Staff: Location offi ces: Admiral Group’s contact centre in Halifax, Nova Scotia, provides additional support to the UK business.
Qualitas Auto is the Group’s second Spanish car insurance brand, set up in 2012 and launched on TV in 2013.
2013 was yet another good year for Admiral, but it wasn’t a fl ashy year. It was the year of the baked potato, not brown bread ice cream.
Be opportunistic. Don’t ignore chances for expansion if we can provide consumers with something of value
Admiral’s employees are rewarded through incentive schemes that place emphasis on the quality of service provided to our customers.
Services fi rst call resolution refers to the % of inbound Customer Services calls that are resolved during the initial call.
Fun – by encouraging its employees to have a good time in work, the Group aims to increase levels of employee satisfaction and to enable its people to feel as though they can truly commit to a career within the Group, reinforcing their desire to produce excellent results
Gender diversity The table below provides a breakdown of the gender of Company Directors and employees at the end of the fi nancial year: Male Female
Earnings per share increased by 10% to 104.6 pence (2012: 95.1 pence). The increase is higher than the 7% increase in pre-tax profi t due to the lower effective rate of corporation tax in 2013. Customer numbers were 4% higher at the end of 2013 at 3.70 million (2012: 3.55 million).
The fi nal dividend is made up of a 24.4 pence normal element, based on the stated dividend policy of distributing 45% of post-tax profi ts, and a further special element of 26.2 pence. The special dividend is calculated with reference to distributable reserves after taking into account required solvency and a margin for contingencies.
Money market funds and short-dated debt securities 1,480.6 98.4 — 29.5 1,608.5
Taxation The tax charge reported in the income statement is £83.3 million (2012: £86.2 million), which equates to 22.5% (2012: 25.0%) of profit before tax. The lower average rate of taxation compared to 2012 predominantly results from reductions in the rate of UK corporation tax in 2012 and 2013. The average rate of UK corporation tax in 2013 was 23.25% (2012: 24.5%). The average rate will fall to 21.5% in 2014 and 20.25% in 2015.
Risk Aversion > Underwriting arrangements extended with Munich Re until the end of 2018 and panel of reinsurers until the end of 2016 > The Group has a conservative reserving policy, aiming to initially set reserves which include a prudent margin over actuarially determined best estimates > Investment portfolio continues to be low risk
Admiral, with its low expense ratio and higher quality of risk selection, grew and prospered. In the years Prior to Price Comparison (PPC), the marginal media cost of exposing your prices to an extra motorist was way above the average media cost. But in the PC world, the marginal cost is the same as the average cost, and that allowed us to grow from 2% to 11% of the UK market, while still maintaining a great expense ratio. To do so required rate structures good enough to withstand the merciless scrutiny of near total price transparency. So, as well as offering customers an unbeatable combination of convenience and cost effectiveness, price comparison sites also helped Admiral to grow rapidly.
UK Car Insurance profit before tax 313.6 372.8 393.9 *1 GAAP – Generally Accepted Accounting Practice.
There was an improvement in the reported motor combined ratio, which reduced to 83.0% (2012: 90.0%) (both figures exclude the impact of reserve releases from commuted reinsurance contracts). The improvement was driven by a reduction in the reported loss ratio to 68.0% (2012: 76.4%), which was due to materially higher reserve releases (£53.3 million v £16.3 million). These higher releases were possible due to the positive claims experience during 2012 and 2013 which resulted in improvements in the projected ultimate loss ratios, especially for the 2010 to 2012 underwriting years.
> L’olivier Assurances (Paris, France): the Group’s youngest (and smallest) international insurance business, launched in December 2010
International Car Insurance Strategy An important element of Group strategy is to exploit the knowledge, skills and resources attached to Admiral’s established UK businesses to promote expansion overseas in private car insurance. Admiral’s objective is to create profi table, sustainable and growing businesses, aiming where possible to minimise any negative fi nancial impact on the Group.
The Customer, The Customer, The Customer > Admiral insures 515,300 customers across its Spanish, Italian, American and French operations > The Group’s international businesses continue to take advantage of the experience gained by Admiral within the UK, including customer feedback received by the established UK businesses, to provide a comparable customer experience for overseas customers
France – Diane Larramendy CEO, LeLynx The French car insurance market is poised for change. Price comparison is growing quickly, with quote volumes up over 25% in 2013 from 2012. In the background lies the Hamon Law, which will simplify the current complicated process of changing insurer.
LeLynx was launched four years ago and now enjoys a market-leading position and is a profi table business in its own right. However, there are new entrants into the market that will both stimulate more French consumers to shop but also put pressure on LeLynx for the market leadership position.
“ UK Household Insurance was launched in December 2012 as Admiral Household.”
We believe that having a sound corporate governance framework enables effective and effi cient decision making and ensures that there is the right balance of skills and experience to assess and manage the risks in the markets in which the Group operates and inherent in the Group’s activities. However we also believe that good governance should be proportionate and that individual responsibility and accountability should not be lost within a multi-layered committee structure that distances senior management from the day-to-day reality of operational activity.
The Role of the Board The Board is the principal decision-making forum for the Group providing entrepreneurial leadership, both directly and through its committees, and delegating authority to the Executive team. The Board is responsible for organising and directing the affairs of the Group in a manner that is most likely to promote its success for the benefit of its members as a whole. The Board is accountable to shareholders for setting and achieving the Group’s strategic objectives; for the creation and delivery of strong sustainable financial and operational performance; for ensuring that in carrying out its duties the Group’s legal and regulatory obligations are being met; and for ensuring that it operates within appropriately established risk parameters. The Group’s UK regulated entities are responsible to the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) for ensuring compliance with the Group’s UK regulatory obligations and that dealings with the FCA and PRA are handled in a constructive, co-operative and transparent manner. Similar provisions apply in respect of the Group’s international businesses with regard to the relevant regulatory authorities in those overseas jurisdictions in which the Group also operates.
