“ 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’.”
Group’s share of price comparison profit*1 £7.1 million profit (2016: £2.7 million profit)
*2 Refer to capital structure and financial position section later in the report for further information.
Allowing customers to have two or more cars on the same policy.
There is still a backdrop of uncertainty in our largest business, UK Car, due to the continued deliberations over the Ogden rate affecting large personal injury claims. We expect to see some conclusions on the way forward in 2018. In the meantime, we have taken a prudent approach and reflected the current discount rate in our reserves.
The Group’s second price comparison website Rastreator and US car insurer Elephant Auto.
Admiral Group was named the 6th Best Multinational Workplace in Europe
Over most of the last 20 years our costs have been lower than our competitors – by at least ten percentage points of premium. That’s the equivalent of £50 less expense for a typical policy, and over £200 less for a higher premium policy. And that’s one of the main reasons Admiral’s brands come top on the UK’s price comparison sites more often than any of our competitors.
Once the model is (hopefully) approved (and that shouldn’t be expected until well into 2019), the Board will make an assessment of the capital position and work out what, if anything, that means for potential returns of surplus capital to shareholders.
Sharing risk with co- and reinsurance partners is an important part of Admiral’s business and these relationships are underpinned by strong underwriting results. Sharing risk allows Admiral to only provide capital backing for a minority of its business; this results in a superior return on capital for Admiral shareholders whilst also providing protection for losses.
In the 2016 Annual Report, we disclosed a profit number (£390 million) that the Group would 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.
• Very positive progress in converting our Gladiator van insurance broker portfolio to being underwritten within the Group
The capital add-on to the Standard Formula for 2018 is subject to the usual regulatory approval process. The Group plans to submit an application for approval to use an internal model to calculate capital requirements during 2018.
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.
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 retained by Admiral. Other factors affecting the increase are increases in average premium and customer numbers.
25 years ago, I was… …7 years old, and around this time of the year I learnt for the first time how to ski!
Loss ratios are developing well and show a consistent downtrend across 2016 and prior underwriting years.
• A record profit in the Group’s Italian business ConTe, which also grew its customer base to 0.5 million customers
2017 has been a year of challenge and growth for Rastreator. A major challenge was to improve price accuracy and conversion in our core business while maintaining growth in all business lines. And we can proudly say we have achieved both. Conversion is at its historical maximum while we keep on improving revenues, sales and profit. Challenges remain: improving customer experience, maximising profitability and growing revenue for other business lines.
Compare.com had the wonderful combination of increasing volumes while at record low acquisition costs in 2017. This allowed us to achieve marketing break-even early in the year and continue it for the rest of 2017. We added a variety of key carriers including nationally recognized Travelers and Allstate’s Encompass brand. Equally important, our existing panel members expanded through state additions, risk spectrum expansions, and the addition of the homeowners product in nearly half our states.
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 part of Admiral’s future and hope to be a meaningful 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.
Admiral’s Price Comparison businesses have grown 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).
• Continuous appraisal of and investment in staff, systems and processes.
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.
As well as UK Motor, long-term arrangements are also in place for UK Household and International businesses.
Admiral purchases a range of insurance covers to mitigate the impact of a number of operational risks.
Chief Executive Officer 27 February 2018 37Admiral Group plc · Annual Report and Accounts 2017
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 and includes great customer comments. This is shared across the whole Group to inspire and motivate.
Background and experience: Geraint’s responsibilities include finance, actuarial, investments and investor relations. He joined Admiral in 2002 and held a number of senior finance positions including Head of Finance, before being promoted to Deputy Chief Financial Officer in January 2012 and Chief Financial Officer in August 2014.
Current Appointments: Chief Executive Officer and Director of White Mountains Insurance Group, Ltd.
Justine Roberts5 7 3/3 *1 Alastair Lyons stepped down from the Board with effect from 26 April 2017.
The table below details the length of service of the Chairman and each of the Non-Executive Directors and illustrates the balance of experience and fresh perspectives.
regularly updated on the Group’s business; legal matters concerning their role and duties; the competitive environments in which the Group operates; and any other significant changes affecting the Group and the industry of which it is a part.
The Committee also had presentations and discussions on a range of important issues including: Forthcoming IFRS accounting changes , controls in overseas subsidiaries, Group Minimum Standards and Solvency II Technical Provision and other Solvency II preparatory phase reporting requirements
Significant Issues considered by the Committee After discussion with both management and the external auditor, the Audit Committee determined that the key risks of misstatement of the Group’s financial statements related to insurance liabilities and profit commissions.
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 movements in the operation’s risk profile, any risks that have arisen and any emerging risks. Risk Management Committees also assess and monitor any regulatory issues, ensuring that their resolution and the action taken are appropriately recorded. In the UK, the Risk Management Committee receives regular information on conduct risk, such as complaint 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.
The Group has a ‘three lines of defence’ approach to internal control, including those controls that relate to the financial reporting process. The Board recognises that the day-to-day responsibility for implementing policies lies with the senior management, the ‘first line of defence’, whose operational decisions must take into account risk and how this can be controlled effectively.
The Group has in place a policy of recruiting well ahead of impending retirements in order to ensure continuity of knowledge and Board dynamics. In 2017 the Board initiated a 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, the Committee identified Andy Crossley as best placed to fill the role identified.
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 in both size and geography since the previous review in 2004, and prevailing trends in FTSE incentive design and pay levels, particularly in the context of the Group maintaining base salary levels for most senior management positions at the lower end of our peer group.
Where increases are awarded in excess of that for the general employee population, the Committee will provide the rationale in the relevant year’s Annual Report on Remuneration.
Considerations of conditions elsewhere in the Group The 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 when reviewing executive remuneration.
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 not participate in the DFSS.
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, the governance report includes the Directors’ statement on the viability of the Group over a three-year period.
A further special resolution passed at that meeting granted authority to the Directors to allot equity securities in the Company (up to a maximum of 5% of the issued share capital of the Company) for cash, without regard to the pre-emption provisions of the Companies 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 for the following year.
• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU
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).
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 group materiality for the 2017 audit (2016: 70%).
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 are prepared is consistent with the financial statements; and
Total comprehensive income for the period attributable to: Equity holders of the parent 334.8 271.3
The segment relates to the Group’s price comparison businesses: Confused.com in the UK, Rastreator in Spain, LeLynx in France and Compare.com in the US. Each of the price comparison businesses are operating 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.
Consolidated net assets 581.7 5. Premium, claims and profit commissions 5a. Accounting policies
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 the occurrence of man-made catastrophe or natural weather events.
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.
The table below shows the development of UK Car Insurance loss ratios for the past five financial periods, presented on an underwriting year basis.
11. Share capital The Group’s capital includes share capital and the share premium account, other reserves which are comprised of the fair value reserve and foreign exchange reserve, and retained earnings.
5. Financial assets and liabilities The Company’s financial instruments can be analysed as follows: £m
Corporation tax thereon at effective UK corporation tax rate of 19.25% (2016: 20.00%) 51.2 29.6