Accessible, clear, and formatted to meet the requirements of each individual: our approach to communication reflects our broader commitments to our customers, ensuring they know exactly what to expect should they ever need to make a claim. What’s more, we provide a wide range of platforms for our customers to stay in touch with us, including through Facebook chat, webpage chatbots, and a dedicated customer portal to keep it green by going digital rather than relying on carbon-intensive post.
It’s often said that charity begins at home, and with our Community Chest, we aim to provide the necessary funding that can breathe life into all manner of community projects. As applications are submitted by staff who are personally involved in all manner of projects, from drama groups to sports clubs, we can be certain that our funding is being spent where it’s most needed.
Sometimes charity takes the form of time and expertise. We’re proud to say that we help those in search of a career or who want to make their own way in life by providing CV workshops, careers talks, and work experience to schools, local job centres, and Prince’s Trust beneficiaries from time to time.
Admiral Group is one of the UK’s largest and most recognised car insurance providers, with market leading financial results.
Respond to market conditions through effective pricing and growing at the right time.
A substantial and effective collective effort by the Group and the Spanish regulatory authorities, saw us set up a structure that is robust in the face of any Brexit eventuality (or at least, any eventuality reasonably envisaged at the time of writing !) both for our “EU” price comparison operations in France and Spain and for our “EU” insurers in France, Spain and Italy. This was achieved with near zero disruption to, or loss of, any of our now over a million policyholders across France, Italy and Spain. The 2018 P&L cost of circa €3.5 million, is a relatively trivial investment to protect the long-term value being created in our now profitable EU ventures.
I’m hugely grateful for the work of everyone involved - the cooperation of multiple regulators; the invaluable support of numerous advisers. But the main thanks go to our teams – in Spain, Italy, France, Gibraltar and the UK for all the significant effort, commitment and determination shown over the past year and a bit on what was a very ambitious (and at times seemingly impossible) plan. Amazing result and thank you all!
Group’s Share of profit before tax*1 (Ogden – 0.75%) 413.3 405.4 284.3
Group’s Share of profit before tax*1 (Ogden 0%) 479.3 405.4 284.3
• Price Comparison – including Confused.com (UK), LeLynx (France), Rastreator (Spain), Compare.com (US)
The investments we’ve made in technology in recent years, not least the successful implementation of our Guidewire policy platform, are now starting to reap benefits for us and our customers. It’s allowed us to undertake more sophisticated analytical processes to improve pricing accuracy and fight against claims fraud, but most importantly it has enabled us to further improve the great service we provide to customers and claimants.
*5 Commuted reinsurance shows releases, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but has since been commuted and hence reported through underwriting and not profit commission.
The quota share reinsurance arrangements result in all motor premiums and claims that are ceded to reinsurers being included in the Group’s financial statements, but these figures are adjusted to exclude the reinsurer share, resulting in a net result for the Group.
During the first half of 2018, all quota share contracts relating to the 2016 underwriting year were commuted, along with one remaining contract relating to the 2015 underwriting year (the other quota share contracts relating to the 2015 year having been commuted in the second half of 2017). There were no commutations during the second half of 2018. At 31 December 2018, quota share reinsurance contracts remained in place for the 2017 and 2018 underwriting years.
Refer to note 5d(v) of the financial statements for analysis of reserve releases on commuted quota share reinsurance contracts.
Other revenue per vehicle net of internal costs £57 £54 £54 *1 Included in underwriting profit in income statement but re-allocated to Other Revenue for purpose of KPIs.
Spanish market loss ratios finished 2017 at their lowest level for almost a decade, and we saw several competitors decrease prices at the beginning of 2018. Whilst this headwind affected volumes in the first half of the year, we regained momentum in the second half, improving conversion through price comparison sites and reaching record levels of policy retention. We finished the year with more than 250,000 customers, up 12% compared to 2017.
The key features of the International Car insurance results are: • An aggregate loss of £1.1 million reflecting a large improvement from the 2017 loss of £14.3 million; • A record profit in the Group’s Italian business ConTe, which also grew its customer base to 0.6 million customers; • A significant improvement in Elephant Auto’s result (reduced loss from £12.5 million to £7.5 million year-on-year); • An improved combined ratio (net of other revenue) of 105% (2017: 109%) reflecting reduced acquisition costs, positive back year development and improvements in pricing and operational efficiencies; and
It has been challenging in our relationships with insurers but the steps we are taking are improving the experience and therefore conversion.
6. Staff from People Services and Communications at the Wales Air Ambulance airbase in Llanelli, finding out how we can help them promote their fundraising.