The Chairman is primarily responsible for the leadership and workings of the Board, setting its agenda, and monitoring its effectiveness. The Chairman is not involved in the day-to-day management of the business
13yrs 6mths 10yrs 9mths 9yrs 4mths 9yrs 4mths 7yrs 4mths 7yrs 4mths 3yrs 1mth 1yr 10mths 1yr 9mths
The key focus of the Committee’s work has, as usual, been to support the Board in its oversight of fi nancial reporting and the control environment across the Group. The key accounting judgement in the Group’s fi nancial statements continues to be the setting of insurance claims reserves, 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. The Committee also reviewed the Group’s Reserving Policy which, with appropriate amendments, was subsequently approved by the Board.
These issues were discussed with management during the year and with the auditor at the time the Committee reviewed and agreed the auditor’s Group audit plan; when the auditor reviewed the interim financial statements in August 2013 and also at the conclusion of the audit of these full year financial statements.
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. The membership of the UK Risk Management Committee includes the Group Chief Executive and the Chief Operating Offi cer. Membership of the other UK and overseas Committees includes the Managing Director of the operation. At each meeting, the Risk Management Committees consider signifi cant movements in the operation’s risk profi le, 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 management information.
The Company Secretary acts as secretary to the Committee. The Committee met four times during the year.
Membership at the end of the year was: Annette Court, Martin Jackson (Chair), requirements, including overseeing and challenging the design and execution of
The Risk Department defines and prescribes the financial and operational risk assessment processes for the business; maintains the risk registers; undertakes regular reviews of these risks in conjunction with line management; and records any actual losses or near misses that occur as a consequence of the realisation of risk. The Head of Risk has responsibility for ensuring that managers are aware of their risk management obligations, providing them with support and advice, and ensuring that the risk management strategy is properly communicated. Reports are produced showing the most significant risks identified and the controls in place. Internal Audit uses the risk registers to plan and inform their programme of audits around the most significant risks to the Group to ensure that the prescribed controls are in place and are operating effectively.
As the 10 year life of the DFSS expires in 2015 and given the changes in both size and geography to the business since fl otation in 2004, the opportunity will be taken in 2014 to review whether any changes need to be made to the DFSS scheme rules. These will then be put to shareholders for approval at the Group’s AGM in 2015.
In respect of existing Executive Directors, it is anticipated that salary increases will be in line with the increase for the general employee population over the term of this policy. In certain circumstances (including, but not limited to, a significant increase in role size or complexity) the Committee has discretion to make adjustments to salary levels to ensure they remain appropriate.
The Directors are proposing a final dividend for the year ended 31 December 2013 of 50.6 pence per share bringing the total dividend for 2013 to 99.5 pence per share (2012: 90.6 pence per share).
As the CEO does not participate in the DFSS, to provide a meaningful comparison, figures also included for the CFO. Annual bonus outcome has been excluded as Admiral does not operate any performance-based annual bonus schemes.
Under the Companies Act 2006 we are required to report to you if, in our opinion: > Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us > The parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns > Certain disclosures of Directors’ remuneration specified by law are not made > We have not received all the information and explanations we require for our audit
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the Consolidated financial statements from the date that control commences until the date that control ceases.
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 page. The revenue and results of the three International Price Comparison businesses, Rastreator, LeLynx and comparenow.com are not yet material enough to be presented as a separate segment.
(ii) Sensitivity of Recognised Amounts to Changes in Assumptions The following table sets out the impact on equity and profit or loss at 31 December 2013 that would result from a 1% movement in the UK loss ratios used for each underwriting year for which material amounts remain outstanding.
Subsequent Measurement Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised through the income statement.
6. Investments continued 6c. Financial Assets and Liabilities continued The maturity profile of financial assets and liabilities at 31 December 2012 was as follows: On demand £m
Credit Risk The Group defines credit risk as the risk of loss if another party fails to perform its obligations. The key areas of exposure to credit risk for the Group result through its reinsurance programme, investments, bank deposits and policyholder receivables.
The Group also holds a number of fixed-rate, longer term deposits with strongly rated credit institutions. These are classified as term and valued at amortised cost. Therefore neither the capital value of the deposits, nor the interest return will be impacted by fluctuations in interest rates.
No sensitivity analysis to interest rates has been presented on the grounds of materiality.
At each balance sheet date, the Group revises its assumptions on the number of shares to be granted with the impact of any change in the assumptions recognised through income.
Acquisition of insurance contracts 85.5 (51.8) 33.7 Administration and other marketing costs (Insurance contracts) 203.5 (150.5) 53.0
8f. Staff Share Schemes Analysis of share scheme costs (per income statement): £m £m
The consolidated cash flow statement also shows the gross charge in the reconciliation between “profit after tax” and “cash flows from operating activities”. The co-insurance share of the charge is included in the ‘change in trade and other payables’ line.
(i) The Approved Share Incentive Plan (the “SIP”) Eligible employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The current maximum award for each year is £3,000 per employee. The awards are made with reference to the Group’s performance against prior year profit before tax. Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
A final dividend of 50.6 pence per share (£139.6 million) has been proposed in respect of the 2013 financial year. Refer to the Chairman’s Statement and Strategic Report for further detail.
Net insurance premium revenue 403.9 483.0 445.9 498.9 12c. Reconciliation of Expenses Related to Insurance Contracts to Reported Group Expense Ratio
Refer to note 11 of the Consolidated financial statements for disclosure of related party transactions.
Profit commission A provision found in some reinsurance and coinsurance agreements that provides for profit sharing.