Corporate website The Group’s corporate website is at www.admiralgroup.co.uk. A range of information about the Admiral Group is presented, including the Group’s history; fi nancial reports and press releases; corporate responsibility and governance.
The energies of our UK team have been focussed on taking the appropriate action as regards pricing and risk selection to put this issue behind us, re-establish the same broad confidence in the future potential of our business that we ourselves have, and restore lost shareholder value. Knowing as well as I do the quality of our management and our staff I am very confident that 2012 will demonstrate their capability and commitment to achieve this.
• Strong, sustained, organic growth: 21% increase in vehicle base in 2011
The two principal advantages of the arrangements are: • Capital efficiency – The majority of the capital supporting the underwriting is held outside the Group. As Admiral is typically able to retain much of the profit generated via profit commission, the return on Group capital is higher than in an insurance company with a standard business model
The proportion underwritten by Great Lakes (a UK subsidiary of Munich Re) is on a co-insurance basis, such that 40% of all motor premium and claims for the 2011 year accrues directly to Great Lakes and does not appear in the Group’s income statement. Similarly, Great Lakes reimburses the Group for its proportional share of expenses incurred in acquiring and administering the motor business.
Total premiums written in the UK increased by 40% to £1,728.8 million (2010: £1,237.6 million) whilst the number of vehicles insured at year-end increased 21% to 2.97 million (2010: 2.46 million).
Ancillary contribution per vehicle £72 £77 £76 Other revenue per vehicle £77 £84 £84
• Entering into the Gibraltar regulator’s preapplication process for internal model approval
Revenue from other products contributed around 22% of revenue – in line with 2010.
Gladiator operating profit 2.4 2.7 2.8 Group net interest income 1.1 1.1 2.9 Share scheme charges (9.2) (15.0) (18.6)
Admiral has also been able to increase its market share significantly over recent years, and (to varying degrees) is dependent on the four main UK price comparison websites as an important source of new business and growth. The growth in this distribution channel could slow, cease or reverse, or Admiral could lose one or more of the websites as a source of leads.
The impact on the business would be a less profitable UK Car Insurance result and lower return on capital employed.
The Group is exposed to underwriting risk through its underwriting of motor insurance policies. There is a risk that claims costs could rise significantly above historic or expected levels, for a number of reasons including: a) Legislative changes (for example, periodic payment orders, Ogden discount rate changes)
27 Corporate Responsibility 32 The Admiral Group Board 34 Directors’ report 37 Corporate Governance 46 Remuneration report 52 Independent auditor’s report to the members of Admiral Group plc
The Column is a Group wide monthly newsletter issued to staff showcasing a broad range of activities from across the Group. The Column focuses on our staff with content contributed by staff from all levels from across the company. The magazine focuses on staff achievements and fun and charitable causes which our staff are involved in, whether through work or outside of it.
We have a really simple approach to Equality. Everyone should be treated the same. There are no executive dining rooms, no company cars, no dress code, and everyone has their own desk. Fundamental to equality and also important for Reward and Recognition is the share ownership scheme.
Every department has its own set of quality measures to gauge performance. The measures are updated each year to challenge departments to make continual improvements. The programme is reported every month in the internal Company magazine Column and awards are presented each year to the best departments (this is in addition to the Top Ten Department awards highlighted above).
He has previously been Chief Executive of the National Provident Institution and of the National & Provincial Building Society, Managing Director of the Insurance Division of Abbey National plc, and Director of Corporate Projects at National Westminster Bank plc. Alastair was also a Non-Executive Director for the Department for Transport and the Department for Work and Pensions.
Colin has also been an independent Non-Executive Director on the board of Bovis Homes Group plc since 2006 and chairman of their Remuneration Committee since 2008. In 2011 he was appointed Chairman of GoOutdoors Ltd, which is a rapidly growing retailer of outdoor equipment and clothing.
Power of the Directors The Directors are responsible for managing the business of the Company and may exercise all powers of the Company subject to the provisions of relevant statutes, to any directions given by special resolution and to the Company’s Memorandum and Articles. The Articles for example, contain specific provisions and restrictions concerning the Company’s power to borrow money. Powers relating to the issuing of new shares are also included in the Articles and such authorities are renewed by shareholders at the annual general meeting each year.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Agendas and papers are circulated to the Board in a timely manner in preparation for Board and Committee meetings. These papers are supplemented by information specifically requested by the Directors from time to time. All Board and Committee meetings during the year were held in an open atmosphere with Chairmen encouraging robust and constructive challenge and debate. All Directors are, therefore, able to bring independent judgement to bear on issues such as strategy, risk management, performance, and resources. Additional meetings are called when required and there is frequent contact between meetings, where necessary, to progress the Group’s business.