The Board, with support from the Group Risk Committee and the Group Risk Department, undertakes a regular and robust assessment of the principal risks. These risks have been summarised as those which would threaten its business model, future performance, liquidity and solvency. These principal risks have not materially changed over the previous 12 months, although it is noted that as the Group continues to diversify away from UK Motor, the key risks to the new businesses are expected to become more material and begin to feature more prominently within the Group’s principal risks and uncertainties.
Higher claims costs and loss ratios, resulting in reduced profits or underwriting losses.
Market volatility and adverse developments to macroeconomic factors can lead to increased risk of defaults on the loans business.
Admiral only conducts business with reinsurers of appropriate financial strength. In addition, most reinsurance contracts are operated on a funds-withheld basis, which substantially reduces credit risk, as Admiral holds the cash received as collateral.
We feel that by taking action now we can all play a role in mitigating many of the most severe predictions for climate change while laying foundations for a sustainable and optimistic future.
World reduction in plastic cup use in UK offices of funding matched in
A willingness to learn and develop independently is a great attribute for any employee, and something we value so much that we implemented our Buy a Book Scheme. Employees submit requests for books that they feel will help them cultivate and grow their careers and we buy them. This year alone we purchased 3,416 books for our staff.
Karen Green is the former CEO of Aspen UK, comprising the principal UK insurance and reinsurance companies of Aspen Insurance Holdings. Other senior Aspen positions included Group Head of Strategy, Corporate Development, Office of the Group CEO and a member of the Group Executive Committee for 12 years. Prior to that, she held various corporate finance, M&A and private equity roles at GE Capital Europe and Stonepoint Capital having started her career in investment banking at Baring Brothers and Schroders.
Owen was Chief Investment Officer of Equistone from 2011 to 2017. He previously led several management buy-outs for BPE in the insurance and consumer finance sectors, including BPE’s participation in the Management Buy Out of Admiral and was a director of Admiral from 1999 to 2004. He also led BPE’s own buy out from Barclays to form Equistone in 2011.
The Board met on seven occasions in 2018 with all these meetings being held over two days and one of the meetings being a separate strategy meeting held offsite.
THE ROLES OF THE CHAIRMAN, SENIOR INDEPENDENT DIRECTOR AND CHIEF EXECUTIVE
The Board has approved a statement that sets out the clear division of responsibilities between the Chairman and Chief Executive Officer. This and matters reserved for decision by the Board are reviewed annually.
Understanding the views of customers also remained a key area of focus for the Board. A specific session at the Board in April 2018 considered feedback from customers on the Admiral brand, the customer journey experience and how this could be developed to enhance the experience for the customer.
All Committees are chaired by an independent Non-Executive Director, except the Nomination and Governance 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 and Governance 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. An evaluation of the performance of each Committee against the duties set out in each terms of reference is carried out annually.
“ I am pleased to set out in this report an update on the main activities of the Audit Committee in 2018.”
The Committee is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust.
The Group last completed an audit tender in 2016 when, following the completion of a transparent and independent audit tender process, Deloitte LLP were recommended to shareholders as the Group’s auditor at the AGM in April 2016 and a resolution passed to that effect.
The Committee continues to focus on key operational risks that affect the Group. The governance of the risk event process has been enhanced, providing greater assurance to the Committee regarding the management of major risk events. The Committee has continued to spend time reviewing any major risk events reported during the year as per the Group Risk Management Policy.
The threat of Brexit to the viability of the insurance and price comparison businesses in Europe has been mitigated through the restructuring of those businesses and the establishment of new insurance and intermediary companies in Spain. Portfolio transfers have been implemented to ensure ongoing services for existing and future customers in Europe. In the UK, preparations are well advanced for the provision of Green Cards to customers for travel in Europe, supply chain changes and communications to customers. We remain reliant on the regulatory assurances given regarding the timely conclusion of Brexit negotiations and associated UK law changes by government in order to continue business in the UK and Gibraltar, without the need to implement planned mitigating actions.
Talent management continues to be a key area of focus and the Board, at its meeting in June 2018, considered talent management within the Group and identified where there were individuals who, with further experience and guidance, might be capable of moving into particular senior management roles. There have also been several Non-Executive-Director-only sessions during which the Group’s internal talent management capabilities have been discussed and considered. The Committee remains satisfied that succession plans for Directors and senior management are in place to ensure the continued ability of the Group to implement strategy and compete effectively in the markets in which it operates.
The Annual Report on Remuneration (subject to an advisory vote) will be put to our shareholders at the AGM on 25 April 2019. We do hope that you vote in favour of the report. I am available to meet and discuss our Remuneration Policy and Annual Report on Remuneration with shareholders.
