ConTe recorded its second consecutive year of profit in 2015. Despite challenging market conditions – prices decreasing by 6% – we grew the customer count by 11% to 315,300.
Interest and investment incomeInterest and investment income in 2015 was £6.5 million (2014: £3.7 million). The increase represents a full year’s interest on the gilt holdings purchased with the proceeds of the debt issue.
I would sum up all our results since 2000 as being akin to a seedless watermelon: tasty and refreshing but somehow you always wonder ‘how can that work in the future?’ Every year Admiral’s customer growth and profit growth always seems to take people a bit by surprise. Despite the fact that we’ve prospered in good economic times and bad economic times; that we’ve prospered when prices for car insurance were on the rise and when they weren’t; that we’ve prospered even allowing for investment in new operations outside the UK; and that we’ve done it all organically, without any acquisitions. Despite this history we seem to surprise people when we pop up out of the ground each spring with better results than the year before.
There were other big successes in the Group in 2015, but I will let others tell those stories. There were also some things that didn’t go according to plan. I’ll definitely let others tell those stories!
The turn of the market, strong claims experience, and our low cost culture allowed our UK car insurance business to improve profits by 11% to £443 million.
A business is as good as its people and we at Admiral are hugely fortunate to have great people whose commitment, energy and initiative allows us to create great value for our shareholders.
September ConTe signed an important partnership with Italian football league Serie B and became the official sponsor for the 2015–2016 season
Elephant Auto in the US achieved strong growth and is preparing to expand its operations into more states
UK Price Comparison goals for 2016 Build brand preference to strengthen market position in core products
In a year of leadership transition, what have you been talking about?
A Henry: The development of the culture is something I’ve watched with great pride. We are such a better company today than we were 20-odd years ago. But we’ve taken the things that just seemed like common sense to us then, like treating all staff with respect, not being afraid to say ‘thank you’, having a good time in the office while still working hard … and we’ve made those the corner-stones of how we work.
Co-insurance and reinsurance arrangements expose Admiral to two principal risks: • The risk of reduced availability of co-insurance and reinsurance arrangements.
Excluding reserve releases, the loss ratio increased to 87.7% (2014: 86.9%), largely due to the impact of lower premiums earned in 2015.
The projected ultimate combined ratio (ultimate loss ratio plus written expense ratio) for Admiral for the 2015 accident year is 97%, in line with 2014. The reported combined ratio for the UK market (excluding Admiral) for 2014, excluding reserve releases, was 111%.
International Car Insurance goals for 2016 Admiral Seguros to increase market share and grow consumer awareness of Qualitas brand
*³ Adjusted combined ratio, net of Other Revenue is calculated on Admiral’s net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of Other Revenue would be 2015: 136%; 2014: 134%; 2013: 141%.
Many of the potential causes of claims shocks are outside the control of Admiral and the focus is, therefore, on how to prepare for and react to the occurrence of such events.
For very large claims Admiral purchases excess of loss reinsurance, which mitigates the loss.
The Group continues to work to establish similar capability and expertise in its newer UK and international businesses.
Sunday Times Best Companies To Work For Special Award 2015 – Best Leader – Henry Engelhardt
The results of the review were presented by the Chairman to the Board in December 2015. Overall the review found that the Board continued to work effectively and that each Director contributes and demonstrates full commitment to his/her duties.
All Committees are chaired by an independent Non-Executive Director, except the Nomination Committee which is chaired by the Chairman of the Board, and comprise a majority of independent Non-Executive Directors. Appointments to the Committees are made on the recommendation of the Nomination Committee and are for a period of up to three years, which may be extended for two further three year periods, provided the Director remains independent. The Committees are constituted with written Terms of Reference that are reviewed annually to ensure that they remain appropriate and reflect any changes in good practice and governance. These Terms of Reference are available on request from the Company Secretary and can also be found on the Company’s website: www.admiralgroup.co.uk. Directors are fully informed of all Committee matters by the Committee Chairmen reporting on the proceedings of their Committee at the subsequent Board meeting. Copies of Committee minutes are also distributed to the Board. Committees are authorised to obtain outside legal or other independent professional advice if they consider it necessary. The Chairman of each Committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the Committee’s activities.
Report of the Audit Committee Statement from Colin Holmes, Chairman of the Audit Committee
The key areas of focus for the Committee during the year have been to provide support to the Board in its oversight of financial reporting and the control environment across the Group. The setting of insurance claims reserves continues to be a key accounting judgement in the Group’s financial statements, and the Committee placed considerable focus on reviewing the recommendations of management and discussing the key reserving judgements with the Group’s independent actuaries and external auditor. In addition, the Committee continued to monitor the appropriateness of the Group’s system of risk management and internal control as well as the robustness of the internal and external audit processes.
Regular reports have been received on the risks and progress of the major change programme responsible for the implementation of a new policy administration system and data warehouse, known as Project Bolt. The first phase of the programme was successfully implemented in December 2015.
Reviewed the Group’s proposed dividend level, capital plan and capital buffer in line with the capital policy.
As I noted in my letter last year, the Company undertook in late 2014 and early 2015 a comprehensive review of the Group’s DFSS (Discretionary Free Share Scheme) rules. A considerable amount of the Remuneration Committee’s time in early 2015 was spent consulting with our top shareholders and other stakeholders on the proposed revisions to the DFSS. The proposed changes to the DFSS were incorporated into the Group’s Remuneration Policy which was put to shareholders for approval at the Group’s AGM in April 2015 and subsequently approved with 96% voting in favour. I remain confident that the Group’s Remuneration Policy supports the view, held by the Board, that wide share ownership drives outstanding performance and promotes the long term success of the business whilst remaining in alignment with shareholder interests.
