and in significant
detail. The Directors consider that thewide range of policies and proceduresin place to manage credit exposure
continue to be appropriate for theGroup’s risk appetite, and no material
credit losses have been experienced
by the Group.

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

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

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

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

By order of the Board,

Henry Engelhardt
Chief Executive Officer

Kevin Chidwick
Chief Financial Officer

40

INDEPENDENT REVIEW REPORT TO ADMIRAL GROUP PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in
the half‐yearly financial report for the six months ended 30 June 2012 which comprises theCondensed consolidated income statement, the Condensed consolidated statement ofcomprehensive income, the Condensed consolidated statement of financial position, theCondensed consolidated statement of cash flows, the Condensed consolidated statement ofchanges in equity and the related explanatory notes. We have read the other information
contained in the half‐yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with the terms of our engagement toassist the company in meeting the requirements of the Disclosure and Transparency Rules ("theDTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken
so that we might state to the company those matters we are required to state to it in this reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this report, or for theconclusions we have reached.

Directors' responsibilities
The half‐yearly financial report is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the half‐yearly financial report in accordance with
the DTR of the UK FSA.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted
by the EU. The condensed set of financial statements included in this half‐yearly financial reporthas been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial
statements in the half‐yearly financial report based on our review.

Scope of review
We conducted our review in accordance with International Standard on Review Engagements(UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent
Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review ofinterim financial information consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable us to obtainassurance that we would become aware of all significant matters that might be identified in anaudit. Accordingly, we do not express an audit opinion.

41

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that thecondensed set of financial statements in the half‐yearly financial report for the six months
ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 as
adopted by the EU and the DTR of the UK FSA.

Salim Tharani
For and on behalf of KPMG Audit Plc
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiff
CF10 4AX
29 August 201242