Relations with shareholders The Company attaches considerable importance to communications with shareholders and engages with them on a variety of issues. The Investor Relations team has day-to-day primary responsibility for managing communications with institutional shareholders through a combination of briefings to analysts and institutional shareholders, both at the half-year and full year results. A number of analysts and investors visited the Group’s Cardiff office during the year to meet with the Executive Directors and senior management in order to get a better understanding of how the Group operates and how it intends to achieve its strategic and operational objectives. Senior Executives from the Group’s overseas businesses also visit the UK in order to present to, and meet with, analysts and investors. Site visits and individual discussions with the Executive Directors are also arranged throughout the year with individual shareholders. Regular dialogue with shareholders helps to ensure that the Company’s strategy is understood and that any issues are addressed in a constructive way.
Conflicts of Interest In compliance with the requirements of the Companies Act 2006 regarding Directors’ duties in relation to conflicts of interest, the Group’s Articles of Association allow the Board to authorise potential conflicts of interest that may arise and to impose such limits as it thinks fit. The Company has put in place updated procedures to deal with conflicts of interest. These procedures include each Board member completing, annually, a conflict of interest questionnaire that sets out any situation in which they, or their connected persons have, or could have, a direct or indirect interest that could conflict with the interests of the Company. Any current directorships that they, or their connected persons hold, any advisory roles or trusteeships held, together with any companies in which they hold more than 1% of the issued share capital are also disclosed. These conflict of interest procedures have operated effectively throughout 2011.
Corporate Governance continued recommended that a re-tender process should not be undertaken in 2011 but that the relationship and the effectiveness of KPMG should be kept under review. A resolution for the reappointment of KPMG as auditors will be proposed at the forthcoming AGM. During the year and in accordance with Auditing Practice Board guidance, KPMG rotated the audit engagement partner who had led the audit process for the Group for the last five years.
• Reviewing the appropriateness of the performance conditions for both the Discretionary Free Share Scheme (DFSS) and Free Share Incentive Plan (SIP) awards
Non-Executive Directors are not entitled to bonus payments or pension arrangements, nor do they participate in the Group’s long-term incentive plans.
The fee payable to Alastair Lyons in respect of his appointment as Chairman of the Board is reviewed annually. Following review in January 2011 the Chairman’s fee was increased from £180,000 to £210,000 p.a. The Committee approved the increase in fees payable to the Chairman on the basis that they remained modest and appropriate for a Chairman of a FTSE 100 company. The appointment may be terminated by either the Chairman or the Company on three months’ notice.
Trade and other payables 17, 21 856.6 561.0 Current tax liabilities 30.2 48.4 Total liabilities 2,220.5 1,416.0 Total equity and total liabilities 2,614.9 1,766.7
Adoption of new and revised standards The Group has applied all adopted IFRS and interpretations endorsed by the EU at 31 December 2011, including all amendments to extant standards that are not effective until later accounting periods.
Revenue from Price comparison and Gladiator: Commission from these activities is credited to revenue on the sale of the underlying insurance policy.
The Goodwill held on the balance sheet at 31 December 2011 is allocated solely to the UK car insurance segment.
Net insurance premium revenue 418.6 27.2 – – – 445.8 Other revenue and profit commission 299.0 9.7 90.4 11.7 – 410.8 Investment and interest income 10.6 0.2 – – – 10.8
Admiral Group plc Annual Report 201166 5. Net insurance premium revenue 31 December 2011 £m 31 December £m
Analysis of other administration and other marketing costs: 31 December 2011 £m 31 December £m
The maturity profile of gross insurance liabilities at the end of 2011 is as follows: < 1 Year £m 1-3 years £m > 3 years £m
Admiral Group plc Annual Report 201176 f) Reconciliation of movement in net claims provision: 2011 £m £m
Trade payables 12.1 13.3 Amounts owed to co-insurers and reinsurers 579.4 327.4 Finance leases due within 12 months 0.9 – Finance leases due after 12 months – 0.2 Other taxation and social security liabilities 21.9 16.5 Other payables 51.0 59.7 Accruals and deferred income (see below) 191.3 143.9 Total trade and other payables 856.6 561.0
For further information on how the Group conducts its business across UK, Europe and the USA, refer to the Business review.