• Individual performance and effectiveness, and experience of the individual in the role.
To incentivise shareholder value creation, in particular in the form of dividends, management participate in a bonus scheme which directly links their awards to dividends paid to shareholders. Bonus is calculated to be equivalent to dividends that would have been payable during the year on all outstanding DFSS shares awarded but not vested, including salary shares for the CFO.
The Company’s Policy is to limit termination payments on termination to pre-established contractual arrangements. In the event that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between the Company and the employee, as well as the rules of any incentive plans. Under normal circumstances, Executive Directors are entitled to receive termination payments in lieu of notice based on base salary and compensation for loss of benefits. The Company has the ability to pay such sums in instalments, requiring the Executive Director to mitigate loss over the relevant period. The notice period for all Executive Directors is one year.
Annette Court 3 years 21 March 2012 26 April 2017 Three months
Base salary • Annual cash salary and salary shares (CFO only) for 2019 • Same as other scenarios but with 50% share price appreciation on salary shares
5. Alastair Lyons retired from the Board with effect from 26 April 2017.
8. The 2018 fees for Andy Crossley and Michael Brierley include additional fees in relation to their positions as Chairman of the Admiral Financial Services Limited and EUI Limited Board of Directors respectively.
Salaries for the Executive Directors in 2019 will be determined in line with the proposed Remuneration Policy, subject to shareholder approval. David Stevens’ salary will be increased by 2.5% effective 1 September 2019. For 2019, the CFO’s cash salary will be £251,125, an increase of 2.5% effective 1 January 2019, and he will continue to be granted an award of 5,000 salary shares, unchanged from 2018. The salary share award will vest after three years subject to continued employment. An additional two-year holding period will apply, during which time shares may not be sold, save to meet income tax, NI or other regulatory obligations. Malus and clawback provisions will apply during the vesting and holding periods. The salary share award is not included in base salary when calculating the CFO’s pension benefit.
105Admiral Group plc · Annual Report and Accounts 2018 10-YEAR TSR PERFORMANCE: ADMIRAL VS. FTSE 100 AND FTSE 350 INDICES
CURRENT CFO GERAINT JONES’ INTERESTS IN SHARES UNDER THE DFSS AND SIP AND SALARY SHARE AWARDS (AUDITED)
Admiral Group gives full and fair consideration to applications for employment made by those with disabilities, having regard to their particular aptitudes and abilities. Admiral Group’s UK businesses are Disability Confident Employers. This means they are recognised as going the extra mile to make sure disabled people get a fair chance.
Under Provision C.1.3 of the 2016 UK Corporate Governance Code, the Board is required to report on whether the business is a going concern. In considering this requirement, the Directors have taken into account the following: • The Group’s projections for the next 12 months and beyond, in particular the profit forecasts, regulatory capital surpluses and levels and sources of liquidity; • The risks included on the Group’s risk register that could impact on the Group’s financial position and performance, levels of liquidity and solvency over the next 12 months; and
Refer to page 76 in the audit committee report where this is included as a significant issue and note 3 and note 5d in the financial statements which refer to this matter.
In the light of the knowledge and understanding of the group and of the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Insurance claims and claims handling expenses recoverable from reinsurers 1,163.7 961.7
Finance costs paid, including interest expense paid on funding for loans (14.1) (11.6)
The application of these amendments has not had a material impact on the Group’s results, financial position and cash flows. Further information on the impact of the transition to IFRS 9 and IFRS 15 is provided below.
There were no changes to the classification and measurement of financial liabilities. Financial liabilities consist of subordinated notes, trade and other payables, loan backed securities through the Group’s special purpose entity (“SPE”), and a credit facility. These are measured at amortised cost under IAS 39 and this has not changed under IFRS 9.
The Group has opted to apply IFRS 15 retrospectively using the cumulative effect method i.e. by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity as at 1 January 2018. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. No differences in the accounting treatment between these standards have been identified in relation to the Group’s revenue.
Further information regarding the Company’s business activities, together with the factors likely to affect its future development, performance and position, is set out in the Strategic Report. Further information regarding the financial position of the Company, its cash flows, liquidity position and borrowing facilities are also described in the Strategic Report. In addition, notes 7 and 12 to the financial statements include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
The financial statements are prepared on the historical cost basis, except for the revaluation of financial assets classified as fair value through profit or loss or as available for sale. The Group and Company financial statements are presented in pounds sterling, rounded to the nearest £0.1 million.
*2 Eliminations are in respect of the intra-group trading between the Group’s price comparison and UK and International insurance entities and intra-group interest.