• Reviewing the Committee’s Terms of Reference and recommending amendments to the Board for approval.
The Directors’ Remuneration Policy was approved by shareholders at the Annual General Meeting (AGM) on 29 April 2015, and took effect from that date. This section presents a summary of the approved policy, including the policy table and notes, pay-for-performance charts, the recruitment policy, and Non-Executive Director appointments. The full policy can be found on pages 60 to 65 of the 2014 Annual Report and Accounts.
DFSS bonus To further align incentive structures with shareholder interests through the delivery of dividend equivalents.
Awards were made under the DFSS to Kevin Chidwick on 10 October 2013. Vesting is 100% dependent on the Company’s EPS performance in excess of a risk-free return over a three-year period commencing on 1 January 2013, and the standard performance targets for the 2013 DFSS awards apply.
Based on performance to 31 December 2015, 38% of Kevin Chidwick’s 2013 DFSS award will vest in October 2016, subject to his continued employment on the vesting date. Based on performance to 31 December 2014, 36,402 DFSS shares vested to Kevin Chidwick in October 2015. The total value at vest was £561,646, based on a share price of £15.43. Kevin Chidwick’s unvested 2014 DFSS shares, awarded to him when he was CFO, remain 100% subject to performance.
Chairman and Non-Executive Directors Fees for the Board Chairman and other Non-Executive Directors were reviewed in January 2016, and increases effective from 1 January 2016 are as follows: 2016 fee (p.a.) Previous fee (p.a.)
CFO single figure of remuneration £632,312 £1,269,535 £1,048,130 £1,431,218 £1,444,443*³ £1,204,164*³,4 £363,551*4 £495,058
Details of former Chief Financial Officer Kevin Chidwick’s interests in shares under the DFSS and SIP can be found in the 2014 report.
Directors and their interests The present Directors of the Company are shown on pages 42 to 43 of this Report, whilst Directors’ interests in the share capital of the Company are set out in the Remuneration Report on pages 67 to 68.
Additional information for shareholders Where not provided previously in this Directors’ Report, the following provides the additional information required for shareholders as a result of the implementation of the Takeovers Directive into UK law.
At 31 December 2015, the Company’s issued share capital comprised a single class of shares referred to as ordinary shares. Details of the share capital and shares issued during the year can be found in note 11d.
Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.
Independent auditor’s report to the members of Admiral Group plc only
The Group audit team instructed two component auditors as to the significant risk focused audit procedures to be performed. The procedures on the remaining components were performed by the Group audit team. The Group audit team approved the component materialities, which ranged from £480,000 to £14,000,000, having regard to the mix of size and risk profile of the Group across the components.
5. We have nothing to report on the disclosures of principal risks Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to: • the Directors’ statement of the longer-term viability statement on page 55, concerning the principal risks, their management, and, based on that, the Directors’ assessment and expectations of the Group’s continuing in operation over the three years to 2018; or
Other comprehensive income for the period, net of income tax (10.0) 13.9
International Car Insurance The segment consists of the underwriting of car insurance and the generation of revenue from additional products and fees from underwriting car insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in Italy, L’olivier – assurance auto in France and Elephant Auto in the US. None of these operations are reportable on an individual basis, based on the threshold requirements in IFRS 8.
Segment revenues The UK and International Car Insurance reportable segments derive all insurance premium income from external policyholders. Revenue within these segments is not derived from an individual policyholder that represents 10% or more of the Group’s total revenue.
Information about geographical locations All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International Car Insurance reportable segment shown on the previous pages. The revenue and results of the three international Price Comparison businesses, Rastreator, LeLynx and compare.com are not yet material enough to be presented as a separate segment.
Reinsurance assets include balances due from reinsurance companies for ceded insurance liabilities. Amounts recoverable from reinsurers are estimated in a consistent manner with the outstanding claims provisions or settled claims associated with the reinsured policies and in accordance with the relevant reinsurance contract.
Total insurance liabilities – net 1,416.3 1,267.6 *¹ Gross claims outstanding at 31 December 2015 is presented before the deduction of salvage and subrogation recoveries totalling £28.4 million.
The maturity profile of gross insurance liabilities at the end of 2015 is as follows: < 1 year £m 1–3 years £m > 3 years £m
The maturity profile of gross insurance liabilities at the end of 2014 was as follows: < 1 year £m 1–3 years £m > 3 years £m
International and other net claims incurred (28.3) (54.2) (59.9) (70.2) (76.1)
De-recognition of financial assets A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers the asset and all the attaching substantial risks and rewards relating to the asset to a third party.
Notes to the financial statements continued For the year ended 31 December 2015 8. Expenses 8a. Accounting policies
The £63.4 million (2014: £47.5 million) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.
(ii) The Discretionary Free Share Scheme (the DFSS) continued Number of free share awards committed at 31 December 2015
Bell Direct Limited England and Wales Ordinary 100 Dormant comparenow.com Insurance Agency LLC United States of America Ordinary 71.10 (indirect)
Elephant Insurance Company United States of America Ordinary 100 Insurance Company
The Company has taken advantage of the following disclosure exemptions under FRS 101: • FRS 101.8 (d): the requirement of IFRS 7 Financial Instruments: Disclosure to make disclosures about financial instruments.