In 1999 we also put in place a longterm co-insurance agreement with Great Lakes UK, a wholly-owned subsidiary of Munich Re. In 2001 we extended this agreement and it currently runs through at least 2008. In 2002 Munich Re also became a shareholder in AGL and it currently owns 14% of the Group. Management and staff currently own around 27% of the Group.
We launched Confused in its current form in the middle of 2002. 2005 saw Confused generate over 4m quotes up from 1.37m in 2004 (+192%). A great deal of Confused’s growth is coming from word of mouth, the most powerful form of advertising. We fully expect Confused to continue growing in 2006. Not only did Confused generate a lot of quotes, but it also made money. Confused.com made a profit of £8.8m compared to £2.0m last year and £0.3m the year before.
Besides replacing people, we have also been busy recruiting highly motivated MBA graduates to help us grow our business inside and outside the UK. We are very pleased with our ‘stable’ of MBAs. They bring with them not only their intellect and analytical skills but also a fresh, ambitious spirit, which gives me great hope for our future. We are targeting Spain as the first country outside the UK in which we’ll do business. I’m quite confident that when writing next year’s report I will be able to describe in detail our successful launch there.
The expense ratio is reconciled to the figures included in the income statement in note 9 to the financial statements, whilst the underwriting result is reconciled later in this review.
Profit commission The Group earns profit commission through its co-insurance and reinsurance arrangements. The amount receivable is dependent on the volume and profitability of the insurance business, measured by reference to loss and expense ratios.
Confused.com As the profit figures suggest, Confused.com has seen substantial growth during 2005 - both in terms of volume and profitability. This was driven by efficient increases in marketing spend generating substantial increases in quote activity. Confused.com receives a commission from its partners and has a relatively small fixed cost base.
This final payment combines with the interim dividend to make a total distribution for 2005 of 24.6p per share. The final dividend declared in respect of the post-flotation period of 2004 was 9.3p.
Corporate governance The Combined Code on Corporate Governance This Corporate Governance Report explains key features of the Group’s governance structure, how it applies the principles in the revised Combined Code on Corporate Governance (the ‘Code’), and the extent to which the Company has complied with the provisions of the Code.
In the 2004 Corporate Governance statement the Company made reference to paragraphs C.3.1 and B.2.1 of the Combined Code, which state that the Audit and Remuneration Committees should comprise three independent Non-executive Directors. At that time these Committees had only two independent Non-executive members and it was explained that the Board was actively recruiting a new independent Non-executive Director who would join both Committees on appointment. On 26 April 2005 Gillian Wilmot was appointed to the Board and the Audit and Remuneration Committees.
For those services that are deemed appropriate for the auditor to carry out, the policy sets out the approval process that must be followed for each type of assignment.
5) Whistle blowing The Committee reviewed and assessed the procedures put in place throughout the Group to enable employees to raise concerns (in confidence) over any possible wrongdoing in relation to financial reporting or other matters. The Committee ensures that the arrangements in place allow for reasonable, independent investigation of the matters and appropriate follow-up action.
– Automatically terminates should Manfred cease employment with Munich Re. Martin Jackson Indefinite (terminable on one month’s notice from either party) Keith James Indefinite (terminable on one month’s notice from either party) John Sussens Indefinite (terminable on one month’s notice from either party) Gillian Wilmot Indefinite (terminable on one month’s notice from either party) (appointed 26 April 2005)
Community involvement The Group is a leading employer in the South Wales region, and employs people from a wide range of communities. The Group encourages its employees to become involved in local communities and projects that are important to both them and their families. This can range from the local football club to an amateur dramatics society.
Westminster Bank plc. Alastair has also been a Nonexecutive Director of the Department for Transport and of the Department for Work and Pensions.
JC Bamford Excavators Limited. He was a Nonexecutive Director at Chubb plc between 2001 and 2003.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Financial assets are classified according to the purpose for which they were acquired. The Group’s investments in quoted fixed income and other debt securities are classified as financial assets at fair value through profit or loss at inception.
Financial assets classified at fair value through profit or loss are initially recorded at cost and subsequently carried at fair value (based on closing bid prices on the balance sheet date, or the last trading day before the balance sheet date) with changes in the fair value of these investments being recognised through the income statement.
Change in gross unearned premium provision (10,775) (13,479) Change in reinsurers’ share of unearned premium provision (8,708) 4,243
Deferred tax Current period deferred taxation movement (654) (651) Over provision relating to prior periods – deferred tax (634) (877)
15. Earnings per share (EPS) 31 December 31 December 1) Unadjusted EPS Profit for the financial year after taxation 84,720 90,506
Trade payables 4,423 3,381 Amounts owed to co-insurers and reinsurers 98,054 91,347 Finance leases due within 12 months 1,963 1,543 Finance leases due after 12 months 886 741 Other taxation and social security liabilities 4,174 3,236 Other payables 10,066 12,320 Accruals and deferred income (see over) 63,369 51,761
Authorised: Issued, called up and fully paid: 259,861,965 ordinary shares of 0.1p 260 – 258,595,400 ordinary shares of 0.1p – 259
**The Unapproved Free Share Scheme (the UFSS) This scheme is open to managers within the Group (excluding current Executive Directors) with variable awards available.
These financial statements were approved by the Board of Directors on 3 March 2006 and were signed on its behalf by: Andrew Probert Director
8. Subject to passing Resolution 7, that the Directors be and they are hereby empowered pursuant to section 95 of the Act to allot equity securities (as defined in section 94(2) of the Act and as amended by the Regulations) for cash pursuant to the authority conferred by Resolution 7 above as if section 89(1) of the Act did not apply to such an allotment provided that this power shall be limited to the allotment of such equity securities: (i) in connection with an offer of equity securities by way of rights to the holders of the ordinary shares in proportion (as nearly as may be practicable) to their holdings on a record date fixed by the Directors (but subject to exclusions or other arrangements as the Directors may consider necessary or expedient to deal with any legal or practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange in any territory or in connection with fractional entitlements or otherwise howsoever); and
Recommendation Your Board considers each of the proposed resolutions to be in the best interests of the Company and its shareholders as a whole. Accordingly, your Directors unanimously recommend that you vote in favour of the resolutions as they intend to do in respect of their own beneficial shareholdings.
The register of Directors’ interests kept by the Company under Section 325 of the Companies Act 1985 will be available for inspection at the meeting from 1.45 p.m. until the conclusion of the meeting.