The Group’s primary business is the issuance of insurance contracts that transfer risk from policyholders to the Group and its co-insurance partners.
In addition, as mentioned above, excess of loss reinsurance programmes are also purchased to protect the Group against very large individual claims and catastrophe losses.
UK insurance net claims incurred (132.4) (184.1) (323.6) (344.3) (242.3) (192.8) (160.1) (306.7) (239.2) (229.6)
Investment return from financial assets comprises distributions as well as net realised and unrealised gains on financial assets classified as ‘fair value through profit or loss’ (FVTPL), interest income and net realised gains, net of impairment losses, from financial assets classified as “fair value through other comprehensive income” (FVOCI), and interest income on holdings in deposits with credit institutions (held at amortised cost).
Total investment and interest income*2 36.0 41.7 *1 Interest received during the year was £8.0 million (2017: £8.0 million).
For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity. All assets are of investment grade or above (e.g. BBB rated or higher). The credit rating of all assets is regularly monitored. As at the year end reporting date all financial assets are of investment grade and considered low risk under IFRS 9. These therefore remain within stage 1 and a 12 month expected loss is used to calculate the impairment provision required.
• Exposure at Default (EAD): The amount of balance at the time of default. For loans that are in arrears the EAD is taken as the current balance, for up to date loans the contractual outstanding balance in each future month is used.
For instruments in stage 1, the allowance is calculated as the expected credit losses that result from default events possible within 12 months after the reporting date. For instruments in stages 2 and 3 the allowance is calculated as the expected credit loss on a lifetime basis.
Loans are written off where there is no reasonable expectation of recovery. The Group’s policy is to write off balances to their estimated net realisable value. Write-offs occur on a case by case basis taking into account the operational position and the collections strategies.
A further principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by instalment payers. The impact of this is mitigated by the large customer base and low average level of balance recoverable. There is also mitigation by the operation of numerous high- and low-level controls in this area, including payment on policy acceptance as opposed to inception and automated cancellation procedures for policies in default.
Hedge accounting is applied when the criteria specified in IFRS 9 are met. In line with IFRS 9, the gain or loss on the hedged position as at the balance sheet date is recognised through Other Comprehensive Income.
Commission from the provision of insurance intermediary services is credited to revenue on the sale of the underlying insurance policy.
The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The average effective rate of tax for 2018 is 19.0% (2017: 19.25%). A further reduction to the main rate of corporation tax to 17% (effective from 1 April 2020) was enacted on 15 September 2016. This will reduce the Group’s future current tax charge accordingly.
Issued, called up and fully paid 290,502,737 ordinary shares of 0.1 pence 0.3 –
Preminen Online Fiyat Karşılaştırma Hizmetleri Anonim Şirketi 50 (indirect) Insurance intermediary
Prior year release/strengthening – commuted share 73.8 – – 73.8 – – – 73.8
The Company has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of 1 January 2018, which has resulted in changes in the accounting policies for classification and measurement of financial assets. There has been no adjustment to the amounts previously recognised in the financial statements or to the classification and measurement of financial liabilities.
183Admiral Group plc · Annual Report and Accounts 2018 1.5 Critical accounting judgements and key sources of estimation uncertainty
Interest payable of £11.3 million (2017: £11.3 million) was recognised in relation to the subordinated loan notes.
August 2017 (56.0 pence per share, paid October 2017) – 156.6
A final dividend of 66.0 pence per share (£188 million) has been proposed in respect of the 2018 financial year. Refer to the Chairman’s Statement and Strategic Report for further detail.
In January 2019, the operations and net assets of BDE Law Limited were transferred into Admiral Law Limited, with BDE Law Limited ceasing operations. As at 31 December 2018, both of these companies were 90% owned subsidiaries of the Company. Post transfer, the Company owns 95% of Admiral Law Limited, which in turn owns 100% of BDE Law Limited. There is no impact to the Group or Company on financial results in the year and no material impact is anticipated on results going forward as a result of this transfer.
Turnover Turnover is defined as total premiums written (as below), other revenue and income from Admiral loans. It is reconciled to financial statement line items in note 13a to the financial statements.
In 2018, Group’s share of Profit before Tax is presented on a ‘-0.75%’ and a ‘0%’ Ogden basis. -0.75% represents the Group’s share of estimated profit before tax at an Ogden rate of -0.75%, before the impact of the change in actuarial best estimate to an Ogden rate of 0% following Royal Assent of the Civil Liability Bill in 2018.
Claims reserves A monetary amount set aside for the future payment of incurred claims that have not yet been settled, thus representing a balance sheet liability.