• The business has grown consistently and profi tably since being set up from scratch in 1993, and now insures 1.9 million cars; around 7% of the UK’s 26 million total
Highlights 04 Chairman’s statement 06 Chief Executive’s statement 10 Business review 32 Governance 51 Financial statements
• Extend this low-risk philosophy to our investment strategy, only employing cash deposits or money market funds
The core part of the Group remains the UK Car Insurance business, which generated 87% of turnover and 96% of pre-tax profi t. The business grew signifi cantly in 2009 and continues to build market share whilst remaining very profi table.
Turnover rose by 18% to £1.08 billion from £0.91 billion. This was largely driven by the same rate of growth in the number of customers across the Group, up to 2.08 million from 1.75 million. The Group also now has more than 120,000 customers outside the UK.
Admiral’s core UK Car Insurance business employs over 2,600 people in South Wales, Halifax
In the UK, Admiral extended the current agreement for two further years, to at least the end of 2016. Munich Re will retain 40% of the UK risks for the additional years. Admiral has committed to retain at least 25% for the duration of this agreement whilst the allocation of the balance is at Admiral’s discretion.
Net income from ancillary products and services continues to be a major source of UK profi ts. UK net ancillary profi t increased (to £106.3 million from £89.0 million) at a faster rate than vehicle growth (19% v 17%) due to a small increase in the level of contribution per vehicle insured (to £72 from £71). Again, there were no major changes in the component parts of ancillary profi t.
Success in delivering against the strategy is measured against a large number of key performance indicators which are common to the UK and international businesses. These include quote volumes, conversion rates, sales, income per sale, revenue per customer and cost per sale.
• Confused.com is an insurance and fi nancial services comparison website
Confused has continued to develop its product range beyond car insurance and the proportion of revenue generated from non-motor has once again increased, despite an 18% increase in motor revenue itself: Non-motor revenue
In the USA, Admiral’s US insurer retains one third of the risks generated from January 2010, with the remaining two thirds split equally between Hannover Re and Munich Re. Both reinsurers bear their proportional share of expenses and underwriting, subject to certain caps on the reinsurers’ total exposures.
The Group continues to generate signifi cant amounts of cash, enabling the Group to pay the majority of after-tax profi ts to shareholders in the form of dividends. The Group has no debt.
Earnings per share Basic earnings per share rose by 7% to 59.0 pence from 54.9 pence. This rate of growth is in line with pre-tax profi t growth.
During 2009 changes were made to a number of procedures as a result of the monitoring contained within the report. For example, where complaints have been escalated to the Financial Ombudsman Service (FOS) the percentage where FOS found in favour of the Company dropped to 67% during 2009. As a result the Quality department have been looking at the internal procedures that cause complaints to be escalated to FOS and are liaising directly with the FOS. On a monthly basis TCF measure scores have resulted in script changes and extra training.
Provident Life Offi ce. Martin is also a Non-Executive Director of IG Holdings plc, Homeserve Membership Limited and
Plc. He was the Group Managing Director of Misys plc between 1998 and May 2004 having been on the Board of the Company since 1989. Prior to joining Misys, he was
Group results and dividends The profi t for the year, after tax but before dividends, amounted to £156.9 million (2008: £144.9 million).
There are a number of agreements that alter or terminate upon a change of control of the Company following a takeover bid, such as commercial contracts. None is considered to be signifi cant in terms of their impact on the business of the Group as a whole except for the long-term co-insurance agreement in place with Great Lakes Resinsurance (UK) Plc. Details relating to this agreement are contained in the Business review.
Auditor The Company’s auditor, KPMG Audit Plc, has indicated willingness to continue in offi ce and resolutions to reappoint it and to authorise the Directors to fi x its remuneration will be proposed at the Annual General Meeting.
Board Effectiveness During the year the Board carried out a detailed evaluation of itself, the Chairman, and its committees in order to identify areas for improvement to ensure that that the Group’s strategy is implemented as effectively as possible. The process was led by the Chairman and facilitated by the Company Secretary and consisted of the completion of a comprehensive questionnaire evaluating the Board and committees’ processes; their effectiveness; and where improvements could be considered. Completion of the questionnaire by each Director was followed by one-to-one discussions between each Director and the Chairman where the Board’s role and structure, process, relationships, and any emerging issues were discussed.
The Committee has formal terms of reference which were reviewed during the year and were approved by the Board in February 2010. The Committee met on two occasions during 2009.
Net revenue 507.5 422.8 Insurance claims and claims handling expenses (283.1) (213.8)
In addition, it is not anticipated that any of the other improvements, amendments to standards, interpretations or revisions of current standards above will have a material impact on the Group’s fi nancial statements in future periods.
The classifi cation 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 of acquisitions prior to 1 January 2004, goodwill is included at the transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP, which was tested for impairment at the transition date. On transition, amortisation of goodwill has ceased as required by IAS 38.
h) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other shortterm deposits with original maturities of three months or less.
Non-UK Car Insurance The segment consists of the underwriting of car insurance and the generation of ancillary income outside of the UK. It specifi cally covers the Group operations Balumba.es in Spain, AdmiralDirekt.de in Germany, ConTe.it in Italy and for the fi rst time in 2009, Elephant.com in Virginia, USA which launched in October 2009. None of these operations are reportable on an individual basis, based on the threshold requirements in IFRS 8.
Other revenue and profi t commission 188.6 80.5 4.2 10.6 283.9
Improvements to short leasehold Computer Offi ce Furniture buildings equipment equipment and fi ttings Total £m £m £m £m £m
Financial year ended 31 December: Analysis of claims incurred (Net amounts): £m £m £m £m £m £m