• Total turnover for the year was £708m, up 11% from 2005
In the first nine months of the year we raised our new business rates a total of 1%, and that happened gradually and grudgingly. We did move rates upwards almost 3% in the fourth quarter but it is not clear if those rate increases will hold in the early part of 2007. Please note, rate changes at the end of a year have little or no effect on the result of the year they are implemented. Our conversion rate, which is a measure of our prices versus the market, did not fluctuate much during the year, indicative that our rate moves were consistent with the market.
Andrew did everything for Admiral. He takes great pride in relating the story of buying the first company kettle when we moved into our Cardiff offices in September, 1992. He also enjoys explaining that he bought the second kettle as well, because the first one didn’t work! Andrew led finance, planning, property management, legal, audit, facilities, accounts and was, from time to time, the Director responsible for People Services and Confused. He did everything but polish the doorknobs and I have no doubt that if the doorknobs had really needed polishing he would have been the first to volunteer to do that too.
The good news is that their replacements, Kevin Chidwick as Finance Director and Nicolas Weng Kan as MD of MDs, are talented, intelligent and keen.
Key financial highlights The Group’s pre-tax profit showed another significant increase in 2006 – rising 23% from £119.5m to £147.3m. Earnings per share grew by 22% from 32.7p to 39.8p.
As well as proportional reinsurance, the Group has also arranged an excess of loss reinsurance programme with a number of reinsurers to protect itself against very large claims.
The motor expense ratio increased from 15.1% to 15.8% in 2006, reflecting expense inflation with little movement in premium rates. Excluding regulatory levies, the figures are 12.3% in 2005 and 12.9% in 2006.
Combined ratio development The Group’s combined ratio (being the aggregation of the loss and expense ratios above) has risen by around 2 points, from 85% to 87%. This compares to an expected combined ratio for the overall UK motor market in 2006 of around 109% (source – Deloitte) - an outperformance consistent with previous years of around 20 points. Further detail on market results is set out in the Chief Executive’s statement.
Whilst it is still very early days for Balumba, management are encouraged by the results to date, and hope to replicate the model in other markets in the future.
Taken together with the interim dividend (12.1p), this final payment results in a total distribution for 2006 of 36.1p (2005: 24.6p) per share.
Code D.1.1 requires that the Senior Independent Director should attend meetings with a range of shareholders. The Company has a comprehensive programme of meetings and dialogue with institutional investors. The views of investors expressed through this dialogue are communicated to the Board as a whole through the investor relations report. All Directors can, therefore, develop an understanding of any issues or concerns of major shareholders should any be raised. Feedback from shareholders suggests that these arrangements for communication between the Company and its shareholders continue to be satisfactory and effective.
The Board receives presentations from senior managers from within the Group on a regular basis as a component of the ongoing development of the Non-executive Directors.
The Nominations Committee The membership at the year-end was Keith James (Chairman), Lucy Kellaway and Alastair Lyons. The Company Secretary acts as Secretary to the Committee.
The Committee has formal terms of reference, which were last reviewed on 4 September 2006. The Committee met four times during 2006.
The Board is of the view that there is an ongoing process for identifying, evaluating and managing the Group’s internal controls, that it has been in place for the year ended 31 December 2006 and that, up to the date of approval of the annual report and accounts, it is regularly reviewed by the Board and accords with the internal control guidance for Directors provided in the Code.
There are two main elements to the Finance Director’s remuneration package: • Basic annual salary • Awards under the Unapproved Free Share Plan.
• Reducing the waste produced, encouraging recycling and minimising the use of landfill sites, whilst ensuring compliance with all relevant legislation
Waste management We have run a recycling programme for a number of years, to which our staff have shown considerable commitment. Throughout the Company we advertise our recycling facilities and every floor has an area for recycling. As a result, we currently only send 25% of our waste to landfill.
David is a founder Director of Admiral. Initially the Marketing Director, he was appointed
Margaret Johnson (47) Non-executive Director (A,R) Margaret was appointed Non-executive Director of the Company in September 2006. She is currently
Insurance claims and claims handling expenses recovered from reinsurers 29,327 20,597
Net cash used in investing activities (6,046) (3,999) Cash flows from financing activities: Repayments of borrowings (22,000) (10,667)
Cash and cash equivalents at end of period 21 191,242 150,152
The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The Company has elected to prepare its Parent Company financial statements in accordance with UK Generally Accepted Accounting Practice (GAAP).
The claims provisions are subject to independent review by the Group’s actuarial advisors.
Financial assets classified as fair value through profit and loss are initially recorded at cost (which equates to fair value) and subsequently carried at fair value (based on closing bid prices on the balance sheet date, or the last trading day before the balance sheet date) with changes in the fair value of these investments being recognised through the income statement.
The Group’s share of the UK and Spanish private motor insurance business was underwritten by Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL). All contracts are short-term in duration, lasting for 10 or 12 months.
Concentration of insurance risk: The Directors do not believe there are significant concentrations of insurance risk.
(i) The Approved Share Incentive Plan (the SIP) Eligible employees qualify for awards under the SIP based upon the performance of the Group in each half-year against budget. The current maximum award for each half-year amounts to 600,000 shares (or a maximum annual award of £3,000 per employee if smaller). For the 2006 financial year, a maximum of 916,328 shares (2005: 1,181,565 shares) will vest under this scheme.
30. Related party transactions There were no related party transactions occurring during 2006 that require disclosure. Details relating to the remuneration and shareholdings of key management personnel are set out in the remuneration report, above. 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 adoption of all three new standards did not have a material impact on either the current year or comparative figures.